UPM Annual Report 2019

Our innovations create value and business opportunities beyond fossils. We offer renewable, recyclable and low-impact alternatives to non-renewable materials. MEGATRENDS DRIVE DEMAND FOR SUSTAINABLE AND SAFE SOLUTIONS

MEGATRENDS

SIGNIFICANCE TO UPM

OPPORTUNITIES FOR UPM

CHALLENGES FOR UPM

• Global consumer demand is set to grow significantly by 2030 • Value creation by providing sustainable solutions for consumers • Reducing the use of non-renewable materials • Positive contribution to society

• Significant growth in global consumer demand • Growing need for sustainable and safe solutions • New business opportunities with ecodesign • Large business opportunities with bioeconomy, molecular bioproducts in chemical and fuel value chains in particular • Cost-efficient and responsible supply chains

• Fit of UPM’s product mix and geographical presence to the future growth outlook • Unpredictable regulation and subsidies may distort markets • Uncertainties regarding global trade, protectionism, tariffs and sanctions • General economic development

POPULATION GROWTH,

URBANISATION, DEMOGRAPHIC CHANGE

• Customers and consumers are increasingly seeking renewable and recyclable solutions • Competitive forest industry platform and access to sustainable feedstock enable business success • Sustainable land use

• Growing demand for renewable and bio-degradable materials and low-emission energy • Competitive advantage from resource efficiency and new circular economy products • Healthy forests and safeguarded wood availability • Increased forest growth in Northern Europe, sustainable plantations • Sustainable land use and ecosystem services • Responsible water use and safeguard the natural water cycle in forests • Competitive advantages and growth opportunities with sustainability • Growing demand for alternatives to replace fossil materials • Prioritising use of low-emission and renewable energy • Strong demand growth for renewable fuels to decarbonise traffic • Circular economy • Forests as carbon sinks • Increased forest growth in Northern Europe and new plantations in Uruguay • Growing e-commerce drives growth in demand for labelling, packaging, pulp and transport • Increasing efficiency, productivity and change agility • Improved efficiency and decision-making through industrial Internet, big data, data analytics, forecasting, robotics and automation • Demand trends for different paper end uses and geographical areas • UPM’s production platform with continuous optimisation opportunities • Regulation may drive markets for sustainable products • Product stewardship • Transparency as competitive advantage • Cost-efficient and responsible value chains • Engaged and diverse workforce, talent attraction • Sustainable returns and risk mitigation

• Changes in raw material costs and availability • Unpredictable regulation and subsidies may distort markets • Competition for renewable raw materials • Competition for land use • Threat of deforestation and biodiversity loss globally

RESOURCE SCARCITY

AND ROLE OF RENEWABLES

• Forests and wood-based products have a unique role in climate change mitigation • Business opportunities by decarbonisation of traffic and energy • Transition to low-carbon economy

• Unpredictable regulation and subsidies may distort markets • Cost of greenhouse gas emissions • Political instability • Increasingly common and more severe storms, floods and droughts, damage cause by insects • Unpredictable wood-harvesting conditions

CLIMATE CHANGE

• Digital innovations to support value creation and growth • Customer focus • Transforming processes and technology

• Fit of UPM’s product mix and geographical presence to future growth outlook • Declining graphic paper consumption • New forms of competition • Changing needs for skills and competencies • Cyber security

DIGITALISATION

• Responsible operations and value chain • Long-term business success, mitigating risks and capturing opportunities • High-performing people

• Unpredictable regulation and subsidies may distort markets • Reputation and financial risks in the event of non-compliance • Unpredictable changes in the operating environment • Uncertainties regarding global trade, protectionism, tariffs and sanctions

RESPONSIBILITY AND COMPLIANCE

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OUR STRATEGY

OUR STRATEGY

UPM ANNUAL REPORT 2019

UPM ANNUAL REPORT 2019

CONTENTS