UPM annual report 2015

UPM Annual Report 2015

contents

UPM's external purchasing spend

Fibre 29%

Logistics 16%

Indirect

materials and

services 20%

Raw materials

25%

Energy 10%

Sources of wood to UPM mills 2015

Company

forests 16%

Import 13%

Private

forest 37%

Delivered

sale/ incl.

sawmills 31%

State

forests 3%

15 14 13 12 11 10 09 08 07 06

Electricity sourcing

TWh

■

CHP

■

Hydro

■

Hydro, shareholdings

■

Nuclear, shareholdings

■

Condensing, shareholdings

■

Market purchace

IN BRIEF

STRATEGY

BUSINESSES

STAKEHOLDERS

GOVERNANCE

ACCOUNTS

impacts on society. This is realised inmajority

of cases through forest certification and chain

of custody standards (FSC, PEFC) and for the

remaining part through FSC ControlledWood

standard and PEFCDue Diligence system.

The human rights-related risk assessment

of the supplier base has been enhanced since

2013. Consequently, the number of risk assess-

ment-based supplier audits has been doubled,

with a much wider geographical coverage than

earlier. Some of the audits covered the entire

upstream supply chain.

In cases of revealed non-conformances

the supplier is obligated to make corrective

actions. UPM is ready to support its suppliers

in order to help them to develop their perfor-

mance.

Capital expenditure is exposed

to scrutinised responsibility

Responsible sourcing practices also cover all

investments. All approved suppliers are quali-

fied against the UPM Supplier Code, i.e. they

commit themselves to UPM requirements

including occupational health. All suppliers

working on UPM site go through UPM’s safety

requirements and a web-based safety induction

training.

Wood is the primary raw material

for UPM’s businesses

UPM is both a major forest owner and a pur-

chaser of wood. UPM sources all wood assort-

ments to ensure optimal utilisation of this

valuable rawmaterial.

In 2015, UPM sourced 26.1 (26.3) million

cubic metres of wood from around the world.

The majority of wood is purchased from pri-

vate forest owners who numbered nearly

22,000.

A network of local entrepreneurs takes care

of harvesting, logistics and forestry work oper-

ations. There were nearly 6,000 harvester

drivers and 5,000 truck drivers working for

the entrepreneurs in 2015. UPMwood sourc-

ing creates employment opportunities for

thousands of people living in rural areas

within the UPMwood sourcing spheres.

Tracing the origin of wood

is a prerequisite for UPM

Wood used in UPMproducts comes from

sustainably managed forests and from legal

sources. All UPMwood supplies are covered

by third-party verified chain of custody certifi-

cates under FSC and PEFC. UPM aims to use

certified fibre to the highest possible degree

and to promote a global increase of certified

forests. Today, 84% (83%) of the wood used

in the UPMmills is certified.

UPM verifies that the wood rawmaterial

supplied to its mills is procured according to

the requirements of EU Timber Regulation,

the US Lacey Act and other regional jurisdic-

tions. UPM does not accept all wood. Mixed

tropical hardwood from rainforests is not

accepted as rawmaterial, neither wood from

plantations that have been established by

converting rainforests. UPM does not accept

wood from areas where the rights of indig-

enous peoples are not respected.

Pulp, chemicals and other raw

materials are purchased worldwide

Specific requirements are set for pulp, chemi-

cal and other rawmaterials suppliers with

regard to environmental performance, for-

estry and wood sourcing, product safety and

performance reporting.

UPMpaper businesses apply systematic

supplier management methods in order to

ensure good and responsible performance

of key suppliers.

Environmental and social performance

data collection is an integral part of supplier

risk and performance management. The data

is collected regularly fromUPM’s pulp, chemi-

cal and rawmaterial suppliers. The results of

these surveys are discussed with the suppliers,

both on and off-site, resulting in improvements,

action plans and commitments such as continu-

ous improvement.

Based on UPM Supplier Survey in paper

businesses’ rawmaterial sourcing, more than

150 corrective actions were implemented with

key suppliers in 2015. More than 50 key suppli-

ers received feedback including some 300

proposals for improvement.

Supplier awards motivate suppliers for

continuous improvement. In 2015, UPM

Raflatac launched the Label Life Award compe-

tition on corporate responsibility and invited

the best performing suppliers to participate.

The purpose of the award is to recognise UPM

Raflatac’s suppliers’ efforts in achieving good

environmental and social performance and to

share best practices in the field of sustainabil-

ity. UPMPaper ENA awarded packaging sup-

plier Paul & Co. with UPMBest in category

supplier award.

