Strategy Sustainability Welcome to read about our contribution to circular bioeconomy. Stora Enso’s Annual Report 2020 includes our strategic, sustainability and financial performance, governance, and remuneration. Financials Governance
Stora Enso Remuneration Annual Report 2020 Contents Strategy Annual Report 2020 Strategy Strategy Strategy Strategy
Annual Report 2020 Annual Report 2020 Annual Report 2020 Annual Report 2020 Strategy Sustainability Financials Governance Stora Enso supports Part of Stora Enso’s Annual Report 2020 Our sustainability work Part of Stora Enso’s Annual Report 2020 Financials includes the report Part of Stora Enso’s Annual Report 2020 Stora Enso complies with Part of Stora Enso’s Annual Report 2020
customers to meet coversSustainability social, environmental, of the BoardSustainability of Directors and currentSustainability governance rules Sustainability consumers’ demand for and economic responsibility the financial statements, as and regulations, and applies sustainable products based throughout our value chain, well as Stora Enso in capital best practices in the field on renewable materials. Our with respect for human markets and our tax footprint. of governance. solutions offer low-carbon rights integrated into alternatives to products everything we do. based on finite resources. Financials Financials Financials Financials Governance Governance Governance Governance Sustainability Remuneration Remuneration Remuneration Remuneration
Strategy Sustainability Financials Governance This is Stora Enso...... 2 Our approach...... 5 Stora Enso in 2020...... 2 Corporate Governance Strategy, governance, in Stora Enso 2020...... 2 Stora Enso in 2020...... 4 Report of and stakeholders...... 6 Shareholders’ meetings...... 2 the Board of Directors...... 3 CEO’s overview...... 9 Our targets...... 9 Board of Directors (Board)...... 3 Consolidated financial How we create value...... 12 Contributing to the SDGs...... 10 Board committees...... 7 statements...... 21 Human rights...... 12 Management of the Company...... 8 Transformation...... 13 Notes to the consolidated Internal control and Financials Social agenda...... 17 Strategy...... 14 financial statements...... 26 risk management related to Employees and wider workforce...18 Innovation...... 16 financial reporting...... 10 Parent company Circular bioeconomy...... 18 Safety...... 19 Stora Enso Oyj Members of the Board Forest...... 20 Community...... 23 financial statements...... 74 of Directors...... 12 Leadership...... 23 Business ethics...... 28 Notes to the parent Members of the Group Environmental agenda...... 32 Divisions...... 24 company Stora Enso Oyj Leadership Team...... 14 Materials, water, and energy...... 33 Packaging Materials...... 25 financialstatements...... 76 Appendix 1...... 17 Packaging Solutions...... 26 Carbon dioxide...... 43 Signatures for Biomaterials...... 27 Forests, plantations, and land use...49
the financial statements...... 85 Governance Wood Products...... 28 Economic agenda...... 55 Auditor’s report...... 86 Forest...... 29 Customers...... 56 Remuneration Paper...... 30 Suppliers...... 60 Stora Enso in capital markets....89 Introduction...... 1 Investors...... 64 Our renewable solutions...... 31 Stora Enso as a taxpayer...... 95 Letter from the Remuneration External recognition...... 66 Committee Chair...... 1 Group Leadership Team...... 40 Capacities by mill in 2021...... 97 Decision-making procedure...... 2 Data and assurance...... 67 Remuneration development...... 2 Reporting scope...... 68 Information for shareholders....100 Remuneration policy summary...... 3 Data by production unit...... 69 Auditor’s assurance report...... 72 Remuneration Report 2020...... 4 Remuneration
100% plastic free is not The GRI index is available at always feasible. The majority storaenso.com/gri2020 of fossil-based materials in packaging could be reduced The SASB index is available at with existing technologies. storaenso.com/sasb2020 Strategy
Annual Report 2020 Strategy Stora Enso supports Part of Stora Enso’s Annual Report 2020
customers to meet Sustainability consumers’ demand for sustainable products based on renewable materials. Our solutions offer low-carbon alternatives to products based on finite resources. Financials Governance Remuneration Contents Strategy Annual Report 2020 Our renewable products provide a sustainable Sustainability alternative to fossil- based materials.
