Annual Report (ESEF) • Mar 31, 2022
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Download Source FileNorske Skog ASA 529900MYY60WXHHY3039 2020-01-01 2020-12-31 529900MYY60WXHHY3039 2021-01-01 2021-12-31 529900MYY60WXHHY3039 2020-12-31 529900MYY60WXHHY3039 2021-12-31 529900MYY60WXHHY3039 2019-12-31 529900MYY60WXHHY3039 2020-01-01 2020-12-31 ifrs-full:IssuedCapitalMember 529900MYY60WXHHY3039 2020-01-01 2020-12-31 ifrs-full:AdditionalPaidinCapitalMember 529900MYY60WXHHY3039 2020-01-01 2020-12-31 obq:RetainedEarningsAndOtherReservesMember 529900MYY60WXHHY3039 2021-01-01 2021-12-31 ifrs-full:IssuedCapitalMember 529900MYY60WXHHY3039 2021-01-01 2021-12-31 ifrs-full:AdditionalPaidinCapitalMember 529900MYY60WXHHY3039 2021-01-01 2021-12-31 obq:RetainedEarningsAndOtherReservesMember 529900MYY60WXHHY3039 2019-12-31 ifrs-full:IssuedCapitalMember 529900MYY60WXHHY3039 2019-12-31 ifrs-full:AdditionalPaidinCapitalMember 529900MYY60WXHHY3039 2019-12-31 obq:RetainedEarningsAndOtherReservesMember 529900MYY60WXHHY3039 2020-12-31 ifrs-full:IssuedCapitalMember 529900MYY60WXHHY3039 2020-12-31 ifrs-full:AdditionalPaidinCapitalMember 529900MYY60WXHHY3039 2020-12-31 obq:RetainedEarningsAndOtherReservesMember 529900MYY60WXHHY3039 2021-12-31 ifrs-full:IssuedCapitalMember 529900MYY60WXHHY3039 2021-12-31 ifrs-full:AdditionalPaidinCapitalMember 529900MYY60WXHHY3039 2021-12-31 obq:RetainedEarningsAndOtherReservesMember iso4217:NOK iso4217:NOK xbrli:shares ANN U AL REPOR T Photo: Carsten Dybevig SUMMARY Ke y figures Norske Sk og - The big picture The history of Norske Sk og CEO’ s comments Share information Board of directors Corporate management A glimpse of SUST AINABILITY REPORT About Norske Skog’ s operations Stakeholder and mat eriality analysis The sustainable development goals ar e an integral part of our str ategy Compliance About the sustainability report Sustainability development goals o verview Prioritised SDGs Our response to the T CFD recommendations How Norske Sk og relates to the other SDGs Ke y figures GRI standards inde x Independent Auditor’s assuranc e report Corporate gov ernance Report of the board of director s CONSOLID A TED FINANCIAL ST A TEMENTS Notes to the consolidated financial stat ements FINANCIAL ST A TEMENTS NORSKE SK OG ASA Notes to the financial statements Statement fr om the board of directors and the CEO Independent auditor ’ s report Alternative performance measur e s C O NTE NT S Design : B K. no, Print: BK.no Paper : Artic V olum white Editor : Carst en Dybe vig Cove r phot o: Adob e Sto ck. A ll imag es are N orske S kog’s pro per ty a nd sho uld no t be use d for ot her purposes without the consent of the communicat ion department of Norske Skog K EY FIG U RE S NOK MIL LION UNLESS OTHERW ISE ST A TED I N C O M E S TAT E M E N T T otal op erating income EBITDA * Operating e arnings - - - - Profit /loss for th e period - - - - - Earnings p er share (NO K) * - - - - - CAS H F LOW Net cash flow from operating act ivities Net ca sh flow from op erating activi ties per sh are (NOK ) Net ca sh flow from investing a ctivities - - - - - - OPERA TING MARGIN AND P ROFIT ABIL ITY ( ) EBITDA marg in Return on capital employed ( annualised) - PRODU CTION /DELI VERIES /C AP AC ITY UT ILIS A TION Produc tion ( tonn es) Deliverie s ( ton nes) Production/ c apacity ( ) BALANCE SH EET Non-current assets Assets held for sale Current as sets T otal assets Equity - Net interes t -bearin g debt * As def ined in Alternat ive Performance Meas ures. ** C ash fl ow per sha re and earnings p er share are c alculated bas ed on sha res. An analys is of key fig ures comp ared with is include d in the Repor t of the B oard of Directors . 0 2 700 5 400 8 100 10 800 13 500 2021 2020 2019 2018 2017 2016 2015 0 500 1 000 1 500 2 000 2021 2020 2019 2018 2017 2016 2015 0 1 000 2 000 3 000 4 000 5 000 6 000 2021 2020 2019 2018 2017 2016 2015 NET IN TEREST BEARING DEBT TO T AL OPERA TING INCOME E B ITDA 0 2 700 5 400 8 100 10 800 13 500 2021 2020 2019 2018 2017 2016 2015 0 500 1 000 1 500 2 000 2021 2020 2019 2018 2017 2016 2015 0 1 000 2 000 3 000 4 000 5 000 6 000 2021 2020 2019 2018 2017 2016 2015 0 2 700 5 400 8 100 10 800 13 500 2021 2020 2019 2018 2017 2016 2015 0 500 1 000 1 500 2 000 2021 2020 2019 2018 2017 2016 2015 0 1 000 2 000 3 000 4 000 5 000 6 000 2021 2020 2019 2018 2017 2016 2015 NOK million NOK million NOK million Annual report 2021 / Norsk e Skog 4 SUMMARY Boye r , Australia / Bruck , Austria / Golbey , F rance / Skogn , Norwa y / Saugbrugs , Norway / mills in 4 countries 5 12% Female emplo yees Emplo y ees 2 092 8 4% Rene w able energy 89% Certified fibres 1 .9 Lost time injuries per million working hours CEO Sven Ombudstv e dt SV P Lars P . S. Sperre Corporate stra tegy SV P Robert Wood Commercial SV P T ore Hansesætre Strategic projects COO Amund Saxrud CFO Rune Sollie CORPORA TE MANA GEMENT 5 SUMMARY Photo: Carsten Dybevig Annual report 2021 / Norsk e Skog T HE HIS T OR Y OF NOR SK E SK OG Norske Sk og was established in , but our Boyer , Bruck and Saugbrugs mills have been in operation much longer . Until the s, the company grew in Norwa y , acquiring businesses in pulp, paper and wood-based construction materials. Through the nineties, Norske Sk og expanded internationally , first with the construction of a mill in France and la ter through acquisitions of other newsprint and magazine paper companies all over the world. The activities within other paper grades, market pulp , energy and construction materials were sold o . In recent years, the compan y has entered into sever al projects relat ed to recycled containerboard, ener gy and bio products. As of , Norske Sk og has five mills in four countries and is one of the world’ s largest producers of publication paper t o news papers, magazines, periodicals and for advertising purposes. Norske Sk og is listed on the Oslo Stock Exchange, and had about employees at y ear-end . - Purchase of paper mills in Austria and the Czech Republic. Norske Skog was est ablished by Norwegian forest owners. The purpose was to exploit timber resources in centr al Norway , and a newsprint mill was built at Skogn, starting production in . Expansion outside Norway , Start-up of production in Golbey in France, our first business outside of Norway . Sale of pulp mills in Norway . Purchase of Fletcher Challenge Paper in New Zealand, a firm with operations in Austr alasia, South America, Canada and Asia. Purchase of mills in Germany and the Netherlands. Comprehensive restructuring of the business, and divestment of activities outside the defined core area of newsprint and magazine paper . Global expansion - Expansion in Norway - Our core values: openness, honesty and cooperation Annual report 2021 / Norsk e Skog 6 SUMMARY Sale of two mills in Chile and Netherlands, shut-down of Follum paper mill in Norway . Sale of two mills in Brazil and Thailand. T wo machines idled at T asman and Walsum. Ramp-up of a converted newsprint machine to L WC-products at Boyer in Australia. Closure of the W alsum mill in Duisburg, Germany . The board of Norske Skogindustrier ASA filed for bankruptcy . Open new biogas facility at Saugbrugs. New beginning with Oceanwood purchasing the mill portfolio. New three-leg strategy within publication paper , packaging paper , and bio products and energy r elated products. Norske Skog AS A was listed on the Oslo Stock Exchange. Sale of the Albury mill in Australia and the for e st in T asmania. Establishing commercial activities within nanocellose and expansion in biopellets. Closure of T asman mill in New Zealand. Expansion into biocomposittes and starting construction of a waste-to- energy plant at Bruck. Financing the conversion of two newsprint machines at Bruck and Golbey into containerboard pr oduction. Sale of Nature’ s Flame tons pellets facility in New Zealand. Plan to start-up waste -to- energy of plant and recycled container board production at Bruck. Sale of two mills in China, shut-down of one paper machine in Europe. Five newsprint machines shut down, shares in the Canadian business sold. Sale of two mills in South Kor ea, sale of property , shut-down of two paper machines in Europe. Comprehensive r estruc turing - Financial restructuring - New beginning - Annual report 2021 / Norsk e Skog 7 SUMMARY Our transformation fr om a pure publication paper business to a packaging and bio-based company with an assembly of new green products ar e progressing according to plans with sound financing and dedicat ed employees. In , we will fulfil our strat egic ambitions through diversification of our pr oduct p ortfolio . At the same time, we are exploring new fibr e - and energy business opportunities at every mill. The huge containerboard and ener gy projects at Bruck will be part of our revenue str eams in . In , the Golbey projects will be commissioned. These transfor- mations are designed accor ding to sustainable business models and satisfy the global economic ambitions of circularity for thr ee reasons: . W e will be a large independent producer in a growing containerboard mark et with tonnes of cost- competitive capacity , . Our containerboard operations will be fully based on recycled fibr e, . We will utilise gr een energy generat ed from the new waste-to- energy facilit y at the Bruck industrial site and later a new biomass plant at the Golbey industrial site. During , we have seen more v olatile markets for our publication paper products, especially in Europe wher e the abrupt energy price hikes put a tr emendous challenge to our commercial team. Without this well-handled customer response, the business situation would hav e been very dierent f or our European mills. Howev er , we will still be a committed and reliable supplier of high- quality publication paper grades in the futur e. In addition to the new containerboard con versions, we have during the year pr oudly communicated our excellent new fibre business opportunities regularly in dier ent channels with excitement fr om key stakeholders. The promotion of our envir onmental eorts and gr owth story will strengthen the valua tion of the entire group and most importantly the local reputation of each mill. E urope will until strive to fulfil the common commitments of a carbon neutral industry . Through our strategic choic es, we are without doubt well positioned to be a competitive business leader in the transition to a low-carbon economy . Our green transf or mation initiatives demonstrate this: - Golbey won the Choose France A ward in the Gr een T ransition category pr esented by the Minister of Economy and Finance. Golbey receiv ed the award for the environmental c ommitments by the conver sion of one machine to packaging paper and the Green V alley (CRE) energy project. In addition, Golbey has been awarded the Ecov adis platinium level for their outstanding sustainability perf ormance. - Through the construction of two ener gy plants based on waste residues at Bruck and biomass at Golbey , we will have access to gr een energy and significantly reduce our carbon footprint. This will enable us to become one of the best performers in the industry . The waste-to- energy plant at Bruck will commence commercial pr oduction in first half of . - New green products lik e CEBINA and CEBICO developed at Saugbrugs, have suc cessfully entered new markets, r eplacing high carbon footprint products. The production of fibr e composite products at Saugbrugs has a huge market potential, especially considering the decommissioning of fossil based plastic products expected long befor e . GR EEN T R A N SF ORM A T ION T O A BRI GH T F U T U RE CEO Sv en Om buds tved t inter vie wed by Ma rius Lo rents en at H egna r TV a bout t he qua rter ly res ults i n Nove mber . I want to thank all our employees for splendid morale and eort s in , once again a dier ent year for all of us. Annual report 2021 / Norsk e Skog 8 SUMMARY - Through the partnerships with Ocean GeoLoop at Norske Skog Skogn and Bor g CO at Norske Sk og Saugbrugs, Norske Sk og aims to pursue the opportunity to become CO net negative, and to explor e economically viable models for utilisation of biogenic CO . - Sk ogn is successfully contributing to innovative resour ce and energy eiciency impro vement of the pulp and paper industry through the integr ation of process wastewat er and biogas production enabling a CO emission reduction. - Nature’ s Flame received in a prestigious r ecognition at New Zealand’ s Energy Excellence Awar ds for grea tly reducing the carbon footprint for a lar ge customer by shifting from brown coal t o green bio-pellets. The facility was sold in to T alley’ s, a New Zealand based industrial company . In June, our T asman mill in New Zealand unfortunately ceased production due to a diicult market sit uation, and unpredict- ably high and volatile energy prices. W e tried hard for many years to secure the oper ations and jobs for many good colleagues by alternative pr oduc tion to no av ail. In France and Austria, we are inv esting EUR million at the mills because we believe in a prosper ous future. A long-term stability in the political conditions, eective and predictable oper ational environment and loy al customer relations are ev aluated as important pre-requisites for such inv e stments. I want to thank all our employees for splendid mor ale and eorts in , once again a dier ent year for all of us. A t Norske Sk og, we are acutely awar e that we are in charge of our own destiny . We are committ ed to be competitive in the global marketplace, leaving us with no other options than being innovativ e, creating new pr oducts and exploring new business opportunities in a safe working environment f or all our employees. I am glad to say that we ar e undergoing a promising green transf ormation to a bright future. SVEN OMBUDS TVED T CEO STR A TEGY : Publication paper: Improv e and optimise publication paper cash flows Pack aging paper: Become a leading European producer of renew able packaging Bio products and energy: Diversify and innov ate within bio products and energy Norske Sk og creates gr e en v alues from sust ainable fibre and ener gy for the benefit of all stak eholders: OPERA TIONAL EFFICIENC Y T ARGETS : Publication paper: Achieve an EBITD A margin of at least Maintain an operating r ate of at least Pack aging paper (from -): Achieve an EBITD A margin of at least Maintain an operating r ate of at least 10% 90% 20% 95% 9 Annual report 2021 / Norsk e Skog SUMMARY SH A RE IN F ORM A T ION INTRO DU CTIO N Norske Sk og aims to provide long-t erm value growth and an attr active return for its shareholders, which e xceeds that of relevant investment alt ernatives. This ambition will be supported by a responsible capital allocation str ategy and a conservative capit al structure. Norsk e Skog is listed on the Oslo Stock Exchange where it tr ade s under the ticker code NSK OG. All shares hav e equal rights and are fr eely transfer able. The Norske Sk og Corporate Management and Board of Dir e ctors ar e committed to serving all shareholders and pot ential new investors with consistent, accessible, and immediate disclosure of rele vant information through Oslo Stock Exchange, media, and financial news wires. Norsk e Skog has a policy of equal treatment of all stak eholders to the group . SHARE S AND SHARE CAPIT AL On December , the share capital of Norsk e Skog was NOK , consisting of shares each with a par value of NOK . All shar e s have equal rights. The Norske Sk og share price was NOK on December , representing a mark et value of approximately NOK million. The return for was negative NOK or negativ e percent. The Oslo Stock Exchange Benchmark Index (OSEBX) had a r eturn of percent in . For Norsk e Skog, the highest share price in , based on close-of-trading, was NOK on November , and the lowest price was NOK on January . Norske Skog paid no dividends during the year . VO LU M E In , Norske Skog shares were tra ded in the market, e quivalent to a turnover of NOK million. The averag e daily trading volume was share s. This volume exclud es the o-market transaction s reference d be l ow. NS Nor way Holding A S, the large st shareh older of No rske Skog, sold shares in J anuar y and shares in D ecem ber . N orske Skog issue d share s in Februar y raising N OK m illion and incre asing the numbe r of shares is sued from to . DIVIDEND P OLIC Y AND PROPOS AL It follows from N orske Skog’s Corporate G overnance Policy that the c ompany shall, at a ll times, have a clea r and predic table divi dend poli cy estab lished by the board of dire ctors . The dividen d policy forms the b asis for the bo ard of directo rs’ proposals on dividend paymen ts to the com pany’ s general meeting. The comp any’s dividen d policy has hi storically b een to pay divide nds refle cting the unde rlying earnin gs and cas h flow while en suring e icient capit al allocatio n in the group. When d eciding the di vidend level , the board of direc tors will among othe r things take into consid eration capi tal expenditure plans , financin g requirements an d maintaining the approp riate strategic flexibilit y of the group. The group ’ s fina ncing arrang ements for the o ngoing Annual report 2021 / Norsk e Skog 10 SUMMARY SHAREHOL DING INT ERV AL NO. OF SHA REHOLDERS NO. OF SHA RES OF SHA RE CAPIT AL - - - - - above To t a l SHAREHOL DER CIT IZENSH IP NO. OF SHA REHOLDERS NO. OF SHA RES OF SHA RE CAPIT AL No r way United Kingdom Luxe mb ou rg Sweden Ireland Uni ted S tates Ge rma ny Denm ark Belgium Switz erland Guernsey Finland Fra nc e Canada The Net herlands India Japan Italy Lie chten stei n Esto nia Other To t a l projec ts at the Bruc k and Golb ey mills to convert a new sprint pape r machine at each of the mill s to a recycled co ntainerbo ard paper m achine inc lude restric tions on divide nd distribution i n the period up to Jul y . The comp any’s dividend p olicy has there fore been su spend ed until such restric tions do no lon ger apply. For the finan cial year , the board of direc tors has acc ordingly not prop osed that the a nnual gene ral meeting appro ves pa yment of di vidend. LONG TERM INCEN TI VE P ROGRAMME The board of directors has appr oved a synthetic option programme f or senior executive emplo yees in Norske Sk og. By year- end , million synthetic options had been awarded. The pr ogramme is described in detail in the remunera tion report. FUNDING AND CREDIT QUAL ITY Maintaining a strong financial position is consider e d an important risk mitigating factor , supporting Norske Skog’ s possibilities for strategic development of its businesses. Access to e xternal financial resour ces is required to maximise v alue creation over time, balanced with acceptable risk exposure. Norsk e Skog targets freely av ailable and unrestricted cash and cash equivalents of minimum NOK million, EBITD A to net interest cost s of minimum , and book equity to total assets of minimum , see Note Interest -bearing liabilities in the consolidated financial statements. MA JOR SH AREHOLDERS AND V OTING RIGH TS On December , the largest shareholder was NS Norwa y Holding AS with shares corresponding to a owner ship share. On December , the foreign ownership was . Based on the information in the Norwegian Registry of Securities, Norske Sk og had a total of shareholders on December of which resided outside of Norwa y . Annual report 2021 / Norsk e Skog 11 SUMMARY ANAL YST COVERAGE ANAL YST TELEP HON E ABG Sund al Collier Arctic Securities Carne gie DNB Markets Pare to Se curiti es Spareb ank Markets ANNU AL G ENERAL MEET ING The Norske Sk og Annual General Meeting for will be held on Thursday April , at CET . Shareholders who wish to attend, are ask ed to follow the instructions on the notice of annual general meeting and to inform the r egistrar by CET on Monday April: DNB Bank ASA Registrar’s Department P . O . Box Sentrum N- Oslo, Norway Y ou may also register electr onically on our website www.norskesk og.com or via VPS Inv estor Services. Any shareholder may appoint a pr oxy with written authority t o attend the meeting and vote on his or her behalf . The meeting will be held online. FINAN CIAL CAL EN D AR FOR Februar y March April April July Oc tob er Fourth quarter results annual report Annual General Meeting First quarter results Second quarter results Third quarter results Nor ske Sko g res erve s the ri ght to rev ise th ese da tes . M u r i e l C a n i ez P ARI S, FRAN CE Muriel C aniez has worked for Nor ske Skog for years , and for the last t wo years, s he has be en in charge of the Wes tern European Hub. “I w as at t r a c ted t o the w orld of pa per and wa n t ed to le arn mo r e a bout the mar ke t and the pr od uctio n pr o ces ses. Now, 23 yea r s lat er , I sti ll nd this w orld j ust as fasci nati ng , ev en th oug h it has cha nged a l ot si nce the n. ” She be lieves Norske Skog will be come a m ajor player in the green tran sition in France and Europe . “Nor s ke Skog’ s diver sic atio n str at egy pr ovid es a sol id basis f or o ur f utu r e develo pment . T her e wil l be ch al le nges, b ut we a r e condent a nd sol uti on- orie n t ed. ” Annual report 2021 / Norsk e Skog 12 SUMMARY INFORMA TION FR OM NORSK E SK OG Communicating with the stock market is given high priorit y , and Norske Skog aims to maintain an open dialogue with market participants. Our objective is t o provide suicient inf ormation on a timely basis to all market participants to ensure a fair v aluation of our shares. Information that is considered price sensitive is communicated by news r eleases and stock exchange announcements. W e host regular meetings for inv estors, both in-person and virtually . All information about Norske Skog is published on our website: www . norskeskog. com. Our annual and quarterly reports ar e available on www .norskeskog.c om. Printed version of the annual and quarterly r ep orts can be receiv e d at our oice at Sjølyst Plass , Oslo, Norwa y , or via mail by sending a request to info@norskeskog. com. Three weeks befor e the announcement of quarterly results, Nor ske Skog practices a “silent period” , meaning that contact with external analysts, investors and journalists is limited. This is done t o minimise the risk of information leaks and potentially unequal informa tion in the marketplace. SHARE P RICE Share pric e high ( close -of- trading), NOK Share pric e low ( c lose- of -trading ), NOK Share pric e av erage (v olume weigh ted average price), NOK Share pric e year -e nd, NOK Dividend pa id per shar e, NOK Market capit alisation year - end, N OK million V olume (e xcluding o -mark et tr ansactions) Numbe r of shares trade d, million T urnover, NOK million Numbe r of trades Numbe r of trading days Av e rage daily num ber of share s traded Av e rage daily turnover , NOK millio n Av e rage daily num ber of trades Shareholders Non-Norwegian o wnership y ear - end, sh are Shareh olding inter val - , share Shareh olding inter val - , share Shareh olding inter val - , share Shareh olding inter val - , share Shareh olding inter val - , share Shareh olding inter val above , share T op shareholders, share T op shar eholders, share T op shareholders, share T op shar eholders, share T op sha reholders, share T op shareholders, share Number of shar eholders Outstan ding shares year - end Annual report 2021 / Norsk e Skog 13 SUMMARY B O A RD OF DIRE C T ORS JOH N CHIAN G Chair, Board me mber si nce Current election period: Elec ted Chair o n April , for a two-yea r perio d ( - ) Independent: No. Jo hn Chiang is th e Chair of NS Nor way Holdin g AS, whi ch is the larg est share holde r of Norske Skog ASA Residence: London, Unit e d Kingdom Positi on: Se nior Par tner and Po rt folio Mana ger of Oce anwood C apital M anagem ent (Lond on, UK ) Education: Mas ter of Busin ess Admin istration , Har vard Busin ess S chool ( USA) Bachelor of Science in Industri al E ngineering and a Minor i n Economic s, S tanford Uni versity ( USA) Other direc torships: Chair of NS N orway Holding AS Sha res in No rske Skog ASA per : Owns a nd/or controls share s Optio ns: TRIN EMAR IE HA GE N Boa rd membe r since Current election period: Elec ted Bo ard memb er on April , for a two -year peri od ( - ) Independent: Ye s Residence: Oslo, No rway Positi on: Group CFO Felleskjøpet Ag ri SA Education: Four -year prog ramme in e conom ics and busin ess a dministratio n consi sting of three ye ars at bach elor/ under graduate level a nd one year at mas ter /graduate leve l, Nor wegian S choo l of Economics, Bergen (Norway ) Firs t sectio n of law studie s, Unive rsity of B ergen ( N o r w a y) Other direc torships : Subsidi aries of Felleskjøpet Agri SA Sha res in No rske Skog ASA per : Owns a nd/or controls sh ares Optio ns: ARVID GRU NDE K J ØN Board member since Current election period: Elected Board member on April , for a two-year period (-) Independent: Ye s Residence: Oslo, Norway Positi on: Investor and professional boar d member Education: Executive progr amme, Harvard Business School (USA) Master of Law , University of Oslo (Norway ) Master of Business and Economics, Norwegian School of Economics, Bergen (Norway) Other directorships: Currently on dier ent boards of directors, ao . Chair of Infima AS, Chair of Creati Estat e AS, Chair of Cardid AS, Chair of Stiftelsen Fullrigger en Sørlandet, Board member KLP Eiendom, Chair of AK O Art Foundation and Chair of Strømme Founda tion Sha res in No rske Skog ASA per : Owns and/ or controls shares Optio ns: OB SER V ERS: P AUL KRISTIANS EN Observer since Position: Main employ ee represent ative Norske Skog Saugbrugs. Line driver at Norsk e Skog Saugbrugs. SVEIN E RIK VE IE Observer since Position: Main employ ee represent ative Norske Skog Skogn, . machine oper ator Norske Sk o g Skogn. Annual report 2021 / Norsk e Skog 14 SUMMARY C ORP OR A T E MANA G E M E N T SVEN OMB UDSTVE DT Chief E xecutive O icer Employed in N orske Skog sin ce Profess ional e xperience: Seni or Vice Pre sident S CD, SAS Chief Fin ancial O ic er and He ad of Strate gy & Seni or Vice Pre sident U pstream O peratio ns, Y a ra International ASA Seni or Vice Pre sident C orpor ate Strategy, Norsk Hydro ASA V arious p osition s in Hydro Agri and No rsk Hydro Education: Master in Intern ational Management, Thunder bird (USA ) Bach elor in B usine ss Adminis tration at Pacif ic Lutheran University (USA) Sha res in No rske Skog ASA per : Owns a nd/or controls share s Optio ns: sy nthetic option s RU N E SO LLI E Chief Financial Oicer Employed in N orske Skog sin ce Profess ional e xperience: Seni or Direc tor Finan cial Repo rting & C omplia nce, Statoi l Fuel & Retail AS V arious p osition s at UNIc onsult A S and Y ara Internatio nal ASA and KPM G AS Education: State Autho rised Pu blic Acco untant at No rweg ian Sch ool of Econo mics (N orway ) Bach elor of S cienc e in Accountin g and Auditing a t Oslo University College (Norwa y ) Sha res in No rske Skog ASA per : Owns a nd/or controls share s Opti ons: synthetic optio ns LARS P . S. S PERRE Seni or Vice Pre sident C orpor ate Strategy Employed in N orske Skog sin ce Profess ional e xperience: Presid ent and Chi ef Execu tive Oic er , Nors ke Skog Seni or Vice Pre sident C orpor ate Strategy & Le gal, No rs ke S kog Vice Pre siden t Legal, N orske Skog Legal C ounse l, Nor ske Skog Asso ciate law yer , Wikb org Rein Education: Prac tisin g Ce rtif ic ate Mas ter of Law (Cand. Ju r .) at U niversi ty of Berg en ( N o r w a y) Sha res in No rske Skog ASA per : Owns a nd/or controls sha res Optio ns: synthe tic options ROBE RT A. WOO D Seni or Vice Pre sident C omme rcial Employed in N orske Skog sin ce Profess ional e xperience: Vice Pre siden t Comme rcial, N orske Skog Mana ging Dire ctor Ce ntral European H ub, No rs ke S kog Vice Pre siden t European Sa les , Norske Skog General Manager , Norske Skog P anAsia ( Shanghai) V arious p osition s in Comm ercial C onsultin g Co. Ltd. (China), Heral d and Time s ( Glas gow ), Strathclyde Polic e ( G lasg ow ) Education: Bach elor of S cienc e (st Cla ss Hon s), Universit y of Str athcl yde (Sc otlan d) Sha res in No rske Skog ASA per : Owns a nd/or controls share s Optio ns: synthe tic options TORE HANS ESÆTRE Seni or Vice Pre sident S trategic Proj ects Employed in N orske Skog sin ce Profes sion al experi ence in N orske Skog : Chief Operating Oicer Vice Pre siden t Operati ons Manager Operation Support Senior A dvisor Busi ness Performance Cor pora te Strate gy An alys t Education: Master of Industrial E conomics and T echnolo gy Management, Norwegia n Univ ersity of Science and T echnology, T rondheim ( Norway ) Sha res in No rske Skog ASA per : Owns a nd/or controls share s Optio ns: synthe tic options AMU ND SAXRU D Chief O peratin g Oi cer Employed in N orske Skog sin ce Profess ional e xperience: Mana ging Dire ctor , Nor ske Skog Skogn Produ ction Man ager, Norske Skog Foll um Performance Manager , Norske Sk og Follu m Produ ction Man ager in Pulp a nd Energy Department manager Energ y /Eluent, No rs ke S kog Fo llu m Proce ss eng ineer, Norske Skog Fo llum Education: Mas ter of Scien ce, Fac ulty of Che mistr y and Chem ical T ec hnolo gy at the Nor wegia n Institute of T e chnology , T rondheim ( Norway ) Sha res in No rske Skog ASA per : Owns a nd/or controls sh ares Option s: synthe tic options Annual report 2021 / Norsk e Skog 15 SUMMARY Nors k e Sk og recei v es Norwegi an en vir onmental aw ard In connection with the World Envir onment Day on June, Norske Skog’ s Skogn production facility was aw arded Norwegian political party SV’ s local environmental awar d. This is the third time Norsk e Skog Skogn r eceives this recognition since the award was established in . The awar d pointed to Norske Sk og Skogn as a sustainable cornerstone business. Norske Sk og Skogn receiv ed the award specifically for their eorts in the road t o rail strat egy , which has brought Norske Skog Skogn’ s timber transportation from truck s to trains. In collabor ation with Bane NOR and CargoNet, Norske Skog Sk ogn has taken cubic metres of timber o the roads, corr esponding to fewer trucks on the roads per week in the district of T røndelag, Norway . This means reduced CO emissions, safer roads, less airborne dust, and lowered exhaust emissions in the communities in which Norske Sk og operates. Becomi ng a div ersi f ied pl ay er in growing m ark e ts “From being a focused publication paper company we are no w transforming Norsk e Skog tow ards becoming a more diversified company , with projects in several cat egories for growth, ” says T ore Hansesætre, Senior Vice President Strat egic Projects in Norske Sk og. Norske Sk og has a strong portfolio of pr ojects aimed at growing markets. In Continental Eur ope, the company is pushing towards making Norske Sk og a leading independent producer of recycled containerboard, tar geting a rapidly growing packaging market. “The conversions of Norske Sk og Bruck PM and Norske Skog Golbey PM to producing recycled containerboar d, as well as the two new energy facilities at Bruck and Golbey , are four individually large, sustainable and attr active growth projects. T ogether, the y will reinforce each other and will contribute to Norsk e Skog quickly picking up the pace on revenue and earnings gro wth, ” says Hansesætre. A GL I MP SE OF Annual report 2021 / Norsk e Skog 16 SUMMARY Continued c ommercialisat ion of CEB INA CEBINA continues to see strong commer cial traction and high customer attention. Commercial de velopment of CEBINA has seen good progress during , and the commer cial entry into a new application area is a k ey milestone. In addition, it repr e sents the first sales contract with regular v olume delivery . “The sale of CEBINA into a new application is very ex citing, as it provides further evidence of the wide-ranging and envir onmentally beneficial potential of the product. In addition, we will be able to generate regular sales and re venues, and start building the financial foundation for the CEBINA business, ” says Hugo Harstad, Commercial Development Dir ector of CEBINA at Norske Sk og Saugbrugs. CEBINA is a natural fibr e-based product that adds rheology control in fluids and armouring in solid materials. CEBINA is produced by br eaking down the wood fibre to very small parts, called cellulose nano fibrils (CNF) or micro fibrillated celluloses (MFC). One gramme of CEBINA can cover an entir e tennis court, or be stretched eight times around the earth. These incr e dible surface and length properties giv e CEBINA its unique qualities. Norske Sk og Saugbrugs has worked closely with the R&D institutions RISE PFI, NORCE and Re- T urn. Support from The Research Council of Norway and Inno vation Norwa y has been key to the success. A war d fro m Choose F ra nce t o Norsk e Sk og Golbe y for g reen in vest ment In , Norske Sk og was awarded the Choose Fr ance Award in the Green T ransition category for its million investment at Norske Sk og Golbey , for the conversion of one newsprint production line to recy cled containerboard. The award was pr esented to Norske Sk og by the Minister of Economy and Finance during his visit to Norsk e Skog Golbey . “ We are humble and proud to re ceive this award for the investments in our Golbey mill. This recognition proves tha t our future orie nted projects n ot only make busine ss sense , but also contributes to the be nefit for th e environment , the societie s and the economy in the societies in which we operate, ” says No rske Skog’ s CEO Sven Ombudstv edt. Annual report 2021 / Norsk e Skog 17 SUMMARY E nt ers the packag ing mark et with Skogn Interliner The produ ction of Interline r star ted on Skogn’s seco nd produc tion line in March of . Interline r is the liner , which lie s betwe en the flutes in d ouble wall corr ugated cardb oard. The p roduct is m anu- factured fo r use in the typ e of corrugated c ardboard , which is produc ed and utilis ed in Asia . Ope rations progres sed well , and the end u sers provide d positive feedb ack upon te sting the Interliner. Based on th e feedba ck the test de liveries rec eived, Skogn mill is a ctively working to imp rov e the produ ct and to carr y out the nex t test del iveries with enhanced produc t characteristics. “ We aim to further devel op the product an d produce gre ater volumes i n . At the same time, we are pri oritising the important work of strengthening our expertise surrounding the Interline r product, b oth to enhance its qua lity , and to facilitate the Interliner production process’ compatibility with our newsprint production,” says Håvar Fjerdinge n, Hea d of T echn ical Cus tomer Ser vice at Skogn . E nergy p ro ject at Bru ck r eaches k ey milestone Nors k e Skog is investing in a new MW energ y boiler at the Bruck m ill, utilising refu se-d erived fuels a nd paper p roduction residua ls. This will im prove t he carb on footprint, fur ther strengthe n the mill’s profit ability and c reate new busin ess beyond public ation paper. The fuel stora ge building for the p roject reache d its fi nal height in Ap ril . “It i s impress ive how Norske Skog in B ruck have managed to succe ssfull y advance the ene rgy project , despite the still ten se Corona situation. The energy boiler and the machine con version project will ser ve sustaina bly growing mark ets,” s a y s To r e Hansesætre, Senior Vice Presi dent Stra tegic P rojects. Annual report 2021 / Norsk e Skog 18 SUMMARY Biog as fill in g sta t ion o pened in T r ondheim Biogas is increasingly used as a fossil fr ee fuel for vehicles, replacing diesel and petrol. Norsk e Skog Skogn mill contributes to innovativ e resource use and impr oved energy eiciency of pulp and paper industry eluents through a collabora tion between Norske Sk og, Scandinavian Biogas and Biokraft AS. In Nov ember a new biogas filling station opened in Tiller , Norway , where heavy transporta tion vehicles can now fill biogas produced at Biokraft Skogn, a pr oject located at Norske Sk og Skogn. By integrating the paper mill and the biogas pr oduction facility , the project was able to r educe CO emissions by , an estimated amount of to tons per year . The demonstration project was supported by the EU LIFE Pr o gramme. Lau nchi ng in to a ne w spher e f or containerboar d production In and , Norske Sk og will launch into a new sphere as a producer of recy cled containerboard, with a clear commitment t o become a leading, independent supplier in the packaging industry . “Over the next two y ears, Norske Skog will conv ert two paper machines, entering a fast- gro wing packaging mark et with tons of recycled containerboar d. PM at Norske Sk og Bruck will start production in fourth quarter of . Norske Sk og Golbey will follow almost one year later with their PM, ” s ays Marleen van den Berg, VP Containerboar d Sales at Norske Sk og. Marleen van den Berg has been with Norsk e Skog since the beginning of and together with the Norske Sk og sales team, she has already started t o reach out to potential customers acr oss Europe. “ Although we have a long history in producing high quality papers, we are a newcomer in the pack aging industry . We need to introduce ourselves, inform people about our projects and our organization, ” she says. Nors k e Sk og recei v es Pla tin um Sus taina bility Rating from Eco V adi s Since , Norske Sk o g Golbey has been assessed by EcoV adis for its performance on envir onmental and social impact , human rights and responsible purchasing. E coV adis is an independent organization in char ge of evaluating supplier’s perf ormance in terms of sustainable development. For , Norsk e Skog Golbey scored higher than the industry aver age across all categories. This means Norsk e Skog Golbey have achiev ed a score of /, which awar ds them an EcoV adis Platinum rating and r anks them in the top of companies in the pulp and paper industry . “ At Norske Skog, we belie ve that industry must participate actively in the process to drive sus tainability . Our mills work continuously to reduce emissions and discharges and to build new , innovativ e solutions to contribute to the tr ansition. We are v ery proud of the work done at Golbey and congratulat e them with the EcoV adis Platinum rating. They ar e inspiration for the rest o f our company and industry , ” says CEO Sven Ombudst vedt. For further information on these and other short stories please visit our website www .norskesk og.com Annual report 2021 / Norsk e Skog 19 SUMMARY AB O UT NORSK E SK OG’S OP E R A T ION S SUM MAR Y Nors k e Skog is a world le ading produ cer of public ation paper w ith strong market pos itions and cus tomer relation s in Europe and Australas ia. The Nor ske Sk og group op erates four mills in Europe, of whic h two will produ ce recycle d contain erboard foll owing planne d conversion projec ts. In a ddition, the gro up operates o ne public ation paper m ill in Australasia . Norske Skog ceas ed produ ction at one co nv er ting grade mill in June and sold on e pellet fa cility in New Zealand in J anuary . Nors k e Skog aims to fur ther diversif y its op era - tions and c ontinue its transfo rmation into a growing and high- margin busin ess through a ran ge of promisin g converting , energy an d bio produc ts projec ts. Th e group has approximately e mployees in four co untries, is h ead quar tered in Nor way and listed on the O slo Stock E xchange under t he tic ker NSK OG. PUBLIC A TION P APER The group’s newsp rint paper pro ducts in clude stan dard and improved grad es, while th e group’s magazine pap er produ cts comp rise unco ated super -calendared paper ( “SC ”) and li ghtweig ht coated p aper (“ L WC ”). The end u ses of the group’s produc ts are mainly n ewspape rs and magaz ines, but also incl ude catalogues, inserts/ flyers, supplements, free-sheets, directories, direc t mail, broc hures and bo ok pape r . The group sells it s produc ts under well -known brand s, includi ng Nornews , Norbright , NorX, Nors tar , Norcote, N orSC , Norboo k, and Vantage. The group’ s customers include publ ishers of lead ing newspa pers and m agazines in Europe, Aus tralasia and the res t of the world. The gro up has longs tanding re lationships wi th several of its larges t custome rs. In Europe , the group ser ves a diversif ied cus tomer bas e including i nternationally recognised publ ishers, reta ilers and commercial printers , with the top custome rs represe nting approximately of revenu e. The group’s market share s based o n productio n capa city for news print, SC ma gazine paper an d L WC magazine p aper in Western Europe a re approximately , and respe ctively , acco rding to PPPC. In Australas ia, the group is the sole pro ducer of p ublication pa per , b ut the group estimate s a market share in terms of publi cation pape r deliveries of ap proximately for newsprint a nd for magazine pap er . NEW ACTIVITY Nors k e Skog plans to be come a le ading European produc er of recycle d containe rboard by conver ting two newsprint m achines , one at Nors k e Skog Bruc k and one at Nor ske Skog Golb ey . The c onversions will introd uce tonnes of c ompetitive contain erboard c apacit y to meet the grow ing demand for r enewable packagin g. The group h as chose n Strato as the new recycla ble packagin g paper p roduct br and name . The Strato comme rcial team prep ares several promotio nal activitie s and camp aign to attrac t new custome r to our new packa ging produc ts. Th e Skogn mill produc es Skogn inter - liner , a complemen tary packagi ng paper pr oduct to Strato, on one of it s three newsprint m achines to ser ve the Asian packagin g markets. Following the c onversions , both mills will have acce ss to renewabl e energy and w ill have reduced their carb on footprints to be come am ong the bes t per former s in the industr y . Th e instalme nt of a MW renewabl e waste-to-en ergy boile r in Austria is sche duled for s tart-up in the first h alf of . Nors k e Skog actively works to reali se value from the indus trial sites by developing exis ting infrastruc ture and indus try comp etence . Norske Skog ceas ed produ ction at the T a sman mill in June . The T asm an mill site is in the proc ess of being s old. The tonnes woo d pellet s produc tion facilit y was sold to the New-Z ealan d base d food co mpany T alley ’s in January . Nors k e Skog is the large st shareh older in Circ a Group, wh ich has be en granted EUR million from the EU Flagship G rant for the produ ction of a firs t -of-its-kind tonnes bi ochemi cals plant in France. Circ a Group was lis ted on the Euronext Grow th market in Oslo during th e first q uarter of . Circa s ucces sfully com pleted a NO K million private place ment, in whi ch Norske Skog ASA invested NO K million. Th e procee ds will be use d to fund the constru ction of the ReSo lute plant in France , furthe r market developme nt, and developm ent of new produ cts. N orske Skog Australasi a has worked close ly with Circa sinc e at its Boyer Mill in T asm ania, providing signif icant indu strial and proc ess co mpetenc e to enabl e the scalabili ty of Circa’s unique and pate nted Fu race ll tec hno log y . Following s ignific ant marketing eor ts and fur ther custom er testing in , CEBINA is now sold an d delivered to cus tomers in N orway and internationally. CEBINA is a natural f ibre produ ct developed at Norsk e Skog Saugbrugs, which adds rheo logy control in f luids and arm ouring in solid materials . The continu ed developm ent of CEBICO (bi o comp osites) progres sed well durin g the year . The insta llation of a NOK million extrud er or pilot - plant at No rske Skog Saugbrug s, enab ling a signif icant incre ase in the abilit y and qualit y of testing with p otential custome rs, was in stalled and is now ee ctively prod ucing bio -comp osites . Innovation Nor way has granted NO K million to a pilot bio-composittes plant. Through the pa rtner ships with Oc ean Geo Loop at Nors k e Skog Skogn and B org CO at Nors k e Skog Saugb rugs, No rske Skog aims to pursue the opportunity to become CO net ne gative, and to explore economically viable models for utilisation of bioge nic CO . Annual report 2021 / Norsk e Skog 20 SUST AINABILITY REPORT S T AK E HOL DE R AN D MA T E R IAL I T Y ANAL Y S I S The stakeho lders ae ct Nors ke Sk o g’s decisi ons, ac tivities and pe rforma nce in many ways. In our op inion, our key stakehold ers are our own em ployees, l ocal com munities whe re we operate, investor s and owners , custom ers and our key suppli ers. In d etermining the mo st material su stainabili ty topics fo r Norske Skog, we have asses sed to what ex tent dierent st akeholder grou ps are aecte d by our activities an d/ or to what exte nt they are aecting our s ustainab ility work and p erform ance. This i s based o n our ongoin g interactio ns and dialo gues with the diere nt stakehold er groups . One example is that the c ommercial organis ation in Norske Skog regul arly per forms custom er sur veys. The mos t impor tant custom ers are followed up cl osely for e ach deliver y . Other exampl es of coop eration and intera ction with dieren t stakehol ders are inc luded und er the dierent s ections of the s ustainab ility repo rt. The materiali ty analysis hi ghlights areas of o ppor tunity and risk that w ill be fundam ental to the group’s strategy and i ntegrated in daily op erational ac tivities. N orske Skog busine ss units have during the l ast years be en seek ing bes t environmenta l practice an d the repor ted figure s show great prog ress in the same p eriod. Th e group has ach ieved signifi cant result s in collabo ration with stakehol ders, n ational authoritie s and employee initiatives . Nors k e Skog has als o through the years be en nationally re cognis ed for its lab our prac tices and excellent wo rk environment , and the outs tanding he alth and safet y per formanc e compare d to the industr y av erage . The materiali ty analysis h as been revis ed and app roved by the corporate mana gement . The SDG s trategy is base d on both extern al and internal inp ut. The ou tcome of th e materia lity review are lis ted be low. Economic performance Energy Public policy Occupational Health and Safety W aste THE GR I ST AN DARDS TOPIC S WITH THE MO ST VIT AL I MP ACT ON N ORSK E SKOG’S E XTE RNAL ST AKE HOLDE RS THE GR I ST AN DARDS TOPIC S WITH THE MO ST VIT AL I MP ACT ON N ORSK E SKOG’S O PER A TI ONS Economic performance W ater and eluents Customer health and safety Non-discrimination Our priorities will have a significant impact throughout the sust ainability report and ar e included in the presentations r elated to each of the UN Sustainable Dev elopment Goals. A total overview of which GRI Standards we r ep ort on, can be seen from the GRI Inde x presented in the back of this r eport and on our homepages below: www.nor skeskog. com/ sustainability Annual report 2021 / Norsk e Skog 21 SUST AINABILITY REPORT T H E S U ST AI NAB L E D E VE L O PM E N T G O ALS A RE A N IN T EGR A L P A R T OF O U R S TR A TE G Y The UN Su stainabl e Developme nt Goals (S DGs), adopted by world le aders in Septemb er , are a call for ac tion for all countrie s and busin esse s to promote pros perity w hile protecting the p lanet . The SDG s addres s the global c hallenge s we face, in cluding thos e related to pover ty , inequ ality, climate, e nvironmental de gradation , prosperit y , a nd peac e and justice . The SDG s interconne ct, and i t is impor tant that the world ac hieves each of the SDG s and its targe ts set for . Nors k e Skog suppo rts all SDGs, b ut realize that some are more re levant to our busin ess than other s. Durin g , we have assess ed which of the se goa ls that we consid er are the most re levant for Norske Skog, an d those where we be lieve we can make a dierenc e and contribute po sitively . WE HA V E ASKED O URS EL VE S THES E QU ESTIO NS: • T o what ex tent do the SDG s aect our o perations an d busines s strategies? • T o what ex tent may we influenc e and contribute to the ach ievement of the specif ic goal? Our as sessm ent includ ed input fro m workshops with repre sentatives from all our mills fo cusing on wh ich of the SDG s that are the most rel evant ones for our op erations. We be lieve that we can make the greatest diere nce and contribute p ositively through the prio ritiz ed SD Gs highlighte d in the illustration . We hav e summarized what the p rioritized SDGs m ean to us in one sent ence: T o b e a profitabl e busine ss is fundam ental for cre ating jobs and value fo r socie ty through our o perations an d produc ts. Profit m ust be cre ated in a sustainable and responsible w ay . Innov ations a nd operational ex cellence will spur a lon g-term profitabl e busine ss. We have a strong commi tment to maintain a hig h-level governance p ractice co mbined with an o perational safety fo cus for our em ployees. O ur operation s must be b ased on s ustainab le sourcin g, e.g. u sing cer tifie d wood and c hips docum ented through the Ch ain of Custod y and use of recycle d pape r . We must be re source and e nergy eec tive in all our operations . Environmental im pacts from o ur supply cha in and our mill s must be min imiz ed . Our attitud e and ability to b e entreprene urial, emp ower each other an d behave con sistently, define our re sults in chan ging and chall enging markets . Through reli able, res ponsibl e and sust ainable co nduct , we will win the trust and conf idenc e of our stakehol ders , both within and out side of Nors ke Sk o g. We monitor activi ties in order to achi eve sustainabl e produc ts and proc esse s throughou t the entire value chain . We continuously s trive t o maintain o ur status as the m ost attrac tive industr y partne r for supplie rs and cus tomers . The corp orate strategy con sists of three e lement s and gives us a well- def ined found ation for our work related to the p rioritized SDGs : • Improve and optimise p ublication p aper cas h flows • Bec ome a lea ding produc er of renewable p ackaging • Diversif y and inn ovat e within fib re and energy These s trategic goals a re communic ated extensi vely throughout the organis ation, and are we ll known to external , crucial s takeholder s, esp ecially the pres s and investors . In , the group reviewed the bu siness c limate risks and op por tunities and related th ese fin dings to def ine ambitions , target settin gs for the prioritized SD Gs and relate the se to the already determ ined strategic ch oices of the grou p. The purpos e of the assignm ent was to align the corpo rate strategy with a sel ection of the mo st relevant of the U N Sustainable Development Goals. T o make the SD G targets rel evant for the board, m anagem ent and the res t of the group, the intention wa s to align and integrate the prioritized sustainable dev elopment goals to the resolv e d stra tegic goals a lready eec tuated by the board of direc tors. The followin g five susta inable develop ment goal s that were sele cted to be mo st re levant to th e exis ting s trate gy: • SDG : Goo d health and we ll-being • SDG : Quality educ ation • SDG : Industry innovation and infrastructure • SDG : Responsible consump tion and pr oduction • SDG : Climate action For eac h of the prioritized SDGs , we summarize in this repor t how we relate to the goals , e.g. ou r ambitions and re levant targets an d actions initiate d or planne d. For the S DGs con sidered l ess relevant to No rske Skog, we provide a brief de scription of ambitio ns and per formanc e. Norske Sk og shall create value for people and society in a responsible way , while promoting a sustainable envir onment and principles of circular econo m y. Annual report 2021 / Norsk e Skog 22 SUST AINABILITY REPORT Compliance Non-compliant and unethical conduct can have severe c onsequences, and entails both substantial economic losses and reput ational damage. Norske Skog’ s aim is to be a “best in class” industry partner for our suppliers, customers and other business relations, and an attr ac tive inv estment for our shareholders. Norske Sk og has common standards for all business units and employees to ensure compliance (the S teering Guidelines - https:/ /www .norskeskog. com/ sustainability / steering-guideline s ) to which all of our business partners shall adhere. This strengthens the qualit y of our operations and pr omotes our predictability and cr e dibility with customers, supplier