UPM Annual Report 2025

We are UPM

Governance

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Sustainability Statement

Report of the Board of Directors

Financial Statements

Auditor's Report

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Topical assessments

The interests and concerns of various stakeholders have been included in the process of identifying material impacts, risks, and opportunities. The process includes customer and local community inquiries, counterparty and media screening, NGO concerns, investor, government, and regulatory agendas, as well as UPM's employee engagement survey. For the first double materiality assessment in 2023, interviews, questionnaires and workshops with internal and external stakeholders were also used. The identified material topics are taken into account in the review of UPM's sustainability focus areas and define the scope of this Sustainability Statement. See » table in chapter SBM-3 for an overview of the material topics and their relation to UPM's sustainability focus areas and the ESRS standards relevant to this Sustainability Statement. Short-, medium- and long-term impacts are considered throughout the value chain. The significance of impacts is assessed according to their severity, which is determined by their scale and scope. In case of negative impacts, irremediability is also considered. The likelihood of potential impacts is also assessed. UPM's thresholds for assessing scale, scope, and irremediability follow the principles of the global frameworks to which UPM is committed in its operations (e.g. different thresholds for environmental versus social impacts). Thresholds can be both quantitative and qualitative. For example, materiality thresholds evaluate impacts against UPM's financial performance, the number of stakeholders affected, and geographical coverage. UPM's Group-level risk assessment process includes an assessment of the financial impact of sustainability-related risks and opportunities on the company. Some of the impacts of the company's activities and business relationships on the economy, environment, and people may eventually become financial material issues. Financial materiality is assessed by analyzing the probability or frequency of events and the range of potential financial consequences to determine their effect on the company's objectives. Risks are evaluated based on their immediate and direct impacts (e.g. physical climate-related risks to UPM's production sites), secondary impacts (e.g. the ability to continue operations and generate business results), and long-term transformative impacts resulting from demand and regulatory changes (e.g. the societal transition to renewable and fossil-free materials). Using thematic assessments (e.g. climate change, biodiversity, and human rights), UPM's expert teams evaluate potential risks arising from identified dependencies. After analyzing the impacts, risks, and opportunities, the most significant ones are identified as material to UPM and grouped into topics. Internal professional judgment is also used to prioritize and group them. This list of material impacts, risks, and opportunities is annually reviewed by the Audit Committee of the Board of Directors and approved by the GET. UPM integrates the management of environmental, social, or governance (ESG) risks into its risk management practices throughout the organization.

Current and anticipated effects on UPM

Resilience of UPM's business model UPM's strategy and business management are based on the continuous assessment of potential changes in the operating environment and market dynamics. The analysis of business resilience is based on different scenarios, which take into account the main sustainability-related risks, impacts, and opportunities. Key sustainability-related risks and impacts are considered in relation to raw material and operational expenses, both of which are monitored and forecasted as part of the regular business steering processes. Separate analyses of climate resilience and water scarcity risk have been conducted in relation to environmental risks. Refer to » ESRS 2 IRO-1 Climate-related risks, » E1 SBM-3 Climate risks and business resilience; » E3-2 Actions, Water risk assessments Comparison with 2024 reporting The list of material impacts, risks and opportunities did not change materially from the previous year's report, except for a new risk regarding the unpredictability of emerging sustainability legislation. Other changes focused on clarification. For example, two former product-related material topics were combined to “Renewable and circular products, and CO 2 -free energy“. Based on the review of the double materiality assessment in 2025, UPM omitted the quantitative disclosure on E2-5 Substances of Concern. UPM has conducted an annual materiality assessment since 2011. Since 2023, UPM's annual materiality assessment has followed EFRAG's guidelines for double materiality assessments. Double materiality considers both impact materiality such as UPM's impact on people and the environment, and financial materiality, i.e. sustainability-related risks and opportunities that are likely to have a financial impact on UPM. The assessment covers negative and positive, actual and potential impacts on the economy, the environment, and people, including the impact on human rights. The identification of impacts, risks, and opportunities is based on internal expertise and several internal sources, including: • salient human rights assessments, • supplier and contractor audits as well as supply chain ESG risk assessments, • occupational health and safety and environmental performance results, • grievance mechanisms, • company risk assessments and compliance, • regulatory monitoring, • sustainability-related data (e.g. emissions, resource use, and health and safety data) and • sustainability due diligence processes. IRO-1 Materiality assessment process Process in general

Impact on climate change Based on its double materiality assessment, UPM considers the impact of its fossil CO 2 emissions on climate change to have a high negative potential. The physical impacts of climate change include more frequent and severe weather conditions, which may lead to societal shifts, with increasing social inequality and working poverty. UPM can mitigate the negative impacts through its climate-related sustainability targets and developments.

