Metsä Board Annual Review 2024

E4 – Biodiversity and ecosystems

METSÄ BOARD Annual review 2024

Impacts

Risks and opportunities for Metsä Board

Management

Impacts on the state of species and the extent and condition of ecosystems

Material impacts, risks and opportunities related to biodiversity and ecosystems

Risk: If valuable habitats are not considered in felling prac- tices, Metsä Group’s reputation as a sustainable operator committed to regenerative forestry may be undermined. Risk: The use of fresh fibre in products with a short life-cy- cle is associated with biodiversity loss, negatively affecting the reputation and market position of Metsä Board and Metsä Group, as well as the price of their products and their employer image. A weakened reputation as a sustain- able operator may negatively affect forest owners’ interest in selling wood to Metsä Group.

If valuable habitats or endangered species are not identified or taken into account in wood supply and forest management, there will be fewer forests offering special biodiversity and ecological value or fewer endangered species

• Metsä Board procures wood only from commercial forests. Forest certification and controlled origin require the company to consider valuable nature sites in com- mercial forests. Metsä Group’s nature site service helps focus the protection required by the FSC on the sites most valuable in terms of nature. • The assessment of nature risks is part of the wood trade process. A geographic information system is used to take environmental data into account, such as registers of endangered species, and data about real estate, groundwater areas, and waterbodies in planning and implementation. • Metsä Group annually funds development projects with a regional impact that improve biodiversity and the condition of waterbodies and are implemented outside commercial forests in Finland. • In line with the principles of regenerative forestry, spruce, pine, silver birch, downy birch and aspen – all species that spread to Finland after the last Ice Age – are grown as industrial trees. • In 2023, Metsä Group launched a multi-year action plan for regenerative land use in which a biodiversity plan will be drawn up for each production unit. The project was launched as a pilot project at the mills in Kemi. The plan encompasses areas on the industrial site, as well as offsite land areas owned by the company.

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

Impacts

Risks and opportunities for Metsä Board

Management

Direct impact drivers of biodiversity loss

Climate change : Metsä Board’s production generates greenhouse gases that cause global warming. The company’s biogenic carbon dioxide emis- sions are classified as carbon-neutral. Pollution : The emissions to water, air and soil from Metsä Board’s production units can have a negative impact on species and ecosystems in the area. Wood supply causes nutrient, suspended solid, humus and metal load in small waters and waterbodies. This load results in the eu- trophication or cloudiness of waterbodies. Land-use changes : A new production unit takes up space from any natural environment originally on the site. Direct exploitation : Metsä Board uses wood as its raw material. However, neither Metsä Board nor Metsä Group owns forests. Instead, they procure all their wood raw material from forests whose owners decide how they are used. The impact of wood supply on biodi- versity and ecosystems is described in this table under Impacts on the state of species and the extent and condition of ecosystems and Impacts and dependencies on ecosystem services

The risks, opportunities and actions related to climate change are discussed under E1 – Climate change .

• The risks, opportunities and actions related to climate change are discussed under E1 – Climate change .

Strategy and financial targets

Value creation

The risks, opportunities and actions related to pollution are discussed under E2 – Pollution.

• The risks, opportunities and actions related to pollution are discussed under E2 - Pollution .

Opportunity: Metsä Board’s and Metsä Group’s reputation as sustainable operators strengthens .

Biodiversity and the condition of waterbodies improve outside commercial forests.

Financial development 10 Key figures 12

Metsä Board’s reputation as a sustainable operator weak- ens especially among local communities.

• Water protection measures and actions in discharge areas are developed. • Continuous cover forestry is encouraged in suitable areas. • Fossil-based chain oils are replaced with bio-based alternatives. • The PEFC (Programme for the Endorsement of Forest Certification) and FSC® (Forest Stewardship Council) certification systems are promoted. • Biodiversity plans for mills in accordance with regenera- tive land-use principles to ensure that the state of nature is improved in industrial environments. • Management measures are discussed under Impacts on the state of species and the extent and condition of ecosystems.

Opportunity: Regenerative forestry offers a competitive advantage over competitors who use foreign tree species in their products.

Metsä Board offers consumers products based on naturally occurring tree species.

Report of the Board of Directors

20 20 37 70 89 96

• Sustainability statement

Opportunities: • Metsä Board’s and Metsä Group’s reputation as sustain- able operators strengthens. • Metsä Board can more comprehensively monitor the environmental impact of its production units, with the built environment’s biodiversity impacts included in monitoring. • Cooperation with significant stakeholders develops in the localities of production units. Risk: If the state of forest nature deteriorates, forests become more vulnerable to weather phenomena caused by climate change. Risk: The development of ecological compensation models will lead to the increased protection of commercial forests. Opportunity: As a result of the improved state of nature and the comprehensive management of ecosystem ser- vices, or benefits obtained from nature, forests can adapt better to climate change. In addition to wood production, forests offer other ecosystem services such as pollinator services, picked products, clean water, recreational use and carbon sinks. As the principles of regenerative forestry become main- streamed, the benefits from the approach will be fully considered in the sector and in social discussions.

