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

UPM’s personnel by business area 2018

88% 12% 61% 39% Permanent Fixed term Shop-floor Salaried

Other operations 3%

UPM Biorefining 14%

UPM Plywood 13%

UPM Energy 0%

UPM Raflatac 17%

UPM Communication

UPM Specialty

Papers 42%

Papers 11%

Employee Engagement Survey results, Trend 2009–2018

100

12 11 10

13 14 15 16 18 17

■ Response rate (%)

Employee Engagement Index (EEI) Employee Enablement Index

Our people and their capabilities, integrity and drive set UPM apart and drive our success. Our culture of Aiming Higher sets the tone for everything we do and encourages all UPMers to develop, as individuals and as a company. Our values – Trust and be trusted, Achieve together and Renew with courage – guide us along the way. OUR PEOPLE

GOOD FEEDBACK ON HUMAN RIGHTS WORK IN URUGUAY UPM works systematically to ensure that human rights are respected across the value chain. In 2018, we took an important step forward in Uruguay to identify salient human rights issues specifically relevant for our Fray Bentos site. The work was conducted with the assistance of Shift, the non-profit organisation and the leading center of expertise on the UN Guiding Principles for Business and Human Rights. Topics such as management systems, working conditions, contractor management and community engagement were included. The impact of UPM’s operations on people, society and environment in Uruguay, particularly on human rights, was considered. UPM’s participation in a number of certification processes and internal auditing are one element in continuous assessment of human rights risks. Based on our site visit, there seems to be high level of internal awareness and attention to the main aspects of human rights by the local management team, which I was glad to see” says Lloyd Lipsett , an advisor with Shift. In summary UPM received good feedback on embedding human rights in its policies and manage ments systems. Based on Shift’s recommendation, UPM has identified areas which require work in Uruguay and continues the dialogue with various stakeholders on how to ensure human rights are respected. “It was positive to observe that UPM has strong commitment to international human rights standards.

Continuously aiming higher Building a culture of Aiming Higher is essential to our success in today’s rapidly changing world. While this sets our tone, our values remain the foundation of who we are. Our strengths are our accountability and performance-driven approach. In the future, we want to focus more on innovation and being even more outward looking, as well as agility and cooperation across boundaries. A novel approach to performance management was adopted by most salaried employees in 2018 and will be expanded to cover all salaried employees in 2019. Our aim is to increase employee motivation to drive performance. In addition, we want to better differentiate and reward high performance. As a result, we introduced active manager-employee relationships, including more regular, forward-looking manager-employee discussions, agile goal setting and regular feedback from relevant stakeholders. Engaging employees We are committed to active employee participation and consultation, organised in accordance with international and national rules and regulations. We offer various forums to facilitate continuous dialogue between employees and business management, and there are new communication tools and channels that ease and enhance dialogue within and across teams. UPM continues its cooperative body, the UPMEuropean Forum, which focuses on issues related to our business environment in general and changes within the company. The forum organises regular meetings for employee representatives from business units operating in Europe. There are also co-operative bodies in UPM countries, operating based on country-specific rules, regulations and UPMpractices. The aim is to promote employee participation, consultation and dialogue between UPM business area and country management and employee representatives and employees on national level. We continuously measure how our progress, and the results illustrate successful development in engaging our people. The annual UPMEmployee Engagement Survey (EES), which invites all employees across the company to evaluate distinct aspects of their working environment every year, has a high participation rate 84% (85%). It indicates that UPMers are keen to improve our common workplace. The survey shows that employee engagement improved steadily over the last ten years, from 50% in 2009 to 71% in 2018.

SIGNIFICANCE • The capabilities, integrity and drive of our people make us unique

OUR WAY • Encourage learning and continuously aim higher • Enable performance with agile goal-setting and feedback • Engage employees to develop the workplace • Lead with passion, according to UPM values and integrity • Develop an inclusive and diverse work environment • Reward and recognise high performance • Focus on 2030 responsibility targets on diversity and inclusion, working conditions, learning and development and responsible leadership

TARGETS • Aim for higher business performance • Advocate value-based and inspiring leadership • Continuously challenge the status quo to develop the company

• Provide a safe and healthy working environment and foster the well-being of employees and contractors

68%

89%

of employees had goal setting or annual discussion completed

favourable responses to Employee Engagement Survey’s diversity and inclusion index

TARGETS 2030