UPM_Biofore_Magazine2016_ENG_160623_e-magazine_72dpi

UPM'S STAKEHOLDER MAGAZINE 2/2016

A NEW ERA OF EXCELLENCE

Global megatrends are not short-term issues. Their full impact will only be felt in the future. In this issue of Biofore magazine we take a look at the major global forces taking shape today which will significantly impact our business landscape through to 2030 and beyond. The challenge for every business and society is how to adapt and adjust to the new operating reality that is emerging as a result of the megatrends. Ultimately it is a question of how to address the risks and how to capitalize on the opportunities. We at UPMare in the perfect position to do both. We have for many years been integrating the bio and forest industries with the help of technology and the power of human innovation. The foundations of our biomass- based business can be summarized in three Rs: renewable, recyclable and responsible. Our expertise in biomass processing has earned us a leading position in wood-based product innovation. In accordance with the Biofore strategy, our innovation is driven by our commitment to develop sustainable, future-oriented solutions. In short: solutions that address global megatrends and capitalize on business opportunities in a profitable and responsible manner. Biofore addresses global megatrends

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UPM – The Biofore Company UPM leads the integration of b​io and forest industries into a new, sustainable and innovation-driven future.​ Our company consists of six business areas: UPM Biorefining, UPM Energy, UPM Raflatac, UPM Paper Asia, UPM Paper ENA (Europe & North America) and UPM Plywood. Our products are made of responsibly sourced, renewable raw materials. They offer alternatives to replace non-renewable fossil-based materials. We develop new innovative and sustainable businesses. Biofuels, bio­ composites and biochemicals are based on our extensive know-how and strong position in the forest biomass sourcing and processing value chain. We live by our values – trust and be trusted, achieve together, renew with courage.

LINKEDIN www.linkedIn.com/ company/ UPM-Kymmene

UPM – The Biofore Company. www.upm.com

Climate

YOUTUBE www.youtube.com/ upmdotcom

Biodiversity

FACEBOOK www.facebook.com/ UPMGlobal

Elisa Nilsson Vice President, Brand and Communications, UPM

Water

Responsibility criteria

Social Responsibility

2/2016  | 03

The transparent digital touch screen is made from nano-cellulose, which is a material that is optimal to use in conjunction with electronics because of its conductive properties.

The screen is transparent and can be placed in front of objects to photograph or explore them.

© Tomorrow Machine

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C ON T E N T S

03 EDITORIAL

04 THE TRANSPARENT DIGITAL TOUCH SCREEN

14

We meet UPM's partner Xu Lianjie, founder of China's largest manufacturer of

36

06 CONTENTS

tissue paper, Hengan International Group.

08 IN TIME

UPM updated its responsibility focus areas, adopting ambitious new targets and performance indicators up to the year 2030.

10 SMART SOLUTIONS TO GLOBAL CHALLENGES Climate change is pushing our planet to the limit. UPM’s Biofore strategy is a response to the great sustainability challenge. 14 NEW ROADMAP TO RESPONSIBILITY UPMupdated its responsibility focus areas, adopting ambitious new targets and performance indicators up to the year 2030. 17 MORE VALUE FROM SIDE STREAMS UPM’s target for 2030 is zero solid waste dumped at landfills and zero incineration of side streams.

32

EDITOR-IN-CHIEF Elisa Nilsson

A EUR 277 million investment in Changshu, China will enable UPM to deliver value- added, advanced paper products worldwide.

EDITORIAL STAFF Heli Aalto, Annukka Angeria, Sari Hörkkö,Terhi Jokinen, Klaus Kohler, Monica Krabbe, Anneli Kunnas, Marjut Meronen, Pia Nilsson, Marika Nygård, Sini Paloheimo, Juha Pitkäranta, Mari Ruissalo, Annika Saari, Päivi Salpakivi-Salomaa, Jaana Simonaho, Reetta Södervik, Päivi Vistala-Palonen, Vivian Wang, Antti Ylitalo.

35 SHOPPING GOES ONLINE Retail and packaging are being radically reshaped by global megatrends and the growing volume of online commerce. 36 THREE DECADES OF HENGAN We meet UPM’s partner Xu Lianjie, founder of China’s largest

27 UNDER THE SHARP EYE OF LYRECO

The French office products company expects all its suppliers to comply with strict standards. The UPM Changsumill passed Lyreco’s recent audit with flying colours.

DESIGN Valve

28 A NEW ERA OF EXCELLENCE A EUR 277 million investment in

manufacturer of tissue paper, Hengan International Group.

PRINTING Erweko Oy

Biofore peers into the crystal ball and looks at the exciting future of packaging in 2030.

Changshu, China will enable UPM to deliver value-added, advanced paper products worldwide.

28

COVER UPM Finesse Silk 200g/m² PAGES UPM Finesse Silk 130 g/m² UPM-KYMMENE CORPORATION PO Box 380 FI-00101 Helsinki Finland Tel. +358 (0)204 15 111 www.upm.com www.upmbiofore.com

39 UPM AND UTEC

19 LIGHTER LANDFILL LOADS

Uruguay’s first regional university builds on cooperation between industry and the academia.

Finnish forestry is decreasing its landfill waste volumes – a trend set to continue throughmore efficient use of side streams.

30 BIOFORE TEA HOUSE

Ancient traditionmeets modern biomaterials in the Biofore Tea House.

