UPM Annual Report 2018

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

UPM businesses actively engage with stakeholders

In addition to the group-wide focus areas, our businesses had their additional focus areas in stakeholder dialogue in 2018. Customer collaboration is presented on pages 62–65, employee activities on pages 54–57.

A CHANCE TO DO GOOD FOR THE LOCAL COMMUNITY

Employee volunteering was introduced as a new form of support under the Biofore Share and Care Programme in 2018. UPMers can use up to eight of their working hours each year to volunteer for locally selected charitable causes. The concept will expand from salaried employees to include all UPMers in 2019. The idea of employee volunteering is to support societal causes in local communities where we operate, and to provide employees with new experiences and possibilities to find inspiration and motivation. Employee volunteering is also known to increase employee engagement and, at its best, also a team’s sense of solidarity. UPM Raflatac’s co-operation project with WWF Poland on the Rivers for Life project encourages citizens to become active stewards to protect and clean 150,000 kilometres of river banks in Poland. UPM Raflatac’s volunteers will join this group of guardians in 2019. In Helsinki, the local causes include co-operation with the new Helsinki Central Library Oodi and the Helsinki Lifeboat Association, for example. The first response among UPMers has been very positive.

GOVERNMENTS AND REGULATORS SUPPLIERS

BUSINESS

COMMUNITIES

NGOs

MEDIA

Finland: Forest trips and tree planting events. Recruitment events and excursions for students. Uruguay: Information-sharing events related to the planned pulp mill in Central Uruguay. UPM Foundation activities. FI & UY: Training programmes, initiatives related to Biofore Share and Care programme and mill visits. Co-operation with universities, schools and research institutes. Co-operation with universities and research institutes, associations and certification bodies and auditors. Participation in seminars and conferences. Active participation in local events and projects, such as DuuniExpo recruitment event. Co-operation with vocational colleges on apprenticeships and education. Forest owner visits at sawmills. Sponsorships of various energy-related student organisations. Collaboration with local communities on responsibility programmes: "Green Future" and "Green Lifestyle" in China, "Local Waters" school project in Finland. Tree planting days in Finland and China. China: "Mini Library Project" and "Little Scientist Labs" continued, "Green Bookshelf" started. Finland: local youth sports initiatives. Cooperation with schools and universities. Partnership with Stiftung Lesen. Community engagement at mill locations through micro- sponsorships. Recruitment activities focused on students. Zero Solid Waste programme. Donation to environmental organisation Plant-for-the-Planet to support educational projects focusing on children. 100-year celebration at UPM Joensuu. Apprenticeship and summer worker programmes at the mills. Local events on modern forestry methods and sustainable forestry. Dialogue on logging plans. Co-operation project with Centre for Economic Development, Transport and the Environment to remove migration barriers of fish. 1,400 forest trips for Finnish 6th grade students. Co-operation with universities and research institutes in Finland and Central Europe and the UK. Development co-operation with start-ups, technology suppliers and SMEs. Partnership with the Packaging School at Clemson University. Local sponsorships, such as Icehearts in Finland, Greenworks and Riverlink in North Carolina, USA and China Women's Development Foundation.

Discussions with the Government of Uruguay on the development of logistics infrastructure as a prerequisite for a possible pulp mill investment in Central Uruguay. In Finland, discussions

Safety training with contractors. Co-operation with machine suppliers.

Uruguay: Aves Uruguay, BioUruguay, DESEM, Vida Silvestre.

Communications on the socio-economic and environmental impact of pulp mills and growth plans in Uruguay and related topics. Mill events and visits.

UPM PULP

on infrastructure and environmental permits.

Discussions with Finnish and EU politicians and authorities on future biofuel policies.

Safety training with contractors. Continuous dialogue and supplier audits.

Co-operation with the Roundt­ able on Sustainable Bio­ materials and Zero Emission Resource Organisation (Norway).

Visits to biorefinery, interviews and communications on mill events.

UPM BIOFUELS

Active co-operation with local authorities on logistics, traffic and permits. Sawmill visits.

Induction and training for maintenance and logistics companies.

Interviews. Press releases on Kaukas educational co-operation and Alholma kiln expansion.

UPM TIMBER

READ MORE: upm.com/responsibility

Discussions with Finnish and EU politicians and authorities on energy policy development.

Collaboration related to maintenance of hydro­ power plants and facilities. Label Life Awards for suppliers, supplier audits, joint projects and workshops.

Promoting migrating fish programme and related projects.

UPM ENERGY

Changshu factory recognised as a Green Company in an Environment Credit rating by the Changshu government in China.

