UPM annual report 2015

IN BRIEF

STRATEGY

BUSINESSES

STAKEHOLDERS

GOVERNANCE

ACCOUNTS

Collaborating with customers UPM offers a wide range of renewable and recyclable products to be further processed into a variety of useful everyday products, and also provides services that meet the needs of a versatile range of customers. UPM’s interaction with customers is based on continuous dialogue and regular customer satisfaction surveys.

Wood Sourcing and Forestry Wood and wood-based biomass (logs, pulpwood, chips, forest residues etc.),

Pulp

Biofuels

Timber products

Energy

UPM Raflatac UPM Paper Asia

UPM Paper ENA Plywood

Product range

Softwood, birch and eucalyptus pulp

Wood-based renewable diesel and gasoline for transport

Standard and special sawn timber

Electricity and related services

Self-adhesive paper and film labelstock

Fine papers, office papers, labelling and packaging materials

Magazine papers, newsprint, fine papers for various end uses

Plywood and veneer products, thermoformable wood material

full forestry service package offering

Customer industries

Tissue, specialty, printing and writing papers and packaging

Fuel distributors, transporta- tion, oil and petrochemicals industry

Joinery, packaging, distribution and construction industries

Nordic market: Industrial consumers, electricity distributors and retailers

Label printers, packers, brand owners in durables, tyres, retail, A4, food, beverage, personal care, pharmaceutical, retail and logistics segments Continuous dialogue, customer surveys, training, customer events • Strengthen films & specials offering • Optimisation of production and distribution network • Product development partnership • Improvement of supply chain efficiency • Sustainability and product safety solutions Product safety, lifecycle analysis, ecodesign, waste management, recyclability and forest certification increasing label use for packaging and logistics • Increase in automated product labelling and identification • Retailer and distributor network development • Adhesive technologies for demanding applications • Online commerce

Distributors, retailers, OEMs (original equipment manufacturer), printers, publishers and converters

Newspaper and magazine publishers, printers, cataloguers, retailers, distributors and converters

Construction, vehicle flooring, LNG shipbuilding and parquet industries as well as furniture and other manufacturing industries

All UPM businesses using wood or wood-based biomass, forest owners

Measurement of customer satisfaction

Continuous dialogue, regular customer surveys

Continuous dialogue and collection of feedback, end-user studies

Continuous dialogue and collection of feedback, customer satisfaction survey every second year • Further focus on strategic markets and market- specific weighting • Customer categorisation and customer specific account plans • Optimisation of raw material quality and usage • Delivery accuracy

Continuous dialogue

Continuous dialogue and customer meetings, regular customer surveys

Continuous dialogue, regular customer surveys

Continuous dialogue, bi-annual customer surveys

Continuous dialogue and regular customer surveys

Actions in 2015

• Co-marketing and best practice sharing on sustain- ability with customers • Increased pulp production and bailing capacity at Kymi mill • Strengthened supply chain • Strengthened technical customer service in Europe • Strengthened sales in APAC and Europe Safety, forest certification, sustainable forestry, environmental performance of mills, water use and resource efficiency

• Commercial production and deliveries started in January • Launch of UPM BioVerno

• Achieved customer cost reductions through energy management services

• Launch of PM3 label products and new value-added products • Joint development projects with customers • Enhancing sustainability message further • Customer focus throughout the organisation

• Launch of new products that add value to customers • Joint product and • Development of service offering • Improved business interaction with customers Safety, forest certification, environ- mental performance, supplier audits at mills, ecolabels, resource efficiency and financial stability as a supplier business development

• Continuation of the ongoing work to improve supply chain performance and service • Quantifying the added value of new product solutions • Continuous customer and contract manage- ment

• Development of a new way of serving forest owners • Development of web solutions to improve customer service • Development of the relationship and way of working with entrepreneurs Sustainable forestry, forest certification, income and employment for people living in rural areas, employee relationship with private entrepreneurs

renewable diesel to consumers in Finland

• Ensuring product functionality by

Customers value UPM’s comprehensive product range, reliability and excellent environmental performance.

comprehensive motor and fleet testing

Important corporate responsibility topics

Low-emission electricity production, balancing energy grid with balancing power, fish migration

Reducing greenhouse gas emissions and tailpipe emissions, biofuels-specific sustainability certification, social and traceability criteria in targets set by the EU Renewable Energy Directive • Global increase of advanced biofuel volumes and demand • Waste and residue-

Chain of custody, origin of wood and forest certification

Product safety, forest certification, origin of wood and resource efficiency, supplier audits at mills

Forest certification, chain of custody, product safety and resource efficiency

Major changes in customer industries

Fine Papers APAC: • Changes in graphics end uses • Increased share of e-media • Quality upgrade and lower price in cut-size business Label, Pack and Release: • Growth in personal care products • Retailer and distributor network development • Online shopping boosting • Increase in automated product labelling and identification

• Growth of tissue and packaging board production • Continued decline of printing and writing paper industry in mature markets

• Growing importance of East Europe as a production area • Instability and financial challenges in Egyptian market

• Structural changes in the Nordic electricity market • Increased volatility of electricity market through subsidised weather dependent production capacity

• Digitalisation • Structural overcapacity • Variations in raw

• Increased need for services, stocks and short lead times • Requirement for forest certifications has increased within on-site construction end use • More customer-driven specifications among industrial end users decreasing supplier’s possibility to differentiate with a product

• Increasing wood demand and

UPM’s businesses vary in the products and services they offer. Each business has its own customer management process and way of interacting with customers. A comprehensive understanding of the markets, knowledge of end uses and an appreciation of customers’ needs form the basis of UPM’s customer relationship management. UPM’s target is to provide customers with solutions that improve customers’ business processes, with a special focus on creating mutual benefits with increased efficiency. Matters related to environmental perfor- mance are also at the centre of UPM’s cus- tomer offering. Collaboration with customers In addition to a continuous working dialogue, UPM is engaged in various development projects with customers. Many of the projects are related to product development, supply chain efficiency and optimisation, as well as the co-planning of activities. Customer satisfaction is measured regu- larly in most businesses through customer satisfaction surveys conducted by a third party. Based on various business customer satisfaction surveys, the overall total satisfac- tion with UPM as a supplier is 75%. The result is not comparable with the previous year’s result due to changes in the methods of surveys. The surveys act as a tool for further

competition due to pulp mill investments in Finland

based biofuels are favoured by both customers and legislation

material availability and costs

• Increasing energy wood demand

• Power shift in global economy • Consolidations

development, and bring an important cus- tomer dimension to performance manage- ment. Customers interested in responsibility Based on the dialogue and surveys, UPM’s customers take an interest in the company’s responsibility performance and the sustain- ability of its operations. Product safety, forest certification and chains of custody, resource efficiency, safety performance and the supply chain are among the most important topics. The significance

of long-term financial performance and profit- ability of the supplier have increased. UPM offers product declarations and environmental data for most products as a tool to provide customers with information on the sustainability of products and the supply chain.

Read more on UPM BioVerno renewable diesel on p. 22 and 51, UPM Raflatac’s shrink sleeves p. 26 and UPM Paper ENA’s Paper consultancy model on p. 30

UPM Annual Report 2015 49 contents

UPM Annual Report 2015 50