Mitigation measures and opportunities
The management of risks is actively pursued in the Information Risk Management System and best practice change management and
project methodologies are applied. We actively work to prevent cybercrime. A number of security controls have been implemented to
strengthen the protection of confidential information and to facilitate compliance with international regulations.
Opportunities may arise from efficient operations, performance optimisation, innovative product offerings, and new customer services
through digitisation and sophisticated IT systems, as well as new technologies offering significant potential for higher level of process
optimisation and automatisation, generating new business and enhanced value propositions for customers and consumers.
Strategic investments
To succeed with the implementation of its strategy, Stora Enso has to understand the needs of its customers and find the best way to
serve them with the right offering and with the right production asset portfolio. Failure to complete strategic projects in accordance with
the agreed schedule, budget or specifications can, therefore, have serious impacts on the company's financial performance. Significant,
unforeseen changes in costs or an inability to sell the envisaged volumes or achieve planned price levels may prevent Stora Enso from
achieving its business goals.
Mitigation measures and opportunities
Risks are mitigated through profound and detailed pre-feasibility and feasibility studies which are prepared for each large investment.
Investment guidelines stipulate the process, governance, risk assessment, management and monitoring procedures for strategic
projects, including climate related risk factors. The guidelines also require that the calculation of potential cost and income for CO2
emissions as part of the investment proposal, Environmental and Social Impact Assessments (ESIAs) are conducted for all new projects
that could cause significant adverse effects in local communities. Post completion audits are carried out for all significant investments.
Mergers, acquisitions, and divestments
Failure to realise the expected benefits from an acquisition of a company or asset can have serious financial impacts on Stora Enso. The
Group can also find itself liable for past acts or omissions of the acquired business, without any adequate right of redress. Failure to
achieve expected values from the sales of assets or deliveries beyond the expected receipt of funds may also impact the Group's
financial position. Divestments or business restructuring may involve additional costs due to historical and unaccounted liabilities as well
as reputational impacts.
Mitigation measures and opportunities
Rigorous M&A guidelines, including due diligence procedures are applied to the evaluation and execution of all acquisitions. Structured
governance and policies such as the policy for responsible right-sizing, are followed when making restructuring decisions. A strong
balance sheet and cash flow enable value enhancing M&A, when the timing and opportunity are right.
Ethics and compliance
Stora Enso operates in a highly regulated business area and is, thereby, exposed to risks related to breach of applicable laws and
regulations associated to e.g. capital markets regulation, company and tax laws, customs, environment, human rights, and safety, as well
as areas covered by policies such as the Stora Enso Code and Business Practice Policy, e.g. fraud, anti-trust, corruption, conflict of
interests and other misconduct. Breaches may lead to high compliance and remediation costs including prosecution costs, fines,
penalties, and contractual, financial and reputational damage.
Mitigation measures and opportunities
Stora Enso’s Ethics and Compliance Programme, which includes policy setting, promoting values, training, knowledge sharing and
grievance mechanisms, is continuously updated and developed. Other compliance mechanisms include Stora Enso Group’s internal
control system and Internal Audit assurance, as well as Supplier Code of Conduct in supplier contracts, risk assessments, trainings,
audits and black-listing procedures. In response to capital markets regulations, Stora Enso’s Disclosure Policy emphasises the
importance of transparency, credibility, responsibility, proactivity and interaction.
Environmental risks are minimised through environmental management systems and environmental due diligence for acquisitions and
divestments, and indemnification agreements where effective and appropriate remediation projects are required. Special remediation
projects related to discontinued activities and mill closures are executed based on risk assessments.
Focus on ethics in a wider sense, not mere compliance with laws and regulations, promotes a value-driven and more successful
business, fosters accountability and enhances corporate reputation.
Climate-related financial disclosures (TCFD)
The Financial Stability Board’s (FSB) Task Force on Climate-related Financial Disclosures (TCFD) recommends a framework for
disclosing climate-related risks and opportunities that goes beyond current practices. In the online index table, we list our disclosures with
reference to TCFD recommendations, and refer to those locations where these issues are addressed in our annual reporting. The
location references are complemented in the index with additional information, as necessary.
Scenario analysis in 2021
The TCFD recommendations encourage companies to use a scenario analysis to help ensure that their strategies are resilient to climate
change in a range of possible future states. Leading practice shows that this is best approached by breaking down the full scope of
scenario analysis into a set of smaller scopes considering asset type and geography, and to apply prioritisation in conducting the full
scenario analysis.
In 2020, Stora Enso developed a scenario analysis with the qualitative assessment of the physical climate impacts on the Nordic
forests and the Group's business until 2050. This work was based on the Business-As-Usual scenario by the International Panel for
Climate Change (RCP 8.5 scenario) that would deliver a temperature increase of 4–5 degrees by the end of the century. The climate
change attributes considered are pests, diseases, droughts, wildfires, floods, periods of frost, water scarcity, changes to precipitation
patterns, rise in sea level and changing temperatures. In 2021, the work with physical climate impacts continued by a deeper analysis of
measures improving resiliency of the forests against the negative impacts of global warming. Results show that sustainable forest
management practices as well as possibilities to monitor and to react to events such as forest fires and diseases, play an important role
in mitigating the negative impacts of climate change.
During 2021, Stora Enso assessed a business impact scenario for 2030 according to the global transition required to limit the global
average temperature increase in line with the Paris agreement of 1.5 degrees (RCP 1.9). The assessment was done based on the TCFD
transition categories as part of the Group's annual strategy process.
The work concluded that the overall transition to a low carbon, circular bioeconomy is well aligned with Stora Enso’s strategy. The
Group's strategy is to provide sustainable, renewable alternatives to fossil-based solutions, presenting attractive growth opportunities