UPM annual report 2014

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UPM Annual Report 2014 UPM Annual Report 2014 59 60
CONTENTS
RESPONSIBILITY 45–59
Independent Assurance Report Corporate governance
UPM-Kymmene Corporation (UPM) is a publicly listed limited liability company
with headquarters in Helsinki, Finland. It is the parent company of the UPM Group
which consists of 110 subsidiaries in 44 countries. The Group’s business operations
are divided into six business areas supported by global functions.
UPM’s governance structure
UPM’s control and governance is divided
among the General Meeting of Shareholders,
the Board of Directors and the President and
CEO as shown in the illustration on the right.
In the operational management of the com-
pany, the President and CEO is assisted by the
Group Executive Team.
In matters pertaining to the preparation of
group and business area strategies, financial
targets, strategic projects, capital expenditure,
M&A initiatives and other strategic develop-
ment initiatives, the President and CEO is
assisted by the Strategy Team consisting of the
CFO and the heads of the strategy, technology
and legal functions.
Each of the company’s business areas and
functions has its own management team, the
purpose of which is to assist the business area
or function head in the preparation and imple-
mentation of strategies, budgets, commercial
strategies, business development plans, and the
operating model and organisation for the
business area or function in question.
Governance guidelines
In addition to laws and regulations applicable
to Finnish listed companies, UPM complies
with – and its corporate governance is based on
– the recommendations of the Finnish Corpo-
rate Governance Code issued by the Securities
Market Association. UPM’s Corporate Gov-
ernance Statement for the year 2014, and the
Remuneration Statement dated 3 March 2015,
prepared in accordance with Recommendations
54 and 47 of the Finnish Corporate Govern-
ance Code, are available on the corporate
website in the Investors Section,
under Governance.
Furthermore, the company’s governance is
based on the charters and policies listed in the
table on the right.
UPM’s Code of Conduct forms the frame-
work for all company operations and sets out
standards of behaviour for each individual at
UPM globally. It covers topics relating to legal
compliance and disclosure, conflicts of interest,
gifts and anti-bribery, HR practices, human
rights issues and environmental matters. Viola-
tion of the Code will lead to disciplinary action
up to and including termination of employ-
ment. The UPM Code of Conduct is comple-
mented by more detailed rules and guidelines
approved by the Group Executive Team. These
rules and guidelines cover, among others, such
topics as anti-bribery, competition law compli-
ance, contract management, human resources,
environment, safety and equality.
CORPORATE GOVERNANCE STRUCTURE AND POLICIES
OF UPM-KYMMENE CORPORATION
GENERAL MEETING OF SHAREHOLDERS
PRESIDENT AND CEO
GROUP EXECUTIVE TEAM
BOARD OF DIRECTORS
Remuneration Committee
Nomination and
Governance Committee
Audit Committee
AUDITOR
STRATEGY TEAM INTERNAL AUDIT
Elects
Assist
Elects
Issues
Auditor’s
Report
Appoints,
steers,
monitors
Steers,
monitors
Reports
Reports
To the Management of UPM-Kymmene Corpo-
ration
We have been engaged by the Management of
UPM-Kymmene Corporation (hereinafter also
the Company) to perform a limited assurance
engagement on corporate responsibility perfor-
mance indicators in the areas of economic, social
and environmental responsibility for the report-
ing period 1 January 2014 to 31 December 2014.
The assured performance indicators are disclosed
in UPM-Kymmene Corporation’s Annual Report
2014, and on its website in section “Responsibil-
ity”, and they are listed in section 5 “Perfor-
mance Indicators” of the GRI Content Index
(hereinafter CR Reporting). The GRI Content
Index is disclosed in the Company’s Annual
Report 2014 and on its website.
Furthermore, the assurance engagement has
covered UPM-Kymmene Corporation’s adher-
ence to the AA1000 AccountAbility Principles
with moderate (limited) level of assurance.