This is Stora Enso...... 2
Stora Enso in 2020...... 4 Financials
CEO’s overview...... 9
How we create value...... 12
Transformation...... 13 Strategy...... 14 Governance Innovation...... 16 Circular bioeconomy...... 18 Forest...... 20 Leadership...... 23
Divisions...... 24 Packaging Materials...... 25 Packaging Solutions...... 26 Biomaterials...... 27 Wood Products...... 28 Remuneration Forest...... 29 Paper...... 30 Stora Enso’s formed fiber products help customers to replace plastics. The salad bowl made of PureFiber™ by Stora Enso is plastic-free, recyclable and made of Our renewable solutions...... 31 renewable materials. The PureFiber™ product line enables approximately 75% lower CO2 footprint compared to alternative packaging materials, such as plastic or bagasse. Group Leadership Team...... 40 Strategy Annual Report 2020 This is Stora Enso Strategy
Part of the bioeconomy, Stora Enso is a leading Sustainability This is Stora Enso global provider of renewable solutions in packaging, biomaterials, wooden construction Stora Enso in 2020 and paper. We employ some 23 000 people and CEO’s overview have sales in more than 50 countries. Our shares are listed on the Helsinki (STEAV, STERV) and How we create value Stockholm (STE A, STE R) stock exchanges. Transformation Our fiber-based materials are renewable, Strategy recyclable, and fossil free. Our solutions offer Financials Innovation low-carbon alternatives to products based on finite Circular bioeconomy resources. We believe that everything that is made Forest from fossil-based materials today can be made Leadership from a tree tomorrow. Divisions
Our renewable solutions
Group Leadership Team Governance Remuneration
We are the renewable Our raw material is Our products Our renewable products renewable, recyclable, replace fossil- contribute to a circular materials company and fossil-free. based materials. bioeconomy. 3 Stora Enso 2020: Strategy Strategy Sales Sales by destination Annual Report 2020 Serving markets EUR 8.6 billion around the world Countries Employees Europe 72%
Stora Enso operates worldwide and focuses on utilising its Enso Stora is – This expertise in renewable materials and creating value in packaging, Strategy biomaterials, wooden construction, and paper. We combine 50 23 000 global resources with local presence, service and sustainability. Sustainability This is Stora Enso Asia Pacific 18% North America 4% Stora Enso in 2020 South America 2% Other 5% CEO’s overview Production unit Sales office How we create value Design Studio Sales by origin Transformation Innovation Centre Value in % Strategy Other 5% 5% Forests and plantations South America 2% Financials 2% Innovation North America 4% 4% Circular bioeconomy Asia Pacific 18% 18% Europe 72% 72% Forest Europe 89% Leadership
Divisions
Our renewable solutions Brazil and Uruguay 6% Group Leadership Team China 5% Governance
Personnel by country1 Purchases by region Value in % Other countries 1% Europe 89% 89% Brazil and Uruguay 6% 6% Brazil and Uruguay 3% China 5% 5% Other Europe 17% Finland 26%
Europe 88% Russia 5% Germany 4% Remuneration Poland 8% Sweden 21% China 15% 1 Including 50% of the employees at Veracel in Brazil Asia Pacific 7% and Montes del Plata in Uruguay. South America 5%
