UPM Forestal Oriental Annual Report 2022

ANNUAL REPORT 2022 FIBRES FOR THE FUTURE

FIBRES FOR THE FUTURE

ANNUAL REPORT 2022

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EDITORIAL Álvaro Fitipaldo Head of Operations at UPM Forestal Oriental

CONTENT

8. INTRODUCTION

9. UPM Biofore 9. UPM Uruguay

10. COMPANY

10. UPM’s history in Uruguay 12. UPM Forestal Oriental 17. Integrated Management System

18. FOREST ACTION PROGRAMME

24. CERTIFICATIONS

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26.ASSETS

44. OUR TEAM

98. RESPONSIBLE ENVIRONMENTAL MANAGEMENT

26. Land use 28. Main species for plantations 30. Environment: biological and geoclimatic data

52. SAFETY AS A CORE VALUE 66. PRODUCTION PROCESS 68. Genetic improvement programme 70. Nurseries 74. Forestry 76. Harvesting 80. Transportation 86. Roads

99. Main objectives and actions taken 100. How we work 102. Environmental protection measures 105. Environmental values 110. Biodiversity conservation 116. Biodiversity monitoring programme 127. Waste management

32. COMMUNITY

RELATIONSHIP S

40. UPM FOUNDATION

128. CONTACT

88. COMPLEMENTARY FORESTRY PRODUCTS

92. FOMENTO PROGRAMME

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UPM ANNUAL REPORT 2022

EDITORIAL Álvaro Fitipaldo Head of Operations at UPM Forestal Oriental

Th e year 2022 was a transition year marked by the implementation of our operational growth plans and the preparation of forestry operations to start the timber supply for the new pulp mill in the department of Durazno. In 2022 we achieved all important objectives thanks to the team and the workflows in place. We completed important projects that were key to UPM’s commitment to research and development towards sustainable forestry. In that sense, during May, we celebrated the inauguration of UPM’s First Forestry Research Centre in the city of Paysandú. The centre is the first of its kind in the world and specialises in Eucalyptus. The project required a USD 5 million investment, and it currently employs around 60 people including agronomists, genetic improvement and healthcare experts, forestry and timber quality researchers, and chemical technologists and operators. The team continues to promote applied research activities in Uruguay,

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and Young-based metallurgi cal company J. Hartwich. It was awarded by the National Academy of Engineering which

something UPM has been doing for over 30 years.

corporate level during 2022 with the “Best Improver 2021” award. This award, which is presented annually by UPM, undoubtedly motivates the entire team to continue along the road travelled, doubling down on its commitment to making operations safer every day. We have big challenges ahead and at UPM Forestal Oriental we have a wonderful team committed to sustainable and responsible forestry development to continue producing for the future.

In transportation our contractors completed the training programmes for new drivers and incorporated new units for the beginning of supply operations. New technologies were firmly incorporated in our operations thanks to tri-train trucks. Closer to the end of the year, the new mill welcomed the first load of timber logs, which was a milestone for both our team and the company. Our team’s work alongside communities was focused on supporting their growth and preparation for new job opportunities surrounding forestry activities, in addition to helping educators gain access to training. Day-to-day work with communities, their leaders, and authorities, is part of our daily work. In occupational health and safety, we continued working hard on promoting a zero accident culture within all our operations by making sure every person and every contractor understand s that they can make a difference. The commitment of the entire UPM Forestal Oriental team to safety was recognised at a

The construction of the nursery in Sarandí del Yí was also completed during the year and has already begun producing its first cuttings. With first in-class technology and an annual yield of 10 million seedlings, the nursery has a team of 120 people working year-round. At the same time, the two other nurseries located in Paysandú continued operating with excellent numbers in the production and dispatching of seedlings to different fields, ensuring plant ing in both autumn and spring. We continued developing a long term forestry base, moving forward with our plantation plans. The forestry process, with a strategy that looks to combine academia and local industry for the continuous improvement of our plantations, received the first “Rosario Pou” Award for the technological development of the planting device known as Sarapico. The achievement was shared with the UTEC ( the Technological University of Uruguay)

celebrates innovation in Uruguay’s forestry chain.

The Timber Supply process continued moving forward with its growth strategy by incorporating new contractors and opening new work fronts to ensure a stable supply to both pulp mills. Progress was made in the construction of interior roads necessary for the operation and supply of both mills under stable normal operations, and new intermediate stockpiles were built on paved roads so that the transportation fleet can operate during rainy days while avoiding the use of neighbourhood roads. During the harvest season, we completed the onboarding of different contractors and work fronts in different locations. By the end of the year, all fronts were reporting excellent production levels and strengthening our inventories to meet the new demand while maintaining high operational and safety standards.

Álvaro Fitipaldo Head of Operations at UPM Forestal Oriental

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UPM ANNUAL REPORT 2022

COMMUNITY RELATIONSHIP S

COMPANY

FOREST ACTION

CERTIFICATIONS

ASSETS

UPM FOUNDATION

OUR TEAM

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SAFETY AS A CORE VALUE

PRODUCTION PROCESS

COMPLEMENTARY FORESTRY PRODUCTS

FOMENTO PROGRAMME

RESPONSIBLE ENVIRONMENTAL MANAGEMENT

CONTACT

UPM URUGUAY

UPM BIOFORE

UPM Paso de los Toros, which has an annual yi e ld of 2.1 million tonnes, began operating in April 2023. The new mill will be one of the most competitive and will help place Uruguay among the main global pulp exporters in the market. Founded in 2006, the UPM Foundation works in coordination with local institutions and community leaders within UPM Forestal Oriental’s sphere of influence to promote entrepreneurship, improve access to education and promote networking. Alongside its contractors, UPM generates close to 7,000 direct jobs. Additionally, the company’s operations in the country will create some 10,000 jobs throughout its value chain.

