UPM Annual Report 2020

UPM BIOREFINING - BIOFUELS

DRIVING CLEANER TRAFFIC

OUR DIRECTION • Unique, sustainable, advanced biofuels and biomaterials in various markets and segments • Expanding biofuel business OUR STRENGTHS • Established producer of low-emission renewable diesel and naphtha • Sustainable bio-based alternative to fossil feedstock in the petrochemical industry • Certified in line with international sustainability standards ISCC and RSB

We are committed to helping our customers mitigate climate change with advanced biofuels.

Our low-emission diesel and naphtha made from 100% wood-based residue are sustainable alternatives to fossil fuels and respond to the EU’s ambitious targets for greenhouse gas (GHG) reduction. In EU, an overall 55% reduction is needed by 2030 to move towards a low carbon economy. UPM’s Lappeenranta Biorefinery in Finland promotes a circular economy by converting crude tall oil, a residue of pulp making, into renewable UPM BioVerno diesel for road transport. UPM BioVerno reduces GHG emissions by over 80% com pared to fossil diesel and it also reduces tailpipe emissions significantly. Unlike first-generation biofuels, it has no blend ing limit. Petrochemicals are projected to account for one third of global oil demand growth by 2030 despite the efforts put into recycling and reduction of single-use plastics. Our

renewable UPMBioVerno naphtha can be used as a low emission biocomponent for gasoline and for replacing fossil rawmate rials in plastics and other chemical industry solutions. UPMBioVerno naphtha-based plastic has same technical characteristics and recyclability as conventional plastic. The biorefinery also produces wood based chemicals. Turpentine can be used in bio-based aroma chemicals for the fra grance industry. Wood-based pitch can be used to produce inks, bitumen for roads and roofs, or used in energy generation. In 2020, the biofuel market continued to evolve in a healthy direction, with contin uous demand growth. UPMLappeenranta Biorefinery was racing to keep up with demand by running at a record level with increased nameplate capacity of 130,000 t/a. It also continued to perform above UPM’s average return targets.

Collaborating for responsible solutions Our collaboration with sustainability frontrunners has led to 100% wood-based breakthrough innovations in recent years. In 2020, UPMBiofuels, SABIC and DSM co-operated in creating bio-based Dyneema® fibre (read more below). Also, UPM Formi EcoAce biocomposite, which is made of wood fibres and UPMBioVerno naphtha, was launched for the new range of Finnish Mysoda sparkling water makers (read more on page 61). Our collaboration with UPMRaflatac continued in renewable labelling materials UPMRaflatac Forest Film™ and UPMRaflatac Fossil-Free Adhe sive as well as in the recent launch of UPM Raflatac Forest Film PE™. Unique sustainability certifications UPM’s biofuel production is certified as meeting the RSB (Roundtable on Sustaina up with UPM Biofuels and global chemicals company, SABIC, to improve the environmental impact of its materials. UPM BioVerno naphtha is processed by SABIC to make certified renewable ethylene for DSM’s Dyneema products. The collaboration supports DSM’s ambitious sustainability target for Dyneema of sourcing at least 60% of its feedstock from bio based raw materials by 2030. From a business point of view, the most important argument driving companies to switch to bio based alternatives is how they help to reduce the carbon footprint of the end product.

Our low-emission diesel and naphtha are sustainable alternatives to fossil fuels.

CASE

ble Biomaterials) and ISCC (International Sustainability and Carbon Certification) international sustainability standards. Our RSB low indirect land use change (ILUC) risk certification proves that our products have minimal risk of causing indirect emis sions. All our products satisfy the sustain ability and traceability criteria of the EU Renewable Energy Directive. Future plans for decarbonisation Advanced biofuels play an important role in our Biofore strategy by offering sustainable alternatives to fossil economy solutions. Global demand continues to be driven by climate change mitigation targets and stricter environmental standards.

In 2020, we were exploring the oppor tunities to expand biofuel business with new types of technology concepts and raw materials. Potential next generation multi-feedstock biorefinery would produce 500,000 t/a of renewable fuels including sustainable jet fuel. The products would significantly reduce carbon footprint in the road transport and aviation, as well as replace fossil rawmaterials with renewable alternatives in chemicals and bioplastics. The potential new biorefinery would utilise sustainable feedstocks based on wood and other climate-positive feedstocks. Research on rawmaterials has been focused on forest industry residues. Alternatives made fromwaste and residue-based raw

materials that do not compete with food production have also been tested. We have also been developing a new climate-positive feedstock concept by cultivating brassica carinata as a sequential crop in Uruguay. The carinata crop produces non-edible oil that is suitable for use as feedstock for biofuels. We took next steps of the potential biorefinery in January 2021 and started a detailed basic engineering phase and site option assessment primarily in two loca tions: Kotka, Finland and Rotterdam, the Netherlands.

THE WORLD’S STRONGEST FIBRE GOES RENEWABLE

Extending the use of UPM BioVerno naphtha as a raw material in new applications such as clothing and sports equipment is an example of the collaboration needed to take us towards a future beyond fossils. Ultra-High Molecular Weight Polyethylene (UHMWPE), known under the Dyneema brand as the world’s strongest fibre, is a material used in ropes, sports equipment, protective clothing, and offshore marine or air cargo netting. There is growing interest to use bio-based polymers in a broad range of segments, including hygiene and cosmetic products, the automotive and electrical industries, and other durable goods.

Committed to increasing the share of bio-based raw materials in the production of Dyneema, Royal DSM, a global science-based company in Nutrition, Health and Sustainable Living, teamed

Towards a future beyond fossils on page 16 www.upmbiofuels.com

46

47

UPM ANNUAL REPORT 2020

UPM ANNUAL REPORT 2020