UPM Annual Report 2020

OUR RESPONSIBILITY TARGETS FOR 2030 UPM’s Biofore strategy guides us in achieving our responsibility targets for 2030 and contributes positively to achieving the UN Sustainable Development Goals (SDGs).

UPM RESPONSIBILITY FOCUS AREA

2030 TARGET

2030 FOLLOW-UP / 2020 RESULTS

ECONOMIC Profit Creating value to shareholders

•Comparable EBIT decreased by 32% to EUR 948 million (1,404 million) •Comparable ROE was 7.5% (11.2%) •Net debt/EBITDA was 0.04 times (−0.24) •99% (96%) of active employees completed the trainings for the updated Code of Conduct. Training started in September 2019. •84% (84%) of supplier spend covered by UPM Supplier and Third-Party Code •96% (94%) of raw material spend covered by UPM Supplier and Third-Party Code •117 supplier audits based on identified risks. 350 contractor reviews with focus on working conditions. •Coverage of the reporting was improved and the share of primary data from suppliers increased •Responses to the Employee Engagement Survey’s Diversity and Inclusion index 71% (70%) favourable •UPM continued a dialogue with key management teams on developing inclusive leadership •82% (88%) of employees had completed individual goal setting or annual discus sion. 63% (65%) of employees had a development plan documented •Responses to Employee Engagement Survey’s question regarding learning and development were 69% (68%) favourable •Employee engagement index 71% (71%) favourable. This is 2 pp below the external high-performing norm. Employee enablement index 75% (74%) favourable. This is 2 pp above the external high-performing norm •No (one) fatal accidents, 2 (3) serious accidents. •LTAF was 2.8 (2.9) for UPMworkforce and 3.5 (3.3) incl. contractors, TRIF was 5.3 (7.1) for UPMworkforce and 6.2 (6.8) incl. contractors •All production sites have an OHS management system in place. 47% of the sites have external certification of their OHS system. •A majority of the sites with Health Promotion initiatives •The absenteeism rate was 3.9% (4.0%) •Cooperation started with the Uruguayan El Paso Civil Association •Sharing of best practices ensured through well-established networks •Local initiatives and voluntary work in response to the pandemic

•Comparable EBIT growth through focused top-line growth and margin expansion •Comparable ROE: 10% •Net debt/EBITDA: 2 times or less

Governance Ensuring accountability and compliance

•100% coverage of participation to UPM Code of Conduct training (continuous)

Responsible sourcing Adding value through responsible business practices

•80% of UPM spend covered by UPM Supplier and Third-Party Code (continuous) •100% of UPM raw material spend covered by UPM Supplier and Third-Party Code by 2030 1) •Continuous supplier auditing based on systematic risk assessment practices •30% reduction of CO 2 emissions from materials and logistics (Scope 3) 2)

Our responsibility focus areas are divided into economic, social and environmental respon sibility. For each focus area, we have deter mined the respective targets and key perfor mance indicators. The focus areas, as well as the targets, are reviewed annually. The review is based on our annual materiality analysis, which identifies issues that either have a sig nificant impact on our business performance or issues that influence the assessment and decisionsmade by our stakeholders. Focus on climate targets With our targets set in early 2020, we are putting a strong focus on our contribution to climate change mitigation. We have tightened our target for fossil CO 2 emissions from our own combustion processes and from purchased electricity. We also added a new target for indirect fossil CO ² emis sions, focusing on sourced materials and logistics, and have set targets for ensuring climate-positive land use and a climate-pos itive product portfolio in the future.

Our contribution to achieving the SDGs Our responsibility targets contribute posi tively to achiving the SDGs. We have selected six goals and thereunder 12 targets that are the most relevant for us based on where we can have the greatest effect, either by mini mising our negative impacts or by increasing our positive impacts on people, societies and the environment. There are others that are also relevant to us, but to a lesser extent. To strengthen our future efforts, we launched a new target in 2019 to develop new products and services with contri bution to SDGs. In 2020, we renewed our sustainable product design concept. One step was the updating of our ecodesign questionnaire to cover the SDGs. We carried out a pilot case in the development of sus tainable lignin products. In 2021, the work will continue with sustainable packaging and other business areas. A special focus on sustainable product development will be put on circularity. Towards a future beyond fossils on page 16 Ensuring performance on page 28 Value from responsibility on page 34 People and safety on page 70–75 Compliance on page 76 Responsible sourcing on page 80 Responsible product lifecycle on page 82

