Metsä Board Annual Review 2024

METSÄ BOARD Annual review 2024

Areas valuable to biodiversity in the vicinity of Metsä Board’s production units

in the absence of suitable values, no ecological threshold values have been used in target setting to date. The action plans for achieving the targets are scientifically justified. Forest management, support for forest biodiversity, and forest thinning make forests more vigorous and resilient against climate change-induced weather phenomena or insect damage, for example. Metsä Group also repairs and restores nature sites that have suffered from any damage. For example, management measures on sunlit slopes and in herb-rich forests support the restoration of biodiversity. The goal is to increase the number of species on sites allocated to production by diversifying tree species and adding decaying wood, for example. The identification and assessment of material impacts, risks and opportunities The materiality assessment is discussed on pages 26–28. In the materiality assessment, nature impacts, risks and opportunities were assessed in terms of the company’s own operations and the value chain. The key impacts and dependencies were found to be related to the wood raw material supply chain and the company’s own production units. The assessment was conducted using the LEAP approach (locate, evaluate, assess and prepare). The assessment was based on data such as information about wood supply areas, certification statistics, valuable areas in the vicinity of production units, and a list of biomes and ecosystems that Metsä Board affects, or on which its operations depend. Wood production is a key ecosystem service, or a benefit offered by nature, for Metsä Board, which is part of Metsä Group. Other benefits include pollinator services, picked products, clean water, recreational use and carbon sinks, all of which are important for business resilience. In the risk analysis, attention was paid to transition and systemic risks and physical risks. The impacts of climate change on ecosystem services is assessed under E1 – Climate change . Habitats valuable to biodiversity are found in the vicinity of Metsä Board’s production units. These areas have been identified within a radius of 10 kilometres of each production unit. The potential impacts of pulp mills are not expected to reach farther than this. However, the potential environ- mental impacts of paperboard mills are limited to an area smaller than this. Areas valuable to biodiversity encompass Natura 2000 sites, state nature reserves, private nature reserves, areas included in nature conservation programmes and key biodiversity areas. For some production units, mild impacts on these areas have been identified, and they are listed in the table later in this section. The measures for managing and reducing impacts are discussed under E2 – Pollution . Risk management as part of Wood Supply and Forest Services operations Metsä Board’s impacts, risks and opportunities related to forest biodiver- sity and the state of forest ecosystems take place through Metsä Group’s Wood Supply and Forest Services. Metsä Group does not own forest important for its wood supply. In Finland, most of the wood is acquired from Metsäliitto Cooperative’s owner-members, who together own around half of Finnish private forests and 32% of all the forests in Finland. In Swe- den, wood is mainly procured from Norra Skog’s owner-members, who own

around 10% of all the productive forest land in Sweden. The certified ISO 14001 environmental management system used in Metsä Group’s wood supply guides operations towards environmental targets and supports risk management as part of daily operational work. The assessment of nature risks is part of the wood trade process. The authorities are informed about harvesting plans with forest use declarations, and the authorities notify the company if any legislative requirements must be considered when carrying out harvesting. In addition to legislation, the requirements of forest certification systems are followed when planning and implementing harvesting. Metsä Group has a comprehensive, continuously maintained geospatial dataset that is used in wood trade offers and deals, and in planning and implementing harvesting. The geographic information system enables the identification of sites at risk and geospatial analyses. The geographic information system is also used to update environmental data such as registers of endangered species and data about real estate, groundwater areas and waterbodies in real time for use in work guidance. Regulatory impacts on forest use are one of the identified risks in Metsä Group’s wood supply. Regulatory risks are identified and assessed in accordance with Metsä Group’s standardised risk management process, and they are regularly assessed. Risks are identified, assessed and managed in cooperation with Metsä Group’s Wood Supply and Corporate Affairs. Risk management as part of investments and production units’ operational activities Metsä Board’s production units may have negative impacts on the produc- tion unit sites’ biodiversity and ecosystems due to the units’ emissions and land use. The environmental impacts of production units are identified and assessed in the environmental permit process. The need for environmental impact assessments is ultimately determined by the local EIA authority. The impacts on conservation areas and Natura sites are considered in the assessment. If required, a Natura assessment is carried out in accordance with the specified procedure, and in large projects, a separate environmen- tal impact assessment preceding the environment permit process is also carried out. After any environmental impact assessment, the production units operate in accordance with their environmental permit and the company’s operational management system. The methods for identifying and managing the impacts of pollution are discussed under E2 – Pollution . Stakeholder engagement The results of the operating model for stakeholder engagement are considered in the sustainability materiality assessment and identification of biodiversity risks. The engagement of stakeholders in wood supply is discussed under Policies . The engagement of local communities in the production units’ operations from an environmental perspective is dis- cussed under E2 – Pollution . A general description of the operating model for the engagement of stakeholders, as well as processes for managing stakeholder engagement, can be found under S3 – Affected communities . Stakeholders have been widely and actively engaged in the resilience analysis through regenerative initiatives such as regenerative forestry and land use.

