Metsä Board Sustainability Report 2022

At Metsä Board, sustainability is based on compliance with good corporate governance, bearing social and environmental responsibility, respecting business ethics and human rights, as well as the continuous improvement of operations with respect to all of the above. In addition to our own operations, we also expect sustainability from our suppliers, customers and other partners.

Contents

We aim for vibrant, diverse forests that store carbon efficiently and mitigate the impacts of climate change. 9

CEO’s introduction

2 4 5 6

Sustainability management

Progress in 2030 sustainability targets

Material topics

Material flows and the circular economy

Environment

16 and 23 To achieve our climate and water targets by the end of 2030, we have mill-specific plans for investments and measures.

Forest biodiversity and carbon storage

12 14

Sustainable products Climate and energy

18 20 21 22

Climate change creates risks and opportunities

Other emissions

Waste and by-products

Water

Social responsibility Workplace community

25 30 32

Safety at work Product safety

We are committed to a corporate culture of diversity, equality, inclusion and occupational safety.

Sustainability governance A culture of doing the right thing Sustainability of the supply chain

35 36 40

Advocacy

36 We only use wood fibre of sustainable origin and favour responsible suppliers.

Tables and reporting principles 42 Mill-specific information 43

Production capacities and environmental permit limit violations Disclosure in accordance with SASB Standard

44 46

Disclosure in accordance with TCFD recommendations Principles of sustainability reporting

48 50

Independent practitioner’s limited assurance report

14 We are on schedule to have 100% fossil free production and products by the end of 2030.

We are taking a broad range of actions to achieve our ambitious sustainability targets

It’s good to see that our systematic work has not gone unnoticed. For the second year in a row, we secured a place on the ’A’ List in all of CDP’s three environmental focus areas: climate change, water security and forests. In EcoVadis’s evaluation, we were in the top 1% among paper, paperboard and packaging manufacturers, receiving 100% in the environment section. Naturally, improving sustainability is an ongoing joint effort with our customers, partners and suppliers. Co-creation with our Excellence Centre and 360 Services has helped many of our customers lower their use of plastic and reduce the carbon footprint of their packaging. I hope we can further develop this cooperation as it takes a combined effort to succeed together.

While we say that sustainability is at the core of our operations, we also want to walk the walk. Every employee at Metsä Board has at least one sustainability objective included in the personal performance goals. Mine, for example, concerns safety at work. Achieving our increasingly ambitious sustainability targets by the end of 2030 takes a broad range of actions like this – both small and large. We invest in our production units to make them more resource efficient and their production 100% fossil free. Together with our customers and partners, we innovate paperboard and packaging solutions that reduce environmental impacts throughout the value chain. Our measures to ensure a responsible corporate culture and supply chain are now even more comprehensive.

Mika Joukio CEO

METSÄ BOARD SUSTAINABILITY REPORT 2022

Sustainability management

E S G

Sustainability governance model At Metsä Board, the realisation of sustainability is monitored and supported by the company’s Board of Directors, CEO and Corporate Management Team. Sustainability is incorporated in the company’s strategy, long-term business and investment plans, risk assessments and annual action plans approved by the Board of Directors. The CEO is responsible for the implementation of the sustaina- bility measures per instructions provided by the Board. In accord- ance with the annual plan, the CEO presents to the Board a review of environmental matters and a sustainability review focusing on the progress towards sustainability targets twice a year, as well as the reviews of work safety and R&D once a year. The company’s Corporate Management Team prepares sustainability-related matters before the CEO presents them to the Board. The Board discusses and approves the sustainability matters presented by the CEO, including the sustainability targets and related investment plans, and monitors their implementation annually.

Of the members of the Corporate Management Team, the Senior Vice President, Development, is responsible for research, product and business development, and sustainability. The SVP, Development, participates in Metsä Group’s Sustainability Process Management Team and reports on the realised results of the sustainability measures to the Sustainability Process Management Team quarterly. The CFO chairs Metsä Board’s Risk Committee, which deals with sustainability-related risks as part of the company’s general risk assessment. The results of the company’s risk assessment, includ- ing risks related to sustainability, are presented to the Board and the Audit Committee twice a year. In addition, the Audit Committee handles biannually an information security review and annully a compliance report. Other sustainability issues, such as investment plans, are also presented to the Board and the committees as appropriate. Metsä Board’s Product Safety and Sustainability Director reports on the realisation of sustainability and development needs

Sustainability reporting is developing

When it enters into force, the new EU directive concerning sustainability reporting will have a major impact on corporate sustainability reporting. At Metsä Board, we have initiated preparations by adopting the ESG structure in our current sustainability report and by acquainting ourselves with the new reporting standards and verifying our key sustain- ability information. We have also adopted a reporting tool that enables the digital and machine-readable reporting of both financial and sustainability information. “There will be a stronger link between sustainability reporting and financial reporting. For example, Metsä Board reports on its climate impact, but it must also consider climate-related risks from a business perspective,” says Henri Sederholm , CFO.

to the company’s SVP, Development, and presents topical sustain- ability matters to the entire Corporate Management Team on a regular basis. The Product Safety and Sustainability Director leads a team of experts, which works in close cooperation with produc- tion, wood supply, procurement and logistics, HR, marketing and sales, communications, investor relations and legal affairs. Wood supply, as well as sourcing and legal affairs, is centralised in Metsä Group. Sustainability is part of the entire personnel’s daily work. We also expect sustainability from our suppliers, customers and other partners. Further information on sustainability governance can be found on pages 34–39.

