UPM annual report 2014

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UPM Annual Report 2014 UPM Annual Report 2014 47 48
CONTENTS
Key
trends
Key area
of responsibility Target Achievement 2014
POWER SHIFT IN WORLD ECONOMY
ECONOMIC
Profit
Shareholder value creation
• 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 8.6% of sales. Four out
of six business areas achieved their long-term return targets.
Return on equity excluding special items was 8.3%.
Gearing ratio as of 31 December 2014 was 32%.
Governance
Accountability and compliance
• > 90% coverage of participation to UPM
Code of Conduct training by 2015
Approximately 88% of employees have completed Code of Conduct
training.
SOCIAL 1)
Leadership
Responsible leadership
• Employee engagement index overall
favourable score exceeding 70% by 2015
• Employee engagement survey response
rate reaching 70% and over by 2015
Employee engagement index overall favourable score increased
slightly to 63%.
Employee engagement survey response rate was 78%.
DEMOGRAPHIC CHANGE
People development
High performing people
• Employee Personal Performance Review (PPR)
coverage exceeding 90% globally by 2015
Employee Personal Performance Review (PPR) coverage
increased slightly and was at the level of 86%.
Working conditions
Safe and encouraging
working environment
• No fatal accidents (continuous)
• Lost time accident frequency below
5 (per million hours or work) by 2015
• Annual targets set for the reporting of near
misses and safety observations
Three fatal accidents: one employee accident in Finland as well as
one contractor accident in Finland and one in Germany.
Approximately 18% improvement in lost-time accident frequency
(LTAF) from the previous year and 70% achievement over 3 years. In
2014, the LTAF was 4.4.
Annual target (two near misses or safety observations reported per
employee) set and achieved at corporate level.
Community involvement
Local commitment
• Continuous development of strategic
sustainability initiatives with leading NGOs
• Continuous sharing of best practices
of stakeholder initiatives
Co-operation with IUCN, WWF and Vida Silvestre continued.
Sharing of best practices ensured for example through well-estab-
lished operational stakeholder forums in various locations.
Responsible sourcing
Value creation through
responsible business practices
• > 80% of UPM supplier spend qualified
against UPM Supplier Code by 2015 5)
• Continuous supplier auditing based
on systematic risk assessment practices
67% of supplier spend qualified against UPM Supplier Code with
3 percentage points increase compared to the previous year.
Risk assessment related to supplier base enhanced and number of risk
assessment-based supplier audits significantly increased in 2014,
with a wider geographical coverage than before. Awareness on
responsible sourcing raised through internal training.
RESOURCE SCARITY CLIMATE CHANGE
ENVIRONMENTAL 2)
Products
Taking care of the entire
lifecycle
• Environmental management systems certified in
100% of production units (continuous)
• Environmental declarations for all product groups
(continuous)
• 25% growth in the share of ecolabelled products
by 2020 3)
All sites except one have a certified environmental management
system in place. UPM is a global frontrunner in the use of EU EMAS.
Environmental declarations are available for all relevant UPM
products. In 2014, UPM launched Product Safety Profiles for
its paper products.
Increase of ecolabelled sales in line with target. UPM actively
participated in developing new EU Ecolabel criteria for converted
paper products.
Climate
Creating climate solutions
• 15% reduction in fossil CO 2 emissions by 2020 4) Development not in line with target. Despite improvements in fuel mix
and energy efficiency, actions have not compensated for the
increased level caused by the Myllykoski acquisition in 2011.
Water
Using water responsibly
• 15% reduction in wastewater volume by 2020 4)
• 20% reduction in COD load by 2020 4)
Development not in line with target. Average specific wastewater
volume for UPM decreased only slightly due to a higher weight of
pulp in portfolio, despite the fact that UPM Fray Bentos has one
of the lowest water use rates in the industry.
Development in line with target. 16% reduction achieved since 2008
for the UPM average product.
Forest
Keeping forests full of life
• Maintain high share of certified fibre 85%
• 100% coverage of chains of custody (continuous)
Development in line with target. The certified share increased from
80% to 83%.
Coverage is 100%.
Waste
Reduce, reuse and recycle
• 40% reduction in waste to landfill by 2020 Development in line with target. 21% reduction achieved since 2008
for the UPM average product.
4) Numerical targets relevant for pulp and paper production
5) Covers all UPM business-to-business spend including wood
and wood-based biomass sourcing and excluding energy
Group Executive Team in charge of
managing corporate responsibility
The company’s Biofore strategy and the Code
of Conduct approved by the Board lay the
foundations for responsible business opera-
tions and continuous improvement.
The Group Executive Team, headed by the
President and CEO, is in charge of managing
corporate responsibility, determining the
course of action and guiding development
work. The day-to-day work has been integrat-
ed into the company’s business operations.
Group-level corporate responsibility is man-
aged by the Environment and responsibility
team that coordinates the projects being car-
ried out in business areas and functions.
The company’s Code of Conduct addresses
human rights, labour rights, good business
conduct, occupational safety and environmen-
tal practices. The Code of Conduct is comple-
mented by more detailed policies, rules and
guidelines, and training concerning these
documents is provided regularly.
