npao “sylvamo corporation rus” “sylvamo nordic sales

DDS 2021 NPAO “Sylvamo Corporation Rus”

“Sylvamo Nordic Sales Company Oy”

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Due Diligence System - DDS for compliance with the requirements for sourcing controlled wood

Contents 1. Normative documents and DDS structure 2. Objective and general methodology 3. Scope 4. Risk assessment (3) 5. Supplier selection and control 6. Requirements for wood supply contract (general control measure) 7. Risk assessment and control measures for the company 8. Consultations with stakeholders 9. Internal DDS audit 10. 2020 desk audits report 11. 2020 field audits report 12. Contacts

1. Normative documents and DDS structure

1.1. Standards referenced in this DDS

FSC-STD-40-005 V3-1

Requirements for Sourcing FSC Controlled Wood, hereinafter referred to as "the Standard".

FSC-STD-40-005 (current date)

Directive on FSC Controlled Wood

FSC-NRA-RU V1-1

FSC National Risk Assessment for the Russian Federation, hereinafter referred to as “NRA”

Regulation (EU) No 995/2010 of the European parliament and of the Council of 10/20/2010

Laying down the obligations of operators who place timber and timber products on the market, hereinafter referred to as “EUTR”

(1.1) after a specific item in this guide means that the item meets the requirements specified under Paragraph 1.1 of the Standard.

1.2. DDS structure

DDS A system of measures and procedures to minimize the risks of sourcing material from unacceptable sources (public document)

Appendix 1 Risk Assessment and Control Measures (public document)

Appendix 2 "Wood Origin Data", a standardized Appendix 2 to the supply contract

Appendix 3 Supplier Verification Form for identification of risk factors

Appendix 4 Field Audit Report Form

Appendix 5 Procedure "Handling Comments and Complaints from Stakeholders" (public document)

Appendix 6 List of stakeholders (public document)

Appendix 7 Letter forms for inviting various stakeholder groups to consultations



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1.3. Abbreviations used in this DDS

FSC - Forest Stewardship Council CW - Controlled wood Con - Contractor D - Desk audit ECA - Estimated cutting area EGAIS - Unified State Automated Information System “Accounting of Wood and Transactions With It” by the

Federal Forestry Agency of the Russian Federation F - Field audit FLA - Forest lease agreement FCG - Forest Certification Group GC - Government contract HCV - High conservation value HCV1 - Species diversity (SOW, KOTR, KBT). HCV2 - Landscape-level ecosystems (IFL, IFT) HCV3 - Rare, threatened or endangered ecosystems HCV4 - Critical ecosystem services HCV5 - Community needs HCV6 - Cultural values HP - Harvesting permit HPH - HP holder IFL - Intact forest landscapes IFT - Intact forest tracts ITP - Indigenous and Tribal Peoples KBT - Important plant areas KOTR - Important bird areas of Russia m3 - Cubic meter FD - Forest declaration MNC - Minor non-compliance OHS - Occupational health and safety PPE - Personal protective equipment P&L - Planning and Logistics Team of the Wood Procurement Department Q - Quarter SH - Stakeholder SNC - Substantial non-compliance SOW - Sites of wetlands SPNA - Specially protected natural area STSC - Standing timber sale contract SU - Supply unit Sub - Subsupplier Sup - Supplier UNT - Unit

-Low risk

- Specified risk

2. Objective and general methodology

This DDS has been developed to comply with the requirements of:

- corporate policies to control sources of origin and supply chains for timber entering the NPAO “Sylvamo Corporation Rus”, which is the only seller of wood products for “Sylvamo Nordic Sales Company Oy”;

- sustainable forest management systems of the Company,



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- Forest Stewardship Council –FSC- certification system, according to which the Companies are certified to avoid material from unacceptable sources, that cannot be used in FSC Mix products,

- Forest legislation of the Russian Federation, EUTR and Lacey Act (USA) prohibiting the placing of illegally harvested or unknown origin timber in the export supply of products for “Sylvamo Nordic Sales Company Oy”.

