UPM Annual Report 2023

GOVERNANCE

UPM

BEYOND FOSSILS

BUSINESSES

RESPONSIBILITY

ACCOUNTS FOR 2023

ation included quantitative and qualitative analyses of the Board and Committee work through various methods such as inter views and surveys. The performance of the Board and its Committees was evaluated in relation to their respective duties and re sponsibilities, their oversight, effectiveness and decision-making process, their support for executing the Company’s strategy, their relationship with the Company’s operative management, the Board and Committee compositions and structure, the Board cul ture, the individual performance of Board members and the performance of the Chair of the Board. The preliminary results of the 2023 per formance evaluation were highly favourable and indicated that the Board, the Chair of the Board and the Board Committees are performing effectively, and that Board members are committed to their Board work. Identified areas for improvement are considered when planning Board-related work, and the Nomination and Governance Committee takes the results into consider ation when preparing its proposals for the composition of the Board for the Annual General Meeting. In 2024, the Board will continue to discuss and analyse the results and potential actions thereof. Board Committees The Board has established the following three Committees to further improve the preparation of matters to be decided by the Board: • Audit Committee, • Remuneration Committee • Nomination and Governance Committee The Nomination and Governance Com mittee assisted the Board in reviewing the composition, qualification criteria and duties of the Board Committees, and made a proposal to the Board for the appoint ment of Committee members and Chairs. The members were appointed to the Board Committees in the Board’s constitutive meeting on 12 April 2023. The composition of the Committees is presented in the table above. Neither the President and CEO nor any other Company executives are allowed to be members of any Board Committees. The written Committee Charters approved by the Board of Directors define the purpose, composition, operations

prepared its recommendation in accord ance with the EU Audit Regulation and established a statutory audit firm selec tion procedure, reviewing potential audit firm candidates which were evaluated against a variety of selection criteria, such as proposed audit plan and methodology, experience and composition of the audit team, and audit quality and price. The selection process included multiple rounds of information submissions, testing of technological capabilities, interviews and presentations by the candidates, and exter nal reference checks. After careful consid eration based on the selection criteria, EY became the Committee’s preference and recommended audit firm for the financial year 2024 with Deloitte Oy as the second ary option. The Board agreed with these proposals, made corresponding proposals to the AGM 2023 and the AGM 2023 elect ed the auditors for the financial years 2023 (PwC) and 2024 (EY). Authorised Public Accountant Mikko Nieminen continued as the lead audit partner for the financial year 2023. EY has stated that Authorised Public Accountant Heikki Ilkka will act as the lead audit part ner for the financial year 2024. Remuneration Committee The Remuneration Committee is respon sible for preparing the Company’s remu neration principles and practices, as well as planning the remuneration of the President and CEO and remuneration and and succes sion of other senior executives . In 2023, the Committee held five meet ings. In addition to undertaking the as signed matters and regular reports listed above, the Remuneration Committee also discussed the performance measures of the incentive plans and made recommen dations to the Board concerning the terms of remuneration of the President and CEO and other senior executives, concerning a new share based long-term incentive arrangement and Restricted Share Plan 2024–2027 and concerning the terms of Service agreement of the Executive Vice President of UPM Fibres, who was appointed during the year 2023. The Com mittee reviewed the Remuneration Policy adopted by the AGM 2020 and reviewed the slightly updated Remuneration Policy to be presented to the AGM 2024.

reports on and discussed cyber security, the preparation of upcoming sustainability reports, ESG, environmental impact and other non-financial matters (together with the review of non-financial reporting). The Board would respectively be informed as part of the Committee Chair’s regular reporting to the Board if the Committee received from stakeholders having a mate rial impact on the economy, environment or people. Read more on our sustainable development on pages 58–101. The lead audit partner attended all Committee meetings and reported to the Committee on interim procedures and findings, as well as the quarterly audit and non-audit fees and services. The Com mittee’s standard procedures also include quarterly sessions with the internal audi tor, the lead audit partner, management and some Committee members. When preparing the proposal for the auditor for the financial year 2023, the Committee evaluated the qualifications and independence of the auditor, as well as the audit-related and non-audit-relat ed services provided by the auditor. The evaluation included an assessment of the effectiveness of the audit process, the qual ity of the audit, the performance of the lead auditor and audit team, and the coopera tion with the auditor’s international audit network. As a result of the evaluation, the Committee recommended that Pricewa terhouseCoopers Oy (PwC) be re-elected as the Company’s auditor for the financial year 2023. Following the stipulations of the Audit Regulation, the last financial year that PwC can act as the Company’s auditor is 2023. The Audit Committee has prepared the Board’s proposal for the election and remuneration of the auditor for the finan cial year 2025, which will be presented at the AGM 2024. Following an audit firm selection procedure conducted in 2022, the Board proposed at the AGM 2023 that Ernst & Young Oy (EY) be elected UPM’s auditor for the financial year 2024 based on the Audit Committee’s recommendation. Electing an auditor for the financial year 2024 at the AGM 2023 gave the elected auditor time to prepare for the new audit engagement. With regard to the proposal for the financial year 2024, the Audit Committee