Management’s responsibility
The Management of UPM-Kymmene Corpora-
tion is responsible for preparing the CR Report-
ing in accordance with the Reporting criteria as
set out in the Company’s reporting instructions
and the G3 Sustainability Reporting Guidelines
of the Global Reporting Initiative.
The Management of UPM-Kymmene Corpo-
ration is also responsible for the Company’s
adherence to the AA1000 AccountAbility Princi-
ples of inclusivity, materiality and responsiveness
as set out in AccountAbility’s AA1000 Account-
Ability Principles Standard 2008.
Practitioner’s responsibility
Our responsibility is to express a conclusion on
the CR Reporting and on the Company’s adher-
ence to the AA1000 AccountAbility Principles
based on our work performed. Our assurance
report has been prepared in accordance with the
terms of our engagement. We do not accept, or
assume responsibility to anyone else, except to
UPM-Kymmene Corporation for our work, for
this report, or for the conclusions that we have
reached.
We conducted our work in accordance with
the International Standard on Assurance
Engagements (ISAE) 3000 “Assurance Engage-
ments Other than Audits or Reviews of Histori-
cal Financial Information”. This Standard
requires that we comply with ethical require-
ments and plan and perform the assurance
engagement to obtain limited assurance whether
any matters come to our attention that cause us
to believe that the CR Reporting has not been
prepared, in all material respects, in accordance
with the Reporting criteria.
In addition, we have conducted our work in
accordance with the AA1000 Assurance Stand-
ard 2008. For conducting a Type 2 assurance
engagement as agreed with the Company, the
AA1000AS (2008) requires planning and per-
forming of the assurance engagement to obtain
moderate (limited) assurance on whether any
matters come to our attention that cause us to
believe that UPM-Kymmene Corporation does
not adhere, in all material respects, to the
AA1000 AccountAbility Principles and that
the CR Reporting is not reliable, in all material
respects, based on the Reporting criteria.
In a limited assurance engagement the evi-
dence-gathering procedures are more limited
than for a reasonable assurance engagement,
and therefore less assurance is obtained than in
a reasonable assurance engagement. An assur-
ance engagement involves performing proce-
dures to obtain evidence about the amounts and
other disclosures in the CR Reporting, and
about the Company’s adherence to the AA1000
AccountAbility Principles. The procedures
selected depend on the practitioner’s judgement,
including an assessment of the risks of material
misstatement of the CR Reporting and an
assessment of the risks of the Company’s mate-
rial nonadherence to the AA1000 AccountAbil-
ity Principles. Our work consisted of, amongst
others, the following procedures:
• Interviewing senior management of the
Company.
• Interviewing employees from various organisa-
tional levels of the Company with regards to
materiality, stakeholder expectations, meeting
of those expectations, as well as stakeholder
engagement.
• Assessing stakeholder inclusivity and respon-
siveness based on the Company’s documenta-
tion and internal communication.
• Assessing the Company’s defined material
corporate responsibility topics as well as
assessing the CR Reporting based on these
topics.
• Performing a media analysis and an internet
search for references to the Company during
the reporting period.
• Visiting the Company’s Head Office as well as
three sites in Finland and Uruguay.
• Interviewing employees responsible for collect-
ing and reporting the information presented
in the CR Reporting at the Group level and at
the different sites where our visits took place.
• Assessing how Group employees apply the
reporting instructions and procedures of the
Company.
• Testing the accuracy and completeness of
the information from original documents and
systems on a sample basis.
• Testing the consolidation of information and
performing recalculations on a sample basis.
Conclusion
Based on our work described in this report,
nothing has come to our attention that causes
us to believe that UPM-Kymmene Corporation
does not adhere, in all material respects, to the
AA1000 AccountAbility Principles.
Furthermore nothing has come to our
attention that causes us to believe that UPM-
Kymmene Corporation’s CR Reporting has
not been prepared, in all material respects, in
accordance with the Reporting criteria, or that
the CR Reporting is not reliable, in all material
respects, based on the Reporting criteria.
