Metsä Board Annual Review 2024

METSÄ BOARD Annual review 2024

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

Metsä Board’s 2030 sustainability targets

Impacts

Risks and opportunities for Metsä Board

Management

Products

2030 target

2024

2023

2022

2018

Regulatory opportunity: Regulation that acknowledges that forest industry products can replace materials made from fossil-based raw materials, and/or the production of which generates substantial amounts of fossil-based emissions. Market opportunity: Metsä Board’s long- term work to promote resource efficiency and fossil-free operations and products helps Metsä Board’s customers achieve their own climate change mitigation targets. Climate benefits are verified with life-cycle calculations. Consumers favour easily recyclable packaging made from a renewable fossil-free raw material. Metsä Group has an ongoing development project related to biogenic carbon capture that is an important component in the development of a hydrogen economy and can provide a sustainable raw material for various products. Regulatory risk: Regulation that does not identify the climate benefits of products based on renewable wood raw material but primarily focuses on promoting recycled raw material.

Metsä Board uses mainly fossil-free raw materials and packaging materials

• The main raw material of products is renewable wood. The goal is for all raw materials and packaging materi- als to be fossil-free by 2030. • The use of fossil-free energy and the resource efficiency of products reduce their carbon footprint. • The continuous development of the carbon footprint calculation of Metsä Board’s products. • Metsä Board cooperates with Metsä Group’s R&D organisation in themes concerning fossil-free raw materials and the circular economy. • New forest-based bioeconomy and circular economy business concepts are sought and developed in cooper- ation with partners. • Active dialogue with policymakers and lobbying associations to develop product-related legislation.

• Regulatory and market opportunities are greater in the 1.5 °C scenario than in the 4.3 °C scenario. • In the 4.3 °C scenario, the carbon footprints of products and the biogenic carbon stored in products no longer steer customer’s choices. The market introduction of new bio-based products is more difficult in this scenario than in the 1.5 °C scenario.

Fossil-based carbon dioxide emissions (Scope 1 and Scope 2 market-based), t

0 tn

251 708

183 600

391 220

577 875

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

Share of target group suppliers with targets set in accordance with the SBTi by 2024 (Scope 3)¹⁾, %

70%

4.3

Improvement in energy efficiency from the 2018 level, %

+10%

+0.9

-5.8

+2.7

2.36 MWh/t

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

100%

98.9

98.8

Metsä Board produces fibre-based products that can be used to replace fossil-based products and are recyclable, retaining biogenic carbon in the cycle.

Metsä Group’s 2030 sustainability targets MG: Amount of carbon stored in wood products from the 2018 level, %

Strategy and financial targets

+30%

-25

-21

-12

1,651,505 t

Value creation

MG: Amount of forest regeneration and young stand management from the 2018 level, % +30%

+18

+14

+2.8

33,265 ha

MG: Amount of forest fertilisation from the 2018 level, %

+50%

-22

-26

9,115 ha

Financial development 10 Key figures 12

MG: Share of continuous cover forestry in peatland forest regeneration, %

30%

¹ ) In contrast with the other targets, the Scope 3 target year was 2024, and the base year was 2019. ² ) The wet pulp production line acquired by Metsä Board in Kemi in 2024 has not yet been factored into the water and energy efficiency target calculations. MG: The target has been set at the level of Metsä Group. Comparative data has not been provided for all the new targets set in 2023. Information for 2018 is not disclosed in the case of fossil-free raw materials and packaging materials due to changes in calculation. Further details can be found under Reporting principles for metrics.

Report of the Board of Directors

20 20 37 70 89 96

• Sustainability statement

General information

E – Environment

S – Social responsibility

Metsä Board’s 2030 sustainability targets, and their setting and moni- toring, are discussed in greater detail under Sustainability governance and strategy and Material sustainability-related impacts, risks and opportunities . The company’s targets for reducing greenhouse gas emissions (Scope 1 and Scope 2) have been approved by the Science Based Targets initiative, and they meet the strictest requirements of the Paris Agreement, aimed at limiting global warming to 1.5 degrees. In 2019, Metsä Board also set the target that 70% of the suppliers belonging to the company’s target group would set GHG emissions reduction targets in accordance with the SBTi by the end of 2024. In 2024, the actual figure was 24%. In accordance with the EU’s Corporate Sustainability Due Diligence Directive, Metsä Board is preparing to set an absolute Scope 3 emissions reduction target and thus a total emissions reduction target (Scope 1, Scope 2 and Scope 3) in accord- ance with the Paris Agreement no later than 2027. The guidelines on the Directive’s application and its national implementation are still underway. Progress in targets • Fossil-based carbon dioxide emissions (Scope 1 and Scope 2, mar- ket-based) − Investments and energy efficiency measures along with a moderate production level slightly reduced Scope 1 emissions. Scope 2 emissions increased clearly from the previous year due to higher energy consumption. Nevertheless, the emissions level complied with the 2030 target plans. Overall, fossil-based carbon dioxide emissions (Scope 1 and Scope 2 market-based) have decreased by 56% from the 2018 level. • Share of target group suppliers with targets set in accordance with the SBTi by 2024 (Scope 3) – In 2024, the realisation of the target was 24%. The company is preparing to set a new target. • Improvement in energy efficiency from the 2018 level – In 2024, energy efficiency improved from the previous year due to higher production at mills. In addition, 17 energy efficiency projects were carried out during 2024. However, production curtailments due to the market situation kept energy efficiency development at a moderate level. Furthermore, the gas explosion at Metsä Fibre’s Kemi bioproduct mill caused a long production outage at Metsä Board’s Kemi board mill. • Fossil-free raw materials and packaging materials, share of dry tonnes – The share of fossil-free raw materials and packaging materials

of dry tonnes remained at a good level, with nearly all the raw materials and packaging materials being fossil-free.