42 THE FIVE MEGATRENDS OF PRINT Nils Müller, CEO of TRENDONE, looks at the future of print and how it can complement digital products in innovative ways.

20 SUSTAINABILITY LEADERS UNITE! UPM is the first forest industry company invited to join the United Nations’ Global Compact LEAD, a platformdedicated to advancing sustainability.

31 WORLD'S LARGEST MACHINE FOR RELEASE LINERS UPM’s Chairman BjörnWahlroos shares his thoughts on UPM’s future in China at the grand opening ceremony of the Changshumill. 32 THE NEW SHAPE OF PACKAGING Biofore peers into the crystal ball and looks at the exciting future of packaging in 2030.

44 THE FUTURE IS IN YOUR HANDS The reinvented New Future office

22

UPM expects all 25,000 of its suppliers to operate responsibly. But how is this assessed? A round table of UPM experts share their insights.

22 RESPONSIBILITY IN ACTION

paper family provides a fresh example of Biofore thinking.

UPMexpects all 25,000 of its suppliers to operate responsibly. But how is this assessed? A round table of UPM experts share their insights.

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I N T I M E

The Institute for Molecular Medicine Finland (FIMM), at the University of Helsinki and UPM Biochemicals have started a joint research project with the purpose of investigating the applicability of UPM's new cellulose-based gel material for cancer research. The project focuses on growing cancer cells on a three-dimensional culture using UPM's new biomaterial and studying the drug responses of the cancer cells. This exciting research project brings together two growth areas: bioeconomy and personalised medicine. "One of the key challenges in experimental drug testing is being able to grow cells in a laboratory in an environment that resembles the human body," says Senior Researcher Vilja Pietiäinen , who is responsible for coordinating the project at FIMM. "We need better three-dimensional models for cell culture so that cells from cancer tissue would retain their distinctive characteristics also outside the body. Creating an environment that resembles tissue requires new types of materials." FIMM, the academic partner in the research project, specialises in research into personalised medicine. The institute's high throughput screening unit allows researchers to determine the response of different types of cancer cells to hundreds of drugs in only a few days. The constantly increasing amount of data enables researchers to identify cancer cell characteristics that help predict the most efficient drug for each type of cancer. In time, this information will also help patients. Joint project between UPM and FIMM

Innovation unit at the Biomedicum research and educational centre

UPM Biochemicals is establishing an innovation unit at the Biomedicum research and educational centre in Meilahti, Helsinki, Finland. The unit will focus on biomedical applications for the cellulose nanofibril technology developed by UPM. At Biomedicum Helsinki, the UPM team will be working more closely with medical researchers and other operators in the field. GrowDex ® , UPM's first commercial product developed for biomedical purposes, is a cellulose nanofibril hydrogel for 3D cell culture applications, such as pharmaceutical research and development. GrowDex ® is highly biocompatible with human cells and tissues.

Schwedt mill to be sold to LEIPA Georg Leinfelder GmbH UPM has signed an agreement to sell its Schwedt newsprint mill site and relevant assets to LEIPA Georg Leinfelder GmbH. All employees at the Schwedt mill will be transferred to LEIPA. The transaction price is EUR 70 million. The transaction is subject to customary third- party approvals. As part of the transaction, the parties have agreed to enter into a contract manufacturing agreement for newsprint for a transition period which would conclude at the end of 2017 at the latest. The capacity of the mill is 280,000 tonnes of newsprint annually. LEIPA will convert the mill for liner production. The planned production capacity would be approximately 450,000 tonnes of liner annually.

ISCC PLUS certification for bio-based applications UPM Biofuels has extended its sustainability certification to cover all of its output streams from the Lappeenranta Biorefinery in Finland under the International Sustainability and Carbon Certification Scheme ISCC PLUS. UPM Biofuels produces renewable diesel and naphtha at the Lappeenranta site. Wood-based renewable diesel UPM BioVerno for transportation is the main product. However, the process also generates a smaller amount of renewable naphtha, which can be used as a biocomponent for petrol.

UPM PELLOS REACHES ITS 10 MILLION MILESTONE

In Pellosniemi in south-eastern Finland, plywood has been produced for supply to the world's markets for almost half a century. The first plywood mill started its operations back in 1968, with the other two mills following in 1994 and 2002. Some 1.6 million cubic metres of particleboard was produced between 1964 and 1994. In April, UPM Pellos reached the milestone of 10 million cubic metres. UPM's WISA-Spruce plywood is a familiar sight at construction sites, in particular in the Central European region where it is used as floor, wall and ceiling material. Additionally processed special plywood panels are also used in concrete-forming applications and in the transportation industry. Today, the mills employ some 600 people. The annual production capacity of all three mills combined is around 480,000 m³, with two plants operating in three shifts every day of the week. At the oldest mill, Sundays are considered a day off, with no operation taking place. Maintaining a production level such as this requires over a million cubic metres of wood each year; a figure that corresponds to 70 to 80 truckloads of large- diameter spruce logs per day, or one truckload every twenty minutes. The raw material is sourced from sustainably managed forests located nearby.

You can now read Biofore Magazine and interesting stories at www.upmbiofore.com.