Metsä Group will draw up biodiversity plans for its production unit sites to increase the sites’ biodiversity, taking special local features into account and combining local industrial history and nature solutions.

General information

E – Environment

Metsä Board’s reputation as a sustainable operator weak- ens especially among local communities.

S – Social responsibility

G – Governance

Risks are discussed under Impacts on the state of species and the extent and condition of ecosystems.

Annexes to the Sustainability statement

Impacts and dependencies on ecosystem services

Finnish forests produce a diverse range of tangible and intangible services, with a local, regional, national and international impact. Commercial forest use reduces the amount of dead wood and number of old trees and makes forest structure more one-sided, weak- ening the state of species and ecosystems. Metsä Group aims to strengthen the state of nature measurably and verifiably by 2030.

• The goal of regenerative forestry is to develop forestry so that nature’s various benefits from carbon sinks to pollinators – that is, ecosystem services – can be meas- ured, and that wood is produced as part of a developing production model with multiple targets and based on ecosystem services.

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

Impacts on the state of species and the extent and condition of ecosystems

Risks: • Regulation that emphasises the protection of forest nature to promote biodiversity restricts felling volumes or increases wood supply costs. • A complex regulatory environment sets conflicting requirements for the forest industry. • Ecological compensation may increase the protection of commercial forests, as industries exploiting non-re- newable materials strive to compensate their negative impacts. Meanwhile, the use of non-renewable materials continues. • Consumers view forests as protected sites and reduce their consumption of wood-based products. • If the state of nature continues to weaken, the accepta- bility of the forest industry as well as the reputation of Metsä Board and Metsä Group as sustainable operators will suffer. Opportunities: • As a result of the improved state of nature and the comprehensive management of ecosystem services, or benefits obtained from nature, forests will be better able to adapt to climate change. • Metsä Group’s compliance with the principles of regen- erative forestry and success in strengthening the state of nature will improve Metsä Board’s and Metsä Group’s reputation as sustainable operators. Risk: Regulation that emphasises the special role of peatlands as large carbon reservoirs, sources of GHG emissions, and potential restoration and protection sites restricts felling volumes.

Commercial forest use reduces the amount of dead wood and changes forest structure, leading to changes in species and the state of ecosystems.

• Metsä Group’s Wood Supply has adopted the princi- ples of regenerative forestry, which aim to measurably improve the state of nature by 2030. Examples of regen- erative forestry actions: - The Metsä Group Plus service that compensates forest owners for the costs incurred from safeguarding nature values - Diversifying tree species in forests - Increasing the number of old trees - Diversifying and adding more decaying wood - Increasing the structural diversity of forest stands - Protecting valuable habitats • Forest certification can be used to demonstrate that the forest has been managed sustainably and responsibly. The international certification systems in use are: PEFC (Programme for the Endorsement of Forest Certification, PEFC/02−31−92) and FSC (Forest Stewardship Council, FSC-C001580). • Regulatory risks are managed through active dialogue with policymakers, discussed in greater detail under G1 – Business conduct .

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

Metsä Group’s 2030 sustainability targets for wood supply

Metsä Group aims to measurably and verifi- ably strengthen the state of nature by 2030. If achieved, this will have a positive impact on the state of nature.

2030 target

2024

2023

2022

MG: Retention trees on regeneration felling sites, %

100

MG: High biodiversity stumps on harvesting sites, %

100

MG: Spruce as the only tree species after young stand management, %

MG: Measures promoting biodiversity, number

10,000

6,586

816

The draining of peatland forests causes changes in habitats and can lead to biodiver- sity loss.

• In forestry, the goal in peatlands is to maintain the water economy and water quality of water ecosystems, as well as to protect their species. New drainage is not created, and old drainage is improved only if necessary. Bog environments suitable for active restoration will be determined and selected on a case-by-case basis. Continuous cover forestry is proposed to forest owners on suitable sites, and additional bonuses for choosing it are paid through the Metsä Group Plus service.

Comparative data have not been provided for all the new targets set in 2023. MG: The target has been set at the level of Metsä Group.

Metsä Group, which is in charge of Metsä Board’s wood supply, has strategic 2030 sustainability targets for promoting forest biodiversity and sustainable forest use, which are indirectly related to the promotion of biodiversity and ecosystems from Metsä Board’s perspective. The 2030 sustainability targets address the impacts, risks and opportunities related to biodiversity and ecosystems identified in the materiality assessment.

Metsä Group’s 2030 sustainability targets concerning wood supply are part of the regenerative forestry strategy, which aims to strengthen the state of nature. The targets are aligned with the goals for curbing biodiver- sity loss stated by the UN, the EU and Finland. The division of forests into commercial and natural forests is also taken into account when setting targets. The targets do not include external ecological compensation, and

196 Remuneration report 201 Investor relations and investor information

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