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UPM ANNUAL REPORT 2019 UPM ANNUAL REPORT 2019 3 UPM in Changing World

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UPM ANNUAL REPORT 2019 UPM ANNUAL REPORT 2019 3 UPM in Changing World ANNUAL REPORT 2019 CONTENTS OUR OUR THE WAY ACCOUNTS STRATEGY 14 BUSINESSES 32 WE OPERATE 58 GOVERNANCE 100 FOR 2019 118 CONTENTS UPM IN CHANGING WORLD OUR STRATEGY OUR BUSINESSES THE WAY WE OPERATE GOVERNANCE ACCOUNTS FOR 2019 4 FUTURE BEYOND FOSSILS 16 UPM BIOFORE STRATEGY – 34 BIOFORE COMPANY 60 OUR RESPONSIBILITY 102 SIGNIFICANT DECISIONS 120 REPORT OF THE BOARD OF is a key driver for UPM going BEYOND FOSSILS Leading the forest-based TARGETS UPM’s Board of Directors made DIRECTORS forward. We create value by seizing the bioindustry into a sustainable, Our strategy guides us in achieving several significant decisions for limitless potential of bioeconomy. innovation driven and exciting our responsibility targets for 2030 the future. 144 FINANCIAL STATEMENTS 6 THE NEED FOR RESPONSIBLE future beyond fossils. and our contributions to UN SDGs. CHOICES 18 TOP PERFORMANCE 110 REMUNERATION 210 AUDITOR’S REPORT Our innovations create value and Continuous improvement, right 36 BUSINESS AREAS 62 VALUE FROM STAKEHOLDER business opportunities that go operating model, performance culture The direction and performance ENGAGEMENT 112 BOARD OF DIRECTORS beyond fossils. and effective capital allocation. of our six business areas. Active and open dialogue with 214 OTHER FINANCIAL our stakeholders provides valuable 114 GROUP EXECUTIVE TEAM INFORMATION 8 SUSTAINABLE AND SAFE 20 SPEARHEADS FOR GROWTH 52 NEW SUSTAINABLE input. SOLUTIONS We have selected three focus areas ALTERNATIVES Our alternatives for fossil-based where we are seeking significant growth. Developing wood-based 68 ENABLING PEOPLE GROWTH materials. renewable biofuels, naphtha and Our people and Aiming Higher 22 INNOVATING FOR GROWTH biochemicals. culture drive our success. 10 YEAR 2019 IN BRIEF We are developing innovative and Key performance indicators and high-quality products from wood- 86 COMMITTED TO CLIMATE main events. based biomass. ACTIONS We are committed to limit global 12 FROM THE PRESIDENT AND 24 VALUE FROM RESPONSIBILITY temperature rise to 1.5°C. CEO Sustainability is the only solid President and CEO reviews the foundation for long term value 88 SUSTAINABLE FORESTRY year 2019. creation. Sustainably managed forests are 102 more resilient to changes in the 28 RISKS AND OPPORTUNITIES climate. 30 CREATING SHAREHOLDER VALUE Our Biofore strategy is designed to 38 generate attractive shareholder returns. 118 4 UPM does not publish a separate environmental and corporate responsibility report but has integrated the contents into this annual report. Various highlights from the year 2019 can be found under 66 the sections for each business area. To find out more about UPM’s 18 responsibility agenda, please visit upm.com/responsibility. 2 UPM ANNUAL REPORT 2019 UPM ANNUAL REPORT 2019 3 UPM in changing world FUTURE BEYOND FOSSILS is a key driver for UPM going forward SUSTAINABLE FORESTRY Food AND LAND USE Water Hygiene and Climate change personal RESOURCE care EFFICIENCY INSPIRED by the limitless opportunities HI N GH of bioeconomy O S E TI TA R Increasing A H N L L T D IV Packaging resource U W A I P R N scarcity O D O G R S CIRCULAR P G ECONOMY 2 DELIVERING BIOFORE renewable and billion TREND GROWTH CHALLENGE middle class SOLUTIONS responsible consumers solutions D in Asia I G RESPONSIBLE N I T O BUSINESS CONDUCT A I L T Need for IS A E-commerce A IS sustainable TI N choices ON BA UR INNOVATING for a future beyond fossils RENEWABLE Tightening MATERIALS Mobility regulation Energy Living and REPLACING FOSSIL-BASED construction MATERIALS 4 UPM IN CHANGING WORLD CONTENTS UPM ANNUAL REPORT 2019 UPM ANNUAL REPORT 2019 UPM IN CHANGING WORLD 5 UPM in changing world Sustainable and 2030 safe solutions for global consumer demand 2020 Climate solutions Innovation THE NEED FOR Responsible RESPONSIBLE operations and Circular economy A FUTURE BEYOND FOSSILS CHOICES value chain Our innovations create value and business opportunities that go beyond fossils. We offer renewable, recyclable High and low-impact alternatives to non-renewable materials. performing people Sustainable forestry We need sustainable choices sustainable choices. The demand for and is a more effective carbon sink in the Responsible operations and a circular Renewable and recyclable products, and Forests play an important role in Population growth, urbanisation and rising responsibly produced renewable materials long term. Sustainable forestry safeguards economy create a competitive innovations based on these products, are mitigating climate change, and sustainable living standards, particularly in emerging and products increases as a result of biodiversity, the good status of water advantage an essential part of