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

SUSTAINABLE AND SAFE PRODUCTS

DRIVEN BY SUSTAINABLE AND SAFE PRODUCTS

ELECTRICITY everywhere

PLYWOOD AND SAWN TIMBER for construction and industrial applications

As the population grows, and consumption along with it, the use of renewable raw materials and recycling must be increased to replace fossil materials and other non-renewable natural resources. This brings opportunities to both UPM and its customers.

GRAPHIC AND OFFICE PAPERS

IMPORTANCE • Global megatrends are driving demand for sustainable and safe solutions • Renewable wood and recyclable products reduce the world’s dependency on fossil-based and other non-renewable raw materials TARGET • Innovating renewable and responsible solutions for a future beyond fossils • Taking care of the entire lifecycle • Creating value to customers

OUR WAY • Products are made of renewable and biodegradable raw materials and are recyclable • Strong commitment to long-term customer relationships • Co-operation in value chain • Circular-economy thinking and ecodesign approach • Restricted Chemical Substances List and certified management systems • Open and transparent product communication through ecolabels,

for advertising and home and office uses

BIOCOMPOSITES for various outdoor building material uses

certificates and product declarations • Focus on 2030 responsibility targets

PLYWOOD for vehicle flooring

LABEL MATERIALS for information and product labelling

PULP AND SPECIALTY PAPERS for packing materials

RENEWABLE BIOFUELS for all vehicle engines

Mitigating climate change and creating value to society UPMproducts help to mitigate climate change by replacing fossil-based products with bio-based renewable alternatives. The carbon bound from the atmosphere remains in the product over its lifetime, even when the product is recycled several times. Sustainable management of forests and plantations as the main source of our rawmaterials ensures their existence as a carbon sink. UPM actively develops solutions based on the circular economy model, in which materials circulate and products generate added value. The target is to provide customers with solutions that improve customers’ business processes, with a special focus on creating mutual benefits and societal value as well as investigating new business opportunities. Biomedicals, as well as pharmaceutical and healthcare labelling solutions, are examples of creation of direct societal value. Rafcycle® and recovered paper recycling are examples of added value by circular economy. In 2018, UPMBiofuels gained the world’s first Roundtable of Sustainable Biomaterials (RSB) low indirect land use change (ILUC) risk certification for its feedstocks. UPM also launched UPMFormi 3D biocomposite, which was specially developed for the 3D printing market. It brings together advanced cellulose fibre and biopolymer technologies and is an alternative to fossil-based 3D printing material. Continuous dialogue and collaboration with customers UPM’s businesses vary in the products and services that they offer. Each business has its own customer management process and way of

interacting with customers. A comprehensive understanding of the markets, knowledge of end uses, and an appreciation of customers’ needs form the basis of UPM’s customer relationship management. UPM’s interaction with customers is based on continuous dialogue and regular customer satisfaction surveys. In addition, UPM is engaged in various development projects with customers. Many of these projects are linked to product development and to supply chain efficiency, as well as the co-planning of activities. Customer satisfaction is measured regularly in most businesses through customer satisfaction surveys. Based on results from various business customer satisfaction surveys, the overall total satisfaction with UPM as a supplier is 86% (86%). These surveys act as a tool for further development. Product safety, forest certification, chains of custody, resource efficiency and recyclability are amongst the most important factors for our customers. Lifelong product stewardship Ecodesign approach Ecodesign is integrated into UPM's product development in all businesses. the company is committed to minimising the environmental impact of its material usage and manufacturing processes across the entire value chain and during the whole product lifecycle. Lifecycle assessments (LCAs) are an important part of the Ecodesign tool box. LCAs are used for supporting product and process development to give reliable and documented information of environmental impacts of optional materials and production processes. Results are also used for UPMRaflatac’s LabelLife tool, UPMPlywood’s Environmental Product Declarations, carbon footprints of pulp and paper products or of UPM Biofuels.

12,600 customers worldwide

6,000 chemicals that are subject to restrictions in our products

Product safety Since the launch of the UPMRestricted Substances List in 2010, it has been our main tool to communicate product safety requirements to our chemical and rawmaterial suppliers and to our customers. ISO 9001 quality and ISO 22000 food safety management systems provide a framework for continuously improving performance. Most UPM sites are ISO 9001 certified. In addition, all European sites of UPMRaflatac, UPM Specialty Papers as well as all pulp mills have a certified ISO 22000 food safety management system. Thus, we can offer several products that are designed and produced to meet food packaging requirements. In 2018, UPMparticipated in a Pulp & Paper Value Chain Information System development project with several chemical suppliers. The aim is to enhance transparency in the supply chain and speed up the exchange of information. Ecolabels and product declarations UPMprovides product declarations to grant customers easy access to information on the responsibility of products and the supply chain. Product profiles such as Paper Profile or Plywood’s Environmental Product Declarations summarise the central environmental information. Product safety profiles show the compliance with

relevant product and chemical regulations. Wood origin statements provide information on countries of origin and wood species used. Ecolabels help customers make responsible choices and provide stakeholders with important information. Globally, UPM is the largest producer of EU ecolabelled newsprint, office papers and graphic papers and the EU Ecolabel is available for all UPM graphic papers in Europe. In 2018, the renewal of EU Ecolabel criteria was finalised with UPM actively contributing in the process. UPM also provides its customers with the opportunity to use well-known local ecolabels, such as the German Blue Angel or the Nordic Ecolabel. In 2018, UPMwas one of the first companies to receive the enhanced Singapore Green Label under the Singapore Green Labelling Scheme (SGLS). In addition, all UPM businesses have FSC® and PEFC™ chain of custody certification. UPM’s Responsible Fibre™ trademark combines environmental and social responsibility criteria into one entity. It’s used to provide information about responsibility of products with a logo on the product and reference to detailed information on the UPMwebpage.

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