UPM Annual Report 2017

Stakeholders

In brief

Strategy

Businesses

Governance

Accounts

In November, UPM signed an agreement with the Government of Uruguay on infrastructure development and other local prerequisites for a potential pulp mill investment in the country. The signing was followed by a handshake and press conference in Montevideo.

To ensure long-term engagement, UPM works consistently with its diverse range of stakeholders to understand their specific expectations. It is equally important to communicate and discuss the company’s targets, operating principles, values and the challenges it faces within the operating environment.

Stakeholder engagement brings stability to operations As stakeholders view UPMprimarily as an economic operator, financial success, stability, future outlook and growth are key themes for most stakeholders. In addition, UPM’s environmental performance and social responsibility play a significant role in UPM licence to operate and affect the long-term success of its businesses. UPM aims to provide a balanced view of the economic, environmental and social aspects of its business activities, recognising, however, that expectations vary between stakeholders. Stakeholder engagement is part of the strategy process For all businesses, stakeholder mapping is an essential part of stakeholder relations, along with the systematic gathering of feedback and views from different sources. UPM’s materiality analysis highlights the most important issues for UPM and its stakeholders. The analysis is based on stakeholder feedback and the company’s risk mapping. UPM’s most important stakeholders are customers, investors and financiers, employees, suppliers, local communities, authorities and decision makers, the media and non-governmental organisations. The approach for each stakeholder varies depending on business focus, region and individual stakeholder groups. Best practices are regularly shared. The UPMCode of Conduct sets the standards for responsible behaviour towards stakeholders for each and every UPM employee. The standards cover topics relating to legal compliance and disclosure, conflicts of interest, anti- corruption and anti-bribery, HR practices, human rights questions and environmental matters. The level of stakeholder engagement is measured by several indicators, such as customer enquiries, contact with the mills, forest department or investor relations, number of job applications and share-price development. Activity in 2017 UPM carried out a materiality analysis based on several surveys, customer enquiries and feedback from an anonymous web-based tool. A detailed description of the analysis is available on page 53. Implementation of the Code of Conduct, renewed in 2016, continued. Targeted training sessions were organised for specific employee groups (read more on page 77). By the end of the year, 98% of active UPM employees had completed a Code of Conduct training session. Sustainable forestry issues were highlighted during the year and discussions on forestry were carried out with environmental organisations, certification bodies, authorities and decision makers (read more on page 63). Customer enquiries focused on topics such as product safety, ecolabels and the origin of rawmaterials. The majority of direct feedback from stakeholders focused on the local effects of UPM’s operations, such as odours or visual impact of forest logging. UPMprovided further information relating to each topic. In addition, some UPM sites, UPMKaukas for example, introduced community evenings to share information and receive feedback. Competitiveness at the forefront of public affairs Through public affairs work, UPM aimed to foster the necessary prerequisites for operations, particularly in Finland, Uruguay, Germany and China. UPM co-operated with a number of trade associations on these topics, the most important of these being the Finnish Forest Industries Federation (FFIF) and the Confederation of European Paper Industries (CEPI).

FOCUS ON EU’S CLIMATE POLICY

The focus of the EU’s climate change policy agenda for 2030 and beyond can be divided into three parts: land use emissions, which are regulated through the LULUCF regulation (Land Use, Land Use Change and Forestry), industrial emissions, within the EU emission trading scheme, and emissions outside emission trading, such as transport. The aim of land use regulation is to ensure that emissions are followed and accounted for, and that an equivalent amount of CO 2 is captured from the atmosphere by each member state. During 2017, a regulative proposal for these measures was handled in legislative procedures of the European Parliament and EU member states. The EU renewable energy directive, including sustainability criteria for biomass in energy production and the new post 2020 framework for biofuels in traffic, was also revised in 2017. In its advocacy communication through, for example, one-to-one meetings, joint association outreach, and letters and articles directed at MEPs, politicians and civil servants, UPM has been stressing that forests, and sustainable wood harvested from the forests, can form a sustainable alternative for fossil-based raw materials and products. The LULUCF legislation should contribute to an increased use of sustainable renewable material, by promoting active and sustainable forest management. For the de-carbonisation of the EU traffic sector, UPM can offer cost-efficient and sustainable solutions, which at the same time require a predictable and reliable regulative framework for advanced biofuels.

Our stakeholders

SIGNIFICANCE • Stakeholder engagement is providing UPM with stability, predictability and a competitive advantage • Dialogue with stakeholders helps identify risks and improves understanding of key challenges and opportunities in the company’s operating environment TARGET • UPM aims to ensure that the company is in dialogue with its stakeholders and that their needs are understood and considered in strategic development and in decision- making processes

OUR WAY • The UPM Code of Conduct sets the standards for responsible behaviour towards stakeholders for each and every UPM employee • Every year, UPM updates a materiality analysis that highlights the most important issues for UPM and its stakeholders • Stakeholder engagement is measured by several indicators • Stakeholder relations are led and coordinated globally at the Group level while UPM’s businesses are responsible for local engagement activities • Focus on 2030 targets on community involvement

Read more: https://ec.europa.eu/clima/lulucf_en

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UPM Annual Report 2017

UPM Annual Report 2017