Biofuels, which are increasingly gaining space in our portfolio, are assuming a strategic position in the market due to the low-carbon logic and the global need to limit the increase in the average global temperature to 1.5 °C above pre-industrial levels, as advocated for by, for example, the Paris Agreement, which replaced the Kyoto Protocol in 2020. Brazil's Nationally Determined Contributions (NDC) include, among other measures, an 18% increase in the share of sustainable bioenergy in the country's energy matrix by 2030. To contribute to achieving this goal, the Federal Government created the National Biofuels Policy (RenovaBio) three years ago, effective as of December 2019. The main instrument of the provision is the establishment of annual decarbonization targets for the Brazilian fuel distribution sector, broken down into specific targets for each distributor based on their performance in the previous year. The targets are met through the purchase of CBios, credits generated by biofuel producers according to the carbon intensity of their production processes.

Therefore, there is increased importance on quantifying and managing our Greenhouse Gas (GHG) emissions. These are practices that we have adopted since the start of our activities based on the guidelines of the Greenhouse Gas Protocol and its Brazilian version, the Brazilian GHG Protocol Program. Most of the data is collected automatically to avoid information handling and mitigate calculation errors. The results are submitted for an independent audit, which results in an analytical report on each of our emission sources. This allows us to map where our biggest and smallest impacts are and assess the application of more or less energy to drive our transition to a low-carbon economy. |GRI 102-12|

* We started to monitor emissions in Argentina in 2020.

More information about our emissions is available here

Additionally, we answer Carbon Disclosure Project (CDP) questionnaires. This financial sector initiative has become the main international database focused on topics such as climate change, water, and forests, and it seeks to understand the evolution of companies and cities in relation to these topics. In 2020, we reached the “A-“ level, which places us among the companies with the best practices (Leadership). |GRI 102-12|

We are also evaluated annually through the EcoVadis platform, an international system that considers criteria for responsible business management. We were awarded a Silver medal, which places us in the top 25% of the 50,000 analyzed in about 150 countries. Specifically in our industry, we are among the 23% of companies with the highest scores. |GRI 102-12|

In addition to innovating internally in the constant search for effectiveness and efficiency, we are attentive to innovations in the sectors in which we operate. Pulse, our open innovation hub, is fundamental to this work. Currently, the structure collaborates directly with the development of more than 38 startups, and more than 70 pilot projects have already been conducted in partnership with several areas in our team.

In August 2020, registration was opened for the hackathon dedicated to the development of complementary tools for Shell Box. The Out of the Box marathon involved startups in three immersive days of a 100% digital event. This was Pulse's first major action outside agribusiness. Some of the challenges proposed were: an analytical platform for managing transactions and fleet operations; a systemic view of invoice collection; vehicle identification and mileage control; monitoring of consumption behavior; and solutions for gamification and reward.

The startups selected received detailed instructions about the challenge and the means used to develop the projects, along with the Shell Box squads. All solutions presented were evaluated by a panel that considered criteria such as usability, innovation, and technology development. Besides winning a year's supply of ethanol at Shell gas stations, the winning startup went on to develop a pilot project (but was not contracted to become our supplier).

Pulse also opened a sustainability call for proposals to select startups with solutions that impact our ESG commitments (see here). The proposed challenges seek solutions in the following pillars: climate change and energy transition, water management, land use, sustainable sugarcane, human rights, and social and environmental ethics and compliance. With the call for proposals, we seek to strengthen partnerships that will help us consolidate our positive impact and fulfill the commitments we have recently assumed in an innovative and agile manner, relying on a collaborative network of best practices.

The proposals aimed to generate innovative products, software, processes, or services based on technology for the reality of our different businesses. The initiative was developed in partnership with Endeavor, SP Ventures, Thought for Food, and Associação Brasileira de Startups (Abstartups).

After the sign-up period, the Pulse team conducted interviews and assembled the selected startups. The solutions were evaluated on Pitch Day, which included a technical team and executives from our team. The approved proposals went on to the ideation and pilot-project development phase. If the solution delivered meets the expectations of the challenge proposed and has positive results in the field, the startup might be hired as a long-term supplier, with differentiated conditions and collective mentoring from Pulse partners.

The goal is to expand examples such as ARPAC, a startup specializing in agricultural services, which has already signed a contract with our team. The innovation proposed consists of using drones to spray herbicides capable of fighting weeds in sugarcane fields in a strictly localized manner.

After conducting tests to validate the technology, it was found that its use resulted in operational savings of 47% and input savings of 82%. The innovation contributes to reducing pesticide use and, consequently, to lowering the environmental impact by applying inputs more effectively and accurately. The project is inclined to grow already considering a variation identified in the results. With use in a larger area, the projection is for operational savings of around 30%, and savings in inputs of nearly 60%. Our expectation is to replicate the solution not only in our own commercial areas, but in the properties of sugarcane suppliers.

In addition to the spraying drones, ARPAC is developing a sugarcane ripener pilot project. By using new tools and equipment, we are betting on an even more assertive application of inputs, which directly contributes to improving the management of costs and production.

Another highlight from 2020/2021 was the consolidation of our partnership with Agricef, our supplier for ultimate precision planters, a technology that is very common in grain crops but still not widespread in the sugar, ethanol, and bioenergy sector. We are, therefore, pioneers in the implementation of equipment that uses the gaps identified mainly by images captured by Unmanned Aerial Vehicles (UAVs) and plants the areas identified in a more assertive way, using the exact number of seedlings to correct the detected gaps.

Pulse is increasingly consolidated within this ecosystem as a link between our business and startups, validating projects in line with our strategic objectives.

Similarly, in Argentina, we work in partnership with Endeavor in the scope of Impulso Raízen, an open innovation program aimed at startups and entrepreneurs in the logistics, customer relations, and energy areas. In 2020, those selected in the program's first call for proposals continued with us in the development process. We are checking the feasibility of each idea for subsequent contracting.