Distance from Metsä Board’s production unit

Total surface area owned

Name of area valua- ble to biodiversity Perämeri National Park, Kallinkangas, Kaltiojänkä herb-rich forest, Kirvesaapa Närpes archipelago, Kristiinankaupunki archipelago, Bred- mossmyran nature reserve

Protection type of area valuable to biodiversity Natura 2000 sites (the National Park is also a state nature reserve)

Production unit

Metsä Board’s impact on the area

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

Kemi

11 ha*

6–10 km

Mild indirect combination impacts from eutrophication on the Perämeri National Park. The ecological state of surface waters in the area is satisfactory. No direct impacts on buffer zones and thus on the protected habitats or species. Estimat- ed combined impact with Metsä Fibre’s bioproduct mill. Mild indirect combined impacts from eutrophication on the Närpes and Kristiinankaupunki archipelagos 2–5 km from the production unit. The ecological state of surface waters in the area is satisfactory. No impacts on the habitat types or species forming the basis for Natura protection.

Kaskinen

180 ha

Natura 2000 sites (and several areas in the Närpes archipelago included in nature conser- vation programmes)

2–10 km

Strategy and financial targets

Value creation

* Metsä Group owns a total of 1,787 ha of the Kemi production unit site, and of this, 1,776 ha is in Metsä Fibre’s ownership.

Financial development 10 Key figures 12

Report of the Board of Directors

Transition plan and consideration of biodiversity and ecosystems in the strategy and business model

• The regenerating communities that emerge from dialogue, cooperation and partnerships support the overall target of regenerative forestry and land use. The impact of climate change on the state of nature and the role played by actions improving the state of nature are discussed under E1 – Climate change . Policies The environmental policy lays the foundation for environmental targets. The environmental policy includes a commitment to procuring wood raw material from sustainably managed forests, paying attention to economic, social and environmental matters in forest management and wood supply, preventing pollution, and continuously developing production processes using the best available methods and technologies. Wood supply and forest management services Metsä Group, which handles Metsä Board’s wood supply, adopted the regenerative forestry principles in 2023 as a continuation of Metsä Group’s ecological sustainability programme for safeguarding biodiversity. Regen- erative forestry aims for a set of measures that lead to the state of nature verifiably strengthening in Metsä Group’s wood supply and in the forest services it provides across Finland. The wood supply strategy is based on wood production that does not involve land-use change, and in which the amount of native species is very high despite production. The regenerative forestry programme was approved by Metsäliitto Cooperative’s Board of Directors, and it was presented to all owner-members. Forest certification can be used to demonstrate that forests have been managed sustainably and responsibly. Forest certification has two key elements: sustainable forest management and the wood supply chain. The international certification systems used by Metsä Board are PEFC and FSC Metsä Group’s principles for forest use and management are publicly available. All the wood is procured from either certified forests or forests that meet the requirements of controlled origin (PEFC Controlled Sources, FSC Controlled Wood). The origin of the wood is always known. The attention paid to biodiversity in forestry is comprehensively noted in certification systems. Certification systems help recognise and restrict measures harming biodiversity by defining sites that must always be saved and excluded from operations, for example. The procurement of Metsä Board’s wood does not cause deforestation. All the countries from which wood is procured have issued legislation requiring forests to be renewed after felling. The wood that Metsä Board

20 20 37 70 89 96

• Sustainability statement

General information

Metsä Board’s wood supply is handled by Metsä Group’s Wood Supply and Forest Services. The resilience of Metsä Board’s strategy and business model has been assessed by identifying material risks related to biodiversity and ecosystems and by assessing how effective Metsä Group’s long-term actions aligned with the regenerative forestry and land-use principles are in managing the risks in question. The material risks and their management are presented in the table on pages 58–59. Key uncertainty factors identified in the resilience analysis include the weak predictability of EU legislation and the climate change adaptation of complex natural ecosystems, which are discussed in greater detail under E1 – Climate change . The implementation of the materiality assessment and the periods used in it are described on pages 26–28. Resilience has been assessed in the company’s own operations and in the value chain. The key risks related to biodiversity and ecosystems concern the wood supply chain. The resilience analysis will be specified in 2025, especially regarding the rest of the value chain. The assessment of business risks fundamental in the resilience analysis is based on the cli- mate scenarios also used in the climate risk analysis and on the scenarios in the wood processing industry’s biodiversity roadmap. The goal of a comprehensive identification and management of ecosystem services is to prepare for both transition and systemic risks and physical risks. The key risks are related to forest use regulation and climate change-induced physical risks, among other things. Increasing biodiversity plays an important role in forests’ climate change adaptation. The goal of regenerative forestry is to develop forest management so that the various ecosystem services can be measured, and wood is produced as part of a production model based on ecosystem services. The key identified factors strengthening business resilience are: • A production model based on native tree species, which is an important part of business resilience in terms of ecosystems, biodiversity and climate change. • Increasing the value of the forest assets of Metsäliitto Cooperative’s owner-members and transferring forests in a stronger state from one generation to the next are key elements of Metsä Group’s strategy. • The aspiration for more comprehensive identification and safeguarding of ecosystem services at the national level as well. • With its target of strengthening the state of nature, Metsä Group contrib- utes to international, EU and Finland biodiversity targets by providing an example from the private sector.

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

196 Remuneration report 201 Investor relations and investor information

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