UPM Annual Report 2023

ACCOUNTS FOR 2023

UPM

BEYOND FOSSILS

BUSINESSES

RESPONSIBILITY

GOVERNANCE

rights impact assessment across its operations in Uruguay in collaboration with an external partner. The focus on strengthening UPM’s human rights due diligence practises in investments and business development projects as well as in contractor management also continued. Responsible sourcing UPM requires its suppliers, third party intermediaries and joint venture partners to apply the same principles as in the UPM Code of Conduct including commitment to anti-corruption, environmental and social responsibility, safe products, human rights and occupational health and safety practices. Transparent supplier requirements are the basis for responsible sourcing. These requirements for suppliers are defined in the UPM Supplier and Third Party Code. A number of additional requirements are in place for the sourcing of wood, chemicals, pulp and packaging materials, as well as for safety and logistics. All contractors working on site go through UPM’s safety requirements and a web-based safety induction training. UPM identifies its supply chains with a high risk of potential negative environmental and social impacts. These responsibility-related high-risk suppliers are determined by the country of origin, sourced material or service, and the UPM supply chain ESG risk register which holds UPM’s view on company and business area relevant risks on people and the environment. UPM also uses EcoVadis and other assessments, supplier audits and joint development plans to carry out more detailed evaluations of suppliers’ activities. For the first time in 2023, our various responsible sourcing practices and priorities were formulated into a cohesive, over-arching sustainable supply chain programme. Each element entails clear instructions regarding the relevant sourcing and supply chain management practices and implications in UPM, as well as tangible guidance, requirements and expectations for UPM’s suppliers. Effective implementation is managed and tracked through our 2030 responsibility targets and performance indicators. UPM continued its co-operation with Together for Sustainability (TfS), a chemical industry initiative that promotes and improves sustainability practices within the supply chains. In 2023, UPM conducted some 540 (520) EcoVadis environmental and social assessments and 95 (121) supplier audits. In addition, about 890 (360) contractor reviews with a focus on working conditions were carried out in Uruguay. Social and employee-related matters UPM’s responsibility focus areas in social and employee-related matters are: learning and development, responsible leadership, diversity and inclusion, fair rewarding as well as safe and healthy working environment. UPM is committed to active employee participation and consultation, organised in accordance with international and national rules and regulations. UPM aims to empower and engage employees at all levels through responsible leadership. UPM encourages its employees to pursue professional growth, expects development and supports them in learning skills and developing them further. UPM respects the privacy of employees and promotes equal opportunities and objectivity in employment and career development. All UPM employees are treated as individuals regardless of gender, age, ethnic origin, nationality, etc. Also in 2023, UPM carried out a gender pay equity review process closing the unexplained gender pay gap and a living wage review process to make sure that salaries are sufficient everywhere. To achieve and follow-up the set target of greater