Business Ambition for 1.5 °C and to scientifically set targets to mitigate climate change. We have around 17, 0 00 employees worldwide and our annual sales reach approximately EUR 11,700 million. Our shares are listed on the Nasdaq Helsinki Ltd. Stock Exchange. UPM Biofore: Beyond Fossils.

UPM’s operations in Uruguay include the pulp mills in Fray Bentos and Paso de los Toros; UPM Forestal Oriental which supplies the mills with timber and has three nurseries located in Paysandú and Durazno; the UPM Foundation and the specialised pulp terminal in the port of Montevideo. Through the Fomento Programme, UPM Forestal Oriental manages around 317,500 hectares of plantable land including its own land and that of third parties. UPM Forestal Oriental’s plantations are certified under the international FSC® (Forest Stewardship Council®) and PEFC sustainable forest management standards. The pulp mill at Fray Bentos began operations in 2007 and continues to be one of the most modern and efficient mills in the world. Its annual production capacity is 1.3 million tonnes of Eucalyptus pulp.

We offer responsible, renewable, and innovative solutions to move towards a future that goes beyond fossil-based products in six business areas: UPM Fib re s, UPM Energy, UPM Raflatac, UPM Specialty Papers, UPM Communication Papers and UPM Plywood. As an industry leader in responsibility, we are committed to the United Nation’s

FSC-C020173

MORE THAN 30 YEARS OF HISTORY IN THE COUNTRY

KYMMENE (UPM since 2009) and Shell create the Compañía Forestal Oriental S.A. Plantations and the genetic improvement programme begins

FOMENTO PROGRAMME The Fomento

Programme and the Botnia Foundation (now the UPM Foundation) are created

UPM UPM purchases Botnia shareholding

1990 2003 2005 2007 2009 2012

P U LP MILL IN FRAY BENTOS The pulp mill in Fray Bentos begins its operations

BOTNIA Botnia purchases

NURSERIES Inauguration of the second nursery in Paysandú and of the Research and Development Centre in the Fray Bentos mill

the Shell shareholding at Compañía Forestal Oriental

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PROTECTED AREAS

CONSTRUCTION Construction begins for UPM Paso de los Toros and for the third UPM nursery in Sarandí del Yí, Durazno

UPM PASO DE LOS TOROS UPM confirms the investment in a new pulp mill the middle of the country

The Esteros and Algarrobales del Río Uruguay area is added to the National System of Protected Areas

2015 2016

2017

2019 INVESTMENT UPM and the Uruguayan Government sign an investment contract establishing local requirements for potential investment in a new pulp mill

2020 2022

DISTINCTION The Food and Agriculture Organisation (FAO) of the United Nations recognises UPM as an exemplary case due to its sustainability

FORESTY RESEARCH CENTRE

UPM inaugurate s a specialised pulp terminal in the port of Montevideo. In addition, in Paysandú, the first Forestry Research

criteria for plantations

Centre specialised in Eucalyptus opened its doors and the nursery in Sarandí del Yí beg i n s operating 11

UPM ANNUAL REPORT 2022

COMPANY

FOREST ACTION

CERTIFICATIONS

ASSETS

COMMUNITY RELATIONSHIP

UPM FOUNDATION

OUR TEAM

UPM FORESTAL ORIENTAL

OUR OBJECTIVES

The main forestry management objective is the sustainable production of timber for the manufacturing of pulp, primarily meeting the demand of the Fray Bentos and Paso de los Toros mills with timber from the company’s own plots and those of third parties.

STRATEGIC OBJECTIVES Creating value for society – whether through sustainable products or responsible operations – is an integral part of UPM’s strategy. The company’s strategy is based on the use of timber in all forms, bringing together the biological and forestry industries to create a future without fossil fuels that has innovation, efficient use of resources and responsibility as central axes. This strategy acknowledges some of the biggest challenges the world is facing today, including resource scarcity, climate change, loss of biodiversity and use of water.

To guide the company’s corporate responsibility policies, UPM defined a set of goals and performance indicators for 2030 across three areas: economic, social, and environmental responsibility. The targets are reviewed annually, and the results are published in UPM’s global Annual Report. The company’s strategy, vision and values guide and motivate us to achieve these challenging goals that, at the same time, contribute to several of the United Nations Sustainable Development Goals (SDGs).

