Metsä Board Annual review 2023

G – Sustainability governance

METSÄ BOARD Annual review 2023

Metsä Board’s 2030 sustainability targets

2030 target

2023

2022

G1 – Business conduct

Implementation of ethics barometer measures, %

100

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

Traceability of raw materials, share of total purchases, %

100

Impacts, risks and opportunities related to business conduct

Share of certified wood fibre, %

>90

Impacts

Risks and opportunities for Metsä Board

Management

Suppliers’ commitment to the Supplier Code of Conduct, share of total purchases ,%

100

99.0

98.7

Corporate culture

Supplier assessments and audits of core suppliers, %

100

Opportunity : The employees’ and other stake- holders’ experience of Metsä Board and the company’s reputation as an ethical and reliable operator strengthen. Risk : Metsä Board incurs financial losses due to operations in breach of legislation. The com- pany’s reputation as a sustainable partner and operator weakens. Unequal treatment and har- assment reduce the employees’ job satisfaction and commitment. Opportunity : The stakeholders’ experience of Metsä Board and the company’s reputation as an ethical and reliable operator strengthen, improv- ing performance and competitiveness. Risk : Corruption and bribery have significant fi- nancial consequences and weaken the reputation and employer image. Opportunity : Metsä Board’s reputation as a sustainable partner and operator improves. Cooperation with suppliers becomes closer and leads to long partnerships. Risk : Metsä Board unintentionally supports operations contrary to its values, which risks the company’s reputation as a sustainable partner. Relationships with suppliers weaken, leading to the loss of the best partnerships.

Metsä Board’s measures to promote an eth- ical corporate culture offer the employees a safe work environment and other stakehold- ers an opportunity for cooperation with an ethical and reliable operator. Inadequate measures to commit employees to an ethical corporate culture could lead to non-compliance with the law or unethical business operations, as well as unequal treat- ment and harassment.

• Employees learn about ethical corporate culture during induction, and later during employment, through e-learning and classroom training, as well as through communication. Especially supervi- sors’ capacity to address grievances is developed through training. • Ethical corporate culture is measured with the ethics barometer. • Metsä Board has a Compliance and Ethics Channel open to everyone.

Strategy and financial targets

MG: Joint sustainability targets with partner suppliers, %

100

Value creation

Comparative data have not been provided for all the new targets set in 2023. The previous result of the implementation of ethics barometer measures is from 2021. MG: The target has been set at the level of Metsä Group.

Financial development 10 Key figures 12

Report of the Board of Directors

■ Progress in targets • Implementation of ethics barometer measures – The ethics barometer is conducted every two years. The measures based on the 2020 ethics barometer were specified for 2021, during which 100% of the measures were carried out. In 2023, 100% of the measures defined in 2022 were achieved in accordance with the target. • Traceability of raw materials, share of total purchases, % − The traceability of raw materials remained at a high level in 2023. • Share of certified wood fibre – In 2023, the target set for 2030 was achieved. • Suppliers’ commitment to the Supplier Code of Conduct, share of total purchases − Supplier commitment to the Supplier Code of Conduct progressed as planned towards the 2030 target. Among other things, the supplier approval process was developed in 2023. • Supplier assessments and audits of core suppliers − Significant progress was made in this target in 2023, as Metsä Board initiated cooperation with Ecovadis, which specialises in sustainability assessments. • Joint sustainability targets with partner suppliers − A sustainability target has been agreed with all current partner suppliers, which means the 2030 target has been achieved. The company works in close cooperation with its suppliers to reach the joint targets. ■ The role of the administrative, management and supervisory bodies The Compliance and Ethics programme is supervised by the Compliance Committee, composed of the directors in charge of legal affairs, internal audit, HR, and compliance and ethics. In 2023, the Compliance Committee convened five times. Once a year, the director in charge of compliance and ethics presents a compliance and ethics review to Metsä Board’s Corporate Management Team and Audit Committee. In addition, the directors in charge of legal affairs, taxes, and compliance and ethics present a legal affairs, compli- ance and tax review twice a year to the CEO and CFO. The Compliance Committee’s role in investigating ethical concerns is described under Mechanisms for identifying, reporting and investigating concerns .