female representation in professional and managerial roles has been in focus for different organisations. In its People Strategy, UPM focused on leadership and creating a safe, inclusive and diverse working environment, as well as aiming higher in performance and ensuring the growth of our people. The aim is to create a unique, positive UPM experience and to develop future ways of working and collaborating, supported by attractive culture, workspace and technology. In 2023, UPM continued with its programme to develop the UPM experience and ways of working, having digital capabilities in focus for operators and tools for citizen development for UPMers. The enabling performance approach by strengthening feedback culture, agile goal setting and frequent manager-employee discussions is being further strengthened. Development programmes to support growth and performance were continued and implemented. The key areas of development have been inclusive and purposeful leadership, high-performing teams, self leadership and coaching. Development planning and related tools were developed and a campaign to support UPMers in their development done. To further develop inclusive leadership and culture, UPM continued to have a dialogue and train UPMers. In 2023, an Employee Resource Group (BeU) was set-up to support the LGBTIQ community, create awareness and develop inclusive culture at UPM. UPM promotes employees´ health and wellbeing. In 2023, UPM continued to implement its health and wellbeing vision, which takes a holistic approach on themes: body, mind, heart and soul. Safety is an essential part of UPM’s activities and business management system. Equal safety requirements are applied to all employees, visitors and contractors working at UPM’s premises. Proactively thinking about the safety of employees and contractors remained an important focus area in 2023. The requirements concerning process safety have been clarified with a new safety standard and process safety has been in focus especially in the new investment projects of the biofuel and biochemicals businesses. In 2023, a new safety project was started with a dialogue with employees to engage UPMers to give input about how does the safety look from employee perspective, what works well and what could be improved. Product stewardship The majority of UPM’s products are made from renewable raw materials and are recyclable. UPM products help to mitigate climate change by replacing fossil-based products with bio-based renewable alternatives. Product stewardship covers the entire lifecycle of all UPM products from the development phase to the end-use and beyond. In 2023, UPM’s Sustainable Product Design concept implementation continued with several projects . The approach applies lifecycle thinking and lifecycle assessment data, both of which are integrated in sustainable product design practices. During the process, the whole raw material chain, production and distribution efficiency, sustainable use and circularity are considered. UPM provides product declarations to provide customers with easy access to information concerning the products´environmental and product safety aspects or the wood origin. Together with a number of paper and chemical companies the exchange of information in the supply chain was improved. This facilitated a pre-assessment of chemical use and to ensured compliance with legislations and ecolabels. Most UPM products are certified with widely recognised ecolabels, such as the EU ecolabel and national ecolabels for graphic paper or ISCC and RSB certification for biofuels, biocomposites and labels. All UPM pulp mills, UPM Raflatac sites, UPM Specialty Papers´ production lines and UPM Kymi paper mill have implemented food

management systems in accordance with ISO 22000. The respective products are designed and produced to meet food packaging requirements. In 2023, UPM developed internal guidance on how to make sustainability claims in its communication and marketing. Environment UPM’s responsibility focus areas in environmental matters are forests, biodiversity, water, waste and climate. UPM uses raw materials, water, energy and nutrients in a responsible manner and continuously improves its energy, resource and cost efficiency. UPM is committed to sustainable forestry and third-party-verified FSC™ and PEFC chain of custody certification covers all sites using wood raw materials. This ensures that the wood is legally sourced from sustainably managed forests. All UPM-owned forests are certified, or in the process of certification if acquired recently. According to the water risk analysis carried out with the WWF Water Risk Filter in 2021, our production sites are in areas with low to medium water scarcity. A comprehensive water risk analysis has provided 2030 and 2050 scenarios of water risks, based on climate and socio-economic changes to enable us to understand and prepare for future water risks and opportunities. The water withdrawn by UPM plants comes from rivers, lakes or groundwater resources. UPM uses water responsibly in terms of the company’s water usage and effluent quality. If the price of raw water were to increase by EUR 0.01 per cubic metre, it would mean additional water costs of approximately EUR 4 million annually. In 2023, wastewater volume decreased by 10% per tonne of pulp and increased by 23% per tonne of paper. The increase for paper is due to temporary market-related shut-downs. Circular bioeconomy is at the core of our operations. We have developed innovative ways to reduce and recover waste and to use side streams, residues and recovered materials. For example, tall oil is used for the production of UPM BioVerno renewable diesel and naphtha and ash is utilised e.g. in soil stabilisation, cement industry or as raw material for paper filler production. Regulatory changes may have an impact on the options for waste or residue use, either by restricting the end uses and thus causing higher costs for alternative solutions, or by creating new opportunities. In 2023, 87 (90)% of UPM’s process waste was recycled or recovered, of which 30 (21)% is energy recovery. In 2023, UPM’s environmental investments totalled EUR 60 million (11 million). The significant increase compared to previous year was mostly due to investments in electric boilers at eight mills, totalling EUR 35 million. In addition, at UPM Kaukas over EUR 2 million were invested in wastewater management related renewals and upgrades. UPM’s environmental costs, which were mainly attributable to effluent treatment and waste management, totalled EUR 121 million (123 million), including depreciation. The company-wide Clean Run concept, launched in 2012 and developed since to cover all operations and being holistic environmental management system, aims to improve UPM’s environmental performance by bringing environmental issues to the forefront of everyday work and enabling consistent way of working whatever operation in concern. In 2023, UPM strengthened its management of environmental topics by revising and standardizing its Clean Run concept. The new Clean Run standard will be implemented globally during 2024. All sites systematically follow up any deviations, proactively report observations and near misses, carry out walks and discussions, share best practices and compile detailed risk assessments. Approximately 1,500 (1,400) environmental walks were organised and 2,600 (2,100) preventive environmental observations and near misses were reported in 2023.

