UPM Annual Report 2019

UPM’S MATERIALITY ANALYSIS 2019 The materiality analysis of the company’s responsibility issues covers topics that directly or indirectly influence the ability to create, maintain or acquire economic, environmental or social value for UPM, its stakeholders and society. Analysis is carried out annually, based on follow-up of the interests and concerns of various stakeholder groups, including communities, employees, NGOs, customers, suppliers, government and regulators, investors, researchers and media. All customer questions and stakeholder concerns received during the year are taken into consideration. Additionally, UPM conducts a specific

in 2019 the member states had to submit their LULUCF plans to the EU Commission. UPMhas highlighted the importance of sustainable forest management and manufacturing products from renewable rawmaterials that replace fossils, as an effective way to mitigate climate change. UPM actively promotes cost- competitive and consistent implementation of climate change policies. The EU Emission Trading Scheme´s third trading period will end in 2020 and UPMhas been engaged in the EU preparations for the new trading period starting in 2021. While the mechanism is still limited to cover only activities within the EU, it is necessary to have so called carbon leakage measures in place to ensure both efficiency in mitigating emissions and the competitiveness of industrial players in global competition. Decarbonising traffic through renewable energy and biofuels policies continued. The update of the EU Renewable Energy Directive for 2021– 2030 was approved in 2018. It sets an EU-wide target for renewable energy overall, and a sub-target for renewables in traffic by 2030. For UPM, it was very important to get recognition for advanced and residue-based biofuels with high GHG reduction. In 2019, we actively monitored the implementation of the EU-wide target in national legislation, especially in Finland, Sweden, Norway, the Netherlands, Germany and France. World-class commitment to corporate responsibility UPM continued active participation in the UN Global Compact's action platforms. In September, the UN recognised UPM as one of 36 Global Compact LEAD companies demonstrating world-class commitment to corporate responsibility. In 2019, UPM chaired the Global Compact Finland Network, bringing together all Finnish companies and organisations committed to the Global Compact. We also continued our co-operation with different stakeholders on responsibility issues on a voluntary basis, around themes such as ecolabels, fish migration and nature conservation. UPM’s two-year co-operation agreement with the Forest Stewardship Council FSC® has significantly increased the share

of FSC® certified wood in Finland. As a member of FSC and working with PEFC (the Programme for the Endorsement of Forest Certification) Forest Management standard updates, UPM engaged in active dialogue with the management of FSC and PEFC International. In 2019, UPM continued its co-operation withWWF Finland and Birdlife Finland. Responsibility issues were also raised in customer enquiries, with product safety, ecolabels and the origin of rawmaterials emerging as key themes. Globally, we continued active co-operation with local permit authorities. Emphasis on local communities and impacts UPM’s mills in Europe, China and Uruguay can be among the biggest employers and taxpayers in the locations in which they operate. In Uruguay, UPM started a major pulp mill investment project in 2019. Stakeholder engagement around the investment project has been active (see the previous page). All in all, UPM aims for engagement and open dialogue with local communities. For example, our Kymi and Kaukas mills have their own forums for local dialogue. In 2019, both mills organised open door days reaching thousands of visitors. UPM co-operates with local schools and academia, organising boot camps and visits for students, for example. In addition, it is crucial for us to have active dialogue with local forest owners, neighbours of harvesting sites and other individuals related to forest management. Our EMAS (EU Eco-Management and Audit Scheme) statements cover societal impacts in addition to environmental performance, providing more detailed information on the local impacts of our pulp and paper mills. The EMAS statements also include information on co-operation with local stakeholders, such as sponsorship of local organisations or co-operation with educational responsibility reporting. Mill-specific EMAS statements are compiled annually and published on the UPMwebsite. Biofore Share and Care programme continues UPM’s Biofore Share and Care programme demonstrates our dedication to responsibility through sponsorships, institutions. Local statements complement UPM’s corporate

stakeholder survey using a web-based tool that enables stakeholders to answer anonymously. In 2019, the survey also covered the relevance of UN Sustainable Development Goals (SDGs) for UPM. Results of the survey are gathered and analysed by an independent third party and used to support UPM’s wider evaluation. Most material economic, environmental and social responsibility topics identified in UPM’s analysis are presented below. UPM’s responsibility focus areas and targets (pages 60–61) reflect these material aspects. UPM does not distinguish between topics within the section and considers them all equally material.

