UPM annual report 2015

IN BRIEF

STRATEGY

BUSINESSES

STAKEHOLDERS

GOVERNANCE

ACCOUNTS

from forest plantations that have been estab- lished by converting rainforests. UPM does not operate in areas where the rights of indigenous peoples are threatened or endangered. In 2015, UPM received recognition from the Food and Agriculture Organization of the United Nations (FAO) for its exemplary forest management practices in Uruguay. The recognition was conferred by the local forestry authorities. Own forests essential for research and development UPMhas systematically developed new ways of securing biodiversity in commercial forests for over two decades. A good example of this work is provided by a joint project aimed at promot- ing the wellbeing of the endangered white- backed woodpecker in commercial forestry. The project was carried out by UPM, WWF Finland, The Finnish Environment Institute (SYKE) and Metsähallitus (Finland’s forest administration). During the past 20 years, the population of the white-backed woodpecker has multiplied as a result of the conservation and management of its natural habitat. During the year, UPMparticipated in the CBD Business and Biodiversity Forum 2015 held in Helsinki. The CBD Business and Biodi- versity Forum is part of the UN’s Convention on Biological Diversity initiative. Recognising ecosystem services offers plenty of opportuni- ties from the bioeconomy point of view, and UPM and the Finnish Environment Institute (SYKE) published a joint study on ecosystem services that can be derived from forests along- side the production of wood. The study pro- vided more insight into the environmental impacts of wood-based products. UPM and the FinnishMinistry of the Environment also agreed on the establishment of several private conservation areas in different parts of Finland in 2015.

Sourcing operations play a significant role in ensuring the efficiency and profitability of UPM.

The objective of UPM’s sourcing operations is to enhance a supplier base that is capable of delivering material and service solutions that are cost competitive, produced in a responsible way and innovative to UPM businesses globally.

Photo: Orpe Kuljetus

Responsible sourcing throughout the entire supply chain

The sourcing of all necessary products and services represents a significant cost element for UPM business. Cost efficiency is the lead- ing principle in UPM sourcing. Besides cost, UPM sets requirements for the reliability of deliveries in the long term as well as the quality of the products and services. In addition, requirements are also set for financial stability of the supplier, the environ- mental management of operations, social responsibility, occupational health and safety and product safety. UPM aims to be a professional partner to its suppliers and to develop supplier relation- ships in a responsible manner that deliver long-term benefits to both parties. Suppliers are an important stakeholder group for UPM. The company’s sourcing network consists of suppliers ranging from private forest owners and local companies to large international corporations. Over 25,000 suppliers around the world deliver a variety of rawmaterials, products and services to UPM. UPM continuously evaluates the perfor- mance of its suppliers and seeks to develop key supplier relationships. We have estab- lished long-term plans with some 400 suppli- ers in order to ensure systematic performance and quality development. Internal stakeholders’ satisfaction with the responsibility of key suppliers is measured annually. As a result, our understanding of the Wide range of suppliers – targeted co-operation

complete lifecycle of products is continuously enhanced, and the social and environmental performance of UPMproducts is further improved. Transparent supplier requirements are the basis for responsible sourcing The current business environment calls for a transparent and responsible supply chain. Transparent and systematic supplier require- ments are the basis for UPM’s supplier selection process and supplier performance evaluation. UPM requires its suppliers to apply the principles of the Code of Conduct and to fulfil the criteria concerning social and environmen- tal responsibility. These supplier requirements are defined in the UPM Supplier Code. UPM expects its suppliers to expose the same requirements in their upstream supply chain. In 2015, 79% (67%) of supplier spend was qualified against the Supplier Code. Additional specific requirements are in place for areas such as wood, chemicals, safety, logistics, pulp and packaging. UPM’s supplier risk assessment covers financial, quality, delivery, environmental, social and economic risks. Based on the risk assessments UPM selects the suppliers whose performance is studied more closely by annual questionnaires, joint development plans and supplier audits. All UPM’s suppliers of primary rawmaterials – wood, pulp and recovered paper – have been screened using environmental, labour practices and human rights criteria and criteria for

Certified wood supplied to mills %

100

80

60

40

20

0

15 14 13 12 11 10 09 08 07 06

Read more how larger loads improve efficiency and benefit the environment: www.upmbiofore.com

The share of certified fibre supplied to UPM’s mills increased to 84% (83%). UPM’s target is to get all fibre certified by 2030.

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UPM Annual Report 2015

UPM Annual Report 2015