ESG Supplier Program

At CMPC, we are committed to upholding the highest standards of corporate responsibility, including environmental, social and governance (ESG) practices. Our commitment to ESG extends to our supplier relationships, where we prioritize sustainability and ethical practices.

We understand the importance of our purchasing practices in promoting ESG values throughout our supply chain. Therefore, we continually review our purchasing practices to ensure they are in line with our Supplier Code of Conduct and consistent with ESG requirements. This includes avoiding potential conflicts with ESG obligations.

To further demonstrate our commitment to ESG, we set high standards for our suppliers. Suppliers who cannot meet our minimum ESG requirements within a set time frame are excluded from contracting opportunities. This approach allows us to prioritize partnerships with suppliers who share our commitment to sustainability and responsible business practices.

CMPC implemented an ESG evaluation of strategic suppliers, in order to give preference to suppliers with a better ESG performance in the supplier selection and contract award processes. During 2023 we incorporated ESG criteria as a minimum weight in our evaluation process, ensuring that sustainability considerations play a significant role in our decision making. On the other hand, suppliers that do not meet the minimum ESG requirements within a set period will be excluded from contracting with us. In this way, we encourage our suppliers to actively contribute to sustainable business practices and generate a positive impact on society and the environment.

Additionally, we understand the importance of educating our team members about their roles in the ESG vendor program. To ensure a full understanding of our goals and expectations, we provide comprehensive training to our company’s buyers and internal stakeholders. This training equips them with the knowledge and tools to effectively support and implement our ESG vendor program. For Softys, these trainings are carried out in conjunction with EcoVadis.

The organization has criteria and definitions that help identify and classify suppliers:

• Strategic suppliers: are those who provide goods and/or services with high impact on company performance, either due to the amount traded or the complexity and criticality of the equipment or processes involved. Variables such as operational criticality, billing total, concentration of suppliers by category, technical and logistical complexity are used for their calculation. The Kraljic Matrix was used as a methodological tool.
• Local supplier: The Company’s General Procedure for Developing Local Suppliers defines them as having a permanent and close relationship with the local community where their productive operations are based as a result of their origins, ownership and initiatives that have positive impacts on employment and the sustainable development of the community.
• MSME Supplier: Each country where CMPC operates has its own specific definitions that cover micro, small and medium-sized enterprise suppliers.

– Argentina: definitions according to business line and annual sales (construction: up to ARS 466.9 million; services: annual sales up to ARS 222.1 million; trade: annual sales up to ARS 1,518.3 million; industry and mining: annual sales up to ARS 1,125.4 million; agriculture and livestock: annual sales up to ARS 334.9 million (Source: Ministry of Economy, Government of Argentina, 2024).

– Brazil: companies with annual sales of up to BRL 360 million (Source: Government of Brazil, 2024) 

– Chile: companies with annual sales of up to 100,000 UF (Source: Ministry of Economy, Development and Tourism, Government of Chile, 2024).

– Mexico: companies with annual sales of up to MXN 250 million. (Source: Government of Mexico, 2024) 

– Peru: companies with annual net income of up to 2,300 tax units (UIT) in the fiscal year. (Source: Congress of the Republic of Peru, 2024)

KPIs for Supplier Screening:

Since 2022, CMPC businesses have an evaluation process that seeks to measure the performance of its suppliers in sustainability matters, through a model that considers environmental, economic and social factors. The evaluation methodology is comprehensive, applied both remotely and in the field, and considers the following aspects:

• Country-specific risk: Each country of operation presents different degrees of political, economic and social risk, which may affect the stability and reliability of suppliers.
• Sector-specific risk: Each sector has its own particular challenges, so its specificity is taken into account, as well as environmental regulations, labor practices and supply chain vulnerabilities. Potential issues are identified and we work collaboratively to mitigate them effectively.
• Product-specific risk: Product risks can have an impact on the performance and reliability of suppliers, so risks associated with specific products, price volatility and interruptions in the supply chain are analyzed.

The process evaluates all suppliers of goods and services to ensure compliance with quality specifications, delivery terms, risk management and other obligations established in the respective contracts or purchase orders. Significant risks assessed during supplier evaluation include financial backing, customer diversification, accident and occupational safety indicators, compliance with legal and labor obligations,applicable certifications, conflicts of interest, global crimes (such as human trafficking and terrorism) and environmental issues. Lastly, supplier eligibility is determined based on an exhaustive verification, which includes financial analysis, fiscal regularity, mandatory records and technical evaluation.

These standards and methodologies provide clear and objective criteria for evaluating supplier performance in areas such as human rights, labor practices, environment, ethics and responsible supply chain.