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TEXT MATTI REMES PHOTOGRAPHY JANNE LEHTINEN, UPM; COURTESY OF THE INTERVIEWEE

Megatrends such as population growth, urbanisation and climate change are placing strain on the Earth's carrying capacity. UPM developed its Biofore strategy as a smart response to global sustainability challenges. Smart solutions to global challenges

T he world’s carrying capacity became a widely recognized issue in 1972, when a think tank of scientists known as the Club of Rome published the report The Limits to Growth. One of the authors, futurist Jørgen Randers , predicts that the scarcity of natural resources and population growth will continue to be the most important megatrends shaping the future. “Climate change has now claimed its place among the other two megatrends, as we now have proof of its progression,” says the 70-year-old Norwegian professor.

Randers believes that significantly lower growth figures will remain a dominant economic trend in the next few decades, especially in developed countries. This is due to the ageing population

and a decline in the profitability of work. As society grows wealthier, employment becomes concentrated in the service sector. In addition, health and social services will

Jørgen Randers

employ more people than before. “Increasing productivity in these fields is much harder than in the manufacturing industry or agriculture. I doubt we will be willing to accept robots taking care of the elderly in the future.” Funding the fight against climate change Randers expects to see the world’s GDP (the amount of products and services produced) double within the next

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Energy consumption by region

Global GDP growth is set to slow down over the next 50 years, 2010–2060

18

Other

15

4.0

Other Asia

12

3.0

9

Persentage points

China

2.0

6

Billion Toe (tonnes of oil equivalent)

Non-OECD

1.0

OECD

3

OECD

0

0

Global population trends United Nations population growth estimates by continents, million people

1965

2000

2035

2001–2010 2010–2020 2020–2030 2030–2040 2040–2050 2050–2060

BP 2016 Energy Outlook

OECD

12 Million people

Randers’ recent book “2052 – A Global Forecast for the Next Forty Years” has been translated into nine languages and has sold 150,000 copies. Environmental organisations criticize Randers for being overly optimistic in believing that there

40 years. At the same time, he anticipates that population growth will start to slow down and reach a peak of 8.1 billion people in 2040. This means that average consumption per person will grow. Randers is nevertheless hopeful that in the future a larger portion of national income will be spent on investments in a sustainable future instead of daily commodities. Within the last couple of decades, an average of 25% of national product has been spent on investments. In the future, we might have to increase this to 40%. By investments, Randers means infrastructure like roads and production facilities, transportation and education. A vast amount of money will have to be spent everywhere in the world adjusting to climate change and repairing its damage . “The rise of the sea level will force the Netherlands to build higher protective barriers. Norway will have to excavate long tunnels to protect the roads in the mountainous fjord areas from landslides caused by the melting of permafrost,” Randers explains. The game is not lost yet The transition from fossil fuels to renewable and emission- free energy sources will also require massive investments, as will the increasingly efficient use of natural resources. As for future investment needs, Randers adds the struggle to reduce global poverty and economic inequality. Without corrective actions, refugees and armed conflicts threaten the stability of global political and economic systems. Randers emphasizes that despite the grim outlook, the game is not over yet. “What we need now are solid, long-termdecisions based on facts to guide society in the right direction.”

a positive effect on UPM’s business. “They increase the demand for pulp, hygiene, wood and label products especially in developing economies.” Ahead of the curve with Biofore Business based on renewable and recyclable raw materials is at the core of UPM’s Biofore strategy. Ståhlberg believes this to be a solid foundation for the future.

4

8

Africa Asia Europe Latin America and the Caribbean North America Oceania Global Africa Asia Europe Latin America and the Caribbean North America Oceania Global Africa Asia Europe Latin America and the Caribbean North America Oceania Global Africa Asia Europe Latin America and the Caribbean North America Oceania Global

will be no shortage of food and water if humankind only makes the right choices. Meanwhile, many people in the business sector criticize him for not having enough trust in the free market’s ability to mend these issues. “I have been criticized equally by both sides – it has made me evenmore convinced that my prediction is solid. The biggest difference to before is that we now have enough information to make a realistic estimate for the next decades.”

“For a long time now, UPM’s businesses have been based on sustainable ground. It helps us to answer the pressure for change and gives us a competitive advantage over many competitors.” The fight against climate change received an

encouraging boost from the Paris Climate Conference in December. UPMhas joined the fight by developing bio-based fuels to replace fossil energy sources producing emissions. The company also produces biocomposites and bio­ chemicals to replace oil-basedmaterials. These products create added value andmay be a significant source of growth in the future. “UPM’s strong balance sheet and income stream enable us to invest also in riskier prospects that may become new growth sectors in the future.” Ståhlberg points out that retaining competitiveness requires continuous improvement of cost efficiency and productivity. “UPMhas shown that it is possible for a company using renewable rawmaterials to continuously improve its productivity.” Ståhlberg notes that the revenue per hectare of forest plantation has increased significantly. “By increasing productivity, we are able to spread wellbeing among the owners, employees and the surrounding society.”

Kari Ståhlberg

Megatrends mean big opportunities UPM’s strategy director Kari Ståhlberg believes the challenges related to the Earth’s carrying capacity can be overcome. Natural resources are used and recycledmore efficiently than before, which helps to satisfy the growing demand associated with population growth and higher living standards. “I believe that the world will continue to go forward and become a better place for us all to live in. Higher living standards in China and other developing economies do not affect western countries negatively,” says Ståhlberg. UPM follows global megatrends closely because they create both challenges and new opportunities for the company. For example, urbanisation, the growing middle class and the increased purchasing power of consumers have

Source: United Nations, World Population Prospects: The 2015 Revision.

