Paper at the expense of communities and nature in Brazil

Paper company Suzano has received billions of dollars in sustainable bonds to expand Brazilian operations. Local communities fear they will pay the environmental and social price.In January 2023, members of the Curvelandia community in Brazil's north-eastern Maranhao state used branches and palm fronds to create a barricade across the red dirt road that runs through their 1200-strong village.

They wanted Suzano — Latin America's largest eucalyptus pulp producer — to pave and manage the dirt track and reduce the number of trucks along it to nearby eucalyptus plantations.

They also want the Brazilian company to deal with environmental and land issues resulting from the construction of the road, which community member Sandro Lucio said was built on Curvelandia land, including his property.

"There was no agreement. They didn't pay anyone anything," he said, adding that they just turned up with heavy machinery. "They removed the fence from my land and the truck ran over and killed my horse. They also installed water systems without saying they had permission from the state to draw water from the springs."

He argues they had no such permission, since the land was private.

Curvelandia is not an isolated case. DW investigated eight ongoing socio-environmental conflicts on the ground in Brazil, and spoke to officials, community leaders and union representatives who gave information on at least 40 more. According to documents Suzano is required to submit to the U.S. Securities and Exchange Commission, the company is facing 262 possible and probable civil and environmental proceedings, and 2,449 probable and possible labor proceedings.

Claims against the company range from indiscriminate use of pesticides and pollution of waterways to land grabbing and failure to consult with traditional communities on infrastructure projects.

Yet Suzano, which manages over a million hectares of eucalyptus plantations across the country and plans to almost double that in the next decade, has succeeded in achieving high environmental, social and governance (ESG) ratings and attracting billions in green investments.

Many shades of green finance

Globally, green finance is the fastest growing financial sector, with the World Bank predicting it will balloon from $100 billion (€90 billion) within the next three years to $10 trillion by 2030. Suzano is already benefiting.

The multinational has received billions from big players including French banking group Credit Agricole, the Government Pension Fund of Norway and the Netherlands' pension fund, Dutch Pensioenfonds Zorg en Welzijn.

According to analysis by Forest & Finance, a coalition of organizations tracking forest-risk commodities and companies, Suzano received 15% of all known loans and underwriting for such commodities between 2015 and 2020. That makes it the single largest recipient of credit out of all the companies dealing in forest risk goods. These include cattle, soy, palm oil, cocoa, rubber, and wood products like timber and paper — all of which have been connected to deforestation, a major driver of planetary heating.

Ward Warmerdam, a senior financial researcher at Profundo, a Netherlands-based NGO that analyzes sustainability in international commodity supply chains, said forest risk also refers to the land-grabbing and human rights violations that often accompany deforestation. He said even though banks and other investors should practice better due diligence when considering financing, most don't.

"That's one of the biggest issues," Wardman said. "All the financial institutions that are developing policies are doing so on a voluntary basis, which means there are no standards, there are no regulations, there is no monitoring of this."

Meanwhile Suzano has also been able to attract green finance in the form of ESG bonds. In 2016, the company became one of the first in an emerging economy to issue green bonds and in 2020 it started issuing sustainability-linked bonds. These bonds hinge external financing on select environmental and social targets, such as emissions reductions, water use intensity, and gender diversity in management.

Some 39% of Suzano's debt is linked to green financing and that amount is set to grow.

'Everything changed the moment eucalyptus arrived'

Celio Pinheiro Leocadio, who heads the Volta Miuda quilombo — a community formed by descendants of African people who escaped slavery — is stunned that the pulp giant has been able to attract so much green finance.

"Suzano commits environmental racism. It disregards and disrespects the history of our people, our black ancestry, and the suffering we carry and experience," he said.

The 3,495 quilombo communities in Brazil have special rights under the Brazilian constitution, including the right to their ancestral territory. However only 206 have official land titles, leaving them vulnerable to territorial disputes.

Around 90% of the 6500 hectares of the Volta Miuda territory, which lies in the very south of the Brazilian state of Bahia, is covered by eucalyptus plantations that Suzano either supplies or owns. Trees grow between the houses of community members, who say the plantations have led to reduced levels of groundwater in their territory while agrochemicals have polluted their waterways.

"This whole region, it was once rich in everything," Pinheiro Leocadio said. "Everything changed the moment eucalyptus arrived. The springs started to disappear. We lost the forests."

Are ESG ratings reliable?

The Dutch organization BankTrack, which tracks private sector commercial bank investments, lists Suzano in its "dodgy deals'' section — a red list of harmful projects or companies financed by banks. The company appears there in large part because of its history of land conflicts with traditional and local communities, according to the NGO.

Brazilian journalist Antenor Ferreira reported that around 70% of the plantations Suzano acquired in the north-east Maranhao state resulted from land-grabbing. Brazilian and international NGO's have detailed ongoing conflicts with the company. But that information isn't necessarily reflected in a company's ESG rating. Currently, most companies scored on whether they have things like a human rights policy, not whether they are abiding by them.

"ESG raters generally have an amalgamated score. They don't separate out the E, S, and G," said Joanne Bauer, an environmental and human rights expert, and Adjunct Professor of International Affairs at Columbia University. "If the company is seen as sustainable based on environmental metrics and not social ones, that's actually another blind spot for proper due diligence and human rights."

A spokesperson for Pensioenfonds Zorg en Welzijn told DW that allegations against Suzano, including those referred to in this article, were also flagged by their internal screening process, and that they would "continue to engage regularly directly with the company to understand these allegations." Adding that the outcome of that engagement "could eventually lead to divestment."

Credit Agricole and the Norwegian Government Pension Fund Global declined a DW request for comment. But they referred to their "forestry and palm oil" policy as well as a document on how companies in their portfolio are expected to manage "global challenges" like climate change and human rights.

Another new road in the making

Meanwhile, Suzano is constructing a road through Volta Miuda and two other quilombos. Pinheiro Leocadio and other community members say it will destroy not only their native Atlantic Forest, but the traditional paths and gathering sites they've used for generations.

In January, Volta Miuda and seven other quilombos who have been fighting against Suzano for several years sent a letter to the federal public ministry and local public defender's office asking to halt the construction of the new road.

"They are ignoring us," said Pinheiro Leocadio. "Our right to be consulted has been violated."

In response to DW's request for comment, Suzano said "engagement is at the heart of our approach." That includes, the company continued, "our engagement with the Volta Miuda quilombo and the Curvelandia community."

The pulp giant said it participated in more than 3,700 dialogues last year, averaging more than 10 each day and had "addressed 86.6% of the operational issues identified, with 92.6% accepted as an effective solution."

'Monocultures can never be good for people and the environment'

Late last year, the International Finance Corporation (IFC), the private arm of the World Bank, approved a $600 million in loans to Suzano to build a new pulp mill project in the south-eastern state of Mato Grosso do Sul.

It will be the world's largest single eucalyptus pulp production mill. It will also be a "fossil-fuel free" pulp plant, producing the industry's lowest-cost hardwood pulp with what Suzano is saying will have minimal environmental impact.

The project will cause more social conflicts, while large-scale eucalyptus monoculture plantations "decrease the richness of biodiversity," said Karen Vermeer, who works for the Environmental Paper Network.

The NGO works for a sustainable paper industry and is one of over 40 environmental and civil society organizations that sent a letter to the IFC in response, urging them not to approve the loan for the project.

"There's no way that a large-scale monoculture plantation, at least not on the scale that Suzano is operating, can ever be good for people and the environment," said Vermeer.

Edited by: Tamsin Walker

This investigation was developed with the support of Journalismfund Europe

Author: Sarah Sax, Mauricio Gomes Angelo