Metsä Board Annual review 2023

E4 – Biodiversity and ecosystems

METSÄ BOARD Annual review 2023

■ Progress in targets • Reduction in process water use per tonne produced compared with the 2018 level – Production curtailments caused by the market situation and investment shutdowns weakened the efficiency of process water use in 2023. ■ The identification and assessment of material impacts, risks and opportunities The material impacts, risks and opportunities related to water and marine resources have been identified in a double materiality assessment based on the principles of the company’s risk management process. The materi- ality 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 production units’ impacts on water resources 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. Matters considered include water withdrawal, the thermal stress caused by the water returned or the impact of emission parameters on waterbodies. The impacts are also assessed in connection with process development and environmental risk mapping. Several production units have waterbody monitoring obligations and commitments. These are often regionally comprehensive long-term programmes for monitoring the long- term consequences of operations. Metsä Board’s operations are designed so they do not affect other parties’ rights or opportunities to use water. Surface water accounted for nearly 100% of Metsä Board’s water withdrawals. A small amount of groundwater is used mainly for hygiene and laboratory purposes. Production processes account for roughly half Metsä Board’s water use, and cooling purposes for the rest. The cooling water circulates in a separate system and does not need to be treated. However, the cooling water returned to waterbodies has a local heating impact. Process water is carefully treated before it is returned into waterbodies. All Metsä Board’s production units are located in areas at low or low-medium water risk that have large surface water reserves. None of the production units is located in an area of high water stress or high overall water risk (WRI Aqueduct Water Risk Atlas). Water stress indicates water demand in relation to water availability. Overall water risk indicates the risks related to water resources, taking the volume and quality of water resources and regulation in the area into account. ■ Policies Environmental management and continued environmental performance are guided by the requirements of the mills’ certified quality, environmental and energy management systems. The Environmental policy lays the foundation for environmental target setting. Resource efficiency is a key part of the policy, and in compliance with it, Metsä Board is committed to reducing its water use. In the Leader in sustainability strategic programme, the environmental focus is on implementing the planned actions aimed at reaching the strategic sustainability targets in water and energy efficiency, for example.

■ Actions

Water withdrawals and water consumption Increasing the efficiency of water use supports the circular economy, energy efficiency and minimised emissions. Metsä Board’s actions to reduce process water use in line with the 2030 sustainability target include investments in processes and wastewater treatment, as well as adjustments to and optimisation of water use. The actions improve water recycling and reduce water withdrawal from waterbodies. In addition to the company-level target, all production units have targets for water use, which are regularly monitored. Of all the water the company uses, approximately 96 per cent is returned to waterbodies after use, and the remaining 4 per cent evaporates in the process or is bound to the products. The development programme of the Kemi paperboard mill, completed in 2023, reduces the mill’s energy consumption by 5 per cent and water use by roughly 40 per cent per tonne produced. In 2023, water recycling was enhanced at the Husum pulp mill, and the renewal of the pulp and white-water system continued at the Simpele paperboard mill, the goal being to reduce the use of process water and energy. Wastewater discharges The impacts, risks and opportunities, as well as management methods related to wastewater discharges, are discussed under E2 – Pollution .

Material impacts, risks and opportunities related to biodiversity and ecosystems

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

Impacts

Risks and opportunities for Metsä Board

Management

Direct impact drivers of biodiversity loss

Climate change : Metsä Board’s production generates greenhouse gases that cause global warming. The company’s biogenic carbon dioxide emis- sions are classified as carbon-neutral. Pollution : The emissions to water, air and soil from Metsä Board’s production units can have a negative impact on species and ecosystems in the area. Direct exploitation : Metsä Board uses wood as its raw material. However, neither Metsä Board nor Metsä Group owns forests. Instead, they procure all their raw material from forests whose owners always decide how they are used. The impact of wood supply on biodiver- sity and ecosystems is described in this table, under Impacts on the state of species and the extent and condition of ecosystems.

The risks, opportunities and actions related to climate change are discussed under E1 – Climate change.

• The risks, opportunities and actions related to climate change are discussed under E1 – Climate change.

Strategy and financial targets

Value creation

The risks, opportunities and actions related to pollution are discussed under E2 – Pollution.

• The risks, opportunities and actions related to pollution are discussed under E2 – Pollution.

