Metsä Board Annual and sustainability report 2022

The world needs solutions that support the circular economy, and fresh fibre paperboards meet this need. In 2022, we continued our sustainability efforts to mitigate climate change and helped our customers lower their use of plastic and reduce the carbon footprint of their packages.

Metsä Board Annual and Sustainability Report 2022

The world needs solutions that support the circular economy, and fresh fibre paperboards meet this need.

Contents

Business operations

In line with our strategy, we invest in sustainable growth. 9

and value creation 2 This is Metsä Board 4 CEO’s review 6 Highlights of the year 8 Strategy and targets 10 Value creation 12 Operating environment 16

Product and service development

Sustainability report Sustainability management

We help our customers achieve their sustainability targets.

20 22 23 24 26 42 52 60

Progress in 2030 sustainability targets

Material topics

Material flows and circular economy

E – Environment

S – Social responsibility

G – Sustainability governance

Mill-specific information

Production capacities and environmental permit limit violations Disclosure in accordance with SASB Standard Disclosure in accordance with TCFD recommendations

The mitigation of climate change, promotion of the bioeconomy and the circular economy, and resource efficiency are strong drivers of our operations.

62 64 66

Principles of sustainability reporting

Financial development Report of the Board of Directors Consolidated financial statements

72 90 94

34 and 41 To achieve our climate and water targets by the end of 2030, we have mill-specific plans for investments and measures.

Notes to the consolidated financial statements

141 Parent company financial statements 144 Notes to the parent company financial statements 157 Auditor’s Report 161 Shares and shareholders 167 Taxes and key figures Corporate governance

169 Corporate governance statement 176 Board of Directors of Metsä Board

178 Corporate Management Team of Metsä Board 180 Investor relations and investor information

METSÄ BOARD ANNUAL AND SUSTAINABILITY REPORT 2022

BUSINESS OPERATIONS AND VALUE CREATION

SUSTAINABILITY REPORT

FINANCIAL DEVELOPMENT

GOVERNANCE

This is Metsä Board

We focus on premium fresh fibre paperboards and are a forerunner in sustainability. Our strategy is to grow in fibre-based packaging materials and renew our industrial operations.

Focus on sustainable fresh fibre paperboards

A forerunner in sustainability Our products support the circular economy and they have a smaller carbon footprint compared to many other packaging mate- rials. Our future growth is based on more efficient use of resources and raw materials. Our target is fossil free production and products by the end of 2030.

We focus on premium and recyclable fresh fibre paperboards, that help our customers reduce their plastic use. Our paper- boards are mainly used in consumer packaging and in retail packaging solutions where demand is rather stable, regardless of the economic situation.

Strong position in a growing market

Investing in sustainable growth

We are a leading producer of folding boxboard and white kraftliners in Europe, and globally the biggest producer of coated white kraftliners. In the USA, we are the largest supplier of folding boxboard. We expect the global demand for paperboards to grow faster, at an annual rate of around 5%, compared to other packaging materials.

Our ongoing and planned investments respond to the growing demand for sustainable packaging materials. We are continuously modernising our industrial operations to further strengthen our competitiveness. We have a clear road map to implement our ambitious sustainability targets. This includes investments and explorations of alternative raw materials in cooperation with our partners.

We are part of the profitable Metsä Group and benefit from the good availability of our main raw material, northern wood. Our self-sufficiency in pulp guarantees the consistent and high quality of the fibre and enables the growth of our paperboard business.

Sales EUR 7.0 billion

The parent company Metsäliitto Cooperative is composed of over 90,000 Finnish forest owners.

METSÄ GROUP

WOOD SUPPLY AND FOREST SERVICES (Metsä Forest)

METSÄ WOOD Wood Products

METSÄ FIBRE Pulp and sawn timber

METSÄ BOARD Paperboard

METSÄ TISSUE Tissue and greaseproof papers

OWNERSHIP

Metsäliitto Cooperative 100%

Metsäliitto Cooperative 50.1% Metsä Board 24.9% Itochu Corporation 25.0%

Metsäliitto Cooperative 50.2*% (68.2% of votes) The company is listed on Nasdaq Helsinki.

Metsäliitto Cooperative 100%

METSÄ SPRING Innovation company

* Information based on flagging release on 30 December 2022

A record year 2022

Our strong financial position lays the foundation for our future growth. Interest-bearing net debt/ comparable EBITDA 0.2

SALES

COMPARABLE OPERATING RESULT EUR million % of sales

TOTAL INVESTMENTS

EUR million

2,500 2,000 1,500 1,000 500 0

350 300 250 200 150 100 50 0

30 25 20 15 10 5 0

600 500 400 300 200 100 0

Our financial target is no more than 2.5

18 19 20 21 22

In 2022, we produced 1.9 million tonnes of paperboard and 1.4 million tonnes of pulp and BCTMP

SALES SPLIT BY PRODUCT % of sales

SALES SPLIT BY REGION % of sales

Folding boxboard �� 57 White kraftliners �� 25 Market pulp �� 15 Other �� 3

EMEA �� 66 Americas �� 26 APAC region �� 8

Source: Metsä Board’s estimates

We are 2,248 Metsä Board employees in 17 countries We procure wood from forests where renewal and biodiversity are safeguarded. Of all the wood fibre we procure, certified wood fibre accounts for 83 % Target > 90% by the end of 2030

