UPM Annual Report 2019

ACTIVE CUSTOMER COLLABORATION

We serve the global market with a comprehensive product range of responsibly produced renewable products for everyday use.

PRODUCT RANGE

CUSTOMER INDUSTRIES

BUSINESS

COLLABORATION ACTIONS IN 2019

IMPORTANT CORPORATE RESPONSIBILITY TOPICS

MAJOR CHANGES IN CUSTOMER INDUSTRIES

Softwood, birch and eucalyptus pulp

Tissue, specialty, graphic papers and packaging

• Joint projects on technical, logistics and sustainability topics • UPM Pulp Schools providing sustainability and technical services and training • Strengthening production, sales and customer service with R&D • Strengthening service concept with new tools like RFID tagging of pulp deliveries • Sales of UPM BioVerno naphtha stabilised for the production of sustainable plastics in Europe • Joint development projects with customers • Expanding the target markets • Strengthening sales and technical product support • Customer focus throughout the organisation

• Safety culture at mills and product safety • Forest certification, origin of wood, sustainable forestry, climate change • Environmental performance of pulp mills including emissions, water usage and solid waste • Urgency to find alternatives for plastics, EU and national regulations • Reducing greenhouse gas emissions and exhaust emissions • Biofuel-specific sustainability certification (ISCC and RSB) • Social and traceability criteria for targets set by the EU Renewable Energy Directive • Safety and product safety

• Growth of tissue and packaging board production • Continued decline of printing and writing paper industry in mature markets • Stricter environmental legislation in China resulting in limitations on recovered paper imports, for example • Increased demand for wood-based solutions to replace plastics • Global increase of advanced biofuel volumes and demand • Wood, waste- and residue-based biofuels and biomaterials are favoured by both customers and legislation • Growing demand for sustainable feedstock alternatives

UPM PULP

Wood-based renewable diesel for transport and renewable naphtha for transport and petrochemicals

Fuel distributors and the transportation, oil and petrochemicals industries

UPM BIOFUELS

• Chain of custody, origin of wood, forest certification, sustainable forest management • Safety

• Growing importance of Eastern Europe as a production area • Instability and financial challenges in Middle Eastern and North African markets

Standard and special sawn timber

Joinery, packaging, furniture, distribution and construction industries

• Further focus on strategic markets and market-specific weighting • Customer categorisation and customer-specific account plans • Optimisation of raw material quality and usage • Delivery accuracy • Excellent service throughout the supply chain

UPM TIMBER

Electricity and related services

Nordic market and industrial consumers

• Enhanced service portfolio

• Zero-carbon electricity production • Active grid balance management • Fish migration

• Structural changes in the Nordic electricity market • Increased volatility of the electricity market due to intermittent weather-dependent production capacity • Climate change mitigation through decarbonisation

UPM ENERGY

Self-adhesive paper and film label stock

Label printers, converters, packers, brand owners in food, beverage, home and personal care, pharmaceutical, retail, logistics, durables, tyres and A4 segments

• Expanding customer sales & service reach through excellent commercial functions and digital customer portal: MyRAFLATAC • Sustainable product development and offering via our Smart Choice and Smart Circle solutions • Collaboration in leading packaging forums like the Ellen MacArthur Foundation (CE100 and New Plastics Economy Global Commitment), the Sustainable Packaging Coalition and the Association of Plastic Recyclers. • Joint projects with customers and brand owners e.g. tailored LCA calculations via our Label Life service • Ongoing development work on supply chain performance and service • Product development projects with customers and value chain members • Sustainability services and training • Supporting copypaper merchants with marketing materials and initiatives • Joined Cepi's 4evergreen initiative to boost fibre-based packaging • Joint product development initiatives • Engaging with the international magazine publishing industry through strategic partnerships with FIPP and VDZ organisations • Comprehensive sustainability agenda with clear goals, focusing on raw material sourcing, production, role in society and value generation for stakeholders • Active customer satisfaction and relationship management • Introduction of extended capabilities and offering of UPM Chudovo mill • Introduction of new functional products for construction use

• Product safety, Life cycle assessment, ecodesign and bio-based components • Waste management • Recyclability and recycled content (PCR) • Forest certification • Climate change

• E-commerce increasing label use for packaging and logistics • Increase in automated product labelling and identification • Retailer and distributor network development • Increased need for sustainable label products and solutions • Legislation: Increasing mandatory product information

UPM RAFLATAC

Labelling materials, release liner base papers,

• Renewable and recyclable raw materials • Forest certification, origin of wood • Product safety • Resource efficiency • Compliance with laws and regulations

• Increased consumer demand for renewable and recyclable solutions • Increased share of e-commerce • Technology development; for example, increase in automated product labelling and identification • Increase in the number of personal printers in APAC

Paper converters, merchants, distributors, retailers, printers, publishers, label stock manufacturers and commercial siliconisers Newspaper and magazine publishers, retailers, print shops, catalogue, directory and book publishers, office, envelope and home suppliers, merchants, brokers, advertising Construction, vehicle flooring, LNG shipbuilding and parquet industries, as well as other industrial applications All UPM businesses using wood or wood-based biomass, forest owners

UPM SPECIALTY PAPERS

flexible packaging papers, office and graphic papers

Graphic papers for various end uses

• Safety culture • Supplier social responsibility and safety performance

• Digitalisation • Consolidation • Process streamlining • Efficiency increases through automation

UPM COMMUNICATION PAPERS

• Forest certification, ecolabels • Resource efficiency and CO 2

-footprint reduction

Plywood and veneer products

• Safety culture • Forest certification and chain of custody • Product safety • Focus on climate actions, resource efficiency

• Lack of visibility for demand development increases uncertainty • Increased need for services, stocks and short lead time • Increasing demand for online services • Increased environmental awareness drives LNG demand

UPM PLYWOOD

Wood and wood- based biomass (logs, pulpwood, chips, forest residues etc.), full forestry service offering Lignin products, glycols and industrial sugars development pipeline

• Focus on creating unique customer experience for forest owners • Development of forestry service offering • Enhanced digital solutions to improve customer service

• Sustainable forestry, forest certification • Income and employment for people living in rural areas, employment of entrepreneurs

• Increasing wood demand and competition due to pulp mill investments in Finland

UPM FOREST

Resins and adhesive industry, bio-plastics and plastic compounds

• Joint development projects on technical and sustainability issues • Close collaboration to develop tailormade solutions for specific production conditions and product requirements

• Forest certification, lifecycle analysis, ecodesign and bio-based materials • Sustainable alternatives to fossil-based materials • Safety

• Growing customer demand for renewable and sustainable materials • Strong attention on recyclability of plastics

UPM BIOCHEMICALS

Wood-based products for biomedical applications

Academic, biotech, pharma, research hospitals and CROs (contract research organisations)

• Joint development projects on new applications and product development • Digital marketing development • Customer and stakeholder training • Co-marketing projects with industrial partners

• Animal-free in-vitro medical research • Products for healthcare improvement

• Growing customer preference for renewable and sustainable materials • New technologies for more relevant human science

UPM BIOMEDICALS

UPM ProFi decking products and UPM Formi granules

Distributors of building products in Europe, contract manufacturers for large-scale consumer brands

• Joint development projects with customers on technical and design issues • Customer and stakeholder training

• Sustainable alternatives to fossil-based plastic materials • Recycling plastics and label production side streams

• Trend to find renewable alternatives to fossil-based polymers • Trend to increase the content of recycled materials in products

UPM BIOCOMPOSITES

• Digital marketing development • Demand chain understanding

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UPM ANNUAL REPORT 2019

UPM ANNUAL REPORT 2019

CONTENTS