Forest Management Policy

1. Introduction

Marubeni Group (hereinafter the “Company”) promotes sustainable forest management by conducting fair and upright corporate activities in accordance with the spirit of the Company Creed of “Fairness, Innovation and Harmony”. We recognize that forests are renewable resources that provide various benefits for sustaining life on earth, and embrace economically viable forest management methods with the aim of ensuring the prosperity of present and future generations.

We strive to contribute to the establishment of a circular economy by creating innovation in the utilization of forest resources and responding to the society’s environmental needs that are becoming more diverse.

The Forest Management Policy (hereinafter the “Policy”) drives our commitments to sustainable forest management, the protection of forests with high conservation value (HCV^*1) and the elimination of unregulated forest logging in our business activities. We, through our focus on on-site operations, are able to create economic benefits and contribute to society by conducting sustainable forest management through coexistence and co-prosperity with local communities, as well as supplying environmentally conscious wood resources that respond to society's needs.

2. Scope of Application

The Policy applies to all woodchip and pulp manufacturing and forest plantation operations by Marubeni and its subsidiaries worldwide.

3. Commitments

We go beyond compliance in our commitments to sustainable forest management. Through this Policy, we reaffirm our commitment to comply with all applicable laws and regulations relevant to forestry operations and seek to extend this obligation to our contractors and their employees.

（1）Natural Capital

In implementing sustainable forest management, we commit to the following guidelines on the principle of No Deforestation:

• Only handling wood resources managed in a sustainable and appropriate way.
• No conversion of natural forests in forest plantation developments.
• Proactively addressing protection of HCV forests in our forest management from the viewpoint of biodiversity conservation.
• No forest plantation operations in HCV forests or on peatland.
• Committing to a “No Burn Policy” that restricts the use of fire in forest plantation operations that can potentially cause forest fires in tropical forest areas.
• Minimizing the impact of logging and related logging access roads construction on ecosystems.
• Proactively addressing the protection of species at risk of extinction included in IUCN’s (International Union for Conservation of Nature and Natural Resources) Red List of Threatened Species.
• Restricting the usage of alien species only to cases where impact is manageable.
• Following international best practices for soil management.
• Not using any pesticides classified as Class 1A/1B in the classification scheme of the WHO (World Health Organization), or any substances regulated by the Rotterdam Convention and the Stockholm Convention as pesticides.
• Not using genetic modification technology in forest management.
• Effective utilization of trees damaged by natural disasters such as burned trees, fallen trees, drift wood etc.

（2）Social Capital

We commit to the social and economic development of the areas where we operate and seek to identify opportunities to create shared values with local communities. We recognize the importance of land use rights for local communities and indigenous people and their right to enjoy a fair share of the benefits obtainable from the commercial use of forest resources. Marubeni Group follows the principles regarding human rights described in the Basic Policy on Human Rights, and conducts the following activities as a responsible party:

• Committing to provide a safe and productive work environment, and not tolerating any form for child labor, forced labor, discrimination, harassment or abuse.
• Following the principle of Free, Prior and Informed Consent (FPIC) when starting new forestry operations on the lands where indigenous and local communities hold legal or customary rights.
• Establishing grievance and conflict resolution mechanisms compliant with international standards and the regulatory requirements of the host countries of our forestry operations, as well as engaging in good-faith dialogue with stakeholders to resolve any issues.
• Actively carrying out stakeholder engagement on local, national and international scales.
• Respecting the rights of every worker.

We are contributing to economic and social development of areas where we operate through the following initiatives:

• Creating employment opportunities for local residents (priority allocation of contracts for forest plantation related work)
• Joint programs with local residents (Joint Forestry, Agriculture and Forest Products Harvesting Programs, etc.)
• Support activities for local residents (support for indigenous people, vocational training, disaster prevention drills, voluntary provision of daily necessities, etc.)
• Educational support (scholarships, construction or renovation and extension of schools, dispatching of teachers, operational support, etc.)
• Other community support (support for infrastructure equipment repair, sports events, etc.)

（3）International Standards

We promote the main principles outlined in international standards relevant to the forestry industry (forest plantations, woodchips and pulp manufacturing) in our own operations as part of our commitment to sustainable forest management.

（4）Environmental and Social Risk Assessment

We conduct the necessary environmental and social risk assessment prior to the completion of land acquisitions or land developments for new operations.

4. Governance

（1）Implementation

The Policy is approved by Marubeni’s Board of Directors. Oversight of the Policy is by the Chairperson of Sustainability Management Committee with implementation by the Business Group.

（2）Links to Other Policies

The Policy complements other sustainability related policies of the Company including the Basic Policy on Human Rights and Basic Supply Chain Sustainability Policy.

（3）Policy Management

We will review the Policy at least once a year, or as new information and knowledge becomes available, in ways that are consistent with our objectives of sustainable forest management.

（4）Certification Audit and Monitoring

We hold international certification for sustainable forest management and CoC (Chain of Custody) certification to manage distribution and processing. As a result, accredited bodies conduct regular auditing and monitoring of these certifications.

（5）Information Disclosure

In addition to increasing the transparency of our business activities, we are committed to disclose information on our approach to sustainable forest management on the Company website etc.

1　HCV forests are forests that have a High Conservation Value in social, cultural and or environmental terms.

Procurement Policy (Forest-derived Products)

1. Introduction

The Marubeni Group (hereinafter referred to as “we”) conducts fair and upright corporate activities in accordance with the spirit of its Company Creed of "Fairness, Innovation and Harmony" and strives to build a sustainable society together with its business partners in line with the "Basic Supply Chain Sustainability Policy."