based on Metsä Board’s operating result (weighting 50%) and the strategic targets defined by the Board of Directors (weighting 50%), including the sustainability targets, as well as the realisation of Metsä Group’s EBIT multiplier. In 2022, the CEO’s sustainability target was related to safety at work. The remuneration of the other members of the Corporate Management Team is based on Metsä Board’s operating result (weighting 30% or 50%), the targets of their respective areas of responsibility (weighting 50% or 70%), including the sustainability targets, as well as Metsä Group’s EBIT multiplier. In 2022, the sustainability targets of the other Corporate Management Team members related to the reduction of energy and water use, sustainability cooperation with customers, and the development of sustainable products, for example.

The link between sustainability and remuneration The personal performance bonus target of each Metsä Board employee includes an ESG target. The CEO’s remuneration is

SUSTAINABILITY MANAGEMENT AT METSÄ BOARD

Board of Directors

Metsä Group Sustainability Process Management Team

Corporate Management Team

Product Safety and Sustainability Director

Business functions

Sustainable and ethical operations, as well as compliance with the law, are the foundation of Metsä Board’s business operations. Our operating methods are based on Metsä Group’s Code of Conduct and policies. Our sustainability targets are based on our company’s strategy, Metsä Group’s sustainability targets and materiality analysis on corporate responsibility (page 5).

ESG assessments Metsä Board actively participates in the following ESG and sustainability assessments:

ESG ASSESSMENT

RATING

COMMENT

UPDATED

CDP

Climate Change: A Water Security: A Forests: A

Metsä Board is at the highest level in combating climate change and in the sustainable use of water and forests. The scale ranges from D to A.

Q4/2022

EcoVadis

Metsä Board is at the highest level, Platinum, which puts it among the top 1% in the paper, paperboard and packaging manufacturers category. The highest possible score in the assessment is 100.

Q2/2022

MSCI

AAA

Metsä Board is at the highest level. The scale ranges from CCC to AAA.

Q4/2021

Sustainalytics

14.6

Metsä Board has a low risk of experiencing significant financial impacts caused by ESG factors. A score of 0 indicates the lowest risk and 100 the highest risk.

Q3/2022

ISS ESG Corporate Rating B-

Metsä Board is at Prime level. The scale ranges from D- to A+.

Q4/2022

ISS QualityScore

Environment: 2 Social: 6 Governance: 3

A score of 1 indicates the lowest governance risk and high-level sustainability reporting, while 10 is the weakest score.

Q4/2022

VigeoEiris, Moody’s ESG Solutions

Metsä Board is on the Advanced level. The highest possible score in the assessment is 100. Metsä Board is rated B in the Ellen MacArthur Foundation’s Circulytics® assessment. The scale ranges from E to A.

Q3/2021

Circulytics®

Q4/2022

METSÄ BOARD SUSTAINABILITY REPORT 2022

Progress in our 2030 sustainability targets

E S G

In 2022, our successes included reducing fossil-based carbon dioxide emissions as well as positive developments in safety at work and the monitoring of supplier responsibility. Lower production in the last quarter of the year weighed on the full year performance in energy efficiency and process water use.

TARGET

TARGET 2030 ACTUAL 2022

PROGRESS

E – ENVIRONMENT Safeguarding biodiversity Share of certified wood fibre

>90%

83%

MG : Retention trees at regeneration sites

100%

95%

MG : Four high biodiversity stumps in harvesting sites

90%

Mitigating climate change and reducing emissions Fossil-based carbon dioxide emissions, tonnes (Scope 1 and Scope 2, market based)

0 t

383,098 t

Share of fossil free energy of total energy consumption

100%

87%

Share of target group suppliers have set SBTi targets by 2024* (Scope 3)

70%

15%

Fossil free raw materials and packaging materials, share of dry tonnes

100%

99.3%

MG : Area of regeneration and management of young stands from the 2018 level

100%

2.8%

MG : The amount of carbon stored in wood products from the 2018 level

+ 30%

-12.4%

Sustainable production and efficient use of resources Improvement in energy efficiency from the 2018 level

>+ 10%

2.7%

Reduction in the use of process water per produced tonne from the 2018 level

- 30%

- 12.2%

Utilisation of side streams

100%

99.9%

S – SOCIAL RESPONSIBILITY Responsible corporate culture and accident free working environment Ethics index in ethics barometer

100%

85%

Total Recordable Injury Frequency (TRIF) per million hours worked

6.7

G – SUSTAINABILITY GOVERNANCE Sustainable supply chain Suppliers’ commitment to the Supplier Code of Conduct, share of total purchases

100%

99%

Supplier background check passed, share of total purchases

100%

96%

Supplier sustainability assessment passed, share of total purchases

100%

63%

Traceability of raw materials, share of total purchases

100%

97%

MG = Target at Metsä Group level

* 70% of our non-fibre suppliers and of the logistics operators related to our customer deliveries, measured as a share of our total purchases, would set themselves targets in accordance with the SBTi by 2024.

Progress in 2022 compared to the previous year. Above target On target Below target

Material topics

E S G

We focus our sustainability work on the most material topics for us and our stakeholders. Metsä Group’s materiality assessment regarding sustainability was updated in autumn 2022, and Metsä Board will report according to the updated topics and targets starting with the reporting of 2023 data.