The five FSC controlled wood categories of unacceptable sources (referred to as controlled wood categories) are:

# Category

1 Illegally harvested wood

2 Wood harvested in violation of traditional and human rights

3 Wood from forests in which high conservation values are threatened by management activities

4 Wood from forests that are converted to plantations and non-forest use

5 Wood from forests in which genetically modified trees are planted

In order to coordinate deliveries, the supplier provides in good faith all information about the origins and chains of custodies of the supplied wood.

In its turn, the Company:

Checks the completeness and quality of the information provided;

Assesses the supplier's risk based on the information provided;

Consults with SH;

Conducts supplier desk audits and selective field audits throughout the wood supply chain;

If violations are identified, the Company may appoint corrective actions and monitor their implementation, or suspend deliveries and terminate the supply agreement.

The DDS was developed with the assistance of the expert organization APEX Group LLC (www.apex-g.ru). The adequacy of control measures for category 2 and 3 of controlled wood is also further determined as the system improves and consultations with stakeholders take place (4.9, 6.2 c).

The DDS development experts

Name Professional education and work experience CW

category

Medunitsyn Dmitry Vladimirovich

Education:

Forestry Engineer, Arkhangelsk State Technical University (ASTU), 1996 Work experience:

since 2013, General Director, OOO APEX Group;

since 2004, Auditor, GFA Certification GmbH;

since 1996, Forest Inventory Engineer, Arkhangelsk Forest Management Expedition.

1, 2, 3

Myakshinov Alexey Vladimirovich

Education:

Forestry Engineer, Arkhangelsk State Technical University (ASTU), 2006 Work experience:

since 2015, Expert, OOO APEX Group;

since 2014, Auditor, GFA Certification GmbH;

since 2008, Deputy Head of the Department of Protection, Preservation and Reproduction of Forests, OGAU Arhoblles;

since 2007, Reforestation Engineer, OGU Arkhangelsk Rural Forest Management.

1, 3

Karzin Dmitry

Education:

Forestry Engineer, Arkhangelsk State Technical University (ASTU), 2000

1, 3

http://www.apex-g.ru/



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Evgenievich The Presidential Program for Training Management-Level Staff for the Development of the National Economy of the Russian Federation (The Institute of Economics, Finance and Business) 2009

Work experience:

since 2016, Expert, OOO APEX Group;

since 2010, Wood sourcing in the North-Western region of Russia;

2009-2010, Director, OOO Servis Les (forest management, forest development projects);

2008-2010, Forestry Engineer, OGU Arkhangelsk Rural Forest Management;

2000-2008, Forest Inventory Engineer / Party Leader, FGUP Sevlesproekt, Arkhangelsk Forest Management Expedition branch.

Agamirzov Konstantin Evgenievich

Education:

Engineer, Technical University of Munich, 2008;

Engineer, Moscow Aviation Institute, 2006 Work experience:

2010-2016, FSC Supply Chain and Controlled Wood Auditor; Regional Coordinator of the Certification Body GFA Certification GmbH in the Russian Federation;

2008-2010, Greenhouse Gas Auditor for Kyoto Protocol Projects – TÜV SÜD Industrie Service GmbH (Munich, Germany).

1, 2

All experts and drafters of the DDS confirm the full adequacy of the control measures developed for this document (Appendix 1- Risk Assessment and Control Measures).

3. The scope of this DDS includes:

3.1. Production sites hereinafter referred to as "Company”: 3.1.1. NPAO “Sylvamo Corporation Rus” (the main production site, hereinafter referred to as "the

Mill"), located at: 188991, Russia, Leningrad region, Svetogorsk, Zavodskaya street, 17, which is the only seller of wood products for “Sylvamo Nordic Sales Company Oy”;

3.1.2. The ZAO Tikhvin KLPH terminal station (raw material warehouse, hereinafter referred to as "the Terminal"), located at: 187555 Russia, Leningrad region, Tikhvin, 10 Razyezzhaya street.

3.2. The DDS will apply to all suppliers and sub suppliers that supply raw wood materials to the Company.

3.3. This DDS does not apply to own forest resources (owned or managed directly or through subsidiaries) (1.4).

3.4. Sylvamo Nordic Sales Company Oy”, located at: Koskenparras, 10, 22100, Imatra, Finland, operating in accordance with a distribution agreement with NPAO “Sylvamo Corporation Rus”.