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SAFETY AS A CORE VALUE

PRODUCTION PROCESS

COMPLEMENTARY FORESTRY PRODUCTS

FOMENTO PROGRAMME

RESPONSIBLE ENVIRONMENTAL MANAGEMENT

CONTACT

AREAS OF RESPONSIBILITY:

ECONOMIC RESPONSIBILITY •Create value for our shareholders, ensuring the efficient use of resources •Ensure competitiveness in the supply chain by continuously incorporating new technological improvements •Responsible production and consumption •Good business practices (decision making, management and operations), as well as responsible practices •Promote long-term relationships and open collaboration with suppliers, especially those that are key to our operations •Ensuring compliance with our Code of Conduct throughout our value chain

SOCIAL RESPONSIBILITY •Develop a strong organi s ational culture and a place of work that guarantees a diverse and inclusive environment •Ensure the health and safety of our employees, contractors, and local communities closest to our operations •Ensure continuous learning and development of skills and abilities among our team •Promote responsible leadership based on values and integrity •Ensure the commitment and active involvement of third parties in our operations, as well as in promoting local development •Ensure fair working conditions in compliance with local regulations and applicable international standards

At UPM Forestal Oriental, we frame our strategic objectives across these three areas of responsibility:

ENVIRONMENTAL RESPONSIBILITY •Guarantee the sustainable and responsible use of natural resources •Maintain and enhance biodiversity •Promote circular economy initiatives •Ensure forest ecosystem services and climate-positive forestry •Design solutions that consider the product’s entire life cycle

MORE INFORMATION ON UPM’S PERFORMANCE IN EACH RESPONSIBILITY OBJECTIVE

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UPM ANNUAL REPORT 2022

COMPANY

FOREST ACTION

CERTIFICATIONS

ASSETS

COMMUNITY RELATIONSHIP

UPM FOUNDATION

OUR TEAM

MISSION To e nsure the sustainable supply of timber for pulp th r ough good customer relationships and competitive costs. COMMITMENT

UPM Forestal Oriental respects people and the environment, and aims to build long-term, mutually beneficial relationships with communities. Social development is part of all its actions, aiming to contribute towards the growth and development of the communities within its sphere of influence. VALUES UPM Forestal Oriental’s attitude towards work and people is defined by its values as a company:

•Trust and be trusted •Achieve together •Innovate with courage

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FOMENTO PROGRAMME

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CONTACT

UPM CODE OF CONDUCT

UPM aspires to be a trusted business partner and believes that responsible and ethical practices create long-term value for both the company and other stakeholders. UPM has expressed its commitment to integrity in the Code of Conduct. Our guiding principle is that we do not compromise our standards of integrity under any circumstances, and we expect the same from our third-party vendors and intermediaries. All UPM suppliers and intermediaries must comply with the standards set in the UPM Code for Suppliers and Third-Parties or

demonstrate compliance with similar standards defined in their own codes of conduct or company policies. This code defines a minimum threshold for performance that UPM requires from all its suppliers. There are additional requirements for certain materials and services. The code is based on the United Nations Global Compact Initiative, the United Nations Guiding Principles on Business and Human Rights, and the International Labour Organization Declaration on Fundamental Principles and Rights at Work:

1. Commitment to integrity 2. Respect for people and human rights 3. Concern over the environmental impact and the safety of products 4. Zero tolerance against corruption and bribery 5. Business transparency

6. Compliance with antitrust legislation 7. Protection of information and assets 8. Familiarity with business partners 9. Interaction with stakeholders and society 10. Compliance is everyone’s business

UPM CODE FOR SUPPLIERS AND THIRD PARTIES

UPM CODE OF CONDUCT

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UPM ANNUAL REPORT 2022

COMPANY

FOREST ACTION

CERTIFICATIONS

ASSETS

COMMUNITY RELATIONSHIP

UPM FOUNDATION

OUR TEAM

PROCEDURE FOR REPORTING INAPPROPRIATE BEHAVIOURS

At UPM we are all responsible for supporting the company’s standards for integrity and ethics. If we suspect inappropriate behaviour, we must speak up and report it. We should also listen to other people’s concerns. We want to address issues to rectify them in a timely manner and prevent them from happening again.

which is available online and in more than 40 languages. Reports can also be made anonymously by calling 000 404 4014 from Uruguay and entering the access code 39864 or by email at reportmisconduct@upm.com

All employees must immediately report any suspicion or observation of non-compliance with the law, the UPM Code of Conduct or other corporate policies, by following established internal procedures. Anyone can use UPM’s Misconduct Reporting Channel,

SEE THE PROCEDURE

MISCONDUCT REPORTING CHANNEL

UPM will carefully review all misconduct reports, which will be kept strictly confidential.

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RESPONSIBLE ENVIRONMENTAL MANAGEMENT

CONTACT

UPM Forestal Oriental operates using an Integrated Management System (IMS), which organises internal processes and creates a decision-making model based on records, measurements, and supplier integration. In this way, a continuous improvement system can be implemented. INTEGRATED MANAGEMENT SYSTEM

THE IMS INCLUDES AND CONSOLIDATES IN A SINGLE WORKFLOW ALL PLANS, METHODOLOGY, ACTIONS, AND INSPECTIONS FOR THE FOLLOWING SYSTEMS:

Chain of C ustody (FSC ® and PEFC)

Occupational Health and Safety Management Systems (ISO 45001:2018)

Quality Management Systems (ISO 9001:2015)

Environmental Management Systems (ISO 14001:2015)

Forest Management (FSC ® and PEFC)

This ensures compliance with the highest quality, safety and occupational health and environmental standards.