Legend Value in % Exact value Finland 26% 26% 10 26% Finland Sweden 21% 21% 10 15% China China 15% 15% 10 21% Sweden Value in % 8% 10 8% Poland 8% Poland Europe 88% 88% 4% 10 4% Germany 4% Germany Asia Pacific 7% 7% Russia 5% 5% 10 5% Russia South America 5% 5% 2 Other Europe 17% 17% 10 17% Other Europe Brazil and Uruguay 3% 10 3% Brazil and 3% Uruguay Other countries 1% 1% 10 1% Other countries Total 100% 90
3
1 4 Strategy Annual Report 2020 Stora Enso in 2020 Strategy Sustainability
This is Stora Enso
Stora Enso in 2020 Meeting consumer
CEO’s overview demand for eco-friendly How we create value and circular solutions. Transformation
Strategy Operational ROCE Sales and operational EBIT Innovation excl. Forest EUR million % Financials Circular bioeconomy 12 000 18 Forest 7.0% 10 000 15 Leadership ( Target >13%) 8 000 12 Divisions 6 000 9 4 000 6 Our renewable solutions Climate impact 2 000 3 Group Leadership Team million
0 0 Governance tonnes 2018 2019 2020 of CO e −11.5 2 Sales, EUR million (annual estimate) Operational EBIT, %
Sales by business 2018 2019 2020 77% Packaging MaterialsSales, EUR 36% million 10 486 10 055 8553 Packaging SolutionsOperational 7% EBIT, % 12.9 10.0 7.6 Biomaterials 14% Remuneration Wood Products 16% Forest 24% Paper 23% Other and eliminations –21%
sales excl. Paper
Legend Value in %
Packaging Materials 36%
Packaging Solutions 7%
Biomaterials 14%
Wood Products 16%
Forest 24%
Paper 23%
Other and eliminations 21% –21%
77%
Total 141%
6
5 5 Stora Enso 2020: Strategy Strategy Annual Report 2020 Highlights of 2020
Growth in premium and 2020 in Enso – Stora low-carbon packaging Strategy As the demand for sustainable Sustainability packaging in e-commerce and food This is Stora Enso applications is increasing, we enable growth by converting production at Stora Enso in 2020 our Oulu Mill from paper to kraftliner. The conversion strengthens our Exploring expansion of CEO’s overview offering in the growing packaging consumer board production business and is a major step Stora Enso is conducting a feasibility study for How we create value forward in our transformation. The possible expansion of pulp and board production production of AvantForte™ by at its Skoghall Mill in Sweden. The investment Transformation Stora Enso on the converted line would allow us to meet the increasing demand for sustainable packaging among consumers. It would Strategy started in the beginning of 2021. AvantForte™ is a strong, premium also bolster profitable growth in, for example, liquid Financials Innovation quality kraftliner that meets packaging board and other packaging grades Circular bioeconomy our customers’ need for high- such as CKB. Skoghall Mill is ideally located in performing, safe and plastic-free the proximity of Stora Enso’s forests in Sweden, Forest allowing for cost-efficient, local sourcing of wood. packaging while using less material. Leadership The feasibility study is expected to be completed by the end of 2021 and if the project is approved, Divisions the production could start earliest at the end of 2023.