s and other partners, and consequently Norske Sk og’ s commercial position. Norske Skog board of directors has appointed a compliance oicer f or the group to ensur e that the Steering Guidelines are up to dat e and adequate global and local internal control sy stems exist. However , the responsibility to comply with the Steering Guidelines on a day-to-day basis lies with the line organisation at each of our business units as compliance must take place wher e the risk lies, primarily in the production and commercial oper ations and their associated activities. Norske Sk og has for a number of years maintained a whistle-blowing channel, where an employ ee can report irregular conditions or matt ers he/ she finds diicult to report dir ectly to immediate superiors. Norske Sk o g considers it important that each employee is ensur e d confidential and serious trea tment of reported issues, and all reports ar e handled in accordance with written procedures set out in the Norsk e Skog reporting routines. Non-compliant and unethical conduct can be reported to compliance@norskesk og.com . About the sustainability report Nors k e Skog is comm itted to contribu te to sustainabl e developmen t and suppo rts the ten p rinciples in th e UN Globa l Compac t. Nors k e Skog also sup por ts the work to develop a glob al standa rd for reporting of sustainable de velopment; therefore, w e use the Global R e porting Initiative’s ( G RI) Standa rds for repor ting relating to su stainabilit y as a tool in our work to repo rt environm ental and co rporate resp onsibilit y . O ur repor ting practic e is, in our vi ew , for all prac tical purpo ses in line wi th the GRI Stand ards repor ting princi ples. The repo rt covers m aterial sustai nability topic s to Norske Skog. Fo r the environme ntal data, it c overs the value chain of the group ’s activities. Sust ainability d ata for include s the five Nor ske Sk og pap er mills at Boyer , B ruck, G olbey, Sk ogn and S augbrugs o perating at Dece mber , and data for th e T asman m ill until the end of June , when it c eased production. Environmental dat a has bee n collec ted from the mills u sing est ablishe d repor ting routine s. Thes e include s tandard mo nthly repor ting for the key environme ntal data as well as a s tandard c ollectio n of supplem entary information on an a nnual basis . Data from this re por ting is colle cted by the chief op erating oic er of the group in mon thly repor ts to the corpor ate manag ement and to the b oard quar terly . S imilarly , peo ple data , and health and safet y data are colle cted from the m ills with monthly rep orting to the corpo rate managem ent and quar terly to the board q uarterly. The sustainability report consists of three elements: Materiality analys is and TCFD ( task forc e on climate-rel ated finan cial disclosures ) Sustainable Development Goals Corporate governan ce THE SDGS ARE AN INTEGRAL P ART OUR STRA TEGY Establis hing renewable packaging Imp rove an d opti mis e Diversi fy and inno vat e W e create green v a lue Pack aging Public ation pap er Bio and energy products Ambition Strategy Prioritise d SDGs Annual report 2021 / Norsk e Skog 23 SUST AINABILITY REPORT Lis a G rim s t ad SA UGBRUGS , NOR WA Y Lisa Grims tad has a M aster of Scie nce in Proce ss T e chnolo gy and has b een with Nor ske Skog for year s, both in the Nor ske Sk og Rese arch & Develop ment depa rtment an d at the Saugb rugs mill. Sh e is now respo nsible for h ealth, environm ent and safet y , qu ality as surance and sustainability . She has a passion for continuous i mprov eme nt, a sustaina ble futur e for Nors k e Skog and a safe work e nvironment for all em ployees / . “We have c r eat e d gr e en val ue ! I see a s ust a in abl e Nor ske Sk og in a l l dimensio ns . We wil l contin ue with su cce ssf ul g r owth pr oj ec t s at Sa ug brugs with CEBICO an d CEBINA am ongst other s, and sti l l ho ldi ng a lea din g positio n in pu bli cati on paper . ” Phot o: Stia n Jensen Sustainability goals o v erview E/ S/G & E Ambition/ Area Ta r g e t s Planned acti vities S Ins pire ot hers t o lear n from ou r ‘be st in c lass ’ oc cupa tiona l heal th and s afet y sta ndard s. Share knowledge through r elevant professional f orums and industry organiza tions. - Par tici pate in a nd sha re kno wled ge wi th memb ers hip as so ciati on like Fe der ation of N or wegi an Ind ustri es and C EPI (Conf ede ratio n of Europ ean Pa per I ndus try). - Define int renal knowledge networ k vital to increase HESQ inno vation across Norske Skog. - Revi ew and d evelo p inter nal e- Lear ning H ESQ -mate rial f or loc al tra ining . - Focus on contractor management con tracts. Increase j ob attenda nce for all emplo yees. Reduce absent e eism. - Deve lop l oca l and co mmun ity B U medi cal c entre s. - Provi de me dic al ass ist ance f or inju ries . - Provi de ex tens ive hea lth an d well- bein g pro gramm es fo r empl oyee s. Ensu re a hea lthy an d safe wo rkin g enviro nme nt. Rea ch zero o ccup atio nal in jurie s (L TI an d TRI). - Use D NV GL ’s too l “S yner gy” t o repo rt L T I and TRI , and c omp lete tr ainin g prog ramm es for r eleva nt personnel. - Deve lop a n ew HESQ l ead ers hip trai ning p rogr am. - Per form r egul ar sel f–asse ssm ent s to iden tif y focu s area s for im provem ent . S Attra ct an d keep to p tale nt. Achi eve at le ast of n ew hire d skil led wo rkers t o be rec ruit ed fro m appre ntic es pro gram s by . - Im ple ment a dvan ced a ppre ntice p rogr ams an d exte nde d train ing pr ogra ms at all m ills . Oe r ten tra ine e posi tion s or inte rnsh ips fo r mast er de gree s tude nts an nuall y. - Coo per ate with l oca l sch ools a nd se lec ted un iver sitie s abo ut rel evant pr ogra ms. Inves t in ou r peo ple thr ough tr aini ng and d evelo pme nt. Establish thr ee knowledge network s to capture critical compet ence and facili tate know ledge transfer throughout the group. - Est abli sh and o per ate thre e know led ge ne twor ks by the en d of . Provide training m odules f or technical cor e skills, soft skil ls and complia nce skills. - Oe r train ing an d sup plem enta ry e duc ation f or all th roug h their e ntire j ob car eer. - Reinv igor ate the N ors ke Skog Aca demy. - Reinvigorat e NSPS-modules . Achi eve a c ompl etion r ate for a nnua l per form anc e revie ws and d evelo pme nt pla ns by . - Sti mulate m id-l evel m anag ers to c arr y out p erf orma nce rev iews a nd ann ual pl ans fo r train ing an d development. Prep are No rske S kog for e nteri ng the c ontai nerb oar d market i n . Est abli sh thre e kno wled ge ne twor ks and re late d comm erc ial pro ces ses t o captu re crit ical c omp eten ce and facilitat e knowledge tra nsfer t hroughout the gr oup. - Est abli sh a co ntain erb oard k nowl edg e netw ork in . - Review the sales organisation. - De liver a m arket kn owle dge p rogr am. G & E Create shareholder value. Publication paper: - Achi eve an EBI TDA margi n of at le ast . - Mai ntain a n ope ratin g rate of at l eas t . Pac kagin g pape r (from - ): - Achi eve an EBI TDA margi n of at le ast . - Mai ntain a n ope ratin g rate of at l eas t . - Adhe re to op erati onal b udg et pla ns and i mple men t nec ess ar y corre cti ve acti ons . Achi eve net d ebt /EBITDA r atio of or l ess . - Finance activities adapt ed to operational profit capabilities. Deve lop s usta inab le ind ustr ial cl uste rs util izing ex istin g site in fras truc ture an d cont ribut e to eco nomi c grow th. Achi eve of reve nue f rom new b usi nes s area s by . - Inves t in pa ckag ing, e ner gy and f ibre p roje cts . Align innov ation activities wit h the long term group strategy . - Ensu re alig nme nt thro ugh gro up ann ual st rateg y disc uss ions i n corp orate m ana geme nt. Per form R& DI ac tivi ties at a ll bus ine ss uni ts bas ed on N ors ke Skog ’s posi tion in th e fib er val ue cha in. - Rep ort R &DI ac tivi ties in t he mill s to cor pora te man agem ent th rough t he bud get p roce ss . Commercialize promising and profitable innovat ion results. Achi eve of reve nue f rom new b usi nes s area s by . Achi eve at min imum a n IRR of on new inv este ment p roje cts . - Est abli sh ste erin g com mitt ees at g roup l evel to en sure n ee ded an cho ring a nd all ocat ion of n ece ssa ry re sou rces t o spe ed up an d suc cee d with c omme rcia lisa tion of n ew bus ine ss opp or tunit ies . Inc reas e the lev el of su stai nabi lity th roug h know led ge sha ring a cros s bus ines s uni ts to stre ngth en co ntinu ous improv ement activities and product development wit hin t he ex isting cor e business. Rea ch a min imum of a nnua l conti nuou s impr oveme nt ac tiviti es ac ross a ll mill s. - Evalu ate the c ontin uous i mprove men t activ itie s and th e impa ct the y have on th e SDG ta rget s com pare d to planned activity . S Und ers tan d the ac tual an d pote ntial i mpac ts ou r ope ratio ns have on l oca l com munit ies , and to un der sta nd the ir expectations and needs. Rep ort t he sig nifi can t soci al, e nviron men tal, s afet y and e con omic i mpac ts ou r ope ration s have on th e loc al communities. - Co ope rate wit h loc al com muni ty org aniza tion an d bei ng op en and h one st ab out env iron ment , safe ty an d economic issues with relevant community bodies. E Rep ort t he ext ent of d evelo pmen t of sig nifi cant i nfra struc ture inv estm ents a nd se rvi ces s uppo rte d, bo th curr ent or expected impacts on communities and local economies. Rep ort e xampl es of si gnif ica nt ide ntif ied in dire ct e cono mic im pac ts of th e organ izatio n als o in the co ntex t of ex terna l ben chma rks an d stake hol der pr iorit ies , such a s nati onal a nd inte rnati onal s tan dard s, pro toco ls, and policy agendas. - Co ope rate an d comm unic ate op enly w ith the l oca l comm unit y abo ut co mpany s trate gy and i nvestm ent p lans a s earl y as po ssib le. E Ensu re sus tain abl e use of m ateri als an d ene rgy in ou r ope ratio ns. Achi eve e icie nt use o f bipro ces s stre ams in t he pro duc tion pr oce ss to cr eate bi obas ed- ene rgy or bip rodu cts fo r sal e. - Util ise bi -pro duc ts from t he enti re pro duct ion pr oce ss. Operate mills with high energy eiciency. Measure t he level of CAPEX used on energy eicienc y /ener gy-sour ce impro vements. - Establis h specific act ivities and in vestments in ener gy eiciency and changes in energy sour ce, i.e. activi ties f rom the CA PEX-lis ts and t he con tinuo us imp rovem ent pr ogra ms. Reduce Chemi cal Oxygen Demand ( COD) t o recipien t. Ins tall a nae robic w aste water tre atme nt and b iog as at all Eu rope an mil ls ( i nsta lle d) with in . - Inves t in ana erob ic was te water tr eatm ent an d biog as pro duc tion at a ll Euro pean m ills . Reduce emissions of Sulphur Dio xide (SO ) and N itrog en Ox ide (N OX) fro m our o pera tions . Ensure compliance with e mission permits and regulat ions. - Per form m ill ac tivit ies re late d to SO and NO X impr ovemen ts. Red uce wa ste fro m our o pera tions . De liver n o ash to l andf ill in . - Establish pr ocedures and/ or ash product development. G Ensu re sus tain abl e sourc ing of r aw mate rial . Achi eve cer tifi cati on of all w ood u sed fo r our p rodu cts . - Revi ew inte rnal c ontro l routi nes to m easu re and r each th e cer tif ica tion ta rget . Ensure responsible supplier value chain handling. Ensu re sup plie r adhe renc e to Nor ske Sko g cod e of con duc t withi n . - Matu re sus tain able s ourc ing pr acti ces by u pdati ng co de of co ndu ct, q ues tionn aire fo r supp lier s on ESG -top ics an d rou tines f or aud it of su ppli ers . E Reduce gr eenhouse gas (GHG ) emissions. Red uce G HG emi ssi on kg/to nne pa per ( base line ) by in ( Sco pe & ). - Inve st in p acka ging a nd pro misin g ene rgy an d fib re proj ect s. Net ze ro GH G emis sio n kg/tonn e pap er in . - P art icip ate in CC S and C CU act iviti es at No rske S kog Skog n and No rske S kog Sau gbru gs. Red uce S cop e GHG e miss ions b y coll abor ating w ith ex terna l par ties . - Col lab orate w ith tran spo rte rs to util ize CO -free ve hic les su ch as tr ain for t ruck p rogr ams at th e mills . Use sustaina ble energy sources. Reduce dependency of fossile energy sources. - I nvest i n biom ass- boi lers to r epl ace fo ssil e ene rgy so urce s at the mi lls . Handle cl imate risk a nd business o pportunity understand ing. Revi ew the an nual c limat e risk p lan an d busi nes s opp ortu nit y anal ysis . - P erf orm an an nual c lima te risk a nd opp or tunit y anal ysis f or eac h bus ines s uni t. G Abs tain f rom f inan cial a nd in- kind p oliti cal c ontri butio ns . Rep ort w hich p oli tical t opic s and i nflu ence c han nel th e group h as us ed. - Be invo lved i n poli tica l task s throu gh the N orw egia n Fede rati on of T r ade an d Indu str y, the Nor weg ian pu lp and paper orga nizat ion, CEP I, and t hrough other releva nt partnerships. S Ensure our customers healt hy and safe working envi ronment. Rep ort p erc enta ge of si gnif ica nt pro duc t and se rvi ce ca tego ries f or whi ch hea lth an d safet y imp act s are assessed for i mprov ement. - Per form r eview s of rel evant he alth a nd safe ty ha zards o ur pro duc ts exp ose to o ur cus tome rs. G Abs tain f rom an ti-co mpe titive b ehav iour an d adh ere to re levan t comp etive l egis lati on. Rep ort t he num ber of l ega l acti ons pe ndi ng or co mpl eted d uring t he rep ort ing pe rio d rega rding anti- com peti tive be havio r and v iola tions o f anti-tru st an d mon opol y leg isla tion in w hich th e orga nizati on has b een i dent ifie d as a pa rti cipa nt. Re por t the m ain ou tcome s of co mple ted le gal a ctio ns, i nclu ding a ny decisions or j udgments. - Per form a nnua l revie ws with r eleva nt per son nell a nd ag ents o n relev ant anti -co mpe titive le gis latio n and Norske S kog ste erin g guid elin es. S Have zer o tole ranc e for di scri minati on on gr ound s of rac e, co lor, sex , reli gion , pol itica l opin ion , natio nal ex trac tion , or so cial o rigin a s def ine d by the ILO, or o ther re levan t form s of disc rimi natio n involv ing int erna l and/or ex tern al stakeholders. Rep ort t he tota l numb er of in cide nts of d iscr imin ation d uring t he rep or ting pe rio d. - Ide ntif y thro ugh fo rmal pr oce ss(e s) inst ance (s) of no n-c ompl ianc e to rel evant n on-d icri minat ory s tee ring document procedur es, including management system audits, fo rmal moni toring programs or gr ievance mechanisms ( whistleblower channels ). G Have no t oler anc e for pra ctic es su ch as b ribe ry, fac ilita tion p aymen ts, f raud , exto rti on, c ollu sion , and m oney l aund erin g; the o er or re cei pt of gif ts , loan s, fe es , reward s, or o ther a dvant age s as an in duce men t to do so methi ng tha t is dis hone st , ille gal , or rep res ents a b reac h of trus t. Th is als o incl ude p racti ces s uch a s embe zzlem ent , tradi ng in inf lue nce , abus e of function, i llicit enrichment, concealment, a nd obstruct ing just ice. Rep ort t he tota l numb er an d perc ent age of o pera tions a sse sse d for ri sks re late d to corr uptio n, an d the sig nifi cant r isks re late d to cor ruptio n ide ntif ied th rough t he ris k ass ess ment . Rep ort th e tota l numb er an d natu re of con firm ed in cide nts of c orru ption : in whi ch emp loye es were d ismi sse d or di scip line d, wh en con trac ts with b usi nes s par tner s were te rmin ated o r not ren ewe d, pub lic le gal c ase s agai nst th e organizat ion or its employ ees. - Revi ew the st eeri ng gui deli nes a nnua lly. - Perform mandatory compliance r eview and training for r elevan t personell a nd business partners and others rele vant to our business periodically or when needed. Proh ibit th e use of c hild l abo r withi n our op erat ions a nd avoid c ontri butin g to the u se of ch ild lab or su ppli ers an d customers. Rep ort o pera tions a nd sup plie rs co nsid ered t o have sign ific ant ri sk for in cide nts of : - chi ld lab or and y oung wo rkers e xpos ed to h azardo us wor k, - chi ld lab or eit her in te rms of t ype o f oper ation (s uch a s manu fact uring p lant ) and s uppl ier ; or - cou ntrie s or ge ogra phic a reas w ith op erati ons an d supp lie rs con sid ered a t risk . - Revi ew the st eeri ng gui deli nes a nd co de of co nduc t ann ually. - Perform mandatory compliance r eview and training for r elevan t personell a nd business partners and ot hers relev ant to our business periodically or when needed. * E/S/G&E: Environment / Social / Governance and Economy Annual report 2021 / Norsk e Skog 26 SUST AINABILITY REPORT Sustainability goals o v erview E/ S/G & E Ambition/ Area Ta r g e t s Planned acti vities S Ins pire ot hers t o lear n from ou r ‘be st in c lass ’ oc cupa tiona l heal th and s afet y sta ndard s. Share knowledge through r elevant professional f orums and industry organiza tions. - Par tici pate in a nd sha re kno wled ge wi th memb ers hip as so ciati on like Fe der ation of N or wegi an Ind ustri es and C EPI (Conf ede ratio n of Europ ean Pa per I ndus try). - Define int renal knowledge networ k vital to increase HESQ inno vation across Norske Skog. - Revi ew and d evelo p inter nal e- Lear ning H ESQ -mate rial f or loc al tra ining . - Focus on contractor management con tracts. Increase j ob attenda nce for all emplo yees. Reduce absent e eism. - Deve lop l oca l and co mmun ity B U medi cal c entre s. - Provi de me dic al ass ist ance f or inju ries . - Provi de ex tens ive hea lth an d well- bein g pro gramm es fo r empl oyee s. Ensu re a hea lthy an d safe wo rkin g enviro nme nt. Rea ch zero o ccup atio nal in jurie s (L TI an d TRI). - Use D NV GL ’s too l “S yner gy” t o repo rt L T I and TRI , and c omp lete tr ainin g prog ramm es for r eleva nt personnel. - Deve lop a n ew HESQ l ead ers hip trai ning p rogr am. - Per form r egul ar sel f–asse ssm ent s to iden tif y focu s area s for im provem ent . S Attra ct an d keep to p tale nt. Achi eve at le ast of n ew hire d skil led wo rkers t o be rec ruit ed fro m appre ntic es pro gram s by . - Im ple ment a dvan ced a ppre ntice p rogr ams an d exte nde d train ing pr ogra ms at all m ills . Oe r ten tra ine e posi tion s or inte rnsh ips fo r mast er de gree s tude nts an nuall y. - Coo per ate with l oca l sch ools a nd se lec ted un iver sitie s abo ut rel evant pr ogra ms. Inves t in ou r peo ple thr ough tr aini ng and d evelo pme nt. Establish thr ee knowledge network s to capture critical compet ence and facili tate know ledge transfer throughout the group. - Est abli sh and o per ate thre e know led ge ne twor ks by the en d of . Provide training m odules f or technical cor e skills, soft skil ls and complia nce skills. - Oe r train ing an d sup plem enta ry e duc ation f or all th roug h their e ntire j ob car eer. - Reinv igor ate the N ors ke Skog Aca demy. - Reinvigorat e NSPS-modules . Achi eve a c ompl etion r ate for a nnua l per form anc e revie ws and d evelo pme nt pla ns by . - Sti mulate m id-l evel m anag ers to c arr y out p erf orma nce rev iews a nd ann ual pl ans fo r train ing an d development. Prep are No rske S kog for e nteri ng the c ontai nerb oar d market i n . Est abli sh thre e kno wled ge ne twor ks and re late d comm erc ial pro ces ses t o captu re crit ical c omp eten ce and facilitat e knowledge tra nsfer t hroughout the gr oup. - Est abli sh a co ntain erb oard k nowl edg e netw ork in . - Review the sales organisation. - De liver a m arket kn owle dge p rogr am. G & E Create shareholder value. Publication paper: - Achi eve an EBI TDA margi n of at le ast . - Mai ntain a n ope ratin g rate of at l eas t . Pac kagin g pape r (from - ): - Achi eve an EBI TDA margi n of at le ast . - Mai ntain a n ope ratin g rate of at l eas t . - Adhe re to op erati onal b udg et pla ns and i mple men t nec ess ar y corre cti ve acti ons . Achi eve net d ebt /EBITDA r atio of or l ess . - Finance activities adapt ed to operational profit capabilities. Deve lop s usta inab le ind ustr ial cl uste rs util izing ex istin g site in fras truc ture an d cont ribut e to eco nomi c grow th. Achi eve of reve nue f rom new b usi nes s area s by . - Inves t in pa ckag ing, e ner gy and f ibre p roje cts . Align innov ation activities wit h the long term group strategy . - Ensu re alig nme nt thro ugh gro up ann ual st rateg y disc uss ions i n corp orate m ana geme nt. Per form R& DI ac tivi ties at a ll bus ine ss uni ts bas ed on N ors ke Skog ’s posi tion in th e fib er val ue cha in. - Rep ort R &DI ac tivi ties in t he mill s to cor pora te man agem ent th rough t he bud get p roce ss . Commercialize promising and profitable innovat ion results. Achi eve of reve nue f rom new b usi nes s area s by . Achi eve at min imum a n IRR of on new inv este ment p roje cts . - Est abli sh ste erin g com mitt ees at g roup l evel to en sure n ee ded an cho ring a nd all ocat ion of n ece ssa ry re sou rces t o spe ed up an d suc cee d with c omme rcia lisa tion of n ew bus ine ss opp or tunit ies . Inc reas e the lev el of su stai nabi lity th roug h know led ge sha ring a cros s bus ines s uni ts to stre ngth en co ntinu ous improv ement activities and product development wit hin t he ex isting cor e business. Rea ch a min imum of a nnua l conti nuou s impr oveme nt ac tiviti es ac ross a ll mill s. - Evalu ate the c ontin uous i mprove men t activ itie s and th e impa ct the y have on th e SDG ta rget s com pare d to planned activity . S Und ers tan d the ac tual an d pote ntial i mpac ts ou r ope ratio ns have on l oca l com munit ies , and to un der sta nd the ir expectations and needs. Rep ort t he sig nifi can t soci al, e nviron men tal, s afet y and e con omic i mpac ts ou r ope ration s have on th e loc al communities. - Co ope rate wit h loc al com muni ty org aniza tion an d bei ng op en and h one st ab out env iron ment , safe ty an d economic issues with relevant community bodies. E Rep ort t he ext ent of d evelo pmen t of sig nifi cant i nfra struc ture inv estm ents a nd se rvi ces s uppo rte d, bo th curr ent or expected impacts on communities and local economies. Rep ort e xampl es of si gnif ica nt ide ntif ied in dire ct e cono mic im pac ts of th e organ izatio n als o in the co ntex t of ex terna l ben chma rks an d stake hol der pr iorit ies , such a s nati onal a nd inte rnati onal s tan dard s, pro toco ls, and policy agendas. - Co ope rate an d comm unic ate op enly w ith the l oca l comm unit y abo ut co mpany s trate gy and i nvestm ent p lans a s earl y as po ssib le. E Ensu re sus tain abl e use of m ateri als an d ene rgy in ou r ope ratio ns. Achi eve e icie nt use o f bipro ces s stre ams in t he pro duc tion pr oce ss to cr eate bi obas ed- ene rgy or bip rodu cts fo r sal e. - Util ise bi -pro duc ts from t he enti re pro duct ion pr oce ss. Operate mills with high energy eiciency. Measure t he level of CAPEX used on energy eicienc y /ener gy-sour ce impro vements. - Establis h specific act ivities and in vestments in ener gy eiciency and changes in energy sour ce, i.e. activi ties f rom the CA PEX-lis ts and t he con tinuo us imp rovem ent pr ogra ms. Reduce Chemi cal Oxygen Demand ( COD) t o recipien t. Ins tall a nae robic w aste water tre atme nt and b iog as at all Eu rope an mil ls ( i nsta lle d) with in . - Inves t in ana erob ic was te water tr eatm ent an d biog as pro duc tion at a ll Euro pean m ills . Reduce emissions of Sulphur Dio xide (SO ) and N itrog en Ox ide (N OX) fro m our o pera tions . Ensure compliance with e mission permits and regulat ions. - Per form m ill ac tivit ies re late d to SO and NO X impr ovemen ts. Red uce wa ste fro m our o pera tions . De liver n o ash to l andf ill in . - Establish pr ocedures and/ or ash product development. G Ensu re sus tain abl e sourc ing of r aw mate rial . Achi eve cer tifi cati on of all w ood u sed fo r our p rodu cts . - Revi ew inte rnal c ontro l routi nes to m easu re and r each th e cer tif ica tion ta rget . Ensure responsible supplier value chain handling. Ensu re sup plie r adhe renc e to Nor ske Sko g cod e of con duc t withi n . - Matu re sus tain able s ourc ing pr acti ces by u pdati ng co de of co ndu ct, q ues tionn aire fo r supp lier s on ESG -top ics an d rou tines f or aud it of su ppli ers . E Reduce gr eenhouse gas (GHG ) emissions. Red uce G HG emi ssi on kg/to nne pa per ( base line ) by in ( Sco pe & ). - Inve st in p acka ging a nd pro misin g ene rgy an d fib re proj ect s. Net ze ro GH G emis sio n kg/tonn e pap er in . - P art icip ate in CC S and C CU act iviti es at No rske S kog Skog n and No rske S kog Sau gbru gs. Red uce S cop e GHG e miss ions b y coll abor ating w ith ex terna l par ties . - Col lab orate w ith tran spo rte rs to util ize CO -free ve hic les su ch as tr ain for t ruck p rogr ams at th e mills . Use sustaina ble energy sources. Reduce dependency of fossile energy sources. - I nvest i n biom ass- boi lers to r epl ace fo ssil e ene rgy so urce s at the mi lls . Handle cl imate risk a nd business o pportunity understand ing. Revi ew the an nual c limat e risk p lan an d busi nes s opp ortu nit y anal ysis . - P erf orm an an nual c lima te risk a nd opp or tunit y anal ysis f or eac h bus ines s uni t. G Abs tain f rom f inan cial a nd in- kind p oliti cal c ontri butio ns . Rep ort w hich p oli tical t opic s and i nflu ence c han nel th e group h as us ed. - Be invo lved i n poli tica l task s throu gh the N orw egia n Fede rati on of T r ade an d Indu str y, the Nor weg ian pu lp and paper orga nizat ion, CEP I, and t hrough other releva nt partnerships. S Ensure our customers healt hy and safe working envi ronment. Rep ort p erc enta ge of si gnif ica nt pro duc t and se rvi ce ca tego ries f or whi ch hea lth an d safet y imp act s are assessed for i mprov ement. - Per form r eview s of rel evant he alth a nd safe ty ha zards o ur pro duc ts exp ose to o ur cus tome rs. G Abs tain f rom an ti-co mpe titive b ehav iour an d adh ere to re levan t comp etive l egis lati on. Rep ort t he num ber of l ega l acti ons pe ndi ng or co mpl eted d uring t he rep ort ing pe rio d rega rding anti- com peti tive be havio r and v iola tions o f anti-tru st an d mon opol y leg isla tion in w hich th e orga nizati on has b een i dent ifie d as a pa rti cipa nt. Re por t the m ain ou tcome s of co mple ted le gal a ctio ns, i nclu ding a ny decisions or j udgments. - Per form a nnua l revie ws with r eleva nt per son nell a nd ag ents o n relev ant anti -co mpe titive le gis latio n and Norske S kog ste erin g guid elin es. S Have zer o tole ranc e for di scri minati on on gr ound s of rac e, co lor, sex , reli gion , pol itica l opin ion , natio nal ex trac tion , or so cial o rigin a s def ine d by the ILO, or o ther re levan t form s of disc rimi natio n involv ing int erna l and/or ex tern al stakeholders. Rep ort t he tota l numb er of in cide nts of d iscr imin ation d uring t he rep or ting pe rio d. - Ide ntif y thro ugh fo rmal pr oce ss(e s) inst ance (s) of no n-c ompl ianc e to rel evant n on-d icri minat ory s tee ring document procedur es, including management system audits, fo rmal moni toring programs or gr ievance mechanisms ( whistleblower channels ). G Have no t oler anc e for pra ctic es su ch as b ribe ry, fac ilita tion p aymen ts, f raud , exto rti on, c ollu sion , and m oney l aund erin g; the o er or re cei pt of gif ts , loan s, fe es , reward s, or o ther a dvant age s as an in duce men t to do so methi ng tha t is dis hone st , ille gal , or rep res ents a b reac h of trus t. Th is als o incl ude p racti ces s uch a s embe zzlem ent , tradi ng in inf lue nce , abus e of function, i llicit enrichment, concealment, a nd obstruct ing just ice. Rep ort t he tota l numb er an d perc ent age of o pera tions a sse sse d for ri sks re late d to corr uptio n, an d the sig nifi cant r isks re late d to cor ruptio n ide ntif ied th rough t he ris k ass ess ment . Rep ort th e tota l numb er an d natu re of con firm ed in cide nts of c orru ption : in whi ch emp loye es were d ismi sse d or di scip line d, wh en con trac ts with b usi nes s par tner s were te rmin ated o r not ren ewe d, pub lic le gal c ase s agai nst th e organizat ion or its employ ees. - Revi ew the st eeri ng gui deli nes a nnua lly. - Perform mandatory compliance r eview and training for r elevan t personell a nd business partners and others rele vant to our business periodically or when needed. Proh ibit th e use of c hild l abo r withi n our op erat ions a nd avoid c ontri butin g to the u se of ch ild lab or su ppli ers an d customers. Rep ort o pera tions a nd sup plie rs co nsid ered t o have sign ific ant ri sk for in cide nts of : - chi ld lab or and y oung wo rkers e xpos ed to h azardo us wor k, - chi ld lab or eit her in te rms of t ype o f oper ation (s uch a s manu fact uring p lant ) and s uppl ier ; or - cou ntrie s or ge ogra phic a reas w ith op erati ons an d supp lie rs con sid ered a t risk . - Revi ew the st eeri ng gui deli nes a nd co de of co nduc t ann ually. - Perform mandatory compliance r eview and training for r elevan t personell a nd business partners and ot hers relev ant to our business periodically or when needed. Annual report 2021 / Norsk e Skog 27 SUST AINABILITY REPORT Photo : Enzo Zad ra P RIORI T I SE D S DGS E nsur e healt hy l iv es an d pr omo te we ll -bei ng fo r al l at a l l ages Health an d Safety has h igh priority fo r Norske Skog, t wenty-four hours a day, sev en days a week . Nors k e Skog’s health and s afety progra mme at the busin ess units , calle d “T ake Care hours”, is adapted to our d ierent cultures , requireme nts and lo cal requirem ents whe re we operate, bu t shall always me et the requirem ents of our hea lth and safet y standa rds for international a ctivities . Our goa l is a safe working environm ent where health an d safety rec eive equal at tention in plannin g and in the daily op erations of the com pany . All empl oy ees in N orske Skog shall take resp onsi- bility for im proving the working e nvironment for themse lves, their c olleagu es, visi tors and sub - contrac tors. Interna l coope ration, involving sharing of exp erience a nd best p ractice , enable s us to adapt preventive activi ties to all our busin ess units . Through the ac tivities in T ake Care hours , the group stimul ates and enco urages the same at titudes and b ehaviour at work and du ring our spare tim e, for our own emp loyees and their families . At Norske Skog, we be lieve that issues relating to hea lth, safety a nd the environment must b e fully integrated into all ou r activities at every level an d not manage d as a sep arate and distinc t function . That is why everyone wo rking in Nors k e Skog – whethe r an employee or c ontractor – is acc ountable for the c ompany ’ s health , envi ron mental and safety performance. The Proce ss for Safet y Excellen ce (PSE ) is an ongoin g, struc tured proce ss integrated into the day- to-d ay business of the c ompany to achieve the highe st level of health , safety and e nviron- mental p erfo rmance. I t applies to ever y unit within Nors k e Skog and ac tivity carrie d out by empl oy ees and contra ctors. P SE focus es on three man ageme nt components: people, assets and systems. Each component inc ludes nine elements ( standards) , providing the fram ework for health , safety and l oss prev ention. OUR I DENT IFIED NIN E K EY EL EMENT S ST ANDARDS ARE: These standards ar e applicable to all operations, throughout Norsk e Skog, which have the pot ential to adversely aect the health and safet y of people, including employees, contract ors, visitors and the public. * E/S/G&E: Environment / Social / Governance and Economy Our identif ied k ey elements • Leadership commitment • Employee participation and safe behaviour • T raining and competence • Hazard and risk management • Management systems, re views, audits, inspections • Performance measur ement and reporting • Emergency prepara tion and response • Health • Contractors E/ S/G & E Ambition/ Area Ta r g e t s Planned acti vities S Ins pire oth ers to l earn fro m our ‘ bes t in clas s’ occ upati onal h ealth a nd saf ety s tand ards . Share knowledge through relevant professional forums and industry organizations. - Par ticip ate in an d share k nowl edg e with me mbe rship a sso ciati on like Federation of Norwegian Industries and C EPI (Confe der ation of Eur opea n Pape r Indu str y ). - Def ine i ntrena l know ledg e net work vi tal to in crea se HESQ i nnovati on across Norske Sk og. - Revie w and deve lop in terna l e-Le arnin g HESQ -ma terial f or loc al trai ning . - Focus on contractor management contracts. Inc reas e job at tend ance fo r all em ploye es. Reduce absen teeism. - Deve lop lo cal a nd com munit y BU me dic al cen tres . - Provi de med ica l assi stan ce for i njuri es. - Provi de exte nsive h ealt h and wel l-be ing pr ogram mes fo r emp loyees . Ensu re a heal thy and s afe work ing env ironm ent . Rea ch zero oc cup ationa l injur ies (L TI a nd TRI). - Use D NV GL ’s tool “ Syn ergy ” to rep or t L TI a nd TRI , and c ompl ete trai ning programmes for rele vant personnel. - Deve lop a ne w HESQ le ade rshi p traini ng pro gram . - Per form re gula r self–as ses sme nts to id entif y foc us are as for im provem ent. Annual report 2021 / Norsk e Skog 29 SUST AINABILITY REPORT . LT I ) (H) TRI ) (H) Abse nce due to illnes s H DEVELOPME NT Lost time injuries per million working hours 0.0 0.5 1.0 1.5 2 .0 2021 2020 2019 2018 2017 THE O BJEC TIVES OF TH ES E ST AN DARDS AR E AS FOLLOWS : • T o define the minimum requirement s for the Health and safety syst ems at all levels of operation • T o provide a framework for health and safet y systems measur ement • T o encourage a consistent appr oach to health and safety syst ems • T o identify and share the best practice between business units • T o provide the business units the opportunity to assess themselves against the standards and continually improv e their systems • T o enable inter-mill/unit r eviews to provide an external perspective and r ecommendations for improv ement Where Norsk e Skog has no operational r e sponsi- bility , but has an equity stake, or wher e -significant Norske Sk og assets are involv ed in a subcontracting site, arrangements shall be made to ensur e that comparable standar ds of safety ar e maintained. We str ongly believe in behavioural based safety observations and audits. These ar e observations of people’ s workplace behaviour that enables positive feedback for safe behaviour , recognition and correction of unsafe acts. Our Norwegian business units have signed a letter of intent regar ding a more inclusive workplace (IA Agreement with supplementary agr eements) with the aim of reducing sickness absence rat es and increasing job attendance f or all employees. Although the IA Agreement is a distinctly Norwegian concept, our non-Norwegian business units operate under similar conditions. The IA Agreement builds on a tripartite cooper ation between the national authorities, the trade unions and the company . The IA Agreement and Norske Skog’ s operational objective is to develop tar gets for our work to pre vent sickness and absence and to establish verifiable activity t argets to achiev e a professional attitude to both pr eventive and reactive health car e in the company . All our business units also have local health, safety and environmental (HSE) forums wher e the company and trade unions hav e regular meetings to address local HSE issues. At these meetings, there should be an equal number of repr esentatives from the company and the emplo yees, with as many dierent gr oups as pos sible from within the organisation repr esented. If the organisation has Occupational Health Services, it should also be represent ed on the committee. Occupational Health Services should be an advisory and independent body , and represent the interests of both the employer and the employ ees. Norske Sk og has used Synergi Life for man y years, which is an operational risk management tool fr om DNV GL. We have a monthly Management F ocus Report (MFR), which is distributed to all business units for internal distribution and includes type of injury and rates of injury , o ccupational disease rate, lost working da ys due to accidents, absenteeism, total number of work -related personal injuries and fatalities, by r egion and business unit. All business units report their information into the Syner gi Life database sy stem (Synergi), which is also a sourc e for the transfer of experience and sharing of best practices. Reports from Synergi ar e analysed and form the basis for our internal HSE audits conducted by our HSE sta at the group le vel. Norske Sk og is committed to pro vide a safe working environment for our emplo yees, contractors and visitors. Health and safety consider ations are integrated int o the day-to-day business of Norske Skog and apply to ev ery organisation within Norske Sk og and every activity carried out by its employees and contract ors. Norske Sk og aims to have zer o injurie s, reduce sickness absence rates and to incr ease focus on job attendance for all employ ees. PERFOR MANCE: Norske Sk og had an absence rate due to illness of per cent in , which is on the same level as last year . The total number of accidents at the mills are almost at the same level in as in , but it was an increase in lost time injuries per million working hours (H or L TI) in compared to . The IA -agreement has been renew ed and cont inues the oper ational obje ctives for the coo peration: • Reduce sick leave • Increase employ ee retention ra te • Increase employment of people with functional impairments • Increase the retir ement age Our work with the IA -agreement has been extended to apply to all of Norsk e Skog’s business units and is intended to be an integral part of our targeted health, safet y and environmental (HSE) work. ) L TI L o st Time Injuries per million working hours. ) TRI T otal Recordable Incident meaning to tal number of injuries with and without lost time p er million working hours. Annual report 2021 / Norsk e Skog 30 SUST AINABILITY REPORT E nsur e incl usiv e and eq uita ble qu al ity educa tio n and p ro mo te lif elong learning opp or tun ities for all Nors k e Skog’s peo ple and organi sation strategy is to maintain a busine ss-orie nted, international organis ation that attract s and retains high ly comp etent and motivated em ployees on all levels around the worl d. We strive to give people the oppo rtunity to grow pe rsonally a nd professi onally in a stimulating working environm ent. Our go al is to have a broad acce ss to qualifi ed per sonnel in a sh ort an d long-term per spec tive. PERFOR MANCE: Nors k e Skog has a stru ctured proc ess for asse ssing p eople p erform ance and cre ating targeted pro fessional dev e lopment plan for human res ources . We believe in developing peo ple through their e ntire employment p eriod in Nors k e Skog by providing training , job enrich ment and career opp ortunities. We take pride in delivering ad vanced pro grams for apprentic es. The se program s are the preferred source w hen recrui ting to our busine ss and a key contribution f rom Norske Skog to socie ty in terms of quality e ducation . In , of our employee s were apprentice s and trainee s. In Nor way , of new hire d skilled wo rk ers are recruite d from apprentice p rograms , whereas the group achi eved . During , a containe r - board knowledge network has been established. It has be en est ablishe d a platform for othe r knowle dge net works. Mos t busine ss units coop erate with sele cted sch ools , colleg es, and univ ersities. Our engagement emb races activ ities such as m ill visits , project wo rk, diplo ma theses , trainee , and apprentic es’ prog rammes . In our internal continuou s improvement programme s, we aim to share knowl edge and l earnings . The group is workin g to further im prove t he execution of annual p erform ance reviews and d evelopment plans by . NU MB ER O F APPRE NTIC ES AN D TEMP ORAR Y EMPL O YEES T e mporary employees Apprentices * E/S/G&E: Environment / Social / Governance and Economy 0 30 60 90 120 150 2021 2020 2019 2018 2017 E/ S/G & E Ambition/ Area Ta r g e t s Planned acti vities S Attra ct and ke ep top t alen t. Achi eve at lea st of new h ired s kille d worker s to be re crui ted fro m appre ntice s pro grams by . - Implement advanced apprent ice prog rams and extended traini ng programs at all mills. Oe r ten trai nee p ositi ons or i ntern ship s for mas ter degree students annually. - Co oper ate with l oca l scho ols an d sel ecte d unive rsit ies ab out relevant programs . Inves t in our p eop le thro ugh trai ning an d development. Establish thr ee knowledge network s to capture critical compet ence and facil itate kno wledge tran sfer th rough out th e group . - Est abli sh and o pera te three k nowle dge n etwo rks by the e nd of . Provi de train ing mo dule s for te chnic al co re skil ls, soft skills and compliance skills. - Oe r train ing an d suppl eme ntar y edu cati on for al l throug h their enti re j ob care er. - Reinv igora te the No rske Sko g Acade my. - Reinvigorat e NSPS-modules . Achi eve a co mple tion rate f or ann ual per for manc e review s and de velop ment p lans by . - Stim ulate m id-le vel man ager s to carr y ou t per form ance r eviews a nd annu al pla ns for tra inin g and deve lopm ent . Prep are No rske Sko g for ente ring th e containerb oard market in . Establish thr ee knowledge network s and r elated com merc ial pro ces ses to c aptur e critic al competence and faci litate knowledge transfer thro ugho ut the gro up. - Est abli sh a con taine rbo ard kno wled ge ne twork i n . - Revie w the sal es or ganis ation . - De liver a ma rket kn owled ge pro gram . Annual report 2021 / Norsk e Skog 31 SUST AINABILITY REPORT Bui ld r esil ien t i n frast ruct ur e, pro mot e incl usiv e and susta inable in du str ia lizatio n an d f os ter inn ovati on Nors k e Skog’s researc h and developme nt work is per formed at e ach busin ess unit of ten in co oper - ation with extern al research in stitutions. Th e work is coo rdinated centrally, with the aim of leveraging synergie s and bes t practic es throug hout the group. The re are continued fo cus on improving pape r produc ts and new innovative, gree n alternatives in syn ergy with existing pro duction process. Nors k e Skog continuo usly enga ges in low-c ost R&D activitie s to explore new revenue sourc es. The eor ts inclu de both shor t -term and lo ng-term projec ts acros s a wide range of in itiatives. The initiatives are at various s tages of the develo pment cycle, from e arly-stage re search to fin al stage s of implementa tion and range from b ioenergy produc tion to developme nt of bioche mical and fibre p roducts . Investments i nto projects fo r alternative use of f ibre and develop ment of bioch emical s are being don e in the form of pilot plants that , if succe ssful , can contribu te to growth when commercialised . The group’s five pap er mills are materi al industrial sites that oer p ossibl e attractive brownfi eld inv e stment opportunit ie s for inv e stments such as packagin g grades pro duction , since a materi al par t of the infrastruc ture at a publication pa per mill can b e re-use d for packagin g grades production such as con tainerboard. In addit ion, the logis tics flow of inb ound raw material s and outboun d finish ed goo ds materials are ver y similar an d oers synergi es compa red to a greenf ield investmen t alternative. Finally, an existing pub li c ation paper m ill will normally have all require d permits a nd licens es in place fo r such a large- scale in dustrial prod uction and the modif ication of exis ting permits to a die rent type of p roduction m ay oer a less co mprehen sive and a quicker pro cess c ompared to a gre enfiel d inves tment alter native . PERFOR MANCE: In addition to the trad itional public ation pape r busin ess, n ew growth initiatives rel ated to pack - aging, rene wable energy , biochemical pr oducts and f ibre produc ts have been laun ched . Nors k e Skog plans to b ecome a l eading Europe an produc er of recycle d containe rboard by con- verting t wo newsprint m achines , one at Nor ske Skog Bruck a nd one at Nor ske Sk og Go lbey . The conversio ns will introduce tonnes of comp etitive containerb oard capa city to mee t the grow ing demand for r enewable packagi ng. The group ha s chosen S trato as the new packagin g produc t brand name , and has est ablishe d a commerci al team that is already per forming marketing ac tivities and devel oping customer relat ions. Nors k e Skog empl oys dedicated R&D s ta at all the pape r mills, en gaging in both the devel opment of new publi cation pape r produc ts and rese arch- ing oppor tunit ie s within biochemical and f ibre produc ts than can re place pe trochemic al produc ts. In a ddition to the R&D sta, the group employs p ersonn el involved in developing an d * E/S/G&E: Environment / Social / Governance and Economy E/ S/G & E Ambition/ Area Ta r g e t s Planned acti vities G & E Create shareholder value. Publication paper: - Achi eve an EBITDA ma rgin of at l eas t . - Main tain an o per ating ra te of at lea st . Pack aging p ape r (from -): - Achi eve an EBITDA ma rgin of at l eas t . - Main tain an o per ating ra te of at lea st . - Adhe re to ope ratio nal bu dget p lans a nd imp leme nt ne ces sar y corre ctive a ction s. Achi eve net de bt/ EBITDA ratio o f or les s. - Finance activities adapted to operational profit capabilities. Deve lop su stai nabl e indu stria l clus ters u tilizing exis ting si te infra struc ture an d contr ibute to economic growth. Achi eve of reven ue fro m new bu sine ss area s by . - Inves t in pac kagin g, en ergy a nd fi bre pro jec ts. Align innov ation activities with the long term group strategy . - Ensu re align ment th roug h group a nnual s trate gy dis cuss ions i n corporat e management. Per form R& DI ac tiviti es at all b usin ess u nits bas ed on N orske S kog’s po sitio n in the f iber value chai n. - Rep ort R& DI ac tiviti es in the m ills to c orpo rate man age ment th rough the bu dget pr ocess. Commercializ e promising and profitable innovation results. Achi eve of reven ue fro m new bu sine ss area s by . Achi eve at mini mum an IR R of on n ew inv estement pr ojects. - Est abli sh ste ering c ommi ttee s at gro up level to e nsur e nee ded a ncho ring and all ocati on of ne ces sar y res ourc es to sp eed up a nd su cce ed with commercialisation o f new business opportunities. Inc reas e the leve l of sus taina bilit y thro ugh know led ge sha ring a cros s busi nes s units to strengt hen cont inuous im prov ement act ivities and p rodu ct deve lopm ent wi thin the ex istin g core business. Rea ch a mini mum of ann ual co ntinu ous imp roveme nt acti vitie s acro ss all m ills . - Evalua te the co ntinuo us imp roveme nt act ivitie s and th e impa ct they have on the S DG tar gets c ompa red to pl anne d act ivit y . Annual report 2021 / Norsk e Skog 32 SUST AINABILITY REPORT executin g on opportunit ies for biogas, waste- to- energ y facilities and al ternative or additional method s of reusing the by-prod ucts from the produc tion proce sses . The busin ess unit s are all continuous ly working on improving existing public ation paper p roduct s and find ing new alternative purpo ses for our p aper . For example, the Skogn mill has sw itched from pro ducing stand ard newsprint to interline r , whic h is a produc t within the pac kaging pape r segment . Nors k e Skog engag es in several early-ph ase rese arch projec ts into bioch emical an d fibre prod ucts . Nors k e Skog has toge ther with the Circa G roup develope d the Furacell pro cess , which co uld repres ent the firs t bioche mical so lvent for use in the pharma ceutical in dustr y to replace pe tro- chemi cal produ cts. N orske Skog is the large st shareh older in Circ a Group, which h as recei ved a EUR million EU Flags hip Grant for the produc tion of a firs t -of-its-kind tonnes bioch emical s plant in France. Circ a Group was listed o n the Euronext Grow th in Oslo durin g the firs t quar ter of wi th the purpose of rais ing the require d capital fo r construc tion of the plant in France and c ontinued market introdu ction of its biochemicals . The group is al so engag ed in developin g nanofibri ls for strengt hening paper products, enhan cing paint and gl ue, developin g D comp osites and a dditives in nutritional pro ducts . Following s ignific ant marketing eor ts and custom er testing in , CEBINA is now s old and delivere d to customer s in Norway and inter - nationally. CEBINA is a natural f ibre produc t developed at Norsk e Skog Saugbrugs, which adds rheo logy control in f luids and arm ouring in solid materials . Nors k e Skog has buil t a tonnes c apacit y pilot plant for f ibre comp osites at the Sau gbrugs mill in Norway , which Innov asjon Norge has g ranted NOK million . In early , Norske Skog Saugb rugs, tog ether with its res earch and indus try par tners , have been granted N OK million in resea rch funding from the Re search Co uncil of Norway a nd Inno vat ion Norway under the Gr een Platform Prog ramme. The p ort folio of produc ts to be develop ed aims to rem ov e or greatly redu ce the use of pe troleum-ba sed raw material s and harmful materi als, as well a s to contribute to increased recycl ing of plast ics. Through the pa rtner ships with Oc ean Geo Loop at Nors k e Skog Skogn and B org CO at Nors k e Skog Saugb rugs, No rske Skog aims to pursue the opportunity to become CO net ne gative, and to explore economically viable models for utilisation of bioge nic CO . While the managing director at Norsk e Skog Bruck in Austria, Enzo Zadra, points t o external factor s as corona, energy prices, and short age of important raw materials for pr oduction, he picks internal factors as organisational development when ask ed to point to what is key f or the future success of his mill. “It is import a n t to use the e xis ti ng know- how a nd to lear n f r om ea ch other to develo p the mi l l f urther towar ds o ur a mbiti ous cli mat e and b usine ss go als. “ “We wil l put l ot s o f ef fo r t i n to at tracting yo u ng talent s to wor k in o ur t eam . A ze r o-ha rm wor king en vironmen t a nd a sou nd wor king at mosph er e is at the base o f ou r activitie s . T h e last two y ear s h ave shown t hat it is es sentia l to combi ne gl obal thi nki ng an d loc al acti ng an d sour ci ng to safeg uar d o ur b usines s . ” Photo : Enzo Zad ra E nz o Z a d ra BRU CK, AUSTR IA Annual report 2021 / Norsk e Skog 33 SUST AINABILITY REPORT E nsur e sustaina ble consum pt ion and pr o ducti on pat t erns The highly si mplifie d diagram on pa ge illustrates the p aper pro duction pro cess . Main input materi als are wood an d/ or re covered pap er , as well as e lectricit y and chem icals . Wood and recovered f ibres are se parated during p ulp produc tion in two diere nt proces ses . Pulp produ ction base d on recovere d paper consumes less energy than pr oduction from fresh fibre b ecau se the fibre s in recovered pap er are more eas ily separate d than those within woo d. In the pape r machine , the pulp pas ses alon g a web, firs tly through a wet se ction, the n a press se ction and f inally through a dr ying se ction. The p aper is fina lly rolled up on re els, an d then cut to the sizes ordere d by the customer. During this proc ess , more than of the wood fi bres in trees are conver ted to paper pro ducts . The resid ues from the pro duction pro cesse s are reuse d or dispo sed of in a numb er of ways: energy recover y , la ndfill , agriculture or sale/deliver y . Where p ossible , proce ss residu es are use d to generat e energy for t he pulp and paper manufac turing proce ss. S ome cus tomers want pape r based e ntirely on recovered p aper. Howev er , a value chain b ased onl y on recovered pa per is not sust ainable. A bout one third of the p aper is lo st in the recovered p aper cycle . Factors suc h as consumer a wareness, w aste d isposal and colle ction system s and