Mercer International : Sustainability Report

Fit for Future

MERCER INTERNATIONAL INC. SUSTAINABILITY REPORT 2021

S E C T I O N 1		S E C T I O N 6
Messages from Leadership	01	Embrace Social Responsibility	53
From the President & CEO		Road to Zero
From the VP, Sustainability & Innovation	Employee Engagement
From the Board of Directors		COVID-19
United Nations Sustainable Development Goals	Mercer Leadership Programs
S E C T I O N 2		Diversity, Equity and Inclusion
Who We Are 11		S E C T I O N	7
Fit for Future		Sustainable Forest Management 63
Sustainable Solutions for Society		Ecosystem-Based Management
Location Is Key		Principles for Sustainable Forest Management
2030 Aspirational Goals		Protection of Biodiversity
History & Vision		S E C T I O N	8
S E C T I O N 3		Enhance Stakeholder
Continuously Improve		and Indigenous Engagement	71
Environmental Performance	21	Engagement of Local Communities
World-Class Modern Mills		Indigenous Engagement
S E C T I O N 4		Focusing on Customer Needs
Mitigate Climate Change 29		S E C T I O N	9
Climate Change		Governance and More 83
Scope 3 Greenhouse Gas Emissions 2021	Board of Directors
Transportation and Logistics Strategy	Issue Reporting
Renewable Energy Generation		Cybersecurity
Fiber Carbon Sequestration		Industry Associations
S E C T I O N 5		Mercer's Materiality Assessment 2021
Continuously Improve		S E C T I O N	1 0
Resource Efficiency 41		Indexes	89
Investing in Fiber Efficiency		GRI Disclosure Index
Full Forest Utilization and Consumption	SASB Disclosure Index
Responsible Water Usage		TCFD Disclosure Index
Energy Efficiency		Independent Accountants' Review Report
Reduction in Solid Waste		Notice Regarding Forward-Looking Statements
Biosolid Land Application

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Messages

from Leadership

This symbol denotes limited assurance of KPI by EY.

FROM THE PRESIDENT & CEO

David Gandossi

For me, it's about showing our commitment to sustainability, in all the ways that concept impacts our company, our people and our planet.

If one theme were to define Mercer and our people in 2021, it would be resilience, a word that embodies the strength and capacity of our people to learn, adapt, pivot and continue safely operating through a year with evolving challenges. We know that challenges will always be present, but adapting well in the face of adversity has enabled us to continue to move intentionally towards our goals.

To be sustainable, we look beyond the ability to meet our present needs and consider the ability of future generations to meet their own needs. It's a commitment to manage and operate our business, including the natural resources under our care or direction, with a long-term view. We believe by doing so we will be able to deliver value to our customers, employees, shareholders, communities and other stakeholders.

Together, we successfully faced a global pandemic with a commitment to health and well-being and one underlying message: stay safe. The keyword here isn't safety, though that is paramount to Mercer. It isn't even expenditures

or capital, though those are crucial considerations as we seek long-term value for our shareholders. It's commitment.

Elsewhere in this report - our first comprehensive sustainability report

• you'll see my colleagues use words like care and responsibility and balance to define what we believe are the
  key drivers in all of our operations, enhancing our decision-making, our business and our relationships with our various stakeholders and the communities in which we operate. We believe our commitments to all of the foregoing elements are interconnected and vital to our long-term future, success and sustainability.

It's a commitment that those decisions can reduce our carbon footprint, boost financial performance, maximize the value of fiber from the forest, reduce our chemical and water use, and prepare us for replacing fossil fuels with greener options on our road to net-zero carbon emissions.

We believe that by caring for the health and safety of our workers, maintaining the environmental quality of our operations and being part of and actively engaged in the communities, we provide value for all of our stakeholders. We work to build all of these values and goals into our corporate culture, which we refer to as "the Mercer Way."

As we say in these pages, it's about our commitment today to ensure we are fit for future. We've accomplished a lot in recent years and we have much justifiable pride, but we're not finished. What we do every day shows the value of Mercer's commitment.

David Gandossi

President and CEO

For information and a description of, among other things, our business, operations, including our mills, human resources, results of operations, capital expenditures, innovations, human resources, climate change and the risk factors we face, please see our annual report on Form 10-K for the fiscal year ended December 31, 2021, and filed February 17, 2022, a copy of which is available on our corporate website, www.mercerint.com, and on the United States Securities and Exchange Commission's Electronic Data Gathering, Analysis and Retrieval system: www.sec.gov/edgar/ browse/?CIK=0001333274.

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FROM THE VP, SUSTAINABILITY & INNOVATION

Bill

Adams

In creating Mercer's first sustainability report, we are guided by a great sense of responsibility. In what follows, we try to share an overview of Mercer's commitment to sustainability in the mills we operate and the forests we manage.