We have 8 production units in Finland and Sweden and deliver products to approximately 100 countries Our sustainable investments are moving us closer to fossil free operations. The share of fossil free energy of our total energy consumption is

Our customers include international brand owners, packaging converters, manufacturers of corrugated products and merchants

Our ambitious targets strengthen our position as a forerunner in sustainability

87 % Target: 100% by the end of 2030

Read more on page 22

METSÄ BOARD ANNUAL AND SUSTAINABILITY REPORT 2022

SUSTAINABILITY REPORT BUSINESS OPERATIONS AND VALUE CREATION Record result in a challenging business environment FINANCIAL DEVELOPMENT GOVERNANCE

We achieved an excellent result in 2022, and our financial position at the end of the year was strong. We continued our sustainability efforts to mitigate climate change and helped our customers lower their use of plastic and reduce the carbon footprint of their packages. All this builds a strong foundation for future growth, which we seek through our sustainable and profitable investments.

For Metsä Board, 2022 was an exceptional year in many ways. As a paperboard company, we achieved a record result in a challenging business environment that proved difficult to predict. Our sales were nearly EUR 2.5 billion, and our comparable operating result was EUR 521 million. At 20.9%, our return on capital employed exceeded our long-term target by a wide margin. Our result improved especially thanks to the higher prices of fresh fibre paperboards supported by a favourable currency effect. Success- ful price increases exceeded the rapid cost inflation. In addition, the profitability of Metsä Fibre, our associated company, was boosted by the higher market pulp prices. The past year was overshadowed by Russia’s war against Ukraine, which is continuing in 2023. In addition to human suffer- ing, Russia’s military operations triggered the most severe energy crisis in Europe’s recent history, making energy self-sufficiency a significant competitive factor for many companies. Metsä Board’s energy self-sufficiency is at a high level, which offers stability to our operations. The new recovery boiler and turbine that started up at the Husum pulp mill in December, will increase the production of bioenergy and take us closer to our goal of entirely fossil free production by the end of 2030. Valuable recognition of our sustainability efforts During the year, we continued our long-term work to promote sustainability. For the second year in a row, we secured a place on the ’A’ List in all of CDP’s three environmental focus areas: climate change mitigation, water security and forest protection. Only 12 out of 15,000 companies achieved the same excellent result. In EcoVadis’s evaluation, we were in the top 1% among paper, paperboard and packaging manufacturers, receiving full points in the environment section. These acknowledgements reflect our role as a forerunner in sustainability and the systematic work that

everyone at Metsä Board carries out to achieve our goals. Since 2022, the personal performance goals of all Metsä Board employ- ees have included at least one sustainability objective, which in my case concerns safety at work. Our strategy has proven its success Our strategy has proved its sustainability and success in a challenging market situation, and we will continue its systematic implementation – growing sustainably in fibre-based packaging materials. In recent years, we have strengthened our market position in premium fresh fibre paperboards and have met the quickly increasing demand for recyclable packaging materials that can replace plastic in our main markets – Europe and North America. In 2023, our paperboard capacity will increase following the completion of our investments in folding boxboard in Husum and kraftliner in Kemi. To continue our sustainable growth, we have launched pre-engineering for a new folding boxboard mill with an annual capacity of 800,000 tonnes in Kaskinen. A potential investment decision could be made in 2024 at the earliest.

Resource efficiency helps us reduce the environmental impact of packaging

Our resource-efficient paperboards made of renewable raw mate- rial have a smaller carbon footprint than many other packaging materials, and they are an excellent match to circular economy needs. Packaging design carried out in cooperation with our customers helps us continuously reduce the amount of packaging material and waste. Resource and production efficiency play a key role in the pre-engineering for the new folding boxboard mill in Kaskinen. We aim for the world’s most resource-efficient paperboard mill, with

Our resource-efficient paperboards made of

renewable raw material have a smaller carbon footprint than many other packaging materials, and they are an excellent match for circular economy needs.

shareholder value. Metsä Board’s Board of Directors proposes that a dividend of EUR 0.58 per share be distributed for 2022. The proposal is in line with our dividend policy and reflects confidence in our future success. Our excellent performance in a volatile operating environment is proof not only of a well-functioning strategy but also of a compe- tent and motivated personnel. I wish to thank all our employees for their great work and all our customers and other partners for their good cooperation.

world-class competitiveness and a product concept that enables carbon footprint reduction. By utiliing the best available tech- nology, the consumption of raw materials, energy and water per tonne of folding boxboard produced can be significantly reduced compared to our current production units. Strong financial position supports growth Our strong financial position creates a firm foundation for future and planned growth investments in fibre-based packaging materials. In addition to our financial and sustainability targets, our decision making is guided by our long-term goal of increasing

Mika Joukio CEO

CEO’s review | METSÄ BOARD ANNUAL AND SUSTAINABILITY REPORT 2022

SUSTAINABILITY REPORT BUSINESS OPERATIONS AND VALUE CREATION Highlights in 2022

FINANCIAL DEVELOPMENT

GOVERNANCE

In 2022, Metsä Board delivered a strong financial result. We continued the systematic implementation of our strategy and cooperation with our customers to create packaging solutions that support the circular economy.

