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January 04, 2005
Latin American Forest Products Company Illustrates Best Practice Sustainability Reporting
    by William Baue

Terranova issues its second Global Reporting Initiative-based sustainability report, exhibiting many exemplary practices such as stakeholder engagement and external verification.

Late last month, forest products company Terranova issued its second sustainability report based on Global Reporting Initiative (GRI) guidelines. What makes this development particularly significant is that the company is based in Chile, a country not often associated with cutting-edge corporate sustainability performance. To put things into perspective, only four US-based forest and paper products companies--Georgia-Pacific (ticker: GP), International Paper (IP), MeadWestvaco (MWV), and Weyerhaeuser (WY)--have issued GRI-based sustainability reports.

The report also distinguishes itself on several other counts, including its straightforward presentation of information and easy readability, its depth of engagement with stakeholders, and its external verification.

"Several positives stand out for me in Terranova's 2002-2003 Sustainability Report as useful models for reporters," said Riva Krut, a vice president at Cameron-Cole, an environmental management services (EMS) consultancy. Dr. Krut has been tracking sustainability reporting since 1993.

"Their environment footprint chart is a model of how this type of information can be displayed," Dr. Krut told, referring to the concise one-page diagram graphing 2003 environmental performance in both sawmill and forestry operations. "GRI data is offered in an easy-to-follow format with metrics included in the GRI table." Often, sustainability reports provide indexes linking sections of the text to GRI indicators, but rarely do they include corresponding performance metrics in these indexes.

Terranova streamlined its presentation in response to stakeholder demand.

"Our employees, neighbors, suppliers, and customers requested that our reports be shorter and written in layman's terms," the report states. "We are confident that we have complied with their expectations; this confidence is supported by stakeholders' opinions of this report included at the end of this document."

In fact, stakeholder opinions appear throughout the report.

"Terranova's stakeholder engagement efforts seem conscientious," said Dr. Krut. "They seem to have integrated stakeholder engagement at a deeper level."

"And of course, as you want to see in this sector, there is a strong emphasis on the land rights of indigenous communities, and of preserving biodiversity," she added.

The report illustrates the strength of Terranova's engagement on indigenous land rights issues in the words of stakeholders themselves.

"The most important changes related to joint collaboration with the Mapuche communities are more evident in Terranova, as the company encourages dialogue whenever there is a land dispute," states Aucan Huilcaman, president of the Todas Las Tierras Council in Chile, in the report. "This does not mean that the company gives things away."

"Rather, there is a policy to listen, talk, and understand what each claim is about," he continues. "Twelve years ago Terranova had a different position, and today the change is due to the realization that the company cannot ignore the Mapuche communities, as this will propagate conflict." The report includes a chart of the current status of all land claim dispute resolutions.

Boldly, Terranova cites not only pats on the back, but also highly critical statements from stakeholders. For example, the section on clear cutting juxtaposes an opinion from the Clemson University Forest Resources Department defending the practice with an opinion from Chilean Forest Defenders criticizing the practice in the particular context of the mountainous Chilean landscape.

Throughout the text, Terranova lists commitments from its 2001 sustainability report that have been realized, as well as disclosing those that have not and those that are in process. At the end of the clear cutting section, Terranova states its commitment to sow "protective strips of other rapidly growing species" to reduce the "visual impact of future harvesting activities," addressing concerns raised by Clemson but not those raised by Chilean Forest Defenders.

The structure of the report benefited from interaction with other outsiders as well, namely its assurance auditor, KPMG.

"The experience of working with external verification has been particularly interesting in that it has helped us considerably improve our information and reporting systems," the report states. "It also made us realize that our environmental and social concerns need better systematization, and has helped us define our aims and objectives in these areas more accurately."

Terranova instructed KPMG to base its assurance on AA1000, the foremost standard in sustainability reporting developed in 1999 by AccountAbility, a decision "to be commended" according to Ms. Krut.

Even KPMG's assurance work took sustainability into account.

"Terranova's AA1000 assurance providers, KPMG, worked with Future Forests to offset the CO2 emissions associated with their travel--a carbon-neutral assurance project," said Ms. Krut.


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