UPM Annual Report 2017

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Businesses

In brief

Strategy

Stakeholders

Governance

Accounts

Opportunities of bioeconomy

Cost savings New services New business models Improved products New products Go-to-market concept Cost savings New products New technologies Application development Commercialisation

UPM continues to develop biomedical products in collaboration with researchers at Biomedicum in Helsinki, Finland. GrowDex hydrogel is suitable for cell culturing, and medical research is finding more new applications for it. One example is a new wound dressing product that is expected to be launched soon. Lignin can be used in resins employed as binders in wood-based products, as well as in plastics, foams and coatings. In 2017, UPMPlywood launchedWISA BioBond, a gluing technology for plywood manufacturing where fossil-based phenol is replaced with lignin (read more on page 39). Formed as a side stream in the pulp production process, lignin has traditionally been burned to generate energy, but the new technology turns it into a high-quality product that can replace fossil rawmaterials. The gluing technology is based on lignin technology developed and patented by UPMBiochemicals. Developing new end uses and feedstocks in biofuels Made from a renewable rawmaterial, crude tall oil, UPMBioVerno naphtha is an excellent biocomponent for gasoline. It also works exceptionally well as a rawmaterial for producing bioplastics (read more on the next page). UPMBiofuels announced that it is testing a sequential crop of Brassica carinata in Uruguay and Brazil as part of biofuels future development. Carinata is an oilseed crop specially developed for sustainable production of biofuels. New biocomposite materials for indoor and outdoor uses UPMBiocomposites develops innovative and sustainable composite products for various outdoor uses and consumer products. The patented UPMProFi production process is a good example of circular economy: cellulose fibres and polymers from self-adhesive label waste is used to create high-quality decking systems. UPMFormi composite material, made from cellulose fibres and polymers, is suitable for a variety of applications from furniture to consumer electronics. UPMFormi complies with the requirements set by the EU for reinforced plastics in relation to circular economy, and its carbon footprint is up to 50% lower compared to traditional plastics. Advanced analytics for efficient decision-making UPMutilises advanced analytics to significantly improve the optimisation of sales, production, logistics and inventory management, as well as risk management. Analytics provide a competitive edge and added value quickly and cost-efficiently. UPM set up an advanced analytics team in 2017 to develop modern tools based on applied mathematics, both to support decision-making in UPM businesses and for use across the company. UPMForecasting Platform, launched in 2017, made top-level algorithmic forecasting available throughout the company. The analytics team offers data science training for UPM employees and is involved in academic collaboration with UPM’s external networks. Solid patent portfolio UPM actively protects innovations and brands with intellectual property rights, and manages and uses its patents, trademarks and other intellectual property rights worldwide. Protected innovations and high-level risk management are an integral part of UPM’s business model. UPM is also actively seeking partners and licensing opportunities to develop new technologies and solutions for its customers. The significance of the patents and intellectual property rights protecting UPM's innovations is even more pronounced in new businesses. A solid patent portfolio boosts UPM's competitive edge and also provides an excellent basis for value creation in the future. UPMfiles approximately 360 patent applications around the world every year. Technical solutions and innovations that use wood, chemicals, energy and water more efficiently are being patented also in existing businesses like pulp and paper production. Research projects to enhance circular economy UPM's research into the side streams of pulp and paper mill integrates aims to find more efficient ways to utilise side streams such as sludge, ash, green liquor dregs and waste heat.

NEW

BIOFUELS • Significantly decrease both fossil greenhouse gas emissions and tailpipe emissions • Renewable diesel fuel suitable for all diesel engines • Renewable naphtha that can be used as a bio- component for gasoline and as a raw material for bioplastics BIOCHEMICALS • Biochemicals replace oil-based products and can be used in, e.g., textiles, bottles, packaging, deicing products, composites, cosmetics, pharmaceutical products and detergents • Medical products, such as wood-based hydrogel GrowDex, for 3D cell culturing and other biomedical applicatio ns • Lignin products replace oil-based products and can be used in, e.g., resins, plastics, foams and coatings BIOCOMPOSITES • Biocomposites are recyclable materials that reduce the amount of solid waste and carbon footprint • UPM ProFi composite for decking boards for terraces and fences • UPM Formi composite material for various end uses targeting at consumer electronics

