Setra Sustainability Report 2020

Sustainability Report Setra Group

Year of Grönsamhet

2020

2 | OUR PORTFOLIO

Sustainability Report 2020 — Setra Group

OUR PORTFOLIO | 3

4 This is Setra 5 Our 2020 6 CEO’s comments 8 Setra’s value chain 10 Setra’s sustainability work 12 Core areas and progress with Grönsamhet 14 Our portfolio 18 Climate-smart raw material 22 Resource-efficient business 28 Climate report 32 Sustainable transport 36 Culture and colleagues 42 Management and organisation 44 Managing Setra’s sustainability work 48 GRI index 50 Contact details

Sustainability Report 2020 — Setra Group

4 | ABOUT SETRA

This is Setra

Our production units

Pine sawmills

Malå*

Spruce sawmills

Setra is one of the largest wood industry companies in Sweden. We want to do business where everyone prospers – not just ourselves but also our customers, society and nature. When a business is profitable for everyone, we call it Grönsamhet – Green profit. We create green profit.

Processing units

We process raw material from responsibly managed forests and supply climate-friendly products for construction, housing, the paper and pulp industry and energy production. We help our customers do better business in a global marketplace and contribute to the transition into a bioeconomy.

Our head office is located in Solna, Sweden, while our customer service and logistics departments are based in Gävle. The Group comprises seven sawmills and two wood processing units, one of which is located in the UK. Setra employs approximately 800 people and generates annual sales of more than SEK 4 billion. Exports to Europe, North Africa, the Middle East, Asia and Australia account for 65 percent of

Färila

Kastet Långshyttan Nyby Heby

Skinnskatteberg

Hasselfors*

sales. Setra employs around 50 people abroad, with sales offices in UK, Germany, Poland, Spain, Tunisia, Japan and China. Setra is owned by Sveaskog, the largest forest owner in Sweden, which has a 50 percent stake, and the forest owners’ association Mellanskog which holds 49.5 percent. The remaining 0.5 percent is shared between approximately 1,400 small shareholders.

Setra Wood Products (UK)

Our markets

Production and employees

Sales offices

Per unit 2020

Sweden 34%

UK Germany Spain

Pine sawmills

Poland

North Africa &Middle East 13%

Employees at year end

Kastet

260,000

60

Malå*

170,000

71

Nyby

177,000

57

225,000

58

207,000

65

Skinnskatteberg

Japan

Tunisia

Europe 31%

Production m3

China

Asia & Australia 22%

Spruce sawmills Färila Hasselfors*

313,000

77

Heby

260,000

76

Processing units Långshyttan

54,000

92

Setra Wood Products

20,000

45

* Processing is also done here.

Sustainability Report 2020 — Setra Group

OUR 2020 | 5

Our 2020 This has been an extraordinary year, in which the corona­ virus pandemic has had a significant impact on us all.

Following a steep dip in the market during the spring, the rest of the year was distinguished by strong demand for wood products. The high commitment and elevated responsibility our employees displayed has proved more important than ever before.

97 %

Green energy

300,000 m

3

Investments realised

Over the past year, production commenced both at the Setra factory for Cross-Laminated Timber (CLT) and at our new trimming and planing line. In total, they will increase our production potential of processed wood products by 300 000 m3 per year – to 430 000 m3.

Almost all the energy we use in our business comes from renewable sources. Our stated aim is for Setra’s operations to be climate neutral by 2030.

4,131 MSEK

1.3 million tonnes

Setra’s net sales rose by 5 percent compared to 2019.

Demand for wood products has grown during the coronavirus pandemic, developing particularly strongly during the latter half of the year.

Our wood products are climate positive, which means that they bind more carbon dioxide than their production generates. The wood products we sold in 2020 bind carbon corresponding to around 1.3 million tonnes of CO2, which remains locked in throughout the life cycle of the goods.

107 MSEK

Locked up carbon dioxide

Accident frequency rate Safety first

21

We have a zero vision for accidents at work. Setra’s accident frequency rate, i.e. the number of accidents per million hours worked, improved marginally in relation to 2019. During the year we introduced a number of new preventative safety measures and adopted a new subgoal to help us achieve our zero vision.

Sales

Operating profit

Setra’s operating profit of SEK 107 million, adjusted for non-recurring items, represents an improvement of SEK 77 million on the previous year.

Net sales by business (MSEK) 3,061

72 EMI

Motivation at work The Employee Motivation Index (EMI) rose from 71 to 72, demonstrating that motivation among our employees is increasing. Our focus on leadership development and on building a culture where everyone is involved and makes a contribution continued over the past year.

626 405 Sawn

Processed

Bioproducts

Sustainability Report 2020 — Setra Group

6 | CEO’S COMMENTS

Green steps forward 2020 was a year like no other, with the coronavirus pandemic having an impact on us all. For us at Setra, however, it is pleasing to note that the sharp drop in the market in spring was unexpectedly short-lived. The year as a whole was distinguished by high demand and strong development in our profits.

When I took over the position of CEO in January 2020, I could not imagine that remote working and video conferencing would come to dominate our working lives. For much of the year, those of us at Setra with the opportunity to do so have worked from home, while we have introduced a range of procedures in our production units to provide the best possible protection against infection.

I am proud that our entire organisation has stepped up to shoulder its responsibility at this extraordinary time.

Thanks to our employees’ commitment and sense of responsibility, we have been able to tackle all the challenges that have arisen.

For a number of turbulent weeks in the spring, COVID-19 caused our markets to plummet, but our subsequent recovery proved to be swift and strong.

One of the reasons for this is that activity remains high in the construction industry, at the same time as enthusiasm for DIY is on the rise around the world.

Starting in April, Setra experienced fantastic development on almost all markets. China led the way, followed

by Scandinavia and the rest of Europe.

During the summer, we also began to note a strong increase in demand in the United States, which is a major growth market for us. The same applies to Australia and the UK. High demand has led to rising prices, which has naturally benefited our profit margins. The fact that our sales and production departments have had the capacity to handle these market variations laid the foundations for strong development in our profits.

The year in figures The Setra Group’s operating profit for 2020 totalled SEK 107 million, corresponding to an increase of SEK 77 million on the previous year. Net sales

Sustainability Report 2020 — Setra Group

amounted to SEK 4,131 million (compared with SEK 3,924 million in 2019).

In October 2020, Setra sold Rolfs sawmill in Kalix to Stockhult Holding, which already owns another sawmill in Norrbotten and is keen to resume operations.

Market conditions continue to look promising for 2021. Over the coming years, we will increase the production volumes at our existing plants in order to confirm our market position. There is appreciable potential in our units in Bergslagen and at Setra Malå in Västerbotten. In Malå, we are planning to apply for a new operating permit so that we can double production of wood products and expand our processing operation.

Hi-tech solutions In spite of the pandemic, we have succeeded in continuing our strategic work, which entails developing our product portfolio so as to be able to supply hi-tech building solutions and other highly processed construction products. Our new trimming and planing line in Hasselfors was officially opened in 2020 and produces precisely the type of planed construction timber that is in high demand in the UK and the US, for example.

In Långshyttan, we have opened our new factory for Cross-Laminated Timber (CLT), supplying products that are currently attracting a good deal of attention. Setra is delivering CLT to the Cederhusen project in Haga­staden, Stockholm, which will be the city's first modern residential area in wood.

Working to promote wood as a construction material is one of our business goals. It is also an approach that aligns neatly with society’s climate goals and the transition to renewable materials in the construction industry.

Another example of how we are making a tangible contribution to the green transition is the plant for producing pyrolysis oil that we, in partnership with Preem, will be bringing online in Gävle in autumn. Here, sawdust from Setra’s operations will be converted into energy-packed bio-oil, which is subsequently refined to make renewable fuel.

The bio-oil will contribute to achieving Sweden’s stated goal for fossil-free transport in 2030.

Climate neutrality in 2030 Initiatives such as this are fully in line with Setra’s vision of Grönsamhet – Green profit. That is why it is only natural for us to have the stated aim of becoming climate neutral ourselves by 2030. Our core business generates little climate impact; making wood products does not leave a big footprint.

However, there are always areas that can be improved, particularly when it comes to transport. We can cut diesel consumption, use electric forklifts and optimise load factors. In addition, we are committed to tightening up our planning in every link of the value chain, introducing smarter flows and ensuring that we always make the best use of all raw materials so as to produce optimal value.

These are examples of how we plan to continue developing, supplying the products that society and our customers are demanding, becoming more resource efficient and, at the same time, increasing our profitability. This is truly living and working in a green profitable manner, and in this context we will become even better at specifying the measures that lead to improved climate benefit for us all.

Katarina Levin, CEO

CEO’S COMMENTS | 7

Our entire organisation has shouldered great responsibility at this extraordinary time

Sustainability Report 2020 — Setra Group

8 | SETRA’S VALUE CHAIN

Setra’s value chain Our value chain stretches from the forest and out into society, where our wood products become sustainable homes and where our bioproducts are used to make cellulose and biofuels.

Setra’s work and responsibility begin when we choose locally produced wood from sustainably managed forests.

We take our customers’ needs as our starting point and make sure to use the whole log. Whatever is not used for wood products becomes bioproducts and is incorporated into the production of paper goods and biofuel or used in our own heating system.

By applying a method where we analyse shortcomings and work to promote constant improvements, we boost

commitment at our workplaces and streamline pro­ duction. We strive to find climate-smart solutions in the fields of logistics and transport.

When our wood products are used in buildings and furnishing solutions, or for renewable energy, the value and climate benefit from the forest is relocated to society as a whole. In this way, we are contributing to reducing the carbon footprint of the construction industry and our customers alike.

Sawmill

Sawn Wood Products

Processed Wood Products

Raw Material

Bioproducts Bio-oil

Bark Chips Sawdust

Sustainability Report 2020 — Setra Group

SETRA’S VALUE CHAIN | 9

Direct economic value generated and distributed MSEK

Customers

Sales of wood products, bioproducts and building systems 4,136

Suppliers, raw material

Purchases of timber raw material -2,052

Suppliers, transport

Transport costs -559

Suppliers, other

Purchases of other goods and services plus depreciation -901

Employees

Salaries and social security costs -507

Lenders

Interest -24

State

Taxes -22

Net profit/loss Proposed dividend to owners

71 35.4

Sustainability Report 2020 — Setra Group

10 | SETRA’S SUSTAINABILITY WORK

Our responsibility and contribution to sustainable development Our work for a sustainable Setra involves creating value through a climate-smart portfolio and taking full responsibility for the impact that our business has on individuals, society and the environment.

Grönsamhet is to be a feature of everything Setra does, which entails incorporating financial, social and environmental perspectives into the operation and development of our business. The starting point is to minimise the negative impact and maximise value creation and positive effects in every link of the value chain from raw material production in the forest to use of the end product. We focus on the areas where we have the greatest influence and an opportunity to make a difference.

More information about the analysis behind our priorities is available on page 44.

Sustainability Report 2020 — Setra Group

We likewise strive to develop in step with the world around us, and in line with the demands and expectations placed on us as a company. That is why we manage our sustainability work in such a way as to contribute to the UN Sustainable Development Goals and Agenda 2030. We are striving to become climate neutral by 2030.

Sustainability on the global agenda We are facing major shared challenges in achieving sustainable societal development, where everyone on the planet is granted the opportunity to live a good life within the limits of what the planet can provide.

With awareness growing worldwide and the effects of climate change becoming ever-more tangible, sustainability issues have acquired a prominent position on the societal agenda, including for many of our stakeholders.

Expectations regarding Setra’s contribution to climate work and our willingness to take responsibility have risen steeply over the past year. We are noting how customers and owners are making clearer demands on us, and how both knowledge and awareness have increased appreciably among our employees and society as a whole.

SETRA’S SUSTAINABILITY WORK | 11

Some global trends of particular significance to Setra’s business and sustainability work Greater interest in wood as a construction material The global construction industry is responsible for huge emissions of greenhouse gases, while demand for new housing is increasing in step with population growth and urbanisation.

According to the UN environmental programme UNEP, construction materials account for 10 percent of global carbon emissions. UNEP states that the building and construction industry needs to halve its emissions by 2030. As a result, there is great and growing interest in reducing the climate impact of the construction industry, both in Sweden and globally.

Given that wood generates substantially less climate impact than steel and concrete, it has a key role to play in the transition. Industrially manufactured structures in Cross-Laminated Timber (CLT) make it possible to build effectively with wood on a large scale. Wood has thus become a viable alternative to steel and concrete, even in large buildings such as apartment blocks.

In Sweden, the government has decided that construction with wood is to be encouraged and is preparing to introduce new legislation concerning climate declarations for buildings.

Figures from Statistics Sweden show that the share of apartment blocks built

●

with a timber frame rose from 13 to 20 percent between 2018 and 2019.

The domestic production capacity of CLT that has now been built up – at the Setra factory in Långshyttan, for example – will allow this development to continue.

Focus on climate and bioeconomy Global greenhouse gas emissions need to be cut back rapidly if the 1.5 degree target in the Paris Agreement is to be achieved. Sweden has the stated aim of becoming the first fossil-free welfare state in the world, with a target of zero net emissions by no later than 2045.

Many industries, including the forestry industry, have submitted a “Fossil-free roadmap” proposal to the government. The plan for the forestry industry highlights the role of the sector in replacing fossil fuels and materials with bio-based alternatives, as well as in capturing carbon in forests and wood products, and sets out an undertaking to reduce its own use of fossil energy.

The EU roadmap for a sustainable economy and a climate-neutral Europe in 2050 – the green deal – is also powering development in our industry. The focus of the roadmap is on efficient utilisation of resources through transition to fossil-free solutions and circular

●

economy, in parallel with measures to restore lost biodiversity and cut pollution.

Debate about biological diversity The loss of species and the impoverishment of the ecosystem services on which we humans are so dependent pose a serious and increasing threat to our future. The tone of discussions about sustainable forestry has sharpened in recent years. It is vital to ensure long-term sustainable forestry that nurtures biodiversity and simultaneously allows climate-friendly development of our society with unchanged welfare.

