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HUHTAMÄKI OYJ

DIRECTOR’S REPORT AND
FINANCIAL STATEMENTS

2021

BUSINESS ID: 0140879-6

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Contents

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Directors’ report 2021

Operating environment

The year 2021 was marked by a challenging business environment, linked to the continued COVID-19 pandemic, fueled by the appearance of new variants, and the subsequent significant disruption of the value chain and markets.

Demand for foodservice packaging was negatively impacted by the COVID-19 pandemic due to closures of quick-service restaurants and restrictions on movement throughout the year. Demand improved gradually during the first three quarters due to vaccination deployment and as restrictions started to be lifted. Demand remained resilient through Q4 despite the new acceleration of new Covid variants. In addition, demand for food delivery increased reflecting emerging new consumption habits with more people continuing to stay at home.

Demand for food on-the-shelf packaging, mainly flexible packaging and fiber packaging, remained relatively resilient to the effects of COVID-19. The impact on retail business and consumer goods products was limited, though demand for egg-packaging softened against high 2020 comparisons.

The pandemic-driven supply chain disruptions throughout the year led to scarcity, particularly in raw materials, that resulted in extraordinary inflation in input costs, and started to impact our operations. Freight, energy and labor inflation also increased significantly in the second half of 2021.

Sustainability is key to Huhtamaki and its stakeholders and Huhtamaki is taking a leading role within the food packaging industry in addressing the global challenges of circularity and climate change. Packaging forms an important part of the food system bringing real benefits for the future of the world, not only concerning food safety and availability of food for the world’s population, but also by playing a key role in reducing food wastage, which accounts for 10% of global greenhouse gas emissions. It is essential to improve the sustainability profile of packaging to reduce the impact further whilst at the same time improving its functionality and therefore its value.

Strategic development

In 2020, Huhtamaki launched its renewed 2030 Strategy, which builds on five priorities: growth through organic and inorganic investments, competitiveness through scale and performance, talent through developing strategic capabilities and a high-performance culture, sustainability through an ambitious agenda for Huhtamaki’s operations and product innovation as well as digitalization to improve operational performance and explore new business growth avenues. In 2021, Huhtamaki made good progress implementing the strategic priorities.

Huhtamaki launched Push Tab® paper, an industry-first sustainable renewable paper-based blister solution for the global healthcare industry. Another innovation that was announced was the next generation of tube laminates for use in both the cosmetics and food sectors in partnership with LyondellBasell, Plastuni Lisses and Groupe Rocher. The company also announced Future Smart fiber lids, replacing plastic lids. These new fiber lids are made of renewable material are recyclable and compostable.

On sustainability, Huhtamaki’s climate targets were approved and validated by the globally recognized Science Based Targets initiative. Huhtamaki also received recognition of its commitment to ESG agenda by improved ratings in three key ESG Ratings: EcoVadis, CDP as well as S&P Global CSA. To develop its climate-related governance and reporting further, Huhtamaki started to align its process with the TCFD, Task Force on Climate-Related Financial Disclosures, recommendations. With the launch of the

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EU taxonomy regulation in 2021, Huhtamaki is reporting on the eligibility of its economic activities with the taxonomy for the first time.

Huhtamaki also introduced the Global Sustainability Index (GSI), which links the short-term incentives of the President and CEO, as well as other GET members to the Group’s sustainability performance. The index tracks Huhtamaki’s progress towards its 2030 sustainability ambition. Linking remuneration and sustainability further strengthens Huhtamaki’s commitment to sustainability and drives actions to help achieve its ambitious targets.

Huhtamaki announced and completed two acquisitions and acquired full ownership of its Ireland based joint venture company. Huhtamaki acquired Jiangsu Hihio-Art Packaging Co. Ltd, a leading manufacturer of paper bags, wraps and folding carton packaging in China. With the acquisition, Huhtamaki continues to strengthen its position as the leading foodservice packaging provider in Asia and expands its product portfolio in China allowing it to better serve its existing and new customers in this exciting growth market. Huhtamaki also acquired Elif Holding A.Ş. (Elif), with operations in Turkey and Egypt. As a major supplier of sustainable flexible packaging to global FMCG brand owners, this acquisition adds scale in strategic geographies and supports Huhtamaki’s progress towards reaching its high sustainability ambitions.

In addition to the acquisitions, Huhtamaki decided to invest in a new state-of-the-art foodservice manufacturing unit in Malaysia and in a new fiber packaging manufacturing site in South Africa.

In 2021, the Board of Directors focused on contributing to and following implementation of Huhtamaki’s long-term strategy and supporting management in its continuing efforts to limit the impact from COVID-19. The Board also continued to following development and strengthening of the company’s people capabilities and resources, sustainability initiatives as well as innovation and digitalization activities.

Key figures

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¹ Excluding IAC of EUR -18.7 million in 2021 (EUR -8.6 million in 2020 and EUR -7.6 million in 2019).

² Excluding IAC of EUR -19.3 million in 2021 (EUR -36.8 million in 2020 and EUR -7.6 million in 2019).

³ Excluding IAC of EUR -17.1 million in 2021 (EUR -26.2 million in 2020 and EUR -5.9 million in 2019).

Unless otherwise stated, all comparisons in this report are compared to the corresponding period in 2019. Figures of return on investment (ROI), return on equity (ROE) and return on net assets (RONA) as well as net debt to EBITDA presented in this report are calculated on a 12-month rolling basis.

IAC includes, but is not limited to, material restructuring costs and acquisition related costs (gains and losses on business combinations, professional and legal fees, material purchase price accounting adjustments for inventory, material purchase price amortization of intangible assets and changes in contingent considerations) as well as material impairment losses and reversals, gains and losses relating to sale of intangible and tangible assets and fines and penalties imposed by authorities.

The figures in the tables are exact figures and consequently the sum of individual figures may deviate from the sum presented. Key figures have been calculated using exact figures.

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Financial review 2021

Net sales by business segment

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Comparable net sales growth by business segment

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The Group’s net sales increased 8% to EUR 3,575 million (EUR 3,302 million) during the reporting period. Comparable net sales growth was 7%. Net sales increased especially in the Foodservice Europe-Asia-Oceania segment, driven by the continued recovery in demand for foodservice products. Sales of retail tableware in North America was strong. The Group´s growth in emerging markets was 13%. Foreign currency translation impact on the Group’s net sales was EUR -54 million (EUR -89 million) compared to 2020 exchange rates.

Net sales by segment, 2021Net sales by segment, 2020

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Adjusted EBIT by business segment

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Adjusted EBIT by segment, 2021Adjusted EBIT by segment, 2020

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Adjusted EBIT margin by business segment

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The Group’s adjusted EBIT increased to EUR 315 million (EUR 302 million) and reported EBIT was EUR 296 million (EUR 265 million). Adjusted EBIT improved following net sales growth, continued focus on operational efficiency and pricing actions and was offset by higher input costs.  The Group’s adjusted EBIT margin decreased and was 8.8% (9.1%). Foreign currency translation impact on the Group’s earnings was EUR -6 million (EUR -8 million).

Adjusted EBIT excludes EUR -19.3 million (EUR -36.8 million) of items affecting comparability (IAC).

Adjusted EBIT and IAC

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Net financial expenses were EUR 33 million (EUR 28 million). Tax expense was EUR 60 million (EUR 53 million). The effective tax rate was 23% (23%). Profit for the period was EUR 203 million (EUR 184 million). Adjusted earnings per share (EPS) were EUR 2.07 (EUR 1.95) and reported EPS EUR 1.91 (EUR 1.69). Adjusted EPS is calculated based on adjusted profit for the period, which excludes EUR -17.1 million (EUR -26.2 million) of IAC.

Adjusted profit and IAC

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Statement of financial position and cash flow

The Group’s net debt increased mainly due to the acquisitions and was EUR 1,520 million (EUR 867 million) at the end of December. The level of net debt corresponds to a gearing ratio of 0.95 (0.64). Net debt to EBITDA ratio (excluding IAC) was 3.1 (1.8). Average maturity of external committed credit facilities and loans was 2.6 years (2.7 years).