4. Risk assessment (3)

4.1. The Company uses the NRA in the current edition as the basis for its risk assessment. 4.2. The supply of timber with an FSC-claim (FSC 100%, FSC Mix, FSC Controlled Wood) is a factor that

mitigate the risks of timber supply from “unacceptable sources” for all risk assessment indicators in accordance with the NRA to “low” level.

4.3. Risk assessment indicators, developed control measures and actions the Company takes to reduce risks are given in Appendix 1 to the DDS.

4.4. The Company has and implements control measures to mitigate specified risks. A description of the control measures and Company actions is provided in Appendix 1 to this DDS.

5. Supplier selection and control

5.1. Each Supplier that by contract supplies timber to the Company must be approved according to the system established herein in accordance with the following procedure:



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5.2. Risk assessment is performed for each supplier who contracts with the Company to supply wood, as well as for all subsuppliers in the chain up to FLA and/or FSPA for the forest plots from which the timber is supplied.

6. Requirements for wood supply contract (general control measures)

6.1. The Company ensures that the Company, the Certification Body and Accreditation Services International are granted access to evidence of conformity by suppliers and subcontractors with the requirements of this DDS. This condition is set out in the supply contract. The Supplier also guarantees the access of the Company's specialists to all production sites along its chain to verify the volumes and methods of wood harvesting (within the requirements of the Standard in its current version). Admission is granted within a week after the Company notifies the Supplier of its intention to come for inspection. (1.3)

6.2. The supplier shall fill in the standardized form in Appendix 2 to the supply contract (see Appendix 2 to this DDS), indicating all the regulatory documents for wood harvesting and for the main elements of the supply chain. The Appendix 2 is filled in before the contract is concluded, when it is renegotiated and when the Supplier's supply chain structure changes.

6.3. If during a field or desk audit it turns out that the information in the Appendix 2 to the contract with the Supplier is not true or is outdated for any reason for any HPH, the Company removes the HPH from the supply acceptance lists and requests additional documents from the Supplier, which shall be provided within 5 (five) business days. This condition is set out in the supply contract.

6.4. If during a field audit risks of supply of uncontrolled wood are identified, as reflected in the field audit report in the form provided in Appendix 4, the Supplier shall eliminate the identified minor non-compliances within 1 (one) month. If the reasons for the risk specified in the report are not eliminated, the Company has the right to refuse any timber supplied from the specific HPH for which the report was made. This condition is set out in the supply contract.

FSC-supplier 1 …… FSC-supplier N Supplier 1 Supplier 2 …… Supplier N

…….

Control

measures for

Supplier 1

Control

measures for

Supplier 2…….

Control

measures for

Supplier N

Low risk Low risk Low risk High risk Level of risk

Supply allowed Supply allowed Suply allowed Supply deniedDecision

about supply

Request and analysis of documention on

the origin of wood (FLA, HP), supply

chains

Analysis of primary documentation on the origin of wood

(FLA, HP), supply chains, consultations with SH, analysis of

maps data

Supplier category

to determine the level of risks and control measures for risk metigation for each supplierRISK ASSESSMENT

Suppliers с FSC- claim (FSC 100%, FSC

Mix, FSC Controlled Wood)Controlled suppliers



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7. Risk assessment and control measures for the Company

7.1. For risk assessment purposes each Supplier shall provide all information about its supply chain up to the forest site where the wood is harvested. This information is sent to the Company before the contract is concluded, when it is renegotiated and when the supply chain structure changes. The information is provided as Appendix 2 to the supply agreement (the form in Appendix 2 to this DDS (2.1, 2.2, 2.4).

7.2. There is a EGAIS in the Russian Federation. Data from this system is publicly available. The state (the owner of all forest resources in the Russian Federation) owns and administers the System. The legislation requires registering all transactions with wood in this system – thus, the volume control is carried out on the basis of this system and the volume of wood harvested or purchased by the supplier cannot exceed the volume delivered by the Supplier to the Company. (2.5.2) In complex supply chains volume control is performed by requesting all contracts in the supply chain from all HP holders and all subsuppliers.