MANAGEMENT

READ THE INTEGRATED MANAGEMENT COMMITMENT

FORESTRY OPERATIONS ARE GUIDED BY THREE MAIN PROCESSES

TIMBER SUPPLY

TIMBER AVAILABILITY

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UPM ANNUAL REPORT 2022

FOREST ACTION

COMPANY

CERTIFICATIONS

ASSETS

COMMUNITY RELATIONSHIP

UPM FOUNDATION

OUR TEAM

FOREST ACTION PROGRAMME In March of 2022, UPM launched the Forest Action Programme, a comprehensive global forestry responsibility programme. Its main objective is to provide the framework for responsible forestry activities, encourage further undertakings in UPM’s timber sourcing regions around the world and raise knowledge and awareness in relation to the five main areas of the programme: climate, biodiversity, water, soil, and social contribution.

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COMPLEMENTARY FORESTRY PRODUCTS

FOMENTO PROGRAMME

RESPONSIBLE ENVIRONMENTAL MANAGEMENT

CONTACT

CLIMATE This area is divided into an other three priority areas: reducing emissions, strengthening forest carbon storage and sinks, and improving forest adaptation to climate changes. UPM has committed to the UN’s Business Ambition for 1.5°C and Net-Zero emissions by 2040. This means that UPM has committed to reducing CO 2 emissions from its own operations by 65% and those from its supply chain by 30% for 2023. In addition, UPM’s climate-positive forest management boosts the growth of forests and provides sustainable feedstock for bio-based innovations that substitute fossil-based materials and products.

UPM’S COMMITMENT TO CLIMATE

65%

PIONEERING CLIMATE-POSITIVE PRODUCTS

REDUCTION OF OUR OWN CO 2 EMISSIONS

30%

REDUCTION OF OUR SUPPLY CHAIN’S CO 2 EMISSIONS

PRESERVE FORESTS AS CARBON SINKS

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UPM ANNUAL REPORT 2022

FOREST ACTION

COMPANY

CERTIFICATIONS

ASSETS

COMMUNITY RELATIONSHIP

UPM FOUNDATION

OUR TEAM

BIODIVERSITY This area includes the development of protective measures, plantation care and other , different programmes on the subject. UPM set the goal of achieving a net positive impact (NPI) on biodiversity to help in its expansion inside Finnish forests. The Forest Action Programme extends this objective to UPM’s plantations in Uruguay, where biodiversity indicators have been developed by taking into considerations local context and conditions.

To learn more , see page 110 for biodiversity inclusion

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RESPONSIBLE ENVIRONMENTAL MANAGEMENT

CONTACT

OUR COMMITMENT TO WATER

RESPONSIBLE USE OF FERTILIZERS

PROTECT THE QUALITY OF GROUNDWATER

WATER Water management encompasses three priority areas: surface water, groundwater, and aquatic habitats. Water scarcity and access to clean water pose a global challenge and UPM is determined to take action to improve water protection in forestry by minimising the use of fertilizers and/or chemicals, among other actions.

To learn more , see page 106 for hydrological monitoring

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UPM ANNUAL REPORT 2022

FOREST ACTION

COMPANY

CERTIFICATIONS

ASSETS

COMMUNITY RELATIONSHIP

UPM FOUNDATION

OUR TEAM

SOIL The focus on soil issues is divided into priority areas related to productivity, pollution prevention and erosion control. Agriculture, forestry, construction, and infrastructure all compete for land use and, since the land on earth is limited, it is vitally important to keep the soil in good condition. Soil constitutes the base of most ecosystems, and UPM is committed to minimising the potential impact of forestry by preventing and controlling erosion, avoiding degradation, and maintaining forests for future generations.

OUR COMMITMENT TO THE LAND

KEEP SOILS HEALTHY AND PRODUCTIVE

BE PIONEERS IN INNOVATIVE PRACTICES TO PROMOTE GOOD SOIL CONDITIONS AND AVOID IMPACT

To learn more , see page 105 for environmental values potentially affected by forestry

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CONTACT

OUR COMMITMENT TO SOCIAL CONTRIBUTION

ENGAGE WITH LOCAL COMMUNITIES AND CREATE A POSITIVE IMPACT ON SOCIETY

GUARANTEE SAFE WORKING CONDITIONS THROUGHOUT OUR SUPPLY CHAIN

CREATE VALUE THOUGH RESPONSIBLE BUSINESS AND SOURCING PRACTICES

SOCIAL CONTRIBUTION Social contribution includes priority areas related to responsible supply chains and local communities, determining how UPM gets involved with societies in each of the countries where it operates. UPM has a 150-year history in Finland with remarkable social and economic impact, active community work in the US and Uruguay, and is looking to make a tangible positive impact on development together with local communities. Responsible supply chains are an essential part of UPM’s social responsibility, respecting the labour regulations of each country.

To learn more , see page 32 for community relations

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UPM INFORME PÚBLICO 2022 UPM ANNUAL REPORT

CERTIFICATIONS

COMPANY

FOREST ACTION

ASSETS

COMMUNITY RELATIONSHIP

UPM FOUNDATION

OUR TEAM

CERTIFICATIONS

Achieving and maintaining long-term certification involves applying policies, standards and working procedures that enable the protection, monitoring and maintenance of all company resources and operations. Forestal Oriental makes public its commitment to long-term adherence to the FSC ® Principles and Criteria for the Management Unit and related FSC ® Policies and Standards.