Pre-engineering for the world’s most resource- efficient paperboard mill started Metsä Board started pre-engineering work for a new folding boxboard mill, with an annual capacity of approximately 800,000 tonnes, at the Kaskinen mill site in Finland. Read more on p. 9

Innovating for circularity Golf ball packaging takes on a second life as an insect hotel. The innovative packaging was a result of a co-creation workshop at Metsä Board’s Excellence Centre. In total 45 co-creation workshops were organised with customers and partners during the year. Read more on p. 16.

Recognitions for systematic work for sustainability Metsä Board was recognised again with an outstanding triple CDP ’A’ score for its environmental leadership in climate change, water security and forests. Only 12 companies achieved a triple ‘A’ out of nearly 15,000 companies scored. Metsä Board was again awarded Platinum rating by EcoVadis for the company’s sustainability and corporate social responsibility, scoring the full 100/100 in the Environment section for the first time. Metsä Board won for the second time both the Finnish Circular Economy Award and the Finnish Quality award in the Excellence Finland assessment using the international EFQM model. Read more on p. 21.

Solutions for plastic reduction and recyclability

Metsä Board’s dispersion coated barrier paperboard helped several brands, including the U.S.’s fastest growing cookie company, Crumbl Cookies, to reduce plastic and lightweight their packaging. Sales of dispersion coated barrier board have grown rapidly, and the aim is to increase its share up to half of the Kyro mill’s production capacity in 2023. Read more on p. 16.

A LIST 2022

CLIMATE FORESTS WATER

Renewal of the Husum pulp mill is an important step towards our goal of 100% fossil-free production The new recovery boiler and turbine, started up in December, will increase the bioenergy production of Husum pulp mill and improve the integrate’s electricity self-suffiency. Read more on p. 9.

Business operations and value creation | METSÄ BOARD ANNUAL AND SUSTAINABILITY REPORT 2022

BUSINESS OPERATIONS AND VALUE CREATION

SUSTAINABILITY REPORT

FINANCIAL DEVELOPMENT

GOVERNANCE

Our strategy highlights solutions that promote the circular economy

We are a leading European producer of premium fresh fibre paperboards and a forerunner in sustainability. Our decision making is guided by our profitability and sustainability targets and the ambition to increase shareholder value. Our goal is to maintain a strong financial position and distribute a competitive dividend to our owners.

Purpose Advancing the bioeconomy and circular economy by efficiently processing northern wood into first- class products. Vision Preferred supplier of innovative and sustainable fibre-based packaging solutions, creating value for customers globally. Strategy We grow in fibre-based packaging materials and renew our industrial operations.

Values

Reliability

Cooperation

Responsible profitability

Renewal

Megatrends

Urbanisation

Biodiversity loss

Population growth

Climate change

Digitalisation

Operating environment supports growing demand for fresh fibre paperboards • Population growth, urbanisation and rising living standards drive packaging • Global e-commerce continues to grow • Availability and quality of recycled fibre is declining • Regulation and consumer preferences favour fossil free packaging materials • The requirements of the circular economy become more specific and drive the development of the industry

We invest in sustainable and profitable growth

Metsä Board has significant investments under- way and in the pipeline to achieve sustainable growth in fibre-based packaging materials. In line with our strategy, we are also renewing our industrial operations to further strengthen our competitiveness. By using the best available technology, we improve our production and resource efficiency and reduce the carbon footprint of our products. We will increase the annual production capac- ity of folding boxboard at the Husum integrated mill by some 200,000 tonnes and of white kraftliners at the Kemi paperboard mill by some 40,000 tonnes. We expect both investments to be completed in the second half of 2023. The new recovery boiler and turbine of the Husum pulp mill started up at the end of 2022. This increased the mill’s bioenergy production and considerably improved the integrate’s energy self-sufficiency. In the renewal’s second phase, during the 2020s, an investment decision will be made concerning the renewal of the mill’s fibre line. The renewal will strengthen the Husum integrate’s role as an efficient and sustainable platform for the long-term development of paperboard production and is an important step towards our target of entirely fossil free mills. In the autumn of 2022, we initiated a pre-engineering process for the new Kaskinen paperboard mill, with an annual capacity of 800,000 tonnes. A potential investment decision will be made in 2024 at the earliest. The planning of the new mill is based on fossil free production, world-class resource and production efficiency, and a product concept that reduces carbon footprint.

Our strategic programmes We implement our strategy through five strategic programmes that drive sustainable growth in fibre-based packaging materials and industrial efficiency.

