UPM Annual Report 2016

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UPM Annual Report 2016 UPM Annual Report 2016 42 43
In brief Strategy Businesses Governance Accounts Stakeholders
CONTENTS
THE RIGHT TO ACCESS SAFE DRINKING WATER
UPM promotes access to safe drinking water, proper
sanitation facilities and good hygiene by implementing
the WBCSD’s WASH at the Workplace Pledge.
By signing the WASH Pledge, companies commit to providing
access to safe water and sanitation for all employees in
premises. As the first phase of the three-year implementation
plan, UPM conducted the WASH Pledge Self-Assessment
survey in all production sites in 2015. The survey concerned
the local water, sanitation and hygiene conditions for
employees at the sites.
In 2016, UPM continued the evaluation for its sales network
and terminals. So far, the survey results have proved that
UPM is compliant with the WASH Pledge requirements
although some areas of improvement were identified. UPM
renovated a washroom and installed some new showers for
men and women at the Raflatac Johor terminal in Malaysia.
“We provide companies with an asset of tools that brings
together international best practice and standards set by
recognised bodies such as the World Health Organisation
about what a healthy work place should look like,” explains
Associate Sara Traubel from the WBCSD.
Traubel thanks UPM for the very structured approach it
has taken to performing the self-assessments, addressing
the gaps and communicating internally about the initiative
and the need to address WASH. UPM will continue the
programme by assessing its forestry and wood sourcing
facilities in 2017.
Read more:
ENERGY AND CURIOSITY
AT THE BOOT CAMPS
When seeking out new innovations, bringing together
people with different backgrounds and skill sets creates
the best circumstances for success and fresh results. UPM’s
new “Boot Camp” innovation programme brings together
UPM employees from different businesses and functions.
The workshop lasts for one or two days, during which time
the employees team up to tackle topical development pro-
jects. The Boot Camp participants are chosen based on their
relevant skill sets and their interest in development work.
The actual workshops are very informal — the group
decides on the goals and methods together. After the
workshop, the groups pitch their ideas to the judges and
a winner is chosen from among them. The panel of judges
consists of experts and members of the management.
In 2016, approximately 150 UPMers participated in
the Boot Camps. Some of the ideas generated at the
Boot Camps were refined within initial business concepts
and then developed further. The aims of the internal
Boot Camps are to work on real business challenges
and to develop the ways in which we work.
Read more: Rewarding and recognising
good performance
UPM offers rewards and recognition with an emphasis on high
performance. UPMhas a total compensation approach consisting of
a base salary, benefits and incentives, which are determined by UPM’s
global rules, local legislation, general agreements, local market practice,
the level of the position and individual performance. Gender, race, age
and nationality have no role in the definition of salaries and wages. The
differences between male and female average salaries do not differ a lot
and vary to both directions, assessed for salaried employees in UPM’s
main countries of operations.
Intangible recognition is included in the total reward portfolio,
which means that UPMprovides, for instance, a safe and healthy
working environment, interesting and meaningful work and excellent
leadership and career opportunities. Individual, team and business
performance are criteria for compensation planning and decisions.
All UPM’s employees belong to a unified annual Short Term
Incentive (STI) scheme. The plan includes group- and business-
level targets and personal and/or team performance targets.
EBITDA is one of the key financial indicators for the group and
business-level targets. The annual incentives paid in 2016 for the 2015
STI plan were EUR 52.9 million and the estimated amount of annual
incentives for the 2016 STI plan is EUR 59.1 million. For significant
individual or team successes, there is a separate Achievement Award
system in place.
UPMhas two long-term incentive plans: a Performance Share Plan
(PSP) for senior executives and a Deferred Bonus Plan (DBP) for other
key employees. Since 2011, when the plans have been launched annually
and approximately 670 employees have been covered by the plans. In
both plans, the earning of shares is subject to the achievement of
predetermined criteria. Under the plans, UPM shares are awarded
based either on group/business area-level performance or total
shareholder return. More information about long-term incentives can
be found on in the Investors section, under Governance,
in the Remuneration Statement.
Developing empowering
and engaging leaders
UPM aims to have inspiring leaders who empower and engage employees at
all levels. We strive to lead by our own example, in accordance with UPM
values and with integrity. Our values guide and support us in our daily actions
— Trust and be trusted; Achieve together; Renew with courage.
UPM continuously develops leadership capabilities and management
teams. The development programme portfolio is created to support aspects
of leading self, people and the business. Topics such as self-leadership,
coaching capabilities, innovation and leading in complexity are integrated
into various development activities.