The specific ESG criteria considered in the evaluations are:

Based on supplier assessments, companies are supported in implementing corrective actions and improvement plans to address identified gaps.

In the supplier evaluation process, both newly registered suppliers and those that bill around 1 billion dollars a year are evaluated. CMPC evaluates its suppliers of goods and services to ensure compliance with quality specifications, delivery terms, risk management and other obligations established in the respective contracts or purchase orders. Significant risks assessed during supplier evaluation include financial support, sole proprietors with exclusive billing to the company, workplace accidents, non-payment of employee pensions, applicable certifications, conflicts of interest, global crimes (such as human trafficking and terrorism) and environmental problems. Finally, we determine the eligibility of the supplier based on a thorough verification, which includes financial analysis, fiscal regularity, mandatory registrations and technical evaluation.

Softys’ goal is to have 100% of critical suppliers of goods and services assessed on ESG by 2025.

CMPC’s objective was to evaluate 80% of strategic suppliers, actually reaching 91% in 2023. The objective for 2024 was to reach the remaining 9% and this milestone was successfully achieved.  A strategic supplier is one that has a high financial impact for the company and a high impact on the supply chain.

Supplier Evaluations 2024

In 2024, CMPC had a total of 12,401  level 1 (direct) suppliers, while Softys had 10,059. Of the total of 22,460 direct suppliers, 346 suppliers are considered to be significant or strategic CMPC does not use the “non-Tier 1” supplier classification, as its procurement model is based exclusively on direct relationships with suppliers. Consequently, all suppliers with which the company engages are considered Tier 1.
The total spending on suppliers during 2024 was USD 6,363 million, of which CMPC allocated USD 1,789.6* million to its strategic suppliers.

During 2024, a total of 883** suppliers were evaluated through remote or face-to-face evaluations, among these 306 strategic suppliers. CMPC also implements comprehensive capacity building programs designed to systematically enhance supplier practices and performance on specific ESG topics. In 2024, 109 suppliers participated in these programs.

(*)This total value refers exclusively to CMPC’s strategic suppliers and does not include those of Softys

(**) The same suppliers can be evaluated through the three different methodologies in CMPC and Softys.

Remote Supplier Assessments

Remote supplier assessments are performed with systematic verification of evidence. During 2023, CMPC implemented an ESG (environmental, social and governance) audit to measure supplier compliance with the standards established by the Company. In addition, audits are conducted for suppliers defined as “strategic”, to guarantee compliance with internal and regulatory requirements. The process determined opportunities for improvement in the Company’s suppliers, which were converted into action plans for each of the evaluated suppliers. During the first quarter of 2024, the Company deepened contact with those suppliers not evaluated, in order to reach the total sample. Softys uses an online platform provided by EcoVadis, where suppliers complete questionnaires and provide the required documentation to demonstrate their sustainability performance.

On-Site Supplier Evaluations

Supplier evaluations can also be conducted in person by employees of the purchasing company or a contracted consultant (second party evaluation). CMPC carries out on-site evaluations for each service execution, where the Evaluation and Incorporation Committee evaluates the supplier’s performance. During 2023, an ESG indicator that involves planned on-site visits to suppliers that do not meet the company’s standards was implemented. Third-party assessments are also being implemented by CMPC through an accredited and independent audit entity as part of the ESG audit process. Suppliers who score below 60% overall (poor or very poor) for two consecutive years or three times within a five-year period are not eligible to become CMPC suppliers.

Evaluation standards and methodology

At CMPC, our supplier evaluation methodology encompasses a comprehensive approach that considers the specific risk of each country, the specific risk of the sector, and the specific risk of the products. We understand that different countries present different degrees of political, economic and social risk, which can affect the stability and reliability of our suppliers. Therefore, we carefully assess the risks associated with operating in different countries to ensure that our suppliers can meet our standards and deliver consistent quality.

Furthermore, we recognize that each sector has its own unique risks and challenges. We take into account the specific risks associated with the sector in which our suppliers operate, such as environmental regulations, labor practices and vulnerabilities in the supply chain. Through a thorough assessment of industry-specific risks, we are able to identify potential issues and work collaboratively with our vendors to effectively mitigate them.

We also understand that product-specific risks can have a significant impact on the performance and reliability of our suppliers. We analyze and assess the risks associated with specific products, including price volatility, supply chain disruptions, and sustainability concerns. This allows us to make informed decisions when selecting suppliers and ensuring they have the necessary capabilities and safeguards in place to manage product-specific risks.