●

Make the best use of forest resources Sweden is a world-leading nation in industrial forestry research. Wood as a raw material can already be used to make everything from clothes to packaging. Renewable fuels made from bioproducts constitute an area where demand is forecast to rise in the future.

New applications and increased demand for both raw materials and other benefits from the forest are making the issue of values and priorities more important than ever. Debate is also ongoing regarding the EU’s new taxonomy on the climate and environmental performance of biofuels. ●

Our contribution to Agenda 2030 2015 saw the adoption of Agenda 2030, the world’s collective plan for sustainable development. The agenda comprises 17 sustainable development goals and 169 sub-goals that balance financial, social and environmental perspectives, and which are to be achieved by 2030. Setra supports the agenda in its entirety and is aware that, through our business, we have the capacity to make an active contribution to several of the goals. The most important factor is the climate benefit of our products, but our responsibility as an employer, supplier, partner and local community actor also comes into play.

Sustainability Report 2020 — Setra Group

12 | PROGRESS WITH GRÖNSAMHET

Core areas and progress with Grönsamhet Our sustainability work encompasses many different issues and is an integrated part of our everyday operations and strategic business development. Our knowledgeable and committed employees are the driving force behind this work and the reason we can be proud of a number of exciting advances in 2020.

Our portfolio Working to promote greater use of wood products – having more houses built of wood, for example – is the most important contribution Setra makes to climate issues.

We are also working to increase the level of processing in our portfolio, through added emphasis on CLT, for example, which allows the construction of larger and taller wooden buildings. In addition, we are developing new, climate-friendly products, including our focus on pyrolysis oil, which is made from sawdust and serves as a raw material in the production of biofuel.

Climate-smart raw material The forest is the source of our most important raw material. Sourcing timber from sustainable forestry is important both to us and to our customers. Through certification according to the FSC® and PEFC™ programmes and checking against set criteria, we ensure that the raw material we use comes from legal logging activities that feature full respect for biological diversity.

The start of wood contruction on a larger scale Setra is playing a key role in the Cederhusen project in Stockholm, a future-oriented project where one of the largest city center wooden residential areas in the world is now taking shape. The building frames are made of bespoke CLT units made in our Långshyttan factory.

Page 17

Timber quality ensured for the future Climate change entails new challenges for forestry and our access to climate-smart raw material of the highest quality. For example, the risk of storm-felled and insect-damaged timber is rising. One measure to ensure the quality of stocked timber is the option to water stocks at our units.

Page 21

Sustainability Report 2020 — Setra Group

PROGRESS WITH GRÖNSAMHET | 13

Resourceefficient business We work systematically to create efficient flows and to reduce Setra’s negative environmental impact. Over 97 percent of the energy that Setra uses comes from renewable sources, and we are focusing on reducing our energy consumption.

We make resource-efficient use of 100 percent of the raw timber material, processing it to create wood products or bioproducts for use in the paper and energy industries. Our goal is for the whole business to be carbon neutral by 2030.

Sustainable transport Setra’s wood products have to be transported in order to reach our customers, and it is transport that accounts for the majority of our greenhouse gas emissions. We are now striving to link more of our units to railways and contributing to the development of renewable fuels. Cutting emissions from transport is a challenge we share with our customers and suppliers. Many of the initiatives in this area are therefore based on cooperation with others.

Smart choices in the component factory Through innovation and constant improvements, we have made significant improvements to the efficiency of our new component factory. Following the switch from a two-shift system to daytime work, production has increased by 50 percent, at the same time as the number of complaints has fallen to almost zero. We have also decided to make a new investment which entails using material which previously was used as biofuel as raw material for joists instead.

Page 27

On the right track towards the future In 2020, we almost doubled the share of sawn wood products transported at least part of the way by train. By making greater use of railway terminals close to the units where we produce a large volume of export goods, we can ensure that large quantities are carried by rail to the harbour in Gothenburg. This is an efficient solution that is also better for the climate.

Page 35

Culture and colleagues Committed, satisfied employees are a prerequisite for the success of our business. Setra is a value-based organisation where we want everyone to feel involved and able to contribute to our shared goals. Occupational health and safety is a permanently prioritised area.

Generating a winning corporate culture The workforce at Långshyttan has almost doubled in just a short time, increasing from 60 employees at one factory to 110 at three facilities.

The sense of “we”, participation and a holistic perspective are all key elements in a successful organisational structure.

Page 41

Sustainability Report 2020 — Setra Group

14 | OUR PORTFOLIO

Our portfolio Our wood products are made of renewable material, thus contributing to the transition to a sustainable society.

Our opportunities and challenges As a manufacturer of renewable products for the construction and wood industry, we and our customers are participating actively in the climate transition of the construction sector.

Increasing the use of wood as a construction material is one of Setra’s core aims, given that wood is not only a renewable raw material, but also binds carbon dioxide throughout its life cycle.

The challenge facing us is to deliver competitive products and solutions that make it simple to choose wood rather than other materials such as steel and concrete, which leave a deeper climate footprint.

Our strategy is to gradually increase the share of processed wood products over the coming years. In 2020, the first construction element in CLT left our Långshyttan factory for installation in new, climate-smart apartment blocks.

The first deliveries of planed construction timber were also shipped from our newly started trimming and planing line in Hasselfors. In Gävle, we will start working with Preem on the production of bio-oil from sawdust in 2021, thus contributing to the development of new renewable fuel.

Where Setra’s products go (percentage of sales) 15%

Bioproducts

75%

Sawn wood products

10%

Processed wood products

How we work A broad product range Setra’s product range encompasses everything from sawn wood products and planed construction timber to highly processed products such as door and window components and complete building solutions. Our range also includes bioproducts such as bark, sawdust and woodchips.

Wood is the only renewable construction material and demand for processed wood products for construction is on the rise. We manufacture climate-smart and highly processed wood products for the construction industry in Sweden and around the world.

Our products are used for building and construction, as well as in the paper and energy industries and as a raw material for biofuel.

Sustainability Report 2020 — Setra Group

Sawn wood products Sawn pine and spruce products are important export goods, accounting for the majority of Setra’s sales. Planks and boards from our sawmills form part of everything from furniture to furnishings and packaging, while strength-graded construction timber is used in construction projects all over the world.

Our biggest markets are Sweden, Europe, North Africa, the Middle East and Asia. Our customers are primarily to be found in the wood processing industry: planing mills, CLT manufacturers, house builders and packaging producers, for example. Pine is easy to process and is often used for products where the wood is to remain visible,

such as floors, furniture and doors, as well as for pressure-impregnated products such as decking. Spruce is the most commonly used wood in building and construction projects on account of its impressive durability. It is used in glulam and CLT, for example.

Processed wood products.

We have expanded our range of processed products over the course of 2020, and it now includes construction solutions in CLT and glulam, planed construction timber, decking, joists and components for doors and windows.

Setra supplies a complete solution in CLT and glulam for construction projects, where a project team accompanies the customer through all phases of the process. The solid, cross-laminated timber panels in planed wood are industrially manufactured with great precision and adapted at the factory to facilitate assembly at the construction site. Cross-laminated timber is a rigid material with a high load-bearing capacity, which makes it particularly well-suited to large constructions such as apartment blocks, office buildings and schools. The construction solutions are principally marketed to construction companies and building pre-fabricators in Sweden and the rest of Scandinavia. In addition to the frame material, Setra provides technical expertise and guidance in the areas of project planning, construction solutions, logistics and transport.

Setra sells glulam products as a standard range via builders’ merchants and as bespoke solutions sold directly to building developers, wood industries and builders' merchants, primarily in Sweden and the rest of Scandinavia.

Setra also sells “standardised halls” in glulam for industrial, warehouse and agricultural applications, and in

430,000 m

3

The volume of processed wood products Setra will be able to manufacture annually once all new investments have achieved full production. The calculation includes 200,000 m3 of planed construction timber and 100,000 m3 of CLT.

Sustainability Report 2020 — Setra Group

16 | OUR PORTFOLIO

1,575 GWh

The volume of bioenergy supplied by Setra in 2020.

This is sufficient to heat approx. 240,000 apartments.

Our business concept The future is built on wood. With a raw material that originates from responsibly managed forests, we create refined climate-smart products and solutions for con­struction, housing, pulp and paper manu­facture and energy production. We thereby help our customers do better business in a global marketplace and are part of the solution in the transition to a bioeconomy.

2020 we also developed a concept for glulam padel halls. Glulam posts and beams also form part of most CLT projects. The Setra glulam factory in Långshyttan has long been working to streamline production and can now supply customers with made-to-measure glulam products within six working days from the date of order.

In 2020, Setra’s construction timber range was expanded to include planed products, such as roof truss timber and joists in a variety of dimensions.

The spruce is planed in Hasselfors and supplements our range of sawn construction timber products. The timber is machine sorted and graded using the strength standards applicable for load-bearing structures in Europe, the United States and Australia. The intention is to sell these products to builders’ merchants, wood product manufacturers and major construction projects.

Where Setra’s bioproducts go (percentage of sales) 31%

Heating and power plants

8%

Pelletindustry

<1%

Other

60%

Pulp and paper mills

Bioproducts Making use of the whole log, utilising it as effectively as possible, is a key issue for Setra. Around 50 percent of each sawlog is turned into planks and boards, while the remainder becomes

Sustainability Report 2020 — Setra Group

bioproducts in the form of bark, woodchips and sawdust. The bioproducts are sold as cellulose woodchips, biofuel and animal bedding. The customers are primarily paper and pulp plants and energy generators.

The transition to a bioeconomy, where we make use of renewable resources from forests, for example, rather than using fossil fuels and materials, gives grounds to expect that bioproducts will become a growing market.

Setra’s investment in extracting bio-oil from sawdust is one example of the many new applications for the bioproducts. The company Pyrocell, owned jointly and equally by Setra and Preem, is building a factory for the production of pyrolysis oil close to Setra’s sawmill in Gävle. Once Preem has refined the oil, it will be used to replace a part of the fossil component in standard petrol and diesel.

Customer surveys Helping our customers to do better business is a part of Setra’s business concept and our vision for Grönsamhet.

We strive to maintain high levels of service expertise, and in order to find out what customers think we conduct qualitative customer surveys. The most recent surveys involved European customers in 2018 and Swedish customers in 2017. In both cases, Setra achieved a net promoter score of +67.

This is a measurement of how inclined customers are to recommend us, and the value ranges from -100 to +100.

Starting in 2021, we are planning to carry out a new, annual qualitative survey to measure customer satisfaction in all major customer groups and markets.

PROGRESS WITH GRÖNSAMHET | 17

The start of wood construction on a larger scale In 2020, Setra commenced production of Cross-Laminated Timber, CLT. Our Långshyttan factory manufactures the largest CLT elements on the market. It is a climate-smart construction alternative to steel and concrete. The first deliveries are being made to the Cederhusen project in Hagastaden, Stockholm, where one of the largest timber-based inner city districts is now taking shape.

Why is Cederhusen a key project in the field of industrial wood construction?

Every link of the supply chain in this project has high ambitions for reducing the climate impact. Architects and construction companies are focusing on frames made of CLT, which means they will be using a renewable material that binds carbon dioxide. At the same time, they can work with an efficient process involving bespoke deliveries that come directly from Setra, along with quick and easy assembly. The construction of the Cederhusen buildings has attracted attention from the very start, and the project has considerable symbolic value.

How does Setra ensure that sustainability considerations are included in the actual production of CLT? All our raw materials are controlled and traceable. We also supply FSC- and PEFC-certified products. Another example

is our flexible production process. Rather than working with set dimensions, we manufacture precisely the sizes the customer needs. This helps minimise material waste in every link of the chain. A third example is how we are constantly working to cut our energy consumption and improve the efficiency of our transports.

We are highlighting good examples, building up knowledge and working with a range of stakeholders – from clients and consultants to different sector representatives.

In addition, Setra has set up its own project office where we provide advice and analyses for builders who are new to building with wood.

Why is there so much interest in CLT? Interest really picked up a few years ago and is now extremely high, both in Sweden and abroad. In Sweden, 20 percent of new multi-family residences are now built of wood. The goal – both for Setra and from the world of politics – is to have increased this figure to 50 percent by 2025.

What is Setra doing to promote this development?

We are investing in production capacity and helping to improve access to the products.

Anna-Lena Gull, Senior Sales Specialist, CLT

Sustainability Report 2020 — Setra Group

18 | CLIMATE-SMART RAW MATERIAL

Climate-smart raw material We only use wood from forests that are responsibly managed for the benefit of future generations. All the timber can be traced back to the harvesting site.

Our opportunities and challenges Although Setra does not own any forest itself, it is in the forest that our business begins. We must be able to guarantee that the timber we use comes from sustainably managed forests, i.e. forests where financial, economic and social values have developed in a balanced manner. That is why we only work with certified suppliers and value our long-term relationships with them.

We have identified a future need to govern the length, dimensions and quality during harvesting to an even greater extent, depending on the products demanded. This will be possible through the application of new technology and close working relationships involving us exchanging data with timber suppliers.

We are also facing new challenges in the context of dealing with damaged timber, given that storms, forest fires and attacks from insect pests are expected to rise in step with the effects of climate change.

In a future in which wood plays an increasingly important role, it is vital to continue safeguarding the Swedish

Sustainability Report 2020 — Setra Group

forestry model, where we maintain biological diversity while simultaneously working to generate high returns.

Governance All the raw material that Setra purchases is either certified or controlled by a certified supplier. Certification is performed according to the FSC® and PEFC™ standards – the largest forestry certification systems in the world. Setra’s raw material policy is in line with the FSC policy for Controlled Wood and PEFC Controlled Sources. This ensures that we are also in compliance with the requirements set out in the EU Timber Regulation.

Setra’s sawmills and processing units are certified in accordance with FSC and PEFC standards for Chain of Custody and the FSC standard for Controlled Wood.

How we work Responsible forestry and climate benefits from wood More than 99 percent of Setra’s raw material comes from Sweden, with the remainder being imported from Norway. In Sweden, the Swedish Forestry Act stipulates how we are to utilise and manage our forests. A key concept with regard to sustainable forestry is the “reforestation obligation”, which requires the forest owner to start planting, sowing or using seed tree stands within three years of harvesting. At least two new trees must be planted for each one harvested.

