Contents
About this report
Group overview
Our 2021 reporting theme
Who we are
Where we operate
Our strategy and performance
How we create value
Our business model
Letter to stakeholders – Chairman and CEO
Q&A with the CEO
Creating value by responding
strategically
Risk management
Our key relationships
Our performance review
Our operating context
Sappi and the SDGs
Integrating our key material issues
Our key material issues
Product review
Chief Financial Officer’s Report
Governance and compensation
Our leadership and executive management
Corporate governance
Remuneration Report
Social, Ethics, Transformation and
Sustainability (SETS) Committee Report
Appendices
Five-year review
Share statistics
Glossary
Notice to shareholders
Shareholders’ diary
Proxy form for the Annual
General Meeting
Notes to the proxy
Administration
Forward-looking statements
1
4
5
6
10
16
18
22
28
34
42
64
66
68
70
100
112
134
138
154
174
178
180
182
187
196
197
199
201
202
How to navigate
our report
Throughout our annual integrated
report, the following icons are
used to show the connectivity
between sections:
Referencing
Page
Online
Risk
Sappi’s 3Ps
Prosperity
People
Planet
Thrive25
strategy
Grow our business
Drive operational
excellence
Sustain our financial
health
Enhance
trust
Our capitals
Human capital
Intellectual capital
Finance capital
Natural capital
Social and
relationship capital
Manufactured
capital
Sappi and the United Nations (UN)
Sustainable Development Goals (SDGs)
*
*
* Sappi Southern Africa (SSA) priority SDGs.
This report is printed on Sappi Magno Plus
Silk 135 and 350 g/m2.
ABOUT THIS REPORT
About this report
Our annual integrated report for the year ended September 2021
provides an overview of how we create value in terms of our purpose,
vision and strategy. The report deals with key opportunities and risks in
our markets as well as our performance against fi nancial and non-
fi nancial objectives, together with our priorities and expectations for the
year ahead. While the report addresses issues pertinent to a broad
group of stakeholders, the primary audience is our shareholders.
Our global and regional sustainability reports address the
wider audience in more detail on key material issues.
In addition to our annual integrated
report (pages 1 to 177), we have
included supporting appendices
(pages 178 to 202).
Integrated thinking and the 3Ps
We understand that the long-term sustainability of our business will only be ensured by delivering
sustained value for our stakeholders. In understanding our value-creation process, we take an integrated
approach, considering Prosperity, People and Planet (the 3Ps) – an approach that is aligned with the
International Integrated Reporting Council’s (IIRC) six capitals model.
Prosperity
People
Planet
Natural capital
Recognising that our business
depends on natural capital,
we focus on understanding,
managing and mitigating our
impacts.
Intellectual capital
Our technology centres and
research and development (R&D)
initiatives promote a culture
of innovation to support the
development of commercially and
environmentally sustainable
solutions for the company.
Financial capital
We manage our fi nancial capital,
including shareholders’ equity, debt
and reinvested capital to maintain
a solid balance between growth,
profi tability and liquidity.
Manufactured capital
Our operations require signifi cant
investments in manufactured
capital. Investing in building,
maintaining, operating and
improving this infrastructure
requires fi nancial, human and
intellectual capitals.
Human capital
We require engaged and
productive employees to create
value. By creating a safe and
healthy workplace for our people
in which diversity is encouraged
and valued, and providing them
with ongoing development
opportunities, we enhance
productivity and our ability to
service global markets.
Social and relationship capital
Building relationships with our key
stakeholders in a spirit of trust and
mutual respect enhances both
our licence to trade and our
competitive advantage, thereby
enabling shared value creation.
1
ABOUT THIS REPORT
About this report continued
Ensuring holistic value creation
Value for Sappi is not only about delivering returns to our shareholders, it is also
about maximising the value of every resource along our value chain to ensure
those returns are sustainable. We recognise that our sphere of infl uence and
impact extends beyond our mill gates.
Through this lifecycle approach that harnesses the power of the circular
economy, we strive to minimise our negative impacts and increase our positive
impacts on people and the planet, while securing sustainable profi t margins.
We then measure value created, preserved and eroded in terms of our
defi ned, holistic targets, as outlined and set out in the
Business model on pages
18 to 21.
Scope and boundary
The scope of this report includes all our operations
(see Where we operate on page
that is material, comparable, relevant and complete. The issues
and indicators we cover refl ect our signifi cant economic,
environmental and social impacts, and those we believe would
substantively infl uence the assessments and decisions of investors.
6). We aim to present information
Forward-looking
statements
For important information
relating to forward-looking
statements, refer to page
200.
The materiality of the information presented has been determined on the basis
The materiality of the information presented has been determined on the basis
The materiality of the information presented has been determined on the basis
The materiality of the information presented has been determined on the basis
of extensive ongoing engagement with our stakeholders and has been assessed
of extensive ongoing engagement with our stakeholders and has been assessed
of extensive ongoing engagement with our stakeholders and has been assessed
against the backdrop of current business operations, as well as prevailing trends
against the backdrop of current business operations, as well as prevailing trends
against the backdrop of current business operations, as well as prevailing trends
against the backdrop of current business operations, as well as prevailing trends
against the backdrop of current business operations, as well as prevailing trends
against the backdrop of current business operations, as well as prevailing trends
against the backdrop of current business operations, as well as prevailing trends
in our industry and the global economy (see How we determine materiality on
in our industry and the global economy (see How we determine materiality on
in our industry and the global economy (see How we determine materiality on
in our industry and the global economy (see How we determine materiality on
in our industry and the global economy (see How we determine materiality on
in our industry and the global economy (see How we determine materiality on
in our industry and the global economy (see How we determine materiality on
page
70).
In preparing this report, we have tracked environmental fi ndings and research,
In preparing this report, we have tracked environmental fi ndings and research,
In preparing this report, we have tracked environmental fi ndings and research,
In preparing this report, we have tracked environmental fi ndings and research,
In preparing this report, we have tracked environmental fi ndings and research,
public opinion, employee views and attitudes, the interests and priorities of
public opinion, employee views and attitudes, the interests and priorities of
public opinion, employee views and attitudes, the interests and priorities of
public opinion, employee views and attitudes, the interests and priorities of
public opinion, employee views and attitudes, the interests and priorities of
environmental and social groups, as well as the activities, profi les
environmental and social groups, as well as the activities, profi les
environmental and social groups, as well as the activities, profi les
environmental and social groups, as well as the activities, profi les
and interests of investors, employees, suppliers and customers,
and interests of investors, employees, suppliers and customers,
and interests of investors, employees, suppliers and customers,
and interests of investors, employees, suppliers and customers,
communities, governments and regulatory authorities.
communities, governments and regulatory authorities.
G lobal forces
g
O p eratin
co nte xt
U N S D G s
Risksand
opportunities
i a l
t e r
i t y determination
M a
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ur
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r eportingbou
bou
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d
a
a
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y
y
Sappi
Europe
Sappi
Southern
Africa
t e d
t e
Inte g r a
Inte g r a
Sappi
North
America
F
F
i
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n
a
n d aryry
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cialreport i n g b
u
o
At Sappi, we take a
holistic view of
value creation.
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ABOUT THIS REPORT
We are also assessed in terms of the forest certifi cation
systems we use and, in South Africa, our broad-based black
economic empowerment (BBBEE) performance is assessed
by an external ratings agency. In 2021 Sappi Limited was a
constituent of the FTSE/JSE Responsible Investment Index.
Collectively, these external assessments and certifi cations,
as well as interaction with our stakeholders, give us
confi dence that our performance indicators are reliable,
accurate and pertinent. The Social, Ethics, Transformation
and Sustainability (SETS) Committee is satisfi ed that the
sustainability information presented in this report has been
provided with a reasonable degree of accuracy.
For information on the combined assurance framework
relevant to the disclosure in this report, and for the
independent auditors’ report, see Group Annual Financial
Statements on www.sappi.com/annual-reports.
This year’s report does not include summarised fi nancials.
However, the full 2021 Sappi Annual Integrated Report with
fi nancials is available on www.sappi.com/annual-reports
in interactive and PDF format.
Board approval
The Sappi Limited board acknowledges its responsibility
for ensuring the integrity of the annual integrated report
and, to the best of its knowledge and belief, the 2021
Sappi Annual Integrated Report addresses all issues
material to the group’s ability to create value in the short,
medium and long term, and fairly presents the integrated
performance of the organisation and its impact.
We believe that this report has been prepared in
accordance with the International Framework
(2021). The report has been prepared in line with best
practice and the board has approved the 2021 Sappi
Annual Integrated Report on 08 December 2021.
Sir Nigel Rudd
Chairman
Steve Binnie
Chief Executive Offi cer (CEO)
Our reporting suite
Report
2021 Sappi Annual Integrated Report
www.sappi.com/annual-reports
Frameworks
•
IIRC's International Framework
• Companies Act, No 71 of 2008, as
amended (Companies Act)
• Johannesburg Stock Exchange (JSE)
Listings Requirements
• King IV Code on Corporate Governance
(King IVTM 1
)
GROUP ANNUAL
FINANCIAL
STATEMENTS
2021 Sappi Group Annual Financial
Statements
www.sappi.com/annual-reports
Frameworks
•
International Financial Reporting
Standards (IFRS)
• Companies Act
• JSE Listings Requirements
• King IV
2021 Sappi Group Sustainability
Report
www.sappi.com/sustainability
Frameworks
• Global Reporting Initiative (GRI)
standards
• United Nations Global Compact (UNGC)
• UN SDGs
For up-to-date information, please refer to our quarterly results
announcements and analyst presentations
(www.sappi.com/quarterly-reports).
1 Copyright and trademarks are owned by the Institute of Directors
in South Africa NPC and all of its rights are reserved.
Assurance
We obtained external assurance on selected sustainability
key performance indicators in our 2021 Sappi Group
Sustainability Report. The independent practitioner’s limited
assurance report is included in the 2021 Sappi Group
Sustainability Report. Our sustainability information is also
verifi ed by our internal audit team. Their verifi cation process
includes reviewing the procedures applied for collecting and/
or measuring, calculating and validating non-fi nancial data, as
well as reviewing reported information and supporting
documentation. In addition, most of our key operations
undergo external verifi cation including the Eco-Management
Audit System in Europe, ISO 50001 energy certifi cation
in Europe and South Africa and globally, ISO 45001
environmental certifi cation and ISO 9001 quality certifi cation,
as well as OHS 18001 and ISO 45001 health and safety
certifi cation.
3
Our 2021 reporting theme
The images used throughout this report, from the exquisite
hummingbird to the thundering waterfall, from the dainty
dandelion to the agile cheetah and iridescent dragonfly, are all
very different, but they share certain characteristics, no matter
their size:
Strength. Power. Vitality. Energy.
Over the last five years we have transformed to become
a more unified and focused group with investments in
growth markets and product categories. Each year we
build on our success, adapting to market conditions but
always preparing for the next positive wave. We
continue to leverage our market-leading positions
across numerous categories to deliver real value so that
we can further invest in our growth.
All qualities which embody our strategic intent and are
reflected in our theme of ‘Advance’.
Inherent in our Thrive25 strategy is the commitment to
advance, whether through improved profits, a more
engaged workforce, embedding safety as a core value,
securing the trust of our stakeholders, increased
financial stability or integrating the UN SDGs and
science-based targets as strategic objectives.
Equally, the Coronavirus pandemic and Covid-19
required us to advance. To adopt new methods of work;
to ensure that we continue to operate while respecting
all Covid-19-related guidelines; to respond to the needs
of our customers.
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Page headingGROUP OVERVIEW
GROUP OVERVIEW
Who we are
Page heading continued
Sappi is a leading global
provider of everyday materials
made from woodfi bre-based
renewable resources. As a
diversifi ed, innovative and
trusted leader focused on
sustainable processes and
products, we are building a
more circular economy by
making what we should, not
just what we can.
Paper capacity
per year
5.5 million tons
Paper pulp capacity
per year
2.5 million tons
Our raw material off erings (such as dissolving pulp,
wood pulp, biomaterials and timber) and end-use
products (packaging and speciality papers,
graphic papers, casting and release papers and
forestry products) are manufactured from
woodfi bre sourced from sustainably managed
forests and plantations, in production facilities
powered, in many cases, with bio-energy from
steam and existing waste streams.
Together with our partners, Sappi works
to build a thriving world by acting boldly
to support the planet, people and
prosperity.
Dissolving pulp (DP)
capacity per year
1.4 million tons
Globally we have
12,492
employees(1)
394,000 ha
Owned and leased
sustainably managed
forests in South Africa
(1) Includes Corporate and Sappi Trading employees.
5
GROUP OVERVIEW
Where we operate
Page heading
Sappi Trading
Sappi Trading operates a
network for the sale
and distribution of our
products outside our core
operating regions of
North America, Europe
and South Africa. Sappi
Trading also coordinates
our shipping and logistical
functions for exports from
these regions
• Sales offi ces
Hong Kong
Bogotá
Johannesburg
México City
Nairobi
São Paulo
Shanghai
Sydney
• Logistics offi ces
Durban
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North America
Production facilities
4
Sales offi ces
6
Employees
2,037
Europe
Production facilities
10
Sales offi ces
15
Employees
Employees
5,531
5,531
South Africa
Production facilities
5
Sales offi ces
6
Employees
4,752
GROUP OVERVIEW
Sappi North America
Mills
Products produced
Cloquet Mill
Dissolving pulp, kraft pulp for own consumption and kraft pulp*
Coated woodfree paper
Matane Mill
Somerset Mill
Westbrook Mill
High yield hardwood pulp for own consumption and kraft pulp
Bleached chemical pulp for own consumption and kraft pulp
Coated woodfree and packaging paper
Speciality paper; casting and release paper
Total Sappi North America
Sappi Europe
Mills
Products produced
Capacity(1) (’000 tons)
Paper
Pulp
370
270
525
340
970
23
1,333
1,165
Capacity(1) (’000 tons)
Paper
Pulp
Bleached chemical pulp for own consumption
Speciality paper; flexible packaging paper, paperboard, containerboard, release liner, label paper, functional papers
Speciality paper; dye sublimation paper, flexible packaging paper, inkjet paper and label paper
Speciality paper; dye sublimation paper, flexible packaging paper, inkjet paper and silicone base paper
Bleached chemical pulp for own consumption and kraft pulp
Coated woodfree paper and containerboard
Bleached chemical pulp for own consumption
Coated woodfree paper
Bleached mechanical pulp for own consumption
Coated mechanical paper
Bleached chemi-thermo mechanical pulp for own consumption
Coated woodfree paper
Coated woodfree paper and paperboard
Bleached chemical pulp for own consumption and kraft pulp
Coated woodfree paper and uncoated woodfree paper
275
100
60
280
980
750
530
260
220
120
140
250
300
165
145
Alfeld Mill
Carmignano Mill
Condino Mill
Ehingen Mill
Gratkorn Mill
Kirkniemi Mill
Lanaken Mill
Maastricht Mill
Stockstadt Mill
Total Sappi Europe
Other operation
Rockwell Solutions Coated barrier film and paper
Sappi Southern Africa
Plantations**
Products produced
KwaZulu-Natal
Mpumalanga
Plantations (pulpwood and sawlogs) (tons)***
Plantations (pulpwood and sawlogs) (tons)***
Total Sappi Forests
(owned and leased
supply)
Mills
Products produced
Lomati Sawmill
Ngodwana Mill
Stanger Mill
Tugela Mill
Sappi ReFibre****
Sawn timber (m3)
Unbleached chemical pulp for own consumption
Mechanical pulp for own consumption
Kraft linerboard
Newsprint
Bleached bagasse pulp for own consumption
Office paper and tissue paper
Neutral Sulphite Semi Chemical pulp for own consumption
Corrugating medium
Waste paper collection and recycling for own consumption
Total Sappi Paper and Paper Packaging
Ngodwana Mill
Saiccor Mill*****
Dissolving pulp
Dissolving pulp
Total Dissolving pulp
3,455
1,120
Capacity(1)(cid:797)(cid:11)million m2)
100
Capacity(1) (’000)
Hectares
Standing
tons
159
235
10,526
17,128
394
27,654
Capacity (m3) Capacity (’000 tons)
Timber
Paper
Pulp
93
240
140
110
200
690
210
110
60
155
89
624
255
800
1,055
The stated capacity is for DP, the capacity for kraft pulp is 25% higher.
Total Sappi Southern Africa
(1) Capacity at maximum continuous run rate per annum.
*
** Approximately 136,000 hectares of our land is set aside and maintained by Sappi Forests to conserve the natural habitat and biodiversity found there.
*** Plantations include owned and leased areas.
**** Sappi ReFibre collects waste paper in the South African market which is used to produce packaging paper.
***** Saiccor Mill is currently commissioning the expansion project which will increase the mill nameplate capacity by 110,000 tons. Once the expansion is
1,679
690
93
complete and taking into account speciality grade production which reduces the run rate, the net capacity will be 890,000 per annum.
7
GROUP OVERVIEW
Page heading
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A G I
L I T Y
Hummingbirds are the trapeze artists of the avian world. They can fly forwards,
backwards, even upside down and are also the only vertebrae capable of
hovering in place. In addition to being agile, hummingbirds are extraordinarily
fast. They have been observed at speeds of nearly 48 kilometres per hour (km/h)
in direct flight and over 72 km/h during courtship dives.
Adaptability is another hummingbird characteristic. These tiny birds have
fewer feathers than other birds, because they need to have an efficient body
that is as lightweight as possible in order for the flight aerobics they perform.
As the insulation that they get from their feathers is insufficient, at night they
go into torpor, a hibernation-like state that allows them to conserve energy by
slowing down their metabolism, heartbeat and respiration rate. Furthermore,
hummingbirds remember migration routes and every flower they’ve ever visited.
They can also figure out how long to wait between visits so the flowers have time
to generate more nectar.
Inherent in our approach is being agile to stay ahead of market changes,
preferences, customer needs and expectations.
Page heading continued
A G I
L I T Y
Hummingbirds are the trapeze artists of the avian world. They can fly forwards,
backwards, even upside down and are also the only vertebrae capable of
hovering in place. In addition to being agile, hummingbirds are extraordinarily
fast. They have been observed at speeds of nearly 48 kilometres per hour (km/h)
in direct flight and over 72 km/h during courtship dives.
Adaptability is another hummingbird characteristic. These tiny birds have
fewer feathers than other birds, because they need to have an efficient body
that is as lightweight as possible in order for the flight aerobics they perform.
As the insulation that they get from their feathers is insufficient, at night they
go into torpor, a hibernation-like state that allows them to conserve energy by
slowing down their metabolism, heartbeat and respiration rate. Furthermore,
hummingbirds remember migration routes and every flower they’ve ever visited.
They can also figure out how long to wait between visits so the flowers have time
to generate more nectar.
Inherent in our approach is being agile to stay ahead of market changes,
preferences, customer needs and expectations.
9
GROUP OVERVIEW
Our strategy and performance
Our strategy
Through collaboration and innovation, we will grow profitably, using our strength as a sustainable and diversified global
woodfibre group, focused on dissolving pulp (DP), graphic, packaging and speciality papers, and biomaterials.
What this means
>
How we performed in 2021
>
• Strengthen our safet(cid:92) first culture
• Continuously improve our cost position
• Continue to ma(cid:91)imise the benefits of our
global(cid:123)footprint
• (cid:37)est-in-class production efficiencies
• (cid:42)roup efficienc(cid:92), procurement and continuous
improvement savings > US$98 million
• Volumes improved 8% year-on-year
resulting in an improvement in cost per ton
• (cid:48)a(cid:91)imised the benefits of (cid:50)neSappi (cid:11)internal
alignment) to achieve cost advantages
Drive operational
excellence
Enhance trust
Sustain our
financial health
•
Improving our understanding of and proactively
partnering with all stakeholders
• Driving sustainability solutions
• Meeting the changing needs of every Sappi
employee
• Committed to set science-based
decarbonisation targets
• Following Task Force on Climate-related
Financial Disclosures (TCFD) recommendations
• Expanded Supplier Code of Conduct
compliance and initiated EcoVadis partnership
• Executed Group Engagement Survey
• Sappi Southern Africa Forestry was awarded
first ever PEFC certification in South Africa
• Achieved Level 1 BBBEE in South Africa
• Target net debt: EBITDA*(1) ex SI at 2x
• Reduce absolute debt level and improve EBITDA
• Net debt: EBITDA ex SI at 3.7x
• Focused capex on essential projects so as
ex SI
• Optimise capital management
• Continue to monitor bond market for
opportunities
• Grow DP capacity, matching market demand
• Continue to expand and grow packaging and
speciality papers in all regions. Commence
commercialisation of biotech opportunities
• Reduce exposure to declining graphics business
•
to(cid:123)effectivel(cid:92) manage li(cid:84)uidit(cid:92) and cash flow
• Negotiated covenant suspension period until
September (cid:21)(cid:19)(cid:21)(cid:20) (cid:115) first measurement
(cid:39)ecember(cid:123)(cid:21)(cid:19)(cid:21)(cid:20)
• Successfully issued convertible bonds during
November 2020 to improve liquidity
• Strong cash generation and much improved
liquidity
• Successfull(cid:92) refinanced our (cid:98)(cid:22)(cid:24)(cid:19) million bonds
due (cid:21)(cid:19)(cid:21)(cid:22) with (cid:98)(cid:23)(cid:19)(cid:19) million bonds due (cid:21)(cid:19)(cid:21)(cid:27) at
a(cid:123)coupon of (cid:22)(cid:17)(cid:25)(cid:21)(cid:24)(cid:8)
• Packaging and specialit(cid:92) contributes (cid:23)(cid:19)(cid:8) of
group EBITDA ex SI
• Packaging and speciality volumes constituted
(cid:21)(cid:24)(cid:8) of (cid:21)(cid:19)(cid:21)(cid:20) sales volumes
Increased packaging and speciality volumes
y-o-y up 21% vs 2020
• Saiccor e(cid:91)pansion finalised towards the close
of(cid:123)(cid:52)(cid:23) F(cid:60)(cid:21)(cid:19)(cid:21)(cid:20)(cid:17) Commissioning and ramp up
commenced during (cid:52)(cid:20) F(cid:60)(cid:21)(cid:19)(cid:21)(cid:21)
• Strong growth in lignin sales and favourable
advancement of other Biotech opportunities
Grow our business
* Earnings before interest, tax, depreciation and amortisation.
(1) EBITDA excluding special items (EBITDA ex SI).
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GROUP OVERVIEW
Measuring our progress
Guided by our strategy, we measure our progress holistically
against our mission, collaborating and partnering with
stakeholders as we strive to be a trusted and sustainable
organisation with an exciting future in woodfibre.
Return on average capital employed (ROCE) (%)
Our strategic performance indicators
Self-assessment of 2021 performance
2019
2020
1.6
2021
11.5
Thrive25
Link to
strategic objectives
5.4
Link to 3Ps
0
2
4
6
8
10
12
Why is this important?
ROCE is an important measure that assesses long-term
profitabilit(cid:92) b(cid:92) comparing how effectivel(cid:92) assets are
performing with how these assets are financed
Linked to executive remuneration
2022 objectives
Ramp up the additional Saiccor Mill volumes and reduce
logistics constraints. Further optimise packaging and
specialit(cid:92)(cid:123)papers volumes in all regions(cid:17) (cid:53)estore and
improve(cid:123)the graphic papers margins in all regions
EBITDA ex SI (US$ million)
2019
Our strategic performance indicators
2019
2020
2021
2020
687
Self-assessment of 2021 performance
Thrive25
Link to
strategic objectives
378
532
Link to 3Ps
0
200
400
600
800
Why is this important?
EBITDA ex SI measures how we performed operationally as
a(cid:123)compan(cid:92)
Linked to executive remuneration
2022 objectives
Focus on ma(cid:91)imising cash generation through efficient cape(cid:91)
and working capital management
Satisfactory
Unsatisfactory
Progress to be made/ongoing
Grow our business
Sustain our financial health
Drive operational excellence
Enhance trust
Prosperity
People
Planet
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GROUP OVERVIEW
Our strategy and performance continued
EBITDA ex SI margin (%)
Our strategic performance indicators
Self-assessment of 2021 performance
2019
2020
2021
12.0
Thrive25
Link to
strategic objectives
8.2
10.1
Link to 3Ps
0
2
4
6
8
10
12
Why is this important?
EBITDA ex SI margin is an important and comparable measure of
our profitabilit(cid:92) (cid:11)e(cid:91)cluding the impact of financing, accounting
treatments or tax implications) against our revenue
Sales (US$ million)
2022 objectives
Focus on reducing fi(cid:91)ed and variable costs and ma(cid:91)imise pricing
2019
Our strategic performance indicators
2020
Self-assessment of 2021 performance
2019
2020
2021
5,746
Thrive25
Link to
strategic objectives
4,609
5,265
Link to 3Ps
0
2,000
4,000
6,000
Why is this important?
While not the onl(cid:92) determinant of financial success, sales is
a(cid:123)ke(cid:92) measure of demand, customer lo(cid:92)alt(cid:92) and a critical
contributor to profit
2022 objectives
Continue to grow and optimise packaging and speciality papers
to achieve full operations of our paper machine assets.
Maximise DP volumes to capacity with increased volumes from
Saiccor Mill
Net debt (US$ million)
Net debt (US$ million)
2020
Our strategic performance indicators
Self-assessment of 2021 performance
2019
2020
2021
1,501
Thrive25
Link to
strategic objectives
1,957
1,946
Link to 3Ps
0
500
1,000
1,500
2,000
Why is this important?
Given the capital-intensive nature of our operations, we need
to(cid:123)raise debt to complete significant pro(cid:77)ects that enable our
long-term success. Net debt comprises current and non-
current interest-bearing borrowings and bank overdrafts (net
of(cid:123)cash, cash e(cid:84)uivalents and short-term deposits(cid:12)
2022 objectives
During 2022 we are targeting to further reduce net debt
T
R
O
P
E
R
D
E
T
A
R
G
E
T
N
I
L
A
U
N
N
A
1
2
0
2
i
p
p
a
S
12
GROUP OVERVIEW
Covenant leverage ratio
Our strategic performance indicators
Self-assessment of 2021 performance
2019
2020
2021
2.2
Thrive25
Link to
strategic objectives
5.2
3.7
Link to 3Ps
0
1
2
3
4
5
6
Why is this important?
(cid:55)he net debt to E(cid:37)(cid:44)(cid:55)(cid:39)A e(cid:91) S(cid:44) (cid:11)as defined b(cid:92) our bank covenants(cid:12)
ratio measures our abilit(cid:92) to pa(cid:92) off our debt should net debt and
EBITDA ex SI remain consistent. EBITDA ex SI focuses on the
operating decisions of a business as it looks at profitabilit(cid:92) from
core operations before the impact of capital structure
Linked to executive remuneration
Lost-time injury frequency rate (LTIFR)
2022 objectives
With growth in EBITDA ex SI and reduced debt targeting to
further reduce the debt ratio to approximately 2x through the
cycle through EBITDA ex SI growth and reduced debt
2019
Our strategic performance indicators
2020
0.54
Self-assessment of 2021 performance
Thrive25
Link to
strategic objectives
2019
2020
2021
0.35
0.48
Link to 3Ps
0,0
0,1
0,2
0,3
0,4
0,5
0,6
Why is this important?
