EU Deforestation Regulation (EUDR)

ARAUCO Group’s corporate strategy is based on a model that unites nature and the development of projects that create value.

From forest management to industrial innovation, the aim is to create shared value, drive renewable bioeconomy and generate nature-based solutions that contribute to people and the planet.

ARAUCO Group’s operations and products seek to:

• Ensure business continuity through responsible forest management: conserve integrated and resilient landscapes and promote their regeneration and long-term vitality.
• Generate sustainable products that retain carbon: pulp, wood, panels and renewable energy are part of ARAUCO Group’s inventory.
• Make use of renewable resources: seek solutions that replace fossil-based materials, retain carbon and help mitigate climate change.
• Obtain opportunities in global markets: strengthen competitiveness through innovation, responsibility and good stewardship.
• Have a positive impact on local communities: contributing to the social, economic and environmental development of the places where ARAUCO Group operates.
• Adopt international standards: in risk management and in compliance with the commitments undertaken.

Accordingly, the responsible and renewable management of plantations and forests and the manufacture of products is the core of ARAUCO Group’s model.

This model includes actions and commitments that positively contribute to the well-being of society and the environment, through renewable solutions, products and alternatives that improve people’s quality of life.

ARAUCO Group’s commitment to responsible sourcing includes the sustainable management of its forest assets, the use of raw materials from known and traceable sources, compliance with applicable legislation, protection of the environment and biodiversity, respect for human rights and relations with communities.

Since 2003, ARAUCO Group has maintained a commitment not to replace native forest or encourage its replacement by third parties. It also has a Responsible Wood Buyer Policy that excludes, among other sources, wood that is:

• Illegally harvested.
• Obtained in violation of traditional or civil rights.
• From forests whose high conservation values are threatened by management activities.
• From forests that are being converted to plantations or other non-forest uses.
• From forests in which genetically modified trees are planted.

Wood sourcing and traceability are also supported by internationally recognized forest management and chain of custody certifications. These certifications are complementary background information and do not replace the due diligence required by the EUDR.

ARAUCO Group’s System integrates forestry, industrial, commercial, technological and governance processes to:

• Collect and verify the information required by the EUDR from ARAUCO Group’s customers.
• Maintain the traceability of raw materials and products.
• Verify compliance with the relevant legislation of the country of production.
• Assess potential risks of non-compliance.
• Adopt mitigation measures where appropriate.
• Retain supporting information and evidence.

The System is based on the principles of traceability, legality, integrity and verifiability of information, risk-based management, information protection and continuous improvement.

ARAUCO Group collects, organizes, verifies and retains the information necessary to link the products covered by the EUDR to the origin of the raw material used in their manufacture.

Depending on the product and the type of source, this information includes:

• Identification of the product and the raw material used, including wood species and quantity.
• Geographic origin of the raw material: country and area of production, geolocation of the plots and period of production.
• Supply chain information that allows the product to be traced.
• Evidence is that the raw material is free from deforestation and forest degradation, and that it complies with the legislation of the country of production.

The information comes from ARAUCO Group’s forest management systems, sourcing records, legal documentation, operational and industrial records and traceability systems.

This information makes it possible to link the raw material from its place of origin to the processes of harvesting, transport, industrial reception, transformation and marketing of the finished product.

The System includes verification of compliance with the relevant legislation of the country of production on the matters covered by the EUDR.

Depending on the characteristics of the property, the type of source and the legislation of each country, the evidence may include documentation related to:

• Land rights and rights to use the property.
• Forestry legislation and management and harvesting authorizations.
• Protection of the environment and biodiversity.
• Labor rights.
• Human rights.
• Rights of local communities and indigenous peoples.

Tax, trade, customs and anti-corruption regulations.

Where required, ARAUCO Group verifies and analyzes the information collected to determine whether there is a risk that the products covered by the EUDR do not comply with its requirements.

The assessment considers, among other factors:

• The risk level of the country or area of production, and the prevalence of deforestation or forest degradation in all or part of the country of production.
• The reliability of the available information and compliance with the relevant legislation of the country of production.
• The complexity of the supply chain and the risk of circumvention of the Regulation or of mixing with products of unknown origin.
• The existence of substantiated concerns or other information that may indicate a risk of non-compliance.

The assessment is based on geographic, forestry, legal, commercial and traceability information and evidence, complemented, where appropriate, by certifications or other verification mechanisms.

In accordance with the EUDR, products within its scope of application may only be placed or made available on the European Union market, or exported from it, when the due diligence process makes it possible to conclude that there is no risk or that the risk of non-compliance is negligible. ARAUCO Group makes available to its customers the information and evidence that supports this conclusion.

If a non-negligible risk is identified, the product may not be placed or made available on the European Union market, nor exported from it, for as long as such risk persists.

Depending on the nature of the risk identified, mitigation measures may include:

• Requesting, verifying or correcting additional information and documentation.
• Additional technical verifications and enhanced review of the traceability and origin of the raw material.
• Corrective actions in the supply chain or, if necessary, suspension of supply until compliance is demonstrated.

The operation may only continue when the measures adopted make it possible to conclude that the residual risk is nothing or negligible.

ARAUCO Group maintains a policy on relations with the communities and indigenous peoples present in the territories where it operates, in force since 2012, which provides for permanent mechanisms of dialogue and consultation aimed at identifying the impacts of operations, concerns and opportunities, and at managing them jointly with the communities.

ARAUCO Group will review the System periodically and will update it when regulatory, operational, technological or supply chain changes occur, as well as when the results of audits, reviews or corrective actions make it necessary to strengthen its procedures and controls.

Risk assessments and decisions related to mitigation measures will be documented and reviewed.

The related documentation will be retained in accordance with the applicable periods and will be available to the competent authorities or to ARAUCO Group’s customers, as applicable, when requested.

ARAUCO Group also has a whistleblowing channel available to report possible breaches of legislation, of its policies and of its corporate principles.