UPM Annual Report 2025

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Sustainable packaging In food packaging, one of the key features is barrier protection, which ensures that food reaches consumers in perfect condition. Plastic, glass and metal packaging has traditionally been widely used to provide this protection. Packaging requirements vary greatly, depending on several factors, including the characteristics of the food itself, the surrounding climate conditions, the size and format of the package, and the logistics route used. Sugar-coated confectionery, dark chocolate and cereals, for example, are well preserved with lower barrier protection. Our existing barrier paper portfolio is well suited for these types of end-uses. However, most packaging applications require much higher barrier protection. Through co-creation with partners in the packaging value chain, UPM Specialty Papers aims to enhance the performance of fibre based packaging and help brand owners and converters transition to it. In 2025, UPM Specialty Papers introduced a fibre-based alternative to plastic and aluminum packaging solutions. These recyclable, food-safe barrier papers were developed in collaboration with Royal Vaassen, a Dutch company. UPM Specialty Papers, Orkla Suomi and Walki Westpak also piloted a new paper wrapper for Panda Milk chocolate. The new wrapper has been validated as recyclable in existing fibre-recycling streams and has undergone extensive testing, including shelf-life tests. During the six month pilot period, the new wrappers replaced the traditional PP plastic wrappers. Co-creation projects have resulted in innovative packaging solutions that combine high barrier properties, sealability and runnability on high speed packaging machines. These solutions are typically designed for demanding uses such as food packaging for coffee, chocolate and confectionery products. They offer a recyclable alternative to traditional plastic packaging. Implementing sustainable product design concept The UPM Sustainable Product Design concept supports and guides the company’s product development projects. It promotes a life-cycle-based approach to design and ensures that every new product and service has a proven sustainability value proposition and meaningfully contributes to the UN Sustainable Development Goals (SDGs). With this concept, UPM prioritizes customer and consumer needs in the company’s development efforts. This allows UPM to create solutions that align with market sustainability expectations. The concept is a key element of the global UPM Product Stewardship standard, which was launched in January 2025. Implementation has progressed across all business areas and is supported by joint workshops that foster collaboration and knowledge-sharing. The concept is currently being applied in various product development projects across the business areas. One notable example is the Carbon Action label portfolio of UPM Adhesive Materials, which demonstrates how the concept translates into tangible solutions that advance our sustainability goals.

