Metsä Board Annual review 2023

METSÄ BOARD Annual review 2023

Impacts

Risks and opportunities for Metsä Board

Management

Metsä Group’s Wood Supply and Forest Services and increasing the share of certified wood fibre in Metsä Board’s wood use. Forest certification is a demonstration of sustainable and responsible forest management. Forest certification has two key elements: sustainable forest management and the wood supply chain. The international forest certification systems used by Metsä Board are PEFC (Programme for the Endorsement of Forest Certification, PEFC/02−31−92) and FSC® (Forest Stewardship Council®, FSC-C001580). Metsä Board aims for the share of certified wood fibre to remain at least 90 per cent of all the wood fibre it uses. The wood used by Metsä Board is procured by Metsä Group. All the wood that Metsä Board uses comes from either certified forests or forests that meet the requirements of controlled origin (PEFC Controlled Sources, FSC® Controlled Wood). The origin of the wood is always known. The procurement of Metsä Board’s wood does not cause deforestation. The countries from which wood is procured impose a statutory obligation to renew forests after regeneration felling. The wood that Metsä Board uses in its products is mainly procured from Finland and Sweden. A break- down of wood supply by country is presented in the table on page 67 . Metsä Group’s Wood Supply requires all partners to comply with legislation, and operations adhere to the European Timber Regulation (EUTR), US Lacey Act and UK Timber Regulation (UKTR). Wood supply is described in more detail under G1 – Business conduct . Metsä Group’s Wood Supply complies with certification requirements and considers the impacts of its operations on its key stakeholders, includ- ing forest owners, mill locations and their residents, nature, and people who earn their livelihood from nature, such as indigenous peoples, as well as other parties interested in the environment, such as NGOs. Metsä Group has an operating model for the active engagement of stakeholders, as well as processes for managing stakeholder engagement, which are described under S3 – Affected communities .

biodiversity-promoting measures that follow the principles of regenerative forestry include the following: • Wood is procured only from certified forests or sources of controlled origin (see Policies for further information). • Metsä Group only procures tree species naturally occurring in the area, that is, spruce, pine, silver birch, downy birch and aspen. • Mixed forests increase forest biodiversity and forest resilience against storm and insect damage, for example. • In wood procurement areas, decaying wood is added by retaining dead trees, leaving retention trees preferably in groups, and by making high biodiversity stumps during thinning and regeneration felling. • In herb-rich forests, Wood Supply recommends nature management methods – and voluntary protection for the most valuable sites. Nature management measures are thus focused on places where they have the greatest impact on biodiversity. • Protective thickets are left for animals at all stages of forest management. • Buffer zones along waterbodies promote biodiversity and prevent the runoff of soil and nutrients. • Continuous cover forestry is chosen as the procedure for sites that it is suited for. • The FSC nature site service contributes to focusing protection on the most valuable nature sites. A very tangible example of the practical implementation of regenerative forestry measures in forest management services and wood supply is the Metsä Group Plus service introduced in June 2023, which is a forest man- agement model designed for Metsäliitto Cooperative’s owner-members. In the Plus model, measures that safeguard and improve the state of forest nature more comprehensively than current standard practices are agreed in connection with wood trade and orders for young stand management. Metsä Board has identified the key legislative initiatives that may affect forest use and the production of Metsä Board’s products. As part of Metsä Group, Metsä Board participates in the management of regulatory risks by actively engaging in policy dialogue and targeting its key messages based on the identified regulatory risks. Advocacy is discussed under G1 – Business conduct . Regenerative forestry makes business more resilient to impacts related to legislation, the markets and climate change. Biodiversity outside commercial forests Metsä Group’s nature programme annually funds regional development projects that improve biodiversity and the state of waterbodies and are implemented outside commercial forests in Finland. In 2023, a total of 23 Finnish biodiversity management and restoration projects were selected for funding. They focus on themes such as the management of traditional landscapes and restoration of flowing waters. The funding for these projects totalled EUR 600,000. Biodiversity in areas around production units In 2023, Metsä Group launched a multi-year systematic action plan in which a biodiversity plan will be drawn up for each of the company’s production units. The project was launched in Kemi, which will serve as the pilot site for the entire project. The action plan encompasses the industrial

Opportunities : • Metsä Board’s and Metsä Group’s reputation as sustain- able operators strengthens. • Metsä Board can more comprehensively monitor the environmental impact of its production units, with the built environment’s biodiversity impacts included in monitoring. • Cooperation with significant stakeholders develops in the localities of production units.

Metsä Group will draw up biodiversity plans for its mill sites to increase the biodiversity of the sites, taking special local features into account and combining local industrial history and nature solutions.

