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

Temporary carbon storage The temporary carbon storage of UPM's wood-based products is estimated based on a scientific report “Fossil carbon emission substitution and carbon storage effects of wood-based products” published in early 2022 by The Finnish Environment Institute (SYKE) and the German Institut für Energie- und Umweltforschung Heidelberg (IFEU). The study was initiated and funded by UPM. The general method to estimate the magnitude of the defined carbon (C) stock in the HWP pool in use and its net changes involve the so called “HWP in use” method (IPCC 2019). UPM calculates the annual change in carbon stock based on the Company's annual production (in terms of carbon content) of sawn wood, wood-based panels, pulp and paper products, an estimate of half-life factor (number of years it takes to lose one-half of the material currently in the pool) for the respective product and an estimate of the decay constant. IPPC factors are used to estimate half-life and decay constant. When carbon stocks of harvested wood products (HWPs) increase, the carbon is accounted as removal (negative emission). In the opposite situation, HWPs are accounted as carbon emissions. Internal carbon pricing The internal carbon price is used as an input to the long-term electricity price forecast. The long-term electricity price and internal carbon price are used to value UPM's existing assets and to plan investments. The type of system is an implicit carbon price, and it is set to align with the price of the allowances under EU ETS. It is used for capital expenditure and risk and opportunity management to drive low-carbon investments, to identify and seize low-carbon opportunities, and for stress testing of investments. UPM has fundamental power market models for both the Nordic and Continental European market areas. These models are used to forecast electricity prices several decades ahead. The models consider the transformation of the energy sector with climate change mitigation. The resulting power and commodity (fuel, CO 2 ) prices are used in assessing the value of UPM's assets and in investment decisions. In addition to numerical electricity price forecasting, UPM Energy uses scenario analyses in strategic decision-making. Currently, these analyses are used up to 2045. They are also used in other businesses of UPM, such as paper businesses, as future carbon prices may have a significant impact on the profitability of current and/ or planned assets. The internal carbon price is set to be in line with the EU ETS allowance price. E1-8

figures. Only chemical transports are not calculated based on actual distances but are estimated using actual quantities received and an average CO 2 eq per quantity factor for pigment transport as a proxy. The estimated percentage of emissions calculated using data from suppliers is 30%. UPM's -30 by 30 Programme to reduce CO 2 emissions related to logistics and purchased materials includes measures to receive accurate data from more suppliers. • 10 Processing of sold products: This category includes all UPM products, calculated based on production figures and various sources of emissions related to further processing. CO 2 eq for tissue and packaging paper production from pulp and industrial printing of paper is calculated based on Ecoinvent data for electricity consumption for the respective processes and region-specific factors for electricity generation. CO 2 eq for printing at home or the office is estimated as the average electricity consumption of laser and inkjet printers and Ecoinvent's region-specific factors for electricity generation. UPM's average CO 2 eq emissions from graphic paper and label production are used to estimate external processing. The average represents different regions. The processing of sold labels is based on assumptions and calculations for UPM Raflatac's LCA from 2021. CO 2 eq emissions are based on assumptions and calculations from the verified Environmental Product Declarations for the processing of timber, plywood and biocomposites sold. The percentage of emissions calculated using data from customers: 0%. Included minor categories The following minor categories are included in UPM's carbon inventory as additional information: • 2 Capital goods • 5 Waste generated in operations • 6 Business travel • 7 Employee commuting Carbon removals and use of carbon credits Carbon sink In 2024, the annual carbon sink from UPM own forests in Finland and in the US and UPM own and leased plantations in Uruguay has averaged 2.1 million tonnes of CO 2 equivalent over the past five years. This removal could be used to mitigate the residual emissions in UPM's net zero pathway, presuming that carbon sinks will be accepted by credible international carbon accounting and assurance standards. » Refer to E1-4, UPM's path to net-zero In 2023, the reported sink was 4.8 Mt CO 2 eq. The main reasons for the lower sink in 2024 are changes in methodology and higher logging volumes in own forests in Finland and on plantations in Uruguay following the start-up of the Paso de Los Toros pulp mill. Temporary carbon storage UPM's wood-based products store carbon during their lifetime. UPM is calculating the annual change in carbon stock of its sold wood-based products such as paper products, pulp, sawn timber and plywood. In 2024, the change in the annual carbon stock of wood-based products sold by UPM resulted in a carbon removal of 2.8 million tonnes of CO 2 . UPM estimates the temporary carbon storage based on a scientific report by the Finnish SYKE and the German IFEU institutes » Refer to Reporting principles of metrics . Depending on the development of E1-7

