UPM Annual Report 2020

ings. Read more on this strategic invest ment on pages 44–45 and on the corporate website at upm.uy/en/growth. In January the Board made another strategic investment decision regarding a biorefinery in Leuna, Germany. UPMwill invest EUR 550 million in an industrial scale biorefinery to convert solid wood into next generation biochemicals. The biorefinery will produce a range of 100% wood-based biochemicals that enable a switch from fossil raw materials to sus tainable alternatives in various consum er-driven end-uses. Both major investment projects proceeded according to the plan throughout the COVID-19 pandemic, with high health and safety standards ensuring safe working conditions. The Board has regularly been reviewing the status of the projects. Read more on this strategic investment on pages 58–59 and on the cor porate website at www.upmbiochemicals. com/biorefinery. Board performance 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 each evaluate their performance and working methods on an annual basis. Identified areas for improvement are considered when plan ning the Board-related work, and the Nom ination and Governance Committee takes the results into consideration when prepar ing its proposal for the composition of the Board to the Annual General Meeting. In 2020, the evaluation was conducted as a self-assessment and its results were reviewed and discussed at the Board meeting in December. The Board members 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 meet ings, the individual performance of Board members and the performance of the Chair of the Board. The overall results of the 2020 self-assessment survey were highly favour able and indicated that the Board, Chair of the Board and the Board Committees are functioning effectively and Board members are committed to the Board work.

pany for more than ten consecutive years. Based on the Board’s overall evaluation of the independence of these Boardmembers, their long-standing service does not compromise their independence and no other factors or circumstances have been identified that could affect their independence. Board-related work in 2020 The Board held 12 meetings in 2020 and its work was not disrupted, even under the exceptional circumstances caused by the COVID-19 pandemic. The Board convened according to its original meeting schedule, however most of the meetings were held remotely. There is no minimummeeting attendance requirement for Board mem bers. Instead, Board members are expected to attend all meetings unless there is a valid reason for not attending. The average attendance of the Board members at the Board meetings was 95.6% (2019: 96.4%) and at the Committee meetings 90.9% (2019: 97.8%). The personal attendance rates of each Board member are presented in the table on page 103. In connection with its meetings, the Board also held non-exec utive sessions and non-executive sessions with the auditor. Strategic focus points in 2020 In line with its main duties and responsi bilities, the Board reviewed and approved strategic plans during its strategy session in May. The main focus points of the UPM Biofore strategy continue to be perfor mance, growth, innovation, responsibility and portfolio development (read more on pages 24–37). An essential part of the Board’s annual strategy-related work is to oversee the assessment and management of risks related to the Company’s strategy and operations. These risks and opportunities and their impact on operations and strategy are described on pages 62–63. In 2020, the Board continued to focus on the major strategic investment in Uruguay, the 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 investment will raise UPM’s pulp production capacity by more than 50% and significantly contribute to future earn

COMMITTEE MEMBERS 2020

AUDIT COMMITTEE Piia-Noora Kauppi (Chair)

Emma FitzGerald Marjan Oudeman KimWahl

REMUMERATION COMMITTEE Veli-Matti Reinikkala (Chair) Henrik Ehrnrooth Martin à Porta

NOMINATION AND GOVERNANCE COMMITTEE Björn Wahlroos (Chair)

Berndt Brunow Ari Puheloinen

outcome of such assessments. In particular, the Committee assesses Board members’ positions in other publicly listed companies to ensure that the members adhere to the best practices related to overboarding. The Board of Director changes that took place in 2020 had an effect on the director inde pendence assessment, as Mr Pesonen, the President and CEO of UPM, had not been independent of the Company. Thereafter, according to the Nomination and Govern ance Committee’s assessment, all directors are independent of both the Company and the significant shareholders as from the AGM 2020. The commitment of Board members and their availability for Board-re lated work is evidenced by the members’ high attendance at Board and Committee meetings (see the table on page 103). According to the evaluation carried out by the Board with the help of the Nomination and Governance Committee, all directors are independent of the Company’s signifi cant shareholders, as the Company has no controlling shareholder and none of the Company’s shareholders have announced a holding of 10%or more of the Company’s shares or votes attached thereto. In addition, all directors are independent of the Com pany, including Berndt Brunow, Veli-Matti Reinikkala and BjörnWahlroos, who have been non-executive directors of the Com

customers in Africa, Central and Southern America and Asia. Prior to that, she was involved in the UK utility industry respon sible for gas, water and waste networks for the UK National Grid and Severn Trent PLC. Before that, she had an over 20-year career with Shell around the world man aging, among others, downstream retail, lubricant and LPG (liquefied petroleum gas) businesses. Ms FitzGerald has served on Boards in both executive and non-executive director positions for Severn Trent plc, Cookson Group plc, Alent plc and DCC plc. She has also served in the audit, remuneration and nomination committees for these corpora tions, except Severn Trent plc, where she was an executive director. She sits currently on the Advisory Board of Oxford Sciences Innovation. The other new director, Martin à Porta (born 1970), is a Swiss citizen and holds a master’s degree in engineering (M.Sc.) from the Swiss Federal Institute of Technology. He is now acting as a Senior Advisor in the private equity market. FromNovember 2015 until February 2019, à Porta served as the President and CEO of Pöyry Plc, an international consulting and engineer ing company providing services in power

related objectives and results obtained is available in our CG Statement 2020. Director independence The Board of Directors evaluates the inde pendence of its members both annually and on a continuous basis, with the assistance of the Board’s Nomination and Govern ance Committee. Director independence is assessed based on the independence criteria of the Finnish CG Code. The majority of members of the Board of Directors must be independent of the Company, and at least two of these independent members must be independent of any significant shareholders. Independence evaluation of director candidates is one of the key factors in the preparation of the Nomination and Govern ance Committee’s annual proposal for the composition of the Board. The Committee assesses the independence of members of the Board of Directors on a continuous basis and reviews a report on any changes in professional engagements and other commitments in every meeting to ensure that members are compliant with the independence criteria. The Committee also assesses how such changes may affect the Board members’ availability for Board-re lated work, and reports to the Board on the

generation, transmission and distribution, forest industry, biorefining and chemicals, mining and metals and infrastructure, as well as water and the environment. Pöyry was acquired by ÅF AB in 2018. Following the completion of the transaction, à Porta was responsible for ÅF Pöyry’s Manage ment Consulting Division until October 2019. Before Pöyry, à Porta had a long career in different leadership positions in Swit zerland, China, Hong Kong and Qatar with Siemens, which he joined in 2001, with his most recent position as the CEO respon sible for Siemens Building Technologies Division Europe from 2012–2015. Board diversity The Board diversity aspects are defined in the Diversity Policy of the Board and include relevant professional experience and education, gender, age, nationality and length of tenure. This policy is available at www.upm.com/governance. Information on the professional backgrounds of the Board of Directors and their other signif icant commitments is available on pages 110–111 of this report. Information on the other aspects of Board diversity is availa ble in the pie charts on the previous page. More information on UPMBoard diversity,

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UPM ANNUAL REPORT 2020

UPM ANNUAL REPORT 2020