Growth is currently higher than

harvesting and has been so throughout the twentieth century. As a result, there is twice as much forest in Sweden today as there was a hundred years ago. According to the Swedish National Forest Inventory, the annual growth in productive forest land has been calculated at around 116 million cubic metres of forest, of which approximately 75–95 million cubic metres are harvested annually.

One key aspect in this context is the capacity of the growing trees to absorb carbon dioxide. There is huge climate benefit linked to managing the forests because young, growing trees capture more carbon dioxide than older trees.

While it is true that harvesting does release carbon dioxide from land and remaining branches into the atmosphere, the reforestation obligation ensures a circuit in which the new, growing trees bind carbon dioxide.

When we use the timber to manufacture wood products, we contribute to continuing to lock in the carbon dioxide – stored as carbon – in homes, for example. Buildings store carbon throughout their lifetimes and if they are subsequently demolished, the material can be reused or sent for incineration to generate electricity and heat.

On incineration, the stored carbon is converted into carbon dioxide.

Raw material purchasing Setra purchase pine and spruce from around 15 suppliers.

52% Pine

48%

Spruce

CLIMATE-SMART RAW MATERIAL | 19

3.46

million m3 How much timber Setra processed in 2020. All timber comes from sustainable and responsibly managed forests.

Wood purchasing Setra has no forests of its own and therefore buys all its raw timber material. Setra works with around 15 suppliers including our owners – Sveaskog and Mellanskog – which supply a large proportion of the raw timber.

In 2020, Setra purchased 3.46 million cubic metres of wood, of which 52 percent was pine and 48 percent spruce. The timber often comes from local or regional sources. Our catchment area is normally within a radius of approximately 100 kilometres from the sawmill.

Setra’s timber purchasing includes harvesting and delivery to our mills.

The majority of timber deliveries involve road transport. Some of our plants have their own railway tracks and in 2020, Setra received slightly more than 4 (4) percent of its timber deliveries by train. We hope to be able to expand the proportion of train-based deliveries in future.

for planning and managing operations in the value chain from raw material to delivery of the finished wood products.

Supply Chain ensures that each sawmill receives the correct volume of timber of the correct quality to manufacture its product mix.

The correct timber for the different purposes is selected out in the forests, where cutting is adapted to match customers’ wishes and requirements. In 2020, Setra and Sveaskog participated in the DiVisi project concerning digitalised value chains in the forestry industry. The project works with the huge volume of data stored in harvesters and timber trucks and at the sawmills. The objective is to enhance competitiveness by sharing the data through the value chain. For Setra, this may involve gaining early access to data regarding the lengths and diameters of the incoming logs, which should translate into more efficient production and increased profitability.

Optimal flow to our saws For the past two years, our Supply Chain department has been responsible

Close working relationships with suppliers Quality and reliable raw material

deliveries are crucial to our business.

The fact that Setra’s leading suppliers – Sveaskog and Mellanskog – are also our owners provides a firm basis for a secure supply of raw material.

Sveaskog is the largest forest owner in Sweden. The company is owned by the Swedish state and shall function as a role model in the area of climate and the environment. Sveaskog has certified its entire holding of managed forest in line with FSC® and PEFC™ standards, and has set aside 20 percent of its productive forest land for nature conservation. As a state-owned company, Sveaskog is expected to work to realise the national climate and environment goals with regard to thriving forests and rich populations of flora and fauna. Sveaskog’s new strategic direction represents a positional realignment so as to enhance forest growth and boost ecological values, taking into account the high social values the forest generates.

Mellanskog is an association belonging to 26,000 private forest owners. The association is environmentally certified

by PEFC and traceability certified by

Sustainability Report 2020 — Setra Group

20 | CLIMATE-SMART RAW MATERIAL

100 km Our raw material comes from forests within a radius of around 100 km from the sawmill.

Certified raw material PEFC – Programme for the Endorsement of Forest Certification™ – is an independent umbrella organisation working to promote sustainable private forestry through independent third party certification. In Sweden, approximately 15.8 million hectares of forest land are PEFC-certified.

FSC – Forest Stewardship Council® – is a non-profit, indep­endent, international members’ organisation that provides a system for the voluntary certification of responsible forest management.

Around half the productive forest land in Sweden is FSC-certified. In 2020, the FSC adopted a new forest standard under which an additional five percent of the land is to be protected so as to preserve and develop natural or social assets, in addition to the five percent set aside for nature conservation purposes.

FSC. Mellanskog purchases its members’ wood and sells it to customers including Setra. Approximately onethird of the members and 40 percent of their forest area are PEFC-certified.

When selling, the association checks that timber that is not certified still fulfils the requirements in its raw material policy.

Stringent demands on the raw material Many people today want to know the origin of the wood products they buy.

It is becoming increasingly common to demand sustainable forestry and certified raw material. All Setra’s raw material suppliers are certified in line

with FSC and/or PEFC standards.

This means that the forest owner has made a voluntary commitment to responsible and sustainable forestry, thus agreeing to inspections by third-party auditors.

As a minimum, wood delivered to Setra must be fully traceable and live up to five fundamental criteria.

Certified suppliers check that the wood meets the requirements.

Setra does not accept: • Illegally harvested wood.

• Wood from forests in areas with serious social conflicts.

• Wood from forests worthy of conservation.

• Wood from harvesting that threatens forests of high conservation value.

• Wood from forests containing genetically modified trees.

Setra pays a premium to receive certified raw material. The proportion of certified timber purchased is defined by customer demands. In 2020, fully 50 percent of the wood products sold by Setra were FSC- or PEFC-certified, representing an increase of seven percentage points on 2019. At the same time, 23 (30) percent of the cellulose chip and 15 (16) percent of the biofuel was sold as certified. Demand for certified wood is also high in the construction industry, and in December 2020 Setra’s CLT factory was certified, so the company can now sell CLT elements as certified.

Traceability Setra requires transparency and traceability from all suppliers. It must

Sales of sawn wood products Certified and controlled, proportion of sales 100%

100%

100%

100%

19%

19%

20%

23%

17%

18%

20%

20%

22%

2016

2017

2018

2019

2020

■ Controlled

■ Proportion PEFC

100%

28%

■ Proportion FSC

All the wood that Setra purchases is certified or controlled, and we work exclusively with certified suppliers. Wood from forests that are not certified must fulfil Setra’s raw material policy, which is controlled by the supplier.

Sustainability Report 2020 — Setra Group

PROGRESS WITH GRÖNSAMHET | 21

be possible to trace the wood back to the harvesting site if we are to be able to check that no wood from areas of forest worthy of conservation is delivered as raw timber to Setra’s sawmills.

In Sweden, all harvesting areas larger than half a hectare must be registered with the Swedish Forest Agency for approval. Coordinates from the harvesting site make it possible to check with the Swedish Forestry Agency to make sure that the wood does not come from a conservation area. In this way, the wood can be traced all the way from harvesting to log sorting at a Setra unit.

Damaged wood We at Setra are committed to ensuring that as much benefit as possible is drawn from forest assets – taking into account both respect for nature and the interests of the forest owners. That is why we accept timber felled in storms and damaged by insect attacks and forest fires. These are all natural incidents, but their frequency may increase and the associated damage may become more far-reaching due to the increasing effects of climate change.

Major incidents affect harvesting in the forests and, as a result, the reliability of our deliveries, which is why we see a need for greater preparedness. Setra is preparing licence applications in order to be able to water the timber at two more of our units during the summer months.

By watering the timber, we can take care of larger volumes if necessary, protecting them from insect attacks during the storage period.

However, watering cannot help save timber from trees that have already been attacked by the European spruce bark beetle, as the protective bark is damaged.

Figures from the Swedish Forest Agency indicate that almost 8 million cubic metres of spruce forest were attacked by the European spruce bark beetle during the past year, which is the highest level of damage ever recorded in Sweden. In spring 2020, Setra conducted a test sawing of wood damaged by the European spruce bark beetle in Hasselfors. The results demonstrated that it is essential to work with the wood quickly, while it is still fresh and suitable for sawing. Continuing the experiment, we will be test planing and checking the bending strength of wood from trees damaged by the European spruce bark beetle so as to identify potential applications.

Timber quality ensured for the future The capacity to deal with and store timber quickly has already become a key issue and with the increasing effects of climate change, the need may become even greater. The consequences of a warmer climate include more severe storms, as well as insect attacks which may make it necessary to harvest areas of forest ahead of schedule. Setra is now making preparations to be able to water the timber at all our sawmills if necessary.

Why water the timber?

Watering lowers the surface temperature when evaporation occurs, helping to eliminate fungal growth. It also protects the wood against insects, which need heat to gain a foothold, even though the majority of attacks take place in the forests. If, during the summer months, we need to accept large volumes – in the aftermath of a storm, for example – watering is essential in assuring the quality of the timber. We view it as a “safety valve”.

How can you water in a sustainable manner?

We use huge sprinklers that we set up in the timber yard to spread the water evenly and efficiently across a given area. In order to optimise the flow and manage our water resources, we use a control system which sprays out the volume of water calculated to evaporate from the wood on the basis of the prevailing conditions.

This makes it possible to reduce environmental impact and to minimise the flow of water leeching out from the yard. The water that does not evaporate is led away from the timber yard via a culvert to a sedimentation tank where bark and other coarse particles are captured.

How often is the timber watered, and why?

This is principally defined by the stock turnover. At our Malå unit, we haven’t watered for 15 years. The summer is short there, and we maintain a good flow of timber. In Skinnskatteberg, on the other hand, we water every year. The reason for this is that we have numerous saw classes there, which means we need larger stocks – and this naturally increases the risk of blue staining.

We are currently preparing to be able to water stocks at all our units if we suddenly receive large deliveries of timber, following a storm for example.

How is the need likely to change?

The effects of climate change are becoming increasingly noticeable, resulting in an increased risk of storm felling during mild winters. This also leads to more insect attacks, as well as a greater risk of drought and fires, which means areas of forest have to be harvested ahead of schedule so as to preserve the value of the wood. All in all, this means we envisage an increased need for watering in the future.

Anders Nordmark, EVP Supply Chain and Technology

Sustainability Report 2020 — Setra Group

22 | RESOURCE-EFFICIENT BUSINESS

Resource-efficient business We base our operations on customer requirements and focus on making optimal use of the raw material, generating efficient flows and reducing the environmental impact of Setra’s business.

Our opportunities and challenges The principal sources of environmental impact at a sawmill are energy consumption and noise, as well as emissions into the air from internal transport vehicles such as forklifts and other machines, and from biofuel boilers. By developing our work practices and making smart investments, we can improve the efficiency of our production and reduce its environmental impact. We have also identified potential in raising the efficiency of our internal transports and increasing the share of electric vehicles in the long term.

Another benefit for Setra is that bark, woodchip and sawdust generated from the manufacturing processes can be used as biofuel in our own boilers and to benefit the local community. We have established energy partnerships in several areas, where the surplus energy from our operations is used to heat nearby premises and homes.

Governance The environment and climate constitute an area in which Setra has the greatest influence and they are therefore clearly regulated in our sustainability policy.

Resource efficiency and energy recovery play a key role in the work to reduce our climate footprint and are therefore monitored both centrally and in each unit.

Setra’s sawmills and processing units are certified according to the ISO 14001 standard and apply systematic environmental management programmes involving precise procedures and continuous monitoring. The factory for cross-laminated timber and components will be certified according to the same standard in 2021. Our operations require an environmental permit and are subject to comprehensive environmental legislation.

How we work Efficient production flows Setra’s units plan their production on the basis of customer needs, so as to generate the most efficient flows possible. In this way, we can ensure that the raw material from the forest is used to manufacture the goods that are in the greatest demand and generate the highest value.

Over the past three years, we have worked intensively to introduce a process-oriented work method in all areas of our production organisation. The work method has now reached all units

Sustainability Report 2020 — Setra Group

and departments. Every new working day/shift starts with a status update or briefing. This is used to discuss crucial factors such as safety, quality, delivery and efficiency.

It is clear that the method has generated an effect in the form of faster and clearer processing of non-compliances and improved profits. We are also seeing a tendency to be able to operate with lower stock levels which, in turn, has a positive impact on both internal transports and the volume of quality damage. When the turnover of wood products increases, the goods do not have to be moved as often. Another effect is a reduction in the risk of bluestained timber and mould developing on sawn wood that has not yet dried.

Shorter lead times also mean more satisfied customers. The glulam factory in Långshyttan has made the most progress, having refined its work practices progressively over the years and repeatedly setting new internal production records.

The effects of the coronavirus pandemic The pandemic that has dominated large parts of the world over the past year has naturally had an impact on demand for Setra’s products and caused logistical challenges. Setra’s crisis management team met every week – and sometimes several times a week – so as to respond quickly to the different situations that arose. Thanks to close cooperation between the market, supply chain, and production departments, we succeeded in continuing to manufacture without disruptions throughout the year. In the wake of an unstable spring, market conditions for wood products went sharply higher, and some products were actually in short supply during the latter half of 2020.

Operations at Setra’s sawmills and

RESOURCE-EFFICIENT BUSINESS | 23

Sustainability Report 2020 — Setra Group

24 | RESOURCE-EFFICIENT BUSINESS

production units have been adapted to prevent the spread of infection, not only to protect our employees, but also to safeguard our delivery reliability.

A ban on visits, digital or physically distanced meetings for the unit management and careful planning to prevent the mixing of employees from different shifts are some examples of new procedures that we have introduced.

See page 40 for additional information about what we are doing to protect our employees.

Fewer interruptions to production Maximising availability – i.e. the time our sawmills and processing units run without interruption – is clearly linked to efficiency. Fewer stoppages translates into increased accessibility and higher production, which means lower energy consumption per volume produced. It also means that employees need to devote less time to operational

Sustainability Report 2020 — Setra Group

disruptions and acute maintenance – tasks that can also be associated with elevated risk.

