UPM annual report 2014

UPM’S MATERIALITY ANALYSIS 2014

Biofore strategy Economic Environmental Social

PROMOTING ADVANCED BIOFUELS The European Union is aiming to increase the use of renewable fuels in transport by the year 2020. In 2014, the EU decision-making bodies discussed the draft directive on Indirect Land Use Change (ILUC) aiming to minimise the changes in land use by favouring certain renewable raw materials, such as wood-based residues. Legislation regarding renewable transport fuels will have an impact on the development of the UPM Biofuels business. UPM is developing high quality, residue-based renewable fuels that will not cause changes in land use or compete with food production. UPM has established the Leaders of Sustainable Biofuels (LSB) coalition together with other European companies that produce and develop advanced biofuels. The purpose of the coalition is to communicate with other organisations and stakeholders about the development and opportunities of advanced biofuels and technologies, and to define the preconditions for advancing investments in the field. This is achieved, for example, by arranging joint meetings and open expert seminars. Expert assessments are also used to increase awareness of the challenges and possibilities relating to biofuels.

Increasing Importance to stakeholders High Increasing Significance of current or potential impacts on UPM High Market presence Supplier reliability Information availability and materiality Transparency Value offering and collab- oration with customers Taxation Transport Land management Compliance & certification Non-discrimination Rewarding Focus on health Biofore brand Stakeholder expectations & investor attractiveness Public policy & regulation Risk management Anti-corruption Cost competition Risk management Forest management & origin of wood Biodiversity Responsible restructuring People development & talent attraction Local commitment Value creation (direct/indirect) Business portfolio development & new Biofore products Biofore opportunities in the changing business environment *) Profitability Good governance & business ethics Growth Environmental performance: raw materials, water, climate, waste Product stewardship: ecodesign, qualification and product safety Responsible sourcing Employee engagement OHS Responsible sourcing

STAKEHOLDERS 31–44

On the environmental front, the most important influencing activity was the updating of the EU Best Available Techniques (BAT BREF) reference document. The document sets the basis for European pulp and paper mill permits.

*) Change in consumer behaviour, climate change, demographic change, digitalisation, material scarcity, political and financial instability

Co-operation on environment provides prerequisites for trust

Globally, UPM continued its active co-opera- tion with local permit authorities. For environ- mental and responsibility issues, UPM’s stake- holder engagement activity aimed to maintain consistent quality in operations and products, along with securing the prerequisites for future activities. Co-operation also continued on a voluntary basis with a wide range of stakeholders relating to ecolabels, standards and standardisation frameworks, as well as nature conservation. Regarding environmental issues, co-opera- tion continued with WWF, IUCN and the Uruguayan Vida Silvestre, for example. As to ecolabels and standardisation issues, UPM collaborated with FSC, PEFC, the German Blue Angel, the Swan label and the EU Ecola- bel. Global sustainable development projects have been developed alongside WBCSD (World Business Council for Sustainable Development) and “The Forest Dialogue” organisation. Biofore strategy communicated through versatile channels During 2014, UPM’s Biofore strategy and its progress were regularly communicated to key stakeholder groups. The constant transforma- tion of the company, growth projects and innovations continued to generate significant interest about UPM. According to a brand tracking study carried out at the end of 2014, UPM’s stakeholders give the company very positive scores in future orientation, sustainability and innovation. In the growing Asian markets, these features were estimated to have a specific weight in the future. Since UPM opened its new head office in Helsinki, more than 22,000 visitors have visited the Biofore House and heard about UPM’s transformation. In Lappeenranta, Finland,

Read more: www.sustainablebiofuelsleaders.com

UPM’s Biofore strategy forms the foundation of UPM’s stakeholder dialogue. The key focus areas and activities vary locally and according to stakeholder needs. Find out more about our activities in 2014 in this picture. THE FOCUS OF UPM’S STAKEHOLDER ENGAGEMENT WORK

1 Solid and future-oriented partner and transparent supplier requirements 2 Supplier collaboration projects and the improvement of contractor safety 3 Cost efficiency, value creation and compliance with Supplier code

1 Reliable, safe neighbour, employment opportunities, dialogue on local topics and responsible restructuring 2 Community forums, sponsorship and local community projects, responsible restructuring 3 Acceptance and good collaboration

UPM’s support for its Uruguayan UPM Foundation continued with EUR 530,000. The foundation supports and encourages training, entrepreneurship, employment and healthy living and entertainment in local communities in the Uruguayan countryside. UPM does not financially support political parties or individual candidates. Approximately EUR 225,000 was donated to charities or other non-profit purposes, targeting the health and wellbeing of children and the young, as well as universities. Continuous development with corrective actions UPM does not tolerate any violations of the UPM Code of Conduct or the rules and guide- lines that accompany it. In 2014, a total of 16 concerns were report- ed through the UPM Report Misconduct channel. UPM took corrective actions consid- ered appropriate to the circumstances. The complaints related mainly to suspected cases of fraud and suspected failures to adhere to the company’s HR Rules or compliance procedures. Some of the cases involved miscon- duct and led to disciplinary action including terminations of employment.

UPM has opened a dedicated visitor centre for its renewable diesel biorefinery. UPM’s Biofore Concept Car, launched at the Geneva Motor Show, showcased the oppor- tunities for renewable materials to an extensive international audience. The car was manufac- tured in co-operation with students from the Metropolia School of Applied Sciences. The company also engaged in several joint initiatives with different parties: for example, together with VR, the Finnish state railways, rail yard safety risks on wood transportation were assessed. UPM also initiated co-operation with WWF Finland to promote the sustainabil- ity of economic forests and the sustainability of wood-based liquid biofuels. Sponsorships revisited UPM focuses on sponsorship initiatives that are future oriented and appropriate for an inno- vative bio-forest industry company with sus- tainable values. To better align with UPM’s strategy, the company’s guidelines for sponsor- ships and donations were revised in late 2013. New targets and focus areas for 2014-2016 were defined. The focus of the local sponsorship was to support the vitality of UPM production loca- tions. UPM spent approximately EUR 490,000 on local sponsorships and donations. For commercial sponsorships, UPM spent approxi- mately EUR 750,000.

Suppliers

Communities

1 Proactive and responsive communications 2 Clear and reliable disclosure, active interaction with media 3 Fact-based media coverage

1 Safe and motivating working environment 2 Step Change in Safety initiative 3 Employee engagement

Media

Employees

1 Stakeholders’ main concerns and expectations 2 Key engagement activities 3 UPM’s target

1 Total shareholder value 2 Clear and reliable disclosure and communications, investor meetings and events 3 Attractive investment

Investors

Government and regulators

1 Compliance with laws, tax transparency 2 Co-operation with trade

associations, discussions with decision-makers of different levels, co-operation with tax authorities

Customers

1 Reliable partner, service consistency, product safety and quality, product profiles and ecolabels 2 Collaboration, customer satisfaction surveys, co-operation on environmental credentials of products 3 Business success and Biofore opportunities

NGOs

3 Ensuring competitiveness and a fair operating environment as well as consistent energy and climate policy regulation

1 High level of environmental and social responsibility performance 2 Dialogue, transparency and co-operation with relevant NGO’s 3 Collaboration, common projects

Read more on malodorous gas emissions at UPM Kaukas (p. 52), co-operation with Vida Silvestre (p. 53) and UPM Biofore Concept Car (p. 32).

CONTENTS

33

34

UPM Annual Report 2014

UPM Annual Report 2014