UPM Annual Report 2019

OUR EMPLOYEES BY REGION

UPM’s personnel by business area 2019

7,341 Finland

UPM Specialty Papers 11% UPM Raflatac 17% UPM Energy 0%

UPM Communi- cation Papers 41%

3,975 Germany

3,689 Other Europe

879 North America

UPM Biorefining 15% Other operations 3% UPM Plywood 13%

1,725 China

322 Other Asia

Rest of the world

197

TARGETS 2030

95% favourable responses in the Diversity and inclusion index 70%

614 Uruguay

18,742 Total

favourable in Employee Engagement Survey 2019

UPM continuously invests in developing leadership capabilities and management teams. Our development programmes support our three corner­ stones of leadership: leading oneself, leading people and leading business. Dealing with complexity, improving coaching capabilities and promoting inspiring leadership have been the key areas of development in recent years. In 2019, leadership development focused on front-line and middle managers, as they lead most of our employees. UPM continued to foster a growth mindset and improve the skills needed to enable performance, such as conversation and feedback skills. By

To further develop inclusive leadership and culture, UPM started a dialogue with management teams in 2019 and this work will continue in 2020. Approximately 600 people participated in the dialogue in autumn 2019. We regularly review our diversity status. UPMmanagement teams regularly conduct self-assessments that include diversity and inclusion. We welcome the talent of people with different competencies, backgrounds and experiences, as well as genders, ages and nationalities. This contributes to a richness of views, thereby improving decision-making and business success. Inclusive behaviour is integrated into UPM leadership development programmes and emphasised in UPM Code of Conduct training. Rewarding and recognising high performance UPM rewards and recognises high performance. Our approach to compensation consists of base salary, benefits and incentives, which are determined by UPM’s global rules, local legislation, general agreements, local market practices, the level of the position and individual performance. Gender, age, ethnic origin and nationality play no role in determining salaries and wages. Intangible recognition is included in the total reward portfolio, whichmeans that UPMprovides, for instance, a safe and healthy working environment, interesting andmeaningful work and good leadership and career opportunities. UPMdesigned its reward policy to increase employee

commitment to andmotivation for high performance. Each employee belongs to a unified annual Short-Term Incentive (STI) scheme. The STI scheme covers group and business-level targets, personal and teamperformance targets and individual performance evaluation, to differentiate and reward high performance. The annual incentives paid in 2019 for the 2018 STI plan were EUR 61 million and the estimated amount of annual incentives for the 2019 STI plan is EUR 53 million. To recognise significant individual or team success, we have a separate Achievement Award system. It is designed to support UPM’s high-performance culture and recognise individuals and teams for outstanding contribution, significant achievements and exceptional performance. In addition to the Short-Term Incentive scheme, we provide two long-term incentive plans: Performance Share Plan (PSP) for senior executives and Deferred Bonus Plan (DBP) for other key employees. Launched annually, the plans cover approximately 400 employees. Restructuring to ensure cost competitiveness In restructuring situations, we follow local labour laws and work in close co-operation with various authorities and other external parties and take active measures exceeding mandatory obligations to promote retraining, re-employment and relocation within the company. We also offer different kinds of outplacement programmes. UPMCommunication Papers has taken action to ensure competitiveness and profitable paper production by closing paper machines and by taking other restructuring measures in 2019. The business area permanently closed paper machine 10 at UPM Plattling, Germany, and paper machine 2 in Rauma, Finland. These measures affected 155 employees in Germany and 179 employees in Finland. In addition, UPMannounced its plan to sell or close its Chapelle newsprint mill in France by the end of Q2/2020. The plan will affect 236 employees. In addition, other business areas and functions are taking action to ensure cost-competitiveness and UPMhas established a new Business Services Hub intoWroclaw, Poland. In total, 168 positions in 11 locations are to be transferred to the new hub, which will be fully operational by the end of Q3/2020.

the end of 2019, approximately one fifth of UPMmanagers had completed the programme on achieving quality conversation skills and improved feedback. Developing a diverse and inclusive work environment We value diversity and strive for an inclusive culture. We respect the privacy of our employees and promote equal opportunities and objectivity in employment and career development. In addition to building a culture of Aiming Higher, we are committed to developing local conditions that ensure an inclusive and diverse working environment.

CASE

DIVERSITY BRINGS NEW PERSPECTIVES People with different competences and backgrounds who are committed to UPM company values and culture contribute to higher team performance and help businesses succeed. They bring out new perspectives in decision-making and help to provide a wider understanding of various scenarios. UPM started a dialogue on developing inclusive leadership in 2019. Workshops on diversity and inclusion have been carried out in management teams across UPM. Work will continue in 2020. Workshops have shown that diversity is often simplified as a gender, nationality or age issue, but there are many invisible factors in each individual’s background, such as work history, personal experiences, language and so on. A term repeated often in the workshops was “unconscious bias”. There are stereotypes, prejudices and personal experiences that may be difficult to recognise, but which affect our decisions and behaviour. However, diversity without inclusion will not improve performance in the way that is expected of diverse teams. Also, we cannot bring the best out of people and their potential without inclusive culture. If UPMers ensure that team members are encouraged to contribute to company development and ideas are listened to, diversity becomes a big asset.

UPM PERSONNEL IN FIGURES

2019

2018

2017

Turnover %

9.2

8.9

9.2 3.9

Turnover % (voluntary)

4.0

4.1

Average age of personnel

44.3

44.0

44.5

People development Average training hours/employee OHS figures, UPM workforce Lost-time accident frequency

12

12

13 1)

2.9

2.7 6.9 3.9

3.3 8.2 3.8

Total recordable injury frequency

7.1

4.0

Absenteeism % 2)

6

6

17

Number of occupational diseases 2) OHS figures, contractors Lost-time accident frequency Total recordable injury frequency

4.2 6.2

3.3 5.8

7.0 9.4

1) Reflects active employees 2) Reflects own employees

70

71

OUR WAY

OUR WAY

UPM ANNUAL REPORT 2019

UPM ANNUAL REPORT 2019

CONTENTS