PORTFOLIO

RESPONSIBILITY

PERFORMANCE

GROWTH

INNOVATION

CASE

ADDRESSING DECENT WORK IN THE TAPIOCA SUPPLY CHAIN Tapioca starch is a raw material used in paper production extracted from the root of the cassava plant. As part of an extensive onsite survey, we interviewed more than 500 workers from a tapioca starch factory and farmers supplying tapioca in Thailand. The results showed that most of the workers are satisfied with their working and living conditions, including access to clean water and electricity. Nevertheless, there are still major challenges in the supply chain and we are taking them seriously. Even though our supplier has implemented a number of measures to improve safety, many factory workers have safety concerns. Working with machinery and the safety of chemicals were identified as the areas most in need of improvement. The factory has taken action after the survey. For the farmers, the greatest potential for improvement lies in ensuring that helping out at farms does not interfere with their children going to school. The survey created good opportunities to discuss the importance of safety and the use of personal protective equipment at the factory, for example. The supplier is also committed to improving conditions at the farms and further assessing the conditions of young workers. UPM has carried out regular and extensive audits in Thailand since 2014 and initiated discussion with various stakeholders. Our goal is to continuously improve the working conditions of factories and farmers in Thailand. The suppliers must be committed to our Supplier and Third Party Code.

ECONOMIC • Competitiveness • Compliance, ethics and values

Significance for stakeholders MEDIUM HIGH MEDIUM

• Corruption and bribery • Responsible sourcing

ECONOMIC • Regulatory environment • Risk and opportunity management • Selling ethics • Taxation

SOCIAL • Child and forced labour • Diversity • Employee engagement • Health and safety

ENVIRONMENTAL • Circular economy and resource efficiency • Climate change • Product stewardship • Responsible forest management and biodiversity

ENVIRONMENTAL • Sustainable land use • Third-party verified management systems

SOCIAL • Local engagement • People development and talent attraction

HIGH

Significance for UPM

the Uruguayan countryside. EUR 474,000 (499,000) was donated to charities or other non-profit causes. UPMmade donations to e.g. SOS-Children’s Villages to improve the wellbeing of children and families, Finnish Forest Association to organise children’s educational forestry trips, the Baltic Sea Action Group for nutrient recycling initiative and the Economic Information Office (TAT) to support the Yrityskylä learning environment. Wroclaw university of science and technology also received a donation to study properties of bio-based filmic materials for the use of food packaging.

donations and employee voluntary work. We share our resources with causes that respect sustainable development and work in line with our purpose and values. We direct support to four focus areas: reading and learning projects, responsible water initiatives, bio-innovations and community engagement. UPM does not financially support political parties or individual candidates. Employee volunteering emphasises local commitment and impact. UPM’s salaried employees can spend up to 8 hours per year on local volunteering work during their working hours. Over 500 employees

with over 3,000 hours volunteered in local communities. UPMers have participated in several reading and learning projects in Finland, Uruguay, Germany, China and the US, for example. In addition, UPM spent approximately EUR 1.2 (1.2) million on local sponsorships aiming to support the vitality of UPM’s production locations. UPM’s support for its Uruguayan UPMFoundation continued with a contribution of USD 400,000 (USD 400,000). The foundation supports and encourages training, entrepreneurship, employment, healthy living and entertainment in local communities in

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OUR WAY

OUR WAY

UPM ANNUAL REPORT 2019

UPM ANNUAL REPORT 2019

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