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TEXT VESA PUOSKARI

PHOTOGRAPHY JANNE LEHTINEN, UPM

nowwe are looking at things from a broad termperspective up to the year 2030,” she adds. The goal of UPM’s responsibility work is to create a competitive advantage and long-termvalue through the efficient use of resources and the input of high performing people. “We are using very accurate indicators to measure our responsibility performance. If we reach our targets earlier than we expected, we’ll keep on shooting even higher,” asserts Norjama. Continuous improvement A safe, healthy working environment and the wellbeing of personnel are among UPM’s main social responsibility focus areas. “We want to make safety a permanent part of UPM’s culture. A zero compromise culture is the only way to continuously lower accident rates both among our own personnel and among external contractors working at the company’s premises.” Last year’s lost-time accident frequency was the lowest in the company’s history. At the end of the year, 12 production units achieved more than one year without any lost- time injuries. An inclusive, diverse working environment is among the new targets defined in UPM’s social responsibility agenda. This year, UPM is launching an initiative aiming to promote diversity in the working environment and thereby improve its business results. “Our target is for all UPM employees to feel they are treated as individuals regardless of gender, age, race or nationality by 2030. These targets will be monitored through the Employee Engagement Survey, which already looks at the diversity question. In the 2015 survey 77% of the respondents said they had not experienced discrimination within UPM,” she adds.

In the field of economic responsibility, UPM’s target is to create added value through responsible sourcing in cooperation with suppliers. For example, UPM is conducting supplier audits that are helping to improve its suppliers’ performance in everything fromproduct quality to occupational health and safety as well as environmental responsibility issues. responsibility targets, UPM initiated comprehensive discussions on the Sustainable Development Goals ratified by the UNGeneral Assembly in autumn 2015. Workshops were organised in different management teams to discuss all 17 UN Sustainable Development Goals, the target being to identify the issues of greatest relevance to UPM. “We found a link between every UN goal and UPM’s operations. In the end, we selected 11 that we regarded as the most relevant to UPM. These targets either relate to promoting a desired outcome or thwarting an undesired one. Slowing down climate change is one such example.” Forests and biodiversity were, as to be expected, top of UPM’s discussion agenda. “This has been our focus area for a very long time. UPMalso has an excellent opportunity to influence this field in the future. In wood sourcing and forestry we are carrying out very detailed operations to achieve our targets,” notes Norjama. Active voice in global forums UPM is active inmany international forums as a key participant in dialogue with other companies. “For example, we took part in the Sustainability Salon forum organised in China. There we introduced listeners to UPM’s Biofore strategy and howUN Sustainable Development Synergy with UN goals In the process of updating its

Nina Norjama

Goals are linked to our operations. We want to encourage companies to take on an important role in related efforts,” she adds. Compared to the previous UN MillenniumDevelopment Goals, the new goals have a wider, global scope. As sustainability problems are global, the solutions must also embrace a global perspective, which is why the new UNGoals highlight cooperation and human rights. “Making the world a better place for everyone requires the cooperation of countries, companies, non-governmental organisations and individuals as well. This is a puzzle that the whole worldmust solve together,” concludes Norjama.

New roadmap to responsibility

UPM updated its responsibility focus areas, adopting ambitious new targets and performance indicators up to the year 2030.

T he main pillars of UPM’s corporate responsibility policy are economic, social and environmental responsibility. Nina Norjama , Director, Responsibility Development and Support, affirms that UPM is committed to continually deepening its corporate responsibility work in the long term. UPMpromotes responsible practices across the whole value chain and is actively searching for new sustainable solutions in cooperation with its customers, suppliers and partners. “We have adoptedmore ambitious targets in our updated Responsibility focus areas. The greatest change is that

United Nations Sustainable Development Goals guiding UPM Targets

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Lighter landfill loads

based fraction, deinking sludge and ash for various end uses. Deinking sludge is used as an additive and raw material in brick production and in the cement industry as a carrier and filler. Thanks to these determined efforts, UPMmills have reduced solid landfill to zero in Germany. Thomas Krauthauf , Senior Manager Business Development at the UPMSchongau/Ettringenmill notes that the costs of disposing of solid waste streams have decreased significantly in recent years due to closed recycling loops with other industries. As an example, the UPMSchongau mill has successfully developed new recycled products from ash generated in recovery boilers. “We have created new products by selecting certain ash fractions and developing their properties further. These fractions are nowmore effective in soil stabilisation and they can be used in other new applications as well,” Krauthauf says. For commercial applications to be successful, it is essential to find the right partners and to know the customers’ production processes in order to invent optimised new products in the field of secondary raw materials. “We can guarantee our customers a continuous rawmaterial stream. At the same time we have improved our quality control system to ensure that our rawmaterial properties match specifications. With demand for these materials growing, we have successfully increased prices while also decreasing our cost,” he adds.

The Finnish forest industry is rapidly decreasing its landfill waste volumes, and this trend will continue through more efficient use of side streams, predicts Maija Heikkinen, Senior Environmental Adviser at the Finnish Forest Industries Federation.

Thomas Krauthauf

More value

Boosting Europe's circular economy In December 2015, the EU Commission published a new action plan for the circular economy. The aim is to close the loop of product lifecycles throughmore efficient recycling and reuse, bringing benefits to both the environment and the economy.