For the ESG audit, CMPC uses international standards and methodologies such as DJSI, CDP, among others. The relevant criteria are measured using assessments from related organizations such as the General Treasury of the Republic, mutual funds, government institutions, etc. Softys uses the EcoVadis platform, which is based on the principles of the United Nations Global Compact, the international standards of the International Labor Organization, the Global Reporting Initiative and the Global Compact Index. These standards and methodologies provide clear and objective criteria for evaluating supplier performance in areas such as human rights, labor practices, the environment, ethics, and responsible supply chain.

Corrective/Improvement Action Plans for Suppliers

CMPC implemented an ESG indicator that includes on-site visits to suppliers that do not meet the company’s standards. Action plans are developed in each case to address the gaps identified. Softys provides recommendations and guidance to suppliers through the EcoVadis platform to help them implement corrective or improvement action plans. These plans may include specific measures to address identified deficiencies and improve performance in key sustainability areas.

Support to Suppliers in the Implementation of Corrective and Improvement Actions

At CMPC, we provide remote and on-site support to suppliers in the implementation of corrective and improvement actions. We have a comprehensive technical support program designed to improve vendor ESG capability and performance. Our Local Supplier Development Program follows the following stages:

• Diagnosis: We evaluate the current practices of the suppliers and identify areas for improvement.
• Identification of Opportunities for Improvement: We detect gaps and opportunities for improvement.
• Strengthening: We provide resources, training and guidance to help suppliers strengthen their practices.
• Accompaniment and Implementation of Improvement Plans: We provide continuous support to suppliers during the implementation of improvement plans.
• Measurement, Results and Impact: We measure the results of improvement efforts and evaluate their impact.

Softys also offers strong support to suppliers on their sustainability journey. We provide suppliers with a detailed report that highlights specific areas for improvement. This report includes specific recommendations and action points to address the identified gaps. In addition, our platform offers additional resources and tools to help suppliers implement any necessary corrective or improvement actions.

All suppliers assessed through EcoVadis have free access to our learning platform, educational resources, training courses and materials related to sustainability and corporate responsibility. We believe in providing support without additional costs. In addition, our suppliers can seek help through the EcoVadis support center for any additional guidance they may need.

Supplier Development

At CMPC, we understand the importance of involving and supporting our suppliers in the adoption of ESG (Environmental, Social and Governance) practices. We have implemented a Supplier Development Program with the objective of providing information, training and support to our suppliers to ensure that they meet the requirements of our program.

Information and training

Information and training are provided to suppliers on the company’s ESG program, process, and requirements. In 2022, CMPC completed a Local Supplier Development Training Program for 100 companies associated with the company, addressing topics such as occupational health and safety, compliance, systems, finances, sustainability, among others. The third edition of the program was launched in the same year, continuing through 2023 and incorporating suppliers from four Latin American countries for the first time: Argentina, Chile, Mexico and Peru. This edition included the participation of 237 people from 130 companies with 12 workshops and more than 600 mentoring sessions. It is scheduled to conclude in the second quarter of 2024. In this program, CMC provides industry best practice examples, encouraging suppliers to replicate and contribute to ESG efforts.

At Softys, guided by our Responsible Supply Policy, we annually select our critical suppliers and offer them a webinar with the following objectives:

• Communicate transparently the company’s sustainability strategy.
• Clearly and concisely convey Softys’ sustainability objectives, goals and approaches.
• Build commitment to better understand Softys’ sustainability expectations and how suppliers can align with them.
• Encourage networking and collaboration between Softys and its suppliers.

In addition, through our Supplier Web Portal, suppliers can register themselves in our program and learn about our sustainability strategy.

Since 2021, we organize events for our suppliers that reinforce our sustainability strategy and recognize those who have achieved the highest scores:

• Softys Business Partner Awards (in person): We recognize and reward outstanding suppliers during this event.
• Softys Business Partner Awards (online transmission): In this global public event, aimed at our suppliers, the current strategy of Softys was presented, as well as how we intend to transform ourselves for the future, contributing to a more sustainable society.

These events serve as a platform to promote sustainability and encourage positive reinforcement among suppliers who have demonstrated excellence in their practices.

Access to ESG performance benchmarks

As part of the Local Supplier Development Program, we provide real examples of best practices in the industry so that our suppliers can replicate them and contribute to the ESG approach.

At Softys, through our digital assessment platform, suppliers have access to compare their global score and scores in specific areas (environment, labor practices and human rights, ethics and sustainable procurement) against a vast global database. from EcoVadis, classified by country/territory and sector.

For a detailed list of our suppliers of goods and services, please visit Social Field/People/Goods and Services Suppliers/