UPM Annual Report 2023

RESPONSIBILITY

UPM

BEYOND FOSSILS

BUSINESSES

GOVERNANCE

ACCOUNTS FOR 2023

ACTIONS FOR ENVIRONMENT

surrounding areas of the UPM Ettringen and the UPM Nordland paper mills in Germany to optimise conditions for birds and insects. At the UPM Schongau paper mill, we devel oped a concept to systematically assess and decrease the negative impacts of mill lighting on insects and the surrounding communities. The results and feedback have been positive and it has also reduced energy consumption.

has on biodiversity. We have also carried out several actions and projects to restore habitats, develop new ecologically sus tainable forest management practices and improve ways to monitor and measure our impact on forest ecosystems. We have had a target of net-positive impact on biodiversity in our own forests in Finland since 2018 and in Uruguay since 2022 with dedicated key performance indi cators to measure the progress. At present, we have nine indicators in Finland: share of broad-leaved trees, amount of deadwood, forest age, forest structure, protected areas, valuable habitats, habitat restoration, species and habitat projects and indicator development. In 2023, all the quantitative indicators measured showed a positive trend. The share of broad-leaved trees increased and the protected area continued to grow. New data on the amount of deadwood will be available in 2024 in connection with national forest inventory. The increased amount of deadwood in our forests had a di rect link to the increased number of species dependent on deadwood. In Uruguay, most plantations grow on grasslands formerly used for cattle grazing. The area’s biodiversity values are assessed before the plantation is established, and valuable biodiversity hotspots and native forests are protected. Our work focuses on the active man agement of protected habitats and the control of invasive species. In Uruguay, the area where we take some form of conser vation measures covers altogether 75,000 hectares. This includes a network of 33 biodiversity reserves, covering more than 14,500 hectares. Each biodiversity reserve has specific management and monitoring plans. The majority of species indicators from the last five years shows a positive trend of occurrence compared o the last 15 years. Continuous monitoring has allowed us to find 33 new species for Uruguay, and one new species for science as a whole. In the US, we have developed a Smart Forestry™ method to use plant commu nities and ecological principles as a basis for silviculture practices and maintaining biodiversity. This method is based on eco logical classification, which optimises both the value and the quality of forests based on the place of growth and tree species. All

harvest sites are managed so that deadwood is retained at sustainable levels. Water and biodiversity In Finland, our hydropower plants and other obstacles such as dams impact the environment by altering river or stream flows and their ecosystems. Our stream water programme strives to remove obsta cles to fish migration, restore fish stocks throughout Finland and improve the living conditions of all stream fauna. We have a target of opening 500 kilo metres of obstacle-free streams by 2030 to steer our activities and to measure our im pact on biodiversity. By the end of 2023, we managed to open 154 kilometres thanks to our own projects and 32 kilometres in joint projects funded by us. One such example was the restoration of the Hiitolanjoki river in Finland (on the left). After the demolition of the Arvajankoski dam in 2022, our funding enabled research on migratory fish that has been carried out in the upper stream for 40 years to continue. Enhancing biodiversity at the mill sites In parallel to continuously monitoring our emissions, we also monitor our impact on waters, in particular. Before any new mills are built, we con duct a baseline study to measure the level of biodiversity. At the new UPM Paso de los Toros pulp mill, we monitor the effluent discharge to the surrounding river as well as the quality and biology of the water. We also monitor the emissions to air and the quality of the air and soil. Studies at the UPM Fray Bentos pulp mill show that mill operations have had no measurable negative impact on biodiversity since the start-up in 2007. With older sites such as UPM Kymi, with a history of over 150 years, the impact of emissions to water close to the mill is compared to the respective impact up stream of the Kymi River. The latest results from 2022 indicate that the environmental impact of the UPM Kymi’s wastewater load on the midge communities is low and that the benthic communities indicate a slightly oligotrophic condition of the river i.e. the level of nutrients is low. Many mills actively enhance local biodi versity. We planted dedicated species in the

ENHANCING BIODIVERSITY

Biodiversity is instrumental to ensuring the vitality of our business.