We believed it was time to set out for stakeholders and others, in this report, what we mean when we use the word sustainability so that readers would better understand and perhaps even take inspiration from some of what we do. And to do that, we had to make tough choices: what to illuminate in the report and what to leave out.

It comes down to a matter of balance.

We present a lot of data here as a measure that reflects our commitment to sustainability. You'll see charts, tables and graphs on a myriad of technical and environmental goals: water consumption, effluent quality, chemical use and more. The results say a lot about the meaningful impacts we're trying to make in the forest, in the watershed and on our climate.

We also express our commitment to sustainability through our aspirations: to decarbonize our mills and lower emissions intensity, to operate the safest mills in

the industry, to bring more women into leadership positions and to further invest in technology to realize the maximum value from the fiber we harvest or purchase.

We further express it through stories that describe our actions. For example, you'll learn about our partnership with Indigenous communities in Peace River, Alberta, where we are identifying and mapping sites in the forests that are sacred and meaningful to these communities. It's a short account, but it speaks volumes about what we believe and how we behave at all our sites.

After much thought from our senior leadership team, we organized the information into the most material topics here at Mercer: continuously improving environmental performance, mitigating climate change, continuously improving resource efficiency, embracing social responsibility, sustainably managing forests and enhancing stakeholder and Indigenous engagement.

We explore each area through a mix of data, trends, aspirations and stories. Underpinning it all is guidance from the standards and recommendations of the Global Reporting Initiative (GRI), the Task Force on Climate-Related Financial

Disclosures (TCFD) and the Sustainability Accounting Standards Board (SASB). Our metrics, performance and management approach relative to these frameworks are all included in this report.

We know our Mercer team is proud to see the breadth of our sustainability efforts presented in this report for the first time. We are excited to share a key milestone on our net-zero pathway as Mercer is the first forest products company in Canada to have our climate targets validated by the Science Based Targets initiative. We hope our customers and stakeholders recognize us as an organization that aligns with their aspirations and hopes for our forests, rivers, climate and an inclusive society.

Above all, we hope it's an engaging and balanced look at an organization striving to do the right thing every day.

Bill Adams

Vice-President of Sustainability and Innovation

As it does every day in the forests we manage and the mills we operate, it comes down to a matter

of balance. In what follows, we try to share a brief but accurate look at what we believe to be true about Mercer's commitment to sustainability.

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FROM THE BOARD OF DIRECTORS

Jim Shepherd

For more than 30 years, I've been fortunate to have a front-row seat as the forest products industry has evolved. Much has changed in that time, but one thing has remained constant: it's a tough industry. It was tough when I started as a young mechanical engineering grad, and it's tough today. Those who come to work each day are challenged by Mother Nature, noisy mills and the high expectations of everyone, including their local communities and those who strive for a sustainable world.

At Mercer, I witness everyone rallying to meet those challenges because we care.

Tough and care might seem mutually exclusive, but they certainly are not at Mercer. Care is at the heart of everything we do, and I hope that notion rings through these pages.

It starts with caring for the forests and how we harvest them, get logs and chips to our mills and extract the most productive fiber possible while reducing our impact on climate change. It's a

privilege to work in these forests, in Canada and Germany, and so we should care for them as the meaningful resources that underpin all of our business.

Most organizations demonstrate care, particularly for their employees. But I've seen few organizations bring such caring into their business as forcefully and comprehensively as Mercer does. In particular, our executive, led by David Gandossi, has made the safety of our teams a primary focus of their leadership.

Tough and care might seem mutually exclusive, but they certainly are not at Mercer. Care is at the heart of everything Mercer does, and I hope that notion rings throughout these pages.

A root of sustainability is insisting that

1. safety-firstmindset is non-negotiable. This is how we can sustain excellence and trust among employees. In addition, it fosters a culture of caring from the boardroom to the shop floor.

Of course, we also care about our investors and the value we bring to them. We are fortunate at Mercer to have a stable shareholder base of thoughtful people who are mindful of

the balance between profitability and the need for long-term sustainability. They understand how our business is affected by the relationships between the forest, our customers, partners, Indigenous peoples and our global workforce.

Sustainability reports like this are an important vehicle to show stakeholders what we mean when we say that we care. This is through a record of our actions in the forest, in the relationships we build with customers and partners, and in

the stronger workplace we are creating through our commitment to diversity, equity and inclusion.

The essential thing about caring is that it's impossible to stop once you start. It endures, and I can see how caring drives this team I admire at Mercer to improve continuously. I hope you see it, too, in the numerous stories revealed throughout this report.

Jim Shepherd

Director

Jim Shepherd chairs Mercer's Environmental, Health and Safety Committee, and has served as President of Canfor Corporation, Slocan Forest Products Ltd., Crestbrook Forest Industries Ltd. and Finlay Forest Industries Ltd. He is a past chair of the Forest Products Association of Canada.

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