In order to understand what causes stoppages in production, we break down non-compliances into their root causes and then work on solutions designed to prevent recurrence of the problems. The starting point is to ensure that all tasks are performed in the best way possible before we start replacing equipment. In 2020, new software for measuring downtime was introduced in all units and we are working to prepare a shared method for using it. We also focus on cutting downtime in connection with retooling and on improving maintenance efficiency by involving operators in the care of the equipment. One good example is the Skinnskatteberg sawmill, where a systematic approach having operators do some of the maintenance resulted in an increase in productivity.

Downtime is reduced by separating activities that can be dealt with in advance or in parallel, and defining standardised work procedures for resetting the machines.

The whole log is used It is important to make use of the entire log, from the perspectives of profitability and sustainability alike.

We strive to achieve a high saw yield, i.e. a high volume of sawn product in relation to the volume of incoming raw timber material. The saw yield is defined by the log dimensions, sawing technique and how it is decided to saw the log into boards and planks on the basis of the financial value of the end products. In 2020, saw yield amounted to 49.2 percent, which is slightly lower than in 2019 (49.5), largely on account of working with slightly smaller logs. As a result, around half of each log becomes bioproducts such as cellulose chip and

RESOURCE-EFFICIENT BUSINESS | 25

biofuel. The quality of the bioproducts is important; they constitute a valuable raw material or fuel in customers’ processes.

The yield is naturally important for processing as well. For example, we manufacture CLT in flexible widths, which means that we can adapt the size of the solid panels to match each project. As a result, our production is highly resource-efficient and generates minimum waste.

Goals for reducing energy consumption Several aspects of sawmill and wood processing procedures demand a great deal of energy, so we accord high priority to reducing consumption. Setra’s overarching goal was to cut electricity consumption by 20 percent and fuel consumption by 15 percent per cubic metre of sawn wood between 2010 and 2020.

Electricity consumption has been reduced by 9.6 percent since 2010. We are implementing energy-saving measures and working to increase accessibility and, consequently, productivity. This should lead to a reduction in specific emissions, since we report our electricity consumption in relation to the volume of cubic metres produced. It has not proved sufficient for us to achieve our goal, however, which was based on the general objective of the Swedish Forest Industries Federation for the sector. We can now see that more aggressive measures would have been required to make more progress in this area. Certain initiatives, including improving the efficiency of the kiln drying process, have been underway for several years, but are only now beginning to generate results. In summary, it is our view that our sawmills and production units still contain appreciable potential for improvement, and that increased accessibility in the production process is a key issue.

We have succeeded in cutting fuel consumption by 11 percent since 2010, which indicates that our initiatives to improve the efficiency of internal transports are paying dividends – but they can be developed even further.

Setra’s total energy consumption amounted to 624 GWh in 2020. Thermal energy accounted for 78 percent of this figure, electrical energy a little under 18 percent, and fuel consumption slightly more than 4 percent.

Going forward, we will be working →

Energy consumption, 2020 Setra consumed a total of 624,362 MWh

481,710 MWh Bioenergy district heating or own boiler 9,194 MWh Internal transport (biodiesel) 111,796 MWh Renewable electrical energy 17,263 MWh Internal transport (diesel) 4,399 MWh Heating oil district heating or own boiler

Electricity consumption, 2010–2020 (kWh/m3 sawn timber)* 75 71.1 70 65

63.1

62.4

63.7

64.3

60

Targets 2020 56.9 kWh/m3 (-20% compared to 2010)

55 50

2010

2017

2018

2019

2020

Setra has cut electricity consumption by 9.6 percent since 2010, but we unfortunately failed to reach our goal of lowering consumption by 20 percent.

Consumption per m3 sawn timber has increased slightly over the past two years. A few units have had problems achieving the productivity as planned, partly on account of our having started up new production. Since 2018, Setra purchases electricity exclusively from renewable sources.

Diesel consumption, 2010–2020 (kWh/m3 sawn timber)* 20 17.6 15.1

15

16.0

15.7

15.7

10

Targets 2020 15.0 kWh/m3 (-15% compared to 2010)

5

0

2010

2017

2018

2019

2020

We have cut diesel consumption by 11 percent since 2010. The improvement is attributable to more efficient driving and we have identified potential for even greater efficiency. The share of biodiesel is shown in green. * Calculated for units with year-round production

Sustainability Report 2020 — Setra Group

26 | RESOURCE-EFFICIENT BUSINESS

towards the overarching goal of making our company climate neutral (excluding foreign transports) by 2030. Continuing to reduce energy consumption plays a key role in this work, and we will be following up on this goal by continuing to measure the consumption of electricity and diesel as a KPI. In addition to the Group-wide measures, each unit is responsible for identifying and implementing those measures that are expected to generate the greatest impact locally. For additional details of the Climate report, see page 28.

Energy survey highlights opportunities Setra is working systematically to map our energy consumption and identify potential savings. We are subject to the Swedish Act on Energy Audits in Large Enterprises (EKL), and we have been surveying consumption at all our production units since 2016. The findings indicate those measures that are most profitable from the perspective of energy savings and are reported to the Swedish Energy Agency.

Our conclusion is that the greatest potential is to be found in improving the efficiency of the wood drying process, which accounts for 50 percent of the company’s electricity consumption and 95 percent of the thermal energy consumption.

In 2019, we prepared a report setting out methods for drying significantly more wood using the same or a lower volume of energy and maintaining

the current quality. In 2020, the conclusions from this report were implemented at four units, and the work will continue in 2021. One good example comes from the sawmill in Heby, which appreciably shortened the change-over time between drying programmes and achieved significant benefits in efficiency.

Other savings could potentially be made by investing in new, energy-efficient equipment and developing new work practices and procedures. In 2020, Setra invested in a new trimming and planing line, as well as a new dryer in Hasselfors. We have fitted our sawmill

97%

How much of the energy we use is renewable in Nyby with a new saw line, which can produce higher volumes and provide a better saw yield.

We are continuing to replace all light sources with LED lighting, while systems powered by hydraulic oil are progressively being replaced with electric systems. Other ongoing projects include fitting presence sensors to lights, checking the maintenance temperature in our premises and expanding eco-driving training.

Renewable energy and energy partnerships More than 99 percent of Setra’s thermal energy stems from renewable fuels. Bark and sawdust from our own production is incinerated in boilers and the heat is then used in drying kilns. During the past year, we replaced an old oil boiler at our CLT plant in Långshyttan with a new bio-boiler.

In several locations, we have also set up energy partnerships with the local community. Malå, Gävle and Skinnskatteberg all use biofuel from Setra in their district heating boilers, with some of the energy generated being returned to our industrial plants.

In Nyby, we also use our own boiler to generate district heating for the nearby town of Björklinge.

Since 2018, Setra only buys ecolabelled electricity, from suppliers of hydropower, wind power and bioenergy.

Reduced emissions from internal transports Setra’s forklifts are powered by diesel with up to 42 percent renewable additives. Our unit in Färila is an exception, as we use almost 100 percent HVO there. In Nyby and Kastet, the internal transport of timber is handled by the contractor Pålgårds, which uses 35 percent bio-additive.

During the past year, a new leasing agreement came into effect, whereby the forklifts are progressively replaced with newer models with more eco-friendly engines. Setra is closely monitoring developments in drive lines in the forklift market, and will likely switch to purely electric forklifts in the future. At our new CLT factory in Långshyttan, we are already using electrically powered forklifts indoors.

We are also checking the traffic routes at all our units. At Kastet, the old saw intake was demolished during the year to shorten the distance between the timber store and the table where the timber is loaded.

Noise Disruptive noise is always a highpriority issue when making new investments and operational changes.

Noise calculations make it possible to determine how any new operations will affect local residents, and how the unit can be designed to prevent unnecessary disruption.

Sustainability Report 2020 — Setra Group

PROGRESS WITH GRÖNSAMHET | 27

Smart choices in the component factory Setra’s newly opened factory for door and window components has completed an impressive journey of improvement. In just a short time, we have almost tripled the pace. We will shortly be making another new investment that should make the business even more resource-efficient.

What is the background for the improvement work?

Initially, we were a little too quick to step on the accelerator, which is an easy mistake to make when you are eager to move ahead.

For example, we needed better basic knowledge about the machines and to come up with procedures for our work.

How did you go about it?

Switching from a two-shift system to daytime enabled us to consolidate the core of the group and create a really strong team that works well together. We pooled our resources and focused on reviewing our procedures together. We “put out the fires” systematically rather than trying to work on all fronts at the same time. A lot of people in Långshyttan have been involved in the process, working hard to achieve a solid result.

What’s the biggest difference in production compared to previously?

We know more about the machines today

and we have procedures that hit all the right notes. This has resulted in us feeling much more confident when we start the line in the morning. Everything is finely tuned now, and we usually run without any problems all day long. We’ve increased production from 29,000 running metres in the two-shift setup to 44,000 running metres in our daytime system. The efficiency we have achieved means that we can choose the most profitable deals. What is more, the number of complaints is effectively zero – which proves we’re doing things right.

A new investment is now being planned for the factory; what does that entail?

We’ll be able to make even better use of the raw material and we’re adding another product to our range. We’ll be using some of what previously went to waste to make construction joists. It naturally feels great to be able to make long-life products from material that would otherwise be used as biofuel.

What’s your biggest take-away from your journey of improvement?

Improvement work is an ongoing process that requires you to maintain full control of what you are doing. All employees need to pull in the same direction; they have to know what needs doing and what is expected of them. Only then can you achieve the production targets and find ways to improve the efficiency of the business.

Fredrik Eriksson, Shift manager and foreman on the component line, Setra Långshyttan

Sustainability Report 2020 — Setra Group

28 | RESOURCE-EFFICIENT BUSINESS

Climate report All our climate measures are intended to lead towards one and the same goal: to make Setra’s operations climate neutral by 2030.

This goal applies to all areas of the value chain with the exception of foreign transports.

Our opportunities and challenges Wood binds carbon and our products are climate positive. The climate benefits of using wood as a construction material far outstrip the emissions linked to manufacturing and transporting the products. For Setra’s wood products, the net effect is approximately 800 kg of bound carbon dioxide per cubic metre of wood, depending on the degree of processing and the transport distances involved. There is great benefit to be gained from the bioproducts created when we make our wood products as well; they are used, for example, for recyclable packaging and renewable energy.

For our business to become climate neutral, we need to work with our own negative climate footprint, where dependence on energy for production and transport operations are our two biggest challenges.

Governance The annual Climate Report indicates where in our operation emissions are generated – and how large they are – in relation to the life cycle as a whole.

Setra also prepares local climate reports for every unit in Sweden. These reports help us to prioritise our efforts and monitor our goal of becoming climate neutral.

Sustainability Report 2020 — Setra Group

How we work Climate calculations in line with the GHG Protocol Setra performs its climate calculations in accordance with the Greenhouse Gas (GHG) Protocol, which is an international calculation standard. The report presents our emissions from a life cycle perspective: from planting the spruce and pine seedlings to delivery of the sawn and processed products, as well as bioproducts, to customers. In order to clarify the impact from the respective production units and to facilitate locally adapted climate initiatives, we have prepared a climate report for each and every production unit since 2020.

Emissions are divided into three categories, or scopes, as follows • Scope 1: Direct emissions from the business (fuel combustion at own plants and in company vehicles) • Scope 2: Indirect emissions from purchased energy (electricity, district heating, district cooling) • Scope 3: Indirect emissions from other parts of the value chain, such as purchased transport, travel and the climate footprint of the raw materials. For the timber raw material, emissions come from machines and transports in connection to forest management and felling.

Setra’s emissions of greenhouse gases from the company’s own heating boilers, machines and vehicles (Scope 1) account for only a small part – approximately four percent – of the total emissions. Indirect emissions from purchased energy (Scope 2) account for less than one percent of the total emissions. This is because since 2018, Setra has only purchased renewable, eco-labelled electricity. The

overwhelming majority of the emissions thus fall within Scope 3, where transport operations are the biggest contributor (see page 32 to find out more about our transports).

Plan for climate-neutral Setra Our goal is for Setra to be climate neutral by 2030. The goal applies to the entire business from forest to customer, with the exception of foreign distribution operations, and entails the total climate impact from our operations equalling the net sum of zero. First and foremost, we will be reducing emissions to the lowest level possible. For the emissions we cannot eliminate, it may be necessary in the long term to purchase what is known as “climate compensation” such that our net sum is zero. In 2020, emissions from activities where we aim to become climate neutral amounted to approximately 60,000 tonnes of carbon dioxide.

During the year, we have intensified the work to survey the key activities that we expect to produce the greatest effect. We have begun examining the conditions for implementing certain strategic measures in the long term – replacing diesel powered forklifts with electric models, for example, and making greater use of renewable fuels.

Our ambition of becoming climate neutral means that everyone at Setra will be required to make an effort.

Promoting activities and objectives to reduce climate emissions is thus an integral aspect of operations planning in each and every unit and department.

Setra’s Climate report does not contain a detailed presentation of every single activity taking place at the company, but it should be noted that there are also a range of small changes that are being made to minimise our footprint. →

0 299

018

RESOURCE-EFFICIENT BUSINESS | 29

Wood has a positive effect on the climate

Wood binds the equivalent of 800 kg of carbon dioxide per cubic metre of sawn timber. The table shows the binding effect in relation to the carbon dioxide emissions generated, from forest planting to delivery to customers in different countries.

For example, using wood from Setra for construction in Sweden helps to lock in 772 kg of carbon dioxide per cubic metre (800 kg -28 kg).

Sweden

20

20

28

Sweden UK 28 62

Germany Germany UK Japan 62

79

800

800

Wood has a positive Wood has a positive effect on the climate effect on the climate ■ Carbon dioxide emissions, ■ Carbon dioxide emissions, excl. transport, in kg. excl. transport, in kg.

■ Carbon dioxide emissions, ■ Carbon dioxide emissions, incl. transport, in kg. incl. transport, in kg.

■ Amount of carbon bound ■ Amount of carbon bound in wood recalculated as in wood recalculated as CO2.

CO2.

Japan

79 232

Emission categories

232

Total carbon footprint 2018–2020 Number of tonnes of carbon dioxide

SCOPE 3

200,299

198,129

SCOPE 2

182,002 SCOPE 1

2018

Setra reports its emissions in accordance with the GHG protocol: The emissions are divided into three scopes: Scope 1 comprises direct emissions in the business, scope 2 covers indirect emissions from purchased electricity, steam, heating and cooling for own plants, and scope 3 encompasses indirect emissions from areas such as transport, rented machines and purchased products. The calculations include emissions from divested and sold units, as well as from new investments.