In 2016, the theme of aiming higher in business performance and
leadership was integrated into strategy communication and leadership
programmes. UPM continued to support a coaching leadership style and the
use of various tools for feedback on behaviours and performance. The aim is
to improve dialogue and the feedback culture within the company.
UPM also continued its mentoring programmes as a valuable tool for
developing leaders. Investments in training and the renewal of front-line
leadership development capabilities continued globally. In Finland, the
Future Supervisor Programme, which brings new supervisors to the
company, was ongoing.
UPMwants to develop its working environment so that it is diverse
and inclusive. It is important to employ people with different competences,
backgrounds and experiences and of different genders, ages and nationalities
to bring multiple views and improve decision-making and business success.
In 2016, UPMpublicly committed to strengthening its commitment to a
diverse and inclusive workplace by signing the Finnish Diversity Charter. It
describes how a company can promote equal opportunities in the workplace.
UPM focused strongly on training on the renewed Code of Conduct,
including discussions on inclusive behaviour in the working environment.
UPM continued to review the status of diversity in businesses and functions
and integrated inclusion into key leadership development programmes to
improve performance and innovation. The implementation of the diversity
initiative will continue in 2017.
UPM promotes active participation
At the end of 2016, UPMhad 19,310 employees working in 45 countries.
UPMpromotes local leadership at the main production sites, where 96%
of management team positions are held by locals. Overall at UPM, approx­
imately 0.2% of employees were on international assignments at various
levels of the organisation in foreign countries.
As a multinational company, UPM complies with international, national
and local laws and regulations and respects international agreements
concerning human and labour rights and freedom of association.
UPM abides by legally binding collective agreements. UPM does not
collect information on or report on its employees’ union membership at a
global level due to differences in national legislation in the various countries.
The estimated percentage of employees covered by collective agreement
mechanisms was 71% in 2016.
UPMpromotes active employee participation and consultation,
organised in accordance with international and national rules and
regulations. UPM respects the privacy of employees and promotes equal
opportunities and objectivity in employment and career development.
To encourage an open, international dialogue, UPMhas a co-operative
body, the UPMEuropean Forum, which focuses on issues related to changes
within the company and the business environment in general. The forum
organises regular meetings for employee representatives from business
units operating in Europe.
Supporting re-employment
The central elements of UPM’s activities regarding permanently closed
operations and restructuring are typically retraining, re-employment
and relocation within the company, supporting entrepreneurship as
well as severance payments. Active measures promoting employment
and retraining are carried out in close co-operation with various
authorities and other third parties.
In restructuring situations, UPM follows local labour laws.
In Finland, the employer’s minimum notice period is determined
in the Finnish Employment Contract Act and collective agreements,
based on the length of employment: for employment of less than
12 years, the notice period varies between 14 days and four months,
and for employment exceeding 12 years it is six months.
Similarly, in Germany the minimum notice period is determined by
the German Civil Code and adhered to by collective agreements. It is
calculated based on the length of employment: from zero up to 20 years,
the notice period varies accordingly from four weeks to seven months.
In China, the minimum notice period is 30 days and is described in
local legislation.
In 2016, UPMpermanently closed Madison paper mill in the US.
UPM also sold Schwedt mill in Germany. In Finland, UPM adjusted
operations at the UPMTervasaari mill after the tenant’s announcement
to close down its operations at the mill site. UPMpersonnel was
reduced by approximately 400 people by the end of 2016 as a conse­
quence of these measures.
In November, UPM announced plans to permanently close two
paper machines at UPM Steyrermühl and UPMAugsburg in Austria
and Germany.
UPM PERSONNEL IN FIGURES 2016 2015 2014
Turnover % 9.0 10.5 10.9
Turnover% (voluntary) 3.2 3.3 4.8
Average age of personnel 43.7 43.6 43.7
People development
Average training hours1)
(hours/employee) 13 14 15
OHS figures, UPM workforce
Lost-time accident frequency 3.7 3.9 4.4
Total recordable injury frequency 9.3 10.6 11.6
Absenteeism % 3.4 3.7 3.4
Number of occupational diseases 12 6 n/a
OHS figures, contractors
Lost-time accident frequency 6.2 5.5 6.5
Total recordable injury frequency 7.5 2) n/a n/a
1) Reflects active employees
2) Figure for last 9 months of the year, excl. Germany and Austria
21% 79%
2016
Full time
97%
Part time
3%
Employee engagement index
increased but is still behind
our target to be among top
quarter companies 69%
TARGETS
2030
Permanent
87%
Shop-floor
62%
Fixed term
13%
Salaried
38%
2016 2016