alternative use s for used pape r influenc e its colle ction rate. The s tructure and stren gth of the fibres of pa per degra de with succ essive use . Recovered pa per fib res that are no lon ger suitab le for paperm aking are reje cted in our mill pulpi ng proce sses an d are generally u sed as a sourc e of renewable en ergy . T o make the recover ed paper value chai n sustainable, fresh fibre fro m forests , plantations o r sawmill by- products must be added. We will only use raw materia ls from sust ainably manag ed source s. Our g oal is to have cer tifie d wood in our pro ducts . Key objectives in all o ur busines s units are e icient production process es with high yield on raw material an d energy utilisa tion. Nor ske Sk og expec ts all of our bus iness pa rtner s to comply with the applicable laws, regulations and pr inciples set out in N orske Skog’s Code of C onduc t. Norske Sk og shall hav e an env ironmental perfor - mance that su pports our customers in reaching their envi ronmenta l objectiv es . PERFOR MANCE: Nors k e Skog has syste ms and proc esse s to make sure that all woo d used in No rske Skog’s product s comes from sustainably ma naged forests. All Nors k e Skog mills utilisin g fresh fib re have t hird- par ty verifi ed Chain of Cus tody ( CoC) ce rtifi cation systems in p lace. The averag e share of cer tified fresh f ibre in was , in l ine with last year. In , Norske Sk og consumed million m of fresh fibre and million t onnes of recover ed paper . On a tonnage basis, our largest consumption of recov ered paper tak es place in continental Europe. The fibre sourc e used at the dierent Norsk e Skog mills depends upon availability and economic consider ations. The minimisation of transport distances and costs is an increasingly import ant economic and environmental consider ation. The total quantit y of produc tion waste gene rated by the group in w as dry ton nes. tonnes of ash were g enerated fro m combu stion. In , of the waste was us ed as biofuel . Other re sidues , for example ash , are used in concrete or brick maki ng, or in road constr uction. Agricultural re-u se is also an op tion for some as h and organ ic materials . Part of the pro duction residu es are depo sited in landf ills. H azardous * E/S/G&E: Environment / Social / Governance and Economy E/ S/G & E Ambition/ Area Ta r g e t s Planned acti vities E Ensu re sus taina ble us e of mate rial s and en ergy in our o per ation s. Achi eve ei cien t use of bi proc ess s tream s in the pro duct ion pro ces s to crea te biob ase d-e nerg y or bip roduc ts fo r sale . - Utili se bi- prod ucts f rom the e ntire pr oduc tion p roce ss . Operate mills wit h high energy eiciency . Mea sure th e level of CA PEX us ed on e nerg y eiciency /energy -source i mprov ements. - Est abli sh spe cif ic ac tivitie s and i nvestm ents in e nerg y ei cien cy and cha nge s in ene rgy so urce , i.e . activ ities f rom the CA PEX-list s and th e co ntinuo us imp roveme nt pro grams . Red uce Ch emic al Ox ygen D eman d (COD) to recipient . Ins tall a naero bic wa stewate r treatm ent an d bio gas at all Eur ope an mill s ( ins tall ed) w ithin . - Inves t in ana erob ic was te water tre atmen t and bi ogas p rodu ctio n at all Eu rope an mill s. Reduce emissions of Sulphur Dio xide (SO ) and Nitro gen O xide (N OX) fr om our o pera tions . Ensu re comp lian ce with e mis sion p ermi ts and regulations. - Per form m ill act ivitie s rela ted to SO and NO X improvemen ts. Red uce wa ste from o ur op eratio ns. De liver no a sh to lan dfi ll in . - Establish procedures and/ or ash product dev elopment. G Ensu re sus taina ble so urcin g of raw ma teria l. Achi eve c ert ific ation o f all woo d use d for ou r products. - Revie w intern al con trol ro utine s to mea sure an d reac h the ce rtif ica tion ta rget . Ensure responsible supplier value chai n handling. Ensu re supp lier a dher ence to N ors ke Skog co de of con duc t within . - Matur e sust aina ble so urcin g prac tice s by upda ting co de of c ondu ct, questionnaire f or suppliers on ESG -t opic s and routines f or audit of suppliers. Annual report 2021 / Norsk e Skog 34 SUST AINABILITY REPORT waste amou nted to t onne s in . Hazardous waste is disp osed throu gh authorise d colle ction systems in a ccordanc e with national regu lations. Nors k e Skog makes great eor ts to ens ure that the w astew ater trea tment meet the highest stan dards. In and , the operation s in Australasi a had an increa se in discharg es of organic substances (C OD ) and Suspended Solids (SS). This is due to the clo sure of two mills with very beneficial en vironmental profiles, lead ing to increa sed KPI values for th e region. Many of our mills pa rticipate in proj ects to f ind alternative or add itional metho ds of reusing the by-product s from the produ ction proce sses . Our products come with an environmental product decl aration for pape r (Paper Profil e ) which guid e the paper buyer according to en vironmental performance on sta ndardised envi ronmenta l parame ters. All of No rske Skog’s busines s units are cer tifie d in accordan ce with ISO and . Please re fer to SDG about s ustainab ly manage d forest an d fibre so urcing, SD G about cl ean water , and SD G to read about e nergy utilisatio n. SOURCES PRODUC TION W ASTE T ot al 32 5 842 to nne s 62% Sludge 32% Bark 6% Othe r 85% biomass ( used as biofuel) 9% Agriculture 2% Landfill 4% Sale delivered DISPOS AL P RODUCT ION W ASTE tonn es was te tonn es production was te SHA RE OF R ECOVER ED PAPER I N P AP ER PRO DUC TION : 74% Wood (ro undwoo d and sawmill chips) 1% Purchased pulp 18% Recov ered paper 6% Inorganic fillers CONSUMPTION OF RA W MA TERIA L mill m wood mill ton nes other Photo: Finn-Arne Bjørnstad Nors k e Skog Bruck , Austria Nors k e Skog Golb ey , France No r ske S ko g S kog n, No r way Annual report 2021 / Norsk e Skog 35 SUST AINABILITY REPORT ROUNDWOOD SAW MILL CHIPS RAW MATERIALS PRODUCTS RECOVERED PAPER RAW MATERIALS PAPER MILL PAPER MACHINE HEAT CHEMICALS WATER PAPER BIOGAS BIO PRODUCTS ENERGY Thermical Electricity ELECTRICITY PULP DISCHAR GES OF SUSPENDED SOLI DS SS Kg per ton ne of pa per DI SCHA RGE S OF WASTEW A TER m 3 per to nne of paper Euro pe Australasia To t a l DISCHAR GES OF ORG ANIC SUBST ANCES COD Kg per ton ne of pa per Euro pe Australasia To t a l Euro pe Australasia To t a l P APER PRODUCTION PROCESS 0 3 6 9 12 15 2021 2020 2019 2018 2017 0 1 2 3 4 5 2021 2020 2019 2018 2017 0 10 20 30 40 50 60 2021 2020 2019 2018 2017 0 3 6 9 12 15 2021 2020 2019 2018 2017 0 1 2 3 4 5 2021 2020 2019 2018 2017 0 10 20 30 40 50 60 2021 2020 2019 2018 2017 0 3 6 9 12 15 2021 2020 2019 2018 2017 0 1 2 3 4 5 2021 2020 2019 2018 2017 0 10 20 30 40 50 60 2021 2020 2019 2018 2017 Photo: Carsten Dybevig Annual report 2021 / Norsk e Skog 36 SUST AINABILITY REPORT T a k e ur gen t acti on t o com bat c li ma t e change and its impacts The European Union and r elated national governments hav e set forth new ambitious goals to reach carbon neutr al societies by . Norske Skog, together with other Eur opean and Norwegian industries, has adopted these ambitious goals and through our industrial organisations presented a pr opose d industrial road map to r each this ambition by . The EU together with member state gov ernments have introduced a comprehensiv e energy plan including various common and stat e programmes within technology development, energy eiciency and energy consumption to fulfil this ambitious goal. Norske Sk og has integrated r eduction of greenhouse gas emissions as a ke y part of the business strategy . The goal is to reduce energy consumption, increase the shar e of renewable energy sources and t o optimise the use of process chemicals and transport. We ar e committed to contribute to combat global climate change. Climate change is the environment al issue receiving the grea test attention today . Norske Skog has a long-term goal to achiev e net zero GHG emission by , and a reduction within from the baseline in . Norsk e Skog has a tradition of setting ambitious goals of greenhouse gas reduction. Emissions to air occur primarily from energy generation pr ocesses, and the majority of solid wastes occur from the pr ocessing of fibre inputs (wood or recov ered paper) and from the treatment of eluent (fibre and biological solids). Most of our mills have their own boilers or inciner ators for producing thermal energy fr om these solid residues. Fossil fuels in the form of natur al gas, oil and coal may also be used. The main emissions associated with these activities include carbon dioxide, particulates, sulphur dioxide and nitr ogen oxides. A number of technologies are used to reduce and control these discharges. Ash r esidue s result fr om combustion processes involving solid fuels. T o demonstrate Norske Skog’ s commitment to combating climate change, and to mak e critical information av ailable to investors, cust omers and the market, we will start reporting to Carbon Disclosure Pr oject (CDP) in . EU T AXONOMY : T o meet the climate and energy targets and reach the objectives of the European gr een deal, the EU has introduced the “EU T axonomy” , a classification system for sust ainable economic activities. The EU T axonomy Regulation sets mandatory requirements on disclosur e. For , only the proportion of T axonomy-eligible and T axonomy non-eligible economic activities of the net turnover , operational expenditur e, and capital expenditure shall be disclosed. An economic activity is considered eligible if it is included in the list of activities covered b y the delegated acts of the T axonomy Regulation. Norske Sk og’ s main ac tivities, paper and cardboar d production, do not fall under the scope of the taxonomy activities that ar e published in the Climate Delegated Act. The European Commission has been explicit that economic activities that are not recognised b y the EU T axonomy are not necessarily environment ally harmful or unsustainable. This is also true for the non-eligible activities in Norske Skog. Norske Skog will closely follow the EU T axonomy regulation as it gets updated with new eligible activities that might be relevant f or our business, and will assess the eligibility for new products and services from Norsk e Skog under development. PERFORMANCE: Our carbon footprint, based on the CEPI carbon footprint tool, cover s emissions from sever al elements of our value chain: • Pulp and paper production • Forest and recycling oper ations • Producing other raw materials and fuels • Purchased electricity and heat • T ransport: excluding tr ansport to final customers, which is calculated on a case-by-case basis Carbon stored in for est products (biogenic carbon) is sep arately repor ted to the Nor wegian Environme nt Agency . Norske Sk og has set forth ambitious goals to reduce o ur carbon fo otprint. In , we reache d a level of kg CO /tonne of pap er – a slight red uction from . Our gree nhouse g as e mission s were at the same level in as in . In , Norske Skog Bruck will d uring the year reduc e the use of foss ile gas and sub stitute the gas with en ergy from the waste -t o-e nergy plant . In , the Norske Sk og Boyer mill and Norsk e * E/S/G&E: Environment / Social / Governance and Economy E/ S/G & E Ambition/ Area Ta r g e t s Planned acti vities E Reduce gr eenhouse gas ( GHG) emissions. Red uce GH G emi ssio n kg/tonn e pap er (ba seli ne ) by in ( Scop e & ). - Inves t in pac kagin g and pr omis ing en ergy a nd fib re proj ect s. Net ze ro GHG e mis sion kg/t onne p aper i n . - Par ticip ate in CC S and C CU act ivitie s at Nor ske Skog S kogn an d Norske Sk o g Saugbrugs. Red uce Sc ope G HG em issi ons by co llab orati ng with ex ternal p arti es. - Col labo rate wi th trans por ters to u tilize CO -free ve hicl es suc h as trai n for truc k prog rams at th e mill s. Use sustaina ble energy sources. Reduce dependency of fossile energ y sources. - Inve st in bi omas s-b oiler s to rep lace fo ssi le ene rgy so urce s at the mil ls. Han dle cli mate ri sk and b usin ess o ppor tuni ty understanding. Revie w the ann ual cli mate ri sk plan a nd bu sine ss opportunity analysis. - Per form a n annua l clima te risk a nd opp or tunit y analy sis for e ach business unit. Annual report 2021 / Norsk e Skog 37 SUST AINABILITY REPORT NORSKE SK OG GREENHOUSE G AS EMISSIONS CO CH N O CO -e quiv Direct (Scope ) Emissions to nnes tonnes tonnes to nnes Direct emissions from stat ionar y fuel combustion Direct emissions from t ranspor tation a nd mobile sources T otal direct emission s Indirect (Scope ) Emissions Indirec t emiss ions from stea m and power impo rts T otal F ossil Fuel Ba sed Emiss ions (Direc t & Indirec t) Direct & Indir ect Biogenic CO emissions from combustion of biomass * * Wood a nd ba rk res idue s only Skog Bruck mill encompass for about of the CO emission; whereas, the two Norwegian mills had ar ound of the total CO emission in the Group. Thr ough the partnerships with Ocean GeoLoop at Norske Skog Skogn and Borg CO at Norske Sk og Saugbrugs, Norske Skog aims to pursue the opportunity t o become CO net negative, and to explor e economically viable models for utilisation of biogenic CO . Some of our mills are located in areas wher e access to water and/ or flooding might b ecome a risk with climate change. In , Norske Sk og reviewed these climate risks relat ed to our mills. Please refer to SDG to r ead more about energy consumption and production. CARBO N FOOTPR INT DE VELO PME NT Kg CO 2 /ton ne of pa per 0 100 200 300 400 500 600 700 2021 2020 2019 2018 2017 0 50 100 150 200 250 T W h total energy consumpti on 84% gre en energy Pulp a nd pap er production For est an d recyclin g operations Pro ducing o ther raw materials and fuels Purchased electricity and heat Produ cing othe r raw materials and fuels 51% Electricity from gr een so urce s, mainly hydro 16% Fossil gas and coal 16% Biomass boilers supplied - with internal biomass 15% Rec overe d from TM P 2% Othe r GR EEN ENER GY FO R CUR RENT PA P E R C A PAC I T Y Photo : Erik Sa nde rse n Annual report 2021 / Norsk e Skog 38 SUST AINABILITY REPORT CO 2 CH 4 N 2 O SCOPE 2 INDIRECT EMISSIONS SCOPE 3 IN D IR ECT EMISSIONS SCOPE 1 DIRECT EMISSIONS PURCHASED ELECTRICITY AND HEAT INTERNAL TRANSPORT EMISSIONS ASSOCIATED WITH TRANSPORT OF PAPER PRODUCTS ARE CALCULATED FOR EACH CUSTOMER OUR REDUCTION TARGET OUR CARBON FOOTPRINT COMBUSTION OF FOSSIL FUEL IN OUR MILLS DELIVERED WOOD AND RECOVERED PAPER PRODUCTION OF FUEL AND OTHER RAW MATERIALS TRANSPORT OF RAW MATERIALS SOURCES OF GRE ENHOUSE G AS EMISSIONS Ni c k Bä u m l SK OGN , NOR W A Y Nick Bäuml started his career as an appr entice at Norske Sk og after two years of studying Chemical process engineering at Lev anger C ollege. He wanted to work in the pr o cess industry and saw Norske Skog as a lar ge and interesting employer with advanced contr ol systems. “I ge t ma n y exciti ng an d varied w ork tasks a nd new cha ll enge s . I enjoy th e learning ex perien ce . ” Bäuml thinks Norske Sk og’ s future looks good. Keeping envir onment and sustainability in mind, he believes wood fibre is the gr een future. “We also need to nd new produ c t s based o n woo d br e in additi on to th e pub li catio n paper we pr od uc e today. I r e al ly believe i n the f ut ur e of Nor sk e Skog an d know that I wa n t to lear n mor e a nd develo p . I wa nt t o c ontinu e m y edu cati on at Nor sk e Skog wh ilst I w ork her e. ” Annual report 2021 / Norsk e Skog 39 SUST AINABILITY REPORT 1. Governance Disclose the organisation’ s governance around climate-related risk s and opportunities. A. Describe the board’ s oversight of climate-related risks and opportunities. • Th e boa rd revie ws the cl imate ri sks ann ually a s par t of the over all ris k ass ess ment fo r the gro up. • Th e boa rd revie ws the lo ng-ter m clima te-re lated t arge ts ann ually a s an inte gral pa rt of th e bus ines s bud get an d strate gy pro ces s. Th e busi nes s risks and o ppor tuni ties a re disc uss ed and c ons idere d in def inin g the bu sine ss pl ans . The tar gets a re des crib ed und er ea ch rel evant SD G, with th e red uctio n of gre enho use ga s emis sio ns as a key pa rt of o ur busi nes s strate gy. The go al is to re duce e nerg y con sumpti on, c hang e the so urces o f ener gy and to optim ise th e use of p roce ss ch emic als an d trans por t. • I n an annu al SD G review p roce ss for th e entir e group , the bo ard set a mbiti ous S DG targ ets , esp eci ally for e nviro nmen tal an d clima te-re lated i ssu es. • Th e boa rd clo sely fo llows u p the an d gro up cli mate go als sp ecif ic ally. B. De scrib e man agem ent ’s role in assessing and managing climate-related risks and opportunities. • Corporate management assesses business risk a nd opportunities, stra tegies, corporate ambitions and targets f or envi ronmental aspects, including climate-related topic s. • The envir onmental d ata is sent mon thly to cor porate management. • At each mill, the managi ng director is the main responsible for envi ronmental issues. Each mill also has a r esponsible manager for environmental is sues. Eac h mill ha s regul ar co ntac t with na tiona l perm it age ncie s and im medi ately r epor ts a ny irreg ulari ties an d devia nce s from the p erm its. S ome m ills have partnerships, memberships or collaborat ion with ex ternal environmental and certification NGOs, professional nat ional tr ade organisat ions and For est Owner Association. • Ea ch mil l mana geme nt team r egul arly re ceive s, u suall y on a mon thly ba sis , intern al envi ronme ntal r epor ts re gard ing em issi on dat a. Enviro nme ntal reporting is par t o f the agenda at mill management meetings. Specific envir onmental i ncidents receive specific atten tion. 2. Strategy Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’ s businesses, strategy , and financial planning where such information is material. A. Describe the climate-related risks and opportunities the organisation has identified over the short, medium, and long term. • The transformation to a larger , more diversified product portfolio with new products will reduce the dependency on one publication paper and thus r e duce the business risk. The planned packaging production will be based on renewable resources. One of the new legs in Norsk e Skog’s main strategy is t o exploit opportunities within the circular economy utilising fibre and ener gy to create new non-fossil pr o ducts. T o day , pilot plants utilise fibre to produce nanocellulose-based products, biochemicals and biocomposites. This will in the long run contribute to green growth when commer cialised. • The goal is to reduce energy consumption in production, change the sources of ener gy and to optimise the use of process chemicals and transport. After start-up of the new energy boiler at Bruck in 20 22, all the European mills will be among the top performers regarding sc ope 1 and scope 2 emissions in the industry . • In and outbound logistics will be prioritised in the long-term horizon to minimise transport distances and costs, and for environmental c onsiderations. • T emperature risk: Some of our mills ar e located in areas where dr ought/ access to water and/ or flooding might become a risk with a changed climate. • Regulatory risks: The EU has introduced a comprehensive gr een energy plan including various common and sta te programs within technology dev elopment, energy eiciency and energy consumption to fulfil ambitious zer o greenhouse gas goals by 2050. If some countries lag in the implementation and financing process, this may cause a competitive (dis )advantage. B. Describe the impact of climate- related risks and opportunities on the organisation’ s businesses, strategy , and financial planning. • S trateg ic deve lopm ent: I n , Nor ske Skog ha d an ex tensi ve revisi on of it s busi nes s strate gy, emph asis ing the n eed f or a prof itab le, ro bus t and sus tain able b usin ess p lan . The cli mate go al for th e new pro duc t por tfo lio is to at tain a re cycl able , low CO footprint and be environmentally and financially sustainable. • B usin ess o ppor tuni ties in clud e sever al earl y-pha se res earc h proje cts i n bioc hem ical a nd fib re pro duct s: • C EBINA , a na tural f ibre pr oduc t that a dds rh eolo gy co ntrol in f luid s and ar mouri ng in so lid mate rial s. • C EBIC O, a bioc omp osite p rodu ct deve lope d at Sa ugbr ugs . • C yren e, deve lop ed at a pi lot pl ant in pa rtn ersh ip bet wee n Boyer an d Circ a Group , coul d repr esen t the fi rst bi och emic al so lvent fo r use in th e pharmaceutical industry to replace petrochemical products. • B usin ess ri sk: N ors ke Skog has i nclu ded a re duc tion of g reen hous e gas e miss ions a s a key par t of our b usin ess s trateg y . The g oal is to re duc e ene rgy con sump tion, c han ge the so urce s of ene rgy an d to optimi se the u se of pro ces s che mica ls and tr ansp or t. It is i mpor tan t for No rske Sko g to reus e pro duct ion was te, wh ich ha s a signi fic ant imp act o n CO emi ssio ns. T he bio gas pl ants ti ed to our p rodu ctio n at Gol bey, Skogn a nd Sau gbru gs utili se was te to prod uce en ergy. In ad ditio n, an e nerg y plan t is unde r con stru ction a t Bruc k, wh ich wil l utilis e prod ucti on pro ces s waste a nd fue ls de rived fr om refu se. • T emp eratu re risk : Clim ate cha nge wi th incre ase d pan -Europ ean te mper atures m ay chan ge the g rowth p otent ial for f ibre , and th e large f ocus o n utili sing bio mass i n new pro duc t area s will in th e long -term im pact t he dem and si de and , thus , the pr ice of vi rgin f ibre, o erin g risks a nd opp or tunitie s in ful fill ing the tra nsiti on to a low- car bon e cono my. • G overnm enta l supp ort r isk : Som e nation al gover nmen ts pri oritis e and fu nd low va lue bio mas s utilis ation p roje cts , whic h may dis plac e proj ect s that un der nor mal ma rket con ditio ns woul d have be en pre ferre d. The l imite d biom ass re sou rces s houl d be use d whe re they p rovide th e high est va lue cre ation , and pref erab ly also w here th e fin ishe d pro duct s can b e recyc led . The au thori ties sh ould th erefo re refr ain fro m subs idisi ng bio mas s proje cts s ole ly use d for ene rgy pu rpos es. T he auth oriti es sho uld b e enco urag ed to prov ide su ppor t for e nerg y proj ect s wher e the purp ose i s to utilis e wast e from wo od processes. • B usin ess p artn er de pen denc y risk : The sp ee d of impl eme nting gr eenh ous e gas em issi on (sco pe ) ini tiative s will de pen d on the ab ilit y of our su ppli ers to tran sform th eir b usine ss in to carb on ne utrali ty and o f autho ritie s’ ab ility to d esi gn ee ctive po litic al too ls. C. Describe the resilience of the organisation’ s strategy , taking into consideration dier ent climate- related scenarios, including a 2° C or lower scenario. • Ea ch mil l mana geme nt reg ularl y review s the phys ical , leg al, te chno logi cal an d marke t risks an d opp ortu nitie s, wh ich wil l creat e the bas is for th e overall lon g-term b usin ess p lan and s trate gy for th e corp orate m anag emen t and the b oard . • If t he glo bal po litic al vis ion of li miting g lob al warmi ng to C is not a chieve d, th is may have a ne gative e ec t on wate r and en ergy s upply. • Wate r availab ilit y: our m ills ar e depe nde nt on wate r availa bilit y and wo uld be s everel y aec ted by wate r res tricti on pla ns, a lthou gh clim ate cha nge c ould pote ntial ly incr ease th e water s uppl y for som e mill s. • S ui cient e nerg y supp ly: th e phas ing ou t of fos sil and n ucle ar en ergy s ource s may with out a ny altern ative en ergy s ubsti tution a nd with a g ene ral inc reas e in publ ic ene rgy co nsum ption c ause a n incr ease i n dema nd and th us a ge nera l incre ase in e nerg y pric es. T hat co uld thre aten th e profi tabi lity of the business. • B usin ess ri sk: N ors ke Skog has a dopte d a stra tegy an d prod ucti on pro ces s to devel op exis ting an d new pr oduc ts in c ongru enc e with the v isio n of a max imum C tem pera ture inc reas e. • N orske S kog is co mmit ted to the EU G HG ta rget s of carb on ne utrali ty by w ith an int erme diate t arget o f a redu ctio n in GHG e mis sion s by bas ed on f igure s. Ou r r espons e t o the T C F D r ecom men da ti ons (T ask Force on Climate-related Financial Disclos ures) Annual report 2021 / Norsk e Skog 40 SUST AINABILITY REPORT 3. Risk management Disclose how the organisation identifies, assesses, and manages climate-related risks. A. Describe the organisation’ s processes for identifying and assessing climate-related risks. • Annually, the board, corpor ate and business unit management make an ext ensive and systematic risk and opportunit y evaluation as described in the SDG report. • Legal factors may constitute a business risk, especially if climate-related regulatory requir ements are not evenly implemented among peer countries. • Politically imposed grid taris, especially taris not based on cost and eiciency as in Norway , will be a competitive disadvantage and thus constitute a severe business risk. • Policy related to energy , energy transmission and other regulat ory energy issues may increase ener gy market prices, with a negative impact on Norske Sk og. Energy constitutes about 15- 20% of the mill gate cash costs. B. Describe the organisation’ s processes for managing climate-related risks. • N orske S kog han dles b usin ess ri sks by se curin g del iver y of ene rgy and f ibr e throug h long -term co ntrac ts. • Norske Skog r epresentativ es participate in nat ional organisat ions to influence and monitor polit ical dev elopments. C. Describe how processes for identifying, assessing, and managing climate- related risks are integrated into the organisation’s over all ri sk management. • I n , the gro up revi ewed th e busi nes s clima te risks a nd opp or tunitie s and u sed th ese f indin gs to de fin e ambiti ons , set t arget s for the p riori tise d SD Gs and re late th ese to th e alrea dy dete rmin ed str ategi c choi ces of th e group . The pu rpos e of the as sign ment w as to alig n the cor pora te strate gy with a sel ect ion of the m ost r elevan t of the UN Sus taina ble D evelop men t Goal s. • I n the pro ces s, the c orpo rate ma nage ment a nd key emp loyee s were invo lved in p riori tisin g, an d set ting new a mbiti ons an d spe cif ic targ ets fo r each o f the UN SDG s af ter an ex tens ive evalu ation of c limate -rel ated ri sks. 4. Metrics and targets Disclose the metrics and targets used to assess and manage rele vant climate-related risk s and opportunities where such information is material. A. Disclose the metrics used by the organisation to assess climate- related risks and opportunities in line with its strategy and risk management process. • In the materiality analysis, a set of factors related t o energy , raw material, emissions, water and legal issues are given specific risk assessments, and their potential financial and operational impact on the business. • Production and environmental data: A large set of k ey figures ar e reported at the end of the sustainability r eport. • There are no specific established targets to measur e climate-related threats and opportunities. Howev er , each mill reviews the most imminent risks and business opportunities in relation to the annual revision of the ma teriality and risk analysis. • In the budget process, there are assessments of the long-term financial eects of changes in the forwar d energy prices in each market. Energy constitute on average about 15- 20% of the mill gate cash cost for the group. The high energy prices seen during 2021 and into 20 22 in Europe are not sustainable. Ther e needs to be a political commitment to maintain a competitive long-term industrial energy r egime in Europe to ensure Europe’ s competitiveness on a global scale in parallel with the transition to a low-carbon economy . The licence and permits to operate are re viewed and discussed both internally but also with relevant go vernmental agencies. • T oday , the revenues derived from fossil r esource-substitution activities and the low-carbon e conomy r epresent about 10% of the total re venue. In 2030, the group rev enues from such activities will constitute about 50%. B. Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks Our c arbo n footp rint , base d on the C EPI car bon fo otprin t tool , covers e mis sion s from se veral e leme nts of o ur value c hain : • Pu lp and p aper p rodu ctio n • Forest and recycling op erations • Pr oduc tion of o ther raw m ateri als an d fuel s • Purchased electricity and heat • T ranspor t, ex cluding transport to final customer which i s calculated on a case-by -case basis • C arbo n store d in fore st pr oduc ts (bi oge nic ca rbon ) is rep ort ed se parate ly Performance : • S cop e : kg/tonn e of pro duce d pap er • S cop e : kg/ton ne of pro duce d pap er • S cop e : kg/tonne o f prod uce d pape r • Key f igure s are rep or ted in th e back o f the sus tain abili ty rep or t. C. De scrib e the ta rget s used by t he organisation to manage climate-related risks and opportunities and performance against targets. • Th e grou p and the m ills have s et E-ind ex targ ets fo r for the pa rame ters in clud ed in th e E-index , as we ll as the re sult s ach ieved du ring th e last f ive year s. Th e EU Comm issi on fi nalis ed the B A T con clus ions u nder t he Ind ustri al Emis sion s Dire ctive /EU in S eptem ber . N ors ke Skog has s ince use d revis ed BA T l evels i n the envi ronme ntal i ndex . • I n , throug h an exte nsi ve involvem ent an d anch orin g proc ess th rough out th e entire o rgan isatio n, ne w GHG -e miss ion ta rget s were se t alon g with new S DG tar gets a nd pla nne d activ ities . No rske Skog ’s targ ets for C O emi ssio ns with b ase line : • A r edu ction i n CO emi ssio ns by • A ze ro CO em issi on targ et by • Th e ambi tions a re in lin e with the t arge t set by the EU . • Th e ambi tious t arge ts will b e fulf ille d thro ugh the n ewly e stab lish ed str ategy c onver ting n ewspr int into p acka ging an d innova tion of lo w carb on foo tprint pro duct s bas ed on re cycle d mate rials a nd fre sh fi bre res ourc es, a nd ren ewabl e ene rgy sou rces . Und er ea ch rel evant SD G sec tion , a set of r ealis tic targets and subgoals are de fined. Ou r r espons e t o the T C F D r ecom men da ti ons (T ask Force on Climate-related Financial Disclos ures) S é ve r i n e Bu thier GOLBEY , FRANCE Direc tor of Human reso urces at Go lbey , S éverine Buthier, has worked years in the steel in dustr y before joinin g Norske Skog in . “Nor s ke Skog attr a c ted me b eca use I wa n t ed to wor k for a n am biti ous c o m p a n y .” One of Bu thier’s main mis sions is to develop the a ppeal of the co mpany to attract an d retain the be st tale nts for all jobs . “I s ee Nor sk e Skog as a ma rke t lead er in co n tainerbo ar d produ c t io n, a pr o t abl e com pan y with a r ep ut ati on f or bei ng a g r e at pla ce to w ork, an d innovative in t er ms of socia l r e sponsib il it y . ” Annual report 2021 / Norsk e Skog 41 SUST AINABILITY REPORT Photo : Even Lun d HO W NORSK E SK O G RE LA T ES T O T H E O T H ER S DGS Mar tin S immle r BRUCK, A USTRIA Martin Simmler went straight fr om university to Norsk e Skog and has stayed with the company ever since. He holds a Master of Science in Envir onmental Engineering and a Master of Science in Engineering Management. For the past years, he has been heading the Energy & Envir onment Department at Bruck. “Nor s ke Skog Bruck o f fer ed a wide el d of i nt e r e sting work in e ngi neeri ng a nd envir o nment a l topic s . T h e high i mpor tanc e of safe t y a nd envir onment is a clea r sig nal a nd se t s Nor ske Sk og apart f r om oth er compa nies. ” Simmler enjoys working with a company tha t has great ambitions on the sustainabilit y agenda. He sees the coming years as crucial in reaching the climat e goals. “T h e ener gy sector wil l h av e to cha nge a lo t to r ea ch the go al of bei ng cl imat e neutral . It is gr e at to b e pa r t of t he cha nge i n the e ner gy sect or i n gener al an d in Nor s ke Skog i n par t icu l ar” E nd po ve r ty in a l l its forms ev er y w her e OVERALL AMBITION : T o maximise the group’ s value through reliable, r esponsible and sustainable conduct throughout our oper ations. PERFOR MANCE: We saf eguarded employment for our work ers. Our mills are delivering products to mor e than countries. The mills are contributing with employment and taxes in the countries they operate. Our business units ar e often cornerstones of local communities. These facilities work closely with the local communities through open dialogue. OVERALL AMBITION : T o have a neutral impact on sustainable agriculture. PERFOR MANCE: We do not ha ve a significant impact on food syst ems or agriculture nor ar e we operating in societies with high poverty. We deliv er organic materials fr om production waste to agriculture for r e -use. OVERALL AMBITION : • T o promote diversit y and inclusion by pro viding equal employment and career opportunities. • T o treat all employees f airly and with respect. • T o consider competence as the key f or both the company and the individual. DESCRIPT ION OF A CTIV IT IES: In , Norske Sk og will conduct an analysis of certain aspects of equality and diversit y , including data on equal pay and par ental leave. Based on the outcome of this analy sis, Norske Sk og will further develop its tar gets and initiatives. PERFOR MANCE: The paper industry has traditionally attracted f ew female employees. A t Norske Skog the share of female employee has been ar ound for many years. In , the f emale share of the total workf orce was . Our female share in t op management positions is , representing the top le vel in group management at the headquarter , the management teams at the business units and the Managing Directors at the sales oices. Our female shar e in other leadership positions is . We are committed to search for f emale talents for a wider r ange of roles in our company . Norske Sk og recognises that further impro vement is needed, and we believe that our new str ategic growth Initiatives will be instrumental in t erms of diversity . E nd h un ger , ach ie v e food sec u ri ty and i mpr o ved nutr itio n and promo te su stainab le agric ultur e A chie ve gender equal it y and empower al l wo men a nd gi rls fema le fema le in top man ageme nt posi tions PROP ORTION OF FEMALE 0 2 4 6 8 10 12 14 16 2017 2018 2019 2020 2021 Annual report 2021 / Norsk e Skog 44 SUST AINABILITY REPORT E nsure a vaila bil it y and sustainable managemen t o f wa t er an d sani ta ti on f or a ll OVERALL AMBITION : • T o improve water qualit y through elue nt treatm ent . • T o i mprove wat er e iciency throu gh reducing , reusing, r ecover ing, recycling and repl enishing usag e of water . DESCRIPT ION OF A CTIV IT IES: Nors k e Skog is comm itted to maintain a sustainable envi ronment and r esponsible use of natural reso urces. We are com mitted to foste r innovation and implem ent continuous imp rov e- ment ac tivities in order to have no or on ly minimal adverse i mpact on the e nvironment . Water shall gene rally be use d and recovere d multiple time s through the pulp and p apermak ing proce sses b efore finall y being dis charged to a numbe r of treatment stag es. The se treatments remove solid pa rticle s as well as diss olved organic material , making the water suit able for safe return to the natural environme nt. Nors ke Sk og is commit ted to follow the ambitio us water permit goals gi ven by the local autho rities. Nors k e Skog Environmental In dex (E-index) forms par t of the regular rep orting by the mill s to corpo rate managem ent and the bo ard. Mill per formanc e is measu red in the index again st a stand ard, which s hould be at tainable wi th the use of Be st Av ailable T ec hnolog y (BA T) or b est practic e, as des cribed in the Europ ean Union IPPC referen ce docum ent. An ind ex value of or les s indicates that the mill h as an environme ntal stan dard, which s atisfie s the ambitious levels tha t can be at taine d with BA T or be st practic e. The environme ntal index for the whol e group is calcu lated as an average of eac h mill’s index score weighted by prod uction volume s. PERFOR MANCE: The water usa ge in i s shown in the illustration . of the water taken into the mills is returned to the water ways after treatment to fulf il the loc al quality re quirement s for water discha rges. Perm it breache s are repor ted and manag ed acco rding to standa rd proced ures. Any permit b reache s will be continuo usly moni tored and discussed with super visory authorities. Nors k e Skog doe s not use ble aching ch emicals contain ing chlorine in a ny mills. Chlorin ated organic c ompound s are therefore not cre ated and AO X is n ot include d in our emis sion repo rting . The tabl e below shows the t argets for and for the param eters inclu ded in the E-index, as well as the re sults achieved d uring the last f ive years . The EU Commiss ion fina lised the BA T conc lusions und er the Indus trial Emissions Direc tive /E U in Septemb er . Nors k e Skog has sin ce used revis ed BA T -levels in the en vironmental i ndex. Please re fer to SDG to read more ab out discha rges of water into the natural environme nt. ENVIRO NMENT AL IN DEX Achi eved Ac hieved Achi eved Achi eved Ac hi eved T a rget Discharged process water m /tonne Disch arges of organi c substan ces kg/tonne Suspended solids kg/tonne Nitrogen oxides g/G J Waste to landfill kg/tonne T otal energy consumpt ion GJ/tonne Env ironment al inde x Annual report 2021 / Norsk e Skog 45 SUST AINABILITY REPORT NORSKE S K OG G L O B AL A VE RA G E W A TER US E AND DISCHARGE m /t onne of paper OTHER LOSSES 0.1 CHEMICALS WATER IN PRODUCTS 0.09 GROUND WATER 1.6 SURFACE WATER 54.5 MUNICIPAL WATER 0.05 RECYCLED PAPER AND PURCHASED PULP 0.03 PRODUCTION EVAPORATION 0.5 TO SURFACE WATER FROM EFFLUENT TREATMENT 18.6 OTHER WATER INPUTS 0.04 WATER IN WOOD 0.6 TO SURFACE WATER FROM COOLING 37.6 E nsu r e acc es s t o a or dabl e, r el iab le, sust ai na ble and modern ener gy for all O VERALL AMBITION: • T o achieve energy eiciency • T o utilise renewable sources f or energy use • T o increase production of bioenergy DESCRIPTION OF A CTIVITIES: The production of paper is an energy -intensive process. Energy is consumed mainly for t wo purposes: • T o separate, process and transport fibr e and water (electrical energy ) • T o provide process heat and to dry the paper (thermal energy ) The major use of electrical energy in mills which process fresh fibr e is the process which mechanically converts wood chips into fibr es. This process is called the thermomechanical pulping (TMP) process. Paper production based on recov ered paper consumes less energy because the fibres from r ecovered paper are mor e easily separated than those within wood. Thermal energy is used for the heating and drying of paper . In contrast with electrical energy , thermal energy is mostly generat ed within the mill. The sources of this energy include r e cov ered heat fr om the thermomechanical pulping or eluent treat - ment processes, combustion of mill residues, purchased biofuel, oil, gas or coal. In some cases, the thermal energy is supplied by ext ernal third parties or in the form of geothermal energy . Norske Sk og has comprehensive pr ogrammes in place to continuously reduce ener gy consumption and to become more envir onmentally friendly by changing the sources of energy . Norske Skog is utilising the mill eluent to produce biogas with its own biogas plants at Saugbrugs and Golbey . Eluent from Skogn is deliv ered to an e xternal biogas plant adjacent to the mill. Norske Sk o g will continue to explor e projects within bioenergy that support and develop the business. At Bruck in Austria, the group will open a new MW wide range energy boiler , utilising refuse derived fuels and paper production residuals in April . In France, the Gr een Valle y Energie (G VE) project, supported by a partnership between Norsk e Skog Golbey (NSG) and V éolia Industrie s Global Solutions (V éolia), involves the design and construction of a new biomass cogeneration plant, which will produce GWh of electricity and more than GWh of steam. PERFOR MANCE: Thermal energy , mostly heat recovery fr om the thermomechanical pulping (TMP) or eluent treatment pr ocesses or from combustion of mill residues (biofuel), is used for the heating and drying of paper . This accounts for in total about , in addition, electricity covers about and fossil sources of the tot al energy consumption in . of the production-relat ed waste generated at the site is used to generat e thermal energy . Biogas facilities at the Golbey and Saugbrugs paper mills, provide ener gy for the mills’ operations and opportunity for energy sales to e xternal customers. The biogas plants employ biowaste from paper production as fuel, contributing to a reduced carbon footprint and an impro ved environ- mental profile for the gr oup. NORSKE SK OG ENERG Y CONSUMPTION TOT AL AND BY REGI ON T ot al 7 84 3 GWh , 4. 09 MW h/ton ne of pa per 51% Electricity 13% Fossil 20% Bio 17% Rec overe d from TMP 0% Othe r 55% Electricity 28% Fossil 0% Bio 9% Rec overe d from TMP 9% Othe r 51% Electricity 16% Fossil 16% Bio 15% Rec overe d from TMP 2% Othe r NORSKE SKOG EURO PE AUSTRALASIA Annual report 2021 / Norsk e Skog 47 SUST AINABILITY REPORT The waste-to- energy facilit y at the Bruck mill is estimated to pro vide new rev enue from waste handling as well as cost savings in the publication paper production. The project is progr es sing according to plan. Bruck deliv ers enough heat to the local district heating system to supply households ( GWh). Minimisation of transport distances and costs make up import ant economic and environmental consider ations. The wood pellets plant in New Zealand had an annual capacity of appro ximately tonnes. The additional production capacity was aimed at producing industrial grade pellet fuels f or both the domestic New Zealand commercial and industrial market. The Nature’ s Flame plant was sold in the beginning of . Please refer to SDG to r ead more about waste handling. CON SU MPTI ON O F FOSS IL FU EL PER TO NN E P A PER KWh/tonne 2021 2020 2019 2018 2017 2021 2020 2019 2018 2017 0.0 0.1 0. 2 0. 3 0.4 0.5 0.6 0.7 Recovered from TMP Fossil 560 580 600 620 640 660 680 CON SU MPTI ON O F RECOVE RED H EA T F ROM THERMOMECHANIC AL P RODUCTION MWh/tonne 2021 2020 2019 2018 2017 2021 2020 2019 2018 2017 0.0 0.1 0. 2 0. 3 0.4 0.5 0.6 0.7 Recovered from TMP Fossil 560 580 600 620 640 660 680 Tr i s t a n D el ah o usse GOLBEY , FRANCE Engineer T ristan Delahousse joined Norske Skog one and a half years ago . He was attracted by the ambitious transf ormation going on in the company . T oday , he is an onsite deputy project manager , reporting to the senior vice president Strategic Pr ojec ts. “Nor s ke Skog wi l l be a dif fer ent compa n y i n the f utu r e, with Gol bey as ou r agship in the co n tainerbo ar d mar ke t . I am conde n t ther e w il l be exc iting op po rtun ities for our e m p l o y e e s .” Dela housse s ays he is proud to be p art of the journey that will s ecure the future of Nor ske Sko g . Photo: F BF ( drone image) Annual report 2021 / Norsk e Skog 48 SUST AINABILITY REPORT Pr omot e sustained, inclusiv e and sustai nable economic gr ow th, full and product iv e employmen t and de cen t work for all O VERALL AMBITION: • T o promote decent and transparent working conditions, which are necessary to nurtur e the productivity , growth, and sustainability of our business. • T o comply with employment legislation in the countries where we operat e and have close cooperation with unions. DESCRIPT ION OF A CTIV IT IES: Norske Sk og is committed to promote div ersity and inclusion by pro viding equal employment opportunities and treating all employ ees fairly and with respect. All employees and others acting on behalf of Norske Sk og are expected to conduct business in an ethical manner and must always comply with applicable laws and regulations. Norske Sk og fully complies with all laws regulating collective bargaining and r ecognises freedom of association. Our commitment to respect the freedom of association is embodied in the Global Framework Agr eement on the D evelopment of Good Working Relations, concluded by Nor ske Skog and the IndustriALL Global Union. Norske Sk og respects and supports the human rights of all individuals potentially aected by our operations and subscribes to the United Nations Global Compact principles. Norske Sk og Australia signed the first Modern Slavery and T raicking Statement, as required under the Australian F ederal Modern Slavery A ct of . The purpose is to outline our approach and commitment to ensuring that the group has robust framework s and processes in place to establish zero t olerance level f or modern slavery and human traicking in our business and value chain. Norske Sk og is obliged to operate responsibly and adhere to the highest ethical standards acr oss business units. TR A N S PAR E N CY AC T: The Norwegian Parliament passed in June the T ransparency A ct (In Norwegian: “ Åpenhetsloven”) with the purpose to promote companies’ r espect for fu ndamental human rights and decent working conditions in connection with the production of goods and services, and to ensure the general public access to information on how companies handle negative consequences on fundamental human rights and decent working conditions. The Act applies to large enterprises that ar e domiciled in Norway and that oer goods and services inside or outside Norway . The Act enters into force on July . Nor ske Skog will comply with the obligations under the scope of this Act. PERFOR MANCE: As of Decemb er , No rske Skog employed peop le in Europe and Australas ia, which i s a reduc tion from last yea r due to the shut - down of Nors k e Skog T as man mill. The turnover of pe ople , includi ng retirement , was close to . O ur employment le vels ar e not subject to seasonal variations , and the share of temp orary e mployment is around of the total. In , unio ns represe nted of our employee s for colle ctive bargainin g purpose s. There h av e bee n no repor ted incid ents of child lab our , fo rced or comp ulsor y labour durin g the repor ting perio d. Nor has th ere been any rep orte d incidents of discrimin ation in respe ct of empl oyment or occup ation. The ris k of such incid ents in the supply c hain is cons idered low, and a high -level risk as sessm ent of supplie rs has not provide d information or in dications of any viol ation by our suppliers. Photo: Carsten Dybevig Annual report 2021 / Norsk e Skog 49 SUST AINABILITY REPORT R e duce inequal it y with in and among count ries O VERALL AMBITION: • T o commit to an inclusive work culture, which appreciates and r ecognises that all people are unique and valuable and should be respected for their individual abilities and views. • T o encourage the Norwegian Discrimination Act’ s obje ctives within our business. • T o promote gender equality , ensure equal oppor- tunities and rights. • T o prevent discrimination due t o ethnicity , national origin, descent, skin colour , language, religion and faith. DESCRIPT ION OF A CTIV IT IES: Norske Sk og shall promote diversit y and inclusion by pro viding equal employment opportunities and treat all employ ees fairly and with respect. We shall also show commitment to developing pr ograms and actions to encourage a diverse or ganisation based on the principle of equal opportunities. PERFOR MANCE: During , we will further examine the risk of discrimination and other barriers to equality in our organisation. W e follow the principle of equal pay for equal work and will examine further the actual status rela ted to this principle during . Ma k e cit ies an d hum an se ttle men ts inc lusi ve, safe , re silient and su st ainabl e OVERALL AMBITION : • T o unde rstand th e actual and pote ntial impact s our ope rations have on loca l communitie s, and to u nderstand thei r ex pectations a nd needs. • T o repo rt the exte nt of development of s ignifi- cant infras tructure investments a nd ser vices suppo rted , both current or expe cted imp acts on communities and local econ omies. DESCRIPT ION OF A CTIV IT IES Several bus iness uni ts are locate d in immediate proximity to a lo cal town. No rske Skog aims to be a strong an d solid contribu tor for these com muni- ties. T o man age this relations hip we have estab - lishe d a target to repo rt the signi ficant s ocial, environ me ntal, safet y and eco nomic impa cts our operatio ns have on the local c ommunities . This is achieved by workin g with the communit y in variou s ways, both authorities an d private part - ners a nd though ope n and hone st dialo gue about envir onment, safety and economic issues. Our ac tivities aec t employees , supplier s, custome rs and par tners in m any countries, re gions , towns, and villages. Our de cisions and activities, production and sale s have an impact on a mul titude of individual s, groups , and comp anies, b oth financi ally and other wise. We reco gnise our imp act and co nsider this when m aking dec isions . This is why we aim to coop erate and com muni catio n openly with lo cal commun ities about c ompany strategie s and investment pla ns as early as p ossibl e. PERFOR MANCE: T o imp rov e and mainta in our role in so ciety and a s an impor tant em ployer in local c ommunities , our busin ess units a re encourag ed to be ac tive and open in th eir communic ation and co ntact with loc al stakehold ers. E xamples inc lude repo rts to neighbours a nd ot her local stak eholders, open days for the public to inform ab out our bus iness , engagement in nat ure pro tection pro jects, suppor t to local m useums , involvement in spo rts an d cultural initia tiv es, suppor t t o charitable orga ni sa tio ns , as well as integratio n of immigrants and di sabled per sons through voc ational training . W e enco urage employee s to take part in lo cal comm unity work as many of them do. * E/S/G&E: Environment / Social / Governance and Economy E/ S/G & E Ambition/ Area Ta r g e t s Planned acti vities S Und ers tand th e actu al and p otenti al imp acts our o pera tions h ave on loc al co mmuni ties , and to u nderstand thei r ex pectations and nee ds. Report the significant social, environmental, safety and e con omic im pac ts our o per ations h ave on the local communities. - Co oper ate with l oca l comm unit y organ ization a nd be ing op en an d hone st abo ut envi ronm ent, s afet y and ec ono mic is sues w ith rel evant co mmun ity bodies. E Rep ort th e exte nt of deve lopm ent of s ignif ica nt infr astru cture i nvestm ents an d ser vic es sup por ted , both cu rrent o r expe cted i mpac ts on communities and local economies. Rep ort exa mple s of sig nifi cant i denti fie d indi rect ec onom ic imp acts o f the org anizati on als o in the conte xt of e xternal benchma rks and stak eholder priorities, such as nationa l and in ternationa l standards, protocols, and policy agendas. - Co oper ate and c ommu nica te open ly with th e loc al co mmuni ty ab out com pany st rategy a nd inves tmen t plan s as ear ly as po ssib le. Annual report 2021 / Norsk e Skog 50 SUST AINABILITY REPORT Phot o: Sha ne Co etzee Con serve a nd sust ai na bly use t he ocea ns, seas an d ma rin e r e sour ce s for sustainable dev elopment O VERALL AMBITION: • T o im prove wat er qualit y through ef fluent treatm ent . DESCRIPT ION OF A CTIV IT IES: W ater discharges fr om production processes are treated in a number of stages to r emove solid particles and dissolved organic material. Nutrients such as nitrogen and phosphorus are added during this eluent treatment. The addition of nutrients should be at a minimum. Nors k e Skog’s objec tive is to prevent and reduce pollutio n of all kinds . W e are commi tted to follow the EU Wat er Framework Dire ctive and the ambitiou s water permit go als given by the local authoritie s. Our obj ective is to minimise o ur eect on