G – Governance

Physical risks related to climate change adaptation and their management

Annexes to the Sustainability statement

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

The identification and assessment of material impacts, risks and opportunities Metsä Board’s climate risks were assessed in 2024 as part of Metsä Group’s climate risk analysis, which covered the physical risks, transition risks and opportunities in the company’s own operations and value chain. Metsä Group’s internal climate risk workshops were attended by specialists and management from Metsä Board and Metsä Group’s other business areas and functions. Two IPCC climate scenarios (RCP 1.9 and RCP 8.5), reports of the Finnish Meteorological Institute and scientific articles were used in the analysis. In the RCP 1.9 scenario, the increase in the world’s mean temperature is limited to 1.5 °C, and in the RCP 8.5 scenario, emissions continue to increase at the current pace, and the world’s mean temperature increases on average by 4.3 °C by 2100. The analysis included a short-term (less than one year), medium-term (1−5 years) and long-term (more than 5 years) review. The time horizons have been considered in terms of the production units’ operating lifetime. Production units are designed to operate for a long time, and their life-cycle exceeds the time horizons employed. They are therefore not discussed in greater detail. Metsä Group’s ongoing lobbying work and the related analysis of the operating environment played a key role in the assessment of transition risks. The physical climate risks of Metsä Board’s production units and key supply chains were analysed by an external partner. The analysis was carried out using geolocation-based modelling and various climate scenarios. In addition to the present day, the analysis covered 2030 and 2040. The results of the analysis did not highlight any significant risks related to Metsä Board’s production units. Based on this, the location of Metsä Board’s production units supports the company’s competitiveness in the face of climate change. The results of the climate risk and scenario analysis are presented in the table on page 45. The results of the climate risk analysis are included in the company’s double materiality assessment. The materiality assessment is discussed on page 26–28. Ensuring undisturbed and uninterrupted operations in all conditions is key in the risk assessment of production units. The assessment process of

Risks for Metsä Board

Management

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

Acute hazards

An analysis of the physical risks of production units conducted in 2024 indicated that the physical risks of Metsä Board’s production units are clearly below average, which supports the company’s competitive- ness in a changing climate. Storms, drought and floods cause disruptions in pro- duction or complicate the transport of raw materials and products.

Metsä Board prepares for the risks arising from extreme weather phe- nomena at both the company and mill levels. Examples of such measures include sufficient wood reserves, controlling water levels with dam arrangements, and ensuring power supply in exceptional situations. The supply chain is preparing for alternative partners or transport routes.

The impacts of risks are considerably higher in the 4.3 °C scenario than in the 1.5 °C scenario.

Chronic hazards

Metsä Board’s mills are not located in or do not withdraw water from areas at high overall water risk, which supports the company’s competitiveness in the face of climate change. The increased frequency of droughts weakens the availability of the process and cooling water needed by mills and causes production breaks. Harvesting conditions weaken due to a lack of snow and frost and because of increased precipitation.

All Metsä Board production units are located by abundant surface water reserves. Metsä Board’s mills are not located in areas at high overall water risk, which supports the company’s competitiveness in the face of climate change (WRI Aqueduct Water Risk Atlas). Metsä Board’s goal of reducing process water use and enhancing the recycling of water within the process reduces the water risk. Metsä Group’s wood supply always considers weather conditions and related changes in harvesting. Wood is harvested only in suitable conditions. If required, wood terminals can be used to smooth out any variation caused by harvesting conditions Metsä Group engages in active technological development to adapt to climate change (planning and harvesting technology). Metsä Group’s regenerative forestry principles and sustainable forest management services help forests adapt to climate change by strength- ening forest biodiversity and promoting forest ecosystems overall. Metsä Group’s Wood Supply has strategic targets for promoting forest biodiver- sity. An example of regenerative forestry is the Metsä Group Plus service offered to owner-members. Metsä Group engages in active technological development to mitigate and adapt to climate change. Examples of this development include the application for detecting forest damage and the use of forest asset data. Increasing the share of continuous cover forestry helps curb and adapt to climate change, as it minimises the GHG emissions of peatland forests. The goal of continuous cover forestry is to maintain a steady surface level of groundwater to prevent the carbon stored in peat being released into the atmosphere and to minimise impacts on waterbodies.

The impacts of risks are considerably higher in the 4.3 °C scenario than in the 1.5 °C scenario.

Temperatures are rising at a different pace in different parts of the world due to climate change. In the 4.3 °C scenario, the long- term (2050) increase in Finland is expected to be 6–7 degrees. The impacts of risks are bigger and more likely in the long term than the short term. Temperatures are rising at a different pace in different parts of the world due to climate change. In the 4.3 °C scenario, the long- term (2050) increase in Finland is expected to be 6–7 degrees. The impacts of risks are bigger and more likely in the long term than the short term.

During their life-cycle, Finnish forests will be faced by a considerable temperature increase. As a result, the risk of storms, floods, snow, forest fires, drought and pest insects will increase. Emissions from peatland forests will increase as temperatures rise. Changes will also occur in the prevalence of tree species, and alien species will cause problems in the forest.

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 Neutral impact on the environment and society or on Metsä Board’s business

196 Remuneration report 201 Investor relations and investor information

* The 1.5 °C scenario corresponds to RCP 1.9, in which global warming resulting from climate change remains at or below 1.5 degrees centigrade. The 4.3 °C scenario corresponds to RCP 8.5, in which global warming resulting from climate change averages 4–5 degrees centigrade (by 2050)

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