2019

2020

Over the past three years, Setra has reduced its total footprint by 9 percent (18,300 tonnes). Emissions have been cut within all scopes.

Our total climate footprint is heavily influenced by production volumes and the export balance between different markets.

Setra’s climate footprint, 2020 198 129 Number

of tonnes of carbon dioxide

182 002

SCOPE 1_____________________________________________ 4.3%

SCOPE 3__________________________________________95.6%

Drying and heating_________________________________ 3,106 Machines_______________________________________________ 4,550 Business travel__________________________________________ 63 Total_____________________________________________________ 7,718

Fuel and energy-related activities___________ 2,067 Raw material and materials____________________ 17,248 Waste in own operations_____________________________ 15 Commuting and business travel_________________526 Inbound timber deliveries______________________ 11,925 Transport to customers______________________ 142,283 Total, incl. transport _________________________ 174,064

SCOPE 2_____________________________________________ 0.1% Purchased electricity, heating and cooling_ 219 Total________________________________________________________ 219 2019 2020

Sustainability Report 2020 — Setra Group

30 | RESOURCE-EFFICIENT BUSINESS

New knowledge about wood in construction

For example, we are recycling and circulating our computers.

Setra is involved in several projects that are helping expand knowledge about using wood in construction:

Specific measures for the climate Wood is the only fully renewable construction material, and it also binds carbon dioxide throughout its entire life cycle. Therefore, the most important contribution we make in our climate work is to promote increased use of wood as a construction material. We are working in various ways to boost our own and our customers’ knowledge about the climate benefit of wood and bio-based raw materials.

• We supply our customers with product information, quality assured climate data and environmental product declarations (EPD).

• We participate in studies and analyses to increase knowledge and reporting of the climate benefit of buildings made of wood.

• We participate and invest in innovation and the development of new products and applications for forest raw material and bioproducts. This includes our focus on biofuels, which is helping to cut carbon emissions in the transport sector. Read more on page 34.

In order to become climate neutral, we also have to minimise – and, in the long term, completely eliminate – our own negative climate footprint. Since Setra presented its first complete Climate report in 2014, we have succeeded in halving greenhouse gas emissions per cubic metre of sawn wood. Emissions excluding transport have been reduced from 54 kg in 2014 to around 20 kg in 2020.

As such, Setra’s previously stated aim of cutting carbon emissions by 6 kg per cubic metre of sawn wood between 2010 and 2020 has been achieved by a good

• An interdisciplinary group which, on the basis of the Cederhusen construction project in Stockholm, is reviewing where in the building process climate emissions are generated and how the choice of materials and methods can help reduce them.

• Linnaeus University’s four-year research project centred on increasing the competitiveness of CLT as a construction material.

• Productivity measurements for industrial wood construction – a project at Luleå University of Technology, which is comparing the development in productivity in the field of industrial wood construction with a view to reinforcing market communication.

The project also aims to identify productivity measurements that will allow industrial wood construction to be compared on more equal terms with other methods.

The forestry industry roadmap for fossil-free competitiveness Setra is participating in the Swedish forestry industry’s roadmap for a fossil-free Sweden. The plan focuses on three areas in which the forestry industry can contribute to Sweden’s work on climate issues: • Substitution – using bio-based products as replacements for fossil products or products whose manufacture involves significant fossil emissions.

• Carbon capture – binding carbon in forests and bio-based products.

• Reduced energy utilisation – cutting climate emissions from the industry’s own consumption of fossil energy.

margin. The most important measure of all has been to purchase electricity from renewable sources. Other measures have included increasing the share of renewable diesel used to power our machines, improving the efficiency of the drying process and investing in energy-efficient equipment. Our units in Heby and Skinnskatteberg conducted energy surveys during the past year.

This means that all our production units have surveyed their consumption, and we can now continue the work to implement and monitor the effect of the identified energy-saving measures.

Key activities in Setra’s plan going forward include: • Continuing to improve the efficiency of our energy consumption, and ensuring a high level of accessibility in production.

• Replacing diesel powered forklifts and machines with electric models.

• Increasing the use of renewable fuels.

• Making rail transport possible for both raw timber and finished products.

A large part of our emissions is generated indirectly – when we purchase transport services, for example. In order to reduce these emissions, we need to hold an advanced dialogue with and make demands on our suppliers. Issues that are especially important: • The carriers’ choice of fuel and how they are working to optimise capacity utilisation and route planning.

• How the timber suppliers are working to reduce their emissions. For example, Sveaskog has signed agreements to secure long-term access to renewable fuel and to reduce its greenhouse gas emissions. This has a positive effect in Setra’s Climate report as well.

Carbon dioxide emissions, 2014–2020 Setra has cut its emissions per cubic metre of sawn products manufactured (exclusive outbound deliveries) by 63 percent since 2014, when the company published its first complete Climate Report featuring three scopes. The switch to electricity from renewable sources in 2018 has been the most important single measure. Other measures included increasing the share of renewable diesel in the company’s machines, improving the efficiency of the drying process and investing in energy-efficient equipment.

The specific emissions have not been corrected for changes in emission factors or inconsistencies identified subsequently.

Sustainability Report 2020 — Setra Group

Kg CO2/m3 sawn timber 60

Switch to renewable electricity

50 40 30 20 10 0

2014

2015

2016

2017

2018

2019

2020

RESOURCE-EFFICIENT BUSINESS | 31

1,300,000 tonnes The volume of wood products Setra sold in 2020 (1.6 million cubic metres) binds carbon equivalent to approx. 1.3 million tonnes of carbon dioxide. That corresponds to the greenhouse emissions of around 160,000 people in Sweden.

Sustainability Report 2020 — Setra Group

32 | SUSTAINABLE TRANSPORT

Sustainable transport Setra's operations depend on transport, and it accounts for the majority of our greenhouse gas emissions. We are therefore working in a targeted way to make the transports as efficient and sustainable as possible.

Our opportunities and challenges Setra transports large volumes, often across long distances, which makes efficient logistics crucial to our business. Our sawmills and processing units are located in rural Sweden, and approximately 65 percent of sales are exported to customers in Europe, North Africa, the Middle East and Asia. In total, transport operations account for 10–15 percent of Setra’s costs and almost 85 percent of our total climate emissions (see the Climate report on page 28 for details).

Viewed from the perspective of the entire life cycle, our wood products strongly benefit the climate even if they are transported to the other side of the world, because they bind so much more carbon dioxide than their production and transport generate. Nevertheless, it is naturally important for us to do whatever we can to minimise emissions from the transport operations. Participating in the development of new, renewable fuels and switching loads from road to rail are two important steps along the path.

Governance Fundamentally, the transport options we use must be efficient, safe and climate- and eco-friendly; they must also meet requirements for a good working environment and good working conditions for transport company employees.

The requirements we apply are based on the Swedish Forest Industries Federation’s sustainability criteria for road

Sustainability Report 2020 — Setra Group

transport, as well as criteria from Q3, which is an association for sustainable road transport.

How we work Working relationships, dialogue and follow-up We choose our partners with care and only work with reliable shipping lines and forwarders who maintain a high level of quality and comply with applicable laws and regulations. In all, our business helps provide employment for around 300 people in the transport sector.

Setra’s Code of Conduct for Suppliers applies to all new agreements we conclude. We expect all our existing suppliers of transport services to approve this code by no later than 2021. The code stipulates fundamental sustainability requirements concerning areas such as the employees’ conditions of work and pay, and the supplier’s own environmental work.

We also monitor how our partners handle their systematic sustainability work, by requesting and assessing the responses to a survey from the association Q3. The survey asks suppliers questions about social responsibility, the working environment, traffic safety and

measures to reduce climate impact. In 2021, it will be possible to use responses to the survey to rank suppliers in the C-load booking platform. Suppliers who fail to complete the survey will be awarded a low ranking, thus reducing their likelihood of receiving assignments.

We also monitor the situation by collecting emission reports as the basis for our climate calculations. We hold regular alignment meetings with our suppliers, where sustainability is a fixed point on the agenda.

Fossil-free top of mind For domestic road transport, we have a long-term agreement with a principal supplier, Unite, which puts us in a better position to achieve optimised, smart transport chains. For example, the same vehicle can be used to transport sawn wood from a sawmill to a processing unit, collect finished products and deliver them to nearby customers. Unite has a well-developed programme of environmental work, with the objective of becoming fossil free by 2030, and is a prime mover in encouraging fuel companies to increase their use of non-fossil additives. The company is also assessing biogas as an alternative fuel and in 2020 launched a three-year development project involving the use of vehicles powered by biogas for half the transports of bioproducts from Setra's unit in Hasselfors to E.ON’s Åbyverket power plant in Örebro.

As regards our new products, construction solutions in CLT and glulam, interest in fossil-free transport is especially high. We therefore offer a transport solution based on 100 percent HVO. Efficiency in every load Working closely with our partners, we strive to achieve the most optimal trans-

Climate benefit Our wood products are of major benefit to the climate, even if they are transported to the other side of the world – because they bind so much more carbon dioxide than is released through their production and transport.

Sustainability Report 2020 — Setra Group

34 | SUSTAINABLE TRANSPORT

18%

The proportion of our sawn wood products transported in part by rail in 2020.

Principal type of transport Share of sold wood products

48%

52%

As from 2021, a share of Setra’s sawdust will be used to make renewable fuel.

Sustainability Report 2020 — Setra Group

port flows possible. This is a question of developing flexible and efficient links in the transport chain involving optimising the capacity utilisation and running rate – i.e. utilising as much of the cargo space as possible and minimising the distance the vehicle drives without a load.

Adapting sales volumes to match the capacity of the transport vehicles and installing scales to weigh each pack are examples of measures that can help improve the load factor.

Through our working relationship with Triona and the digital platform C-load, we can choose the supplier that best matches each individual load.

Transport needs and available transport capacity are coordinated so that our transport partners can find loads that match their flows. This contributes to a higher load efficiency.

Focus on rail and sea transport Rail transport is the most advantageous option from an environmental perspective, but sea transport also generates lower emissions per tonne kilometre than road freight. In 2020, on the basis of the increased volumes from Setra’s new planing mill in Hasselfors, we were able to start a more efficient shipping route to the UK from Kristinehamn. The new route not only shortens the total length of transport, but also makes a significant reduction to the distance the goods have to be transported by road.

Today, around 18 (10) percent of our sawn wood products travel a part of the distance by rail – a substantial increase on 2019. By concentrating on running Setra’s export flow to Asia through the port of Gothenburg, we have been able to utilise the rail connections from the hubs in Central Sweden down to the shipping point.

Our ambition is to continue increasing the share of rail transport, and we are working to link existing rail connections at Kastet, Skinnskatteberg and Hasselfors with the unit in Heby.

Today, around 4 percent of our timber arrives by train, and if we succeed in increasing this share, it will generate a huge climate benefit – not only for our own flows, but also for timber suppliers and society in general. By linking additional units to the railway network, we can also carry timber long distances in a cost-effective manner in connection with storm felling and insect attacks.

In the long term, we can also see good opportunities to use the railways for the long-distance transport of bioproducts, pulpwood and finished products.

We are planning investments in the working relationship with the Swedish Transport Administration, which we expect to implement in the period 2021–2023, starting with Hasselfors in 2021. The infrastructure initiative in Heby is the most comprehensive, encompassing a new industrial railway line and terminal at the sawmill. All investments in railway infrastructure are to be co-financed by the Swedish Traffic Administration and Region Uppsala.

Development of renewable fuel As a processor of raw material from forests, Setra is uniquely placed to contribute to an increase in renewable fuel and a reduction in the climate impact of transport. Through the jointly owned company Pyrocell, Setra and Preem are working together on the production of bio-oil from sawdust. This oil can replace a part of the fossil raw material used in standard petrol and diesel, cutting carbon dioxide emissions by an estimated 80–90 percent in relation to fossil fuel.

The factory is located next to Setra’s Kastet sawmill in Gävle and production is scheduled to start towards the end of 2021. The facility is expected to produce around 25,000 tonnes of bio-oil per year, corresponding to the annual consumption of up to 17,000 cars.

Industry partnerships In order to make a bigger contribution to a more sustainable transport sector in the future, we are actively involved in a number of industry forums and dialogues. Over the past year, we have continued our working relationships with other transport-intensive companies via the Mid Sweden Chamber of Commerce.

The Swedish Forest Industries Federation, of which Setra is a member, is lobbying to have longer and heavier goods vehicles allowed to operate in Sweden, a move that should help cut both traffic and emissions.

The electrification of heavy traffic, more intermodal transport (i.e. solutions involving the use of different means of transport) and emission issues linked to sea transport are other areas where we are working with the sector to make a difference.

PROGRESS WITH GRÖNSAMHET | 35

On the right track towards the future Rail is the best transport option from the perspective of the climate, and Setra is working in several areas to increase the proportion of rail transport. Over the past year, the share of wood products that make at least part of their journey by rail has almost doubled.

How have you managed to increase the share of rail transport?

We’ve started making more use than previously of the rail terminals located close to the units where we manufacture our export products. For example, goods for Asia are loaded into containers directly at the sawmill and then carried by road to a railway terminal. From there, they can travel all the way to the port in Gothenburg, from where we ship the majority of our exports. We have also been using the railway solution from Gävle to Gothenburg more frequently and reduced the volume shipped by vessel from Gävle. In other words, we have replaced a number of our sea transport loads with rail transport.

Is it possible to increase the use of rail transport outside Sweden as well?

Wood products destined for customers in Europe are still collected by lorries.

Some trailers are then loaded onto railway wagons in Sweden, which transport them to the destination country where they are loaded onto another lorry that completes the delivery. We are in dialogue with our transport booking partner about making it easier to book solutions of this kind. So there is potential for increasing the proportion of goods that travel down through the continent by rail.

What is Setra’s vision for the future as regards rail transport?