the surr ounding ecosy s tems. PERFOR MANCE: T wo mills (Norske Skog Boy er and Norske Sk og Golbey) reported minor non-compliance issues to the respective local authorities in . None of the instances have r e sulted in any further actions from the authorities. The discharges of dissolved organic mat erial and suspended matters per tonne of paper were respectively both up by and compar ed to due to more fr equent halt in production than normal. The discharge of nitrogen incr ease d by and discharge of phosphorus per tonne of paper increased by compar ed to . The dierenc e in results from one y ear to the next is the result of many factors, including pr ocess improv ements, utilisation of equipment, production-related issues and product changes. Please refer to SDG about wat er usage, treatment of water discharge and Norsk e Skog E-index. Annual report 2021 / Norsk e Skog 51 SUST AINABILITY REPORT P r ot ect, r est or e and pr omo t e sus ta ina ble use o f t err estri al ecos yst ems, sust ain abl y ma nage f or ests, com ba t desertifi cat ion, an d ha lt an d r ev erse l and deg ra da ti on an d ha lt bi odi ve rsi t y loss OVERALL AMBITION : • T o promote sustainable forest management. • T o en sure that all purchas ed fresh f ibre and recycle d have t hird par ty chain of c ustody ce rtif ic ation . DESCRIPT ION OF A CTIV IT IES: Fores try and us e of forest prod ucts play an important role in t he combat of c limate change. For the fores t value chain to be a par t of the climate chan ge solution , the forest s must be managed sustainably . Norske Sk o g has sy stems and proc esse s to make sure that all wood use d in Norske Sk og ’ s products comes from sustainably manag ed forest s. All Nor ske Skog mills utilising fresh f ibre have third-part y verifie d Chain of Custod y ( C oC) cer tification sys tems in plac e. Our goal is to have ce rtifi ed wood in o ur produc ts. The main glo bal forest c hallenge s are related to defores tation in developin g countries an d forest biodiver sity de gradation through the l ogging of high- conser vation areas in ma ny parts of the world. In o rder to meet the se challe nges , we need to ensure that mo re of the world’s forest are as are managed on a sustainable basis. For est cer ti - fic ation is an impor tant too l in this context . PERFOR MANCE: Nors k e Skog is not a fore st owner. T he abilit y to incre ase the sh are of cer tifi ed woo d therefore depe nds large ly on decis ions made by fore st owners. The roundwo od comp onent of our fre sh fibre came fro m both forests ( ) and plant ations (). In all c ountries whe re Norske Skog source s wood , fores t areas are increas ing. Th e average share of ce rtifie d fresh f ibre in was . In , Nor ske Skog consume d million m of fresh f ibre and million tonne s of recovered p a p e r. Roundwoo d accou nted for of our consumption of fresh f ibres in . Sawmill chips , a by-product from the sawmill in dustry, accoun ted for the remaining . Please re fer to SDG to read ab out sust ainable sourcin g and recycling of pa per . CERTIFIED PROP ORTION OF FRESH FIBRE Roundwood and chips 0 20 40 60 80 100 2021 2020 2019 2018 2017 B j ørn -Eina r Uged a l SK OGN , NOR W A Y Bjørn- Einar Uged al is managin g director at No rske Skog Skogn and has high ambition s for the future of the mill site at Skogn. “We ar e ver y d edicated to loo king i n to f utu r e pl ans f or ou r mil l at Skogn , i ncl udi ng possi ble new pr o du c t s a nd new initi atives th at can h ave syner gi es with c urr ent oper at io n s. ” Going fo rward, U gedal ha s his eyes set on expan ding the collab oration with other com panies that have similar g oals and value s as Norske Skog. “We ar e putti ng sig nica n t e f f or t s into develop men t activiti es, worki ng with var io us t ech nol ogy pr ovider s to map possi ble f utu r e opt io n s and s yner gie s with oth er r e lat ed an d sust ai nab le in dustri es. And f u r th er work towar ds devel opi ng the mi l l sit e into a modern i nd ustria l cl ust er co ns isti ng of “ gr e en ” a nd sustain abl e compani es with o per ati ona l syner gi es. ” Annual report 2021 / Norsk e Skog 52 SUST AINABILITY REPORT FLO W OF S UST AI NABLE R A W MA TER IALS CERTIFIED FOREST BY-PRODUCTS RECOVERED PAPER CERTIFIED PAPER CERTIFIED PAPER MILL CERTIFIED WOOD PRODUCTS CERTIFIED SAW MILL P r omo t e peace ful an d inc lu si v e soci e t ies f or sus ta ina ble de ve lo pme nt, pr o vide ac cess t o j ust ice f or al l and b u il d e ect iv e, accoun table and inclusiv e i nstit utions a t all le vels OVERALL AMBITION : • T o abst ain from fina ncial and in- kind politic al con tribu tions • T o ensure o ur custome rs healthy and safe worki ng env ironmen t • T o ab stain from ant-competitive be havoiur and adhere to relev ant competit ive legisla tion • T o have no toleran ce for discrimi nation on grounds of ra ce, col or , sex , religion , political opinion, nationa l extraction, or social origin as def ined by the ILO, or other relevant forms of discrimin ation involving internal and/or external stak eholders. • T o have no toleran ce for prac tices such a s bribery, facilitat ion payments, fraud, extortion , collus ion, and m oney launde ring; the oer or rece ipt of gifts , loans , fees , rewards, or othe r advantage s as an induc ement to do so mething that is disho nest , illegal, o r represen ts a breach of trust . This also inclu de practic es such as embezz lement, trading in in fluence, abuse o f function, i llici t enrich ment, concealmen t, and obs truc ting j usti ce. • T o proh ibit the use of child l abor within our operatio ns and avoid contributing to the us e of child labor suppl iers and customers. DESCRIPT ION OF A CTIV IT IES: Nors k e Skog’s goal is to create c ompetitive shareh older value s aligned wi th our strategic goals. Important instruments for achieving t his obje ctive include go od princip les for corp orate governance an d a clearly def ined di vision of responsibilit ies and roles between Norsk e Skog’ s governing bo dies. N orske Skog adhere s to the Nor wegian Co de of Practice fo r Corporate Governanc e (t he “Co de” , see w w w. nues. no ). All empl oy ees an d others ac ting on behal f of Nors k e Skog must a ct in comp liance with applicable laws and regulations and ethical guidelin es at all times . Norske Skog has a zero - toleranc e policy for n on-co mpliant beh aviour and will take nec essar y action s in order to resp ond to any breache s that may occur. * E/S/G&E: Environment / Social / Governance and Economy E/ S/G & E Ambition/ Area Ta r g e t s Planned acti vities G Abs tain f rom fi nanc ial and i n-ki nd pol itic al contr ibutio ns. Rep ort w hich p oliti cal top ics a nd inf luen ce cha nnel the gro up has u sed . - Be invo lved in p oliti cal t asks thr ough th e Nor wegi an Fed erati on of T ra de and Ind ustr y, the Nor wegi an pulp a nd pap er or ganiza tion, C EPI, a nd thro ugh oth er rel evant pa rtne rsh ips. S Ensu re our cu stom ers h ealthy an d safe wo rkin g envir onment. Rep ort p erce ntag e of sig nifi cant p rodu ct and ser vic e cate gori es for w hich h ealth a nd safe ty imp acts a re ass ess ed fo r improve ment . - Per form re views of r elevan t heal th and s afety h azard s our pro duc ts exp ose to our customers. G Abs tain f rom anti- com peti tive beh aviou r and adh ere to rel evant c ompe tive le gisla tion . Rep ort th e numb er of le gal a ction s pen ding o r com plete d duri ng the re por ting p erio d rega rding anti- com petit ive beh avior an d vio lation s of anti-tr ust an d mon opol y legi slati on in whi ch the orga nizati on has b een i denti fie d as a par tici pant . Rep ort th e main o utco mes of c ompl eted l egal actions, includi ng any de cisions or judgments. - Per form a nnual r eviews w ith rel evant pe rso nnel l and ag ents o n relev ant anti- com petit ive leg islati on and N ors ke Skog ste erin g guid eline s. S Have zero to ler ance fo r disc rimin ation o n grou nds of ra ce, c olo r , s ex, re ligio n, po litic al opinion, nationa l extraction, or so cial origin as def ine d by the ILO, or ot her re levant fo rms of discrimination involving internal and/or external stakeholders. Rep ort th e total n umbe r of inc iden ts of discrimi nation during the reporting period. - Ide ntif y throu gh form al pro ces s(es) ins tanc e(s) of no n-c omp lianc e to relevant non-dicriminator y steering document pro cedures, incl uding management s ystem audits, for mal moni toring programs or grievance mechanisms (whist leblower channels) . G Have no to lera nce fo r prac tice s such a s brib ery, facilitation pa yments, fraud, extortion, collusion , and money laundering; the oer or receip t of gif ts , loan s, fe es, re wards , or oth er adva ntag es as an in duc emen t to do so methi ng that i s dis hone st, i lleg al, or r epre sent s a brea ch of trus t. Thi s also i nclu de pra ctic es suc h as embezzl ement, tr ading in influence, abuse of function, i llicit enrichment, concealment, and obs tructi ng justi ce. Rep ort th e total n umbe r and p erce ntag e of ope ratio ns as ses sed fo r risks re late d to corr uption , and th e sign ific ant ri sks rel ated to co rrupti on ide ntifi ed thr ough th e risk as ses sme nt. Re por t the tota l numb er and n ature of c onfi rmed i ncid ents of cor ruptio n: in wh ich em ployee s were d ismis sed o r disciplined, when cont racts wit h business partners were te rmin ated or n ot ren ewed , publ ic leg al cas es aga inst th e orga nizatio n or its e mploye es . - Revie w the ste erin g guid eline s annu ally. - Per form m andat ory c ompl ianc e review a nd trai ning fo r releva nt personell and business partners and ot her s r eleva nt to our business periodically or when needed . Proh ibit th e use of ch ild la bor wi thin ou r ope ratio ns and avo id con tributi ng to the u se of child labor su ppliers and cust omers. Report operations and suppliers considered to have significant risk f or incidents of: - chil d lab or and yo ung wor kers exp ose d to hazardous work, - chil d lab or eith er in ter ms of ty pe of op erati on (suc h as man ufac turing p lant ) and su ppli er; o r - cou ntrie s or geo grap hic are as with o per ation s and s uppl iers c onsi dere d at ris k. - Revie w the ste erin g guid eline s and c ode of c ondu ct an nuall y . - Per form m andat ory c ompl ianc e review a nd trai ning fo r releva nt personell and business partners and ot her s r eleva nt to our business periodic ally or when needed . Annual report 2021 / Norsk e Skog 54 SUST AINABILITY REPORT St r eng th en the m eans o f im ple men ta ti on an d r evitali z e the global par tnershi p for sustainable dev elopment O VERALL AMBITION: • T o contribute to a sustainable development in close cooperation with our main stak eholders. DESCRIPT ION OF A CTIV IT IES: We wer e the first international paper manufacturer to sign an agreement with the IndustriAll Global Union (the former International F ederation of Chemical, Energy , Mine and General Work ers’ Unions (ICEM) and the Norwegian United Federation of T rade Unions concerning employee rights on a global basis. Our group has been a pioneer in setting a global standard for social r esp onsibility and labour- management relations. W e were also an early adopter of the principles in the UN Global Compact. PERFOR MANCE: Norske Sk og’ s research and development work is performed at the individual business units and in cooperation with ext ernal research institutions. The work is coordinated centr ally , with the aim of leveraging s ynergies and best practices thr ough- out the group. Ther e is a continued focus on the evolution of paper products and new inno vative green alternatives t o existing resour ces. PERFOR MANCE: T o meet future sustai nability e xpectations, we conduct our business manda tes and activit ies acco rding to internally develop ed Stee ring Guide lines, Power of Attorn ey structures and Ope rating Mode ls. Thes e provide the basi c framework for o ur mandates an d activities . Nors k e Skog’s busine ss units have a high de gree of independence and accoun tability . Local managers are responsible a nd accountable for decisions and results within their unit. Norske Skog has co mmon stan dards of cond uct for all business units a nd employ e es t hrough ou r Steeri ng Guidelin es. We apply a uni form basis for our ope rations acros s countries an d cultures with regard to HESQ (h ealth, environm ent, safet y and quality ), people dev e lopment, financial r eporting and le gal complian ce. In the se areas, o ur conduc t must b e base d on the same sus tainabl e principle s to promote the share d interests of N orske Skog and our stakehol ders. Nors k e Skog has for a num ber of years mai ntained a reporting ( whistle-blowing) channel, where employ ee s and other stak eholders can r eport on pos sible unethic al and/or unlawful b ehaviour , and be as sured conf idential and s erious treatme nt of their rep orts . Any confirm ed non- complia nce will be followe d-up with fair con sequen ces . Pe r I v a r B e rg SA UGBRUGS , NOR WA Y Per Iv ar Berg looks back on December of last year as a huge milestone for Nor ske Skog, as the commissioning of the CEBICO demonstration plant was finalised and start ed up. “Sever a l yea r s o f develo pment work led to a grant of NOK 15 mil li on f rom Innovatio n Norw ay for th e investment in this new t echno logy . With a capacit y o f 300 tonnes per yea r , t he de monstr at ion pla nt wil l veri fy th e sca led-up pr od uctio n pr o ces s a nd pr ovid e la r ger product vol ume s for c ustomer t esti ng i n new appli cati ons . ” The CEBICO product is a wood fibre and thermoplastics composite mat erial that can be used for standard injection moulding and pipe extrusion to produce f or instance furniture, tr ansportation box es, automotive parts and drainpipes. Berg points to the importance of being cost - eective as well as investing in an impr ovement pr ogramme as key f actors for success in the futur e. “A t the sa me ti me , we m ust con ti nue th e commer cia lis atio n of CEBINA a nd CEBICO and su cceed i n gro w in g the sa le s . Fr amewor k conditi ons ar e a lso crucia l f or f utu r e s ucc ess an d es pecial ly th e CO2-compensatio n sche me . ” Annual report 2021 / Norsk e Skog 55 SUST AINABILITY REPORT Health & Safety H ) H ) Abse nce due to illnes s People T o tal e mpl oyee s FTE T e mp orar y e mpl oyee s FTE Apprentices FTE Averag e ag e of em ploye es F TE Fem ale emp loyee s Female in t op management position Female i n management position T urnov er of people (incl. dema nning and retirement) Employees w/ colle ctive agreeme nts 1) Nu mber o f per sona l inju ries w ith abs enc e x 1 000 0 00/num ber o f worked h our s. 2) N umbe r of pe rson al inj urie s with m edic al tre atme nt x 1 000 0 00/num ber o f worked h our s. KEY F IGURES EMPL O YEES Fema le sh are in of e mpl oy ees cove re d by collective agreements Business Unit Number of employ ees (FTE) De cember T op m ngt positions Other mngt positions Ordinary T emporary Apprentices Other To t a l End End En d Norske Sk og Saugbrugs No r ske S ko g S kog n Co rpor ate He adqu ar ter Norwa y total Norske Sk og Bruck Nors k e Skog Papier Re cycling No r ske S ko g G ol be y Sale s oice s in Europe Europe tot al No r ske S ko g B oye r Norske Sk og T asman Na tu re ’s F la me Australasia Shared Service s Austra lasi a total Norske S k og group total K EY FI GU R ES Annual report 2021 / Norsk e Skog 56 SUST AINABILITY REPORT KEY F IGURES OPERA TIONS Production Pape r tonne s Consumption of ra w mater ials Rou ndwood m Sawmill chip s m Rec overe d pa pe r tonn es Purchased pulp tonn es Inorgani c filler s tonn es Energy consumption Electricity GWh Heat GWh Dis charg es to water Discharged process water mill m Discharges of or ganic substances tonn es Suspended Solid (SS) tonn es Phosphorus (T ot -P) tonn es Nitrogen ( T ot-N) tonn es Emission to air CO -equivalents (direct) tonn es SO tonn es NOX tonn es Production waste Sludge ( dry ) tonn es Bark tonne s Other to nne s PRODU CTION CAP A CITY in ton nes Business Unit Newsprint (including impro ved NP) Packaging paper SC (magazine paper ) LW C (magazine paper ) To t a l capacity Norske Sk og Bruck - - No r ske S ko g G ol be y - - - Norske Sk og Saugbrugs - - - No r ske S ko g S kog n - - T otal Europe No r ske S ko g B oye r - - T o tal No rske Skog Austra lasi a - - T otal Norske S k o g gr oup Annual report 2021 / Norsk e Skog 57 SUST AINABILITY REPORT G RI S T A N D A RDS IN D E X Nors k e Skog is repo rting in ac cordanc e with the Global Re por ting Initiative GRI St andards: C ore option. Following the m ateriality ana lysis - the table b elow covers asp ects that are consi dered to be the m ost material on es to our stakeho lders an d/ or the comp any . For mo re information on GRI S tandards an d on the individu al disclosures, see GRI’s homepages, ww w.g lobalreporting.org The index refer s to where information ab out each G RI disclo sure can be found in the No rske Skog – Annual Repo rt , regardle ss of whether th ey are fully or pa rtly repo rted rel ative t o GRI . AR Annual Rep ort SR Sus tainabilit y Repor t , par t of Annual Repo rt General disclosures – Organisational profile Reference and/ or response - Nam e of the org anis ation No rske Skog ASA - Activities, brands, products, and services AR – Key fi gures SR – Ab out N orske S kog’s op eratio ns - Location of headquarters Oslo, Norway - Loc ati on of opera tions AR – Key fi gures - O wne rshi p and le gal fo rm AR – Cor porat e govern ance - M arket s ser ved AR – Key fi gures SR – Ab out N orske S kog’s op eratio ns - S cal e of the org anis ation AR – Key fi gures - In forma tion on e mploye es an d other w orkers SR – Key fi gure s empl oyees ; Key figu res op erati ons - S upply chain SR – SD G - Significant changes to t h e or ganisation a nd its supply chain AR – Gr een tra nsfo rmati on to a brig ht futur e - Precautionary principle or approach SR – A bou t the sus tain abili ty rep or t; SD G Em bed ded i n the UN G loba l Comp act p rinc iple s - Ex terna l initiati ves SR – SD G ; SD G - Membership of associations SR – SD G ; SD G General disclosures – Strategy SR – SDG 3; SDG 17 - Statement f rom senio r decision-ma ker AR – CEO ’s comm ents ; Repo rt of th e Boa rd of Dire cto rs General disclosures – Ethics and int egrity Reference and /or r esponse - Value s, pri ncip les , stan dard s, an d norm s of beh aviour AR – Co rpor ate Gover nanc e SR – C ompli ance ; SDG General disclosures – Governance Reference and/ or response - Gove rnan ce str ucture AR – Co rpor ate Gover nanc e General disclosures – Stakeholder engagement Reference and/ or response - List of stak eholder groups SR – S takeho lde r and ma terial ity an alysi s - C ollective bargaining agree ments SR – SD G ; Key fig ures - e mploye es - Identifying and selecti ng stak eholders SR – S takeho lde r and ma terial ity an alysi s - Approach to stakeholder engagement SR – S takeho lde r and ma terial ity an alysi s - Key top ics a nd con cern s rais ed SR – S takeho lde r and ma terial ity an alysi s General disclosures – Reporting practice Reference and/ or response - Entities include d in the consolidated financ ial statements SR – Co nso lidate d fin anci al sta teme nts, N ote - D efi ning re por t con tent an d topic b ound arie s SR – Stake hold er an d materi alit y anal ysis ; Abou t the sus tain abil ity re por t; - Lis t of mate rial top ics SR – S takeho lde r and ma terial ity an alysi s; The s ust ainab le deve lopm ent go als ar e an inte gral par t of ou r strate gy - Restatements of information No significant r estatements - Changes in reporting No significant changes - Repor ti ng period - D ate of mo st re cent re por t Marc h - Repor ting c ycle Annual - C ont act p oint for q ues tions r egar ding th e repo rt info@norskesk og.com - C laims o f repo rtin g in acc orda nce wi th the GR I Stan dard s SR – Ab out the s ust ainab ilit y repo rt ; GRI St anda rds In dex - G RI content index SR – GR I Stan dard s Index - E xternal assurance SR – Independent audit or’s assu rance r eport Annual report 2021 / Norsk e Skog 58 SUST AINABILITY REPORT Main category: Economy Reference and/ or response - Management approach f or economic standards and disclosures AR – Co rpor ate govern anc e; Rep ort o f the Bo ard of Dir ecto rs SR – C ompli ance ; Abo ut the su sta inabi lity re por t; S DG GRI Standard: Economic performance Reference and/ or response - Direct economic value generated and distribut ed SR – K ey figures; Consol idated financial sta tement, I ncome stat ement and notes - Fina ncial implicat ions and o ther risk s and opportunit ies due t o climat e change SR – S DG ; O ur resp ons e to the TCFD re comm end ation s - Defined benefit pla n obliga tions and ot her ret irement plans SR – C onso lidate d fin anci al st ateme nts , Note GRI Standard: Anti-corruption Reference and / or response - Con firm ed in cide nts of co rrupti on and a ctio ns taken No confirme d incidents in GRI Standard: Anti-competitive behavior R eference and/ or response - Legal a ction s for an ti-co mpe titive be havio ur, anti-trus t, and m ono poly p racti ces No su ch le gal ac tion s in Main category: Environment Reference and/ or response - Management approach f or social standards and disclosures AR – Co rpor ate govern anc e; Rep ort o f the Bo ard of Dir ecto rs SR – C ompli ance ; Abo ut the su sta inabi lity re por t; S DG ; S DG ; S DG ; S DG ; SD G ; S D G GRI Standard: Materials Reference and/ or response - Mate rials u sed by w eight o r volum e SR – SD G ; S DG ; Key fi gures o pera tions - Recycl ed inp ut mate rials u sed SR – SD G ; Key fig ures o pera tions GRI Standard: Energy Reference and/ or response - En ergy c onsu mption w ithin th e orga nisati on S R – SDG ; Key fig ures o pera tions - Energy int ensity SR – SD G - Re duction of energy consumption SR – SD G GRI Standard: W ater Reference and/ or response - Water with drawal SR – SD G - Wat er discharge SR – SD G ; Key fi gures o per ations - Water consumpt ion SR – S DG GRI Standard: Emissions Reference and/ or response - Direc t (Sc ope ) GHG e miss ions SR – SD G ; Key fig ures o pera tions - En ergy in dire ct (Sc ope ) GHG e miss ions SR – SD G - Oth er ind irec t (Sco pe ) GH G emis sion s SR – SD G - GHG emissions intensity S R – SDG - Reduc tion o f GHG emissions SR – SDG ; SD G - Nitrog en oxid es (NOX ), sul fur oxid es (SOX ), and ot her si gnif ican t air emi ssi ons SR – Key f igure s ope ration s GRI Standard: W aste Reference and/ or response - Wast e generated SR – S DG ; Key f igure s ope ratio ns - Waste di ver ted fro m disp osal SR – SD G - Was te dire cte d to disp osal SR – SD G GRI Standard: Environmental compliance Reference and/ or response - Non-compliance with environmental laws and regulations S R – SD Main category: Social Reference and/ or response - Management approach f or social standards and disclosures AR – Co rpor ate govern anc e; Rep ort o f the Bo ard of Dir ecto rs SR – C ompli ance ; Abo ut the su sta inabi lity re por t; S DG ; SD G ; SDG ; S DG ; S DG ; S DG ; SDG GRI Standard: Employment Reference and / or response - New e mploye e hire s and em ploye e turnover SR - SD G , SD G ; key fig ures op erat ions GRI Standard: Labor/ Management r elations Reference and / or response - Minimum notice periods regarding operat ional changes Follow national laws and practice GRI Standard: Occupational health and safety Reference and / or response - Worker s covere d by an oc cupat iona l heal th and sa fety m anag emen t syste m SR – SD G ; All wo rkers c overed - Work-related injuries SR – S DG ; Key fi gures o per ation s GRI Standard: Diversity and equal opportunity Reference and / or response - Diver sity o f governa nce b odie s and e mploye es AR – Bo ard of Di rec tors; C orp orate ma nage men t SR - SD G , SD G ; Key figu res em ploye es GRI Standard: Non-discrimination Reference and/ or response - Incid ents o f disc rimina tion an d corr ecti ve actio ns take n S R – SDG , S DG GRI Standard: Freedom of associations a nd collectiv e bargaining Reference and/ or response - Op eratio ns and s uppl iers i n whic h the righ t to free dom of a sso ciati on and c olle ctive barg ainin g may be a t risk SR – SD G GRI Standard: Child labour Reference and/or response - Op erati ons an d supp lier s at sig nifi cant ri sk for i ncid ents of c hild l abor SR – SD G GRI Standard: F orced or compulsory labour Reference and/or response - Oper ation s and su pplie rs at si gnif ica nt risk fo r inci dent s of forc ed or c ompu lsor y lab or SR – SDG Annual report 2021 / Norsk e Skog 59 SUST AINABILITY REPORT Munk e dams veie n 45 Post bok s 1 704 V ik a 0121 O slo www.b do.no Indepen dent Au ditor' s Repo rt 2021 – Norske Skog ASA Page 1 of 2 Independent Auditor 's Report To t he b oa rd of d irec tors in Nors ke S kog We have been enga ged b y the Manag ement o f Norske Skog ASA to provide l i mited assur a nce in respect o f t he infor m ati on pr esented in the S ustainab le Report section (“the R epo r t”) includ ed in the Norske Skog – Annual Report 20 21. Con clus io n Based on our wo rk, no t hing has come to o ur attention c ausing us not to belie ve that: • Norske Sk og ap plies a repor ting pr ac ti ce f or its sus tainability rep orting aligned with the Global Reporting Initiative (G RI) S tandards rep orting p rinciples and t h e reporting fulfils l evel Core acc o rd ing to the GR I Stand ards. • Norske Sk og’s GRI ind ex prese nted in the Repor t appr opriately re flects wher e informat io n on each of the discl osures o f the GRI S tandards is to b e found w ithin t he Norske Sk og – Annual Rep ort 2021. • Sustainabili t y infor ma tion present ed f or 2021 is consis tent wi t h data accu mulated and appr opriately pres ented in the Rep ort. Manage ment’s Res ponsib ilities Managemen t o f N o rske Skog is re sponsibl e for t he pre paration and p res entati on o f the Report and that it has been p repared in accordan c e wi th the rep orting criteria describ ed in the Report, including t he GRI S tandards. Ma nagemen t is also responsibl e for est ablishi ng such internal con t rol managemen t determi ne is ne cessary to ens ure that th e informati o n is free fr o m m a t eria l misstate ment, w hether due to fra ud or err o r. Our i ndepe nden ce and qual i ty con trol We are ind ependent o f the C o mpan y as required b y laws and regulati o ns and t he Interna t ional Ethics S tandards Board f or Acc o un tants’ C ode of I nternati o nal Ethics for Profess io n al A ccoun tants (including I nt er national Indep ende nce Sta ndards – IES BA Code , a nd we ha ve fulfill ed o ur other ethical resp onsibilities in accordan ce w ith th ese r equi rements. Our f irm applies I nternati o nal Standard o n Quality Co n trol 1 and accordingly mainta ins a compr ehensiv e s ystem of quali ty control including d oc u mented p olicies and procedur es regardi ng complian ce wi th et hical requ irements, profession al standard s and app licable l egal and r egula t ory r equire ments. Auditor’s responsib i lities Our resp onsibil it y is to expres s a limited assurance c onclusion o n t he inf o rmati on in t h e Report. W e have c o nduc ted our w ork in a ccordance with IS AE 3000 ( Revised) Assurance Engagemen t s other t han Audits or Reviews o f Historical Finan cial Informa tion, issued by the I nter national Auditing and Assurance Stand ards Board. Considerin g the ri sk of ma t erial misst at e ment, our pr ocedures includ ed, amon g o ther s: • Meetings wit h c e nt ral a nd local ma nagemen t (Norske Skog Sau gbrugs and Norske S k og Bruck) to discus s issues, risks, impor tant su stainab ility t o pics and pr ocedur es for collecting a nd reporting rele van t d a ta • Analytical r eview of devel o pmen t and c hanges fr om p rio r r epor t ing periods • Review of eviden ce support ing the in f or mation in the report on a sa mple basis Annual report 2021 / Norsk e Skog 60 INDEPENDENT AUDIT OR ’S ASSURANCE REPOR T BDO A S, a N orwegian liabilit y compan y, is a me mbe r of BDO Int ernat ional Limited, a UK co mpany limit ed by g uarante e, an d form s pa rt of th e international B D O network o f indep endent member fi rms. Th e Reg ister of Business E nte rprises: NO 993 606 650 VAT. Page 2 of 2 We belie ve th at the evide n ce w e ha v e ob tained is s ufficien t and appr o priate to pr ovide a bas is for a conclusion w i th a l imited l evel of assuranc e on the subject matters. Oslo , 29 March 2022 BDO AS Terje Tvedt State Au thorised P ublic A c c ountant Annual report 2021 / Norsk e Skog 61 INDEPENDENT AUDIT OR ’S ASSURANCE REPOR T Norske Sk og ASA is a Norwegian based paper manufacturer with pr oduc tion and sales operations in Eur ope and Australasia. Norsk e Skog’ s goal is to increase shareholder v alue, through profitable and sustainable pr oduction of publication and packaging paper as well as other fibre and ener gy related business. Norske Skog AS A is a Norwegian register ed public limited liability company listed on the Oslo Børs and is subject to Norwegian law , including Norwegian and EU securities legislation and stock exchange r egulations. The board of directors of Nor ske Skog has a str ong focus on ensuring compliance with applicable corporate go vernance standar ds. Norske Sk og is subject to reporting requir ements for corporate governance pursuant t o Section -b the Norwegian Accounting Act, and complies with the Norwegian Code of Practice for Corpora te Governance (the “ C ode” , see www.nues.no , English pages). Corporate gov ernance principles as referr ed to in this statement define r ole s and responsibilities, powers and processes, between and within gov erning bodies, such as the general meeting, the board of dir ectors and the corporate management. For further information on corporat e bodies and corporate governance matter s, please visit Norske Sk og’ s website www .norskeskog.com. Corporate gov ernance is continuously addressed by the boar d of directors, and the board of directors has appr oved this corporate governanc e statement. There are no ma terial amendments to the corporat e governance sta tement compared to the corpor ate governance st atement included in the annual report for , other than as pr ompted by the amendments to the Code in the most recent re vision dated October . . I mplementat ion and r epor ting on corporat e gov ernance This corporate go vernance statement f ollows the structure of the Code published on October . Deviations from the Code are explained wher e relev ant in this statement, and the deviations may be summarised as follows: Section of the Code Deviances – Genera l meetings • Th e Cod e rec omme nds th at the bo ard of di recto rs en sure that th e mem bers o f the bo ard of dir ecto rs att end the gen eral m eeti ng. N orske Sko g doe s not re quire th e entire boa rd of dire cto rs’ pr ese nce at g ener al me eting s. How ever, the ch air of th e boar d will at tend , and hi stori call y a numb er of addit ional board members hav e attended general meetings. • Th e Cod e rec omme nds th at the bo ard of di recto rs en sure that the gener al meeti ng is a ble to elec t an independent cha ir of the ge ner al mee ting . Nors ke Skog do es not r equi re an independent chair of its general meetings. The b oard of dire ctor s has hi stori call y reco mme nde d that the c hair of the b oard of d irec tors or, in the eve nt that th e chai r of the boa rd of dire cto rs is no t a Nor wegi an spe akin g per son , another board member who can chair t he general meeting in No rwe gian , is ele cte d to chai r gene ral me etin gs. • Th e Cod e rec omme nds th at shar ehol der s are abl e to vote on ea ch ind ividu al ca ndida te nomi nated f or ele ctio n. His toric ally, Nor ske Skog ’s gene ral me etin g is invite d to ele ct th e boar d memb ers c olle ctive ly to pro mote the b oard of dire cto rs as a qu alif ied te am and in a cco rdanc e with legal requ irements for gender representation a nd qualifications for participation in the audit committee. C ORP OR A T E G O VE R NAN C E Annual report 2021 / Norsk e Skog 62 CORPORA TE GOVERNANCE The corporate go vernance principles adopted by Norsk e Skog are set out in the company’ s Corporate Governance Policy , and are fundamental for the company’ s corporate governance and v alue creation. Norsk e Skog’ s Corporate Governance P olicy is based on the Code and, as such, it is designed to establish a basis for good corporat e governance and to support achiev ement of the company’ s core objectives on behalf of its shareholders, including the achievement of profit ability for the shar eholders of Norske Sk og in a sustainable manner . The manner in which Norske Skog is governed is vit al to the development of its v alue over time. Norske Sk og believes that good corporate go vernance involv es openness, honesty and cooperation between all parties inv olved in and with the group: the shareholders, the board of dir ectors and executive management, employees, customers, suppliers, public authorities and the society in gener al. By pursuing the principles set out in the Corporate Governance P olicy , the board of directors and management shall c ontribute to achieving the following objectives: • Openness and honesty . C ommunication with the inter est groups of Norsk e Skog shall be based on openness and honesty on issues relev ant for the evaluation of the dev elopment and position of the company . • Independence. The relationship between the board of director s, the management and the shareholders shall be based on independence. Independence shall ensure that decisions are made on an unbiased and neutral basis. • Equal treatment. One of Norske Skog’ s primary objectives is equal treatment and equal rights for all shareholders. • Control and management. Goo d control and c orporate gov ernance mechanisms shall contribute to predictabilit y and reduce the lev el of risks for shareholders and other int erest groups. The development of , and improvements in, the company’ s Corporate Governance P olicy are ongoing and important pr ocesses that the board of directors and management hav e continuous focus on. Deviations from the Code: None. . Bus ines s Norske Sk og’ s busine ss purpose is set out in the Articles of Association, article : “The company’ s objective is to conduct wood processing industry , investing activities and activities related to this, as well as pro viding headquarter services for the group , including raise of ext ernal loans and conducting group financing arrangements. ” The Articles of Association are av ailable on the company’ s website. The business of the company is conducted in accordance with the targets, str ategies and risk profile determined b y the board of directors, within the scope of the company’ s business purpose, in order to realise value cr eation for the shareholders in a sustainable manner . The board of directors considers the t argets, strat egies and risk profile of the company on a continuous basis. The company has established guidelines and principles which are used to integrate consider ations to human rights, employee rights and social matters, the external envir onment and anti-corruption eorts in its business strategies, its day-t o- day operations and in r elation to its stakeholders. This includes, but is not limited to the Norske Sk og Steering Guidelines and the Co de of Conduct. Compliance with the Steering Guidelines and the Code of Conduct is mandatory for all employ ees in the group and others acting on the group ’s behalf , and similar conduct and ethical standards ar e expected in partnerships, joint ventures and partially owned subsidiaries. The Steering Guidelines and the Code of Conduct can be found on the company’ s website. Sustainability and corpora te social responsibility ar e integrated part s of the group’ s busine ss. The group ’s sustainability r eport is included in the sustainability report section of the annual r eport. Deviations from the Code: None. . Equity and dividend s SHARE CAPIT AL The share capital of Norsk e Skog is set out in the Articles of Association, article . The company’ s share capital at year end was NOK million, divided into shares, each with a nominal value of NOK . EQ UIT Y The board of directors is r esponsible for ensuring that the group is adequately capitalised relativ e to the risk and scope of operations and that the capit al requirements set f orth in laws and regulations ar e met . The company shall have an equity capit al at a level appropria te to its objectives, stra tegy and risk profile. The board of dir ec tors shall continuously monitor the gr oup’ s capital situation and shall immediately tak e adequate steps if the company’ s equity or liquidity is less than adequate. Norske Sk og’ s consolidated total equity as at December was NOK million, which is equivalent to of total assets (f or Norske Skog ASA, the total equity was NOK million, which is equivalent to of total assets). DIVIDEND P OLIC Y It follows from Norsk e Skog’s Corpor ate Governance P olicy that the company shall, at all times, have a clear and pr edictable dividend policy established by the board of directors. The dividend policy f orms the basis for the board of directors’ pr oposals on dividend payments to the company’ s general meeting. The company’ s dividend policy has historically been to pay dividends reflecting the underlying earnings and cash flow while ensuring eicient capital allocation in the group . When deciding the dividend level, the board of directors will among other things tak e into consideration capital expenditure plans, financing requirements and maint aining the appropriate str ategic flexibility of the gr oup. The gr oup’ s financing arrangements for the ongoing projects at the Bruck and Golbey mills to conv ert a newsprint paper machine at each of the mills to a recycled cont ainerboard paper machine include restrictions on dividend distribution in the period up to July . The company’ s dividend policy has therefore been suspended until such restrictions do no longer apply . For the financial year , the boar d of directors has accor dingly not proposed that the annual general meeting appr oves payment of dividend. PURC HASE OF TR EASU R Y SHAR ES The general meeting in authorised the board of dir e ctors to pur chase Annual report 2021 / Norsk e Skog 63 CORPORA TE GOVERNANCE treasury shares up t o a nominal value of NOK , equivalent to of the company’ s share capital at the time. The authorisation was granted f or the period up to the annual general meeting in . As of the date her e of , the authorisation has not been used. Deviations from the Code: None. . E qual trea tment of shar eholders The company has only one class of shares. Each shar e in the company carries one vote, and all shares carry equal rights, including the right t o participate in general meetings. All shareholders shall be tr eated on an equal basis, unless there is just cause for tr eating them dierently . In the event of an increase in shar e capital through issuance of new shares, a decision to deviate fr om existing shareholders’ pr e -emptive rights to subscribe for shares shall be justified. Where the boar d of directors resolves to issue shares and deviate fr om the pre -emptive rights of existing shar eholders pursuant to an authorisation granted t o the board of directors b y the general meeting, the justification will be publicly disclosed in a stock exchange announcement issued in connection with the share issuance. Any transactions in treasury shar es carried out by the company shall be carried out on the Oslo Børs, and in any case at the prev ailing stock exchange price. In the event that ther e is limited liquidity in the company’ s shares, the company will consider other ways t o ensure equal trea tment of shareholders. Any transaction in treasury shar es by the company is subject to notification requirements, and shall be publicly disclosed in a stock exchange announcement. Deviations from the Code: None. . Shares and negotiabilit y The shares of the company ar e freely negotiable and there ar e no limitations on any party’ s ability to own or vote for shar es in the company . Deviations from the Code: None. . General meetings The general meeting is the shareholders’ f orum and the supreme gov erning body of the company . The Articles of Association do not limit the shareholders’ rights as provided b y the Public Limited Liability Companies Act. The board of directors sets the agenda for the gener al meeting. The minutes from the general meeting are published e xternally and on the company’ s website, in accordance with applicable laws and deadlines. The board of directors shall ensur e that as many of the company’s shar eholders as possible are able to ex ercise their voting right s at the company’ s general meetings, and that the general meeting is an eective f orum for shareholders and the board of directors, which shall be f acilitated through the following: • the resolutions and any supporting documenta tion shall be suiciently detailed, comprehensiv e and specific allowing shareholders to understand and form a view on all matters to be consider e d at the gener al meeting; • deadlines for shareholders to giv e notice of their attendance at the general meeting shall be set as close to the date of the general meeting as pr ac tically possible. The time limit may not expire earlier than fiv e days before the meeting; • the chair of the general meeting shall if determined by the gener al meeting provide f or that the shareholders ar e able to vote separ ately on each candidate nominated for election to Norsk e Skog’s Boar d of Directors and other corporate bodies (if applicable); • the chair of the board of directors and the chair of the nomination committee shall be present at general meetings, while other members of the boar d of directors, the nomination committee, the audit committ ee and the remunera tion committee, as well as the auditor shall be present at gener al meetings where matters of r elevance for such committees/ persons are on the agenda; and • the board of directors shall mak e arrangements to ensure that an independent chair for the general meeting is appointed. Shareholders who ar e unable to be present at the gener al meeting shall be given the opportunity to be r epresented by pr oxy and to vote by pr oxy . The company shall in this respect: • provide inf ormation on the procedure f or attending by pr oxy; • nominate a person who will be av ailable to vote on behalf of shareholders as their proxy; and • prepare a pro xy form, which shall, to the ext ent this is possible, be set up so that it is possible to vote on each of the items on the agenda and the candidates nominated for election. DEVIA TIONS FR OM T HE CODE: • The Code recommends that the board of dir ectors ensure that the members of the board of directors a ttend the general meeting. Norsk e Skog does not require the entir e board of directors’ presence at gener al meetings. However , the chair of the board will attend, and historically a number of additional board members hav e attended general meetings. • The C ode recommends tha t the board of directors ensur e that the general meeting is able to elect an independent chair of the general meeting. Norske Skog does not requir e an independent chair of its general meetings. The board of directors has hist orically recommended that the chair of the board of directors or , in the event that the chair of the board of dir ectors is not a Norwegian speaking person, another board member who can chair the general meeting in Norwegian, is elected to chair general meetings. • The Code recommends that shareholders ar e able to vote on each individual candidate nominated for election. Historically , Norske Skog’ s general meeting is invited to elect the board members collectively t o promote the board of directors as a qualified t eam and in accordance with legal requirements f or gender repr esentation and qualifications for participation in the audit committee. . Nominati on committee Pursuant to the Articles of Association, article , the company shall ha ve a nomination committee consisting of between one and three members. The company’ s general meeting elects the members and the chair of the nomination committee and determines their remuner ation. The majority of the members of Annual report 2021 / Norsk e Skog 64 CORPORA TE GOVERNANCE the nomination committee shall be independent from the company’ s board of directors and ex e cutive management. The members of the nomination committee shall not be members of the board of dir ectors or the executive management, and not oer themselves for election to the board of dir ec tors. The composition of the nomination committee should be such that the interest s of shareholders in gener al are repr esented. The nomination committee currently consists of two members, Ma tthew Joseph T urner , who serves as the chair of the committee and Y ngve Nygaard. Mr T urner is an employee of Oceanwood Capital Management L td, an entity associated with funds managing the company’ s largest shareholder , NS Norway Holding AS. Due to internal guidelines in Oceanwood Capital Management L td, Mr T urner does not receive remunera tion for his role as chair of the nomination committ ee. The general meeting shall appro ve the instructions for the nomination committee. These instructions set out the objectives, responsibilities and functions of the nomination committee, and provide guidelines f or rotation of its members. The company shall pro vide information regar ding the composition of the nomination committee, the members of the nomination committee and any deadlines for submitting proposals to the nomination c ommittee as part of its recommendations to the gener al me eting. The nomination committee shall recommend candidat es for the election of members and chair of the board of director s, candidates for the election of members and chair of the nomination committee, and remuner ation of the members of the board of director s, its board committees and the nomination committee. The nomination committee shall have cont act with shareholders, the board of directors on an individual basis and the company’ s executive personnel as part of its work on proposing candidates for election to the boar d. The nomination committee’ s recommendation of candidates to the nomination committee shall ensure that the y repr esent a broad group of the compan y’ s shareholders. The nomination committee ’ s recommendation of candidates to the board of directors shall ensur e that the board of directors is composed to comply with legal requirement s and principles of corporate gov ernance. The nomination committee shall justify why it is pr oposing each candidate separately . The proposals from the nomination committee shall include a reasoning for its pr op osal, as well as a statement on how it has carried out its work. The nomination committee’ s proposal shall include information about the candidates, and shall be made available at the la test in accordance with the days’ notice rule to call f or a general meeting. Shareholders shall be given the opportunity to submit pr oposals to the nomination committee for candidates for election to the board of dir ec tors and other appointments in a simple and practical manner . Any date for when such proposals must be subm itted to be co nsidere d by the nomination co mmittee sh all be communicated. The nomination committee of Norsk e Skog are, howe ver , generally av ailable to receiv e proposals for candidates or other input fr om shareholders at any time thr oughout the year. Deviations from the Code: None. . T he boar d of di rect ors’ composi ti on and independence According t o the Articles of Association, the board of directors of Nor ske Skog shall have between thr ee and eight board members. The current number of board members is three, and in addition ther e are two observers to the board of directors being union repr esentatives from each of the two Norwegian mills. The composition of the board of directors should ensur e that the board of directors has the expertise, capacit y and diversity needed to achiev e the company’ s goals, handle its main challenges and promote the common interests of all shar eholders. Each board member should ha ve suicient time available to de vote to his or her appointment as a boar d member . The number of board members should be determined on this basis. Furthermor e, individuals of the board of directors shall be willing and able t o work as a team, resulting in the board of directors working e ectively as a collegial body . The board of directors shall be composed so that it can act independently of any special interests. A majority of the shar eholder- elected members of the board of directors shall be independent of the e xecutive management and material business connections of the company . At least two of the members of the board of directors shall be independent of shar eholders that owns or controls or mor e of the company’ s shares or votes, and meaning that there are no cir cumstances or relations that may be expected to be able to influence the independence of the board members’ assessments. The members of the board of director s and the chair of the board of directors shall be elected by the company’ s general meeting. No member of the company’ s executive management shall be members of the board of director s. At least half of the members of the boar d of directors shall r eside in Norway or another EEA country . Both genders shall be represented on the board of directors in compliance with the gender r epresentation r equirements set out in section -a of the Norwegian Public Limited Liability Companies Act. The term of oice for the board members shall not be longer than t wo years at a time. Members of the board of director s may be re-elected. The election of the members of the board of director s should be phased so that the entire board of directors is not r eplaced at the same time. The following table summarises the roles of the members of the boar d of directors and meeting attendance at boar d meetings held in : Name () Residence Role Commi ttee member ships Board meeti ngs attended Board member since End o f term John Chiang London, UK Chair Audi t comm itte e and remuneration committee / Arvid Grundekjøn Oslo, Norway Bo ard member Audi t comm itte e and remuneration committee / T rine-Marie Hagen Oslo, Norway Board member Audit c ommi ttee / Annual report 2021 / Norsk e Skog 65 CORPORA TE GOVERNANCE () Please refer to the description in the boar d of directors section of the annual report for further informa tion on the expertise, experience and independence of the members of the board of director s, as well as the board members’ respective shareholdings in the c ompany . The board members have a statistic attendance at boar d meetings of . Members of the board of director s are encouraged t o own shares in the company . However , caution should be taken not to let this encourage a short - term approach, which is not in the best inter ests of the company and its shareholders in the longer term. The nomination committee’ s proposal to the general meeting (as further described in item above) shall include detailed inf ormation on candidates for the board of directors (both appointments and r e -elections), and shall be made available at the lat est in accordance with the day s’ notice rule to call for a general meeting. Deviations from the Code: None. . The wo rk o f the boar d of di rec t ors The board of directors’ main t asks comprise the ov erall responsibility f or the management of the company , and overseeing the daily administration and operations of the company . The work of the board of directors is carried out in accordance with the rules and standar ds applicable to the group, as described in the company’ s Corporate Governance Policy’ s instructions to the board of directors. The instructions to the boar d of directors include detailed description of duties and responsibilities of the board members, as well as working