GROWTH

MATURE INNOVATION NEEDS DIFFER IN UPM’S BUSINESSES

DIGITALISATION AS A TOOL FOR TRANSFORMATION

A joint project with fertilizer manufacturer Yara develops recycled fertilizers for crops from sludge. Research projects have investigated many solutions for the use of green liquor dregs and ash, and some more promising development projects are currently underway in the construction sector (read more on page 73). UPM also applies the positive results in its Zero SolidWaste project, aiming to develop intelligent and sustainable solutions for recycling surplus materials to ensure they produce added value. The China More with Biofore research programme is looking for technical solutions for UPMChangshu paper mill to decrease water consumption and emissions, save energy and utilise solid waste, for example. The mill's water consumption and energy-efficiency are already at a good level and among the best in the world, and their sulphur dioxide, nitrogen oxide and dust emissions are clearly lower than China's most stringent limit values. Aiming for bioeconomy The bioeconomy is based on the sustainable use of renewable resources. UPM's bio-based products can reduce the use of fossil rawmaterials and replace non-renewable materials with renewables. The bioeconomy utilises the best available techniques to consume and recycle natural resources and nutrients efficiently. Biodiversity forms the basis for a sustainable bioeconomy. One example of a research project exploring opportunities of bioeconomy is UPM's Sustainable Fibre Materials programme, which examines new ways to utilise fibre-based, value-added products and materials. The aim is to find sustainable and safe solutions that replace fossil alternatives and are environmentally sound and versatile. The starting point for the development work is UPM's ecodesign thinking, covering the impacts of the entire lifecycle. Special attention is paid to the biodegradability of products. Business Finland supports this programme. Fibre-based materials are being developed for growing end-uses such as tissue, hygiene, nonwovens, flexible packaging, labels and biocomposites. New solutions will be developed in collaboration with UPM's businesses, research organisations and customers. Extensive partner network UPM's extensive partner network comprises universities, research institutes, suppliers and start-up companies. Collaboration speeds up the development and launch of new solutions, particularly for new businesses. UPM is involved in the European Joint Undertaking on Bio-based Industries, BBI. The partnership programme focuses on the development of bioeconomy, bio-based products and their production, as well as on strengthening their competitiveness in Europe. The members of the programme represent several industries. UPM is a shareholder in the Finnish CLIC Innovation company whose research programmes focus on bioeconomy and cleantech research, as well as energy and environmental research, thus supporting UPM's own R&D efforts.

Digitalisation continuously creates new opportunities for UPM to explore new technologies, applications and robotics to gain newly optimised outcomes for competitive advantage. In addition to process automation and industrial robots, which have long been used at product ion facilities, tools for analytics, optimisation, forecasting and more agile decision-making are being created. Digitalisation, extensive use of existing and new data and industrial internet solutions are already in use in processes in the mills; however, in the future digitalisation will increasingly be visible in customer fronted processes such as supply chain, sales and quality monitoring. Visual and user friendly mobile applications for customers, suppliers and personnel are being developed. UPM has been very active at various innovation events and in searching for partners. As a result, an extensive co-operation network has been established to pilot and scale up new digital possibilities in industrial processes, customer interfaces, the supply chain and administrative work. A good example is UPM’s new eOrder service for paper ordering, launched in 2017 (page 37). The service developed for UPM ProFi, a biocomposite material for decking materials, helps managing the certified installer base by combining online marketing and training, extranet services and the customer relationship management (CRM) platform. The UPM Metsäni (My Forest) application provides forest owners with a mobile service that gives them an estimation of the distribution, volume and age structure of their forests in a matter of seconds as well as allowing them to estimate the value of the forest in euros. The aim is to engage private forest owners and therefore increase wood trade.

RENEWABLE RAW MATERIALS FOR PLASTIC INDUSTRY

Packaging industry strives to enhance the usage of renewable raw materials, also in plastics. UPM aims to offer high-quality alternatives to non-renewable materials. UPM BioVerno naphtha produced from crude tall oil, a residue of pulp production, is an excellent biocomponent in petrol. It also works exceptionally well as a raw material for producing bioplastics. Bioplastics produced from renewable naphtha are suitable for various packaging applications. These include packaging used by the food industry, such as cartons for liquids. UPM is one of the very few renewable naphtha producers in the world.

Number of UPM patent filings

400

300

200

100

Read more: www.upmbiofuels.com, www.upmbiochemicals.com, www.wisabiobond.com, www.upmprofi.com, www.upmformi.com

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