UPM annual report 2015

IN BRIEF

STRATEGY

BUSINESSES

STAKEHOLDERS

GOVERNANCE

ACCOUNTS

United Nations Sustainable Development Goals guiding UPM Targets

New responsibility targets to 2030

UPM responsibility focus area 2030 target

2030 follow-up / 2015 RESULTS

E conomic Profit Creating value to shareholders

Based on a materiality analysis (page 10), UPM has established a set of responsibility focus areas to guide its responsibility activities, and determined targets and performance indicators. The responsibility focus areas, targets and performance indicators were all updated in 2015, and cover all three areas of responsibility: economic responsibility, social responsibility, and environmental responsibility. In addition to being influenced by the materiality analysis, UPM’s new long term responsibility targets were also influenced by the UN’s Sustainable Development Goals (SDG) published in 2015. In the area of economic responsibility, UPM’s responsibility principles cover econo- mic performance, good governance and res- ponsible sourcing. The principles for social responsibility focus on the implementation of human rights, occupational safety, local co-

ent third party PricewaterhouseCoopers Oy (see the Independent Assurance Report on page 77), and congruence between the English and Finnish versions has been checked. The shortened GRI content index can be found on pages 75–76. The GRI content index, including detailed descriptions of the scope of the repor- ting and data collection techniques, is available on the company website at www.upm.com/ responsibility. To further underline the company’s strong focus on stakeholder engagement and sustai- nable development, UPM is committed to the principles of inclusivity, materiality and res- ponsiveness, as defined in the AA1000 Accoun- tAbility Principles Standard (2008).
 UPMprovides comprehensive environmen- tal information that has been assured by third parties from corporate level to the mills and individual products. Ecolabelled products, product declarations and certified operations are used to inform the company’s stakeholders about sustainability, transparency and risk management (read more on product steward- ship on page 51).

operation between UPM and stakeholders, and UPM’s role as a responsible employer. In terms of environmental responsibility, the key focus areas are sustainable products, the climate, the utilisation of forests and waterways, and the reduction of waste. Some of the targets are con- tinuous and some have been extended to 2030. For environmental targets, the reference year 2008 was maintained to ensure that the new targets remain comparable with previous targets (see table on next page). The 2015 achievements in regard to old 2020 targets are presented on UPMwebsite. UPM provides an extensive amount of assured information UPMuses the G4 Guidelines published by the Global Reporting Initiative to measure and report on corporate responsibility at Group level. UPM’s corporate responsibility reporting in 2015 has been prepared to meet the GRI G4 ‘In accordance’ - Core option. Standard disclo- sures for 2015 in English with a reference to external assurance in the GRI content index have been externally assured by an independ-

• Operating profit margin > 10% • Return on equity at least 5 percentage points above the yield of a 10-year risk-free investment • Gearing ratio to be kept below 90%

• Operating profit excluding special items was 11.5% of sales. • Return on equity excluding special items was 12.1%. • Gearing ratio as of 31 December 2015 was 26%. • More than 90% of employees have completed the previous Code of Conduct training. • 79% of supplier spend qualified against UPM Supplier Code. (+12pp compared with 2014). • 92% of raw material spend qualified against UPM Suppler Code. • Since 2013, the number of risk assessment-based supplier audits has been doubled, with a much wider geographical area than earlier.

Governance Ensuring accountability and compliance Responsible sourcing Adding value through responsible business practices

• 100% coverage of participation to UPM Code of Conduct training (continuous)

• 80% of UPM spend qualified against UPM Supplier Code (continuous) • 100% of UPM raw material spend qualified against UPM Supplier Code by 2030 1) • Continuous supplier auditing based on systematic risk assessment practices