The process used for the materiality assessment consisted of three stages: identifying the material sustainability topics; prioritis- ing them; and confirming them. Sustainability frameworks and standards, regulatory require- ments, trends, and Metsä Group’s strategy were used to identify the material sustainability topics. In addition, interviews with internal and external stakeholders were carried out to find out their expectations towards the company. The external stakeholders interviewed included customers, investors, goods and service suppliers, and NGOs. The identified topics were prioritised in a workshop for Metsä Group’s management, where the significance of the topics’ impacts

on Metsä Board’s and entire Metsä Group’s business as well as the surrounding society, people and nature was assessed (so called double materiality). The seven material sustainability topics identified in the materiality assessment concern all Metsä Group’s business operations and account for the most significant impacts across the value chain. Metsäliitto Cooperative’s Board of Directors confirmed the material topics and the sustainability 2030 targets at the beginning of the year 2023. We will report according to the updated topics and targets starting with the reporting of 2023 data.

Material sustainability topics

TOPIC

IMPACTS

INDICATORS FOR SUSTAINABILITY 2030 TARGETS

E – ENVIRONMENT 1. Safeguarding biodiversity and ecologically sustainable forestry

MG : 100% of regeneration felling sites have retention trees MG : 100% of harvesting sites have high biodiversity stumps MG : 0% young stand management have only spruce remaining MG : 10,000 actions to enhance biodiversity

We safeguard and enhance biodi- versity byincreasing the conditions required by species and preserving valuable habitats. We mitigate climate change and reduce fossil-based carbon dioxide emissions, minimising the environ- mental impact of products and ensur- ing that carbon is bound in forests and stored in wood products.

2. Mitigating climate change and reducing emissions

0 t fossil-based carbon dioxide emissions, (Scope 1 & 2) 70% of target group suppliers have set SBTi targets by 2024 (Scope 3) 100% fossil free raw materials and packaging materials MG : +30% forest regeneration and young stand management (ha. compared to 2018) MG : +50% forest fertilization (ha. compared to 2018) MG : +30% share of continuous cover forestry in peatlands MG : +30% amount of carbon stored in wood products (ha. compared to 2018) -35% process water use per tonne of production (m 3 /t, compared to 2018) 10% improvement in energy efficiency (compared to 2018) 0 t of process waste sent to landfills

3. Sustainable production and efficient use of resources

We use natural resources efficiently and reduce waste.

S – SOCIAL RESPONSIBILITY 4. Respecting everyone and doing the right thing

We do the right thing – we respect each other and value diversity.

100% implementation of ethics barometer measures 100% anonymous recruitment for open recruitment >30% women in management positions

5. Promoting safety and well-being at work

We promote safety across the value chain.

0 accidents at work (TRIF) AAA job satisfaction among personnel

G – SUSTAINABILITY GOVERNANCE 6. Innovation and open- minded cooperation and 7. The impact of forest-based bioeconomy for society

We develop new wood-based products with partners. We know the origin of our raw materials. We favour responsible suppliers.

100% traceable raw materials >90% share of certified wood

100% commitment to Supplier Code of Conduct 100% core supplier assessments and audits 100% common sustainability targets with key partners

METSÄ BOARD SUSTAINABILITY REPORT 2022

The entire life cycle of fresh fibre supports the circular economy

E S G

By the principles of the circular economy, we continuously invest in the viability of forests and the resource efficiency of our processes, as well as in generating as little waste and emissions as possible and keeping materials in circulation for extended periods.

Inbound material flows

99% of raw materials are fossil free Wood-based • Wood used for self-produced pulp, million m 3

Renewable wood-based raw material

5.4 (5.2)

• Purchased pulp, 1,000 t*,

558 (570)

• Wood used for purchased pulp, million m 3

2.9 (3.1)

Other • Process chemicals, 1,000 t*

• We ensure that forests grow more than they are used • We promote biodiversity • We use every part of the tree in the best possible way

11.0 (8.6)

• Coatings, binders and pigments, 1,000 t*

315 (315)

• Packaging materials, 1,000 t*

30 (36)

* dry tonne

87% of the energy we use is fossil free • Own fuel consumption, TWh

6.0 (5.4)

• Purchased electricity, TWh

5.2 (5.2)

Promoting recycling

• Purchased heat, TWh

0.8 (1.2)

Surface water accounts for nearly 100% of water use • Surface water, 1,000 m 3 110 (115) • Groundwater*, 1,000 m 3 0.07 (0.06) * mainly for hygiene and laboratory

• Our paperboards are recyclable and/or compostable • Fresh fibre is strong and can be recycled several times • We are actively involved in the 4ever- green alliance and the European Paper Packaging Alliance