Premium supplier

Effective innovation

Safe and efficient operations and organic growth

Leader in sustainability

Motivated people

Our financial targets

COMPARABLE RETURN ON CAPITAL EMPLOYED %

INTEREST-BEARING NET DEBT / COMPARABLE EBITDA

DIVIDEND / NET RESULT

2.5 2.0

60 50 40 30 20 10 0

Read more on Metsä Board’s investments at metsagroup.com/metsaboard/investors/metsa-board- as-an-investment/investments/

1.5 1.0 0.5 0 -0.5

18 19 20 21 22

Target > 12%

Target < 2.5

Target at least > 50%

Business operations and value creation | METSÄ BOARD ANNUAL AND SUSTAINABILITY REPORT 2022

BUSINESS OPERATIONS AND VALUE CREATION

SUSTAINABILITY REPORT

FINANCIAL DEVELOPMENT

GOVERNANCE

We create value and well-being, with respect for nature

We help our customers achieve their sustainability targets with our paperboards and our expert services that support the circular economy. We are continuously looking for opportunities to grow profitably and sustainably, and to generate value for our stakeholders with our operations.

Resources

Business model

We produce resource-efficient fresh fibre paperboards from renewable raw materials, which support the principles of the circular economy and offer an alternative to fossil-based packaging materials. We are part of Metsä Group, and benefit from its unique value chain, from pure northern fibre to premium end products. We have high energy self-sufficiency, and our holding in our associated company Metsä Fibre ensures our over self-sufficiency in pulp. Our production is located in Finland and Sweden, and we have sales around the world. Our main markets are Europe and North America.

People and partnerships

• 2,248 employees in 17 countries • 25 apprentices • Active cooperation with local communities and educational institutions

Production and supply chain

• More than 3,600 suppliers • 8 production units in Finland and Sweden • Deliveries to approximately 100 countries

OUR SALES IN 2022 EUR 2,480 million

Natural resources • 8.3 million m 3 of sourced wood of which 83% is certified • Total energy consumption 12.0 TwH of which 87% is fossil free • Water intake 110 million m 3 • 355,000 dry tonnes of purchased pigments, adhesives and other raw materials

OTHER 3% (of sales) MARKET PULP 15% (of sales) FOLDING BOXBOARD 57% (of sales) WHITE KRAFTLINERS 25% (of sales)

Intangible assets

• R&D expenditure EUR 6 million • An Excellence Centre in Äänekoski, Finland, and a satellite centre in Norwalk, the United States • Recoqnition for premium quality paperboards

Economic capital

• Capital invested EUR 2.7 billion • 57,000 shareholders in B series and 10,000 in A series

Outputs

Impacts

Sustainable products and services

Customers

• 1.9 million tonnes of premium fresh fibre paperboards • 1.4 million tonnes of pulp and BCTMP • 5 service entities that generate benefits throughout the packaging value chain (360 Services) • Common stock service improves availability and enables fast delivery to the customer Emissions and side streams • Fossil-based CO 2 emissions 383,000 tonnes (Scope 1 and 2, market-based) • 96% of the used water is returned to the waterbodies after treatment • More than 99% of production side streams are used as materials or energy

• Recyclable and sustainably produced products with a smaller carbon footprint • Innovative and material-efficient packaging solutions that help reduce the use of plastic • Customer satisfaction NPS (Net Promoter Score) 34

Suppliers

• EUR 2.0 billion purchases from suppliers • 99% of suppliers are committed to the Supplier Code of Conduct • 15% of target group suppliers have set their own SBTi targets Personnel • EUR 217 million paid to employees as wages and benefits • 100% of the personnel have completed the Code of Conduct training

Shareholders

• A sustainable investment; several recognitions from ESG evaluations conducted by third parties • EUR 206 million distributed to shareholders of the parent company as dividends • 20.9% comparable return on capital employed Common value creation • Taxes to be paid EUR 96 million • Total investments EUR 304 million • Aiming for a 100% fossil free future, with science-based targets

Further information on taxes on p. 167

Business operations and value creation | METSÄ BOARD ANNUAL AND SUSTAINABILITY REPORT 2022

SUSTAINABILITY REPORT BUSINESS OPERATIONS AND VALUE CREATION Business environment FINANCIAL DEVELOPMENT

GOVERNANCE

Paperboard is the fastest growing packaging material

Paperboard demand is influenced by long-term trends

Paperboard accounts for around a third of the global packaging market, and it is expected to experience faster growth than other packaging materials – an average annual rate of 5%. The main growth drivers include the consumers’ increasing environmental awareness, which favours recyclable packages, and the ease of packaged food in daily life.

REGULATION Regulation seeks to reduce the negative impacts of climate change, the increasing amount of waste and loss of biodiversity.

The value of the global packaging market is around USD 1 billion Annual growth is approximately 4% (2021–2026).

EASE To make everyday life easier, consumers shop online and buy ready meals.

THE GLOBAL PAPERBOARD PACKAGING MARKET VALUE BY MATERIAL

PLASTIC REDUCTION Brand owners and retailers are setting ambitious goals for making packages reusable, recyclable and compostable by 2025.

Paperboard �� 33% Plastic �� 37% Metal �� 13% Glass �� 4% Other packaging (mostly fibre-based) �� 13%

APPROPRIATENESS Packages help protect products and thereby prevent waste generation while avoiding over-packaging.

Source: Smithers Information

BRAND PROMOTION IN E-COMMERCE Positive unboxing experiences are becoming increasingly important, leading to more branding inside boxes.

