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

TARGETS

The positive impact has to be proven by monitoring and measuring the carbon balance and by maintaining the carbon sink. The Natural Resources Institute Finland (LUKE) calculates UPM's carbon sink based on the latest scientific knowledge and methodologies aligned with the International Panel on Climate Change (IPCC) requirements for national accounting for the land use, land use change and forestry (LULUCF) sector. Both trees and soil carbon are taken into account. Fossil CO 2 emissions caused by forest management activities (e.g. nurseries, planting, harvesting) shall be lower than the sink. The five-year average of UPM's carbon sink has to be a negative value, i.e. a carbon removal, to achieve UPM's target of climate-positive forestry. This is a UPM-specific term and definition as long as no international standard provides a commonly accepted definition. Climate-positive product portfolio Starting from 2024, UPM reports on this target based on the share of its decarbonisation solutions out of total sales: biofuels, biochemicals and CO 2 -free energy. Overall, UPM considers the following of its current products to have a positive impact on the climate: • Products that have a lower carbon footprint compared to fossil-based alternatives – such as biofuels and biochemicals, • Products that substitute fossil-based energy - such as CO 2 -free nuclear energy and hydropower, • Products that avoid greenhouse gas emissions by replacing fossil based products – such as biochemicals and timber, or • Products that act as temporary carbon storage – such as pulp, paper, plywood and timber over their lifecycle. The positive impact has to be proven by means such as life cycle analysis, availability of Guarantees of Origin, calculation of substitution and storage effects based on a study initiated by UPM and carried out by the SYKE and IFEU institutes (Fossil carbon emissions substitution and carbon storage effects of wood-based products, Reports of the Finnish Environment Institute, 22/2022). A pre-condition for the storage effect is the wood supply from sustainably managed forests which ensures a sustainable biogenic carbon cycle between land carbon storage and product storage. This is a UPM-specific term and definition as long as no international standard provides a commonly accepted definition.

Reporting principles for targets

E1-4

GHG emissions reduction targets (Scopes 1, 2 and 3) in detail UPM's target for Scope 1 and Scope 2 emissions is a combined reduction of 65% from 2015 levels. Scope 1 includes UPM's on-site fossil CO 2 emissions from combustion processes. Calculation is based on the European Emissions Trading System, other national requirements or official calculation factors. Scope 2 covers fossil CO 2 emissions related to purchased electricity and steam. Electricity and steam purchases are calculated based on supplier information (market-based method). If the market-based data is unavailable, the residual mix is used, and if the residual mix is unavailable, regional or national grid factors are used. In cases where UPM has sold greenhouse gas claims (such as Guarantees of Origin) for energy used by UPM, the corresponding amount has been calculated using the national residual mix. GHG emissions other than CO 2 are not material and are therefore not included in the target scope. The base year value of 6.8 million tonnes of CO 2 (Scope 1: 57%, Scope 2: 43%) for 2015 has been chosen as representative to follow up on the target during UPM's transition phase. UPM's Scope 3 target covers materials and logistics, which accounted for 67% of total Scope 3 emissions in the base year 2018. The base year value of 6.08 million tonnes CO 2 eq is calculated based on secondary data for emission factors. In recent years, the values are calculated based on data availability, using either secondary emission factors or the previous year's primary emission factors. Emissions are reported as CO 2 eq (including CH4 and N 2 O) using the global warming potential (GWP) values provided by the International Panel on Climate Change (IPPC).

Targets related to climate change To steer its sustainability activities, UPM has set several targets and key performance indicators for its sustainability focus areas covering the three pillars of UPM's climate approach: forests; emission reductions;

and products. UPM's sustainability targets are developed by UPM by taking the views, wishes and perspectives of external stakeholders from UPM's constant multi-stakeholder dialogue into account.

SUSTAINABILITY FOCUS AREA AND KEY PERFORMANCE INDICATOR

TARGET FOLLOW-UP 2024 (2023)

BASE YEAR BASE YEAR VALUE

2030 TARGET

Responsible sourcing Fossil CO 2 emissions from materials and logistics (Scope 3) Forestry Climate-positive land-use in UPM's own and leased forests * Biodiversity Positive impact on forest biodiversity and developing a monitoring system 2)

2018

6.08 mt

-30 %

-22% (-23%)

Since 2019

—

Forests as carbon sink (continuous)

-2.1mt CO2eq (5-year average)

Since 2018 (Finland), 2022 (Uruguay)

Always the previous year

Continuous improvement

Overall positive development measured

Climate Fossil CO 2 emissions Scopes 1 and 2

2015 2020

6.80 mt 3.3 TWh

-65 %

-50% (-45%) 2.8 (2.7) TWh Not achieved

Coal and peat usage

0 TWh

Annual energy efficiency improvement

Since 2016

—

+1% (continuous)

Share of renewable fuels

2015

67 %

above 70% (continuous)

80% (76%)

» Refer to E1-6 Metrics, Reporting principles for further information on Scope 1, 2 and 3

Product stewardship Climate-positive product portfolio

Since 2019

—

Continuous improvement

Decarbonisation solutions: 8% of sales

Climate-positive land-use in UPM own and leased forests UPM defines climate-positive forestry as the act of managing forests or plantations to ensure that trees grow more than they are harvested, as well as working to improve forests' growth and to ensure the ability of forests to absorb more carbon and to adapt to the changing climate. Climate-positive forestry is not only about sinks but also about enhancing biodiversity as a means to adapt.

* Five-year annual average carbon sink; approximate value ** Covers UPM's own forests in Finland and UPM's land in Uruguay

Targets related to climate-positive forestry and innovating products support UPM's development towards net-zero. However, methodologies are still being developed by the GHG Protocol and the Science-Based Target initiative (SBTi) to accurately calculate and formulate targets. UPM's Scopes 1, 2 and 3 fossil CO 2 emissions reduction targets for 2030 have been validated by the SBTi to be aligned with the 1.5 °C pathway as outlined in the Paris Agreement. The targets have been set using the SBTi's absolute contraction approach, so that they deliver absolute emissions reductions in line with global decarbonisation pathways. In 2024, UPM's combined Scope 1 and 2 target of 65% reduction in fossil CO ₂ emissions was in line with achieving the 2030 target. The reduction of fossil CO 2 emissions was 9% compared to 2023 and 50% compared to the base year 2015. The Scope 3 target of a 30% reduction in fossil CO 2 for purchased materials and logistics was also in line with the 2030 target, with a 22% reduction in fossil CO 2 emissions compared to the base year 2018. Compared to 2023, the fossil CO 2 emissions increased by 1% mainly due to the increase in pulp production in 2024, and the associated

increase in purchased materials and logistics. However, the increase would have been higher without the achievements of the -30 by 30 Programme. Refer to E1-3 Responsible sourcing: UPM's -30 by 30 Programme These targets are supported by specific targets for increasing energy efficiency, the share of renewable fuels, and ending the use of coal and peat in UPM's power plants. » Refer to E5-3 Targets for certified fibre target, » Refer to E4-4 Targets for biodiversity target, » Refer to G1-2 Responsible sourcing for sourcing targets and » Refer to 1-5 Metrics for share of renewable fuels.

UPM FINANCIAL REPORT 2024

154

UPM FINANCIAL REPORT 2024

155

154

155

UPM ANNUAL REPORT 2024

UPM ANNUAL REPORT 2024