UPM Annual Report 2017

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Strategy

In brief

Businesses

Stakeholders

Governance

Accounts

Responsibility is good business

FOCUS ON HUMAN RIGHTS UPM conducted a human rights due diligence of all UPM operational sites during 2017 as defined in the UN Guiding Principles on Business and Human Rights. The focus on UPM sites forms part of an ongoing process which also covers supply chains, through which UPM assesses risks to human rights and integrates findings into decision making and actions in order to mitigate any risks. As part of UPM’s human rights diligence process, self- assessment exercises were carried out at all 75 UPM operational sites globally with the guidance and assistance of Shift, the leading centre of expertise on the UN Guiding Principles. Shift provided input to the scope and coverage of the exercise, and interpretation of the results. The target of the process was to raise internal awareness of UPM’s responsibility to respect human rights and embed this as part of everyday operations. Orientation and awareness sessions were held for all Human Resources personnel and site managers prior to assessments at the sites, building capacity and understanding of the issues involved. The due diligence assessment revealed no major issues at UPM sites but identified areas common across a number of sites where practices should be strengthened. In particular, the management of contractors, local sourcing and community engagement would benefit from a clarified andmore consistent approach. The findings of the due diligence assessment will form a programme of ongoing activity during 2018 and have been used as input into a continuous review of our most salient human rights issues. focus area. One Safety, the global reporting tool, launched in 2016, was trained and implemented during 2017. The coverage of the tool has expanded to all UPM sites from the beginning of 2018. One Safety provides a standardised way of managing safety and environment- related operations within UPM. To further enhance product stewardship, UPM’s businesses launched several new sustainable and safe solutions such as Wisa BioBond plywood gluing technology and RafNXT+ labels. UPM also contributed to the revision of the EU Ecolabel for paper products. UPM signed a global partnership with FSC International to promote and widen the FSC certification, especially among private forest owners in Finland. At the same time, UPM’s operations at various logging sites in Finland caused concerns (page 63). Work continued towards environmental 2030 targets. The Zero SolidWaste to Landfill project was successful and UPMPlywood and UPMTimber businesses and UPM Jämsä River and UPMRauma paper mills in Finland have already reached zero waste level. The China More with Biofore research programme on environmental performance continued at the UPMChangshu paper mill. Tangible results are expected to be achieved in 2018. Emphasis is now being put on reducing UPM’s fossil CO 2 emissions with the long-term aim of achieving carbon neutrality.

UPM promotes responsible practices throughout the value chain and actively seeks sustainable solutions in co-operation with its customers, suppliers and partners. Creating value for society both as a company and through our products is an essential part of the Biofore strategy.

SIGNIFICANCE • UPM builds a sustainable future by replacing non-renewable materials with renewable ones, by using them more efficiently and by creating completely new kinds of solutions • Responsibility is an integral part of UPM’s Biofore strategy and our operations, and seen as a source of competitive advantage TARGET • UPM leads the forest-based bioindustry into a sustainable, innovation-driven and exciting future OUR WAY • UPM respects international agreements, such as the UN Declaration of Human Rights, the ILO Declaration on Fundamental Principles and Rights at Work and the OECD Guidelines for Multinational Enterprises • UPM’s purpose and vision incorporate responsibility and the creation of value in society • UPM’s Biofore strategy guides the company in achieving its responsibility targets for 2030 and in contributing to the UN Sustainable Development Goals • Our Code of Conduct provides a foundation for responsible business conduct and continuous improvement • The Board of Directors, Group Executive Team, and businesses and functions manage corporate responsibility

Commitment to the UN Sustainable Development Goals UPMparticipates in the UNGlobal Compact initiative whose ten universal principles are derived from international agreements in the areas of human rights, labour standards, the environment and anti-corruption. In 2017, UPM continued to work as a member of the UN Global Compact LEAD forum as the only representative of the forest industry and the only Finnish participant. UPMpromotes the Sustainable Develop ment Goals (SDGs) of the 2030 Agenda for Sustainable Development published by the UN. In addition to participating in global projects, UPM also works with several local expert organisations to promote and achieve the SDGs . UPMhas identified the goals where the company’s negative impact is largest or those where UPM can contribute most positively (other SDGs are also relevant to us, but to a lesser extent or only indirectly):

In 2017, four UPMmills completed their environmental performance reports, providing locally relevant information on societal aspects and impacts, under the EU’s EMAS (Eco-Management and Audit Scheme). In 2018, UPMwill broaden the scope to other pulp and paper mills to increase local transparency. Amore detailed description of UPM’s commitments, impacts and how corporate responsibility is managed can be read from the Report of the Board of Directors (pages 94–110). Other responsibility focus areas in 2017 Another main theme was strengthening management of compliance- related issues at UPM. UPM launched an initiative to further ensure adherence to the Code of Conduct and implemented a corresponding policy management framework. Following the revision of the UPM Supplier and Third Party Code in late 2016, UPM carried out internal training and implemented the Code with suppliers in 2017. The process will continue in 2018. Several targets related to social responsibility focus areas were revised in 2017. UPM continued human rights due diligence with a site-level human rights assessment focusing on working conditions at UPM sites, community relations and local sourcing (read more above). UPM considers the salient human rights issues within the company’s sphere of influence to be environmental pollution, occupational health and safety (OHS), working conditions, protection of children, and forced labour. In assessing human rights, the rights of the following vulnerable groups are especially taken into account: children, minorities, migrant workers and indigenous people. The safety of employees and contractors remains an important

• Goal 3: Good Health andWellbeing • Goal 8: Decent Work and Economic Growth • Goal 9: Industry, Innovation and Infrastructure • Goal 12: Responsible Consumption and Production • Goal 13: Climate Action • Goal 15: Life on Land

Continued focus on value creation and impact valuation The illustration presented on pages 74–75 includes examples of UPM’s direct and indirect value creation. In 2017, UPM assessed in greater detail the monetary value of the key environmental and social impacts in selected areas. Impacts were calculated when possible and relevant, showing qualitative and quantitative indicators.