UPM is a significant user

and buyer of recovered paper

UPM is the world’s largest user of recovered

paper for the production of graphic papers. In

2015, the total consumption of recovered paper

was approximately 3.1 (3.4) million tonnes.

Paper can be recycled up to six times after

its first use, and even after the fibres wear out,

they can still be used to generate renewable

bioenergy.

Efficient paper recycling depends on the

local infrastructure for national collection

schemes and recovery systems. The recovered

paper used by UPM is purchased fromEurope,

where the most significant suppliers are local

authorities, waste management companies and

printing houses. UPM aims to optimise the

value chain of recovered paper by focusing on

local supply close to the mills with minimal

costs and environmental impact.

The share of recycled fibre represents one

third of all fibre rawmaterials used in UPM’s

paper production.

Energy from renewable sources

UPM is both a significant purchaser and

producer of energy. The majority of electrical

and thermal energy is consumed at the com-

pany’s pulp and paper production. UPM

favours a wide range of low-emission energy

sources and focuses on energy efficiency and

energy savings in its businesses. In 2015, 67%

(67%) of the fuels used by UPMwere from

renewable sources.

In addition to the company’s own electric-

ity generation, electricity is also purchased

from the Nordic and Central European

energy markets. In Germany, the company

has bilateral agreements in place with elec-

tricity suppliers.

Logistics form the foundation

of on-time deliveries

UPM delivers approximately 1.2 million

truckloads (c. 25 tonne each) of products and

rawmaterials around the world every year;

that is one load every 25 seconds. Of all UPM

deliveries, 68% are transported by rail and

road and 32% by sea. The majority of UPM’s

haulage is handled by contract partners. UPM

aims to create strategic long-term alliances to

create benefits for the company and its cus-

tomers.

UPMhas focused on optimising transpor-

tation. At the same time, emissions caused

by transportation are reduced to the lowest

possible volume.

EU Sulphur Directive came into effect in

the beginning of 2015. All 30 ships of UPM

partners are equipped with sulphur scrubber

and have been taken in use in early 2015 as

planned. The method improves the quality of

air and reduces negative impacts of health.

Wood sourcing, transportation and logis-

tics have a significant socio-economic impact

on rural areas around the UPMmill sites. The

total external workforce includes 5,916 har-

vester drivers, 4,839 truck drivers and 791

railroad workers. The number of entrepre-

neurs and companies involved is 1,155. Look-

ing at UPM global scale, this – together with

purchases from the forest owners – results in

significant support for local livelihoods in

rural Europe, USA and Uruguay.

Out of total spend of EUR 3,355 million

for UPMprimary rawmaterials – wood, pulp

and recycled paper – 70%was purchased

from local suppliers.

Supplier audit process creates

mutual benefits

“As one of the leading companies in the

global paper industry UPM has an advanced

management style and comprehensive

experience in industrial production. Our

business relationship gives us an excellent

opportunity to develop our own practices as

well,” says Mr Meng Xiang Feng from Asian

Sage, the owner and CEO of the company.

Asian Sage manufactures blade devices,

dewater and sealing elements, fibre

reinforced products and composites like

fiberglass and carbon fibre. The company

started its co-operation with UPM at the

Changshu paper mill in 2008 and since then

it has become the main supplier for UPM in

this field in China.

Mr Meng welcomes UPM’s well-designed

audit process that has helped Asian Sage to

improve management systems and increase

production efficiency.

The main targets of the audits are to improve

company management and the quality of

products but also to make improvements in

health and safety of employees and social

and environmental responsibility.

Petri Riihinen, Quality and Supply

Development Manager at UPM confirms

that the target is to continuously improve

relationships with suppliers. “So far, unsafe

working practices such as lacking personal

protective equipment or excessive working

hours have been the most common findings

in the audits,” he notes.

“This development brings along mutual

benefits for both partners but also for

employees and for the society in general.

Such positive and continuous improvement

strengthens the relationship and co-operation

between all parties.”

Read more:

www.upm.com/responsibility

wood deliveries to upm mills

1,000 m

2015

2014

Finland

17,697 17,910

Germany

1,543

1,336

Austria

1,013

962

Russia

272

328

United Kingdom

271

289

Estonia

135

United States

867

940

Uruguay

4,293

4,366

Total

26,090 26,266