Metsä Board Annual review 2023

METSÄ BOARD Annual review 2023

■ Progress in targets • Fossil-based carbon dioxide emissions (Scope 1 and Scope 2 market-based) − The production curtailments caused by the market situation and investment shutdowns significantly reduced fossil-based CO 2 emissions in 2023. Completed investments and energy efficiency measures also reduced emissions. The carbon dioxide emissions of purchased energy were reduced by the notably lower total electricity consumption and the increased share of nuclear-based electricity. All in all fossil-based carbon dioxide emissions (Scope 1 and Scope 2 market-based) per produced tonne have reduced by 54 per cent from the 2018 level. • Share of target group suppliers with targets set in accordance with the SBTi by 2024 (Scope 3) – Despite progress being made in 2023, Metsä Board will not reach the supplier commitment target set for 2024. The company will update its Scope 3 target in 2024. • Improvement in energy efficiency from the 2018 level – The production curtailments caused by the market situation and investment shutdowns weakened energy efficiency in 2023. However, energy efficiency measures saved 30 GWh of energy. • Fossil free raw materials and packaging materials, share of dry tonnes – The share of fossil free raw materials and packaging materials remained at a good level. The company’s targets for reducing greenhouse gas emissions (Scope 1 and Scope 2) have been approved by the Science Based Targets initiative, and they meet the strictest requirements of the Paris Agreement, aimed at limiting global warming to 1.5 degrees. The Scope 3 target concerning suppliers meets the strictest requirements of the SBTi and complies with best practices. ■ The identification and assessment of material impacts, risks and opportunities The material impacts, risks and opportunities related to climate change have been identified in a double materiality assessment based on the principles of the company’s risk management process. The materiality assessment is discussed on pages 26–28 . Ensuring undisturbed and uninterrupted operations in all conditions is key in the risk assessment of production units. The assessment process of production units’ environmental risks is guided by the ISO 14001 and ISO 50001 management systems. The key identified risks are included in the company-level risk management process. The environmental impacts of production units are assessed in connection with the environmental impact assessments of investment projects, for example. The need for environmental impact assessments is determined by the local EIA authority. Risks related to climate change have been taken into account in the environmental impact assessments of the most recent investments. The regulatory risks associated with forest use are identified, assessed and managed in cooperation with Metsä Group’s Wood Supply and the Group’s Corporate Affairs unit. ■ Policies In its Environmental policy, Metsä Board is committed to transitioning to fully fossil free fuels at its production units, developing its production methods to support this transition, replacing purchased electricity and heat with fossil free alternatives, and finding fossil free alternatives to all

Physical risks related to climate change adaptation and their management

the company’s raw materials and packaging materials. The company is also committed to the continuous improvement of its environmental and energy efficiency. Environmental management and environmental perfor- mance are guided by the requirements of the production units’ certified quality, environmental and energy management systems. In the Leader in sustainability strategic programme, the climate focus is on reaching the strategic sustainability targets for fossil free operations at production units, fossil free products, and water and energy efficiency. Forest use is guided by Metsä Group’s principles for forest use and management, in which Metsä Group commits to increasing the amount of carbon bound in forests and to promoting forest biodiversity, among other things. Certified quality and environmental management systems are in use in Metsä Group’s wood supply. Suppliers are required to commit to Metsä Group’s Supplier Code of Conduct or to their own equivalent codes. In the Supplier Code of Conduct, suppliers are encouraged to set reduction targets for greenhouse gas emissions, for example, in accordance with the principles of the Science Based Targets initiative, and to continuously improve their environmental performance and efficient energy use. Suppliers are required to adopt a certified environmental management system where applicable.

Risks for Metsä Board

Management

Acute hazards

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

Storms, drought and floods cause disruptions in pro- duction or complicate the transport of raw materials and products.

Metsä Board prepares for the risks arising from extreme weather phenomena in both company and mill-level risk assessments. Examples of such measures include sufficient reserves of wood, the control of water levels with dam arrangements, and ensuring power distribution in exceptional situations. The supply chain is preparing for alternative transport routes or partners.

Chronic hazards

The increased frequency of droughts weakens the availability of the process and cooling water needed by mills and causes production breaks. Harvesting conditions are complicated due to a lack of snow and frost and because of increased precipitation. Damage caused by snow, storms, drought, forest fires, insects and fungi are increasing in forests, and chang- es are occurring in the prevalence of tree species. Alien species are likewise causing problems in forests.