Our renewable solutions
Group Leadership Team Governance Renewable, plastic- free products for eco-friendly lifestyles In 2020, we introduced several new renewable products for packaging. PureFiber™ by Stora Enso enables plastic- and PFAS-free food service packaging made from Growth in mass timber Developments underway for bio-based formed fiber. Investments in more construction for eco-living protective packaging materials formed fiber capacity in Sweden Stora Enso is enhancing its position as the market Stora Enso is building a pilot facility for producing and China are ongoing. Performa leader for cross laminated timber (CLT) by building lightweight, fiber-based foam material that Light by Stora Enso is a new a new production line at its Ždírec sawmill in replaces oil-based polymer foams. Cellulose Remuneration plastic-free, lightweight board with the Czech Republic. As a sustainable renewable foam can be used as protective packaging for low climate impact for food and material, CLT shows significant growth potential fragile products such as consumer electronics. cosmetics packaging. in construction, as it makes it possible to build higher and lighter yet stronger multi-storey buildings. Production on the new line is scheduled to begin in the third quarter of 2022. 6 Stora Enso 2020: Strategy Strategy
Annual Report 2020 Accelerating circularity along the value chain • Increasing the recycling of used beverage cartons in Central and Eastern Europe: Together with
Tetra Pak, Stora Enso is exploring 2020 in Enso – Stora the possibility of building a new Strategy recycling line for used beverage
cartons (UBC) at its Ostrołeka Mill Sustainability in Poland. A more efficient way of A new valuation method This is Stora Enso • Developing barriers designed handling dry lignin and for forest assets for circularity: Stora Enso is development of carbon fiber Stora Enso started using a valuation Stora Enso in 2020 investing in dispersion barrier Stora Enso is building a granulation and method based on market transaction technology at its Forshaga site in packing plant for lignin, allowing easier data for its forest assets in the Nordics. CEO’s overview Sweden. The investment supports packing and handling of lignin compared The methodology is based on market the development of paperboard with to powder and wet form. Lignin is one of transactions in the regions where How we create value barrier properties that are easier to the key innovation areas for Stora Enso for Stora Enso’s forests are located, on handle in a recycling process, have delivering growth on new applications, such the standing stock and price data of Transformation a smaller carbon footprint and can as energy storage, binders, and carbon the traded forest, and own forest regional be composted in industrial facilities. fiber. Stora Enso and Cordenka, the world’s standing stock inventory. This method Strategy • Extending the lifecycle of paper largest producer of industrial rayon, are provides a more transparent and less Innovation cups: During 2020 Stora Enso developing bio-based carbon fiber for subjective basis for valuation. The total Financials Circular bioeconomy continued to explore the recycling industrial applications, such as wind value of the Group’s forest assets increased potential of paperboard cups for energy rotor blades. to EUR 7.3 billion at the end of 2020. Forest magazine paper production at Leadership Langerbrugge Mill in Belgium. The paperboard is made from Divisions renewable, high-quality fibers that can be recycled several times. Our renewable solutions • Working for positive change in the circular economy: Group Leadership Team Stora Enso is part of the 4evergreen
alliance – a European circular Governance economy platform focusing on fiber-based packaging. The aim is to drive the recycling of fiber-based packaging and collaboration in circular design. • Turning wastewater into Science-based evidence Meeting the growing need renewable energy: Stora Enso for positive climate impact for sustainable textile fibers and energy company Gasum have Stora Enso is collaborating with the Swedish TreeToTextile is a joint venture between built a biogas plant at Stora Enso’s University of Agricultural Sciences (SLU) H&M group, Inter IKEA group, Stora Enso, Nymölla paper mill in Sweden. The to develop more accurate climate impact and inventor Lars Stigsson. TreetoTextile’s plant, built and operated by Gasum, research for forest product companies. In goal is to develop and industrialise an turns the mill’s wastewater into 2020, SLU published a new report, providing innovative man-made cellulosic fiber The pandemic has changed our buying Liquefied Biogas (LBG). evidence of Stora Enso’s positive climate technology that will provide textile fibers behaviour and e-commerce is growing Remuneration impact. The report confirms that when our with good sustainability performance at in specific areas, such as food. More products are used to replace fossil-based and a low cost. deliveries mean more packaging, and other non-renewable materials, it is possible consumers are increasingly aware of the
to save 18 million tonnes of fossil CO2e environmental impacts of materials – they annually from entering the atmosphere. want eco-friendly and circular solutions. 7 Stora Enso 2020: Strategy Strategy Packaging Materials Packaging Solutions Annual Report 2020 Our divisions have The Packaging Materials division is a global The Packaging Solutions division develops leader in high-quality renewable packaging and sells premium fiber-based packaging specific focus areas materials based on both virgin and recycled fiber. products and services.
