1.4.2015

To our stakeholders:

I am pleased to confirm that Valmet Corporation reaffirms its support of the Ten Principles of the United Nations Global Compact in the areas of Human Rights, Labour, Environment and Anti-Corruption.

In this annual Communication on Progress, we describe our actions to continually improve the integration of the Global Compact and its principles into our business strategy, culture and daily operations. We also commit to share this information with our stakeholders using our primary channels of communication.

Sincerely yours,

Pasi Laine

President and CEO

Valmet Corporation

Valmet operates according to and promote the principles described
in the OECD Guidelines for Multinational Enterprises,
the International Labor Organization’s (ILO) Declaration of
Fundamental Principles and Rights at Work.

Valmet’s Code of Conduct creates a uniform foundation for
all business transactions and work assignments covering sustainable
business operations, people and society, and environment.
The Code of Conduct is based on globally acknowledged
guidelines and principles and is translated into 11 languages.

In order to reinforce the Code across the company, we will execute
a comprehensive process in 2015 including the enforcement of
redefined processes related to the Code, management training
and a global e-learning program for all employees.

Alongside the Code of Conduct, Valmet also has policies and
guidelines supporting sustainable business practices. These include
its Anti-Corruption Policy and Competition Compliance
Guidelines. The Anti-Corruption Policy defines in detail Valmet’s
zero tolerance approach to bribery and corruption and sets
out guidance for daily operations. The Competition Compliance
Guidelines provide practical instructions for compliance with
competition and anti-trust laws.

Training for these topics is organized on a regular basis. The
most recent training for the Competition Compliance Guidelines
was launched in the second half of 2014, and the next Anti-Corruption
e-learning will be launched in the first quarter of 2015. The
training will be given first to top management and other senior
management and employees from sales and procurement. The previous
Anti-Corruption training was completed during 2014.

Valmet has in place a specific Health, Safety and Environment
(HSE) Policy, which defines our common principles and shows
our commitment to responsible management of health safety
and environmental issues globally within Valmet. It guides our
approach to HSE in own operations, stakeholder collaboration
and Valmet’ solutions. The policy is promoted actively in all Valmet’s
activities as an element in our local management systems.

In 2014, we launched a Sustainable Supply Chain Policy, which
applies to all suppliers globally. The policy was approved by
Valmet’s Executive Team in June. The policy will be incorporated
into new contracts and purchase orders, and communicated to
all active suppliers.

The policy addresses Valmet´s requirements for its suppliers
regarding business ethics, compliance, human rights and labor
rights, occupational health and safety, environmental management
and sustainability in products and services. We expect all
our suppliers to comply with the principles defined in the policy;
it is the starting point for all business relationships with Valmet.
If the requirements of Valmet´s Sustainable Supply Chain Policy
are not followed, Valmet reserves the right to terminate the
contract with the supplier. The policy acts as a basis for supplier
evaluations, self-assessments and sustainability audits.

During 2015–2016, Valmet will conduct a human rights
impact assessment of the supply chain and its own operations.

During 2015–2016, Valmet will conduct a human rights
impact assessment of the supply chain and its own operations.

In order to enable continuous stakeholder dialogue, we launched
a comprehensive web-based brainstorming tool for collecting and
analyzing stakeholder opinions in 2014. The process allows
our stakeholders to express their views on Valmet’s sustainability
performance and propose ideas for further development.

The web-based tool is open for all stakeholders and utilized in
annual and one-off meetings with our stakeholders to gather
feedback from all stakeholder groups.

The brainstorming results are reviewed on a regular basis. All
information received is gathered together and analyzed for the
annual strategy review process to assess and evaluate potential
new topics of concern.

Valmet’s Code of Conduct creates a uniform foundation for
all business transactions and work assignments covering sustainable
business operations, people and society, and environment.
The Code of Conduct is based on globally acknowledged
guidelines and principles and is translated into 11 languages.

In order to reinforce the Code across the company, we will execute
a comprehensive process in 2015 including the enforcement of
redefined processes related to the Code, management training
and a global e-learning program for all employees.

Valmet´s web-based brainstorming (stakeholder dialogue) results are reviewed on a regular basis. All
information received is gathered together and analyzed for the
annual strategy review process to assess and evaluate potential
new topics of concern.

Valmet measures progress through:
-Third party sustainability
ratings
- Depth of stakeholder
dialogue
- Local evaluation of
community programs

During 2015–2016, Valmet will conduct a human rights
impact assessment of the supply chain and its own operations.