LTIFR is an important measure of our business’s safety. We
target zero harm and aim to improve LTIFR by at least 10%
year-on-year
Linked to executive remuneration
(cid:44)dentified sustainabilit(cid:92) goal(1)
2022 objectives
Achieve zero fatalities and LTIFR
(1) For this indicator, we have clear targets for 2025 that we are working towards. See our Group Sustainability Report for more information.
Satisfactory
Unsatisfactory
Progress to be made/ongoing
Grow our business
Sustain our financial health
Drive operational excellence
Enhance trust
Prosperity
People
Planet
13
GROUP OVERVIEW
Our strategy and performance continued
Sustainable engagement (%)
Our strategic performance indicators
Self-assessment of 2021 performance
2019
2020
Not measured
2021
79
Thrive25
Link to
strategic objectives
75.6
Link to 3Ps
0
10
20
30
40
50
60
70
80
Why is this important?
We rely on a productive and engaged workforce. Employee
engagement has been linked to higher safety performance,
lower staff turnover, improve productivit(cid:92) and efficienc(cid:92)(cid:17) Aim to
maintain or improve engagement to be above (cid:26)(cid:24)(cid:8)
2022 objectives
Sustain and/or improve engagement
(cid:44)dentified sustainabilit(cid:92) goal(1)
Energy intensity (GJ/adt)
2019
Our strategic performance indicators
2019
2020
2021
2020
22.12
23.71
22.35
0
5
10
15
20
25
Why is this important?
Energ(cid:92) intensit(cid:92) is a measure of how efficientl(cid:92) we are
operating. By continually improving this metric, we manage
costs and lower our impact
(cid:44)dentified sustainabilit(cid:92) goal(1)
Self-assessment of 2021 performance
Thrive25
Link to
strategic objectives
Link to 3Ps
2022 objectives
21.6 GJ/adt
(1) For this indicator, we have clear targets for 2025 that we are working towards. See our Group Sustainability Report for more information.
T
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P
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D
E
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A
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G
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N
I
L
A
U
N
N
A
1
2
0
2
i
p
p
a
S
14
GROUP OVERVIEW
Certified fibre (%)
Our strategic performance indicators
2020
Self-assessment of 2021 performance
2019
2020
2021
Thrive25
Link to
strategic objectives
Link to 3Ps
75
73
77
0
20
40
60
80
Why is this important?
We are committed to sourcing woodfibre from forests and
timber plantations in a manner that promotes their health
and(cid:123)supports communit(cid:92) wellbeing
(cid:44)dentified sustainabilit(cid:92) goal(1)
2022 objectives
(cid:48)aintain or improve percentage certified fibre (cid:33)(cid:26)(cid:24)(cid:8)
(1) For this indicator, we have clear targets for 2025 that we are working towards. See our Group Sustainability Report for more information.
Satisfactory
Unsatisfactory
Progress to be made/ongoing
Grow our business
Sustain our financial health
Drive operational excellence
Enhance trust
Prosperity
People
Planet
15
GROUP OVERVIEW
How we create value
We take an integrated
approach to value creation.
Guided by our values, our
Guided by our values, our
six value streams enable the
six value streams enable the
delivery of our purpose
and our Thrive25 strategy
strategy
Forests
Our 100% Forest Stewardship CouncilTM (FSCTM ) and
PEFC-certified plantations in South Africa give us a low-cost
woodfibre base on which our business depends, and are thus
a key pillar of competitive advantage. (FSC-N003159). Our
leading-edge tree improvement programmes aim to grow
better trees faster, thereby ensuring this advantage is
maintained and enhanced.
Manufacturing excellence
Manufacturing excellence
We focus on enhancing machine efficiencies, digitising our
processes to make the smart factory a reality, reducing variable
costs through new practices in logistics and procurement, as
well as implementing go-to-market strategies, which lower the
cost of serving our customers and increase customer
satisfaction.
Our
plantations in
South Africa
are 100%
FSC and
PEFC-certified
Bioproducts
We are unlocking the chemistry of trees and meeting the
We are unlocking the chemistry of trees and meeting the
challenges of a carbon-constrained world by establishing
challenges of a carbon-constrained world by establishing
a strong position in adjacent businesses including
a strong position in adjacent businesses including
nanocellulose, sugars and furfural, lignosulphonates,
nanocellulose, sugars and furfural, lignosulphonates,
biocomposites and bio-energy. Extracting more value
from each tree is strengthening our core business model.
Machine
learning and
digitisation
accelerating
Commercial
uptake of
Sappi Symbio
Our purpose
(cid:2)(cid:24)(cid:8)(cid:8)(cid:15)(cid:31)(cid:22)(cid:1)(cid:15)(cid:21)(cid:16)(cid:21)(cid:31)(cid:16)(cid:18)(cid:31)(cid:17)(cid:27)(cid:15)(cid:23)(cid:127)(cid:31)(cid:24)(cid:31)
(cid:16)(cid:3)(cid:26)(cid:15)(cid:25)(cid:15)(cid:14)(cid:19)(cid:31)(cid:129)(cid:18)(cid:26)(cid:23)(cid:127)(cid:31)(cid:17)(cid:13)(cid:31)(cid:27)(cid:14)(cid:23)(cid:18)(cid:11)(cid:4)(cid:15)(cid:14)(cid:19)(cid:31)
(cid:16)(cid:3)(cid:22)(cid:31)(cid:8)(cid:18)(cid:129)(cid:22)(cid:26)(cid:31)(cid:18)(cid:141)(cid:31)(cid:26)(cid:22)(cid:14)(cid:22)(cid:129)(cid:24)(cid:17)(cid:23)(cid:22)(cid:31)
(cid:26)(cid:22)(cid:21)(cid:18)(cid:27)(cid:26)(cid:11)(cid:22)(cid:21)(cid:31)(cid:16)(cid:18)(cid:31)(cid:17)(cid:22)(cid:14)(cid:22)(cid:143)(cid:16)(cid:31)(cid:8)(cid:22)(cid:18)(cid:8)(cid:23)(cid:22)(cid:144)(cid:31)
(cid:11)(cid:18)(cid:10)(cid:10)(cid:27)(cid:14)(cid:15)(cid:16)(cid:15)(cid:22)(cid:21)(cid:31)(cid:24)(cid:14)(cid:127)(cid:31)(cid:16)(cid:3)(cid:22)(cid:31)(cid:8)(cid:23)(cid:24)(cid:14)(cid:22)(cid:16)(cid:29)
Pulp
DP is a truly sustainable raw material. Our customers transform
our DP into products that meet the needs of people around the
globe every day. Products that enable fashion, household
comfort, personal beauty and hygiene, as well as a healthy
lifestyle.
Commissioning
of 110,000 tpa
expansion at
Saiccor Mill
anticipated
Q1 FY2022
Packaging and speciality papers
Our customers use our packaging and speciality papers to add
value to niche markets, enable product differentiation and offer
environmentally conscious consumers an alternative to fossil-fuel
based packaging. Our focus on innovation helps our customers to
meet and anticipate the challenges of changing market dynamics.
Sales
volumes in
this sector
increased
21% y-o-y
Graphic papers
While the digital age has impacted the use of paper, our
graphic papers continue to meet the needs of consumers and
marketers around the world. They rely on paper for a tactile,
emotional experience no other communication medium can
replicate.
Paper’s
haptic qualities
enhance
marketing
and branding
M
A
G
M A G
M A G
We are embracing new
thinking and emerging
technologies so that
every solution we create
through our value
streams supports our
goal of making our
products and processes
more sustainable.
(cid:31)(cid:30)(cid:29)(cid:31)(cid:28)(cid:27)(cid:26)(cid:31)(cid:25)(cid:24)(cid:23)(cid:27)(cid:22)(cid:21)
(cid:31) (cid:5)(cid:29)(cid:31)(cid:28)(cid:27)(cid:26)(cid:31)(cid:4)(cid:22)(cid:13)
(cid:31) (cid:26)(cid:22)(cid:23)(cid:24)(cid:16)(cid:15)(cid:18)(cid:14)(cid:21)(cid:3)(cid:15)(cid:8)(cid:21)
(cid:31) (cid:6)(cid:29)(cid:31)(cid:28)(cid:27)(cid:26)(cid:31)(cid:15)(cid:14)(cid:8)(cid:27)(cid:16)(cid:21)
(cid:7)(cid:29)(cid:31)(cid:28)(cid:27)(cid:26)(cid:31)(cid:25)(cid:24)(cid:23)(cid:27)(cid:22)
(cid:21)(cid:16)(cid:26)(cid:22)(cid:24)(cid:10)(cid:21)
(cid:31) (cid:9)(cid:29)(cid:31)(cid:28)(cid:27)(cid:26)(cid:31)(cid:18)(cid:27)(cid:16)(cid:8)(cid:27)(cid:16)(cid:21)
(cid:12)(cid:29)(cid:31)(cid:28)(cid:27)(cid:26)(cid:31)(cid:18)(cid:27)(cid:16)(cid:11)(cid:18)(cid:10)(cid:22)(cid:21)
How we do business
How we remain relevant
As OneSappi, we do
business safely, with
integrity and courage,
making smart decisions
that we execute with
speed.
Ongoing engagement
with our stakeholders,
conducted in a spirit
of trust and mutual
respect, based on an
understanding of their
operating context,
enables more tangible
business value creation.
What we do –
our business activities
The value streams set
out above reflect our
belief that it is our
responsibility to make
the most out of every
tree harvested.
What we need –
the resources and
relationships on which
we rely
Our integrated approach to
sustainable development
acknowledges that we
depend on striking a
balance between
Prosperity, People and the
Planet in order to thrive. We
rely on certain inputs to
create value.
What we produce –
our products, services and
waste products
Our diverse product range
is aligned with our focus on
using our expertise to help
create a sustainable future
while meeting the needs of
a growing, evolving society.
See page 42
See page 18
See above and page 19
See page 19
What we create, preserve
or erode – the broader
impacts of our business
activities
our business activities
outcomes, we strive to
maximise the positive
consequences of our value
streams in terms of
Prosperity, People and
Planet.
See page
19
(cid:20)(cid:29)(cid:31)(cid:28)(cid:27)(cid:26)(cid:31)(cid:19)(cid:23)(cid:18)(cid:17)(cid:24)(cid:23)
(cid:21)(cid:27)(cid:21)(cid:16)(cid:24)(cid:15)(cid:14)(cid:24)(cid:17)(cid:15)(cid:23)(cid:15)(cid:16)(cid:13)(cid:31)(cid:19)(cid:18)(cid:24)(cid:23)(cid:21)
What we are striving for –
our long-term, broader
outcomes
Monitoring and reporting
Prosperity, People and Planet
Thrive25
vision of being a trusted partner
to all our stakeholders.
See our 2021 Sappi Group
Sustainability Report
While we acknowledge that
transparently on our ambitious
have positive and negative
targets aligns with our
T
R
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P
E
R
D
E
T
A
R
G
E
T
N
I
L
A
U
N
N
A
1
2
0
2
i
p
p
a
S
16
We take an integrated
approach to value creation.
Guided by our values, our
six value streams enable the
delivery of our purpose
and our Thrive25 strategy
Forests
Our 100% Forest Stewardship CouncilTM (FSCTM ) and
PEFC-certified plantations in South Africa give us a low-cost
woodfibre base on which our business depends, and are thus
a key pillar of competitive advantage. (FSC-N003159). Our
leading-edge tree improvement programmes aim to grow
better trees faster, thereby ensuring this advantage is
maintained and enhanced.
Manufacturing excellence
We focus on enhancing machine efficiencies, digitising our
processes to make the smart factory a reality, reducing variable
costs through new practices in logistics and procurement, as
well as implementing go-to-market strategies, which lower the
cost of serving our customers and increase customer
Our
plantations in
South Africa
are 100%
FSC and
PEFC-certified
satisfaction.
Bioproducts
We are unlocking the chemistry of trees and meeting the
challenges of a carbon-constrained world by establishing
a strong position in adjacent businesses including
nanocellulose, sugars and furfural, lignosulphonates,
biocomposites and bio-energy. Extracting more value
from each tree is strengthening our core business model.
Machine
learning and
digitisation
accelerating
Commercial
uptake of
Sappi Symbio
Our purpose
(cid:2)(cid:24)(cid:8)(cid:8)(cid:15)(cid:31)(cid:22)(cid:1)(cid:15)(cid:21)(cid:16)(cid:21)(cid:31)(cid:16)(cid:18)(cid:31)(cid:17)(cid:27)(cid:15)(cid:23)(cid:127)(cid:31)(cid:24)(cid:31)
(cid:16)(cid:3)(cid:26)(cid:15)(cid:25)(cid:15)(cid:14)(cid:19)(cid:31)(cid:129)(cid:18)(cid:26)(cid:23)(cid:127)(cid:31)(cid:17)(cid:13)(cid:31)(cid:27)(cid:14)(cid:23)(cid:18)(cid:11)(cid:4)(cid:15)(cid:14)(cid:19)(cid:31)
(cid:16)(cid:3)(cid:22)(cid:31)(cid:8)(cid:18)(cid:129)(cid:22)(cid:26)(cid:31)(cid:18)(cid:141)(cid:31)(cid:26)(cid:22)(cid:14)(cid:22)(cid:129)(cid:24)(cid:17)(cid:23)(cid:22)(cid:31)
(cid:26)(cid:22)(cid:21)(cid:18)(cid:27)(cid:26)(cid:11)(cid:22)(cid:21)(cid:31)(cid:16)(cid:18)(cid:31)(cid:17)(cid:22)(cid:14)(cid:22)(cid:143)(cid:16)(cid:31)(cid:8)(cid:22)(cid:18)(cid:8)(cid:23)(cid:22)(cid:144)(cid:31)
(cid:11)(cid:18)(cid:10)(cid:10)(cid:27)(cid:14)(cid:15)(cid:16)(cid:15)(cid:22)(cid:21)(cid:31)(cid:24)(cid:14)(cid:127)(cid:31)(cid:16)(cid:3)(cid:22)(cid:31)(cid:8)(cid:23)(cid:24)(cid:14)(cid:22)(cid:16)(cid:29)
GROUP OVERVIEW
Page heading continued
Pulp
DP is a truly sustainable raw material. Our customers transform
our DP into products that meet the needs of people around the
globe every day. Products that enable fashion, household
comfort, personal beauty and hygiene, as well as a healthy
lifestyle.
Commissioning
of 110,000 tpa
expansion at
Saiccor Mill
anticipated
Q1 FY2022
Packaging and speciality papers
Our customers use our packaging and speciality papers to add
value to niche markets, enable product differentiation and offer
environmentally conscious consumers an alternative to fossil-fuel
based packaging. Our focus on innovation helps our customers to
meet and anticipate the challenges of changing market dynamics.
Sales
volumes in
this sector
increased
21% y-o-y
Graphic papers
While the digital age has impacted the use of paper, our
graphic papers continue to meet the needs of consumers and
graphic papers continue to meet the needs of consumers and
marketers around the world. They rely on paper for a tactile,
marketers around the world. They rely on paper for a tactile,
emotional experience no other communication medium can
replicate.
Paper’s
haptic qualities
enhance
marketing
and branding
M A GM A GM A G
M A G
M
A
G
(cid:31)(cid:30)(cid:29)(cid:31)(cid:28)(cid:27)(cid:26)(cid:31)(cid:25)(cid:24)(cid:23)(cid:27)(cid:22)(cid:21)
(cid:31) (cid:5)(cid:29)(cid:31)(cid:28)(cid:27)(cid:26)(cid:31)(cid:4)(cid:22)(cid:13)
(cid:31) (cid:26)(cid:22)(cid:23)(cid:24)(cid:16)(cid:15)(cid:18)(cid:14)(cid:21)(cid:3)(cid:15)(cid:8)(cid:21)
(cid:31) (cid:6)(cid:29)(cid:31)(cid:28)(cid:27)(cid:26)(cid:31)(cid:15)(cid:14)(cid:8)(cid:27)(cid:16)(cid:21)
(cid:7)(cid:29)(cid:31)(cid:28)(cid:27)(cid:26)(cid:31)(cid:25)(cid:24)(cid:23)(cid:27)(cid:22)
(cid:21)(cid:16)(cid:26)(cid:22)(cid:24)(cid:10)(cid:21)
(cid:31) (cid:9)(cid:29)(cid:31)(cid:28)(cid:27)(cid:26)(cid:31)(cid:18)(cid:27)(cid:16)(cid:8)(cid:27)(cid:16)(cid:21)
(cid:12)(cid:29)(cid:31)(cid:28)(cid:27)(cid:26)(cid:31)(cid:18)(cid:27)(cid:16)(cid:11)(cid:18)(cid:10)(cid:22)(cid:21)
How we do business
How we remain relevant
What we need –
What we do –
As OneSappi, we do
business safely, with
integrity and courage,
making smart decisions
that we execute with
speed.
Ongoing engagement
with our stakeholders,
conducted in a spirit
of trust and mutual
respect, based on an
the resources and
our business activities
relationships on which
we rely
The value streams set
out above reflect our
Our integrated approach to
belief that it is our
sustainable development
responsibility to make
understanding of their
acknowledges that we
the most out of every
operating context,
depend on striking a
tree harvested.
enables more tangible
balance between
business value creation.
Prosperity, People and the
What we produce –
our products, services and
waste products
Our diverse product range
is aligned with our focus on
using our expertise to help
create a sustainable future
while meeting the needs of
a growing, evolving society.
Planet in order to thrive. We
rely on certain inputs to
create value.
See page 42
See page 18
See above and page 19
See page 19
What we create, preserve
or erode – the broader
impacts of our business
activities
While we acknowledge that
our business activities
have positive and negative
outcomes, we strive to
maximise the positive
consequences of our value
streams in terms of
Prosperity, People and
Planet.
See page
19
We are embracing new
thinking and emerging
technologies so that
every solution we create
through our value
streams supports our
goal of making our
products and processes
more sustainable.
(cid:20)(cid:29)(cid:31)(cid:28)(cid:27)(cid:26)(cid:31)(cid:19)(cid:23)(cid:18)(cid:17)(cid:24)(cid:23)
(cid:21)(cid:27)(cid:21)(cid:16)(cid:24)(cid:15)(cid:14)(cid:24)(cid:17)(cid:15)(cid:23)(cid:15)(cid:16)(cid:13)(cid:31)(cid:19)(cid:18)(cid:24)(cid:23)(cid:21)
What we are striving for –
our long-term, broader
outcomes
Monitoring and reporting
transparently on our ambitious
Prosperity, People and Planet
Thrive25
targets aligns with our
vision of being a trusted partner
to all our stakeholders.
See our 2021 Sappi Group
Sustainability Report
17
GROUP OVERVIEW
Our business model
Inputs
The resources and
relationships we rely on
1
l
s
a
t
i
p
a
C
Financial
Intellectual
Manufactured
l
s
a
t
i
p
a
C
Human
Social and
relationship
l
s
a
t
i
p
a
C
Natural
• 19 production facilities across the globe (see page
7)
• Debt: US$1,946 million
• Equity and liabilities: US$6,186 million
• Research and development (R&D) investment: US$43 million
• Investment in growth: US$376 million to grow the business
• Employees: 12,492
• South African contractor employees: approx. 9,250 contractor
employees (average)
• Average training spend per employee per region: SEU US$473,
SNA US$238, SSA US$671, Sappi Trading US$504
• Ongoing stakeholder engagement
• Corporate social responsibility investment: US$3.49 million
• Plantations:
– 394,000 owned and leased, of which 258,000 is planted
– The remainder is managed to conserve the natural habitat and
biodiversity found there
• Energy purchased: 2,547.29MW
• Energy generated on site: 1,934.81MW
• Renewable energy 52.44%, of which 66.35% own black liquor
• Water extracted: 287.14 million litres in absolute terms, 34.86m3/adt
in specifi c terms
• Certifi ed fi bre used: 77%
T
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E
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D
E
T
A
R
G
E
T
N
I
L
A
U
N
N
A
1
2
0
2
i
p
p
a
S
18
Our activities
Our value streams
2
Outcomes
The broader impacts of
our business activities
4
Forests
Manufacturing
excellence
Biomaterials
Pulp
Packaging and
speciality papers
Graphic papers
Outputs
Our products, services
and waste products
3
Products:
• 6.3 million tons of saleable production
Waste:
• 1.4 million tons of which 332,680 tons
(23.3%) is sent to landfi ll
Emissions:
• 4.3 million tCO2e absolute direct
(Scope 1) GHG, in specifi c
terms: 0.679 tCO2e/adt
Value
created
Value
preserved
Value
eroded
Total assets: US$6,186 million
EBITDA: US$532 million, an increase
of 41% year-on-year
Net debt: down 1%
US$64 million paid to governments
through taxation
Zero fatalities
Global average of 48.29 training hours
per employee
Energy intensity: 22.35 GJ/adt
High levels of wood certifi cation result in
competitive advantage
World-leading tree improvement
programmes have led to shorter growth
times and enhanced fi bre gain
Training of smallholders in SNA and SSA
to educate them on more sustainable
forestry practices
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GROUP OVERVIEW
Actions to
enhance
outcomes
5
US$1,045 million paid to employees as
salaries, wages and other benefits
US$154 million paid to lenders as interest
Earnings per share (excluding special
items): 15 US cents
Our high levels of innovation give our
customers a competitive edge in global
markets
New products developed to meet changing
customer expectations and market trends
Return to
profitability
• Implemented a series of price increases in our paper
businesses to offset rising input costs
• Increased investment in R&D to ensure cutting-edge
solutions for customers (FY2021: US$43 million,
FY2020: US$39 million)
• Consolidation and alignment of Global Business
Services: sales, supply chain and finance, as well as
logistics and manufacturing
>
• Ongoing diversification of our product portfolio into
higher margin segments
• Commercialisation of bioproducts gaining traction
Productivity: 4 hours worked/adt saleable
production
Level 1 BBBEE contributor
74.4%
skills training,
25.6%
compliance
training
• Continued investment in embedding a safety culture
across the group
• Focus on entrenching transformation in our South
African operations to support inclusive growth
• Investment in training and development of our
employees, 74.4% allocated to skills training and
25.6% allocated to compliance training
• Strong governance and ethical culture reinforced by
>
the Code of Ethics
• Initiated our first campaign to onboard suppliers onto
the EcoVadis platform, with the number of suppliers
now on this platform accounting for 33% of our total
global procurement spend
• Formulated a social impact strategy in SSA
PEFC certification in SSA
DP used for clothing and household
textiles, baby wipes and wet wipes –
reducing environmental impact
Lighter-weight packaging products
– reduction in carbon footprint
Expanded packaging portfolio offers
customers and consumers more
sustainable alternatives to fossil-fuel
based packaging (plastics)
PEFC
certification
in SSA
• Progressed our decarbonisation roadmap in each
region
• Increased energy self-sufficiency by 6.3% over five
years due to focus on reducing purchased energy
• GHG emissions offset by carbon sequestration
• Continued to adjust our tree breeding strategy to
mitigate the impacts of climate change
• Made progress in terms of our 2025 biodiversity
goal (vegetation assessment on our land)
>
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GROUP OVERVIEW
Our business model continued
Examples of our trade-off s
The most diffi cult decisions made during the year
The sale of the southwestern part of our
site at Maastricht Mill in the Netherlands
has necessitated a relocation of activities
and associated construction. However,
the costs thereof will be off set by the
proceeds of the sale.
Risk
Risk
7
Cyclical macro-economic
factors
9 Liquidity
Balancing employee health and safety
with operational continuity
A comprehensive Covid-19 action plan enabled
us to operate in a safe and uninterrupted manner
where demand permitted.
Closure of operations because of the civil unrest
in KwaZulu-Natal, South Africa in order to mitigate
the risks to our operations and our employees
negatively impacted EBITDA ex SI.
Risk
1
Safety
Risk
10 Employee relations
Balancing aff orestation and
biodiversity
At stand level, our plantations have a
negative impact on biodiversity. At
plantation level, we manage this impact
by managing approximately one third of
our landholdings for biodiversity.
Risk
Risk
4 Sustainability
expectations
5
Climate change
21
GROUP OVERVIEW
Letter to the stakeholders
Chairman and Chief Executive Offi cer
Operating review
The lingering impact of the Covid-19
pandemic including ongoing lockdown
measures and global economic
volatility continued to dominate in
FY2021. An unwavering focus on the
implementation of our Thrive25
strategy and commitment
to sustainable business operations
facilitated a return to profi tability
during the year, and the group generated
a profi t for the period of US$13 million,
which was a substantial improvement
compared to the loss of US$135 million
for the 2020 fi nancial year.
Throughout this unprecedented time, the health and safety of
our employees remained paramount. Execution of a comprehensive
Covid-19 action plan enabled us to operate in a safe and
uninterrupted manner where demand permitted. Working closely
with our customers and suppliers we systematically increased
activity and output in response to improved market demand. Our
support for local communities helped mitigate the impact of the
pandemic and the ensuing socio-economic consequences on
them. We are very pleased to report there were no work-related
fatalities during the year, but regrettably 17 employees
succumbed to Covid-19. We recognise the pandemic has a
tremendous impact on the mental health of our employees
and their families, and our employee-wellbeing programmes
and communication campaigns focused on providing emotional
support and encouraging vaccination.
Our performance with respect to safety across the group was
mixed. Sappi Southern Africa achieved an all-time low LTIFR in
2021, however, Sappi North America and Sappi Europe’s safety
performance deteriorated relative to 2020. The pleasing progress
in Sappi Southern Africa was a result of continuous focus on and
integration of programmes such as the “Life Saving Rules”,
“Visible Felt Leadership” and Sappi Forest’s “Stop. Think before
you act”. In Sappi North America, four of the fi ve sites recorded
their best ever safety performance but several slip/trip/fall injuries
in the fi rst quarter of the year were responsible for the overall
LTIFR deterioration in the region. The issues were successfully
addressed through employee engagement and probing of
cultural factors as part of the incident investigations and the
safety performance in the remainder of the year was back
Steve Binnie
CEO
Sir Nigel Rudd
Chairman
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GROUP OVERVIEW
in line with previous excellent standards. Sappi Europe’s safety performance was
disappointing with the majority of the injuries occurring at three sites. A
Instruction Handbook’ covering all aspects of safety from values, tools, management
and behaviours was developed and rolled out together with a standardised audit
system. The European leadership remain steadfastly committed to zero injuries and
a communication campaign emphasising that “nothing is so important it cannot be
done safely” is underway.
(cid:31)
Safety
Market demand across Sappi’s major product segments improved steadily during
the year as global economic activity resumed. Highlights for the year included the
recovery of profitability in the pulp segment driven by buoyant demand and
significantly better market prices, combined with an excellent performance of the
North American region, which delivered its highest EBITDA ex SI in over a decade.
The investments of recent years into packaging and speciality papers, including the
Matane Pulp Mill investment, reaped rewards as the segment achieved record
profitability and sales volumes increased by 21%. However, profitability of the
European business was hindered by strict Covid-19 lockdowns, which suppressed
economic recovery across the value chain and spiralling costs.