and products that cater 2020 in Enso – Stora Strategy Sustainability
This is Stora Enso to a broad range Stora Enso in 2020 of customers. CEO’s overview
How we create value Share of Group Share of Group sales 36% sales 7% Transformation Share of Group Share of Group Strategy operational operational Innovation EBIT 62% EBIT 5% Financials Circular bioeconomy Forest Biomaterials Wood Products Forest Paper Leadership The Biomaterials division meets the growing The Wood Products division is a leading The Forest division sources all wood raw material The Paper division offers a wide product Divisions demand for the replacement of products made provider of wood-based solutions for to Stora Enso Mills in Finland, Sweden, Russia and portfolio of paper products for print and office from fossil-based and hazardous materials with construction, the window and door the Baltic countries. It also manages Stora Enso’s use based on both recycled paper and fresh fiber. Our renewable solutions bio-based solutions. The division’s offering industry, pellets and for the packaging and Swedish forest assets and the 41% share of Tornator, includes a wide variety of pulp grades. decoration industries. the majority of whose forest assets located in Finland. Outer Value in % Value in text Inner Value Outerin % Value in text Value in % Value in text Inner Value in % Value in text
Group Leadership Team Share of Group sales Share of Group Share of Group sales Share of Group 36% operational EBIT 62% 7% operational EBIT 5% Governance 64% 36% 38% 62% 93% 7% 95% 5%
Total 100% 100 Total Total100% 100 100% 100 Total 100% 100
Share of Group Share of Group Share of Group Share of Group
sales 14%* sales 16% sales 24% sales 23% Remuneration
Share of Group Share of Group Share of Group Share of Group operational operational operational operational EBIT 1% EBIT 18% EBIT 25% EBIT –6%
* of which internal sales 14% Sales include inter-segment transactions.
Outer Value in % Value in text Inner Value Outerin % Value in text Value in % Value in text Inner Value Outerin % Value in text Value in % Value in text Inner Value Outerin % Value in text Value in % Value in text Inner Value in % Value in text
Share of Group sales Share of Group Share of Group sales Share of Group Share of Group sales Share of Group Share of Group sales 14% operational EBIT 1% 16% operational EBIT 18% 24% operational EBIT 25% 23% 94%
86% 99% 84% 82% 76% 75% 77% Share of Group 6% 14%* 1% 16% 18% 24% 25% 23% operational EBIT –6%
Total 100% 100 Total Total100% 100 100% 100 Total Total100% 100 100% 100 Total Total100% 100 100% 100 Total 100% 100
* of which internal sales 14%
* Sales include inter-segment transactions.
7 8
9 10 12 11 8 Stora Enso 2020: Strategy Strategy Packaging Materials Packaging Solutions Annual Report 2020 Stora Enso has Sales and operational EBIT Sales and operational EBIT EUR million % EUR million % remained resilient in 3 600 24 800 20
3 000 20 – Stora Enso in 2020 in Enso – Stora the challenging times, 600 15 Strategy 2 400 16 Sustainability 1 800 12 400 10 This is Stora Enso thanks to our diversified 1 200 8 Stora Enso in 2020 200 5 business portfolio 600 4 CEO’s overview 0 0 0 0 2018 2019 2020 2018 2019 2020 How we create value and relatively strong Sales Sales Transformation balance sheet. Operational EBIT, % Operational EBIT, % Strategy 2017 2018 2019 2020 2017 2018 2019 2020 Financials Innovation Sales Sales 3422 3254 3115 701 698 594 Circular bioeconomy Operational EBIT, % 13 10.4 Operational12.9 EBIT, % 4.6 6.6 5.7 Forest Leadership
Divisions
Our renewable solutions Biomaterials Wood Products Forest Paper
Group Leadership Team Sales and operational EBIT Sales and operational EBIT Sales and operational EBIT Sales and operational EBIT Governance EUR million % EUR million % EUR million % EUR million % 1 800 30 1 800 24 2 500 25 3 500 14
3 000 12 1 500 25 1 500 20 2 000 20 2 500 10 1 200 20 1 200 16 1 500 15 2 000 8 900 15 900 12 1 500 6
1 000 10 1 000 4 600 10 600 8 500 2 500 5 300 5 300 4 0 0 Remuneration 0 0 0 0 0 0 -500 -2 2018 2019 2020 2018 2019 2020 2018 2019 2020 2018 2019 2020
Sales Sales Sales Sales Operational EBIT, % Operational EBIT, % Operational EBIT, % Operational EBIT, %
2017 2018 2019 2020 2017 2018 2019 2020 2017 2018 2019 2020 2017 2018 2019 2020 Sales 1635 1464 Sales1193 1622 1569 Sales1386 2285 2321 Sales2046 3066 2856 1979 Operational EBIT, % 26.1 15.9 Operational0.8 EBIT, % 10.2 6.7 Operational8.3 EBIT, % 3.9 4.3 Operational8.0 EBIT, % 7.6 7.4 -1.9