and meeting procedures. The Corpor ate Governance P olicy’s instructions to the board of director s and the instructions to the CEO include procedures f or how the board of directors and e xecutive management shall handle agreements with rela ted parties, including whether an independent valuation must be obtained. Agr eements with related parties ar e de scribed in Note (Related parties) in the consolidat ed financial statements. The board of directors pr epares an annual plan for its work, clearly setting out strategic, financial, opera tional and organisational matters f or discussion and resolution. In addition to addr essing the matters on such plan, the board of directors continuously addr esses matters and processes which requir e the board of directors’ in volvement fr om time to time. Throughout and into , the board of directors has in addition t o recurring matters conc entrated a significant amount of time on strategic dev elopment and financing and capital markets matt ers related ther eto. One of the most important strategic development goals addressed b y the board of directors in has been the group’ s conversion of newsprint paper machines to recycled containerboar d paper machines, with one machine at the Golbey mill in France and one machine at the Bruck mill in Austria, including the financing of these conversions. F urthermore, eorts and r esults within the areas of health, environment and safet y are annually report ed comprehensively to the boar d of directors, and the CEO r eports on health, environment and safet y , operations and market development s in every board meeting. The boar d of directors actively manages the resour ces of the board of director s and its committees in accordance with the r elative stra tegic and commercial importance of matters. The board of directors has t wo sub- committees, an audit committee, as required b y the Public Limited Liability Companies Act, and a remuner ation committee. The members of the audit committee are Arvid Grundekjøn ( chair), John Chiang and T rine-Marie Hagen. The members of the remuneration committee are John Chiang ( chair) and Arvid Grundekjøn. The company’ s Corporate Governance P olicy includes a set of instructions for each of the committees, describing defined areas of responsibilit y . The committees undertake pr eparatory discussions and submit their r ecommendations to the board of directors. The audit committee focused on the company’ s financial reporting and internal control function in . The r emuneration committee focussed on salary and other remuneration t o executive per sonnel in . The external auditor and the CFO attend the meetings of the audit committee. The CEO attends the meetings of the remuner ation committee, ex cept if excused for discussions on the CEO’ s remuner ation. The following table summarises the meeting attendance of the boar d memb ers at board and committee meetings held in : Name () Committee member ships Board meeti ngs attended Audit committee meetings attended Remuneration committee meetings a ttended John Chiang Audit comm ittee and rem uneration committee / / / Arvid Grunde kjøn Audit comm ittee and rem uneration committee / / / T rine -Marie Ha gen Audit committee / / N /A Annual report 2021 / Norsk e Skog 66 CORPORA TE GOVERNANCE () Please refer to the description in the boar d of directors section of the annual report for further informa tion on the expertise, experience and independence of the members of the board of director s, as well as the board members’ respective shareholdings in the c ompany . The board members have a statistic attendance at boar d and committee meetings of . In , the board of director s held twelve meetings and eight matters wer e resolved by writt en resolutions. The audit committee held six meetings in and the remunera tion committee held three meetings in . Due to the circumstances ar ound COVID-, the meetings of the board of dir ectors and its committees were to a lar ge extent held by video conf erence thr oughout . Representation a t meetings of the board of directors and committ ee meetings is at The board of directors shall annually e valuate its perf ormance and expertise for the previous y ear . This evaluation shall include the composition of the board of directors and the manner in which it s members functions, both individually and as a group, in r elation to the objectives set out for its work. The report shall be made av ailable to the nomination committee. Due to the circumstances ar ound COVID- and the eects these hav e had on the meetings of the board of directors, the annual e valuation in was postponed to , and the evaluation by the boar d members instead provided dir ectly to the nomination committee as part of the nomination committee’ s work , as further described in item above (Nomina tion committee). Deviations from the Code: None. . Risk management and in ternal con tr ol The board of directors is r esponsible for ensuring that the company has sound and appropriate internal c ontrol syst ems and systems f or risk management, and that these systems ar e proportionate t o and reflect the extent and natur e of the company’ s activities. Having eective internal control syst ems and systems for risk management in plac e are important to pr event the group from situations that can damage its reput ation and financial standing. Furthermor e, eective and proper internal c ontrol and risk management are import ant factors when building and maintaining trust, to r each the company’ s objec tives, and ultimately creat e value. Having in place an e ective internal control system means that the compan y is better suited to manage commercial risk, operational risk, the risk of breaching legislation and regula tions as well as other forms of risk that may be material t o the company . As such, there is a correlation between the compan y’ s internal control s ystems and eective risk management. The internal control syst em shall also address the organisation and execution of the company’ s financial reporting, as well as cover the company’ s guidelines for how it integrates considerations r elated to stakeholders int o its creation of v alue. Norske Sk og shall comply with all laws and regulations that apply to the gr oup’s business activities. Norske Sk og’ s enterprise risk management processes are based on COSO’ s Enterprise Risk Management framework, and cover financial, oper ational, market and organisational risk s. By this delineation of risk control, all sustainability and responsibilit y areas cov ered by Norsk e Skog’s St eering Guidelines are also cov ered by its enterprise risk management pr ocesse s and is reported to the boar d of directors. The sy stem is based on the management teams in each business unit and in key corpor ate functions annually reporting potential risk factors to the compan y’ s risk management function, which in turn provide a basis f or the agenda of the corporate management meetings and adequate follow-up measures. In addition, Nor ske Skog annually r eviews and reports on sustainabilit y in accordance with GRI’ s Sustainability Reporting Standards. The annual r eview is carried out by an independent and internationally recognised audit firm. F urther information on the group ’s sustainability reporting is pr ovided in the group’ s sustainability report included in the sustainability report section of the annual r eport. The internal control s ystems within the finance organisation primarily co ver the financial reporting structure and pr o cesses. Routines for internal contr ol over financial r eporting are defined in Norske Sk og’s internal contr ol documentation (Financial Reporting Manual, Financial Closing Manual and Financial Closing Checklist). Responsibilities are clearly defined in terms of execution, documentation and c ontrol. As part of the continuous focus on compliance, regular r eviews of business processes, investments or other issues are carried out. These compliance processes are carried out on the basis of risk assessments, and support the business in improving internal control and achieving the set goals. The gr oup also has a power of attorney structure which describes and regulates financial empowerment t o individual positions. In addition, Norske Sk og has implemented internal routines to ensur e continuous attention and eorts on maintaining high c ompliance standards throughout the group . These internal routines are set out in Norske Sk og’s Continuous Compliance Program, and include a number of compliance r elated activities that shall be carried out over the course of a calendar year . Norske Sk og has clearly established channels and procedures f or reporting and handling instances of possible serious misconduct (whistle blowing). Such channels are described on our website, intranet and in the St eering Guidelines. It is the opinion of the board of directors tha t Norske Sk og’ s internal control and systems for risk management ar e adequate and proportionate to the nature and comple xity of the company’ s operations and financial situation. Deviations from the Code: None. . Re mun era tion o f the boar d of di rect ors The remunera tion of the board of directors is decided b y the annual general meeting on the basis of the nomination committee’ s proposal. The committee considers the level of r esponsibility , complexity and time consumption, as well as the required e xpertise, for the board members. Pr op osals for annual adjustments of the remuner ation of the board of director s are based on considerations to ensur e that Norske Skog remains attr active and competitive on the market for go verning bodies’ competencies. No board member has carried out specific tasks or commissions for the company in addition to the director ship, and Norske Sk og has not paid other remunera tion to any board member than the or dinary board remuner ation. Separate r emuneration is set for the chair and members of the boar d of directors and r espective committees under the board of director s. The current remunera tion amounts are as follows: Annual report 2021 / Norsk e Skog 67 CORPORA TE GOVERNANCE . The remuneration f or the chair of the board is NOK (zer o) per year . () . The remuneration for the other members of the boar d is NOK per year . . The remuneration for the chair of the audit committee is NOK per year . . The remuneration for other members of the audit committ ee is NOK per year . () . The remuner ation for the chair of the remuneration committee is NOK (zero ) per year . () . The remuneration for other members of the remuner ation committee is NOK per year . . T ravel expenses in connection with board and committee meetings ar e paid in accordance with the Norwegian Government’ s T ravel Allowance R egulation. () John Chiang, chair of the board, chair of the remuner ation committee and member of the audit committee, is a partner of Oceanwood Capital Management LLP , an entity associated with funds managing the company’ s largest shareholder , NS Norway Holding AS. Due to internal guidelines in Oceanwood Capital Management LLP , Mr Chiang does not receive remunera tion for his role as chair of the boar d, chair of the remuneration committee and member of the audit committee. The total remuner ation for the board of directors in , including committee work, was NOK . For further information, please refer to the report on salary and other remuneration t o leading personnel, which is available on the company’ s website, www.norsk eskog.com. Deviations from the Code: None. . R emuner ati on of e x ecut ive perso nnel The board of directors has adopt ed guidelines for determining salary and other remunera tion to leading personnel in accordance with Section - a of the Public Limited Liability Companies Act and the Regulation on guidelines and reporting on remuner ation for leading personnel. In the preparation of the guidelines and in any subsequent amendments to these, the focus of the board of directors is t o provide f or that the guidelines are clear and easily understandable, and that they contribut e to the company’ s commercial strategy , long-term interests and financial viability . Furthermore, the company’ s arrangements in respect of salary and other remuneration shall be simple and contribute to aligning the inter ests of leading personnel and shareholders, with an absolute limit on performanc e-related remunera tion. The guidelines are present ed for approv al by the general meeting if significant changes are made, and at least every f ourth year . The current version of the guidelines was approv ed by annual general meeting in and ar e available on the company’ s website, www.norsk eskog.com. The CEO’ s remuneration terms are r eviewed and decided annually by the board of directors f ollowing prepar atory discussions in the board of dir ectors’ remunera tion committee. The remuner ation consists of base salary , annual performance bonus, pension and other benefits. The decision on the CEO’ s remunera tion takes into consider ation the overall performance of the CEO and the company , and the market development for CEO r emuneration in companies of similar complexity , size and industries. The remuneration of other leading personnel is determined by the CEO , and the performance related remuner ation consist of the same elements as for the CEO . Perf ormance based elements are calculated on the basis of quantifiable objective targets as well as on quantifiable t argets falling within ar eas over which the respective ex ecutives have a r easonable influence. In addition, Norske Sk og has established a long-term incentive pr ogram based on synthetic stock options. The progr am mirrors the financial outcome of an actual stock option with an initial “ exercise price” (which corr esponds to the price per share set at the time of awar d of the options and a mechanic to fix a “fair market v alue” in the future when the options ar e exer cised (- years following award of the options ). The long-term incentive pr ogram is described in the guidelines for determining salary and other remuner ation to leading personnel, which are av ailable on the company’ s website, www.norsk eskog. com. The board of directors shall f or each financial year pro vide for the prepar ation of a report on salary and other remuner ation to leading personnel in accordance with Section - b of the Public Limited Liability Companies A ct and the Regulation on guidelines and reporting on r emuneration for leading personnel. The report is subject to an advisory vote b y the annual general meeting and is published on the company’ s website, www.norsk eskog.com, following the annual general meeting. In addition, information about remunera tion of leading personnel is available in the financial sta tements, in Note (Employee benefit expenses ) in the consolidated financial statements. Deviations from the Code: None. . Infor mation and co mmunic ation s The company has established guidelines for its r eporting of financial and other information based on openness and taking into account the r equirement of equal treatment in the securities market. These guidelines are set out in the company’ s Communication Policy and the Investor Relations P olicy . The company pro vides on a continuous basis its shareholders, the Oslo Børs and the securities market and the financial market in gener al with timely and precise information about the company and it s operations. Such information is published through the Oslo Børs’ information sy stem and the company’ s website. Information is typically giv en in the form of annual reports, half- year reports, quarterly r eports, press releases, notices t o the stock exchange and through published investor pr esentations in accordance with what is deemed appropriate and r equired at any giv en time. Financial reporting follows International Financial Reporting Standar ds, and through open and proactiv e communication with investors and financial mark ets, including through regular presentations, Norsk e Skog ensures transparency and equality t o facilitate our stakeholders’ assessment of the company . The company furthermore regularly pro vides information on its long-term potential, including str ategies, value drivers and risk f actors. Information to Norsk e Skog’s in vestors will also be published simultaneously through the Oslo Børs’ information s ystem and/ or the company’ s website. The company publishes an annual, electronic financial calendar with an overview of dates f or important events, such as the annual gener al meeting, interim financial reports, public pr esentations and payment of dividends, if applicable. The information is made av ailable in English and Norwegian. Annual report 2021 / Norsk e Skog 68 CORPORA TE GOVERNANCE Photo: Carsten Dybevig Unless there are applicable e xemptions that is appr opriate to utilise in the specific situation, Norske Sk og promptly discloses all inside information (as defined in article of the EU Market Abuse Regulation). In addition, Norsk e Skog pro vides information about certain ev ents, e.g. by the boar d of directors and the general meeting concerning dividends, mergers/ demergers or changes to the share capital, the issuing of subscription rights, con vertible loans and all agreements of major importance that ar e entered into by Norske Skog and relat ed parties. Separate guidelines hav e been implemented regarding handling of inside information, and these follow fr om the instructions for handling of inside information and the instructions for primary insiders. The rules of pr ocedure for the board of dir ectors set out who in the board of dir ectors is entitled to publicly speak on behalf of the company , and the Communication Policy defines the responsibility of communications on behalf of the company in various matters. Deviations from the Code: None. . T ake - over s The board of directors has est ablished clear principles in the Corporate Governance P olicy for how it will act in the event of a tak e -over bid, including that it will act in accordance with the Code and Norwegian law . The principles emphasise the importance of equal treatment of e xisting shareholders. They further warrant that the boar d of directors will ensur e suicient information in time and content for the shareholder s to assess a possible bid, including issuing a statement to the shar eholders with the board of dir ectors’ assessment of such bid, together with a valuation pr epared by an independent e xpert. A sale of a significant part of the company will requir e approv al by the general meeting. The board of directors will not without decision b y the general meeting attempt to hinder a tak e- over bid f or the company . Deviations from the Code: None. . Au di tor The auditor presents an annual audit plan, describing the auditor’ s understanding of the industry and significant risks, as well as the audit approach to be applied. The auditor participates in audit committ ee meetings when discussing the financial statements and other audit r elated matters. The auditor furthermore attends boar d meetings at which the annual accounts are on the agenda and as otherwise requested. A t such meetings, the auditor are requested to r eport on any material changes in the company’ s accounting principles and key aspects of the audit, comment on any material estimated accounting figures and r eport all material matters on which ther e has been disagreement between the auditor and the ex ecutive management of the company . The auditor annually confirms its independence in writing. During and , the auditor has participated in discussions with the audit committee. Furthermor e, the auditor has met with the board of dir ectors without the corporate management being pr esent, and reviewed the company’ s internal control procedures. The company has e ective guidelines for the ability of the auditor to perf orm non-audit services for the company upon approv al by the audit committee. The company inf orms the general meeting about the auditor ’ s fees for audit and non-audit services. The board of directors r egularly asses ses the quality and eiciency of the work of the auditor . Deviations from the Code: None. H u g o H a rs t a d Hugo Ha rstad is B usines s Developme nt Director a t Norske Skog. He h as been work ing with international b usines s developme nt and techno logy develo pment over the pas t years and jo ined Nor ske Skog in . “T h e mai n r easo n why I star ted a t Nor sk e is the o ppor tu nit y to work with th e develo pmen t of th e new sust ai nab le mat eri als CEBIN A and CEBICO. A t N or s ke Skog we h ave a gr eat c ult ur e f or in dustri al i nnovatio n and k no wledge sharing. ” Hars tad’s main tas k is comme rcializing nano cellu lose and bio c ompos ites. He b elieves Nors k e Skog is hea ding for a per fect s torm introducing n ew bio-ba sed materia ls. “We have s tar ted the gr ee n tr a nsf ormati on a nd lo ok f orw ar d to th e busi ness g r owth into ne w ar en as . ” SAUGBR UGS , NORWA Y Annual report 2021 / Norsk e Skog 69 CORPORA TE GOVERNANCE REP OR T OF T H E B O A RD OF DIREC T ORS Norske Sk og is one of the leading producers of publication paper in the world, with an annual production capacity of million tonnes. The gr oup has production sites in Eur ope and Australasia. In Eur ope, the group has four production sites, two in Norwa y , one in France and one in Austria. The European segment is the lar gest with million tonnes of capacity , of which million tonnes is newsprint and million tonnes is magazine paper . In Australasia, the gr oup has one production site in Austr alia. The production capacity in the Australasian segment is million t onnes newsprint and million tonnes magazine paper located in T asmania at Norske Skog Bo yer . Norske Sk og Boyer is the only domestic producer of publication paper in Australia. NO RSKE S K OG IN The year was once again an event ful year for Norsk e Skog and the world in general. The CO VID- pandemic continued to impact the business and the life of our employees. The numer ous and continuously changing restrictions imposed in all markets Norsk e Skog operat es have impacted the demand for the group’ s products although to a lesser extent than last year . The European oper ations experienced a very challenging opera ting environ- ment during particularly in the second half . Despite demand stabilizing, prices remained low for the first half of impacting pr ofitability . Prices increased into the second half but the extr aordinary and surging prices, particularly for energy led to continuous pr e ssure on mar gins. Because of this further price increases were implement ed in fourth quarter impro ving the profitability t owards the end of the year , but the overall profitabilit y for the year was at an unsustainable lev el. In Australia and New Zealand, the demand declines e xperienced in resulted in ov ercapacity in the r egion and as a consequence of this Norske Skog T asman ceased production of newsprint at the end of June . The Norske Sk og T asman mill was an important contributor to the regional economy in New Zealand for years, pr oducing more than million tonnes of publication paper over its lifetime. Nor ske Skog Bo yer is now the sole producer of publication paper in the r egion serving Australia and New Zealand. also marked an important milestone for Nor ske Skog thr ough the entrance into gr owing markets for pack aging paper with final investment decisions being made for conversions at Norsk e Skog Bruck and Norske Skog Golbey . The financing of both projects was completed during the year at attractive terms and both pr oje cts are underw ay with Norske Sk og Bruck to start production of r ecycled containerboard in f ourth quarter of and Norske Sk og Golbey in fourth quarter of . In February the company issued new shar es raising approximat ely NOK million in new equity . In March, the company issued a EUR million senior secured bond with maturity in to r efinance the outstanding EUR million senior secured bond. The net pr oceeds from these transactions and the maturity pr ofile provided the gr oup with a strong foundation to dev elop its business and to execute it s strategic inv estments into the recycled cont ainerboard market. During Oceanwood has reduced its ownership from t o through two priv ate placements of shar es, the first in January consisting of shares and the second in December consisting of shar es. IN COME S T A TE MENT A ND CASH FLOW Norske Sk og’ s op erating inc ome was NOK billion in (NOK billion). The increase was mainly due to price incr ease s realiz ed in the second half of but also due to higher volumes compared t o in Europe. In Australasia volumes decr ease following the cessation of production at Norske Skog T asman. Distribution costs of NOK billion (NOK billion) were in line with previous year . C osts of materials of NOK billion (NOK billion) incr eased due to higher production volumes, but in particularly due to ener gy prices which surged in the second half of while reco vered paper r emained at high levels throughout the y ear . Employee benefit expenses of NOK billion (NOK billion) decr eased slightly year-on-year . EBITDA decreased to NOK million in (NOK million), mostly impacted by the negative oper ating environment in Europe and Austr alasia in the first months while the fourth quarter saw some improv ement. Restructuring expenses in amounted to NOK million (NOK million) and is mainly related to the closur e of Norske Skog T asman in June . Depreciation was NOK million in (NOK million). Derivatives and other fair value adjustments in ended at NOK - million (NOK - million) reflecting the impact of the change in fair value of energy contracts in Norwa y. Operating earnings ended at NOK - million in (NOK - million). The change reflects the challenging market conditions in all r egions and the change in fair value of the ener gy contracts in Norway . Net financial items in were NOK - million (NOK - million). Net interest expenses of NOK million in (NOK million) was in line with previous year . Currency gain of NOK million (NOK million) is due to the stronger NOK during as most debt is denominated in other currencies, primarily Eur o. Income tax es for amounted to NOK million (NOK million) reflecting the lower tax pay able due to weaker results as well as taxes for pr evious years related to the Italian sales oice. Loss f or the period was NOK million in (NOK - billion). Net cash flow from operating activities ended at NOK million in (NOK million). Cash from operations w as NOK million (NOK million) reflecting the challenging operating en vironment in . Net inter est payments were NOK million (NOK million), in line with the pr evious years. T axes paid was NOK million in (NOK million). T axes paid in are rela ted to Norske Sk o g Golbey , Norske Skog Bruck and in part payment of tax for pr evious years in Italy . Annual report 2021 / Norsk e Skog 70 REPORT OF THE BOARD OF DIREC TORS BALAN CE SH EET T otal assets were NOK billion at December (NOK billion). T otal non- current assets wer e NOK billion at December (NOK billion). The increase is mainly r elated to the investment in the wast e-to - energy boiler at Norske Sk og Bruck as well as investments related to the conversion to r e cycled cont ainerboard at Norsk e Skog Bruck and Norske Skog Golbey . Investments in property , plant and equipment amounted to NOK million in (NOK million). T otal current assets were NOK billion at December (NOK billion), with cash and cash equivalents of NOK million at December (NOK million). The increase in current assets is mainly r elated to an increase in trade r eceivables due to higher sales and increase in cash and cash equivalents. T otal non- current liabilities wer e NOK billion at December (NOK billion). Non-current liabilities increased due to refinancing and upscaling of the EUR bond debt as well as loans related to the w aste-to- energy boiler . T otal current liabilities were NOK billion (NOK billion). Net interest - bearing debt at December was NOK million (NOK million). Equity was NOK billion at December (NOK billion). The decrease reflects loss for . RIS K MANA G EME NT The main risk exposures for the gr oup are linked to continued negative demand development in ke y sectors within publication papers not matched by capacity management by the suppliers. Acc ordingly , prices could come under pressure and become highly v olatile. The group is also exposed t o movements in the prices of key input f actors such as energy , recov ered paper , wood and chemicals. Thus, eorts to continue to impr ove eiciencies and develop purchasing stra tegies are ke y to mitigate these risk factors. The group’ s revenues and cost s are partly hedged operationally fr om a currency point of view; providing some risk r eduction but significant movements, particularly in the NOK, pose a financial risk for the group. Norsk e Skog’s oper ations are predominantly production of publication paper in Eur ope and Australasia. The demand for publication paper will likely continue t o decrease and the market balance is over time dependent on futur e closures of production capacity either permanently or through conv ersions to other paper grades. Exposure to both newsprint and magazine paper grades give some pr oduct diversification, while the conversion to r e cycled cont ainerboard at Norsk e Skog Bruck and Norske Sk og Golbey as well as new fibre based and bio-related products will provide further div ersification and reduced exposur e to publication paper. Business segments located on opposite sides of the world provide some geographical diversification. Norsk e Skog is not vertically integrated back into forest r esources and theref ore must sour ce wood from third parties. The supply of wood is to a certain extent co vered by medium to long-term contracts which reduce c ost exposure and incr ease supply certainty . For the remaining part the price dev elopment of wood is linked to the activity in the pulp and paper sector with lower activity and pricing giving lower cost and opposite when activity is high. Financial risk management includes currency and liquidity planning. Curr ency volatility is to a cert ain extent mitigated b y natural hedging wher e income and expenses are matched in the same curr ency. Norsk e Skog has loans predominantly denominated in EUR, replica ting cash flows from the EUR based European mark et. Liquidity is ensured by maintaining suicient cash balances and open credit lines linked to tr ade receivables facilities and a revolving cr edit facility . Norske Skog continuously assesses the most competitive funding sources f or the group. Norsk e Skog performs credit evaluations of counterparties. The gr oup’s insur ance program is managed centrally through a well-established insurance pr ogram. Norske Sk og ASA has a directors and oicer s liability insurance for the gr oup and its subsidiaries. The insurance cov ers defence costs and potential legal liability for director s and oicers arising out of claims made against them while serving on a board of directors and or as an oic er . The insurance renews annually , and the sum insured was USD million at December . Risk factors ar e further discussed in Note Financial risk in the consolidated financial statements. CORPO RA TE GOVERNAN CE Norske Sk og considers good corporate gov ernance to be a prer e quisite for value crea tion, trustworthiness, and access to capital. Norsk e Skog believes that good corporate gov ernance involves openness, honesty and cooperation between all parties involved in and with the gr oup: the shareholders, the boar d of directors and ex e cutive management, employees, customer s, suppliers, public authorities, and the society in general. T o secure strong corporate gov ernance and value creation in a sustainable manner , it is important that Norske Skog ensures good and healthy business practices, reliable financial r ep orting and an envir onment of compliance with legislation and regulations acr oss the group. Norske Sk og has governance documents setting out principles for how business shall be conducted. These apply to all group entities. The Norske Skog governanc e regime is appro ved by the boar d of directors of Norsk e Skog. Further det ails are described in the corporat e governance section in the annual report and on www .norskeskog.com. SUST AINAB ILITY Norske Sk og is committed to contribute to sustainable de velopment and supports the ten principles in the UN Global Compact and support the work to develop a global standar d for reporting of sustainable development. We therefor e use the Global Reporting Initiative’ s (GRI) Standards f or reporting relating to sust ainability as a tool in our work to report en vironmental and corporate r esponsibility . Our reporting practice is, in our view , for all practical purposes in line with the GRI Standards r eporting principles. The UN Sustainable Development Goals (SDG) are an integral part of our business strategy . Norske Sk og supports all SDGs but realize that some are more rele vant to our business than others. In , the gr oup reviewed the business climate risks and opportunities. The findings were used to define ambitions, target settings for the prioritiz ed SDGs and relate these to the already determined str ategic choices of the group . The purpose of the assignment was to align the corporate str ategy with a selection of the most relev ant of the SDGs. In the process, the entire organisation was in volved in prioritizing and setting new ambitions and specific targets for each of the SDGs. Our assessment included input from workshops with repr esentatives from all our mills focusing on which of the SDGs that are the most r elevant ones for our operations. W e have summarized what the prioritized SDGs mean to us in one sentence: Norsk e Skog shall creat e value for people and society in a responsible way , while maintaining a sustainable environment and use of natural r esources. Our attitude and ability to be entr epreneurial, empower each other and behave consistently , define our results in changing and challenging markets. Thr ough reliable, responsible, and sust ainable conduct, we will win the trust and Annual report 2021 / Norsk e Skog 71 REPORT OF THE BOARD OF DIREC TORS confidence of our stakeholders, both within and out side of Norske Skog. W e monitor activities to achieve sustainable pr oduc ts and pr ocesses throughout the entire value chain. W e continuously strive to maintain our status as the most attractive industry partner for supplier s and customers. The corporat e strategy consists of thr ee elements and gives us a well- defined foundation for our work related to the prioritiz ed SDGs: • Improv e and optimise publication paper cash flows • Become a leading producer of renewable pack aging • Diversify and innov ate within fibre and ener gy These strategic goals ar e communicated extensiv ely throughout the organisation, and are well known t o external stak eholders, especially the press and investors. T o make the new SDG targets r elevant for the board, management and the rest of the group , the intention was to align and integrate the prioritized sustainable development goals t o the resolved stra tegic goals already eectuated b y the board of director s. The following five sustainable development goals that wer e sele cted to be most r elevant to the existing strat egy: • SDG : G ood health and well-being • SDG : Qualit y education • SDG : Industry innovation and infr astructure • SDG : Responsible consumption and pr oduction • SDG : Climate action Details of environmental impact of the oper ations, environment al responsibility and corporate social r esponsibility are described in the Sustainability r eport section in the annual report and on www .norskeskog.com. HE AL TH AND SAF ETY Norske Sk og aims to have zer o injurie s among employ ees. All near misses and injuries are reported in our global Health Saf ety and Environment s ystem. Experiences from every single incident ar e shared within the entire organisation. Lost -time injuries per million working hours, was in (). Norske Sk og had an absence rate due to sickness of in (). EMPL O YEES, GENDER EQU ALI TY , GENDER B ALAN CE AND DIVERSI TY The Norske Sk og group had employees at year end (). The paper industry has traditionally had few female emplo yees. At Norsk e Skog, the share of female emplo yees, around , is a slight incr ease from the level it has been for many y ears. Given the low shar e of female employees, particularly at the mills, there is high focus when r ecruiting to increase the number of female operators. The boar d of directors consists of three members, two men and one woman. Norske Sk o g is working to encour age the Norwegian Discrimination Act’ s objec tive within our business. This includes activities to promote gender equality , ensure equal opportunities and rights, and to prevent discrimina tion due to ethnicity , national origin, descent, skin color , language, religion and faith. RE SEARC H AND D EVELOP MENT Norske Sk og’ s research and development work is performed at the individual business units and in cooperation with other external c ompanies and/ or external r esearch institutions. There is a continued f ocus on evolution of paper products and new innov ative green alterna tives to replace e xisting materials and substances that in many cases ar e based on petrochemical products. Investments int o projects for alternativ e use of fibre and development of bio-chemicals are being made in the form of pilot or demonstration plants that, if successful, can contribute to gr owth when commercialised. Norske Sk og has developed bio-based products at the Norske Sk og Saugbrugs in Halden since , with particular focus on both nanocellulose (CEBINA) and bio composites (CEBICO). Significant pr ogress has been made for both products over the last y ear and Norske Skog have r ealised commercial sales and proof-of-concept for its CEBINA product. High testing activities for CEBINA, with customers and partners, have shown promising results f or new applications in water-based paint, composites and epoxy syst ems. CEBINA is suitable in most water-and solv ent free applications lik e adhesives, flooring and putties, and provides advant ages in eiciency and health. In epoxy syst ems, demonstrations in putty and spr ay filler have shown great potential in tests with customers. Norske Sk og Saugbrugs has in carried out an investment study for a new demonstration plant to upscale pr oduction of CEBINA for epoxy and coating systems. In December a new milestone at Norske Sk og Saugbrugs was achieved when the commissioning of the CEBICO demonstration plant was finalised and the plant was started up. Sev eral years of development work lead to a gr ant support of million NOK from Innov ation Norway for the inv e stment in this new technology . With a capacity of tonnes per year , the demonstration plant will verify the up-scaled production process and provide larger pr o duct volumes for customer testing in new applications. The CEBICO product is a wood fibre and thermoplastics (“plastics”) composite material and can be based on recycled, vir gin and biobased plastics. The wood fibre is thermomechanical pulp (“TMP”), produced at Norske Skog Saugbrugs. CEBICO can be used for standard injection moulding and pipe e xtrusion to produce furnitur e, transportation box e s, automotive part s, drainpipes etc. GOING CON CERN In accordance with the pr ovisions in the Norwegian Accounting A ct, the board of directors has assessed the going concern assumption as basis for pr eparing and presenting the financial statement s. At December the equity of the company is NOK billion, giving an equity ratio of appr oximately . Based on the results for the company and gr oup for , the solidity and available liquidity , the board of directors confirms that the assumption applies and that the financial statements ha ve been prepar ed on a going concern basis. OUTLOOK FO R Although the publication market and demand hav e levelled out in it is expected that there will be a structur al decline in the coming years. However , in the near to medium term, due to the significant capacity closur es completed and the further closures that hav e been announced, the market is expected to remain balanced. Energy and raw mat erial markets r emain highly volatile and uncertain into . The unprecedented increases f or the largest input factors, particularly energy , do not show signs of being alleviated any time soon. The continued high prices for energy , recov ered paper and other input costs into hav e resulted in further necessary publication paper price increases f or all grades in Europe. Annual report 2021 / Norsk e Skog 72 REPORT OF THE BOARD OF DIREC TORS The significant capacity closures and conv ersion to packaging paper in the industry have positively impacted the mark et balance for publication paper. Additional capacity closures ha ve been announced for and . Operating ra tes are expected to r emain high for the industry well into . The waste-to- energy facilit y at Norske Sk og Bruck is in the commissioning phase and is expected to reach full oper ations in the second quarter of . Once fully operational, the facilit y will substantially reduce gas consumption and thus CO emissions for the Norske Sk og Bruck site. Prepar atory groundwork for c onverting two newsprint machines into recycled container board pr oduction at both Norske Sk og Bruck and Norske Skog Golbey is underway and will progr ess during . Production of packaging paper is expected to start at Norsk e Skog Bruck in the fourth quarter of , and at Norske Sk og Golbey in the fourth quarter of . Norske Sk og will continue its strategic r eview of the operations in Australia following the closure of the Norsk e Skog T asman mill and the sale of the Nature’ s Flame pellets facility in New Zealand. Norsk e Skog Boyer is the only publication paper producer in the r egion. Further opportunities to r ealise values relat ed to the Norske Sk og Boyer industrial site will be r eviewed. Norske Sk og will continue to develop business opportunities for CEBINA and CEBICO . This includes to evaluat e a potential capacity increase f or CEBICO beyond the existing t onnes annual pilot-scale capacity . The pilot facility will enable production and delivery of larger t est volumes. In February Norsk e Skog Saugbrugs, together with its resear ch and industry partners, was granted NOK million in r esearch funding fr om the Research Council of Norway and Inno vation Norwa y under the Green Platform Program. The portf olio of products to be dev eloped aims to remov e or greatly reduce the use of petroleum-based r aw materials and harmful materials, as well as to contribute to incr eased recycling of plastics. The invasion of Ukr aine by Russia at the end of February has cr eated further uncertainty in the mark ets and particularly energy market which is import ant for Norske Sk og. Norske Skog has no operations or sales to the impacted regions but there is an inherent uncertainty on any impact on operations during . NO RSKE S K OG ASA THE PARENT CO MP ANY The parent company , Norske Skog ASA, is incorporated in Norway and has its head oice at Skøy en in Oslo. The activities of Norske Sk og ASA consist of holding shares in the operating companies and conducting the head oice functions of the Norske Skog gr oup. At December the company had employees. Operating re venue NOK million (NOK million) is primarily from the services provided within the gr oup. Employ ee benefit expenses NOK million (NOK million) and other operating expenses NOK million (NOK million) are rela ted to the head oice functions. Net financial items amounted to NOK - million (NOK - million) reflecting unr ealised currency gain osetting net financial items. The loss for the y ear for Norske Skog ASA was NOK million in (NOK - million). Net cash flow from operating activities was NOK - million (NOK - million). T otal assets were NOK billion at December (NOK billion) the increase mainly due to incr ease in cash and cash equivalents. T otal n on-curre nt asset s were NOK b illion at Decemb er (NOK billion). T otal non -current lia bilities were NOK billion at Decemb er (NOK billion) while curren t liabilities inc reased to NOK billion from NOK billion. Equity wa s NOK billio n at Decemb er (NOK billi on). The increas e is due to new paid -in capit al of approximately NOK millio n during the year . Lost-time injuries per million working hours, was in () in Nor ske Skog ASA. The company had an absence rate due to sickness of in (). The risk factors described for the gr oup are also rele vant for the par ent company . Furthermore, Norsk e Skog ASA is also e xposed to the risks of funding from the cash genera ting operations not being av ailable for the company when requir ed, whether by way of intr agroup loans or other capital transactions such as dividend payments. The total number of shareholders w as at December (). P R O F I T L O S S A L L O C AT I O N The loss for the year for Norsk e Skog ASA (the parent company ) in was NOK million (loss of NOK million). The loss for the year was allocated to retained earnings. DIVIDEND P ROPOSA L For the financial year , the boar d of directors has not pr oposed that the annual general meeting appro ves payment of dividend. SKØ YEN, 29 MARCH 20 22 THE BOARD OF DIRECTORS OF NOR SKE SKOG ASA John Chiang Arvid Grundekjøn T rine -Marie Ha gen Sven Ombudstvedt Chair Board member Board member C EO Annual report 2021 / Norsk e Skog 73 REPORT OF THE BOARD OF DIREC TORS Photo: Carsten Dybevig CONSO LID A TED FI NANCIAL ST A TE MENTS Cons olidated incom e statement 76 Consolidat e d stat ement of comprehens ive income 76 Consolidated balance sheet 77 Consolidated stat ement of cash flows 78 Cons olidated st atement of chan ges in group e quity 79 NOTES TO THE CON SOLIDA TED F INANC IAL ST A TE MENTS 1 General info rmat ion 80 2 Accounting p olicies 80 3 Accounting es timates and assum ptions 85 4 Financial risk 85 5 Operati ng segments 88 6 O ther operati ng income 91 7 Emp loye e be nef it ex pe nse s 92 8 Other opera ting expenses a nd audit ors fees 93 9 D erivat ives and other fair value adjustment 93 10 Asso ciated companies 94 11 Financial items 94 12 Income taxes 96 13 Earnings an d dividend per share 97 14 Intangible assets and property , plant and equi pment 99 15 Lease s 102 16 Share s 103 17 De riva tives 104 18 Financ ial instruments 106 19 Receivabl es and ot her non-current assets 109 20 Pension and other employ e e oblig ations 110 21 Provisions 113 22 Interes t -be aring liabilities 115 23 Sp ecifi cation of balan ce sheet i tems 117 24 Rel ated p ar ties 118 25 Events af ter the balanc e sheet date 119 C ONSOL ID A T E D F I NAN C IAL S T A TE M E NT S CONSOLIDA TED FINANCIAL ST A TEMENTS CON SOLID A TE D IN COME ST A TEM ENT NOK MIL LION NOTE 2021 2020 Operati ng re venue 5 9 848 9 173 Other operat ing income 6 466 439 T otal opera ting inc ome 10 315 9 612 Dis tribu tion c ost s -1 187 -1 159 Cos t of materials -6 055 -5 093 Empl oyee b en ef it exp en ses 7 -1 723 -1 760 Other operat ing expenses 8 -687 -865 Rest ruct uri ng e xpenses 21 -192 -75 Depreciation 14 -433 -438 Impairme nts 14 22 -451 Derivatives and other fair v alu e adjustments 9 -218 -1 112 T otal opera ting e xpenses 10 474 10 952 Operating earnings 5 -160 -1 339 Share of prof it in asso ciated comp anies 10 -18 -10 Financial in come 11 5 6 Financial expenses 11 -200 -170 Gains/(losses) on foreign currency 11 78 -185 Profi t/ (loss) bef ore income taxes -295 -1 698 Income taxes 12 -68 -186 Profit/ (los s) after tax -363 -1 884 CON SOLID A TE D ST A TEM ENT O F COM PREH EN SIVE I NCOM E NOK MIL LION NOTE 2021 2020 Profit/ (los s) after taxes -363 -1 884 Ite ms that m ay be recl assif ied sub sequ ently to p rofit or l oss Curr ency tr anslat ion dierences -122 183 Reclas sifie d translation die rences up on divestmen t of foreign operatio ns 0 -62 T ax exp ense on trans lation dierenc es 0 -4 To t a l -122 117 Ite ms that wi ll not b e recla ssifi ed sub sequ ently to p rofit or l oss Remeasur ements of p ost emplo yment benefit obligat ions 14 11 T ax eect on r emeasurements of post employment benefit obliga tions -2 -2 To t a l 12 9 Other comprehensiv e income -110 126 T otal comprehensiv e income -473 -1 758 Basic e arnings pe r share (NOK ) 13 -3.90 -22.84 Diluted e arnings pe r share (NOK ) 13 -3.90 -22.84 Annual report 2021 / Norsk e Skog 76 CONSOLIDA TED FINANCIAL ST A TEMENTS CON SOLID A TE D BALANCE S HE ET NOK MIL LION NOTE 31.12.2021 31.12.2020 Asse ts Intangible assets 21 55 Property , plant and equi pment , 4 103 3 586 In vest ment in ass ociat ed companies 108 43 Other non-current assets , 305 401 T otal non-current assets 4 538 4 084 Inve ntor ies , 1 203 1 194 T rade and o ther r eceivables , 1 411 1 288 Othe r current asse ts 484 241 Cash and cash equivalents 1 489 980 T o tal curr ent ass ets 4 587 3 703 T otal assets 9 125 7 787 Equity and liabilities Paid-in equity 8 898 8 510 Retai ned earnings and ot her reserves -5 765 -5 292 T otal equ ity 3 133 3 219 Employ ee benef it obligations 312 297 Deferred tax liability 260 308 Interest-bearing non- current liabilities , 2 356 1 613 Other n on-current liabili ties 463 277 T otal non- curren t liabilities 3 391 2 496 T rad e and other payable s 1 941 1 728 T ax payable 50 54 Interest-bearing current liabilities , 187 92 Other curre nt liabilities 422 199 T otal curre nt liabilities 2 600 2 073 T otal liabilities 5 991 4 568 T o tal eq uity an d liab iliti es 9 125 7 787 SKØ YEN, 29 MARCH 20 22 THE BOARD OF DIRECTORS OF NOR SKE SKOG ASA John Chiang Arvid Grundekjøn T rine -Marie Ha gen Sven Ombudstvedt Chair Board member Board member C EO Annual report 2021 / Norsk e Skog 77 CONSOLIDA TED FINANCIAL ST A TEMENTS CONSOLID A TED ST A TEMENT OF CA S H FL OWS NOK MIL LION NOTE 2021 2020 Cash generated from operations 5 10 003 9 617 Cash used in operations -9 564 -8 786 Cash f low from currency h edge s and finan cial items -39 -77 Inter e st pa yments received 11 4 5 Inter est payments made 11 -107 -109 Ta x e s p a i d -106 -102 Net c ash flow fro m opera ting ac tiviti es 1) 5 191 549 Purchases of property, plan t and equipment and intangible assets 5, 14 -1 021 -632 Sale s of proper ty, plant and equip ment and inta ngible as sets 14 17 933 Purchase of s hares in com panies and oth er finan cial payments -95 -79 Sale s of shares in com panies an d other finan cial instrum ents 207 80 Net c ash flow fro m investing a ctivit ies -891 302 New loan s raised 22 1 202 472 Repa yments o f loans 22 -383 -811 Dividends paid 0 -516 New paid-in equity 388 0 Net c ash flow fro m finan cing a ctivit ies 1 207 -855 Foreign curre ncy eec ts on cash a nd cash e quivalents 2 16 T otal change in cash and cash equiv alents 509 11 Cash an d cash e quivalents at st art of pe riod 980 970 Cash an d cash e quivalents at en d of period 1 489 980 1) Reco ncil iatio n of net ca sh flow from o perati ng act ivities Profit/ (loss) befor e income tax es -295 -1 698 Change in w orking capital 57 393 Change in re structuring p rovisions 21 -28 6 Depre ciation and impairme nts 14 411 888 Derivatives and other fair v alu e adjustments 9 223 1 055 Gain and l osses fro m divestment of bu siness a ctivities an d proper ty, plant and equip ment -16 -153 Net f inancial item s without ca sh eect -7 179 Ta x e s p a i d -106 -102 Change i n pension obl igat ions and other employ e e benefits -13 -7 Adjust ment for ot her it ems -37 -12 Net c ash flow fro m opera ting ac tiviti es 191 549 Annual report 2021 / Norsk e Skog 78 CONSOLIDA TED FINANCIAL ST A TEMENTS CONSOLID A TED ST A TEMENT OF CHANGE S IN GROUP EQU ITY NOK MIL LION P AID-IN- EQU ITY 1) OTHE R P A ID -I N EQU ITY 2) R E TA I N E D EARNINGS TOT AL EQU ITY Equity 1 January 202 0 6 261 2 249 -3 018 5 493 Profit /(loss) afte r tax 0 0 -1 884 -1 884 Other compr ehensive income 0 0 126 126 Dividends paid 0 0 -516 -516 Equity 31 December 202 0 6 261 2 249 -5 292 3 219 Change in p aid-in equit y 3) 388 0 0 388 Profit /(loss) afte r tax 0 0 -363 -363 Other compr ehensive income 0 0 -110 -110 Equity 31 December 202 1 6 649 2 249 -5 765 3 133 1) Paid -in eq uity c ons ist of sh are c apita l NOK 377 mi llio n (94 264 705 s hare s with a no mina l value of N OK 4.00) an d shar e prem ium of NO K 6 272 m illio n. 2) Other paid-in equity arises from a de-reco gnition of debt in 2018. 