Outbound material flows

Our products support the circular economy • Paperboard, 1,000 t 1,890 (1,918*) • Pulp and BCTMP, 1,000 t 1,409 (1,362) • By-products recovered, 1,000 t 36 (50) • Bioproducts, such as tall oil • Bioenergy sold * The 2021 figure has been revised. Aiming for zero tonnes of fossil Scope 1 and 2 emissions • Fossil-based CO 2 (Scope 1 + 2), 1,000 t 383 (439*) • Fossil-based CO 2 e (Scope 3), 1,000 t 1,817 (1,855) • Biogenic CO 2 , 1,000 t 1,951 (1,713) • Other emissions: Sulphur and nitrogen compounds and particles. See figures p. 42. * The 2021 figure has been revised. Around 96% of the water is returned to waterbodies • Treated wastewater, 1,000 m 3 54,291 (57,486) • Other emissions: COD, BOD, nitrogen and phosphorus compounds, solids, AOX compounds. See figures on p. 42. 58,740 (58,738) • Cooling water Side streams and waste mainly for recovery • Waste to materials use, 1,000 t 60 (46) • Waste to energy, 1,000 t 74 (60) • Landfill waste, 1,000 t 0.16 (0.34) • Hazardous waste, 1,000 t 0.96 (1.6)

Resource-efficient production

• We progress towards fossil free production • We use energy, water and materials efficiently and recycle them in the production process • We utilise more than 99% of our pro- duction side streams in cooperation with our partners

Circular paperboard solutions

• Paperboard is a pure and safe material • We reduce the environmental impact of packaging with smartly designed packages that are suitable for their intended purpose, reduce the use of raw materials, replace plastic and are easy to recycle

METSÄ BOARD SUSTAINABILITY REPORT 2022

Environment

E S G

Our environmental operations are guided by the principles of our environmental policy, which concerns matters such as sustainable forest management, environ- mental responsibility, the continuous improvement of our operations, resource efficiency, stakeholder communication, and our suppliers’ sustainability. Forest use is guided by Metsä Group’s principles for forest use and management.

All Metsä Board production units have a certified ISO 9001 quality management system, ISO 14001 environmental management system, ISO 50001 energy management system, and an energy efficiency system (EES). All our operations are covered by the PEFC and FSC® certified Chains of Custody. In accordance with the systems’ requirements, we conduct regular risk assessments and internal and third-party audits of our operations. All our mills have environmental permits issued by the authorities, which specify the maximum limits for discharges into

waterbodies and emissions into the atmosphere. The permits also set limits for environmental noise and minimum requirements for the monitoring of emissions and reporting on them. We engage in continuous dialogue with our stakeholders. All major projects such as new production lines always include an environmental impact assessment, during which we hear the opinions of local residents and other stakeholders. License codes: PEFC/02–31–92 and FSC®-C001580

Working together to promote the circular economy

In 2022, Metsä Group joined the global circular economy network of the Ellen MacArthur Foundation, which brings together companies, innovators, cities, universities and influencers. This cooperation sup- ports our goal of being a forerunner in a fossil free circular economy. “The circular economy is more than ramped-up waste management and recycling of end products. The goal is to optimise material, energy and information flows, and generate value across the entire value chain and system. This calls for a dialogue with operators of the value chain,” says Maija Pohjakallio , Metsä Group’s VP, Climate and Circular Economy. For example, in Äänekoski, wood supply and forest services, as well as the operations of Metsä Board, Metsä Fibre, Metsä Spring and Metsä Wood come together with other companies to form an industrial ecosystem in which nearby production units benefit from one another.

Forest biodiversity and carbon storage

E S G

We aim for vibrant, diverse forests that store carbon efficiently and mitigate the impacts of climate change. We always require that the wood we use has a sustainable origin. Our wood supply and forest services provide forest owners with measures and services that promote biodiversity and strengthen forests’ carbon storage and adaptation to climate change.

Indicators and progress

Metsä Group’s goal is that in 2030, retention trees will be left on all regeneration felling sites, and four high biodiversity stumps per hectare will be made in 90% of thinning and regeneration felling sites.

RETENTION TREES AT REGENERATION FELLINGS %

HIGH BIODIVERSITY STUMPS IN HARVESTING SITES, %

100 80 60 40 20 0

20 21 22

TARGET 2030

18 19 20 21 22

TARGET 2030

In 2022, retention trees were left on 95% (94) of Metsä Group’s regeneration felling sites.

High biodiversity stumps were made on 90% (88) of Metsä Group’s thinning and regeneration felling sites.

AREA OF REGENERATION AND MANAGEMENT OF YOUNG STANDS, %

Metsä Group’s goal is to increase the amount of carbon stored in forests by 30% compared to 2018. This will be achieved by increasing the area of newly established forests and the area covered by young stand management.

In 2022, Metsä Group increased the areas of newly established forests and those covered by young stand management by a total of 2.8% (3.8).

21 22

TARGET 2030

THE AMOUNT OF CARBON STORED IN WOOD PRODUCTS, %

Metsä Group aims to increase the amount of carbon bound in long- lived products such as construction materials by 30% compared to 2018.

Metsä Group’s long-lived products produced in 2022 stored -12.4% less (-1.2) of carbon compared to 2018.