13 14
15 16 18 17 9 Stora Enso 2020: Strategy Strategy Annual Report 2020 Significant potential for profitable growth
Little did we know, entering 2020, what an extraordinary year it would be for overview – CEO’s Strategy the world. It was shaped by an uncertain political and economic landscape,
but above all by the pandemic. In these challenging times for societies, Sustainability companies, and individuals, Stora Enso has remained resilient. Our business This is Stora Enso is built on a renewable raw material, serving global markets with products that help consumers make eco-friendly choices. Stora Enso in 2020
CEO’s overview Our changing world Creating value in forest, pulp and paper How we create value The battle against climate change cannot be Although we have specific growth areas, our put aside – on the contrary, it is more important ability to create value has its foundation in Transformation than ever that we accelerate the shift towards the forest. We are one of the largest private a circular bioeconomy. As a society, we need to forest owners in the world today. The forest Strategy end our dependency on fossil-based materials in is a valuable, growing asset that ensures Innovation favour of products based on renewable materials. a long-term fiber supply for our products. In Financials Circular bioeconomy Stora Enso’s offering plays an important role in addition, pulp is the base for our production of this. Sustainably managed forests grow back and packaging materials, as well as for innovation Forest our products are low carbon, helping to address within biomaterials. The traditional wood products Leadership some of the world’s climate challenges. business contributes to value-added solutions within Building Solutions. Divisions Making choices for growth and value In Paper, we have continuously adapted to In 2020 we renewed our strategy, entering a new decreasing structural demand while generating Our renewable solutions phase in our transformation journey and shaping strong cash flow and providing high service our business for accelerated growth and value. levels for our customers. We aim to ensure our Group Leadership Team We have chosen to focus our growth initiatives on paper business has a high degree of operational
Packaging, Building Solutions, and Biomaterials independence so that it can be more agile in Governance Innovations. These are the areas where we have adapting costs and operational processes to leading market positions and are in the frontline the changing market environment. of customer driven innovation. And we can build on strong and competitive assets to drive Innovation through collaboration accelerated profitable growth. In line with the updated strategy focus, we will In Packaging, we see increasing demand for concentrate our innovation efforts and resources sustainable, plastic-free, and circular products on areas with strong business opportunities and continue to drive innovation that goes beyond such as new sustainable packaging materials, consumer needs. We are a global leader in wooden sustainable barriers, and our biochemical from 2020 include a strategic partnership with Building Solutions, which improve construction platform. Speed to market is essential and we Our customers are the Swedish University of Agricultural Sciences efficiency and can replace concrete and steel, will continue to push this through collaboration asking us to help them (SLU) to develop new knowledge within significantly reducing the carbon footprint. New and an open innovation approach. In our key sustainable forestry. We have also entered several biomaterials, such as biochemicals based on lignin initiatives, we are moving into the piloting and reduce their carbon materials innovation driven partnerships, such Remuneration for binders, carbon fibers, and energy storage, scale-up phase. We work across the value chain as our collaboration with Cordenka – the world’s provide a highly attractive innovation platform, with with customers, partners, suppliers, research footprint and innovate largest producer of industrial rayon – through the potential to become a business of its own one and academic institutions, and start-ups to drive to substitute fossil- which we are jointly developing bio-based day. Learn more about this in the Transformation open innovation and find new solutions to some carbon fiber. Or the Tree-to-Textile project with section of this report. of the world’s sustainability