■ The identification and assessment of material impacts, risks and opportunities The material impacts, risks and opportunities related to governance and corporate culture 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 . The Know Your Business Partner process, supplier assessments and audits, the company’s ethics barometer, and the Compliance and Ethics Channel are key elements in the identification, analysis and management of impacts, risks and opportunities related to governance and corporate culture. ■ Policies The sustainability of Metsä Board’s business conduct is guided by applicable legislation as well as the values, Metsä Board’s Code of Conduct and various policies approved by the company’s Board of Directors. Metsä Board is committed to operating in accordance with the UN Guiding Principles on Business and Human Rights and requires the same from its business partners. Since 2003, Metsä Board has supported the UN Global Compact and its principles on human rights, employees, the environment and anti-corruption. In 2023, all Metsä Group’s 16 policies were updated to comply with changes in legislation and the company’s operating methods. Three of the policies are public, and 13 are internal to the company. All the group’s employees are required to complete e-learning courses in the Code of Conduct and other key policies such as the Equality policy and Information Security policy every three years. The e-learning course in the Code of Conduct covers Metsä Board’s key ethical principles and describes the best practices related to business sustainability through examples and exercises. Depending on the employees’ duties, they are also required to complete e-learning courses related to other policies such as the antitrust, procurement, agreement and legal affairs policies. The classroom training programme in competition law, initiated in 2022, continued in 2023, as did workshops in diversity, equality and inclusion for local management (workshops are discussed in more detail under S1 – Own workforce ). A sec- tion developing supervisors’ capability to address ethical grievances and encourage the reporting of grievances was added to the training offered to supervisors. Ethical operations and doing the right thing are also part of the induction of new salaried employees and apprenticeship trainees.

Corruption and bribery

20 72

• Sustainability statement • Sustainability statement assurance report

Prevention and detection: Metsä Board’s measures and control mechanisms for preventing corruption and bribery offer stake- holders the opportunity to cooperate with an ethical and reliable operator. Incidents: Inadequate measures and control mechanisms for preventing corruption and bribery could lead to non-compliance with Metsä Group’s Code of Conduct and legisla- tion concerning corruption and bribery.

• Employees learn about ethical corporate culture during induction, and later during employment, through e-learning and classroom training as well as through communication. • Metsä Board has internal controls, which are continuously developed. • Ethical corporate culture is measured with the ethics barometer. • Everyone can report grievances through the Compliance and Ethics Channel.

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

Management of relationships with suppliers including payment practices Metsä Board’s requirements and control mechanisms, as well as its sustainability cooperation with suppliers, have a positive impact on the realisation of ethical operations and sustainability in the supply chain.

• Suppliers are required to commit to the Code of Conduct. • Metsä Board follows due diligence in its selection of partners (Know Your Business Partner process). • Joint sustainability targets and actions are agreed with partner-lev- el suppliers. • The company uses supplier assessments, surveys and audits, as well as risk analyses. • Procurement personnel are trained in matters concerning ethics and sustainability. • Cooperation is close with local contract entrepreneurs in harvest- ing, transport and forestry work. • The sustainability and traceability of wood fibre is ensured in accordance with the Chain of Custody. • The traceability of other raw materials and packaging materials is continuously developed. • Reports can be submitted anonymously through Metsä Group’s Compliance and Ethics Channel. • The reports are handled in confidence under the Compliance Committee’s lead. • Metsä Board is committed to protecting the rights and privacy of people who report breaches in good faith. These commitments have been confirmed in both the Code of Conduct and the prin- ciples guiding the reporting and investigation of breaches, which were updated in 2023 to comply with the new requirements of the EU Whistleblowers Directive. • An ethical corporate culture and the Code of Conduct are put into practice through training. The Code of Conduct includes Metsä Group’s policies on matters such as gifts, hospitality, conflicts of interest, anti-corruption and fair competition. • Influencing plans and key social messages are determined based on the Group’s and business areas’ strategies, reviews of the oper- ating environment and surveys of regulatory risks. • The progress and success of influencing activities are regularly reported to group management and the Board of Directors.

If Metsä Board’s requirements and control mechanisms were inadequate, this could lead to non-compliance with the law or the compa- ny’s requirements in the supply chain. Inadequate training of the procurement personnel or insufficient control mechanisms could cause unequal treatment of suppliers.

Protection of whistle-blowers

Risk : Trust in the Compliance and Ethics Channel wanes, and suspected misconduct is not report- ed. Activities contrary to Metsä Board’s values and Code of Conduct may not be detected. Unlawful activities may incur financial losses. The employees’ job satisfaction and the employer image weaken.

Failure to protect the anonymity of whis- tle-blowers and confidentiality could lead to retaliation against whistle-blowers. No such incidents were recorded in 2023.

Political influence and lobbying activities

Opportunity : Political operators recognise the potential of the circular bioeconomy and the role of forests and wood-based solutions in climate change mitigation, improving the conditions of Metsä Board’s operations.

Through successful influencing and lobbying, Metsä Board, as part of Metsä Group, can in- troduce views into social debate that support the promotion of the circular bioeconomy and highlight wood-based products as an alternative to, for example, plastic-based products and emphasise their role in climate change mitigation. If Metsä Group’s key messages related to influencing and lobbying or the related ethical practices are not adequately implemented in the company, this may lead to influencing or lobbying that is inconsistent or in breach of the company’s policies. The potential of the circular bioeconomy and wood-based products in climate change mitigation would not be harnessed in society.

170 Remuneration report 174 Investor relations and investor information

Risk : Metsä Board and Metsä Group are unable to consistently introduce the key messages identified as being material to political discus- sion, which may, in the worst case, lead to the realisation of regulatory risks. Unethical forms of influencing and lobbying weaken the company’s reputation as a sustainable operator.

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 | METSÄ BOARD ANNUAL REVIEW 2023