UPM Forestal Oriental manages a group certification scheme (UPM Forestal Oriental Certification Group, SGS-FM/COC-002240) that includes small and medium-sized producers from Cerro Largo, Colonia, Durazno, Lavalleja, Maldonado, Paysandú, Río Negro, Rocha, and Treinta y Tres.

2015 Third FSC ® recertification for an additional five-year period, confirming the responsible management of environmental, social, and productive natural resources

The Forest Stewardship Council ® is an international organisation whose aim is to promote responsible, socially beneficial, and economically viable environmental management of the world’s forests by establishing a global set of recognised and respected principles and criteria. Through its working methods and in accordance with FSC ® , UPM Forestal Oriental favours the maintenance of ecosystem and biodiversity functions, contributes to the country’s scientific expertise and provides education on environmental conservation.

2011 Forest Management Certification, UNIT 1152 standard, recognised by PEFC

The Programme for the E ndorsement of Forest Certification (PEFC) is an international non- governmental organisation dedicated to the promotion of sustainable forest management th r ough independent certification of the implementation of stringent environmental, social, and ethical standards. The PEFC is a certification scheme that, rather than having a single standard for sustainable forest management applicable to all countries or regions, recognises and validates the standards developed by each country. To do this, it has a series of requirements regarding how the standard should be developed, the central aspects that must be considered, and the environmental, social, and legal compliance parameters that must be considered.

2009 Integrated certification of all processes: quality (ISO 9001), environmental (ISO 14001),

and occupational health and safety (ISO 45,000)

UPM FORESTAL ORIENTAL CERTIFICATION GROUP: FSC - C022008

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N

Artigas

W

E

MAP OF CERTIFIED AREAS

S

Salto

Rivera

359,703 ha TOTAL AREA WITH FSC ® CERTIFICATION (SGS-FM/ COC-000606): 359,703 ha TOTAL AREA WITH PEFC CERTIFICATION (UY11/20080091): TOTAL AREA WITH FSC ® CERTIFICATION FROM THE UPM FORESTAL ORIENTAL GROUP CERTIFICATION SCHEME (SGS-FM/COC-002240):

Tacuarembó

Paysandú

Cerro Largo

Río Negro

Durazno

Treinta y Tres

Soriano

Flores

9,531 ha

Florida

FSC-C020173

Lavalleja

Rocha

Colonia

San José

Canelones

Maldonado

* Updated to January 2023

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UPM ANNUAL REPORT 2022

Montevideo

ASSETS

COMPANY

FOREST ACTION

CERTIFICATIONS

COMMUNITY RELATIONSHIP

UPM FOUNDATION

OUR TEAM

ASSETS

Forestry assets are the basis for the sustainability and competitiveness of the activities on which the supply strategy for the Fray Bentos and Paso de los Toros pulp mills is planned.

LAND USE Prior to each intervention, company specialists study the biophysical environment, as well as social and cultural resources in the immediate surroundings. This allows them to assess the effect that the intervention may have and plan activities that respect and preserve environmental conditions. The primary objective of planning is to identify the most appropriate use of the land, and to preserve biodiversity, soil, and water quality, which are vital for the sustainability of long- term forestry activities. At UPM, we do not turn native forests into plantations, nor do we use them for other non-forestry related activities.

OTHER AREAS LEFT UNPLANTE D These include infrastructure areas (such as roads and service areas), firebreaks and other areas surrounding plantations that have alternative uses.

AREAS INTENDED FOR FORESTRY PRODUCTION Suitable for the growth of Eucalyptus plantations in line with climate land management criteria as determined by regional and national legal regulations. AREAS INTENDED FOR THE CONSERVATION OF SPECIES AND ENVIRONMENTS Areas that have natural ecosystems that are relevant to the conservation of environments or species (some examples: native forests, natural fields, sandbanks, grasslands) and other areas of importance for conservation work (riparian areas, buffer zones, etc.). This also includes sites of archaeological or historical cultural value and visual basins, among others.

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AREA DEPENDING ON OWNERSHIP (Thousands of ha) TYPE OF TOTAL

PLANTABLE SURFACE

OWNERSHIP

SURFACE

Owned

305

182

Fomento Programme (leases)

167 472

136 318

Total

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TOTAL SURFACE DISTRIBUTION DEPENDING ON USE (Thousands of ha)

21

Plantable surface

113

318

Natural fields and other areas

Native forests and other natural ecosystems

Infrastructure

OUT OF THE LANDS OWNED BY UPM FORESTAL ORIENTAL

AREAS INTENDED FOR THE CONSERVATION OF SPECIES, CATTLE RAISING AND INFRASTRUCTURE

~40%

~60%

AREAS INTENDED FOR PRODUCTION

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UPM ANNUAL REPORT 2022

ASSETS

COMPANY

FOREST ACTION

CERTIFICATIONS

COMMUNITY RELATIONSHIP

UPM FOUNDATION

OUR TEAM

MAIN SPECIES FOR PLANTATION

The species Eucalyptus grandis and E. dunnii have shown better and greater adaptability to local conditions (type of soil, risk of frost and drought, etc). Good adaptability to edaphological and climatic conditions of the area allow the favourable growth of plantations and their good sanitary condition. There are also areas that are planted with other species that, while negligible due to the small area they occupy, are also included in the company’s operational plans. The selection of tolerant/ resistant genotypes is one of the priorities of the Genetic Improvement Programme. Materials with greater sensitivity to pests and diseases are discarded and only those with the most resistance are planted commercially. These materials, selected during their commercial phase, are monitored throughout their growth and development from the production of the plants in the nursery to their harvest. An integrated management of pests and forestry systems 28