A rapid rebound in global trade following the resumption of economic activity after
the first wave of the Covid-19 pandemic amplified existing logistics challenges
around the world. Demand for shipping accelerated dramatically as organisations
attempted to restock inventories, which led to widespread supply chain constraints
including vessel and container shortages, severe port congestion and significant
freight rate increases. The logistical disruptions described above severely
constrained our export sales in all regions. Furthermore, the high demand for raw
materials and commodities, coupled with long lead times, fuelled worldwide
inflationary pressures. Consequently, escalating delivery and raw material costs,
particularly purchased pulp, chemicals and energy, negatively impacted margins
in all product segments. To mitigate the impact of the rising costs we implemented
a series of price increases in our paper businesses.
DP market conditions rallied strongly from the first quarter on the back of improved
apparel retail demand in the US and Asia, which favourably impacted demand for all
textile fibres. Low DP and viscose staple fibre (VSF) inventory levels, high paper pulp
prices and a weaker US$/Renminbi exchange rate were all factors that further
contributed to the positive sentiment in the sector. The market price(1) for
hardwood DP surged from a base of US$624 per ton in October 2020 to a peak
of US$1,106 per ton in April and closed the year at US$1,000 per ton at the end of
September 2021. Sappi customer demand was robust, and EBITDA ex SI for the
segment of US$197 million was more than three times that of the prior year.
However, the ongoing global supply chain challenges, exacerbated by the impact
from the South African civil unrest and a cyber security breach at the Durban port,
constrained sales and resulted in a backlog of approximately 100,000 tons at year end
which reduced EBITDA ex SI by approximately US$30 million. In addition, once-off
events at the South African mills including a labour strike, shortage of oxygen due to
Covid-19, an extended annual shut at Saiccor Mill and the civil unrest, which forced
Saiccor Mill to close temporarily, significantly reduced production volumes. The
project to expand the Saiccor Mill capacity was impacted negatively by Covid-19
lockdowns and associated travel restrictions, which delayed the project schedule.
Commissioning of the plant began during the fourth quarter and will be completed
in the first quarter of FY2022.
The 21% growth in sales volumes for the packaging and speciality papers segment
was primarily driven by the successful ramp up of sales volumes from Somerset Mill
PM1 in North America. The line ran fully on packaging grades from the third quarter
and the focus shifted subsequently to product mix and margin optimisation. Growth
in the European packaging and speciality papers sales volumes was hampered by
(1) Market price for imported hardwood DP into China issued daily by the CCF Group.
weaker demand for certain non-
essential luxury product categories
and prolonged speciality paper
qualifications. Profitability in the
European region was also impacted
by higher purchased pulp, energy,
chemicals and delivery costs.
Containerboard demand in South Africa
was robust on the back of strong fruit
exports. EBITDA ex SI for the segment
increased from US$179 million to
US$214 million.
Global demand for graphic paper grades
improved progressively through the
course of the year. However, market
recovery in Europe lagged that in North
America due to stricter lockdowns in the
European Union. Capacity closures in
North America in combination with
constrained imports into the region due
to supply chain challenges contributed
to a favourable shift in the supply and
demand balance and enabled domestic
producers to operate at full capacity.
Conversely, the lagging European
demand recovery necessitated 367,000
tons of graphic paper production
curtailment in the European operations.
Despite overall graphic papers segment
sales volumes increasing 3% compared
to the previous year, EBITDA ex SI
deteriorated from US$131 million to
US$120 million driven primarily by
substantial cost inflation in purchased
pulp, chemicals, energy and delivery
costs.
Strategic review
Fiscal 2021 was the first year of our
Thrive25
strategy. The five-year strategy
Thrive25
leverages the power of OneSappi to
drive real and sustained value creation.
An integral component of the
vision is recognition that society in
general and our people, in particular,
expect us to play a role beyond making
and selling. Within this context, we have
created a purpose statement as part of
our new strategy that articulates our
ambition to create a brighter future for
the world and our business.
Thrive25
purpose statement and
The
strategy are fully aligned with our
business strategy.
23
GROUP OVERVIEW
Letter to the stakeholders continued
Significant production curtailments
were necessary to manage inventories
in response to dramatic reductions in
sales across all product segments.
During FY2021, market demand across
Sappi’s major product segments
improved progressively as global
economic activity resumed, which
prompted a shift in the strategic focus
to returning the business to profitability
and mitigation of supply-chain
disruptions and cost inflation.
Thrive25
Within the context of ongoing
economic uncertainties and the
priority to restore the business to
profitability, we re-evaluated the
timelines of our
While the four strategic pillars remain
relevant for our five-year vision, our
strategic imperative over the next
two years is to deleverage the
business and reduce absolute debt.
strategy.
P(cid:75)(cid:68)(cid:86)e(cid:3)(cid:20)(cid:3)(cid:11)(cid:21)(cid:19)(cid:21)(cid:20)-(cid:21)(cid:19)(cid:21)(cid:21)(cid:12)(cid:3)(cid:115)(cid:3)
Deleveraging the business
The priority in the first phase is to
strengthen the balance sheet by
reducing debt and maximising cash
generation. During this period, we will
drive further margin improvement and
ensure that all approved capital
projects are completed on time and
within budget. We will also begin
investigating new growth opportunities
for the next phase.
P(cid:75)(cid:68)(cid:86)e(cid:3)(cid:21)(cid:3)(cid:11)(cid:21)(cid:19)(cid:21)(cid:21)(cid:14)(cid:12)(cid:3)(cid:115)(cid:3)(cid:44)(cid:81)(cid:89)e(cid:86)t(cid:3)(cid:73)(cid:82)r(cid:3)
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During the second phase, we will begin
the investment roll out into new growth
opportunities, make decisions on
larger expansions and conversions and
execute our sustainability strategy.
Initiatives and actions undertaken in
FY2021 to support our strategic
objectives are outlined below.
Thrive25
Grow our business
In the first phase of our
strategy, as we deleverage the
business, there are no new major
capital projects planned. The 2021
focus for growing the business was
therefore on completion of the
110,000 ton Saiccor Mill expansion
project and growing the packaging and
speciality papers volumes from our
recently converted assets in Europe
and North America.
Through collaboration and innovation,
we will grow profitably, using our
strength as a sustainable and
diversified global woodfibre group,
focused on DP, graphic papers,
packaging and speciality papers,
and biomaterials.
Thrive25
Our
the following four main objectives:
strategy encompasses
• Grow our business – Committing
to core business segments while
investing in innovation, growth
opportunities, and ongoing
customer relationships.
• (cid:54)(cid:88)(cid:86)t(cid:68)i(cid:81)(cid:3)(cid:82)(cid:88)r(cid:3)fi(cid:81)(cid:68)(cid:81)ci(cid:68)(cid:79)(cid:3)(cid:75)e(cid:68)(cid:79)t(cid:75)(cid:3)–
Reducing and managing our debt,
growing EBITDA ex SI, maximising
product value, optimising processes
globally, and strategically disposing
of non-core assets.
• (cid:39)ri(cid:89)e(cid:3)(cid:82)(cid:83)er(cid:68)ti(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)e(cid:91)ce(cid:79)(cid:79)e(cid:81)ce(cid:123)–
Strengthening our safety-first culture
and reducing resource use while
enhancing efficiency and making
smart data investments.
• Enhance trust – Improving our
understanding of and proactively
partnering with, clients and
communities, driving sustainability
solutions, and meeting the changing
needs of every employee at Sappi.
In 2020 the Covid-19 pandemic
triggered the deepest global recession
in decades as economic activity faltered
when governments enforced strict
restrictions on movement to curb the
transmission of the virus. The
subsequent implementation of health
and safety protocols and vaccination
programmes enabled economic activity
to resume. However, the emergence of
more transmissible variants of the virus
resulted in a series of Covid-19 waves in
2021 which continued to fuel economic
uncertainty and volatility as countries
moved in and out of lockdown
restrictions.
The impact of the pandemic on our
results in the second half of FY2020
was catastrophic and necessitated
a shift in strategic focus to the
preservation of liquidity.
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The Saiccor Mill expansion project was impacted negatively by the Covid-19
pandemic. The ongoing travel restrictions due to Covid-19 prevented original
equipment vendors from travelling to South Africa and resulted in significant delays
to the project schedule and commissioning timeline. The civil unrest in July 2021
necessitated a complete shutdown of the site and added to the delays. The hot
commissioning of the plant began in the fourth quarter and will be completed during
the first quarter of FY2022. We expect the ramp up to full operating rate will take a
number of months and therefore full cost savings and environmental benefits of the
project will likely only be realised from the second half of 2022. We anticipate
demand for DP in 2022 will be strong and with pricing significantly above the
long-term average, every effort will be made to expedite the ramp-up.
The strategic decision taken to reduce exposure to graphic papers through
diversification into packaging and speciality papers continued to yield benefits
through the year. Sales volumes grew by 21%, and EBITDA ex SI in this segment
reached a new record high, contributing 40% of the group EBITDA ex SI (vs 18%
in FY2019). The underlying demand for packaging and speciality paper grades
remained resilient despite the negative impact of Covid-19 on the demand for
non-essential luxury goods. The gratifying growth in sales volumes was primarily
driven by the ramp up of the Somerset Mill PM1 conversion in North America, which
achieved target run rate during the period. Strong demand for our packaging grades
in the US allowed for product mix enhancement and optimisation at both a product
and customer level, which facilitated growth in EBITDA ex SI margins in the region. In
FY2022, we will continue to optimise margins by shifting into more high-end label
and packaging markets while expanding on our base folding carton business. In
Europe, packaging and speciality paper sales volumes grew by 10% despite a
relatively slower economic recovery from Covid-19 and we expect further growth
during FY2022 as retail and consumer activity increases. New product introductions
such as our containerboard Fusion Nature range and Parade Label Pro will enable us
to further expand our European portfolio of packaging and speciality papers. In
South Africa, containerboard demand continues to grow, driven by robust fruit
exports, and in FY2022 we will optimise our customer portfolio to focus on
supporting the growth in the domestic market.
We are committed to reducing our exposure to the graphic paper market and will
continue to explore opportunities to utilise our graphic paper assets to produce
packaging and speciality paper grades without significant capital investment.
Sappi Biotech made pleasing progress in growing lignin and commercialising our
Symbio fibre composite and Valida fibrillated cellulose product offerings. In FY2021,
commercialisation of Symbio gained traction with uptake by a major automotive
manufacturer in the US, while various other brand owners have the product in their
pre-commercial qualification phase. Our Valida pilot plant is running at capacity with
repeat orders in diverse application fields such as concrete, cosmetics, personal
care, paint and coatings, where it is valued as a dispersant, suspension stabiliser and
rheology modifier. Our lignin business continued with its expansion trajectory in
FY2021 and for the third year in a row, growth exceeded 30%. We have made
considerable progress in moving beyond traditional commodity markets such as
dust suppression and concrete admixtures to higher value markets. As part of Sappi
Biotech’s ongoing strategy to enter adjacent markets, the development of our lignin
product for the animal feed industry culminated in the launch of our Sappi Pelletin
product in this market with first sales reported in 2020.
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health
The strategic imperative to deleverage
the business was a key focus in the
current year. The net debt to EBITDA
ex SI leverage ratio decreased from a
peak of 6.5 in the second quarter to
3.7 as EBITDA ex SI recovered steadily
quarter-on-quarter. The leverage ratio
remains significantly above our target
of two times, and therefore the
imperative for FY2022 remains
deleveraging the business and utilising
the cash generated in the year to
reduce our absolute debt.
In 2020 we proactively negotiated the
suspension of the measurement of our
revolving credit facility (RCF)-linked
financial covenants through to
September 2021 (with the first
measurement due in December 2021)
in order to see us through the worst of
the Covid-19 impact on our business
and financial metrics. In 2021, we
negotiated new leverage covenants
(net debt: EBITDA ex SI) with our
banking group. The leverage covenant
for December 2021 is 5.50 and will
reduce quarterly to 4.50 in
December 2022 and 4.25 in
March 2023. The interest coverage
covenant will be reinstated at its
previous level of 2.50 times. With the
leverage ratio of 3.7 at year end, we
have sufficient headroom when the
covenants are reinstated in
December 2021.
In the first financial quarter of 2021,
Sappi Southern Africa Limited issued
five-year convertible bonds with a
principal amount of ZAR1.8 billion.
Shareholder approval to convert the
bonds into ordinary shares of Sappi
Limited was received at the AGM on
03 February 2021. The net proceeds
from the bonds were used to fund the
remaining capital expenditure required
for the expansion of the Saiccor Mill.
25
GROUP OVERVIEW
Letter to the stakeholders continued
During 2021 favourable market conditions provided the group with the opportunity
to refinance the €350 million 2023 bonds at par. Strong investor demand provided
the opportunity to upsize the replacement 2028 bond to €400 million at a coupon
3.625%. The additional proceeds were used to repay the partly drawn RCF in
Europe. We have no significant maturities due before 2026 and we are comfortable
with the maturity profile of our debt.
Capital expenditure in FY2022 is estimated to be US$395 million and includes
approximately US$30 million for completion of the Saiccor Mill expansion,
US$80 million for cost optimisation and quality improvement projects and
US$75 million for sustainability projects.
Drive operational excellence
Reducing both variable and fixed costs throughout the business is integral both
to maintaining or improving margins and to the sustainability of our operations.
This is especially true in commodity businesses where we faced declining demand,
such as graphic papers. In the past year, we set ourselves a target of a US$70
million reduction in third-party expenditure compared to 2020 through efficiency
and raw material usage improvements as well as delivering savings through various
procurement initiatives. We are pleased to report that savings of US$98 million
were realised, which helped offset the significant increase in purchased pulp,
chemicals and energy costs. In 2022 we are targeting a further US$42 million
in variable cost savings.
The sustainability capital projects for FY2022 include the conversion of the calcium
cooking line at Saiccor Mill to the more sustainable magnesium bisulphite
technology as well as decarbonisation investments in Europe to convert boilers at
Gratkorn and Kirkniemi Mills from coal to biomass and an electric boiler at
Maastricht Mill. This Saiccor Mill calcium conversion will reduce the need for
coal-based power generation at the mill, significantly reducing the carbon footprint,
and will additionally facilitate considerable variable cost savings. One of the more
significant cost and quality optimisation projects for FY2022 is an upgrade of the
kraft liner board machine at Ngodwana Mill which will improve the quality of the
product and allow the mill to remain competitive against imported grades. The
South African containerboard market is growing at a rate of 5% per annum on the
back of increasing fruit exports and this is seen as a strategic investment to retain
our customer footprint in preparation for further potential expansions in this product
segment. The cost and quality capital also includes an allocation for information
technology projects which are critical for addressing both the risk and opportunities
offered by Industry 4.0 and will support the various advanced analytics projects
across all three regions which are focused on improving operating efficiencies.
Thrive25
strategy, one of our strategic fundamentals is to ‘enhance trust’.
Enhance trust
Under our
We aim to meet the challenges of a constantly changing business environment
by building mutual trust and proactively partnering with employees, clients and
communities to drive sustainability solutions and create shared value. Our
people strategy focuses on leadership and creating a culture that enhances
OneSappi; builds capability for current and future requirements; and strengthens
employee engagement. In FY2021 we completed an employee engagement survey,
identified areas for improvement and developed appropriate action plans. Values and
ethics are critical for driving operational performance and developing stakeholder
trust. We place a high premium on adherence to sustainable business practices and
ethical behaviour as encapsulated in our Supplier Code of Conduct and in FY2021
we made good progress towards our supplier engagement target. Furthermore,
we have partnered with EcoVadis and will utilise their technology platform and
methodology to assess the sustainability performance of our suppliers.
Thrive25
In January 2021, our South African Forestry division was awarded the first ever
Programme for the Endorsement of Forest Certification (PEFC) forest management
certificate in South Africa. This achievement indicates that Sappi Southern Africa’s
forest management practices meet the requirements for sustainable forest
management set out in the PEFC-
endorsed standard for South Africa,
the Sustainable African Forestry
Assurance Scheme (SAFAS). The
intense work in collaborating on the
development of the SAFAS system
will yield significant benefits outside of
our own forest certification as there is
now potential to make PEFC forest
certification accessible to South
Africa’s small landowners. This has
great promise for ensuring certification
not only delivers social and
environmental value, but also supports
socio-economic and development
priorities.
Through heightening our focus and
ambition on climate action, we seek
to increase our contribution to building
a resilient, thriving world and have
aligned our decarbonisation pathway
with climate science. In FY2021 we
submitted our 2030 GHG emission
reduction target to Science Based
Target initiative (SBTi) for validation
and also completed assessment of
our mill operations and forestry assets
following the TCFD recommendations
on climate-related disclosure.
Thrive25
strategy as we strive to be
Sustainability
Sustainability forms the foundation of
our
a trusted, transparent and innovative
partner in building a biobased circular
Thrive25
economy. The alignment of our
sustainability targets with the United
Nations Sustainable Development
Goals (SDGs) demonstrates our
commitment to ending poverty,
protecting the planet and ensuring that
all people enjoy peace and prosperity.
Sappi has always focused on the
sustainable management of our
operations, on increasing efficiency
and maximising value from our
sustainable natural resources but as
we look to the future, it is clear we have
an obligation to play a role beyond
making and selling. Working with nature
using renewable and sustainable wood
to produce circular, biobased products
can have a sustainable impact on
society and the planet and is the basis
of our ambition to build a thriving world
by unlocking the power of renewable
resources for the benefit of people,
communities and the planet.
In the past year we made great strides
in assessing our risk related to climate
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change utilising the recommendations
of the TCFD, submitted our GHG
emissions reduction target to SBTi for
validation and placed increasing focus
on managing risk in our supply chains
via our Supplier Code of Conduct
roll-out and partnership with EcoVadis.
Looking forward
Strong demand in the global textile
and apparel sector coupled with low
inventories throughout the value chain
and elevated textile fibre prices (cotton,
polyester and VSF) are all contributing
to our positive outlook for DP in
FY2022. Furthermore, growing
consumer demand for nonwoven
hygiene products and a global shift
away from single use plastics creates an
opportunity for viscose based cellulosic
nonwoven products that drives further
positive sentiment for our DP business.
However, short-term DP demand in
China is impacted by the recent
implementation of energy savings
regulations imposing curtailments for
energy-intensive manufacturing
operations, which includes the textile
value chain. Consequently, the Chinese
DP market price dropped to US$940
per ton in October 2021. However, lower
VSF supply and a widening price
differential to cotton fuelled a significant
rise in VSF pricing, which should be
positive for DP pricing. Sappi’s sales
volumes are not expected to be
impacted by the weaker Chinese market
as demand in South-East Asia, Europe,
North America and the near East
remains strong.
The recovery of demand for graphic
papers combined with industry
capacity closures has tightened the
market balance. In North America,
ongoing restrictions on imports due
to global supply chain disruptions have
further contributed to a positive
environment in this region. The underlying
demand in the packaging and speciality
papers segment remains robust in both
the North American and South African
regions and opportunities for further
growth in sales volumes exist in
Europe. The scheduled Somerset Mill
annual maintenance shut, which
includes an extended statutory cold
outage, will have an estimated
US$22 million impact on profitability
in the first quarter.
Recent spikes in global energy prices
for gas, power and coal are anticipated
to have an adverse impact on our first
quarter results, principally in Europe.
To offset rising costs, we have
announced selling price increases
across all paper grades. In addition,
energy specific surcharges have
been implemented for all European
shipments from 25 October 2021.
Global logistical challenges and vessel
shortages are expected to continue
through FY2022, which may have an
ongoing negative impact on our export
sales. It is unlikely that any significant
improvement in supply chain reliability
will be realised in the first quarter and
hence the backlog of 100,000 tons
of DP sales volumes will take time
to resolve.
Capital expenditure in FY2022 is
estimated to be US$395 million and
includes approximately US$30 million
of Saiccor Mill expansion capex,
US$80 million for cost optimisation
and quality improvement projects
and US$75 million for sustainability
projects.
The first quarter of FY2022 will comprise
14 weeks instead of the typical 13-week
quarter. This is in order to adjust our
reporting periods closer to the calendar
periods and will result in increased
sales compared to comparative
quarters.
Current liquidity headroom in the group
remains good, with cash deposits at the
end of the financial year of US$366 million
and committed revolving credit facilities
of approximately US$732 million.
The first measurement of our newly
negotiated covenants will now take
place at the end of December 2021.
We remain encouraged by the growing
resilience of global economies as the
Covid-19 pandemic evolves and the
corresponding recovery in underlying
demand in all of our product segments.
However, the supply chain challenges
and the extraordinary cost inflation
may affect profitability. In addition, the
maintenance shut at Somerset Mill is
scheduled for the first quarter and will
impact EBITDA ex SI. Taking these
factors into account, we anticipate a
further improvement in EBITDA ex SI
for the first quarter of FY2022 relative
to the fourth quarter of FY2021.
Appreciation
The Covid-19 pandemic continues to
impact on our employees, communities,
suppliers, customers, funders and
shareholders. In these uncertain
and difficult times, close relationships,
transparency and trust remain the
foundation of our collaborative approach
to seeking solutions to problems
and creating shared value for all of
our stakeholders. We thank you for
the faith you have shown in us during
these challenging times.
Thrive25
We are grateful for the support of
our customers in all of our different
markets, with whom we continue to
work together, providing relevant
products and services which provide
sustainable value. Our employees
embraced our
strategy and demonstrated incredible
resilience and agility. We thank them for
their unwavering dedication to our
OneSappi vision and adaptation to a
new way of working, which allowed us
to continue operations under the most
difficult circumstances and return the
business to profitability.
purpose and
Our gratitude goes to the board for
their continued commitment to the
group, their valuable insights and
encouragement and for holding us
to the highest ethical standards.
Mrs Janice Stipp has indicated she
will not be making herself available
for re-election as an independent
non-executive director in 2022.
Mrs Stipp was appointed to the board
in June 2019 and served on the Audit
and Risk Committee. We would like to
thank her for the contribution which
she has made to the board since her
appointment.
In conclusion, we value the support
which our shareholders have provided
as we work to enhance sustainable
long-term shareholder returns. We look
forward to their participation at the
AGM on 09 February 2022.
27
GROUP OVERVIEW
Q&A with the CEO
“A steadfast focus on operational
excellence and innovative
problem solving underpinned
our FY2021 strategic objective
to return the business to
profi tability.”
Steve Binnie CEO
Q1
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actions have you taken to mitigate
t(cid:75)e(cid:86)e(cid:3)e(cid:428)(cid:3) ect(cid:86)(cid:3)(cid:68)(cid:81)d(cid:3)(cid:69)(cid:88)i(cid:79)d(cid:3)re(cid:86)i(cid:79)ie(cid:81)ce(cid:34)
Q2
Logistical challenges created havoc
with global supply(cid:3)c(cid:75)(cid:68)i(cid:81)(cid:86)(cid:3)i(cid:81)(cid:123)F(cid:60)(cid:21)(cid:19)(cid:21)(cid:20)(cid:3)
leading to escalating raw material
costs and constraining your export
sales. Do you expect these problems
t(cid:82)(cid:3)(cid:69)e(cid:3)re(cid:86)(cid:82)(cid:79)(cid:89)ed(cid:3)i(cid:81)(cid:3)F(cid:60)(cid:21)(cid:19)(cid:21)(cid:21)(cid:3)(cid:68)(cid:81)d(cid:3)(cid:90)(cid:75)(cid:68)t(cid:3)i(cid:86)(cid:3)
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There is no doubt the Covid-19 pandemic dominated our
business environment in FY2021. However, we are grateful
for the adaptability of our workforce and the resilience of the
global economy, which rebounded much faster than we
could have anticipated a year ago. Although we are
optimistic the worst is behind us, we also recognise there are
signifi cant ongoing challenges and risks for our markets and
operations due to recurring waves of infection. Our Covid-19
action plan to ensure safe working conditions for all of our
employees has been successful and we entrenched a new
way of socially distanced working. The roll out of vaccinations
across all our operating regions was a major highlight for the
year and we encouraged all our employees to vaccinate for
their safety and that of their families and colleagues. In South
Africa we established vaccination sites at our major
operating units and off er vaccination for employees,
contractors and their family members. A steadfast focus on
operational excellence and innovative problem solving
underpinned our FY2021 strategic objective to return the
business to profi tability. Market demand across all our major
product segments improved progressively during the year as
global economic activity resumed and despite the signifi cant
headwinds including unprecedented supply chain challenges
and cost infl ation, we were able to achieve our objective in
the second half of the fi nancial year.
The unprecedented logistical issues we faced in the past
12 months began with the economic upheaval of the
pandemic. The situation was aggravated by the strength of
the economic rebound as lockdowns eased, combined with
container and vessel dislocation. In principle there are
suffi cient containers and vessels to handle global trading
volumes, but the sudden onset of the pandemic stranded
large numbers of containers and vessels in the wrong
geographical location, thereby substantially reducing
availability in several parts of the world. Additionally, ports
around the globe struggled with increased shipping volumes
and vessel berthing delays, resulting in ports and shipping
lines not being able to clear backlogs, which created even
more bottlenecks and congestion. Our exports from South
Africa were further impacted by signifi cant events including
civil unrest and a cyber-attack which exacerbated the
existing ineffi ciencies at the Durban Port. But it is not only
ocean freight that is a problem. In every region where we
operate, domestic transport systems were also under
pressure due to surging demand and a shortage of drivers
during Covid-19 waves. Consequently, costs for rail/road
freight increased considerably. These logistical disruptions
contributed to the global surge in infl ation as lower
inventories and signifi cantly increased lead times for
deliveries of raw materials led to shortages of certain key
supplies, which of course drove prices upwards.
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GROUP OVERVIEW
To mitigate the impact of raw material shortages and cost
inflation, we have optimised product recipes to manage
usages of constrained input materials, fast-tracked R&D
efforts to identify material substitution opportunities and
implemented price increases across all our product
categories. Despite the challenging shipping environment,
we managed to consistently secure space by leveraging our
extensive global logistics network and contracts. We also
negotiated spot deals where possible to secure additional
capacity and engaged directly with senior leaders of our
principal shipping lines. These are global logistical issues
affecting all industries, so we are not unique in our
challenges and there is significant pressure on shipping lines
and ports to address the issues. The sheer scale of the
problems suggest it will take time to resolve. However, we are
seeing encouraging signs of improvement that indicate that
the worst is over, and in South Africa, we are working directly
with shipping lines to gain access to additional capacity and
dedicated vessels and planning more direct routes to
expedite delivery of our backlog of DP volumes to our
customers.
Q3
DP market prices surged well above
the long-term average in 2021. Can
you explain some of the drivers that
were responsible and do you think
these high prices are sustainable
given the new capacity entering the
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The impact of Covid-19 on the textile, apparel and fashion
industries was extreme as retailers were forced to close
down during initial lockdowns, which led to a chain reaction
of order cancellation through the entire value chain. Many DP
producers, including Sappi, curtailed production and those
with swing capacity shifted to market paper pulp production.