The Code of Conduct training is required
from all employees and it is part of the induc-
tion programme for new employees. By the
end of 2014, approximately 88% of all active
UPM employees had attended Code of Con-
duct training. In 2015, the company will
update the Code of Conduct and launch a new
round of training.
UPM continuously strives to improve its
environmental and health and safety perfor-
mance by using various tools, such as certified
management systems. In 2014, UPM began
renewing the management systems of its pulp
and paper mills in order to harmonise proce-
dures.
The company monitors and assesses its
anti-corruption and anti-bribery activities, and
an Ethics Advisory Committee has been estab-
lished to perform these tasks. The committee
oversees UPM’s compliance with company
rules and reports to the Audit Committee
regularly.
Responsibility principles
and targets steer business
Based on a materiality assessment, UPM has
established a series of responsibility principles
and determined targets and performance
indicators to monitor how these principles are
translated into action (see table on next page).
In the area of economic responsibility,
UPM’s responsibility principles cover eco-
nomic performance and good governance.
The principles for social responsibility focus
on sourcing, local co-operation between UPM
and stakeholders, occupational safety and
UPM’s role as a responsible employer. In
terms of environmental responsibility, the key
focus areas are sustainable products, the cli-
mate, the use of forests and water, and the
reduction of waste.
In 2014, UPM’s group-wide responsibility
efforts focused on the Step Change in Safety
initiative, the improvement of contractor
safety and the Clean Run environmental
campaign. The business areas also focused on
increasing the amount of ecolabelled products,
verifying product safety and improving prod-
uct safety-related communication.
In addition, special attention was paid to
the continued development of UPM’s respon-
sible sourcing activities. The development
work was based on the human rights related
assessment conducted in 2013 within the
context of the UN Protect, Respect and Rem-
edy Framework and the associated UN Guid-
ing Principles on Business and Human Rights.
Results of technology, know-how
and development
Investments ensure that businesses are able
to continue their good environmental perfor-
mance. UPM’s investments in environmental
performance are part of the Group’s invest-
ment programme and aim to improve the
efficient and responsible use of energy, water
and raw materials.
In 2014, the company’s environmental
investments totalled EUR 12 (29) million.
The largest investment was the combustion
gas purification system at UPM Changshu
paper mill.
The company’s environmental protection
costs amounted to EUR 127 (134) million
(including depreciation), and mainly consisted
of effluent treatment and waste management
costs.
No major environmental incidents
No significant environmental incidents
occurred at UPM production plants in 2014.
However, several minor temporary deviations
from permit limits did arise. UPM immedi-
ately reported these deviations to the local
authorities and undertook corrective measures
to normalise the situation and prevent similar
situations from occurring in the future.
These measures are part of UPM’s internal
Clean Run campaign that aims to improve the
company’s environmental performance further,
sharing best practices and promoting and
maintaining environmental awareness.
UPM provides an extensive
amount of assured information
At corporate level, UPM follows the Global
Reporting Initiative’s G3 reporting guidelines,
which enable companies to measure and report
on their sustainability performance. The cor-
porate responsibility information in English
(see the Independent Assurance Report on
page 59) has been assured by Pricewaterhouse-
Coopers Oy, and congruence between the
English and Finnish versions has been
checked.
PricewaterhouseCoopers has checked that
UPM’s corporate responsibility reporting for
2014 meets the GRI requirements for Applica-
tion Level B+, which does not indicate quality,
but the number of indicators. The GRI content
index can be found on pages 57-58, and an
extended version of the GRI content index,
including detailed descriptions of the scope of
the reporting and data measurement techniques,
is available at
To support the company’s strong focus on
stakeholder engagement and sustainable devel-
opment further, UPM is committed to the
principles of inclusivity, materiality and respon-
siveness, as defined in the AA1000 AccountAbil-
ity Principles Standard (2008).
UPM provides comprehensive environmental
information that has been assured by third
parties from corporate level right through 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.
PRODUCT STEWARDSHIP
WITH NEW TOOLS
Product safety is the single most important
responsibility-related topic for UPM’s
customers.
To support UPM’s paper customers, UPM
created a new Product Safety Profile in
2014. It is a unique tool to ensure that
UPM’s customers receive all relevant product
information in one, concise form. The
document includes basic facts on product
composition, product certificates, regulations
related to product compliance and other
possible measures taken to ensure that
the product is safe.
The UPM Restricted Substance List (UPM RSL)
was updated in 2013, and its implementation
started in 2014. UPM RSL includes nearly
6,000 substances that are either restricted
or prohibited.
In 2014, all relevant sourcing personnel
received training, and the new updated list
was communicated to UPM’s suppliers and
their compliance with the renewed restricted
substances list was examined.
Read more:
1) Social targets: from 2011 levels
2) Environmental targets: from 2008 levels
3) Includes paper, timber, plywood, pulp and label
Read more on Step Change in Safety (p. 44),
responsible sourcing (p. 40) and the UPM
Changshu environmental investment (p. 51).
RESPONSIBILITY 45–59