UPM annual report 2015

IN BRIEF

STRATEGY

BUSINESSES

STAKEHOLDERS

GOVERNANCE

ACCOUNTS

Creating added value through stakeholder engagement

Challenging start-ups at Slush

The 2015 Slush event focused on themes related to the bio-based and circular economy and added value generated by services and smart operations. UPM partnered with Slush to offer new partnership opportunities for start-up companies. “We are looking for partners to develop new ideas that aim to make good use of forest industry side streams such as sludge, ash and, in particular, waste heat derived from the pulp and paper process. We believe that start-up companies have plenty of opportunities to grow with us in these areas”, says Jyrki Ovaska, Executive Vice President of Technology at UPM. UPM is also engaging in start-up collaboration to build innovative mobile solutions for the new generation of forest owners. UPM also challenges mobile game developers together with Guides and Scouts of Finland to create a mobile game that motivates the younger generation to learn about forests and the opportunities they offer from a completely new perspective. Slush brings together some 15,000 attendees, including 1,700 start-ups and 800 venture capital investors from 100 countries.

To ensure long-term engagement, UPM continuously works with its diverse range of stakeholders to understand their specific expectations. It is equally important to communicate and discuss the company’s targets, operating principles, values and the challenges it faces within the business environment.

Well-functioning stakeholder engagement is bringing competi- tive advantage to the company. Every year, UPM produces a mate- riality analysis that highlights the most important issues for UPM and its stakeholders. The analysis is based on stakeholder feedback and the company’s risk mapping. In 2015, the most important issues were innovation, portfolio devel- opment and value creation, as well as growth.

advantage and continuous innovation. It also helps third parties to understand key challenges and opportunities in the company’s operating environment. Activity in 2015 The 2015 materiality analysis is based on a third-party survey and additional focus group interviews. In addition, the importance and potential impact of different issues or activities on UPM’s operations was assessed based on feedback from regular stakeholder enquiries, the company’s risk mapping and other sources of information. During the year the management’s responsi- bility for legal and Code of Conduct compliance was underlined in trainings and discussions. The Code of Conduct was renewed during the year and the Board of Directors approved the new Code of Conduct in February 2016. The revised Code of Conduct includes new sections on trade sanctions, data privacy, responsible sourcing and interaction with stakeholders. UPMwas able to respond to stakeholders’ expectations reasonably well. The majority of direct feedback from stakeholders focused on the local effects of UPM’s operations, such as noise, odour or logging practices. Customer enquiries focused on topics such as product safety, ecolabels and the origin of rawmaterials. UPM actively participated in the discussion and provided facts and further information in each situation. In one case a stakeholder pursued its interest through a court process. The former employees of the French Docelles mill demanded to acquire the mill below the market price: the claimwas dismissed in the commer- cial court. OECD, however, reprimanded UPM for the process. Competitiveness at the forefront of public affairs Through public affairs work, the company aimed to foster the necessary prerequisites for investment, particularly in Finland, China and Uruguay. Within the EU, UPMpromoted competitive and consistent energy and climate policy regulation. UPM co-operated with a

As UPM is primarily viewed as an economic operator, financial success, stability, future outlook and growth are fundamental themes for most stakeholders. In addition, UPM’s environmental performance and social respon- sibility play a significant role in UPM’s ability to operate and affect the long-term success of its businesses. UPM aims to provide a balanced view of the economic, environmental and social aspects of its business activities, recognising, however, the differing interests and emphases of differ- ent stakeholders. Stakeholder engagement is part of the strategy process Stakeholder mapping in all businesses is an essential part of stakeholder relations, along with the systematic gathering of feedback and views from different sources. This way, UPM aims to ensure that sufficient consideration is given to stakeholder needs during the strategic development and decision-making processes. The Stakeholder Relations function, which is represented in all businesses, is responsible for the global leadership and co-ordination of activities, while UPM’s businesses are respon- sible for local activity. Best practises are regu- larly shared. UPM’s most important stakeholders are customers, investors and financiers, employ- ees, suppliers, local communities, authorities and key decision makers, the media and non- governmental organisations. The approach to each varies based on business focus, region and individual stakeholder groups. The UPMCode of Conduct sets the stand- ards of responsible behaviour for each and every UPMemployee towards stakeholders. The standards cover topics relating to legal compliance and disclosure, conflicts of interest, anti-corruption and anti-bribery, HR practices, human rights questions and environmental matters. The level of stakeholder engagement is measured by several key performance indica- tors and enquiries. Feedback from stakehold- ers adds value by contributing to risk mitiga- tion, as well as the development of competitive

Read more: www.upm.com/innovation

Co-operation on environment provides prerequisites for trust For environmental and responsibility issues, UPM’s stakeholder engagement activity was aimed at maintaining consistent quality in operations and products, along with securing the prerequisites for future activities. Globally, UPM continued its active co-operation with local permit authorities. Co-operation also continued on a voluntary basis with a wide range of stakeholders relating to ecolabels, standards and standardisation frameworks, as well as nature conservation. UPMwas invited to participate in the UN Global Compact LEAD group, which represents the world’s leading companies to promote sustainability through innovation and actions. On environmental issues, co-operation contin- ued with the Birdlife and Uruguayan Vida Silvestre. With regard to ecolabels and stand- ardisation issues, UPM collaborated with FSC, PEFC, the German Blue Angel, the Swan label, The Finnish Key Flag symbol, ISCC and the EU Ecolabel. Global sustainability initiatives were

promoted withinWBCSD and in co-operation with The Forest Dialogue organisation. The company also engaged in several joint initiatives with different parties: in China, UPMwas one of the ten founding members of the China Sustainable Paper Alliance (CSPA). WWF China and the Chinese Forestry Industry Association are key players in the initiative. The purpose of the alliance is to promote responsible sourcing and sustainable forestry During 2015, UPM’s Biofore strategy and its progress was widely discussed with the key stakeholder groups. The constant transforma- tion of the company, growth projects and inno- vations continued to generate significant inter- est. More than 20,000 visitors visited the head office at Biofore House and were introduced to UPM’s transformation story. An important step was the start-up of the Lappeenranta Biorefinery, which marks the in the Chinese forest industry. Biofore transformation strategy raised interest

number of trade associations on these topics. In Finland, UPMhighlighted the economic footprint of its existing operations. In addition, UPMhas published six critical topic areas within the Finnish operating environment that impact the competitiveness of the forest indus- try in Finland and continued to discuss these topic areas with several Finnish decision mak- ers. The same consistent messages were also delivered to local decision makers. On the environmental front, the most important influencing activity was the pre­ parations for the Paris COP climate summit together with industry associations and through the Low Carbon Technology Partner- ship Initiative by the World Business Council for Sustainable Development (WBCSD). The initiative involved an extensive dialogue with the stakeholders. Forest industry, for its part, offers solutions to mitigate climate change through renewable, carbon binding and resource efficient products.

contents

43

44

UPM Annual Report 2015

UPM Annual Report 2015