UPM has evaluated the position and resilience of its businesses and functions with regard impacts of climate change from both physical and transition perspectives. Expertise of scientific community was used in this work.
A company-wide assessment of transition risks and opportunities has been made for UPM's businesses according to three scenarios of International Energy Agency (IEA):
- New Policies Scenario (NPS)
- Current Policies Scenario (CPS) and
- 2 ℃ scenario (2DS).
Physical scenario analysis focused on the impacts in four main areas of UPM's operations: Finland, Germany, Uruguay and China has been carried out by Finnish Meteorological Institute first in 2019 and updated in 2024.
In general, transition impacts play a larger role in low and medium emissions scenarios. UPM is well positioned, as its business portfolio allows flexibility in terms of recognized risks and opportunities. In the high emissions scenario, physical impacts dominate, with serious consequenses not only for UPM but for the ecosystems and societies around the world.
The main risks and opportunities for UPM have been identified as transitional: competition, markets, customers, products and regulation. For example, distortion in the raw material (wood) market due to unpredictable regulation, subsidies, or EU policies resulting to national legislation could have a significant impact on UPM's financial performance. Opportunities arise from the use of wood as renewable raw material for UPM's products, which are often an alternative to fossil-based products.
Understanding the physical impacts of climate change
The physical impacts of climate change may also cause distortion in the raw material (wood) market and availability. The Finnish Meteorological Institute (FMI) issued a report in 2019 for three selected emissions scenarios in four main areas of UPM's operations: Finland, Germany, Uruguay and China, helping us to predict the future physical impacts of climate change on our business. The report was updated in 2024 with the latest global climate models (CMIP6) and scenarios. Three scenarios considered are:
- SSP1-2.6 representing low,
- SSP2-4.5 representing medium and
- SSP5-8.5 representing very high future emissions.
The updated report examines also observed changes in weather conditions between the years 1961-2023 for these regions.
Observational data shows a statistically significant increase in seasonal temperatures. Mean temperatures are expected to rise in all four regions, although the magnitude of change varies considerably. With general warming, hot extremes are expected to become more frequent and present increased drought risks even with modest increases in precipitation. Precipitation is likely to increase in Finland during winter and to decrease in Germany during summer. Extreme precipitation events are expected to intensify in all four regions. In the second half of the 21st century, the extent of climate change will strongly depend on the evolution of greenhouse gas emissions. If emissions are effectively reduced, the changes will likely to be less severe.
The FMI reports are publicly available on the University of Helsinki open repository.
Forest resources are increasing in Europe
In recent decades, forest resources have been increasing in Europe. Especially in Northern Europe, forests have benefitted from the warmer climate and increased CO2 concentration in the atmosphere. During the coming decades, this positive trend may at least partly halt due to potentially increasing disturbances that might inhibit forest growth, such as damage caused by drought, fire and insect pests. The role of forests as a carbon sink is an important point to consider in the context of climate change mitigation. Intensifying public debate on the most beneficial and sustainable use of forest resources is predicted to continue.