In an ideal world, there would be rail connections to all our units. We would then be

able to receive trains of empty containers that we could unload, fill up and then have collected by another train. However, the investments involved are considerable so we need to investigate the situation carefully and look into the infrastructure issues beyond our own gates. We are running several projects intended to improve access to the rail network near our units. For example, we are working with the Swedish Traffic Administration and the Municipality of Heby to analyse the possibility of a new industrial track and terminal at the sawmill.

This is an initiative with the potential to cut carbon dioxide emissions by 2,500–3,000 tonnes per year.

Maria Jansson, Logistics Manager

Sustainability Report 2020 — Setra Group

36 | CULTURE AND COLLEAGUES

Culture and colleagues We want a high performance organisation where everyone makes a contribution. Employee health and safety is our top priority.

Our opportunities and challenges The wood industry is a future-oriented green business that is contributing to creating sustainable societies. The sustainable business model provides strong motivation for many of the people who work at Setra, and for those applying to join the company. Our vision of Grönsamhet/Green profit is founded on doing business where we, our customers, nature and society all benefit. This signals our responsibility, our commitment and our role going forward.

One of the greatest challenges entails establishing a strong and stable safety culture and bringing down the number of accidents. The wood industry is a high-risk sector from the perspective of the number of workplace accidents, and systematic, assiduous work is required to achieve results.

We are active across a large geographical area, which provides excellent opportunities to establish rewarding connections in many communities.

Another effect is that we are used to meeting digitally. By working on the basis of our values, with clear leadership and a culture where everyone is involved and makes a contribution, we reinforce both well-being and commitment, which are crucial to enhancing our competitiveness at both the local and global levels.

Sustainability Report 2020 — Setra Group

Governance Setra’s values and sustainability policy make clear what applies at Setra and emphasise that safety, business ethics and the working environment, including social and organisational factors, are all prioritised issues. We have a zero vision regarding workplace accidents, combined with a management system that encompasses occupational health and safety, which are examined regularly through risk analyses, safety rounds and internal audits.

Our units all comply with competition legislation, guidelines from the Swedish Anti-Corruption Institute, and international provisions regarding sanctions.

How we work Management by objectives In order to ensure that we are all working to achieve Setra’s overarching strategy and business plan, we apply a shared model of management by objectives. This model is based on managers and other leaders clearly communicating their expectations and setting goals in consultation with employees and work teams. The idea is to cultivate the commitment of each and every employee, and to help each individual identify his/her role in Setra’s results and development. At the same time, management by objectives assists the organisation in making full use of the skills, potential and personal drive that the employees possess.

Values-based leadership Setra uses values-based leadership, where commitment, innovation and responsibility are key concepts. In order to develop leadership skills in line with Setra’s values, and to assure strong leadership in all areas of the company, a comprehensive initiative was launched in 2019 to work with an external partner on a new development programme for managers. The programme is mandatory for managers with subordinate employees. All managers at Setra, around 50 people, have already completed it. New managers receive continuous training, although the training programme has been put on hold during the coronavirus pandemic. The course is based on each manager being coached by his/her own manager and has consistently scored highly when assessed by the managers themselves.

The objective is for this development programme to contribute to a corporate culture where employees feel valuable, have the confidence to show initiative, know their voices are heard, and under­ stand their own contribution to the company’s overarching goal. We also hope that the focus on leadership will have a positive influence on motivation levels, sick leave and staff turnover, which, by extension, should also have an impact on the company’s financial results.

Since 2019, all managers with HR responsibility have had access to a digital managers’ handbook to support them in their work.

Continuous improvements We work systematically to improve the results of our operations. We are committed to enhancing safety, quality, delivery reliability and productivity.

A key aspect of this work is our meeting structure, where we follow up on goals

CULTURE AND COLLEAGUES | 37

on a daily basis, learning from any noncompliances. All production units have received training in this structure, with support from an external partner. Departments outside the area of production have also drawn inspiration from – and adopted – this way of working.

The structure is based on making sure all employees are on board and making an active contribution. The daily meetings constitute a forum where the entire shift is involved in how production is running, and everyone is expected to provide input about non-compliances, as well as suggestions for improvement, on the basis of his/her professional role.

The opportunity to play an active part and have an influence is a key factor in raising well-being and motivation. We have already seen several examples of how increased participation has resulted in constructive solutions.

Employeeship and dialogue Our employees are our most important resource. It is their knowledge, drive

and commitment that power Setra forwards. For this reason, employees and managers share responsibility for reinforcing and improving our working environment. One fundamental component in this work is the performance review, which focuses on the working environment, development and job satisfaction. The reviews are held once a year between each employee and their manager.

SetraRingen, the annual employee survey, is another tool we use to improve our working environment.

The findings from the survey indicate changes in attitude over time and highlight the issues that require focus and attention. The 2020 survey was held at the beginning of the year and shows that the EMI (Employee Motivation Index) has risen from 71 to 72. The result is stable and in line with comparable industries. The objective is for the index to continue to rise, reaching 75 in 2025.

Setra’s focus on developing leader­

Key figures, employees Number of employees

Proportion of women

2020

779

18%

2019

767

17%

2018

861

17%

2017

849

14%

2016

855

14%

Sustainability Report 2020 — Setra Group

38 | CULTURE AND COLLEAGUES

ship and the work with the daily status updates may go some way to explaining why motivation is on the rise within the company.

44 The average age of Setra’s employees.

Total sick leave (percent, Setra in Sweden) 6,3 5,3

2016

5,1

2017

5,2 4,5

2018

2019

2020

Sick leave in 2020 was higher than in normal years on account of the coronavirus pandemic. Short-term absence due to illness increased by around 1.5 percentage points. Setra is working in several ways to improve employee health, and our goal is for a healthy presence figure of at least 95 percent.

Employee motivation index, EMI (Setra in Sweden) 70

71

70

71

72

2016

2017

2018

2019

2020

The SetraRingen employee survey is held every year. EMI is an overarching measure of how motivated our employees are in their work. Setra’s result is stable and in line with comparable industries.

Sustainability Report 2020 — Setra Group

Skills development and recruitment As Setra develops as a company, our skills requirements are naturally changing and the company requires more and more technical competence.

Prior to staffing the new planing mill in Hasselfors, we mapped skills to identify any training requirements.

In 2021, we will be starting work on reviewing skills throughout the Setra organisation, using the new HR system, Setra People, that we introduced in 2020. The system will make it easier to follow up on personal development, certifications, permits and skills, and to compile HR statistics. Setra People also meets GDPR requirements better than our previous solution.

Around ten new jobs were created in 2020, primarily at the wood industry centre in Långshyttan and in Pyrocell, our jointly owned subsidiary based in Gävle. The recruitment situation is favourable, and we are noting that sustainable construction involving wood is an area that is attracting applications from both white and blue collar workers.

The wood industry remains a heavily male-dominated sector, and we have much to gain, especially from a purely business perspective, by improving our work with equality. Setra often recruits via staffing companies and always highlights equality as a key aspect of the assignment. This has proved to be a successful approach to attracting more applications from women. After an introductory period, Setra has the opportunity to take over the employment.

Preventative safety work Setra has a stated zero vision: no-one is to come to harm through his/her work. For 2020, we had a sub-goal of fewer than 1.0 accidents resulting in sick leave per 100 employees – a goal we unfortunately failed to achieve. There were 26 accidents resulting in sick leave during the year, corresponding to a figure of 3.6. This is the same as in 2019 but represents a rise since 2018.

Setra uses SIA, the sawmill industry’s shared system for reporting work injuries and for processing near misses and accidents. Two years ago, we adopted the LTA (Lost Time Accident) Frequency Rate for measuring accident

frequency. This measurement presents the number of accidents resulting in sick leave of more than one day per million hours worked. Our new subgoal is that the accident frequency rate shall not exceed 10 by 2025. The result for 2020 was an accident frequency rate of 21 (22.5). The goal for the year was 16, which corresponds to a maximum of 20 accidents within the business.

The most common incidents are slips, crushing and cutting injuries. The accidents often happen when work is being done to deal with a disruption to operations.

For the past two years, the strategy for reducing accidents has entailed focusing on reporting near misses and risk observations. According to Heinrich’s triangle theory – also know as “the iceberg principle” – every serious accident is preceded by a large number of smaller accidents and near misses. It should therefore be possible to prevent serious accidents by learning from earlier non-compliances.

The work method involving the daily briefings ensures that the working environment and safety issues are always at the top of the agenda. A briefing is held every Monday, where Setra’s mill managers share information about the latest non-compliances and approve actions for the coming week. The number of near miss reports and risk observations has risen sharply in recent years, but as the number of serious accidents has not decreased, two new preventative tools were brought into play in 2020.

One involves all managers in production writing a safety promise, in which they specify what safety means to them in their role, and how they are to work with the issue. The promise is then shared with the employees. In addition, a quick, deeper root cause analysis is performed on all accidents resulting in sick leave. Measures required to eliminate the risks are mapped on the basis of a “measure staircase” and then communicated to the organisation. We have also introduced a checklist for new or high-risk work tasks to ensure that the work is performed safely.

Two key factors in reducing accidents at Setra are to establish a behaviour where safety always takes priority, and to cut the number of stoppages in our production. We know that disruptions to operations lead to more high-risk situations than when the equipment is running as planned.

CULTURE AND COLLEAGUES | 39

Training in working safely is a key component in the preventative work.

Setra uses SSG’s safety training course, which is an established concept in Swedish industry. The course is mandatory for all new employees and is renewed every five years. Corresponding requirements are made on contractors who perform work at our units.

Perimeter protection and protective equipment Setra has invested heavily in perimeter protection over the years. All saw lines and trim saws are fitted with barriers and safety guards that disconnect the power if anyone comes too close to the machinery. Additional protective barrier measures such as fences and gates are required to create a safer environment at our units. Over the course of 2020, we have improved the external perimeter protection at two further units, so now only Hasselfors remains, and the protective coverings there will be upgraded over the coming year.

New, more stringent requirements on work clothes and protective equipment were introduced over the past year. For example, the requirement for hi-viz clothing has been changed such that a warning vest must now be worn as a minimum in all areas.

Working environment Being a Setra employee entails participating in occupational health and safety work and making an active contribution to the working environment.

Each production unit has its own safety committee tasked with following up and taking decisions on issues relating to the working environment.

Managers, leaders and safety officers all take the common training course entitled BAM – Bättre arbetsmiljö (Better Working Environment). The objective is to lay the foundations for systematic work to improve the physical, organisational and social working environments at the respective workplaces. The training course is held every year to include all new managers, leaders and safety officers. On account of the coronavirus pandemic, it was not possible to hold the course as planned this year, so all managers and safety officers have been encouraged to complete their working environment training remotely. We hope to be able to recommence the in-person training courses in 2021.

Employee distribution 2020 76%

93%

24%

7%

Proportion blue collar

Proportion of employees in Sweden

Proportion white collar

Proportion of employees in other countries

Workplace accidents 5

25

4

20

3

3.6 2.9

2

3.6

2.5

10

2

1 0

15

5

2016

2017

2018

2019

2020

0

Workplace accidents with sick leave per 100 employees per year (left axis) Lost Time Accident (LTA) Frequency Rate: number of accidents resulting in sick leave of more than one day, calculated per million hours worked (right axis) 10 Target for LTA Frequency Rate in 2025

Safety always comes first at Setra, and our vision is that no-one should come to harm at work. In 2020, we adopted a number of new measures intended to reduce the number of accidents. Our new sub-goal is that the accident frequency rate shall not exceed 10 by 2025. This KPI encompasses everyone who works at our facilities, including temporary staff and long-term contractors.

Sustainability Report 2020 — Setra Group

40 | CULTURE AND COLLEAGUES

In the most recent employee survey, three percent of respondents stated that they have been subjected to some kind of discrimination. The proportion is slightly lower than the average for the industry but may indicate the existence of unrecorded cases. Setra has a system for reporting, processing and following up on discrimination, and is working tirelessly with the issue. Aspects such as workplace culture and discrimination feature in both the BAM training course and the leader development programme.

Random drug and alcohol tests have been carried out at all parts of Setra since 2019. On account of the pandemic, these tests were paused at the offices in Solna and Gävle, where almost all the staff worked from home.

Preventative measures against COVID-19 A number of measures have been adopted to prevent the spread of infection among employees. The company’s precautionary regulations during the coronavirus pandemic have been communicated centrally via the intranet and screens and through the management structure.

All travel and visits that are not directly mission-critical have been cancelled, and staff at the offices in Solna, Gävle and at at our overseas offices have worked from home. The production units have been cleaned more often

Sustainability Report 2020 — Setra Group

than previously. Workstations, machine interfaces and forklifts have been disinfected at every staffing rotation.

Hand sanitizer is always available, as are face masks that are to be used for work tasks where it is not possible to maintain a safe distance. The mill managers have worked together to share experience and solutions in a shared best practice set-up, and meetings have been held digitally or outdoors as far as possible. All in all, Setra has succeeded in continuing to operate without interruption even though some employees have become infected and sick leave, including precautionary time off and usual winter colds, has been high at times at certain units.

Employees in risk groups who need to be particularly careful have found solutions in consultation with their managers Physical and mental health Sick leave increased over the past year, totalling 6.3 (5.2) percent, including both long- and short-term sick leave.

Short-term sick leave was approximately 1.5 percentage points higher than in a normal year, which was only to be expected given that society adopted more stringent regulations during the coronavirus pandemic, and that everyone showing symptoms of a cold had to stay at home. A couple of Setra units also experienced redundancy notices and lay-offs, which may well have affected

our employees during the year.

Our objective is to achieve a healthy presence rate of at least 95 percent. We are well aware that numerous factors affect how often we are off sick, and for how long, and we are working on the issue in several ways. Examples include our focus on leadership development, performance reviews and a meeting structure where everyone has the opportunity to take part and give their opinion.

Setra has an agreement with a company that is helping us with the issue of concealed mental health issues stemming from stress or problems with drugs and alcohol. The agreement also gives all employees the chance to ask questions anonymously about mental health issues – both work-related and private. All Setra managers with subordinate employees are trained in spotting the signs of concealed mental health issues. In 2020, we introduced an updated digital training course for managers in dependency and substance abuse issues.

