UPM annual report 2014

UPM Annual Report 2014

CONTENTS

ACCOUNTS

Environmental performance

In 2014, UPM’s environmental investments totalled EUR 12 million

(29 million). The largest investment was the combustion gas purification

system at UPM Changshu paper mill.

UPM’s environmental costs, which were mainly attributable to efflu-

ent treatment and waste management, totalled EUR 127 million

(134 million), including depreciation.

No significant environmental incidents occurred in 2014. However,

several minor temporary deviations from permit limits did arise. These

deviations were reported to the relevant authorities immediately, and

corrective and preventive measures were taken. These measures are part

of UPM’s internal Clean Run campaign that aims to improve the com-

pany’s environmental performance further, sharing best practices and

promoting and maintaining environmental awareness.

Taking care of the entire lifecycle

UPM’s products are made from renewable, biodegradable and recyclable

raw materials. UPM businesses have adopted an eco-design approach in

their product development processes, which means the systematic inte-

gration of environmental aspects into product design at an early stage,

covering the whole lifecycle.

The majority of UPM’s production sites, as well as its forestry oper-

ations, are covered by environmental, quality and health and safety sys-

tems, which are certified in accordance with the ISO 9001, ISO 14001

and OHSAS 18001 standards respectively. UPM has certified all its

European pulp and paper mills and the UPM Fray Bentos pulp mill in

Uruguay and UPM Changshu paper mill in China in accordance with

the voluntary EU Eco-Management and Audit Scheme (EMAS). UPM

has participated in EMAS for 20 years.

UPM is the largest producer of EU Ecolabelled newsprint, graphic

and office papers. In 2014, UPM was part of consortium which created

the EU Ecolabel criteria for Converted Paper products.

More waste reduction through recycling and reuse

Today, approximately 90% of all UPM’s production waste is reused or

recycled. UPM has developed innovative ways to reduce its own waste

and reuse waste or residues in new products such as UPM BioVerno,

UPM’s renewable diesel and UPM ProFi composite which utilises partly

waste from the production of self-adhesive label materials. UPM is also

the world’s largest user of recovered paper for the production of graphic

papers, consuming 3.4 million tonnes of paper for recycling in 2014. The

total amount of solid waste sent to landfill has decreased with 17%

compared to the previous year.

UPM ensures that all wood and wood fibre is

sustainably sourced

All of UPM’s own forests and eucalyptus plantations are certified ac-

cording to the FSC and/or PEFC certification schemes. All of UPM’s

wood supplies are covered by third-party-verified chains of custody. 83%

(80%) of all wood used by UPM is sourced from certified forests. 83%

(83%) of UPM’s paper is produced using fibre that meets the criteria of

either the FSC or the PEFC forest certification scheme.

In connection with the biodiversity programme, UPM carried out

several projects with stakeholders in 2014. UPM is a network partner in

the Biodiversity in Good Company initiative in Germany and the FIBS

Business & Biodiversity programme in Finland, both of which contrib-

ute to the UN Convention on Biological Diversity. UPM also co-oper-

ated with the International Union for Conservation of Nature (IUCN)

in 2014.

Climate actions recognised and energy saved

Since 1990, specific CO2 (carbon dioxide) emissions per tonne of paper

have been reduced by approximately 25%. UPM has a wide range of

energy sources and it maximises the use of carbon-neutral energy. Bio-

mass-based fuels make up 83% of the fuels used by UPM in Finland and

67% of those used worldwide. UPM is the second largest generator of

biomass-based electricity in Europe.

In addition, UPM has invested significantly in renewable energy and

modern power plants. The largest project is the combined heat and

power (CHP) plant at the UPM Schongau mill in Germany, completed

in late 2014. The refurbishment of the company's own hydropower pro-

duction assets in Finland is also underway.

Energy efficiency has been significantly improved by energy audits,

innovations and internal campaigns over the last 15 years.

More results with responsible water management

UPM has reduced wastewater volumes per tonne of paper by 25% and

per tonne of chemical pulp by 17% over the last ten years. The COD

load has decreased by 26% per tonne of paper, and by 39% per tonne of

pulp, over the last ten years.

The optimisation of operating models continued at the UPM Pietar-

saari pulp mill effluent treatment plant, completed in 2013. A working

group established as part of the Clean Run campaign participates in the

optimisation of all effluent treatment plans by sharing good operating

models and preparing for exceptional situations. During 2014, UPM

participated in developing the ISO water footprint standard and joined

the WBCSD Water Cluster's WASH Pledge programme as the first forest

products company. As a participant in the WASH Pledge programme,

UPM is committed to ensuring that all its employees have access to clean

water, sanitation and hygiene in the workplace.

Corporate Governance Statement

UPM presents the Corporate Governance Statement as a separate report

which is available on the company's website

www.upm.com.

Board of Directors’ proposal for the distribution of profits

The Board of Directors proposes to the Annual General Meeting of

UPM-Kymmene Corporation to be held on 9 April 2015 that a dividend

of EUR 0.70 per share be paid based on the balance sheet to be adopted

for the financial year ending 31 December 2014 and that the remaining

portion of the distributable funds be retained in the Company's unre-

stricted shareholders' equity.

The dividend will be paid to a shareholder who is registered in the

Company's shareholders' register held by Euroclear Finland Ltd on the

dividend record date of 13 April 2015. The Board of Directors proposes

that the dividend be paid on 23 April 2015.

On the date of the dividend proposal, 3 February 2015, the

Company's registered number of shares is 533,735,699. The aforemen-

tioned number of shares includes 230,737 treasury shares. Treasury

shares are not entitled to dividend. Based on this, the proposed dividend

would total EUR 373.5 million.

On 31 December 2014, the distributable funds of the parent com-

pany were EUR 3,361,198,148.19 including EUR 710,263,052.06 profit

for the period. No material changes have taken place in respect of the

Company’s financial position after the balance sheet date. In the opinion

of the Board of Directors, the proposed distribution of profits does not

risk the solvency of the Company.

Signatures of the annual accounts and the report of the Board of Directors for the year 2014

Helsinki, 3 February 2015

Björn Wahlroos

Berndt Brunow

Matti Alahuhta

Chairman

Piia-Noora Kauppi

Wendy E. Lane

Jussi Pesonen

President and CEO

Ari Puheloinen

Veli-Matti Reinikkala

Kim Wahl