We promote transparency in our communications with our
stakeholders and strive to ensure that all our operations are carried
out in a socially responsible and globally aligned manner.
Our daily operations are guided by Valmet’s general operating
principles, which comprise of Valmet’s Code of Conduct and
related policies. These create the foundation for sustainable
business practices. They define how we deal with human rights,
labor practices, environmental issues, compliance with laws and
regulations, fair competition, occupational well-being and safety,
and ethical standards through the entire value chain.

Valmet’s Code of Conduct creates a uniform foundation for
all business transactions and work assignments covering sustainable
business operations, people and society, and environment.
The Code of Conduct is based on globally acknowledged
guidelines and principles and is translated into 11 languages. In
order to reinforce the Code across the company, we will execute
a comprehensive process in 2015 including the enforcement of
redefined processes related to the Code, management training
and a global e-learning program for all employees.

Alongside the Code of Conduct, Valmet also has policies and
guidelines supporting sustainable business practices. These include
its Anti-Corruption Policy and Competition Compliance
Guidelines. The Anti-Corruption Policy defines in detail Valmet’s
zero tolerance approach to bribery and corruption and sets
out guidance for daily operations. The Competition Compliance
Guidelines provide practical instructions for compliance with
competition and anti-trust laws.

Training for these topics is organized on a regular basis. The
most recent training for the Competition Compliance Guidelines
was launched in the second half of 2014, and the next Anti-Corruption
e-learning will be launched in the first quarter of 2015. The
training will be given first to top management and other senior
management and employees from sales and procurement. The previous
Anti-Corruption training was completed during 2014.

Valmet has in place a specific Health, Safety and Environment
(HSE) Policy, which defines our common principles and shows
our commitment to responsible management of health safety
and environmental issues globally within Valmet. It guides our
approach to HSE in own operations, stakeholder collaboration
and Valmet’ solutions. The policy is promoted actively in all Valmet’s
activities as an element in our local management systems
as a part of contracts with suppliers, and it is communicated
continuously as part of HSE trainings.

At Valmet, the requirements for complying with ethical
standards go beyond own operations, covering the supply chain
and with the aim of integrating sustainable business practices
throughout the entire value chain. In 2014, we defined our requirements
for suppliers in a Sustainable Supply Chain Policy,
for which global roll-out was initiated in the second half of 2014.
All the most relevant policies and guidelines are reviewed
and approved by the Board of Directors and or the Executive
Team on a regular basis.

Valmet has established a strategic plan for safety improvement,
focusing on safety culture development and global standards
and procedures. We also have a dedicated environmental efficiency
program. Our goal is zero harm, and we work proactively
towards the long-term targets for reducing our environmental
impacts and preventing workplace injuries.

To continuously improve our safety performance, we focus on
building a strong safety culture. While Valmet is committed to
providing the tools and processes needed to ensure the health
and safety of its employees, all Valmet people are aware of their
personal ownership for safety and the value of caring for safety
in our teams.

To ensure continuous dedication to safety throughout the
organization, we completed the process of establishing HSE as
a standard agenda item in all management meetings and continued
to implement the routine practice of management safety
walks during 2014. With the aim of securing competent and
aware personnel in all operations and activities our units also
focused on defining HSE training requirements during the year
as the basis for annual planning going forward.

In 2014, we continued to develop our global HSE management
structure by harmonizing critical global HSE procedures, such
as severe incident investigation routines, our global HSE auditing
process and accountability guidelines.

Valmet’s local organizations are required to report and analyze all
HSE incidents (injuries, near misses) and observations (hazardous
conditions, unsafe behavior) in Valmet’s global incident management
system to ensure systematic learning from previous cases.

In 2014, Valmet focused on methodical investigation of severe or
high-potential incidents by a core team of investigators to ensure
preventive actions are defined and taken globally. In 2014, there were
no fatalities in Valmet’s operations (own and supervised employees
as well as independent contractors), and the lost time incident frequency
rate (LTIF) of our own personnel decreased 15% to 5.5.

According to Valmet’s HSE policy, compliance with applicable
laws and regulations is only a minimum requirement. In addition
to this, Valmet has defined minimum requirements for safety at
work for high-risk activities to ensure a common safety platform
across all its operations.

In 2014, we extended the minimum safety
standards to cover five additional critical activities: safeguarding
of machines, hazardous manual handling, hot work, driving
safety and emergency action planning. Since the introduction of
the standards in 2012, serious incidents leading to absences of one
or more days have decreased by 34%.

