UPM Annual Report 2017

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Stakeholders

In brief

Strategy

Businesses

Governance

Accounts

Committed to sustainable forestry

UPM SIGNED A GLOBAL PARTNERSHIP WITH FSC INTERNATIONAL UPM’s global partnership with FSC International, signed in spring 2017, is aimed at developing the FSC forest certification scheme to better suit the northern boreal forest zone and operating environment, where a significant proportion of sourced wood comes from small private forest owners. Other areas of co-operation are the general strategic development of standardisation and development work on ecosystem services. UPM has extensive experience of sourcing FSC certified wood. All wood sourced by UPM is FSC controlled. UPM’s plantations in Uruguay and the majority of UPM’s forests in Finland are FSC certified. In these countries, UPM is also responsible for managing FSC group certification which is a way of offering FSC as a forest service to interested forest owners. Major environmental organisations are also committed to the FSC forest certification scheme. FSC emphasises the environmental issues of forestry, stakeholder engagement and the transparency of operations. UPM’s FSC operations received a lot of public attention in Finland in 2017. The discussion focused particularly on the protection of endangered species in connection with forest management. Finland has the highest levels of knowledge in the world about forest species and their habitat requirements. UPM participates in a national development group that aims to improve the protection of species as part of FSC certification. Compliance with standards is assessed by an independent auditor in an annual audit. In 2017, UPM achieved the best results so far in the external FSC audits carried out in Finland. FSC forestry audits have been conducted since 2011, when the certification scheme was established.

SIGNIFICANCE • Forests and wood-based products have a unique role in climate change mitigation • Biodiversity loss and deforestation are of concern, especially in the tropics • Forest area increases in Europe • Renewable wood is UPM’s most important raw material

Active forestry-related research and development in UPM forests Forest biodiversity is one of the key factors in UPM’s forest operations. The aim of UPM’s global biodiversity programme is to maintain biodiversity in forests, to promote best practice in sustainable forestry and to emphasise the role of ecosystem services. The company is involved in several biodiversity projects in collaboration with various stakeholders. The Finnish Government’s bioeconomy strategy raised conflicting opinions due to the increasing demand for wood and its impacts on biodiversity. UPM continued to participate actively in a roundtable process coordinated by the Ministry of the Environment and the Ministry of Agriculture and Forestry. The process involves forest owners, forest and environmental organisations and representatives from industry, research and public administration. The common goal is to find ways to safeguard forest biodiversity. A biodiversity-related project continued into its 12th year at UPM’s forest in Harviala in Finland. Controlled burning is used to increase biodiversity, but in the research project, burned trees have been combined with another key habitat, decaying wood. The aim of the long-term research project is to find practices that can be used to increase biodiversity as part of normal forestry operations. UPMhas also systematically developed methods for maintaining biodiversity in its eucalyptus plantations in Uruguay. In the first phase, UPM conducted a biological survey at the beginning of the 1990s to discover and classify species in the regions where it was going to operate. Mafalda was found to have very special flora, fauna and ecosystems. Therefore, a valuable part of the site was saved from planting and since then, this has been an important part of our biodiversity work in Uruguay. It demonstrates that it is possible to enhance biodiversity and run forest operations in the same area. Currently UPM is developing the infrastructure of the site to allow visitors such as locals, students, authorities and experts to research and enjoy the nature of the region.

As a responsible forest owner and wood user, UPM ensures that the wood it receives is legally sourced from sustainably managed forests.

At the end of 2017, UPM owned 570,000 hectares of forest in Finland and 75,000 hectares of forest in the United States. Additionally, the company has 255,000 hectares of forest plantations in Uruguay. Forests owned by UPMhouse around 45,000 protected sites with a total area of 135,000 hectares. The company is also responsible for managing approximately 960,000 hectares of forests and forest plantations owned by private forest owners. UPM continued to sell forest land that is remote from its production sites. In Finland, UPM and the Ministry of the Environment agreed on the establishment of several private conservation areas on UPM land. Co-operation with stakeholders The growing need for food production and wood causes deforestation, especially in the tropics, which is an important concern for the entire forest industry. UPM recognises this challenge and has reacted by taking action in its own operations and by actively participating in international co-operation networks. Forest certification is based on standards that have been defined in an open stakeholder process, and compliance with these standards is monitored by an independent third party. All UPM owned forests are certified. To promote the certification of privately owned forests in Finland, UPMhas established FSC® and PEFC™ group certification schemes. In 2017, UPM’s Finnish FSC group certification scheme grew to cover over 300,000 hectares of forest. UPM and the Forest Stewardship Council® (FSC) signed the partnership agreement in 2017. The partnership aims to deliver benefits to forest owners through FSC certification and to increase the FSC certified wood supply. In 2017, the CDP Forest Program listed UPM as one of the six global leaders on the 2017 Forest A List for timber and timber-based products. Companies on the A List are recognised as having responded to market demand for environmental accountability and taken action to prevent deforestation.

TARGET • Ensure sustainable land use and keep forests full of life

OUR WAY • Sustainable forest management with credible certification systems for all our own forests • Third-party verified chain of custody systems to ensure 100% traceability of wood • Global biodiversity programme • We do not use wood from tropical rainforests or accept wood from forest plantations that have been established by destroying rainforests • No operations in areas where the rights of indigenous peoples are threatened or endangered • Focus on 2030 target: all fibre certified