3) Inc rea se of pai d-in- equ ity i n Febr uar y 202 1 by issu ing 11 764 705 n ew sha res . The in crea se co nsis ted of in crea se in sh are c apita l of NOK 47 mil lion a nd inc reas e in sha re pre mium o f NOK 341 milli on. Annual report 2021 / Norsk e Skog 79 CONSOLIDA TED FINANCIAL ST A TEMENTS . Gen eral informati on Nors k e Skog ASA (“ the compa ny”) a nd its subsi diaries (“ the group” ) is a world lea ding produc er of public ation paper w ith strong market pos itions in Europe and Austral asia. Pub lication pap er include s newsprint an d magazine pape r . Nor ske Sk og op erates five mills in fo ur countries . Norske Skog has an annual pu blication pap er produ ction cap acity of m illion tonnes . Four of the mills are in Europe an d one in Australia . Newsprint an d magazine pape r are sold throu gh sales o ices an d agents to over countrie s. The group h as approximately employees . Of the four m ills in Europe two will als o produc e recycled c ontainerb oard following c onversion proje cts . In addition to the traditional pub lication pap er busin ess, N orske Skog aims to fur ther diversif y its op erations and c ontinue its transfo rmation into a growing and high margin b usines s through a range of exciting fib re projec ts. The parent c ompany , Nors ke Sk o g ASA, i s incorpor ated in Nor way and has its head o ice at Sk øyen in Os lo. The comp any is listed on O slo Stock E xchange with the ticker NSKOG. The con solidated f inancial s tatements a re presented in a ccordan ce with International Fi nancial Rep orting S tandards (I FRS) and interpretations from the IFRS Interpretatio ns Commit tee (IFRIC), as adopted by the Europe an Union (EU). The co nsolidated f inancia l statement s are presente d in English only. All amounts are pre sented in NOK m illion unles s otherw ise stated . There may be som e small dieren ces in the summ ation of columns an d rows due to rounding . The corre spondin g amounts for pri or year in parenthe sis. The cons olidated f inancial st atements were au thorised for i ssue by the boa rd of direc tors in Norske Skog ASA on March . The tabl e below shows the averag e monthly foreign exchang e rates applie d in the i ncome stat ement and t he closing ex change rat es applied i n the balance shee t for the most im port ant currencie s for the group. Income sta tement Balance sheet AU D EUR GBP NZD USD . A ccounting polic ies The principal accounting policies applied in the preparation of the c onsolidated financial statements of Norsk e Skog ASA ar e set out below. The consolidated financial statements hav e been prepared under the hist orical cost convention, as modified by the rev aluation of biological assets, available-for-sale financial assets and financial assets at fair value thr ough profit or loss. The policies have been consistently applied to all periods pr esented, unless otherwise stated. They ha ve been prepar ed under the assumption of going concern. CONSOL I D A TION a) Basis of consolidation The consolidated financial statements c omprise the financial statements of Norske Sk og ASA and its subsidiaries as at 31 December 2021. Control is achieved when the group is e xposed, or has rights, to variable r eturns from its involvement with the inv estee and has the ability to aect those r eturns through its power ov er the investee. Specifically , the group controls an investee if , and only if, the group has: • Power over the investee (i. e., existing rights that give it the current ability to direct the relev ant activitie s of the invest ee) • Exposure, or rights, to variable r eturns from its involvement with the investee • The ability to use its power ov er the investee to aect its r eturns Generally , there is a presumption that a majority of v oting rights results in control. T o support this presumption and when the group has less than a majority of the voting or similar rights of an inv estee, the group considers all relev ant facts and circumst ances in assessing whether it has power over an investee, including: • The contractual arrangement( s) with the other vote holders of the in vestee • Rights arising from other contr actual arrangements • The group’ s voting rights and potential voting rights The group re-assesses whether or not it controls an inv estee if facts and circumstances indicat e that there are changes t o one or more of the three elements of control. Consolidation of a subsidiary begins when the gr oup obtains control o ver the subsidiary and ceases when the group loses contr ol of the subsidiary . Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year ar e included in the consolidated financial statements fr om the date the group gains contr ol until the date the group ceases to contr ol the subsidiary . When necessary , adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the group ’ s accounting policies. All intra-group assets and liabilities, equity , income, expenses and cash flows relating t o transactions between members of the group are elimina ted in full on consolidation. NO T ES T O T H E C ON S OL ID A T ED F I NAN C IAL ST A TE M E NTS Annual report 2021 / Norsk e Skog 80 CONSOLIDA TED FINANCIAL ST A TEMENTS b) Associates Associates are all entities ov er which the group ex ercises significant influence but not control, generally ac companying a shareholding of to of the voting rights. Investments in associat es are accounted for using the equit y method of accounting. The investment is initially recognised at cost, and the carrying amount is increased or decreased to r ecognise the investor ’ s share of the profit or loss of the investee after the da te of acquisition. The group’ s share of post-ac quisition profit or loss is recognised in the income statement as shar e of profit in associated companies and is assigned to the carrying value of the investment, together with the group ’s shar e of other comprehensive income in the associat ed company . When the group’ s share of losses in an associate equals or exceeds its inter est in the as sociate, including any other unsecured receiv ables, the group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Profits and losses r esulting from transactions between the gr oup and its associates are r ecognised in the consolidated financial statements only to the extent of unr elated investors’ int erests in the associates. At each r eporting date, the group determines whether ther e is any objective evidence that the investment in the associate is impaired. If this is the case, the group calculates the amount of impairment as the dier ence between the recov erable amount of the associate and its carrying v alue, and recognises the amount as share of profit in associat ed companies. SEGMENT REP ORT ING Reportable se gments The activities in the group are divided into t wo operating segments: publication paper Europe and publication paper Austr alasia. The segment struc ture is in line with the group’ s op erating model. The oper ating segments are reported in a manner consistent with the internal reporting pr ovided to the chief operating decision maker . The chief operating decision maker , who is responsible for allocating resources, making str ategic decisions and assessing performance of the group’ s mills, has b een identified as corporat e management. Activities that are not part of the opera ting segments are included in other activities. Accounting policie s applied in the segment re porting Recognition, measurement and classification applied in the segment r eporting are consistent with the accounting principles applied for the c onsolidated income statement and balance sheet and the internal management r ep orting. Perform ance measur ement The group assesses the performance of the operating segment s based on a measure of EBITD A. These items exclude the eects of expenditur e not deemed to be part of the regular opera ting activities of the segment, such as restructuring expenses, impairments, changes in fair v alue of certain energy contracts, embedded derivativ es in energy contracts and v alue change of biological assets. See Alternative P erformance Measures (APM) for further information relat ed to performance measurement other than financial measur e defined or specific in the applicable financial reporting framework (IFRS). Intercompany tr ansactions The revenue r eported per operating segment includes both sales to external parties and sales to other segments. Intra-segment sales are eliminated in the consolidated financial statements. All sales tr ansactions between operating segments are carried out at arm ’ s length prices as if sold or transferred to independent third parties. FOREIGN CURRENC Y TRANSLA TION a) Functional and presentational cur ren cy Items included in the financial statements of each of the gr oup’ s entities are measured using the currency of the primary economic location in which the entity operates ( the “functional currency”). The consolidated financial statements ar e presented in NOK, which is both the functional and presentational curr ency of the parent company . b) T ransac tions and balances Foreign curr ency transactions are translated into the entity’ s functional currency using the ex change rate pr evailing on the date of the transaction. Foreign e xchange gains or losses resulting from the settlement of such transactions and from the tr anslation of monetary assets and liabilities denominated in foreign curr encies at year-end exchange rates are r ecognised in the income statement. Exchange dier ences arising from the settlement of trade r eceivables/ payables and unr ealised gains/losses on the same positions are recognised in operating re venue/ cost of materials respectively . Exchange dierences arising from the settlement of other items ar e recognised within financial income/ financial expenses. Foreign e xchange gains and losses that relate to borrowings and cash and cash equivalents are pr esented in the income statement within financial income/financial e xpenses. Non-monetary items that ar e measured at fair v alue in a foreign currency are translated using the e xchange rat es at the date when the fair v alue was determined. T ranslation dier ences on assets and liabilities carried at fair value are r eported as part of the fair value gain or loss. c) Group co mpanies The results and financial position of all group entities which ha ve a functional currency dier ent from the pr esentational currency ar e translated into the presentational curr ency as follows: i. Assets and liabilities for each balance sheet presented are translat ed at the closing rate at the dat e of that balance sheet, ii. Income and expenses for each income statement ar e translated at a verage exchange r ates on monthly basis, iii. All resulting exchange dier ences are booked t o comprehensive income On consolidation, exchange di erences arising fr om the translation of the net investment in for eign entities are booked as part of compr ehensive income. When a foreign oper ation is derecognized, such ex change dierences are booked out of comprehensiv e income and recognised in the income stat ement line other operating income. Other operating expenses as part of the gain or loss of the transaction. PROPE RTY , PL ANT AND EQ UI PME NT Land and buildings comprise mainly mills, machinery and oice premises. All property , plant and e quipment (PPE) is shown at historical cost less subsequent depreciation and impairments. Historical cost includes expenditure dir e ctly attributable to the acquisition of the it ems. The residual value of production equipment is defined as the r ealisable value after deduction of the estimated cost of dismantling and remov al of the asset . If the estimated cost exc eeds the estimated value, the net liability is added to the cost of the related asset, and a pro vision is recognised as a liability in the balance sheet. Borrowing costs, which ar e directly related t o qualifying assets, are r ecognised as part of the acquisition cost for the qualifying asset. Subsequent costs are included in the asset’ s carrying amount or recognised as a separate asset, as appropriate, only when it is pr obable that future economic benefits associated with the item will flow to the group and the c ost of the item can be measured reliably . The carrying amount of the replaced part is derecognised. All other repair and maintenanc e costs are charged t o the Annual report 2021 / Norsk e Skog 81 CONSOLIDA TED FINANCIAL ST A TEMENTS income statement during the financial period in which they ar e incurred. Land is not depreciated. Depreciation on other assets is calcula ted using the straight-line method t o allocate their cost or rev alued amounts to their residual values over their estimat ed useful lives. The residual value and useful lif e of property , plant and e quipment are reviewed and adjusted. Re view of impairment indicators are perf ormed regularly , and if impairment indicators are identified an impairment test of property plant and equipment for the CGU in question is performed. An asset’ s carrying amount is written down immediately to its r ecover able amount if the asset’ s carrying amount is greater than its estimat ed recover able amount . Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and is included in the income statement line other operating income/ other operating expenses. INT ANGIBLE AS SETS a) Patents and licenses Patents and licenses ha ve a finite useful life and ar e recognised at historical cost less accumulated amortisation. Amortisation is calculated using the straight-line method t o allocate the cost of patents and licences o ver their estimated useful lives. b) Com puter sof tware Acquired computer soft ware licences ar e capitalised on the basis of the costs incurred to acquir e the specific software and bring it into use and amortised over their estimated useful liv es. Costs associated with maintaining computer software ar e recognised as an expense as the y are incurred. Costs which ar e directly associated with the development of identifiable and unique softw are products controlled b y the group , and which are likely t o generate economic benefits exceeding the costs be yond one year , are recognised as intangible assets. Direct costs include the costs of softwar e development personnel and an appropriate portion of r elevant ov erheads. C omputer softwar e development costs recognised as assets ar e amortised over their estimated useful lives. IMPAIRMENT OF N ON FINANCIAL ASSETS Intangible assets, which have an indefinit e useful life, are not subject to amortisation but are tested annually f or impairment. Assets that are subject to amortisation are tested for impairment whene ver events or changes in circumstances indicat e that the carrying amount may not be reco verable. An impairment loss is recognised for the amount by which the asset’ s carrying amount exceeds its r ecover able amount. The recover able amount is the higher of an asset’ s fair value less costs t o sell and its value in use. F or the purpose of assessing impairment, assets are grouped at the lowest level for which cash flows are separ ately identifiable (cash-generating units). A t each balance sheet date, the possibility of re versing impairment losses in prior periods is evaluated f or non-financial assets other than goodwill. NO N CU RRE NT ASSETS OR D IS POSAL GRO UPS H ELD FOR SALE Non-current assets (or disposal groups) ar e classifie d as assets held for sale when their carrying amount is to be recov ered principally through a sale transaction and a sale is considered highly pr obable. They are st ated at the lower of carrying amount and fair value less costs t o sell. Non-current assets are not depreciat ed or amortised while they are classified as held for sale. Interest and other expenses attribut able to the liabilities of a disposal group classified as held for sale continue to be recognised. Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are pr esented separately fr om the other as sets in the balance sheet. The liabilities of a disposal group classified as held for sale are pr esented separately fr om other liabilities in the balance sheet. FINANC IAL ASSETS The group classifies its financial assets in the following thr ee categories: at fair value thr ough profit or loss, at amortised cost, and at fair value through other comprehensive income. This classification depends on the purpose f or which the financial assets were acquir ed. Management determines the classification of its financial assets at initial recognition and r e -evaluates this designation at every r eporting date. The group has an e xpected credit loss model for trade r eceivables, whereb y expected credit losses are r ecognized based on ageing categories of trade r eceivables that includes all r eceivables. Norske Sk og has historically low levels of r ealised bad debts in trade receivables. a) Financ ial assets at fair valu e through profit o r loss This category has two sub-categories: financial assets held for trading, and those designated at fair v alue through profit or loss at inc eption. A financial asset is classified in this category if it was acquired principally for the purpose of short-term sale or if so designated b y management. Derivatives are also categorised as held for trading unless designated as hedges. Assets in this category are classified as curr ent assets if they either are held f or trading or are expected to be r ealise d within months of the balance sheet date. Non-financial commodity contracts wher e the relev ant commodity is readily convertible to cash, and wher e the contracts ar e not for own use, fall within the scope of IFRS and such contracts are tr eated as derivatives. Embedded derivatives ar e separated fr om the host contract and accounted for as a derivative if the economic char ac teristics ar e not closely related to the economic characteristics and risk of the host contract. See Notes , and for more informa tion. Commodity contracts within the scope of IFRS are classified as current assets, unless they are e xpe cted to be r ealised more than months after the balance sheet date. In that case, they ar e classified as non-current assets. b) Amortise d cost Amortised cost includes cash, loans and receivables, and ar e non-derivative financial assets with fixed or determinable payments tha t are not quoted in an active market. Items classified as amortised cost are curr ent items maturing less than months after the balance sheet date and are pr esented as T rade and other receivables or Cash and cash equiv alents in the balance sheet. Items maturing later than months after the balance sheet dat e are presented within Other non-current assets. c) F air value throug h ot her comprehensi ve income Investments in other shares not held f or trading purpose are classified as f air value through other c omprehensive income. F or the group ’ s investments in other shares, there ar e no ac tive mark et. Fair value for these inv e stments is determined applying valuation technics in accor ding to level three in the valuation hierar chy . DER IV A TIVE S AND HED GE ACT IVITIES Derivatives ar e initially recognised at fair v alue on the date a derivativ e contract is enter ed into and are subsequently r emeasured at their fair v alue. Changes in the fair value of any of these deriv ative instruments are recognised in the income statement. The group has selected to not designat e any financial instruments for hedge accounting. The fair value of quoted in vestments is based on the current mark et price. If the market for a financial asset is not active, the gr oup applie s valua tion techniques to establish the fair v alue. These include the use of recent arm’ s length transactions, refer ence to other instruments which are substantially the same, and discounted cash flow analyses defined to reflect the issuer’s specific circumstances. F air value includes the impact of credit risk and the adjustment for credit risk is dependent on whether the deriv ative is in the money (asset) or out of the money (liability ). Credit value adjustment is Annual report 2021 / Norsk e Skog 82 CONSOLIDA TED FINANCIAL ST A TEMENTS applied to assets positions based on credit risk associated with the counterparty . Debit value adjustment is applied to liability positions, based on the groups own credit risk. CASH AND CASH EQ UIV ALENTS Cash and cash equivalents include cash in hand, deposits held at call with banks and other short-term, highly liquid in vestments with original maturities of three months or less. Drawn bank ov erdrafts are shown as Inter est-bearing current liabilities in the balance sheet. TRAD E REC EIV A BLES T rade receiv ables are amounts due fr om customers for mer chandise sold or services performed in the ordinary course of business. T rade receivables ar e initially recognised at invoiced amount and subsequently measur e d at amortised cost using the eective inter est method, less provision for impairment. The impairment model for financial assets under IFRS require recognition of doubtful receiv ables allowances based on expected credit losses. The group has an expected cr edit loss model for trade receiv able s, whereby e xpected credit losses are r ecognized based on ageing categories of trade receiv ables that includes all receivables. INVENTORY Inventories ar e stated at the lower of cost and net r ealisable value. Cost is determined using weighted aver age cost. The cost of finished goods and work in progress comprises r aw materials, direct labour , other direct costs and related pr oduction overheads (based on normal operating capacit y). It excludes borr owing costs. Net realisable value is the estima ted selling price in the ordinary course of business, less applicable variable selling e xpenses. TRADE P A Y ABLES T rade pay ables are obligations to pa y for goods or services that have been acquired in the ordinary c ourse of business from suppliers. T rade payables are recognised initially at fair v alue and subsequently measured at amortised cost using the eective inter est method. PR OV I SI O N S Provisions f or environmental r estoration, dismantling costs, restructuring activities and legal claims are recognised when the gr oup has a present legal or constructive obligation as a result of past ev ents, an outflow of resour ces is more likely than not t o be required to settle the obligation and the amount can be reliably estimated. Restructuring costs are costs which ar e not related to the ongoing operations. This includes for example sev erance (r edundancy) payments, early r etirement or other arrangements for emplo yees leaving the company , external costs to lawyers and legal advisors in rela tion to the restructuring pr ocess, lease termination costs and onerous c ontracts. Salary which is earned while the employee contributes to the ongoing operations is not classified as restructuring costs. This includes f or example salary in the notice period when the employee is working during the notice period, or bonuses earned whilst the employee contributes to the normal operations. These are book ed as normal employee benefit expenses. Costs for projects relat ed to improv ements are gener ally ordinary opera ting costs. Where a number of similar obligations exist, the likelihood that an outflow will be required in settlement is determined b y considering the class of obligations as a whole. A provision is r ecognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions ar e measured at the present value of the best estimate of the expenditure r e quired t o settle the present obligation using a pre-tax r ate that reflects current mark et asse ssments of the time value of mone y and the risks specific to the obligation. The increase in the pr ovision due to passage of time is recognised within financial items. CURREN T AND DEFERRED IN COME T A X The group’ s income tax expense includes curr ent tax based on taxable profit for each jurisdiction adjusted by changes in deferr ed tax assets and liabilities attributable to tempor ary dierences and to unused t ax losses. T ax is recognised in the income statement, ex cept to the extent tha t it relates to items recognised in other compr ehensive income or directly in equity . In this case, the tax is also recognised in other compr ehensive income or directly in equity , respectively . The tax charge is calculated on the basis of the t ax laws enacted or substantively enacted at the balance sheet date in the c ountries where the company’ s subsidiaries and associates operate and generate taxable inc ome. Deferred tax is pr ovided in full, using the liability method, on tempor ary dierences arising between the carrying amount of asset s and liabilities in the consolidated financial statements and their t ax bases. Deferred tax assets ar e recognised to the e xtent that it is probable that futur e taxable profit will be a vailable against which the deductible temporary dierences and unused tax losses can be utilised. Deferr ed tax assets are oset against deferred tax liabilities when the def erred tax assets and liabilities relate to income t axes levied by the same tax ation authority and there is a legally enfor ceable right to set-o current t ax assets against current deferred tax liabilities. PEN SIO N OB LIGA TIO NS , BON US ARR ANG EM ENTS AN D OTHE R EMPL O YEE BENEF IT S a) Pension obligations Group companies operat e various pension schemes. These are gener ally funded through payments t o insurance companies, as determined by periodic actuarial calculations. The group has both defined benefit and defined contribution plans. The liability recognised in the balance sheet in r espect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present v alue of the define d benefit obligation is determined by discounting the estimated futur e cash outflows using interest rates of high quality c orporate bonds which ar e denominated in the currency in which the benefits will be paid, and which have terms to ma turity approximating t o the terms of the related pension liabilit y , or alternatively a government bond inter est rate if such bonds do not e xist. Actuarial gains and losses arising from experience adjustment s and changes in actuarial assumptions are charged or cr edited to equity in other comprehensive income in the period in which the y arise. Past-service costs are recognised immediat ely in income. A defined contribution plan is a pension plan under which the group pay s fixed contributions into a separate entit y . These contributions are made to publicly- or privately administer ed p ension insurance plans on a manda tory , contractual or voluntary basis. The gr oup has no further payment obligations once the contributions have been made. These contributions are r ecognised as an employee benefit expense in the period the contribution is r elated to. P repaid contributions are r ecognised as an asset to the extent that a cash r efund or a reduction in the future pa yments is available. b) Other emplo yee benefit oblig ation s Group companies operat e various other employ ee benefit schemes. Annual report 2021 / Norsk e Skog 83 CONSOLIDA TED FINANCIAL ST A TEMENTS Other employee benefits are futur e b enefits that the emplo yees have earned in return for their service in curr ent and prior perio ds. Actuarial gains and losses arising from experience adjustment s and changes in actuarial assumptions are charged or cr edited to equity in other comprehensive income in the period in which the y arise. The obligations are classified as non-current during the period they are being earned, and are for some of the plans r e classified to curr ent when the employees hav e completed the required period of service and the gr oup do es not have an unconditional right to def er settlement for these obligations. c) Share -base d remuneration Norske Sk og has a long-term incentives progr amme (L TI) which falls within the scope of IFRS Share-based payments. A share-based payment transaction is a transaction in which the company r e ceives services fr om the employee of those services in a shar e-based payment arrangement. A cash- settled share-based payment transaction is a share-based payment transaction in which the entity acquir es services by incurring a liability to transfer cash to the emplo yee of those services for amounts that ar e based on the price of the shares in the company . IFR S applies not only to awar ds of shares but also to awar ds of cash of a value equivalent t o the value, or a movement in the v alue, of a particular number of shares, which is the case for the long-term incentive plan. The ultimate cost of a cash-settled shar e-based transaction is the actual cash paid to the counterpart y , which will be the fair value at settlement date. The periodic determination of this liability is at each reporting da te between grant and settlement the fair v alue of the award. The f air value of the awar d is determined in accordance with the specific r equirements in IFRS . During the vesting period, the liability recognised at each r eporting date is the fair v alue of the award at that dat e multiplied by the expir ed portion of the vesting period. All changes in the liability are recognised in pr ofit or los s for the period. The fair value of the liabilit y is determined by applying an option pricing model, considering the terms and conditions on which the cash-settled transaction was granted, and the e xtent to which the employees have render ed services to date. d) Bonu s arrangemen ts The group accrues for bonus arr angements when there exist s a contractual obligation, or past practice has crea ted a constructive obligation. e) Short -term obligat ions Liabilities for wages and salaries, including non-monetary benefits and accumulating sick leave that ar e expected to be settled wholly within months after the end of the period in which the employees render the r elated service are r ecognised in respect of employees’ services up to the end of the reporting period and are measur ed at the amounts expected to be paid when the liabilities are settled. The liabilities are pr esented as current employ ee benefit obligations in the balance sheet. BORRO WINGS Borrowings are r e cognised initially at fair v alue, net of transaction costs incurred. Borrowings ar e subsequently carried at amortised cost. Any dierence between f air value of proceeds (net of transaction costs) and redemption value is r e cognised in the income stat ement over the period of the borrowing, using the eective inter est method. Fees paid on the establishment of loan facilities ar e recognised as transaction costs of the loan to the ext ent that it is probable that some or all of the f acility will be drawn down. In this case, the fee is deferr ed until the drawdown occurs. T o the extent there is no evidence that it is probable tha t some or all of the facility will be drawn down, the f ee is capitalised as a prepa yment for liquidity services and amortised over the period of the facility t o which it relates. Borrowings are classified as curr ent liabilities, unless the group has an unconditional right to defer settlement of the liability f or at least months after the balance sheet date. Inter est costs are recognised in pr ofit or los s in the period in which they are incurr ed. DERECOGNIT ION A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expir es. When an existing financial liability is replaced by another fr om the same lender on substantially dier ent terms, or the terms of an existing liability ar e substantially modified, such an exchange or modification is treated as the der ecognition of the original liability and the recognition of a new liability . The dierence in the respective carrying amounts is recognised as part of the gain or loss in the income statement. P AIDINEQUITY Ordinary shares ar e classifie d as equity . Incremental costs directly attributable to the issue of new shares or options are shown in equit y as a deduction, net of tax, from the proceeds. Where any gr oup company purchases the compan y’ s equity instruments, for example as the result of a shar e buy-back or a share-based payment plan, the consideration paid, including any dir e ctly attributable incr emental costs (net of income taxes) is deducted fr om e quity attribut able to the owners as treasury shares until the shar es are cancelled or reissued. REVENUE RECO GNITION Revenue fr om contracts with customers is r e cognised when control of the goods or services are transf erred to the customer at an amount that r eflec ts the consideration to which the gr oup expects to be entitled in exchange for those goods or services. Revenues in the gr oup consists almost exclusiv ely of the sale of goods. In practical terms, the timing of re venue recognition is based on the delivery terms for the dier ent markets and customers, and wher e revenue is recognised at point in time. It is important to mak e sure that all performance obligations are fulfilled, and the customer can benefit on its own. If the customer cannot obtain control of the good or service, the r evenue cannot be recognised. Norske Sk og’ s terms of delivery are based on Incoterms , which are the oicial rules for the interpret ation of trade terms issued by the Int ernational Chamber of Commerce. The timing of re venue recognition is largely dependent on these delivery terms: • D -terms, where the gr oup delivers the goods to the pur chaser at the agreed destination, usually the purchaser’s pr emises. The point of sale is when the goods are deliver ed to the purchaser . If the customer is invoiced befor e delivery of the goods purchased, r evenue is only recognized if the cust omer has taken o ver a significant part of the gain and loss potential relating t o the goods. • C-terms, where the group arranges and pay s for the external tr ansp ort of the goods, but the group no longer bears any r esponsibility for the goods once they have been handed o ver to the transporter in ac cordance with the terms of the contract. The point of sale is when the goods are handed over to the transporter contr acted by the seller . • F-terms, where the purchaser arr anges and pays for the transport. The point of sale is when the goods are handed over t o the transporter contracted by the pur chaser. Norske Sk og may deliver a product to another part y , such as a dealer or retailer , for sale to end customers. In these circumst ances, the company is required to assess whether the other part y has obtained control of the Annual report 2021 / Norsk e Skog 84 CONSOLIDA TED FINANCIAL ST A TEMENTS product. If the other party has not obtained control, the pr o duct may be held in a consignment arrangement. In such case, the company does not recognise the revenue until the pr oduc t is contr olled by the end customer . V ariable considerations normally , include volume discounts, rebates, r efunds, and similar items. V ariable considerations are only included in the tr ansaction price if it is highly probable that a significant r eversal in the amount of r evenue recognised will not occur . DIVIDEND INC OM E Divide nd incom e is recogni sed whe n the right to receive payme nt is established, which is generally when the shareholders appr ove the dividend. INT EREST INC OME Interest income is r ecognised using the eective interest method. This is the interest r ate that gives a net pr esent value of the cash flows from the loan that is equal to carrying value. GOVER NM ENT G RANTS Government grants ar e recognised as income or as a cost r eduction, dependent on the basis for which the government gr ant has been awarded. Recognition will be on a systematic basis o ver the period they hav e been granted for , or on a systematic basis to the c osts that they are int ended to compensate for . CO compensation is recognized as a r eduction of energy cost as the element of energy cost it compensates is consumed and incurr ed. Government grants in the f orm of compensation for losses which have alr eady been incurred, or in the form of direct financial support, which is not directly related to futur e costs, are recognised as income in the same period as they are awar ded. Government grants r elated to assets ar e presented in the balance sheet as deferred income or as a r eduction of the cost price of the assets the grant r elates to. The gr ant is then recognised in the income stat ement either through futur e periodic income recognition or as a future r educ tion in the depreciation char ge. LEAS ES Norske Sk og recognises a liability to mak e lease payments and an asset representing the right t o use the underlying asset during the lease term (“right-of-use asset”). Exceptions for short term leases and low v alue leases have been adapted by the gr oup. At initial recognition the right -of-use assets is measured at an amount equal to the lease liability . Norske Skog separately recognises the interest e xp ense on the lease liability and the depr eciation expense on the right-of-use asset. Lease liabilities are measur ed at the present value of the c ontractual payments due to the lessor over the lease term, with the discount r ate determined by refer ence to the rat e inherent in the lease, if av ailable, or the group ’ s incremental borr owing rate. V ariable lease payments are only included in the measurement of the lease liability if the y depend on an index or rate. Other variable lease payments ar e expensed in the period to which they relate. NE W AND AM EN DED I NTER PRET A TI ON AN D ST A NDARDS ADO PTED BY THE GRO UP a) New sta ndards ee ctive from January Changes in standards and interpr etations during has not had any material impact on Norske Sk og’ s financial reporting. b) New standards, interpretations and amendments not yet eectiv e There are a number of st andards, amendments to st andards, and inter- pretations which ha ve been issued by the IASB that ar e eective in future accounting periods that the group has decided not to adopt early . The group does not expect the standar ds issued, but not yet eective, to ha ve a material impact on the group ’ s financial reporting. . Acco unting es timates and as sumpti ons IMPO RT ANT ACCOUNTING ESTIMA TES AND ASSU MPTION S The prepara tion of consolidated financial statements in conf ormity with IFRS requires the use of accounting estimat es and assumptions for the future. It also requires management to e xercise its judgment in the process of applying the group’ s accounting policies. Estimates and assumptions, which represent a significant risk of a material adjustment in the carrying amount of assets and liabilities during the coming financial year , are discussed below. a) Fair value of derivatives and other f inancial in struments Norske Sk og’ s p ortfolio of ener gy contracts consists mainly of phy sical energy contracts of which some contain embedded deriv atives. The fair v alue of embedded derivatives in physical c ontracts is influenced by price inde x fluctuations. Norske Sk og has energy contracts in Norwa y that does not fulfil the criteria for use of the “ own use exemption” . Therefore, the contr ac ts in whole are treated as financial deriv atives in the scope of IFRS and measured at f air value through pr ofit or loss The fair value of the contracts will vary in dependent on the market price for ener gy in Norway . The fair value of financial instruments tha t are not traded in an active mark et is determined by using valuation t echniques. The group uses its judgment to select methods and make assumptions that are mainly based on mark et conditions existing at each balance sheet date. See Note and Not e for more information. b) Recoverable amou nt of intangible a ssets and p roper ty , plant and equi pment (PPE) The group performs impairment tests t o assess whether there has been a decline in the value of intangible assets and PPE if ther e are impairment indicators present. These are written down t o their recov erable amount when the recov erable amount is lower than the carrying value of the asset. The recov erable amount from assets or cash-generating units is det ermined by calculating the higher of fair value less costs t o sell and value in use. V alue in use is the present value of the futur e cash flows expected to be derived from an asset or cash-generating unit. Calculation of value in use requires use of estimates. See Note for further information. c) Annual ass essme nt of the remaining e conomi c life of PPE The group conducts annual r eviews of the remaining economic life of PPE. An increase or decrease in the r emaining economic life will have an impact on future depr eciation, as well as aect the cash flow horizon for calculating value in use. Economic lif e is estimated by considering the expected usage, physical wear and tear , as well as technical and commercial development. Assessment of future development s in demand in the markets Norsk e Skog’ s products are sold is centr al to the assessment of the economic life of the group’ s mills. Exp ected future demand, t ogether with the competitiveness of Norske Sk og’ s mills, is crucial for the determination of economic life. In addition, legal or other restrictions relating t o usage could aect the economic life of the mills in the group . . Financial risk FINANC IAL RISK MANAGEME NT The main risk exposures for the gr oup are linked to uncertainty to pric e and volume developments f or publication paper and the costs of ke y input factors such as energy and fibre. W eaker demand than expected for the group ’s products can aect profit ability and associated cash flows in a negative w ay . The group operat es in a multicurrency envir onment, where the main currencies Annual report 2021 / Norsk e Skog 85 CONSOLIDA TED FINANCIAL ST A TEMENTS of importance for the business are EUR, GBP , USD, A UD and NZD. Currency movements between these curr encies, as well as against NOK, may influence demand as well as prices and costs of ke y input factors. Liquidity is ensur ed by maintaining suicient cash balances and open credit lines link e d to accounts receiv ables facilities. Norske Sk og continuously asse ss the most competitive funding sources f or the group. Uncertainty about futur e changes in the broader economic climate development and more adv erse developments than e xpected may influence all of the above. The afor ementioned risks may all aect futur e results. The factors ar e an inherent uncertainty when the boar d makes its assessments. The group has one cash pool for the Eur op ean entities and the cash pool is legally placed in Norske Sk og ASA. Norske Sk og ASA and its subsidiaries is an international gr oup that, through its ongoing business operations, will be exposed to financial risk s related to litigation and claims from public authorities and contr acting parties as well as assessments from public authorities in each country it operat es. FINANC IAL RISK FA CTORS The group is exposed to v arious financial risk factors through the group ’ s operating activities, including market risk (inter est rate risk, currency risk and commodity risk), liquidity risk and credit risk. The group seeks to minimise losses and volatility on the group ’s earnings caused by adv erse market movements. Mor eover , the group monitors and manages financial risk based on internal policies and standards set f orth by corporate management and approv ed by the board of dir ectors. These written policies provide principles for the over all risk management as well as standards for managing currency risk, interest rate risk, credit risk, liquidity risk and the use of financial derivatives and non-derivative financial instrument s. MARKET RIS K a) Interes t rate risk The goal of interest r ate risk management is to secure the lowest possible interest r ate payments ov er time within acceptable risk limits. This includes having a portfolio of loans in the gr oup with both floating interest and fix ed interest r ates. The group may also use deriv atives to manage the interest rate risk in the group. INTE REST- BE ARIN G ASS ETS AND L IABILI TIES F L O AT I N G FIXE D TOT AL F L O AT I N G FIXED TOT A L Int erest -bearing liabilities Int erest -bearing assets - - - - Net exp osure All amounts presented in the table ar e notional amounts. T otal interest- bearing liabilities will therefor e dier from book ed amounts due to bond discounts/ premiums. Floating rate exposur e is calculated without accounting for potential future r efinancing. Interest rate sensit ivity analysis In accordance with IFRS Financial instruments - disclosur es, an interest r ate sensitivity analysis is present ed showing the eects of changes in market interest r ates on interest costs and int erest income, as well as equity wher e applicable. The analysis is based on the following assumptions: Floating rate debt is e xposed to changes in market inter est rates, i. e. the interest costs or inter est income associated with such instruments will fluctuate based on changes in market r ates. These changes are accounted for in the sensitivity analysis. The result is based on the assumption that all other factors ar e kept constant. Changes in market rat es on fixed rat e debt will only aect the income statement if they ar e measured at fair value. Thus, fixed r ate instruments recognised at amortised cost will not repr esent an interest rate risk as defined by IFRS . Such instruments will theref ore not have an y influence on the sensitivity analysis. Results are pr esented net of tax, using the Norwegian statutory tax r ate of . The interest r ate sensitivity analysis is based on a par allel shift in the yield curve for each r elevant curr ency to which Norske Sk og is exposed. NET P ROFIT A FTER T A X INTE REST R A TE basis p oint downward parall el shif t in the yield cur ve - - basis p oint upward paralle l shif t in the yield cur ve With a basis point upward change in inter est the interest payments will increase with NOK million. The upwar d change will have no eect on the values of derivativ es carried at fair value thr ough profit or loss. b) Currency risk T ransaction risk - economic hedge The group has re venues and expenses in various curr encies. The major currencies are NOK, EUR, GBP , USD, A UD and NZD . T ransaction risk arises because the group has a dier ent currency split on income and expenses. In Norske Sk og has economic hedged some of its cash flows in foreign currencies. The result of the hedging is included in Net unr ealised/ realised gains/losses on foreign currency in the inc ome statement. The cash flow hedges resulted in a realised loss of NOK million in (NOK - million). The remaining unrealised hedging contr ac ts is r ecognised at fair value of NOK - million. T ra nslation ris k - net investment h edge The group does not have an y net investment hedges. Foreign ex change - sensiti vity analys is on financial instr uments The following foreign e xchange sensitivity analysis calculates the sensitivity of derivatives and non-derivative financial instrument s on net profit and equity , based on a defined appreciation/ depreciation of NOK against relev ant currencies, keeping all other v ariable s constant. The analysis is based on several assumptions, including: • Norske Skog as a group c omprises entities with dierent functional currencies. Derivativ e and non-derivative financial instruments of a monetary nature, denomina ted in currencies dier ent from the functional currency of the entity , create foreign ex change rate exposure on the consolidated income statement. • Financial instruments denominated in the functional currency of the entity have no curr ency risk and will therefor e not be applicable to this analysis. Furthermore, the f oreign curr ency exposure of tr anslating financial accounts of subsidiaries into the group ’ s presentational currency is not part of this analysis. • Sensitivity on commodity contr ac ts and embedded derivativ es is presented separately under “ commodity risk”. Annual report 2021 / Norsk e Skog 86 CONSOLIDA TED FINANCIAL ST A TEMENTS • Other currency derivatives tha t are recognised at f air value thr ough profit and loss will aect the income statement. These eects come mainly fr om currency deriva tives and financial liabilities managed as economic net investment hedges which do not qualify for hedge accounting accor ding to IFRS . • O ther non-derivative financial instruments accounted f or in the analysis comprise cash and cash equivalents, accounts pa yable, accounts r e ceivable and borrowings denominated in curr encies dierent fr om the functional currency of the entity . • Correlation eects between currencies are not t aken into account. Figures are present ed net of tax. GAIN/LOS S FROM APP RECIA TION ON F OREIGN CU RRE NCY EXCHAN GE R A TES CU RRE NC IES AGAIN ST TO WHI CH TH E GRO UP HAS S IG NIF ICANT EX POSU RE EUR - - GBP USD Other TOT AL - - The eect of the sensitivity analysis on the income sta tement is mainly caused by for eign exchange gains/losses on the translation of EUR denomina ted debt for which there is no hedge accounting. c) Commodity risk A part of the commodity demand is secured thr ough long-term contracts limiting the exposure to changes in commodit y prices. Some of the group purchases contracts ar e defined as financial instruments, or contain embedded derivatives, which f all within the scope of IFRS . These financial instruments and embedded derivatives ar e measured in the balance sheet at fair v alue with value changes recognised thr ough profit or loss. The embedded derivativ es are common in physical c ommodity contracts and comprise a wide v ariety of derivative char ac teristics. Changes in fair value of commodity c ontracts reflect unr ealised gains or losses and are calculated as the dier ence between market price and contract price, discounted to present v alue. S ome commodity contr acts are bilater al contracts or embedded derivativ es in bilateral contr acts, for which there exists no active mark et. Therefore, v aluation techniques are used as much as possible, with the use of available mark et information. T echniques that reflect how the market could be expected to price instrument s are used in non- observable market s. The fair value of embedded deriva tives in physical contracts depends on currency fluctuations. Sen sitivity ana lysis for co mmodit y contracts T rading and hedging mandates hav e been established for energy activity . Financial trading and hedging activities are carried out bilater ally with banks and trading companies. When calculating fair value of futur e and forward contracts, cash flows ar e by principle assumed to occur in the middle of the period. Currency eects arise when contract values nominat ed in foreign curr encies are translat ed into the reporting currency . Net profit after tax is aected in a non-linear manner due to changes in the fair value of options. F AIR V ALUE NET P ROFIT A F T E R TA X NET P ROFIT A F T E R TA X C OMMODITY CON TRAC TS WITH IN THE S COPE O F IFR S - INCRE ASE - DE CRE ASE Energy pric e change - - Currency change - Price index change - - Sensitivity an alysis for embedded derivat ives Embedded derivatives ar e common features in ph ysical commodity contracts. The most common embedded derivatives ar e currency . F AIR V ALUE NET P ROFIT A F T E R TA X NET P ROFIT A F T E R TA X EMBEDDED DERIV A TIVES - INCREA SE - DEC REAS E Currency change - LIQUIDI TY RISK The group is exposed to liquidit y risk in a scenario when the group ’ s cash flow from operating activities is not suicient to c over payments of financial liabilities. In order to eectively mitiga te liquidity risk, Norske Skog’ s liquidity risk management strategy focuses on maint aining suicient cash, as well as securing available financing thr ough committed credit facilities. Managing liquidity risk is centralised on a gr oup level. In order to unco ver future liquidit y risk, the