Metsä Board’s paperboards are especially used in food packaging, which is more defensive in nature

END USES OF FOLDING BOXBOARD

END USES OF WHITE KRAFTLINERS

Food and food service packaging Other consumer products (including the packaging of pharmaceuticals and cosmetics) Graphical end uses

Shelf-ready-packaging, point-of sale displays and solutions E-commerce Other consumer packaging

Source: Metsä Board’s estimates

Consumers prefer recyclable packaging, policymakers drive reusability According to Euromonitor, 66% of consumers try to have a positive impact on the environment through their everyday actions. Reducing plastic is the top measure taken, followed by reducing food waste, recycling items, and using sustainable packaging. Recyclability is seen as the key sustainability feature for a sustaina- ble packaging. (source: Euromonitor International Global Lifestyles Survey 2022) With a recycling rate of 82%, paper packaging is the most recycled packaging material in the EU, while the plastic recycling rate is 38%. (Source: Eurostat) Reusability is favored in EU’ s waste hierarchy, although many third-party certified LCA studies show that reuse or refill is not always the best option for the climate and environment. The main purpose of packaging is to protect products, thereby preventing waste. Packaging accounts for only 5% of the total global food system greenhouse gas emissions. (Source: the UN and the EC)

Consumers responded to the inflationary environment of 2022 Rapid inflation has reduced consumers´ purchasing power and forced them to reconsider their consumption habits. The demand for packaged food has remained stable. Con- sumers have moved to less expensive products and private label products and are opting for discounters. Purchases of durables and luxury products are being postponed. Despite the pressure to save, the majority of consumers are eager to catch up on experiences they missed out during the pandemic.

Business operations and value creation | METSÄ BOARD ANNUAL AND SUSTAINABILITY REPORT 2022

BUSINESS OPERATIONS AND VALUE CREATION

SUSTAINABILITY REPORT

FINANCIAL DEVELOPMENT

GOVERNANCE

Strong position in a growing market

Paperboard market

things, demand was boosted by the pandemic-induced consump- tion shift from services to packaged goods and concerns about the availability of packaging materials. Demand began to normalise towards the end of the year. In the long term, the increasing demand for sustainably produced fresh fibre paperboards used to replace plastic is expected to continue.

Metsä Board has an established position in its main markets – Europe and North America. It is a leading producer of folding boxboard and white kraftliners in Europe and the largest supplier of folding boxboard in the US. In 2022, demand for folding boxboard and white kraftliners was strong, especially in the first half of the year, and the average paperboard prices improved. Among other

Metsä Board’s paperboards have several growth drivers in its main market areas in Europe and North America

AMERICAS

EMEA

APAC

Regional emphasis

Continued growth in North America

Maintaining strong market position in Europe

Focus on high quality packaging in selected end use segments

Paperboard deliveries in 2022 • share of all deliveries by region

28 %

68 %

4 %

• delivery volumes

503,000 tonnes

1,239,000 tonnes

75,000 tonnes

Demand outlook for folding boxboard and white kraftliners

• Environmental awareness and regulation support the demand for recyclable packaging materials • Food safety requirements favour pure fresh fibre paperboards • Demand growth for retail- ready packaging in stores • Growth of e-commerce • Weakened availability and higher price of recycled fibre

• Growth of the middle class increases consumers’ purchasing power and demand for packaged products • China’s import ban on recycled fibres increases demand for pulp and fresh fibre paperboards

• Limited local availability of lightweight high-quality folding boxboards and coated white kraftliners • Demand growth for recyclable and/or compostable food and food service packaging made from renewable raw materials • Demand growth for retail-ready packaging in stores • Promotion and differentiation of brands in growing e-commerce

Metsä Board is Europe’s largest producer of folding boxboard and white kraftliners

Metsä Board is the biggest producer of coated white kraftliners globally.

PRODUCERS OF FOLDING BOXBOARD IN EUROPE Total capacity 4.0 million tonnes

PRODUCERS OF WHITE KRAFTLINERS IN EUROPE Total capacity 2.1 million tonnes (excl. Russia)

Metsä Board �� 34% Peer 1 �� 21% Peer 2 �� 20% Peer 3 �� 6% Peer 4 �� 5% Others �� 14%

Metsä Board �� 32% Peer 1 �� 25% Peer 2 �� 14% Peer 3 �� 12% Peer 4 �� 10% Peer 5 �� 7%

Sources: the companies’ websites, RISI, Metsä Board’s own estimates

Pulp market

Megatrends drive long-term demand for sustainably produced pulp

Globally, about 181 million tonnes of pulp made from fresh fibre is used each year, of which 112 million tonnes is pre-integrated into e.g. paper or board production. The remainder, 69 million tonnes, is sold to the market, and consists mainly of bleached softwood and hardwood pulp. Demand and prices for pulp can vary from year to year and are influenced, among others, by the general economic situation. In the long term, megatrends such as urbanisation and emerging economies will support demand for sustainably produced pulp. Demand growth will be sustained by the development of tissue and packaging board products. Also new products, such as pulp-based textile fibres will play an increasingly important role in the future. Market pulp supply has been limited in recent years by logistical bottlenecks and a number of planned and unplanned production stoppages.

