UPM Annual Report 2023

ACCOUNTS FOR 2023

UPM

BEYOND FOSSILS

BUSINESSES

RESPONSIBILITY

GOVERNANCE

EU Taxonomy disclosure EU Taxonomy is a sustainable finance classification system, which defines criteria for economic activities that are considered environmentally sustainable. It represents an important step towards achieving carbon neutrality by 2050 in line with the EU climate goals. The first EU Disclosures Delegated Act on Climate was adopted in 2021 and it required large companies to report the proportion of their economic activities considered Taxonomy-eligible in relation to Climate change adaptation and Climate change mitigation objectives. In financial reporting year 2022, companies were also required to report the taxonomy alignment of their economic activities based on the sustainability requirements defined in the regulation. In June 2023, the Commission adopted the Taxonomy Environmental Delegated Act, including a new set of EU taxonomy requirements for economic activities making a substantial contribution to one or more of the non-climate environmental objectives, namely: Sustainable use and protection of water and marine resources, Transition to a circular economy, Pollution prevention and control and Protection and restoration of biodiversity and ecosystems. The Commission also adopted amendments to the Taxonomy Disclosures Delegated Act and to the Taxonomy Climate Delegated Act, covering the environmental objectives of Climate change mitigation and adaptation. For the financial year 2023, the KPIs shall cover all six environmental objectives concerning the Taxonomy eligibility. From 2024 onwards, also In 2023, UPM conducted a thorough evaluation of the eligibility of activities with the new sustainability requirements defined in the adopted regulation. The assessments were carried out with the support of several UPM functions and businesses coordinated by UPM’s finance and responsibility teams. EU NACE Classification (Statistical Classification of Economic Activities in the European Community) was used as a reference in activity identification. Based on the assessment, UPM identified a potential new activity 1.2. Manufacture of medicinal products for the objective Pollution prevention and control within its Biomedicals business developing and supplying wood-based biomedical products. However, as the reportable amounts for the activity are currently minor and have no impact on the KPIs, UPM considered to report it as non-eligible. UPM also completed an annual review of all taxonomy-aligned activities recognized contributing to climate objectives. All turnover generating activities aim at a substantial contribution to climate change mitigation (CCM) and they meet specific technical screening criteria and the criteria for ‘do no significant harm’ (DNSH) stated for each activity within the relevant Appendix to the delegated act. For all activities contributing to climate change mitigation, a physical climate risk assessment is needed pursuant to Appendix A to the Climate Delegated Act. Technical screening and ‘do no significant harm’ criteria were reviewed together with the responsibility experts from related UPM’s businesses. Audit requirement related to the activities 1.1 Afforestration and 1.3 Forest management is interpreted to be fulfilled based on the FSC, PEFC and (or) SFI audits due to lack of service providers in the market fulfilling Taxonomy specific certifier requirements on Forest management. Data for the separate Climate benefit analysis for the related activities is provided by Natural Resources Institute Finland. UPM’s Taxonomy aligned economic activities are the following: alignment shall be reported regarding all six objectives. Assessment of Taxonomy eligibility and alignmen t

KEY PERFORMANCE INDICATOR

1.1 “Afforestation” relates to transformation of land use from non forest to forest through planting, deliberate seeding or natural regeneration and consists of UPM’s afforestation operations in Uruguay. 1.3 “Forest management” relates to economic activity that influences the ecological, economic or social functions of the forest and mainly consists of UPM’s forest management and regeneration activities in Finland, Uruguay and USA. 3.6 “Manufacture of other low carbon technologies” relates to technologies and products dedicated to the reduction of GHG emissions and includes construction of UPM’s new biochemicals biorefinery in Leuna, Germany and intangible rights related to UPM Biochemicals acquisition of SunCoal Industries GmbH. 4.13 “Manufacture of biogas and biofuels for use in transport and of bioliquids” relates to manufacture of biofuels from forest biomass and consists of UPM’s biorefinery operations in Lappeenranta, Finland. 4.5 “Electricity generation from hydropower” relates to operation of electricity generation facilities that produce electricity from hydropower including UPM’s own and co-owned hydropower plants. 4.20 “Cogeneration of heat/cool and power from bioenergy” relates to operation of installations used for cogeneration of heat/cool and power exclusively from biomass, biogas or bioliquids and it mainly consists of operation of UPM’s own and co-owned biomass-based boilers in Finland and Uruguay. UPM reports separately information on nuclear and fossil gas related activities according to the Complementary Delegated Act. UPM identifies the activities 4.27 "Construction and safe operation of new nuclear power plants" (Olkiluoto 3) and 4.28 "Electricity generation from nuclear energy in existing installations" (Olkiluoto 1& 2) through its shareholdings in Pohjolan Voima Oyj (PVO) which has direct shareholdings in Teollisuuden Voima Oyj (TVO), refer Note 4.3 Energy shareholdings . TVO operates three nuclear power plants in Finland after Olkiluoto 3 started its production phase in Q2 2023. Both nuclear activities 4.27 and 4.28 are Taxonomy aligned based on the comprehensive assessment conducted by Teollisuuden Voima Oyj (TVO). For 2023, UPM identified a potential new activity, 4.29. “Electricity generation from fossil gaseous fuels”, related to new Nordland CHP plant in Germany. The plant generates electricity mainly for UPM's internal consumption but in case of excess production electricity can be sold externally to grid operator. The reportable amounts for the activity are currently minor and have no impact on the KPIs, hence, UPM considered to report it as non-eligible. UPM re-evaluated Taxonomy-eligible activities and made the following change to the eligible scope compared to 2022: UPM reclassified its R&D activities previously reported within the activity 9.1 "Close to market research, development, and innovation" to be reported as a part of activities 3.6 “Manufacture of other low carbon technologies” and 4.13 “Manufacture of biogas and biofuels for use in transport and of bioliquids”. Reclassification regarding the activities did not have an impact on the alignment interpretation of the items. The change has also been incorporated into comparison figures .

Waste TOPIC

MANAGEMENT

2023 RESULTS

Circular economy means both financial and environmental efficiency. UPM aims to reuse materials and products, reduce the amount of solid waste and increase recycling and recovery in its operations. UPM is committed to sustainable forestry and uses third-party verified chains-of-custody to ensure that wood is legally sourced from sustainably managed forests.

No process waste sent to landfills or to incineration without energy recovery by 2030

87% (90%) of all UPM’s process waste was recovered and recycled. The total amount of waste to landfills increased by 50% compared to 2022. 87% (86%) of all wood used by UPM is sourced from certified forests. Overall positive development as all measured subindicators were positive. For deadwood volume the data will be available in 2024 in connection with national forest inventory.

Forest

All fibre certified by 2030

Biodiversity UPM aims to improve biodiversity with tangible actions for maximising positive impacts and mitigating possible negative impacts on land, in stream waters or in mill operations.

Positive impact on forest biodiversity in Finland (continuous)

Material risks and their management is described on pages 133–137 of the Report of Board of Directors and in the Annual Report on pages 32–33. Information on the company’s risk management system is available on the corporate website in the governance section and in the Corporate Governance Statement 2023, which is also available as a separate report on the corporate website upm.com/governance . More information about performance related non-financial topics is available in the general section of the Annual Report and on the UPM website upm.com .

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