Metsä Board Annual review 2023

METSÄ BOARD Annual review 2023

Impacts

Risks and opportunities for Metsä Board

Management

site, as well as off-site land areas that are used by the town for recreational purposes. The special features of local nature will be taken into account in the project, and the living conditions of endangered species will be improved. Impacts and dependencies on ecosystem services Wood production is a key ecosystem service, or a benefit offered by nature, for Metsä Board. The goal of Metsä Group’s forest management services is to safeguard locally, nationally and internationally significant ecosystem services. Strengthening the state of nature with regenerative forestry and comprehensively managing nature’s ecosystem services improve forests’ adaptation to climate change

Waste and side streams

Reporting principles for metrics The calculation of high biodiversity stumps left on harvesting sites covers the direct standing sales carried out by Metsä Group’s Wood Supply and Forest Services. The harvesting sites include intermediate and regeneration felling sites. The calcula- tion of retention trees left on regeneration felling sites covers the direct standing sales carried out. Forest certification criteria set minimum requirements for the number of retention trees. The calculation is based on the number of regeneration felling sites. Stands containing only spruce after young stand management are determined based on the young stand management work carried out. The calculation takes into account spruce-dominated sites where spruce accounts for more than 50 per cent of the remaining trees. Spruce is considered to be the only tree species if other species account for less than 10 per cent on the site. The number of measures promoting biodiversity is calculated based on the measures carried out in owner-members’ forests. The measures that are currently monitored include nature management measures in herb-rich forests, burned retention trees, FSC nature site services and the number of Metsä Group Plus agreements.

Opportunity : The utilisation of side streams generates financial benefit. Making full use of the forest industry’s side streams strengthens the industry’s acceptability and secures future operations. Risk : If an end use is not found for all side streams, the acceptability of forest industry operations will weaken, and no economic benefit will be obtained from side streams. Risk : Legislation that leads to a decline in the use of forest industry side streams for bioenergy generation erodes the acceptability of forest industry operations.

Metsä Board’s production side streams are converted into new products.

• In cooperation with Metsä Group’s other business areas, Metsä Board aims to make full use of wood raw material. • New applications are jointly sought for production side streams with partners. • As part of Metsä Group, Metsä Board develops industrial symbioses so that the network of companies offers synergies in resource use. • Metsä Board invests in cleaner process technology.

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

Metsä Board’s production currently generates landfill waste that causes emissions to air, wa- ter and soil. Nearly all production side streams are utilised as materials or energy. Landfill waste in the reporting year is presented in the table on page 49. The 2030 target is 0 tonnes of process waste delivered to landfills.

Strategy and financial targets

Value creation

Financial development 10 Key figures 12

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

Report of the Board of Directors

20 72

• Sustainability statement • Sustainability statement assurance report

Metsä Board’s 2030 sustainability target

2030 target

2023

2022

Process waste delivered to landfills, t

1,164

130

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

■ Progress in targets • Process waste to landfills – In 2023, the volume of landfill waste increased from the previous year due to a waste batch resulting from the Husum investment shutdown. The investment shutdown is also expected to affect the volume of landfill waste in 2024. Except for this single incident, the reduction of Metsä Board’s landfill waste has progressed as planned towards the 2030 target. The targets related to water and energy use are discussed under E1 – Cli- mate change and E3 – Water and marine resources . Comprehensive system-level indicators for the circular economy are still under development internationally. Metsä Group follows the development of indicators and participates in testing and development work in the scope of the Ellen MacArthur Foundation. ■ The identification and assessment of material impacts, risks and opportunities The material impacts, risks and opportunities related to resource use and the circular economy have been identified in a double materiality assess- ment based on the principles of the company’s risk management process. The materiality assessment is discussed on pages 26–28 . The production units’ resource efficiency and waste management are considered in 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. After any environmental impact assessment, the production units operate in accordance with their environmental permit and the company’s operational management system. The mills’ waste management is also regulated by the conditions in the environmental permits. Some mills have their own waste management area, subject to an environmental permit, the environmental impacts of which are monitored and managed in accord- ance with the permit conditions. Risks related to waste management are assessed as part of regular risk assessments.

