UPM Annual Report 2024

WE ARE UPM

GOVERNANCE

ACCOUNTS AND PERFORMANCE

Our strategy

Our businesses

Sustainability

CHANGES IN POLICIES, LEGISLATION AND

INFORMATION TECHNOLOGY AVAILABILITY AND INCREASING CYBERCRIME ACTIVITY

The rising concern of the cost-of-living crisis and the strain on natural ecosystems have intensified expectations for companies to deliver economic, social and environmental benefits and complement the actions of governments. Changes in regulation, taxation or subsidies could have an effect on our performance, competitiveness and the costs and availability of raw materials. Unpredictable and rapid changes in e.g. US or EU policies or local legislation may occur. Environmental regulations may contin ue to become more stringent. As policies, legislation or stakeholder expectations, or the application of them change, additional costs in complying with more stringent requirements or fines for non-compli ance may be imposed on us. Management: Responsible operations in the value chain enhance the ability to operate and influence long-term business success, including environmental management systems, sustainable forestry and compliance. Opportunity: Creating value for society, as a company and through our renewable and responsible solutions, is an integral part of our strategy. The bioeconomy offers new opportunities for value creation and business growth. We invest in selective strategic projects to enable profitable growth. Investment projects are often large and may take several years to complete. They may also involve strategic, technical and operational risks. Our biochemical refinery project in Germany involves new technology and opens new markets for us. The recent high inflation and interest rate environment, price uncertainty of construction materials, and availability of skilled labour as well as bottlenecks in the global logistics and supply chains have added new challenges to large investment projects. Management: Stringent and continuous operational planning, steering and supervision, quality control, input procurement, scheduling as well as resource and cost monitoring. Environmental, health, safety and social impact assessments and protocols. Stakeholder engagement. Opportunity: Carefully selected and implemented growth projects improve our earnings and returns and change the positioning of the company. The main production inputs required in the manufacturing of our products are wood, fibre, chemicals, energy and water. The prices for many of these inputs have been volatile in recent years and are ex pected to remain volatile for the foreseeable future. Ongoing military conflicts, governmental protec tion, geoeconomic rivalry, climate change, supply chain disruptions, environmental policies and other governmental actions or restrictions, could continue to cause further uncertainty around the prices and availability of these inputs as well as logistics services. Management: Continuously improving resource efficiency and supply chain optimisation and diversifi cation. New technologies. Long-term supply contracts and relying on alternative suppliers. Selected ownership of forest land and long-term forest management contracts. Opportunity: Circular economy, continuous improvement in resource efficiency and supply resilience to withstand price fluctuations offer competitive advantage.

Our business operations depend on the availability of supporting information systems and network services. Unplanned interruptions in critical information system services can cause disruptions to the continuity of operations. The information systems may be exposed to a cyber-intrusion that could cause leakage of sensitive information, violation of data privacy regulations, theft of intellectual property, AI-generated misinformation or disinformation, production outages or damage to reputation. Management: We systematically maintain and further develop our measures for cybersecurity protetion. Opportunity: Sophisticated IT systems enable efficient operations and optimised performance, as well as new customer services and data security. Our operations are exposed to risks arising from the environment, fires, natural events, machinery breakdowns, site security and occupational health and safety. A major incident at a UPM site or at a critical part of the supply chain could cause a shutdown or curtail production. Any failure to maintain high levels of safety management could also result in physical injury, sickness or liability to employees, contractors or third parties and cause business interruption. Management: We systematically maintain and further develop our management, safety, security and loss prevention programmes as well as insurance protection and business continuity. Development of process safety. Opportunity: Industry-leading environmental performance provides competitive advantage. Health and safety performance strengthens engagement, efficiency and productivity. Financial risks include foreign exchange and interest rate fluctuations, challenges in refinancing, coun terparty or credit risks or changes in taxes. Changes to the monetary policies of major central banks may significantly impact interest rates and consequently various currencies that directly or indirectly affect UPM. Our foreign exchange rate risk primarily relates to the US dollar, British pound sterling and Japanese yen. Management: Continuous hedging of net currency exposure. Hedging the balance sheet. Continuous improvement in competitiveness. Disciplined planning and selection of investments. Business portfolio development. Opportunity: Diverse business portfolio and geographical presence, focus on competitiveness and strong balance sheet may present strategic opportunities in a changing currency environment.

STAKEHOLDER EXPECTATIONS

OPERATIONAL HAZARDS, HEALTH AND SAFETY ISSUES AND BUSINESS INTERRUPTION

EXECUTION OF STRATEGIC INVESTMENT PROJECTS

FINANCIAL RISKS

INPUT PRICE FLUCTUATIONS ON THE MAIN RAW MATERIALS AND SERVICES

EMERGING RISKS

Artificial Intelligent (AI) -generated misinformation, disinformation or other adverse effects of AI technologies could erode trust of democratic pro cesses, deepen polarised views and increase sophisticated cybercrime events. Such events could lead to e.g. erroneous deliveries, non-payments of delivered products or high-value decisions based on falsified information and documents. Management and opportunity: Strong balance sheet. Maintaining and developing cybersecurity protection. Ensuring AI governance to unlock advantages of AI. Biodiversity refers to the diversity and variation of species and ecosystems on our planet. According to the UN, and despite ongoing efforts, bio diversity is deteriorating worldwide. Our operations are widely linked to biodiversity, and most significant impacts on biodiversity arise from wood sourcing activities. Deterioration of biodiversity could lead to slower forest growth which could impact the availability and increase costs of wood for UPM in the long term. Biodiversity loss arising from wood sourcing could lead to claims against UPM or restrictions to wood use. Management and opportunity: Global 2030 Forest Action Programme combines measures on climate, biodiversity, soil, water and social contri bution. Biodiversity is instrumental in maintaining healthy forest growth.

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UPM ANNUAL REPORT 2024

UPM ANNUAL REPORT 2024