UPM Annual Report 2017

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Stakeholders

In brief

Strategy

Businesses

Governance

Accounts

Communities

Customers

UPM’s Biofore strategy forms the foundation of UPM’s stakeholder dialogue. The key focus areas and activities vary locally and according to stakeholder needs. UPM’s most important stakeholders

Ensuring local commitment, enhanced co-operation, stakeholder engagement and sustainability initiatives

TARGETS 2030

Within the EU, UPMpromoted the competitive and consistent regulation of energy and climate policy. The discussion on the impact of forests on climate was especially relevant as the EUmade a legislative proposal on land use, land use change and forestry regulation (LULUCF). Influencing the future prerequisites and markets within the advanced renewable fuels sector, as well as sustainability criteria for forest-based biomass, were the key themes of the revision to the Renewable Energy Directive for the years 2021–2030. In Finland, UPM contributed to discussions on the Finnish operating environment that impact the competitiveness of the forest industry in Finland. One Finnish discussion topic during the year related to different public subsidies and existing tax mechanisms, for example to promote renewable energy generation or the competitiveness of industries exposed to international competition. UPMwas actively involved in the stakeholder processes related to sustainable forestry. The round-table forum initiated by the Ministry of the Environment and FFIF’s “Forest Environment” programme focuses on maintaining the biodiversity of forests as part of sustainable forestry practices. For its part, UPMpromoted means to increase the amount of wood on the Finnish markets. The act on forest inventory data, which makes forest data public information, will be introduced in 2018. Together with the launch of Kuutio.fi, an electronic wood-trade portal, this will facilitate modern wood-trade services and activate the wood market. In Uruguay, UPM concluded discussions with the Government of Uruguay regarding the development of a logistics infrastructure and other local prerequisites for a potential pulp investment in the country. An agreement on local prerequisites was signed in November. Rail and road connections are a critical challenge for establishing a large-scale industrial operation in the Uruguayan inland and connecting it to a deep sea port (read more on page 80). Co-operation on responsibility issues helps secure operations For environmental and responsibility issues, UPM’s stakeholder engagement activity concentrated on promoting and improving UPM’s performance, along with securing the prerequisites for future activities. Globally, UPM continued its active co-operation with local permit authorities. UPMparticipated in the UN Global Compact LEAD group, which represents the world’s leading companies to promote sustainability through innovation and actions. Co-operation also continued on a voluntary basis with a wide range of stake holders relating to ecolabels, standards and standardisation frameworks, as well as nature conservation. UPM entered into a two-year cooperation agreement with Forest Stewardship Council FSC® and significantly increased the share of FSC® certified wood in Finland (read more on page 63). Biofore Share and Care programme supports company strategy UPM’s Biofore “Share and Care” programme demonstrates the company’s dedication to a sustainable and innovative future through sponsorships and donations. UPM shares its resources with causes that respect sustainable development and work in line with the company strategy. The company’s rules for sponsorships and donations were revised during the year to ensure appropriate decision making. Rules for employee volunteering were also outlined. UPM directs support to reading and learning projects, water initiatives, bio-innovations and community engagement. UPM does not financially support political parties or individual candidates. The focus of the local sponsorship is on supporting the vitality of UPM production locations. UPM spent approximately EUR 1.1 (1.4) million on local sponsorships and donations. UPM’s support for its Uruguayan UPMFoundation continued with USD 400,000. The foundation supports and encourages training, entrepreneurship, employment, healthy living and entertainment in local communities in the Uruguayan countryside. EUR 406,300 (232,500) was donated to charities or other non-profit causes, including a donation to the BiomedicumFoundation for cell-based cancer research, Save the Children for reading materials for pupils from deprived families, the Finnish Olympic Committee for organising children's afternoon sports clubs and the Economic Information Bureau for developing digital business course modules for Finnish secondary-school students.

Media

Employees

Investors

NGOs

Government and regulators

Suppliers

VERLA WAKES UP IN SUMMER

UPM is renovating the Verla groundwood and board mill, owned and maintained by UPM, in South-Eastern Finland. Verla is the only preserved industrial history complex in the Finnish forest industry. In Verla, the changes in industrial work and technological development are visible. UPM wants to keep the valuable UNESCO World Heritage Site in good condition for the future. In 2017, UPM repaired the old chimney, the boiler room structures and the buildings in the museum area. At the beginning of 2018, a new heating plant will be built in Verla, which has been serving as a mill museum since 1972. The brick buildings were heated when the groundwood and cardboard mills were still in operation. However, the heating was removed after operations ceased in 1964. When the buildings are heated again, the heat will be conducted through its structures, drying both the air inside the building and the structures in turn. Heating the facilities also protects the preserved machines and equipment. The new boiler produces heat using renewable wood pellets. The project has been developed in co-operation with the National Board of Antiquities. Until now, Verla has only been open to the public during the summer season. Heating enables the development of tourism and a longer – at best, year-round – operating season. After Verla was named a World Heritage Site in 1996, the buildings were fitted with fire protection systems, for example. As the mill stands by the stream, a dam was also constructed to protect the buildings from flooding and water leakages.

UPM’s materiality analysis 2017

All customer questions and stakeholder concerns received during the year are taken into consideration. Additionally, UPM conducts a specific stakeholder survey using a web-based tool that enables stakeholders to answer anonymously. Results of the survey are gathered and analysed by an independent third party and used to support UPM’s wider evaluation. Most material economic, environmental and social responsibility topics identified in UPM’s analysis are presented on the right. UPM’s responsibility focus areas and targets (p. 16-17) reflect these material aspects. UPM does not distinguish between topics within the section and considers them all equally material.

The materiality analysis (below) of the company’s responsibility issues covers topics that directly or indirectly influence the ability to create, maintain or acquire economic, environmental or social value for UPM, its stakeholders and society. Analysis is carried out annually, based on follow-up of the interests and concerns of various stakeholder groups, including communities, employees, NGOs, customers, suppliers, government and regulators, investors and media.

Strategic focus areas

PERFORMANCE 1 2 3 4 5 RESPONSIBILITY GROWTH INNOVATION

PORTFOLIO

ECONOMIC Compliance, ethics and values Competitiveness Responsible sourcing Corruption and bribery

MEDIUM HIGH

ECONOMIC Risk and opportunity management Regulatory environment Selling ethics Taxation

SOCIAL Health and safety Employee engagement Diversity Child and forced labour

ENVIRONMENTAL Responsible forest manage- ment and biodiversity Resource efficiency and environmental performance Climate change Product stewardship

ENVIRONMENTAL Sustainable land use Circular economy Third-party verified management systems

In 2017, Verla had some 40,000 visitors, of which nearly half participated in the guided mill tours.

SOCIAL People development and talent attraction Local engagement

Significance for stakeholders