UPM Annual Report 2021

STRATEGY

UPM

BEYOND FOSSILS

BUSINESSES

RESPONSIBILITY

GOVERNANCE

ACCOUNTS FOR 2021

OUR FOCUS IN 2021

IMPACT • Respond to global megatrends and growing demand for renewable products • Replace fossil raw materials with bio based materials • Provide more sustainable choices for customers and consumers TARGETS • Developing products that replace fossil based solutions and create added value and growth • Accelerating the commercialisation of bio-based solutions into viable industrial processes • Creating new business and a competitive advantage OUR WAY • In-depth expertise in forest biomass processing • Responsibility and circular bioeconomy • Sustainable product design • Technological development and intellectual property rights • Innovation culture, current and future competences • Extensive partner network development and launch of new business solutions. Our network include the European Joint Undertaking on Bio-Based Industries (BBI) and the European Chemical Industry Council (CEFIC). We participated in the Re newable Carbon Initiative (RCI) as well as 4evergreen Alliance, an initiative by CEPI to raise the overall recycling rate of fibre-based packaging to 90% by 2030 (page 88). We want to be proactive in the develop ments that reduce greenhouse gas emis sions. In 2021, we joined the EU’s Clean Hydrogen Alliance and became a member of the Roundtable on Clean Hydrogen for industrial users. We also joined the newly established Finnish Hydrogen Cluster to accelerate investments in the hydrogen economy.

EXPANDING THE INFRASTRUCTURE

experience and expertise in the new and existing businesses. The centres also focus on piloting and analytics enabling seamless collaboration with customers, value chain partners and research organisations such as universities. The research centres work closely with mills, UPM businesses and their research centres in various countries.

UPM’s Biofore Base research centres in Lappeen ranta, Finland and Changshu, China are acceler ating the development of new bio-based products and their launch to the markets. The Leuna Biofore Base in Germany was established at the end of the year. It works in connection with the upcoming biochemicals refinery and specialises in developing new biomolecular products. The Biofore Base research centres unite our various technologies with globally accumulated We aim to significantly accelerate and improve da ta-based decision-making. Our development work in data utilisation focuses on high-quality, compli ant, secure and modern common data platforms and services. We use agile methods in defining and implementing new business-driven data and digital solutions together with our partners. As a result, we aim for data products and digital services that have identified business value. We finalised our Digi and Data strategy in 2021 based on a solid operating model created Our biochemicals biorefinery under construction in Leuna, Germany, will enable a switch from fossil raw materials to wood-based sustainable alterna tives in textiles, plastics, PET bottles, packaging and pharma or cosmetics products. The basic engineering phase of a next-genera tion biofuels biorefinery is proceeding. The potential biorefinery would produce high-quality renewable fuels, including sustainable jet fuel. The products would significantly reduce the carbon footprint of Our 2030 responsibility targets and our contribu tion to the UN SDGs are integrated into our R&D activities and product development. We want our products to create value for our stakeholders during the whole product lifecycle. In 2021, we further developed our Sustainable Product Design concept, the methodology that is based on design thinking. Our approach applies lifecycle thinking and lifecycle assessment data, both incorporated in sustainable product design practices. We piloted the new concept with packaging and bio

VALUE FROM DATA AND DIGITAL SOLUTIONS

in co-operation with businesses. Our target is to achieve greater impact from the digital and data-driven solutions both on a corporate and a business level. The development projects common to several businesses include digital customer expe rience and pricing, digital supply chain and intelli gent operations. The implementation of the strategy and development projects will start in 2022.

INNOVATING FOR THE FUTURE We innovate climate-positive products and turn them into growing businesses.

INNOVATING CLIMATE POSITIVE PRODUCTS

road transport and aviation, as well as replace fossil raw materials with chemical and plastic alter natives from renewable sources. We are also examining new ways to utilise renewable fibre-based materials that are being developed for textiles, nonwovens, hygiene prod ucts, labels and flexible packaging, amongst other applications.

Our products offer solutions tomitigating climate change as they replace fossil raw materials with bio-based renewable alter natives. The products store carbon for the entire duration of their lifecycle, especially when recycledmultiple times. New solutions are developed in collaboration with our busi nesses, technology partners and customers. Innovation and R&D programmes are es sential in the development of new products and technologies. Research and develop ment expenses cover the development of new technologies, businesses and processes. In 2021, UPM spent EUR 266 million (EUR 189) million) on research and development, making up 21.3% (18.8%) of UPM’s operat ing cash flow. The patents, trademarks and intellectual property rights protecting our innovations

supports the journey from innovation to business. We have nearly 3,000 patents and patent applications, and nearly 1,400 trade marks globally. Licensing innovations and technolo gies provides an excellent basis for value creation with customers and technology partners. As an example, at the end of 2021, UPMBiochemicals owned 160 patents and patent applications and another 353 pat ents and patent applications were held by partners, covering technology and products throughout the value chain. Extensive partner network Our close-knit global partner network is comprised of customers, universities, research organisations, suppliers and start up companies. Collaboration speeds up the

DEVELOPING SUSTAINABLE PRODUCT DESIGN CONCEPT

composites. Testing will continue in 2022 and the new concept will be gradually adopted in all businesses. Our product development concept consists of six lifecycle steps. The process starts with a holistic overview of the design, like the purpose and use the product is developed for. During the process, the whole raw material chain, production and dis tribution efficiency and sustainable use including all circularity and technology aspects are considered. Lifecycle assessments (LCAs) are an important part of the sustainable product design toolbox.

It’s a material world on page 10 Sustainable product lifecycle on page 86

Report of the Board of Directors on page 120 www.upm.com/innovation

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UPM ANNUAL REPORT 2021

UPM ANNUAL REPORT 2021