7.3. For Suppliers who are FSC certificate holders, the Company defines the risk level as "low" after the Supplier has provided the entire set of documents in accordance with the Instructions for completing Appendix No. 2 to the wood supply contract.

7.4. According to Appendix 2 to the Supplier contract, for all suppliers of “controlled wood”, the Company performs a desk risk assessment. Each company that is part of the Supplier's supply chain and is listed in Appendix 2 shall be evaluated against the applicable indicators according to the methodology set out in the risk assessment (Appendix 1). The results of the desk audit are recorded in the summary table of risk factors (in the form provided in Appendix 3) stating the date of the audit, after which the total risk factor of the HP holder and Supplier is determined. The frequency of desk audits:

before the contract with the Supplier is concluded – 6 weeks before the supplies begin (2.5.2.);

when the Supplier's supply chain changes (at providing a new Appendix 2) – 6 weeks before the start of deliveries from the new source;

if the contract with the Supplier is concluded for a long period of time, and the chain is not updated- according to system of risk assessment

7.5. When all the Supplier data is collected and the risk factors for each indicator are determined the Company takes actions to mitigate the specified risks. The actions are described in Appendix 1. A Supplier who failed to mitigate the specified risks is not allowed to supply. Risk mitigation can also be achieved by excluding companies whose risks cannot be mitigate from the Supplier's chain (3.7).

7.6. Evidence of risk mitigation shall be retained and available during 5 years from the date of submission and shall be ready for presentation during external audits. The evidence can also be used for repeated desk audits on new or updated declarations, thus mitigate the risk where evidence of low risk has already been obtained.

7.7. An additional measure for risk mitigation is the implementation of the field audit program. Field audits can be carried out by the Company itself or a contractor. In both cases experts in the field of forest certification are involved in audits.

7.8. The selection of HP holder for field audits is based on the principles of geographical diversity, supply chain structure diversity, and high risks that cannot be mitigate without a field audit. The minimum annual number of audits (y – rounded up when calculating) for conducting field audits is determined by the formula:

y = 0,8 ∗ √𝑥

where, x is the number of HPH at the time of approval of the field audit program.

7.9. Based on the results of the field audit, a Report is drawn up (in the form provided in Appendix 4), which describes the supply chain from a specific HPH, checks the relevance and reliability of the information provided to the Company, and analyzes the degree of risk mitigation for all indicators for



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the chain. If the experts conducting the audit find that the risk has not been mitigated, this is recorded in the non-compliance section of the field audit report.

7.10. Based on the results of field audits and analysis of Reports the Company decides on the necessary corrective actions in relation to a particular chain, up to the exclusion of the HPH from the acceptance lists. Until the non-compliances are resolved, deliveries from the HPH are suspended.

7.11. A summary of field audit reports is annually and published as section 11 of DDS (6.2 d).

8. Consultations with stakeholders (SHs)

8.1. Consultations with SHs is the process of obtaining information from third parties who can provide qualified and competent comments on a particular risk assessment indicator. The consultation process is carried out in different forms. To achieve maximum effectiveness, the most convenient form of interaction is determined for each SH, in the following order of priority:

Analysis of publicly available databases and maps (for example, tax authorities, forest management authorities, publicly available maps of HCVs, etc.);

Sending out newsletters;

Consultation by written request;

Interview. 8.2. The Company continuously identifies SHs. Initially, the Company makes a list of SHs that have

competence in all the considered risks and regions. The primary source for the list of SH is the current List of Stakeholders for Certification in the Russian Federation as provided by FSC Russia (https://ru.fsc.org/ru-ru/cert/nbsp). As field and desk audits of suppliers are conducted the list is updated and expanded. Form – Appendix 6 (Appendix B, 1.1).