is implemented with the main objective of minimising the use of chemical pesticides, thus ensuring optimisation in line with the main objectives of the management plan. UPM’s sanitary monitoring programme has the following main objectives: •Assess their impact and evolution of those already present in the country and the region •Test alternative control methods and evaluate their effectiveness in coordination with other private and public entities, if applicable. There is continuous monitoring of the effects caused by climatic factors (frost, wind, fire, drought, etc.). With the information recorded, we generate reports that focus on the main sanitary, climatic, or alternative problems affecting plantations, which is an important source of information for decision making as it pertains to the •Detect and report new pests and diseases

management and handling of affected areas. During 2022 the results obtained were within the expected range. The biggest impact was recorded during the planting phase, which resulted in a 19.6% rate of total replacements because of pests and/or diseases.

PLANTED AREA DEPENDING ON SPECIES (Thousands of ha)

EUCALYPTUS AND PINES

OTHERS

TOTAL

Owned

175 130

1

176 130

Fomento Programme

-

(leases) Total

305

1

306

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N

Total plantable area (includes owned and leased)

Artigas

W

E

Salto

Rivera

S

Paysandú

Tacuarembó

Cerro Largo

Río Negro

Treinta y Tres

Durazno

Soriano

Flores

Florida

Lavalleja

Rocha

Colonia

San José

Canelones

Maldonado

Montevideo

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UPM ANNUAL REPORT 2022

ASSETS

COMPANY

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UPM FOUNDATION

OUR TEAM

ENVIRONMENT

BIOLOGICAL DATA

DISTRIBUTION OF THE KINDS OF ENVIRONMENTS IN UN PLANTED AREAS:

Environments Natural environments in a region or area are the result of the interaction between various factors, such as climate, geology, soil, flora, and vegetation, and vary based on these factors. For classification purposes, UPM Forestal Oriental uses a methodology based on satellite imaging, information regarding soil class and digital terrain models. Environments are classified according to their degree of vulnerability, facilitating management and conservation. The internal and external connectivity between environments is also analysed more naturally, as are the location and size of the company’s reserve areas.

10.2 %

69.4 %

6.1 %

Natural grassland

14.3 %

Native Forests

Stony areas

Infrastructure

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GEOCLIMATIC DATA

RAINFALL Annual average: 1,200 to 1,500 mm depending on the area

TEMPERATURE Daily average: 12°C to 25°C

•9.1 (Argisols and Brunosols) •9.3 (Argisols and Planosoles) •09.3 (Argisols and Brunosols) •7.32 (Luvisols and Acrisols) •2.12 (Brunosols and Argisols) •8.8 (Luvisols and Acrisols) National Commission for the Agronomic Study of the Earth (CONEAT in Spanish)): Geology Plantations on the West Coast are primarily located on the following geological formations: Guichón, Mercedes, Asencio, Salto and Fray Bentos. In turn, those located on central and northern areas of the country do so on Tacuarembó, Cuchilla del Ombú, San Gregorio, Melo, Yaguarí, and Tres Islas. Soil The plantations fall mainly into the following groups and soil classes (according to classification by the

Hydrology According to the current predominant classification (Decree 253/79) the company’s forest management unit watercourses are Class 3: “water intended for the preservation of fish in general and other water flora and fauna, or the irrigation of crops whose product is not consumed in natural form or, in cases where it is consumed in natural form, the irrigation system does not water the product.”

Within land owned by UPM Forestal Oriental there are:

OF WATERWAYS 1,278 km

6

119

163

RIVERS

CREEKS

STREAMS

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UPM ANNUAL REPORT 2022

COMMUNITY RELATIONSHIP

COMPANY

FOREST ACTION

CERTIFICATIONS

ASSETS

UPM FOUNDATION

OUR TEAM

COMMUNITY RELATIONSHIP

UPM Forestal Oriental operates in five regions spread across the departments of Cerro Largo, Colonia, Durazno, Flores, Florida, Lavalleja, Paysandú, Río Negro, Rivera, Rocha, Salto, Soriano, Tacuarembó, and Treinta y Tres. Across every region we identify and work together with communities within our sphere of influence in each region. In other words, we work with the communities that are connected to the company’s activities in some operational or environmental way. We annually review the planning of operations (planting, harvesting, loading and transportation, among others) and identify the affected areas and activities taking place accordingly. We then work to involve the communities to mitigate, reduce and accommodate such activities. The potential impact on communities includes three categories: transportation of timber , use of chemicals , and changes in the landscape, among others. 32

To reduce points of impact, which are identified and classified in a matrix based on area and activity, we put into action different initiatives that are evaluated on a case-by-case basis and are in direct contact with all parties involved. For example, in order to manage the transportation of timber that goes through though certain communities, we get in touch through area representatives and/or put out radio announcements on local media stations with information related to routes and dates, in addition to the measures included in our extensive Road Safety Programme, which is detailed in the Safety chapter o n page 84.

