Metsä Board Annual review 2023

METSÄ BOARD Annual review 2023

Wood supply Metsä Board uses wood from the Northern European forests as its main raw material. Metsä Group has wood supply organisations in Finland, Sweden, Estonia and Latvia. The company works in close cooperation with local contract entrepreneurs in harvesting, transport and forestry work. All the countries from which wood is procured have issued legislation requiring forests to be renewed after regeneration felling. Wood and purchased pulp account for 93% of the company’s raw material consumption. Metsä Board produces the pulp and high-yield pulp it uses or procures the material from its associated company Metsä Fibre. The wood fibre’s sustainability and traceability are ensured by practices which meet the requirements of the PEFC Chain of Custody and FSC® Chain of Custody (PEFC/02−31−92 and FSC-C001580). These practices are annually assessed by Metsä Group’s internal and third-party audits. The audits focus on matters related to environmental and social respon- sibility in the operations of wood suppliers and harvesting contractors, as well as on the traceability of wood fibre. Metsä Board aims for certified wood to account for at least 90% of all the wood fibre used by the company by 2030. The share of certified wood fibre in 2023 is presented in the table on page 65. Non-certified wood is also required to be of a sustainable origin, and the wood always meets at least the requirements for PEFC Controlled Sources and FSC Controlled Wood. For example, Metsä Board’s policies concerning indigenous peoples are discussed under S3 – Affected communities . Procurement of other raw materials and services As a minimum requirement in procurement agreements, suppliers are required to commit to the Metsä Group Supplier Code of Conduct or their own equivalent principles. To ensure the sustainability of suppliers, Metsä Board follows third-party due diligence in its Know your Business Partner background check, which is described under Policies . Metsä Board only selects suppliers that are committed to the Supplier Code of Conduct and pass the background checks. More detailed supplier assessments focus on the core suppliers and on suppliers operating in industries with identified potential risks related to human rights, corruption or the environment. Suppliers’ sustainability and supplier-related risks are assessed with questionnaires, the Ecovadis tool and supplier audits. Metsä Group, an external HSEQ cluster and another external party if required conduct annual supplier audits focusing on ethics, environmental responsibility, occupational safety and quality. The supplier assessments and audits are used as the basis for making development proposals and monitoring any corrective action taken. The results are the responsibility of a third party or a Metsä Group employee who is not responsible for sup- pliers. The number of assessments and audits in 2023 is presented in the table on page 67 . No serious incidents were observed in the assessments and audits. To ensure the equal treatment of suppliers, the procurement personnel are trained to disqualify themselves in decisions that may involve conflicts of interest. A written assurance of this is required in the procurement pro- cess. Approximately every two years, an anonymous survey is conducted among suppliers concerning the smoothness and fairness of cooperation and factors contributing to these matters. The survey results are submit- ted to the suppliers, and measures to improve procurement practices are adopted based on them. The procurement personnel have annual financial

The completion of e-learning courses and classroom training is regularly monitored by the Compliance Committee, which supervises the Compli- ance and Ethics programme, and the results are reported once a year to the Audit Committee of the company’s Board of Directors as part of the Compliance and ethics review. The completion percentage of the Code of Conduct e-learning course is presented in the table on page 68 . A culture of diversity, equality and inclusion (DEI) and the implementa- tion and development of an ethical and respectful corporate culture are one of the focal areas of the Motivated people strategic programme. The programme’s focal areas and goal are discussed under S1 – Own workforce . The implementation and development of the culture of doing the right thing are measured with the ethics barometer, conducted every two years, which surveys the employees’ experience of ethics in the company’s operations. According to the most recent barometer, conducted in 2022, financial misconduct, corruption, conflicts of interest, inappropriate influ- encing of partners’ decision-making and information security breaches are not considered to be material risks. The results of the ethics barometer were discussed on all sites in 2022, and each site determined development measures for 2023 to correct the problems observed. To ensure the sustainability of its suppliers, customers and other partners, Metsä Board follows third-party due diligence in its Know Your Business Partner process, in which the third party’s background is checked for any risks related to trade sanctions, corruption, money laundering, human rights violations and various other misconduct before a binding agreement is concluded, as well as during the cooperation relationship by means of continuous monitoring. In 2023, the process was developed by introducing a new tool for background checks, harmonising the process, clarifying responsibilities and roles, and updating the risk model used in background checks. Due to Russia’s military aggression against Ukraine, Metsä Board has ended all business related to Russia and Belarus. Operations have been guided by compliance with the applicable regulations and overall consider- ation regarding business ethics.

