Metsä Board Annual review 2023

METSÄ BOARD Annual review 2023

and provides a performance evaluation once a year. The CEO is covered by the Employees Pensions Act, which provides for a pension compensation based on service years and earnings. In the Finnish earnings-related pension system, basic salary, remuneration and taxable fringe benefits are included in earned income, whereas income from options and share-based incentive schemes for management are not. The Company has commissioned an extra pension insur-ance policy for the CEO, entitling the CEO to retire at the age of 62. The maximum level of the CEO’s pension is 60% of the total salary under the Employees Pensions Act, calculated on the basis of the five-year period preceding retirement. The Board of Directors appoints and dismisses the CEO. The CEO may be discharged by the Board of Directors’ without a specific reason. The CEO can also resign from their assignment. The mutual period of notice is six months. However, the Board may decide to discharge the CEO without a notice period. If the Board terminates the CEO’s contract, the CEO is entitled to discharge compensation equal to their 12-month salary. Deputy to the CEO The Board of Directors may appoint a deputy to the CEO. The Deputy CEO shall be responsible for the duties of the CEO in the event of the CEO’s absence. Currently, no deputy has been appointed for the CEO. Corporate Management Team In the operative management of Metsä Board, the CEO is assisted by the Corporate Manage- ment Team, which consists of Mika Joukio, CEO, with function heads Markku Leskelä (Develop- ment), Jussi Noponen (Sales and Supply Chain), Harri Pihlajaniemi (Production and Technology), Henri Sederholm (Finance) and Camilla Wikström (Human Resources), who all report to the CEO. Ari Kiviranta, the Company’s Chief Technology Officer, retired on 31 October 2023. Ari Kiviranta’s responsibilities were transferred to Harri Pihlajaniemi as of 1 November 2023. The tasks and responsibilities of the Corpo- rate Management Team include investment planning, the development and preparation of the Company’s strategic guidelines, the allocation of resources, the supervision of day- to-day operations and the preparation of several matters for the Board of Directors. As a rule, the Corporate Management Team meets once a

The board members listed below have acted as members of the Audit Committee since the Annual General Meeting 2023. The members of the Audit Committee are independent of the Company and its major shareholder.

The Audit Committee met five times during 2023. The attendance rate of Committee members was 92% (100% in 2022 and 2021).

month at the invitation of the CEO, and whenever necessary. The members of the Corporate Management Team have written employment or service contracts. With the exception of the CEO, they have no pension arrangements other than the statutory pension scheme. The period of notice for members of the Executive Board is six months on either side. ■ Internal control, internal audit and risk management Effective business requires that operations are monitored continuously and effectively. Metsä Board’s internal management and control procedure is based on the Companies Act, other laws and regulations applicable to listed companies, the Articles of Association, the rules and recommendations of the Helsinki Stock Exchange, the recommendations of the Good Corporate Governance Code and the Company’s own approved policies and principles. The effectiveness of internal control is assessed by the Company’s Internal Audit function. Internal control is implemented throughout the organi- sation. Internal control methods include internal guidelines and reporting systems that support controls. External control is the responsibility of Metsä Board’s auditor and the authorities. Metsä Board’s internal control, risk manage- ment and internal audit principles, operational objectives, and responsibilities are described below. Internal control and risk management for sustainability reporting is described in the Sustainability Report included in the Company’s Annual Review in the Risk management and internal control for sustainability reporting section. Internal control At Metsä Board, internal control includes finan- cial reporting, sustainability reporting and other operational controls. Internal control is carried out by the Board of Directors and the acting management, as well as the entire staff. Internal control aims to ensure the achievement of the Company’s goals and objectives, the economi- cal, appropriate and efficient use of resources, the reliability and accuracy of financial and other management information and sustainability data, compliance with external regulations and internal procedures, adequate safeguarding of operations, data and assets, and adequate and properly organised manual and IT systems to support operations.

Internal control is divided into (i) preventive control such as establishing the Company’s values, general operating and business princi- ples, (ii) day-to-day control such as directing and monitoring activities, including operating systems and work instructions, and (iii) ex-post control such as management assessments and reviews, and comparisons and verifications to ensure the achievement of objectives and to monitor compliance with agreed operating and control principles. The Company’s corporate culture, management style and approach to control together form the basis of the overall internal control framework. Monitoring of the financial reporting process, credit control and authorisation rights The financial organisations of the different functions and central administration are respon- sible for financial reporting. The units report their financial figures each month. The units’ controller functions check their units’ monthly performance and submit a performance report to central administration. The functions’ profitability development and business risks and opportunities are discussed at monthly meetings attended by the Company’s and each function’s management. The result is reported to the Board and Corporate Management Team monthly. The Board presents the financial statements to the Annual General Meeting for approval, approves the financial statement bulletin and interim reports, and decides on their publication. The rules for reporting and control, as well as the reporting process, are described in greater detail in the Company’s internal guidelines. Credit control in Metsä Board has been centralised to a Credit Committee, which convenes at least quarterly. Credit controllers monitor the trend in trade receivables in each sales company under the supervision of the Metsä Group’s Director, Credit Management. Counterparty-specific credit limits are set within the boundaries of the credit policy confirmed by the Board in cooperation with centralised credit control, sales and financial management. The development of credit risks is regularly reported to the Board of Directors. Authorisation rights concerning expenses, significant contracts and investments have been specified progressively for different organisation levels according to the decision-making authority policy confirmed by the Board and