the bioeconomy, both forest management ensures that forests markets in Asia, create new consumer sustainable consumer choices and bodies and the benefits of forests for A circular economy and resource efficiency now and in the future. are adapting to the changing climate. demand that stretches far into the future. increasing regulation. humans. offer solutions to climate change and the Renewable wood and recyclable products Demographic change creates new needs. Sustainable forest management scarcity of natural resources. Many of the We use and reuse our resources reduce the world’s dependency on fossil- Digitalisation and e-commerce change We offer sustainable and safe requires investment and continuous challenges we face could be solved entirely efficiently and ensure responsible based and other non-renewable raw consumer behaviour. solutions and innovate for a future development. This secures the economic or in part if materials and products were business conduct throughout our materials. The demand for daily consumer goods beyond fossils value of forests and wood supply. The recycled and used more efficiently. value chain and the need for packaging materials and benefits are widely distributed across rural Globally, approximately 60% of the wood We commit to UN’s target to limit labelling continue to increase. People also Sustainable forestry preserves forests areas, balancing out regional disparities. fibre used in the production of paper and Mitigating climate change is urgent global temperature rise to 1.5°C move more, use more energy and invest in and increases carbon sinks This is the foundation of a sustainable boards is recycled. However, only some The main cause of climate change is the lifestyle choices, all of which increases the Sustainable forestry and land use respond bioeconomy. 18% of plastics and 20% of electronic waste use of fossil fuels. We must quickly reduce demand for our products. to resource scarcity and climate change, is recycled. our usage and move to low-emission or Climate actions on page 86 While consumer demand grows, natural while also creating the prerequisites for We ensure sustainable forestry Responsible business conduct and zero-carbon energy sources. This requires Sustainable forestry on page 88 resources are dwindling. Mitigating financial growth. A sustainably managed and keep forests full of life product design encompass the entire value a versatile energy portfolio that guarantees Circular economy on page 96 climate change and tackling other forest grows more, creates renewable raw chain, from sourcing raw materials to the a sufficient supply of clean energy for Product stewardship on page 82 environmental challenges requires materials, adapts better to climate change recycling or disposal of end products. society. Innovation on page 22 and 52 6 UPM IN CHANGING WORLD CONTENTS UPM ANNUAL REPORT 2019 UPM ANNUAL REPORT 2019 UPM IN CHANGING WORLD 7 UPM in changing world Our strategy on page 16 EXAMPLES OF OUR PRODUCTS Product stewardship on page 82 Limitless opportunities of a THAT REPLACE FOSSIL-BASED SUSTAINABLE bioeconomy on page 6 MATERIALS Customer collaboration on page 84 upm.com/responsibility PACKAGING Products made from pulp; UPM UniqueBarr™ barrier papers; AND SAFE UPM BioVerno renewable naphtha used in products such as milk cartons; UPM Fine paper LABELLING UPM Raflatac Forest Film™; UPM Raflatac Fossil-Free Adhesive; SOLUTIONS RAFNXT+ range; PCR (post-consumer recycled) film and paper label materials; fibre-based face papers and release liners We respond to the growth in consumer TRANSPORTATION demand with recyclable products that Low-emission UPM BioVerno diesel and naphtha; are made of responsibly sourced, WISA plywood vehicle flooring in trailers renewable raw materials. ELECTRIFICATION Providing zero-carbon electricity to the market We actively develop new solutions for CONSTRUCTION various needs and promote the sustainable UPM’s sawn timber and WISA Plywood; UPM ProFi composite use of renewable materials. decking material; ash from biomass-based energy generation We strive to mitigate climate change and used in the cement industry and soil stabilisation drive value creation through innovating novel products. We innovate climate-positive MANUFACTURING products and turn them into growing WISA BioBond gluing technology; UPM BioPiva™ lignin in resins, adhesives, polymer blends and bio-plastics; green liquor businesses. dregs from pulp mills as a desulphuring agent at power plants; Product design must cover the entire ash as raw material for paper filler production value chain, from raw material sourcing to end products, and their recycling or disposal. MEDICATION AND MEDICAL RESEARCH Renewable and recyclable products, and FibDex®, a wound care dressing made from nanofibrillar innovations based on these products, are an cellulose, and GrowDex®, a nanocellulose
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