Some smaller DP producers completely shut operations and
furloughed employees. However, as soon as economic
activity resumed after the first wave, global retail apparel
sales rebounded dramatically. Inventory levels through the
entire value chain, which were already at low levels, came
under severe pressure as supply chain challenges hindered
restocking.
With DP capacity reduced due to the temporary closures
and lead times for global deliveries at all-time highs, the
supply of DP was severely constrained. Additionally, rapidly
climbing paper pulp prices incentivised swing producers to
continue producing paper pulp which intensified the DP
supply shortage. The constrained DP supply, combined with
resurgent VSF demand and prices, fuelled the DP market
price and we saw a meteoric rise from a low of US$624 per
ton in October 2020 to a peak of US$1,106 in April 2021. A
weaker US$/Renminbi exchange rate and surging textile fibre
prices further supported the DP market price. Gradual
restocking of VSF, yarn and grey fabric through the supply
chain and resumption of DP production at the temporarily
shut mills eased the supply/demand imbalance and both
VSF, and consequently DP, prices started to subside from
the third quarter of our financial year. At year end the DP
price was at US$1,000 per ton, which is still above the
long-term historical average. Currently there are short-term
challenges in the textile value chain in China due to energy
curtailments which are putting pressure on the DP market
price. However, the DP demand outside of China remains
buoyant and underlying global textile demand is strong.
Cotton prices soared in recent months, and the differential
between cotton and VSF is the highest in over a decade,
which should incentivise yarn producers to shift from cotton
to VSF in the coming months. All of these factors create a
positive outlook for DP in FY2022 and therefore we are
optimistic the elevated DP pricing will continue for some
months. Long term, we believe a more sustainable price will
be around US$850 per ton. The new DP capacity entering
the market in 2022/2023 is from integrated pulp/fibre
producers and we expect the pulp to be absorbed into their
own fibre production. Globally, retail apparel sales are still
below pre-Covid-19 levels, and we anticipate that the
combination of value chain restocking and resumption of
further textile demand growth will absorb this additional
capacity and therefore supply/demand will be balanced as
we move through the next two years.
Q4
The packaging and specialities
segment delivered record sales
(cid:89)(cid:82)(cid:79)(cid:88)(cid:80)e(cid:86)(cid:3)(cid:68)(cid:81)d(cid:3)E(cid:37)(cid:44)(cid:55)(cid:39)(cid:36)(cid:3)e(cid:91)(cid:3)(cid:54)(cid:44)(cid:3)i(cid:81)(cid:3)F(cid:60)(cid:21)(cid:19)(cid:21)(cid:20)(cid:17)(cid:3)
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expect further growth in this
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Our investments of recent years into packaging and
speciality papers are bearing fruit. We are particularly
pleased with the progress of our Somerset Mill PM1
conversion. The machine can make both coated woodfree
and paperboard packaging grades and this hybrid swing
capability has worked exceptionally well for us and allowed
this machine to run at maximum operating rates as we have
ramped up the packaging volumes in the past couple of
years. From our second quarter, we achieved our target
volumes of packaging grades and the focus is now on
optimising the product and customer mix to maximise
margins. Within the US we have some additional
opportunities to make label grades on our graphic paper
machines at Cloquet and on PM2 at Somerset and we will
pursue every opportunity to maximise these volumes. In
Europe we experienced good growth in our packaging and
speciality papers volumes and there is further opportunity
for additional containerboard at Ehingen and paperboard at
Maastricht in FY2022. We are also exploring opportunities
for wet-glue and self-adhesive labelling at Gratkorn
alongside existing graphical grades. Robust demand for
containerboard in South Africa was supported by buoyant
fruit exports. South Africa is the world’s second largest
exporter of citrus and fruit exports remain the main
contributor to positive agricultural trade balance for the
country. The outlook for the agriculture exports sector in
South Africa is promising, and there are exciting
opportunities to expand our containerboard capacity in the
future to meet the growing demand in this segment.
29
GROUP OVERVIEW
Q&A with the CEO continued
Q5
Graphic paper demand seems to
have recovered to pre-Covid-19
levels, but margins are still below the
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demand in this sector developing in
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Q6
ESG seems to be the latest buzz
word in the sustainability space.
What does ESG mean to Sappi and
how are you integrating sustainable
business practices into your
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Pre-Covid-19 the decline in demand for graphic paper was
especially noticeable in developed countries, where there
has been a clear correlation between reducing paper
consumption and economic advancement, driven by
digitisation. The Covid-19 pandemic had an immediate and
devastating impact on paper demand and accelerated some
of the previously existing declining trends. The closure of
retail stores and restrictions on travel due to strict lockdowns
impacted advertising demand. Additionally, the shift to
remote working and virtual meetings led to a significant
reduction in office-paper consumption such that in 2020 we
were predicting a 20% permanent reduction in graphic paper
demand due to Covid-19. Over the last two years, graphic
paper producers reacted to the dampened market outlook
by taking drastic steps to curtail production. Numerous
closures and conversions resulted in 10-20% of the
production capacity exiting the market, including our Paper
Machine 2 (PM2) at our Stockstadt Mill as well as PM9 and
the energy complex at Westbrook Mill. However, the steady
recovery of paper demand through 2021 combined with the
market capacity closures resulted in a restoration of market
balance in Europe and North America as we begin our 2022
financial year. While some of the demand may be temporary
restocking, we are encouraged by the fact that globally,
economic activity, particularly travel and entertainment, is
not yet at pre-Covid-19 levels. We are therefore optimistic
about the short-term outlook for the segment. Unfortunately,
cost inflation is negatively impacting our margins and we are
focusing on operational efficiencies and offsetting rising
costs through announced price increases. Longer term, we
expect the demand decline to continue at 5-6% per annum.
We will endeavour to reduce our cost base through smaller
investments in efficiency improvement projects where
appropriate and maximise cash generation through FY2022
as we look for further opportunities to diversify into higher-
margin packaging grades.
Institutional investors are increasingly committing to
sustainability as a core driver of financial value. While financial
metrics were the primary tools for investment selection in the
past, this new wave of socially and environmentally
responsible investing requires a completely new framework
for evaluation incorporating environmental, social, and
governance (ESG) factors into the financial analysis.
Investors are increasingly applying these non-financial
factors as part of their analysis process to identify material
risks and growth opportunities. We are experiencing a
significant increase in investor requests for ESG discussions
and there is no doubt these factors are becoming more critical
to our shareholders. At Sappi, our commitment to sustainability
is based on being a trusted, transparent and innovative
partner in building a biobased circular economy and we
welcome these ESG engagements as opportunities to share
our sustainability journey and values.
One of the key challenges we face is that ESG disclosures
are not commonly part of mandatory financial reporting and
currently there is no standardised approach to the
calculation or presentation of different ESG metrics. Various
rating firms have developed ESG frameworks which tend to
rely on multiple criteria to evaluate each of the individual E, S
and G components and provide an overall score for
companies. Since most ESG evaluations are based on
information that is available in the public domain, the
pressure on companies to disclose more and more
information is escalating. While we fully support the
underlying principles of ESG and the drive for sustainable
value creation, we question whether there is a good
understanding of the relative merits and limitations of the
different metrics. For this reason, we view every opportunity
to engage with stakeholders on ESG matters as an
opportunity to contexualise our sustainability performance,
targets and action plans. We recognise that as an industry
that utilises renewable resources, there is both great
opportunity and an ethical obligation to reduce adverse
impact inherent in our business. Value for Sappi is not only
about delivering returns to our shareholders, it is about
maximising the value of every resource along our value chain
to ensure those returns are sustainable and embedding
sustainable business practices and innovation into our
overall business. This is the foundation of our
strategy.
Thrive25
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GROUP OVERVIEW CREATING VALUE BY RESPONDING STRATEGICALLY
Page heading
O N
W A R D S
When presented with a dandelion, few people can resist the urge to hold the
flower and blow at it to see how far the seeds will travel. It’s the same when
presented with a beautiful coffee table book or an impactful piece of print –
there is an almost irresistible urge to pick it up, examine it and touch it. Studies
have shown that even the simple act of touching objects, like premium packages,
brochures and direct mail, can subconsciously increase the perceived value of a
brand and its products in the eyes of customers.
Touch can make a stronger impact than sight or sound alone. That’s because touch
has the power to shift the brain into a deeper level of engagement, one more
conducive to building lasting knowledge. In fact, a number of studies have found that
communication through physical media, particularly paper, is more likely to lead to
knowledge than communication via digital media.
The haptics of paper and board, together with our need to touch and feel, have created
high-growth, cash-generative niche opportunities for Sappi.
We continue to move onwards in terms of paper and paper packaging: Our paperboard
packaging product lines are some of the most renowned and valued brands with high-finish
premium solutions for cosmetics and perfume, health and beauty care, consumer electronics,
confectionery, luxury drinks, food packaging and more. Our packaging brands constitute a
great portion of the food packing and labels on shop shelves today. And our graphic papers are
used to grab the attention of consumers all over the world.
32
Page heading continued
O N
W A R D S
When presented with a dandelion, few people can resist the urge to hold the
flower and blow at it to see how far the seeds will travel. It’s the same when
presented with a beautiful coffee table book or an impactful piece of print –
there is an almost irresistible urge to pick it up, examine it and touch it. Studies
have shown that even the simple act of touching objects, like premium packages,
brochures and direct mail, can subconsciously increase the perceived value of a
brand and its products in the eyes of customers.
Touch can make a stronger impact than sight or sound alone. That’s because touch
has the power to shift the brain into a deeper level of engagement, one more
conducive to building lasting knowledge. In fact, a number of studies have found that
communication through physical media, particularly paper, is more likely to lead to
knowledge than communication via digital media.
The haptics of paper and board, together with our need to touch and feel, have created
high-growth, cash-generative niche opportunities for Sappi.
We continue to move onwards in terms of paper and paper packaging: Our paperboard
packaging product lines are some of the most renowned and valued brands with high-finish
premium solutions for cosmetics and perfume, health and beauty care, consumer electronics,
confectionery, luxury drinks, food packaging and more. Our packaging brands constitute a
great portion of the food packing and labels on shop shelves today. And our graphic papers are
used to grab the attention of consumers all over the world.
33
CREATING VALUE BY RESPONDING STRATEGICALLY
CREATING VALUE BY RESPONDING STRATEGICALLY
Risk management
Our risk
management
philosophy
We have an established
culture of managing key
risks to our business.
We believe effective risk
management will safeguard
the continuity of our
operations and contribute
to the achievement of our
strategic objectives.
Therefore, we ensure that
our risk management
processes are aligned and
compatible with our
strategy.
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Over the years, we have implemented several
processes, resources and structures to ensure
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Among these, we have entrenched safety
programmes, internal audit reviews, insurance,
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and governance processes throughout the group,
along with quality management and a range of line
management interventions. We are also working to
implement the recommendations of the Task Force
(cid:82)(cid:81)(cid:3)C(cid:79)i(cid:80)(cid:68)te-re(cid:79)(cid:68)ted(cid:3)Fi(cid:81)(cid:68)(cid:81)ci(cid:68)(cid:79)(cid:3)(cid:39)i(cid:86)c(cid:79)(cid:82)(cid:86)(cid:88)re(cid:86)(cid:3)(cid:11)(cid:55)CF(cid:39)(cid:12)(cid:17)
Group board of
directors
Assumes overall responsibility for
risk governance
Group Audit and
Risk Committee
Mandated to assist the board in
carrying out its risk management
responsibilities at group level
Line management
in each region,
business unit and
operation
Responsible for implementing
regional risk management
processes
Group Internal
Audit
Provides independent assurance
on(cid:123)the risk management process
CREATING VALUE BY RESPONDING STRATEGICALLY
Risk appetite and
tolerance
We have a board-approved framework
for risk appetite and tolerance. Risk
appetite is the total quantum that
Sappi wishes to be exposed to on the
basis of risk/return trade-offs for one
or more desired and expected
outcomes. This is the quantum of risk
that the board believes will provide an
adequate margin of safety within the
group’s risk capacity while enabling the
achievement of strategic objectives.
Risk tolerance is the amount of
uncertainty Sappi is prepared to
accept. This is the maximum level of
loss or reduced earnings that can be
absorbed without compromising key
objectives, e.g. return on investment.
For an analysis of the principal financial
risks we are exposed to, refer to note
32 to the Group Annual Financial
Statements on
www.sappi.com/annual-reports
Our 2021 Risk Management Report
provides a detailed discussion of
the group’s risk factors, and can
be accessed on
www.sappi.com/annual-reports
6
3
2
(cid:24)
(cid:23)
7 8
10
9
1
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Very low
Impact
Very high
Strength of current mitigations
Weak
Satisfactory
Good
Top 10 risks
Residual risk ranking
1
2
3
4
5
6
7
8
9
Safety
Evolving technologies and consumer preferences
Supply chain disruption
Sustainability expectations
Climate change
Cyber security
Cyclical macro-economic factors
Uncertain and evolving regulatory landscape
Liquidity
10
Employee relations
35
CREATING VALUE BY RESPONDING STRATEGICALLY
Risk management continued
1 Safety
Root cause
Due to the nature of our manufacturing facilities and forestry operations, our employees and contractors
operate in an inherently dangerous environment. We continue to prioritise their health and safety to ensure
the continuity of our business.
(2020: 1)
Thrive25
strategy
objectives impacted
Mitigating actions
Related material issues
3Ps impacted
• Conduct root cause analyses of all major incidents and
• Ensuring the safety of our employees
fatalities
• Drive continuous improvement in safety performance
• Ensure compliance with behaviour-based safety (BBS)
principles
• Host regular training sessions
• Approach all transgressions of our safety policies
with discipline
• Encourage reporting of near-miss incidents
• External safety reviews
and contractors
• Engaging more closely with our
employees
• Supporting sound labour relations
Capitals impacted
2 Evolving technologies and consumer preferences
Root cause
The advent of new technologies has an unavoidable impact on the way we operate. Similarly, changes in
consumer preferences driven by emerging trends in advertising, electronic data transmission and storage,
the internet and mobile devices, as well as digital alternatives to traditional paper applications, could
materially affect the sustainability of our business.
(2020: 3)
Thrive25
strategy
objectives impacted
Mitigating actions
Related material issues
3Ps impacted
• Improve profitability by implementing restructuring and
other cost-saving projects
• Enhance productivity
• Drive growth in our higher-margin packaging and
speciality paper business
• Leverage our position in the market to capture growth
in the dissolving pulp (DP) market
Capitals impacted
• Procuring responsibly
• Reinforcing Verve (our dissloving
pulp brand) as the Fibre of Choice
Increasing the sustainability of our
products by exploring opportunities
in adjacent markets
•
• Developing and commercialising
innovations in addition to adjacent
businesses
• Sourcing sustainable woodfibre
• Prioritising renewable and clean
energy
• Responding to climate change
• Demonstrating agility
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Page heading continued
3 Supply chain disruption
Root cause
We depend on a reliable and efficient supply chain to deliver products to our customers within a time frame
that meets their expectations. A number of factors, many of which are beyond our control, could disrupt the
operation of our supply chain and jeopardise our ability to fulfil our customers’ orders. These factors include
inclement weather, natural disasters, transportation interruptions or inefficiencies, port or traffic congestion,
labour shortages or disruptions and oil price increases, as well as unrest and pandemics (such as Covid-19).
These could impair our ability to supply our customers or maintain an appropriate logistics chain and levels of
production and inventory, all of which could adversely affect our reputation, business, results of operations and
financial condition.
(2020: not ranked)
Thrive25
strategy
objectives impacted
Related material issues
• Demonstrating agility
• Responding to climate change
• Procuring responsibly
3Ps impacted
Capitals impacted
Mitigating actions
• Documented business continuity and Covid-19 plans
• Ability to operate via multiple transportation modes
• Operational plans to utilise multiple ports for shipments
• Ongoing communication with key stakeholders, including
government
• Alternate modes of shipping
• Fine-tuning internal processes to enhance coordination
between departments
• Negotiating longer lead times
4 Sustainability expectations
Root cause
The requirements from stakeholders are changing rapidly, challenging Sappi’s ability to keep up to date,
exceed or even lead with regard to regulatory, social, product and environmental demands. Our operational
impact and environmental footprint need to support and demonstrate our sustainability commitments and
actions.
(2020: 5)
Thrive25
strategy
objectives impacted
Mitigating actions
Related material issues
3Ps impacted
• Utilise product certifications
• Enhanced health and safety specifications
• Promote recyclability
• Drive product innovation (including R&D)
• Move fast to secure benefit from the high-value niche
opportunities created by the ‘paper-for-plastics’
movement
• Build on our strong position and commitment to fibre
certification
• Procuring responsibly
•
Increasing the sustainability of our
products through circular design and
adjacent markets
• Developing and commercialising
innovations in addition to adjacent
businesses
• Sourcing sustainable woodfibre
• Prioritising renewable and clean
• Communicate our social and environmental credentials
energy
Capitals impacted
through all media channels
• Responding to climate change
• Focusing on water stewardship
• Accelerating circular business
models
• Safeguarding and restoring
biodiversity
37
CREATING VALUE BY RESPONDING STRATEGICALLY
Risk management continued
5 Climate change
Root cause
Climate change will have an unavoidable effect on our business in the form of transitional, reputational and
physical impacts. The latter include the frequency and intensity of forest disturbances such as wildfires and
extreme storms. This, in turn, could reduce forest productivity and change the distribution of tree species.
The impact of climate change on our supply chain, including the availability of raw materials and the wood
supply we need for our operations, may adversely impact our business.
(2020:9)
Thrive25
strategy
objectives impacted
Regarding transitional risk, governments around the world are focusing on carbon trading and taxes as a
response to climate change and such taxes could impact profitability to an increasing extent in future.
Mitigating actions
Related material issues
3Ps impacted
• Source pulp and woodfibre from a variety of sources and
•
regions
• Invest in fire, pests and disease prevention protocols in
South Africa, as well as site species matching to
withstand abnormal weather events and reduce our water
footprint in this region
• Formulate a climate change strategy under the auspices
of our Task Force on Climate-related Financial Disclosure
(TCFD) work
• Sappi Southern Africa has engaged National Treasury via
Paper Manufacturers’ Association of South Africa
(PAMSA) to motivate taking into account carbon
sequestration by companies that own their own forests
when calculating carbon tax
Increasing the sustainability of our
products through circular design and
adjacent markets
• Developing and commercialising
Capitals impacted
innovations in addition to adjacent
businesses
• Sourcing sustainable woodfibre
• Prioritising renewable and clean
energy
• Responding to climate change
• Focusing on water stewardship
• Accelerating circular business
models
• Safeguarding and restoring
• Group-wide decarbonisation initiatives are in place
biodiversity
6 Cyber security
Root cause
During the normal course of our business, we make use of our digital platforms to access and transact
on confidential customer, employee, financial and commercial information, through our transactional and
production systems. We also store, access and share our trade and proprietary information in our
databases. These could be vulnerable/susceptible to cyber-attacks.
(2020:10)
Thrive25
strategy
objectives impacted
Mitigating actions
Related material issue
3Ps impacted
• Mitigate against cyber-attacks and information security
• Maintaining ethical behaviour and
breaches through our multi-layered information
technology security programme
• Adhere to relevant data protection laws in the
jurisdictions where we operate
• Provide relevant cyber security training to all our
employees
• Identify the employees susceptible to social engineering
and phishing attacks
compliance
Capitals impacted
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CREATING VALUE BY RESPONDING STRATEGICALLY
Page heading continued
7 Cyclical macro-economic factors
Root cause
Our business is impacted by cyclical changes in global economic conditions, including fluctuations in
exchange rates, periodic supply and demand imbalances, industry capacity and output levels. Global
economic turmoil (including that caused by the Covid-19 pandemic) can lead to significant decreases in
sales volumes, as well as pressure on our prices in the markets where we operate. We continue to operate
in a highly competitive environment. Consolidation in the pulp and paper industry – leading to larger, more
focused companies – has become more prevalent.
(2020: 2)
Thrive25
strategy
objectives impacted
Mitigating actions
Related material issues
3Ps impacted
• Monitor the balance between supply and demand
• Monitor potential impairment of operating assets
• Implement capacity closures as required
• Improve efficiencies and reduce costs across the
business
• Enhance customer service, innovation, and efficient
manufacturing and logistics processes
• Drive performance to set our businesses apart from
competitors
• Increase pulp integration
• Demonstrating agility
• Enhancing efficiency through
machine learning and digitisation
• Developing and commercialising
innovations in addition to adjacent
businesses
Capitals impacted
8 Uncertain and evolving regulatory landscape
Root cause
Our business is subject to various regulatory requirements across the regions where we operate, including
requirements relating to environmental stewardship, health and safety. Significant changes to applicable
laws and regulations – along with instabilities in political, financial and social spheres – could impact our
competitiveness and profitability.
(2020: 7)
Thrive25
strategy
objectives impacted
Mitigating actions
Related material issue
3Ps impacted
• Maintaining ethical behaviour and
compliance
Capitals impacted
• Remain up to date on changes to applicable legislation
• Ensure compliance with all relevant laws and legislation
• Report regularly on compliance to the Group Audit and
Risk Committee
• Reduce the impact of our operations on the environment,
as guided by relevant and recognised programmes
• Invest in initiatives aimed at reducing our air emissions,
wastewater discharges and waste generation
• Monitor potential changes in pollution control laws,
including greenhouse gas (GHG) emission requirements,
and take action accordingly
• Cooperate across regions to apply best practices in
sustainability
39
CREATING VALUE BY RESPONDING STRATEGICALLY
Risk management continued
9 Liquidity
Root cause
Our principal sources of liquidity are cash generated from operations and available under our credit
facilities, and other debt arrangements. Our ability to generate cash depends mainly on general economic,
financial, competitive, market and regulatory factors. Our cash flow from operations may be adversely
impacted by a downturn in worldwide economic conditions (including as a result of the effects of the
Covid-19 pandemic), which could result in a decline in global demand for our products.
(2020: 4)
Thrive25
strategy
objectives impacted
Mitigating actions
Related material issues
3Ps impacted
• Cost saving initiatives
• Re-prioritising various strategic initiatives
• Commercial downtime taken to match supply to demand
• Deferral of non-critical capex projects
• Postponement of scheduled annual maintenance shuts
• Demonstrating agility
• Enhancing efficiency through
machine learning and digitisation
• Developing and commercialising
innovations in addition to adjacent
businesses
Capitals impacted
10 Employee relations
Root cause
The majority of our employees are represented by labour unions and are subject to collective bargaining
agreements. These agreements are negotiated and renewed periodically, and any corresponding wage
increases or work stoppages could impact our business. The risk of workforce reductions, closures or
restructuring remains a reality given the current economic climate.
(2020: 8)
Thrive25
strategy
objectives impacted
Mitigating actions
Related material issues
3Ps impacted
• Interact and engage with union representatives and
• Ensuring the safety of our employees
organised labour regularly
• Build constructive work relationships
and contractors
• Engaging more closely with our
employees
• Supporting sound labour relations
• Attracting, developing and retaining
key skills
Capitals impacted
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CREATING VALUE BY RESPONDING STRATEGICALLY CREATING VALUE BY RESPONDING STRATEGICALLY
Our key relationships
One of the strategic
fundamentals of
our Thrive25
strategy is
to enhance trust.
This means listening to
our stakeholders and
responding to their
issues and concerns.
To do this and to improve
our understanding of their
needs, we proactively
partner with them, challenging
the status quo where necessary
as we seek to transform the
future with innovative, biobased
and renewable materials.
Employees
Unions
Customers
Communities
Industry bodies, related
memberships and
organised business
Shareholders,
bondholders and banks
Suppliers and
contractors
Government and
regulatory bodies
Civil society
and media
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Our overarching aim is to collaborate with our stakeholders to
make all processes and materials more sustainable and also to
leverage cutting-edge thinking that will help them become more
successful and contribute to a thriving world.
The challenges facing the creation of a thriving world necessitate decisive
action. In partnership with our stakeholders, we are thinking and acting more
boldly than ever before to come up with real-world solutions to a broad range
of challenges.
We establish and maintain proactive dialogue with all our stakeholders. In doing
so, we recognise that stakeholder needs are dynamic and that we need to be
responsive to the evolving stakeholder landscape. In addition to
responsiveness, our approach to engagement is based on the principles of
inclusivity, materiality, relevance and completeness.
We assess the quality of our relationships both informally, as set out on the
following pages and formally – through regular employee and customer surveys,
community forums and Poverty Greenlight in South Africa.
Our stakeholder work is aligned to the governance framework of King IV Code
on Corporate Governance (King IV) namely performance and value creation,
adequate and effective controls and trust, as well as reputation, legitimacy and
ethics. Our membership of the United Nations Global Compact (UNCG) provides
further guidance to our stakeholder approach.
Trust is not possible without an ethical culture underpinning our everyday
activities, which is why we train our employees, customers and suppliers on our
Code of Ethics and also promote awareness of the Sappi Hotlines in each
region which allow all stakeholders to report breaches of the Code in full
confidentiality without fear of reprisal.
We regularly review our activities with regard to the Organisation for Economic
Co-operation and Development (OECD) Anti-Bribery Convention and the
Convention's 2009 Anti-Bribery Recommendation, particularly Section VII of
the OECD Guidelines for Multinational Enterprises dealing with Combating
Bribery, Bribe Solicitation and Extortion. No issues have been raised regarding
Sappi with regards to compliance with the Convention and Guidelines either
externally or internally.
Read more: Maintaining ethical behaviour and compliance on page
71.
Principle 10: Businesses should work against corruption in all its forms,
including extortion and bribery.
CREATING VALUE BY RESPONDING STRATEGICALLY
Employees
Self-assessment of quality of relationship: Good
Why we engage
As we take Sappi into the future based on the clear roadmap entrenched in our
Thrive25
strategy, our task is to help our people understand the plan and clear
their path to success. Our aim is to unlock the wide-ranging, significant
expertise of our people today and tomorrow. In doing so, we secure our exciting
future in woodfibre as a business that provides relevant solutions, delivers
enhanced value and is a trusted partner to all our stakeholders.
Shared priorities
Shared priorities
Constructive action with regard to Covid-19
Focused wellness and wellbeing
Our response
Our response
As the pandemic and associated lockdown dragged on,
we continued to facilitate remote working and a staggered
return to our sites. Covid-19 information hubs continued
to support our staff, customers and their families, focusing
specifically on vaccination-related topics.
Read more on page
64 under Our operating context
• Wellbeing and wellness programmes are tailored to the
•
needs of each region.
In SSA, our (cid:43)(cid:44)(cid:57)(cid:18)(cid:36)id(cid:86)(cid:3)(cid:83)r(cid:82)(cid:74)r(cid:68)(cid:80)(cid:80)e provides support for
employees and contractors. In this region, we also work
with government in terms of community health
programmes.
Shared priorities
Involvement in safety
Shared priorities
Effective recognition programmes
Our response
Our response
• For the second year running, the theme for Global Safety
Our recognition programmes include:
•
Awareness week was ‘I Value Life’. In the light of the
Covid-19 pandemic, virtual webinars and e-media
were used to convey safety messages to our people.
