UPM Annual Report 2016

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UPM Annual Report 2016 UPM Annual Report 2016 26 27
In brief Strategy Stakeholders Governance Accounts Businesses
CONTENTS
furniture and joinery markets in Europe and Asia. Sawn timber is a
versatile and sustainable material, it is strong and can be reused and
recycled.
Long-term demand prospects are promising for pulp
Demand for sustainably produced chemical pulp continues to increase
globally. UPM’s four world-class pulp mills serve customers in the
growing consumer and industrial end-uses such as tissue, board and
specialty papers as well as graphic paper end-uses.
Longer term chemical pulp demand is expected to be further
underpinned by a declining supply of white recycled fibre. Supply of
white fibre will become restricted, in part due to lower graphic paper
production and in part as mixed recovered paper crowds out white
recycled fibre in the collection process.
UPMPulp offers its customers a multi-fibre product range with
direct sales to the global market. Through its own production or through
the Fibre United co-operation, UPMprovides pulp customers with the
most versatile range of northern softwood, birch, eucalyptus and semi-
chemical pulp. UPMPulp’s own sales and technical service experts are
located close to customers in the main markets and in each mill working
in close co-operation with UPM’s global research and development
network.
In July, UPM started discussions with the Government of Uruguay
regarding the development of logistics infrastructure in the country.
Railroad and road connections are a critical challenge for establishing a
large scale industrial operation in the Uruguayan inland and connecting
it to a deep sea port. UPMhas consistently increased its plantation base
in Uruguay.
Significant improvement in biofuel production efficiency
UPMhas been producing UPMBioVerno renewable drop-in diesel
fromwood-based residues since early 2015. UPMBioVerno is a unique,
competitive and sustainable alternative to fossil fuels or first-generation
biofuels, and is well positioned among the few existing biofuel
alternatives available on the market. UPMBioVerno significantly
reduces greenhouse gas and tail-pipe emissions. Demand is predicted
to be strong for sustainable, high-quality advanced biofuels.
The UPMLappeenranta Biorefinery is the first of its kind in the
world. Production is based on a hydrotreatment process developed
by UPM, and the capacity is approximately 120 million litres, which
is 100,000 tonnes.
In terms of profitability, UPMBiofuels reached the break-even point
already in the fourth quarter of 2015. In 2016, the production efficiency
improved significantly and production reached a record level. Strong
biofuels markets, in particular towards the end of 2016, also contributed
positively to the sales and profitability of UPMBioVerno compared
to 2015.
To expand target markets, field tests progressed with dedicated
fleets, public transportation and shipping. The field tests focused on fuel
functionality, emissions and fuel consumption compared to fossil diesel.
UPMBioVerno diesel tests in both marine transportation and public
buses provided good results —UPM’s renewable diesel is well-suited
for both end uses even as 100% pure renewable diesel, and functions
as well as the best quality fossil-based diesels.
The UPMLappeenranta Biorefinery is the first significant invest­
ment in a new and innovative production facility. Having proven that
the technology and business case work, UPMhas started evaluating
future growth opportunities. The planning includes new alternatives
in sustainable liquid feedstocks, newmarkets and customer segments
as well as applications and product development. UPMwill continue
developing new process technologies using solid wood biomass.
Efficient use of renewable materials and energy
UPMhas leading competencies both in plantation and industrial
operations as well as in environmental and social responsibility.
UPM’s modern pulp mills have certified environmental manage­
ment systems in place and the production technology enables efficient
use of rawmaterials, chemicals, energy and water. In wood sourcing,
UPMmeets the highest sustainability demands in the industry.
UPMBioVerno is a sustainable alternative that helps mitigate climate
change. Demand for advanced biofuels is being driven by stricter
environmental standards and sustainability.
UPM brings life to the whole community. It plays an active role in
the local community as an employer fostering safety and healthy living,
and as a business partner. Communities and businesses have grown
around UPMpulp and timber operations over the years.
Responsibility offer both competitive advantages and growth
opportunities for UPMBiorefining.
• Capital intensive process industry
• Engaged high performing people
• Responsible raw material sourcing
• Integration to internal raw-material
• Intellectual property rights
• Community engagement
CAPITALS
UPM BIOFUELS
VALUE CREATED
Advanced renewable diesel and naphtha
Competitive and sustainable non-food feedstock
Infrastructure synergies
Sustainability leader in biofuel solutions in Europe
Intellectual property rights
• Oil majors
• Distributors and retailers
• Dedicated heavy-duty fleets
• Marine fleets
CUSTOMERS
• Employment
• Work safety
• Community wellbeing
• Low-emission
transportation fuels
• Renewable energy
• Sustainable products
• ROCE
• Growth
• Best available technology
OUTCOMES
SOCIAL
IMPACT
ECONOMIC
IMPACT
ENVIRONMENTAL
IMPACT
CLEANER PUBLIC TRANSPORT
UPM’s wood-based UPM BioVerno biofuel has
been proven to reduce carbon dioxide and particle
emissions in both urban and maritime transport.
UPM has been testing UPM BioVerno diesel fuel
in Helsinki region buses in collaboration with the
Helsinki Region Transport (HSL) for a year. Traffic
is the main source of emissions in cities affecting
air quality.
According to the test results, using UPM BioVerno
in the current bus fleet instead of fossil diesel would
significantly reduce emissions resulting from public
transport. By using wood-based fuel, air quality in
the Helsinki region could be improved quickly. The
tailpipe emissions of UPM BioVerno, such as nitrogen
oxides and particulate matter, were significantly
lower than those of the commercial grade fossil
diesel in laboratory testing.
Maritime transport is looking for new ways to
reduce carbon dioxide and sulphur emissions.
In the beginning of 2017, the Marine Environment
Protection Committee of the International Maritime
Organization (IMO) agreed that the sulphur content
limit of ships’ fuel will be lowered to 0.5% starting
from 2020 in all maritime transport.
Increasing the use of biofuels in ships is a cost-
effective alternative. In 2016, UPM BioVerno was
tested for the first time in a marine vessel in the diesel
engine of a dredger. Biofuels offer ship operators
a way to reduce ships’ carbon dioxide emissions
by 80-90% and eliminate sulphur emissions.