challenges. Examples based materials. H&M group, Inter IKEA group, and inventor 10 Stora Enso 2020: Strategy Strategy Lars Stigsson, in which we are developing and new-generation formed fiber products. We have Annual Report 2020 industrialising an innovative, man-made cellulosic also announced investments in a new production fiber technology that will provide textile fibers line for cross laminated timber (CLT), a granulation with good sustainability performance at low cost. and packing plant for lignin, and a feasibility study We continue to explore new start-up related on significantly enhancing and expanding pulp 100% plastic free is not always business ventures through the Combient Foundry and board production. Programme, which is the Nordic region’s leading feasible, but the majority of fossil-
cross-industry collaboration network. In 2020, Business during the pandemic based materials in packaging overview – CEO’s we were once again recognised as the most Like all businesses, we have taken numerous Strategy startup-friendly company in Finland. Through measures in the face of the Covid-19 pandemic. could be reduced with existing our Accelerator programme, launched in 2017, Our key priorities through the year have been to Sustainability we have screened over 1 200 startups in nearly protect our people and business and to support materials and technologies. This is Stora Enso 40 countries. our customers. Very early on, we took action Our investments support our strategic related to mitigating the spread of the virus Stora Enso in 2020 focus and innovation agenda. The major and its impacts, including a global travel ban, projects for accelerated growth are presented in social distancing and appointed work streams CEO’s overview the Highlights of 2020 section of this report. to maintain the business momentum. Our units We want to support industries, producers follow strict contingency plans, and significant How we create value and retailers in meeting the growing demand effort has gone into managing our supply chain to for eco-friendly and circular solutions – and serve our customers in the best possible way. We Transformation developing a plastic-free supply chain is part have built a strong liquidity position and continue of this. Yet this shift will not happen in isolation. active working capital management and cost Strategy Some oil-based plastics and fossil materials will savings with, for example, our profit protection Innovation be harder to replace. This change will require new programme. A strong cash flow gives us flexibility Financials Circular bioeconomy levels of cooperation throughout value chains and and therefore the ability to be ready when different combinations of solutions. the markets eventually turn. Forest The market effects of Covid-19 have posed Leadership Investing for accelerated growth challenges for our paper and pulp businesses. Our investments are intended to support our However, with other parts of our diverse portfolio Divisions strategic focus and innovation agenda. Our continuing to perform well during the pandemic, transformation project at Oulu Mill in Finland the overall impact has been limited. Moving Our renewable solutions and conversion to kraftliner production was into 2021, new vaccines will gradually be finalised. We are ramping-up the production of rolled out. In the meantime, we are prepared to Group Leadership Team Governance
Operational ROCE excl. Forest Net debt to operational EBITDA % 20 4.0
3.0 15 2.0 10 1.0 Remuneration
5 0.0 2018 2019 2020 2018 2019 2020 Operational ROCE excl. Forest, % Net debt to operational EBITDA Target >13% Target <2.0
Legend 2017 2018 2019 2020 Leave this row blank
Net debt to operational EBITDA 1.1 2.0 2.3
Target <2.0 2.0 2.0 2.0 Legend 2017 2018 2019 2020 Leave this row blank
Operational ROCE excl. Forest, % 18.9 12.8 7.0 Target >13% 13.0 13.0 13.0
19 20 11 Stora Enso 2020: Strategy Strategy Dividend proposal per share manage uncertainty and volatility in the business operational EBIT margins potentially exceeding Annual Report 2020 environment. Our focus is on ensuring that 20% in growth areas. In Building Solutions, we our colleagues and partners are safe, and on aim to triple our sales with margins close to serving our customers by keeping our operations 20%. Within Biomaterials innovations, we aim EUR 0.30 running, mitigating supply chain challenges and for margins exceeding 35% in new markets introducing new products. for Stora Enso.