group forecasts both short - and long-term cash flows. Cash flow for ecasts include cash flows from oper ations, investments, financing activities and financial instruments. The group had cash and cash equivalents of NOK million at December (NOK million). Restricted bank deposits amounted to NOK million at December (NOK million). Scheduled repayments in Note shows the contr ac tual maturities of non- derivative financial liabilities. All amounts disclosed in the t able are undiscounted cash flows. Furthermor e, amounts denominated in for eign currency are tr anslated to NOK using closing rates at December . These amounts consist of trade pay ables and interest payments. V ariable rate interest cash flows ar e calculated using the forwar d yield curve. Projected interest payments ar e based on the maturity schedule at December without accounting for for ecasted refinancing and/ or other changes in the liability portfolio . All other cash flows are based on the group ’s positions held at December . CRE DIT R ISK The group makes a cr edit evaluation of all financial trading counterparties. Based on the evaluation, a limit on credit e xposure is established for each counterparty . These limits are monitor ed continuously in relation to unr ealised profit on financial instruments and placements. The maximum cr edit risk arising from financial instruments is r epresented by the carrying amount of financial assets in the balance sheet. The group procedur es for credit management of European trade r eceivables, and the authority to appro ve credit lines to cust omers of European business units, are r egulated by a policy drafted and maint ained by a centralised cr edit management function at the head oice. The operational r esponsibility to act within the guidelines as set out by this policy lies with each business unit. For operations outside of Eur op e, customer cr edit management is handled locally . Annual report 2021 / Norsk e Skog 87 CONSOLIDA TED FINANCIAL ST A TEMENTS . Opera ting seg ments REPO RT ABLE SEGM ENTS Norske Sk og group is a producer of publication paper . Publication paper includes newsprint and magazine paper . Newsprint encompasses standard newsprint and other paper qualities used in newspapers, inserts, catalogues, etc. These paper qualities, measured in grammes per square met er , will normally be in the range - g/ m. Magazine paper encompasses the paper qualities super calendared (SC) and lightweight coated (L WC). These paper qualities are used in magazines, periodicals, catalogues and brochur es. The activities of the group are f ocused on two business systems, publication paper Europe and publication paper Austr alasia. The segment struc ture is in line with how the group is managed internally . Norske Sk og’ s chief op erating decision maker is corporat e management, who distribute resources and assess performance of the group’ s op era ting segments. Norske Sk og has an integrated str ategy in Europe and Australasia to maximize the pr ofit in each region. The optimisation is carried out through coor dinated sales and operational planning. The regional planning, in c ombination with structured sales and operational processes, ensur es maximisation of profit. Publication pape r Europe The publication paper Europe segment encompasses pr oduction and sale of newsprint and magazine paper in Europe. All the four E uropean mills and the regional sales organisation ar e included in the operating segment publication paper Europe. Publication paper Australasia The public ation pape r Australasia se gment en compas ses prod uction and sale of new sprint and mag azine paper in Austral asia. The m ills in Australasia and the regi onal sale s organisation a re include d in the operating se gment public ation paper Aus tralasia . Norske Skog T as man ceas ed produ ction at June . Ot her ac tiviti es Activities in the group that do not f all into the operating segments publication paper Europe or publication paper Austr alasia are presented under other activities. This includes corporate functions, green ener gy , including the pellets operations in New Zealand, and other holding company activities. See Note . Up to energy (commodit y contracts and embedded derivativ es in commodity contracts ) were included in the segment other activities. Fr om this is included together with the mill this relates to and is ther efor included in segment publication paper Europe or publication paper Austr alia. The corresponding figures f or has been changed in the table below . REV ENU E FRO M CONTR A CTS WITH CU STOME RS T otal revenues, cash flows and contract balances fr om contracts with customers has been disaggregated and pr esented in the segment tables below . Contract with customers are r ecognized upon satisfaction of a performance obligation by tr ansferring the promised goods to a cust omer and measured at point in time for the sale of pr oducts to the customer . Sale of publication papers and other products ar e non-interest -bearing receivables, generally on terms of - day s. REV ENU ES AN D EXPE NS ES NOT ALLOCA TE D TO OPE RA TIN G SEG ME NTS Norske Sk og manages non-current debt, taxes and cash positions on a group basis. Consequently , financial items and tax expenses are presented only f or the group as a whole. MA JOR CUS TOMERS No customer repr esents or more of the opera ting revenue. Norske Sk og had a total sales volume of newsprint and magazine paper of tonnes in , of which sales to the group’ s largest customer constituted appro ximately tonnes. T otal sales volume in of newsprint and magazine paper to the five largest customer s in Europe and Australasia amounted to appr oximately and tonnes respectively . Annual report 2021 / Norsk e Skog 88 CONSOLIDA TED FINANCIAL ST A TEMENTS OPERA TING REV ENUE AND EXP ENSES PER OPERA TIN G SE GMEN T PUBLIC A TION P APE R EURO PE PUBLIC A TION PA P E R AUSTRALASIA OTHE R ACTIVITIES ELIMINA TIONS NO RSKE S KOG GRO UP Operati ng re venue - Other operat ing income - T otal opera ting Income - Dis tribu tion c ost s - - - - Cos t of materials - - - - Empl oyee b en ef it exp en ses - - - - Other operat ing expenses - - - - E B IT DA - Rest ruct uri ng e xpenses - - - - Depreciation - - - - Impairme nts Derivatives and other fair v alu e adjustments - - - Operating earnings - - - Share of op erating revenue from ex ternal par ties ( ) PUBLIC A TION P APE R EURO PE PUBLIC A TION PA P E R AUSTRALASIA OTHE R ACTIVITIES ELIMINA TIONS NO RSKE S KOG GRO UP Operati ng re venue - Other operat ing income T otal opera ting inc ome - Dis tribu tion c ost s - - - - Cos t of materials - - - - Empl oyee b en ef it exp en ses - - - - Other operat ing expenses - - - - E B IT DA - Rest ruct uri ng e xpenses - - - - Depreciation - - - - Impairme nts - - - Derivatives and other fair v alu e adjustments - - Operating earnings - - - - Share of op erating revenue from ex ternal par ties ( ) Annual report 2021 / Norsk e Skog 89 CONSOLIDA TED FINANCIAL ST A TEMENTS OPER A TIN G REVEN UE PER GEOG RAPHI C AL MARKET The alloc ation of operatin g revenue by market is based o n custome r location . No r way Rest o f Eur ope North America Australasia Asia Afri ca To t a l CASH FLOW FROM CO NTRACTS WITH CU STOME RS Publication p aper Europe Publication p aper Australasia Oth er a ctivi ties Eliminations - - To t a l NET CASH F LO W FRO M OPER A TIN G A CTIVITIE S Publication p aper Europe Publication p aper Australasia - - Oth er a ctivi ties - - T o tal ca sh flow all ocate d to segm ents Net financial items - - Ta x e s p a i d - - Net c ash flow fro m opera ting ac tiviti es Euro pe Australasia To t a l PROPE RTY , PL ANT AND EQ UI PME NT PER G EOGR APH ICAL REG ION The tabl e below shows p roper ty, plant and equipm ent alloc ated to Norske Skog’s countr y of domicile an d other regions i n which the group hol ds asset s. The allo cation is ba sed on the lo cation of the prod uction facilities. Annual report 2021 / Norsk e Skog 90 CONSOLIDA TED FINANCIAL ST A TEMENTS INVENTOR IES Inventories inclu de raw materials , work in progres s, fin ished go ods and othe r produc tion materials . Publication p aper Europe Publication p aper Australasia Oth er a ctivi ties To t a l TRADE RE CEIV ABLES Publication p aper Europe Publication p aper Australasia Oth er a ctivi ties To t a l PURC HASES O F PROPE RTY , PL ANT AND EQ UI PME NT AND I NT AN GIB LE ASSETS Publication p aper Europe Publication p aper Australasia Oth er a ctivi ties To t a l . O ther op erating inc ome OT HER OPERA TING INCOME Gain on s ales of non- current as sets Other To t a l Gain on s ale of non- current asse ts in consi sts of gain of sal e of land at Nors k e Skog Skogn of NOK milli on and at Nor ske Sk og T a sman of NOK milli on. Gain on sale of non-current assets in consists of an extraor dinary non- cash gain of NOK million related to the Norsk e Skog Albury sale from recycling of tr anslation dierences thr ough the income statement, and a gain on sale of T asmanian forest assets at Norske Sk og Boyer of NOK million. Other for both and consist mainly of gain on sale of emission rights, sale of energy steam, r eceipt of interruptibility compensation and COVID- financial support. The COVID- support in relates to Norsk e Skog Bruck and amounts to NOK million. Appr oximately NOK million has been received. Ther e are no significant conditions attached to the remaining amount. Annual report 2021 / Norsk e Skog 91 CONSOLIDA TED FINANCIAL ST A TEMENTS . Emplo yee benef it e xpense s EMPL O YEE BENEFI T E XPEN SES NOTE Salarie s includin g holiday pay Soci al securit y contributions Pension and ot her long t erm employ ee benefits Other emplo yee benefit expenses To t a l NUMBER O F EMP LO YEES B Y RE GION Euro pe Australasia Corporate fu nctions To t a l REMUNERA TIO N F OR MEMBERS OF COR PORA TE M ANA GEMENT Pursuant to - (b) in the P ublic Limited Liability Companies Act, and associated regulations, Norsk e Skog publishes a separa te management remunera tion report disclosing detailed information on r emuneration to corporate management and dir ectors of the board. The r emuneration r eport will be published immediately after the annual general meeting on April and will include detailed information on management r emuneration comple- menting the numbers presented below . In accordance with the code of conduct for corpor ate governance recommended by the Oslo Stock Ex change, salary , benefits in kind and bonus for members of corporat e management are specified below . In relation to the lon g-term incentive program for c orporate man agement NOK m illion was expens ed in and at D ecem ber t he corres ponding li ability was NO K million. SALARY P AID BE NI FITS IN KI ND ETC . ) BONUS EAR NE D ) CONTR IBUTI ON TO DE FIN ED CO NTRI - BUTI ON SCHEMES TOT AL REMUNERA TION AWA R D E D SYNTHETIC OPTIONS (NUMBER OF) Sven Ombudstvedt ( CEO ) Lars P . S. S perre (SVP) Rune Solli e ( CF O ) A mu n d S ax r u d (CO O) T ore Hansesætre (SV P) Rober t Wood (SVP) ) To t a l SALARY P AID BE NI FITS IN KI ND ETC . ) BONUS EAR NE D ) CONTR IBUTI ON TO DE FIN ED CO NTRI - BUTI ON SCHEMES TOT AL REMUNERA TION AWA R D E D SYNTHETIC OPTIONS (NUMBER OF) Sven Ombudstvedt ( CEO ) Lars P . S. S perre (SVP) Rune Solli e ( CF O ) A mu n d S ax r u d (CO O) T ore Hansesætre (SV P) Rober t Wood (SVP) ) To t a l ) Inc lude s car a llowa nce , insu ranc e, fr ee tel epho ne, e tc. ) Bas ed on r esu lts ac hieve d in the f inan cial ye ar, paid in and in . ) Rob er t Wood is e mplo yed by No rske S kog (UK ) Ltd. bu t works f ully f or Nor ske Sko g ASA as SVP C omme rcia l. (in NOK ) Annual report 2021 / Norsk e Skog 92 CONSOLIDA TED FINANCIAL ST A TEMENTS . Other ope ra ting e xpenses a nd au dit ors fees NOTE Maint enance mat erials and services Mark eting expenses V ari able leas e, shor t term and low value l ease expe nses Administration, insurance , tra vel expenses etc . Other e xpenses To t a l Spe cific ation o f losse s on acc ounts re ceivab le incl ude d in othe r expens es Recei vables writ ten o during the peri od Change in p rovision for bad d ebt - To t a l A UDITOR S FEES INCLUDED IN O THER OP E RA TING EXP ENSES in NO K , excl udi ng V A T P AR ENT COMP ANY NORWE GIAN SUBSIDIARIES AUDI TED BY THE GR OUP COMP ANY A UDITOR SUBSIDIARIES AUDITE D BY GRO UP A UDITOR S SUBSIDIARIES AUDITE D BY OTHE R A UDITOR S TOT A L Audi t fe e Audit -related assis tance ) T ax assistance Other fees To t a l ) Audit -related assistance includes service s, which only auditors can pro vide, such as the review of interim financial sta tements, agreed upon control procedures et c. . Der ivatives and othe r fair valu e ad justm ent Change s in value – comm odity co ntracts ) - Change s in value – embe dded d erivatives - Changes in v alue – biological assets - Other realised g ains/ (losses) - To t a l - - ) Long-te rm fi nanc ial co ntrac ts and c ommo dit y contr acts t hat no lo nger m eet th e req uire ment i n IFRS re late d to own us e are me asur ed at fa ir value . Norske Sk og’ s p ortfolio of commodit y contracts consists mainly of phy sical energy contracts. The f air value of commodity contr ac ts is especially sensitive to future changes in ener gy prices. A sensitivity analysis of the impact on profit after tax of fluctuations in ener gy prices, currency and price indices is given in Note . The valua tion techniques used are described in Note . T otal change in fair value recognized on the embedded derivativ e s in amount to NOK million (NOK - million). The loss in was mainly due to change in accounting treatment of the t wo Norwegian energy contr acts. Norske Sk og held its energy contracts in Norwa y for own consumption and used the “ own use exemption” in IFRS as the Norwegian paper mills ha ve been expected to use the full volume. Norsk e Skog reassessed the expected power consumption over the period of the contracts and det ermined that the criteria for the “ own use exemption” was no longer satisfied. Theref ore, the contracts in whole are tr eated as financial derivatives in the scope of IFRS and measured at fair v alue true profit or loss. Other realised gains and losses primarily relates to financial hedging of ener gy . Annual report 2021 / Norsk e Skog 93 CONSOLIDA TED FINANCIAL ST A TEMENTS . Asso ciat ed c ompanies Loss from associated companies ar e included in with NOK million (NOK million). Investments in associated companies ar e accounted for in accor dance with the equity method. The carrying value of associated companies ar e NOK million at December (NOK million). The increase from r elates to the restructuring of ownership and issue of new shares in Cir ca Group AS. Circa Group A S is incorporated in Oslo, Norw ay , and is a holding company of Circa Group Pty L td. Circa Group Pty L td is incorporated in Melbourne, Austr alia, and is a biotechnology company with a vision to produce and sell unique and highly valueable biochemical at scale. A t December Norske Skog had a share of Circa Gr oup AS with a carrying value of NOK million. Circa Group AS was listed on E uronext Gr owth on March . Norske Skog has shares with a mark et value as of December of NOK million. Porsnes Ut vikling AS is incorporated in Halden, Norwa y , and is a real estate company . Norske Skog has a shar e of the company with a carrying value of NOK million at December . SEM is incporporated in Golbey , France, and is a company serving other companies and projects for their establishment and de velopment in the territority of Golbey . Norske Skog has a shar e of the company with a carrying value of NOK million at December . Circa Group A S and Porsnes Ut vikling AS are incorpora ted into the consolidated financial statement based on continuity and the carrying v alue will therefor e deviate from the v alues shown in the accounts of the owner. The table below summarises financial information for Cir ca Group AS. All amounts are on a perc ent basis. T otal rev e nue Net profit/( loss) - - Other compr ehensiv income - - T otal comprehensiv e income - - Non-current assets Current as sets Non- current liabilities Current liabilit ie s The followin g table shows a s ummary of c hanges in c arryin g value for the asso ciated com panies . Circa Group A S Other To t a l December Increased/ de creased ownership Share of net income/ (los s ) - - December . Financial items FINANC IAL IT EMS Financial income Dividends r eceived Inter e st income Other financia l income To t a l Financial e xpenses Int erest expe nse - - Other financia l expenses - - To t a l - - Gains/ (losses) on foreign currenc y - Financi al items - - Other financial expenses mainly consists of commitments fee and other financing expenses. Other financial cost in also includes loss of NOK million due to early repayment of the EUR million bond. See Note . In other financial expenses also includes write-downs on other shares of NOK million. Annual report 2021 / Norsk e Skog 94 Phot o: Stei n Johan sen CONSOLIDA TED FINANCIAL ST A TEMENTS . Income taxes TA X E X P E N S E Current tax exp ense - - Change in d eferred tax - To t a l - - RECO NCI LIA TI ON OF TH E GRO UP T A X EXPE NSE Profit/ (loss) befor e income tax es - - Comp uted tax at nom inal tax group rate of Dieran ces due to diere nt tax rates Non taxable income / non deductible ex penses - Adjustment previous years - Other it ems - Change in tax r ate - Deferre d tax ass et not reco gnised - - T otal tax ( expense) / income - - Ee ctive tax rate - - CURRENT T AX L IABIL ITY No r way Rest o f Eur ope - - Australasia To t a l - - DEFERRED T AX - MO VEMEN TS Net defe rred tax as set/(liabilit y ) Januar y - - Change in d eferred tax in th e income s tatement - T ax on ot her comprehens ive income - - Curr ency tr anslat ion dierences - Net deferred t ax asset/ (liability) December - - DE FER RE D T A X ASSET AN D DE FER RE D T A X LIABI LITY No r way Rest o f Eur ope Australasia Deferred tax assets No r way Rest o f Eur ope - - Australasia Deferred tax liability - - Net deferred t ax assets / (liability) - - DEFERRED T AX DET AILS Fixed assets Pension and other empl oy ee obligat ions Other non-curr ent items Curr ency tr anslat ion dierences and financial instru ments - - Curr ent it ems - T ax l osses to c arry for ward T ax l osses a nd other deferre d tax asse ts not reco gnised - - Net deferred t ax assets / (liability) - - Annual report 2021 / Norsk e Skog 96 CONSOLIDA TED FINANCIAL ST A TEMENTS . E arni ngs a nd di vid end per sh ar e Profit / (los s) f or the year in NO K million attribut able to owners of the p arent - - Weighted average numb er of shares in milli on Basic e arnings/(loss) pe r share in NOK - - Diluted e arnings/(loss) pe r share in NOK - - LOSS ES TO CARRY FORW AR D AND TE MPO RARY DIF FER EN CES BY REG ION NORW A Y REST OF EUROP E AUSTRALASIA TOT AL Indefinite expiry T a x losse s to carr y forward T emporary dierences - T ax losses and t emporary dier ence s no t recognised - - - T o tal tax l osse s and tax c redit s to carry f orward (re cogn ised) Defe rred tax a sset T a x rate - - LOSS ES TO CARRY FORW AR D AND TE MPO RARY DIF FER EN CES BY REG IO N NORW A Y REST OF EUROP E AUSTRALASIA TOT AL Indefinite expiry T a x losse s to carr y forward T emporary dierences T ax losses and t emporary dier ence s no t recognised - - - T o tal tax l osse s and tax c redit s to carry f orward (re cogn ised) Defe rred tax a sset T a x rate - - Norske Sk og has not recognized deferr ed tax asset arising from the carry forward of unused t ax losses. T ax payable relates mainly t o Norske Sk og Bruck and Norske Skog It aly and consist mainly of income taxes. Current and deferr e d tax es are recognised as e xpense or income in the consolidated income statement. T axes on translation dier ences, other reclassifications or remeasur ements of post-employment benefit obligations are recognised in other compr ehensive income. For the financial year , the boar d of directors has not pr oposed that the annual general meeting appro ves payment of dividend. No dividend was paid in for the financial year . In February an extr aordinary gener al meeting in Norske Skog AS A resolved to issue new shares increasing shar e numb er of shares t o . Based on the new number of shares basic earnings per share and diluted earnings per share was NOK - for . Annual report 2021 / Norsk e Skog 97 Photo : Erik Sa nde rse n CONSOLIDA TED FINANCIAL ST A TEMENTS . Int ang ible assets a nd property , plan t and equipmen t Impairment Norske Sk og has no cash generating units (CGUs ) with allocated goodwill or assets with indefinite useful life that need to be tested f or impairment annually , or more frequently when ther e is an indication that the unit may be impaired. Except for CGU Eur ope lightweight coated (Norske Skog Bruck) there ar e no indicators for impairment at December . CGU Eur op e lightweight coated has experienced opera ting losses in due to high cost of input factors, primarily energy fr om purchased gas. The start-up of the boiler at Norske Sk og Bruck will reduce the consumption of gas consider ably and improv e profitability in the c oming years. No impairment has been recognized in relation to CGU E urope lightweight coated f or . Assumptions applied when calculating the r ecoverable amount Intangible non-current assets and property , plant and equipment (PPE ) are written down to their reco verable amount when this is lower than the carrying value of the asset. The recover able amount of an asset or cash- generating unit (CGU) is the higher of its fair v alue less costs to sell and its value in use. V alue in use is the present value of futur e cash flows expected to arise from an asset or cash-generating unit. Norske Skog applies the value in use appr oach when calculating recov erable amount for its cash-generating units. E urope newsprint (Norske Sk og Skogn and Norske Sk og G olbey), A ustralia newsprint (Norsk e Skog Boyer ), Australia lightweight coated (Norske Sk og B oy er), Eur ope super calendared (Norske Sk og Saugbrugs) and Europe lightweight coated (Norsk e Skog Bruck) are assessed to generat e independent cash inflows and to be separate CGUs. These r epresent the five cash gener ating units that the group is focusing on in its follow-up opera tionally and commercially as communication with customers, suppliers, employees. The di erent mills within a CGU works together to generat e cash inflows. The production machines have a long technical lif e, while useful lives are link ed to industry cost curves and the size of the mark et. The estimated remaining useful life of the individual paper machines forms the basis for determining the length of the cash flow period. Estimated useful life for the individual paper machines in the group varies fr om to years. Sales volumes dev elop in accordance with the useful lives of the di erent paper machines in the group . Norske Sk og has modelled the cash flows throughout the useful life of the paper machines. The timing of capacity closures follow s from RISI cost curve positioning and RISI market demand projections. RISI is the leading global source for f orest products inf ormation and data (www .risi.com). Nominal cash flow is estimated in the currency in which it will be gener ated. The value is calculated by disc ounting based on a required r ate of return on capit al that is relev ant for the cash-generating unit. The required r ate of return, or weighted aver age cost of capital (WA CC ), is based on the inter est rate on ten- year government bonds in the curr ency of the cash flow e stimate, an industry debt yield premium, industry beta and an equity risk pr emium. A country- specific risk premium relev ant to the cash- generating unit is also included in the required r ate of return on capit al. The key driv ers of profitabilit y in the industry and thus asset values for the group are pr oduc t prices rela tive to production costs. The st arting point for any impairment test is the financial budget for appro ved by the board of directors. Bey ond sales prices are adjusted in based on expected development and thereaft er by inflation adjusted by a f actor assuming that not all cost increases are passed on t o customers. Costs beyond is e xtrapolated from historical figur es relative t o sales prices and adjusted by inflation. The inflation rates applied in the period ar e estimated by country and is in the range of to . Contracted prices/ costs are reflected when applicable. At the end of the mark et balance was strong and prices for publica tion paper in Europe incr eased. The impact of higher sales prices will to some degree be oset by higher input cost from ener gy , pulpwood and recovered paper . For the ongoing years, we hav e assumed in the impairment model that the announced closures will maintain a positive mark et balance and with further capacity closures in leading to a st able utilization rat e in line with the decline in demand. When calculating value in use a t December , the discount rate after tax (WA CC ) used was for CGU Eur ope lightweight coated. Sensi tivity to estimates of rec overable amount The estimation of recov erable amount is based on assumptions regar ding the future dev elopment of several f actors. These include price development f or finished goods, sales volumes, currency rat es and interest ra tes. In relation to the assumptions made in a calculation of the present value of futur e cash flows, recov erable amount is most sensitive to changes in prices of finished goods, sales volumes and the discount rate used. Norsk e Skog has performed testing of CGUs with impairment indicators. The main CGUs that is sensitive is E urope lightweight coated. The sensitivities are applied in all scenarios thr oughout the forecasting period. A partial sensitivity analy sis would result in the following impairments as at December if the calculated impairment/headroom are a negative amount. SENSIT IVI TY IMP AIRMENT decrea se in the sale s price - decrea se in volume - incre ase in the disc ount rate (WA C C) - Proper ty, plant and equip ment alloc ated to cash -gen erating units The table below shows machinery and equipment and land and buildings allocated to Norske Sk og’s cash-generating units as of December . MA CHINER Y A ND EQU IPM ENT LAN D AND BUILDINGS Europe newsp rint Australasi a newsprint Australasia light weight coated Eur ope super calendared Europe lightweight co ated Carryi ng v alue December Exp ected u seful life Norske Sk og has conducted sensitivity analyses with respect to changes in expected useful life of the gr oup’ s paper machines. If the expected useful life of all the group’ s pap er machines is reduced b y one year , the annual depreciation charge will incr ease with approximately NOK - million. In connection with the year-end closing process for , Norske Sk og performed a review of the e xpected remaining useful lives of pr operty , plant and equipment. The useful life of most of the machines were reduced by one year compared with last y ear ’ s assumptions while some machines increased useful life by one to two y ears following the closure of competing machines and the improv ed market balance in . The increase in useful lif e has a positive impact on the estimated reco verable amount of the mills and is reflected in the impairment. Annual report 2021 / Norsk e Skog 99 CONSOLIDA TED FINANCIAL ST A TEMENTS INT ANGIBL E A SSETS OTHE R INT A NGI BLE ASS ETS LICE NS ES AN D P A TENTS TOT A L Acquisition co st January Additions Disposals - - Reclassified from plant u nder construction Curr ency tr anslat ion dierences Acquisition co st December Accumulated depreciation and impairments January Depreciation Disposals - - Curr ency tr anslat ion dierence Accum ulated depreciati on and imp airment s December Carryi ng v alue December Acquisition co st January Additions Disposals - - Reclassified from plant u nder construction Curr ency tr anslat ion dierences - - - Acquisition co st December Accumulated depreciation and impairments January Depreciation Reclassified to assets held for sale Curr ency tr anslat ion dierence - - - Accum ulated depreciati on and imp airment s December Carryi ng v alue December Annual report 2021 / Norsk e Skog 100 CONSOLIDA TED FINANCIAL ST A TEMENTS Phot o: XX PROPE RTY , PLANT AND EQ UIPM ENT BIOLOGIC AL ASS ETS MA CHINER Y AND EQU IPM ENT LAN D AND BUILDINGS FIXTURES AND FITTI NG S PLAN T UNDER CON- STR UCTION RIGHT - OF- USE A SSETS TOT AL Acquisition co st January Additions Disposals - - - - - - Reclassified to assets held for sale - Reclassified from plant u nder construction - Curr ency tr anslat ion dierences Acquisition co st December Accumulated depreciation and impairments Ja nua ry Depreciation Impairme nt V alue changes Disposals - - - - - Reclassified to assets held for sale - Curr ency tr anslat ion dierence Accumulated depreciation and impairments December Carryi ng v alue December Acquisition co st January Additions Disposals - - - - - Reclassified from plant u nder construction - - Curr ency tr anslat ion dierences - - - - - - Acquisition co st December Accumulated depreciation and impairments Jan uary Depreciation Impairme nt - - Disposals - - - - - Reclassified to assets held for sale - Curr ency tr anslat ion dierence - - - - - - Accumulated depreciation and impairments December Carryi ng v alue December Machinery and equipment are depreciat ed over a period from fiv e to years. Buildings and other property ar e depreciated ov er a period from ten to y ears. Fixtures and fittings are depr eciated over a period from three to ten y ears. Land and plant under construction are not depreciat ed. Right-of-use assets is further described in Note . The dierence between t otal additions in the table abov e and purchases of property , plant , equipment and intangible assets in the consolidated stat ement of cash flows is due to leases, capitalised borrowing costs and ac cruals for payments. Norske Skog has capitalised borrowing c osts of NOK million in and NOK million in . Disposals in and were primarily relat ed to scrapping of fully depreciated assets that no longer ha ve any technical values. At year end the gr oup has contractual commitments for acquisition of property , plant and e quipment of NOK million. T otal payments in and related to this commitment amount ed to NOK million. Non-current assets held for sale Nors k e Skog did not have any non- current ass ets held for s ale at Decem ber . Annual report 2021 / Norsk e Skog 101 CONSOLIDA TED FINANCIAL ST A TEMENTS . Leases RIGHT OF USE A SSETS The group contracts includes se veral assets such as machinery and equipment, land and buildings and fixture and fittings. A contr act is, or contains, a lease if the contract conve ys the right to contr ol the use of an identified assets for a period of time in exchange for consider ation. Right-of-use assets are initially measured at cost. Non-lease components will be separated if these ar e identifiable. Lease terms are negotia ted on an individual basis and contain a wide range of dier ent terms and conditions. The right-of-use assets is depreciated on a linear basis ov er the contract period, currently mainly less than five years. The gr oup’ s right-of-use assets are categorized and present ed in the table below: The group has decided not to r ecognise a lease liability for short term leases or for leases of low value assets. P ayments made under such leases are included in operating expenses. Certain v ariable lease payments are not permitted to be recognised as leases liabilities and are e xpensed as incurred. LEAS ES MA CHINER Y AND EQU IPM ENT LAN D AND BUILDINGS FITU RES A ND FITTI NG S TOT A L Carr ying valu e Janu ary Additions Depreciations - - - - Impairme nts - - Curr ency tr anslat ion dierences Carryi ng v alue December Additions Depreciations - - - - Curr ency tr anslat ion dierences - - Carryi ng v alue December L E A S E P AY M E N T S NOTE Not later than on e year Later than one yea r and not later than f ive years Later than f ive years To t a l Fut ure finance charges Present v alue of liabilities V A RIAB LE LEASE , SH ORT TE RM AN D LOW V ALU E LEASE EX PEN SE S Expe nse relating to variabl e lease paym ents not incl uded in the meas urement of lea se liabilities Shor t term leas es exemption Low- value leases ex emption Reduc ed leas e - To t a l Annual report 2021 / Norsk e Skog 102 CONSOLIDA TED FINANCIAL ST A TEMENTS . Shares SHARES IN SUBSIDIAR IES O WNED B Y THE P ARE NT COMP AN Y CONSOL ID A TED COMP ANIES CURRENC Y SHARE CAPIT AL (I N ) OW NERSHIP Nors k e Skog Bruck G mbH , Bruck , Austria EUR Nors k e Skog Papier Re cycling GmbH , Bruck , Austria EUR Nors k e Skog Golb ey SAS, Golb ey , Franc e EUR Gree n V alley Energi e, France EUR Gree n V alley Energ y SASU, France EUR Nors k e Skog Skogn AS, Levange r , No rway NOK Norske Sk og Saugbrugs AS, Halden, Nor wa y NOK Saugbrugs Bioenergi A S, Halden, Norway NOK Nors k e Skog Indus tries Australia Ltd., Sydn ey, Austr alia AU D Nors k e Skog (Aus tralasia) Pt y Lt d. , Sydney , Aus tralia AU D Nors k e Skog (Aus tralia) No. P ty Ltd., Sydney, Australia AU D Nors k e Skog Capit al (Australi a) Pt y Lt d. , Sydney , Aus tralia AU D Nors k e Skog Holdin gs (No.) Ltd. , Auckland, N ew Zealand NZD Nors k e Skog Paper Mi lls (Alb ury ) Pt y Limited, Sydney, Australia AU D Nors k e Skog Paper Mi lls (Australi a) Lt d., T asmania , Austral ia AU D Nature’s Flame Ltd., Auckla nd, New Zeala nd NZD Nors k e Skog T as man Ltd., Aucklan d, New Zealan d NZD Nors k e Skog Capit al (New Zealand) Ltd., Aucklan d, New Zealan d NZD T op p Ene rgy Limited, Auck land, New Ze aland NZD Nornews A S, Osl o, Norway NOK Nors k e Skog Deu tschland G mbH , Augsburg , Germany EUR Nors k e Skog France SARL, Pari s, France EU R Nors k e Skog Italia SrL , Milan, I taly EUR Nors k e Skog (Österreich) G mbH, G raz, Austria EUR Nors k e Skog (Schweiz) AG, Zürich, S witzerland CHF Nors k e Skog (UK ) Ltd., Londo n, United K ingdom GBP Cebin a AS, Os lo, Nor way NOK Cebi co AS, Os lo, Nor way NOK Nors k e Skog Paper s (Malaysia) Sdn. Bhd. , K uala Lumpur , Malaysia MYR Annual report 2021 / Norsk e Skog 103 CONSOLIDA TED FINANCIAL ST A TEMENTS SHA RES I NCLU DE D AS FIN ANCI AL ASSE TS CURRENCY SHARE CAPIT AL (I N ) OW NERSHIP CAR RY IN G V ALUE (NOK) Sha res owne d by parent Circa Gro up AS, Os lo, Nor way NOK Oce an GeoLo op AS, Skogn , Nor way NOK Shelte rwoo d AS, Osl o, Nor way NOK Sha res owne d by other gr oup com pani es Porsnes Utvikling AS, Halden, Norway NOK Nor Fibre Log istics , France EU R SEM, F rance EUR Austria Papier Re cylcing G mbH, Aus tria EUR Exeltium SAS, Pa ris, France EUR Other shares TOT AL LE VEL LEVE L LEVEL TOT AL Fina ncial a sset s at fair valu e throu gh prof it or los s T rading derivatives Derivatives us ed for hed ging Comm odity co ntracts and e mbed ded derivatives To t a l Fina ncial l iabi litie s at fair valu e throu gh prof it or los s T rading derivatives Derivatives us ed for hed ging - - Comm odity co ntracts and e mbed ded derivatives - - To t a l - - - LEVE L LEVEL LE VEL TOT AL Fina ncial a sset s at fair valu e throu gh prof it or los s T rading derivatives Derivatives us ed for hed ging Comm odity co ntracts and e mbed ded derivatives To t a l Fina ncial l iabi litie s at fair valu e throu gh prof it or los s T rading derivatives - - Derivatives us ed for hed ging Comm odity co ntracts and e mbed ded derivatives - - To t a l - - - . D er ivatives F AIR V ALUE O F DER IV A TIVE S The table below classifies financial instruments within the scope of IFRS measured in the balance sheet at fair v alue, by valuation method. The dierent valuation methods are described as lev els and are defined as follows: Level : Quoted prices ( unadjusted) in active markets f or identical assets or liabilities. Level : Inputs other than quot ed prices included within level that are observable for the asset or liability , either directly (i.e. as prices) or indirectly (i.e. derived fr om prices). Level : Inputs f or the asset or liability are not based on observ able market data (i.e. unobservable input s). Annual report 2021 / Norsk e Skog 104 CONSOLIDA TED FINANCIAL ST A TEMENTS The followin g table shows the c hanges in l evel instruments at De cember . ASS ETS LIA BILITIE S Balance January - Gain and l osses re cognis ed in profi t or loss - Sale s of instrument s - Curr ency tr anslat ion dierences - Balance December - FAIR V A LUE OF D ER IV A TI VES I N LEVEL G IVE N A REAS ONAB L Y PO SSI BLE AL TE RNA TI VE Asse ts Commodity contracts Energy price - Embed ded derivatives Energy pric e - To t a l Liabilities Commodity contracts Energy price - - - Embed ded derivatives Energy pric e - To t a l - - The long -t erm ele ctricity c ontracts in N ew Zealand were terminate d in June . Norske Sk og’ s p ortfolio of commodit y contracts consist mainly of phy sical energy contracts. The commodit y contracts and embedded derivativ es classified as financial instruments within the scope of IFRS contracts are related to ener gy contracts in Norway . Fair value of commodity contr acts is sensitive to estimates of futur e energy prices. For further det ails about gains and losses relating to lev el instruments see Note . The fair value of deriv atives that ar e not traded in an active market ( over-the- counter derivativ es) is determined using various v aluation techniques. Interest rate sw aps, cross-currency swaps, forwar d rate agreements and for eign currency forward contr ac ts ar e all valued by estimating the pr esent value of future cash flows. Quoted cash and swap r ates are used as input for calculating z ero coupon curves used for discounting. The fair value of commodit y contracts recognised in the balance sheet is calculated by using quotes fr om actively traded mark ets when available. Otherwise, price forecasts fr om acknowledged external sourc es are used. Commodity contracts that f ail to meet the own-use exemption crit eria in IFRS are recognised in the balance sheet and v alued on the same principle as financial contracts. Some of these are long-term ener gy contracts. In calculating the fair value of embedded derivativ es, valuation techniques are used in the absence of observable market input s. The following table is present ed in accordance with IFRS , showing the fair value of all commodity contr acts in level within the scope of IFRS given a change in assumptions to a reasonably possible alternativ e. Annual report 2021 / Norsk e Skog 105 CONSOLIDA TED FINANCIAL ST A TEMENTS . Finan cial instrument s CA TEGORI ES OF FINAN CIAL ASSETS AND FINAN CIAL LIABILITIES FINANC IAL ASSETS NOTE FAIR V A LUE THR OUG H OTHE R COMPR EHEN SIVE INCOME FAIR V A LUE THR OUG H PROF IT OR LOS S AMORTIS ED COST TOT AL Other non-current assets T rade and o ther r eceivables Cash and cash equivalents Othe r current asse ts To t a l FINANC IAL LIABILITIES NOTE FAIR V A LUE THR OUG H PROF IT OR LOS S AMORTIS ED COST TOT AL Interest-bearing non- current liabilities , Interest-bearing current liabilities , Other n on-current liabili ties T rad e and other payable s Other curre nt liabilities To t a l FINANC IAL ASSETS NOTE FAIR V A LUE THR OUG H OTHE R COMPR EHEN SIVE INCOME FAIR V A LUE THR OUG H PROF IT OR LOS S AMORTIS ED COST TOT AL Other non-current assets T rade and o ther r eceivables Cash and cash equivalents Othe r current asse ts To t a l FINANC IAL LIABILITIES NOTE FAIR V A LUE THR OUG H PROF IT OR LOS S AMORTIS ED COST TOT AL Interest-bearing non- current liabilities , Interest-bearing current liabilities , Other n on-current liabili ties T rad e and other payables Other curre nt liabilities To t a l See N ote fo r furthe r specif ication of f inancial a ssets an d financ ial liabilities . Annual report 2021 / Norsk e Skog 106 CONSOLIDA TED FINANCIAL ST A TEMENTS CAR RY IN G AMO UNT F AI R V ALUE LE VEL LEVEL LEVEL Derivatives Commodity contracts Miscellaneous ot her non-curren t assets Other non-current assets T rade receivables VAT r e c e i v a b l e s Other receiv ables T ra de an d othe r receivab les Derivatives Commodity contracts Current investments Other cur rent assets Cash and cash equi valent s Interest-bearing non- current liabilities Interest-bearing current liabilities T otal interest-bearing liabilit ies Derivatives Commodity contracts Other non-current liabilities T rade pay ables Other pa yables T ra de an d othe r pay abl es Derivatives Commodity contracts Financial curre nt liabilities Other current liabilities F AIR V ALUE M EASU REM ENT H IE RARC HY FOR FI NANC IAL ASSET S AND L IABIL ITIES The table below classifies financial assets and liabilities instruments measured in the balance sheet at fair value, b y valuation method. The dier ent valuation methods are described as levels and ar e defined as follows: Level : Quoted prices ( unadjusted) in active markets f or identical assets or liabilities. Level : Inputs other than quot ed prices included within level that are observable for the asset or liability , either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level : Inputs f or the asset or liability are not based on observ able market data (i.e. unobservable input s). Annual report 2021 / Norsk e Skog 107 CONSOLIDA TED FINANCIAL ST A TEMENTS CAR RY IN G AMO UNT F AI R V ALUE LE VEL LEVEL LEVEL Derivatives Commodity contracts Miscellaneous ot her non-curren t assets Other non-current assets T rade receivables VAT r e c e i v a b l e s Other receiv ables T ra de an d othe r receivab les Derivatives Commodity contracts Current investments Other cur rent assets Cash and cash equi valent s Interest-bearing non- current liabilities Interest-bearing current liabilities T otal interest-bearing liabilit ies Derivatives Commodity contracts Other non-current liabilities T rade pay ables Other pa yables T ra de an d othe r pay abl es Derivatives Commodity contracts Financial curre nt liabilities Other current liabilities The fair value of bonds (inter est-bearing liabilities) (Level ) is assessed by using price indications from banks a t the reporting date. Ther e is some uncertainty associated with the calculated f air value of Le vel interest - bearing liabilities. The fair value calculation on other int erest-bearing liabilities (Level ) is based on acknowledged valua tion principles according to IFRS, but is not necessarily an estimate of the amount the group would hav e to cover if it wer e to repay all it s debt to all lenders. The fair values of cash and cash equiv alents, trade r eceivables and other receivables, other assets, tr ade payables and other payables and other curr ent liabilities remain largely consist ent with the book value due to the short maturities of such positions. The fair value of deriv atives and commodity contracts is described in Note . Annual report 2021 / Norsk e Skog 108 CONSOLIDA TED FINANCIAL ST A TEMENTS Norske Sk og Bruck, Norske Skog Golbey , Norske Skog Sk ogn and Norske Skog Saugbrugs have f ac toring facilit y agreements wher e the future cash flow on certain accounts r eceivables are sold. The f acility has a limit of EUR million for Norske Sk o g Bruck, limit of EUR million for Norske Sk o g Golbey and a combined limit of NOK million for Norske Sk o g Skogn and Nor ske Skog Saugbrugs. There are no financial co venants in these factoring facility agreements. Account s receivable that ha ve been sold are deducted fr om accounts receiv able in the balance sheet. The utilisation at December was NOK million (NOK million). As of December advances receiv ed from contracts with cust omers amounted to NOK million and other rev enue accruals for invoic e not sent amounted to NOK million (NOK million and NOK million). In addition, receiv ed advanced from cust omers not invoiced NOK million per December (NOK million). The credi t risk on trade and othe r receivab les is continu ously mon itored, indep endent of du e date. The group’s sale s are mainly to large cu stomer s with a low degre e of default. C ollateral as s ecurity is n ot normally re queste d. Further information reg arding the group’s credit p olicy for sal es is provide d in Note . . Recei vabl es and othe r non-curren t as sets NOK MIL LION Note T ra de an d othe r receivab les T rade receivables Provision for ba d debt - - VAT r e c e i v a b l e s Prepai d expens es Other receiv ables To t a l Other non-current assets Long- term shareho ldings Derivatives Commodity contracts Pension pla n assets Loa ns to e mpl oyee s Other non-curr ent receivables To t a l AGEI NG O F THE G ROUP ’S C UR REN T RECE IV ABLE S Not due to months to months Over months To t a l ) ) Does not include provision for bad debt. The maxim um credit risk exp osure at the year - end is the fair value of e ach clas s of receivable m entione d above. Annual report 2021 / Norsk e Skog 109 CONSOLIDA TED FINANCIAL ST A TEMENTS . Pension and ot her emplo yee obligat ions A PE NS ION Nors k e Skog has variou s pension s cheme s in accorda nce with loc al condition s and prac tices in the co untries in which the gro up operates . A total of active and form er employee s are covered by such sch emes . Of thes e, peopl e are covered by defin ed ben efit plan s and pe ople by def ined contri bution pl ans. DE SCRI PTIO N OF THE D EFI NE D BE NEF IT PLAN S The key terms in Nor ske Skog’ s major defined benefit plans are shown in the table below . BE NE FIT IN O F PENS IONABLE EARNINGS Y EARS O F SE RVICE PENSI ONABLE A GE EARL Y RETIREMENT AG E ACTIVE MEMB ERS No r ske S ko g AS A Nors k e Skog Bruck G mbH Norske Sk og Saugbrugs AS No r ske S ko g S kog n AS Nors k e Skog Deu tschland G mbH Nors k e Skog (Österreich) G mbH ASSUMPT ION S MADE WHEN C ALCULA TING FU TURE BENEFIT OBL IGA TIONS IN NOR WA Y Disco unt rate Expe cted return on p lan asset s Salar y adjustment Inf latio n rate NET P ERIODIC P ENSION EXP ENSE Pension expense, define d benefit plan Pension e xpense , defined cont ribut ion plan Net peri odic pensi on e xpense Net peri odic in terest ex pense Estimated p ayments to the group’s def ined be nefit p ension sc hemes in amoun ts to NOK million . The defined benefit plan in Norske Skog Bruck GmbH and Norsk e Skog Deutschland GmbH is closed. The defined benefit schemes in Norway cover people bet ween and years of age, born before January and who wer e employed before January when the plan was closed. The defined benefit obligations in Norway only encompass active members, since they lea ve the defined benefit scheme (having a paid-up policy) when they r etire. Plan assets of the pension schemes in Norske Skog AS A, Norske Skog Saugbrugs AS and Norske Sk og Skogn AS are managed b y a life insurance compan y and invested in accor dance with the general guidelines gov erning investments by life insurance companies in Norwa y . With eect from the beginning of , a defined contribution scheme was introduced in Norway , with a contribution of for earnings up to G and between and G . When evaluating p lan asse ts, it is ba sed on the as sumptions as at Decemb er . This e stimated value is c orrecte d every year in ac cordance with the fig ures for the market value of the ass ets provide d by the insurance compan y . When measuring the incurred obligations, it is based on the assumptions as at December . This estimated obligation is corrected e very year in accor dance with the figures for incurr ed pension obligations provided by the actuary . In addition to the benefit obligation funded through insur ance plans, the group has unfunded benefit obligations. The unfunded obligations include estimated future obligations r elating to the former Norwegian early r etirement scheme, pensions to former owners of subsidiaries as well as pensions for senior management and directors. Obligations r elating to senior management pensions are partly funded through a supplement ary retirement plan with a life insurance compan y . In addition to defined benefit plans, there are also v arious defined contribution plans. The discount rate applied for the pension schemes in Norwa y for is based on the interest ra te for cov ered bonds. Subsidiaries can deviate fr om these assumptions if local conditions require this. The discount r ates applied vary from t o and pension adjustments vary from t o . Norske Sk og has used the mortality table KBE in Norway , Richttafeln G in Germany and A VO -P in Austria. Annual report 2021 / Norsk e Skog 110 CONSOLIDA TED FINANCIAL ST A TEMENTS PEN SIO N PLAN S IN TH E BALANC E SHE ET SPE CIF ICA TIO N OF PE NS ION PL ANS I N THE BAL ANC E SH EET Pension a ssets in the b alance sh eet Pension li abilities in the bal ance she et - - Net pension obligations - - Net unfunded pensio n plans - - Net par tly or fully fun ded pe nsion plan s UNFUNDED PENSION PLA NS CHANGES IN P ENSION OBLIG A TIONS F OR UNFUNDED PENSION P LANS, P ROJE CTED BENEFI T OBL IGA TIONS INCLUDING NA TIONAL IN SURANCE CONT RIBUTIONS Balance Januar y - - Current year 's interest c ost - - Pensions benef its paid Remeasur ements (loss )/ gain OCI - Curr ency tr anslat ion dierences - Balance December - - P ARTL Y OR FU LL Y FU NDE D PEN SIO N PLAN S CHA NGE S IN PE NS ION O BLIGA TI ON S FOR P ARTL Y OR F ULL Y F UN DE D PEN SIO N PLAN S, PR OJE CTED B EN EFIT OBLIG A TIONS INCL UDING NA TIONAL INSURANCE CONTRIBUT IONS Balance Januar y - - Current year 's ser vice cos t - - Current year 's interest c ost - - Payroll tax of empl oyer contribution Pension benefit s paid Remeasur ements (loss )/ gain OCI Balance December - - CHA NGE S IN PL AN ASSE TS FOR PARTL Y O R FULL Y FU ND ED PE NS ION PL ANS , PLAN AS SETS AT F AI R V ALU E Balance Januar y Adjustment to opening balance Return on plan as sets (intere st incom e) Employer contribution i ncluding p ayroll tax Payroll tax of empl oyer contribution - Pension benefit s paid - - Remeasur ements (loss )/ gain oci - - Balance December Net assets /( ob ligations ) partly or fully funded pension plans SPE SI FICA TI ON OF R EM EASU RE ME NT GAINSLOS SES I N OTHE R COM PRE HE NS IVE IN COM E OCI Actuarial los s (gain) - ch ange in disc ount rate - Actuarial los s (gain) - ch ange in other f inancial a ssumptions - Actuarial los s (gain) - ch ange in other de mographi c assumption s - Actuarial los s (gain) - expe rience o bligation Actuarial los s (gain) - expe rience a ssets - Inv es t ment managemen t cost Remeasuremen ts loss (gain) in OCI - Pension assets is included in line other non-current assets and pension liabilities is included in the line employee benefit obligations. Annual report 2021 / Norsk e Skog 111 CONSOLIDA TED FINANCIAL ST A TEMENTS INVEST ME NT PROFILE FOR PENSION F UNDS FUN DS DI ST RIBUTION FU NDS DISTRIBU TION Share s Bonds Pro perties a nd r eal esta te Money ma rk et Other To t a l SE NS ITIVITY A T DEC EMB ER INCREA SE D ECR EASE Disc ount rate - - Salar y adjustment - - Future national se curity - - Future pensio n - - NET P ERIODIC EXP E NSE Net peri odic e xpense Net peri odic in terest ex pense CHA NGE S IN OTH ER E MPLOYEE BE NE FIT Balance Januar y - - Current year ’s servic e cost - - Current year ’s interest cos t - - Decrease in pro vision due t o leav e before entitlement Remeasur ements loss (ga in) OCI Pay ments made Other changes - - Curr ency tr anslat ion dierences - Balance December - - OTHE R EM PLO YEE B EN EF ITS IN TH E BALAN CE S HEE T Other non-curr ent employee benefit obliga tions - - Other cur rent emp loy ee benefit oblig ations - - T otal other employ ee benefits December - - SEN SITIVITY ANAL YSIS Norske Sk og has performed sensitivity analyses of material gr oup companies for the most important assumptions relat ed to defined benefit schemes to predict how fluctuations will impact pension liabilities in the consolidated balance sheet. In relation to the assumptions made in the calculation of pension obligations the amount is most sensitive to changes in discount r ate, salary adjustment and pension growth rat e. The sensitivity of the pension obligation is shown in the table below: The obligation classified as current rela tes to employees that ha ve completed the required period of service and the gr oup does not have an unconditional right to defer settlement for these obligations. Based on pre vious experience, the group does not expect all employ ees to take the full amount of accrued leave or r equire payment within