Metsä Board Annual Review 2024

E1 – Climate change

METSÄ BOARD Annual review 2024

Proportion of OpEx from products or services associated with Taxonomy-aligned economic activities - disclosure covering year 2024

Material impacts, risks and opportunities related to climate change mitigation and energy

DNSH criteria ('Does not significantly harm')

Financial year 2024

Year

Substantial contribution criteria

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

Analysis from the perspective of IPCC’s 1.5 °C and 4.3 °C scenarios*

Impacts

Risks and opportunities for Metsä Board

Management

Greenhouse gas emissions in own operations Metsä Board is a nationally significant producer of renew- able energy. The renewable bio-based fuels used by

Market opportunity: By producing and con- suming renewable energy, Metsä Board can replace fossil-based energy sources. Renewable energy already accounts for 74% of the energy used in Metsä Board’s production (Scope 1 and Scope 2). Most of the energy generated at Metsä Board is used in the company’s own production. Regulatory opportunity: EU regulation recog- nises biogenic carbon capture and reuse as raw material as a key technology in climate change mitigation, and seeks to create market drivers and incentives for investments. Regulatory risk: Regulation sets significant requirements for new production technology reducing emissions or affects the status of biogenic carbon dioxide emissions in terms of climate neutrality. This may cause changes in the pricing of energy and greenhouse gas emis- sions, increasing expenses in both production and transport. Market opportunity: Metsä Board’s main raw material, wood, is mainly procured from Finnish and Swedish forests, keeping transport distanc- es moderate. Regulatory and market risk: Regulation and customer requirements increase the demands to reduce greenhouse gas emissions in the value chain. A comprehensive identification, accurate measurement and reduction of climate impacts is more challenging in the value chain than in the company’s own operations. For example, 31% of Scope 3 emissions come from the end-of-life treatment of sold products. Market opportunity: Awareness of regenerative forestry increases and further boosts custom- ers’, consumers’ and other stakeholders’ trust in Metsä Board. Wood is Finland’s most significant processed natural resource, providing a good basis for the bioeconomy and circular economy, and innovations based on a renewable raw material. Market and regulatory opportunity and risk: The development of voluntary carbon markets and EU regulation concerning the certification of carbon removals provide opportunities for im- proving forests’ carbon storage and tree growth through active forest management. However, the growth of voluntary carbon markets involves a risk of reduced wood raw material availability. Regulatory risk: Regulation concerning the use of forests as carbon sinks and storage restricts felling volumes. Legislation will become fragmented, and it will fail to account for local conditions or all the other ecosystem services apart from carbon storage. This will lead to the partial optimisation of forest management from the perspective of ecosystem services. Market risk: Consumers will become increas- ingly critical of forest use because they associ- ate wood consumption with the decrease in the carbon sinks and storage of forests. The size of this risk will be influenced by Metsä Group’s success in its regenerative forestry target and in mainstreaming related measures.

• Metsä Board has set as its sustain- ability targets the improvement of energy efficiency and the transition to entirely fossil-free fuels, as well as fossil-free purchased electricity and heat, by the end of 2030. To achieve these targets, each of the company’s production units has a roadmap on the required actions. • Active dialogue with policymakers and other stakeholders develops the operating environment. Political in- fluence is discussed in greater detail under G1 – Business conduct . • Metsä Group has continued its study initiated in 2023 concerning techno- logical and business opportunities for capturing biogenic carbon dioxide and reusing it as raw material for bioproducts (BECCU). • During the financial year, the cal- culation of Scope 3 emissions was further developed. • Suppliers are encouraged to set emissions reduction targets. In addition, joint emissions reduction projects are agreed with suppliers. They are related to Metsä Group’s strategic target of setting joint sustainability targets with partner suppliers. • By 2030, Metsä Group’s Wood Supply aims to have reduced fos- sil-based carbon dioxide emissions from wood supply in Finland by 30% from the 2022 level. • Active dialogue with policymakers and other stakeholders develops the operating environment. • Metsä Group’s regenerative for- estry strategy aims to measurably strengthen the state of nature by 2030. As part of regenerative forest- ry, strategic sustainability targets have been set for wood supply, the achievement of which increases carbon storage in commercial forests and promotes forest biodiversity. • The forest is quickly renewed after regeneration felling so that it can begin storing carbon more rapidly from the atmosphere. • The calculation and reporting of the carbon balance of forests is being developed in cooperation with forest owners and partners. • Resource-efficient use of raw materials avoids waste in production. The goal is to use all production side streams. • Active dialogue with policymakers and other stakeholders develops the operating environment and increases awareness of regenerative forestry.

• Thanks to its large share of renewable energy and resource efficiency, Metsä Board can already offer customers prod- ucts with a competitive carbon footprint. The competitive advantage is greater in the 1.5 °C scenario, in which the carbon footprint influences purchase decisions more than in the 4.3 °C scenario. • In the long term, Metsä Group has a considerable opportunity to create BECCU business and introduce bio-based products replacing fossil-based materials on the market. This opportunity is greater in the 1.5 °C scenario than on the 4.3 °C track. • The climate neutrality of biogenic carbon dioxide is a key driver in BECCU value chain investments. Should the classification change, it could negatively affect companies’ investment appetite, making the 1.5 °C scenario more difficult to achieve. • Regulatory impacts, as well as risks and opportunities, are smaller in the 4.3 °C scenario. • Regulatory and market risks and oppor- tunities are greater in the 1.5 °C scenario than in the 4.3 °C scenario. • In the 4.3 °C scenario, the value chain’s motivation to produce and share infor- mation about emissions is low, making it more difficult to measure Scope 3 emissions and commit the value chain to emissions reductions than in the 1.5 °C scenario.