8.3. The Company informs SH about the use of the DDS for controlled wood (the method, risks and control measures) in order to receive comments on NPAO “Sylvamo Corporation Rus” site and within the framework of consultations with SH in accordance with p.7.4. Additionally mailing is done every time the start of deliveries from a new region (6 weeks before the start of deliveries). The most up-to-date and most complete list is always used for notification. The email always includes an up-to-date and complete list of SHs. (Appendix B, 1.2).

8.4. During Supplier desk audits, a wide range of SHs public databases are analyzed. Public databases and other official public sources are listed opposite each indicator (Appendix 1 / Appendix 6) – this analysis is the first stage of consultation with the SHs.

8.5. When identifying risks at elements of the chain, control measures for some indicators require additional written consultations.

In addition, specific local SHs can be identified during on-site field audits. The expect carries out consultation with the identified SHs during the field audit. If it is impossible to carry out on-site consultations expert records identified SHs in the report and after the audit, the Company conducts written consultations with SHs. This is the second stage of consultations:

1-level consultation

Verification of publicly available

databases (targeting by TIN of

each company in the Supplier's

supply chain


Informing according to the SH list.

General information, DDS,

designation of work in the region

Re-information at least once a

year either with a new DDS

version or with deliveries from a

new region


Emailing targeted specific

requests to reduce identified

risks (targeted by TIN and a

specific risk)

Additional identification of

SH during field audits and

targeted consultations.

Supplement the SH list.

https://ru.fsc.org/ru-ru/cert/nbsp



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8.6. The Company keeps a log of consultations. All evidence of consultation is available for review at the Company upon request from Certification Body and their regulatory bodies (Appendix B, 2).

8.7. The Company has a system for processing SH requests. The procedure is described in Appendix 5 to this DDS and is publicly available. When receiving a comment from a SH, the Company always works according to this procedure (7.1).

9. Internal DDS audit

9.1. The DDS is subject to internal review at least once a year and based on its results, it is either approved or amended according to the results of the review. The DDS can also be amended, if necessary, upon changes to the FSC standards or when receiving relevant comments from SHs. (1.6, 1.7).

9.2. The results of SHs comment are always reviewed and taken into account during internal DDS audits.

9.3. A log of internal DDS audits is kept (dates, auditors, identified DDS violations, review of violations no older than 12 months since identified). The use of DDS with overdue violations is not allowed. (1.8, 1.9, 1.10)

10. 2020 desk audits report

Desk audit results, number of HPHs for which:

Desk audits completed

SHs feedback received

High risks identified that required the closure of the HPH when analyzing information from public sources

Complaints received

Corrective actions fulfilled

Delivery suspended because complaints are not closed

119 68 2 12 9 3

10.1. Identified non-consistencies related to certain facts of violations of forest management rules (undercutting, leaving wood not exported in due period, violation of forestry rules and fire safety rules in forests), non-payment of wages to employees, systematic violations of lease payment terms.

10.2. Non-compliances identified using public sources related to liquidation of organizations, inaccurate information about the legal address according to the Federal Tax Service and an extract from the Unified State Register of Legal Entities in the absence of feedback.

10.3. Suppliers provided supporting photos/scans of documents that were accepted to close non-compliances as evidence of corrective actions taken.

11. 2020 field audits report

Field audit results, number of HPHs, for which:

Field audit performed*)

HPH closed as a result of a severe non-compliance

Without non-consistencies

With identified MNC

With unresolved MNC at the end of the year

6 0 3 3 0 *) Due to the epidemiological situation with COVID19, the number of field audits has been reduced compared to the plan from 26 to 6

11.1. The identified non-compliances related to certain violations of the Russian Federation legislation, labor protection, environmental requirements.

11.2. Suppliers provided supporting photos/scans of documents that were accepted to close non-compliances as evidence of corrective actions taken.

12. Contacts for comments and suggestions on the DDS:

1. Alexander Golubev – Forest Certification Group Manager, Wood Procurement Department, “NPAO Sylvamo Corporation Rus”,

email: [email protected]; mobile: +7 921 433 16 93.

2. Irina Kovtun – Certification Manager, Wood procurement Department, “NPAO Sylvamo Corporation Rus”, email: [email protected] ; mobile: +7 921 902 65 44.

mailto:[email protected]

mailto:[email protected]

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