On January 7, 2021, a signing of a EUR 400 million syndicated multicurrency revolving credit facility loan agreement (“RCF”) with a maturity of three (3) years was announced. The RCF refinanced an earlier EUR 400 million credit facility signed in January 2015 and will be used for general corporate purposes of the Group. The RCF has two one-year extension options and the interest margin is tied to three sustainability indicators: share of renewable or recycled material in products, share of non-hazardous waste recycled and EcoVadis rating. During the third quarter of 2021, Huhtamäki Oyj signed a bridge financing facility of USD 500 million to support the financing of the acquisition of Elif. On December 16, 2021, Huhtamäki Oyj signed a confirmation to extend the maturity of the EUR 400 million syndicated revolving credit facility loan agreement for a further period of one year in accordance with the extension option of the loan agreement.

Capital expenditure was EUR 259 million (EUR 223 million). The largest investments for business expansion were made in North America, Germany and Russia. The Group’s free cash flow was EUR -26 million (EUR 207 million) mainly impacted by increased working capital following market recovery and inflationary impact in raw materials as well as higher cash taxes.

Cash and cash equivalents were EUR 179 million (EUR 315 million) at the end of December and the Group had EUR 382 million (EUR 310 million) of unused committed credit facilities available.

Total assets on the statement of financial position were EUR 4,542 million (EUR 3,596 million).

Acquisitions and divestments

On April 21, 2021 Huhtamaki announced its agreement to acquire the assets of Jiangsu Hihio-Art Packaging Co. Ltd., a leading manufacturer of paper bags, wraps and folding carton packaging in China. With this acquisition, Huhtamaki continues to strengthen its position as the leading foodservice packaging provider in Asia and expands its product portfolio in China, allowing it to better serve its existing and new customers in this exciting growth market. Jiangsu Hihio-Art Packaging employs approximately 200 people in its manufacturing unit in Xuzhou city, Jiangsu. In 2020 the annual net sales of the privately owned business were approximately EUR 20 million. The debt free purchase price was EUR 31 million. The acquisition was completed on June 11, 2021 and since then the business has been reported as part of the Foodservice Europe-Asia-Oceania business segment.

On August 16, 2021 Huhtamaki announced its agreement to acquire Elif Holding A.Ş. (Elif), a major supplier of sustainable flexible packaging to global FMCG brand owners, with operations in Turkey and in Egypt. In line with Huhtamaki’s 2030 growth strategy, the acquisition adds scale in strategic geographies and supports Huhtamaki’s progress towards reaching its high sustainability ambitions. The acquisition also expands Huhtamaki’s technology capabilities and product range, allowing it to serve its customers even better. The net sales of the acquired business were approximately EUR 163 million (USD 195 million) in 2020. Elif employs approximately 1,500 people in its two manufacturing locations in Istanbul, Turkey and Cairo, Egypt. The cash free debt free purchase price was EUR 412 million (USD 483 million). The acquisition was completed on September 23, 2021 and since then the business has been reported as part of Huhtamaki’s Flexible Packaging business segment.

On November 30, 2021, Huhtamaki acquired full ownership of its Ireland based joint venture company Huhtamaki CupPrint Limited from the founding shareholders. Huhtamaki acquired 70% majority ownership in the company (that time Cup Print Unlimited Company) on May 31, 2018. CupPrint is specialized in short run custom printed cups with quick delivery time. It has an on-line service model which allows efficient design and delivery of small volumes. The purchase price for the additional shares was approximately

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EUR 11 million. The business has been reported as part of the Foodservice Europe-Asia-Oceania business segment since June 2018.

Significant events after the reporting period

On January 3, 2022, Huhtamaki announced that it has acquired full ownership of its Polish joint venture company Huhtamaki Smith Anderson sp. z o.o. from Smith Anderson Group Ltd. The company manufactures and sells foodservice paper bags in Eastern Europe at Huhtamaki's facility in Czeladz, Poland. Paper bags have become an increasingly important part of Huhtamaki’s product offering and the acquisition enables the company to invest in and further grow the business in Eastern Europe. The purchase price for additional shares and related manufacturing equipment is approximately EUR 2 million. The business has been reported as part of the Foodservice Europe-Asia-Oceania business segment since beginning of operations in 2018.

Business review by segment

Foodservice Europe-Asia-Oceania

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¹ Excluding IAC.

Throughout 2021, demand for foodservice packaging was negatively impacted by the COVID-19 pandemic. Demand improved gradually during the first three quarters as restrictions started to be lifted and remained resilient through Q4 despite the new acceleration of new Covid variants. Compared to the previous year, polymer prices increased, whereas prices of paperboard remained relatively stable.

Net sales in the Foodservice Europe-Asia-Oceania segment increased. Comparable net sales growth was 11% Net sales increased in all main markets and was especially strong in Central and Eastern Europe as well as Middle East and Africa.

The impact of currency movements on the segment’s reported net sales was EUR 2 million.

The segment’s adjusted EBIT improved, as a result of increased sales, pricing actions and continued focus on operational efficiency and was partially offset by higher polymer prices.

The impact of currency movements on the segment’s reported earnings was EUR -0 million.

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North America

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¹ Excluding IAC.

Demand for foodservice packaging was subdued in the beginning of the reporting period and improved towards the end of the period as restrictions were lifted particularly in schools and other venues. Demand for retail tableware was consistently strong throughout the period, defying old seasonal patterns. Raw material prices and distribution costs were higher compared to the previous year, particularly towards the end of the period.

Net sales in North America segment increased, supported by favorable currency movements in the second half of the year. Comparable net sales growth was 6%. Growth was driven by both price and volume and was strongest in retail tableware and supported by strong recovery in foodservice.

The impact of currency movements on the segment’s reported net sales was EUR -44 million.

The segment’s adjusted EBIT improved. The improvement in profitability was driven by volume growth and pricing actions partially offset by higher raw material prices and distribution costs.

The impact of currency movements on the segment’s reported earnings was EUR -5 million.

Flexible Packaging

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¹ Excluding IAC.

Demand for flexible packaging varied between product categories and markets throughout the year. The competitive situation remained tight, and some emerging markets continued to be disrupted. The supply environment was volatile and cost levels increased compared to prior year in critical categories, such as raw material, energy and transport.

Net sales increased in the Flexible Packaging segment. Comparable net sales growth was 7%. Growth was driven by Middle East and Africa, and Southeast Asia and Oceania. The Elif acquisition has been included in the reporting since Q4 and contributed favorably to the reported net sales.

The impact of currency movements on the segment’s reported net sales was EUR -17 million.

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The segment’s adjusted EBIT decreased due to higher raw material prices, partially offset by pricing actions and improved operational efficiency. Earnings growth was highest Middle East and Africa. The Elif acquisition contributed favorably to adjusted EBIT.

The impact of currency movements on the segment’s reported earnings was EUR -1 million.

Fiber Packaging

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¹ Excluding IAC.

Demand for fiber-based packaging normalized on the back of very strong growth in consumption in 2020. Demand for egg packaging softened throughout the year, while increased demand for on-the-go products continued. Prices of recycled fiber increased compared to the previous year.

Net sales in the Fiber Packaging segment increased, supported by continued demand, onboarded capacity and pricing. Comparable net sales growth was 2%.

The impact of currency movements on the segment’s reported net sales was EUR 4 million.

The segment’s adjusted EBIT decreased as continued operational efficiency and pricing actions only partially offset the increased raw material prices and energy prices.

The impact of currency movements on the segment’s reported earnings was EUR 1 million.