Social Diversity and inclusion

• All UPM employees are treated as individuals regardless of gender, age, race, nationality etc. 100% favourable responses in Employee Engagement Survey by 2030 • Diversity initiative to be started in 2016 • Target setting and development plan for all employees, completion rate 100% by 2030 • Employees experience the opportunity for learning and development, 80% favourable in Employee Engagement Survey by 2030 • Employee engagement index overall favourable score in global top quarter by 2030 • No fatalities or serious accidents in UPM operations • Continuous improvement in safety: Lost time accident frequency (LTAF) <1 and Total recordable injury frequency (TRIF) <2 levels permanently reached including contractors • All operations have certified OHS system by 2030 • Health Promotion Programme is in use at all UPM sites and businesses by 2030 • Absenteeism rate < 2 % in all organisations by 2030 • Continuous development of strategic sustainability initiatives with leading NGOs • Continuous sharing of best practices of stakeholder initiatives • UPM sponsorship and donations programme to be started • Environmental Management Systems in 100% use (continuous) • Environmental Product Declarations for all products (continuous) 3) • All applicable products ecolabelled by 2030 • No process waste to landfills or to incineration without energy recovery by 2030 emissions from own combustion and purchased electricity (Scope 1 and 2) reduced 30% by 2030 • Maximise the business benefits of greenhouse gas claims (continuous) • Acidifying flue gases (NOx/SO 2 ) reduced 20% by 2030 4) • Fossil CO 2

• Responses to Employee Engagement Survey’s diversity question were 77% favourable. • Intiative will be started in 2016.

Developing organisational culture and local conditions to ensure inclusive and diverse working environment for business success Continuous learning and development Ensuring high performance for business success and continuous professional development for future employability Responsible leadership Emphasising value-based and inspiring leadership and integrity. Continuous development of working environment Working conditions Ensuring safe and healthy working environment and wellbeing of employees

• 86% of all permanent employees had a personal performance review with their managers.

• Responses to Employee Engagement Survey’s question regarding learning and development were 61% favourable.

• Employee engagement index overall favourable score increased to 66%. This is 10% below global top quarter.

• One fatal contractor accident in 2015. • LTAF was 3.9 for own employees and 5.5 for contractors. TRIF was 10.6 for own employees. Follow-up of TRIF for contractors will be evaluated in 2016. • All production sites have an OHS management system in place. 45% of the sites got external certification of their OHS system. • A majority of the sites have started their programme. • The absenteeism rate was 3.7% in 2015. • Co-operation with BirdLife and Vida Silvestre continued. • Sharing of best practices ensured through well-established operational stakeholder forums, for example. • Programme will be started in 2016. • All production sites have a certified environmental management system in place, except the new biorefinery. • Environmental declarations are available for all relevant UPM products. • The share of ecolabelled products was 77% (76% in 2014). • Over 90% of UPM’s total process waste was recycled or recovered. • Despite improvements in fuel mix and energy efficiency, actions have not compensated for the increased level caused by the Myllykoski acquisition in 2011 and increased CO 2 factors for purchased power. • UPM sold greenhouse gas claims worth of 0.5m CO 2 tonnes. Without sales UPM’s reported emissions (Scope 1 and 2) would have been over 7% lower. • 20% reduction achieved since 2008 for the UPM average product. • 29% reduction achieved since 2008 for the UPM average product. • 11% reduction in wastewater achieved since 2008 for the UPM average product. • Project will be started in 2016.

Read more: www.upm.com/responsibility, https://sustainabledevelopment.un.org

Community involvement Ensuring local commitment

Environmental 2) Product stewardship Taking care of the entire lifecycle

Waste Promoting material efficiency and circular economy - reduce, reuse and recycle Climate Creating climate solutions and working towards carbon neutrality

Water Using water responsibly

• Effluent load (COD) reduced 40% by 2030 4) • Wastewater volume reduced 30% by 2030 4) • 100% of nutrients used at effluent treatment from recycled sources by 2030

Forests and Biodiversity Ensuring sustainable land use and keeping forests full of life

• 100% coverage of chains of custody (continuous) • All fibre certified by 2030

• Coverage is 100%. • The certified fibre share increased to 84%.

1) Covers all UPM raw material spend including wood and wood-based biomass sourcing and excluding energy 2) Environmental targets: from 2008 levels

3) Includes paper, timber, plywood, pulp and label 4) Numerical targets relevant for pulp and paper production

contents

UPM Annual Report 2015 35

UPM Annual Report 2015 36