Involving our people in health and safety is part of our
collaborative approach to doing business. Health and
safety committees are in place at all our operations.
Through these committees, our people are consulted
about the development/review of policies and
procedures and changes that affect workplace safety
or health.
–
–
–
–
In SEU, formal health and safety committees are in
place at different levels of the business in line with
statutory requirements. All employees are represented
by the safety committees.
In SNA, all unions have the opportunity to participate in
joint management/worker safety committees.
In SSA, (including Sappi Limited), health and safety
representatives are elected from non-supervisory
staff. In line with legislation, there is one representative
for every 50 workers.
Sappi Trading does not have formal joint management
worker health and safety committees due to the small
size of the offices, but there are appointed safety
officers.
Sappi Limited
• Technical Innovation Awards
• CEO Award for Excellence
SEU
• Annual Coryphaena Award
SNA
• TOUTS Recognition Awards – in FY2021 employees
generated over 2,400 TOUTS
• Periodic regional President’s Awards
SSA
• Excellence in Achievement Awards
• Annual safety awards
• Annual regional CEO Awards
Sappi Trading
• SMART Awards
Read more about safety: Ensuring the safety of
80.
(cid:82)(cid:88)r(cid:123)e(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)ee(cid:86)(cid:3)(cid:68)(cid:81)d(cid:3)c(cid:82)(cid:81)tr(cid:68)ct(cid:82)r(cid:86)(cid:3)(cid:82)(cid:81)(cid:3)(cid:83)(cid:68)(cid:74)e(cid:3)
43
CREATING VALUE BY RESPONDING STRATEGICALLY
Our key relationships continued
Employees continued
Shared priorities
Shared priorities
Connection with Sappi’s strategic goals and
high levels of engagement
Encourage employee volunteerism through
initiatives
Our response
Our response
We conduct engagement surveys every second year,
with the most recent taking place this year. In 2021
we selected a new survey provider. Their service offering
includes a much-improved participant experience,
significant granularity in reporting as well as fast turnaround
times in obtaining the results. The timespan for results
reduced from three months to one month. In addition, the
engagement categories in the new survey are more defined
and specific than in the previous survey.
Read more: Engaging more closely with our employees on
page
82.
SEU: Support of various local education, cultural and
environmental projects based on annual requests and
identified needs.
SNA: Through the Employee Ideas that Matter initiative,
we provide grants to employees to benefit non-profit
organisations they are most passionate about. The winners
share US$25,000 in corporate giving to support their
selected causes.
SSA: Employee wellbeing committees at each mill support
local community projects as well as Mandela Day.
Shared priorities
Shared priorities
Training and development that benefits Sappi
and our employees
Understanding of Sappi’s commitment to
sustainability which underpins our strategy
Our response
Our response
Globally, each employee benefited from 48.3 hours of
training. Training spend per region was: SEU: US$473,
SNA: US$238, SSA: US$671, Sappi Trading: US$504.
SEU
• The Leadership Talent Strategy and Sappi Leadership
Academy develop a leadership pipeline.
• The Apprenticeship Programme and Graduate Trainee
Programme source talent.
SNA
• Education programmes are supported at targeted
colleges and universities as are programmes to
encourage study in fields relevant to our operations,
including scholarship programmes and internships.
• We provide support for the University of Minnesota
Sustainable Forests Education Cooperative which offers
continuing education opportunities to forestry and
natural resource professionals in a broad range of fields.
• Sappi Learning, a Cornerstone-based system, is a
training and development tool offering new ways of
engaging employees in personal development planning,
with access to a whole library of online training content,
including Udemy training modules.
SSA
• The Sappi Leadership Academy prepares future leaders.
• Apprenticeships, Engineers in Training and Foresters in
Training programmes build our human capital for the future.
• The Regional Employment Equity and Learning Committee
ensures that we meet our legislative obligation to consult
as placed on us by the Employment Equity Act and Skills
Development Act. The committee meets at least twice
a year.
Globally, targeted internal publications and social media
campaigns linked to global days like Global Ethics Day,
World Environment Day (https://www.youtube.com/
watch?v=Bx7EQuoX8OM) and the International Day
of Biodiversity (https://www.youtube.com/
watch?v=JNyMmRRPJMc) enhance understanding of the
sustainability landscape in general as well as our actions
to ensure that we play an active role in driving responsibility
within this landscape, in particular.
SEU has established the Blue Couch series, featuring video
interviews on new products, innovations, sustainability and
more.
SNA runs an active Sustainability Ambassador
programme which promotes understanding and awareness
of sustainability-related issues.
SSA continues to operate Ask Alex, an initiative whereby
employees can pose questions to our CEO.
Opportunities for value creation
• Alignment with our strategic direction enables our people
to contribute more positively to the business as well as
their personal and career development
• By building our human capital base, we establish a base of
technical skills needed both by Sappi and by the industry
• A diverse workforce enhances our ability to service global
markets and promotes a culture of inclusivity
• An increased commitment to safet(cid:92) delivers benefits at
personal, team and operational levels
• By establishing an ethical culture where corporate
citizenship is promoted, we ensure the ongoing viability
of(cid:123)our business, enhance reputation and become an
employer of choice
Challenges for value creation
• Recruitment and retention of key skills
• Loss of institutional memory as older employees retire
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Supporting communities on Mandela Day
Sappi Southern Africa rallies to the call to #ServeLikeMadiba in July
every year by encouraging our staff to give generously of their time
in the week around former President Nelson Mandela’s birthday.
In 2021 we adjusted our activities due to the realities of Covid-19
restrictions and the impact of social unrest.
One of our biggest benefi ciaries this year was the
Nelson Mandela Children’s Hospital – the fi rst
dedicated children’s hospital in Gauteng – which
received a donation of branded blankets, Typek
A4 paper, and hand sanitiser. They responded by
saying: “Thank you Sappi for #servinglikemadiba
by donating two years’ worth of paper! Together
with sanitiser, blankets and water for the children
at our Nelson Mandela Children’s Hospital.”
Staying in Gauteng, our head offi ce staff
partnered with the Helen Joseph Hospital,
a teaching hospital affi liated with the University
of Witwatersrand's Medical School, to donate
a much-needed specialised fridge for storing
Covid-19 vaccines and other medication at the
optimum temperature. They commented: “The
shortening of time saved in rushing to and from
other areas to fetch medication will help all
patients facing an emergency and will keep our
medication requiring refrigeration safe and
eff ective.”
In KwaZulu-Natal (KZN), our Sappi Forests
personnel donated 90 packs of baby nappies
to the Salvation Army’s Joseph Baynes Children’s
Home in Pietermaritzburg. The staff who received
these were delighted and commented: “Christmas
came early for us this year! When you have
30 children aged under two you use a lot of
nappies every day. Your generous donation was
just so amazing and will go a long way to keep our
little ones dry and comfortable. We thank you for
blessing us with this kind donation. In the
uncertain times we live, people like you make
our jobs just so much easier.”
Elsewhere in KZN, several of our neighbouring
forestry communities in the KZN Midlands were
supplied essential nutritional porridge packs.
Sappi Forests joined forces with Savithi Trading
Company, one of its contractor partners to
distribute 1,500 kg of porridge. A further 3,000 kg
of the porridge was distributed by our teams of
foresters and community relations personnel, who
worked closely with the Department of Social
Development to identify and distribute the
porridge to the child-headed households in our
operational areas near KwaMbonambi, inland near
Ixopo and Bulwer and in the vicinity of Greytown
and surrounds.
In the communities of Umkomaas, Mandeni and
Stanger surrounding our three mills in KZN, our
employees contributed to food parcels which were
distributed by local NGOs to people who had been
aff ected with food shortage, exacerbated by the
disruption of supply chains resulting from the
unrest. Donations were also made by staff from
around the country to assist communities who
had been left destitute by the civil unrest.
At our Mpumalanga operations, we teamed up
with members of the Ngodwana Integrated
Community Forum and arranged an Early
Childhood Development (ECD) Outreach
programme, donating blankets and goodie bags
to the children of Empilweni Day Care and
Woodhouse Day Care centres. In Barberton, the
children at the St John’s Care Centre each
received a care parcel containing toiletries and a
soft toy, while the Centre received Typek offi ce
paper, as did the nine Penreach ECDs that
we support in the Emjindini Township.
45
CREATING VALUE BY RESPONDING STRATEGICALLY
Our key relationships continued
Unions
Self-assessment of quality of relationship: Fair
Why we engage
In 2021, globally, 56.43% of our workforce was unionised, with 71.53%
belonging to a bargaining unit. A workplace where people feel they have
been heard and in which they can make a meaningful contribution,
promotes productivity and stability. Accordingly, it makes sound business
sense to maintain constructive relationships with our employees and their
representatives. We do so in a spirit of mutual respect and understanding.
Shared priorities
Freedom of association, collective bargaining
and disciplined behaviour
Shared priorities
Safety and wellness initiatives
Our response
The health and safety committees at all our operations
provide a forum for consultation about the development/
review of policies and procedures and changes that affect
workplace safety or health. Wellness programmes include
fitness and medical screening programmes, as well as
psychological and financial support.
Our response
Sappi endorses the principles of fair labour practice as
entrenched in the United Nations Global Compact and
(cid:56)(cid:81)i(cid:89)er(cid:86)(cid:68)(cid:79)(cid:3)(cid:39)ec(cid:79)(cid:68)r(cid:68)ti(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:43)(cid:88)(cid:80)(cid:68)(cid:81)(cid:3)(cid:53)i(cid:74)(cid:75)t(cid:86). At a minimum,
we conform to and often exceed labour legislation
requirements in countries in which we operate. Protecting
the right to freedom of association and collective
bargaining is fundamental to the manner in which we do
business. We engage extensively with representative trade
unions. Discussions range from remuneration issues, to
training and development, health and safety and
organisational changes.
Given the complex labour situation in South Africa, we have
established a number of structures to enhance ongoing
positive engagement with union leadership. This is
facilitated by structures such as the National Partnership
Forum which includes senior members of management
and senior union leaders who hold regular meetings where
business, safety and union challenges are discussed.
Disciplined behaviour is essential for individual wellbeing,
and to achieve our group goals and objectives. In each
region, disciplinary codes ensure appropriate procedures
are applied consistently, while grievance policies entrench
the rights of employees, including the right to raise a
grievance without fear of victimisation, the right to seek
guidance and assistance from a member of the human
resources department or their representative at any time
and the right to appeal to a higher authority, without
prejudice.
Read more: Supporting sound labour relations
page
83.
UNGC Principle 3: Businesses should uphold
freedom of association and the effective
recognition of the right to collective bargaining.
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Shared priorities
Shared priorities
Remuneration, working hours and other
conditions of service
Resolving grievances, engaging on strategy
Our response
Our labour standards ensure that our remuneration
practices are fair, with compensation levels set to reflect
competitive market practices and internal equity as well as
company and individual performance. In rural areas, forest
products companies like Sappi are often the only, or major,
employers which makes the local population very
dependent on the company and which could, in turn, lead
to exploitative behaviour and an indirect form of forced
labour. Against this backdrop, in all three regions, labour is
sourced on the open market, we pay market-related wages
in line with or above local legislation and ensure that
working hours are fair.
UNGC Principle 4: The elimination of all forms
of forced and compulsory labour.
Our response
• Well-established grievance channels, disciplinary
procedures and whistleblower protocols provide a
non-retributory framework.
• We regularly engage with unions on economic
conditions, market dynamics and growth plans.
Opportunities for value creation
• Good employee/management relations enable us to
resolve new and difficult labour issues as the(cid:92) develop(cid:17)
• When employees understand strategic direction and
operating context, they are more likely to be more
committed to Sappi, leading to a more stable labour force
and higher levels of productivity.
Challenges for value creation
• Multi-union landscapes, particularly in North America and
South Africa, add to complexities in the labour
environment.
• Unrealistic expectations about wages increases,
particularly in light of the ongoing Covid-19 pandemic.
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CREATING VALUE BY RESPONDING STRATEGICALLY
Our key relationships continued
Customers
Self-assessment of quality of relationships: Excellent
Why we engage
The more closely we engage and collaborate with our customers, the more likely
we are to understand and respond to their evolving needs by offering relevant
solutions in the form of sustainable, practical products and services. This
partnership approach builds the loyalty and long-term relationships that enable
us to thrive.
Through our continued focus on innovating paper and packaging solutions, pulp
and biomaterials, we remain committed to partnerships with customers who are
increasingly focused on the social and environmental credentials of our products.
Survey after survey confirms that consumers want to be greener in their
purchasing decisions. We are committed to having a positive impact across the
entire value chain by embracing the circular economy, and using sustainable
materials based on certified wood and replacing fossil-based chemistry. We are
also committed to working on new technologies that support transformation in
Sappi and across our value chain partners to reduce CO2 emissions and contribute
to the UN SDGs.
Shared priorities
Enhanced service levels
Our response
In SEU, we entered into a partnership with Shippeo which offers ‘predictive visibility’ of supply chain transportation. This enhances
the customer experience by providing a reliable estimate of when an order will arrive with the customer as well as a faster response
to customer inquiries on goods in transit. Proactive sharing of the live delivery status with customers ensures early warnings are
given on potential delivery delays.
This move enables us to measure and manage carrier performance in real-time, as well as benefit from faster and more efficient
information exchange and communication between customer service, logistics and carrier teams. Insights drawn from resulting
data also help to drive continuous improvement of operational processes.
Shared priorities
New or enhanced products that meet rapidly changing market demand
Biotech
We achieved commercialisation of Symbio, our biocomposite
product, and are moving ahead with our furfural plant at
Saiccor Mill.
Casting and release
Ultracast Viva® release paper won the Green Product Award
2021 jury prize in the fashion category. This award programme
recognises companies and start-ups that have distinguished
themselves by their sustainable practices and product results.
Ultracast Viva is a first-of-its-kind product made specifically for
high-fidelity PVC, PU, semi-PU and solvent-free casting
systems that are used in the manufacturing of coated fabrics.
Our response
R&D
Consumers have become increasingly aware of social and
environmental issues and are looking to us for help in this
regard. Against this backdrop, our Innovation and Sustainability
department enables us to put sustainability at the heart of
everything we produce, enhances our understanding of our
customers’ current and future needs and means we can meet
and anticipate those needs.
Where relevant, we will conduct R&D and develop products
to suit customers’ specific needs.
Read more: Developing and commercialising innovations
i(cid:81)(cid:123)(cid:68)dditi(cid:82)(cid:81)(cid:3)t(cid:82)(cid:3)(cid:68)d(cid:77)(cid:68)ce(cid:81)t(cid:3)(cid:69)(cid:88)(cid:86)i(cid:81)e(cid:86)(cid:86)e(cid:86)(cid:15)(cid:3)(cid:82)(cid:81)(cid:3)(cid:83)(cid:68)(cid:74)e(cid:3) 78.
Verve
We partnered with Birla Cellulose, one of the leading viscose
manufacturers in the textile value chain, to provide a forest-to-
garment traceability solution for 22 global brand owners.
We are also an advisory partner in the development of the
Textile Exchange biodiversity module.
Read more: Reinforcing Verve as the Fibre of Choice, on
page 74.
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Shared priorities
Information and campaigns to promote print
as a communication medium and encourage
the use of packaging
Our response
• We continue to participate in industry initiatives like
TwoSides.
–
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• We also participate in a number of tradeshows including:
Luxe Pack in Monaco where we showcased our
high-quality paperboard product Algro Design and
our new, upmarket Fusion Nature Plus virgin fibre liner.
FachPack in Germany where we presented our
innovative high-barrier papers with integrated
heat-sealing capability, together with an uncoated,
bright white virgin-fibre liner for corrugated board
applications and paper carrier bags, a non-wet-
strength, wet-glue label paper and new papers in the
flexible packaging sector.
SEU
• Shortly after year end, for the second year running,
Sappi will be joining other leading organisations and
brands to sponsor a Europe-wide hackathon bringing
together small teams of start-ups, scale-ups, industry
enthusiasts and students to brainstorm innovative
solutions to issues facing the graphic papers sector.
This year’s hackathon will tackle multiple challenges in
six main categories exploring the overall theme: “The
graphic communication enterprise of the future. How
to future-proof our industry?”
SNA
• Launched a Sustainable Alternatives Campaign that
included a video, a new addition to Sappi’s website and
social posts demonstrating how Sappi is partnering
with other businesses to be pioneers in more sustainable
alternatives. The campaign shows the many ways we can
enable brands and businesses to meet their
sustainability promises by committing to using renewable
resource-based materials in their products and packaging.
Details can be found at sappi.com/promise.
• Hosted a series of webinars designed to promote the
intersection between print and packaging with digital
marketing. Topics included the persuasive role of
packaging, direct mail and how interactivity,
customisation and innovative printing technologies and
special effects leverage the unique power of print to
expand brand presence, grow sales, and build a bridge
between online and offline marketing.
Opportunities for value creation
• Meet customer needs for products with an enhanced
environmental profile
Innovate to align with evolving market trends
Increase awareness of the importance of sustainability
•
•
• Promote our customers’ own sustainability journeys
• Keep abreast of market developments
• Showcase our products and promote the Sappi brand.
Challenges for value creation
• Confusion about responsible forest management and the
sustainable commercial use of forests and plantations with
deforestation and lack of understanding about the manner
in which the forests and plantations from which we source
woodfibre help mitigate global warming
• Promoting understanding of decarbonisation across the
value chain.
Shared priorities
Information about the fibre sourcing and
production processes behind our brands
Our response
• Customers generally approach us for information about
the fibre sourcing and production processes behind our
brands, including carbon footprint. In response to these
requests, in all regions we compile wood origin
declarations and publish Paper Profiles or similar data
and information sheets for our papers. We also respond
to many questionnaires from our customers including on
our CO2 reduction plans and performance. In SNA, we
hold Customer Council meetings and have developed
our own eQ GHG emissions calculator that quantifies the
amount of emissions associated with a customer order
and how those emissions compare against the industry
average.
• We also publish fibre sourcing declarations on sappi.com
for all mills.
• At the request of our customers, in all three regions, we
participate in EcoVadis and hold a platinum rating for all
three regions.
• Regions also engage with suppliers through sustainability
summits and individual meetings.
• We also publish FAQs covering topics like climate
change, as well as forest and energy certification.
Shared priorities
Technical information
Our response
SEU
• A series of technical brochures is available on our website
sappipapers.com/resources/technical-brochures
• The Sappi&You online knowledge platform for graphic
papers
• The PSP site to provide targeted information on packaging
and speciality papers (www.sappi-psp.com)
• The graphic papers site provides targeted information on paper
and print-based communication (www.sappipapers.com)
SNA
• The POP site is aimed at marketers, creatives,
designers and printers looking to innovate in their
categories (www.sappipops.com)
• Sappi etc is an educational platform for designers and
printers (www.sappi.com/sappietc)
SSA
• Our paper and paper pulp product offerings are supported
by strong technical teams at each mill and the technology
centre in Tshwane
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CREATING VALUE BY RESPONDING STRATEGICALLY
Our key relationships continued
Digital and paper: a powerful combination
Printed electronics are decidedly on the move. Radio-frequency
identifi cation (RFID) is no longer a niche technology. It is already
being used to great eff ect in many areas of everyday life: in our
passports, ID cards and travel cards, clothes, library books and
much more.
The vast scale and intricacy of the RFID market
also off ers new opportunities for the printing
industry. With this in mind, ISBC, an international
company focused on the development of unique
RFID and Internet of Things (IoT) products has
developed and presented to the market an
innovative product: ISBC® RFID Paper.
The product is sheet-fed and made with Sappi’s
100% fi bre-based Swiss Matt speciality paper,
used mostly as an inkjet paper for large-format
printing. RFID chips are embedded into the paper
sheets causing no eff ect over the paper surface
which remains fl at and smooth.
Opportunities for value creation
• Enhanced licence to operate and thrive
• Promoting socio-economic development which could, in the long term, lead to increased demand for our products
• Initiation of real social mobilisation and change for the better
• Closer integration with local development plans from the authorities.
Challenges for value creation
• Community expectations for jobs and service delivery.
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Communities
Self-assessment of quality of relationships: Fair to good and steadily improving
Why we engage
Recognising that we are part of the communities beyond our fence lines and that their
prosperity and wellbeing are linked to our own, we strive to make a purpose-driven,
meaningful contribution towards the wellbeing and development of our neighbouring
communities. We work to create positive social impact by jointly identifying and
leveraging opportunities, thereby demonstrating our commitment to transparency
and collaboration.
Community engagement meetings take various formats in our mills in the regions
where they operate. These range from broad liaison forums for business, local
government and communities, to legally mandated environmental forums that form
part of the licensing conditions of mills. In South Africa, there are local farmer and
community forums related to our forestry communities.
In response to the Covid-19 pandemic, we refocused our response to and investment
in the communities close to our areas of operation.
Shared priorities
Community support including employment, job creation, business opportunities, economic and
social impacts/contributions and community support
Our response
SEU
• Employees are encouraged to nominate and participate in local community projects and events.
• At a local community level, our focus is to add to the wellbeing, safety and health of our communities. We support various local
schools, sports and hobby clubs, forest products industry students, local safety and environmental organisations and local charities.
SNA
• Each site has a group focusing on community connections to channel local support.
• Education programmes are supported at targeted colleges and universities as are programmes to encourage study in fi elds
relevant to our operations.
• We provide fi nancial support to several non-profi t conservation organisations to support regional biologist positions, landowner
and community outreach activities, advocacy eff orts, etc. Examples include funding and in-kind support for elementary and
secondary school fi eld days, community forestry workshops, landowner outreach projects in cooperation with state agencies
and industry associations, billboards promoting Sappi's private lands forestry programme and private landowner management
assistance.
• The Idea that Matter (ITM) programme continues to recognise and support designers who support good causes. Since 1999 the
programme has funded over 500 non-profi t projects and has contributed nearly US$14 million to a wide range of causes around
the world that use design as a positive force in society. Given our focus during the past year on responding to the Coronavirus
pandemic, the ITM programme was suspended. It has been reformatted and relaunched for 2022 to align with the UN SDGs
encouraging applicants to use design to address global challenges.
• The Employee Ideas that Matter programme provides direct funding to the non-profi t organisations about which our employees
are most passionate.
SSA
• Community support has been bolstered by the creation of a dedicated multi-disciplinary team comprising the Enterprise and
Supplier Development (ESD) team, the Human Resources team and the Corporate Citizenship team. This structure has been
rolled out at each mill site and is referred to as the Community Management Committee (CMC). The purpose of the CMC is to
identify shared value opportunities which help identify and support local entrepreneurs as well as to promote the sourcing of
goods and services from local suppliers where possible. The CMC also report on the employment of locals and ensures
investment in communities addresses specifi c needs. The CMC at all times aims to collaborate with government, NGOs and
the private sector for scale.
• Given South Africa’s signifi cant development needs, the bulk of community support is allocated to this region. Support is
directed to education, environment and socio-economic development, based on helping communities help themselves.
Initiatives include:
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Sappi Khulisa, our enterprise development scheme for emerging timber farmers
The Abashintshi Youth programme
Education throughout the education value chain, including ECD; Khulisa Ulwazi, our training centres for small growers and two
training centres for local unemployed youth at the Saiccor and Ngodwana Mills
Support for local tourism through our mountain-biking and trail running sponsorships and promoting recreational riding on Sappi land.
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Read more about our ESD work in particular: Creating a positive social impact with communities, on page
86.
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CREATING VALUE BY RESPONDING STRATEGICALLY
Our key relationships continued
Collaborating to support the endangered Pepper-bark tree
Our operations are deeply seated within the traditional communities of South Africa and we are
committed to developing and improving the resilience of the communities and environment in
which we operate. One such example is the partnership between our Shaw Forestry Research
Centre and local research institutes to restore the endangered Pepper-bark tree (Warburgia
Salutaris) which is widely used in traditional medicine for primary health needs like the common
cold. This tree is endangered due to unsustainable bark harvesting. The Pepper-bark tree was
previously widespread but is currently found growing in small pockets in nature reserves and is
under constant surveillance. It was a challenge to cultivate this species due to a pest that
damages the seed and due to the presence of aromatic oils in the cuttings.
In 2014, we joined a project, launched by SANParks, the Agricultural Research Council and South
African National Biodiversity Institute (SANBI) and used in-house skills in cutting production to
propagate the Pepper-bark tree. The project has been a major success with Sappi also assisting
in the distribution of approximately 40,000 Pepper-bark seedlings and cuttings to rural
communities, at no cost. The fi nancial impact of the project is intangible but invaluable: the
programme of work has led to the discovery that the Pepper-bark tree can be harvested
sustainably as the medicinal properties of the highly prized bark is also abundant in the twigs
and leaves. This has led to an educational outreach programme with traditional healers and
community members. A working group partnership has also established a gene bank and seed
orchards and will coordinate the Pepper-bark conservation project.
Sappi has also provided the Pepper-bark trees to neighbouring countries, like eSwatini via the
eSwatini Traditional Healers Association and to Zimbabwe in partnership with Botanic Gardens
Conservation International. Due to the success of the programme, the South African government
has asked Sappi to consider adopting further endangered species for re-establishment.
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Industry bodies, related
memberships and
organised business
Self-assessment of quality of relationships: Good
Why we engage
We engage with industry bodies and business believing that together, we
are better equipped to meet the needs of a growing and changing society.
Our focus is on using our expertise and our networks to help create a more
sustainable future. Accordingly, we partner with industry and business bodies
to provide input on issues and regulations that affect and are relevant to our
businesses and industries. We also support and partner with industry initiatives
aimed at promoting the use of our products and the overall sustainability of our
industry. One of our longest relationships is with the UNGC, to which we have
been a signatory since 2008. We work to implement the UNGC’s 10 principles,
all of which align with the UN SDGs. Under our
emphasises partnership and collaboration we have been focusing more
intensively on working closely and more often with those who share both our
values and commitment to our industry.
strategy which
Thrive25
Shared priorities
Decarbonisation and net zero
Our response
In FY2021, we continued our work on the (cid:54)cie(cid:81)ce(cid:3)(cid:37)(cid:68)(cid:86)ed(cid:3)(cid:55)(cid:68)r(cid:74)et(cid:86)(cid:3)i(cid:81)iti(cid:68)ti(cid:89)e(cid:3)(cid:11)(cid:54)(cid:37)(cid:55)i(cid:12) in line with our group-wide decarbonisation
strategy and expect our science-based targets to be approved by the SBTi in FY2022.
We also became a project member of the WBCSD Forest Solutions Group’s Forest sector net zero roadmap project
(July 2021-July 2022).
In SNA, we renewed our commitment to the SmartWay® Transport Partnership, an innovative collaboration between the U.S.
Environmental Protection Agency and industry. The partnership provides a framework to assess the environmental and energy
efficiency of goods movement supply chains and benchmark overall performance.