Non-Financial Review

Huhtamaki’s ambition is to become the first choice in sustainable packaging solutions, as defined in the Group’s 2030 Strategy. Sustainability is at the core of the strategy and Huhtamaki has defined a set of 2030 sustainability ambitions to guide its sustainability work. Huhtamaki is committed to doing business in a responsible and sustainable manner and expects the same commitment from its business partners and suppliers globally. Huhtamaki is a participant in the UN Global Compact Initiative and is guided by the UN Sustainable Development Goals (SDGs), helping the company to embed sustainability in all operations. Huhtamaki complies with local laws and regulations and acts in accordance with commonly accepted best practices everywhere it operates. Huhtamaki does not accept the violation of any laws or regulations or any unethical business dealings.

This review represents an overview of the non-financial and sustainability matters material to Huhtamaki. To develop its climate-related governance and reporting further, the Group has started to align its process with the recommendations of the Task Force on Climate-Related Disclosures (TCFD) in 2021. With the launch of the EU taxonomy regulation in 2021, Huhtamaki is reporting on the eligibility of its economic activities with the taxonomy for the first time. Both the TCFD index and the taxonomy related disclosures are presented as part of this review. More information on Huhtamaki’s sustainability work and performance can be found in Huhtamaki’s Business Overview and its Sustainability Performance supplement, which are part of this Huhtamaki Annual Report 2021. Huhtamaki’s business model is described on page 30 of this Huhtamaki Annual Report 2021 publication. Risks and risk management procedures related to the non-financial review are described in a separate section within this Directors’ Report.

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Sustainability governance and management
At Huhtamaki, sustainability is ultimately governed by the Board of Directors and at the operational level, by the CEO, the Global Executive Team, the Sustainability Global function and other senior staff across the different business units. The Board is the highest body to approve the guiding policies for sustainability and outline sustainability principles regarding the Group’s strategy. It monitors and evaluates the risk management activities of the Group, including the sustainability risks such as climate-related risks. It approves the risk level that the Group is capable and prepared to accept and the extent to which risks have been identified, addressed, and followed up.

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In 2021, a Sustainability Steering Committee, presided by selected members of the Global Executive Team, was founded at Group level, with the mission to steer transformative sustainability initiatives. A separate steering committee was established to support the implementation of the group-level energy strategy.

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The Group's sustainability performance is tracked regularly in its operations: at the manufacturing unit, business segment and Group-levels. The results are collected and monitored at Group-level in the sustainability dashboard which is discussed in the Global Executive Team and presented quarterly to the Board of Directors. For more information about the Group’s sustainability performance, see the Sustainability Performance section.

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In 2021, Huhtamaki introduced the Global Sustainability Index (GSI), which links the short-term incentives of the President and CEO, as well as other members of the Global Executive Team to the Group’s sustainability performance. The index tracks Huhtamaki’s progress towards its 2030 sustainability ambition. KPIs within the index are linked to the sustainability dashboard and relate, for example, to the share of renewable or recycled materials, the share of renewable electricity, and the share of non-hazardous waste recycled. As of 2022, the GSI will also be applied as a business objective for all employees working in Global Functions and taking part in the short-term incentive plan. As for the rest of the employees within the short-term incentive plan, there is a requirement to have at least one site- or segment-specific sustainability-related personal objective that is linked to the sustainability dashboard. Linking remuneration and sustainability further strengthens Huhtamaki’s commitment to sustainability and drives actions to help achieve its ambitious targets.

Material topics

To ensure that the Group’s sustainability work is focused on the most material issues, Huhtamaki continuously follows the most recent developments and trends in the field of sustainability, changes in legislation as well as input from stakeholders. Huhtamaki also updates its materiality assessment regularly, although the material sustainability topics tend to stay the same over the years, with only slight variations to their relative importance. A substantial update of the materiality analysis was performed in 2018, followed by lighter updates in 2019 and 2020.

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In general, the updated 2020 assessment reaffirmed that Huhtamaki’s sustainability ambitions cover the most material topics for the Group and its stakeholders. The transition to a circular economy was added as a completely new topic in the materiality assessment, and it has a central role in the 2030 sustainability ambitions. The effects of the COVID-19 pandemic could be seen through clearly increased emphasis on product safety as well as occupational health and safety. Managing product safety is essential in Huhtamaki’s business when delivering material that will be in contact with food. Huhtamaki continues ensuring that its global Quality and Food Safety fundamentals are implemented in local quality management systems. Also, Huhtamaki is committed to safeguarding the health and safety of its employees and is building a safety culture for everyone, everywhere.

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Impacts of COVID-19 on Huhtamaki’s sustainability work

The ongoing COVID-19 pandemic continues to affect Huhtamaki’s operating environment, and although there has not been a significant impact on the Group’s sustainability work overall, the pandemic has however slowed down the work especially in developing Huhtamaki’s supply chain due diligence process. Supply streams are under pressure because of constraints brought about by the impact of the

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pandemic, and therefore the Group has been unable to roll out the supplier audit program as had been planned. Huhtamaki is committed to strengthen its efforts in this area in 2022.

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The pandemic has also limited the Group’s capacity to facilitate face-to-face trainings for its employees. To accommodate for this, Huhtamaki has focused on actively incorporate learning in the flow of work and has invited employees to contribute online to global and local initiatives and has provided online training opportunities. Hybrid working models were trialed at office locations, but due to the worsening of the pandemic situation, remote work has largely continued at the offices.

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The pandemic has had some effect on Huhtamaki’s non-financial KPIs, but not to a material degree. Huhtamaki has been able to continue advancing towards its sustainability ambitions and is committed to protecting its employees as well as business continuity.

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Environmental matters

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Policies

• Huhtamaki Code of Conduct

• Code of Conduct for Huhtamaki Suppliers

• Global Environmental Policy

• ISO management systems 14001, 50001

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Circularity and climate are key focus areas in Huhtamaki’s 2030 sustainability agenda. Similar to many companies, the largest environmental impacts and the majority of Huhtamaki’s total greenhouse gas emissions arise from its value chain. The largest impacts are related to raw materials and the end-of-life treatment of products. In terms of the Group’s own operations, greenhouse gas emissions and production waste are the main environmental impacts. Additionally, water usage is a material topic in the Group’s molded fiber manufacturing operations.

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Huhtamaki’s ambition of becoming the first choice in sustainable packaging solutions puts high emphasis on the environmental performance of the company, mainly related to mitigating climate change. In 2021, Huhtamaki’s Scope 1, 2 and 3 greenhouse gas (GHG) emissions reduction targets were approved and validated by the Science Based Targets initiative based on the well-below 2°C scenario. These targets guide Huhtamaki’s low-carbon transition plan to ensure the resilience of its business model with the 1,5°C target set by some stakeholders. Huhtamaki’s science-based targets add to the previously defined metrics on sourcing 100% of renewable electricity and carbon neutral operations by 2030. Huhtamaki aims to reduce operations-related absolute Scope 1 and Scope 2 GHG emissions by 27.5% by 2030 from a 2019 base year. During 2021, Huhtamaki focused on setting the foundations for a decade-long emissions reduction pathway by defining and launching a global energy strategy to improve energy efficiency, switch to low-carbon fuels and increase the share of renewable electricity, globally. In order to reduce the Scope 3 emissions from the value chain, Huhtamaki aims to drive emissions reductions related to the raw materials and to reduce the emissions from the end-of-life treatment of products. Huhtamaki has committed to ensuring that 70% of suppliers, by spend, sign up to setting their own science-based targets by 2026. In the downstream value chain, Huhtamaki is committed to reducing the GHG emissions from the end-of-life treatment of its products by 13.5% by 2030 from a 2019 base year.

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During 2021, the Sustainability Global function conducted internal preparatory workshops to assess the resilience of the Group’s strategy against climate change. Going forward, Huhtamaki will benchmark different options and select which publicly available climate-change scenarios will be used for assessing the impacts of the physical and transition risks to the company. Read more about the current climate-related risks and opportunities that have been identified in the Risk Management section.