“At the beginning of this year, Finland banned the dumping of organic waste at landfills. We hope that new legislation will also facilitate the fabrication of new products from side streams. This wouldmake

from side streams

Pekka Ståhlberg, Katja Viitikko

Maija Heikkinen

coming from solid waste treatment and landfills, but it also creates extra income from external sources. The Zero SolidWaste project focuses on five main side streams: ash, sludge, dregs, wood-based fraction and landfill operations. Most of UPM’s solid side streams are used for landscaping or incinerated for energy. Only a small fraction of waste goes to landfill. “We are currently doing research and development exploring several new applications where we could use these side streams. Fractions could be used in applications such as biogas production or in fertilisers. At the same time, we intend to create new business models and find new partners for cooperating in this field,” adds Katja Viitikko , who is responsible for the side stream reuse programme at UPMR&D. Ahead of the curve Germany has a long tradition of exploiting side streams such as wood-

Currently around 90% of the side streams produced at UPMmills are reused in other processes. UPM’s target for 2030 is zero solid waste dumped at landfills and zero incineration of side streams unless the energy is re-harnessed and exploited. Pekka Ståhlberg , Director of UPMBusiness Support says that Finland’s ongoing Zero SolidWaste project confirms UPM’s position as a frontrunner in the circular economy. Stricter waste legislation and increasing cost pressures are key drivers behind this trend. “We have to find a sustainable solution for side streams, enabling us to reuse excess materials and generate added value for us. Our aim is to define the best operational practice in these areas and scale themup UPM-wide in Finland. The target is for UPM to become a Zero SolidWaste company in Finland.” Harnessing side streams will also have a clear impact on UPM’s EBITDA. Not only does it eliminate costs

sound business sense as well. Forest industry companies are often the ones to pay for others exploiting their side streams as rawmaterial.” The forest industry’s total landfill waste volume in 2013 amounted to 114,000 tonnes. The latest statistics for 2014 confirm that this total decreased to 92,000 tonnes. This welcome trend is set to continue in coming years. According to Heikkinen, the forest industry’s side streams could be used more effectively in fields such as landscaping, but legislation has posed obstacles. “When the Finnish Land Use and Building Act is amended, we will try to ensure that we can increase the use of various recoveredmaterials. Also, threshold limit values should be revised so that ash can be usedmore widely for maintaining and building forest roads.”

“From the perspective of the forest industries, the new action plan places slightly more emphasis on the bioeconomy and the use of renewable rawmaterials, which is important for our industry. However, it still seems to focus on the recycling of non-renewable natural resources,” says Heikkinen. The new action plan also includes measures to monitor the circular economy andmeasure the use of resources. “We hope these indicators will take into account the difference between renewable and non-renewable natural resources. This is genuinely a big challenge.” The Commission’s action plan includes some 50 proposals to boost Europe’s circular economy in coming years. This includes actions in the fields of production, product design, waste, public procurement and consumer information.

UPM's Zero Solid Waste project aims to develop sustainable solutions for side streams generated in industrial production processes. The project is an integral part of the UPM Responsibility 2030 Agenda.

You can read more about our responsibility targets for 2030 in UPM's Annual Report 2015.

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TEXT VESA PUOSKARI

PHOTOGRAPHY UPM; COURTESY OF THE INTERVIEWEES

Sustainability leaders unite!

UPM is the first forest industry company invited to join the United Nations' Global Compact LEAD, a platform dedicated to advancing sustainability leadership through innovation and action.

Global Compact LEAD is a unique United Nations leadership platform designed for companies with leading sustainability standards. “Participating in LEAD offers UPMan excellent opportunity to show its sustainability leadership on a global stage. Companies in LEAD can uniquely demonstrate how good business practices can advance global Sustainability Development Goals,” says Lise Kingo , Executive Director of Global Compact.

companies that LEAD is an

geographical regions and industry sectors that participate

Another important emphasis is on designing future business models, including those that are emerging from the digital revolution. For example, LEAD has a new Young Innovators Programme that will engage young professionals fromLEAD companies. “The target is to understand and benefit the potential of organisations emerging from Silicon Valley and elsewhere. The programme gives the industries a chance to explore and transform these developments into new sustainable business models and opportunities,” continues Hansen. Currently, with UPM the only forest industry company in LEAD, Hansen expects an important contribution, especially in the field of bioeconomy and all 11 UN goals that are considered to be important targets for UPM. “We hope that UPMwill benefit from the collaboration and find inspiration when working together with other industry leaders, exploring the potential for radical new andmore sustainable business models within the sector,” Hansen concludes.

integral part of the UNGlobal Compact and thus the driving force in the creation of a large global movement.”

in LEAD. The total number of member

companies in the UNGlobal Compact is

Pirkko Harrela

approximately 8,500.

