UPM Annual Report 2023

RESPONSIBILITY

UPM

BEYOND FOSSILS

BUSINESSES

GOVERNANCE

ACCOUNTS FOR 2023

CLIMATE-POSITIVE FORESTRY ACTIONS FOR ENVIRONMENT

by UPM’s FSC™ certification group covered approximately 570,000 hectares in Finland and over 13,000 hectares in Uruguay. Since 2016, CDP has recognised us annually as a Forest A List company for our significant actions to mitigate climate change and prevent deforestation. Cooperation with stakeholders We have a long history of working with researchers, academic institutions, environmental organisations and other stakeholders to develop sustainable forest management. In 2023, we initiated a forest pollinator project with Tapio Group in Finland. The project will provide us with comprehensive and up-to-date research-based working instructions for considering pollinators in final harvesting. Numerous pollinators use clear-cuts as so-called replacement habitats and find many of the resources they need there, but this aspect of biodiversity has not been specifically addressed in practice. In the USA, we initiated stakeholder cooperation with local indigenous peoples’ communities to learn more about their ap proach to forest management. We will strive to increase this type of work in the future. In Uruguay, we collaborated with stakeholders and NGOs like Vida Silvestre

Uruguay, with which we jointly developed the management plan of the first protected area included in the National System of Pro tected Areas under the direction of a single private company (page 25). We participated in forest and environ 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 cooperation with FSC™ International 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 98

UPM FORESTS AND PLANTATIONS 2008

2023

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 plantations, including land (EURm)

1,073

1,012

11.5

4.3

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

7.0

2.2

3,301

1,270

Finland and Uruguay are UPM’s largest wood sourcing regions. At the end of 2023, we owned approximately 903,000 hectares of forest land in Finland, Uruguay and the USA. Most of this land is in Finland, totalling around 523,000 hectares. In Uruguay, we have about 304,000 hectares of eucalyptus plantations, grasslands and conservation areas, and in the USA 76,000 hectares of forest. We also lease about 170,000 hectares in Uruguay and manage about 1.5 million hectares of private for ests in Finland. We apply the same strict sustainability standards everywhere we operate. Globally, about 135,000 hectares (15%) of UPM-owned land is protected or in restricted use. Protected areas include valuable habitats, natural forests and other important areas such as wetlands or cultur ally important sites. Of our four modern tree nurseries, three are located in Uruguay and one in Finland. In 2023, our newest nursery in central Uruguay was at full capacity to ensure the required annual planting capacity to supply the UPM Paso de los Toros pulp mill. High-quality seedlings ensure good growing conditions for the forests. They are important not only for wood raw material production but also for carbon seques tration, restoration of biodiversity and increasing resilience to climate change. In 2023, we continued promoting our For est Action programme that encompasses measurable actions under five focus areas: climate, biodiversity, water, soil, and social contribution. Our main harvesting approach is to leave untouched buffer zones along watercourses. Forest Action: the global forest responsibility programme

Our forest inventory systems are updated annually to include the locations of valuable habitats and waterbodies in relation to wood harvesting activities. In Uruguay, an institutional network has studied and monitored the water usage of eucalyptus plantations for decades. Euca lyptus plantations are not irrigated except for the nurseries. Tree plantations reduce rapid run-off through the soil surface, thus minimising soil erosion. Following the worst drought ever recorded in Uruguay in 2021–2023, we developed a procedure to characterise the drought’s effect on the plantations using satellite images. Most affected areas are being harvested to mini mise productivity losses. In Finland, we were one of the funding partners in a national restoration project in 2022–2023 related to small inland waters. In 2023, we identified locations and set res toration targets for our own forests in Fin land. In the USA, we continued our efforts in mixed forest restoration covering about 324 hectares. A new research partnership with the University of Minnesota will quantify the productivity and biodiversity benefits of mixed forest management. A new forest inventory collaboration with the Minne sota Department of Natural Resources will enable a more precise understanding of our forests, including their role as carbon sinks. Forests and climate We are committed to climate-positive for estry and to enhancing biodiversity in our own forests in Finland. Forests and forest biodiversity are critical for mitigating the effects of climate change. We ensure that our forests continue to act as carbon sinks, remain resilient and diverse in changing climate conditions and grow well for future generations.

The growth needs to exceed harvests for our forests to remain carbon sinks. The annual carbon sink from UPM-owned for ests in Finland and the USA and owned and leased plantations in Uruguay has averaged -4.8 million tonnes of CO 2 equivalent over the past five years. There is ongoing work to harmonise methodologies and make calcu lations more accurate. The previous year's figure is therefore not fully comparable. We aim to constantly improve our un derstanding of carbon. In 2022, we started a project with the Natural Resources Insti tute Finland (Luke) to improve soil carbon models for Uruguay with actual measure ments on the ground. Field measurements in eucalyptus plantations began in 2023 and will continue for one year. An improved model for carbon calculations will be used for our 2024 carbon calculations. Third-party verified supply chain We always know the origin of the wood we use. We do not use wood from illegal sourc es or from areas where high conservation value forests could be under threat. Our wood procurement does not cause deforest ation: forest cover is stable or increasing in all wood sourcing areas. We do not use genetically modified trees. Compliance 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. In 2023, 91% of own forests were FSC™ and PEFC double-certified and 8% only PEFC (SFI) certified. We also promote forest certification for private forest owners and other customers. We have established FSC™ group certifi cation schemes in Finland and in Uruguay, which support small forest owners’ access to certification. In 2023, the forest area covered

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 forests and 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 land owners to grow and develop their sustainable forestry operations • Forestry builds wealth and prosperity for local communities • Sustainably managed forests provide clean air and water as well as recreation TARGETS • Climate-positive forestry and maintenance of carbon sinks • Efficient production of high-quality wood for diverse end-uses • 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 plantations that have been established by converting natural forests to plantations • No deforestation • Respecting human rights and indigenous peoples’ rights in all areas of operations • No establishment of plantations in areas where water is scarce • Strong stakeholder engagement • Long-term biodiversity targets included in UPM’s remuneration and financing • UPM Forest Action programme • Focus on 2030 responsibility targets

IN ACTION

STUDY ON THE BIODIVERSITY OF CLEARCUT AREAS

The study by the Natural Resources Institute Finland (Luke) aimed to investigate how the amount and quality of retained deadwood and retention trees and the time elapsed since a felling affect the diversity of polypore and saproxylic beetle species in the regeneration areas. The presence of rare and threatened species in the areas was of particular interest. The study was carried out in UPM’s forests in southern Finland. The study compared fellings carried out in three different periods, as the recommendations and guidelines for retention trees have varied over time. The UPM regeneration areas were found to be inhabited by a vast range of polypore and saproxylic beetle species. The study shows that leaving decayed wood and retention trees has a positive effect on forest biodiversity. Regeneration areas can provide habitats for rare and threatened species that depend on decaying wood, and the prevalence of the species can be increased via ecological forest manage ment measures. In UPM-owned forest regeneration areas, the amount of coarse decaying wood has clearly increased in recent decades, supporting the diversity of decaying wood-dependent species.

Certified fibre share %

100

90

80

70

60

50

19

20 21

22 23

Target

TARGETS 2030

100% certified fibre

87%

achieved

www.upm.com/forests

82

83

UPM ANNUAL REPORT 2023

UPM ANNUAL REPORT 2023