LEARN ABOUT OUR 100+ AREAS OF INFLUENCE:

SAFETY AS A CORE VALUE

PRODUCTION PROCESS

COMPLEMENTARY FORESTRY PRODUCTS

FOMENTO PROGRAMME

RESPONSIBLE ENVIRONMENTAL MANAGEMENT

CONTACT

Communities of influence are classified according to:

Size

To date, the communities we work with are distributed as follows: 82% in category 4 10% in category 2 6% in category 3 2% in category 1. In addition, Fray Bentos and Paso de los Toros are considered communities of influence that have more than 10,000 inhabitants.

1

2

3

4

<500

INHABITANTS 500 to 1,000

INHABITANTS 1,000 to 5,000

5,000 to 10,000

INHABITANTS

INHABITANTS

Forestry activity nearby This characterisation is updated annually according to forestry activities

Permanent: neighbouring communities close to forestry operations o n lands under company management and/or with frequent operational activities

Specific: communities with operations nearby only for a short period of time

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UPM ANNUAL REPORT 2022

COMMUNITY RELATIONSHIP

COMPANY

FOREST ACTION

CERTIFICATIONS

ASSETS

UPM FOUNDATION

OUR TEAM

Permanent involvement with communities, as well as social monitoring, are essential sources of input for the preparation of the company’s annual work plan and strategic definitions. For this we undertake different activities, including:

OPEN DAYS

OPERATIONAL VISITS Tour of the company’s facilities and operations

Meeting opportunities with local representatives from new communities or places where the company’s operations are not yet known

COMMUNITY INVOLVEMENT

MEETINGS WITH LEADERS

SOCIAL MONITORING

Periodic study to monitor our impact and how company operations are perceived by neighbouring communities

Working groups involving different individuals where they can exchange concerns, needs or development opportunities

INFORMATIVE TECHNICAL TALKS

VISITS TO NEIGHBOURS

Instances to get involved with communities to inform them about the company’s operational activities in the area and make a note of concerns.

The content varies depending on the specific concerns of the communities

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SAFETY AS A CORE VALUE

PRODUCTION PROCESS

COMPLEMENTARY FORESTRY PRODUCTS

FOMENTO PROGRAMME

RESPONSIBLE ENVIRONMENTAL MANAGEMENT

CONTACT

Continuous communication with communities Contact and active involvement between the UPM Forestal Oriental team and local communities encourages interaction and gives us the opportunity to receive complaints, comments or suggestions that are taken into consideration by the company as a valuable input for the continuous improvement of the entire forestry chain. According to the existing standards, all complaints or suggestions concerning UPM's operations submitted by various stakeholders have to be registered as part of the management monitoring. In 2022 there were 38 complaints and suggestions registered .

T hese were sorted into different categories: state of fences, roads, transportation activities, animal handling, waste management, and fires, among others. Each of these concerns were processed individually and followed up by involving the different participants to be able to reach an agreed solution. All reported issues have already been resolved. In addition to receiving complaints face-to-face throughout our tours and visits, people can leave their comments in our offices or various communication channels.

DISPUTE RESOLUTION PROCEDURE

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UPM ANNUAL REPORT 2022

COMMUNITY RELATIONSHIP

COMPANY

FOREST ACTION

CERTIFICATIONS

ASSETS

UPM FOUNDATION

OUR TEAM

ACTIVITIES CARRIED OUT

IN 2022: 355

Artigas

138

NORTH-CENTRAL REGION Cerro Largo, Durazno, Florida and Tacuarembó

Salto

Rivera

Paysandú

Tacuarembó

Cerro Largo

217

COASTAL REGION Colonia, Paysandú, Río Negro and Soriano

Río Negro

Treinta y Tres

Durazno

Soriano

Flores

Florida

Lavalleja

Rocha

Colonia

San José

Canelones

Maldonado

Montevideo

36

SAFETY AS A CORE VALUE

PRODUCTION PROCESS

COMPLEMENTARY FORESTRY PRODUCTS

FOMENTO PROGRAMME

RESPONSIBLE ENVIRONMENTAL MANAGEMENT

CONTACT

ACTIVITIES WITH LOCAL COMMUNITIES

21

355

65

Within the UPM Foundation framework

141

Community activities

Activities with local representatives

As part of the fire management framework

128

37

UPM ANNUAL REPORT 2022

A CLOSE RELATIONSHIP WITH SARANDÍ DEL YÍ AND ITS COMMUNITY

The start of operations for our new nursery in Sarandí del Yí was an important milestone for the community. By working together with local leaders and institutions, we promoted different activities and training to prepare the community for the new job opportunities surrounding the new nursery. For over 15 years, UPM Forestal Oriental has been present in Sarandí del Yí with forestry operations in the area and has spent the last six working on community involvement through a group of leaders who meet periodically. Their goal is to look for proposals that contribute to the development of the community, and help keep them informed of the company’s

and obligations, and employment sustainability. Once the onboarding process began for the first nursery workers, we promoted a project in coordination with UN Woman and The National Institute for Women’s Affairs (INMUJERES) aimed at 60 operators, supervisors, foremen and forewom e n. The aim of this project was to support workers in the first steps in their working experience looking to have a stable team. This project included seven face to-face workshops that worked on assertive communication, finding balance between personal and professional life, and gen d e r issues among others.

