Metsä Board Annual review 2023

METSÄ BOARD Annual review 2023

Interests and views of stakeholders

accounting for Metsä Group’s EBIT multiplier, at most 50% or 62.5% of the fixed annual salary. The reward is based on Metsä Board’s operating result (50% weighting) and the targets of the own responsibility area, including sustainability targets (50% weighting), as well as the realisation of Metsä Group’s EBIT multiplier. In 2023, the Corporate Management Team members’ individual sustainability targets were related to Metsä Board’s 2030 sustainability targets such as occupational safety, the promoting of an ethical corporate culture, water use, the development of fossil free products and the reduction of fossil-based CO 2 emissions.

Metsä Board’s competitiveness is strengthened by its high pulp and energy self-sufficiency. The company’s own pulp production and a 24.9 per cent holding in Metsä Fibre secure its self-sufficiency in pulp and ensure the high and consistent quality of its end products. The company covers its energy consumption especially with its own production, electricity pur- chased from its associated company Metsä Fibre and electricity purchased at cost price from Pohjolan Voima, in which Metsä Board has a 2.6 per cent holding. Metsä Board’s energy self-sufficiency is approximately 90 per cent. The procurement of other raw materials and services is centrally handled by Metsä Group’s procurement and logistics unit, which strives, through its procurement process, to ensure that partners operate sustain- ably. Relationships with goods and service suppliers are discussed under section G1 − Business conduct . The resources used by Metsä Board and the company’s output are discussed under section E5 − Resource use and circular economy and in the Annual Review, under Value creation . Strategy According to its strategy, Metsä Board aims to grow in fibre-based packaging materials and renew its industrial operations. The company is implementing its strategic programmes, including investments in growth and development, which improve the mills’ production and resource efficiency and reduce the carbon footprint of products. The company’s decision-making is guided by financial and sustainability targets and long-term shareholder value growth. Metsä Board focuses on the continuous improvement of cost-effectiveness and on customers who benefit from the high performance of the company’s products and services. The company’s long-term goal is to achieve at least a 12 per cent comparable return on capital employed (ROCE) and keep the ratio of interest-bearing net liabilities and comparable EBITDA below 2.5. ■ Interests and views of stakeholders Metsä Board interacts with its key stakeholders and develops its opera- tions based on stakeholder feedback. In 2023, Metsä Group developed its operating model for stakeholder engagement by defining management processes for it. The processes will be implemented during 2024. They will enable an increasingly systematic identification and active engagement of key stakeholders and the collection and processing of stakeholder feedback. The processes will also ensure that the feedback is taken into account in the company’s operational development and decision-making. According to the processes, stakeholders’ main messages and key feedback are regularly reported to Metsä Board’s Board of Directors and Corporate Management Team. The views of stakeholders were used in the double materiality assess- ment carried out in 2022, based on which Metsä Board determined the sustainability themes material to the company’s operations. These themes serve as the focal areas for the company’s sustainability development. The materiality assessment is discussed in more detail under Material sustainability-related impacts, risks and opportunities . Stakeholder feedback is used in risk management and as a basis for new cooperation projects, examples of which are included in section S3 – Affected communities .

This table includes a summary of Metsä Board’s key stakeholders and of how themes important to them are considered in the company’s strategy and business model.

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

Impact on operations, business model and strategy • Certified safety management systems • Metsä for all vision • Anonymous recruitment • Metsä Group’s academies and other training • Development of leadership and key capabilities • Measures determined based on the ethics barometer • Recyclable products with a small carbon foot- print that replace fossil-based materials • Resource-efficient production • Product safety and quality • Wider use of product information • Forest certification and regenerative forestry • Investments in fossil free production and products and the improvement of the mill’s production and resource efficiency • Forest certification and regenerative forestry • Metsä for all vision • Sustainability targets in management remuneration • Definition and management of sustainability risks • Harmonised safety management system for the company’s own and service providers’ employees • Proactive operating model to combat the grey economy in construction projects • Joint sustainability targets with partner suppliers • Measures defined based on the cooperation survey for suppliers • Assessment of suppliers’ sustainability as part of the supplier selection process and continu- ous supplier assessment • New investments • Fossil free energy • Resource-efficient production • Waste-free production • Recyclable products with a small carbon foot- print that replace fossil-based materials • Regenerative forestry, Metsä Group’s nature programme and biodiversity plans on mill sites • Regenerative forestry • Biodiversity roadmap of the Finnish Forest Industries Federation • Recyclable products with a small carbon foot- print that replace fossil-based materials • Joint research and development projects • Metsä Group’s nature programme • Education and training cooperation and partnerships • Jobs and traineeships • Student guidance and induction • Regenerative forestry • Forest protection (incl. METSO programme) • Biodiversity roadmap of the Finnish Forest Industries Federation • Biodiversity plans on mill sites • Metsä Group’s nature programme

Stakeholder

Stakeholder engagement

Themes important to stakeholders

Own workforce

• Employee survey and Pulse survey • Ethics barometer • Cooperation with employee representatives • Safety and health at work and related observations

