UPM Annual Report 2019

COMMITTEE MEMBERS 2019

AUDIT COMMITTEE Piia-Noora Kauppi (Chair) Marjan Oudeman Kim Wahl

The lead audit partner attended all committee meetings and reported to the committee on the interim procedures and findings as well as quarterly audit and non-audit fees and services. The committees’ standard procedures include also quarterly sessions with the internal auditor, with the lead audit partner, with the management and among the committee members. The Audit Committee has prepared the Board’s proposal to the AGM 2020 for the election and remuneration of the auditor. In this context, the committee evaluated the qualifications and independence of the auditor, as well as the audit-related and non-audit- related services provided by the auditor. The evaluation included an assessment of the effectiveness of the audit process, the quality of the audit, the performance of the lead auditor and the audit team, and the co-operation with the auditor’s international audit network. As a result of this evaluation, the committee recommended to the Board the re-election of PricewaterhouseCoopers Oy as the company’s auditor and the Board concurred with this proposal and has made a corresponding proposal to the AGM 2020. According to Pricewaterhouse­ Coopers Oy, Authorised Public Accountant Mikko Nieminen would continue as the lead audit partner.

committees were involved with in addition to their regular duties during the year. Audit Committee The Audit Committee is responsible for overseeing of the company’s financial reporting processes and financial reporting, internal control, internal audit and risk management, and for monitoring the company’s audit and compliance procedures. In 2019, the committee held five meetings. In addition to its regular duties, the committee reviewed, among others, the following topics in these meetings: • Update of UPMCode of Conduct (approved by the Board in April) • Financial matters and approval limits related to the pulp mill construction project in Uruguay • Non-financial matters including anti-corruption and anti-bribery, labour practices, safety and human rights, responsible sourcing, environmental matters and product safety • Update of UPMApproval Policy (approved by the Board in October) • IT compliance, cybersecurity and data privacy • Taxation • Lease accounting • Accounting of forest sales • Amendments to the committee charter (approved by the Board in December)

REMUNERATION COMMITTEE Veli-Matti Reinikkala (Chair)

Henrik Ehrnrooth Suzanne Thoma

NOMINATION AND GOVERNANCE COMMITTEE Björn Wahlroos (Chair)

Berndt Brunow Ari Puheloinen

the Board on the matters discussed and the actions taken by the committees. Furthermore, minutes of committee meetings are recorded and submitted to the Board members for reference. All committee meeting materials are available to the Board members before and after the meetings. Committee work in 2019 The importance and extent of the work of the committees has increased in recent years and will further increase following the continuous changes in the regulatory framework and the company’s business environment. This is also reflected in the amendments made to the committee charters and in the topics and matters the

Board committees The Board has three committees that assist in preparing matters to be decided by the Board: • The Audit Committee, • The Remuneration Committee and • The Nomination and Governance Committee. The committees also assist the Board in its oversight and monitoring responsibilities. The Board is always responsible for the performance of any duties assigned to the committees. The Nomination and Governance Committee assisted the Board in reviewing the composition, qualification criteria and duties of the Board committees, and made a proposal to the Board for the appointment of committee members and chairs. The members appointed to the Board committees in the Board’s constitutive meeting on 4 April 2019 are shown in the table above. Neither the President and CEO nor other company executives may be members of any Board committees. The written committee charters approved by the Board of Directors set forth the purposes, composition, operations and duties of each committee, as well as the qualifications required for committee membership. The charters were amended in 2019 to reflect the changes in the regulatory environment and are available on the corporate website. Each committee is responsible for performing the duties assigned to it in its charter. The committees hold their meetings prior to Board meetings in order to prepare matters to be decided by the Board. In the Board meeting following the committee meetings, the Committee Chairs report to

platform development project. The Board has been closely reviewing the status and the feasibility of this project since 2016 and has conducted several status reviews, including risk assessments, in its meetings since then. The preparation work related to this project became more intense during the year, with the main focus being in the achievement of the readiness for the final investment decision by the Board. Prior to this decision, the Board visited Uruguay in the spring and also held one of its meetings there (read more on page 103). On 23 July 2019, the company then announced that it will construct a 2.1 million tonne greenfield eucalyptus pulp mill near Paso de los Toros in central Uruguay. This major strategic investment decision will grow the company’s current pulp capacity by more than 50%, resulting in a step change in the scale of UPM’s pulp business as well as in UPM’s future earnings. Read more on this strategic investment on pages 38–39 and on the corporate website at upm.uy/en/ growth. Strategic focus areas in 2020 In 2020, the Board will continue to closely monitor the progress of the various streams of the pulp mill construction project including the mill, port, logistics, housing and railway streams as well as the development of the ongoing infrastructure initiatives by the Government of Uruguay. The Board will also follow strategic business opportunities relating to the company’s biochemicals and biofuels businesses. Read more on the company’s biochemicals and biofuels businesses on pages 21 and 40 of this report. The third nuclear power plant unit in Olkiluoto has been a matter of concern for the Board throughout the seriously

delayed construction project, as the Company is involved in this project on the basis of its energy shareholdings (read more on these holdings and on this project on pages 130 and 171. As the construction project is approaching completion and production is expected to start in March 2021, Olkiluoto 3 will be one of the Board’s focus areas this year as well. Board evaluation The Board conducts an annual evaluation of its performance and working methods, including an evaluation of the performance and working methods of its committees. In addition, the committees evaluate their performance and working methods on an annual basis. The Nomination and Governance Committee assists the Board in the annual evaluation and in the review of its results and takes these results into consideration when preparing the Board’s proposal for the composition of the Board to the Annual General Meeting. In 2019, the evaluation was conducted as a self-assessment and its results were reviewed and discussed at the Board meeting in December. Directors evaluated the performance of the Board and of the committees in relation to their duties and responsibilities, Board and committee composition and structure, Board culture, effectiveness of Board and committee meetings, individual director performance, and performance of the Chair of the Board. The overall results of the 2019 self-evaluation survey were highly favourable and indicated that the Board, Chair of the Board and the Board committees are functioning very effectively.

GOVERNANCE 106

GOVERNANCE 107

UPM ANNUAL REPORT 2019

UPM ANNUAL REPORT 2019

CONTENTS