Shared priorities
Biodiversity
Our response
In 2021, we joined the Circ(cid:88)(cid:79)(cid:68)r(cid:3)(cid:37)i(cid:82)ec(cid:82)(cid:81)(cid:82)(cid:80)(cid:92)(cid:3)(cid:36)(cid:79)(cid:79)i(cid:68)(cid:81)ce(cid:3)(cid:11)C(cid:37)(cid:36)(cid:12), a new global movement which puts nature at the heart of the global
circular bioeconomy. Established by His Royal Highness the Prince of Wales under his Sustainable Markets Initiative in 2020, the CBA
connects the dots between investors, companies, local communities, governmental and non-governmental organisations to advance
the circular bioeconomy – while also restoring biodiversity.
At this stage, the focus on biodiversity in the textile industry – as with many others – is nascent. The Textile Exchange has developed
a biodiversity module and associated Index to prepare the fashion industry for action. Sappi was an advisory partner in the module
development. The module is going through an initial pilot phase to track the level of engagement and effort that companies are
starting to make in terms of biodiversity. The biodiversity module will support and develop alongside the science-based targets
network in order to reinforce consistency in language, frameworks and measurements. Additionally, use of this module and its future
iterations will help companies prepare for stakeholder (including investor) questions around nature-related risk.
In SNA we have conducted training for wood procurement teams on biodiversity involving local, state and regional experts from
state government agencies.
In SSA we have seven declared nature reserves on our landholdings in the Mpumalanga and KwaZulu-Natal provinces. These
proclaimed nature reserves are part of South Africa’s Biodiversity Stewardship Programme managed by the SANBI and are based
on partnerships between landowners, provincial conservation authorities and NGOs, in order to secure biodiversity. The sites are
declared where important biodiversity or ecosystem services have been identified.
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CREATING VALUE BY RESPONDING STRATEGICALLY
Our key relationships continued
Industry bodies, related memberships and organised business continued
Shared priorities
Issues that affect the sustainability of our industry and initiatives that promote sustainability,
awareness and understanding
Our response
Global
As a member of the Sustainable Apparel Coalition (SAC), we have contributed both data and resources to support the (cid:43)i(cid:74)(cid:74)(cid:3)(cid:44)(cid:81)de(cid:91),
which measures sustainability performance and drives supply chain transparency and decision-making to improve efficiency and
sustainability impact. Our Cloquet Mill in North America was assessed for environmental issues in FY2020 and Saiccor Mill in South
Africa conducted a self-assessment for social issues in FY2021. Both mills achieved good scores.
SEU
We continued our active participation in the 4Evergreen Alliance which we joined last year. Membership is now at 80 organisations
and includes a growing number of brand owners and fast-moving consumer goods companies. A strategy taskforce is working to
shape the workplan for 2022 and beyond. The Circularity by Design Guidelines have been drafted and will likely be the first technical
output from the alliance to be published.
The Forests Dialogue (TFD) leads multi-stakeholder dialogue processes among key stakeholders, to overcome conflict and spur
collaborative action on the highest priority issues facing the world’s forests. TFD convened a series of dialogues on Climate Positive
Forest Products during 2021.
SNA
We host supplier sustainability summits to discuss issues related to sustainability and we hold numerous one-on-one meetings with
suppliers to discuss specific issues related to sustainability.
Shared priorities
Regulatory issues
Our response
Global
There is growing interest in determining how biogenic emissions
are reported throughout the value chain. We are actively
involved in one of the GHG protocols’ working groups to
contribute to the formulation of the (cid:42)(cid:43)(cid:42)(cid:3)Pr(cid:82)t(cid:82)c(cid:82)(cid:79)(cid:3)(cid:82)(cid:81)(cid:3)(cid:47)(cid:68)(cid:81)d(cid:3)
Sector and Removals Guidance.
SEU
The EU Taxonomy is a classification system providing
definitions on which economic activities can be considered
environmentally sustainable and which will shape sustainable
finance in the future. A series of documents containing
proposed criteria for different Industrial activities were open for
public consultation, including the draft forestry criteria, as well
as criteria for manufacturing of food products and beverages,
including food packaging. Together with other industry
members, we provided comment.
We provided input during the formation of the EU Single Use
Plastic Guidelines and continue to engage on the EU Forests
strategy.
SNA
We continue to provide Lacey Act training for staff and have
improved our documentation regarding fibre sourcing
declarations.
In the USA, E(cid:91)te(cid:81)ded(cid:3)Pr(cid:82)d(cid:88)cer(cid:3)(cid:53)e(cid:86)(cid:83)(cid:82)(cid:81)(cid:86)i(cid:69)i(cid:79)it(cid:92)(cid:3)(cid:11)EP(cid:53)(cid:12) legislative
activity focuses on packaging materials. The biggest impact of
such legislation is likely to be increased costs to our customers
and possible mandates for greater recycled content which
could disadvantage and add costs to Sappi products. As both
our Somerset and Westbrook Mills are located in the State of
Maine, we will continue to monitor the Maine regulatory
development process and engage as draft proposals emerge,
presently slated for late 2022. We are also actively participating
with our trade association, American Forests and Paper
Association, in steering their positions to be one that seeks to
participate in the regulatory development process.
SSA
The SA Government launched its EPR programme during 2021.
It outlines a new approach to waste management for paper,
packaging and some single use products, lighting and electrical
and electronic equipment. The aim is to divert waste from
landfills and increase recovery, recycling and reuse of materials.
Sappi is a member of the Fibre Circle, the producer
responsibility organisation created for the South Africa paper
and paper packaging sector.
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Shared priorities
Shared priorities
Enhanced forestry management
Combatting deforestation
Our response
Our response
SNA
We continued our ongoing participation in Emerald Ash
Borer surveys and other pest /pathogen/invasive species
quarantines and studies.
We continued to monitor the FSC-US Forest Management
Standard Revisions. We have been engaging with land
managers, industry associations, peer companies,
customers and FSC to raise awareness and concern
regarding these changes during the review and
commenting periods.
Sappi chaired the National Fibre Sourcing Standards
Revision Taskgroup of the Sustainable Forestry
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We continue to work closely with private land owners
through our stumpage programme.
SSA
A milestone was reached when we were awarded the
first-ever Programme for the Endorsement of Forest
Certific(cid:68)ti(cid:82)(cid:81)(cid:3)(cid:11)PEFC(cid:12) forest management certificate in
the country. The certification will now enable Sappi to
offer PEFC-certified wood from its plantations in South
Africa, giving further assurance to Sappi’s local and
global customers that the wood raw material originates
from responsibly managed forests. This is in addition to
the longstanding certification that Sappi holds for its
394,000 hectares with the Forest Stewardship Council
(FSC).
Sappi Forests is involved in an initiative to make DNA
fi(cid:81)(cid:74)er(cid:83)ri(cid:81)ti(cid:81)(cid:74)(cid:3)tec(cid:75)(cid:81)(cid:82)(cid:79)(cid:82)(cid:74)(cid:92) (developed through
collaboration with the Forest Molecular Genetics
programme) available to small growers and farmers. This will
allow growers to determine clonal identity of their material
obtained from Sappi nurseries and will be provided through
government funding. This is an example of providing
access to technology developed through Sappi input and
funding together with other South African companies.
In conjunction with the University of Pretoria, Sappi Forests
conducted a pilot study to determine if Near Infrared
(cid:53)e(cid:432)ecti(cid:82)(cid:81)(cid:3)(cid:36)(cid:81)(cid:68)(cid:79)(cid:92)(cid:86)i(cid:86)(cid:3)could be used to classify susceptible
eucalypt hybrids against the pathogen Chrysoporthe
austroafricana, a fungal pathogen that causes the
development of stem cankers on susceptible trees. The
next step will be to verify the model independently and then
deploy it operationally. It will be a useful tool to identify
hybrids to maintain high purity in nurseries rapidly and
cost-effectively.
We believe that creating value in standing forests is one of
the best ways to combat deforestation in the long term.
Engagement with participants along the supply chain from
the forests to the customers is active, and Sappi advocates
for the importance of sustainable forest management
practices, and forest certification as assurance of the
supply chain integrity. We are an active member of FSC
International’s Northern and Southern economic
chambers and we are a PEFC International Stakeholder
member. We participate to promote and expand forest
certification and to ensure that the systems continuously
develop themselves to sustain the integrity and robustness
of certified supply chains.
We support the recent initiatives of the EU to propose
new measures to minimise risks of products causing
deforestation to enter the EU market, and share the view
that such measures should focus on the real drivers of
commodity-induced deforestation, namely conversion of
forests to agricultural land.
Shared priorities
Ensuring the integrity of natural resources
like water
Our response
Sappi Southern Africa has partnered with WWF South
Africa to proactively manage water resources in the
uMkhomazi catchment in which our Saiccor Mill is situated.
A key component of the partnership is multi-stakeholder
engagement in the catchment. The project has four focus
areas, namely:
•
Improved water governance through multi-stakeholder
engagement
• Enhanced estuary management and downstream
water-use efficiency
• Alien invasive clearing and wetland rehabilitation
• Capacity development of local communities in natural
resource management.
Opportunities for value creation
• Address complex topics
• Develop sustainable, transparent supply chains
• Maintain and expand markets for our products
• Enhance understanding of our social and environmental
credentials
(cid:44)nfluence polic(cid:92) and regulations
•
• Promote dialogue.
Challenges for value creation
• High costs and allocation of human resources required for
certain industry memberships.
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CREATING VALUE BY RESPONDING STRATEGICALLY
Our key relationships continued
Industry bodies, related memberships and organised business continued
Our membership of industry associations
• University of Maine Paper Surface Science
Consortia
• University of Minnesota Sustainable Forests
Education Cooperative
SSA
• Birdlife SA
• Business Unity South Africa
• Fibre Processing and Manufacturing Skills
Education and Training Authority
• Forestry South Africa
• Forest Stewardship Council (FSC)
• National Business Initiative (NBI)
• Manufacturing Circle
• Packaging SA
• PAMSA
• Recycle Paper ZA
• Shared Value Initiative Africa
• SANBI
• Local chambers of commerce and industry
• World Wide Fund for Nature South Africa (WWF-SA)
Sappi Forests
• Biological Control of Eucalypt Pests
• Biorenewable Deployment Consortium
• CAMCORE
• Eucalypt Pest and Pathogen Working Group
• Forestry and Agricultural Biotechnology Institute
• Forest Molecular Genetic Programme
• Institute for Commercial Forestry Research
• South African Institute of Forestry
• The Tree Protection Co-operative Programme –
founding member
Sappi Limited
• Business Leadership South Africa
• Cambridge Institute for Sustainability Leadership
• CEO Initiative (South Africa)
• CBA
• Ethics Institute (South Africa)
• International Stakeholder member of the
Programme for the Endorsement of Forest
Certifi cation (PEFC)1
• Technical Association of the Pulp and Paper
Industry
• Paris Pledge for Action
• SAC
• Textile Exchange
• UNGC
• WBCSD Forest Solutions Group’s Forest sector net
zero roadmap initiative (project member)
SEU
• Biobased Industries Consortium
• BioChem Europe
• CELAB: Towards a Circular Economy for Labels
• CEFLEX: A circular economy for fl exible packaging
• Ligninclub
• 4Evergreen Alliance
• Confederation of European Paper Industries
• Eurograph
• European Joint Undertaking on Biobased Industries
• Print Power
• The Alliance of Energy-Intensive Industries
• The Forests Dialogue
SNA
• Alliance for Pulp & Paper Technology Innovation
• American BioFuels Association
• American Forests and Paper Association (AF&PA)
• Dovetail Partners
• Forests in Focus
• Forest Products Working Group
• Forest Stewardship Council (FSC)
• Paper and Paper Packaging Board
• Sustainable Packaging Coalition
• SFI
1 PEFC logo licence code: PEFC/01-44-43.
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CREATING VALUE BY RESPONDING STRATEGICALLY
Shareholders, bondholders
and banks
Self-assessment of quality of relationships: Good to excellent
Why we engage
Our aim is to provide investors (shareholders and bondholders), analysts as well
as fi nancial institutions with transparent, timely, relevant communication that
provides them with an understanding of our industry, sets out the manner in
which we hope to achieve our growth ambitions and facilitates informed
decisions.
Shared priorities
Understanding Sappi’s strategy
Return on investment
Transparent information about risks, opportunities and environmental, social and governance
(ESG) performance, in particular the impact of climate change on strategic and fi nancial decisions
Ability to generate suffi cient cash fl ows to fund our business and service our debt
Our response
• Our investor relations department engages with shareholders and analysts on an ongoing basis
• Our Chairman and CEO engage with shareholders on relevant issues. We conduct ad hoc mill visits and roadshows, and issue
announcements through the Johannesburg Stock Exchange (JSE) – Stock Exchange News Service (SENS), in the press and on
our website (see www.sappi.com/SENS)
and sustainability reports (see www.sappi.com/sustainability)
and participate in the Annual General Meeting (AGM) as well as the four quarterly fi nancial results briefi ngs
. We publish our annual integrated report (see www.sappi.com/annual-reports)
on the group website. Shareholders and analysts can attend
• We engage with various ratings agencies, particularly in terms of ESG performance. Recognising the importance of climate
change in a fi nancial context, we are incorporating the recommendations of the TCFD into our decision-making processes
(discussed further under Responding to climate change on page
91)
• We participate in the CDP Climate and CDP Forests (https://www.cdp.net.en
projects every year, making our submissions
publicly available
• Our Chief Financial Offi cer and Head of Treasury engage with bondholders, banks and rating agencies on the performance of
the company. A key point of discussion was our strong recovery in FY2021 and our return to profi tability
• At the end of FY2020, in response to the impact of Covid-19, we agreed an extension of the covenant suspension period
applicable to our debt facilities fi nancial covenants until September 2021 with the fi rst measurement due again at the end of
December 2021
Opportunities for value creation
• Understanding of and commitment to our strategic direction
• Enhanced reputation
• (cid:42)reater investment confi dence
• Broader licence to invest.
Challenges for value creation
• Slow post-Covid-19 economic recovery
• Uncertainty about upcoming environmental regulations.
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CREATING VALUE BY RESPONDING STRATEGICALLY
Our key relationships continued
Suppliers and contractors
Self-assessment of quality of relationship: Good
Why we engage
We aim to establish mutually respectful relationships with our suppliers and
encourage them to share our approach to using woodfibre not only for business
profit but also for generational prosperity; investing in and searching for
innovative ways to leave the planet better than we found it and making a
purpose-driven and meaningful contribution towards the wellbeing and
development of employees and communities.
We want to build long-term value partnerships, based on the importance
of suppliers to a sustainable supply chain.
Shared priorities
Robust safety procedures and a strong culture of safety
Our response
Given our focus on zero harm in the workplace, we work with our contractors to ensure that they follow Sappi’s safety systems and
regard their safety as just as important as that of our own people.
In South Africa, Sappi Forests continues to work closely with contractors and their workers to implement the innovative Stop and
Think Before You Act safety initiative.
Shared priorities
Transparency into the value chain
Our response
In 2021, we announced a collaboration with EcoVadis to assess the sustainability performance of our suppliers through proactive
ratings and evaluations using EcoVadis’ methodology. Under the EcoVadis banner, we have been submitting our own sustainability
performance to our customers for many years now.
Globally, our procurement team made progress in assessing suppliers against our Supplier Code of Conduct: SEU: 67% of total
procurement spend covered; SNA: 53% and SSA 44%. This averages out, on a global basis, to 59% of total procurement spend.
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CREATING VALUE BY RESPONDING STRATEGICALLY
Shared priorities
Security of fibre supply
Certification
Income generation and job creation
Our response
SEU: In Europe, we procure wood through well-established wood sourcing companies in Europe (Metsä Forest in Finland, proNARO
in Germany, Sapin in Belgium and Papierholz in Austria) all of which operate with an established pool of forest owners and wood
suppliers.
SNA: The Sappi Maine Forestry Programme and the Sappi Lake States Private Forestry Programme, staffed by SNA foresters, offer
a wide range of services to landowners including contracting with experienced loggers and providing plans to enhance wildlife
habitat and forest health. We work directly with landowners, loggers and suppliers to encourage sustainable forest management
and provide markets for woodfibre material from harvesting and stand improvement activities. We continue to evaluate, promote
and support smallholder certification options where feasible, thereby adding value to both the landowner and marketplace.
Procurement practices extend far beyond avoiding controversial sources by requiring the promotion of biodiversity, logger training,
forest research, landowner and community outreach, and implementation of best management practices for soil and water
conservation, as evidenced by our conformance to the SFI Fibre Sourcing Standard.
During the year we hosted a Supplier Sustainability Summit and held pulp supplier sustainability meetings.
SSA: Qualified extension officers provide growers in our Sappi Khulisa enterprise development scheme with ongoing growing
advice and practical assistance. We have established a training centre, Khulisa Ulwazi, for Khulisa growers. The objective is to
develop growers’ and contractors’ skills so that they can conduct silviculture operations economically and to a high standard.
Training material has been developed in conjunction with the Institute of Natural Resources and covers areas like entrepreneurship,
fire management, harvesting planning, leadership and management development, as well as safety. The Sappi team is partnering
with other institutions such as Cedara Agricultural College, to provide the growers with the tools to expand their farming activities
so that they can have additional sources of income. This is crucial for timber farmers who must wait years between timber harvests
for a return on their investment.
At the end of September 2021, Sappi was involved in 40,697 land reform projects, helping beneficiaries to manage approximately
8,151 hectares of land. Many of these properties previously belonged to commercial farmers who had supply agreements with
Sappi. For many of the land claims in which we have been involved, and where there has been a change in ownership, we continue
to buy the timber and help to manage those plantations
The high cost of certification has been an issue for small growers which we have helped to overcome by offering a group
certification scheme. In 2021 there were 42 members in the scheme with plantations totalling 41,000 ha. Members delivered
269,000 tons of woodfibre and receive a bonus per ton for certified material delivered.
In addition, we actively contributed to the development of the Sustainable African Forestry Assurance Scheme (SAFAS). The
PEFC-endorsed SAFAS now offers affordable forest certification solutions and thus market access especially for the country’s
smallholders. In South Africa and in Africa altogether, the amount of certified forests is still very low (less than 2%), so this type of
work is ground-breaking, and can really make a difference in enhancing sustainable forest management in Africa and thus improve
both the level of forestry and also the level of livelihoods.
Improved supplier relations
Opportunities for value creation
•
• Better understanding of the requirements of the Sappi group
• E(cid:91)panded basket of certified fibre
• Support for local economic development
• Support for emerging supplier/contractor development.
Challenges for value creation
• Securit(cid:92) of woodfibre suppl(cid:92)
• Ensuring that SMMEs have the right social and environmental procedures in place.
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CREATING VALUE BY RESPONDING STRATEGICALLY
Our key relationships continued
Government and regulatory
bodies
Self-assessment of quality of relationship: Good
Why we engage
We engage with government departments and regulatory bodies to provide
input into issues and regulations that affect our industry. We also engage with
regional and local governments and local authorities to obtain support for our
operations, show how our activities contribute to local economic and social
development and identify issues where we can work together for our mutual
benefit.
Shared priorities
The social and economic benefits of our industry nationally as well as at a local level
Increased investment
Energy issues in general and in particular government moves on carbon taxation
The impact of increased regulations on business
Enhancing sustainable forest management and land use
Our response
•
•
•
In SEU, we are actively working in a number of forest-sector collaborations to ensure a thriving forest bioeconomy remains an
integral part of the EU Green Deal. Through sustainable forest management practices, responsible sourcing, efficient use of
resources and manufacturing innovation, the sector provides fibre-based and low-carbon solutions and products and thus
boosts the transition into a circular economy
In SNA, we engage in forest management planning processes as a stakeholder during public comment processes. In the Lake
States (Michigan, Minnesota and Wisconsin) we are involved in the Minnesota Forest Resources Council and various sub-
committees
In SSA, through Forestry SA, we participated in the Presidentially led Private Public Growth Initiative in the compilation of the
Forestry Sector Master Plan. This has been approved by Parliament and aims to drive sustainable forestry industry, updated
regulation and improved collaboration in integrated risk management as well as R&D.
Opportunities for value creation
• Promote understanding of issues and challenges as well as the strategic value of our industry
• Help create a more receptive regulatory and policy environment.
Challenges for value creation
• Policies which take neither our high use of biobased energy into account, nor recognise the important carbon sequestration role
pla(cid:92)ed b(cid:92) the sustainabl(cid:92) managed forests and plantations from which we source woodfibre
• Uncertainty about regulatory developments, for example: carbon tax
• Administrative delays.
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CREATING VALUE BY RESPONDING STRATEGICALLY
Civil society and media
Self-assessment of quality of relationships: Good
Why we engage
We maintain an open relationship with the media, believing that an informed
media is better able to serve public reporting and debate on any issue.
We engage with civil society organisations on issues of mutual interest and
belong to key organisations relevant to our operations. We engage with various
civil society groups on our societal and development impact.
Globally we interact and engage with a wide range of non-governmental
organisations, especially through our participation with forest certification
systems (FSC, PEFC and SFI). We leverage these platforms to actively contribute
to the growth of forest certification worldwide and collaborate with diverse
stakeholders.
Shared priorities
Business developments
The future of our industry
Our impacts on our communities
Protecting the environment
Developing the bioeconomy
Our response
• Join key credible organisations as members
• Develop personal relationships and engage continually
• Provide support to and sponsorship for key organisations on issues of mutual interest
SEU: We are actively involved in TFD Steering Committee and provide annual sponsorship to the organisation,
so that it can continue to convene diverse stakeholders for dialogue and build solutions to address
challenges impacting forests globally.
SNA: We support the Dovetail Partners which works to promote bat habitat conservation efforts in the state
and the University of Minnesota Sustainable Forests Education Cooperative. We also participate in the
Minnesota Forest Resources Council.
SSA: In terms of civil society, our forestry operations belong to a number of fire associations, given that fire
is a key risk on our plantations. We have established a project which coordinated efforts to re-establish the
Warburgia salutaris (Pepper-bark tree) in communities and the wild.
Read more: see our 2021 Group Sustainability Report at www.sappi.com.
Opportunities for value creation
•
• Encourage civil society to share our sustainability and
Inform and educate media
Thrive25
vision through positive actions.
Challenges for value creation
• Misunderstanding of our environmental impacts.
61
B L O
S S O M
In mythology, the beautiful, delicate dragonfly symbolises
change, transformation and adaptability. This change is
said to be about understanding the deeper meaning of
life, with the dragonfly’s scurrying flight across water
representing an act of going beyond what’s on the surface
to look into the deeper implications of life.
Looking beyond – and deeper – is reflected in our Thrive25
sustainability strategy which incorporates our belief that
to continue thriving as a global business, we must create
long-term value for all stakeholders by supporting a
low-carbon circular economy through relevant products
from sustainable woodfibre.
Our strategy also recognises that we must understand the
forces that heavily impact our lives and work.
Dragonflies have huge compound eyes with thousands
of lenses and photoreceptors sensitive to different
wavelengths of light, each bringing in information about
the insect's surroundings. In other words, they have
near-360- degree vision. Which is why they’re able to
go after their prey – butterflies, moths, bees and flies –
with such accuracy.
At Sappi, we understand that by widening our scope to
the broader ecosystem and a wide range of stakeholders,
we can identify uncertainty and opportunity beyond our
periphery of vision. We leverage insights into our
operating context and patterns from our data, stay ahead
of nascent technologies and draw on the acumen of our
people, to embrace change and create innovative
solutions that are relevant to all our stakeholders.
62
B L O
S S O M
In mythology, the beautiful, delicate dragonfly symbolises
change, transformation and adaptability. This change is
said to be about understanding the deeper meaning of
life, with the dragonfly’s scurrying flight across water
representing an act of going beyond what’s on the surface
to look into the deeper implications of life.
Looking beyond – and deeper – is reflected in our Thrive25
sustainability strategy which incorporates our belief that
to continue thriving as a global business, we must create
long-term value for all stakeholders by supporting a
low-carbon circular economy through relevant products
from sustainable woodfibre.
Our strategy also recognises that we must understand the
forces that heavily impact our lives and work.
Dragonflies have huge compound eyes with thousands
of lenses and photoreceptors sensitive to different
wavelengths of light, each bringing in information about
the insect's surroundings. In other words, they have
near-360- degree vision. Which is why they’re able to
go after their prey – butterflies, moths, bees and flies –
with such accuracy.
At Sappi, we understand that by widening our scope to
the broader ecosystem and a wide range of stakeholders,
we can identify uncertainty and opportunity beyond our
periphery of vision. We leverage insights into our
operating context and patterns from our data, stay ahead
of nascent technologies and draw on the acumen of our
people, to embrace change and create innovative
solutions that are relevant to all our stakeholders.
63
OUR PERFORMANCE REVIEW
OUR PERFORMANCE REVIEW
OUR PERFORMANCE REVIEW
Our operating context
Our external operating environment presents risks
and opportunities, impacts our ability to generate
value and informs our response to our stakeholders
as well as our approach to material matters.
The ongoing Covid-19
pandemic
Social unrest and need
Social unrest and need
Context
Context
The pandemic and associated
lockdowns continued through
most of FY2021 across
the world.
Our response
With safety as our core value and top
priority, we continued to emphasise
the importance of safety protocols.
As at year end, just over 1,600 members
of our workforce of 12,492 people had
been infected, with numbers peaking
in December 2020 and January 2021.
We embarked on an extensive
awareness campaign to encourage
people to get vaccinated. In South
Africa, where the roll out was slow,
we introduced on-site vaccination
stations from the beginning of August
for employees, their families and for
contractors.
In each region where we operate,
we responded to the needs of society
by donating funds and supplies.
Halfway through 2021, South Africa was engulfed by the worst unrest
and mass violence since the end of apartheid, triggered by ex-President
Jacob Zuma’s imprisonment for contempt of court. Described as an
insurrection targeting the country’s economy and infrastructure, the root
causes go far deeper to ongoing lack of service delivery, the economic
and social fall outs of Covid-19, endemic corruption and the fact that
almost half of South Africa’s adult population of 35 million live below the
breadline. While there was no material damage to any of our plants as a
result of the civil unrest, work at our three mills in KwaZulu-Natal and
associated logistical supply chains was halted at the height of the
unrest. We incurred a permanent loss of sales volumes of about
28,000 tons of dissolving pulp (DP) and 7,000 tons of paper.
Our response
While we deplore the violence and regret the loss of sales volumes, working as closely
with the communities surrounding our operations as we do, we understand and
empathise with the underlying root causes. We cannot fulfi l the functions of government;
nevertheless, we have intensifi ed our focus on working with communities to help resolve
their challenges.
Our work to uplift the communities around us began as far back as 1983 when we
launched our fl agship enterprise and supplier development (ESD) programme, Sappi
Khulisa (previously known as Project Grow). The total area currently managed under
this programme, which encompasses individual and community tree farming, is
34,755 hectares. In 2021, under this programme, 225,509 tons of timber
(2020: 284,038 tons) worth some ZAR207 million (2020: ZAR232 million) was
delivered to our operations. Since 1995, a total volume of 4,731,488 tons to the
value of ZAR2.9 billion has been purchased from small growers under this programme.
Our ESD strategy, fi rst initiated in 2018, has gathered sustained momentum. With the
ESD strategy now embedded in the business and commitment and support at all levels
of the organisation, we have seen positive improvement in stakeholder and community
relations. Sappi SA has successfully integrated a total of 145 small and medium
enterprises (SMEs) into the value chain. These businesses account for procurement
spend of over US$9.4 million, exceeding the set annual target by US$2.45 million. In
addition to the ESD spend fi gures, 587 jobs were sustained by the active local SMEs.
