UPM Annual Report 2017

Stakeholders

In brief

Strategy

Businesses

Governance

Accounts

UPM PERSONNEL IN FIGURES

2017 2016 2015 9.2 9.0 10.5 3.9 3.2 3.3 44.5 43.7 43.6

Turnover %

Full time 97%

Turnover % (voluntary) Average age of personnel People development Average training hours 1) (hours/employee) OHS figures, UPM workforce Lost-time accident frequency Total recordable injury frequency Number of occupational diseases 3) OHS figures, contractors Lost-time accident frequency Total recordable injury frequency Absenteeism % 3)

Promoting active participation As a multinational company, UPM complies with international, national and local laws and regulations, and respects international agreements concerning human and labour rights and freedom of association. UPM abides by legally binding collective agreements. UPM does not collect information on or report on its employees’ union membership at a global level due to differences in national legislation in the various countries. The estimated percentage of employees covered by collective agreement mechanisms was 69% in 2017. UPMpromotes active employee participation and consultation, organised in accordance with international and national rules and regulations. UPM respects the privacy of employees and promotes equal opportunities and objectivity in employment and career development. To encourage an open, international dialogue, UPMhas a co-operative body, the UPMEuropean Forum, which focuses on issues related to changes within the company and the business environment in general. The forum organises regular meetings for employee representatives from business units operating in Europe. Rewarding and recognising good performance UPM rewards and recognises high performance. UPMhas a total compensa­ tion approach, consisting of a base salary, benefits and incentives, which are determined by UPM’s global rules, local legislation, general agreements, local market practice, the level of the position and individual performance. Gender, age, ethnic origin and nationality have no role in the definition of salaries and wages. The differences between male and female average salaries do not vary a lot and in both directions, as assessed in UPM’s main countries of operations of salaried employees. 
Intangible recognition is included in the total reward portfolio, which means that UPMprovides, for instance, a safe and healthy working environment, interesting and meaningful work and good leadership and career opportunities. Individual, team and business performance are criteria for compensation planning and decisions. All of UPM’s employees belong to a unified annual Short Term Incentive (STI) scheme. The plan includes group- and business-level targets and personal and/or team performance targets. EBITDA is one of the key financial indicators for the group- and business- level targets. The annual incentives paid in 2017 for the 2016 STI plan were EUR 65 million and the estimated amount of annual incentives for the 2017 STI plan is EUR 57 million. For significant individual or team successes, there is a separate Achievement Award system in place. UPMhas two long-term incentive plans: a Performance Share Plan (PSP) for senior executives and a Deferred Bonus Plan (DBP) for other key employees. Since 2011, the plans have been launched annually and approx­ imately 700 employees have been covered by the plans. In both plans, the earning of shares is subject to the achievement of predetermined criteria. Under the plans, UPM shares are awarded based either on group/business area-level performance or total shareholder return. More information about long-term incentives can be found on www.upm.com in the Investors section, under Governance, in the Remuneration Statement. Changes in 2017 At the end of 2017, UPMhad 19,111 employees working in 46 countries. InMarch, UPMpermanently closed two paper machines in Austria and Germany, based on a plan announced in November 2016. In June, UPM restructured Paper ENA Supply, customer service and sales organisations in Europe. In October, UPM announced plans to permanently close one paper machine at UPMBlandin in the US, closed in December, and optimise operations at its UPMNordland Papier and UPMNorService units in Germany. As a consequence of these measures, the number of UPM personnel was reduced by approximately 650 people by the end of 2017. During the year, UPMRaflatac acquired a Texas-based Southwest Label Stock and opened a new terminal in Chile. UPM’s investments and business development, in biochemicals for example, increased the number of employees by approximately 300 people.

