Metsä Board Annual review 2023

METSÄ BOARD Annual review 2023

Reporting principles for metrics The amount of forest regeneration and young stand management covers, in hectares, the soil preparation and young stand management, or early cleaning and thinning, carried out by Metsä Group’s Wood Supply and Forest Services (Metsä Forest). The amount of forest fertilisation includes, in hectares, the growth, boron and ash fertilisation carried out by Metsä Forest. The share of continuous cover forestry in peatland forest regeneration covers Metsä Forest’s standing sales, as well as the group selection cutting, selection cutting and strip felling carried out to regenerate peatlands, and it is calculated based on the amount of harvesting. The amount of carbon stored in wood products is calculated for Metsä Group’s mechanical wood products. The carbon content is calculated using tree species-specific database factors to ensure comparable results between tonnes of wood (CO 2 equivalent). The amount of fossil free raw materials and packaging materials covers the raw materials and packaging materials of products produced by Metsä Board. The weight of raw materials is con- verted to dry tonnes using the factors provided by the suppliers. A raw material is considered fossil free if none of its main raw materials contains fossil-based oil. Materials that do not remain in the product, such as process chemicals, are not taken into account in calculation. In 2023, the dry tonne factor for raw wood was adjusted, and as a result, the 2022 comparison figure was retroactively calculated in accordance with the new factor. Energy consumption encompasses all Metsä Board’s production units. Metsä Board’s internal heat transfer is taken into account to avoid double counting. Energy consumption is expressed as final energy consumption, which means that the efficiency factors of electricity and heat are not taken into account. Final energy consumption is obtained by summing up the fuel consumed at mills, self-generated hydropower and the amount of purchased electricity and purchased heat, and then deducting sold heat and electricity. Internal logistics and the electricity purchased for buildings outside mill areas, such as warehouses and office facilities, is excluded from the calculation, as their share of total energy consumption, and thus of Scope 1 and Scope 2 emissions, is assessed to be non-material. Local factors are used to calculate the energy contained in different fuels. Metsä Board’s heat consumption is mainly based on steam. The improvement of energy efficiency is determined as specific energy consumption, meaning the ratio of energy consumption and production volume. Specific energy consumption is calcu- lated for individual production lines, including the consumption of electricity, heat and fuels as megawatt hours (MWh). Tonnes and cubic metres are both used as units in production volume calculations. They are considered to be of equal value. The energy efficiency of Metsä Board’s power plants is not taken into account in calculations. Discontinued lines are included in the calculations for as long as they are used in production. New production units are included in the calculations from the year in which their production begins. GHG emissions include the emissions of all Metsä Board production units. In emissions calculations, Metsä Board’s internal heat transfer is taken into account to avoid double counting. GHG emissions are calculated in accordance with the GHG Protocol Corporate Accounting and Reporting Standard and the Corporate Value Chain (Scope 3) Accounting and Reporting Standard. The scope of reporting is based on operational control. Reporting covers direct GHG emissions (Scope 1) from Metsä Board’s own operations, indirect GHG emissions (Scope 2) from

the production of purchased energy, and indirect GHG emissions from other parts of the value chain (Scope 3), including upstream and downstream. Power plant emissions are allocated to the mills that use the energy generated by the plants. The calculation includes all the greenhouse gases covered by the GHG Protocol (CO 2 , CH4, N 2 O, HFCs, PFCs, SF 6 and NF 3 ). Emissions have been converted into carbon dioxide equivalents. The figures for previous years have been adjusted retroactively, as Metsä Board has previously included only carbon dioxide emissions in the calculation. In addition, the Scope 1 emissions for 2022 were retroactively adjusted by 8,116 tonnes due to changes in emissions factors. Scope 1 emissions have been calculated from the fuels used by production units. The calculation is based on supplier-specific emission factors for fuels or on national emission factors. Two different methods are used for Scope 2 carbon dioxide emissions. The market-based method uses supplier-specific emissions factors, supplemented with national residual mix emission factors for untracked purchased electricity. In the location-based method, country-specific average emission factors for electricity are used. The residual mix factors and country-specific factors have been obtained from the AIB (Association of Issuing Bodies) report on emission factors. Metsä Board’s 2030 sustainability target, “0 tonnes of fos- sil-based carbon dioxide emissions”, concerns Scope 1 and Scope 2 emissions and only encompasses carbon dioxide emissions, excluding other greenhouse gases. In other respects, the target has been calculated in accordance with the GHG Protocol. The target does not include buildings outside the mill areas or internal logistics, as their share of emissions is assessed to be non-material. The company’s biogenic carbon dioxide emissions originate in wood-based fuels. A CO 2 emission factor of 396 tonnes of CO 2 / GWh, provided by Statistics Finland, has been used in their calculation. The materiality of each of the 15 Scope 3 categories was determined using a spend-based materiality assessment. All the categories assessed to be material were calculated. Categories in which the amount of greenhouse gases was insignificant were also included in the Scope 3 inventory. The categories included in the calculation are listed in the table on page 37 . Only three categories were excluded from the calculation – upstream leased assets, downstream leased assets and franchising – as they were assessed to be non-material. Metsä Board does not have significant leased assets under Scope 3 that would not already be included in Scope 1 and Scope 2. Metsä Board does not engage in franchising. The Scope 3 inventory has been calculated as tonnes of CO 2 equivalent, excluding biogenic CO 2 . The operational data used in the calculation are obtained from Metsä Group’s internal systems. In the absence of accurate data, assumptions have been used. The emission factors used are mainly from global databases, including ecoinvent 3.9.1, EXIOBASE 3, DEFRA’s GHG conversion factors (full set 2022) and IEA’s Life Cycle Upstream Emission Factors (2023). In addition, supplier-specific emission factors have been used for logistics (46 per cent of operational data) and raw materials (78 per cent of operational data excluding raw wood). Some of the supplier-specific emission factors in logistics only cover CO 2 in current calculations, but they will be updated to include other essential greenhouse gases in the next few years as the international disclosure guidelines for logistics develop. Currently, many of the supplier-specific emission factors