When reading our assurance report, the
inherent limitations to the accuracy and com-
pleteness of sustainability information should
be taken into consideration.
Observations and recommendations
Based on our work described in this report, we
provide the following observations and recom-
mendations in relation to UPM-Kymmene Cor-
poration’s adherence to the AA1000 Account-
Ability Principles. These observations and
recommendations do not affect the conclusions
presented earlier.
• Regarding Inclusivity: UPM-Kymmene Corpo-
ration has processes in place for stakeholder
inclusivity and engagement. Stakeholder Rela-
tions function coordinates stakeholder engage-
ment at the group level. We recommend that
the Company clarifies the need to increase
stakeholder engagement related guidance from
the Stakeholder Relations function to the
businesses.
• Regarding Materiality: UPM-Kymmene Corpo-
ration has a systematic process in place to
evaluate and determine the materiality of
corporate responsibility topics. The Company
conducted a materiality analysis that highlights
the most important issues for the Company and
its stakeholders in 2014. On this basis, we
recommend that the Company continues to pay
special attention to business and regional
characteristics in its stakeholder dialogue.
• Regarding Responsiveness: UPM-Kymmene
Corporation has processes in place for respond-
ing to stakeholder needs and concerns. We
recommend that the Company considers the
possibilities to increasingly utilise the Stake-
holder Relations function in sharing best
practices between the businesses.
Practitioner’s independence and
qualifications
We comply with the independence and other
ethical requirements of the Code of Ethics for
Professional Accountants issued by the IESBA
(the International Ethics Standards Board for
Accountants).
Our multi-disciplinary team of corporate
responsibility and assurance specialists possesses
the requisite skills and experience within finan-
cial and non-financial assurance, corporate
responsibility strategy and management, social
and environmental issues, as well as the relevant
industry knowledge, to undertake this assurance
engagement.
Helsinki, 19 February 2015
PricewaterhouseCoopers Oy
Sirpa Juutinen Maj-Lis Steiner
Partner, Director,
Sustainability & Authorised Public
Climate Change Accountant
Assurance Services
Charter / Policy Approved by Originally approved Last amended
Articles of Association General Meeting of
Shareholders
31 October and 1
November 1995 *)
22 March 2010
UPM Code of Conduct Board of Directors 31 May 2006 3 August 2010
Board Charter Board of Directors 31 May 2006 24 October 2013
Audit Committee Charter Board of Directors 31 May 2006 24 October 2013
Remuneration Committee
Charter
Board of Directors 31 May 2006 24 October 2013
Nomination and
Governance Committee
Charter
Board of Directors 31 May 2006 24 October 2013
Risk Management Policy Board of Directors 1 February 2007 6 April 2009
Disclosure Policy Board of Directors 24 July 2008 –
Group Treasury Policy Board of Directors 1996 26 April 2012
Treasury Policy for
Subsidiaries and
Business Units
Board of Directors 1996 26 April 2012
Insider Policy Board of Directors 31 October 2006 24 October 2013
Acceptance Policy Board of Directors 5 February 2009 3 February 2015
Internal Audit Charter Board of Directors 1 February 2010 –
*) Approved in the General Meetings of the merging companies Repola Oy and Kymmene Oy.
Annual General Meeting 2014
The General Meeting of Shareholders is the
company’s supreme decision-making body. The
Annual General Meeting (AGM) of 2014 was
held on 8 April in Helsinki. A total of 1,984 (in
2013: 1,769) shareholders attended the meeting
in person or through a legal or proxy repre-
sentative, representing 45.6% (42.4%) of the
company’s registered share capital and voting
rights at the time of the meeting.
The AGM adopted the company’s financial
statements for the period 1 January–31 Decem-
ber 2013, decided to distribute dividends
amounting to EUR 0.60 (EUR 0.60) per share
Report
Appoints
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