UPM Annual Report 2024

First page Table of contents Previous page 248-249 Next page Last page

WE ARE UPM

GOVERNANCE

ACCOUNTS AND PERFORMANCE

Report of the Board of Directors

Sustainability Statement

Financial Statements

Auditor's Report

Sustainability Assurance Reports

R&D’s role in different businesses

The current feedstock for biofuels in the UPM Lappeenranta Biorefinery is crude tall oil, which is a residue from pulp production. In the plans to increase production of advanced biofuels, UPM is also considering other residue streams and by-products of the forest industry. Feedstock sourcing would focus on UPM integrated feedstocks from the company’s own ecosystem, including various wood-based residues and potential carbon farming. The design for the potential biorefinery has progressed, and a major part of the basic engineering has been completed. The chosen technology has been validated at a demonstration scale. Before the potential investment decision, the focus will be on testing the novel, proprietary technology on a larger scale and on flexible feedstock options that will ensure differentiation and support the long-term competitiveness of the business case. This work is expected to take approximately two years, until 2026. In the future, the path to defossilisation in different transport sectors will increasingly rely on renewable synthetic fuels. UPM’s extensive know-how and experience in biorefinery operations not only gives a competitive edge but also opens up growth opportunities in the realm of green hydrogen solutions. Towards 2030 UPM’s advanced biofuels belong to the most demanding sustainability category of the Renewable Energy Directive (RED II and RED III), which includes residues from agricultural and forestry activities. The UPM Lappeenranta Biorefinery, with an annual capacity of 130,000 tonnes, is the largest advanced biofuels-only refinery in the EU. The RED III Directive includes an increased target for advanced biofuels in the transport energy mix in Europe by 2030, reflecting a considerable increase on today’s production capacity and creating significant opportunities for new investments.

BUSINESS AREA DESCRIPTION UPM Fibres

UPM's global R&D presence continued to enable the company to work faster and better with our customers and partners to find and implement the required and fit for purpose solutions. Several developments were made to improve the operational reliability, safety and environmental performance of our pulp mills. UPM's commitment to developing sustainable and high-quality eucalyptus plantations for pulp production remains at the core of our operations in Uruguay. The new Forestry R&D Centre and the third tree nursery were fully operational, turning company's long-term R&D into high quality seedlings for new plantations and supporting the operations of the company's two pulp mills. In Uruguay, UPM was also able to capitalise on long-term R&D into circular economy solutions for the pulp mill waste materials. The company has established a continuous supply of a dried mix of biosludge and lime sludge to a local cement factory, reducing landfill waste at the UPM Fray Bentos pulp mill and replacing fossil CO ₂ energy sources at the cement factory with a renewable biofuel. UPM also made further progress in the development of agricultural liming agents made from recycled alkaline waste materials. The first material was productised into a liming agent and commercial development began. At UPM’s pilot plant in Lappeenranta, more emphasis was placed on developing and piloting the first stages of the next fibre-based and bio streams growth concepts for the pulp mills in co-operation with research institutes. UPM sees clear synergies and advantages in having in-house businesses focused on replacing fossil materials with renewable solutions. This allows the company to make its customers more successful faster by designing and implementing solutions based on the bio-steams in different industries and applications. UPM is exploring options for the further use of its biogenic CO ₂ sidestream. The options being explored include the creation of negative emissions by storing the biogenic CO ₂ emitted by the pulp mills, as well as the use in, for example, carbon-neutral synthetic fuels and chemicals. UPM has published a white paper on its views on how to scale up the negative emissions value chain. The focus was on improving the cost-competitiveness and environmental performance of hydropower production assets and on developing competencies and business operations related to the optimisation of industrial energy consumption and demand-side flexibility. UPM Energy participated in several research programmes and undertook development work with the aim of improving UPM’s power generation and consumption operations in a changing electricity market, as well as developing the means to mitigate the impact of hydropower operations on rivers and migratory fish as a part of UPM’s Stream water programme. UPM Raflatac’s Product Development (PD) & Innovation organisation plays a key role in maintaining UPM Raflatac’s competitiveness in a rapidly evolving market. Innovation is the cornerstone of the entire organisation, enabling the company to not only meet but exceed the customers’ expectations and support sustainable growth. With a deep end-use understanding, UPM's regional and global development experts anticipate market needs and translate them into actionable innovations. Company's global network of experts enables to deliver region-specific solutions while leveraging collective expertise on a global scale. Sustainability is at the core of UPM's efforts. The company continues to drive product portfolio towards innovative, scalable solutions that have a positive impact on climate and circularity to meet growing customer and regulatory needs. UPM Specialty Papers R&D and product development initiatives aim to enable high performance and efficiency in the value chain and to develop fibre-based alternatives for non-renewable materials. These initiatives also support growth targets by driving the innovation of products for new applications. UPM continues to focus on co-creating sustainable paper-based packaging solutions for various end-uses with the packaging value network. The company has currently several ongoing co-creation initiatives supported by its excellent R&D infrastructure including Northern European and Asian R&D centres. UPM Specialty Papers continues to develop release liner base papers to further improve efficiency and minimise the environmental impact of the value chain. The company also supports industry-wide design-for-recycling approach across the label and tape value chains. CO ₂ emissions in an increasingly volatile electricity system. All boilers are installed and operational. There has also been a focus on technological innovations that help minimise energy needs at the production sites. The paper mills also developed further intelligent operations to enable increasing demand-side management of electricity markets and grids to support system stability and reduce emissions at peak times. The Research & Development Centre in Lappeenranta, Finland, and the Central European Support Team in Augsburg, Germany, continued to focus on investigating fibre concepts for various paper grades. UPM Communication Papers continued to participate in projects and association activities to keep RCP recyclable. UPM's R&D teams also supported the optimisation of the deinking process to minimise material losses and reduce energy and the water consumption. Product portfolio development focused on the needs of key customer groups. In terms of operational efficiency, the R&D efforts focused on improving the efficiency of several mills in order to identify both efficiency enhancing and safety-improving areas. Contributions from the R&D teams helped to achieve the 2030 targets in the areas of energy, water consumption, effluent treatment and resource efficiency. UPM Energy UPM Raflatac UPM Communication Papers In the area of energy, UPM has finished the electrification of our heat and steam generation and invested considerably in power-to-heat boilers at its paper mills to enable reliable heat supply in the event of gas or other fuel supply disruptions, to improve its cost competitiveness and to reduce UPM Plywood product management and development provides competitive products within selected end-use areas in collaboration with the customers, superior technical expertise and support for customers, and support for the commercialisation of newly developed products and applications. An example would be further expanding the use of lignin-based WISA BioBond gluing solution to new product lines. Development of new applications for renewable plastics based on UPM BioVerno naphtha continued. Piloting, research and process development continued to take place at the UPM Biorefinery Development Centre (BrDC) and with external partners. UPM also studied and tested the use of several new innovative feedstocks that meet sustainability criteria, such as forest industry residues for its possible growth plans. In Q4 2023, UPM Biofuels started the registration process for tall oil-based biofuels for jet engine use with ASTM (American Society for Testing and Materials) – a necessary step to enter into the production of sustainable aviation fuels which is one of the potential products of potential next biofuels refinery. The registration process and discussions with technical partners in the aviation space are ongoing. Other operations UPM Biofuels UPM Plywood