UPM Annual Report 2016

UPM Annual Report 2016

In brief

Strategy

Stakeholders

Governance

Accounts

Businesses

CONTENTS

TOWARDS A CLOSED CYCLE

The China More with Biofore research programme seeks

to improve the environmental performance and energy

efficiency of mills through new technologies. UPM Changshu

paper mill is a pilot in a 2-3-year programme to improve

the resource efficiency including water and energy use at

the mill.

The goal is to reduce emissions in China, but at the same

time UPM is looking for new solutions that can be applied

at other mills around the world. The programme also

complements the strict environmental policy implemented

by the Chinese authorities.

There are two separate resource projects going on at

Changshu. The goal of the first project is to reduce the

water consumption of the three paper machines. Another

target for development is to improve the efficiency of energy

use by reducing carbon dioxide and particle emissions

from the power boilers.

In the long term, the aim is to move towards a closed-cycle

mill. Reducing fresh water usage also decreases emissions.

UPM will optimise water use by increasing water recycling

in internal mill processes and only using clean water if

absolutely necessary. The ultimate goal is that the water

exiting the mill is clean and has no environmental impact.

All in all, the programme offers excellent support for UPM’s

long-term responsibility targets.

In 2016, UPM spent EUR 46 million (63 million) on research and development

work equating to 2.7% (5.3%) of UPM’s operating cash flow. The focus was on

new technologies and developing businesses. On top of the direct R&D

expenditure of approximately EUR 40 million (37 million), the figures include

negative operating cash flow and capital expenditure in developing businesses.

UPMhas a global network of research centres to support both new and

existing businesses and their development goals.

Research projects

Circular economy is an integral part of UPM’s business. Resource efficiency

is at the core of the Biofore strategy. Product stewardship and ecodesign

approach covers the entire value chain from the design stage to end products

and their reuse.

UPM’s side stream efficiency research (SEFF) is looking for solutions to

better utilise the side streams of integrated pulp and paper mills; sludge, ash,

green liquor dregs, various rejects and waste heat. The aim is to reduce costs

and increase the value of side streams by finding new business opportunities

with partners.

Fertiliser development and nutrient recirculation is one of the possible

circular economy solutions. UPM established a joint project with fertiliser

and crop nutrition expert Yara to develop nutrient recycling. The project

concentrates on the possibilities for the agricultural reuse of nutrients

retrieved from the sludge originating from the pulp and paper mill’s effluent

treatment plants and the ash from the incineration process.

Other studies relate among others to ash product development for con

struction applications and new ways to reuse green liquor dregs. The results

are also used in UPM’s Zero SolidWaste programme. The initiative develops

smart and sustainable solutions, in which excess materials circulate and

generate value.

UPM’s fibre ecosystem project aims to study new fibre processes for

enhanced product properties. The new product possibilities address global

megatrends and sustainability demands. The research is done in co-operation

with customers, partners and research organisations along various value

chains.

Wide-scale collaboration

UPM is one of the founding members of the industrial consortium, part of

the European Joint Undertaking on Bio-based Industries (BBI). This Public

Private Partnership (PPP) aims to trigger investments and create a compet

itive market for bio-based products and materials. For UPM, the PPP is an

important funding element for speeding up the implementation of future

investments.

UPM is a shareholder in the Finnish CLIC Innovation Oy, which focuses on

bioeconomy and cleantech research. The cluster’s research programmes focus

on bioeconomy as well as energy and environmental research, thus supporting

UPM’s internal R&D activities.

In 2016, UPM received approximately EUR 1.0 million (1.4 million) from

Tekes (the Finnish Funding Agency for Innovation) for its research projects.

These projects were carried out in co-operation with research institutes,

universities and other companies.

UPMworks together with a wide network of universities, research insti

tutes, technology suppliers and startups to develop new solutions and get to

the market faster, especially in new businesses.

Focus on circular economy

OUR DIRECTION

•

Innovations are at the forefront in the creation and

development of new products that can be used to

replace non-renewable materials with renewable,

recyclable and low-impact alternatives and provide

resource efficient alternatives for the future.

•

The aim of UPM’s R&D programmes and business

development is to create new technologies and

products, provide support to and ensure the

competitiveness of its businesses.

•

By co-operating with selected value chain partners

UPM aims to increase its speed, agility and

effectiveness.

Innovation and R&D

UPM actively protects inventions and brands with intellec

tual property rights. UPMmanages and uses its patents, trade

marks and other intellectual property rights throughout the

world. Protected innovations and high level risk management

is an integral part of the business model throughout UPM.

UPM is also actively seeking partners and licensing opportunities

to develop new technologies and solutions for its customers.

UPM leaves approximately 350 patent applications annually.

For example in Finland, UPMwas granted over 50 patents in

2016, more than any other Finnish company.

Biocomposites create sustainable value

UPMBiocomposites develops, manufactures and sells high quality

composite products for a wide range of consumer and industrial

applications.

UPMProFi Deck range is one of the leading composite decking

brands in Europe. Through patented recycling technology,

UPMBiocomposites recovers the cellulose fibres and polymers

found in label material waste and gives them a second life. Each

square metre of UPMProFi Deck contains 10 kg of label waste.

UPMFormi is the engineered range of pure cellulose and

virgin polymer compounds suitable for various applications from

furniture to consumer electronics. Its carbon footprint is up to

50% lower compared to traditional plastics.

Biochemicals offer an alternative

to fossil-based solutions

UPMBiochemicals offers and develops innovative, sustainable

and competitive wood-based biochemicals. It is currently focusing

on four product categories: chemical building blocks, lignin

products, biofibrils and biomedical products.

For example, bio-based chemical building blocks can be

used to replace oil-based chemicals in plastic production. Wood-

based lignin can for instance be used to manufacture bio-based

resins to replace fossil-based resins.

Biofibrils are cellulose-based micro and nanofibril products

that can be used for shaping and reinforcing different materials.

They can also be used in new biomedical applications. GrowDex®

is a proprietary hydrogel for cell culturing in medical research

and other applications.

UPMBiochemicals has already commercialised the first lignin

applications and biomedical products. It is actively developing

and testing industrial applications with its partners in order to

create large scale industrial concepts.

UPM’s ValChem project, started in 2015 and funded by the

European Union, proceeded in 2016 as planned. The aim of the

project is to demonstrate the technical and economic viability of

an integrated biochemical process, covering the whole value chain

fromwood rawmaterials to a selected platform-chemical and

lignin-based performance chemicals.

MATURE

GROWTH

NEW

Cost savings

New services

New business models

Improved products

New products

Go-to-market concept

Cost savings

New products

New technologies

Application development

Commercialisation

12 13 14 15 16

150

120

■

Developing businesses*

)

■

Mature businesses

Of operating cash flow

EURm

UPM’s development expenditure

)

Includes negative operating cash flow