Role of Innovation in a Forest Based Economy Stefan Sundman VP, Corporate Relations and Development UPM-Kymmene Corporation

FOREST OF NEW OPPORTUNITIES Biofore growth and competitiveness World is changing Resource scarcity Power shift in global economy Climate change Digitalisation Materials and energy efficiency Renewable and recyclable products Innovation and new businesses Internal

Wood raw material for many products Fibres to biocomposites Fibres to pulp Bark and branches to biofuels and energy Fibres to biofibrils Lignin to energy and biochemicals Cellulose or hemicellulose to biochemicals Extractives to biodiesel or biochemicals Logs for sawn goods and plywood May 2012

The sixth industrial revolution is bio-based 6. wave Sustainable Bioeconomy Renewable energy Green chemicals Industrial ecology 3. wave Electricity Chemicals Combustion engine 2. wave Steam engine Railways Steel Cotton 1. wave Iron Hydro power Machines Textile Trade Innovation 5. wave Digital web Biotechnology Information technology We´re living in the middle of the sixth industrial revolution. And that revolution is bio-based. — What does it mean? It means that already now new disciplines and motives steer the behaviour of people. People as individuals. People as citizens. People as business decision-makers. And people as consumers. Today people justify their purchasing decisions on totally new grounds. The key word is sustainability — sustainability understood in a rather wide context. Sustainable bioeconomy means that people prefer renewable energy, renewable raw materials and recyclable products. For us, the manufacturing industry, it means the demand for industrial ecology — sustainable combinations of environment, economy and technology. The same applies for our customers: publishers, printers, brand owners, construction and transportation companies. We must all pay attention to new consuming patterns, new innovative products and production technologies utilizing for example green nanotechnology which enhances sustainability. 4. wave Petrochemicals Aircrafts and space Electronics 1785 1845 1900 1950 1990 2020 Public Source: Worldwatch Institute / State of the World

Integration of current operations and competencies into new knowledge and operations Current businesses & competencies New forest industry New knowledge & new businesses Public Sunday, 30 December 2018

Building new on current businesses UPM ProFi UPM Biofibrils UPM BioVerno Bio- fibrils Biochemicals Biofuels for transport UPM Grada Bioenergy – heat and power UPM ForMi Labels and composites Pulp, paper, plywood and wood products Wood-based biomass procurement and logistics | © UPM

Commercialisation and industrial-scale business operations as primary goals Public Sunday, 30 December 2018

Public Private Partership on Biobased Industries A joint initiative to overcome industry challenges Investment & implementation in order to keep Europe in the global race Innovation: New products and new value chains Integration to accelerate the building of value chains Focused on development and actual realisation of integrated biobased value chains Internal

Europe offers a variety of policies that are relevant to the biobased economy and can trigger its development by 2020 Support demand for advanced biofuels Renewable energy directive EU BIO-ECONOMY Strategy & Action Plan Common agricultural policy HORIZON 2020 Support biomass mobilisation as part of Greening the CAP Support investment in biorefineries with a possible PPP on Biobased Industries

An Action Plan: what for? Demonstrate how the ECE region forest sector can contribute to the transition towards a Green Economy; Share best practices and promote policies which are effective, efficient and equitable; Communicate achievements – to public, policy makers and other sectors.

The five pillars of the Action Plan Patterns of consumption and production of forest products are truly sustainable. 1. Sustainable wood consumption and production The forest sector makes the best possible contribution to mitigation of, and adaptation to, climate change. 2. The low-carbon forest sector The workforce is able to implement SFM and the forest sector provides decent jobs. 3. Decent green jobs in the forest sector Forest functions are valued and PES are established. 4. Valuation of and payment for forest ecosystem services The forest sector policies and institutions promote SFM, policy making is evidence-based, and policy instruments are effective, efficient and equitable 5. Monitoring and governance of the forest sector For more information: http://www.unece.org/forests/greeneconomy.html

Attractive growth investment based on UPM’s competitive advantages Competitive raw material Efficient production process High quality product Crude tall oil, a residue from pulp production Steady supply partially from own sources Outside food value chain No indirect land-use change Technology based on UPM innovations Efficient use of raw material Integrate synergies Industrial infrastructure 2nd generation biodiesel fully compatible with current diesel motors 80% reduction in greenhouse gas emissions High energy content No blend wall issues | © UPM

Growing UPM Kaukas mill site in Lappeenranta - Biorefinery Internal