SOCIAL Diversity and inclusion

•People feel that UPM values and promotes diversity. People are treated fairly in their work environment and can advance regardless of personal background or characteristics. 95% favourable in the Employee Engagement Survey Diversity and Inclusion index by 2030. •Diversity and inclusion initiative (continuous) •Goal setting discussions are held and development plans are created for employees, completion rate 100% by 2030 •Employees perceive good opportunities for learning and development at UPM, 80% favourable in Employee Engagement Survey by 2030 •Employee engagement and enablement indices with favourable score clearly above external high-performing norm by 2030 •No fatalities or serious accidents in UPM operations •Continuous improvement in safety: Lost time accident frequency (LTAF) <1 and Total record able injury frequency (TRIF) <2 levels permanently reached (including contractors) •All operations have certified OHS system by 2030 •Health Promotion Programme is in use at all UPM sites and businesses by 2030 •Absenteeism rate <2% in all organisations by 2030

Developing organisational culture and local condi tions to ensure diverse and inclusive working environ ment for business success Continuous learning and development Ensuring high performance for business success and continu ous professional development for future employability Responsible leadership Emphasising value-based and inspiring leadership and integrity. Continuous development of working environment Working conditions Ensuring safe and healthy working environment and wellbeing of employees

Community involvement Ensuring local commitment

•Continuous development of strategic sustainability initiatives with leading NGOs •Continuous sharing of best practices of stakeholder initiatives •UPM’s Biofore Share and Care programme brings significant added value

ENVIRONMENTAL Product stewardship Taking care of the entire lifecycle

Goal 6: Clean water and sanitation (Target: 6.3) Goal 7: Affordable and clean energy (Targets: 7.2 and 7.3)

•Climate-positive product portfolio (continuous) •Development of new products and services with contribution to the UN Sustainable Development Goals (continuous) •All applicable products eligible for ecolabelling by 2030

•Scientific study on substitution and storage effect initiated •Assessment developed as part of sustainable product design concept, launch in 2021 •82% (83%) of UPM sales was eligible for ecolabelling

Waste Promoting material efficiency and circular economy – reduce, reuse and recycle

•No process waste sent to landfills or to incineration without energy recovery by 2030 •89% (89%) of UPM’s total process waste was recovered or recycled. The total amount of waste to landfills increased by 3% compared to 2019.

Sustainable forestry on page 86 www.upm.com/responsibility

Goal 8: Decent work and economic growth (Targets: 8.2, 8.5 and 8.8) Goal 12 : Responsible consumption and production (Targets: 12.2, 12.4 and 12.5)

Climate Creating climate solutions and working towards carbon neutrality

•Fossil CO 2 emissions from our own combustion and purchased electricity (Scope 1 and 2) reduced by 65% by 2030 3 ) •Maximise the business benefits of greenhouse gas claims (continuous) • Improve energy efficiency annually by 1% (continuous) •70% share of renewable fuels (continuous) •Acidifying flue gases (NO X /SO 2 ) reduced 20% by 2030 3) •Effluent load (COD) reduced by 40% by 2030 4) •Wastewater volume reduced by 30% by 2030 4) •100% of nutrients used at effluent treatment from recycled sources by 2030 4) •Climate-positive land use (continuous) •All fibre certified by 2030 5) •Positive impact on biodiversity (continuous): implementing biodiversity programme and developing monitoring system 6)

•Fossil CO 2 emissions reduced by 20% compared to 2015 and 6% compared to 2019 •UPM sold greenhouse gas claims worth nearly 1.1 million CO 2 tonnes •Energy efficiency target was not achieved •Level of 72% (70%) reached in the use of renewable fuels •19% reduction achieved since 2015 for the UPM average product •33% reduction in effluent load achieved since 2008 for the UPM average product •10% reduction in wastewater volume achieved since 2008 for the UPMaverage product •28% of nutrients from recycled resources •Five year annual average carbon sink of UPM’s own amd leased forests was approx. 6.1 m tonnes of CO 2 equivalents •83% (82%) of all wood used by UPM is sourced from certified forests • Improvement measured in all quantitative biodiversity indicators

Water Using water responsibly

Goal 13: Climate action (Target: 13.1)

Forests and biodiversity Ensuring sustainable land use and keeping forests full of life

Goal 15: Life on land (Targets: 15.2 and 15.5)

1) Covers all raw material spend including wood and wood-based biomass sourcing and excluding energy, 2) From 2018 level, 3) From 2015 level, 4) From 2008 level, relevant for pulp and paper production, 5) Forest management certification, 6) Covers UPM own forests in Finland

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UPM ANNUAL REPORT 2020

UPM ANNUAL REPORT 2020