■ Policies In its environmental policy, Metsä Board is committed to regenerative forestry, efficiently using raw materials, water and energy, and continu- ously developing operations. The side streams generated in production processes are used primarily as raw material or energy. The company takes advantage of synergies between its production units and develops industrial cycles and the recyclability of products. In its operations, the company follows circular economy principles, safe- guarding nature’s capacity for renewal, minimising waste and emissions, and keeping natural resources used by society in use for as long as possible and as valuable as possible. As the complete recycling and reuse of materials are impossible, maintaining the material cycle also requires the addition of primary raw materials to the cycle. Fresh fibre is therefore needed to maintain a good and functioning recycling loop of fibre-based packaging. Primary renewable resources can be obtained while safeguarding nature’s capacity for renewal, as required by circular economy principles. Metsä Group’s wood supply is based on regenerative forestry, which is discussed under E1 – Climate change and E4 – Biodiversity and ecosystems . In the Leader in sustainability strategic programme, the focus concern- ing the circular economy is on achieving the strategic sustainability targets for fossil free production units and products, water and energy efficiency, and expanding the company’s role in the circular economy. The goal of the Effective innovation programme is to ensure the long-term competi- tiveness of Metsä Board’s products. Its focal areas include reducing the weight of paperboard and developing fossil free recyclable products such as dispersion-coated paperboard. All Metsä Board’s paperboards are produced from renewable and recyclable fresh fibre. Fresh fibre paperboards do not interfere with the smell or flavour of the product they cover, and they are the safest choice for fibre packaging designed for food and other demanding end uses.

E5 – Resource use and circular economy

Material impacts, risks and opportunities related to resource use and the circular economy

Impacts

Risks and opportunities for Metsä Board

Management

Resources inflows, including resource use

Opportunity : Legislation that recognises the climate and other benefits of fossil free raw materials in the produc- tion of materials and sets requirements for replacing primary fossil-based raw materials with more sustainable alternatives. Risk : Legislation that requires the use of recycled material in several products and does not recognise the circular economy benefits offered by fresh fibres and other bio- based raw materials. Because the current business strate- gy focuses on fresh fibre products, this will probably have a negative impact on business. Adapting to a changed operating environment will require new investments, among other things .

Thanks to regenerative forestry, Metsä Board’s primary renewable resources can be obtained in line with circular economy principles, and they are a more sustainable alternative to primary fossil-based raw materials, the pro- curement of which is not compatible with the circular economy. The impact of wood raw material on the car- bon balance of forests and forest biodiversity, as well as the related risks and opportunities, are presented under E1 – Climate change and E4 – Biodiversity and ecosystems. The impacts, risks and opportunities of water and energy consumption are described under E1 – Climate change and E3 Water and marine resources. Resource outflows related to products and services Metsä Board’s products offer customers and consumers the opportunity to use recyclable products and an alternative to products made from fossil-based raw materials.

• Wood raw material is utilised entirely. • Industrial symbioses are developed so that the network of companies offers synergies in resource use. • R&D for developing fossil free alternatives and making products more lightweight. • The continuous improvement of production processes and new mill investments further improve resource efficiency. • Commitment to regenerative forestry principles, the continuous development of forest management services and other active cooperation with the cooperative’s owner-members. The actions are described in more detail under E1 – Climate change and E4 – Biodiversity and ecosystems. • Attention is also paid to the resource efficiency of other materials and energy use. Actions to reduce water use are described in more detail under E3 – Water and ma- rine resources, and actions to improve energy efficiency are described under E1 – Climate change. • R&D and services increase the recyclability of products and reduce their environmental footprint. • Cooperation with customers and other value-chain operators is active. • Active engagement in advocacy. Metsä Board’s influ- encing and lobbying are discussed under G1 – Business conduct.

170 Remuneration report 174 Investor relations and investor information

Opportunity : Legislation and international agreements that favour recyclable products made from renewable resources by the forest industry instead of packaging made from materials such as plastic offer more growth opportunities. Risk : Legislation that favours reusable packaging instead of recyclable single-use packaging can reduce the demand for Metsä Board’s products and in the worst case, prohibit the use of single-use packaging. If the chemical recycling of plastics is implemented at industrial scale, the use of plastics may become more acceptable, and there will be less need to replace plastics.

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