UPM Annual Report 2024

WE ARE UPM

GOVERNANCE

ACCOUNTS AND PERFORMANCE

Our strategy

Our businesses

Sustainability

Towards CO 2 -free energy Our energy portfolio consists mainly of energy sources that do not cause fossil CO 2 emissions. As the green transition progresses, more fossil-free electricity, as well as expertise in optimising energy use, will be required.

Our role as a producer and consumer of electricity UPM is the second largest electricity produc er in Finland, but also the largest electricity consumer. Being both a producer and a con sumer has given us valuable expertise now that price and supply volatility have become the new normal in the electricity markets. We contribute to maintaining the electricity system’s balance by helping when there is a risk of electricity shortages, either by reducing consumption at our paper mills or increasing production at our hydropower plants. This is also good business for us, as we optimise both our electricity production and consumption according to the price and demand for electricity, i.e. to meet the needs of the electricity system. UPM Energy is a major electricity supplier in Finland with assets in Finnish hydropower and nuclear power, and to a

lesser extent, thermal power. Hydropower is the most effective and sustainable method of producing balancing power for the increased volatility of the electricity grid. Nuclear power provides a reliable baseload generation of electricity, based on Finland’s unique and safe solution for final disposal of spent fuel. 99% of UPM Energy’s electricity is CO 2 -free. The start of operations at OL3 has increased UPM Energy’s CO 2 -free electricity generation by nearly 50%. We are continuously developing our energy portfolio, managing our CO 2 -free elec tricity generation assets in UPM Energy and converting our energy-consuming operations to lower-emission energy sources. We generate significantly more electricity than we consume, and this net sales position increased to over 7 TWh with the new OL3 nu clear power plant unit in Finland and the new UPM Paso de los Toros pulp mill in Uruguay.

In 2024, UPM Energy decided to invest in the second ultracapacitor for balancing the grid (page 46). The new facility will be located next to the Kuusankoski hydropower plant and is expected to be operational by the summer of 2025. UPM Energy is also exploring the development of wind and solar power projects, mainly on UPM-owned land in Western and Eastern Finland. We follow up our energy and CO 2 targets In 2024, we decreased our fossil CO 2 emis sions from energy generation (Scope 1) and purchased energy (Scope 2) by 9% compared to the previous year in line with our 65% reduction target for 2030. The use of coal and peat increased by 4% compared to 2023. Our target is to stop using coal and peat for on-site energy generation by 2030. Currently, coal is the main fuel at the UPM Changshu paper mill in China,

Working on several fronts

CASE STUDY

Efforts to reduce environmental impact

Targets

NEW MODERN TECHNOLOGY LNG VESSELS HAVE EXCEEDED EXPECTATIONS CHALLENGE SUPPORTING TOP RESEARCH ON THE CLIMATE IMPACTS OF FORESTS

CO 2 emissions reduction targets

• Energy generation and purchased energy: 65% reduction by 2030 (Scopes 1 and 2) • Materials and logistics: 30% reduction by 2030 (Scope 3)

introduction of LNG vessels also contributes to UPM’s -30 by 30 programme. IMPACT The study will measure more than 1,200 different variables, and the main measure ment site is the Hyytiälä forest station at the University of Helsinki. The station and its research forest measure atmospheric greenhouse gases and aerosols, tree eco physiology, and soil and weather variables, for example. The donation enables the con tinuation of high-quality measurements and research. A concept has also been developed that will allow measurements to be made in any forest in the future. IMPACT After one year of operation, the LNG vessels have reduced greenhouse gas emissions by more than 26% per tonne transported per quarter compared to 2020 levels. This figure accounts for the well-to-wheel emissions, in cluding the methane slip. The use of LNG has also led to significant reductions in emissions of nitrogen gas (NOx), sulphur dioxide (SO2), and particles, improving air quality in harbour areas.

New technologies

• Exploring clean hydrogen, synthetic fuels and electricity storage innovations

CHALLENGE The key sustainability challenge in maritime transport is to reduce greenhouse gas emis sions and other pollutants while maintaining operational efficiency. This requires the use of cleaner fuels and the implementation of advanced technologies. ACTION In 2022, UPM introduced seven new liquefied natural gas (LNG) powered vessels to its European maritime operations. These vessels, equipped with dual-fuel engines, were ex pected to reduce CO 2 emissions by 25%. The It is important to understand how commercial forests affect climate change in ways other than as carbon sinks and stores. For example, forests also have an impact on the formation of aerosol particles and clouds, rainfall and the reflection of sunlight back into space. ACTION UPM has donated EUR 400,000 to the Uni versity of Helsinki to study the overall climate impact of commercial forests in the Carbon Sinks+ research project. With this significant donation, we want to promote cutting-edge research at an international level and gain knowledge to support our own operations.

Energy efficiency

• Annual 1% increase in energy efficiency through audits, innovations and investments • Implementing energy-efficient technologies and practices

Optimising energy use

• Lowering emissions by optimising purchased electricity sources

Best Available Techniques (BAT)

• Applying the most effective methods to minimise emissions

Supplier collaboration

• Collecting CO 2 emissions data through the -30 by 30 programme • Using biomass-based fuels • Stop using coal and peat for onsite energy generation by 2030 • Installing electric boilers to replace natural gas • Exploring wind and solar power and investing in hydropower

Increasing the share of renewable and fossil-free energy

Minimise other air emissions

• Ensuring that the targets for acidifying flue gases ( NO

X and SO 2 ) are met

Monitoring and reporting

• Conducting thorough reviews for accurate emissions reporting

Policy advocacy

• Supporting regulations that encourage low-carbon investments

Energy market support

• Offering flexibility with nuclear, hydropower and thermal power for stability and balance

56

57

UPM ANNUAL REPORT 2024

UPM ANNUAL REPORT 2024