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

CONTINUOUS IMPROVEMENT OF RESOURCE-EFFICIENCY IN PRODUCTION

Management systems are supporting our continuous improvement process and resource efficiency efforts. Almost all of our production sites and wood sourcing operations have integrated management systems concerning environmental protection, quality manage ment and occupational health and safety in accordance with ISO 14001, ISO 9001 and OHSAS 18001 standards. Joint multi-site management systems are in operation at several production units. This collaboration makes it easy to utilise synergies and to share best practices. All European pulp and paper mills, as well as the UPMFray Bentos pulp mill in Uruguay and the UPMChangshu paper mill in China, adhere to the EU’s eco-management and audit scheme (EMAS). To improve energy efficiency, many of our mills have energy management systems certified under ISO 50001 or the Finnish ETJ+ system. In 2018, UPMRaflatac became the first self-adhesive label material supplier to have all European factories certified according to the ISO 22000 food safety standard. ISO 22000 certification is also in use at pulp and paper mills where relevant. In 2018, UPM expanded the EMAS-compliant environmental statements of its pulp and paper mills to include also verified, local information about societal impacts relating to the company's contribution to employment, tax income and purchasing power, or co-operation with communities, for example. UPM reached its global target of 100% certified environmental management systems by receiving ISO 14001 certification for its two remaining sites in 2018. Investments in environmental performance We invest in maintenance and process improvements in order to continually optimise the environmental performance of our production. In 2018, environmental investments totalled EUR 16 (21) million. The single largest investment was related to air protection in the boiler rebuilt project at the UPMChangshu paper mill in China. UPM’s environmental costs, which are mainly attributable to effluent treatment and waste management, totalled EUR 121 (125) million, including depreciation. Further decline in environmental non-conformances There has been a significant decrease in the number of environmen tal non-conformances since UPM’s internal Clean Run programme was launched in 2012. No major environmental incidents occurred at our production plants in 2018 and no significant fines were paid as a result of non- conformances. However, a total of 26 (33) temporary deviations from permit limits or environmental limits set by UPM occurred at the mills over the course of the year. For example, deviations were related to minor contraventions of air and water emission limits, or occasional odours from pulp mills. UPM immediately reported any deviations to the authorities and, where relevant, to local stakeholders. Appropriate measures were taken to normalise the situation and prevent similar occurrences. All sites systematically follow-up any deviations, proactively report observations and near-misses, carry out walks and discus sions, and compile detailed risk assessments. Since 2016, UPMhas used a global One Safety reporting tool for the management and reporting of both safety and environment-related operations. The goal of this reporting is to improve environmental performance and awareness and to share best practices. In 2018, approximately 2,400 (2,600) preventive environmental observations and near- misses were reported.

IMPROVEMENT AND INSPIRATION THROUGH THE BIOFORE SITE™

UPM Raflatac’s Biofore Site™ concept engages factory employees and fosters a culture of sustainability by setting factory-specific development goals aimed at contributing toward UPM’s 2030 responsibility targets. A multi-parameter Biofore Site scorecard, based on the UN Sustainable Development Goals, is used to monitor each factory’s progress. For many years, UPM Raflatac factories have operated third-party certified environmental management systems in accordance with the ISO 14001 standard. The Biofore Site concept expands on this foundation to include economic and social aspects. Since the piloting in 2017, each factory has created a unique path to improve their scorecard performance. From installing LED lighting on the factory buildings to installing electric car-charging stations, UPM Raflatac factory teams continue to find new ways to further the concept. Employees are encouraged to suggest improvement ideas on sustainability performance and ways to better engage with local communities. The concept addresses sustainability holistically by measuring leadership, employee engagement, resource consumption, waste generation, community involvement and employee safety.

We are using materials, water and energy in a responsible and efficient manner, and aim to continuously reduce our environmental impact.

SIGNIFICANCE • Global megatrends such as population growth lead to resource scarcity and competition for natural resources • Resource efficiency eases the pressure on resources and the environment and brings competitive advantages

TARGET • Continuous improvement of efficiency • Excellent environmental performance

OUR WAY • Certified management systems • UPM’s Clean Run programme • Use of Best Available Techniques (BAT) • Credible and transparent reporting • Focus on 2030 responsibility targets

• Accountability and compliance • Minimising possible negative impacts of operations