operations. It also creates another opportunity to receive suggestions and concerns. This group of leaders is made up of people from different sectors including production, education, health and society. This space helped raise the concern from wom e n in the area interested on working on their skills in preparation for the arrival of the new nursery. For this we promoted a course called “Forging encounters: women in action” which included eight different workshops with more than 80 women. The workshops covered topics such as commitment, self-awareness, patriarchal models and gender roles, assertive communication, family dynamics, worker’s rights

38

UPM FOUNDATION

COMPANY

FOREST ACTION

CERTIFICATIONS

ASSETS

COMMUNITY RELATIONSHIP

OUR TEAM

UPM FOUNDATION GROWING TOGETHER IN THE INTERIOR The UPM Foundation was born in Fray Bentos more than 15 years ago with the aim of supporting community development. Together with the growth of UPM’s operations, the F oundation expanded and refined its vision of being a strong contributor in the long-term strengthening of communities.

more than 5,000 people from some 100 communities. A board of directors made up of five members meets every two months to evaluate and approve the new proposals, manage the Foundation’s budget, and monitor the progress of current projects.

As part of the Foundation’s work, we support projects and promote scholarships for training programmes throughout the interior of the country. All projects are led by leading organizations in their fields. In the last three years the Foundation has implemented 65 projects impacting

AN OPEN CALL FOR PROPOSALS We have an open call throughout the year to receive proposals in education and community development. The people or institutions interested can present their projects on our website: www.upm.uy/fundacion

40

SAFETY AS A CORE VALUE

PRODUCTION PROCESS

COMPLEMENTARY FORESTRY PRODUCTS

FOMENTO PROGRAMME

RESPONSIBLE ENVIRONMENTAL MANAGEMENT

CONTACT

18

PROJECTS COMPLETED

2022 IMPACT ON NEIGHBOURING COMMUNITIES CLOSE TO FORESTRY OPERATIONS

NORTH-CENTRAL REGION Cerro Largo, Durazno, Florida and Tacuarembó

Artigas

18 EDUCATIONAL PROJECTS 6 COMMUNITY DEVELOPMENT PROJECTS 24 PROJECTS COMPLETED IN COORDINATION WITH 21 PARTNER ORGANIZATIONS:

Salto

Rivera

Paysandú

Tacuarembó

Cerro Largo

Río Negro

Treinta y Tres

Durazno

COASTAL REGION Colonia, Paysandú, Río Negro and Soriano 12 PROJECTS

* Out of the 24 projects completed in 2022, some were car r ied out in both regions: Coastal and North-Central. .

COMPLETED

Soriano

Flores

Florida

Lavalleja

Rocha

Colonia

San José

Canelones

Maldonado

Montevideo

INHABITANTS +2,000

+100

OUR PROJECTS HAVE IMPACTED

LOCATIONS IN THE INTERIOR

41

UPM ANNUAL REPORT 2022

EDUCATION AND COMMUNITY DEVELOPMENT: TWO PILLARS IN THE STRENGTHENING OF COMMUNITIES

organi s ation and, in agreement with the local municipality, a room was equipped with a laser cutter, a screen-printing machine, a cutting plotter and a sublimation plate, allowing artisans to produce different components and improve their competitiveness, efficiency and costs. Workshops and training for the use of new machines took place throughout the year and by the end those involved highlighted the major contribution the project had in improving their work. “Thanks to the lab we have constant orders every day”, “this is progress for all of San Gregorio” and “this technology allows us to produce on a larger scale and be able to market our products better”, were some of the views from participants.

In 2022 we asked the United Nations Educational, Scientific and Cultural Organization (UNESCO) to help us evaluate the impact of the educational projects promoted by the UPM Foundation, as well as to arrange an offer for future projects within our communities of influence. This report highlights the UPM Foundation for offering quality training in the interior of Uruguay in a manner that is accessible to people in all levels of education. At the same time, it also notes a big need for teachers in the interior of the country to be able to access this type of educational project and training. All training programmes were very well received by participants and have had a significant impact on their work. In addition, the report also

emphasised the quality of the methodology developed and the high quality training of teachers, as well as the large percentage of graduates. Undoubtedly, this evaluation encourages us to continue working in this area, taking the suggested improvements as a guide. In addition to our educational projects, we promote other community development endeavours. During 2022 we developed a project called “LabHum” in San Gregorio de Polanco, Tacuarembó, with the aim of promoting the entrepreneurial spirit of some 30 local artisans. We provided training in coordination with the UY Robot

43

UPM ANNUAL REPORT 2022

OUR TEAM

COMPANY

FOREST ACTION

CERTIFICATIONS

ASSETS

COMMUNITY RELATIONSHIP

UPM FOUNDATION

OUR TEAM

The development of people and skills form s the basis for achieving UPM’s objectives.

To this end we have set up certain tools that allow us to identify needs in human resources development, taking into consideration economic, operational and social sustainability. These tools are aimed at our own employees and contractors, as well as residents in the communities surrounding our operations. We trust our people and are proud to have a passionate team filled with energy and positive spirit. These attributes are present in every

goal we set for ourselves and in the care expressed when doing what we do. We are the place to be for those who value lifelong learning and want to work in a growing industry. We believe that innovation requires constantly searching for different perspectives, having an open mind, and learning from others. For this reason we constantly provide opportunities for the personal and professional development of our team.

IN 2022 OUR TEAM WAS COMPRISED OF

419 people

307 MEN

112 WOMEN

44