Strategy and financial targets

Metsä Board mainly consist of wood-based production side streams and logging residue.

Value creation

Economic activities

Y; N; N/ EL

Y; N; N/ EL Y/N Y/N Y/N Y/N Y/N Y/N Y/N

Financial development 10 Key figures 12

The company’s biogenic carbon dioxide emissions are classified as carbon-neutral.

EUR million

% E T

A. TAXONOMY-ELIGIBLE ACTIVITIES

Report of the Board of Directors

A.1 Environmentally sustainable activities (Taxonomy-aligned) Cogeneration of heat/cool and power from bioenergy CCM 4.20.

Metsä Board’s production causes climate-warming greenhouse gases. However, Scope 1 and Scope 2 carbon dioxide emissions have re- duced notably from the 2018 level.

20 20 37 70 89 96

• Sustainability statement

N/ EL N/ EL

6.9 5% Y

Y Y Y Y Y Y Y

General information

CCM 4.24.

Production of heat/cool from bioenergy

1.7

1% Y

Y Y Y Y Y Y Y

E – Environment

S – Social responsibility

OpEx of environmentally sustainable activities (Taxonomy-aligned) (A.1)

8.6 6% 6% 0% 0% 0% 0% 0%

Y Y Y Y Y Y Y

G – Governance

Of which enabling 0.0 0% 0% 0% 0% 0% 0% 0% Y Y Y Y Y Y Y

Annexes to the Sustainability statement

Of which transitional

0% 0%

Greenhouse gas emissions in the upstream and downstream value chain The emissions caused by

A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) EL; N/ EL EL; N/ EL EL; N/ EL EL; N/ EL EL; N/ EL EL; N/ EL Cogeneration of heat/cool and power from bioenergy CCM 4.20. 2.4 2% EL N/ EL N/ EL N/ EL N/ EL N/ EL

98 Consolidated financial statements 102 Notes to the consolidated financial statements 150 Parent company financial statements 153 Notes to the parent company financial statements 166 The Board’s proposal to the Annual General Meeting for the distribution of funds 167 Auditor’s Report 171 Sustainability statement assurance report 173 Shares and shareholders 177 Ten years in figures 178 Taxes 179 Production capacities 181 Calculation of key ratios and comparable performance measures Corporate governance 183 Corporate governance statement 190 • Board of Directors of Metsä Board 194 • Corporate Management Team of Metsä Board

the long transport distances of Metsä Board’s upstream and downstream value chain and some products (Scope 3) generate climate-warming greenhouse emissions.

CCM 4.24.

N/ EL N/ EL

N/ EL

N/ EL N/ EL

Production of heat/cool from bioenergy

0.3 0% EL

CE 3.2.

N/ EL

Renovation of existing buildings

0.5 0%

OpEx of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2)

3.2 2% 2% 0% 0% 0% 0% 0%

A. OpEx of Taxonomy eligible activities (A.1+A.2)

11.8 9% 8% 0% 0% 0% 0% 0%

10%

B. TAXONOMY-NON-ELIGIBLE ACTIVITIES

Carbon balance of forests

OpEx of Taxonomy-non-eligible activities

124.4 91%

Metsä Group provides its parent company Metsäliitto Cooperative’s owner-mem- bers with forest management services that support regen- erative forestry, promoting carbon storage in commercial forests. Metsä Group is devel- oping a calculation to verify the impact of wood supply and forest management on the carbon balance. In Finland, wood is mainly procured from owner-members’ forests, and owner-members own 32% of Finnish forests.

• Regulatory and market risks and oppor- tunities are greater in the 1.5 °C scenario than in the 4.3 °C scenario. • In the 4.3 °C scenario, information about forests’ carbon balance and products’ biogenic carbon storage is underutilized, weakening opportunities to extensively optimise the climate benefits of wood- based value chains and the related market opportunities.

TOTAL

136.2 100%

Template 1 for the economic activities of certain energy sectors – Nuclear and fossil gas related activities

Row

Nuclear energy related activities

1. The undertaking carries out, funds or has exposures to research, development, demonstration and deployment of innovative electricity generation facili- ties that produce energy from nuclear processes with minimal waste from the fuel cycle. NO 2. The undertaking carries out, funds or has exposures to construction and safe operation of new nuclear installations to produce electricity or process heat, including for the purposes of district heating or industrial processes such as hydrogen production, as well as their safety upgrades, using best available technologies. NO 3. The undertaking carries out, funds or has exposures to safe operation of existing nuclear installations that produce electricity or process heat, including for the purposes of district heating or industrial processes such as hydrogen production from nuclear energy, as well as their safety upgrades. NO Fossil gas related activities 4. The undertaking carries out, funds or has exposures to construction or operation of electricity generation facilities that produce electricity using fossil gaseous fuels. NO 5. The undertaking carries out, funds or has exposures to construction, refurbishment, and operation of combined heat/cool and power generation facilities using fossil gaseous fuels. NO 6. The undertaking carries out, funds or has exposures to construction, refurbishment and operation of heat generation facilities that produce heat/cool using fossil gaseous fuels. NO

196 Remuneration report 201 Investor relations and investor information

Report of the Board of Directors | METSÄ BOARD ANNUAL REVIEW 2024