30 20 10 0 -10 -20

19 20 21 22

TARGET 2030

METSÄ BOARD SUSTAINABILITY REPORT 2022

E S G

Our operations

Sustainable forest use The sustainable use of forests must account for all three pillars of sustainability – environmental, social and economic. Sustainable forest use creates wellbeing, mitigates climate change, maintains bio- diversity and prevents deforestation. Wood fibre – the renewable raw material provided by forests – is an important alternative to fossil raw materials, and forest industry products play a significant role in the national economy of Metsä Board’s home market: the forest industry generates roughly a fifth of Finland’s export income from goods. Metsä Board’s mills are located in Finland and Sweden, which are Europe’s most forested countries. Forests cover approximately 75% of Finland’s and 69% of Sweden’s surface area. In both countries, at least half of the forests are owned privately, by ordinary families, meaning that forests are a source of income for many people. This is why it is important for forest owners that their forests remain viable for future generations. The volume of wood in Finnish and Swedish forests has increased in recent decades: the annual growth of forests surpasses the volume of felling and natural removal of trees. In 2016–2021, forest felling in Finland accounted for an average of 91% of the country’s felling potential. However, the rate varied in different regions. In Northern Finland, 76% of the estimated felling potential was used, compared to 96% in Southern and Central Finland (Source: Natural Resources Institute Finland). In both Finland and Sweden, the law states that a forest must always be regenerated after final felling. Forestry does not cause deforestation in our wood supply area. Instead, deforestation in our wood supply area in Finland and Sweden is caused by other types of land use, such as infrastructure construction. The targets of Metsä Group’s wood supply and forest services extending until the end of 2030 will help us increase the amount of carbon stored in the forests and long-lived wood products and promote the biodiversity of forests. • In commercial forests: Our ecological sustainability programme focuses on increasing the carbon sinks of forests, as well as improving forest biodiversity and water protection related to forestry work. • Outside commercial forests: Through its nature programme, Metsä Group provides financial support every year to develop- ment projects with a regional impact that promote biodiversity and improve the condition of waterbodies. At the end of 2022, the programme encompassed 16 projects, for which a total of EUR 600.000 had been granted in subsidies. Promoting biodiversity We ensure the sustainable origin of wood and promote biodiversity by using only traceable certified or controlled wood. Our goal is to increase our share of certified wood fibre from 83% at present to 90% by the end of 2030 (p. 36–39).

In 2021–2022, Metsä Group surveyed the species living in high biodi- versity stumps. The results confirmed that high biodiversity stumps increased the number of species dependent on decaying wood in the forest. Compared to felled stumps, they were home to a significantly larger number of species. Moreover, all the discriminating species detected in the study were found in high biodiversity stumps. These included previously threatened beetle species, whose situation has since improved.

Metsä Group’s key measures to increase biodiversity: • We leave rare broadleaved trees in the forest. Since June 2022, we only accept pine, spruce and birch, as well as aspen with a diameter of less than 40 centimetres, in Finland. The tree species excluded from our wood supply account for three per cent of the volume of Finland’s growing stock, but these rare species are significant in view of biodiversity and adaptation to climate change. • We increase the amount of decaying wood in forests. Decaying wood is increased by retaining dead trees, leaving retention trees preferably in groups, and making high biodiversity stumps during thinning and regeneration felling. High biodiversity stumps are made by cutting a tree trunk at a height of 2–4 metres and leaving the upright stump to decay in the forest. Decaying wood is important for many birds, insects and fungi, some of which are threatened species. • Mixed forests help us improve the biodiversity of forests and their resilience against storms and insect damage, for example. Metsä Group offers forest owners a forest renewal service in which both spruce and pine are planted in the same area. Broadleaved trees, such as birch, which spreads to stands naturally, must also be retained in forests. • In line with our policy, we recommend nature management measures in herb-rich forests and voluntary protection of the best sites. We thus direct nature management measures to where they have the greatest impact on biodiversity. Herb-rich forests account for only 1–2% of the surface area of Finland’s forests, but they are the primary home for approximately 45% of threatened forest-dwelling species.

• We leave protective thickets for animals at all stages of forest management. Protective thickets comprising different tree species are small, untended thickets that provide shelter and food for birds and mammals, thereby securing the habitats of forest-dwelling species. • Buffer zones around waterbodies help promote biodiversity and prevent the runoff of soil and nutrients. A buffer zone is a strip along the waterbody where forest management measures are performed more lightly or omitted completely. • The FSC nature site service helps target protection at the most valuable sites in terms of nature. The FSC nature site service means that Metsä Group offers valuable nature sites required by FSC forest certification to its owner-members who have joined the FSC group and whose own estates do not include such sites. In Finland, FSC forest certification requires that at least five per cent of the surface area of forestland on the forest estate is permanently excluded from forestry use. Safeguarding carbon sinks Thanks to forests growing, they act as carbon sinks and mitigate climate change. In sustainable forest management, a forest is regenerated swiftly after harvesting, using seedlings or seeds of Finnish natural tree species, which are rapidly growing and the most suitable for the site. By clearing and thinning stands, more growth space can be created for the best trees. Forest fertilisation also boosts tree growth. The faster a new forest is established and the better the young trees are managed, the faster the stand develops into a carbon sink. Metsä Group aims to increase the amount of carbon stored in forests by actively offering forest management services to forest owners. We offer forest owners both periodic cover forestry, which includes regeneration felling