We have established the Product Procurement Policy (Forest-derived Products) (hereinafter referred to as the “Policy”) to promote the procurement of timber and related products produced from appropriately managed forests, thereby realizing the sustainable use of forest resources.
This Policy has been approved by Marubeni’s Board of Directors. The Chairperson of the Sustainability Management Committee oversees the Policy, and the Business Group is in charge of its effective implementation. We undertake to review this Policy at least annually and revise it as necessary.

2. Scope

This Policy applies to the trading of timber and related products by Marubeni and its subsidiaries worldwide. Specifically, it covers logs, woodchips (including fuel woodchips), pulp, and paper and paperboard products (hereinafter referred to as "procured products").

3. Commitment

In cooperation with suppliers and customers, we are committed to ensuring the traceability of procured products while conducting our procurement activities in accordance with the Basic Supply Chain Sustainability Policy and the following principles.

1. (1) No handling of procured products produced from illegally logged timber.
2. (2) No handling of products procured from suppliers involved in serious environmental and social controversies, such as the destruction of forests with high conservation value.
3. (3) No handling of procured products produced from genetically modified wood.
4. (4) Promoting the handling of procured products that have been certified under a reliable international forest certification system.

In order to promote this Policy, we will investigate the environmental and social considerations of suppliers as well as their compliance with laws and regulations. In the event that any non-compliance with this Policy is discovered, consultations and requests for improvement measures will be made. If the non-compliant supplier does not improve, we will review our business relationship with the relevant supplier.

We will regularly disclose information on this Policy. We are committed to promoting to society the sustainable use of forest resources through appropriate communication with our suppliers and customers and other stakeholders.

Initiatives toward Forest-derived Products

Due Diligence

To ensure the procurement of products in accordance with the Procurement Policy (Forest-derived Products), Marubeni, in FY2019, conducted due diligence (hereinafter “DD”) on the suppliers’ status of compliance with laws, respect for human rights, preservation of the environment, fair trade, health and safety, etc. Results of the DD showed that of the 630 suppliers of timber and related products, the 43 major suppliers (with an annual turnover of JPY1.0 billion or more) exhibited no significant problems within the scope of the DD. This survey covered 78% of Marubeni’s annual turnover of forest-derived products. We intend to gradually expand the scope of the DD from FY2020 and strive for more sustainable utilization of forest resources.

Our target and aim

Through the due diligence on suppliers of forest-derived products, the Marubeni Group will consider the protection of natural forests and the sustainable use of forest resources and will promote initiatives aimed at ensuring that new and existing suppliers are aware of and comply with the Group's Procurement Policy (Forest-derived products) and that traceability of procured products is ensured.

Overview of the FY2019 Survey

■Applicable items and transactions of related products
The survey covered the four items based on the Procurement Policy (Forest-derived Products), i.e. logs, woodchips (including fuel woodchips), pulp, and paper / paperboard products, which correspond to the timber and related products handled by the Group.

■Selection of applicable suppliers and implementation method
A 3-step process has been set up in consideration of the impact on Marubeni’s business and sustainability-related risks.

① First stage of DD: Internal preliminary survey
We first selected the 43 major suppliers (with an annual turnover of JPY1.0 billion or more) out of our 630 suppliers of timber and related products. Of these 43 suppliers, a total of 14 companies (equivalent to 38% of Marubeni’s turnover of forest-derived products), i.e. 12 companies handling products other than certified wood from an entity which has acquired forest certification (FSC certification^*2, PEFC certification^*3, and certified wood under a mutual certification agreement with PEFC) and controlled wood based on a forest certification system (FSC controlled wood^*4, PEFC controlled wood^*5, and controlled wood based on a certification system under a mutual certification agreement with PEFC), and two other companies, which were found to be in need of undergoing a sustainability questionnaire survey by Marubeni, were identified as subjects for the second stage of DD.

② Second stage of DD: Sustainability questionnaire survey
A sustainability questionnaire survey was conducted on the 14 companies identified in the first stage of DD. As a result, no significant problems were confirmed with these 14 companies.

③ Third stage of DD: Detailed onsite inspection
Suppliers whose status of compliance with laws, respect for human rights, preservation of the environment, fair trade, health and safety, etc. could not be sufficiently confirmed are subject to a detailed onsite inspection. If these suppliers do not undertake measures to mitigate the risks identified in the survey, Marubeni would consider reevaluating these transactions. In FY2019, no suppliers were identified as requiring the third stage of DD.

• 　Certification by the FSC®（Forest Stewardship Council®）(FSC® C016260): An NPO established to promote responsible forestry around the world and operates systems of international forest certification.
• 　Certification by PEFC (The Programme for the Endorsement of Forest Certification): An international forest certification system, which endorses mutual recognition of forest certification systems of various countries.
• 　FSC controlled wood: While not FSC certified wood, FSC controlled wood is timber, which may be combined with FSC certified wood to manufacture FSC certified wood. Compliance of FSC controlled wood must be confirmed based on the criteria for FSC controlled wood.
• 　PEFC controlled sources: While not PEFC certified wood, PEFC controlled sources are timber, which may be combined with PEFC certified wood to manufacture FSC certified wood. Compliance of PEFC controlled sources must be confirmed based on the criteria for PEFC controlled sources.

Sustainable Forest Management

Sustainable Forest Management (REDD+)