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In brief

Businesses

Governance

Accounts

Stakeholders

21

UPM Annual Report 2016

UPM Annual Report 2016

20

Strategy

UPM’S BIOFORE STRATEGY FITS WELL

INTO THE CHANGING WORLD

1 PERFORMANCE

UPM’s continuous improvement programmes for variable and fixed costs

and working capital

Efficient use of renewable materials and energy, recycling of production waste

UPM Code of Conduct, compliance, transparency

UPM Supplier and Third Party Code, responsible sourcing

UPM One Safety, continuous improvement of health and safety

Human capital development, employee engagement and capabilities

More with Biofore, industry leading environmental performance, Best Available

Techniques (BAT)

UPM’s global biodiversity programme, sustainable forest management

UPM’s water strategy, production in water abundant areas

UPM’s Biofore Share and Care programme, local commitment

Robust and safe IT systems

2 GROWTH

Focused growth investments in UPM Pulp, UPM Biofuels, UPM Raflatac,

UPM Specialty Papers, UPM Plywood, UPM Energy

Commercialise new business in biofuels (outside food value chain),

biocomposites and biochemicals

Focus on cost competitive, low-emission energy sources

Talent attraction

3 PORTFOLIO

Business portfolio development organically and potentially through M&A

Businesses with best development and/or value potential for UPM

Businesses with sustainable competitive advantage

Disciplined capital allocation

4 INNOVATION

Product stewardship

Develop new businesses in biofuels (outside food

value chain), biocomposites and biochemicals

Value added product and service development

in current businesses

Continuous improvement in cost competitiveness

and efficiency

Expertise in renewable materials and energy

Recycling and reuse of production waste

Collaboration and partnerships in R&D

Intellectual property rights

Changing operating environment

The global megatrends represent many long-term opportunities and

challenges for UPM towards 2030 and beyond. They are also driving

demand for sustainable solutions and responsible business practices.

PM’s Biofore strategy fits

well into the changing world

PERFORMANCE

1

GROWTH

2

PORTFOLIO

3

INNOVATION

4

MEGATRENDS

EXPRESSIONS

OPPORTUNITIES FOR UPM

CHALLENGES FOR UPM

POPULATION GROWTH,

URBANISATION AND

DEMOGRAPHIC CHANGE

Global consumption growth

Growing middle class

in emerging markets

Higher living standards

Changing consumer

behaviour and preferences

Resource scarcity, competition

for natural resources

Deforestation

UPM Pulp

|

UPM Biofuels

|

UPM Raflatac

|

UPM Specialty Papers

|

UPM Plywood

|

UPM Timber

|

UPM Biochemicals

|

UPM Biocomposites

Growing demand for renewable materials and renewable

energy

Growing demand for safe and sustainable products

New business opportunities with ecodesign

Resource efficiency and circular economy offer competitive

advantage

Cost efficient and responsible supply chains

Healthy forests and safeguarded wood availability

Fit of UPM’s product mix and geographical

presence to future growth outlook

Unpredictable raw material costs and availability

Competition for renewable raw materials

Unpredictable regulation and subsidies may

distort markets

DIGITALISATION

Changing consumer

behaviour and preferences

Growing e-commerce

Changing work

Disruptive business models

and technologies

UPM Pulp

|

UPM Raflatac

|

UPM Specialty Papers

|

UPM Plywood

Online shopping drives demand growth for labelling,

packaging and pulp

Different demand trends for different paper end uses

and geographical areas

UPM’s paper production platform provides continuous

optimisation opportunities

Increasing efficiency, productivity and change agility

Industrial internet, big data, automation

UPM Paper ENA

Declining graphic paper consumption

Fit of UPM’s product mix and geographical

presence to future growth outlook

Changing needs for skills and competencies

Cyber security

CLIMATE CHANGE

Policies to mitigate

climate change

Replacing fossil energy and

oil-based materials

Direct and indirect impacts

of climate change

UPM Biofuels

|

UPM Energy

|

UPM Biochemicals

|

UPM Biocomposites

|

UPM Pulp

|

UPM Plywood

|

UPM Timber

Sustainability offers competitive advantage and growth

opportunities

Preferential treatment of low-emission and renewable energy

Growing demand for safe and sustainable products

New business opportunities with ecodesign

Forests as carbon sinks

Increased forest growth in Northern Europe

Unpredictable regulation and subsidies may

distort markets

Cost for greenhouse gas emissions

Political instability

Increasingly common and more severe storms,

floods, draughts and natural disasters

Unpredictable wood harvesting conditions

RESPONSIBILITY

AND COMPLIANCE

Increasing regulation, subsidies

Requirements for transparency

Global trade and businesses –

local impacts

Focus on human rights, environment,

biodiversity

Responsibility and sustainability offer competitive advantage

and growth opportunities

Regulation may drive markets for sustainable products

New business opportunities with ecodesign

Transparency as competitive advantage

Cost efficient and responsible supply chains

Engaged and diverse workforce

Reputation and financial risks in case of

non-compliance

Unpredictable regulation and subsidies may

distort markets

Trade barriers, protectionism, sanctions

CONTENTS