Metsä Board Annual Review 2024

METSÄ BOARD Annual review 2024

Transition plan for climate change mitigation

production units’ environmental risks is guided by the ISO 14001 and ISO 50001 management systems. The key identified risks are included in the company-level risk management process. The environmental impacts of production units are assessed in connection with the environmental impact assessments of investment projects, for example. The need for environmental impact assessments is determined by the local EIA authority. Risks related to climate change have been taken into account in the environmental impact assessments of the most recent investments. The regulatory risks associated with forest use are identified, assessed and managed in cooperation with Metsä Group’s Wood Supply and the Corporate Affairs unit.

26–28. Metsä Board’s risk management process and its responsibilities are described in greater detail in the Corporate Governance Statement. The weak predictability of EU legislation is a key uncertainty factor related to the resilience analysis. Adding to uncertainty is the fact that many important details are laid down in provisions separate from the text of directives and regulations. Another significant uncertainty factor is the assessment of the ability of complex natural ecosystems such as forests to adapt to climate change. Population growth, urbanisation, climate change, biodiversity loss and digitalisation pose challenges to companies while offering them growth opportunities. The purpose of Metsä Board’s business is to promote the bioeconomy and circular economy by sustainably and efficiently upgrading northern wood into premium products. According to its strategy, Metsä Board aims to grow in fibre-based packaging materials and renew its industrial operations. The company implements its strategic programmes, including growth and development investments, to improve the mills’ production and resource efficiency and reduce the carbon footprint of paperboard products. At Metsä Board, climate change mitigation and adaptation and regenerative forestry as part of sustainability work have been integrated into the company’s business and strategic targets. Many Metsä Board shareholders appreciate long-term climate work and continuous development. This is also important to the owner-members of Metsäliitto Cooperative, Metsä Board’s largest shareholder. The company aims to use green financing sources in the transition to fossil-free production and in other financing plans for industrial operations. Investments are financed with equity and external financing. Metsä Board uses Metsä Group’s Green Finance Framework to support the financing and refinancing of environmentally sustainable investments. The Green Finance Framework, which was updated in 2024, links Metsä Group’s sustainability targets increasingly closely to financing operations in accordance with recent market practices. The sustainable financing committee supervises the implementation of the finance framework. This will be further specified in next year’s report. The following table presents the key parts of the climate transition plan. The progress made in the climate transition plan’s implementation is described under Progress in targets on page 43. Climate targets and actions are discussed in greater detail under Targets and Actions in this section. Strengthening the state of forest nature plays an important role in climate change adaptation. Biodiversity-related sustainability targets and actions are presented in greater detail under E4 – Biodiversity and ecosystems . The entire climate transition plan can be found on Metsä Board’s website .