• In 2023, Metsä Group launched a multi-year action plan in which a biodiversity plan will be drawn up for each production unit. The project was launched as a pilot project at the mills in Kemi. The plan encompasses areas on the industrial site, as well as offsite land areas owned by the company.

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

Impacts and dependencies on ecosystem services Finnish forests produce a diverse range of tangible and intangible services, with a local, regional, national and international impact. Commercial forest use reduces the amount of dead wood and number of old trees and makes forest structure more one-sided, weak- ening the state of species and ecosystems. Metsä Group aims for the state of nature to strengthen measurably and verifiably by 2030. If this is achieved, it will have a positive impact on the state of nature.

Risk : For Metsä Board, wood production is one of nature’s key ecosystem services. If the state of forest nature deteriorates, forests become more vulnerable to weather phenomena caused by climate change

• The goal of regenerative forestry is to develop forestry so that nature’s various benefits from carbon sinks to pollinators – that is, ecosystem services – can be meas- ured, and that wood is produced as part of a developing production model with multiple targets and based on ecosystem services.

Strategy and financial targets

Value creation

Financial development 10 Key figures 12

Opportunity : As a result of the improved state of nature and the comprehensive management of ecosystem ser- vices, or benefits obtained from nature, forests can adapt better to climate change.

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

Metsä Group’s 2030 sustainability targets for wood supply

2030 target

2023

2022

MG: Retention trees on regeneration felling sites, %

100

MG: High biodiversity stumps on harvesting sites, %

100

MG: Spruce as the only tree species after young stand management, %

MG: Measures promoting biodiversity, number

10,000

816

Comparative data have not been provided for all the new targets set in 2023. MG: The target has been set at the level of Metsä Group. Metsä Group, which handles Metsä Board’s wood supply, has targets for promoting forest biodiversity and the sustainable use of forests. The progress made in these targets is described in more detail in Metsä Group’s Sustainability statement.

■ Actions

■ The identification and assessment of material impacts, risks and opportunities The material impacts, risks and opportunities related to biodiversity and ecosystems 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 . Metsä Board’s impacts, risks and opportunities related to forest biodiversity and the state of forest ecosystems take place through Metsä Group’s Wood Supply and Forest Services. Metsä Group’s wood supply is guided by Wood Supply’s certified ISO 14001 environmental management system. Regulatory risks related to forest use are assessed and managed in accordance with the principles of Metsä Group’s risk management process in cooperation with Metsä Group’s Wood Supply and Corporate Affairs unit. Wood supply is discussed in more detail under Business model, value chain and strategy and G1 − Business conduct . Metsä Board’s production units may also have negative impacts on the mill sites’ biodiversity and ecosystems due to the units’ emissions, for example. The methods for identifying and managing the impacts of pollution are discussed under E2 – Pollution . The production units’ environmental impacts are assessed in connection with the environmental impact assessments of investment projects and

during the environmental permit processes. The need for environmental impact assessments is determined by the local EIA authority.

Direct impact drivers of biodiversity loss Actions related to climate change mitigation and adaptation, as well as pollution, are discussed under E1 – Climate change and E2 – Pollution .

■ Policies The Environmental policy lays the foundation for environmental target setting. In its Environmental policy, the company is committed to obtaining wood raw material from sustainably managed forests and to paying attention to the economic, social and environmental aspects of forest man- agement and wood supply. Environmental management and continued environmental performance at mills are guided by the requirements of the mills’ certified quality, environmental and energy management systems. In 2023, Metsä Group’s Board of Directors adopted regenerative forestry principles. The goal of regenerative forestry measures is to verifiably strengthen the state of Finnish nature as part of Metsä Group’s Wood Supply and Forest Services. Progress is monitored with the indicators specified for the 2030 targets, presented in the table on page 44 . With its targets for strengthening the state of nature, Metsä Group con- tributes to international, the EU’s and Finland’s biodiversity targets. The principles of regenerative forestry are in line with the biodiversity roadmap prepared by the Finnish Forest Industries Federation. In the Leader in sustainability strategic programme, the focus concern- ing forest biodiversity is on reaching the strategic sustainability targets in

Impacts on the state of species and the extent and condition of ecosystems

Regenerative forestry Wood raw material is used as efficiently as possible to ensure high added value and minimise the forest area needed for harvesting. The utilisation of side streams is described in more detail under E5 – Resource use and circular economy . The principles of Metsä Group’s regenerative forestry are discussed under Policies in the section on biodiversity. As part of the regenerative forestry programme, Metsä Group and its stakeholders are developing monitoring systems so the impacts of operations on the state of nature can be measured and disclosed. Metsä Group cooperates actively with a diverse research community, and the forest and nature management and harvesting methods used in the company’s wood supply are based on recent research. Some of the key

170 Remuneration report 174 Investor relations and investor information

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