Collaboration with Ellen MacArthur Foundation on CE100 and The New Plastics Economy initiatives. Participation in the Sustain­ able Packaging Coalition. Partnership with WWF Poland. Joint events on reporting and transparency with CDP, GRI. Promoting sustainable forest products with FSC ® . The enhanced Singapore Green Label under the enhanced Singapore Green Labelling Scheme.

Regular media coverage and active dialogue around various topics.

UPM RAFLATAC

INDUSTRY LEADER IN RESPONSIBILITY

Our consistent efforts on responsibility have received recognition from several third parties and have made us one of the industry leaders in several fields.

Co-operation with government departments regarding High- Tech Enterprise Status, and implementation of PM3 expansion at UPM Changshu. Participation in government and industry associations’ programmes on environmental protection and industry standards. Discussions on the operating environment and competiveness of the Finnish forest industry. Contribution to industry and government expert groups on energy, RCP and wood sourcing in Central Europe. Discussions with EU and Finnish politicians and authorities on forest and biomass policies. Discussion with Finnish authorities on sustainable forestry and active forest ownership promotion. Discussions with EU and Finnish politicians and authorities on forest and biomass policies. Discussion with Finnish authorities on sustainable forestry and active forest ownership promotion. Discussions with Finnish and German politicians and authorities about investments. Discussion with EU authorities on bio-based materials. Active participation in national and Europe-wide wood plastic composite standardisation development.

Supplier audits and training on compliance, the Code of Conduct, responsibility and safety. Supplier Day in Changshu, China.

Strong engagement with key medias, mill visits and social media development. China International Import Expo exhibition celebrates UPM 20 years in China and generates extensive media coverage. Mill visits and back­ ground meetings, active dialogue around various topics. Responsible Fibre concept. Promoting sustainable advantages of paper. Working with local media on locally relevant stories, press releases regarding investments, publicity on the UPM Joensuu 100-year celebration. Press conferences and background discussions on new products and services and the wood market. Several interviews and coverage on trade press. Promotion of cancer research and EUROoC participation. Promotion of new products and solutions. Launch of new UPM Formi 3D material.

UPM SPECIALTY PAPERS

UN Global Compact LEAD: UPM has been recognised as a Global Compact LEAD company for its strong engagement to the UN Global Compact. UPM is one of 34 global companies and the only forest-industry company and Finnish company participating in the UN Global Compact LEAD. Dow Jones Sustainability Index: UPM has been listed as the industry leader in the forest and paper sector in the Dow Jones Sustainability World and Europe Indices (DJSI) for 2018–2019 for the sixth time. RobecoSAM’s Sustainability Yearbook: UPM has been listed in the RobecoSAM’s Sustainability Yearbook 2018 with the Gold Class and Industry Mover distinctions. CDP Programs: UPM has been recognised as a global leader on the CDP Forest A List for its actions to tackle deforestation in its supply chain with global and sustainable sourcing of key commodities linked to deforestation. With regard climate change CDP recognised UPM with a leadership position A- and with regard water security with B.

Safety training with contractors. Continuous dialogue and develop­ ment of sustainability related co-operation.

Chairmanship of the board of Biodiversity in Good Company. Member of B.A.U.M. environmental initiative.

UPM COMMUNICA- TION PAPERS

Briefings on supplier compliance.

UPM PLYWOOD

Supplier audits. Joint UPM Safety Team. Management training programme for contractors. Nature management training. Griffin e-learning environment. Continuous dialogue and development of co-oper­ ation with key suppliers and service providers. Supplier qualification and audits. Supplier mapping and categorisation. Supplier qualifications and audits. Continuous dialogue with main suppliers.

Joint projects with BirdLife and Osprey Foundation. Meetings and forest visits. Continuous dialogue. FSC ® standardisation work. A new biodiversity target presented.

WOOD SOURCING AND FORESTRY

Corporate Knights: UPM has been ranked on the 23rd place in the list of 100 most sustainable corporations and as the only company listed in the Paper and Forest Products category. Water Efficiency Frontrunner: UPM has been recognised as a Water Efficiency Frontrunner in China, in one of the key initiatives launched by the government to reduce industrial emissions. UPM Biofuels: UPM Biofuels has gained the world's first RSB low indirect land use change (ILUC) risk certification for its feedstocks. In addition, UPM Biofuels has received Uruguay's first RSB sustainability certificate for the cultivation of the Brassica carinata crop, a new feedstock for biofuel production.

UPM BIOCHEMICALS

Technology development co-operation with universities. Participation in housing fairs and exhibitions. Closed material circulation in production.

UPM BIOCOMPOSITES

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CONTENTS

UPM ANNUAL REPORT 2018

UPM ANNUAL REPORT 2018