In 2014, we also finalized our common HSE toolbox for
mill maintenance operations. This extensive handbook adds
a selection of global best practices in HSE maintenance to the
common Valmet standards and procedures and is to be used
as a toolkit when establishing new maintenance operations
in customer mills and a benchmark for the development of
existing operations.

Certified management systems according to the OHSAS
18001 and ISO 14001 standards are the basis for the systematic
management of HSE aspects, risks and sustainable
improvements in Valmet’s activities. We work consistently to
implement these standards and to increase the scope of operational
coverage. Our local safety committees cover 92% of our
employees.

We expect our suppliers, contractors and other partners to implement
the same safety standards and guidelines as those implemented
by Valmet. In 2014, we continued to develop our processes
and tools to align safety practices in customer deliveries.

In South America, for example, Valmet already systematically
monitors important key performance indicators (KPIs) for safety
for independent contractors in all engineering, procurement
and construction (EPC) deliveries, and this is a practice we are
now developing in the other regions too. In 2014, the LTIF for
independent contractors in South America decreased to 0.8.

Please see Valmet´s Annual report and our GRI index for more information.

In 2014, Valmet was included in the Dow Jones Sustainability
World (DJSI World) and Europe (DJSI Europe) indices and
ranked among the leaders in CDP’s Nordic Climate Disclosure
Leadership Index (CDLI) with a score of 98/100. In these indices Valmet responds widely to the questions of environmental protections role, policies and goals. Valmet´s CDP disclosure is publicly available.

Valmet’s operations with the greatest environmental impact are
our foundries and technology centers, as well as our assembly,
manufacturing and service workshops. Our environmental efficiency
program promotes practical actions at all locations to
ensure continuous improvement regarding our most significant
impacts, which relate to the use of energy and water as well as
waste management. Environmental permits are maintained for
all operations. A key improvement contributing to lower CO2
emissions in 2014 was the replacement of coal boilers with a natural
gas heating system in our Xian workshop in China. Coal is
no longer used as a fuel in any Valmet location. The total volume
of non-hazardous landfill waste increased in 2014 due to the
reporting of full year data from a foundry in Sweden acquired
during mid-2013.

Valmet constantly develops its environmental reporting to ensure
it can accurately monitor its performance. We also annually
calculate the entire value chain’s greenhause gas (GHG) emissions.

Please see Valmet´s Annual report and our GRI index for more information.

In 2014, Valmet was included in the Dow Jones Sustainability
World (DJSI World) and Europe (DJSI Europe) indices and
ranked among the leaders in CDP’s Nordic Climate Disclosure
Leadership Index (CDLI) with a score of 98/100. In these indices Valmet responds widely to the questions of environmental protections role, policies and goals. Valmet´s CDP disclosure is publicly available.
Please see Valmet´s Annual report and our GRI index for more information.

Based on Life Cycle Analysis (LCA) of two product families we
have estimated that around 95% of the environmental impacts of
Valmet’s entire value chain are emitted when Valmet’s solutions
are being used for production at the customer sites. Since Valmet’s
solutions are targeted at industrial processes such as pulp,
paper and energy production, environmental improvements
can to a great extent be achieved by optimizing the efficiency of
processes, by utilizing air pollution control technologies, and by
replacing fossil fuels and materials with renewable alternatives.
Valmet has a wide range of solutions that require less energy,
water and raw materials compared to conventional technologies,
and which enable flexibility in fuel source and raw material selection.
Our comprehensive services offering helps to maximize the
environmental efficiency of the technologies and ensures operational
safety and reliability over the entire lifetime of the plant.

We expect our suppliers, contractors and other partners to implement
the same safety standards and guidelines as those implemented
by Valmet. In 2014, we continued to develop our processes
and tools to align safety practices in customer deliveries.
In South America, for example, Valmet already systematically
monitors important key performance indicators (KPIs) for safety
for independent contractors in all engineering, procurement
and construction (EPC) deliveries, and this is a practice we are
now developing in the other regions too. In 2014, the LTIF for
independent contractors in South America decreased to 0.8.

Safety is an integral part of Valmet’s technologies, processes
and services. Safety requirements of all Valmet’s solutions are
carefully reviewed and assessed in the solution innovation
process and must be fulfilled in each solution creation phase.
Valmet solutions are required to be safe to use, and they are
designed to meet or exceed all applicable safety standards and
regulations. To ensure safe operations, customer training is
included in all project deliveries. Moreover, the majority of
Valmet’s operations are certified to quality, health and safety
and environmental management standards, and processes that
ensure product safety are followed.