Business ethics Business ethics plays a key role in value-based leadership. Setra strives to maintain high ethics in all our business relations and to demonstrate responsibility and integrity in all interactions with our customers, suppliers and partners. Setra’s business ethics guidelines encompass compliance with competition legislation, gifts and representation and our Code of Conduct for Suppliers.

A new digital training course in business ethics was introduced in 2019. The course is intended for all white collar workers, agents who work on behalf of Setra, and production staff who have contact with customers, suppliers and/ or partners. Fully 94 (40) percent of the target group had completed the course by the end of the year.

Setra also has a white paper based on actual cases from a survey of the company’s business risks. The purpose of the white paper is to provide additional guidance in business ethics dilemmas. Over the past year, the company prepared to procure an external whistleblower service, which is to be introduced in 2021 to make it possible to report irregularities within the business anonymously. Setra already operates an internal anonymous whistleblower function.

PROGRESS WITH GRÖNSAMHET | 41

Generating a winning corporate culture Over the past two years, the Setra glulam factory in Långshyttan has been joined by two new, strategic factories – one for wood components and one for CLT. In just a short space of time, the number of employees has almost doubled, from 60 to 110. Factory Manager Kjell Lilletjernbakken is in charge of the work to shape a rapidly developing production organisation that is to be characterised by participation and a “we” spirit.

The glulam factory enjoys a reputation as a high-performance organisation, with short decision-making paths and con­sistently high scores in employee surveys. What have you done to transfer this culture to two new factories?

Early in the process, we recruited key staff from the glulam factory to work at the component factory. We then did the same thing with the CLT factory. In addition, many of our new employees started off by working six months or more at the glulam factory.

Our guiding principle is to create safe and secure workplaces where everyone is involved and can contribute his/her skills.

Key aspects are neatness and tidiness, clear structures and roles, good communication and a good helping of responsibility and co-determination.

What was the main challenge?

Building up a new organisation in the

middle of a construction site at the same time as commissioning and calibrating new machines is never easy. But generally speaking, everything ran smoothly. We have celebrated our mini-victories along the way and eaten a fair amount of cake.

Maintaining an open working atmosphere is an ongoing assignment. Against a background of safe conditions, there has to be space for innovation and problem-solving in an everyday context, at the same time as we have to take care to report all non-compliances. It is when we bring mistakes out into the light that we have the chance to improve.

You’ve spent your entire professional life in the wood industry in Långshyttan, holding several management positions.

How would you characterise your leadership?

Långshyttan is an old factory site, and

back then the steel industry featured a clear distinction between blue and white collar workers: “us” and “them”. I grew up in a worker’s home and I’m fully familiar with “mill mentality”. A winning corporate culture looks very different today. It has to be founded on team spirit, involvement and the capacity to see the big picture and the end product of what we are doing. Setra does not make planks and boards; rather, we make components for deluxe homes in Japan, as well as walls and floors for modern apartment blocks in Scandinavia.

Today, it is all about “we”.

Kjell Lilletjernbakken, Factory Manager Business Area Building Solutions & Components

Sustainability Report 2020 — Setra Group

42 | MANAGEMENT AND ORGANISATIONAL STRUCTURE

Setra’s management President and Group CEO

CFO

Katarina Levin

Johanna Gydingsgård

Born: 1964 Employed since: 2020 Education: MSc Forestry Science

Born: 1974 Employed since: 2018 Education: Masters’ in Business Economics

EVP Market and Business Development

EVP Building Solutions and Components

Olle Berg

Daniel Halvarsson

Born: 1965 Employed since: 2013 Education: MSc Econ.

Born: 1979 Employed since: 2019 Education: MSc Eng.

SVP Enterprise Risk Management

CIO / CDO

Pontus Friberg

Andreas Hörnfeldt

Born: 1962 Employed since: 1993 Education: MSc Forestry Science

Born: 1969 Employed since: 2016 Education: MSc Eng.

EVP Production and Sustainability

SVP HR

Joakim Nyqvist

Anna Rasmuson

Born: 1971 Employed since: 2018 Education: Bachelor’s degree in education

Born: 1969 Employed since: 2017 Education: MSc Eng.

EVP SC / CTO

Anders Nordmark Born: 1961 Employed since: 2017 Education: MSc Eng.

Setra’s organisational structure

CEO

FINANCE AND ACCOUNTS

RISK MANAGEMENT

IT AND DIGITALISATION HR AND PAYROLL COMMUNICATION

PRODUCTION AND SUSTAINABILITY

Sustainability Report 2020 — Setra Group

SUPPLY CHAIN AND TECHNOLOGY

MARKET AND BUSINESS DEVELOPMENT

BUILDING SOLUTIONS AND COMPONENTS

44 | MANAGING SETRA’S SUSTAINABILITY WORK

Managing Setra’s sustainability work Setra’s aim is for the perspective of sustainability to be an integral part of everything we do. Our core values of commitment, innovation and responsibility are to serve as our guiding lights in making sustainable decisions and acting ethically in our everyday work.

Materiality analysis – prioritised sustainability areas In order to identify our key sustainability areas, we have completed a materiality analysis, taking as our starting point both the impact our business generates in every link of the value chain, and the demands and expectations placed on us by the outside world. The materiality analysis is checked and updated regularly in step with the development of our business, changes in the world around us and the progression of our stakeholders’ expectations on us.

We have packaged the findings from the materiality analysis into five key issues: Our portfolio, Resource-efficient business, Culture and colleagues, Climate-smart raw material and Sustainable transport. What we consider important in each area, how we work, goals and follow-up are all set out in this sustainability report.

Stakeholder dialogue Setra’s prioritised stakeholders are customers, employees, owners and suppliers. We maintain an ongoing dialogue with our stakeholders to identify areas for improvements, pick up on ideas for stimulating working relationships, and remain up-to-date with the latest requirements and expectations.

Over the course of 2020, climate issues have been highlighted even more clearly as being important to the stakeholders with whom we work actively.

We have noted this primarily among our existing and potential customers, who are increasingly asking questions about the climate performance of our products and how we are working to reduce emissions from our business.

Another area that is gaining an increasingly prominent position in the public debate, in the media and among

Sustainability Report 2020 — Setra Group

our owners involves issues relating to sustainable forestry and biological diversity. This is a key issue for us, and one on which we are working constantly in partnership with the industry, our owners and our suppliers.

The coronavirus pandemic has had an impact on us all in 2020. Initially, the pandemic affected demand for our products, but the market has actually remained strong during the year. We have worked hard to keep production running at our units and to establish a good working environment that minimises the risk of infection.

Sustainability policy Setra’s sustainability policy is our overarching governing document for our work with sustainability. The policy highlights the focus areas of business ethics, employees, occupational health and safety, the climate and the environment, and is published online at setragroup.com Organisation and responsibility The work forms an integral part of our processes and common way of working. All managers and employees are responsible for making a contribution within the framework of their respective areas of responsibility and roles.

Setra operates a sustainability function that encompasses the environment and communication departments. The sustainability function is the responsibility of the company’s sustainability manager and is tasked with developing the work, providing expertise and supporting the business operations.

The HR unit also has an important role to play in our sustainability work.

Responsibility for risk management is delegated from the CEO to the SVP for Enterprise Risk.

The operative work with environmental, ethical, OHAS and staff issues takes place at the respective workplaces.

A reorganisation has been planned for 2021, whereby responsibility for sustainability issues will be distributed more clearly within the organisation and at the different units. The cohesive responsibility for sustainability within the organisation is placed with the EVP for Production and Sustainability, and a new Sustainability Manager will be recruited in 2021.

Certified management systems and shared goals Setra’s Swedish operations are certified in accordance with the ISO 14001 environmental management standard. Setra’s management system also includes health and safety and fire safety, which it is checked regularly through internal audits and insurance inspections.

These elements have not been externally certified.

Setra’s sawmills and processing units are certified in accordance with FSC and PEFC Chain-of-Custody standards and the FSC standard for Controlled Wood. The certification demonstrates that the company has a system in place for tracking the raw wood material and ensuring that it originates from a responsibly managed forest.

The company has four overarching sustainability goals: one each for climate performance, energy utilisation, work safety (accidents) and sick leave.

The majority of the goals applied up until 2020. Over the past year, a new sub-goal for work safety has been adopted. The number of workplace accidents resulting in sick leave per million hours worked (known as the LTA Frequency Rate) shall not exceed 10 by 2025. Setra has also decided to

Sustainability Report 2020 — Setra Group

46 | MANAGING SETRA’S SUSTAINABILITY WORK

strive for a healthy presence level of 95 percent.

In 2019, Setra adopted a new, over­ arching climate goal: to become climate neutral by 2030. In addition to this, local sustainability goals have been set for each unit.

Good result from external audit In autumn 2020, an external audit was performed of the environmental management system for the Hasselfors, Skinnskatteberg, Långshyttan and Heby units, as well as for the Head Office in Solna. On account of the pandemic, the audits were performed in digital format.

The audit report states that Setra meets the requirements defined in the standards and contains several positive comments on our work. Neatness and tidiness, a well-functioning system for handling chemicals, and methodical work to improve energy efficiency are some of the aspects highlighted.

Areas in need of improvement include updating documentation and environmental delegation when managers are replaced.

Our management systems for FSC and PEFC were also audited in the autumn. This audit revealed that the traceability requirement is well integrated into our everyday operations, and that Setra staff are knowledgeable.

Some non-compliances and suggested improvements were noted in the audit, too, and these will be rectified/implemented. The certificate has been renewed.

Permit obligation under the Environmental Code All of Setra’s production units are subject to permit requirements or reporting requirements under the Environmental Code. The principal sources of environmental impact from our production are energy utilisation and noise.

Several of Setra’s production units have historically worked with wood impregnation and/or used various wood protection agents that may have resulted in pollution of the soil. Some other processes and activities may also have contributed to pollution. In addition, there are around 15 currently identified sites where the group has carried out operations in the past.

The environmental authorities have requested an investigation and, in some

Sustainability Report 2020 — Setra Group

cases, subsequent treatment at a number of these sites. Other requirements may be made going forward, therefore Setra has established reserves to cover possible future treatment measures.

Sustainability requirements on suppliers Setra’s Code of Conduct for Suppliers is based on the principles in the UN Global Compact and relevant international conventions. It is intended for suppliers of goods and services and for partners, both in Sweden and abroad. Setra’s largest and most important purchasing category is timber; other significant purchase areas include transport, plastic wrap, stickers and contracting services. As from 2020, Setra only purchases wood raw material from suppliers who are certified in accordance with FSC or PEFC standards.

The work on the Code of Conduct for Suppliers was started in 2017. Over the past two years, we have concentrated on communicating it and having it signed by our suppliers. In order to identify the suppliers that constitute the highest risk from a sustainability viewpoint, we have analysed all parties who sell products or services to Setra for at least SEK 1 million per year. The analysis was based on country, sector, product and supplier. The risk analysis affects our way of working with certain types of suppliers. For the largest purchase

categories: timber and transport, and those considered to entail certain risks, we work continuously on specifying requirements and following up; see the sections about Climate-smart raw material (page 18) and Sustainable transport (page 32).

For new suppliers, we conduct a sustainability investigation if the business or the product is considered to entail risk. In 2020, we completed a comprehensive sustainability investigation of a potential supplier.

Risk management and sustainability risks Since 2018, Setra has implemented a company-wide process for risk management (Enterprise Risk Management, ERM). The objective is to work more efficiently to prevent and deal with risks identified in the business for the company’s stakeholders. Responsibility for risk management is ultimately placed with the company’s SVP for Enterprise Risk, who is also a member of the Group Management.

The following section presents a summary of the company’s risks related to sustainability. These are primarily operative risks within a timeframe of 1–3 years. Financial risks and market risks are dealt with in the overarching company risk process and are not reported here.

MANAGING SETRA’S SUSTAINABILITY WORK | 47

Sustainability risks

■ Potentially high risk ■ Medium risk ■ Low risk

Description of risk

Risk assessment 2020

Risk management

Fire

We work systematically with fire safety, but we operate in an industry with an elevated fire risk.

Setra works systematically and preventatively with fire safety measures. This work includes: • Training • Installations to limit spread and damage – alarms and sprinklers, for example.

• Risk inspections and action plans • Reporting risk observations and near misses with an emphasis on fire

OHAS-related health risks on account of COVID-19

The pandemic has involved a work environmentrelated health risk for our employees, especially those who work in production or are unable to work remotely for other reasons.

Setra’s Group management and Head of Communications constitute the crisis management group. In the early stages of the pandemic, the crisis management group met digitally several times a week. Since the summer, the group has held weekly meetings. Risk analyses and action plans have been prepared at the company level, per workplace and per workstation. Information and guidelines are communicated via the intranet.

The following overarching guidelines are in place to reduce the risk of infection: • Office staff work from home; advance notice must be issued of all visits to the office • Staff at the industrial facilities must comply with strict procedures for distancing and hygiene • The units only receive mission-critical visits • Only mission-critical business travel is permitted

Workplace accidents

Our business operations have a high-risk working environment where failure to comply with procedures can result in injury and material damage.

Setra works systematically with occupational health and safety issues and applies a documented health and safety management system. Work and measures to ensure a safe working environment include: • Safety committee meetings and safety rounds • Risk analyses for the introduction of new machinery and other changes • Reporting of risks, accidents and near misses, daily management and reporting of non-compliances.

• Perimeter protection such as barriers and safety guards • Training in occupational health and safety issues for all managers and employees

Bribery and corruption

This risk primarily applies in the context of relations with customers and suppliers.

Setra has relations all over the world, which makes this risk difficult to check and monitor.

Setra takes a zero tolerance approach to bribery and corruption. The preventative work in this area includes: • Guidelines for compliance with competition legislation, as well as regarding gifts, benefits and third party hospitality.

• A control function on the signing of significant contracts • Training and dilemma exercises for staff who have working relationships with customers/ suppliers.

• The Code of Conduct for Suppliers includes requirements to combat corruption • Simpler whistleblower function (to be developed in 2021)

Regulation of and limitations on biofuel

A major debate is underway in the EU regarding the use of wood as a raw material for energy. There is a risk that new regulations will limit the opportunity for using residual products from production as biofuel.