SOFTWOOD PULP PRICE DEVELOPMENT IN EUROPE AND CHINA USD/tonnes

1,600 1,400 1,200 1,000

800 600 400

12 13 14 15 16 17 18 19 20 21 22

Europe China (net)

Source: Fastmarkets Foex

Metsä Board’s associated company Metsä Fibre is a leading producer of market softwood pulp (NBSK)

3.3 million tonnes of pulp and 1.8 million cubic metres of sawn timber. The pulp produced by Metsä Board and Metsä Fibre is primarily softwood pulp. Metsä Fibre is constructing a new bioproduct mill in Kemi. Its annual capacity is approximately 1.5 million tonnes of softwood and hardwood pulp The mill is expected to be completed in 2023, and it will replace the current pulp mill in Kemi, which has an annual capacity of around 610,000 tonnes.

Metsä Board aims to be self-sufficient in pulp, which ensures consistently high quality in paperboard production. Metsä Board produces chemical pulp and bleached high-yield pulp (BCTMP), which are used in our own paperboard production and sold as market pulp. In addition, Metsä Board has 24.9% holding in its associated company Metsä Fibre, which is a leading producer of wood-based bioproducts such as pulp, sawn timber, biochemicals and bioenergy. Metsä Fibre’s annual capacity is approximately

METSÄ FIBRE’S PULP SALES BY MARKET AREA , %

METSÄ FIBRE’S PULP DELIVERIES BY END USE , %

Paperboards �� 35% Printing papers �� 27% Tissue papers �� 30% Speciality papers �� 8%

Europe �� 46% APAC �� 44% MEA, Americas �� 10%

Business operations and value creation | METSÄ BOARD ANNUAL AND SUSTAINABILITY REPORT 2022

SUSTAINABILITY REPORT BUSINESS OPERATIONS AND VALUE CREATION Our R&D aims for recyclability and resource efficiency FINANCIAL DEVELOPMENT GOVERNANCE

Promoting the goals of the circular economy drives the development of packaging materials throughout the packaging sector’s value chain. The requirements for packages are increasing, and cooperation among all the value chain operators is important.

We continue to focus on lightweighting of paperboard and developing recyclable protective barrier coatings for use in food packaging. Our competence in lightweighting of paperboards plays a key role in the pre-engineering of the Kaskinen folding boxboard mill, launched in 2022, which builds on fossil free production and significantly lower consumption of wood, energy and water per tonne of folding boxboard produced, compared to current produc- tion units. We aim for world-class resource efficiency and a product that enables the reduction of the carbon footprint. We are developing the resource efficiency of all our mills and make use of artificial intelligence. For example, at the Äänekoski paperboard mill, we can now locate the reason for process disrup- tions much faster thanks to new AI technology. The technology analyses the underlying causes of visual defects detected by AI based machine vision and looks for deviations among the 10,000 variables measured at the mill, also accounting for process delays. This helps target the right corrective measures more quickly, reducing the time lost due to disruptions. In the biobarrier programme launched in 2021, we continued to study new alternative products for reducing plastic. Several

Metsä Board has been an active participant in the 4evergreen alliance, covering the entire packaging value chain, since its establishment. The goal of 4evergreen is to make all fibre-based packaging recyclable by 2025 and raise the recycling rate in the EU from the current 82% to 90% by 2030. In 2022, 4evergreen published packaging design guidelines, as well as instructions for collecting and sorting fibre-based packaging and for assessing the recyclability of packaging. They support the recycling of fibre- based packaging and promote the competitiveness of fibre-based packaging against other packaging materials.

Aiming for world-class resource efficiency and a reduced carbon footprint

Ensuring and developing the recyclability and compostability of paperboards is one of the key goals of our product development process. In the fibre-based packaging material circular economy, our task is to provide the market with premium fresh fibre paperboards as resource-efficiently as possible, help replace fos- sil-based materials and reduce the carbon footprint of packaging.

Large-scale material savings

While delicious gourmet cookies have made Crumbl Cookies the fastest-growing cookie company in the United States, its signature pink boxes have helped establish the firm as a social media sensation. Founded five years ago, Crumbl Cookies now has more than 600 U.S. loca- tions, using hundreds of thousands of cookie boxes per week. By switching to Metsä Board’s lightweight dispersion barrier board, Crumbl was able to to reduce the weight of the package by 32% and reduce its carbon footprint by more than 50%.

The 3D Muoto® innovation replaces plastic

Metsä Group’s 3D fibre product has been produced at Metsä Group’s and Valmet’s demo plant in Äänekoski since May 2022. Using brand new technology, the products are pressed from wood fibre into their final form and their properties can be tailored during the production process according to the intended purpose. Ready-to-use three-dimensional Muoto products are suitable for such applications as food packaging. If the market interest and product viability can be proved on a large scale, Metsä Group will consider building a larger production unit.

impacts of different materials, and with concrete packaging solu- tions for improving recyclability and material efficiency. In 2022, we organised 45 packaging development workshops at our Excellence Centre in Äänekoski. Metsä Group and Fortum’s ExpandFibre programme promoting the circular bioeconomy continued in 2022. Among other things, the programme focused on organising cooperation with packaging design companies and packaging technology companies and developing solutions to packaging challenges identified in develop- ment workshops. One example of these efforts was the moderni- sation of the pastry packaging used by bakeries, with Viipurilainen Kotileipomo as the pilot company. The packaging was developed with usability, ecology and layout in mind. The result was a pastry package that is easy to assemble, and that reduces the need for material by 25% and carbon dioxide emissions by roughly 34%.