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The Group’s operating principles regarding environment are set out in the Huhtamaki Code of Conduct, the Code of Conduct for Huhtamaki Suppliers and the Global Environmental Policy. The Environmental Policy was updated in 2021. The objective of the policy is to ensure a group-wide understanding of

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Huhtamaki’s environmental commitments and covers the topics of climate and energy; water and effluent; sustainable forestry and biodiversity; waste, design for circularity and chemicals.

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These policies are supported by Total Productive Manufacturing trainings and ISO management systems and are implemented on manufacturing unit level. At the end of 2021, 54 (53) manufacturing units, representing 66% (66%) of all manufacturing units followed an externally certified environmental management system such as ISO 14001, the Eco-Management and Audit Scheme (EMAS) or the internal Environmental Care Program which is primarily implemented in North America.

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Huhtamaki continuously looks for ways to improve resource efficiency, which is supported by a strong environmental and financial rationale. The Group has defined internal management streams for implementing the Group’s 2030 Strategy, which also outline how Huhtamaki measures, develops and communicates sustainability performance against its commitments.

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The main environmental KPIs and performance are:

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*Scope 2 GHG emissions are calculated using the market-based calculation method. The figure has been updated from the one reported in 2020 due to updates in available emission factors.
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In 2021, the absolute GHG emissions from the Group’s own operations (Scope 1 and 2) decreased by 0.4% (3,100 t) while the production volume increased by 6% compared to 2020. Hence, the GHG intensity per sellable ton produced decreased by 6% compared to 2020. As a result, the Group achieved a reduction of 43,700 metric tons CO2e in its GHG emissions when adjusted for the change in the production volume. This positive development was achieved due to the increased share of renewable electricity in the Group’sr operations. This development is in line with Huhtamaki’s GHG emissions reduction targets resulting in 58,700 t (8%) reduction from the base year 2019 level. The calculation of emissions intensity and reduction covers Scope 1 and Scope 2 emissions. The Group’s absolute Scope 3 GHG emissions increased by 4% mainly due to the increase in production and the related material purchases when compared to 2020. The Group saw a 4% growth both in the emissions related to purchased materials and in the emissions related to the end-of-life treatment of sold products. Due to the indirect nature of Scope 3 emissions and the variety in the emissions sources, Huhtamaki’s calculations include both simplifications and estimations in several categories. As the Group proceeds with its Scope 3 emissions reduction roadmap, it will also constantly improve the accuracy of its calculations.

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The Group’s share of renewable and recycled materials decreased slightly, mainly due to the recent Elif acquisition where the integration of environment, health and safety processes and practices started at the end of 2021 only. The share of non-hazardous waste recycled increased while the share of waste to landfill decreased as our manufacturing units found more sustainable solutions for their waste disposal. Huhtamaki continues to identify and develop recycling solutions for non-hazardous production waste.

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Huhtamaki’s environmental operating costs totaled EUR 16 million (EUR 16 million). The costs consist mainly of expenses related to waste and wastewater management as well as environmental management.

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The environmental data includes the units that have been acquired during the reporting year 2021. Units closed during the reporting year 2021 are included in the data until their closing date.

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Huhtamaki is in the process of aligning its reporting about climate-related impacts on its business with the Task Force on Climate-related Financial Disclosure (TCFD) recommendations. By using this framework, Huhtamaki supports transparency and aims to increase understanding of the impacts of climate change on its business environment and operations. Huhtamaki is still assessing the financial exposure that the physical and transition risks related to climate change pose. Over the coming years, the Group will continue to develop its reporting in this area.

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Eligibility with EU Taxonomy regulation

The EU Taxonomy is a green classification system that translates the EU’s climate and environmental objectives into criteria for specific economic activities for investment purposes. It recognizes as environmentally sustainable, those economic activities that make a substantial contribution to at least one of the EU’s six climate and environmental objectives, while at the same time not significantly harming any of these objectives and meeting minimum social safeguards. The six environmental objectives are 1. Climate change mitigation, 2. Climate change adaptation, 3. The sustainable use and protection of water and marine resources, 4. The transition to a circular economy, 5. Pollution prevention and control, and 6. The protection and restoration of biodiversity and ecosystems. The two climate change-related environmental objectives already published as a Delegated Act address emission-

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intensive economic activities with an aim to guide development towards climate change mitigation and adaptation. The criteria for substantial contribution and significant harm are given in the Technical Screening Criteria for each environmental objective.

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Most of Huhtamaki’s economic activities are not considered emission-intensive and, therefore, they are not considered eligible under the currently disclosed technical screening criteria. However, the manufacture of plastic films is considered eligible under 3.6 manufacture of other low carbon technologies category in the NACE coding system. Based on this, Huhtamaki Flexible Packaging is, as a business segment, considered to be an economic activity that is eligible by providing packaging solutions aiming at substantial GHG emission reductions in other sectors of the economy. Hence, Huhtamaki reports the taxonomy-eligibility of this economic activity in 2021 and reports the alignment based on the screening criteria starting from 2022. Huhtamaki continues to develop its taxonomy-related reporting, assessing current alignment in 2022 and also reviewing the Taxonomy’s eligible economic activities against further updated information from the European Commission.

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Personnel and social matters

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Policies

• Huhtamaki Code of Conduct

• OHSAS 18001 / ISO 45001

• Global Employment Guidelines

• Huhtamaki Working Conditions Requirements

• Group Performance Management Policy

• Performance Review Guidelines

• Group Compensation and Benefits Policy

• Huhtamaki Human Trafficking and Modern Slavery Statement

• Global Human Rights Policy

• Global Occupational Health and Safety Policy

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Huhtamaki aims to create a safe, engaging and high-performance culture by encouraging its employees to act according to its new values Care Dare Deliver. The Group’s functional people processes and solutions support the business in reaching strategic and operational targets. Data analysis and digital workplace tools help the Group make informed decisions and enables employees to succeed in their work.

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In 2021, the average number of employees was 18,385 (18,440), of which 70% (70%) worked directly in production. Countries with the largest number of employees were US, India and Germany, which accounted for 44% (49%) of the Group’s personnel. At the end of the year Huhtamaki had a total of 19,564 (18,227) employees.

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In 2021, Huhtamaki started to engage its employees with the Group’s refreshed values which were introduced in 2020. This was done through facilitated events with the purpose to give all employees an opportunity to discuss the meaning of the values more informally. Some events were organized outside taking into consideration all the necessary safety measures, while some events were conducted fully online.

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Huhtamaki’s latest employee engagement survey, Connect, was conducted in September 2021 with the response rate at 79% (88%). The employee engagement index was at 73% (75%) and employee enablement index at 76% (76%). In comparison to 2019, when the previous survey was conducted, the largest improvements were in ethics, values, and understanding Huhtamaki’s strategy and goals. The increased focus on strategy communications has paid off along with the investment on leadership development. A very positive development, in line with the Group’s values being of key importance, is that employees feel that their leaders and colleagues act ethically, fairly and according to Huhtamaki’s values Care Dare Deliver.

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The Group has identified performance management, resources, diversity and career opportunities as its global focus areas. Teams have reviewed and discussed their results with managers and started to plan actions for the areas of improvements. Teams are also encouraged to select at least one strength they want to maintain.

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As the pandemic resulted in all face-to-face training programs being put on hold, Huhtamaki invited employees to contribute online to global and local initiatives, such as e-learnings on digitalization and safety. Also Huhtamaki’s strategic key projects provide a wide range of learning opportunities at the same time increasing collaboration across the organization.

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In addition, in 2021 Huhtamaki provided a LinkedIn Learning license to more than 350 employees across the globe. With this, the Group wants to support employees’ development with access to a platform that offers courses taught by industry experts specializing in personal and business skills.

