UPM annual report 2015

IN BRIEF

STRATEGY

BUSINESSES

STAKEHOLDERS

GOVERNANCE

ACCOUNTS

Changing operating environment

The global population is growing and its purchasing power and living standards are expected to increase. By 2030, there may be 3 billion more middle- class consumers, mainly in the developing countries. Digitalisation is already impacting most businesses today. This concept will continue to change consumer preferences, as well as the ways in which business or work are being conducted. Climate change is a major challenge for the world. In the coming years, it is likely to have an increasing impact on businesses, both directly as well as through various policy responses. Both regulation and demand for transparency are increasing. These developments represent many long term opportunities and challenges for UPM. They are also driving demand for sustainable solutions and responsible business practices.

Population growth – Urbanisation and EXPANDING middle class in emerging markets Demographic change

Digitalisation

Climate change

Responsibility and compliance

Megatrends

Expressions

Increasing regulation, subsidies Requirements for transparency

Policies to limit and mitigate climate change Replacing fossil energy and oil-based materials Direct and indirect impacts of climate change

Changing consumer preferences — from print to screen Growing e-commerce Changing work Disruptive business models and technologies

Global consumption growth Economic power shift to emerging markets Higher living standards Changing consumer behaviour and preferences Increasing interest for sustainable solutions and supply chains Resource scarcity, competition for natural resources

Global trade and businesses, local impacts Focus on human rights, pollution, biodiversity

Responsibility and sustainability offer competi- tive advantage and growth opportunities Regulation may drive markets for sustainable products New business opportunities with ecodesign Transparency as competitive advantage Cost efficient and responsible supply chains Engaged and diverse workforce

Sustainability offers competitive advantage and growth opportunities Preferential treatment of low-emission and renewable energy Growing demand for safe and sustainable products New business opportunities with ecodesign Forests as carbon sinks Increased forest growth in Scandinavia Unpredictable regulation and subsidies may distort markets Cost for greenhouse gas emissions Political instability Increasingly common and more severe storms, floods, draughts, natural disasters Unpredictable wood harvesting conditions

Different demand trends for different paper end uses and geographical areas UPM’s paper production platform provides continuous optimisation opportunities Online shopping drives demand for labelling, packaging and pulp Increasing efficiency, productivity and change agility Industrial internet, big data, automation

Attractive growth outlook for pulp, tissue, packaging, hygiene products, labelling materials, self-adhesive labelstock and wood products globally Attractive growth outlook for renewable materials and renewable energy Growing demand for safe and sustainable products New business opportunities with ecodesign Resource efficiency and circular economy offer competitive advantage Cost efficient and responsible supply chains Healthy forests and safeguarded wood availability

Opportunities for UPM

Reputation and financial risks in case of non-compliance Unpredictable regulation and subsidies may distort markets Trade barriers, protectionism, sanctions

Declining graphic paper consumption Fit of UPM’s product mix and geographical presence to future growth outlook Changing needs for skills and competencies Cyber security

Fit of UPM’s product mix and geographical presence to future growth outlook Unpredictable raw material costs and availability Competition for renewable raw materials Unpredictable regulation and subsidies may distort markets

challenges for UPM

UPM’s Biofore strategy fits well into the changing world

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performance

growth

PORTFOLIO

innovation

Growth in competitive pulp, label, packaging and release materials, self-adhesive labels, office papers in APAC Plywood solutions for transport and LNG shipping Commercialise new business in biofuels (outside food value chain), biocomposites and biochemicals Focus on competitive, low-emission

Business portfolio development organi- cally and potentially through M&A Businesses with best development and/or value potential for UPM

Continuous improvement in cost efficiency, competitiveness and productivity Efficient use of renewable materials and energy UPM Code of Conduct, compliance, transparency Responsible sourcing, UPM Supplier Code Continuous improvement in health and safety, employee engagement and human capital development Industry leading environmental performance, Best Available Techniques (BAT) Sustainable forest management, UPM’s global biodiversity programme Water strategy, production in water abundant areas Local commitment Robust and safe IT systems

Develop new businesses in biofuels (outside food value chain), biocomposites and biochemicals Value added product and service development in current businesses Expertise in renewable materials and energy Product stewardship Recycling and reuse of production waste Collaboration and partnerships in R&D Intellectual property rights

energy sources Talent attraction

Read more: UPM’s responsibility focus areas and 2030 targets are on page 36

contents

UPM Annual Report 2015 15

UPM Annual Report 2015 16