potential products are being tested in the laboratory, and some proceeded to production testing last year. In accordance with our product development process, the prerequisites for sales and production will first be determined before making decisions about commercialisation. In 2022, we established a systematic development programme for reducing the use of all fossil-based raw materials. As part of this, we work with suppliers to find ways to reduce the carbon footprint of the raw materials we purchase. We have set as our goal that by the end of 2030, all the solutions and polymers developed for paperboards will be based on fossil free raw materials. Deeper customer cooperation We used our 360 Services to further strengthen our customer relationships. The services cover five areas: Sustainability Service; Packaging Design Service; Technical Service; R&D Service; and the Supply Chain and Digital Service. We helped our customers, for example, with life-cycle assess- ments of packaging, data-based comparisons of the environmental

Business operations and value creation | METSÄ BOARD ANNUAL AND SUSTAINABILITY REPORT 2022

Mitigating climate change, promoting biodiversity, using resources efficiently, and developing a responsible corporate culture and supply chain

are at the core of our sustainability efforts.

Sustainability Report

20 22 23 24

Sustainability management

Progress in 2030 sustainability targets

Material topics

Material flows and the circular economy

Environment

27 30 32 36 38 39 40

Forest biodiversity and carbon storage

Sustainable products Climate and energy

Climate change creates risks and opportunities

Other emissions

Waste and by-products

Water

Social responsibility Workplace community

43 48 50

Safety at work Product safety

Sustainability g overnance Culture of doing the right thing Sustainability of the supply chan

53 54 58

Advocacy

Tables and reporting principles 60 Mill-specific information 61

Production capacities and environmental permit limit violations Disclosure in accordance with SASB Standard

62 64

Disclosure in accordance with TCFD recommendations Principles of sustainability reporting

66 68

Assurance report

Sustainability Report | METSÄ BOARD ANNUAL AND SUSTAINABILITY REPORT 2022

BUSINESS OPERATIONS AND VALUE CREATION

SUSTAINABILITY REPORT

FINANCIAL DEVELOPMENT

GOVERNANCE

Sustainability management

E S G

At Metsä Board, sustainability is based on compliance with good corporate governance, bearing social and environmental responsibility, respecting business ethics and human rights, as well as the continuous improvement of operations with respect to all of the above. In addition to our own operations, we also expect sustainability from our suppliers, customers and other partners.

Sustainability governance model At Metsä Board, the realisation of sustainability is monitored and supported by the company’s Board of Directors, CEO and Corporate Management Team. Sustainability is incorporated in the company’s strategy, long-term business and investment plans, risk assessments and annual action plans approved by the Board of Directors. The CEO is responsible for the implementation of the sustaina- bility measures per instructions provided by the Board. In accord- ance with the annual plan, the CEO presents to the Board a review of environmental matters and a sustainability review focusing on the progress towards sustainability targets twice a year, as well as the reviews of work safety and R&D once a year. The company’s Corporate Management Team prepares sustainability-related matters before the CEO presents them to the Board. The Board discusses and approves the sustainability matters presented by the CEO, including the sustainability targets and related investment plans, and monitors their implementation annually.

Of the members of the Corporate Management Team, the Senior Vice President, Development, is responsible for research, product and business development, and sustainability. The SVP, Development, participates in Metsä Group’s Sustainability Process Management Team and reports on the realised results of the sustainability measures to the Sustainability Process Management Team quarterly. The CFO chairs Metsä Board’s Risk Committee, which deals with sustainability-related risks as part of the company’s general risk assessment. The results of the company’s risk assessment, includ- ing risks related to sustainability, are presented to the Board and the Audit Committee twice a year. In addition, the Audit Committee handles biannually an information security review and annully a compliance report. Other sustainability issues, such as investment plans, are also presented to the Board and the committees as appropriate. Metsä Board’s Product Safety and Sustainability Director reports on the realisation of sustainability and development needs

Sustainability reporting is developing

When it enters into force, the new EU directive concerning sustainability reporting will have a major impact on corporate sustainability reporting. At Metsä Board, we have initiated preparations by adopting the ESG structure in our current sustainability report and by acquainting ourselves with the new reporting standards and verifying our key sustain- ability information. We have also adopted a reporting tool that enables the digital and machine-readable reporting of both financial and sustainability information. “There will be a stronger link between sustainability reporting and financial reporting. For example, Metsä Board reports on its climate impact, but it must also consider climate-related risks from a business perspective,” says Henri Sederholm , CFO.

