UPM annual report 2015

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IN BRIEF

STRATEGY

BUSINESSES

STAKEHOLDERS

GOVERNANCE

ACCOUNTS

Responsibility is good business

performance

growth

PORTFOLIO

innovation

UPM’s materiality analysis 2015

Biofore strategy Innovation Portfolio development and value creation (direct/indirect) Growth Performance (economic, social, environmental)

Corporate responsibility is an integral part of all our operations and is seen as a source of competitive advantage. UPM is strongly committed to continuous improvement in economic, social and environmental performance. UPM promotes responsible practices throughout the value chain and is active in finding sustainable solutions in co-operation with its customers, suppliers and partners.

All UPM activities comply with local laws and regulations. The company respects international human rights agreements and agreements concerning labour rights, including the UNDeclaration of Human Rights, the ILO Declaration on Fundamental Principles and Rights at Work, and the OECD Guidelines for Multinational Enter- prises. The company is also one of the participants in the UN Global Compact initiative whose ten universal principles are derived from international agreements in the areas of human rights, labour standards, the environment and anti-corruption. UPM also takes into account the sustainable development goals (SDG) of the UN Agenda 2030. In 2015, UPMwas invited to join the UN Global Compact LEAD group intended for global sustainability leaders. The company has promoted global forest industry partnership projects in the World Business Council for Sustainable Development (WBCSD), The Forest Dialogue (TFD), and with other ethically-driven organisations, such as the WorldWildlife Fund For Nature (WWF). UPMhas also participated in local projects through its co-operation with several expert organisations. Strengthening ethical business conduct The company’s Biofore strategy and the Code of Conduct approved by the Board lay the foundations for responsible busi- ness operations and continuous improvement. During the year 2015, UPM renewed its Code of Conduct and drafted new long term targets. The project involved interviewing approximately 200 UPM representatives, including the Group Executive Team, the members of business and function manage- ment teams and other key personnel. UPM also involved external parties in the process through a third-party stakeholder survey. The company’s updated Code of Conduct discusses our commitment to ethical business conduct, respecting human rights, ensuring occupational safety and environ- mentally sound practices. The Code of Conduct is complemented by more detailed policies, rules and guidelines. Code of Conduct training is mandatory to all employees. Comprehensive training programme introducing the renewed Code of Conduct will be launched in 2016. By the end of 2015, more than 90% of all UPM employees in active employment had attended training covering the previous Code of Conduct. The target set for the cover- age of training was achieved as planned. Group Executive Team in charge of managing corporate responsibility The Group Executive Team, headed by the President and CEO, is in charge of managing corporate responsibility, determining the course of action and guiding development work. The day-to-day work has been integrated into the com- pany’s business operations, and group-level corporate responsibility is managed by an environment and responsibility team that coordinates the projects being carried out in businesses and functions. UPMcontinually strives to improve its environmental and health and safety perfor- mance by using various tools, such as certifiedmanagement systems. The company is committed tomonitoring and assessing its anti-corruption and anti-bribery activities. UPM’s Ethics Advisory Committee monitors UPM’s compliance with rules, and reports to the Board of Directors’ Audit Committee at regular intervals. Several focus areas In 2015, the main focus of UPM’s responsibility activities was the previously mentioned renewal of the company’s Code of Conduct and responsibil- ity targets. The safety of employees and contractors also remained an important focus area. The planning of the new One Safety system began in 2015, and the systemwill be brought into use in 2016. The system covers the anticipatory observation and reporting of both occupational safety and environmental issues. Progress was made in the renewal of the management systems used at the com- pany’s pulp and paper mills, for instance, the role of product safety was reinforced. Investments in the further development of responsible sourcing continued. The devel- opment work performed was based on the human rights assessment completed in 2013. The assessment was founded on the UN Protect, Respect and Remedy Framework, the UN Guiding Principles on Business and Human Rights, and a more comprehensive risk analysis than before.

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Biofore strategy Good governance Biofore brand Reliability to customers

Economic Ethics and values Profitability, cost competitiveness and shareholder return Responsible sourcing and selling

Environmental Responsible forest management (incl. biodiversity) Product stewardship (ecodesign, product safety, ecolabels) Resource efficiency and environmental performance

Economic Anti-corruption Risk and opportunity management Taxation Regulatory environment

Environmental Sustainable land use Renewable and low-emission energy Third-party verified management systems

Biofore strategy Transparency

Economic Value offering and collaboration with customers Security (IT, data)

Social Health and safety Employee engagement Human rights Diversity

Environmental Logistics’ emissions Packaging materials GMO positioning

Social People development & talent attraction Responsible restructuring Local commitment

Importance to stakeholders

Social Rewarding

MANAGING THE WATER CHALLENGE

UPM is among the investments of Norges Bank Investment Management (NBIM), one of the biggest investors in the world. In 2015, NBIM published a revised version of the “Water Management – Expectations to companies” guidance. The purpose of the guidance is to express how NBIM, as a financial investor, expects companies to manage the challenges and opportunities surrounding water resources. UPM was consulted by NBIM for input and discussions in the development of the guidance, as UPM has been one of the top performers in NBIM’s framework assessing water disclosures in companies’ reporting. This co-operation is a good example of how the investor community and companies have started to promote best practices in sustainability topics. Integrating the issue of responsibility more thoroughly into investment decisions improves understanding of risks and opportunities and brings added value to the company and to the society. Water risk analysis is relevant to UPM’s business strategy and operational footprint. The company reports several water-related investment programmes to improve energy and water efficiency. UPM’s most water-intensive production plants are located in areas where there is sufficient water available. High-quality fresh water is a precondition for high-quality paper products, for example. As an example, UPM has mapped all pulp and paper mills on the Water Stress Index (WSI) maps, and reports water stress risk exposure per mill. UPM reports on water-related risks in its supply chain. UPM discloses several water performance indicators at corporate and mill levels. The indicators include volume of process wastewater, as well as emissions to the water courses.

Significance of current or potential impacts on UPM

The materiality analysis of the company’s responsibility issues (above) covers topics that directly or indirectly influence the ability to create, maintain or acquire economic, environmental or social value for UPM, stakeholders and society. UPM’s responsibility thinking (below) starts from risk management and extends to stakeholder involvement. When all steps are included, we can achieve third-party recognition.

More with Biofore: Responsibility as a source of competitive advantage

Value creation with stakeholders Dialogue, feedback and engagement

t h i r d - p a r t y r e c o g n i t i o n

R E N E W A B I L I T Y A N D R E C Y C L A B I L I T Y I N N O V A T I O N

New business opportunities with ecodesign Biofuels

E m p l o y e e e n g a g e m e n t a n d s a f e t y

Biocomposites Biochemicals

Creating competitive advantage and long-term value High performing people Resource efficiency Ecolabels and certification

Anticipating and managing risks Code of Conduct Environmental performance Responsible sourcing and forestry