UPM Annual Report 2022

RESPONSIBILITY

UPM

BEYOND FOSSILS

BUSINESSES

GOVERNANCE

ACCOUNTS FOR 2022

CLIMATE-POSITIVE FORESTRY ACTIONS FOR ENVIRONMENT

not use genetically modified trees. Compli ance with these requirements is verified by an independent third party. All UPM-owned forests are certified or in the process of being certified if the site is new. We also promote forest certification for private forest owners and other customers. We have established FSC group certification schemes in Finland and in Uruguay, which support small forest owners' access to certi fication. In 2022, the forest area covered by UPM's FSC group covered approximately 540,000 hectares in Finland and over 13,000 hectares in Uruguay. CDP has recognised UPM as a Forest A List company for its significant actions to mitigate climate change and prevent deforestation every year since 2016. Co-operation with stakeholders We have a long history of working with researchers, academic institutions, environmental organisations and other stakeholders to develop sustainable forest management. In 2022, we continued our long-term co-operation with the Osprey Foundation in Finland by launching a bird protection project for 8,000 hectares on UPM land. As part of this project, active measures were put in place to encourage three endangered predatory species to nest in commercial for ests using species inventories and artificial nests will also be built. In the USA, we initiated stakeholder co-operation with local indigenous peoples’ communities to learn more about their approach to forest management and aim to increase this type of work in the future. In Uruguay, we collaborated with stakeholders and NGOs such as Vida Silvestre Uruguay to professionally manage conservation areas. We participated in forest and environ

For our forests to remain carbon sinks, the growth needs to exceed harvests. The annual carbon sink from owned forests in Finland and in the US and owned and leased plantations in Uruguay has averaged 2.3 (3.8) million tonnes of CO 2 equivalent over the past five years. The main reason for the decrease was the development of calculation methodologies both in Finland for soil and Uruguay for trees. Our aim is to constantly improve our understanding of carbon. In 2022 we initiated a project with the Natural Resources Institute Finland (Luke) to im prove soil carbon models for Uruguay with actual measurements on the ground. The project's goal is to gather detailed informa tion on the local conditions and enhance the science-based approach of soil carbon mod elling. We expect to have an improved model in use for our 2023 carbon calculations. Third-party-verified supply chain We always know the origin of our wood. We do not use wood from illegal sources or from areas where high conservation value forests could be under threat. Our wood procurement does not cause land-use change or deforestation as is evidenced by the fact that forest cover is stable or increasing in all wood sourcing areas. We do

mental stakeholder forums. In Finland, we took part in biodiversity roundtables coordi nated by the Ministry of Environment and the Ministry of Agriculture and Forestry. We also continued our active co-operation with the international FSC and PEFC to promote sustainable forest management globally. Enhancing biodiversity on page 84 Ensuring a responsible supply chain on page 78 Sustainable product lifecycle on page 96 Forest Action report on www.upm.com/ responsibility

Our business is based on sustainable forest management. We grow and harvest wood to produce renewable materials and products.

Finland and Uruguay are UPM's largest wood sourcing regions. At the end of 2022, we owned approximately 903,000 hectares of forest land in Finland, Uruguay and the USA. Most of this land is in Finland, totalling around 522,000 hectares. In Uruguay, we have about 305,000 hectares of eucalyptus plantations, grasslands and conservation areas, and in the USA 76,000 hectares of forest. We also lease about 167,000 hectares in Uruguay and manage about 1.4 million hectares of private forests in Finland and 33,000 hectares in Uruguay. We apply the same strict sustainability standards everywhere we operate. About 165,000 hectares (18%) of the land we own globally is protected. Protected areas include valuable habitats, natural forests, and other areas of high value. Of our four modern nurseries, three are in Uruguay and one in Finland. In 2022, our newest nursery in central Uruguay began operating to ensure sufficient wood supply for the new Paso de los Toros pulp mill. High-quality seedlings will ensure good growing conditions for the forests and are important not only for wood raw material production but also for carbon seques tration, restoration of biodiversity and increasing resilience to climate change. For example, in Finland, nurseries are producing hardwood seedlings, which enable the restoration of vibrant mixed forests, in turn helping to support enhanced biodiversity and climate adaptation. In Paysandú, Uruguay, we opened our first Forestry Research Centre specialising in eucalyptus plantations (page 41). Forest Action: the global forest responsibility programme In 2022, we launched our new global forest responsibility programme. The Forest