Research and development
We actively engage and cooperate with our customers, research
institutions and universities to collect information on customers’
sustainability needs and to develop new solutions for the
market. Valmet has 13 technology centers and pilot facilities
which are used for demonstration trials and for specific projects
with customers as well as for proprietary development work.
Our research and development work is currently focused
on improving the performance and cost efficiency of existing
product portfolio by modularization and standardization. We
also develop new biomass conversion technologies, which are
expected to offer new business opportunities to both Valmet
and its customers. The aim is to convert biomass to a form that
enables it to replace fossil fuels or be refined further to more
valuable products.

During the last few years, Valmet has introduced several
new technologies to the market, including LignoBoost for
lignin separation, a pyrolysis solution for bio-oil production,
and a gasifier for solid biomass and waste. We have also been
able to apply existing technology to second-generation ethanol
production.

In 2014, we continued to develop our global HSE management
structure by harmonizing critical global HSE procedures, such
as severe incident investigation routines, our global HSE auditing
process and accountability guidelines.

Valmet’s local organizations are required to report and analyze all
HSE incidents (injuries, near misses) and observations (hazardous
conditions, unsafe behavior) in Valmet’s global incident management
system to ensure systematic learning from previous cases.

In 2014, Valmet focused on methodical investigation of severe or
high-potential incidents by a core team of investigators to ensure
preventive actions are defined and taken globally. In 2014, there were
no fatalities in Valmet’s operations (own and supervised employees
as well as independent contractors), and the lost time incident frequency
rate (LTIF) of our own personnel decreased 15% to 5.5.

According to Valmet’s HSE policy, compliance with applicable
laws and regulations is only a minimum requirement. In addition
to this, Valmet has defined minimum requirements for safety at
work for high-risk activities to ensure a common safety platform
across all its operations. In 2014, we extended the minimum safety
standards to cover five additional critical activities: safeguarding
of machines, hazardous manual handling, hot work, driving
safety and emergency action planning. Since the introduction of
the standards in 2012, serious incidents leading to absences of one
or more days have decreased by 34%.

In 2014, we also finalized our common HSE toolbox for
mill maintenance operations. This extensive handbook adds
a selection of global best practices in HSE maintenance to the
common Valmet standards and procedures and is to be used
as a toolkit when establishing new maintenance operations
in customer mills and a benchmark for the development of
existing operations.

Certified management systems according to the OHSAS
18001 and ISO 14001 standards are the basis for the systematic
management of HSE aspects, risks and sustainable
improvements in Valmet’s activities. We work consistently to
implement these standards and to increase the scope of operational
coverage. Our local safety committees cover 92% of our
employees.

Please see Valmet´s Annual report and our GRI index for more information.

guidelines supporting sustainable business practices. These include
its Anti-Corruption Policy and Competition Compliance
Guidelines. The Anti-Corruption Policy defines in detail Valmet’s
zero tolerance approach to bribery and corruption and sets
out guidance for daily operations. The Competition Compliance
Guidelines provide practical instructions for compliance with
competition and anti-trust laws.

Training for these topics is organized on a regular basis. The
most recent training for the Competition Compliance Guidelines
was launched in the second half of 2014, and the next Anti-Corruption
e-learning will be launched in the first quarter of 2015. The
training will be given first to top management and other senior
management and employees from sales and procurement. The previous
Anti-Corruption training was completed during 2014.

Training for these topics is organized on a regular basis. The
most recent training for the Competition Compliance Guidelines
was launched in the second half of 2014, and the next Anti-Corruption
e-learning will be launched in the first quarter of 2015. The
training will be given first to top management and other senior
management and employees from sales and procurement.
The previous Anti-Corruption training was completed during 2014.

Valmet has consistently had a zero-tolerance approach towards bribery and other forms corruption. This approach has been set out in our Code of Conduct and is well established in our way to operate.

The new policy introduces more comprehensive processes and principles in order to secure Valmet’s anti-corruption compliance in the present increasingly complex commercial and regulatory environment.

The policy, approved by Valmet’s President and CEO Pasi Laine, introduces, among other things:

• the main principles for giving and receiving gifts, entertainment and hospitality,
• pre-evaluation process for agents, commercial consultants, distributors and other similar third parties Valmet is using in its business,
• disclosure obligations of potential conflict of interest cases, e.g. transactions with family members, relatives or related parties to Valmet’s employees or with their companies,
• reporting obligations as to suspected bribery or money laundering cases.

The legal services of each segment will give further guidance on the implementation of the new policy and the related procedures. In addition, an anti-corruption training program will be launched shortly.