In 2023, the number of environmental non-conformances increased to a total of 28 (22) deviations from permit, contractual or other obligations. 5 cases were related to air, 20 to water, 2 to soil and water and 1 to waste. All deviations were reported to the authorities and, where relevant, to local stakeholders. In all cases, appropriate measures were taken to normalise the situation, and will be taken to prevent similar occurrences. In 2023, one major environmental incident occurred at UPM’s new Paso de los Toros pulp mill in Uruguay (read more on page 93). In January 2024, Uruguay’s Ministry of Environment imposed a sanction of approx. USD 188,000 on the company for non compliance with the environmental management plan for the UPM Paso de los Toros pulp mill. This sanction will be due for payment in 2024. In 2023, UPM was not required to pay any significant fines due to Since 2022, the importance of biodiversity has been reflected in UPM’s broader approach towards biodiversity to cover other areas beside forests, e. g. streams and mill sites, and in establishing it as an own focus area. Related forestry, UPM continues to carry out biodiversity activities as part of UPM’s global Forest Action programme. Targets for net-positive impact on biodiversity in own forests in Finland and for UPM’s land in Uruguay have been set with dedicated key performance indicators to measure the progress. UPM’s stream water programme strives to remove obstacles to fish migration, restore fish stocks and improve the living conditions of all stream fauna throughout Finland. Possible impacts on biodiversity from industrial emissions are minimised by several measures like using best available techniques, monitoring and continuous improvement processes. In 2023, UPM developed and tested tools, methodology and guidance for setting science-based targets for the preservation of nature as part of the Science Based Targets Network (SBTN) Corporate Engagement Program. Climate The management of climate change related issues is integrated into the management of other non-financial issues and is reported to the Board depending on the context and matter. For example: 1) risks are reported to the Board by CFO, 2) related compliance and regulatory issues are briefed quarterly to the Audit Committee (Board) by the Compliance Officer, 3) annual progress on 2030 responsibility targets is reported by EVP Stakeholder Relations or 4) if there are specific climate-related topics, then the responsible topic owner briefs the Board. Additionally, major climate-related issues such as scenario analyses, commitments and UPM’s overall approach of acting through forests, emission reductions in production and supply chain and through climate positive products are reported directly to UPM management bodies led by CEO. UPM´s position and resilience in different climate scenarios (IPCC RCP 2.6, RCP 4.5, RCP 8.5, IEA B2DS, IEA NPS and IEA CPS) have been evaluated for the businesses and functions from both physical and transitional angles, involving expertise from scientific community. Generally, in low- and medium-emission scenarios the transition impacts play a bigger role and UPM is well positioned as its business portfolio allows for flexibility regarding recognised risks and opportunities. In the high-emission scenario physical impacts dominate with severe consequences not only for UPM but for the ecosystems and societies across the globe. UPM´s targets for reduction of fossil CO 2 emissions are 65% reduction of Scope 1 and 2 emissions from 2015 level and 30% reduction of emissions from sourced materials and logistics (Scope 3) environmental non-conformances. Biodiversity and ecosystems

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UPM ANNUAL REPORT 2023

UPM ANNUAL REPORT 2023

UPM FINANCIAL REPORT 2023

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