to the authorities. Neither the person investigated nor their supervisor participates in the investigation of the breach or suspected breach. If called for by the significance of the breach under investigation, the Compliance Committee reports the incident to Metsä Board’s management and Board of Directors at a regular meeting, or immediately if required. The cases are divided into the following categories: fraud or other criminal behaviour; corruption and bribery; competition law; conflicts of interest; employee matters; discrimination; privacy and information secu- rity; occupational safety; the environment; breaches of the Supplier Code of Conduct; and other reports. Crimes against the company and attempts of such are also taken into account in the number of reports. In 2023, Metsä Board was made aware of incidents that might have had a direct or indirect negative impact on the company’s human rights responsibilities. In addition to less severe work-related accidents causing personal injuries (table on page 56 ), a fatal accident took place at the Simpele paperboard mill. None of the incidents led to court proceedings or fines, or concerned the use of child or forced labour. The fatal accident is under official investigation. In 2023, no confirmed cases of bribery or corruption were brought to the company’s attention. Apart from the principle of continuous development followed in the company’s Compliance and Ethics programme, no need for separate development projects was identified concerning the anti-bribery and anti-corruption process. In June 2023, the European Commission announced it had ended its antitrust investigation into the softwood pulp sector, having concluded that there were no grounds for continuing the investigation. The investigation was initiated in 2021 as a result of an antitrust investigation. The investiga- tion of Metsä Board’s associated company Metsä Fibre was part of a wider EU-level antitrust investigation targeting the pulp industry. The changes required by the EU Whistleblowers Directive (EU 2019/1937) have been taken into account in Metsä Board’s operating countries in terms of the Compliance and Ethics Channel, the investigation of reported incidents and the protection of whistleblowers over the 2022−2023 period as local legislation in EU Member States has entered into force. The company is committed to fairly investigating all reports submitted in good faith and adopting the required actions based on the investigation and its results if required. The company is also committed to protecting the rights and privacy of people who report breaches in good faith. These commitments have been confirmed in the company’s Code of Conduct and the principles guiding the reporting and investigation of breaches, which were updated in 2023 to meet the requirements of the Whistleblowers Directive. In 2023, no cases of retaliation against whistle-blowers were brought to the company’s attention.

performance targets related to matters such as conducting supplier sustainability assessments and monitoring improvements proposed by suppliers. In 2023, the procurement personnel participated in training dealing with the management of supplier cooperation, and how to take sustainability matters in meetings with suppliers into account. In 2023, Metsä Group organised a supplier event and competition dealing with sustainability for its core suppliers. The company’s target is to agree joint sustainability targets and measures to achieve them with all its partner suppliers. The management of environmental impacts in cooperation with suppliers is discussed in more detail under E1 – Climate change . Another target is to know the origin, or at least the country of manufacture, of all the company’s raw materials, including wood and process, basic, and coating chemicals, by the end of 2030, In the annual supplier audits, the company ensures that by using raw materials from its suppliers, the company’s products meet statutory requirements and Metsä Board’s own strict product safety requirements. Product safety is discussed in more detail under S4 – Consumers and end-users .

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

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

Procurement from local operators, %

2023

2022

Procurement from countries in which Metsä Board has production

Procurement of wood fibre by country, %

2023

2022

Finland Sweden

62 30 8.1

60 32 7.0 1.0

Baltic countries

Others

0.02

Assessed or audited suppliers and critical observations

■ Mechanisms for identifying, reporting and investigating concerns

2023

2022

Assessed or audited suppliers

201

The employees and stakeholders are encouraged to report any ethical concerns and non-compliance with the law related to Metsä Board’s oper- ations. Observations can be reported to the supervisor, local management, HR and the Compliance Committee, or through Metsä Group’s Compliance and Ethics Channel, which is available on the company’s website in ten languages to all internal and external stakeholders. Reports can be made anonymously. The channel’s technical implementation is handled by an external service provider. Metsä Board uses the ethics barometer to monitor the effectiveness of the Compliance and Ethics Channel and other reporting methods in raising and handling concerns. The ethics barometer can also be used to provide open-ended feedback related to reporting channels. Every breach or violation, and suspected breach or violation, of which the company becomes aware is investigated. The investigation is supervised by the Compliance Committee. The committee is tasked with monitoring that the consequences of the investigations are applied consistently in cases of equal gravity, and that the corrective actions are sufficient, as described in the company’s Code of Conduct and the principles guiding the reporting and investigation of breaches. Any illegal activities are reported

Significant environmental observations Significant observations related to social responsibility

New supplier background checks, %

2023

2022

Share of suppliers for which a Know Your Business Partner background check was made

■ Relationships with goods and service suppliers

170 Remuneration report 174 Investor relations and investor information

■ Prevention and detection of corruption and bribery

Supplier management practices Metsä Board’s wood supply is ensured by Metsä Group’s Wood Supply and Forest Services. The procurement of other raw materials and services is centrally handled by Metsä Group’s Procurement and Logistics unit. These procurement processes seek to ensure that the company’s partners oper- ate sustainably to minimise any risks in the supply chain related to matters such as the environment, health, corruption, the use of child labour and human rights violations.

The Code of Conduct, which guides ethical operations, prohibits corruption and bribery. It also includes principles for preventing conflicts of interest, crucially linked to anti-corruption, and principles linked to gifts and hospitality. Metsä Group is committed to anti-corruption and anti-bribery in its own operations and in relation to its partners. A similar prohibition is included in Metsä Group’s Supplier Code of Conduct. Anti-corruption and anti-bribery efforts contribute to Metsä Group’s 2030 sustainability targets concerning a responsible corporate culture and supply chain.

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