and forest regeneration, as well as continuous cover forestry, which means removing only some of the trees at a time. We recommend continuous cover forestry above all for peatlands. However, it is the forest owner who ultimately decides how their forest is managed. Impact of regulation on forest use There are several projects under way in the European Union with a direct and indirect bearing on the use of forests within our wood supply area. EU policies place a strong emphasis on the carbon sinks of forests and the safeguarding of biodiversity. The most holistic view of forest use is provided by the EU Forest Strategy, which aims to reconcile the diverse commercial use of forests, their role as carbon sinks, the climate benefits of wood-based products as well as the protection of forests and the safeguarding of their biodiversity. The EU Forest Strategy is not legally binding, but together with other EU initiatives and legislation, such as the Renewable Energy Directive, the Biodiversity Strategy for 2030, and the EU Taxonomy, it will steer the forest-related regulation of EU member states in the coming years. The EU Forest Strategy acknowledges that forest industry products mitigate climate change by replacing materials whose production generates copious amounts of fossil-based emissions. At the same time, the further measures of the Forest Strategy, such as its policies regarding regeneration felling, may limit oppor- tunities in the commercial use of forests. From the forest industry’s perspective, the effects of the EU Forest Strategy are indeed twofold, and it is possible that EU regu- lations with an impact on forest use will begin to limit the availability of wood. The role of member states and differences among forests across Europe should be considered when implementing the strategy.

We updated our goals and measures for promoting biodiversity

Metsä Group updated its 2030 objectives related to biodiversity in early 2023. Measures concerning forest nature will be diversified to support the goal of improving the state of nature. Key targets include diversifying the ratio of tree species, adding more decaying trunk wood and diversifying forest structure. By the end of 2030, retention trees and high biodiversity stumps will be left on all felling sites. In young stand management, we will no longer create spruce forests of a single species. In Finland, threatened species are primarily found on special sites. In addition to the recommended management measures for herb-rich forests determined in 2021, we have initiated management of ridge slopes and the controlled burning of retention trees. “By managing sunny and hot ridge slopes we can prevent overgrowth, which is a threat to species typical of such slopes. The burning of retention trees creates suitable conditions for the species of burnt areas and accelerates the formation of decaying wood important for biodiversity,” says Vesa Junnikkala , Sustainability Director for Metsä Group’s Wood Supply and Forest Services.

METSÄ BOARD SUSTAINABILITY REPORT 2022

Sustainable products

E S G

We aim for fully fossil free products and use natural resources as efficiently as possible in accordance with the principles of the circular economy. This reduces the climate and environmental footprints of our products.

Indicators and progress

We aim to use solely fossil free raw materials and packaging materials by the end of 2030.

In 2022, 99.3% (99.2) of our raw materi- als and product packaging materials per dry tonne were fossil free.

FOSSIL FREE RAW MATERIALS %

100

18 19 20 21 22 TARGET 2030

Our operations

Fossil free products Our main raw material, wood fibre, accounts for 93% of all our raw materials per dry tonne. In our paperboards, we also use raw materials based on natural minerals such as calcium carbonate, fossil oil-based materials such as latex, and especially in food service packaging also PE coating. To replace fossil oil-based materials, we are continuing to develop systematic monitoring of the fossil share of all our raw materials, based on the data provided by our suppliers. We actively monitor the needs of our customers and the global markets and have conducted experiments and test runs of packaging materials using raw materials that can replace paperboard latexes and coatings currently in use. Environmental impacts of products The environmental impact of our products arises throughout their life cycle, including the production and procurement of raw materi- als, our own production processes, transports, further processing, and disposal after use. In the assessments of the environmental impact of our paperboards, we use life cycle analyses that help our

customers reduce the environmental impacts of their packaging through appropriate materials choices and packaging solutions. As well as this, the life cycle analyses help us further improve our products’ environmental performance. We always carry out our products’ life cycle analyses and the comparisons between different materials in accordance with the ISO 14040 and ISO 14044 standards. Our calculations account for the environmental impact attributable to the production of raw materials and energy, sourcing and transports as well as our own production. In 2022, we published our first environmental product declaration (EPD), verified by an external party, which provides a transparent and comparable report of the life cycle analysis results of our paperboard product. The aspects most relevant in terms of paperboard packaging are the energy used in its production and the light weight of the paperboard itself. As we shift to the use of 100% fossil free energy in our paperboard production, the carbon footprint of our products will become even smaller. For example, according to an independent study, the climate impact of a paperboard box for cherry tomatoes is more than 80% smaller than that of a box made from recycled plastic (Natural Resources Institute Finland).

Our lightweight paperboards, made resource-efficiently and primarily from a renewable raw material, respond well to the needs of the circular economy. All our paperboards are recyclable, depending on the local recycling systems. By ensuring good pack- aging design and participating in initiatives supporting recycling, we aim for our products to be recycled after use. If recycling is impossible because of food residue or the like, composting is a good alternative for our paperboards. All Metsä Board paperboards

except for the PE-coated grades have been certified as industrially compostable in accordance with the DIN EN 13432 and ASTM D6400 standards. Some of our paperboard grades have also been certified as home compostable in accordance with the NF T 51–800 standard.

Read more about our product development and services in Metsä Board’s Annual and Sustainability Report 2022, pp. 16–17 .

Read more about the traceability and risk management of our raw materials on pp. 32–33 .

