UPM Annual Report 2024

WE ARE UPM

GOVERNANCE

ACCOUNTS AND PERFORMANCE

Our strategy

Our businesses

Sustainability

OUR INNOVATION FOCUS IN 2024

INNOVATING DECARBONISATION SOLUTIONS

AI is expected to transform the global economy, leading to productivity gains and a faster discovery of new ideas. We have launched an AI programme to develop a comprehensive AI strategy and imple ment the selected transformations. The programme assesses opportunities, sets directions and acceler ates AI adoption and learning across the company. It provides clear, agile governance to ensure that AI delivers value. The AI strategy has been developed with contributions from more than 150 employees across multiple businesses and functions. The demand for sustainable packaging continues to grow. In food packaging, barrier protection ensures food reaches the consumer in perfect condition. Tra ditionally, plastic packaging has been used to provide this protection. Packaging requirements vary, depend ing on the characteristics of the food, the surrounding climate conditions, the size and format of the package and logistics route. Sugar-coated confectionery, dark chocolate and cereals are well preserved with lower barrier protection. Our existing barrier paper portfolio is well-suited for these types of end-uses. However, the majority of packaging end-uses require higher barrier With the launch of the biochemicals business, our customers will be able to switch from fossil raw ma terials to wood-based alternatives in textiles, plastics, PET bottles, packaging and pharma. UPM Biochem icals will be well positioned to provide renewable chemicals made from sustainably sourced wood with a CO 2 product footprint that is considerably below that of fos sil-based chemical products and credibly document ed by our third-party-reviewed LCA. UPM Biochemicals formed several commercial partnerships to speed up product development. The UPM Sustainable Product Design concept (page 24) supports and steers our product develop ment projects, ensuring that every new product and service has a proven sustainability value proposition and supports the UN Sustainable Development Goals (SDGs). We use the concept in new product development, using a tool that we have developed to map our impact on the SDGs. We have also used Life Cycle Assessment (LCA) and carbon footprint to provide

The strategy identifies high-impact AI transfor mations such as increased sales, optimised supply chains and improved processes. AI principles include ensuring the ethical, secure and transparent use of AI, with human oversight and the consideration of cybersecurity, privacy and data quality. AI is expected to significantly increase efficiency and streamline workflows. We are working to bring its benefits to our customers, employees and business development. Our barrier papers are optimal for further convert ing. Co-creation projects have resulted in innova tive packaging solutions combining high barrier properties, sealability and runnability on high-speed packaging machines. These solutions are designed for demanding end-uses, including coffee, chocolate and confectionery. protection. Through co-creation with the packaging value chain, UPM Specialty Papers aims to enhance the performance of fibre-based packaging and enable brand owners and converters to make the transition to fibre-based packaging. UPM Biochemicals and Nokian Tyres introduced the industry-first concept tire partly based on UPM BioMotion™ Renewable Functional Fillers (RFF). The partnership demonstrates the possibilities of using a lighter, 100% renewable alternative to traditional CO₂-intensive fillers (page 47). UPM Biochemicals, Selenis and Bormioli Pharma have partnered to produce the world’s first phar maceutical bottles made of partially wood-based PET. The bottle uses standard PET which is made with UPM BioPura™, UPM’s world first wood-based BioMEG. credible environmental data over the lifecycle. The concept has been used in existing business areas, and in the development of lignin and fibre-based products. UPM Biochemicals launched UPM Solargo™, a new range of bio-based plant stimulants. They sup port plant growth by improving the quality of the soil microbiome and increase drought stress tolerance of the plants. UPM has entered the large agrochemical market with an innovative, sustainable alternative to fossil-based products.

SUSTAINABLE PACKAGING

Innovating for the future

Innovation and R&D programmes are essential for the development of new products and technologies.

SHIFTING GEARS IN AI

Extensive partner network Our close-knit global partner network includes customers, universities, research organisations, suppliers and start-up companies. Collaboration speeds up the development and launch of new business solutions. Our network includes the Circular Bio based Europe Joint Undertaking (CBE JU), the European Chemical Industry Council (Cefic) and the Renewable Carbon Initiative (RCI). We are a member of the 4evergreen alliance, an initiative created by the Confederation of European Paper Industries (Cepi) to raise the overall recycling rate of fibre-based packag ing to 90% by 2030. We are also a member of EUROPEN, the European association that strives towards achieving carbon neutrality in the packaging value chain. Creating value for customers on page 24 R&D in the Report of Board of Directors on page 246

Research and development expenses cover the development of new technologies, busi nesses and processes. In 2024, we spent EUR 488 million (EUR 538 million) on research and development, which accounted for 36.1% (23.7%) of our operating cash flow. In addition to direct R&D expenditure of EUR 70 (66) mil lion, the figure includes negative operating cash flow and capital expenditure in devel oping businesses, transformative business prospects and digitalisation projects. The patents, trademarks and intellectual property rights protecting our innovations support the journey from innovation to business. We have more than 3,700 patents and patent applications, and more than 1,900 trademarks globally. The licensing of innova tions and technologies provides an excellent basis for value creation with customers and technology partners. R&D infrastructure UPM’s three research centres in Finland, Chi na and Germany accelerate the development

of bio-based products. The centres focus on research, piloting and analytics, enabling seamless collaboration with customers, value chain partners and research organisations such as universities. They work closely with UPM’s mills, businesses and business-specific research centres in various countries. In Germany, we have intensified bio chemical R&D and piloting in several of our laboratories in connection with the biochemicals refinery. In Finland, our re search centre in Lappeenranta concentrates on developing biomolecular and advanced materials businesses. In Uruguay, we focus on piloting future pulp end-uses in close col laboration with our forestry research centre specialising in eucalyptus plantations. We continuously develop our competenc es for the future needs of our businesses. In recent years, we have significantly enhanced our chemical expertise, leading to substantial advancements in chemical processing. This progress has also paved the way for the suc cessful commercialisation of future products.

IMPLEMENTING SUSTAINABLE PRODUCT DESIGN CONCEPT

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UPM ANNUAL REPORT 2024

UPM ANNUAL REPORT 2024