UPM Annual Report 2024

WE ARE UPM

GOVERNANCE

ACCOUNTS AND PERFORMANCE

Report of the Board of Directors

Sustainability Statement

Financial Statements

Auditor's Report

Sustainability Assurance Reports

IMPACTS, RISKS AND OPPORTUNITIES

chemicals. The products would significantly reduce the carbon footprint of road transport and aviation, as well as replace fossil raw materials with renewable alternatives in chemicals and bioplastics. Before the potential investment decision, the focus will be on testing the new technologies on flexible feedstock options at a larger scale and securing the feedstock supply. The work is expected to take until 2026. The investment would be considered under » EU Taxonomy activity “4.13 Manufacture of biogas and biofuels for use in transport”. The investment in Leuna and forest management are also included in the proceeds of UPM's Green Bond portfolio. » Refer to line items Capital expenditure and Additions to forest assets in Consolidated cash flow statement » Refer t o line item Costs and expenses in Consolidated income statement » Refer to Note 2.3 Operating expenses and other operating income in the consolidated financial statements. » See EU Taxonomy, section “CapEx”, tables “CapEx of Taxonomy eligible activities” and “Template 2 for nuclear- and fossil-gas-related activities”. » See E1-3 Actions for realised and planned key actions UPM does not consider its assets and sold products to have locked-in fossil GHG emissions. Locked-in GHG emissions are considered to be emissions which occur due to long-term investments or commitments to assets or products generating emissions still long in the future. The majority of UPM's currently eligible economic activities are in line with the sustainability requirements as defined in the taxonomy regulation. The potential investment in a second biorefinery for biofuels refinery is considered eligible and is expected to be aligned. UPM did not spend significant CapEx related to coal-, oil- or gas related economic activities in 2024. UPM is not excluded from the EU Paris-aligned Benchmarks according to the exclusion criteria stated in Articles 12.1 (d) to (g) and 12.2. of the Commission Delegated Regulation (EU) 2020/1818 (Climate Benchmark Standards Regulation). Climate actions embedded in UPM's strategy Forests, wood-based products and low-carbon energy play a unique role in UPM's strategy and in mitigating the effects of climate change. With UPM's target to reduce Scopes 1, 2 and 3 emissions, these areas form the basis for UPM's transition plan. UPM's financing is linked to sustainability performance. Four green bonds, issued since 2020, have a strong focus on climate-related activities. A revolving credit facility is linked to long-term sustainability targets, including the CO 2 emissions reduction target for Scopes 1 and 2.

In accordance with its main duties and responsibilities, the UPM Board of Directors reviewed and approved the strategic objectives and plans of the Company and its business areas. The key enablers of UPM's updated strategy are people, productivity, commercial excellence, sustainability and innovation. UPM aims to accelerate growth in the coming five years. The Company's business portfolio offers robust growth opportunities in renewable fibres – namely, pulp; in advanced materials such as adhesive materials, specialty papers and plywood; and in decarbonisation solutions such as biochemicals, biofuels and CO ₂ -free energy. Decarbonisation solutions offer innovative and sustainable options to meet the urgent need to decarbonise society. With the launch of the biochemicals business, the preparations for the expansion of the biofuels business and by capturing the value of the energy market transformation, UPM is addressing key sectors that are critical for decarbonisation. Minimising the use of fossil fuels is the most important way to mitigate climate change. UPM will contribute to the decarbonisation of the electricity system by increasing the supply of reliable and renewable CO 2 -free electricity. In Biochemicals, the start-up of the UPM Leuna refinery marks a significant milestone. In Biofuels, UPM's current plans for the potential biofuels refinery in Rotterdam in the Netherlands are based on an annual capacity of up to 500,000 tonnes of high-quality renewable fuels, including advanced biofuels and possibly sustainable jet fuels, as well as renewable chemicals. In addition, key climate-related issues such as scenario analyses, commitments and UPM's overall approach to forests, emissions reductions in the production and supply chain, and climate-positive products are reported directly to UPM's management bodies, led by the President and CEO. » Refer to E1-4 Targets for climate-related sustainability targets for 2030 and their follow-up and » Refer to E1-3 Actions for realised and planned key actions.

