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

Anticipated financial effects

EU Taxonomy

EU Taxonomy is a sustainable finance classification system, which defines criteria for economic activities that are considered environmentally sustainable. It represents an important step towards achieving carbon neutrality by 2050 in line with the EU climate goals. The first EU Disclosures Delegated Act on Climate was adopted in 2021 and it required large companies to report the proportion of their economic activities considered Taxonomy-eligible in relation to Climate change adaptation and Climate change mitigation objectives. In financial reporting year 2022, companies were also required to report the taxonomy alignment of their economic activities based on the sustainability requirements defined in the regulation. In June 2023, the Commission adopted the Taxonomy Environmental Delegated Act, including a new set of EU taxonomy requirements for economic activities making a substantial contribution to one or more of the non-climate environmental objectives, namely: Sustainable use and protection of water and marine resources, Transition to a circular economy, Pollution prevention and control and Protection and restoration of biodiversity and ecosystems. The Commission also adopted amendments to the Taxonomy Disclosures Delegated Act and to the Taxonomy Climate Delegated Act, covering the environmental objectives of Climate change mitigation and adaptation. For the financial year 2023, the KPIs covered all six environmental objectives concerning the Taxonomy eligibility. From 2024 onwards, also alignment shall be reported regarding all six objectives. Assessment of Taxonomy eligibility and alignment UPM annually conducts annually a thorough evaluation of the eligibility and alignment of activities with the requirements defined in the Taxonomy regulation. The assessments are coordinated by UPM's Finance and Responsibility Teams with the support of several UPM functions and businesses. EU NACE Classification (Statistical Classification of Economic Activities in the European Community) is used as a reference in activity identification. In 2024, UPM identified nine eligible economic activities of which six were Taxonomy-aligned. All the activities aim at a substantial contribution to climate change mitigation (CCM) and they meet specific technical screening criteria including criteria for 'do no significant harm' (DNSH) stated for each activity within the relevant Appendix to the delegated act. For all activities contributing to climate change mitigation, a physical climate risk assessment is needed pursuant to Appendix A to the Climate Delegated Act. Substantial contribution and 'do no significant harm' criteria were reviewed together with the sustainability experts from related UPM's businesses. In 2024, UPM reported previously Taxonomy-aligned activities 1.1 “Afforestation” and 1.3 “Forest management” as Taxonomy-eligible. Activities consist of UPM's afforestation operations in Uruguay and forest management and regeneration activities in Finland, Uruguay and USA. UPM considers that the mentioned activities fullfill the all the alignment requirements, apart from the third-party verification (section 4. Audit). UPM has been searching for a partner who would be fulfilling Taxonomy certifier requirements and capable of conducting the specific audit on Forest management. Until now, UPM has not been able to find a suitable service provider from the market and, hence reports its forest management activities as not aligned.

In 2024, UPM's Taxonomy-aligned economic activities were the following: 3.6 “Manufacture of other low-carbon technologies” relates to technologies and products dedicated to the reduction of GHG emissions and includes mainly construction of UPM's new biochemicals biorefinery in Leuna, Germany. 4.5 “Electricity generation from hydropower” relates to operation of electricity generation facilities that produce electricity from hydropower including UPM's own and co-owned hydropower plants. 4.13 “Manufacture of biogas and biofuels for use in transport and of bioliquids” relates to manufacture of biofuels from forest biomass and consists of UPM's biorefinery operations in Lappeenranta, Finland. 4.20 “Cogeneration of heat/cool and power from bioenergy” relates to operation of installations used for cogeneration of heat/cool and power exclusively from biomass, biogas or bioliquids and it mainly consists of operation of UPM's own and co-owned biomass-based boilers in Finland and Uruguay. UPM reports separately information on nuclear and fossil gas-related activities according to the Complementary Delegated Act. UPM identifies the activities 4.27 "Construction and safe operation of new nuclear power plants" (Olkiluoto 3) and 4.28 "Electricity generation from nuclear energy in existing installations" (Olkiluoto 1& 2) through its shareholdings in Pohjolan Voima Oyj (PVO) which has direct shareholdings in Teollisuuden Voima Oyj (TVO), » Refer to Note 4.3 Energy shareholdings in the consolidated financial statements . TVO operates three nuclear power plants in Finland after Olkiluoto 3 started its production phase in Q2 2023. Both nuclear activities 4.27 and 4.28 are Taxonomy-aligned based on the comprehensive assessment conducted by Teollisuuden Voima Oyj (TVO). In addition, UPM identified potential activities 1.2. "Manufacture of medicinal products" for the objective Pollution prevention and control within its Biomedicals business developing and supplying wood-based biomedical products and 4.29. “Electricity generation from fossil gaseous fuels”, related to the Nordland CHP plant in Germany. The plant generates electricity mainly for UPM's internal consumption but in case of excess production, electricity can be sold externally to the grid operator. The reportable amounts for the activities are currently minor and have no impact on the KPIs, hence, UPM considered to report it as non-eligible. Minimum Safeguards Requirements for Minimum Safeguards shall ensure that a company not only supports environmental goals, but also adheres to international social standards and guidelines. UPM evaluated the requirements to be fulfilled by UPM's Code of Conduct and related business practices, measures and commitments. UPM's due diligence and remedy processes consider social and employee matters, respect for human rights, anti corruption and anti-bribery. Information on Principal Adverse Impacts (PAIs), as defined in the EU SFDR, are addressed in UPM's reporting, if relevant. UPM's practices and assessments in relevant areas are described in more detail in the Annual Report in the following pages: • Commitment to international frameworks, page 211 • UPM Code of Conduct and other corporate policies, page 237 • Sustainability governance, pages 131–135

E1-9

For qualitative information about the financial impact of risks and opportunities, » Refer to Report of the Board of Directors, section “Climate change” in chapter Risks; » Refer to Note 1.2 Basis of preparation in the consolidated financial statements, Climate related risks. For more information about opportunities, see UPM Annual Report's Strategy chapters.

TCFD

UPM's climate-related disclosures according to TCFD (Task Force on Climate-related Financial Disclosures) are presented in this Sustainability Statement as follows:

REQUIREMENTS

PAGE NUMBER

GOVERNANCE a) The role of the Board in overseeing climate-related issues

131-132; 143-145 133; 143-145; 151

b) The role of management in assessing and managing climate-related issues

STRATEGY a) The climate-related risks and opportunities over the short, medium and long term 143-145; 151;154-156 b) The impact of climate-related risks and opportunities on business, strategy and financial planning 143-145; 149-151;154-156 c) The resilience of strategy, taking into consideration climate-related scenarios 143; 149-151 RISK MANAGEMENT a) Processes for identifying climate-related risks 131-133; 143-145; 151; 240 b) Processes for managing climate-related risks 131-133; 149-151; 240 c) How processes for identifying, assessing, and managing climate-related risks are integrated into overall risk management 133; 143-145; 151; 240 METRICS AND TARGETS a) Metrics used to assess climate-related risks and opportunities 157-161 b) Scope 1, Scope 2 and Scope 3 emissions, and related risks emissions: 158-160; risks:144-145; 151 c) Targets used to manage climate-related risks and opportunities and performance against targets 154-156

• Anti-corruption and anti-bribery, pages 242–244 • UPM and human rights, pages 211, 225, 231 • Taxation, pages 82–83

UPM FINANCIAL REPORT 2024

162

UPM FINANCIAL REPORT 2024

163

162

163

UPM ANNUAL REPORT 2024

UPM ANNUAL REPORT 2024