From an opportunity standpoint, the global shift toward green and sustainable societies supports UPM's strategy and business objectives, as it increases the demand for fossil-free, renewable, and circular products and materials. These opportunities are strategic for UPM's business and financial performance in the short, medium and long term. From a risk perspective, UPM's main sustainability risks are climate change, biodiversity loss, increasing sustainability-related regulation, acceptance of forest biomass, human rights violations in the value chain, and risks to the environment and people from potential operational hazards. Climate change and biodiversity loss are becoming important sources of direct financial and operational risks to UPM's operations and raw material sourcing. These risks are increasing droughts, heat waves, water scarcity, and pest damage. Potential floods, tropical cyclones, severe convective storms, and forest fires could also affect UPM's operations or its suppliers, and their potential impact is expected to increase in the long term. In addition, climate change has, and is expected to have, a direct impact on global logistics and supply chains, directly affecting UPM's operations and those of its suppliers. UPM is investing in developing resilience in forest and supply chain management and operations to mitigate potential negative effects. UPM considers responsible sourcing a key measure to mitigate identified and potential sustainability risks. UPM's forests and plantations are located in areas with low water stress and wildfire risks. Forest management certification schemes ensure responsible wood sourcing. At the Group and business area level, risk management considers sustainability risks as part of ongoing risk management processes. UPM actively participates in developing sustainability-related regulation at the local and EU levels to support the sustainable transformation of the industry. While fully supporting the EU's sustainability-related initiatives, UPM also identifies certain regulatory changes that could directly impact operations by affecting the availability of raw materials. These regulatory changes may impact raw material costs while strengthening UPM's position in producing bio-based products and materials. UPM has identified human rights and responsible sourcing risks and impacts in its global supply chains. UPM adheres to global human rights and sustainability frameworks to promote responsible sourcing practices in supply chains. However, there is potential for negative impacts in supply chains where UPM's sustainability standards may not be met. UPM continuously develops methods and tools to identify, assess, and mitigate sustainability risks and impacts related to supply chains. From an impact perspective, UPM's GHG emissions from its operations and value chain (Scope 1–3) contribute to climate change. Although wood sourcing can have a short-term impact on carbon storage in forests, sustainable forest management ensures carbon sinks in the medium and long term. These impacts are directly linked to climate change and pose risks for UPM's business. At the same time, forest management practices have a direct impact on the state of biodiversity in forests. UPM recognizes this link between forest operations and biodiversity and is constantly increasing its efforts to enhance biodiversity.

Refer to » E1-4 for climate-related sustainability targets and follow-up; Refer to » E1-6 for UPM's greenhouse gas emissions.

Climate-related risks Both top-down (macro trends, expert interviews) and bottom-up (business area, business unit input) approaches are used to manage risks, including those related to climate change. The process includes the assessment of strategic risks (e.g. regulation, market), operational risks (e.g. availability and price of key inputs), and hazard risks (e.g. natural events). Many transitional risks and some physical risks, and especially their combinations, are considered to have a potential strategic and significant financial impact on UPM's operations. UPM's position and resilience in different climate scenarios have been evaluated for the businesses and functions from both a physical and a transition perspective using expertise from the scientific community. The Finnish Meteorological Institute (FMI) has issued a report to predict the future physical impacts of climate change on UPM's main operation areas in Finland, Germany, Uruguay and China. Three greenhouse gas scenarios are considered: the SSP1-2.6 scenario represents low, SSP2-4.5 medium and SSP5-8.5 very high future emissions. Published in December 2024, the report examines changes in weather conditions between the years 1961–2023, and future climate projections in the aforementioned areas. This report is an update to a wider FMI report ordered in 2019. Observational data shows a statistically significant increase in seasonal temperatures. Mean temperatures are expected to rise in all four regions, although the magnitude of change varies considerably. With general warming, hot extremes will become more frequent. Precipitation is likely to increase in Finland during winter and to decrease in Germany during summer. Extreme precipitation events are expected to intensify in all four regions. In the second half of the 21 st century, the extent of climate change will strongly depend on the evolution of greenhouse gas emissions. If emissions are effectively reduced, the changes will likely be less severe. The FMI report is publicly available on the University of Helsinki open repository (helda.helsinki.fi) as report 2024-3; Climate change in Finland, Germany, Uruguay and China: observed changes and future projections derived from CMIP6 global climate models. In general, transition impacts play a greater role in low- and medium emission scenarios, and UPM is well positioned, as its business portfolio allows flexibility with respect to the identified risks and opportunities. The main risks and opportunities related to climate change have been identified as transitional risks: competition; markets; customers; products; and regulation. In the high-emission scenario, physical impacts dominate, with severe consequences not only for UPM but also for ecosystems and societies around the world.

UPM Financial Report 2025

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UPM Financial Report 2025

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UPM Annual Report 2025

UPM Annual Report 2025