• Health and safety • Diversity, equality and inclusion (DEI) • Competence development and good leadership • Working conditions and other work-related rights

Strategy and financial targets

Value creation

■ Business model, value chain and strategy

Financial development 10 Key figures 12

Customers, consumers and end-users

• Customer experience surveys • Customer feedback forms

• Sustainable products • Product safety and quality • Product information • Sustainable forest management and biodiversity

Business model and value chain Metsä Board uses renewable raw materials to produce premium resource-efficient fresh fibre paperboards that support the principles of the circular economy and offer an alternative to fossil-based packaging materials. The company is Europe’s leading producer of folding boxboard and white kraftliners, and the world’s largest producer of coated white kraftliners. In 2023, folding boxboard accounted for 59% of sales, while 24% of sales came from white kraftliner, 13% from market pulp, and 4% from other operations. Metsä Board’s folding boxboard is mainly used in consumer product packaging like food and pharmaceutical packaging. The end uses of white kraftliners are related to various packaging needs in the retail sector. The company also produces chemical pulp and bleached high-yield pulp (BCTMP), which are used in its own paperboard production, with some sold as market pulp. Metsä Board sells paperboard and market pulp worldwide. The com- pany’s main market areas are Europe and North America. Key customer groups include international brand owners, paperboard converters, man- ufacturers of corrugated products and the retail sector. The company’s competitiveness is supported by its delivery reliability and service concept, which helps customers deal with various packaging challenges, such as reducing the carbon footprint of packaging, reducing plastic use and improving production efficiency. Metsä Board employs approximately 2,300 people in 17 countries. Metsä Board’s eight production units are located in Finland and Sweden, close to its main raw material, high-quality northern wood fibre. Metsä Board is part of Metsä Group, the parent company of which is Metsäliitto Cooperative, owned by approximately 90,000 Finnish forest owners. Metsä Board benefits from Metsä Group’s value chain, which extends from the wood fibre of northern forests to the end products. Metsä Board does not own forests. The procurement of wood raw material is han- dled centrally through Metsä Group from forests that are regenerated after harvesting, and where attention is paid to biodiversity. Further information about biodiversity is disclosed in section E4 – Biodiversity and ecosystems . In Finland, most of the wood is procured from Metsäliitto Cooperative’s owner-members, who together own around half of Finnish private forests. This accounts for 31 per cent of all the forests in Finland. In Sweden, wood is mainly procured from Norra Skog’s owner-members, who own around 17 per cent of all the forests in Sweden. Norra Skog has a 30 per cent holding in Husum Pulp AB, Metsä Board’s subsidiary, which owns the Husum pulp mill.

• Bilateral meetings • Events and training • Materiality assessment

Report of the Board of Directors

20 72

• Sustainability statement • Sustainability statement assurance report

• Sustainability assessments • Contact forms on web pages

Investors, analysts and other capital market representatives

• Investor meetings and events coordinated by the company and/or brokerage firms, including mill visits • Annual General Meeting • Regular dialogue • Materiality assessment

• Climate change mitigation and emissions reduction across the value chain • Biodiversity and availability of wood raw material • Human rights and diversity • Management of sustainability risks and good governance • Safety and health • Working conditions and other work-related rights • Climate change • Biodiversity • Sustainable forest management • Circular economy • Sustainable supply chain

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

Suppliers and workers in the supply chain

• Supplier days • Cooperation forums for occupational safety • (Anonymous) cooperation survey for suppliers • Materiality assessment • Compliance and Ethics Channel • Sustainability working group activities with partner suppliers • Bilateral meetings

Policymakers

• Public hearings • Bilateral meetings • Events, seminars and panels • Surveys • Organisation of visits • Compliance and Ethics Channel • Materiality assessment

• Circular bioeconomy • Reducing environmental impacts • Climate change mitigation • Reducing fossil emissions • Safeguarding biodiversity • Logistics and public infrastructure • New products and innovation • Renewal and jobs

Lobbying and industrial associations

• Bilateral meetings • Events, seminars and panels • Materiality assessment

• Safeguarding biodiversity • Climate change adaptation • Climate change mitigation • Advocacy cooperation

Researchers, educational institutions and students

• Surveys • Cooperation projects • Cooperation events • Organisation of visits • Recruitment events • Thesis assignments and traineeships • Materiality assessment • Bilateral meetings • Events, seminars and panels • Materiality assessment • Project cooperation • Organisation of visits • Compliance and Ethics Channel

• Research and development cooperation • Education, training and competence • Investments and jobs • Learning, training and education • Working life • Diversity, equality and inclusion

NGOs

• Safeguarding biodiversity • Old-growth forests

170 Remuneration report 174 Investor relations and investor information

• Carbon sinks and climate change • Forests as carbon sinks and stocks • Forest protection • Rehabilitation of forest nature • Forest management methods • Forestry’s impact on waterbodies • Rights of indigenous peoples

Report of the Board of Directors | METSÄ BOARD ANNUAL REVIEW 2023