Even a small reduction in weight has a big impact

Metsä Board’s annual folding boxboard capacity is 1.3 million tonnes. This corresponds to

1 %

1.6 million packages every day

160

reduction in weight of the paperboard brings material savings equal to

million packages of 19 grammes every day

An easily recyclable package reduces carbon footprint

Belgian Ice Cream Group (BIG), part of the Baronie Group, decided to replace the PE-coated paperboard used in the trays holding its ice pralines with MetsäBoard Prime FBB EB, a dispersion-coated paperboard that is easy to recycle. This supports Baronie’s goal of reducing packaging waste and improving the recyclability of packages. The new package was designed and its environmental impacts analysed in collaboration with Metsä Board’s packaging design and sustainability services. According to the life cycle analysis (LCA), the transfer to the dispersion-coated paperboard reduced the package’s carbon footprint by 32%. In other

words, by replacing 100 tonnes of PE-coated paperboard with the dispersion-coated alternative, the annual carbon dioxide emissions were reduced by an amount equivalent to a 300,000-kilometre car trip. Thanks to the new tray weighing less, the amount of paperboard needed for an individual tray decreased by 5%, and eliminating the PE coating reduces the use of plastic.

METSÄ BOARD SUSTAINABILITY REPORT 2022

Climate and energy

E S G

To mitigate climate change, we will reduce the fossil carbon dioxide emissions from our production to zero, use energy more efficiently and commit our suppliers to setting reduction targets for their emissions.

Indicators and progress

By the end of 2030, we aim to reduce our direct and indirect fossil-based carbon dioxide

FOSSIL-BASED CO 2 EMISSIONS tonnes

SHARE OF FOSSIL FREE ENERGY %

kg/tonne

emissions (Scopes 1 and 2) to zero and increase our share of fossil free energy to 100%. Our goal has been approved by the Science Based Targets initiative (SBTi), and it meets the strictest requirements of the Paris Agreement, which aims to limit global warming to 1.5 degrees.

600,000 500,000 400,000 300,000 200,000 100,000 0

240 200 160 120

100 80 60 40 20 0

80 40 0

0 TARGET 2030

18 19 20 21 22

TARGET 2030

kg CO 2 /product tonne

Since 2018, we have reduced our fossil-based CO 2 emissions (Scopes 1 and 2, market-based) by 33% (23) per tonne produced.

In 2022, fossil free energy accounted for 87% (85) of our energy mix.

As for our value chain (Scope 3), our goal approved by the SBTi is that 70% of our non-fibre suppliers and the logistics operators related to our customer deliveries, measured as a share of our total purchases, set themselves targets in accordance with the SBTi by 2024. Our goal is to improve our energy efficiency by at least 10% compared to the 2018 level by 2030.

SHARE OF SUPPLIERS THAT HAVE SET A SCIENCE-BASED TARGET, %

IMPROVEMENT OF ENERGY EFFICIENCY %

70 60 50 40 30 20 10 0

10 8 6 4 2 0

19 20 21 22 TARGET 2024

19 20 21 22

TARGET 2030

By the end of 2022, 15% (16) of our sup- pliers belonging to the target group had set targets in accordance with the SBTi.

By the end of 2022, our energy efficiency had improved by 2.7% (4.3) compared to our base year of 2018. Lower production in the last quarter of the year reduced energy efficiency.

Our operations

mill’s oil consumption. The change in Hämeenkyrö power plant’s ownership and an increase in the use of fossil free purchased energy contributed to the decrease of Scope 2 emissions. The emissions of our value chain (Scope 3) accounted for 83% (81) of all our fossil greenhouse gas emissions in 2022. A sizeable portion of the emissions in our value chain is attributable to the production of the raw materials we purchase – including pulp, bind- ing agents, pigments and process chemicals – and the further pro- cessing and transport of the products we sell, and their treatment at the end of their life cycles. To reduce our value chain’s emissions, we commit our suppliers to setting science-based reduction targets for emissions. A recommendation to this effect is included in Metsä Group’s Supplier Code of Conduct, and the matter is discussed at meetings with suppliers. We also favour low-emission modes of transport as much as possible (p. 20). In 2022, Metsä Group and the VR logistics group agreed a new joint target to halve emissions from transport covered by their cooperation by 2030. VR handles Metsä Board’s train transports in Finland.

Greenhouse gas emissions Greenhouse gases most significant for our operations and the environment include the carbon dioxide emissions caused by our own energy generation and production processes (Scope 1), the generation of purchased energy (Scope 2) and the rest of our value chain (Scope 3). In 2022, Metsä Board’s Scope 1 emissions declined slightly from the previous year, despite full ownership of the Hämeenkyrö power plant being transferred to Metsä Board, meaning that the power plant’s emissions are now reported as the Kyro mill’s Scope 1 emis- sions instead of Scope 2 emissions. At the company level, Scope 1 emissions decreased thanks to the Simpele mill using less peat and the Husum mill replacing heavy fuel oil with bio-based fuel. Moreo- ver, Husum’s Scope 1 emissions were higher in 2021 due to the fire that broke out on the pulp mill’s chip conveyor, which increased the

GREENHOUSE GAS EMISSIONS IN 2022 WERE APPROXIMATELY 2.2 MILLION TONNES IN TOTAL

UPSTREAM Indirect emissions

OWN OPERATIONS Direct emissions

DOWNSTREAM Indirect emissions

46%

37%

11%

Upstream – Scope 3 799,895 tonnes

Purchased electricity and heat – Scope 2 market-based 147,061 tonnes

Own processes and power plants – Scope 1 236,037 tonnes

Downstream – Scope 3 1,017,084 tonnes

Purchased goods and services �� 33% Fuel- and energy-related activities �� 4% Capital goods �� 4% Upstream transportation and distribution �� 3% Waste generated in operations �� 0.1%