Financial development 10 Key figures 12

Report of the Board of Directors

20 72

• Sustainability statement • Sustainability statement assurance report

Consolidated financial statements

Impacts on the state of species and the extent and condition of ecosystems Commercial forest use reduces the amount of dead wood and changes forest structure, leading to changes in species and the state of ecosystems. Risks :

• Metsä Group’s Wood Supply has adopted the princi- ples of regenerative forestry, which aim to measurably improve the state of nature by 2030. Examples of regen- erative forestry actions: - The Metsä Group Plus service that compensates forest owners for the costs incurred from safeguarding nature values - Diversifying tree species in forests - Increasing the number of old trees - Diversifying and adding more decaying wood - Increasing the structural diversity of forest stands - Protecting valuable habitats • Forest certification can be used to demonstrate that the forest has been managed sustainably and responsibly. The international forest certification systems in use are: PEFC (Programme for the Endorsement of Forest Certifi- cation, PEFC/02−31−92) and FSC® (Forest Stewardship Council®, FSC-C001580). • Regulatory risks are managed through active dialogue with policymakers, discussed in more detail under G1 – Business conduct. • The goal of peatland forestry is to protect natural bog environments and maintain the water economy and wa- ter quality of water ecosystems, as well as protect their species. New drainage is not created, and old drainage is improved only if necessary. Bog environments suitable for active restoration will be determined and selected on a case-by-case basis. Continuous cover forestry is proposed to forest owners on suitable sites. • Metsä Board procures wood from commercial forests. Forest certification and controlled origin also require the company to consider valuable nature sites in commer- cial forests. Metsä Group’s FSC® nature site service helps focus the protection required by the FSC on the sites most valuable in terms of nature. • Metsä Group annually funds development projects with a regional impact that improve biodiversity and the condition of waterbodies and are implemented outside commercial forests in Finland. • In line with the principles of regenerative forestry, spruce, pine, silver birch, downy birch and aspen – all species that spread to Finland after the last Ice Age – are grown as industrial trees.

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

• Regulation that emphasises the protection of forest na- ture to promote biodiversity restricts harvesting volumes or increases wood supply costs. • A complex regulatory environment sets conflicting requirements for the forest industry. • Ecological compensation may increase the protection of commercial forests, as industries exploiting non-re- newable materials strive to compensate their negative impacts. Meanwhile, the use of non-renewable materials continues. • Consumers view forests as protected sites and reduce their consumption of wood-based products. • If the state of nature continues to weaken, the accepta- bility of the forest industry as well as the reputation of Metsä Board and Metsä Group as sustainable operators will suffer. Opportunities : • As a result of the improved state of nature and the comprehensive management of ecosystem services, or benefits obtained from nature, forests will be better able to adapt to climate change. • Metsä Group’s compliance with the principles of regener- ative forestry and success in strengthening the state of nature will improve Metsä Board’s and Metsä Group’s reputation as sustainable operators.

Water withdrawals and consumption and wastewater discharges

1,000 m 3

2023

2022

WATER WITHDRAWALS Surface water

101,884

114,401

Groundwater

Metsä Group aims to measurably and verifi- ably strengthen the state of nature by 2030. If achieved, this will have a positive impact on the state of nature.

Total water withdrawals

101,943

114,465

WATER CONSUMPTION Water consumption

3,874

4,579

WASTEWATER Wastewater discharges

45,380

58,740

Impacts on the state of species and the extent and condition of ecosystems The draining of peatland forests causes changes in habitats and can lead to biodiver- sity loss.

Risk : Regulation that emphasises the special role of peatlands as large carbon reservoirs, sources of GHG emissions, and potential restoration and protection sites restricts felling volumes.

Reporting principles for metrics Water withdrawals include the withdrawal of process and cooling water at all Metsä Board production units. Process water use per tonne produced is measured as cubic metres from the process water used and calculated per tonne of product produced. Water consumption is an estimate of the amount of water that has evaporated in production and wastewater treatment and water bound in products and wastewater treatment sludge. The calculation is based on an estimate, which considers the matters mentioned above, as well as direct water withdrawal, the water contained in raw materials and the water returned to waterbodies. The amount of water withdrawn in 2022 has been retroactively adjusted from 109,967 thousand cubic metres to 114,465 thousand cubic metres because the figure for the Äänekoski paperboard mill was not included in the 2022 disclosures. Water consumption was adjusted from 4,399 thousand cubic meters to 4,579 thousand cubic meters.

Risk : If the state of nature continues to deteriorate, the forest industry’s legitimacy and the image of Metsä Group as a sustainable operator will suffer.

If valuable habitats are not identified or taken into account in wood supply and forest man- agement, there will be fewer forests offering special biodiversity and ecological value.

170 Remuneration report 174 Investor relations and investor information

Opportunity : Metsä Board’s and Metsä Group’s reputation as sustainable operators strengthens.

Biodiversity and the condition of waterbodies improve outside commercial forests.

Opportunity : Regenerative forestry offers a competitive advantage over competitors who use foreign tree species in their products.

Metsä Board offers consumers products based on naturally occurring tree species.

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