Sub-field

Key actions and related targets

Products

Metsä Board’s paperboards can help Metsä Board’s customers, such as brand owners, achieve their own targets for climate change mitiga- tion. Climate benefits are verified with life-cycle calculations. Transitioning to a low-carbon economy will increase demand for climate-resil- ient products. Paperboard can replace materials made from fossil-based raw materials and/or the production of which generates substantial amounts of fossil-based emissions. The company aims for entirely fossil-free production and packaging materials by the end of 2030. The progress made in the targets is discussed under E1 Metsä Board’s 2030 Targets. R&D&I activities play a key role in the climate transition across the value chain. Development focuses on the properties of current products, new wood-based bioproduct innovations alongside traditional forest products, and production technologies. Metsä Board continues to devel- op dispersion-coated paperboards that can reduce plastic use and improve packaging recyclability. In 2024, the technological and energy implications of wide-scale biogenic carbon capture from the flue gases of bioproduct mills were exam- ined for the first time at Metsä Group. Should carbon capture prove viable, the forest industry could gain a new high-volume wood-based raw material as a suitable replacement for fossil-based raw materials in the chemical industry, for example. Metsä Board has set itself absolute 2030 emission reduction targets for Scope 1 and Scope 2 emission categories. It aims for fully fossil-free production, which means reducing fossil-based Scope 1 and Scope 2 carbon dioxide emissions to zero by the end of 2030. After abandoning fossil fuels, only biogenic greenhouse gases are left, most of which is biogenic carbon dioxide, classified as climate neutral in the EU criteria. In addition, wood-based energy generates small amounts of biogenic methane and nitrous oxide, which, according to the ESRS definition, are included in Scope 1 and Scope 2 emissions along with fossil-based GHGs. To achieve the target, Metsä Board has a plan for investments and actions to replace fossil-based fuels and purchase energy from fossil-free sources. Metsä Board is also investing in the efficient use of energy, water and materials. New investments are planned with a high level of au- tomation and the best available technology in mind. It is impossible to calculate the exact capital expenditure for climate measures because some of the costs are indirect and are incurred as part of other investments. In recent years, the key investments for achieving fossil-free production have been the renewal of the recovery boiler and turbine at the Husum pulp mill and the renewal of the turbine at the Kyro board mill. The total capital expenditure of these investments is approximately EUR 420 million. Among other things, future investments include the electrification of the mills’ boilers and processes that still use fossil fuels. Metsä Board’s taxonomy-aligned turnover, capital expenditure and operating expenditure are discussed in the section the EU Taxonomy. The Taxonomy’s technical screening criteria do not currently cover Metsä Board’s core business. Taxonomy-eligible economic activities therefore account for only a minor share of turnover and are not fully in line with the investments included in the transition plan. In 2024, Metsä Board assessed the physical climate risks of all its production units and improved its taxonomy alignment. In 2024, the company’s taxonomy-aligned activities were related to the generation of heat, cooling and power from bioenergy. These activities promote the use of renewable energy in the transition plan. Metsä Board had no investments in coal, oil or gas in 2024. The emission reduction targets are approved by the Science Based Targets initiative (SBTi), and they support the Paris Agreement’s objec- tive of limiting global warming to no more than 1.5 °C above pre-industrial levels. The targets also contribute to the company’s adaptation to a low-carbon future. No internationally recognised sector-specific decarbonisation development path is currently available for Metsä Group’s industry, the forest industry. Metsä Group has not yet set any official post-2030 emission reduction targets, but planning of the 2050 1.5 °C net zero pathway in accordance with the Paris Agreement is underway, particularly regarding Scope 3 emissions. Concerning fossil-based Scope 1 and Scope 2 carbon dioxide emissions, the target is zero as soon as the end of 2030. A net zero target will be set in the near future and no later than 2027. Metsä Group will come under the scope of the EU’s new Corporate Sustainability Due Diligence Directive in July 2027. The Directive requires companies to have a transition path aiming for net zero by 2050. The Directive’s national implementation is underway. The EU Commission is expected to release additional guidelines on the Directive’s application. Metsä Board does not use carbon units purchased outside the value chain to offset or balance emissions. Metsä Board follows the develop- ment of voluntary carbon markets, including the EU’s regulation on carbon removal certification (CRCF). They will play a role in balancing Scope 3 residual emissions when working towards the 2050 net zero target. In accordance with the target set by Metsä Board in 2019, 70% of the suppliers belonging to the company’s target group should set GHG emission reduction targets in accordance with the SBTi by the end of 2024. In 2024, 24% had done so. 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 accordance with the Paris Agreement no later than 2027. The guidelines on the Directive’s application and its national implementation are still underway. Currently, Metsä Board’s Scope 3 target does not comply with the 1.5 °C trajectory. What makes determining Scope 3 emissions challenging is that while Metsä Board can produce products with an increasingly low carbon footprint by investing in new resource-efficient and environmentally efficient production units and the renewal of mills to reduce their emissions, these investments increase Scope 3 emissions. In late 2024, Metsä Group set as its target to reduce GHG emissions in category 4, ‘Upstream transport and distribution’, by 30% per tonne produced by 2030. The target’s baseline year is 2022, and the target will be in force as of 2025, after which information about it will be reported in greater detail. Metsä Group has also agreed to joint sustainability targets, many of which concern reducing GHG emissions, with its partner suppliers. Metsä Group’s Wood Supply and Forest Services, which also handle Metsä Board’s wood supply, provide forest services for climate change mitigation and adaptation to Metsäliitto Cooperative’s owner-members as part of the regenerative forestry strategy. In Finnish forestry, wood production does not involve land-use change, as production is based on native tree species and is part of the natural forest ecosystem, which also offers various other ecosystem services. Metsä Group also promotes regenerative land use in its mill areas. Further information on biodiversity actions is provided under E4 – Biodiversity and ecosystems . Metsä Board’s Board of Directors is the company’s highest body overseeing sustainability. Metsä Board’s CEO is in charge of the implemen- tation of sustainability measures in accordance with the Board’s instructions. To ensure the sustainability and responsibility of its business, Metsä Board uses remuneration to support the achievement of its strategic, operational and sustainability targets. At least one sustainability target is included in the annual targets of the CEO, other Corporate Management Team members and other employees, which are used as the bases for annual bonuses. All Metsä Board employees complete an e-learning course on the basics of sustainability. Climate themes are a central element of the course. An important part of the strategy’s implementation is the development of core competence important to the company. Metsä Group’s Academy concept has been developed for this purpose. In 2024, the concept encompassed Academies for sustainability, sales, procurement, leadership and finance. Climate-related topics are of key importance in the Sustainability Academy, and they are also discussed in other academies and leadership programmes.

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

Research and development

Strategy and financial targets

Value creation

Use of renewable energy, minimi- sation of fossil-based emissions, continuous improvement of resource efficiency and material cycles

Financial development 10 Key figures 12

Transition plan for climate change mitigation and adaptation

Report of the Board of Directors

20 20 37 70 89 96

• Sustainability statement

In 2024, the ability of Metsä Board’s strategy to respond to climate change was examined in a climate resilience analysis carried out in connection with Metsä Group’s resilience analysis. The analysis was used in drawing up a climate transition plan, supervised by Metsä Group’s Corporate Affairs unit and steered by Metsä Group’s Sustainability Process Management Team, which comprises directors in charge of sustainability from Metsä Group’s businesses and Group Services. Metsä Board was represented by the SVP, Development. Metsä Group’s Executive Management Team participated in the climate resilience analysis. Metsä Board’s CEO is a member of Metsä Group’s Executive Management Team. Metsä Board’s Corporate Manage- ment Team approved the transition plan in 2024. The company’s Board of Directors was also informed about the plan. The resilience analysis covered Metsä Board and Metsä Group’s own operations and their value chain. The strategy’s resilience was assessed by comparing its adaptive change capability and transformative capability against the material climate risks identified in the risk assessment. Adaptive change capability means the gradual adaptation and mitigation actions mainly in the company’s own operations. Transformative capability means actions promoting change that have a broader impact in value chains and communities, for example. The analysis indicated that investing in adaptive change capability and transformative capability strengthens Metsä Board’s climate resilience. The significance of transition risks and opportunities is highlighted, especially in the scenario mirroring the Paris Agreement objectives. In turn, the high-emissions scenario emphasises physical risks. The analysis of material physical and transition risks is updated annually. The climate risk scenario analysis and its results are described on page 45. The materiality assessment is discussed on pages

General information

E – Environment

S – Social responsibility

G – Governance

Annexes to the Sustainability statement

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

Cooperation and impact manage- ment in the value chain

Safeguarding nature’s capacity for renewal and developing regenerative forestry

Employee commitment

196 Remuneration report 201 Investor relations and investor information

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