In addition, our Community Management Committees at each mill site continue
to provide support to communities. (See page
51 for further details.)
In 2021, we partnered with the National Business Institute (NBI) to develop a small
business development hub within the Ilembe District in KwaZulu-Natal, where both
Tugela and Stanger Mills operate. Sappi’s community members will benefi t from this
partnership.
The Sappi Skills Centres at our Saiccor and Ngodwana Mills train both Sappi employees
and unemployed youth both for employment and for starting new businesses. The
centres produced fabric face masks for internal use during lockdown and have
expanded to making workwear and other items.
During the year, we also concluded two community engagement agreements at the
above mills which commit both ourselves and our communities to work together in
driving shared value for mutual benefi t.
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Intensifi ed focus on climate change and
Intensifi ed focus on climate change and
social issues
Banning single use
Banning single use
plastics
Context
Just before our year end, the
fi rst-ever global Ministerial
Conference on marine litter and
plastic pollution took place, with
nations across the world moving
to ban single use plastics.
Our response
The ban on single use plastics
represents an opportunity for Sappi
in that our packaging products are
based on renewable, rather than
petroleum-based, resources. The
move to ban single use plastics is in
line with the principles of the circular
economy to which we are committed
and with our
commitment to
creating responsibly sourced and
sustainable solutions as viable
alternatives to fossil-based products.
Thrive25
Context
The spotlight on climate change has been intensifying, given the
extreme weather events that took place in FY2021: fl oods in Germany
and China; fi res in Canada, California and Greece; rain, rather than snow
falling in Greenland and a ‘heat dome’ along the Pacifi c northwest coast
in the USA and Canada, among others.
The Deloitte Global 2021 Millennial and Gen Z survey* highlights the
importance of social change and accountability for these sectors of
the population. As consumers, these sectors of the population often
stop or initiate relationships based on how companies treat the
environment, protect personal data and position themselves on social
and political issues.
Our response
Consumers are already aware of the need for less carbon intensive products.
However, as they are exposed to the extreme weather events just described, we
expect this focus to gather momentum, accelerated by the increased purchasing
power of Millennials and Gen Z-ers for whom environmental principles are just as
important as social ones. We have an advantage in that our manufacturing process
begins with sustainably harvested, renewable forest resources and we operate
according to circular economy principles. We can off er a broad range of products
that meet the needs of eco-conscious consumers.
Our ability to off er more environmentally friendly papers with barrier coatings was
enhanced by our 2017 acquisition of Rockwell Solutions.
In terms of social considerations, we facilitate social and economic wellbeing by using
labour drawn from local communities, and the services of small and medium
enterprises situated in the areas around plantations and production facilities.
* www.deloitte.com/global/en/pages/about-deloitte/articles/millennialservey.html.
We expect to see the global forces identifi ed
under our Thrive25 strategy to continue until
at least 2025. Set out on these pages are
specifi c issues that arose in 2021.
65
OUR PERFORMANCE REVIEW
Sappi and the SDGs
“While we strongly subscribe to
the principle of profi t with
purpose, we have a responsibility
to our shareholders and our
overarching purpose is to
generate strong fi nancial returns.”
Tracy Wessels Sappi Limited Group Head Investor
Relations and Sustainability
(cid:52)(cid:9)(cid:36)(cid:3)(cid:90)it(cid:75)(cid:3)(cid:55)r(cid:68)c(cid:92)(cid:3)(cid:58)e(cid:86)(cid:86)e(cid:79)(cid:86)(cid:15)(cid:3)(cid:54)(cid:68)(cid:83)(cid:83)i(cid:3)(cid:47)i(cid:80)ited(cid:3)(cid:42)r(cid:82)(cid:88)(cid:83)(cid:3)(cid:43)e(cid:68)d(cid:3)(cid:44)(cid:81)(cid:89)e(cid:86)t(cid:82)r(cid:3)(cid:53)e(cid:79)(cid:68)ti(cid:82)(cid:81)(cid:86)(cid:3)(cid:68)(cid:81)d(cid:3)(cid:54)(cid:88)(cid:86)t(cid:68)i(cid:81)(cid:68)(cid:69)i(cid:79)it(cid:92)
Dr Tracy Wessels headed up the Centre of Excellence for dissolving pulp at the Sappi Saiccor Mill for several years and is now
Sappi Group Head Investor Relations and Sustainability.
There are few people who understand the full potential of what trees have to off er better than Tracy, who has dedicated the
majority of the last 20 years of her career at Sappi in progressively more senior roles in research and development (R&D).
Q1
What has made the biggest
i(cid:80)(cid:83)re(cid:86)(cid:86)i(cid:82)(cid:81)(cid:3)(cid:82)(cid:81)(cid:3)(cid:92)(cid:82)(cid:88)(cid:3)i(cid:81)(cid:3)(cid:92)(cid:82)(cid:88)r(cid:3)(cid:81)e(cid:90)(cid:3)r(cid:82)(cid:79)e(cid:34)
Q2
(cid:43)(cid:82)(cid:90)(cid:3)(cid:90)ere(cid:3)(cid:54)(cid:68)(cid:83)(cid:83)i(cid:111)(cid:86)(cid:3)(cid:83)ri(cid:82)rit(cid:92)(cid:3)(cid:54)(cid:39)(cid:42)(cid:86)(cid:3)
(cid:86)e(cid:79)ected(cid:34)
While my previous role focused on the entire value chain,
from the beginning of the DP production process all the way
through to the end user, my new role is more multi-faceted.
That is because I have greater oversight over more functions
within the various value streams across the business.
Within each of these value streams and functions, what has
struck me is the manner in which sustainability is entrenched
throughout the everyday aspects of our business. I’ve also
realised the extent to which our commitment to the
Sustainable Development Goals (SDGs) is taking traction.
SDG17: Partnership for the Goals is evident at board level, with
the Chairman of our SETS Committee having been appointed
as the deputy chairperson of the Presidential Climate
Commission, chaired by South African President Cyril
Ramaphosa. It extends to SDG15: Life on Land, whereby we
are steadily increasing the amount of certifi ed fi bre supplied
to our mills (FY2021: 76%, FY2020: 73%) and in South Africa,
in alignment with SDG1: No Poverty, with the work our ESD
department is doing (described in further detail on page
of this report.
64
Of course, there is much more evidence throughout Sappi, at
every level.
We prioritised certain SDGs not because they were the
easiest to align with, nor because they made for the best
optics. We debated them, weighed up the business case for
each SDG and selected those that had the most relevance
for our business before establishing an agenda and targets
for each priority SDG. We also looked at interdependencies.
While these signifi cant interdependencies between all the
SDGs, some are more profound than others – for example
SDG7: Renewable and Clean Energy and SDG13: Climate
Action are very strongly linked.
Q3
So you are saying that there is a
commercial case for implementing
the UN SDGs, that doing so is not
(cid:82)(cid:81)(cid:79)(cid:92)(cid:3)(cid:68)(cid:69)(cid:82)(cid:88)t(cid:3)t(cid:75)e(cid:3)(cid:82)(cid:83)tic(cid:86)(cid:34)
There is defi nitely a commercial case! While we strongly
subscribe to the principle of profi t with purpose, we have a
responsibility to our shareholders and our overarching
purpose is to generate strong fi nancial returns.
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OUR PERFORMANCE REVIEW
converting the calcium line to magnesium. This will lead
to a significant reduction in the fossil fuel energy
requirements and increase our renewable energy usage in
line with our commitment to SDG7: Affordable and Clean
Energy and SDG13: Climate Action.
We are being smart by investing in best practice safety
programmes in alignment with SDG8: Decent Work and
Economic Growth: Not only do we have a duty of care to
all those working at, or visiting, our operations, but safety
also impacts profitability and reputation and can play a
role in recruitment and retention.
We are also being smart in our shared-value approach to
business, which means that communities close to our
operations benefit from our extensive socio-economic
development programmes.
Q5
(cid:36)re(cid:3)(cid:92)(cid:82)(cid:88)(cid:3)(cid:86)(cid:68)ti(cid:86)fied(cid:3)(cid:90)it(cid:75)(cid:3)(cid:54)(cid:68)(cid:83)(cid:83)i(cid:111)(cid:86)(cid:3)
progress towards your SDG-related
Thrive25
targets on a regional and
(cid:74)r(cid:82)(cid:88)(cid:83)(cid:3)(cid:79)e(cid:89)e(cid:79)(cid:34)
Progress towards our targets while uneven, has generally
been positive. Targets are tracked and presented at our
quarterly Group Sustainable Development Council
meetings, so we have a good understanding throughout
the year of how we are doing. I am confident that we will
achieve these stretch targets within the time frame.
Even more important are the actions that have been put in
place to achieve these targets and that they are helping to
embed the SDGs into our DNA. These actions provide real,
tangible evidence of our commitment to the SDGs and help
us to identify problems and opportunities for future
growth.
They are also an important framework in achieving our
purpose of contributing to a thriving Sappi and a thriving
world.
Thrive25
strategy
To give the most obvious example: Our
states that we exist to build a thriving world by unlocking the
power of renewable resources: Clearly, we cannot achieve
this if there are no renewable resources – primarily trees, in
our case. We rely on healthy ecosystems to produce
renewable woodfibre which is beneficiated into a range of
products. That is why aligning with SDG15: Life on Land
makes sound business sense and why we work so hard to
enhance sound forestry management practices – both on
our own landholdings and on those from which we source
woodfibre.
The key is balancing short-term financial returns with
longer-term viability. Let’s say we had the opportunity to buy
cheap, non-renewable energy. We could decide to ignore the
environmental consequences and just focus on the bottom
line. As energy costs currently represent 8.2% of cost of
sales, the financial impact could be very positive in the short
term.
In the longer term, this move could have far-reaching
repercussions, particularly as we are transparent about our
energy and emissions profiles. Customers generally
approach us for information about the fibre sourcing and
production processes behind our brands, including carbon
footprint. In response to these requests, in all regions we
publish Paper Profiles and/or information sheets for our
papers. We also respond to many questionnaires from our
customers that collect data on our carbon reduction plans
and performance. In SNA, we have developed our own GHG
emissions calculator that quantifies the amount of emissions
associated with a customer order and how those emissions
compare against the industry average.
In the hypothetical situation where we would choose to focus
only on the bottom line, not only would we experience loss of
market share and suffer reputational damage, we would also
incur the costs of trying to attract new customers, with
research indicating that it costs five time as much to attract
new customers as it does to retain existing ones(1).
Q4
Is implementing the SDGs only
(cid:83)(cid:82)(cid:86)(cid:86)i(cid:69)(cid:79)e(cid:3)(cid:90)it(cid:75)(cid:3)(cid:79)(cid:68)r(cid:74)e(cid:3)c(cid:68)(cid:83)it(cid:68)(cid:79)(cid:3)(cid:82)(cid:88)t(cid:79)(cid:68)(cid:92)(cid:86)(cid:34)
The SDGs are transformative and disruptive, and these
processes often involve significant financial investment. In
Sappi’s case, we have a particular challenge in that our
infrastructure is highly capital intensive and it is not possible
to transform overnight.
We overcome this by being smart – in line with one of our
core values. We are being smart in terms of our Saiccor Mill
expansion project, which will not only add shareholder value
by increasing DP capacity by 110,000 tpa, but also
incorporates the installation of a new recovery boiler and
(1) https://www.forbes.com/sites/jiawertz/2018/09/12/dont-spend-5-times-more-attracting-new-customers-nurture-the-existing-ones/?sh=7aba9045a8e0.
67
Integrating our key material issues
Cyber security
Uncertain and evolving regulatory
landscape
Employee relations
Evolving technologies
and consumer preferences
Supply chain disruption
Risk
Sustainability expectations
Maintaining ethical behaviour
and compliance
Procuring responsibly
Key
material
issue
Workplace culture
Responsible procurement
Stakeholder
issue
Global forces
The move towards a
circular economy
Climate change continuing
to impact businesses and
reshape societies
Resource scarcity and
growing concern for
natural capital
Rising social inequality
Continued erosion
of trust in business,
coupled with increasing
social activism
The links
between our
stakeholder issues,
key material issues,
risks and global
forces shaping our
world
Risk
Risk
Safety
Employee
relations
Safety
Sustainability
expectations
Employee
relations
Safety
Cyclical
macro-
economic
factors
Employee
relations
Employee
relations
Sustainability
expectations
Cyclical
macro-
economic
factors
Ensuring the
safety of our
employees
and
contractors
Safety as
a core value
Engaging
more closely
with our
employees
Supporting
sound labour
relations
Attracting,
developing
and retaining
key skills
Creating a
positive social
impact in our
communities
Key
material
issue
Connection
to, and
understanding
of, our
business and
strategic
direction
Fair,
equitable,
safe
workplace
Training and
development
Remuneration
Social
responsibility
and social
inequity
Diversity and
inclusion
Community
upliftment
Jobs
Stakeholder
issue
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A
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2
0
2
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Changing consumer
and employee profiles
Globalisation and high
levels of connectivity
The rapid pace of
technological innovation,
including artificial
intelligence (AI)
Growing populations
with increasing rates
of urbanisation
Risk
Supply chain
Cyclical macro-
economic factors
Liquidity
Sustainability
expectations
Climate change
Liquidity
Evolving
technologies
and consumer
preferences
Cyber security
Evolving
technologies and
consumer preferences
Climate change
Liquidity
Evolving
technologies and
consumer preferences
Sustainability
expectations
Climate change
Key
material
issue
Demonstrating
Reinforcing Verve as
agility
the Fibre of Choice
Enhancing
efficiency through
machine learning
and digitisation
Increasing the
sustainability of our
products through
circular design and
adjacent markets
Developing and
commercialising
innovations in
addition to adjacent
businesses
Stakeholder
issue
Return on
investment
Products based
on renewable
resources
Moving away from a
linear, to a circular,
model of production
Reduced
environmental
impact
New or enhanced
products that meet
rapidly changing
market demand
Responsible
consumption
Evolving
technologies
and consumer
preferences
Supply chain
disruption
Sustainability
expectations
Climate change
Evolving
technologies
and consumer
preferences
Sustainability
expectations
Evolving
technologies
and consumer
preferences
Sustainability
expectations
Evolving
technologies
and consumer
preferences
Sustainability
expectations
Evolving
technologies
and consumer
preferences
Sustainability
expectations
Climate change
Climate change
Climate change
Climate change
Sustainability
expectations
Climate change
Key
material
issue
Sourcing
sustainable
woodfibre
Prioritising
Responding to
renewable and
climate change
clean energy
Focusing
on water
stewardship
Accelerating
circular business
models
Safeguarding
and restoring
biodiversity
Stakeholder
issue
Global
GHG
emissions
Reduction
of fossil
fuel usage
Global
warming
Water quality
and quantity
Resource
scarcity
Biodiversity
loss
OUR PERFORMANCE REVIEW
Uncertain and evolving regulatory
Supply chain disruption
Risk
Cyber security
landscape
Employee relations
Evolving technologies
and consumer preferences
Sustainability expectations
Risk
Supply chain
Cyclical macro-
economic factors
Liquidity
Sustainability
expectations
Climate change
Liquidity
Evolving
technologies
and consumer
preferences
Cyber security
Evolving
technologies and
consumer preferences
Climate change
Liquidity
Evolving
technologies and
consumer preferences
Sustainability
expectations
Climate change
Maintaining ethical behaviour
and compliance
Procuring responsibly
Key
material
issue
Key
material
issue
Demonstrating
agility
Reinforcing Verve as
the Fibre of Choice
Enhancing
efficiency through
machine learning
and digitisation
Increasing the
sustainability of our
products through
circular design and
adjacent markets
Developing and
commercialising
innovations in
addition to adjacent
businesses
Workplace culture
Responsible procurement
Stakeholder
issue
Stakeholder
issue
Return on
investment
Products based
on renewable
resources
New or enhanced
products that meet
rapidly changing
market demand
Responsible
consumption
Moving away from a
linear, to a circular,
model of production
Reduced
environmental
impact
Safety
Employee
relations
Safety
Sustainability
expectations
Employee
relations
Safety
Cyclical
macro-
economic
factors
Employee
relations
Employee
relations
Risk
Sustainability
expectations
Cyclical
macro-
economic
factors
Ensuring the
safety of our
employees
and
contractors
Safety as
a core value
Engaging
more closely
with our
employees
Supporting
sound labour
relations
Attracting,
developing
and retaining
key skills
Creating a
positive social
impact in our
communities
Key
material
issue
Connection
to, and
understanding
of, our
business and
strategic
direction
equitable,
Fair,
safe
workplace
Training and
development
Remuneration
Social
responsibility
and social
inequity
Diversity and
inclusion
Community
upliftment
Jobs
Stakeholder
issue
Risk
Evolving
technologies
and consumer
preferences
Supply chain
disruption
Sustainability
expectations
Climate change
Evolving
technologies
and consumer
preferences
Sustainability
expectations
Evolving
technologies
and consumer
preferences
Sustainability
expectations
Evolving
technologies
and consumer
preferences
Sustainability
expectations
Evolving
technologies
and consumer
preferences
Sustainability
expectations
Climate change
Climate change
Climate change
Climate change
Sustainability
expectations
Climate change
Key
material
issue
Sourcing
sustainable
woodfibre
Prioritising
renewable and
clean energy
Responding to
climate change
Focusing
on water
stewardship
Accelerating
circular business
models
Safeguarding
and restoring
biodiversity
Stakeholder
issue
Global
GHG
emissions
Reduction
of fossil
fuel usage
Global
warming
Water quality
and quantity
Resource
scarcity
Biodiversity
loss
69
Global forces
The move towards a
circular economy
Climate change continuing
to impact businesses and
reshape societies
Resource scarcity and
growing concern for
natural capital
Rising social inequality
Continued erosion
of trust in business,
coupled with increasing
social activism
The links
between our
stakeholder issues,
key material issues,
risks and global
forces shaping our
world
Changing consumer
and employee profiles
Globalisation and high
levels of connectivity
The rapid pace of
technological innovation,
including artificial
intelligence (AI)
Growing populations
with increasing rates
of urbanisation
OUR PERFORMANCE REVIEW Our key material issues
The issues set out on the following pages are those that we
believe underpin our strategic risks and opportunities and
have the highest potential impact – negative and positive
– on stakeholder value. Further information on each of
these issues can be found in our 2021 Sappi Group
Sustainability Report available at www.sappi.com
How we determine materiality
1.
Define stakeholder value, map stakeholder
issues, as well as local and global trends
Regulatory and reporting guidelines are mapped against
stakeholder issues, as well as trends and developments in our
external operating environment.
2.
Identify regulatory and reporting issues
and consider risks
Step 1
We take various stakeholder guidelines into account
including those set out in terms of the UN SDGs, the
Global Reporting Initiative (GRI), the IIRC and the King
Code of Governance™ for South Africa 2016;
as well as ratings agencies such as ISS-OEKOM,
MSCI and the FTSE4Good Index Series.
3.
Evaluate issues through the lens
of materiality
How relevant is each issue to our business?
How does each issue impact our ability to create
value in the short, medium and long term?
4.
Review and prioritise issues
Step 2
Step 3
Step 4
How do our key material issues align with our
the global forces shaping that strategy?
Thrive25
strategy and
How do they link to risk, our priority UN SDGs and developments in our
operating context?
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Principles
Maintaining ethical behaviour and compliance
Why it’s material
Given that our reputation as an ethical company is key to our ability to unlock further growth opportunities, ethics constitutes the
foundation of our business. Values and ethics are not only critical in maintaining a licence to operate but also for developing
stakeholder trust and for driving performance. Recognising that our reputation is largely determined by the ethical behaviour of
our employees and representatives, we place a high premium on adherence to ethical behaviour as encapsulated in our Code of
Ethics. This is a practical tool to guide our directors, management, employees and other stakeholders as to what constitutes
ethical behaviour whilst complying with the various laws, regulations and policies applicable to Sappi.
(cid:43)(cid:82)(cid:90)(cid:3)t(cid:75)i(cid:86)(cid:3)i(cid:86)(cid:86)(cid:88)e(cid:3)(cid:79)i(cid:81)(cid:78)(cid:86)(cid:3)t(cid:82)(cid:3)(cid:82)t(cid:75)er(cid:3)(cid:68)(cid:86)(cid:83)ect(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)r(cid:3)(cid:69)(cid:88)(cid:86)i(cid:81)e(cid:86)(cid:86)
Our global priority SDGs Our top 10 risks
Our strategic fundamentals
The global forces shaping our
Thrive25
strategy
• Continued erosion of trust in
business, coupled with increasing
social activism
6
8
10
Cyber security
Uncertain and evolving
regulatory landscape
Employee relations
(cid:46)e(cid:92)(cid:3)de(cid:89)e(cid:79)(cid:82)(cid:83)(cid:80)e(cid:81)t(cid:86)(cid:3)i(cid:81)(cid:3)F(cid:60)(cid:21)(cid:19)(cid:21)(cid:20)
In line with our emphasis on ethical behaviour, a comprehensive
training programme in 2021 covered the following topics:
• Anti-fraud and corruption (relevant new employees in all
regions)
• Code of Ethics online training refresher course (all regions)
• Competition Law (relevant new employees in all regions and a
refresher course for South Africa, Europe and Sappi Trading)
• Environmental Law training (relevant new employees in all
regions)
• Occupational Health and Safety compliance (relevant new
employees in all regions)
• The Protection of Personal Information Act (POPIA) online
training (South Africa)
These training initiatives – incorporating relevant and practical
examples – have been implemented to inculcate the correct
ethical behaviour and responses and to avoid a tick box
approach to ethics.
Privacy in the workplace training to employees was prioritised in
the year under review due to the recent enactment of POPIA in
South Africa. Privacy is a constitutionally protected right and
accordingly, is an ethical imperative for Sappi. To this end, Sappi’s
POPIA Information Officers have been appointed, trained and
registered with the applicable regulator and the required privacy
policies and procedures are in place.
Sappi continues to provide avenues to employees to
communicate breaches or apparent breaches of the code
either through the telephonic ethics hotline or via e-mail to
Ethics@sappi.com. All complaints are registered and
investigated by Sappi’s internal audit team which are then
reported into Sappi’s Audit and Risk Committee on a quarterly
basis. (Further details on page
148 of this report.)
Opportunities for value creation
Fraud, including bribery and corruption awareness is critical at a time when organisations around the world lose an estimated
(cid:24)(cid:8)(1) of their annual revenues to fraud. By working together as OneSappi to combat fraud and ensure ethical outcomes, we can
significantl(cid:92) enhance our abilit(cid:92) to produce positive economic and social outcomes and enhance our overall competitive
advantage.
(1) https://www.fraudweek.com.
71
OUR PERFORMANCE REVIEW
Our key material issues continued
Principles continued
Procuring responsibly
Why it’s material
Worldwide, we have over 16,000 suppliers and it’s important that they understand – and abide by – our values and ethical
standards(cid:17) (cid:55)his is important from both a moral and reputational perspective, particularl(cid:92) given the intensified global focus
on(cid:123)responsible suppl(cid:92) chains(cid:17)
(cid:43)(cid:82)(cid:90)(cid:3)t(cid:75)i(cid:86)(cid:3)i(cid:86)(cid:86)(cid:88)e(cid:3)(cid:79)i(cid:81)(cid:78)(cid:86)(cid:3)t(cid:82)(cid:3)(cid:82)t(cid:75)er(cid:3)(cid:68)(cid:86)(cid:83)ect(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)r(cid:3)(cid:69)(cid:88)(cid:86)i(cid:81)e(cid:86)(cid:86)
Our global priority SDGs Our top 10 risks
Our strategic fundamentals
2
3
4
Evolving technologies
and consumer
preferences
Supply chain disruption
Sustainability
expectations
The global forces shaping our
Thrive25
strategy
• Resource scarcity and growing
concern for natural capital
• Continued erosion of trust in
business, coupled with increasing
social activism
(cid:46)e(cid:92)(cid:3)de(cid:89)e(cid:79)(cid:82)(cid:83)(cid:80)e(cid:81)t(cid:86)(cid:3)i(cid:81)(cid:3)F(cid:60)(cid:21)(cid:19)(cid:21)(cid:20)
During the year, we initiated our first campaign to onboard suppliers onto EcoVadis. Approximately 100 priority suppliers were
contracted directly and invited to share an EcoVadis scorecard. By the end of the year, 90 suppliers were sharing their scorecards with
us and another 19 were in progress to disclose on the platform. This equates to 33% of Sappi’s global procurement spend. Our
suppliers’ scorecards enable us to evaluate their performance actively, as well as identify risk and priority areas where further
improvements are needed.
The EcoVadis methodology focuses on 21 sustainability criteria that are grouped into four themes: Environment, Labour and Human
Rights, Ethics and Sustainable Procurement. These criteria are aligned with international sustainability standards such as the 10
Principles of the UNGC, the International Labour Organization conventions, the Global Reporting Initiative (GRI) standards and the
ISO 26000 standard.
We also continued the roll out of our Supplier Code of Conduct and made good progress against our
target of 80%
of procurement spend with declared compliance with our code of conduct by 2025. In SEU, 67% of total spend was covered
by agreements into which the provisions of the code are embedded, 53% in SNA and 44% in SSA.
Thrive25
Opportunities for value creation
By working collaboratively with our suppliers to promote and maintain responsible environmental, social and governance (ESG)
practices, we enhance their understanding of our requirements, thereby helping to realise our vision of a thriving world.
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Prosperity
Demonstrating agility
Why it’s material
One of the key lessons of the Covid-19 pandemic has been the need for agility. In seeking to grow our business and sustain our
financial health, we have had to be agile in response to an operating environment which is constantl(cid:92) changing(cid:17) (cid:37)eing fle(cid:91)ible
underpins our abilit(cid:92) to achieve our vision of being a sustainable business with an e(cid:91)citing future in woodfibre that provides
relevant solutions, delivers enhanced value and is a trusted partner to all our stakeholders.
(cid:43)(cid:82)(cid:90)(cid:3)t(cid:75)i(cid:86)(cid:3)i(cid:86)(cid:86)(cid:88)e(cid:3)(cid:79)i(cid:81)(cid:78)(cid:86)(cid:3)t(cid:82)(cid:3)(cid:82)t(cid:75)er(cid:3)(cid:68)(cid:86)(cid:83)ect(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)r(cid:3)(cid:69)(cid:88)(cid:86)i(cid:81)e(cid:86)(cid:86)
Our global priority SDGs Our top 10 risks
Our strategic fundamentals
3
7
9
Supply chain disruption
Cyclical macro-
eco nomic factors
Liquidity
The global forces shaping our
Thrive25
strategy
• Changing consumer and
employee profiles
• Growing populations with
increasing rates of urbanisation
(cid:46)e(cid:92)(cid:3)de(cid:89)e(cid:79)(cid:82)(cid:83)(cid:80)e(cid:81)t(cid:86)(cid:3)i(cid:81)(cid:3)F(cid:60)(cid:21)(cid:19)(cid:21)(cid:20)
In Europe we have agreed to sell the south-western part of our site at Maastricht Mill in the Netherlands. The sale has had no negative
impact on employment at the mill. Given the decline in market demand for graphic paper, approximately three years ago the mill began
to transition into the manufacturing of luxury packaging board. As this activity mainly takes place on the north side of the company
site, the southwestern part is therefore less intensively used and was eligible for sale. We will relocate our activities currently taking
place on the sold land to the remaining Sappi site. Proceeds of the sale will be used to improve internal logistics and additionally
improve the sustainability of our production processes.