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The prolonged COVID-19 pandemic accelerated the development of a hybrid model where office employees have the possibility to work part of the work week remotely. Two major office sites, the headquarters in Espoo (Finland) and the Corporate office in De Soto (US), were selected to pilot the model. Managers were trained to facilitate discussions with their teams and agree the ways of working in the hybrid model. However, the worsening of the pandemic put the pilots on hold for the remainder of 2021 as national remote work recommendations came back into force. The pilots will continue in 2022 with the vaccination program proceeding and as soon as it is safe for employees to return to offices.

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Business units adhere to Huhtamaki’s global Working Conditions Requirements that cover topics such as anti-corruption, safety, work ergonomics, work contracts, working hours, grievances, and supplier management. During 2021, the focus was on the renewal and development of a risk-based audit program.

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Occupational Health and Safety (OHS) is a top priority for Huhtamaki. Huhtamaki is building a safety culture and strives to embed safety across the whole organization. Huhtamaki’s ambition is to develop a mindset to deliver an organization where nobody gets hurt and everyone goes home safe at the end of the day.

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In 2021, a key global safety project addressing all segments was related to machine safety. The project aimed for establishing a global program to identify and mitigate risks related to machine procedures and process by installing a Global standard which states the company position in respect to compliance and safety for all employees. The target is for alignment of machine safety standards, machine compliance processes and upskilling of employees. The basis was established in 2021 and the real outcomes of the program will be visible during 2022-2023 through the expansion of the program.

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The key OHS indicators for 2021 are Lost Time Injury Frequency Rate (LTIFR) and Total Recordable Injury Frequency Rate (TRIFR). In 2021, LTIFR decreased to 1.4 (1.6 in 2020, 2.0 in 2019 and 1.8 in 2018). When calculating LTIFR Huhtamaki considers lost time injuries and actual working hours of Huhtamaki employees and external workers. TRIFR in 2021 was 4.3. There were no fatalities during 2021.

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Human rights

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Policies

• Huhtamaki Code of Conduct

• Code of Conduct for Huhtamaki Suppliers

• Global Human Rights Policy

• Huhtamaki Human Trafficking and Modern Slavery Statement

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Huhtamaki recognizes that, as a global company, its actions can have both positive and negative impacts on people either directly through its own operations, or indirectly through its value chain. Ensuring that human rights are respected throughout the value chain is a key element of Huhtamaki’s 2030 sustainability agenda. Huhtamaki is committed to taking responsibility for the impact it can have on individuals and for making sure that there is no harm to people as a result of its activities.

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The Global Human Rights Policy reflects Huhtamaki’s commitment to human rights as set forth in the United Nations International Bill of Human Rights and taking into account the UN Guiding Principles on Business and Human Rights.

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The Huhtamaki Code of Conduct sets out standards for ethical behavior for all employees. Huhtamaki does not allow for example workplace violence or the use of child labor or forced labor. All employees globally are expected to participate in the mandatory Code of Conduct training annually.

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Human rights due diligence is built into several of the Group’s key processes, for instance, in its Global Working Conditions Requirements, in its health and safety management systems, in supply chain management and in its compliance system.

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In the Group’s own operations, risks for human rights issues are identified via the global Enterprise Risk Management, the global Ethics and Compliance program and by following incidents reported through the grievance system. The Global Working Conditions Requirements are implemented at all production sites and cover topics such as anti-corruption, safety, work ergonomics, work contracts, working hours, grievances, and supplier management. Occupational health and safety have been identified as key topics. As a result, all manufacturing units monitor safety metrics monthly, and performance is assessed against targets. Engaging with local communities gives valuable feedback from local stakeholders. In mergers and acquisitions, environmental and social impact assessments are part of the standard due diligence process.

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Huhtamaki’s updated supply chain due diligence process has been built to identify risks in the supply chain. All key suppliers, corresponding to the top 80% in terms of procurement spend, are now systematically screened in the Group’s supplier monitoring tool against for example sanctions lists, watch lists and negative media, helping Huhtamaki to identify and address risks related to human rights in the supply chain.

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In 2021, the Group took steps to strengthen its human rights due diligence by performing a global assessment of potential human rights risks and impacts and a review of existing policies and procedures. Huhtamaki also conducted its first human rights impact assessment pilot to gain a deeper understanding of its human rights impact at site level. The pilot was conducted in Egypt and included a country-level human rights analysis and a deep dive impact assessment. The findings from both the global review and the local level assessment will feed into developing a more structured approach to human rights.

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Anti-corruption and anti-bribery

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Policies

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The Huhtamaki Global Ethics and Compliance program focuses on Huhtamaki’s commitment to integrity and legal compliance across the Group’s global organization. The program serves as a toolkit supporting Huhtamaki in conducting its business in compliance with laws, regulations and the Group’s ethical standards and ensuring that the Group has adequate procedures in place to prevent Huhtamaki taking part in any unethical business activities. During 2021, Huhtamaki continued to execute the key initiatives supporting the Global Ethics and Compliance program, and continuously developed further the key elements of the ethics and compliance framework.

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The Huhtamaki Code of Conduct is the core element of Huhtamaki’s Global Ethics and Compliance program. The Code works as a compass, helping the Group to navigate and use consistent legal and ethical judgment in its daily work and decision-making. Anti-bribery and corruption provisions are an integral part of the Code. In addition, these provisions are included in the Code of Conduct for Huhtamaki Suppliers. The Global Ethics and Compliance function oversees the implementation of the company’s Ethics and Compliance program by advising and supporting the conduct of business with high integrity and in compliance with laws and regulations, including anti-bribery and corruption provisions.

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Huhtamaki strongly believes that conducting business with integrity is the right thing to do and it is also its license to operate. At Huhtamaki, integrity applies to every part of Huhtamaki’s business, and the company highlights the importance of the commitment at every level. The Group’s structured compliance program also helps Huhtamaki answer to the growing interests of its external stakeholders by establishing a standard, structured approach to handle ethics and compliance matters in its units globally.

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One of the key elements of Huhtamaki’s Global Ethics and Compliance program framework is training and communication. In 2021, based on the Group’s risk assessment, Global Ethics and Compliance focused on raising awareness of integrity and ethical business conduct in the Middle East and Africa region. Employees were invited to discuss and review case examples of selected compliance topics like anti-corruption, gifts and hospitality and conflict of interest situations. Additionally, face-to-face training sessions were organized by Global Ethics and Compliance for Huhtamaki’s entities in Egypt, the UAE and Turkey. The function also continued to raise awareness of trade sanctions and other new compliance topics also in Huhtamaki’s other operating geographies during 2021 by providing training and communication through various online channels.

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Huhtamaki employees are required to complete the Huhtamaki Code of Conduct training, which is cascaded to all employees as part of the Group’s annual mandatory Ethics and Compliance online training program. The Code of Conduct training, which contains also an anti-corruption section with the commitment not to tolerate corrupt practices of any kind and practical examples for ethical decision-making, was completed by 95.4% (2020: 95.7%) of Huhtamaki’s employees globally in 2021.

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In addition to the Code of Conduct online training, in-depth e-learning courses on anti-trust and competition compliance as well as data privacy and information security related topics are mandatory for selected employees. These online trainings are part of the annual Ethics and Compliance training program.

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In accordance with Huhtamaki’s values, the Group promotes a speak-up culture and encourages everyone to raise their concerns and to report any suspected or observed violations of the Huhtamaki Code of Conduct, any other Huhtamaki policies or laws and regulations. If an employee has concerns about potential misconduct or is made aware of a violation, the employee is expected to report the violation by contacting either his/her manager, over manager, a local Human Resources representative or Global Ethics and Compliance. To support the compliance with laws and regulations and the ethical

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business conduct, the company offers various channels to report concerns, including a dedicated email address and the Huhtamaki Speak Up channel, a web-based whistleblowing system, which allows for anonymous reporting and is open to employees and external stakeholders if they want to report concerns or suspected misconduct. The Huhtamaki Speak Up channel can be accessed by visiting the website: report.whistleb.com/Huhtamaki. Retaliation or any negative actions against an employee reporting a suspected violation in good faith is explicitly prohibited and may result in disciplinary action.

