UPM Boosts its Supplier Assessment Practices in Russia

Helsinki, Finland, 16 February 2007 -- UPM has boosted its supplier assessment practices in Russia by increasing the number of assessments and developing the methodology. In 2006, the company carried out 150 supplier assessments and 252 logging site checks. This covered suppliers responsible for 85% of the wood procured in Russia. Supplier assessments and logging site checks help ensure that suppliers work according to UPM's requirements.

New methods have been developed for checking the quality and accuracy of origin of wood documentation prior to the logging site check. During 2006, a lack of documentation resulted in the termination of two contracts and a deferral of payment to eight suppliers.

Some 66% of the logging sites assessed was classed as good. Minor nonconformities related to health and safety, logging site management, and logging practises were found on 34% of sites. Corrective actions have been agreed with the suppliers concerned.

"We have assessed our Russian suppliers since 1998. During 2006, we have been developing our Russian forestry and wood sourcing organisation. Part of that has been to intensify our supplier assessment practises and develop new ways to check origin of wood documentation", says Juhani Hongisto, UPM's chief forester responsible for wood sourcing in Russia. "The assessments continue to be an effective method for creating mutual understanding, giving feedback and strengthening cooperation with the suppliers."

Supplier assessments including logging site checks are part of UPM's origin of wood tracing system, which the company started building in 1996. The system is based on a statement of origin, which is required for all wood deliveries, a database and a mapping system.

"Knowing the origin of wood is essential for UPM. The tracing system has helped us to respond quickly and accurate on specific questions raised by interest groups and to assure our stakeholders that the wood purchased in Russia is sustainable, legal and not from protected areas" Hongisto said.

Assessment information from previous years can be found on UPM's Internet site www.upm-kymmene.com/traceit.

UPM is one of the world's leading forest products groups. The Group's sales in 2006 were EUR 10 billion, and it has about 28,000 employees. UPM's main products include printing papers, converting materials, and wood products. The company has production plants in 15 countries. Its main market areas are Europe and North America. UPM's shares are listed on the Helsinki and New York stock exchanges. www.upm-kymmene.com

UPM has a global forestry and wood sourcing organization to secure wood supply to its different mills as well as to manage company forests. UPM owns forestry land in Canada, Finland, Russia, the UK and the USA. The largest forest properties are in Finland (920,000 hectares) and the USA (79,000 hectares). UPM is also responsible for the management of 950,000 hectares of provincially owned forest land in New Brunswick, Canada. The forests are certified in Canada and the USA against SFI, in Finland against FFCS, and in the UK against UKWAS.

UPM buys about 5 million m³ wood annually from Russia. About 4 million m³ of the wood is used at the mills in Finland. The rest is processed at UPM's Pestovo saw mill and Chudovo plywood and veneer mills in Russia and at Otepää plywood mill in Estonia. UPM supplies wood in Russia also to Svir Timber owned by Botnia, UPM's associated company.

UPM's own forestry and wood sourcing organisation in Russia is responsible for wood sourcing. Wood is purchased from UPM's own logging company in Tikhvin and from about 350 independent logging companies and specialised trading companies. Most of the wood comes from the Karelia, Leningrad, Vologda, and Novgorod regions.

For more information please see: www.upm-kymmene.com