the ne xt months. The current part is included in the balance sheet line trade and other pa yables. The above sensitivity analy ses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur , and changes in some of the assumptions may be correlated. No dat a is available for decr ease of future pension adjustment. The sensitivity analysis is based on actuarial calculations for the Norwegian schemes. B OTHE R EM PLO YE E OBLI G A TION S The groups other employ ee benefits are future benefits tha t the employees have earned in ret urn for their service in current and prior periods. The leave obligations co ver the groups liabilities for long service lea ve and annual leave which ar e classified as either other non-current benefits or short- term benefits. Annual report 2021 / Norsk e Skog 112 CONSOLIDA TED FINANCIAL ST A TEMENTS RESTR UCTURING PRO VISION Restructuring provision is included in the balance sheet line other curr ent liabilities. The restructuring pro vision of NOK million at December includes various restructuring activities included pro vision for sever ance payments and other costs (publication paper Eur ope NOK million and publication paper Australasia NOK million). The amount e xpensed in in relation to r estructuring activities amounted to NOK million (publication pape r Europe NOK million and pub lication pap er Australasi a NOK milli on). NOK million of the increase in pro vision during is due to a reclassi- fication from long term dismantling pr ovision to short term as part of the closure of the production at Norsk e Skog T asman. The restructuring pro vision of NOK million at December includes various restructuring activities included pr ovision for sever ance payments and other costs (publication paper Europe NOK million and publication paper Australasia NOK million). The amount expensed in in r elation to restructuring activities amounted to NOK million. DISMAN TLING PRO VISION Provisions r elated to future dismantling costs arising from a futur e closing down of produ ction facilitie s amounted to NO K million at Decem ber , compared to NOK million at December . The total amount is normally classified as non-current and will only be realised at the time of a future shut down of any of the Norsk e Skog production units. The provision is the net pr esent value of the futur e estimated costs, calculated using a long-term risk -free inter est rate. The periodic unwinding of the discount is recognised in the income stat ement line financial expenses. The opposite entry for dismantling pro vision and change in provision estimat es is prope rty, plant and e quipment . In th e remaining amo unt of NOK million was reclassified from long t erm to short term as part of the closure of the production at the Norske Sk og T asman. This is included in the balance sheet line other current liabilities. ENVIRO NME NT AL PRO VISI ON The group’ s provision f or environmental obligations is pr esented in the balance sheet as other non-current liabilities. The provision is r elated to estimated future costs f or cleaning up any environment al pollution caused by Norske Sk og production units. The pro vision will mainly be realised in a future period upon a potential shut down of the production activities of any of the Norske Sk og production units. Increased envir onmental requirements from local governments may also lead t o realisation of this pr ovision at an earlier point in time. Provisions f or future envir onmental obligations amounted to NOK million at December compared to NOK million at December . Resources spent on envir onmental activities during amounted to NOK . The carrying value of the pro vision is the best estimate made by measuring the expected value of the specific obligations, discounted to pr esent value using a long-term risk -free inter est rate when the time v alue of money is material. Changes in factors included in the e xpected value will impact the carrying value of the obligation. T o illustrate the sensitivity , a reduction in the future discount r ate by one perc entage point would increase the pr ovision by approximat ely NOK million. Changes in accounting estimates not relat ed to assets are classified as operating it ems in the income statement, and the periodic unwinding of the discount is recognised within the income stat ement line financial expenses. CON TINGEN T LI ABIL IT IES Norske Sk og is an international company that, through its ongoing business operations, will be exposed to litigation and claims fr om public authorities and contracting parties as well as assessments from public authorities in each country it operates. . Pro visions RESTR UCTURING PRO VISION DI SMANTLI NG PRO VISION ENVIRO NMENT AL PRO VISION Balance January Change s and new provisi ons - - Utilise d during the year - Periodic unw inding of disco unt Curr ency tr anslat ion dierences Balance December Change s and new provisi ons - - Utilise d during the year - - Periodic unw inding of disco unt Curr ency tr anslat ion dierences - Balance December Annual report 2021 / Norsk e Skog 113 Photo: Carsten Dybevig CONSOLIDA TED FINANCIAL ST A TEMENTS . Interest-bearin g liabilitie s INTERES T - BEARING DE BT , OU TST ANDING AMOUN TS Bond s Debt to financial institutions Factoring facilitie s To t a l INTERES T - BEARING DE BT , OU TST ANDING AMOUN TS CURRENCY AMO UNT NOK NOK EUR AU D T otal interest-bearing debt in foreign cur rencie s NOK T otal int erest-be aring debt In the first quarter of Norske Sk og is sued a EUR million senior secured bond. The bond matures in Mar ch and has an interest r ate of EURIBOR (zero floor) with quart erly interest payment s. The proceeds were mainly used to r efinance the EUR million bond and for general corporate purposes. A t D ecember , the outstanding amount was EUR million. In connection with the refinancing in the first quarter , Norske Skog r epaid the outstanding amount of EUR million on the EUR million re volving credit facility and enter e d into a new EUR million r evolving credit f acility agreement with re vised terms and a tenor of five years. A t December the credit facilit y was undrawn. In the fourth quarter of Norsk e Skog announced that it had enter ed into credit facilit y agreements in an aggr egate amount of EUR million to finance its EUR million investment to con vert two paper machines into producing packaging paper . The total financing amount repr esents approximat ely of the investment amount, of which EUR million relates to Nor ske Skog Golbey and EUR million r elates to Norsk e Skog Bruck. The borrowing entities are Norske Sk o g Golbey SAS and Norsk e Skog Bruck GmbH, and the facilities are fully guar anteed by Norsk e Skog ASA. The facilities will be drawn as capital e xp enditur es are incurred, and r epayment is scheduled to commence appro ximately upon completion of each respective project with aver age maturity towards the end of . Utilisations are subject to customary conditions precedent f or such facilities. At December , the credit facilities had been drawn b y approximately EUR million. In Norske Sk og entered into an EUR million cr edit facility to finance the construction of an incineration boiler on the Norsk e Skog Bruck site. The credit facilit y is drawn increment ally as expenditures incur during the construction phase, after which it will be repaid in quarterly instalments up until the final maturity date in . The borr ower under the facility is Norske Sk og Bruck GmbH and Norske Skog AS A has provided a guar antee of EUR million. At Decem ber , the loan has b een drawn by approximat ely EUR million. The financial covenants applicable to Nor ske Skog on a consolida ted basis are (i) freely av ailable and unrestricted cash and cash equivalents of minimum NOK million, (ii) EBITDA to net interest costs of minimum , and (iii) book equity to total assets of minimum and (iv ) minimum last twelve months (L TM) EBITDA of NOK million at December , and NOK million thereafter . In addition, there are v arious company specific financial covenants applicable to the subsidiaries acting as borr owers under the respective credit f acilities. The EBITDA used in the calculation of financial co venants may dier fr om the EBITDA shown in the financial r eporting due to adjustment requir ements in the facility agr eements. The rem aining financing a rrangement s for t he group incl udes leasing, factorin g, and other c redit facilitie s in the mill owning entities . Norske Sk og Skogn AS and Norske Sk og Saugbrugs AS have pledged its trade receivables in f avour of its f actoring provider s. In addition, Norske Sk og Skogn AS and Norske Sk og Saugbrugs AS have pledged certain part s of its property and assets in favour of the EUR million R CF and the EUR million senior secured bond. Saugbrugs Bioenergi AS, a wholly owned subsidiary of Norsk e Skog Saugbrugs AS, has pledged certain parts of its pr operty and assets in favour of the lender s under a credit facility financing it s biogas facility . Norske Skog Golbey SAS has pledged certain parts of it s property , in an amount of up to EUR million, in fav our of a bank guarantor under a guar antee to one of its energy suppliers. In addition, Norsk e Skog Golbey SAS has pledged certain parts of its property and assets and Nor ske Skog AS A has pledged the shares in Norske Sk og Golbey SAS in fav our of the lenders under the packaging conversion f acilities. Norske Skog Bruck GmbH has pledged cert ain parts of its property and assets in f avour of the lenders under the EUR million cr edit facility . The aver age interest ra te at December was (). Annual report 2021 / Norsk e Skog 115 CONSOLIDA TED FINANCIAL ST A TEMENTS SCHEDUL ED REP A YMENT S OF TH E GRO UP ’S FI NAN CIAL DE BT AND I NTER EST A T INTE RE ST OTH E R LOAN S ) BONDS TOT AL - To t a l SCH ED ULE D REPA Y ME NTS OF TH E GRO UP ’S FI NAN CIAL DE BT AND I NTER EST A T INTE RE ST OTH E R LOAN S ) BONDS TOT AL - To t a l ) including full instalments for the EUR million credit facility The debt amounts set out above ma y dier from the carrying v alue in the balance sheet due to the amortized cost principle and ex clusion of debt items related to leases. A t De cember , the financial statement s included amortized cos in an amount of NOK million (NOK million), and the amount of interest -bearing debt related to leases was NOK million. See Note . T rad e payables amoun ted to NOK milli on at Dec ember (NOK million). Drawn amounts fr om securitization arrangements is classified as inter est- bearing current liabilities. This amounts to NOK million in scheduled repayments in . The financed amount r epresents a group of individual loans, which are settled individually at maturity of the ac counts receiv able. New loans are initiated on a consecutive basis based on new acc ounts receivable included under the securitiza tion agreement. The liability is in its nature curr ent and Norske Sk og does not have an unconditional right to defer settlement beyond twelv e months. The liabilities are liabilities that are settled through its normal opera ting cycle. The corresponding accounts r eceivable is derecognised when the customer pay s it. At D ecem ber , Norske Skog ASA and its su bsidiarie s had issue d bank guarantee s on its beh alf in an amount of NO K million (NOK million ). Norske Sk og Skogn AS and Norsk e Skog Saugbrugs AS hav e pledged certain parts of its assets and machinery , in an amount of up to NOK million, to its energy suppliers under long term ener gy supply agreements. The security has priority behind the EUR million rev olving credit facilit y and the EUR million senior secured bond. Annual report 2021 / Norsk e Skog 116 CONSOLIDA TED FINANCIAL ST A TEMENTS RECONCIL IA TION OF L IABILI TIES ARISING FROM FINANCING ACT IVIT I ES NON-CASH CHANGES N OTE CASH FLOW RECLASSI- FIC A TION ) OTHE R ) FOREIGN EXCH ANGE MO VEMENT Interest-bearing non- current liabilities - - Interest-bearing current liabilities - T otal liabilities from f inancing activities ) Reclassification between non-current and current t erm liabilities ) New Le asi ng deb t, los s ear ly rep aymen t of bon d and am ort ization o f trans acti on cos ts deb t issu anc e. NOTE CASH FLOW RECLASSI- FIC A TION ) OTHE R ) FOREIGN EXCH ANGE MO VEMENT Interest-bearing non- current liabilities - Interest-bearing current liabilities - T otal liabilities from f inancing activities ) Reclassification between non-current and current t erm liabilities ) New Leasing debt . Speci ficat ion o f balanc e sheet i tems NOK MIL LION Note Other non-current assets Long- term shareho ldings Derivatives Commodity contracts Pension pla n assets Loa ns to e mpl oyee s Other non-curr ent receivables To t a l Inve nt ori es Raw materials and othe r produc tion good s Semi-manufactured materials Finishe d goods To t a l Other cur rent assets Derivatives Commodity contracts Current investments Othe r current asse ts To t a l T ra de an d othe r pay abl es T rade pay ables Accrue d labour co sts and ta xes Acc rue d exp ens es Other intere st -free liabilities To t a l Annual report 2021 / Norsk e Skog 117 CONSOLIDA TED FINANCIAL ST A TEMENTS NOK MIL LION Note Other current liabilities Derivatives Commodity contracts Accrued emission rights Accrued financial costs Restructuring pro vision To t a l Other non-current liabilities Commodity contracts Dismantling provision Envi ronmental provision Deferre d recogn ition of government grants Other non-i nter est -bearing debt To t a l Interest-bearing non-current liabilities Bond (a mortised cost) Debt to financial institutions Leasing ob ligations To t a l Interest-bearing cur rent liabilities Debt to f inancial in stitutions and bo nd (amortis ed cos t) Leasing ob ligations Other intere st -be aring liabilities To t a l . Related par tie s Oceanwood Special Situations Malta Limited is a relat ed party to Norske Sk og through the ownership in NS Norway Holding A S (largest shareholder ). There hav e been no transactions with Oceanwood Special Situations Malta Limited in . On January NS Norway Holding sold shares in Norsk e Skog ASA. On December NS Norway Holding sold shar es in Norske Sk og ASA. Following these sales NS Norway Holding AS hold of the shares in Norske Sk og ASA . Balances and transactions between the group and subsidiaries, as listed in Note , have been eliminated on consolida tion and are not disclosed in this note. Remuneration for c orporate management is pr esented in Note . Remuneration for leading personnel is presented in the r emuneration report available at www .norskeskog. com. All transactions with relat ed parties are conducted on normal commer cial terms. Annual report 2021 / Norsk e Skog 118 CONSOLIDA TED FINANCIAL ST A TEMENTS . E ven ts af t er the bal ance s heet d at e On Febr uary Norske Skog ann ounced that i t had entered into agreem ent to sell Nature’s Flame pe llets pro duction co mpany to T alley ’s Group for a c onsidera tion of approximately NZD million. The trans action is expec ted to close du ring the firs t quar ter of , and resul t in a cash payment of app roximately NZD million and a b ook value gain of approximately N OK - m illion. On March tempo rary downtim e was initiated at the Nor ske Sk og Bruck p aper mill in Aus tria due to the high and unce rtain p rice levels of gas , an impor tant inp ut cost in pro duction . Following s ome visibilit y on input c osts and cus tomer com mitments , productio n was gradually s tarted u p again on March. The new b oiler sc hedule d for star t -up in A pril is expec ted to contribute to alleviate the si tuation, if the volatility an d high price levels remain , by reducing the mill ’s gas consum ption and improve its ene rgy supply. The invasion of Ukrain e by Russia at the en d of Februar y has created f urther uncer taint y in the markets and par ticularly en ergy market which is im por tant for Nors ke Sk og. N orske Skog has no op erations or sa les to the impac ted region s but there is an inh erent unce rtaint y on any impact o n operations during . There have bee n no events after th e balance sh eet date with signif icant impac t on the finan cial statem ents for . Annual report 2021 / Norsk e Skog 119 Phot o: Akse l A . Dybev ig FINAN CIAL ST A TEM ENTS Income statement 122 Statement of compr ehensive income 122 Balance sheet 123 Statement of cash flows 124 Statement of change in equity 124 NOTES TO THE FI NANCIAL ST A TE MENTS 1 General information 126 2 Accounting policies 126 3 Operating re venue by geographical mark et 126 4 Payr oll expenses, pension expenses and obligations 127 5 Associated companies 127 6 Financial items 128 7 Income taxes 129 8 Intangible assets and property , plant and equipment 130 9 Shares in subsidiaries 131 10 Equity 132 11 Maturity of interest -bearing liabilities 133 12 Intercompany r eceivables and liabilities 134 13 Guarantees 135 14 Related parties 135 15 Events after the balance sheet dat e 135 F I NAN C IAL S T A TE M E NT S NORSKE SK OG A S A FINANCIAL ST A TEMENTS NORSKE SKOG ASA IN COME ST A TEM ENT NOK MIL LION Note T otal opera ting Income Empl oyee b en ef it exp en ses - - Other operat ing expenses - - Rest ruct uri ng e xpenses - - Depreciation - - T otal opera ting e xpenses - - Operating earnings - - Share of prof it in asso ciated comp anies - Financial in come Financial expense - - Gains/(losses) on foreign currency - Profi t/ (loss) bef ore income taxes - - Income taxes - - Profit/ (los s) after income ta x - - ST A TEM ENT O F COM PREH EN SIVE I NCOM E NOK MIL LION Profit/ (los s) after tax - - Ite ms that wi ll not b e recla ssifi ed sub sequ ently to p rofit or l oss Remeasur ements of p ost emplo yment benefit obligat ions - T ax eect on r emeasurements of post employment benefit obliga tions Other comprehensiv e income - T otal comprehensiv e income - - Annual report 2021 / Norsk e Skog 122 FINANCIAL ST A TEMENTS NORSKE SKOG ASA BALANCE S HE ET NOK MIL LION NOTE Intangible assets Property , plant and equi pment Shares in s ubsidiarie s In vest ment in ass ociat ed companies Other non-current assets T otal non-current assets T rade and o ther r eceivables Othe r current asse ts Cash and cash equivalents T o tal curr ent ass ets T otal assets Paid-in-equity Retai ned earnings and ot her reserves - - T otal equ ity Interest-bearing non- current liabilities , T otal non- curren t liabilities Interest-bearing current liabilities , Other curre nt liabilities T otal current liabilities T otal liabilities T o tal eq uity an d liab iliti es SKØ YEN, 29 MARCH 20 22 THE BOARD OF DIRECTORS OF NOR SKE SKOG ASA John Chiang Ar vid Grundekjøn T rin e-Marie H agen Sven Ombudstvedt Chair Board member Board member C EO Annual report 2021 / Norsk e Skog 123 FINANCIAL ST A TEMENTS NORSKE SKOG ASA ST A TEM ENT OF C ASH FL OWS NOK MIL LION NOTE Cash generated from operations Cash used in operations - - Cash f low from currency h edge s and finan cial items - - Inter e st pa yments received Inter est payments made - - Ta x e s p a i d - - Net c ash flow fro m opera ting ac tiviti es - - Purchases equipment a nd intangible assets - - Sale s of shares in com panies Other financia l pay ments - - Net c ash flow fro m investing a ctivit ies - - New loan s raised Repa yments o f loans - - Dividend paid - New paid-in equity Change in i ntercompany bala nce with group Net c ash flow fro m finan cing a ctivit ies Foreign curre ncy eec ts on cash a nd cash e quivalents T otal change in cash and cash equiv alents Cash an d cash e quivalents Jan uary Cash an d cash e quivalents Dece mber ) ) Where of restricted c ash ST A TEM ENT OF CHANGE IN EQU ITY NOK MIL LION NOTE SHARE CAPIT AL SH ARE PR EM IU M OTHE R P A ID -I N CAPIT AL R E TA I N E D EARNINGS TOT AL EQ UIT Y Equity January Profit af ter tax - - Other compr ehensive income Dividends paid - - Equity December - Change in paid-in capital Profit af ter tax - - Other compr ehensive income - - Equity December - Annual report 2021 / Norsk e Skog 124 Photo: Rune Sollie FINANCIAL ST A TEMENTS NORSKE SKOG ASA . G ene ral info rmatio n All amount s are presente d in NOK million unl ess other wise s tated. The re may be som e small dieren ces in the summ ation of columns d ue to rounding . The fin ancial st atements were auth orised for is sue by the board of dire ctors on 29 Marc h 2022 . . Accou nting polici es The fin ancial st atements for No rske Skog ASA hav e bee n prepared a nd prese nted in acco rdance with simp lified I FRS pursuant to se ction 3-9 of the No rwe gia n Acc ount ing Ac t. Requirem ents related to re cognition an d measurem ent applie d to the company finan cial statem ents of Nor ske Sk og ASA are identic al to the ones de scribe d in Note 2 Accounting p olicies in the c onsolid ated finan cial statem ents, wi th the exception of shares i n subsidiarie s which are rec ognise d at lower of cost a nd net -realizable value in the c ompany fin ancial st atements . Shares in subsidi aries are reviewed for im pairment if ch anges in circu mstanc es indicate that the carr ying amo unt is higher than the fa ir value of the investment, an d impairme nt loss is revers ed if the impairm ent situation no lo nger exist s. Divide nds from sub sidiaries is re cognis ed in the year for whic h it is propos ed by the subsidia ry. For acc ounting estimate s and assum ptions see N ote 3 Accounting estimate s and as sumptions in the co nsolidated f inancia l statement s. OPE RA TIN G REVE NU E BY GEO GR APHI CAL MARKE T No r way Eur ope ex cluding Norway Australasia To t a l . Opera ting r ev enu e by g eogr aphica l mar k et The comp any’s operating revenue c onsist s mainly of the sal e of servi ces to other entities in th e group. Ope rating revenue arising from s ales of internal ser vices to other e ntities in the group amo unted to NOK 82 millio n in 2021 . The corre spondin g figure for 202 0 were NOK 88 milli on. NO T ES T O T H E FIN A NCI A L S T A TE M E NT S Annual report 2021 / Norsk e Skog 126 FINANCIAL ST A TEMENTS NORSKE SKOG ASA . Ass ociated compani es Loss from as sociate d companie s is includ ed in 202 1 with NOK 18 millio n. Investment in as sociate d companie s are accou nted for in acco rdance with the equit y method . The carr ying value of as sets in as sociated c ompanie s are NOK 10 2 million at 31 D ecemb er 2021 (N OK 0 million at 31 D ecem ber 2020). Circa Gro up AS is incorp orated in Osl o, Norway and i s a holding co mpany of Circa Gro up Pty Ltd. Circ a Group P ty Ltd is incorporate d in Melbo urne, Australia , and is a biotechn ical comp any with a vision to produ ce and sell unique an d highly valuable b iochemi cal at sca le. At 31 Dec ember 20 21 Nors k e Skog ASA had a 26% sh are of Circa Group AS wi th a carryin g value of NOK 10 2 million. Circ a Group was lis ted on Euronext G rowth on 2 Marc h 2021 . Due to later rep orting d ates than Nors k e Skog ASA , the share result s from Circa Gro up is include d with at three months l ag. . Pa yroll e xpenses , pension expenses and oblig at ions EMPL O YEE BENEFI T E XPEN SES Salarie s includin g holiday pay Soci al securit y contributions Pension e xpense s Other emplo yee benefit expenses To t a l NUMBER O F EMP LO YEES Empl oyee s NET P ERIODIC P ENSION EXP ENSES Pension expenses, def ined benef it plan Pension e xpense s, defined contr ibution plan Net peri odic pensi on e xpenses Net peri odic in terest ex penses PEN SI ON ASS ETS I N THE BALA NCE S HE ET Net pension assets Iin the balance sheet PENSION OBL IGA TIONS IN T HE BALANC E SHEET Projected benef it obligation - - Plan ass ets at fair value Net pension obligations in the balance sheet SE NS ITIVITY A NAL YS IS A T DE CEM BE R Increase De crease Dis cou nt rate - - Salar y adjustment - See N ote Pensio n and other empl oyee obligations in the c onsolidate d finan cial stateme nts for ass umptions and fur ther informatio n. The comp any is required by law to have a pensi on schem e for all employee s. The comp any’s pensio n plan is com pliant with the require ments in the Nor wegian Act rel ating to mandator y occupatio nal pens ion. Se e also Note 20 Pension a nd other other em ployee obligations i n the consoli dated finan cial statement s for f urther in format ion. Annual report 2021 / Norsk e Skog 127 FINANCIAL ST A TEMENTS NORSKE SKOG ASA . Financial items FINANC IAL IT EMS Financial income Dividends r eceived Inter e st income Interest in come from gro up compani es Other financia l income To t a l Financial e xpenses Int erest expe nse - - Int erest expe nse gr oup compan ies - - Other financia l expenses - - Impairm ent of investments in sub sidiaries - To t a l - - Gains/(losses) on foreign currency - Financi al items - - No divid ends have been re ceived fro m subsidiarie s in 2021 . Dividen ds in 2020 is from the sub sidiar y Norske Skog Golb ey SAS. Annual report 2021 / Norsk e Skog 128 FINANCIAL ST A TEMENTS NORSKE SKOG ASA . Income taxes TA X E X P E N S E Current tax exp ense - - Change in d eferred tax To t a l - - INCOME T AX RECONCIL IA TION Profit/(loss) be fore inc ome ta xes - - Comp uted tax at nom inal tax rate Non taxable income / non deductible ex penses - - Dividend Impairm ent of investments in sub sidiaries - Adjustment previous years Other it ems - Deferre d tax ass ets not rec ognised - - T ax eect on r emeasurements of post - emplo yment benefit ob ligat ions - Withholding tax - - T otal tax (e xpense) /income - - TEM POR ARY DI FFE REN CE S AND T A X LOSS ES - D ET AI LS Fixed assets Other non-curr ent items Pensions - - T ranslat ion di erences and financial i nstrumen ts - Curr ent it ems - - T ax l osses to c arry for ward T ax l osses a nd other deferre d tax asse ts not reco gnised ) - - Bas is for de ferred ta x DEFERRED T AX Net deferred t ax asset/ (liability) 1) The va lue of ta x los ses a nd othe r tax cr edi ts are wr itte n down , sub seq uentl y the tax l oss es ar e lower t han tota l tax b enef its no t reco gni sed . Annual report 2021 / Norsk e Skog 129 FINANCIAL ST A TEMENTS NORSKE SKOG ASA . In tangi ble asse ts and pro pert y , plan t and equi pment INT ANGIBL E A SSETS LICE NS ES AN D P A TENT S Acquisition co st January Addition Reclassified from plant u nder construction Acquisition co st December Accumulated depreciation and impairments January Depreciation Accum ulated depreciati on and imp airment s December Carryi ng v alue December Acquisition co st January Addition Reclassified from plant u nder construction Acquisition co st December Accumulated depreciation and impairments January Depreciation Accum ulated depreciati on and imp airment s December Carryi ng v alue December PROPE RTY , PLANT AND EQ UIPM ENT FIX TUR ES AN D FITTI NG S PLAN T UND ER CONST RUCT ION RIGHT - OF-USE ASS ETS TOT AL Acquisition co st January Addition Reclassified from plant u nder construction - - Acquisition co st December Accumulated depreciation and impairments January Depreciation Accum ulated depreciati on and imp airment s December Carryi ng v alue December Acquisition co st January Addition Reclassified from plant u nder construction - - Acquisition co st December Accumulated depreciation and impairments January Depreciation Accum ulated depreciati on and imp airment s December Carryi ng v alue December Fixture s and fit tings and right of us e assets a re deprecia ted on a linear b asis over a period fro m three to five years . Licens es, patent s and other intan gible ass ets are depre ciated on a s traight - line bas is over a period from thre e to five years. Othe r intangible as sets co nsist main ly of capitali sed develop ment cos ts relating to cus tomising of sof tware. Annual report 2021 / Norsk e Skog 130 FINANCIAL ST A TEMENTS NORSKE SKOG ASA . Shares in subs idiaries SHARES IN SUBSIDIAR IES CURRENCY SHARE CAPIT AL (I N MI LLIO N) O WNERSHIP CARR YING V ALUE (IN NOK MILL ION) Nors k e Skog Bruck G mbH , Bruck , Austria EUR Nors k e Skog Golb ey SAS, Golb ey , Franc e EU R Nors k e Skog Skogn AS, Levange r , No rway NOK Norske Sk og Saugbrugs AS, Halden, Nor wa y NOK Nors k e Skog Indus tries Australia Ltd., S ydney , Australi a AU D Nornews A S, Osl o, Norway NOK Cebin a AS, Os lo, Nor way NOK Cebi co AS, Os lo, Nor way NOK Nors k e Skog Paper s (Malaysia) Sdn . Bhd. , Kuala Lumpur , M alaysia MYR To t a l Investments in s ubsidiarie s are tested for imp airment in ac cordance w ith IAS 36 Imp airment of as sets. S hares in subs idiaries are writ ten down to their recoverabl e amount whe n the recoverable am ount is lower than the c arrying value of the investment . For impairm ent testing purp oses , investments in subsidi aries are group ed in the same m anner as the c ash-g enerating unit s for the group. The c arryin g amount of investme nts in subsidia ries within each c ash-g enerating unit i s measure d against the re coverable amo unt of investments in s ubsidiarie s within this cash -gene rating unit. The investment in s ubsidiarie s have increased fro m NOK 3 149 millio n to NOK 3 3 4 1 millio n during 2021 . The incre ase is due to new sh are capital of EUR 19 million in N orske Skog Bruck G mbH . See N ote 6. For fur ther information wi th respec t to impairment tes ting see Note 14 Int angible as sets and p roper ty , plant an d equipme nt in the conso lidated finan cial statement s. Annual report 2021 / Norsk e Skog 131 FINANCIAL ST A TEMENTS NORSKE SKOG ASA . Eq ui t y The share c apital of Nor ske Sk og ASA at Decem ber was NOK million and con sisted of shares ea ch with a nominal valu e of NOK . There was an in crease of paid -in-cap ital in Februar y b y issuin g new sh ares. The in crease co nsisted of in crease in sh are capital of NOK millio n and increa se of share premium of N OK million. All sh ares have been cre ated under the N orweg ian Public Limited C ompanie s Act and are validly iss ued and fully p aid. NS Nor way Holding A S acquired of the shares in the co mpany on Septembe r . Fo llowing the listing of the c ompany on Osl o Stock Exchang e Octobe r an d subse quent sale s of share NS No rway Holdin g AS’ owne rship share was re duce d to ) . The larges t shareh olders at Dec ember are as follows: LAR GEST S HAR EH OLDE RS A T DE CEM BE R NUMBER O F SHARE S OWNERSHIP NS Nor way Holding A S The Bank O f New Y ork Me llon SA/NV UBS Europ e SE The Bank O f New Y ork Me llon SA/NV J.P . Morg an Bank Luxembourg S . A. V e rdipapirfon det First Ge nerator V e rdipapir fondet Ho lberg Norg e The Bank O f New Y ork Me llon SA/NV V e rdipapirfon det Eika Spar Intertrad e Shipping AS RBC Investor Se rvic es Bank S .A . Clearstream Banking S .A . MP Pensj on PK Caruce l Finance AS V erdipapirfondet Eika Norge V erdipapirfondet DNB SMB Skandina viska Enskilda Bank en AB V erdipapirfondet Fondsfinans Norge Skandina viska Enskilda Bank en AB V erdipapirfondet Nordea Norge V erdi Other shar eholders To t a l The share holder lis t is extrac ted from VPS . Whilst ever y reasona ble eor t is made to verif y all data VPS c annot guaran tee the accuracy of the a nalysis . SHA RES OW NED BY M EM BER S OF TH E BOARD OF D IR ECTOR S A T D ECE MBE R NUMBER O F SHA RES John Chiang ) Arvid Grunde kjøn T rine -Marie Ha gen SHA RES OW NED BY M EM BER S OF CO RPO RA TE M ANAGEM ENT A T DEC EMB ER NUMBER O F SHA RES Sven Ombudstvedt Lars P . S. S perre Rune Solli e Robert W ood T ore Hansesætre Amund Saxru d 1) S ee Note 2 4 Relate d par tie s in the c onso lidate d fi nanc ial sta teme nt. 2) Joh n Chia ng own h is sha res th roug h nomi nee ac cou nt in UB S AG. Mr C hian g was nom inate d to the bo ard of d irec tors du e to his ro le as th e Sen ior Par tne r at Oc eanw ood C apit al Man agem ent LLP. Mr. Chia ng als o ser ves a s the ch airm an of the g roup’s l arge st sha reho lde r NS No rway H oldin g AS. Annual report 2021 / Norsk e Skog 132 FINANCIAL ST A TEMENTS NORSKE SKOG ASA . Maturity of interest -b earing liabilities MA TU RIT Y OF THE C OMPANY’ S DE BT A T DEC EMB ER INTERE ST BOND OT HE R LOA NS TOT AL TOT AL MA TU RIT Y OF THE C OMPANY’ S DE BT A T DEC EMB ER INTERE ST BOND OT HE R LOA NS TOT AL TOT AL The tabl e above shows contrac tual schedu led repayme nts. Fore ign currency debt is pre sented us ing exchange rate at 31 De cemb er . For more inform ation, se e Note 22 Interes t -be aring liabilitie s in the consoli dated financial sta tements. Annual report 2021 / Norsk e Skog 133 FINANCIAL ST A TEMENTS NORSKE SKOG ASA . Inter company receivabl es and liabilities Non- curr ent intercompan y receiv ab les Nors k e Skog Golb ey SAS Norske Sk og Saugbrugs AS No r ske S ko g S kog n AS Nors k e Skog Indus tries Australia Ltd Norske Sk og T asman L td. To t a l Curren t in tercompan y receiv ables Nornews A S Nors k e Skog Italia s .r .l. No r ske S ko g (U K ) Lt d. NS Nor way Holding A S ) Saugbrugs Bioenergi A S Nature’s Flame Ltd Nors k e Skog (Aus tralasia) P ty Ltd Nors k e Skog Indus tries Australia Ltd Norske Sk og T asman L td. To t a l 1) Se e Note 24 Re lated p ar ties i n the con sol idated f ina ncia l state ment s Non- curr ent intercompan y liabilities Nors k e Skog Bruck G mbH To t a l Current in tercompany liabilities Nors k e Skog (Österreich) G mbH Nors k e Skog Bruck G mbH Nors k e Skog Deu tschland G mbH Nors k e Skog France SARL Nors k e Skog Golb ey SAS Norske Sk og Saugbrugs AS No r ske S ko g S kog n AS Norske Sk og T asman L td. To t a l All non- current interco mpany debt falls du e for repayment at le ast 12 month s after th e balance s heet date. Th e majority of this d ebt has a con siderabl y longe r term to maturity . Annual report 2021 / Norsk e Skog 134 FINANCIAL ST A TEMENTS NORSKE SKOG ASA . Gu arant e es The comp any has issue d bank guaran tees in an amount of N OK million at Decemb er (NOK millio n at D ecem ber ). In addition , the comp any has issue d corporate gua rantees with an ou tstandin g amount of NOK million at Dec ember (NOK milli on at Dec ember ) on beh alf of Norske Skog Sau gbrugs AS , Norske Skog Skogn AS, N orske Skog Bruck G mbH, N orske Skog Golb ey SAS and Norske Skog Pape r Mills ( Austra lia) Ltd . . Relate d p ar tie s A desc ription of transactio ns with related pa rties is gi ven in Note Related par ties in the consolid ated financi al statements . . E v ent s after t he balan ce shee t da t e There have bee n no events after th e balance sh eet date with signif icant impac t on the finan cial statem ents for . See N ote Events af ter the balan ce shee t date in the consoli dated fina ncial statement s for o ther post balance sheet e vents. Y ve s Ba i l ly GOLB EY , FR ANCE Y ves Bailly, managing dir e ctor at Norsk e Skog Golbey , is excited when thinking of the futur e that lays ahead. After y ears of cost-cutting strategies, Norske Skog is inv esting heavily in the BOX and GVE pr ojects. “T h ese two pr oject s ar e i nex tr ica bly l in ked . Both a r e par t o f o ur “ t f or 55” poli cy, w hich is part of ou r gr e en transition strat egy. T h ese a r e t wo pha r a onic pr oje c t s. It is an i ncr e dibl e cha l leng e , wh ich we wi l l meet w ith determinat ion . ” Bailly is quick to point to the one thing he thinks is most important in the time to come: “We b e lieve th at the ke y to ou r f utur e s ucc ess l ie s in th e men an d women wh o work at Nor ske Sk og Gol bey. With out th em, th e compa n y w ou ld not be abl e to car r y o ut it s co n ver sio n. ” Annual report 2021 / Norsk e Skog 135 We declare that to the be st of our knowl edge , the financi al stateme nts for the perio d Januar y to D ecem ber hav e b een pre pared in acc ordance with applic able acc ounting stan dards, an d that the information in the fi nancial statem ents give a true and fair view of the c ompany ’ s and the group ’ s asse ts, liabilities, financial position and result as a whole. We confirm that the b oard of director s repor t provides a true an d fair view of the developm ent and pe rforman ce of the busine ss and the p osition of the comp any and the group, as well as a d escription of the key risks and uncer taint y factors whi ch the company and th e group is facing . S T A TE M E NT F R O M T HE BO A RD OF DIRE C T ORS A ND T H E CE O IN COMPL IANCE WI TH SECTION IN THE SECURIT IES TRADING A CT SKØ YEN, 29 MARCH 20 22 THE BOARD OF DIRECTORS OF NOR SKE SKOG ASA John Chiang Ar vid Grundekjøn T rin e-Marie H agen Sven Ombudstvedt Chair Board member Board member C EO P at r i c k D ooley BO YE R, AUSTRALIA T o Patrick D ooley, managing direc tor of the mill in Boyer , Aus tralia, the COVID- pandemi c and its impac t on inputs , logis tics, an d perso nnel has b een a big pa rt of his pa st few years at Nor ske Skog. “O ur f ocus is o n kee pi ng ou r empl oye es safe a nd he alth y whi le tr y ing to me et th e expec tati ons of ou r customer s. ” During la st year , h e and his team co nducte d a study exploring f uture busines s oppor tunities and the growth op por tunities within T a smania and gl obally. “T h er e a r e a n umber of ex citing o ppor tu nitie s our b usine ss develo pment t ea m is lo oki ng at . In pa r tner sh ip with th e Cir ca Gr ou p , th e t e am co n t inu es to develo p bi o-c hemi ca ls on the ba ck of the FC5 and ReSo l ut e projec t s. I n add itio n, w ith th e support of the T asma nia n gov e rnment , we a r e c urr ently asse ssi ng other e xcitin g pr oje c t s ut il ising avai l abl e r e sou r ce s an d inf ras tructur e at th e Boyer mi ll . ” Annual report 2021 / Norsk e Skog 136 ST A TEMENT FROM THE BOARD OF DIRECTORS AND CEO BDO A S Munk e dams veie n 4 5 Post bok s 17 04 V ika 0121 O slo Independent Au ditor’s Repo rt Norske Skog ASA - 2019 si de 1 av 4 Ind epend ent Aud itor ’s Repo rt To the G eneral M eeting i n Norske Sko g ASA Report o n the Audit of the Fin ancial S tateme nts Opinion We have audi ted the f i nancial state ments o f N o rske Skog ASA. The financ ial statemen t s compr ise: • The financ ial statemen t s of the pare nt company, wh ich compr ise th e balance sheet as at 31 Decemb er 20 21 , in co me statement, s tatement o f comprehensi v e income, state ment of changes in equity and c ash flows fo r the year then ended, and notes to the financial s tatements, incl uding a summar y of signi f i c ant acco unting policies, a nd • The financial state ments of the group, which co mprise t he balance sheet as at 31 Dece m ber 20 21 , and inc om e statement, s tatement o f comprehensi v e income, state ment of changes in equity and c ash flows fo r the year then ended, and notes to the financial s tatements, i ncluding a summar y of signi f i c ant acco unting policies. In our opinion: • The f i nancial state ments comply wi th appl icable statut o ry requirem ent s, • The f i nancial state ments g ive a true and fair view o f t he financial p osition of t h e comp any as a t December 31 20 2 1, and its fin ancial performance and its cash flows for the year then ended in accordan ce with simpli f ied appl ication of Interna tional A c c ounting Standards ac co rd ing t o the Norwegian Accounting Act section 3 - 9, a nd • T he f i nancial state ments g iv e a true and fair view o f t he financial p osition of the gr oup as at Dece mber 31 20 2 1, and its fi nancial perf ormance and its cash flows for the y ear then end ed in accordance with Internati o nal Fi nancial Reporting Standard s as ad opted b y the EU Our audit o pin io n is c o nsis t en t with ou r additional report to the audi t commi ttee . Basis for Opinion We cond uc ted our aud it i n accord ance with Internatio nal Standards o n Audi ting (I SAs). Ou r responsibiliti es under those standards are furth er des cr ibed in the Auditor’s Resp o nsibili ties for the Audit o f the Financial S tatements section o f our rep o rt. We are independent of the Comp any and the Gr oup as r equired b y laws and reg ulations and I nternati o nal E thics Standards Board f o r Accountan t s’ C ode of E thics for Professi onal Ac countants (IESB A C ode), and we hav e fulfill ed our other e thical r esponsibil it ie s in ac co rdan ce with th ese requireme nt s. We believ e tha t the audit evidence w e have o b tained is sufficien t and ap propriate t o p rovide a basis f o r o ur o pini o n. To the be st of our k nowledge and beli ef , no prohibi ted non - audi t s ervices r eferred t o in the A udit Regulation (537/ 2014) Article 5.1 have been provided. We have been the a uditor of t he Compan y for 6 years from the election by the ge ne ral mee ting of the shareholder s on 23 August 2 016 for th e accoun ting year 2016. Annual report 2021 / Norsk e Skog 137 INDEPENDENT AUDIT OR ’S REPOR T Annual report 2021 / Norsk e Skog 138 Independent Au ditor’s Report No rske Skog A SA - 20 21 side 2 av 4 Key Audit Matters Key aud it mat ters ar e th o se matters t ha t, in our professional judgmen t, were of most signi ficance in our audi t of the f inancial statement s of the current pe riod. T hese ma tt ers were add ressed i n the context o f o ur audit of the f ina ncial s tatem ents as a whole, and in forming our opinio n there on, and we do no t pr ov ide a separate opinion o n the se matter s. Descri pt ion o f the key aud it ma tter How the key aud it matter was addressed in the audit VA LUATI O N OF PROPERTY , PLANT AND EQU IPMEN T (PPE) The global mar ket f or the group’s pr o duc ts has been, and i s still, declining. Because o f this, there is a n inherent risk t ha t the group s PPE booked valu e exceeds the n et present v alue of future cash flows, i. e. rec overabl e amou nt of PPE, indica ting that i mpairme nt may be required . Accord ingly, v alua t ion of PPE has been iden t i fied as an importan t area in connectio n wi th the audi t of the c onsolid ated financial s tatements. Managemen t ha s identified i mpairment indicators for one C GU and has perfor med an impairmen t test acc ordingly. Based on this test, manageme nt concluded that no impairmen t was required, a nd accordingly, no impairmen t h as be en re cognized . We refer to the d escripti on in note 14 to the consolidat ed financ ial statemen t s. Our audit procedures i nc lud ed, am o ng st others, a thoro ugh and de tailed re v iew of ma nage ment’s docum en tati o n of assess ment of impairmen t i ndicators and the m o del used by managemen t t o cal cula te the r eco verable amount o f PP E, including ass essment o f assumpti ons such a s WA CC , for the CGU tested . We also challeng ed the assump tions f o r futur e cash flows provided by management. W e evaluated m anagement’s views on t he g eneral market d evelopme nt s as well as the interpreta tions and use of t hese views i n light o f t he requiremen t s to us e reas onable and supportabl e da ta as set forth in IAS 36. As pa rt of this e v alua tion, we r eviewed the degree of achievement for the 20 21 fore casts and the degree o f ac curacy reached w hen c o mparing actual r esults t o pl ans and f o recas t s fo r prio r periods. REV ENU E REC OGNIT IO N In c onnec tion with the audit of the operating subsidiaries, factors imp lying t hat there is an inherent risk that the oper ating p aper m ills may o verstate revenue s were iden t ified . Bas ed on this, r ev e nue recogni tion in t hese entities were c onsidered a risk in our aud it o f th e consolidat ed financ ial statemen t s. The audi t o f rev enues was based o n a de t ailed understandin g of the re venue reco gnition accounting p olicies and t h e process o f recording revenues according t o the de f ined polices, i nc luding relevant contr ol acti v ities over this p rocess. We perf o rmed tests regarding the operati ng effectiveness of these controls. In add i tion, we p erformed de t ailed tests of the e nt i ties’ cut - off pr o cedure s t o ver ify co rre ct cu t - off b ased on th e enti t ies’ terms o f deli very. INDEPENDENT AUDIT OR ’S REPOR T Annual report 2021 / Norsk e Skog 139 Independent Au ditor’s Report No rske Skog A SA - 20 21 side 3 av 4 Other i nforma tion The Board of Direct o rs a nd the Managi ng Direc tor (ma nagement) i s resp o nsible for the o ther information. The o ther inf o rma t ion comprises the B o a rd of Dire ctors’ rep o rt a nd o ther in f or m at io n in the A nnu al Rep ort, b ut does n ot include the financi al statements and our aud itor ’ s r ep o rt t he reo n . Our opini o n on the fi nanc ial statemen ts d oes not cover the o th er infor mat i on. In connec t ion w ith o ur audit of the f inancial s tatements, o ur responsibility is to r ead the ot her information and, in do ing so, con sider wheth er the o ther infor mat i on is materially in consis tent wi t h the consolida ted financial stateme nts, or our kno wl ed ge o b taine d in the audit or otherwise ap pears to be mat eriall y mis st a t ed. If, based on the w o rk w e have p erformed, we conclude t hat th ere is a material misstat ement of this o ther in f orma tion, we are req uired t o r eport t hat fact. We ha v e nothing t o rep ort in this regard. Op inion o n t he B oard of D irec tor’ s r epo rt Based on our know ledge obtai ne d in the aud it, in our opinion the Board of Dir ect ors’ repor t • is consistent wi t h the f inan cial s tateme nts and • c ontains the informa tion required by applicabl e l egal requirements Our opini o n o n the B oard of D irec tor’s report appl ies corr espondingl y f or the s t ateme nt s on Corporate G overnance and Corpora te So cial Resp onsibility Responsibiliti es of manage ment for t he financial state ments Managemen t is responsible f or the pr eparation o f fina ncial statemen ts that gi ve a t rue and fair v iew in accordan ce with th e Norwegian Accounting A ct and acc o un ting st andard s and pr acti c es g enerally accepted in Norway, a nd for such internal control as manage ment de termines is necessary to enabl e the prepara tion of fi nancial state ments t ha t are fre e from ma terial mis st a t em ent, w hether d ue to frau d or error. In preparing the finan c ial s tatements, m anag ement is responsible f or assessing the Compan y’s ability to con t inue as a g oing conc ern, discl osing, as a pplicabl e, matters rel ated to goi ng concern and using the g o ing con cern basi s of acco un ti ng insofa r as i t is not likely t ha t the enterprise wil l cease opera tions . Auditor’s Respo nsibiliti es for t h e Aud it of t he Fina ncial S tatements Our objec t ives ar e to o bt ain re asonab le ass urance ab out whether t he financial sta tements as a whole are free from mat erial mis statem ent, whether due to fraud or error, and to iss ue a n auditor’s report that in cludes our opini on. Reaso nable ass urance is a high l evel of assurance, b ut is not a guarantee that an audit conducted in a cco rdance with ISAs will always detect a material misstate ment wh en it exists. Misstatemen ts can ari se fro m fraud or er r or and are considered m a t erial i f, individual ly or i n the aggregate, t he y coul d reasonably be expected to influence t h e eco nomic decisi ons of users take n on the basis of these fi nancial state ments. For furth er description of Audit or’s Resp onsibil ities f or the Audi t of the F inancial State ments reference is mad e to: https://revisor fo re ningen.no/revisjon sberetninger INDEPENDENT AUDIT OR ’S REPOR T Annual report 2021 / Norsk e Skog 140 Independent Au ditor’s Report No rske Skog A SA - 20 21 side 4 av 4 BDO AS , a No rwegian l iabilit y company, is a mem ber of BDO In ternat ional Limited, a UK com pany limit ed by gu arantee , and f orms par t of the international B DO network of i ndependent member firms . The Registe r of Busines s Ent erprises : NO 993 606 650 VAT . Report o n com pliance with Reg ulation on E ur opean Single E lectron ic Form at (ESEF) Opinion We have perf ormed an assurance en gag ement t o obtai n reas onable as suranc e that the f ina ncial statements w ith file na me 529900MYY6 0WX HHY3039-2021- 12 - 31 -en.zip have been prepar ed in accordance with Secti o n 5 - 5 of the N orwegia n Secur iti es Trading Ac t (Verdipapirhand elloven) and the acc ompanying Regulation on European Single Elec tronic F ormat ( ESE F). In our o pini o n, t he financi al sta temen ts have been pre pared, in all material resp ects, in acc o rdanc e with the requirem ents of ES E F. Managemen t ’s R esp o nsibiliti es Managemen t is responsible f or prep aring, t agging and publishing the f ina ncial statements in the single ele c tr o nic r epor ting f ormat req uired in ESEF. T his resp onsibility c omp rises an adequa te process and the inter nal c ontrol pr ocedures whi ch manageme nt dete r mine s is necessary for the prepar at ion, tagging and publicati on of t he financ ial s t atemen ts. Auditor’s R esponsibiliti es For a d esc ripti o n of the audi to r’s r esponsibil it ies whe n perf o rming an assura nc e engag ement of t he ESEF repor ting, see: https://reviso r foreninge n.no/r evisjonsberetn inger Oslo, 29 March 2022 BDO AS Terje Tv edt State Au thorised P ublic Accountant INDEPENDENT AUDIT OR ’S REPOR T NOK MIL LION Operating e arnings - - Rest ruct uri ng e xpenses Depreciation Impairme nts - Derivatives and other fair v alu e adjustments E B IT DA E B IT DA ma rgin : EBITDA/total op erating incom e. EBITDA margin assis t in providing a more co mprehen sive analysis of ope rating per formanc e relative to other companies . NOK MIL LION EBITDA T otal op erating income E B IT DA m a r gi n V a riable costs : Distribu tion costs + c ost of material s. NOK MIL LION Dis tribu tion c ost s Cos t of materials V ariabl e costs F ixed costs : Emplo yee benefit expenses + other operat ing e xpenses. NOK MIL LION Empl oyee b en ef it exp en ses Other operat ing expenses Fix e d costs The European S ecurities a nd Markets Authority ’s (ESMA) ha s define d new guidelin es for alternative pe rforman ce meas ures (APM). An APM is def ined as a fin ancial me asure of historic al or future finan cial per formanc e, fin ancial positio n, or ca sh flows , other than a finan cial mea sure defin ed or spe cific in the applic able fin ancial rep orting fra mework (IFRS). The company use s EBITDA, EBITDA margin and return on cap ital empl oy ed (annualized) to meas ure operating p erforma nce on group level . It is the comp any’s view that the APMs provide s the investors relevant and sp ecif ic operating f igures that may enhance t heir understa nding o f the performance. EBI TDA, EBIT D A margin , variable cos ts, f ixed costs , return on capi tal employed an d net interest-bearing de bt are define d by the company be low. E B IT DA : O perating ea rnings for the pe riod, be fore restruc turing expense s, depre ciation and amo rtization and imp airment charg es, de rivatives and other fair value adju stments , determine d on an entity, combine d or conso lidated basis . EBITDA is used for providin g consis ting information of ope rating per formanc e and cash g enerating whic h is relative to other comp anies and frequent ly used by ot her stakeholders. AL TE R NA TIVE P E RF O RM A NCE M EA SU RES Annual report 2021 / Norsk e Skog 141 AL TERNA TIVE PERFORMANCE MEASURES Retu rn on cap ital em ployed (an nuali sed): ( Annuali sed EBITDA – Annualise d Capital exp enditure) /Capital emp loyed (a verage). Return on capital e mployed assis t in providing a more c omprehe nsive analysis of returns re lative to ot her co mpanies . NOK MIL LION EBITDA Capital expenditure Averag e ca pit al em ploye d Return on capital employ ed (annualised) - NOK MIL LION Intangible assets T angible assets Inve ntor y T rade and o ther r eceivables T rad e and other payable s - - Capital employ ed Net interest-bear ing debt: Net interes t -be aring debt co nsist of b ond issu ed and other intere st -b earing liabili ties ( current and n on-curre nt) reduc ed by cash and cash equivalent . Interest-bearing non- current liabilities Interest-bearing current liabilities - Cash and cash equiv alents - - Net interest-bear ing debt Capital ex penditure (Capex): Purchases o f property, pla nt and equipment a nd intangible assets. Maintenance capex: Capex re quired to maintain the gro up’s current busine ss in acco rdance with GA AP accordin g to the latest annual f inancia l statement s (but excluding any capex for the d evelopment of n ew busines s). Annual report 2021 / Norsk e Skog 142 AL TERNA TIVE PERFORMANCE MEASURES Photo: Carsten Dybevig NORSKE SK OG ASA Sjølyst plass 2, 0278 Oslo www.norsk eskog.com twitter: @Norske_Skog
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