Top 50 sustainability leaders Pirkko Harrela , Executive Vice President, Stakeholder Relations, UPM, sees the invitation as recognition of UPM’s long-term commitment to sustainability work. “For us, joining LEADwill be a great opportunity to stay abreast of developments within the industry and to generate and implement advanced corporate sustainability practices together with other sustainability leaders and committed stakeholders,” she says. UPM is the first forest industry company and the very first Finnish company to receive an invitation to join this group. “LEAD is a well-managed operation with clear targets and good planning. With this inmind, we look forward to good cooperation both with the LEAD management and the peer companies,” Harrela says. There are currently 50 sustainably advanced companies across

Designing for the future LEAD’s work is about developing tools for companies to apply in integrating sustainability into all aspects of their work. In 2016, the focus of

When inviting new companies to join LEAD, the UNGlobal Compact scans a variety of global and local

Global Compact and LEAD is on integrating global goals and local business. “The

sustainability rankings and indices, including the Global Compact 100 and the Dow Jones Sustainability Index. Kingo sees membership as a relevant tool for publicly listed companies like UPM. “LEAD is uniquely positioned

Sustainability Development Goals (SDG) are a

useful source of inspiration and a tremendous opportunity for businesses

Lise Kingo

Ole Lund Hansen

to foster better communication and collaboration with different types of investors. This is something we are going to prioritise evenmore in the years to come,” says Kingo. “Finally, I also believe it is a big advantage for the participating

to innovate, invest and collaborate to create a more sustainable future for all of us,” notes Ole Lund Hansen , Chief, Business of Tomorrow, at the UN Global Compact.

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TEXT HELEN MOSTER

PHOTOGRAPHY TUOMAS UUSHEIMO,

JANNE LEHTINEN, PETRI HEINONEN

“If we are carrying out audits abroad and really want to review everything thoroughly, we always need to have someone with us who speaks the local language and knows how to carry out audits,” says Kimmo Ståhlberg.

“Sometimes it takes months of discus- sions for us to gain permission to carry out a supplier audit at a certain production facility. We always give reasons for why we want to visit them on-site. But our perseverance pays off,” says Nina Norjama.

“We audited the production process, our first priority being to

ensure quality output. During the same visit we also checked the working hour logs, employee conditions, wages, safety and other responsibility related issues,” says Kimmo Ståhlberg.

“Audits are always about improvement. We have to agree with the supplier on the direction and actions that need to be taken so that we can continue working together,” says Petri Heinonen.

“We don't expect any big surprises in the chain of custody in Russia, because forest-related issues have been under the microscope for such a long time. The concept of responsibility has shifted more and more towards social responsibility and there may be lessons to be learned there,” says Tuomas Niemi.

I f anyone understands the principles of responsible sourcing, it’s Petri Heinonen, Tuomas Niemi, Nina Norjama and Kimmo Ståhlberg . Their daily work involves auditing UPM suppliers to ensure that they comply with the strict requirements that UPM sets for its suppliers as a forest company committed to operating responsibly. The primary goal of these supplier requirements is to recognize and reduce risks related to business operations. But that’s not all: they also aim to support suppliers in their continual improvement efforts. On-site visits are one way of assessing suppliers. Heinonen and Ståhlberg have travelled the world carrying out such audits. Niemi in turn monitors pulp suppliers’ operations mainly based on documents. In the following, they recount their experiences in Brazil, China and Russia, with added expert commentary fromNorjama, Director, Responsibility Development and Support.

UPM expects all 25,000 of its suppliers to operate responsibly. But what is responsibility and how can it be assessed? A round table of UPM experts share their insights on this complex topic.

Responsibility in action

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Kaolin from the Amazon Petri Heinonen, Manager, Supply Chains, recently conducted a supplier audit in eastern Brazil, where he scrutinized the operations of Imerys, UPM’s kaolin supplier. UPMuses kaolin in the paper production process. Imerys was selected for auditing due to certain risks related to mining and landmanagement in Brazil. Petri: Imerys Rio CapimCaulimCo.’s production facility

On-site visits are one way of assessing suppliers. Petri Heinonen recently conducted a supplier audit in eastern Brazil, where he scrutinized the operations of Imerys, UPM's kaolin supplier.

is located in Barcarena in the state of Pará. The actual open-pit mines are located 160 kilometres inland in the middle of the rainforest. Thousands of hectares of land have been reserved for extraction, but only a fraction of the rainforest area has been cleared for extraction. We were keen to look into how the extraction permits were obtained and what happens to the land after all the kaolin has been extracted. In the mining area, we saw a tree nursery where native tree species were being grown. This way rainforests are being restored in areas where extraction has been completed. Nina: Had restoration already started? Petri: Yes, it had, and everything seemed to be going well. Nina: Tell me about the people. What are the local surroundings like? Petri: There are nine poor neighbourhoods, favelas, around Barcarena. Imerys has created a social programme for the residents providing support such as remedial education and activities for children as well as dental care and water workouts. In the jungle around the open-pit mines there are villages that are even poorer than the favelas. The company also helps the village residents by providing health education and buying vegetables from them for their canteen. Nina: What about the factory itself? Can you tell me about the working conditions there? Petri: I talked to some of the factory workers at random. I asked themwhether they had had holidays and whether the company had paid them their wages. I also reviewed the employee register and working hour tracking system. I found everything to be at a good level. The company also had a programme to employ people with disabilities.

Wood sourcing has been under the microscope all over the world for a long time.

Chinese, so we had experts on our teamwho understood Chinese. Nina: And you found there were major issues concerning safety at work? Kimmo: The employees lacked safety boots and respirators even though a lot of dust is generated during production. The company corrected all the issues that we pointed out to them. They installed an epoxy floor in the chemical store, which reduced the amount of dust. They also labelled all the chemical barrels and provided employees with safety equipment. Nina: Asian Sage is an excellent example of a supplier willing to invest in improvements. They also had capital earmarked for such investments. Kimmo: Exactly. They knew they did not meet the demands of western companies and they wanted to improve. They were grateful for the “free consultation.” Nina: What about holidays?Were the employees given enough time off? Kimmo: The employees wanted to work longer hours so that they could have time off to help at home during the harvest. We told the company about western requirements and persuaded them to upgrade their holiday pay, for example. Fibre from around the world UPMhas been assessing the origin of wood sourced fromRussia for several decades now. The origins of UPM’s pulp fibre are also subject to scrutiny. But why should the origin of wood and fibre be monitored in the first place? Hasn’t wood sourcing been under the microscope all over the world for a long time already?

