UPM Annual Report 2018

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UPM AT A GLANCE

STRATEGY

BUSINESSES

SOCIETY AND ENVIRONMENT

GOVERNANCE AND COMPLIANCE

REPORT OF THE BOARD OF DIRECTORS

FINANCIAL STATEMENTS

AUDITOR’S REPORT

OTHER FINANCIAL INFORMATION

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

371 UPM patent filings and validations in 2018 370 UPM granted patents and patent validations in 2018

NEW

RENEWABLE ALTERNATIVES ARE PART OF THE SOLUTION TO THE PLASTICS WASTE PROBLEM A strong demand for renewable products is created by consumer brands with a great and critical need to replace fossil-based products with renewable ones. In fact, end products already exist which allow raw materials to be replaced with renewables. In the past two years, the UPM Sustainable Fibre Materials project has focused on finding new ways to utilise renewable and bio degradable materials in tissue papers, hygiene products, nonwovens, flexible packaging, label products and biocomposites. We are currently assessing the business potential comprehensively. We gather data about market direction and how technology will develop in the coming years. In this analysis, a thorough lifecycle assessment and use of our ecodesign model play a key role. Materials are piloted in the laboratory and tested with selected customers. Some areas of activity are completely new to us and some are old. In addition to customers, our partner network includes universities, equipment suppliers and research organisations around the world. Business Finland has supported the project. However, any industrial-scale activity is still a few years away.

GROWTH

Through commercial and basic engineering studies, we aim to ascertain the technical and economic readiness and attractiveness of the overall concept. Active development work is also carried out with potential customers. Lignin products replace oil-based materials We are developing bio-based and sustainable products from lignin obtained fromwood rawmaterial, for a variety of end uses. The development and commercialisation of these products continued in 2018. Lignin can be used in resins, glues, bioplastics and polyurethane, for example. UPMBioPiva lignin is based on technology, developed by UPM, which can replace up to 70% of the oil-based rawmaterials in resins. The biomedical product range expands UPM is continuing to develop biomedical products in collaboration with researchers at Biomedicum in Helsinki, Finland. GrowDex®, a nanocellulose hydrogel, commercialised by UPM, is suitable for 3D cell culturing and related applications, for example, in medical development and research. GrowDex® is biocompatible with human cells and tissue. UPM is also launching an advanced wound dressing product, based on nanocellulose- based films that are applied to wounds. Recycled material use is growing in biocomposites UPMBiocomposites is developing innovative and sustainable composite products for various outdoor building material uses and consumer products. The patented UPMProFi production process is a good example of a circular economy: cellulose fibres and polymers from self-adhesive label waste are used to create high-quality composite products. One of our main targets is to increase the use of recycled materials in products: for example, in the new UPMProFi Piazza decking, the proportion of recycled materials is already 75%. 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 the circular economy, and its carbon footprint is up to 50% lower compared with traditional plastics. In 2018, we launched a new UPMFormi 3D biocomposite, developed especially for 3D printing (read more on the right). Advanced analytics for efficient decision-making Digitalisation continuously creates new opportunities for UPM to explore new technologies, applications and robotics to gain a competitive advantage. In addition to process automation and industrial robots, which have long been used at production facilities, tools are being created for analytics, optimisation, forecasting and more agile decision-making. Digitalisation, the extensive use of new and existing data and industrial internet solutions, already form part of the processes at the mills; however, in the future digitalisation will be increasingly visible in customer-facing processes such as supply chain, sales and quality monitoring. With new digital tools, we can significantly improve the optimisation of sales, production, logistics and inventory management, as well as risk management. Utilising advanced data analytics is a quick and cost-efficient way of gaining a competitive edge and added value. Solid patent portfolio creates value The significance of the patents, trademarks and intellectual property rights protecting UPM’s innovations is even more pronounced in its new businesses. A solid patent portfolio boosts UPM’s competitive edge and also provides an excellent basis for value creation in the future. For example, wood-based biofuels and biochemicals are new UPM businesses where a lot of research and product development is carried out.

MATURE

INNOVATION NEEDS DIFFER IN UPM’S BUSINESSES

Innovations automatically generate a lot of intellectual property. Technical solutions and innovations that use wood, chemicals, energy and water more efficiently are also being patented in existing businesses such as pulp and paper production. Research to enhance circular economy and efficiency In the value chain of forest industry products, UPM is involved in creating circular economy solutions. UPM’s research into pulp and paper mill side streams aims to find more efficient ways to utilise by-products such as sludge, ash, green liquor dregs and waste heat. More promising development projects for green liquor dregs and ash are being carried out in the construction sector and aim to replace traditional materials. The projects are part of UPM’s Zero SolidWaste target, which aims to develop solutions for recycling surplus materials to ensure that they produce added value. The More with Biofore in China research programme continued its search for technical solutions to reduce water consumption and emissions, save energy and utilise solid waste at UPMChangshu paper mill. Already, the mill’s water consumption and energy efficiency are at a good level – among the best in the world – while their sulphur dioxide, nitrogen oxide and dust emissions are significantly lower than

China’s most stringent limit values. The mill was awarded High Tech status by the authorities. Extensive partner network Our close-knit partner network is comprised of customers, universities, research organisations, 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 strengthening their competitiveness in Europe. UPM is a shareholder in the Finnish CLIC Innovation LTD, an open innovation cluster that aims for breakthrough solutions in bioeconomy, circular economy and cleantech as well as in smart energy systems, thus complementing UPM’s own R&D efforts.

READ MORE: upmbiofuels.com, upmbiochemicals.com, upmbiomedicals.com, wisabiobond.com, upmprofi.com, upmformi.com