UPM annual report 2015

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IN BRIEF

STRATEGY

BUSINESSES

STAKEHOLDERS

GOVERNANCE

ACCOUNTS

Prioritising product stewardship

Ecolabels and product declarations as a sign of transparency UPMprovides product declarations to grant customers easy access to information concern- ing the product stewardship and the supply chain. Product profiles are developed for vari- ous customer needs, for instance to ensure that products do not contain hazardous chemicals. Ecolabels help customers make responsible choices and provide stakeholders with impor- tant information. Third-party verified environ- mental certificates and labels tell customers about the environmental performance of our products. UPM is globally the largest producer of EU ecolabelled newsprint, office papers and graphic papers. The company also provides its customers with the opportunity to choose papers that have been granted a well-known local ecolabel, such as the German Blue Angel label or the Nordic Ecolabel. All UPM busi- nesses have FSC and PEFC chain of custody certification, which means that customers can use these certifications in their marketing if they wish to do so. The product safety profiles developed by UPM in 2014 were third-party verified and extended to new product groups in 2015. The company’s new UPMBioVerno diesel has been granted the Finnish Key Flag symbol. UPMupdated its product stewardship target in 2015. The previous target of a 25% increase in the share of ecolabelled products by 2020 was achieved ahead of schedule. The new target is to acquire an ecolabel for all relevant products by 2030.

Product stewardship is a key element in UPM’s responsible practices. Our products are made of renewable, recyclable and biodegradable materials, and our rawmaterial base creates a strong foundation for product stewardship and circular economy. UPM’s product stewardship covers the entire manufacturing process from rawmaterial sourcing to the delivery, use and end-of-life management of all products. Ecodesign and product safety mean that all the impacts the rawmaterials and manufactu- ring processes have on the products and the environment are taken into consideration and minimised early on in the design stage. Raw materials, water and energy are used in a resource efficient way. UPMprovides its custo- mers with products that are safe to use. The company’s product stewardship is comple- mented by open and transparent product communication. In January 2015, UPM launched the com- mercial production of renewable diesel UPM BioVerno. New UPMProFi composite applica- tions were also introduced during the year. Other examples of product stewardship: • Lighter UPMValor printing paper • Thermoformable UPMGrada wood material • Share of ecolabelled products • The UPMRestricted Substance List (RSL) • RafCycle recycling solution for label waste

Pairing low carbon with high efficiency UPM BioVerno renewable diesel is an excellent ecodesign example, combining both high levels of functionality and environmental benefits. The high quality and higher cetane number of UPM BioVerno increases the power of the engine and provides cleaner combustion in the engine, resulting in significantly lower tailpipe emissions. In addition to fulfilling high quality requirements, the fuel provides important environmental benefits such as decreasing CO 2 emissions by up to 80% during its lifecycle, and also decreasing hazardous harmful tailpipe emissions compared to conventional fossil diesel fuels. “The results showed that even as a 30% blending component, the accumulated hydrocarbon emissions were reduced by more than half and the carbon monoxide emissions by more than 40% compared to reference fossil diesel. Our tests also showed good results in NOx emissions and efficiency,” says Dr. Ing. Thorsten Schnorbus, Manager Passenger Car Diesel, FEV. UPM initiated BioVerno field tests in urban buses together with Helsinki Region Transport (HSL) and the VTT Technical Research Centre. The fleet tests are a part of the Helsinki Region Transport initiative that is aiming for emission-free public transport.

A 20-year tradition of guiding the biodiversity Biodiversity has been one key element in UPM’s forestry and wood sourcing strategy for more than 20 years. UPM has enhanced a new working culture by actively taking part in various species and habitat projects in co-operation with stakeholders. UPM’s biodiversity programme aims to maintain and increase biodiversity in forests as well as promote best practices in sustainable forestry and wood sourcing. “It is great that maintaining biodiversity plays such an important role in UPM’s strategy. I hope that UPM’s example also encourages other companies to include ecosystem services in their environmental responsibility themes and to see the opportunities offered by new nature-based solutions in their business strategies”, says Timo Tanninen, Director General, Ministry of the Environment. purification, pollination, preventing erosion and raw material provision. Preserving biodiversity will help to support adaptation to potential impacts on climate change. It is also important for maintaining the health and strength of wildlife populations. Biodiversity supports ecosystem services including air quality, climate, water

Sustainable forestry and fibre sourcing the cornerstones of UPM’s business

During 2015, UPM’s Finnish FSC group certification scheme grew to cover over 100,000 hectares of forest. The company also worked together with FSC Finland to launch a pilot project for promoting the certification of small privately owned forests. All the wood sourced by UPM is covered by third-party verified chains of custody. UPMupdated its forest and biodiversity targets in 2015. The previous target of main- taining the share of certified fibre at 85%was nearly achieved as 84% (83%) of the wood used in the UPMmills is certified. The new target is to reach 100% level by 2030. UPM is both a major forest owner and a purchaser of wood Global deforestation, which is caused by the growing need for food production and wood, particularly in the tropics, is an essential con- cern for the entire forest industry. UPM recog- nises that deforestation is a global challenge and responds to it in its own operations, for instance by actively participating in interna- tional collaboration. UPM does not use wood from tropical rainforests as rawmaterial, or accept wood

Wood is a renewable material and the primary rawmaterial for UPM’s businesses. Wood is UPM’s most important rawmaterial. The company is committed to sustainable forestry, monitors the origin of wood and ensures that wood is legally logged from sustainably man- aged forests. At the end of 2015, UPM owned 704,000 hectares of forest in Finland and 75,000 hec- tares of forest in the United States. The com- pany additionally has 236,000 hectares of forest plantations in Uruguay. Forests owned by UPMhouse approximately 50,000 protected sites with a total area of approximately 148,000 hectares. The company is also responsible for managing nearly 900,000 hectares of forests owned by private forest owners and 57,000 hectares of forest plantations. Forest certification is an excellent tool for promoting sustainable forestry. Certification is based on standards that have been created in an open stakeholder process, and compliance with these standards is monitored by an inde- pendent third party. All of UPM’s forests are certified, and the company also promotes certification in privately owned forests, for instance through group certification.

UPM's ecolabelled sales *)

EU Ecolabelled sales 47% (incl. products with multiple labelling)

Sales without ecolabels 23%

Read more: www.upm.com/responsibility, www.upmbiofuels.com

Other ecolabels sales 30% (FSC, PEFC, SFI, German Blue Angel)

*) incl. Paper, Pulp, Plywood, Timber and ProFi