“In fibre sourcing, raw material supply chain management has been

revolutionized over the past 20 years. It would be great if the same level of performance was achieved for other raw materials as well. That’s our goal,” says Nina Norjama.

Imerys has created a social programme for the residents providing support such as remedial education and activities for children.

Paper machine parts from China Kimmo Ståhlberg, Director, Chemical & Consumables, RawMaterial Sourcing, recently audited the Hebei Asian Sage Industry’s machine workshop in China. Asian Sage supplies doctor blades for the UPM Changshu paper mill. The family business located in Hengshui manufactures products from carbon fibre and has around 50–100 employees. Kimmo: The Changshumill has used products made by Asian Sage for a long time now, and we wanted to see whether we could also use them in Europe and the United States. We audited the production process, our first priority being to ensure quality output. During the same visit we also checked the working hour logs, employee conditions, wages, safety and other responsibility-related issues. The company’s documents were in

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Nasser Kahil

“In recent years, Lyreco has initiated two programmes with the purpose of ensuring that our suppliers comply with local laws, respect human rights and take care of safety at work,” says Nasser Kahil.

UNDER THE SHARP EYE OF LYRECO

Suppliers are selected for auditing by UPM based on risk assessments.

The answers are provided by Tuomas Niemi, Senior Specialist, Systems and Tools, Ecolabels and Reporting, who monitors pulp suppliers in collaboration with the sourcing team. Tuomas: Our goal is to source all wood from certified forests, but in Russia the majority of forests have not been certified. That’s why we have to carry out a risk assessment andmake sure the wood has not been harvested illegally or from a conservation area. The use of child labour is prohibited. We have hundreds of suppliers in Russia. We started carrying out audits in the 1990s, so our wood suppliers are used to them. They know that everything must be in order. We regularly come across deficiencies and deviations, however, and sometimes we have to terminate our contract with the supplier. Nina: Pulp sourcing is also an area where suppliers are being monitored carefully. Tuomas: That’s right. We annually collect detailed information from suppliers related to their environmental and social responsibility and wood sourcing. If necessary, we carry out audits to verify the collected data. Nina: As for fibre sourcing, rawmaterial supply chainmanagement has been revolutionized over the past 20 years. It would be great if the same level of performance was achieved for other rawmaterials as well. That’s our goal.

Audits are based on UPM’s supplier requirements compiled in accordance with international standards (ISO 9001, 14001, OHSAS 18001, SA8000). Audits have improved working conditions and safety at work at a number of sites.

Lyreco, the French worldwide distributor of office products, has been purchasing UPM’s paper grades for more than 15 years. All of Lyreco’s operations are guided by its EcoFuture strategy, which aims to build a sustainable future through economic development, social responsibility and environmental protection. Both Lyreco and UPMexpect all their suppliers to comply with equally strict standards. In January 2016, Nasser Kahil , Lyreco Group Quality, Security & Sustainability Director audited the UPMChangshumill in China, which produces graphic papers and copy

papers for Lyreco. The audit was carried out over two days, providing a comprehensive overview of the mill. “Lyreco is supplied by 63 factories located in developing countries, mainly in China. I used to go to the Southeast Asia for auditing purposes quite often, on average once a month. We inspected such things as working conditions, wages and safety at work. We noticed a number of positives at the Changshu mill. Everything was in order with the buildings, the organisation and the working environment. The premises were clean and bright. A lot of attention had been focused on safety and hygiene. We did not identify any

deficiencies related to wages, contracts or insurance,” says Kahil. “We did detect some issues, particularly in relation to fire safety in employees’ living premises, that will no doubt be addressed in a proper way. In recent years, Lyreco has initiated two programmes with the purpose of ensuring that our suppliers comply with local laws, respect human rights and take care of safety at work. We carried out the first supplier assessment in 2015. In that assessment, UPMwas ranked first among all the paper suppliers.”

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TEXT JAN HÖKERBERG

PHOTOGRAPHY TUOMAS UUSHEIMO

“Innovation and technology in China is moving fast and we want to be a part of it,” says Jussi Pesonen, President and CEO, UPM.

The EUR 277 million investment in PM3 at Changshu, China, means that UPM will focus on delivering value-added and advanced paper products across China and worldwide.

Valued at EUR 277 million, PM3 is the biggest

A fter two years of preparation, engineering work, construction, installations and trial runs, the time finally came for the ribbon-cutting ceremony at the official inauguration of the brand new Paper Machine 3 (PM3) at the Changshumill in China. PM3 is the biggest investment in the UPMGroup over the past two years and is valued at EUR 277 million. Some 450 dignitaries, customers and suppliers were invited to the on-site grand opening event on 12 April. The festivities also included a traditional eye-dotting ceremony, in which UPM’s Chairman Björn Wahlroos and ZhouWeiqiang , Deputy Communist Party Secretary and Executive ViceMayor of Suzhou

A new era of excellence

Innovation at the forefront

City, dotted the eyes and forehead of a golden lion in a blessing that symbolises prosperity, wealth and good fortune. “As China continues to shift from being the factory of the world to an advancedmanufacturer, there’s a need for outstanding and responsible industrial practices and products. For UPM, our new era of excellence in Changshumeans that we will focus on delivering value-added, advanced paper products for new segments in China and worldwide,” said UPM’s President and CEO Jussi Pesonen in his inauguration speech. “At this site, we’re introducing totally new innovative manufacturing technology, not only for China but for the whole paper industry worldwide,” he added.

