UPM Annual Report 2023

RESPONSIBILITY

UPM

BEYOND FOSSILS

BUSINESSES

GOVERNANCE

ACCOUNTS FOR 2023

process gas with electricity for the paper machine. The UPM Fray Bentos pulp mill in Uruguay invested in a lime kiln so that it can burn hydrogen, a by-product from a neighbouring company, reducing the use of fuel oil. UPM Plywood launched projects to re duce steam consumption and air emissions by preheating and improved heat recovery at the UPM Pellos plywood mill. These measures and investments are expected to lead to an annual reduction in fossil CO 2 emissions of around 40,000 tonnes. UPM Timber installed a new heat pump system at the UPM Korkeakoski sawmill.

The system will use the waste heat from the sawn timber drying instead of heat from the mill’s own power plant. This will decrease SO 2 and NO x emissions as well as energy use. As a result of our energy-saving in vestments and actions taken in 2023, we reduced our energy costs by EUR 4.0 mil lion (8.5 million), avoided emitting 18,900 (34,900) tonnes of CO 2 and achieved a 66,000 (114,000) MWh reduction in energy consumption. The annual savings were EUR 4.6 million (9.5 million), 28,900 (40,500) tonnes of CO 2 and 94,000 (126,000) MWh of energy.

Follow-up on our energy and CO 2 targets In 2023, we decreased our fossil CO 2 emis sions from energy generation (Scope 1) and purchased energy (Scope 2) by 17% com pared to the previous year, which is in line with our 65% reduction target for 2030. In addition to capacity adjustments, the main reason for the reduction was a decrease in CO 2 emissions related to electricity purchases. Coal and peat usage decreased by 13% compared to 2022. Our target is to stop using coal and peat for on-site energy generation by 2030. Currently, coal is the main fuel at the

ELECTRICITY GENERATION THROUGH OWN POWER PLANTS AND SHAREHOLDINGS TWh 2023 2022 Mill CHP 5.2 4.3 Hydropower 3.3 3.0 Nuclear power 8.0 5.4 Thermal power 0.1 0.5 Total 16.6 13.2

CAPACITY TO GENERATE POWER THROUGH OWN POWER PLANTS AND SHAREHOLDINGS

FUEL AND HEAT RESOURCES USED TWh

2023 2022

Black liquor

24.5

14.3

Nominal MW

Bark and other biomass Heat recovered from TMP production Renewable fuels total

5.2

5.2

Hydropower Nuclear power Thermal power

729

0.7

0.6

1,089

30.4 20.1

133

Peat

0.2 0.3 4.9 1.5 2.4 0.2

0.6 0.4 6.3 0.9 2.5 0.2

UPM Energy in total

1,951

Purchased heat

Mill site combined heat and power (CHP) Mill site hydropower Mill site power generation in total

Natural gas

1,250

Oil

7

ELECTRICITY CONSUMPTION TWh

Coal

1,257 3,208

2023 2022

Fossil recovered fuel

Total

39.9 31.0

Total

9.6

9.7

Total UPM

Fossil CO 2 emissions

Sources of UPM’s fossil CO  emissions

Electricity generation and consumption by country 2023 TWh

of about 2 million tonnes CO 2 equivalents, mainly due to the expanded reporting scope. In 2023, our total Scope 3 emissions were 7.6 million tonnes, a reduction of 16% compared to 2018. Our target is to reduce the fossil CO 2 emissions from materials and logistics by 30% by 2030 (from 2018 levels). These account for a significant share of our total Scope 3 emissions. To achieve this, we launched the – 30 by 30 programme in 2022. New and existing suppliers are required to provide data on the carbon footprint of the goods and services sold to UPM, including all relevant emissions from the supplier’s own upstream supply chain and operations. In 2023, we achieved a reduction of 23% compared to 2018 for the target scope. Already 57% of our pigment supplies are covered by primary CO 2 emissions data from suppliers and over 62% of our deliv eries are calculated based on supplier data. In 2023, we started to use new dual-fuelled LNG vessels on European sea routes.

TRANSFORMATION STORY

mio t

14

8

On-site energy generation 19%, 2.1 million t

12

6

Purchased energy 14%, 1.6 million t

10

LONG-TERM FUTURE BUSINESS OPPORTUNITIES

Other indirect sources* 67%

8

4

6

We see future business opportunities in carbon removal, storage, and utilisation. Wood-based products store CO 2 and replace fossil products. In the future, the bi ogenic CO 2 generated as a by-product of wood-based processes can serve as a raw material for new carbon-neutral synthetic fuels and materials. We have biogenic CO 2 , low-emission hydro and nuclear power, and experience in the use of hydrogen in the Lappeenranta biorefinery. Technically, carbon removal technology is already fairly mature, but long-term storage solutions have only recently started being developed. However, carbon removal, storage and utilisation require huge investments in equip ment and logistics infrastructure. The storage potential is outside Finland and recovery requires significant hydrogen production and a large amount of clean and compet itively priced electricity, in addition to the investment. From a business perspective, the development of technical carbon sinks requires clear rules and predictable poli cies, including a link to the carbon pricing mechanism and sufficient R&D funding for the coming years.

4

*Other indirect sources such as purchased materials, transportation or processing of sold products 67%, 7.6 million t

2

2

0

0

15

16

17

18

19

20

21

22

23

Target

Finland

Germany

China

Uruguay

US

UK

Other

CO 2 from on-site energy generation (Scope 1) CO 2 from purchased energy (Scope 2)

Electricity consumption Electricity generation, mills Electricity generation, UPM Energy

UPM Changshu paper mill in China, where alternatives have not been available histori cally. Peat is used in Finland. We are in line to meet our 2030 target for acidifying flue gases (NO x and SO 2 ) despite the increase of emissions in 2023 with the start-up of our new pulp mill in Uruguay. We did not reach our target of increasing energy efficiency by 1% annually. Collaboration with suppliers to reduce CO 2 emissions We also evaluate the emissions from other indirect sources (Scope 3), such as pur chased materials, transportation and the processing of sold products. In 2023, we conducted a thorough review of the scope and used secondary factors in our Scope 3 calculation. For comparison over time, we also updated the year 2018, the baseline for our target. The review resulted in an increase

Fuel consumption by country 2023 TWh

Fossil CO 2 emissions by country 2023 mio t

2.0

10 12 14 16 18

1.5

1.0

0 2 4 6 8

0.5

0

Finland

Germany

China

Uruguay

US

UK

Other

Finland

Germany

China

Uruguay

US

UK

Other

Scope 1 Scope 2

Black liquor Peat

Natural gas Recovered fuel

Bark and other biomass Oil

Coal

90

91

UPM ANNUAL REPORT 2023

UPM ANNUAL REPORT 2023