UPM Annual Report 2022

BUSINESSES

UPM

BEYOND FOSSILS

RESPONSIBILITY

GOVERNANCE

ACCOUNTS FOR 2022

We turn sustainable, carbon-binding raw material into high-quality timber products.

UPM Timber benefitted from strong construction activity in the first half of the year. Strong demand for sawn timber raised market prices to a record high level. In the second half of the year, the business was affected by a visible slowdown in the con struction industry. Demand-supply balance weakened and market prices decreased from the peak level. strong, driven by global megatrends. Global demand for pulp is expected to rise from 78 million tonnes to 108 million tonnes by 2035. Demand growth is strongest in China and the rest of Asia. The demand for pulp is being pushed up by the growing Asian middle class, increasing disposable incomes and a rise in the use of tissue and hygiene papers, paper packaging materials and specialty papers. In 2022, construction of our new Paso de los Toros pulp mill in Uruguay progressed well in all main areas (page 40). Once fully commissioned, the new mill will put us among the world’s leading eucalyptus pulp producers, serving global pulp markets with nearly 6 million tonnes of pulp. In the sawn timber business, the demand for sustainable and climate-smart solu tions for the construction and furniture industries is driving future growth. In 2022, we launched our new customer promise “Setting the Standard”. It reflects our aim to become the benchmark in the industry by constantly developing our practices for sus tainability, product quality and customer service (right). The growth and competitiveness of our business is enabled by our strong position and sustainability across the forestry value chain in Finland and Uruguay (page 82). After the start of Russia’s war in Ukraine, we suspended wood sourcing from Russia (page 83). We plan to achieve a new bal ance around the Baltic rim by increasing domestic sourcing and other imports while growing the share of softwood pulp in the production mix of our Finnish mills. Making an impact As a sustainable, renewable, recyclable and biodegradable raw material, pulp is at the core of the bioeconomy. We are actively Meeting future demand Long-term demand for pulp remains

CASE

seeking new solutions for pulp-based pack aging materials to replace plastic and to develop new uses for pulp by-products. Pulp in Finland is produced in energy-ef ficient mills, which play an important role in the highly volatile energy markets. The steady flow of renewable electricity from the Finnish pulp mills helps to maintain the Finnish electrical system and ease energy shortages in the midst of the ongoing ener gy crisis (page 86).

The global construction industry is estimated to account for nearly 40% of energy-related CO 2 emissions. Replacing non-renewable raw materials in construc tion with responsibly produced timber is an effective solution for emissions reduction.

UPM TIMBER’S NEW CUSTOMER PROMISE BENEFITS THE WHOLE VALUE CHAIN As part of UPM Timber’s new “Setting the Standard” customer promise, sustainable carbon-binding raw material is turned into high-quality timber products with the lowest carbon emissions in the industry. Key elements of the promise also include long-term partner

ships with customers and reliability. Our sawmills have operated using fossil-free electricity and heat since 2020. Now, we are aiming to decarbonise our internal logistics by 2025 with electrification and renewable fuels. An extensive energy efficiency programme has been implemented throughout our mills. In 2022, we also switched to recyclable packaging materi als for our timber wrapping and set the goal of replacing all plastics used in packaging by 2030.

Our efforts to reduce emissions also benefit our customers. The more we reduce our emissions, the smaller the customer’s product carbon footprint is. We are also looking for opportunities to jointly optimise our value chain to reduce emissions — by reviewing our logistics chain, for example.

www.upmpulp.com www.upmtimber.com

www.upmtimber.com

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UPM ANNUAL REPORT 2022

UPM ANNUAL REPORT 2022