UPM annual report 2015

UPM Annual Report 2015

contents

To ensure long-term engagement, UPM continuously works with

its diverse range of stakeholders to understand their specific

expectations. It is equally important to communicate and discuss

the company’s targets, operating principles, values and the

challenges it faces within the business environment.

Creating added value through

stakeholder engagement

Well-functioning stakeholder

engagement is bringing competi-

tive advantage to the company.

Every year, UPM produces a mate-

riality analysis that highlights the

most important issues for UPM

and its stakeholders. The analysis

is based on stakeholder feedback

and the company’s risk mapping.

In 2015, the most important issues

were innovation, portfolio devel-

opment and value creation,

as well as growth.

IN BRIEF

STRATEGY

BUSINESSES

STAKEHOLDERS

Challenging

start-ups at Slush

The 2015 Slush event focused on

themes related to the bio-based and

circular economy and added value

generated by services and

smart operations. UPM partnered

with Slush to offer new partnership

opportunities for start-up companies.

“We are looking for partners to

develop new ideas that aim to make

good use of forest industry side

streams such as sludge, ash and, in

particular, waste heat derived from

the pulp and paper process. We

believe that start-up companies have

plenty of opportunities to grow

with us in these areas”, says Jyrki

Ovaska, Executive Vice President

of Technology at UPM.

UPM is also engaging in start-up

collaboration to build innovative

mobile solutions for the new

generation of forest owners. UPM

also challenges mobile game

developers together with Guides and

Scouts of Finland to create a mobile

game that motivates the younger

generation to learn about forests

and the opportunities they offer from

a completely new perspective.

Slush brings together some 15,000

attendees, including 1,700 start-ups

and 800 venture capital investors

from 100 countries.

Read more:

www.upm.com/innovation

GOVERNANCE

ACCOUNTS

As UPM is primarily viewed as an economic

operator, financial success, stability, future

outlook and growth are fundamental themes

for most stakeholders. In addition, UPM’s

environmental performance and social respon-

sibility play a significant role in UPM’s ability

to operate and affect the long-term success of

its businesses.

UPM aims to provide a balanced view of the

economic, environmental and social aspects of

its business activities, recognising, however,

the differing interests and emphases of differ-

ent stakeholders.

Stakeholder engagement is part

of the strategy process

Stakeholder mapping in all businesses is an

essential part of stakeholder relations, along

with the systematic gathering of feedback and

views from different sources. This way, UPM

aims to ensure that sufficient consideration is

given to stakeholder needs during the strategic

development and decision-making processes.

The Stakeholder Relations function, which

is represented in all businesses, is responsible

for the global leadership and co-ordination of

activities, while UPM’s businesses are respon-

sible for local activity. Best practises are regu-

larly shared.

UPM’s most important stakeholders are

customers, investors and financiers, employ-

ees, suppliers, local communities, authorities

and key decision makers, the media and non-

governmental organisations. The approach to

each varies based on business focus, region and

individual stakeholder groups.

The UPMCode of Conduct sets the stand-

ards of responsible behaviour for each and

every UPMemployee towards stakeholders.

The standards cover topics relating to legal

compliance and disclosure, conflicts of interest,

anti-corruption and anti-bribery, HR practices,

human rights questions and environmental

matters.

The level of stakeholder engagement is

measured by several key performance indica-

tors and enquiries. Feedback from stakehold-

ers adds value by contributing to risk mitiga-

tion, as well as the development of competitive

advantage and continuous innovation. It also

helps third parties to understand key challenges

and opportunities in the company’s operating

environment.

Activity in 2015

The 2015 materiality analysis is based on a

third-party survey and additional focus group

interviews. In addition, the importance and

potential impact of different issues or activities

on UPM’s operations was assessed based on

feedback from regular stakeholder enquiries,

the company’s risk mapping and other sources

of information.

During the year the management’s responsi-

bility for legal and Code of Conduct compliance

was underlined in trainings and discussions.

The Code of Conduct was renewed during the

year and the Board of Directors approved the

new Code of Conduct in February 2016. The

revised Code of Conduct includes new sections

on trade sanctions, data privacy, responsible

sourcing and interaction with stakeholders.

UPMwas able to respond to stakeholders’

expectations reasonably well. The majority of

direct feedback from stakeholders focused on

the local effects of UPM’s operations, such as

noise, odour or logging practices. Customer

enquiries focused on topics such as product

safety, ecolabels and the origin of rawmaterials.

UPM actively participated in the discussion and

provided facts and further information in each

situation.

In one case a stakeholder pursued its

interest through a court process. The former

employees of the French Docelles mill

demanded to acquire the mill below the market

price: the claimwas dismissed in the commer-

cial court. OECD, however, reprimanded UPM

for the process.

Competitiveness at the forefront

of public affairs

Through public affairs work, the company

aimed to foster the necessary prerequisites for

investment, particularly in Finland, China and

Uruguay. Within the EU, UPMpromoted

competitive and consistent energy and climate

policy regulation. UPM co-operated with a

number of trade associations on these topics.

In Finland, UPMhighlighted the economic

footprint of its existing operations. In addition,

UPMhas published six critical topic areas

within the Finnish operating environment that

impact the competitiveness of the forest indus-

try in Finland and continued to discuss these

topic areas with several Finnish decision mak-

ers. The same consistent messages were also

delivered to local decision makers.

On the environmental front, the most

important influencing activity was the pre

parations for the Paris COP climate summit

together with industry associations and

through the Low Carbon Technology Partner-

ship Initiative by the World Business Council

for Sustainable Development (WBCSD). The

initiative involved an extensive dialogue with

the stakeholders. Forest industry, for its part,

offers solutions to mitigate climate change

through renewable, carbon binding and

resource efficient products.

Co-operation on environment

provides prerequisites for trust

For environmental and responsibility issues,

UPM’s stakeholder engagement activity was

aimed at maintaining consistent quality in

operations and products, along with securing

the prerequisites for future activities. Globally,

UPM continued its active co-operation with

local permit authorities.

Co-operation also continued on a voluntary

basis with a wide range of stakeholders relating

to ecolabels, standards and standardisation

frameworks, as well as nature conservation.

UPMwas invited to participate in the UN

Global Compact LEAD group, which represents

the world’s leading companies to promote

sustainability through innovation and actions.

On environmental issues, co-operation contin-

ued with the Birdlife and Uruguayan Vida

Silvestre. With regard to ecolabels and stand-

ardisation issues, UPM collaborated with FSC,

PEFC, the German Blue Angel, the Swan label,

The Finnish Key Flag symbol, ISCC and the EU

Ecolabel. Global sustainability initiatives were

promoted withinWBCSD and in co-operation

with The Forest Dialogue organisation.

The company also engaged in several joint

initiatives with different parties: in China,

UPMwas one of the ten founding members of

the China Sustainable Paper Alliance (CSPA).

WWF China and the Chinese Forestry Industry

Association are key players in the initiative.

The purpose of the alliance is to promote

responsible sourcing and sustainable forestry

in the Chinese forest industry.

Biofore transformation

strategy raised interest

During 2015, UPM’s Biofore strategy and its

progress was widely discussed with the key

stakeholder groups. The constant transforma-

tion of the company, growth projects and inno-

vations continued to generate significant inter-

est. More than 20,000 visitors visited the head

office at Biofore House and were introduced to

UPM’s transformation story.

An important step was the start-up of the

Lappeenranta Biorefinery, which marks the