Ongoing and active dialogue with industry organisations, owners and suppliers.

Keeping track of research and development of knowledge in the sector to make the best use of the wood raw material.

Quality shortfalls in responsible forestry

The risk of non-compliance with legislation and requirements in forestry.

As of 2020, Setra only purchases raw material from suppliers who are FCS- or PEFC-certified.

All the timber we purchase is traceable and fulfils our requirements for checked raw material.

We maintain a continuous dialogue with owners and suppliers.

Natural disasters, impacts of climate change

Increased risk of storms, forest fires and insect attacks that may affect the reliability of timber deliveries to our units and require us to be prepared to take care of damaged wood.

Examples of activities include: • Working with raw material suppliers to minimise the consequences of climate-related damage to forests.

• Planning and contingency measures to deal with storm-felled, fire damaged and insect damaged wood – through increased opportunities to water timber stocks, for example.

• Consideration for location, flood risk and soil conditions when setting up new operations.

Breaches of environmental legislation

We have a systematic approach, but there is always a risk of incidents.

Setra works systematically to improve and secure its operations, supported by our ISO 14001-certified management system. Examples of activities include: • Establishing and following up on environmental targets • Procedures/instructions • Internal and external audits • Monitoring legislation and implementing new legislation • Maintenance of plants • Dialogue with public authorities

Setra runs operations in Sweden and the UK; our biggest suppliers are Swedish, and Sweden has strict legislation. Human rights risks are primarily to be found in the supply chain, more specifically within certain sectors.

Setra has clear policies and guidelines concerning equality and non-discrimination, equal rights, recruitment and pay. Corresponding requirements are applied to suppliers through the Setra Code of Conduct. Separate requirements on risk reporting apply in the UK. The Modern Slavery Act came into effect in 2015, requiring all companies with operations in the UK to report risks and risk management measures with regard to forced labour and trafficking in the supply chain. Examples of measures to protect human rights include: • Requirement for FSC- and PEFC-certification on purchased wood • Supplier evaluation and requirements specified for suppliers • Dialogue with employees – via employee surveys, for example

Unplanned emissions into the soil, air and/ or water Soil pollution Breaches of human rights

Sustainability Report 2020 — Setra Group

48 | GRI INDEX

GRI index General information GRI

Information

Reference

Comment

Organisational profile 102-1

Name of the organisation

102-2

Activities, brands, products and/or services

4–5, 8–9, 14–16, 20

Setra Group AB, corp. ID no. 556034-8483

102-3

Location of headquarters

50

102-4

Location of operations

4

102-5

Ownership and legal form

4

102-6

Markets served

4, 14–17

102-7

Scale of the organisation

4–5, 9, 37, 43

102-8

Information on employees and other workers, broken down by employment type, employment terms, region and gender

4, 36–40

Setra’s business operations are mainly conducted by the company’s own employees, with the majority of these being full-time, permanent employees. On 31 December 2020, Setra employed 779 people, of whom 57 were based outside Sweden (UK 45, Poland 2, Germany 1, Spain 2, Austria 1, China 3 and Japan 3).

102-9

Supply chain

8–9, 18–21, 32–35, 46

The organisation’s suppliers can be divided into three main groups: suppliers of timber raw material, suppliers of logistics services and other suppliers.

102-10

Significant changes to the organisation and its supply chain

102-11

Precautionary Principle or approach

44–46

The Precautionary Principle is applied in the event of changes being made to business operations, for example the installation of new machines or choice of chemicals.

102-12

Externally developed economic, environmental and social charters, principles or other initiatives to which the organisation subscribes or which it endorses

20, 44–46

ISO 14001; PEFC™, Programme for the Endorsement of Forest Certification; FSC®, Forest Stewardship Council; Climate Report in line with the GHG Protocol.

102-13

Main memberships of industry or other associations and national or international advocacy organisations

The Rolfs unit has been sold. We have commenced operations at the CLT factory in Långshyttan and the planing and trimming plant in Hasselfors. Setra and Preem have started construction of a pyrolysis factory at Kastet, which is expected to commence operations in 2021. The coronavirus pandemic initially had a negative impact on the market for sawn wood products, but the market has since recovered. The pandemic has also affected how work is conducted at Setra – with regard to working from home, meetings and business travel, for example.

Setra is a member of the Swedish Forest Industries Federation and Svebio.

Strategy 102-14

Statement from senior decision-maker

6–7

Ethics and integrity 102-16

Description of the organisation’s values, principles, standards and norms of behaviour

10, 44–46

Setra’s vision is to do business that we, as well as others – our clients, society and nature – can profit from. This we call “Grönsamhet” – Green profit. We create green profit. Setra has a valuesbased leadership and our values are commitment, innovation and responsibility. The focus areas of the sustainability policy are business ethics, employees, health and safety, environment and climate.

Governance 102-18

Governance structure

The corporate governance report is available on pages 89–91 in Setra’s Annual Report.

Communication and stakeholders 102-40

List of stakeholder groups engaged by the organisation

102-41

Percentage of total employees covered by collective bargaining agreements

17, 46–47

102-42

Identifying and selecting stakeholders

102-43

Approach to stakeholder engagement

41, 46–47

102-44

Key topics and concerns raised through stakeholder engagement

44–46

100% of Setra’s employees in Sweden are covered by collective bargaining agreements.

44–46 Setra conducted an employee survey during the year.

Reporting practice 102-45

Entities included in the consolidated financial statements

102-46

Process for defining the report content and the topic boundaries

Facts and financial KPIs in the report refer to all the Group’s units.

102-47

List of the material topics identified in the process for defining report content

102-48

Effect of any restatements of information given in previous reports

The incorrect comparison year was previously stated regarding the targets for reduced climate emissions. The correct year is 2014. The destination calculations for the “Wood in a climate perspective” figure are incorrect in the sustainability reports for the years 2018 and 2019 on account of a calculation error.

102-49

Significant changes from previous reporting periods in the list of material topics and topic boundaries

No significant changes in scope or topic boundaries.

10, 44–46 12–13, 44–46

102-50

Reporting period

The report covers 2020.

102-51

Date of most recent report

March 2020.

102-52

Reporting cycle

102-53

Contact point for questions regarding the report

102-54

Claims of reporting in accordance with the GRI Standards

102-55

GRI index

102-56

External assurance

Sustainability Report 2020 — Setra Group

Calendar year, annual.

50 The report has been prepared in accordance with Global Reporting Initiatives Standards for sustainability reporting at the Core level.

48–49 The report has not been externally audited

GRI INDEX | 49

Subject-specific information GRI

Information

Reference

Comment

GRI 200 / Economic impact 201 Economic performance 103-1 103-2 103-3

Governance

53

201-1

Direct economic value generated and distributed

5

205 Anti-corruption 103-1 103-2 103-3

Governance

36, 40, 44–47

205-2

Communication and training about anti-corruption policies and procedures

40

205-3

Confirmed incidents of corruption and actions taken

The company’s business ethics guidelines include compliance with competition legislation, gifts and hospitality as well as a Code of Conduct for Suppliers.

No incidents reported.

GRI 300 / Environmental impact 103-1 103-2 103-3

Governance Environment

18–27, 32–34, 44–47

Aspects that are governed: resource efficiency/materials consumption, responsible forest management, energy consumption, greenhouse gas emissions and compliance. With regard to the goal for reducing greenhouse gas emissions, 2014 has been used as the comparison year as this was the first year Setra prepared a complete climate report. Goal fuflilment is not affected.

Environmental work is managed on the basis of ISO 14001. Responsibility is delegated from the CEO to mill managers. The Sustainability Manager is responsible for the management system, etc. and is the designated expert. Legal compliance is among the issues monitored in internal and external environmental audits.

Amount of material used in production, weight or volume

14–21

Used material, exchange. Responsible forest management.

302-1

Energy consumption within the organisation

22–26

Setra has purchased eco-labelled electricity since 1 January 2018.

302-4

Reduction of energy consumption

25–26

301 Material 301-1 302 Energy

305 Emissions 305-1

Direct (Scope 1) GHG emissions

28–31

The whole annual Climate report is published at setragroup.com.

305-2

Energy indirect (Scope 2) GHG emissions

28–31

The whole annual Climate report is published at setragroup.com.

305-3

Other indirect (Scope 3) GHG emissions

28–31

The whole annual Climate report is published at setragroup.com.

305-4

Greenhouse gas intensity

28–31

The whole annual Climate report is published at setragroup.com.

307 Environmental compliance 307-1

Breaches of environmental legislation

There were no breaches of environmental legislation in 2020.

GRI 400 / Social impact 103-1 103-2 103-3

Governance social impact

36–40, 44–47

The following aspects are governed: health and safety, training and skills development.

Worker representation in formal joint management-worker health and safety committees

36–40

The systematic occupational health and safety work at Setra is an integral part of the everyday operations. The producing units’ safety committees include representatives of the site management, safety officers and employees.

Types of injury and rates of injury, and number of days of absence due to illness

39

Typical injuries include crush injuries, wounds and sprains.

We record, manage and follow up work-related accidents and near-misses using SIA, the sawmill industry’s common system for reporting industrial injuries.

403 Occupational health and safety 403-1 403-2

404 Training and education 404-3

Annual performance and career development reviews

We are committed to contributing to positive development outside the Setra organisation and our own value chain as well. In 2020, we continued to act as a sponsor of the important work performed by the SOS Children’s Villages organisation.

38

Transparent and credible reporting To ensure transparent and relevant reporting of work on sustainability, Setra applies GRI Standards, Core level. We have also adapted the content of our annual report in line with the requirements stipulated in “Corporate reporting governing sustainability and diversity policies”. This publication constitutes the Setra Group’s consolidated Sustainability Report for the 2020 financial year. In the absence of any statement to the contrary, the Sustainability Report covers the entire Setra Group.

The auditor’s statement on the statutory Sustainability Report is presented on page 92 of Setra’s Annual and Sustainability Report. The Sustainability Report has not been the subject of additional external audits. Setra also publishes an annual Climate Report, which documents our emissions and the climate footprint of our products.

The annual Climate Report is drawn up based on the guidelines of the GHG Protocol and published in full at setragroup.com.

Sustainability Report 2020 — Setra Group

50 | ADDRESSES

Contact details Head Office Setra Group AB Box 3027 169 03 SOLNA Street address Gårdsvägen 18 169 70 Solna Phone +46 8 705 03 00 E-mail: info@setragroup.com

Sales, customer service & logistics Setra Trävaror AB Box 223 SE-801 04 GÄVLE Street and delivery address Setra Trävaror AB Skolgången 13 SE-802 57 GÄVLE Phone sales and customer service: +46 8 705 03 00

Production units Sawmills Setra Färila Snasbäcken SE-827 63 FÄRILA Phone +46 651 76 81 00 Setra Hasselfors SE-695 85 HASSELFORS Phone +46 585 485 00 Setra Heby 744 32 HEBY Phone +46 224 368 00 Setra Kastet Box 430 SE-801 05 GÄVLE Phone +46 8 705 03 00

Get in touch!

Would you like more information about our sustainability measures or this report?

Feel free to contact us.

Johanna Gydingsgård CFO johanna.gydingsgard@setragroup.com +46 8 705 03 03 Anna Rasmuson EVP Production and Sustainability anna.rasmuson@setragroup.com +46 8 705 03 05

Setra Malå Storgatan 92 SE-939 32 MALÅ Phone +46 953 414 00 Setra Nyby Nybyvägen 8 SE-743 63 BJÖRKLINGE Phone +46 18 56 08 00 Setra Skinnskatteberg Box 100 SE-739 22 SKINNSKATTEBERG Phone +46 222 452 00

Processing units Setra Långshyttan: Setra Glulam Amungsvägen 17 SE-776 72 LÅNGSHYTTAN Phone +46 225 635 00 Setra Building Solutions and Components Hagabergsvägen 3 SE-776 72 LÅNGSHYTTAN Phone +46 225 635 00 Setra Wood Products Ltd Estuary Road King’s Lynn NORFOLK PE30 2HJ, United Kingdom Phone +44 1553 76 00 71

Sustainability Report 2020 — Setra Group

Sales offices outside Sweden UK Setra Wood Products Ltd 11, St. Mary’s Court North Bar Within Beverley, East Yorkshire HU17 8DG, United Kingdom Phone +44 1482 87 00 35 Germany Setra Sales Germany GmbH Reichenberger Str. 5 DE-91207 LAUF Phone +49 9123 83277 Poland Setra Polska Sp. z o.o. ul. Staromiejska 17 E PL-84-300 LEBORK Phone +48 784 300 450, +48 695 198 686 Spain Setra Sales Spain C/Colombia 63, 4 B ES-28016 MADRID Phone +34 91 353 39 20 Japan Setra Sales Japan 4th Floor, 32 Shiba-Koen Building 4-30, Shibakoen 3-chome Minato-ku JP-TOKYO 105-0011 Phone +81 3 5404 7560 China Setra Wood (Guangzhou) Co Room 2720, Teem Tower No 208 Tianhe Road, Tianhe District, CN-GUANGZHOU 510 620 Phone +86 20 2830 6431 North Africa/Tunisia Setra Group c/o Mehdi Daldoul Rue du Lac Leman, Immeuble Regency, Bureau 301 Les Berges du Lac 1053 TUNIS, Tunisia Phone +216 71 861 700

OUR PORTFOLIO | 51

Production: Setra Group AB in partnership with LeadContent and Trossa.

Paper: Munken Kristall. An FSC-certified paper manufactured in Munkedal, Sweden.

Printing: Åtta45.

Photos: Morgan Ekner, Simon Eliasson, Johan Fowelin, Lars Hägglöf, Ola Högberg, Jansin & Hammarling, Magnus Laupa, Christian Ljung, Emil Nordin and General Architecture (page 30).

Sustainability Report 2020 — Setra Group

52 | OUR PORTFOLIO

Setra Group AB Box 3027 SE-169 03 Solna Phone +46 8 705 03 00 info@setragroup.com setragroup.com

Sustainability Report 2020 — Setra Group