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The Global Ethics and Compliance function coordinates the Speak Up channel and oversees the overall investigation process of alleged violations. The Global Ethics and Compliance function is responsible for all investigations involving serious allegations. All breaches and suspected breaches of the Huhtamaki Code of Conduct brought to the attention of Global Ethics and Compliance are investigated and reported further according to the Group Investigation Policy. The Huhtamaki Ethics and Compliance Committee, the Global Executive Team and the Audit Committee of the Board of Directors follow up on the reported incidents and review the implementation of mitigating activities regularly.

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Risk review

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Risk management

Risk management at Huhtamaki aims to identify potential events that may affect the achievement of the Huhtamaki’s objectives as outlined in its 2030 Strategy. Its purpose is to manage risks to a level that the Group is capable and prepared to accept, so that there is reasonable assurance and predictability regarding the achievement of the Group’s objectives. The aim is also to enable the efficient allocation of resources and risk management efforts.

The Group Enterprise Risk Management (ERM) Policy defines the objectives, scope and responsibilities of risk management. Efficient risk management ensures timely identification and assessment of opportunities and risks in the short, medium, and long term, as well as relevant measures to manage them. Detailed risk management procedures are described in the Group’s ERM framework and process guidelines. Huhtamaki’s risk management process is based on the Enterprise Risk Management framework of the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In order to systematize and facilitate the identification of risks, they are categorized as strategic, operational and financial risks. These categories are closely aligned with the strategic, operational and financial objectives of Huhtamaki, with sustainability and compliance embedded in all of them.  Huhtamaki assesses risks in terms of their impact and the likelihood of their occurrence. A risk impact is considered in terms of impact on the organization’s annual EBIT margin. The likelihood of a risk occurring is generally considered in terms of the expected frequency of occurrence. To further evaluate the residual risk level when risk controls are in place, Huhtamaki assesses the effectiveness of those controls over the impact and likelihood of the risk.

In 2021, business units, segments and global functions identified and assessed strategic, operational and financial risks and opportunities against the impact on the achievement of the strategic priorities and performance objectives. These risk assessment results were consolidated from business unit to segment and further to Group level and used to identify the key risks at segment and Group level. The process was complemented with workshops, insight sessions and online surveys. Risk treatment actions were defined in order to reach acceptable risk levels at each stage. The acceptable risk levels associated with appropriate risk management efforts were deliberated by the Global Executive Team, reviewed by the Audit Committee of the Board of Directors and finally approved by the Board of Directors. Agreed risk management efforts will be conducted and monitored during 2022. 

During 2021, the key risks identified in the 2020 risk assessment process were monitored to assess their existing and newly implemented controls and any changes in the risk level itself. Actions to manage

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those risks were planned and executed at Group or segment level and followed by the Global Risk Management function, with a focus on each business segment’s most significant risks. 

The most significant strategic risks  

Huhtamaki’s 2030 strategic priorities are to grow its business, drive competitiveness, digitalize operations, develop talent and embed sustainability in everything it does. Huhtamaki views that the most significant risks and opportunities for growth arise from the uncertainty and unpredictability in macroeconomic and political environment. Continued uncertainty due to the impact of COVID-19 may impact consumer buying behavior, and thus demand for the Group’s products. Further, uncertainty on trade agreements as well as trade wars and political unpredictability may slow down investment and economic growth in impacted geographies. Yet, these changes, together with certain changes in demand also present opportunities to build agile business models and grow in product categories that serve food delivery, casual at home entertaining and everyday convenience. Another key risk for growth arises from the Group’s ability to identify and invest in profitable and growth-enhancing initiatives. Huhtamaki manages the mentioned risks by developing its range of product offering, allocating capital and resources carefully and diversifying investments geographically.

The key risks and opportunities to Huhtamaki’s competitiveness arise from dependence on large customers, changes in competitive landscape and capability to identify and react to in time to new technologies and shifts in materials. Activities to manage the threats and seize the opportunities involve active dialogue with the customers to develop ways to increase value and understand Huhtamaki´s competitive position as well as cross-functional and cross-segment collaboration. To mitigate the risk of its technology and machinery becoming outdated, inefficient or unfit for serving customer demand, the Group continuously monitors and anticipates long term needs for replacement investments. Huhtamaki is also actively working on strategic partnerships and M&A to secure a competitive advantage on new technology innovations.

In terms of talent development, the key risks and opportunities are identified to arise from Huhtamaki’s ability to develop the organization structure and operating model in line with the strategy. The risk management actions include strategic planning, focus on change management as well as explicit accountability and responsibility structures.   

The most significant strategic risks and opportunities impacting the Group’s sustainability ambition arise from potential new laws and regulations impacting the products as well as from changes in consumer and customer preferences. The company’s future growth and success depend on its continued ability to predict and respond to changes and its ability to innovate and develop new sustainable products and solutions in a timely manner. Understanding consumers enables Huhtamaki to realize business opportunities in building long-term sustainable growth in partnership with its customers. On the other hand, regulatory changes may introduce material bans, reduction targets and increased cost. Further, these regulatory changes include a level of unpredictability, especially in certain geographics. Negative media attention on plastics and single-use products which does not take into consideration the value of packaging within the broader sustainability context, may drive attitudes and legislation. To manage the threats, Huhtamaki is focused on driving an evidence-based discussion to deliver data on the value of packaging in terms of hygiene, food safety, food availability and food waste prevention. Furthermore, Huhtamaki actively tracks early stages of regulatory initiatives and potential regulatory changes so as to reflect these in the development and commercialization of its products and solutions.

Operational and financial risks 

Disruption in raw material or energy supply is considered one of the biggest operational risks to the Group. The risk is managed, e.g., by extending the Group’s supplier network, securing volumes in advantage, monitoring and maintaining safety inventory levels and standardizing raw materials.

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Risks and opportunities related to the ability to manage prices so that price changes are implemented in a timely manner and with correct cost and market intelligence data as well as the ability to pass increases in the cost of raw materials and energy to the price of the products are key for the Group. Risk management actions include ongoing monitoring of raw material and energy costs and focus on contract management with energy and material escalation clauses included in customer contracts when possible.   

Risks related to property damage and IT infrastructure, systems and applications are important operational risks potentially impacting the business continuity of Huhtamaki. The company performs a continuous improvement program in property risk control, mitigating the impact and likelihood of hazards, such as fire, explosion, flood or windstorm, that may lead to property damage and business interruption. To minimize the impact of a potential business interruption, Huhtamaki maintains and further develops its disaster recovery and business continuity plans and allocates manufacturing capacity to several locations. Huhtamaki is also renewing its ERP systems, modernizing business software and updating hardware.   

To manage the risks and opportunities relating to leadership and human capital, Huhtamaki has focused on developing the skills of leaders and managers, global and local talent pools and succession planning, as well as performance management activities supporting a high-performing and diverse culture.

Occupational health and safety is top priority at Huhtamaki. The Group is building a safety culture and strives to embed safety across the whole organization. Risks related to incidents that potentially compromise employee health and safety are managed by training, audits, monitoring of safety metrics and fostering safety awareness and culture.

Risk related to non-compliance with laws and sanctions include risk of penalties or claims for compensation, or indictment due to a failure to comply with applicable legislation such as anti-bribery, competition, product, environmental or other legislation or applicable sanctions. Key risk management actions include policies and processes to identify and mitigate the non-compliances and training on various compliance topics.

Product safety and quality are high on the Group’s agenda. While consistent high quality and safety in Huhtamaki’s products build a competitive advantage, a critical shortcoming in product safety or quality could negatively impact the company’s reputation resulting in a decrease in sales. The Group applies rigorous quality control processes in all its manufacturing operations and has formal trial processes for new products and materials. Quality and hygiene management systems, such as ISO9001 and BRCGS, provide a solid base for securing manufacturing consistency.   