the Board also held non-executive sessions and non-executive sessions with the external auditor. Strategic focus points in 2023 In line with its main duties and responsi bilities, the Board reviewed and approved strategic plans during its strategy session in May. The main focus points of the UPM Biofore strategy continue to be growth, performance, innovation, responsibility and portfolio. Read more about our strategy on pages 20–21. An essential part of the Board’s annual strategy-related work is to oversee the assessment and management of risks related to the Company’s strategy and operations. These risks and opportunities, as well as their impact on operations and strategy, are described on pages 34–35 and 133. In 2023, the Board continued to focus on major strategic investments, most notably the biochemicals biorefinery in Germany and completion of the pulp mill project in Uruguay. The Board has been closely monitoring the status and feasibility of the project in Uruguay since 2016 and has con ducted several status reviews, including risk assessments, in its meetings since then. The investment will increase UPM’s pulp pro duction capacity by more than 50% and is consequently expected to contribute future earnings. Read more about this strategic investment on pages 24–25. The Board has regularly reviewed the status and feasibility of the new biorefinery project in Germany. The biorefinery will produce a range of 100% wood-based bio chemicals that will enable switching from fossil raw materials to sustainable alterna tives in various consumer-driven end uses. Read more about this strategic investment on pages 54–55 and on the corporate website at www.upmbiochemicals.com/ biorefinery. The Board has also reviewed commercial and basic engineering studies of the possi ble biofuels refinery in Rotterdam. Board performance evaluation The Board of Directors conducts an annual evaluation of its performance and working methods, including an evaluation of the performance and working methods of its Committees. In 2023, the evaluation was conducted by an external facilitator. The Board evalu

COMMITTEE MEMBERS 2023

AUDIT COMMITTEE Kim Wahl, Chair Pia Aaltonen Forsell (as of 12 April) Marjan Oudeman Jari Gustafsson (until 12 April)

REMUNERATION COMMITTEE Martin à Porta, Chair Emma FitzGerald Topi Manner

NOMINATION AND GOVERNANCE COMMITTEE Henrik Ehrnrooth, Chair (Chair as of 12 April) Jari Gustafsson (as of 12 April) Piia-Noora Kauppi Björn Wahlroos (Chair until 12 April)

SPOTLIGHT

A PEOPLE-FOCUSED, RESULTS DRIVEN LEADER

Aki Temmes was appointed to lead UPM Fibres as of December 2023. Prior to his new role, Aki was Senior Vice President of Busi ness Control and Finance Operations. He has held multiple roles in business finance positions in Finland and France and headed up UPM’s sawmill business. He knows UPM, and especially UPM Fibres, like the back of his hand. The business has evolved significantly since the Paso de los Toros pulp mill started operations. About 60% of pulp capacity is now in Uruguay. With the tightening of the wood market, the business environment in Finland has changed significantly too. “The business is in a very exciting phase. Transformative growth in Uruguay is now complete. The ramping-up of production, sales and the supply chain is well under way. In Finland, the focus is on ensuring competitiveness in a changed operating environment, covering the entire value chain from wood procurement to sawmilling and pulp production.” As a leader, he feels that people make things happen and that teams get results. “I trust people, share responsibility, and try to offer support. When the strategy and goals are clear, inspiring and demanding, focused teams and skilful people get results.”

and duties of each Committee, as well as the prerequisites of Committee member ship. Each Committee is responsible for performing the duties assigned to it in its Charter. Summaries of the Committee Charters are presented in the CG Statement and are also available at www.upm.com/ governance. The Committees hold their meetings prior to Board meetings in order to prepare matters to be decided by the Board. The chairs of each Committee report on matters discussed and actions taken by the Committees during the Board meetings. In addition, minutes from the Committee meetings are available to the Board mem bers for information purposes. Audit Committee The Audit Committee is responsible for overseeing the Company’s financial re porting processes and financial reporting, internal control, and internal audit and risk management, as well as monitoring the Company’s audit and compliance proce dures. In 2023, the Audit Committee held five meetings. In addition to undertaking the as signed matters and regular reports listed above, the Audit Committee also reviewed

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UPM ANNUAL REPORT 2023

UPM ANNUAL REPORT 2023