Metsä Board’s mills are not located in areas of high overall water risk, which supports the company’s competitiveness in the face of climate change (WRI Aqueduct Water Risk Atlas). Metsä Board’s goal of reducing process water use and enhancing the recycling of water within the process reduces the water risk. Metsä Group’s wood supply always considers weather conditions and related changes in harvesting. Wood is harvested only in suitable conditions. If required, wood terminals can be used to smooth out any variation caused by harvesting conditions Metsä Group’s Wood Supply and Forest Services provides sustainable forest management services which support forests’ adaptation to climate change and help safeguard forest biodiversity. Metsä Group’s wood supply has strategic targets for promoting forest biodiversity, and Metsä Group is committed to the principles of regenerative forestry, which aim to strengthen the state of nature and comprehensively manage ecosystem services, or the benefits obtained from nature. As a result, forests can better adapt to climate change. An example of regenerative forestry is the Metsä Group Plus service offered to owner-members.

Strategy and financial targets

Value creation

Financial development 10 Key figures 12

Report of the Board of Directors

20 72

• Sustainability statement • Sustainability statement assurance report

Positive impact on the environment and society or on Metsä Board’s business Negative impact on the environment and society or on Metsä Board’s business Neutral impact on the environment and society or on Metsä Board’s business

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

■ Actions

Metsä Board’s 2030 sustainability targets

Climate change mitigation and energy Metsä Board’s plan for climate change mitigation includes action plans for the climate impacts from production, the supply chain and products. An action plan for the carbon balance of forests has been drawn up for Metsä Group’s wood supply. The plan for climate change mitigation supports the Paris Agreement’s target of limiting global warming to 1.5 °C above pre-in- dustrial levels and promotes the company’s adaptation to a low-carbon future. Greenhouse gas emissions and energy in the company’s own operations Metsä Board’s plan for climate change mitigation comprises investments and measures for replacing fossil fuels with renewable fuels and fossil free electricity at all the company’s production units and power plants. The measures apply to the fuels and backup fuels used at power plants and to the process fuels used at production units. The company will also transition to fully renewable or fossil free alternatives in its purchased energy. In addition, the company will improve the efficiency of its energy and water use through continuous development and investment. Reducing water use is a way of mitigating climate change, as process water use and wastewater treatment consume energy, causing greenhouse gas emissions. Measures related to water use are discussed under E3 – Water and marine resources . The company’s key actions promoting climate change mitigation, carried out in 2022−2023, included the replacement of peat with renewable fuels at the power plants of the Kyro and Simpele paperboard mills and the renewal of the turbine and generator of the Husum pulp mill, which will increase bioenergy generation at the Husum integrated mill and raise the mill’s electricity self-sufficiency from 50 to more than 80 per cent. These actions are expected to reduce fossil-based carbon dioxide emissions by around 136,000 tonnes annually. The renewal and bottleneck investments, completed in 2023, related to the Kemi paperboard mill’s development project will reduce the mill’s water use by 40 per cent and energy use by 5 per cent per tonne of

2030 target

2023

2022

2018

Fossil-based carbon dioxide emissions (Scope 1 and Scope 2 market-based)

0 t

184,713 t

391,220 t

563,627 t

Share of target group suppliers with targets set in accordance with the SBTi by 2024 (Scope 3) 1)

70%

19%

15%

4.3%

Improvement in energy efficiency from the 2018 level

+10%

-5.8%

+2.7% 2.36 MWh/t

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

100%

98.8%

99.4%

Metsä Group’s 2030 sustainability targets MG: Amount of carbon stored in wood products from the 2018 level

+30%

-21%

-12% 1,651,505 t

MG: Amount of forest regeneration and young stand management from the 2018 level

+30%

+14%

+2.8%

33,265 ha

MG: Amount of forest fertilisation from the 2018 level

+50%

-26%

9,115 ha

MG: Share of continuous cover forestry in peatland forest regeneration

30%

17%

1) In contrast with the other targets, the Scope 3 target year is 2024, and the base year is 2019. MG: The target has been set at the level of Metsä Group. The progress made in Metsä Group’s targets is described in more detail in Metsä Group’s Sustainability statement. The comparative data have not been provided for all the new targets set in 2023. Information for 2018 is not disclosed in the case of fossil free raw materials and packaging materials due to changes in calculation. Further information is provided under Reporting principles for metrics.

170 Remuneration report 174 Investor relations and investor information

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