Foreign exchange transaction risk remains among Huhtamaki’s key risks. More information on financial risks and risk management can be found in Note 5.8 of the Financial statements 2021.   

None of the key risks identified in connection with the 2021 risk assessment are considered of a magnitude that could not be managed or would endanger the implementation of Huhtamaki’s 2030 Strategy.   

When considered necessary, appropriate risk treatment actions may also involve a risk transfer by means of insurance. The Group maintains a number of global insurance programs. The need for insurance, including the adequacy of its scope and limits, is continuously evaluated by the Global Risk Management function.   

Risks and risk management procedures related to non-financial information  

The Enterprise Risk Management (ERM) of Huhtamaki includes the assessment of sustainability risks and opportunities. Strategic sustainability risks relate to changes in the business environment or events

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that may impact the Group’s reputation. Operational sustainability risks relate to production, human resources, crime and fraud. Risks are assessed in terms of their impact and the likelihood of their occurrence. A risk impact is considered in terms of impact on the organization’s annual EBIT. Going forward, Huhtamaki will conduct a more detailed and sophisticated analysis of the risks and opportunities caused by climate change.

Sustainability risks and opportunities arising from changes in the business environment can include bans on chemicals and materials used in products as well as new laws and regulations affecting Huhtamaki’s products, plants or processes. Concerns on plastics, non-recyclable and non-renewable products as well as related consumption reducing measures or bans and increased costs on Huhtamaki’s flexible packaging and foodservice products can affect the business. Further, the business environment is affected by changes in consumer and customer preferences. Thus, the Group is continuously evaluating and developing its product portfolio and production capabilities to match market expectations on sustainability. It monitors regulatory changes and drivers through several sources and stakeholders. The Group views that changes can also bring significant business opportunities, which it is well-placed to address with its current knowledge and expertise of different raw materials and conversion technologies combined with an understanding of its customers and consumers.   

In the medium to long term, climate change is likely to increase the frequency and severity of natural disasters such as windstorms, droughts and floods that pose a threat to Huhtamaki’s manufacturing and distribution continuity. The physical damage that extreme weather conditions may cause to manufacturing facilities or infrastructure could disrupt Huhtamaki’s own, its customers’, raw material, energy or utilities suppliers’, or transportation suppliers’ business. The company manages these risks with appropriate precautions in high-risk locations as well as with disaster recovery and business continuity plans. The locations for proposed greenfield or acquisition targets are evaluated for exposure to natural disasters, and must be considered acceptable, prior to proceeding with a project. Risks related to existing manufacturing facilities are reduced by allocating capacity to several locations.

Medium to long term transitional climate change risks may impact the availability and cost of raw materials and energy. Continuous product innovation, including a special focus on plastic substitution, plays an important role in managing these risks. Huhtamaki’s ambition is to increase the share of renewable and recycled raw materials to 80% and use only certified or recycled fiber by 2030. Moreover, Huhtamaki is shifting to renewable energy sources with an aim to reach carbon neutral production by 2030. The Group not only considers the risk of climate change to its business but to the entire planet and its people. The Group sees that as an advanced packaging manufacturer it is responsible for protecting the planet by offering and developing sustainable packaging solutions. More information on the sustainability of the Group’s products can be found in the Business Overview section of this Annual Report 2021 publication. 

Climate change related risk and opportunities are included and taken into account in the risk register used in the ERM process. The ERM process is described in the Risk management section, page x. To support the ERM process, Huhtamaki conducted in 2021 internal preparatory workshops to assess the resilience of its strategy against climate change and in that connection piloted certain scenario analyses on selected climate change related physical risk and transition risk assessments. The work was based on the Business-As-Usual scenarios by the International Panel for Climate Change (RCP 4.5 and RCP 8.5 scenarios) that would deliver a temperature increase of 2–4 degrees. Going forward, Huhtamaki will benchmark different options and select which publicly available climate-change scenarios will be used for assessing the impacts of the physical and transition risks to the company. Huhtamaki recognizes the critical importance of risks and opportunities related to climate change and will continue developing its climate related risk assessment in order to further improve its governance, measurements and disclosure related to the topic.

Short to medium term sustainability risks and opportunities relating to production involve occupational health and safety, product safety and quality, and environmental impacts of Huhtamaki operations. Risk

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management relating to environmental and occupational safety as well as social responsibility is integrated in day-to-day business processes and standard practices and the way we work. These must comply with applicable laws and regulations, as well as the ethical and societal responsibilities set out in the Group’s Code of Conduct and Huhtamaki Working Conditions Requirements. Risk prevention also involves regular training and continuous improvement programs for all employees. The Group measures its progress and monitors its compliance by regular audits. Regarding the environmental impacts of the Group’s operations, more information on water risk and waste management can be found in the Sustainability supplement of this Annual Report 2021 publication.

Short to medium term sustainability risks relating to human resources are assessed in terms of human resources risks in general, as well as in terms of labor relations risks, and human rights risks. Sustainable human resources management focuses on fostering a work culture built on the Group’s values, Code of Conduct and Huhtamaki leadership competencies. The Group aims to provide all its employees a safe workplace, development opportunities, as well as systematic performance and talent management and succession planning. More information on the Group’s People strategy can be found in the Business Overview section of this Annual Report 2021 publication.

In the 2021 ERM assessment, changes in laws and regulations impacting Huhtamaki’s products, changes in consumer and customer preferences as well as human resources represented the most significant sustainability risks and opportunities for Huhtamaki. All three were among the top ten risks. Occupational health and safety, product safety and quality risks, non-compliance with laws and sanctions, human rights and sustainability requirements affecting manufacturing units or processes were considered medium or medium-low risks to the Group. 

Sustainability is also considered in connection with reputational risks relating to products, employer image, governance, and corporate citizenship. Reputational risks are considered to pose a medium-low risk to the achievement of Huhtamaki’s objectives. Reputational risk management focuses on managing the potential root causes of the risks.   

Corruption risk is included in the ERM assessment and considered as an operational as well as a reputational risk. While the risk of corruption and bribery in general is considered medium-low in the 2021 ERM assessment, anti-corruption is seen as a key element of the company’s Global Ethics and Compliance program. Ethics and business integrity requirements, including anti-corruption and zero tolerance to bribery, are also an integral part of Huhtamaki Working Conditions Requirements. Key risk management actions include policies and processes to identify and mitigate the non-compliances and training on various compliance topics. More information on the Group’s Global Ethics and Compliance program can be found in the Sustainability supplement of this Annual Report 2021 publication.

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Personnel

Number of personnel

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¹Including global functions in Finland

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At the end of December 2021, the Group had a total of 19,564 (18,227) employees. The number of employees was 7% higher than in the comparison period, driven mainly by the impact of the two acquisitions.

Personnel by segment on December 31, 2021Personnel by segment on December 31, 2020

Changes in management

Ann O’Hara, MBA, BSE (Chemical Engineering), was appointed President, North America and a member of the Global Executive Team as of January 1, 2021.

Marco Hilty, Ph.D. (Business Administration) was appointed President, Flexible Packaging and a member of the Global Executive Team as of September 1, 2021. Arup Basu, President, Flexible Packaging, decided to leave Huhtamaki on May 12, 2021.

Ingolf Thom, MBA, was appointed Executive Vice President, HR and Safety and a member of the Global Executive Team as of January 10, 2022. It was announced on July 22, 2021 that Teija Sarajärvi, Executive Vice President, Human Resources and Safety, and a member of Huhtamaki Global Executive Team, would leave Huhtamaki in order to pursue another career opportunity.

Fredrik Davidsson, Bs (Engineering), has been appointed Executive Vice President, Digital and Process Performance and a member of the Global Executive Team as of June 1, 2022, at the latest.  Antti Valtokari, Executive Vice President, IT and Process Performance, will assume the role of Senior Vice President, Operating Model and Systems reporting to Fredrik Davidsson. 