13 13 14

Part time 3% 21% 79%

3.3 3.7 3.9 8.2 9.3 10.6 3.8 3.4 3.7

17 12

6

7.0 6.2 5.5

9.4 7.5 2)

n/a

1) Reflects active employees 2) Figure for last 9 months of the year, excl. Germany and Austria 3) Reflects own employees

capabilities and wellbeing is important for both business success and sustained employability. Competences are continuously developed at UPM production sites. UPM trains people to become multi-skilled employees. UPMmills have apprenticeship programmes where employees learn the practical and theoretical demands of the work. Engaging leadership UPM strives to lead by example, in accordance with UPM’s values and with integrity. UPM’s values — trust and be trusted; achieve together; renew with courage — guide and support employees in their daily actions. UPM continuously invests in developing leadership capabilities and management teams. The development programmes support the three cornerstones of leadership: leading oneself, people and business. Dealing with complexity, coaching capabilities and promoting inspiring leadership have been the key areas of development in recent years. Leadership development solutions are continuously renewed. Based on the development needs evaluated in 2017, UPMwill further focus on improving the performance and motivation of people in 2018. Coaching capabilities and giving feedback will continue to be focused on. UPM continues to emphasise the development of front-line managers, as most of the UPM employees are led by them. UPM aims to have world-class management teams. In 2017, all key management teams conducted a self- assessment, planning and implementing development actions accordingly. Valuing diversity UPM aims to develop its working environment so that it is diverse and inclusive. It is important to employ people with different competences, backgrounds and experiences and of different genders, ages and nationalities, in order to bring together multiple views and improve decision-making and business success. In 2017, promoting diversity and an inclusive leadership culture continued to be a primary focus. UPM regularly reviews its diversity status and defines intent for each business and function. Diversity and inclusion are included in the regular management team self-assessments. Inclusive behaviour is integrated into key UPM leadership development programmes and emphasised also in UPMCode of Conduct training. UPM is committed to developing a diverse and inclusive workplace through the Finnish Diversity Charter. Enabling renewal through recruitment programmes UPM’s apprenticeship programmes in Finland and in Germany are a way to ensure the required level of expertise for future employees. The programmes are typically targeted at shop floor positions in production or maintenance. UPM carries out the programmes together with regional vocational schools. In Finland, approximately 100 people are included in the programmes annually. Most of the graduated apprentices have continued to work at UPM. Being the employer of choice has become more important when recruiting new employees and especially young professionals. Following a systematic employer branding work, UPM’s position has improved and it has been recognised by third parties in Finland and in China.

UPM BIOFORCE GRADUATE TRAINEES SEIZE THEIR OPPORTUNITY Enthusiastic young professionals from various back­ grounds and of several nationalities began the 18- month UPM Bioforce graduate trainee programme at a two-day boot camp in September. Aspiring trainees applied directly for specific positions in China, Finland, Germany, Russia and Uruguay, with the 14 accepted for the new pilot programme going through a thorough recruitment process involving detailed forms, psychological tests, video interviews and problem-solving teamwork assignments during the assessment day. Besides their own role and business area, all trainees will work on three modules outside of their own area. These tailored modules can be in other business areas or in global functions, and working abroad is obligatory. “Applying for the programme introduced me to new recruitment processes, especially the individual and team assignments,” says Juanita Roqueta from Uruguay. Juanita heard about the programme from the Universidad de Montevideo, where she studied International Business. During the programme, Juanita will work in Uruguay and Finland in a Stakeholder Relations role.

AIMING HIGHER SETS THE TONE

Aiming higher is an aspirational call-to-action for all UPM employees to further develop and improve every aspect of our performance — both as individuals and as a company. We started the journey towards achieving this by introducing new, more ambitious long-term financial targets. Since a winning culture is a prerequisite for high performance, we introduced a company-wide initiative for developing selected key mindsets which, together with our current strengths, will support UPM’s future success. The chosen mindsets were co-created through online dialogue and team discussions where several thousands of UPMers were invited to join and share their views on UPM's strengths and development areas for our future culture. As a result, the most important Aiming higher mindsets were identified. Discussions and plans for strengthening these mindsets were started in teams and one-on-ones. To support the development of the Aiming higher mindsets, UPM also introduced a new performance enablement model for salaried employees to complement current strengths such as clarity of strategic direction and financial target setting. The new model places emphasis on regular manager-employee discussions, agile goal- setting and regular feedback. Each business and function also received feedback on the status of its organisational health. Management teams did a self-assessment to ensure that agenda and diverse competencies are in place to lead best-in-class performance.

Read more: www.upm.com/careers www.upmbiofore.com

71%

TARGETS 2030

Employee engagement index favourable

CONTENTS

46

47

UPM Annual Report 2017

UPM Annual Report 2017