The link between sustainability and remuneration The personal performance bonus target of each Metsä Board employee includes an ESG target. The CEO’s remuneration is based on Metsä Board’s operating result (weighting 50%) and the strategic targets defined by the Board of Directors (weighting 50%), including the sustainability targets, as well as the realisation of Metsä Group’s EBIT multiplier. In 2022, the CEO’s sustainability target was related to safety at work. The remuneration of the other members of the Corporate Management Team is based on Metsä Board’s operating result (weighting 30% or 50%), the targets of their respective areas of responsibility (weighting 50% or 70%), including the sustainability targets, as well as Metsä Group’s EBIT multiplier. In 2022, the sustainability targets of the other Corporate Management Team members related to the reduction of energy and water use, sustainability cooperation with customers, and the development of sustainable products, for example.

to the company’s SVP, Development, and presents topical sustain- ability matters to the entire Corporate Management Team on a regular basis. The Product Safety and Sustainability Director leads a team of experts, which works in close cooperation with produc- tion, wood supply, procurement and logistics, HR, marketing and sales, communications, investor relations and legal affairs. Wood supply, as well as sourcing and legal affairs, is centralised in Metsä Group. Sustainability is part of the entire personnel’s daily work. We also expect sustainability from our suppliers, customers and other partners. Further information on sustainability governance can be found on pages 52–57.

SUSTAINABILITY MANAGEMENT AT METSÄ BOARD

Board of Directors

Metsä Group Sustainability Process Management Team

Corporate Management Team

Product Safety and Sustainability Director

Business functions

Sustainable and ethical operations, as well as compliance with the law, are the foundation of Metsä Board’s business operations. Our operating methods are based on Metsä Group’s Code of Conduct and policies. Our sustainability targets are based on our company’s strategy, Metsä Group’s sustainability targets and materiality analysis on corporate responsibility (page 23).

ESG assessments Metsä Board actively participates in the following ESG and sustainability assessments:

ESG ASSESSMENT

RATING

COMMENT

UPDATED

CDP

Climate Change: A Water Security: A Forests: A

Metsä Board is at the highest level in combating climate change and in the sustainable use of water and forests. The scale ranges from D to A.

Q4/2022

EcoVadis

Metsä Board is at the highest level, Platinum, which puts it among the top 1% in the paper, paperboard and packaging manufacturers category. The highest possible score in the assessment is 100.

Q2/2022

MSCI

AAA

Metsä Board is at the highest level. The scale ranges from CCC to AAA.

Q4/2021

Sustainalytics

14.6

Metsä Board has a low risk of experiencing significant financial impacts caused by ESG factors. A score of 0 indicates the lowest risk and 100 the highest risk.

Q3/2022

ISS ESG Corporate Rating B-

Metsä Board is at Prime level. The scale ranges from D- to A+.

Q4/2022

ISS QualityScore

Environment: 2 Social: 6 Governance: 3

A score of 1 indicates the lowest governance risk and high-level sustainability reporting, while 10 is the weakest score.

Q4/2022

VigeoEiris, Moody’s ESG Solutions

Metsä Board is on the Advanced level. The highest possible score in the assessment is 100. Metsä Board is rated B in the Ellen MacArthur Foundation’s Circulytics® assessment. The scale ranges from E to A.

Q3/2021

Circulytics®

Q4/2022

Sustainability report | METSÄ BOARD ANNUAL AND SUSTAINABILITY REPORT 2022

BUSINESS OPERATIONS AND VALUE CREATION

SUSTAINABILITY REPORT

FINANCIAL DEVELOPMENT

GOVERNANCE

Progress in our 2030 sustainability targets

E S G

In 2022, our successes included reducing fossil-based carbon dioxide emissions as well as positive developments in safety at work and the monitoring of supplier responsibility. Lower production in the last quarter of the year weighed on the full year performance in energy efficiency and process water use.

TARGET

TARGET 2030 ACTUAL 2022

PROGRESS

E – ENVIRONMENT Safeguarding biodiversity Share of certified wood fibre

>90%

83%

MG : Retention trees at regeneration sites

100%

95%

MG : Four high biodiversity stumps in harvesting sites

90%

Mitigating climate change and reducing emissions Fossil-based carbon dioxide emissions, tonnes (Scope 1 and Scope 2, market based)

0 t

383,098 t

Share of fossil free energy of total energy consumption

100%

87%

Share of target group suppliers have set SBTi targets by 2024* (Scope 3)

70%

15%

Fossil free raw materials and packaging materials, share of dry tonnes

100%

99.3%

MG : Area of regeneration and management of young stands from the 2018 level

100%

2.8%

MG : The amount of carbon stored in wood products from the 2018 level

+ 30%

-12.4%

Sustainable production and efficient use of resources Improvement in energy efficiency from the 2018 level

>+ 10%

2.7%

Reduction in the use of process water per produced tonne from the 2018 level

- 30%

- 12.2%

Utilisation of side streams

100%

99.9%

S – SOCIAL RESPONSIBILITY Responsible corporate culture and accident free working environment Ethics index in ethics barometer

100%

85%

Total Recordable Injury Frequency (TRIF) per million hours worked

6.7

G – SUSTAINABILITY GOVERNANCE Sustainable supply chain Suppliers’ commitment to the Supplier Code of Conduct, share of total purchases

100%

99%

Supplier background check passed, share of total purchases

100%

96%

Supplier sustainability assessment passed, share of total purchases

100%

63%

Traceability of raw materials, share of total purchases

100%

97%

MG = Target at Metsä Group level

* 70% of our non-fibre suppliers and of the logistics operators related to our customer deliveries, measured as a share of our total purchases, would set themselves targets in accordance with the SBTi by 2024.

Progress in 2022 compared to the previous year. Above target On target Below target

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