UPM Annual Report 2023

RESPONSIBILITY

UPM

BEYOND FOSSILS

BUSINESSES

GOVERNANCE

ACCOUNTS FOR 2023

Each employee belongs to a unified annual Short-Term Incentive (STI) scheme. The scheme covers Group and business-lev el targets, personal and team performance targets and individual performance evaluation to differentiate and reward high performance. The annual incentives paid in 2023 for the 2022 STI plan amounted to EUR 58.8 million, and the estimated amount of annu al incentives for the 2023 plan is EUR 47.9 million. We recognise significant individual or team success with a separate Achieve ment Award system. It is designed to sup port UPM’s high-performance culture and recognise individuals and teams for out standing contribution, significant achieve ments and exceptional performance. In addition to the Short-Term Incen tive scheme, we provide two long-term incentive plans: the Performance Share Plan (PSP) for senior executives and the Deferred Bonus Plan (DBP) for other key employees. These annual plans cover ap proximately 400 participants in total. Promoting cooperation We are committed to active employee participation and consultation, organised in accordance with international and national rules and regulations. We offer various forums to facilitate continuous dialogue between employees and business management. The UPM European Forum is a coop erative body that focuses on issues related to our business environment and changes within the company. The forum organises regular meetings for employee represent atives from business units in Europe. Our other cooperative bodies in Finland and Germany aim to promote employee partici pation and dialogue, both between the busi ness areas and country-level management and between employee representatives and employees on a national level.

and teams empowered by inspiring and inclusive leaders. In the long term, we aim to strengthen the leadership culture based on UPM’s values and the Aiming Higher mindset which enables everyone to grow, perform and achieve business results. We continuously invest in developing lead ership capabilities to ensure that leaders throughout UPM have the capabilities they need to lead themselves, people and busi ness and drive the transformation journey toward a future beyond fossils. Our leadership development pro grammes are designed to achieve those long-term goals. In recent years, the key areas of development have been inclusive and purposeful leadership, high-perform ing teams, building success on strengths, self-leadership and coaching. In 2023, we introduced a new programme on psycho logical safety and emotional intelligence to strengthen human-centric skills and included a strengths assessment into our portfolio of assessments for development. Rewarding and recognising high performance We reward and recognise high performance. Our approach to rewarding and recognising employees consists of both tangible and intangible components. Tangible remu neration and recognition consists of base salary, benefits and incentives, which are determined by UPM’s global rules, local legislation, general agreements, local market practices, the level of the position and individual performance. Gender, age, ethnic origin and nationality play no role in determining salaries and wages. Intangible remuneration and recognition consists of, for instance, a safe and healthy working environment, interesting and mean ingful work, and good leadership and career opportunities. We have designed our reward policy to increase employee commitment to, and motivation for, high performance.

OUR EMPLOYEES BY REGION

Restructuring to ensure cost competitiveness

UPM’s personnel by business area 2023

EXPANDING HORIZONS WITH GIGS Gigs, introduced in 2023, are short-term, small, business and individual value-add ed projects for which employees can use 10–20% of their working time. Gigs support employees’ development and enable the dynamic resourcing of smaller projects relevant to the business. Gigs bring benefits to all parties involved: gig hosts, gig members, the business and the members’ own line organisation. They con tribute to the UPM experience and increase cooperation and learning throughout the Group. We get agility and dynamism into our organisation. The goal is also to lower the threshold for internal rotation. All UPM employees can apply for the pro jects. In 2023, a total of 44 gigs were carried out in the Group, involving 150 people, on topics such as carbon utilisation, AI, customer claim handling and project way of working. The year 2023 saw an exceptional business environment, with a downcycle well beyond normal in our industry, especially in Eu rope, which led to restructuring. We permanently closed two paper mills (UPM Plattling in Germany and UPM Steyrermühl in Austria), one paper machine at UPM Schongau in Germany and one label stock production line at the UPM Raflatac factory in Tampere, Finland. We also finalised our exit from Russia, with the largest impact on our plywood business. Temporary layoffs were carried out in nearly all businesses. The closures and restructuring signifi cantly decreased the number of personnel. To alleviate the impact of the closures on our employees, together with the employee representatives, we implemented active measures that promote employment and re training. At the same time, we recruited new people in our growth businesses in Uruguay and in Germany. A diverse and inclusive working culture on page 68 Advancing human rights across our businesses on page 72 SPOTLIGHT

Other operations 6% UPM Plywood 10% UPM Fibres 17% UPM Specialty Papers 12% UPM Raflatac 19% UPM Energy 0% Full time 97% Permanent 92%

6,281 Finland

UPM Communi cation Papers 36%

3,918 Germany

2,621 Other Europe

858 North America

1,572 China

322 Other Asia

Part time 3% Fixed term 8%

Rest of the world

129

872 Uruguay

16,573 Total

were renewed in 2022 enable employees to create their own development plans as needed, and at least once a year. Managers ensure that the plans are relevant. The aim is to support employees to keep their passion and expertise fresh for current and future jobs through continuous devel opment. We encourage and enable employees to contribute to projects such as gigs (on the right). These are a good way to contribute, learn new skills and network. We have de veloped our project approach to support the project way of working and enable success

in different development projects. Being the employer of choice has be come crucial when recruiting new employ ees, especially younger professionals. We have been able to retain and attract employ ees despite the heated labour market. We have organised several successful graduate programmes in recent years. Our apprenticeship programmes are a way to ensure the required level of expertise for future employees. The programmes typically focus on shop floor production or maintenance work and are run together with vocational training partners. In 2023, examples of how they can be used to replace fossil-based materials. The students focused on using either UPM’s specialty papers and label materials, UPM’s biocomposites or alternatives incorporating several materials. The winning concept blends an interesting idea with a near-ready commercialisation concept. The Hangry Boy frozen pizza packaging made from recyclable materials combines the imagina tive use of packaging paper with ease of use. The packaging is also designed to meet the needs of consumers in many ways. The course is a continu ation of the long-standing collaboration between the Lahti Centre of Design Expertise and UPM.

approximately 500 people had participated in the apprenticeship programmes. We are working on our employer brand both internally and in the countries where we operate. Following our systematic efforts to develop our work environment as well as concrete actions to be an employer of choice, our position among students and professionals was recognised by external parties in Finland and China. Leading by example Achieving our ambitious targets requires committed input from skilled people

IN ACTION

PRODUCT DEVELOPMENT WITH STUDENTS

The Sustainable Design Studio course organised by LAB University of Applied Sciences and UPM offered students the opportunity to delve into the world of sustainable design. During the course, students were familiarised with UPM’s packag ing materials and then developed innovative concepts from renewable materials. The course introduced the characteristics of UPM’s packaging materials and practical

UPM PERSONNEL IN FIGURES

2023 16,573

2022 17,236

2021

Employees

16,966

Turnover, %

11.1

14.7

14.5

Turnover, % (voluntary)

5.1

6.8

5.6

Average age

44.3

44.1

44.3

66

67

UPM ANNUAL REPORT 2023

UPM ANNUAL REPORT 2023