Biodiversity refers to the diversity and variation of species and ecosystems on our planet. According to the UN, and despite ongoing efforts, biodiversity is deteriorat ing worldwide. This decline is projected to worsen if no action is taken. Mitigating climate change is the single most important action to safeguard biodiversity. Enhancing biodiversity brings oppor tunities and reduces risks at the same time. Our operations are widely linked to biodiversity. Our most significant impacts on biodiversity take place in wood sourcing. Biodiversity is instrumental in maintaining healthy forest growth and ensuring that forests adapt to the changing climate. Streams have been dammed or blocked, which has affected the flows and changed the living conditions of stream fauna. The potential depletion of oxygen caused by wastewater load deteriorates the living conditions in receiving watercourses. We improve local living conditions for fauna and flora at the production sites through removing obstacles in streams and reduced emissions, both to air and water. The restoration will allow landlocked salmon to rise to their old spawning waters and improve the status of the aquatic habitat of the river. The first results of the project, which began in 2021, are promising in terms of salmon parr numbers. More detailed results for the whole river will be available in 2024. The South Karelia Recreation Foundation (EKVAS) led the project, which was mainly funded by the Finnish Ministry of Agriculture and Forestry’s Nousu programme. UPM’s donation was part of the company’s Biofore Share and Care programme. The aim of UPM’s stream water programme is to release or restore 500 km of stream water by 2030.

We want to strengthen the role of biodi versity in our business. In 2020, we linked the margin of a EUR 750 million revolving credit facility to the biodiversity enhance ment in UPM-owned forests in Finland. In 2022, we further strengthened this link by including biodiversity as a measure in UPM’s management remuneration and in 2023, we implemented the Taskforce for Nature-relat ed Financial Disclosures (TNFD) reporting framework (page 142). We are also testing new scientific meth ods, such as e-DNA for measuring biodiver sity and the impacts of our actions. Forestry and biodiversity We safeguard biodiversity in our own for ests and continue to carry out our biodiver sity activities as part of UPM’s global Forest Action programme. Forest certification plays a crucial role in managing biodiver sity both in our own forests and in other wood sources. We are participating in a project led by FSC™ to better understand and quantify the positive impact that forest certification

IMPACT • Healthy forests ensuring the vitality of our business • Resilient forests to mitigate and adapt to climate change • Increased diversity of habitats, species and thriving ecosystems

Value from responsibility on page 30 Our 2030 responsibility targets on page 32

TARGETS 2030

Positive impact on forest biodiversity

Overall positive development measured in Finland and in Uruguay

TARGET • Enhancing biodiversity

OUR WAY • Global forest biodiversity programme since 1998 • Global Forest Action programme since 2022 • Stream water programme since 2016 • Best available techniques used at production sites • Indicator and monitoring development • Biodiversity is linked to financing and management remuneration

SPOTLIGHT

SETTING SCIENCE-BASED TARGETS FOR NATURE CONSERVATION

We participate in the Science Based Targets Network (SBTN) Corporate Engagement Programme to develop methods, tools and guidelines for setting science-based targets for nature conservation. The network aims to provide companies and cities with a five step framework to verify that their activities are within environmental limits without causing loss of nature. More than 100 com panies from 30 countries are participating in the programme. We have also been selected for the SBTN’s Initial Target Validation Group, where, as the name suggests, UPM and 16 other companies will be the first to test the tools developed in their own operating environment. The tools will be used to assess the impact of the company’s activities on land use, land use change, water use and pollution and soil contamination. The aim of the as sessment is to identify which of the activities have the greatest impact on biodiversity, set targets and develop an action plan for improvement. Participation supports our own biodiversity objectives.

IN ACTION

Image: Mikko Nikkinen

LANDLOCKED SALMON RETURNING TO THE RIVER

UPM has supported the demolition of the third dam on the Hiitolanjoki river and the return of Ladoga landlocked salmon to their old spawning waters in southeastern Finland. The landlocked salmon is a critically endangered species and it is important to enable the species to recover. Improving migratory fish routes and creating suitable spawning and nursery areas, as well as improving the habitats of other endangered species, are important measures for improving the biodiversity of inland waters.

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UPM ANNUAL REPORT 2023

UPM ANNUAL REPORT 2023