ESRS 2 SBM-3

Overview of material impacts, risks and opportunities

IMPACTS, RISKS AND OPPORTUNITIES

DESCRIPTION

Through its sustainable forest management practices UPM ensures that its forests in Finland and the US, as well as its land areas in Uruguay, act as carbon sinks. UPM's bio-based products build a temporary carbon storage and substitute fossil-based materials. Despite continuous actions and achievements to reduce fossil CO 2 emissions in line with the 1.5 °C target, UPM is still generating a significant amount of fossil CO 2 emissions via its energy generation and purchases and in the value chain. These will be reduced further in line with UPM's transition pathway to achieve net-zero. UPM is exposed to a variety of risks related to climate change. Transitional risks are related e.g. to regulation and the price and availability of raw materials and energy. Physical risks are related e.g. to exceptional weather events which could result in unpredictable hydropower availability and wood harvesting conditions. Opportunities driven by resource efficiency, new technologies, CO 2 -free electricity and bio-based products could bring new markets, sources of funding and competitive advantage and a possible increase in forest growth in UPM's relevant areas.

Positive impact: Climate change mitigation through climate-related effects of forests and bio-based products

Negative impact: Fossil CO 2 emissions from UPM's own energy generation (Scope 1), purchased energy (Scope 2) and related to value chain (Scope 3) Risk: Transitional, as well as physical, climate-related risks due to changes in legislation and extreme weather events Opportunity: Transition opportunities covered by UPM's business model focusing on bio-based products and CO 2 -free energy

» Refer to Report of Board of Directors, section Risks, paragraph Climate change

POLICIES

Climate risks and business resilience UPM's position and resilience in different climate scenarios have been evaluated for the Company's businesses and functions from both the physical and transitional perspectives. A Company-wide assessment of transition risks and opportunities has been made for each of UPM's business areas according to the different scenarios for project future energy trends and their potential impacts used by the International Energy Agency (IEA): the New Policies Scenario (NPS), Current Policies Scenario (CPS) and 2 °C Scenario (2DS). The Company-wide physical scenario analysis for three Shared Socioeconomic Pathways (SSP1-2.6, SSP2-4.5 and SSP5-8.5) focused on the impacts of projected changes in four main areas of UPM's operations: Finland; Germany; Uruguay; and China. The analysis included impacts on forest growth, productivity and water availability arising from climate change related disturbances such as changes in precipitation, evaporation, droughts and floods. The study was carried out by the Finnish Meteorological Institute in 2024. » Refer to ESRS 2 IRO-1 Climate-related risks for more information on the study results. In general, transition impacts play a larger role in the low- and medium-emissions scenarios, and UPM is well positioned, as its business portfolio allows flexibility in terms of recognised risks and opportunities. In the high emissions scenario, physical impacts dominate, with serious consequences not only for UPM but for ecosystems and societies around the world.

E1-2

The UPM Code of Conduct expresses the Company's respect for people, the environment and ethical business practices, including its commitment to climate change mitigation and adaptation. The Code is complemented by UPM's Sustainability Policy Statement, which addresses the issue in more detail. The UPM Supplier and Third-Party Code sets out minimum requirements for the value chain. » Refer to G1-1 Policies for more information about these policy documents. UPM's high level commitment to climate change mitigation and adaption is included in the UPM Code of Conduct: “UPM is committed to science-based actions to mitigate the impact of our operations on climate and biodiversity and to adapt to climate change. On an ongoing basis, we measure and assess the direct and indirect environmental risks and impacts of our operations and promote the use of best available techniques. We expect our suppliers and business partners to share our commitment to the environment.” In UPM's Sustainability Policy Statement, this commitment is specified for the CO 2 reduction target to cover operations and the supply chain in line with the science-based target and measures are introduced for the three pillars of UPM's climate actions: climate-positive forestry; reducing emissions; and climate-positive products. In addition, UPM's Sustainable Supply Chain Programme states that UPM's suppliers are expected to report their carbon footprint annually, commit to time-bound greenhouse gas emissions reduction targets and take appropriate actions. UPM's commitment to energy efficiency is also addressed in UPM's Sustainability Policy Statement as a topic for continuous improvement, with energy management systems the preferred measure. Renewable energy targets and the phase-out of coal and peat support and specify the policy commitments.

UPM FINANCIAL REPORT 2024

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UPM FINANCIAL REPORT 2024

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UPM ANNUAL REPORT 2024

UPM ANNUAL REPORT 2024