R&D’s role in different businesses

Business area

Description

UPM Fibres

UPM Fibres’ global R&D presence enables the company to work faster and better with customers and partners to find and implement solutions that are both necessary and fit for purpose. Through continuous R&D efforts, numerous improvements have been made to the pulp mills’ operational reliability, safety, and environmental performance, as well as the performance and qualities of our different pulp products. UPM Fibres has specialized pulp R&D capabilities at the Asia Research Center in Changshu, China, the Research & Development Center in Lappeenranta, Finland, and at the pulp mills. UPM’s commitment to developing sustainable, high-quality eucalyptus plantations for pulp production remains at the core of operations in Uruguay. The Forestry R&D Center and three tree nurseries produce high-quality seedlings for new plantations and support the operations of the company’s two pulp mills. UPM has capitalized on long-term R&D in circular economy solutions for pulp mill waste materials. The company has established a continuous supply of a dried mix of biosludge and lime sludge for a local cement factory. This reduces landfill waste at the UPM Fray Bentos pulp mill and replaces the cement factory’s fossil CO₂ energy sources with renewable biofuel. UPM has also made progress in developing agricultural liming agents from recycled alkaline waste materials. The first material has been productized into a liming agent, and commercial development has begun. UPM is also exploring ways to utilize biogenic CO₂ further. The options being explored include creating negative emissions by storing the biogenic CO₂ emitted by pulp mills and using it to produce carbon-neutral synthetic fuels and chemicals. The focus was on improving the cost-competitiveness and environmental performance of hydropower production assets. Significant development efforts were made to adapt to several changes in the power market. UPM Energy participated in several research programs and continued its development work within UPM’s stream water program. These efforts aimed to mitigate the impact of hydropower operations on rivers and migratory fish. The Product Development (PD) and Innovation organization at UPM Adhesive Materials plays a key role in maintaining competitiveness in a rapidly evolving market. Innovation is the cornerstone of the entire organization, enabling the company to exceed customer expectations and support sustainable growth. UPM’s development experts have a deep understanding of end-uses and anticipate market needs, translating them into actionable innovations. The global network of experts at UPM Adhesive Materials delivers region-specific solutions while leveraging collective, cross-functional global expertise. Sustainable product design is at the core of UPM Adhesive Materials’ efforts, with key aspects like life cycle assessments guiding decision-making. The company continues to shift its product portfolio toward innovative, scalable solutions that meet growing customer and regulatory needs to tackle issues such as climate and circularity. UPM’s R&D and product development initiatives aim to enable high performance and efficiency in the value chain, as well as to develop fibre based alternatives for non-renewable materials. These initiatives also support growth targets by innovating solutions for new applications. R&D efforts also focus on driving operational excellence at UPM Specialty Papers. UPM continues to collaborate with the packaging value network to co-create recyclable, paper-based packaging solutions for various end uses that meet regulatory requirements such as PPWR. The company currently has several co-creation initiatives in progress, supported by its excellent R&D infrastructure, including Northern European and Asian R&D centers. UPM Specialty Papers is developing label papers to improve efficiency and minimize the value chain’s environmental impact. In the energy sector, the R&D work focused on reducing energy consumption. Best practices are shared during regular inter-unit energy audits. One example of this approach is the recent decision to install a new type of heat pump at the Augsburg paper mill. This installation will serve as a model for other industries. UPM expects this innovation to further reduce CO2 emissions in the steam generation process by 15%. The electrification of the heat and steam generation systems, implemented over the past two years, is another excellent example of ecological and economic progress. Thanks to research and development in the energy sector, demand for electricity from the German grid has decreased by over 20%. This means that the carbon footprint from fossil fuels in 2025 was considerably lower than in 2024. The transition of the Finnish electricity market from hourly to 15-minute resolution has created new market participation opportunities while presenting challenges to previous operating models. UPM has ensured the effective implementation of these changes through the development of operating models and by securing the competence of the personnel. The Research & Development Center in Lappeenranta, Finland, and the Central European Support Team in Augsburg, Germany, continued to investigate fibre concepts for various paper grades. UPM Communication Papers participated in projects and associated activities to maintain the recyclability of RCP. UPM’s R&D teams supported the optimization of the deinking process to minimize material loss and reduce energy and water consumption. Product portfolio development focused on the needs of key customer groups. R&D efforts also aimed to improve several mills’ efficiency to identify areas for reducing costs, material losses, and improving the safety, quality, and performance of UPM’s paper products. The R&D teams’ contributions helped achieve the 2030 targets in the areas of energy, water consumption, effluent treatment, and resource efficiency. The UPM Plywood product management and development team offers competitive products in selected end-use areas. The team collaborates with customers and end users to provide superior technical expertise and support, as well as assistance with the commercialization of newly developed products and applications. An example of testing with end users is WISA®-TopGrip, which was installed in two transportation operators’ trailers for trial use. The product offers a fixed, durable non-slip surface for vehicle floors, replacing loose friction mats. UPM Biochemicals R&D played a key role in the startup and commissioning of the Leuna biorefinery. The production process is also continuously being improved. The development of new applications for renewable plastics based on UPM BioVerno naphtha continued. Piloting, research, and process development also continued at the UPM Biorefinery Development Center (BrDC) and with external partners. UPM also studied and tested several innovative new feedstocks that meet sustainability criteria such as forest industry residues. UPM Biofuels continued the registration process for tall-oil-based biofuels for use in jet engines with the American Society for Testing and Materials (ASTM), a necessary step for entering the production of sustainable aviation fuels, one of the UPM Lappeenranta refinery’s potential products. The registration process and discussions with technical partners in the aviation industry are ongoing.

UPM Energy

UPM Adhesive Materials

UPM Specialty Papers

UPM Communication Papers

UPM Plywood

Other operations UPM Biorefining

UPM Financial Report 2025

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UPM Financial Report 2025

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UPM Annual Report 2025

UPM Annual Report 2025