credible international carbon accounting and assurance standards, the temporary carbon storage might be taken into account in UPM's net-zero pathway. Carbon credits In case UPM is offering carbon-neutral products for its customers, it is through credits from voluntary offsetting schemes, such as Gold Standard. The total amount in 2024 was approximately 10,000 t CO 2 eq only. The credits are used solely to offer carbon-neutral products to customers but are not contributing to UPM's CO 2 emission reduction targets. Carbon sink The Natural Resources Institute Finland (LUKE) calculates the carbon sink of UPM's own and leased forests and tree plantations in Finland, the USA and Uruguay. The results are reported annually as a five-year average and the calculation is developed as best practice evolves. There is ongoing work to harmonise methodologies and make calculations more accurate. The previous year's figures are therefore not fully comparable. UPM aims to constantly improve the understanding of carbon balances. In 2022, a project started with LUKE to improve the soil carbon models for Uruguay with actual measurements on the ground. Field measurements in eucalyptus plantations began in 2023. An improved model for carbon calculations is used in UPM's 2024 carbon accounting. Finland Changes in forest carbon stocks cover both the tree stock and the soil. Long-term measurement data and mathematical modelling from LUKE have been used in the calculation. Changes in the carbon stock of the stand are calculated as the difference between annual growth and depletion. The calculation has been performed separately for forests growing on mineral soils and peat soils. Estimates of stand growth is based on the National Forest Inventory (VMI), which is a five-year inventory cycle. Uruguay Changes in forest carbon stocks cover both the tree stock and the soil. Measurement data and mathematical modelling from LUKE have been used in the calculation. Changes in the carbon stock of the stand are calculated as the difference between annual growth and depletion, based on annual increment in volume and harvest information from UPM. The change in soil carbon stock has been calculated using the dynamic Yasso07 soil model. USA Carbon sinks on UPM-owned forests in the USA were calculated as the difference in carbon stored in growing stock between two time points in 5 years. The calculation complied with IPCC guidelines and was based on available data on annual totals of stem volumes by age classes. The total biomass carbon stock change was based on species-specific wood densities and species group-specific biomass expansion factors. The below-ground tree biomass was calculated based on ratios between above-ground and below-ground biomasses for specific species groups in compliance with IPCC guidelines. Reporting principles for metrics

Excluded categories The following categories are excluded from UPM's inventory: • 8 Upstream leased assets: Not a relevant category. According to several Life Cycle Assessment (LCA) studies carried out for the paper industry, infrastructure accounts for less than 1% of CO 2 emissions for paper industry units. • 9 Downstream transport and distribution: UPM mainly produces intermediate products. Due to the scarcity of reliable information, the availability of adequate data and UPM's influence on transport to end-users, UPM only reports CO 2 emissions related to the transport of UPM's (intermediate) products to customers. As these transports are purchased by UPM, their emissions are included in category 4 (Upstream transport and distribution). • 11 Use of sold products: Not a relevant category. UPM's products do not cause any fossil CO 2 emissions during their use. As additional information, UPM reports biogenic CO 2 from the combustion of renewable diesel, while emissions of other greenhouse gases from combustion are estimated to be insignificant. • 12 End-of-life treatment of sold products: As a producer of mostly intermediate products, reliable information, availability of adequate data and the Company's influence on this emission category is limited. These emissions are therefore excluded from the inventory. • 13 Downstream leased assets: Not relevant, as covered by other categories. • 14 Franchises: Not applicable, as UPM does not have any franchise activities. • 15 Investments: Not applicable, as there are no investments with emissions that are not included in Scopes 1 and 2. Included major categories The following major categories are included in UPM's carbon inventory: • 1 Purchased goods and services: If primary data from the supplier is unavailable, secondary data from Ecoinvent is used to calculate emissions. Exceptions: IT-related emissions are evaluated using DEFRA factors per euro spent. Material categories included in the inventory are external pulp, wood, recovered paper, pigments and fillers, chemicals (for pulp, paper and label production), external paper and films. The estimated percentage of emissions calculated using data from suppliers is 20%. UPM's -30 by 30 Programme to reduce CO 2 emissions related to logistics and purchased materials includes measures to receive accurate data from more suppliers. • 3 Fuel- and energy-related activities (not included in Scope 1 or Scope 2): This category includes emissions from the extraction, production and transport of purchased fuels used at production sites. The figure is calculated by multiplying consumption by fuel type with CO 2 eq factors from Ecoinvent or MLC (formerly GaBi) for purchased electricity. Emissions related to the production of biogenic fuels are not included in this category, as they are already included in the figures under other Scope 3 categories: for example, energy wood is included in category 1 under wood. The percentage of emissions calculated using data from suppliers is 0%. • 4 Upstream transportation and distribution: This category includes transport for the same raw materials reported in category 1, as well as product deliveries from UPM sites and storage facilities to customers, as these are under UPM's control. The calculation is based on calculated tonne-kilometres and primary emission data from suppliers or secondary emission factors from databases (GLEC, except UPM Raflatac's which uses GaBi factors). For raw material transport, the calculation is based on actual quantities received and distances per mode of transport. Updates for transport distances vary between raw material categories and business areas. For product transport, both tonnes per transport mode and distances are actual

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UPM FINANCIAL REPORT 2024

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UPM FINANCIAL REPORT 2024

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UPM ANNUAL REPORT 2024

UPM ANNUAL REPORT 2024