Action programme encompasses respon sibility actions under five primary pillars: climate, biodiversity, water, soil, and social contribution. As an example, we use many solutions for managing the impact of forestry on water resources. Our main harvesting approach is to leave untouched buffer zones along water courses and aquatic habitats. Healthy forests are an essential asset to clean water throughout a country. Our forest inventory system is updated annually on the location of important habitats and waterbodies in relation to timber harvest ing activities. In Uruguay, an institutional network has studied and monitored water usage of eucalyptus plantations for decades. Planted eucalyptus species are very efficient in terms of biomass production per water unit usage. Tree plantations reduce rapid run-off through the soil surface thus minimising soil erosion. In Finland, we are one of the funding partners in a national two-year restoration project related to small inland waters including springs, ponds or streams in 2022-2023. In the USA, the forest lands are considered a crucial conservation tool in protecting the iconic Mississippi River which serves as an essential water supply to millions of people in Minnesota where our forests are located. forestry and improving biodiversity. Forests and forest diversity are critical for mitigat ing the effects of climate change. We ensure that our forests continue to act as carbon sinks, remain resilient and diverse in chang ing climate conditions, and grow well for future generations. Forests and climate We are committed to climate-positive

IMPACT • Sustainable forest management is an important means to adapt to climate change • Forests and wood-based products play a unique role in climate change mitigation • Well-managed forest plantations are a sustainable and efficient way to supply fibre for the increasing global demand • Demand for wood-based products creates a strong economic incentive for good forest management and growth • Forestry builds wealth and prosperity for local communities • Sustainably managed commercial forests provide wellbeing and recreation TARGETS • Climate-positive forestry and maintenance of carbon sinks • Efficient production of quality wood • Enhancing biodiversity • Safeguarding forest ecosystem services OUR WAY • Third-party verified and certified wood origin monitoring systems to ensure full traceability • No wood sourced from tropical rainforests or from forest plantations that have been established by converting natural forests • No deforestation • No operations in areas where indigenous peoples' rights are at risk • No plantations in areas where water is scarce • Strong stakeholder engagement • Focus on 2030 responsibility targets • UPM Forest Action programme activities

CASE

INCREASED WOOD PROCUREMENT IN THE BALTIC RIM

After the start of the Russian war in Ukraine, we suspended the purchasing of wood from Russia. The major forest certification bodies FSC™ and PEFC have also excluded wood originating from Russia and Belarus from their certification systems. Approximately 10% of the wood used by UPM in Finland came from Russia, and birch was the most important imported species of wood. Wood imports from Russia have now been replaced with increased wood pro curement in Finland and increasing imports from the Baltic rim and Sweden. Finland is UPM’s main market for wood procurement. Thanks to sustainable forest management, Finland’s forests grow signifi cantly more than they are used. Although logging levels are increasing, they remain below the annual forest growth levels. We have also increased the share of softwood pulp in the production mix. For example, the UPM Kaukas pulp mill has switched to softwood pulp production only. Despite changes to wood procurement areas, we know the origin of the wood, and certification and actions that improve biodi versity play a key role in that. We have also increased the number of purchasing personnel and opened new forest service offices as well as increased resources in logging and logis tics. In addition to onboarding new personnel, we have trained entrepreneurs in quality man agement and the ways of working at UPM.

Certified fibre share %

100

90

80

70

60

50

18

19 20

21

22

Target

UPM FORESTS AND PLANTATIONS 2008

2022

Forest and plantation land, own and leased (1,000 ha) Forest growth (million m 3 ) Wood harvested from UPM forests and plantations (million m 3 ) Value of forests and planta tions, including land (EURm)

1,070

1,012

TARGETS 2030

6.7

4.3

100% certified fibre

4.5

2.2

86% achieved

3,421

1,270

82

83

UPM ANNUAL REPORT 2022

UPM ANNUAL REPORT 2022