“In Changshu, we’re building an excellent platform for exploring future opportunities. We

investment made by the UPM Group over the past two years.

At a well-attended press conference with some 50 Chinese journalists, Pesonen pointed out that the world is changing because of the scarcity of resources, climate change, the power shift in the global economy towards Asia and,

at UPMbelieve that we can help to build a new sustainable and

innovative future by continuing to integrate the bio and forest industries,” Pesonen concluded. Other speakers included Zhou Weiqiang, the Changshu Party Secretary and ChangshuMayor Wang Yang , Finland’s Consul- General to Shanghai JanWahlberg , and the Executive Vice President for UPMPaper Asia Bernd Eikens .

not least, the digitalisation of media. “All these new challenges provide us with a lot of opportunities where we can use our knowledge and innovation to find new, more energy efficient, renewable and recycledmaterials and products as well as advanced high- quality biofuels based on wooden raw materials, which we are the first in the world to produce,” said Pesonen.

>>

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World's largest machine for release liners UPM's Chairman Björn Wahlroos and several directors of the board attended the grand opening ceremony in Changshu. “This doesn’t happen so often,” Wahlroos said. “In today’s world, it’s not so common to see investments of this size.” The PM3 start-up comes at a time when China's economy is slowing down. How does that affect UPM's investment? “We produce paper for the whole Asia-Pacific region, and China has the biggest share. One main reason behind this investment is that, long term, we don’t intend to increase the production of the same grades previously produced in Changshu – that is fine paper for printedmatters. The new paper machine is, in the longer term, mainly meant to produce release liners or glassine, and this is the world’s largest machine for that product group. Our competitors within that product group have much smaller machines whichmeans we’re less sensitive to changes in economic growth rates.” There has been a power shift towards Asia in the global economy. How will that affect UPM's future activities? “The power has perhaps not moved towards Asia; it has moved away fromEurope and it’s affected us very much. We’ve been forced to shut downmore than a dozen paper machines

Mr. Zhou Weiqiang, Deputy Party Secretary of Suzhou Municipal Communist Party Committee & Executive Vice Mayer of Suzhou Municipal Government and Mr. Björn Wahlroos Chairman of the Board, UPM.

Some 450 dignitaries, customers and suppliers were invited to the on-site grand opening event on 12 April.

in Europe. This is a trend that unfortunately will continue. The Europeanmarket is no longer growing and European demand for paper, especially newsprint, is falling. This means that we have to adjust to the global economy by decreasing our capacity in Europe, even though we’re quite profitable there today because we’ve maintained our best machines there, but we’ll expand in new areas, such as pulp production in Latin America and paper production in China.” China has become the world’s largest paper producer, but China’s paper industry also suffers from overcapacity ... “China’s paper industry is somewhat special. There are plenty of machines of various sizes and different production costs. We can see that China has a large number of very small, often not very efficient, machines. As in other markets, old, ineffective machines are gradually replaced. “Changshu is one of the world’s largest mills. We now have three big paper machines here: the two earlier ones, which each produce more than 400,000 tonnes, while the new PM3 means that we’ll be able to produce in total 1.4million tonnes annually.”

“Our competitors have much

smaller machines, which means we’re less sensitive to changes in economic growth rates.”

From left to right: Mr. Jussi Pesonen, Mr. Björn Wahlroos, Mr. Zhou Weiqiang, Deputy Party Secretary of Suzhou Municipal Communist Party Committee & Executive Vice Mayer of Suzhou Municipal Government; Minister Bu Zhengfa, Chairman, China Light Industry Council; Wang Yang, Party Secretary, Changshu Communist Party Committee & Mayor of Changshu Municipal Government.

He added that the core of UPM’s future business success in China is closely integrated with China’s 13th Five-Year Plan’s new concepts, which puts innovation at the forefront in a strategy aimed at a balanced, coordinated and sustainable growth pattern. “Innovation and technology in China is moving fast and we want to be a part of it,” said Pesonen. Pesonen said he was especially proud of the project’s safety record, with almost 4.5 million safe working hours and no lost-time accidents. “I’ve never heard of anyone being able to run a project of this size without any accidents, so this must be the best

Björn Wahlroos, Chairman, UPM.

safety performance in the world,” he said. “This project differs from the PM1 project (carried out between 2003 and 2007) since for PM3 two-thirds of our investment was sourced within China,” said Bernd Eikens of UPMPaper Asia. “As a frontrunner in both bio-economy and sustainability, we’re nowwell prepared for long-term growth for our customers and partners here in Asia.” UPMfirst invested in China in 1998

and has since investedmore than US$ 2 billion in the region. Today, the site boasts a fully integrated production and converting capability that incorporates a paper mill, a labelstock factory, an Asia research and development (R&D) centre as well as a supply chain centre for the Asia-Pacific region. With the new investment, UPM is able to produce 1.4 million tonnes of labelling material and fine papers for customers across the Asia- Pacific region and beyond.

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