Processing of sold products �� 19% Downstream transportation and distribution �� 18% End-of-life treatment of sold products �� 17% Investments �� 2%

GREENHOUSE GAS EMISSIONS (CO 2 ) 2018−2022

2022

2021

2020

2019

2018

Direct fossil-based CO 2 emissions (Scope 1), t 1)

236,037

255,467

240,036

250,259

288,579

Indirect fossil-based CO 2 emissions (Scope 2, market-based), t 2) Indirect fossil-based CO 2 emissions (Scope 2, location-based), t 2)

147,061

184,028

282,236

262,442

275,048

291,482

313,030

383,937

384,781

431,037

Indirect fossil-based CO 2 e emissions (Scope 3), t 3)

1,816,979

1,854,840

1,847,773

1,026,896

1,058,455

Biogenic CO 2 emissions, t

1,950,901

1,712,639

1,812,952

1,815,179

1,837,299

Fossil-based CO 2 emissions (Scope 1 + Scope 2, market-based), kg CO 2 /tonne produced 4)

116.1

134.0

161.7

159.8

173.5

1) Scope 1 emissions consist of carbon dioxide emissions. The 2019 figure has been retroactively corrected due to more detailed emission measurements.

2) Scope 2 emissions consist of carbon dioxide emissions. The calculation of market- and location-based Scope 2 emissions has been revised retroactively due to changes in fuel-specific emission factors for purchased heat, which is why the figures for the years 2018–2021 have been corrected. The amount of location-based Scope 2 emissions is affected by the average energy distribution of Metsä Board’s production countries. 3) Scope 3 emissions consist of carbon dioxide and other greenhouse gas emissions converted into carbon dioxide equivalents. The increase in Scope 3 emissions after 2019 is explained by changes in cal- culation methodology in 2020: two new categories (Processing of sold products and End of life treatment of sold products) were added in the calculations. Calculation methodology related to purchased chemicals was also updated. 4) Due to the revised calculation of market-based Scope 2 emissions and revisions of paperboard tonnes used in the environmental calculation, the figures for the years 2018–2021 have been corrected retroactively.

Further details about the principles of emissions calculations are available on pages 48–49.

METSÄ BOARD SUSTAINABILITY REPORT 2022

E S G

Roadmap for mitigating climate change Our plan for transitioning to entirely fossil free production supports the goal of limiting climate change to no more than 1.5 °C above the pre-industrial era. It also helps adapt our operations to a low-carbon future. Our roadmap comprises mill-specific investments and measures that enable us to replace the fossil fuels used by our production units and power plants with renewable fuels and non-fossil electricity. We will also switch to renewable or fossil free alternatives in terms of purchased energy. We will also continue to improve the efficiency of our energy and water use. Water use makes a difference, given that the use of process water and wastewater treatment consume energy and thereby generate carbon dioxide emissions. The first phase of the Husum pulp mill’s renewal, comprising a new recovery boiler and turbine, was completed at the end of 2022. This will increase the mill’s production of renewable energy and raise the electricity self-sufficiency of the Husum integrated mill. In addition, the use of heavy fuel oil as a support fuel decreased, and

the necessary backup fuels will be replaced with renewable alterna- tives by 2030. The energy source used in the recovery boiler is the wood-based black liquor generated alongside pulp production. In 2022, it was decided to invest in a turbine and generator for the Kyro mill’s biopower plant. Thanks to the improved efficiency of the new turbine, the share of electricity produced by the biopower plant will increase from around 30% to around 50% of the mill’s total electricity use. The investment is scheduled to be completed by the end of 2024. Energy and water efficiency will improve thanks to the 2022 investment in a lamella clarifier for chemically treating water used as process water at the Kyro mill, as well as the introduction of a heat exchanger for cooling the debarking department, and the utilisation of waste heat at the Simpele mill. These measures will reduce raw water intake and water heating needs, thereby reducing the use of water and energy.

Roadmap to fossil free mills by the end of 2030

Key measures, according to plan, for reducing fossil-based carbon dioxide emissions to zero. Some of the projects still lack a final investment decision and the times shown are indicative. The purchasing of power and heat will shift to fossil free energy sources. See also our interactive roadmaps on our sustainability website at https://metsaboard.impact.page/roadmap/Home.

100%

TAKO In steam production, natural gas is replaced by, e.g. electricity

Target: 100%

JOUTSENO Natural gas is replaced by biogas or electricity

SIMPELE Peat is replaced by renewable energy

HUSUM, KASKINEN, KYRO, SIMPELE The power plant’s backup fuels will be replaced with renewable fuels

KASKINEN Process fuels in chemicals recovery will be replaced with renewable fuels

90%

KYRO Peat is replaced by renewable energy

KYRO The power plant’s new turbine and generator

HUSUM, KEMI, KYRO, TAKO and SIMPELE Liquefied petroleum gas (LPG) or natural gas in the coating drying will be replaced e.g. with biogas or electricity

Starting point: 82%

RENEWAL OF THE HUSUM PULP MILL Phase 1: New recovery boiler and turbine

RENEWAL OF THE HUSUM PULP MILL Phase 2: New fibre line

80%

2018

2022

2030

Share of fossil free energy out of total energy. When the share is 100%, Metsä Board’s Scope 1 and 2 emissions are zero.

Estimated time frame for the project

A darker shade indicates measures already taken

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