in logistics only cover TTW (tank-to-wheel) emissions. As a rule, WTW (well-to-wheel) emission factors are used if available from suppliers. Metsä Board’s emissions data related to investments are based on the company’s share of Metsä Fibre’s Scope 1 and Scope 2 emissions, corresponding to Metsä Board’s holding (24.9 per cent) in Metsä Fibre, excluding the emissions associated with pulp raw materials procured from Metsä Fibre that have been assigned to the first category of the Scope 3 inventory. A more detailed description of calculation methods is available on Metsä Group’s website .

The 2022 Scope 3 emissions have been retroactively updated in accordance with the above model, which is why the 2022 Scope 3 emissions increased from 1,816,979 tonnes to 2,274,825 tonnes. The increase in disclosed emissions was caused especially by updated assumptions, the change in the emissions factor depicting landfill disposal, and the inclusion of pulp sold in the category End-of-life treatment of sold products. Emissions also increased because process chemicals were calculated based on weight instead of consumption in the Purchased goods and services category. The updated Scope 3 emissions for 2022 have not been externally assured.

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

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

E2 – Pollution

Consolidated financial statements

Pollution-related impacts, risks and opportunities

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

Impacts

Risks and opportunities for Metsä Board

Management

Pollution of air, water and soil

Risk : Deviations in emissions may cause a liability to pay compensation and costs from corrective action. In addi- tion, Metsä Board’s reputation as a sustainable operator may suffer.

In addition to GHG emissions, Metsä Board’s production generates other emissions to air. Most of the emissions to air originate in the production units’ and power plants’ combus- tion process. Production also generates waste- water discharges. Emissions to air and water, as well as environmental permit deviations at mills in the reporting year, are presented in the tables on page 40. Soil pollution may occur as a result of techni- cal defects or human errors in Metsä Board’s or its service providers’ operations. The com- pany has environmental liabilities related to former activities on industrial sites that have since been closed, sold or leased, and from decommissioned landfill sites.

• Emissions to air are reduced with a meticulous control of the combustion processes and the purification of flue gases. • Emissions to water are reduced through reduced water use, more efficient processes and efficient wastewater treatment. • The best available techniques are used in production. Environmental performance is monitored continuously. Proactive measures aimed at preventing interruptions include comprehensive preventive maintenance and observations in production. • Any deviations in emissions and related corrective ac- tions are immediately reported to the authorities.

Microplastics

Opportunity : Demand for Metsä Board’s products increases.

Metsä Board’s products, produced mainly from renewable raw materials, are an alter- native to plastic packaging and enable the reduction of microplastics.

• Nearly all Metsä Board’s raw materials are fossil free. Active research and development is being conducted to replace the remaining fossil-based raw materials.

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

■ The identification and assessment of material impacts, risks and opportunities The material impacts, risks and opportunities related to pollution 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 pollution-related impacts of production units are assessed in connection with the environmental impact assessments of investment

projects and during the environmental permit processes, for example. The need for environmental impact assessments is determined by the local EIA authority. After any environmental impact assessment and environmental permit process, the production units operate in accordance with their environ- mental permit and the company’s operational management system. The environmental permit and the related programme for monitoring emissions and impacts set the minimum requirements for the observation of environmental impacts. In addition to emissions, observations typically focus on waterbodies, fish stock, air quality and noise. Regular risk assess- ments and official inspections ensure the adequate scope of observations and performance of production units.

170 Remuneration report 174 Investor relations and investor information

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