UPM Annual Report 2020

stewardship, we aim to ensure that our solutions respond to global challenges and that our product communication is reliable and transparent. Thanks to our commitment to responsi ble business, we were recognised as a Global Compact LEAD participant once again. We were one of the only 41 global companies to receive this recognition, the only forest industry representative, and the first com pany fromFinland. Ambitious work towards a future beyond fossils In January 2020, we committed to the UN’s Business Ambition for 1.5°C in a prom ise to pursue science-based measures to limit global temperature rise to 1.5°C. The initiative is a response to the rising concerns about the severe consequences of failing to stop global warming. UPMwas amongst the first global forest industry companies to make this commitment. Wemake a positive impact and contrib ute tomitigating climate change by tangible actions. We are committed to climate-posi tive forestry, which is critical for the compa ny’s business. Sustainablymanaged forests aremore resilient to changes in the climate. We will ensure that we always growmore forest than we harvest and we will work to improve our forests’ growth and ability to absorbmore carbon. In 2020, the five-year annual average carbon sink of UPM’s own and leased forests was approximately 6.1 million tonnes of CO 2 equivalents (1.1 million tonnes in Finland, 4.9 inUruguay and 0.1 in the US). Decreasing the use of fossil fuels is the most important way to mitigate climate change. We made a systematic global review of the opportunities for reducing emissions using existing technologies in 2019. We also analysed the financial impact of each carbon action. Based on the assessment, we made a commitment to reduce our CO 2 emissions from fossil fuels and purchased electricity by 65% from the 2015 level by 2030. In 2020, we achieved a 6% reduction compared to the previous year. We also plan to reduce the emission levels of the supply chain by 30% and started a comprehensive project on Scope 3 emissions (page 91). Innovative and sustainable products that offer alternatives to fossil materials are in the core of our Biofore strategy. We are

SIGNIFICANCE • Responsibility is an integral part of our strategy and our operations and a source of competitive advantage • Climate change is a major challenge and requires action TARGETS • We provide solutions to global challenges, whilst creating value for our stakeholders • We strive to mitigate climate change through innovating novel products, committing to a 65% CO 2 emission reduction and by practising sustainable forestry OUR WAY • We respect international agreements such as the UN Declaration of Human Rights, the ILO Declaration on Fundamental Principles and Rights at Work and the OECD Guidelines for Multinational Enterprises • Our Biofore strategy guides us in achieving our 2030 responsibility targets and in contributing to the UN Sustainable Development Goals and the UN Business Ambition for 1.5°C • Our Code of Conduct and Supplier and Third-Party Code provide a foundation for responsible business conduct and continuous improvement • Corporate responsibility is managed by the Board of Directors and the Group Executive Team, as well as by businesses and functions

VALUE FROM RESPONSIBILITY

2030 from2015 level, in line with UPM’s commitment to UN Business Ambition for 1.5°C In November 2020, we issued our first green bond of EUR 750 million under the EMTN (Euro Medium Term Note) programme. In connection with the programme, we also prepared a Green Finance Framework. UPM’s framework was rated with the highest-grade, Dark Green, by CICERO (Center for International Climate Research). We will allocate assets to projects that enhance sustainable forestry, waste and water management, increase energy efficiency and use of renewable energy as well as promote the innovation of climate-positive products and solutions. Towards a future beyond fossils on page 16 Our responsibility targets for 2030 and how we did in 2020 on pages 22–23 Creating value with people on page 70 Compliance on page 76 Responsibility throughout the value chain on pages 80–83 Responsible product lifecycle on page 82 Examples of responsibility in different sections of this report www.upm.com/responsibility

committed to a climate-positive product portfolio. At the end of 2020, we started a study on climate-related substitution and the carbon storage effects of our products with two research institutes, the German IFEU and the Finnish Environment insti tute (SYKE). As a tangible measure we organised a series of internal climate webinars during the autumn. The aimwas to increase our personnel’s understanding of climate-re lated topics and challenge them to join in the discussion with stakeholders. Responsibility integrated into financing Connecting our sustainability performance to our financing demonstrates the importance of responsible business practices to our long-term value creation. In 2020, UPM became one of the first companies to link the pricing mechanism of a syndicated revolving credit facility (RCF) of EUR 750 million to both biodiversity and climate targets. The margin of the RCF is tied to two key performance indicators: • Achievement of a net positive impact on biodiversity in the company’s own forests in Finland • 65% reduction of fossil CO 2 emissions from fuels and purchased electricity by

Creating value for society—both as a company and through our renewable and responsible solutions—is an integral part of our strategy. The bioeconomy offers new opportunities for value creation and business growth.

Responsibility is integrated into our Biofore strategy and forms a solid foun dation for long-term value creation. We actively seek sustainable solutions in co-operation with our customers, suppli ers and other stakeholders. To ensure responsible business prac tices we focus on: • Compliance • Responsible operations and value chain • Value-based leadership • Renewable rawmaterials, recyclable and safe products

remediate adverse impacts to human rights and environment caused or contributed by our activities. Remediation is specified case-by-case based on verified impacts. Value-based and inspiring leadership ensures high performance and continu ous professional development, a safe and healthy working environment and the well-being of employees and contractors. A diverse and inclusive working environment empowers people. Local commitment is crucial to this. Renewable rawmaterials and recycla ble products are the essence of a circular economy. With our approach to product

Responsibility at the core Our values and the UPMCode of Conduct guide our decision making, management and operations. Responsible business practices are complemented by credible and transparent reporting. Efficient operations not only reduce costs, but also minimise negative environ mental impact. By managing our forests sustainably, we ensure the availability of wood, safeguard biodiversity and mitigate climate change. Our commitment to respecting human rights is a focal point of our responsible business practices. We are committed to

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UPM ANNUAL REPORT 2020

UPM ANNUAL REPORT 2020