It was announced on December 21, 2021, that President and CEO Charles Héaulmé would take a leave of absence from early January to undergo medical treatment. He is expected back in Q2 2022. Thomas Geust, CFO, was appointed as interim Deputy CEO, effective January 1, 2022. He reports to the Board of Directors and assumes the duties of the CEO until the end of Charles Héaulmé’s leave of absence. Eric Le Lay, President Fiber Foodservice EAO, was appointed interim Chief Operating Officer effective January 1, 2022. He reports to the Board of Directors on the said position until the end of Charles Héaulmé’s leave of absence. Marco Hilty, President, Flexible Packaging, and Ann O’Hara, President, North America, will report to Eric Le Lay.  

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Share capital, shareholders and trading of shares

Share capital and share data

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¹  At the end of period

²  Excluding shares owned by the Company

³  Average number of outstanding shares used in EPS calculations

⁴  Number of shares traded on Nasdaq Helsinki

⁵  2021: Board proposal

Shareholder structure as at December 31, 2021

The number of registered shareholders at the end of December 2021 was 43,774 (36,764). Foreign ownership including nominee registered shares accounted for 48% (50%).

Trading of shares

During the reporting period, the Company’s shares were quoted on Nasdaq Helsinki Ltd on the Nordic Large Cap list under the Industrials sector. It was a component of the Nasdaq Helsinki 25 Index.

At the end of December 2021, the Company’s market capitalization was EUR 4,191 million (EUR 4,554 million). With a closing price of EUR 38.89 (EUR 42.26) at the end of the reporting period, the share price decreased approximately 8% from the beginning of the year. During the reporting period the volume weighted average price for the Company’s shares was EUR 40.12 (EUR 37.34). The highest price paid was EUR 45.93 (EUR 46.62) and the lowest was EUR 36.57 (EUR 23.48).

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During the reporting period, the cumulative value of the Company’s share turnover on Nasdaq Helsinki Ltd was EUR 2,027 million (EUR 2,217 million). The trading volume of approximately 51 million (59 million) shares equaled an average daily turnover of 200,455 (235,468) shares. The cumulative value of the Company’s share turnover including alternative trading venues, such as BATS Chi-X and Turquoise, was EUR 6,022 million (EUR 5,673 million). During the reporting period, 66% (63%) of all trading took place outside Nasdaq Helsinki Ltd. (Source: Fidessa Fragmentation Index, fragmentation.fidessa.com)

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Resolutions of the Annual General Meeting 2021

Huhtamäki Oyj’s Annual General Meeting of Shareholders was held on April 22, 2021 in Espoo. The meeting adopted the Annual Accounts including the Consolidated Annual Accounts for 2020, discharged the members of the Company’s Board of Directors and the CEO from liability, and approved all proposals made to the Annual General Meeting by the Board of Directors and the Shareholders’ Nomination Board. The Annual General Meeting also approved the Remuneration Report for the Company’s Governing Bodies presented to it.

The Annual General Meeting resolved that an aggregate dividend of EUR 0.92 per share be paid based on the balance sheet adopted for the financial period ended on December 31, 2020. The dividend was paid in two instalments. The first dividend instalment, EUR 0.46 per share, was paid to shareholders registered in the Company’s shareholders’ register maintained by Euroclear Finland Ltd on the record date for the first dividend instalment April 26, 2021. The payment date for the first dividend instalment was May 3, 2021. The second dividend instalment, EUR 0.46 per share, was paid to shareholders registered in the Company’s shareholders’ register maintained by Euroclear Finland Ltd on the record date for the second dividend instalment October 1, 2021. The payment date for the second dividend instalment was October 8, 2021.

The number of members of the Board of Directors was confirmed to as seven (7). Mr. Pekka Ala-Pietilä, Mr. Doug Baillie, Mr. William R. Barker, Ms. Anja Korhonen, Ms. Kerttu Tuomas, Ms. Sandra Turner and Mr. Ralf K. Wunderlich were re-elected as members of the Board of Directors for a term ending at the end of the next Annual General Meeting. The Annual General Meeting re-elected Mr. Pekka Ala-Pietilä as the Chairman of the Board and Ms. Kerttu Tuomas as the Vice-Chairman of the Board.

The Annual General Meeting resolved that the annual remuneration to the members of the Board of Directors will be paid as follows: to the Chairman of the Board EUR 140,000, to the Vice-Chairman EUR 75,000 and to the other members EUR 62,000 each. In addition, the Annual General Meeting resolved that the annual remuneration to the Chairman and members of the Board Committees will be paid as follows: to the Chairman of the Audit Committee EUR 15,000 and to the other members of the Audit Committee EUR 5,000 as well as to the Chairman of the Human Resources Committee EUR 5,000 and to the other members of the Human Resources Committee EUR 2,500. In addition, the Annual General Meeting resolved that EUR 1,500 will be paid for each Board and Committee meeting attended. Traveling expenses of the Board members will be compensated in accordance with the Company policy.

KPMG Oy Ab, a firm of authorized public accountants, was re-elected as Auditor of the Company for the financial year January 1 - December 31, 2021. Mr. Henrik Holmbom, APA, will continue to act as the Auditor with principal responsibility.

The Annual General Meeting authorized the Board of Directors to resolve on the repurchase of an aggregate maximum of 10,776,038 of the Company’s own shares. Own shares may be repurchased at a price formed in public trading on the date of the repurchase or otherwise at a price formed on the market. The authorization covers also directed repurchases of the Company’s own shares. The authorization remains in force until the end of the next Annual General Meeting, however, no later than June 30, 2022.

The Annual General Meeting authorized the Board of Directors to resolve on the issuance of shares and the issuance of special rights entitling to shares. The aggregate number of new shares to be issued may

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not exceed 10,000,000 shares which corresponds to approximately 9.3 percent of the current shares of the Company, and the aggregate number of own treasury shares to be transferred may not exceed 4,000,000 shares which corresponds to approximately 3.7 percent of the current shares of the Company. The authorization covers also directed issuances of shares. The authorization remains in force until the end of the next Annual General Meeting, however, no later than June 30, 2022.

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Short-term risks and uncertainties

The COVID-19 pandemic may create further disturbances in the Group’s trading conditions and its operating environment, as well as in demand for the Group’s products. Availability and cost of raw material, distribution and energy as well as movements in currency rates are considered to be relevant short-term business risks and uncertainties in the Group's operations. General political, economic and financial market conditions can also have an adverse effect on the implementation of the Group's strategy and on its business performance and earnings. Further, natural disasters and social unrest may have negative effects on the Group’s operating environment.

Outlook for 2022

The Group’s trading conditions are expected to improve compared to 2021, however with continued volatility in the operating environment. Huhtamaki's diversified product portfolio provides resilience and the Group’s good financial position enables addressing profitable growth opportunities.

Dividend proposal

On December 31, 2021 Huhtamäki Oyj’s distributable funds were EUR 462 million (EUR 542 million). The Board of Directors will propose to the Annual General Meeting that a dividend of EUR 0.94 (EUR 0.92) per share be paid.

Annual General Meeting 2022

The Annual General Meeting of Shareholders (AGM) will be held on Wednesday, April 27, 2022 with exceptional meeting procedures based on the Finnish temporary legislative act (375/2021). The AGM will be held without the presence of shareholders or their representatives in order to ensure the health and safety of the Company‘s shareholders, personnel and other stakeholders. After the AGM, shareholders will be provided with an opportunity to follow a webcast where the Chairman of the Board and other Company’s representatives will address topical themes of the Company.

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Corporate Governance Statement and Remuneration Report

The Corporate Governance Statement and Remuneration Report have been issued separately and are presented in a section of this Huhtamaki Annual Report 2021 publication. The statements are also available on the Group’s website www.huhtamaki.com.

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Business model

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Financial statements

Consolidated financial statements

Consolidated statement of income (IFRS)

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Group statement of comprehensive income (IFRS)