the authority separately granted by the CEO and other management personnel. Investment follow-up is carried out by the Metsä Group’s financial administration in accordance with the investment policy confirmed by the Board. After pre-approval, investments are handled by the functions’ Management Teams and the Corporate Management Team within the framework of the annual investment plan. The most significant investments are separately submitted to the Board for approval. Investment follow-up reports are compiled quarterly. Internal auditing Internal auditing is an independent and objective assessment, assurance and consulting activity designed to add value to Metsä Board and improve its operations. Internal auditing assists the Board of Directors in its supervisory role and supports Metsä Board and its management in achieving the Company’s objectives by providing a systematic approach to assessing and improving the effectiveness of risk management, control, governance and management processes. Metsä Board’s internal auditing is carried out by Metsä Group’s internal audit unit. Audit work is carried out in compliance with the internal audit guidelines approved by the Audit Commit- tee. The internal audit function reports to the Audit Committee on operations and to Metsä Group’s President and CEO on administration. Internal auditing draws up a six-monthly action plan which is approved by the Audit Committee. Auditing is risk-based and focuses on the Company’s activities and units that are considered to be key to achieving the objectives set for operations. In cooperation with the audit function, internal auditing sees to the coordination of plans to ensure adequate coverage of auditing and avoid overlapping work. Similarly, cooperation is carried out with Metsä Group’s other assurance functions such as risk management, internal controls and compliance. The results of the audit are compiled in an audit report, which is shared with Metsä Board’s CEO and CFO, the management of the audited entity, and the persons in charge. The audit reports are submitted to Metsä Group’s President and CEO, CFO, auditor and to other Group management if required for the purposes of information. Internal auditing provides the Audit Committee with a six-monthly summary report on the audits carried out, the main findings and

Business operations and value creation 2 This is Metsä Board 4 CEO’s review 6

Audit Committee member

Number of meetings Attendance rate (%)

Strategy and financial targets

Raija-Leena Hankonen-Nybom (Chair)

5/5 5/5 5/5 4/5 4/4

100 100 100

Value creation

Hannu Anttila Mari Kiviniemi Jukka Moisio

Financial development 10 Key figures 12

Juha Vanhainen (as of 23 March 2023)

100

Report of the Board of Directors

20 72

• Sustainability statement • Sustainability statement assurance report

Nomination and HR Committee The purpose of the Nomination and HR Commit- tee is to assist the Board of Directors in matters related to the appointment and remuneration of the Company’s CEO, any Deputy CEO and senior management, and prepare matters related to the incentive schemes for management and employees. In addition, the committee prepares a proposal for the Annual General Meeting on the number of Board members, the Board composition and the remuneration for Board members. The committee also recommends, prepares and presents for the Board’s approval the appointment of the CEO (and any Deputy CEO), as well as their salary and compensation. The committee also prepares and provides recommendations to the Board and the CEO concerning matters related to the remuneration and incentive schemes of management and employees.

The committee consists of five Board members. It convenes on a regular basis, at least four times a year. The Chair of the committee presents the committee’s proposals to the Board. The tasks and responsibilities of the Nomination and HR Committee are specified in the committee’s rules of procedure approved by the Board of Directors ( https://www. metsagroup.com/globalassets/metsa-board/ documents/investors/corporate-governance/en/ general/metsa-board-nomination-and-hr-com- mittee-charter.pdf ). The board members listed below have acted as members of the Nomination and HR Commit- tee since the Annual General Meeting 2023. The Nomination and HR Committee met four times during 2023. All members attended all meetings (100% attendance also in 2022 and 2021).

Consolidated financial statements

78 Notes to the consolidated financial statements 126 Parent company financial statements 129 Notes to the parent company financial statements 142 The Board’s proposal to the Annual General Meeting for the distribution of funds 143 Auditor’s Report 147 Shares and shareholders 151 Ten years in figures 152 Taxes 153 Production capacities 155 Calculation of key ratios and comparable performance measures Corporate governance 157 Corporate governance statement 165 • Board of Directors of Metsä Board 168 • Corporate Management Team of Metsä Board

Members of the Nomination and HR Committee

Number of meetings Attendance rate (%)

Ilkka Hämälä (Chair)

4/4 4/4 4/4 1/1 1/1 3/3

100 100 100 100 100 100

Erja Hyrsky

Jussi Linnaranta

Timo Saukkonen (until 23 March 2023) Veli Sundbäck (until 23 March 2023) Mikko Mäkimattila (as of 23 March 2023)

170 Remuneration report 174 Investor relations and investor information

Chief Executive Officer Chief Executive Officer Mika Joukio (born in 1964), M.Sc. (Eng.), MBA, is responsible for the daily management of the Company’s administration in accordance with the guidelines and instructions provided by the Board. The CEO is also responsible for ensuring that the Company’s accounting has been carried out in

accordance with applicable legislation, and that asset management has been organised in a reli- able manner. The CEO manages the Company’s daily business and is responsible for controlling and steering the businesses. The CEO has a written CEO contract approved by the Board of Directors. The Board of Directors supervises the CEO’s performance

160

161

Corporate governance statement | METSÄ BOARD ANNUAL REVIEW 2023