UPM Annual Report 2021

RESPONSIBILITY

UPM

BEYOND FOSSILS

STRATEGY

BUSINESSES

GOVERNANCE

ACCOUNTS FOR 2021

company among the 37 LEAD participants. UPM continued active participation in the UN Global Compact initiatives. UPM also chaired the Global Compact Finland Network. We continued our co-operation with dif ferent stakeholders on responsibility issues on a voluntary basis, addressing themes

aim to promote sustainable forest manage ment globally. In Finland, we participated in updating the forest management stan dards in both the FSC™ (Forest Steward ship Council™, FSC N003385) and the PEFC schemes. We also collaborated with the Finnish Osprey Foundation and Vida Silvestre in Uruguay. Together with the Natural Resources Institute Finland, we studied the impact of actions to improve biodiversity in commer cial forests. Responsibility issues were also raised in customer enquiries, with product safety, sustainable forest management and climate change as key themes. Globally, we continued active co-operation with local permit authorities. In 2021, we continued our collaboration with different parties to integrate our responsibility targets into the company’s long term financing. Our mills in Europe, China and Uruguay can be among the biggest employers and taxpayers in the locations where they operate. In Uruguay, we have been building a second pulp mill since 2019. Stakeholder engagement around the project has been active. We aim for engagement and open dia logue with local communities. For example, our Kymi, Kaukas and Steyrermühl mills have their own forums for local dialogue. We also co-operate with local schools and education networks, organising virtu al events, for example. In addition, it is crucial for us to have active dialogue with local forest owners, neighbours of harvest ing sites and other individuals involved in forest management. Our EMAS (EUEco-Management and Audit Scheme) statements cover socie tal impacts in addition to environmental performance, providingmore detailed information on the local impacts of our pulp and paper mills. The EMAS statements also include information on co-operation with local stakeholders, such as sponsorship of local organisations or co-operation with educational institutions. Thesemill-specific statements complement UPM’s corporate EMAS reporting. They are compiled annually and published on the UPMwebsite www. upm.com/responsibility. Emphasis on local communities and impacts

such as ecolabels, fish migration and nature conservation. We were an active international stakeholder member of the PEFC (the Programme for the Endorsement of Forest Certification, PEFC/02-44-41) and par ticipated in the development of the PEFC forest certification system, reflecting our

World-class commitment to corporate responsibility In November, UPMwas listed as the forest and paper industry leader in the Dow Jones European and World Sustainability Indices for 2021–2022. In September, the UN recognised UPM as the only forest industry representative and also the only Finnish

The Biofore Share and Care programme continues UPM’s Biofore Share and Care programme demonstrates our dedication to responsi bility and local community involvement through sponsorships, donations and employee voluntary work. We share our resources with causes that respect sustain able development and work in line with our purpose and values. Our new 2030 social responsibility targets highlight our local commitment and positive impact on communities. We assess and measure the quality of community relationships and define business specif ic long-term initiatives in line with our programme. In 2021, we supported projects with a focus on reading and learning, Beyond Fossils initiatives and community engage ment. For example, we collaborated closely with the Guides and Scouts of Finland to increase the dialogue and understanding between young people, companies and poli cy makers on topics such as climate change and responsibility. The collaboration will continue in 2022. UPM does not financial ly support political parties or individual candidates. Employee volunteering strengthens local commitment and impact. However, the number of employee volunteering hours was limited due to prevailing COVID-19 situation in 2021. The local sponsorships and other contri butions amounted to approximately EUR 0.8 million (EUR 1.3 million) within the Biofore Share and Care Programme. The figure includes support for the Uruguay an UPM Foundation, which continued with a contribution of USD 400,000 (USD 465,000). The foundation supports and encourages training, entrepreneurship, em ployment, healthy living and entertainment in local communities in the Uruguayan countryside. In addition, EUR 498,700 (EUR 499,500) was donated to charities or other non-profit causes such as Aalto University, the University of Helsinki, Economy and youth TAT, the Children and Youth Foun dation, UNICEF, the Association of Forest Kindergartens in Bayern and the China Green Foundation.

UPM’S MATERIALITY ANALYSIS 2021

CASE LEGISLATION PLAYS A MAJOR ROLE IN THE DEVELOPMENT OF THE BIOFUELS BUSINESS Advocacy co-operation is an important means to promote the development of advanced biofuels regulatory frameworks in the EU. Influence comes from dialogue with policy makers, public authorities, organisa tions and the media as well as understanding the factors that influence business regulation. In 2021, the EU Commission presented Fit for 55, a major package of climate legis lation proposals. It sets new targets for the use of advanced biofuels. We want to promote investments and market entry of advanced biofuels. Our message in the discussions is that advanced biofuels are needed to meet the emission reduction targets for transport. We also explain what should be done to increase investments in reducing emissions. The EU's energy independence will increase when advanced biofuels are produced from industrial and agricultural and forestry side streams, waste and residues. UPM's biofuel business is based on the EU-wide biofuel blending obligation. In the past, regulation focused on the Renewable Energy Directive. With the proposals in the Fit for 55 package, the business will be affected by a number of different directives. The industry-wide Advanced Biofuels Coalition takes position on the issues related to the EU-wide mandate for advanced biofuels in aviation, maritime and transport sectors. UPM also wants sufficiently clear criteria on how sustainability is defined.

Materiality analysis is carried out annually. The results highlight the sustain ability topics UPM has a significant impact on, or which have a significant impact on the company. The analysis covers both positive and negative impacts on the economy, the environment and people. The current sustainability impacts are assessed based on a follow up of the interests and concerns of various stakeholder groups; communities, em ployees, NGOs, customers, suppliers, government and regulators, investors, researchers and the media. The assessment is completed with an analysis of potential impacts that could occur, based on the signals from the stakehold ers and potential future scenarios.

All customer questions and stakeholder concerns received during the year are taken into consideration. We also conduct specific stakeholder surveys regularly. Most of the material economic, environmental and social responsibility topics identified in the analysis are presented below. UPM’s responsibility focus areas and targets (pages 32-33) reflect these material aspects. We do not distinguish between topics within the section and consider them all equally material.

Significance for stakeholders MEDIUM HIGH MEDIUM

ECONOMIC • Competitiveness • Compliance, ethics and values • Responsible sourcing • Regulatory environment • Climate change

ECONOMIC • Risk and opportunity management • Corruption and bribery • Selling ethics • Taxation

SOCIAL • Decent work and fair rewarding • Diversity and inclusion • Responsible restructuring • Health and safety

ENVIRONMENTAL • Circular economy • Climate change • Product stewardship • Responsible forestry • Biodiversity

ENVIRONMENTAL • Sustainable land use • Third-party verified management systems

SOCIAL • Local engagement • People development and talent attraction • Employee engagement • Child and forced labour

HIGH

Significance for UPM

www.upm.com/responsibility

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UPM ANNUAL REPORT 2021

UPM ANNUAL REPORT 2021