UPM annual report 2014

In 2014 the main focus areas in UPM’s People Strategy were a safe and inspiring workplace, sharp commercial ambition and sales capabilities, and change readiness and agility in changing business environment. These focus areas have been incorporated into the businesses’ strategy process. People enable company transformation

Employee Engagement Survey (EES) results, Trend 2007–2014

UPM’s personnel by business area 2014

80

UPM Biorefining 12%

Other operations 3% UPM Plywood 12% UPM Paper ENA 51%

UPM Energy 0% UPM Raflatac 14%

60

40

20

UPM Paper Asia 8%

STAKEHOLDERS 31–44

0

08 07

14 13 12 11 10 09–

10

■ Response rate (%) Employee Engagement Index (EEI) Manager Effectiveness Index (MEI) OHS Index

Encouraging professional growth UPM aims to provide a safe and inspiring working environment where employees are capable of achieving good results. UPM encourages its employees to pursue professional growth and supports them in learning and developing their skills further. The company uses the 70/20/10 model based on the assumption that 70% of learning takes place on the job, 20% comes from learning from others, and 10% comes from development programmes. UPM systematically uses a performance management process (PPR) to set individual strategy-related targets and development plans for all employees globally. The PPR provides an opportunity, both for managers and employees, to give and receive feedback on performance and behaviour based on UPM values. In past years UPM has developed its perfor- mance appraisal process by emphasising man- agers’ roles in leading performance and giving feedback. Managers are expected to focus on performance management and guiding their team members to reach agreed targets. 86% (85%) of all permanent UPM employees had a personal performance review with their manag- ers in 2014. Developing the workplace together The UPM Employee Engagement Survey (EES) invites all employees across the company to evaluate different aspects of the working environment every year. The survey measures development in three main indices; Employee Engagement, Manager Effectiveness and Occu- pational Health and Safety (OHS). In 2014, 78% (78%) of UPM employees responded to the survey which illustrates a high level of willingness to participate in the devel- opment of UPM as a place to work. The Engagement index increased to 63% (60%) while favourable scores in the OHS index increased it to 78% (77%). Favourable scores in the Manager Effectiveness index have steadily improved over the years (from 74% in 2013 to 75% in 2014), and the score is now close to the top quarter of the global norm. The EES gives an opportunity for annual monitoring of long term trends and the pro- gress of agreed development activities. The

results and progress are evaluated in order to define further improvements both at organisa- tional and team level. Building capabilities for empowering leadership The company aims to have inspiring leaders who empower and engage employees at all levels. To further develop its leadership capabili- ties, UPM has a development programme portfolio focusing on self-leadership, coaching capabilities, innovation and leading in complex- ity. In 2014, UPM continued to support a coaching leadership style and promoted the use of various tools for feedback on behaviours and performance. The target is to improve dialogue and the feedback culture in the company. UPM also continued its mentoring programme as a valuable tool for developing leaders. Rewarding and recognising good performance UPM offers reward and recognition with an emphasis on high performance. UPM has a total compensation approach consisting of base salary, benefits and incentives, which are deter- mined by UPM’s global rules, local legislation and market practice. Intangible recognition is included in the total reward portfolio, which means that UPM provides, for instance, a safe and healthy work- ing environment, interesting and meaningful work, and excellent leadership and career opportunities. Individual, team and business performance are criteria for compensation planning and decisions. Base salary is set with regard to general agreements and local market practice, the level of the particular position, and individual per- formance. Through their own personal achieve- ments and behaviour, employees have the pos- sibility to influence their base salary. All UPM’s employees belong to a unified annual Short Term Incentive (STI) scheme. The plan includes company- and business-level targets, safety targets and personal and/or team performance targets. EBITDA is one of the key financial indicators for the company- and busi- ness-level targets. The annual incentives paid in 2014 for the 2013 STI plan were EUR 50 mil-

lion and the estimated amount of annual incen- tives for the 2014 STI plan is EUR 51 million. For significant individual or team successes, there is a separate Achievement Award system in place. UPM has two long term incentive plans: a Performance Share Plan (PSP) for senior execu- tives and a Deferred Bonus Plan (DBP) for other key employees. Approximately 600 employees are covered by the plans launched in 2011 and run on an annual basis. Under both plans, shares can be earned based on either group or business area level performance. The PSP and DBP have replaced the Stock Option Programme 2007 which expired during 2014. More information about long term incentives can be found in the Remuneration Statement on www.upm.com in the Investors section under Governance. UPM promotes active participation At the end of 2014, UPM had 20,414 employ- ees working in 45 countries. As a multinational company, UPM complies with international, national and local laws and regulations and respects international agreements concerning human and labour rights and freedom of asso- ciation. UPM abides by legally binding collective agreements. UPM does not collect information on or report on its employees’ union member- ship at a global level due to differences in national legislation in the various countries. The estimated percentage of active employees covered by collective agreement mechanisms was 73% (65%) in 2014. UPM promotes active employee participa- tion and consultation, organised in accordance with international and national rules and regu- lations. UPM respects the privacy of employees and promotes equal opportunities and objectiv- ity in employment and career development. To enhance open international dialogue, UPM has a co-operative body, The UPM Euro- pean Forum, that focuses on issues related to changes within the company and the business environment in general. The forum organises regular meetings for employee representatives from business units operating in Europe.

PERSONNEL BY COUNTRY

31 Dec. Finland Germany

2014 2013 2012 7,855 8,110 8,636

4,586 4,609 4,714 United Kingdom 1,098 1,136 1,205 Russia 787 771 970 France 785 901 1,146 Austria 549 547 546 Poland 499 440 454 Estonia 204 206 217 Spain 109 194 212 Italy 61 62 65 Turkey 40 38 39 Sweden 27 26 29 Belgium 28 32 35 Other Europe 111 177 208 China 1) 1,424 1,412 1,430 United States 2) 1,087 1,116 1,129 Uruguay 565 562 576 Malaysia 175 174 185 Brazil 89 95 48 South Africa 67 66 72 Australia 61 77 86 India 39 41 36 Rest of the world 168 158 142 Total 20,414 20,950 22,180 1) Incl. Hong Kong 2) Incl. Madison 50%

UPM is placing particular emphasis on performance orientation and employee engagement.

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UPM Annual Report 2014

UPM Annual Report 2014