Earning per share True to sustainability Our people make it happen overview – CEO’s excl. fair valuation Sustainability is at the core of everything we do. Stora Enso is a large company with operations Strategy It is integral to our relevance as a business, our role all over the world and our people are our greatest
as a responsible member of society, and our ability asset. We emphasise an inclusive culture, we Sustainability to contribute to a greener world. Our emphasis have strong values and a sense of purpose, and This is Stora Enso EUR 0.45 is on social, environmental, and economic as always, safety comes first. I am proud to work responsibility in our operations and the value chain. alongside so many talented colleagues. We are Stora Enso in 2020 We have a strong commitment to keep our people united in our aim to meet the demand for eco- and contractors safe. Our sustainably managed friendly and circular solutions, further develop CEO’s overview forests are an important part of climate change our product portfolio, and contribute to making mitigation. With a focus on biodiversity, land-use, the world a better place. How we create value climate benefit and resilient local communities, As I see it, the winners will be companies our aim is to be the leader. We have set ambitious that have businesses which are sustainable in Transformation science-based targets for reducing greenhouse the long term from an environmental, social, and gas emissions. In 2020, our CO2e emissions financial perspective; that stay close to their Strategy per saleable tonne of board, pulp, and paper customers and innovate based on consumers’ Innovation were 26% lower than the 2010 benchmark future needs; that can manage volatility; and that Financials Circular bioeconomy level. Every year, Stora Enso is estimated to have are agile in adapting to this changed reality. This is a positive climate impact equivalent to a reduction Stora Enso’s competitive edge. Forest of 11.5 million tonnes of CO2e.This equates to To our customers, suppliers, investors and Leadership the CO2 emissions of some 5 million midsize cars other stakeholders, I am delighted that you join us driving 20 000 km. on this journey. Divisions The renewable future grows in the forest. New targets reflecting Our renewable solutions the focus of our strategy We have also adjusted our long-term financial Group Leadership Team targets and our goal is to grow profitably by more
than 5% annually, excluding our paper business. Governance The majority of our future growth will come Annica Bresky from the high-margin packaging business, with President and CEO
We are committed to the UN Global Compact’s Reaching key financial targets Performance ten principles and the EUR million 2020 2019 2018 Target against target Annual dividend 0.30 0.30 0.50 See below1
UN’s Guiding Principles on Growth (excl. Paper) -8.7% -3.0% 5.9% >5% per annum Remuneration Business and Human Rights. Net debt to operational EBITDA 2.3 2.0 1.1 <2.0X Net debt to equity 33% 43% 31% <60% Operational ROCE excl. Forest 7.0% 12.8% 18.9% >13%
1 To distribute 50% of EPS excluding fair valuation over the cycle. Achieved Not achieved 12 Stora Enso 2020: Strategy Strategy
Annual Report 2020 How we create value as a renewable materials company Our solutions provide low-carbon alternatives to products based on finite resources.
Key inputs Key outputs Key impacts
• Investments in human rights • 22 human rights development actions finalised in Group • Respect for human rights in operations value create we – How Strategy due diligence programme function processes Sustainability • 23 000 direct employees and sales in more than • Personnel turnover 13.0% • EUR 1 270 million salaries and benefits This is Stora Enso 50 countries • 6.1 TRI rate • Impacts of injuries, illness, and well-being • OHS and well-being • Illness related absenteeism 3.6% • Engaged and motivated employees and
Social • Employee and leadership development • Leadership index 84/100 a capable organisation Stora Enso in 2020 • Partnerships with communities and universities • 343 voluntary community investment projects • EUR 980 million value through taxes borne • EUR 2.7 million voluntary • Code of Conduct index 86/100 and collected community investments • Value creation with local communities CEO’s overview • Business ethics and compliance • Value through ethical operations in the market place How we create value