UPM Annual Report 2021

RESPONSIBILITY

UPM

BEYOND FOSSILS

STRATEGY

BUSINESSES

GOVERNANCE

ACCOUNTS FOR 2021

incentives for the 2021 plan is EUR 60 mil lion. We recognise significant individual or team success with a separate Achievement Award system. It is designed to support UPM’s high-performance culture and rec ognise individuals and teams for outstand ing contribution, significant achievements and exceptional performance. In addition to the Short Term Incentive scheme, we provide two long term incentive plans: Performance Share Plan (PSP) for senior executives and Deferred Bonus Plan (DBP) for other key employees. Launched annually, the plans cover approximately 400 employees.

kas sawmill. UPM also reorganised activities in several businesses and global functions. The closures, reorganising and stream lining of businesses and functions decreased the number of personnel by 884 in total. We provide support for employees who are affected by the redundancies. This includes outplacement services and training opportunities that support the affected employees in finding new jobs. Our From Job to Job programme, run in conjunction with local authorities and partners, mitigates the effects of employee redundancies following the closure of the Kaipola paper mill. In addition to our statu tory obligations, we have implemented sev eral voluntary measures, including training, a business start-up allowance, and support for temporary housing and education.

Rewarding and recognising high performance

OUR EMPLOYEES BY REGION

UPM’s personnel by business area 2021

We reward and recognise high performance. Our approach to rewarding and recognising employees consists of both tangible and in tangible components. Tangible remuneration and recognition consists of base salary, bene fits and incentives, which are determined by UPM’s global rules, local legislation, general agreements, local market practices, the level of the position and individual performance. Gender, age, ethnic origin and nationality play no role in determining salaries andwages. Intangible remuneration and recognition consists of, for instance, a safe and healthy working environment, interesting andmean ingful work, and good leadership and career opportunities. We have designed our reward policy to increase employee commitment to, andmotivation for, high performance. Each employee belongs to a uni fied annual Short Term Incentive (STI) scheme. The scheme covers group- and business-level targets, personal and team performance targets, and individual per formance evaluation, to differentiate and reward high performance. The annual incentives paid in 2021 for the 2020 STI plan amounted to EUR 58 mil lion, and the estimated amount of annual

Other operations 4% UPM Plywood 13% UPM Biorefining 16% UPM Specialty Papers 11% UPM Raflatac 18% UPM Energy 0%

UPM Communi cation Papers 38%

6,084 Finland

3,843 Germany

3,333 Other Europe

900 North America

1,570 China

332 Other Asia

Full time 97% Permanent 90%

Part time 3%

Rest of the world

133

Restructuring to ensure cost competitiveness

771 Uruguay

16,966 Total

Fixed term 10%

In 2021, UPM closed the Kaipola paper mill in Finland, sold the Shotton paper mill in the UK and closed one log line at the Kau

Our renewed social resposibility targets on page 32

UPM PERSONNEL IN FIGURES

2021

2020 18,014

2019

70%of employees had development plans. In the engagement survey, the result on the question about good opportunities to learn and grow at UPMwas 62. We apply the 70-20-10 learning and de velopment framework: 70% of the learning takes place on the job; 20% comes from sharing with, and learning from, colleagues; and 10% comes from off-the-job training. Digitalisation is enriching our ways of learning. As the global pandemic has changed our ways of working, we have introduced new e-learning content and programmes on an ongoing basis. Thesematerials provide support to leaders inmanaging their teams remotely and encourage individuals to strengthen their self-leadership skills and resilience. Employees can share digital learn ing content flexibly on our learning platform. E-learning content is offered to develop skills in areas such as commerce, finance, compli ance, safety and leadership. Developing employee experience and enabling renewal Our apprenticeship programmes are a way to ensure the required level of expertise for future employees. The programmes are typically targeted at shop-floor positions in production or maintenance. We run the programmes with regional vocational

schools. In Finland and Germany, approx imately 100 people join the programmes annually. Most of the graduate apprentices have carried on working at UPM. Being the employer of choice has be come crucial when recruiting new employ ees, especially younger professionals. We have organised several successful graduate programmes in recent years. We have ex tended our employer brand to new growth areas. Developing employee experience is a key aspect in developing UPM as a workplace. To strengthen our work community, we have started a dialogue on our purpose and values (page 69). All UPMers are given a chance to create a personal and team-based connec tion to our purpose, values and Aiming Higher mindset. Managers have been pro vided with support to facilitate productive and inspiring discussions in their teams. We have also launched projects to develop future ways of working and digital capabili ties, and to create global health and wellbeing concepts. We have continued to develop our career experiences after employees are hired. We use a design-thinking approach and enable employees to contribute to projects. Based on the targets set for career experience in 2020, we started to redefine our develop ment planning process and tools in 2021.

Following our systematic employer branding work, our position among stu dents and professionals was recognised by external parties in Finland and China. Leading by example Achieving our ambitious targets requires committed input from skilled people and teams empowered by inspiring leaders. We continuously invest in developing leadership capabilities and management teams. Our development programmes sup port the three cornerstones of leadership at UPM: leading oneself, leading people and leading the business. In recent years, the key areas of development have been inspiring leadership, coaching capabilities, self-leadership and resilience. Purposeful leadership was added to these areas in 2021. In 2021, leadership development focused on team leaders and middle man agers, as they lead most of our employees. We have continued to foster a growth mindset and improve the skills needed to enable performance, such as conversation and feedback skills. By the end of 2021, nearly 40% of managers had participated in the programme on achieving quality conversation skills and improved feed back.

Employees

16,966

18,742

Turnover, %

14.5

10.4

9.2

Turnover, % (voluntary)

5.6

3.5

4.0

Average age

44.3

44.6

44.3

CASE

WORKING CONDITIONS ASSESSED IN THE WOOD SUPPLY CHAIN

During the audits, we look at their management system, their responsibility issues and how they manage the foreign labour on their payroll. The audits have identified some areas for improvement such as the coordination of adminis trative systems. There is also room for improvement in the transition to local employee negotiation system, in the sharing of information on legislative changes and reforms between different actors, and in finding a common language across the geographical spectrum of the supply chain. Safety at work is one of the areas for devel opment. In logging and forest logistics, heavy equipment is used and heavy loads are moved. There are risks in the working environment that need to be known and managed.

UPM Forest's supply chain includes more than 100 logging and transport companies. As the supply chain becomes more international, we aim to gain greater visibility on recruitment, employment contracts, working hours, payment practices, travel and accommodation of employ ees and to ensure that they comply with the UPM Supplier Code. A supply chain supplier audit project was launched in 2020 by training auditors and de veloping audit materials. The actual audits began in 2021 with the aim to audit all contractors over the next four years. The companies' seasonal labour comes from abroad, mainly from the Baltic states and Russia.

CASE IMAGE

www.upm.com/responsibility

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UPM ANNUAL REPORT 2021

UPM ANNUAL REPORT 2021