In North America we are selling our hydroelectric assets on the Presumpscot River in Maine to Dichotomy Power LLC, pending satisfactory
completion of regulatory and other approvals. The move will enhance our focus on our core competencies and is consistent with our
permanent shut of PM9 and major components of the energy complex at our Westbrook Mill. The sale will allow us to redeploy
resources to further develop our growing businesses. The deal is expected to close by the end of calendar 2021 subject to
regulatory and other approvals.
In South Africa, the delays in completion and commissioning of our Saiccor Mill expansion project highlight the need for agility. In
2020, we were forced to declare force majeure on the project which then ceased construction. In 2021, construction was further
delayed by the social unrest halfway through the year, as well as ongoing Covid-19 travel restrictions which meant certain essential
service providers could not enter the country. Commissioning of the plant began in Q4 FY2021 and will be completed in Q1 FY2022.
In this region, we are positioning Tugela Mill for further growth by increasing production of neutral sulphite semi chemical pulp by
approximately 15,000 tons per annum in response to the anticipated increase in packaging demand. This will enable us to
concomitantly increase production of Ultraflute Plus (fluting containerboard), used primarily for fruit exports. It will also partially fill
the gap created by the closure of LignoTech South Africa at Saiccor Mill in 2020.
Opportunities for value creation
In focusing on cost containment, we recognise that the graphic sector of the market is in decline. However, our graphics assets are
cash generative. In recent years, our strategy has been, rather than closing or disposing of those assets, to try and convert them
into higher margin segments like packaging. We see the big push for paper-based solutions for packing purposes as a strong
opportunity on which we will continue to capitalise.
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OUR PERFORMANCE REVIEW
Our key material issues continued
Prosperity continued
Reinforcing Verve as the Fibre of Choice
Thrive25
Why it’s material
Under our
strategy, one of Sappi’s key drivers is to grow DP capacity and develop our Verve brand as the industry standard.
This is based on our belief that as global textile demand grows, driven by population growth, fashion and rising wealth in developing
economies, the need to develop more climate-friendl(cid:92) solutions, derived from renewable materials that(cid:123)are not fossil-fuel based, will
drive increasing market share for viscose, which is derived from DP. Hawkins Wright(1) reported a(cid:123)rebound in global (cid:39)P shipments of
(cid:20)(cid:25)(cid:8) for the first si(cid:91) months of calendar (cid:21)(cid:19)(cid:21)(cid:20) and are e(cid:91)pecting growth of (cid:20)(cid:23)(cid:8) for the remainder of the (cid:92)ear(cid:17) (cid:50)ur growth ambitions
are underpinned by our focus on sustainability (including the aspect of traceability) which, we believe, will become increasingly
important as a ke(cid:92) differentiator and determinate in defining value for our customers and for Sappi(cid:17)
(cid:43)(cid:82)(cid:90)(cid:3)t(cid:75)i(cid:86)(cid:3)i(cid:86)(cid:86)(cid:88)e(cid:3)(cid:79)i(cid:81)(cid:78)(cid:86)(cid:3)t(cid:82)(cid:3)(cid:82)t(cid:75)er(cid:3)(cid:68)(cid:86)(cid:83)ect(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)r(cid:3)(cid:69)(cid:88)(cid:86)i(cid:81)e(cid:86)(cid:86)
Our global priority SDGs Our top 10 risks
Our strategic fundamentals
4
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Sustainability
expectations
Climate change
Liquidity
(cid:46)e(cid:92)(cid:3)de(cid:89)e(cid:79)(cid:82)(cid:83)(cid:80)e(cid:81)t(cid:86)(cid:3)i(cid:81)(cid:3)F(cid:60)(cid:21)(cid:19)(cid:21)(cid:20)
The global forces shaping our
Thrive25
strategy
• Changing consumer and
employee profiles
• Growing populations with
increasing rates of urbanisation
Partnering for a forest-to-garment traceability solution
While fashion brand owners want to understand their climate
related sourcing risks and opportunities for wood-based fibres, it’s
estimated that only 5% of them are able to trace their raw materials
to origin of feedstock through the entire value chain. In FY2021,
Sappi Verve (DP) partnered with Birla Cellulose, one of the leading
viscose manufacturers in the textile value chain, to provide a
forest-to-garment traceability solution for 22 global brand owners.
This was made possible with the use of Birla’s pioneering ‘Green
Track’ blockchain technology, coupled with Sappi’s comprehensive
database on wood origin for its DP operations in South Africa and
the US.
Traceable and transparent supply chains are key to providing
brand owners and consumers with the assurance and confidence
that their products originate from sustainable and renewable
sources of wood, free from deforestation, where biodiversity is
promoted and where customary, traditional and civil rights of
people are upheld. Our collaboration with Birla enables sustainability-
focused consumers, brand owners and retailers to make more
informed buying decisions.
The efforts were recognised by our inclusion in the Forbes
Magazine ’Blockchain 50 List of 2021‘ which features companies
that lead in employing distributed ledger technology and have
revenue or a valuation of at least US$1 billion.
P(cid:68)rt(cid:81)eri(cid:81)(cid:74)(cid:3)t(cid:82)(cid:3)de(cid:79)i(cid:89)er(cid:3)(cid:82)(cid:81)(cid:3)t(cid:75)e(cid:3)(cid:55)e(cid:91)ti(cid:79)e(cid:3)E(cid:91)c(cid:75)(cid:68)(cid:81)(cid:74)e(cid:3)C(cid:79)i(cid:80)(cid:68)te(cid:14)(cid:3)
strategy
The Textile Exchange (TE) launched their Climate+ Strategy
in 2019, with a goal to reduce GHG emissions in the textile value
chain by 45% by 2030, while addressing other climate-related
impact areas, like water, biodiversity and soil health.
To accelerate progress towards the Climate+ objective and to drive
collective action, Sappi was one of 40 global brands that
participated in a discussion with the Climate Board. The latter was
appointed by the TE to uncover industry best practice in terms of
reducing GHG emissions. Sappi is also a member of the TE
man-made cellulosic fibre roundtable and climate sub-committee,
working with other industry leaders to assess how forestry, pulp and
fibre production can contribute to meeting the 2030 Climate+ goal.
We are an advisory partner in the development of the TE biodiversity
module – containing good practice standards – and have
participated in the pilot launch of the Biodiversity Benchmark and
Index. The Biodiversity Benchmark will enable companies to
understand their impacts and dependencies on nature in their
materials sourcing strategies, chart a pathway to delivering positive
biodiversity outcomes, and benchmark their progress. The tool is
aimed at supporting and is being developed alongside the Science
Based Targets Network in order to reinforce consistency in language,
frameworks and measurements. Additionally, use of this module and
its future iterations will help companies prepare for stakeholders’ –
including investors’ – questions pertaining to nature-related risk.
Partnering to measure the sustainability performance of
our DP operations
The Higg Facility Environment Module (Higg FEM) and the Facility
Labour and Social Module are part of the Higg Index suite of tools
developed by the Sustainable Apparel Coalition to enable the
apparel industry to measure their sustainability performance and
drive supply chain transparency and decision making. By
standardising the process of measuring supply chain impacts in
the textile industry, the index helps suppliers, manufacturers,
brands, and retailers to evaluate materials, products, facilities,
and processes based on environmental performance, social
labour practices, and product design choices. It is utilised by
over 250 brands and manufacturers.
The FEM and FSLM were used to measure environmental and
social performance as well as to identify opportunities for
improvement at Sappi Verve’s operations in South Africa and
North America. Cloquet Mill conducted a Higg FEM verification
audit with an SAC-appointed auditor and received an excellent
score. Furthermore, Saiccor Mill completed a Higg FSLM
self-assessment which also resulted in a high score. We believe
this to be significant, particularly in light of the poor reputation
of the textile value chain in certain parts of the world.
(1) Hawkins Wright: The outlook for dissolving pulp: Demand, supply, costs and prices, September 2021.
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Opportunities for value creation
• The European Union’s Single-Use Plastics Directive aims to combat environmental problems caused by single-use plastic
products. This presents an opportunity for viscose fibre (and hence DP), which is considered a natural polymer, to substitute
part of the 500,000 tons of petroleum based fibres that are used globally each year to produce single-use wipes.
• One of our key Verve customers has requested a mill trial for DP produced from recycled textiles. Against this backdrop and in
line with our commitment to the circular economy, we are exploring opportunities for local and international partnerships in the
textile recycling space. We have identified a high potential South African start-up company with whom to collaborate. Initial
discussions have highlighted numerous opportunities for engagement, including the option to progress Sappi SA’s social
impact strategy as well as the potential for raw material security.
75
OUR PERFORMANCE REVIEW OUR PERFORMANCE REVIEW
Our key material issues continued
Prosperity continued
Enhancing efficiency through machine learning and digitisation
Why it’s material
Data is as an important asset to help optimise operations, create superior customer experiences and disruptive new business
models. Advanced Analytics provide deeper, more advanced insight into patterns, trends, and themes that may be hidden within
data. This allows businesses to understand their customers on a deeper level, predict future outcomes, reduce risk and enhance
competitive edge.
(cid:43)(cid:82)(cid:90)(cid:3)t(cid:75)i(cid:86)(cid:3)i(cid:86)(cid:86)(cid:88)e(cid:3)(cid:79)i(cid:81)(cid:78)(cid:86)(cid:3)t(cid:82)(cid:3)(cid:82)t(cid:75)er(cid:3)(cid:68)(cid:86)(cid:83)ect(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)r(cid:3)(cid:69)(cid:88)(cid:86)i(cid:81)e(cid:86)(cid:86)
Our global priority SDGs Our top 10 risks
Our strategic fundamentals
2
6
Evolving technologies
and consumer
preferences
Cyber security
The global forces shaping our
Thrive25
strategy
• Globalisation and high levels of
connectivity
• The rapid pace of technological
innovation, including AI
(cid:46)e(cid:92)(cid:3)de(cid:89)e(cid:79)(cid:82)(cid:83)(cid:80)e(cid:81)t(cid:86)(cid:3)i(cid:81)(cid:3)F(cid:60)(cid:21)(cid:19)(cid:21)(cid:20)
Our data driven culture and machine learning continued to be
enabled by our Advanced Analytics team, who collaborate very
closely with the business units. All Advanced Analytics’ projects
and innovation initiatives are defined, prioritised and managed by
the business units and are subsequently developed and supported
by the Advanced Analytics team, with a strong focus on enablement.
Beginning in 2019, our digital transformation journey started small,
with different geographies tackling digital transformation projects
individually. Every plant team utilised their own set of data tools for
analytics, tracking production and other digitisation efforts. This
experimentation process, together with insights from these
individual projects, set the roadmap for our Industry 4.0 journey.
The aim was to identify/develop a data analytics platform that could
hold all our data, enable the setting of enterprise-wide governance
and standards and empower domain experts with data science
tools. Drawing on the efforts of our different teams enabled us to
build a comprehensive Proof of Concept for an Industrial Internet of
Things platform with cloud and edge solutions. We finalised this
with the help of multiple vendors.
Key to our AI journey has been the development of digital twins –
a virtual model of a process, semi-finished or finished product
which transforms data from different production systems, formats,
and time series into a usable database. While some plants had
existing digital twins from previous projects, we set an ambitious
goal to build approximately 165 digital twins across 18 mills by
2022. Accordingly, with the help of a vendor, we are now employing
a templatised digital twin framework which makes it easier for us to
capture and distil knowledge from internal teams. This framework
makes it possible for Sappi to have greater autonomy as we grow,
change and make new discoveries. It also makes it considerably
easier to scale our solutions to other facilities.
While digital twins make it easy to update data and gain access to
the right information, they do require resources or internal leaders
to ensure data integrity, which is key to ensuring credibility and
momentum when scaling a solution to other production lines,
factories, or geographies. To meet this need, we have now created
a new global department dedicated to the training, development
and support of Advanced Analytics within Sappi to ensure our
teams are enabled and invested. The combination of dedicated
training and suitable software means that Sappi's data integrators
now have the necessary skills to build and maintain any digital twin
for their manufacturing processes which can then be leveraged by
teams from all over the world.
Root cause analysis at Saiccor Mill
Our use of root cause analysis (RCA) at Saiccor Mill highlights
the effectiveness of our Advanced Anal(cid:92)tics tools(cid:17) (cid:50)ne of the
challenges we have faced at the mill is inconsistent cooking
liquor quality. To overcome this issue, we have developed a
predictive model for liquor quality (soft sensor) together with
an automated RCA, whereby whenever our predictions move
out of a certain band, we start running a short range (hours)
and long range (three days) RCA automatically.
A report is generated and sent to the operators and
production managers which recommends a target setting
range and thus enables more proactive correction of the
process(cid:17) Processes are not static(cid:30) the(cid:92) fluctuate and the
operating windows can shift based on equipment conditions
and efficiencies(cid:17) (cid:55)he predictive modelling helps us to take
these shifts into account, so we have become more dynamic in
our targeting of process settings.
Opportunities for value creation
(cid:47)ooking forward, advanced anal(cid:92)tics will pla(cid:92) a ke(cid:92) role in delivering the digital strateg(cid:92) over the ne(cid:91)t five (cid:92)ears(cid:17) We have
identified advanced anal(cid:92)tics initiatives across different business functions, which has been included in the digital roadmap that
will deliver value to Sappi and our stakeholders.
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OUR PERFORMANCE REVIEW
Increasing the sustainability of our products through circular
design and adjacent markets
Why it’s material
In line with our commitment to a thriving world, we believe it is our responsibility to obtain the maximum value from every tree used in
our production process(cid:17) (cid:50)ur clear advantages in diversification, global scale, and local e(cid:91)pertise are helping us to achieve this(cid:17)
(cid:43)(cid:82)(cid:90)(cid:3)t(cid:75)i(cid:86)(cid:3)i(cid:86)(cid:86)(cid:88)e(cid:3)(cid:79)i(cid:81)(cid:78)(cid:86)(cid:3)t(cid:82)(cid:3)(cid:82)t(cid:75)er(cid:3)(cid:68)(cid:86)(cid:83)ect(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)r(cid:3)(cid:69)(cid:88)(cid:86)i(cid:81)e(cid:86)(cid:86)
Our global priority SDGs Our top 10 risks
Our strategic fundamentals
2
5
9
Evolving technologies
and consumer
preferences
Climate change
Liquidity
(cid:46)e(cid:92)(cid:3)de(cid:89)e(cid:79)(cid:82)(cid:83)(cid:80)e(cid:81)t(cid:86)(cid:3)i(cid:81)(cid:3)F(cid:60)(cid:21)(cid:19)(cid:21)(cid:20)
Sappi Symbio is a natural fibre composite material combining
high-quality cellulose from renewable, forestry certified woodpulp
in a polymer matrix. Benefits include weight reduction in the
application combined with a natural look: soft, warm touch; high
rigidity and low density. Symbio aligns with our drive to make
everyday materials more sustainable. In FY2021, commercialisation
of this product gained considerable traction with uptake by a major
automotive manufacturer in the United States for use in centre
consoles, instrument and door panels, as well as cable trays, among
others. In addition, various other brand owners have the product in
their pre-commercial qualification phase. Symbio application in
household and consumer goods is also under development.
Now that we have commercial uptake of Symbio, we are focusing
on optimisation of the business model to grow offtake and
unlock further capacity for scale-up, including:
•
Increasing the percentage of cellulose to make the product
even more sustainable.
• Simplifying manufacturing and lowering cost.
• Developing Symbio composites with renewable polymers
such as polylactic acid which could replace polypropylene to
further improve the product’s sustainability value proposition.
In terms of our (cid:57)(cid:68)(cid:79)id(cid:68)(cid:3)fi(cid:69)ri(cid:79)(cid:79)(cid:68)ted(cid:3)ce(cid:79)(cid:79)(cid:88)(cid:79)(cid:82)(cid:86)e, our pilot plant is
running at capacity with repeat orders in diverse application fields
such as concrete, cosmetics, personal care, paint and coatings,
where it is valued as a dispersant, suspension stabiliser and
rheology modifier. In addition, Valida is commercialised in wound
care applications, with one of the advantages cited being reduced
frequency of dressing changes.
We are moving ahead with our furfural pilot plant at Saiccor Mill.
The plant, which uses the co-product of the DP process – xylan
hemicellulose sugars – to create furfural, is scheduled for
commissioning in the first half of calendar 2022. Established and
future market uses for furfural include resins, solvents and as a
sustainable platform chemical for the production of a variety of
derivatives to replace oil-based chemicals. Pending successful
results from the pilot plant and a viable business case, the
intention is to build a commercial furfural plant at the mill.
The global forces shaping our
Thrive25
strategy
• The move towards a circular
economy
• Climate change continuing to impact
businesses and reshape societies
• Resource scarcity and growing
concern for natural capital
In the xylose field we continue to monitor and assess market
opportunities.
Our lignin business continued with its expansion trajectory in
FY2021 and for the third year in a row, growth exceeded 30%. We
have made considerable progress in moving beyond traditional
commodity markets such as dust suppression and concrete
admixtures to higher value markets. We have, for example, entered
the oil well drilling, ceramics, carbon black and agrochemical
markets. Our lignin products are used in resin applications for the
production of particleboard, in particular Oriented Strand Board
to improve the product’s safety features and reduce use
of isocyanate and potentially also other oil-based chemicals such
as phenol. In addition, together with a technology partner, we are
working to test lignin-based intermediates as a substitute for
oil-based alternatives in foams in a wide variety of applications
where thermal performance, moisture resistance, fire retardancy
and structural strength are key performance criteria.
As part of Sappi Biotech’s ongoing strategy to enter adjacent
markets, the development of our lignin product for the animal feed
industry culminated in the launch of our Sappi Pelletin product in
this market with first sales reported in 2020. Pelletin is a natural
glue which binds the feed ingredients and additives together to
produce cost-effective compound feed pellets with enhanced
durability and strength. The anti-caking and dispersing properties
of lignin promote mixing uniformity and homogenous blending,
while reduced friction offers lower equipment wear and energy
costs.
The next generation of animal feed products focus on value beyond
pellet binding into functionalities that will aid the drive to find
alternatives to antibiotic growth promoters with natural prebiotic
and probiotic additives, together with mycotoxin binders.
Specialist studies in partnership with industry specialists have
been initiated to determine whether our natural lignin-based
products offer improved animal gut health and performance.
Opportunities for value creation
Frost can have a catastrophic impact on many agricultural crops around the world. To date, farmers have used wind machines and/
or heaters to mitigate this risk. In conjunction with a leading university, we have successfully demonstrated that Valida can
effectivel(cid:92) protect susceptible plant buds from frost damage(cid:17) (cid:44)n addition, we have also obtained a grant from P(cid:22)(cid:49)ano, a public-
private partnership aimed at the rapid commercialisation of cellulosic nanomaterials, to further develop this avenue of usage.
77
OUR PERFORMANCE REVIEW
Our key material issues continued
Prosperity continued
Developing and commercialising innovations in addition to
adjacent businesses
Why it’s material
Without critical thinking, new products and improved processes, we cannot succeed in a highly competitive industry and world.
Thrive25
Accordingly, innovation is embedded in our DNA and in our
strategy which reinforces a culture whereby our people challenge
conventional thinking with new ideas and solutions which contribute to a more sustainable world and add practical value to Sappi, our
customers and societ(cid:92)(cid:17) We make ongoing investments into (cid:53)(cid:9)(cid:39) (cid:11)(cid:56)S(cid:7)(cid:23)(cid:22) million in F(cid:60)(cid:21)(cid:19)(cid:21)(cid:20)(cid:12) and promote a culture of innovation
through the annual (cid:55)echnical (cid:44)nnovation Awards (cid:11)(cid:55)(cid:44)A(cid:12)(cid:17) (cid:55)he combined five-(cid:92)ear net present value for the eight finalists in the most
recent TIA is approximately US$60 million with an estimated annual EBITDA ex SI of US$9 million.
(cid:43)(cid:82)(cid:90)(cid:3)t(cid:75)i(cid:86)(cid:3)i(cid:86)(cid:86)(cid:88)e(cid:3)(cid:79)i(cid:81)(cid:78)(cid:86)(cid:3)t(cid:82)(cid:3)(cid:82)t(cid:75)er(cid:3)(cid:68)(cid:86)(cid:83)ect(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)r(cid:3)(cid:69)(cid:88)(cid:86)i(cid:81)e(cid:86)(cid:86)
Our global priority SDGs Our top 10 risks
Our strategic fundamentals
2
4
5
Evolving technologies
and consumer
preferences
Sustainability
expectations
Climate change
The global forces shaping our
Thrive25
strategy
• The move towards a circular
economy
• Climate change continuing to
impact businesses and reshape
societies
• Resource scarcity and growing
concern for natural capital
(cid:46)e(cid:92)(cid:3)de(cid:89)e(cid:79)(cid:82)(cid:83)(cid:80)e(cid:81)t(cid:86)(cid:3)i(cid:81)(cid:3)F(cid:60)(cid:21)(cid:19)(cid:21)(cid:20)
Sustainable food packaging solutions
Flexible packaging is essential to protect foods from air and
moisture during transportation and storage. Traditionally, heat-
sealing laminates comprising paper and a polyethylene (PE) sealing
layer have been the standard materials to keep food unspoiled and
fresh. However, this kind of flexible packaging requires the additional
converting step of applying a PE layer to the paper. Generally, these
synthetic polymer coated paper products are neither recyclable nor
compostable.
To address our clients’ needs for sustainable alternatives, we
developed Sappi Seal. While not new, this product is included here
as it was the overall winner of the most recent Sappi TIA. Sappi Seal
is a paper-based packaging solution with an integrated sealable
layer. The integrated barrier eliminates the need to apply any other
PE extrusion coatings. Designed to be heat sealable and moisture
resistant, Sappi Seal is the first paper-based solution with dispersion
technology competing with extrusion/lamination in the market.
(cid:54)(cid:68)(cid:83)(cid:83)i(cid:3)(cid:42)(cid:88)(cid:68)rd(cid:3)(cid:42)(cid:79)(cid:82)(cid:86)(cid:86)(cid:3)(cid:49)(cid:68)t(cid:88)re(cid:3)(cid:23)-(cid:50)(cid:43)(cid:42) is another paper product
offering a safe, sustainable alternative to laminate constructions in
food packaging. It is a one-side coated glossy paper with functional
high barrier coating and heat sealability that is suitable for both food
and non-food applications.
The product incorporates a new base paper architecture, modified
coating recipes and a unique drying process. We have filed a patent
application for the latter. The packaging can be heat sealed without
the need for additional sealants because of its unique barrier
coating. The product is safe to use for direct food contact and
protects the contents from oxygen, water vapour, grease and
mineral oil. Its integrated barrier ensures a long shelf life of the end
product, an essential food packaging requirement. Furthermore,
Guard Gloss fulfils the high market demands for excellent printability
and good converting performance.
Introducing new dye sublimation papers
In FY2021 we introduced Transjet Tacky Industrial, a coated dye
sublimation paper for digital transfer printing, specially developed for
high-speed inkjet printing on highly elastic textiles. The paper is first
printed with the desired image or pattern which is then transferred to
the elastic polyester fabric by means of heat and pressure. Transjet
Tacky Industrial has a high ink load capacity so the print can be
better accentuated due to strong colour saturation. The design
remains clearly visible when the fabric is stretched to its maximum,
which is particularly beneficial for sportswear.
We also added Basejet uncoated dye sublimation paper to our
portfolio, thereby providing an additional solution for the digital
printing of fashion and home textiles in consistent print quality.
Both Transjet Tacky Industrial and Basejet are FSC-certified.
E(cid:91)(cid:83)(cid:68)(cid:81)di(cid:81)(cid:74)(cid:3)(cid:82)(cid:88)r(cid:3)(cid:83)(cid:82)rt(cid:73)(cid:82)(cid:79)i(cid:82)(cid:3)(cid:82)(cid:73)(cid:3)(cid:79)(cid:68)(cid:69)e(cid:79)(cid:3)(cid:83)(cid:68)(cid:83)er(cid:123)(cid:86)(cid:82)(cid:79)(cid:88)ti(cid:82)(cid:81)(cid:86)
We expanded our portfolio of label paper solutions with the Parade
Label Pro non-wet-strength wet-glue label paper, targeted at the
beverage, food and consumer goods sectors. The paper is suitable
for a wide range of applications, such as labels for disposable
bottles, food and non-food containers, as well as wrappers for a
wide variety of products. It is distinguished by a glossy, single-side
double-coated quality with a very smooth surface and a high degree
of whiteness – ideally suited for outstanding printing and finishing
results.
(cid:48)eeti(cid:81)(cid:74)(cid:3)t(cid:75)e(cid:3)(cid:81)eed(cid:3)(cid:73)(cid:82)r(cid:3)(cid:83)(cid:68)c(cid:78)(cid:68)(cid:74)i(cid:81)(cid:74)(cid:3)(cid:90)it(cid:75)(cid:3)(cid:68)(cid:123)(cid:81)(cid:68)t(cid:88)r(cid:68)(cid:79)(cid:3)(cid:79)(cid:82)(cid:82)(cid:78)(cid:3)(cid:68)(cid:81)d(cid:3)(cid:73)ee(cid:79)
Driven in part by the booming ecommerce business, demand for
corrugated board packaging has been increasing rapidly. In
response, we launched Fusion Nature Plus, a complement to our
well-established Fusion Topliner. The former is an uncoated, fully
bleached recyclable virgin fibre liner with excellent printability in
flexographic, digital and offset printing. The product’s high
whiteness, brilliant colour reproduction and consistently high quality
make it a good choice for corrugated or solid board packaging
where a bright white appearance is required for topliner, inner liner
and fluting – and for ensuring an exceptional unpacking experience
for the customer. It can be used in a wide number of applications,
from pharmaceutical to food packaging. Moreover, given its strength
properties, as well as an appealing look and feel, the new virgin fibre
liner is also ideally suited for producing paper carrier bags.
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Ultracast Viva’s® green credentials recognised
In April 2021, our Ultracast Viva release paper won the Green
Product Award 2021 jury prize in the fashion category. The
award programme recognises companies and start-ups
that have distinguished themselves by their sustainable
practices and product results. Over a thousand applicants
from 51 countries were screened for this year's nomination.
An industry breakthrough, Viva is the first premium high-
fidelity casting paper compatible with solvent-free systems.
This textured release paper is now the new standard for
high-fidelity polyvinyl chloride, polyurethane (PU), semi-PU and
solvent-free casting systems for high quality coated fabrics
and textured materials.
There is a global movement to limit or eliminate solvent-based
casting systems to reduce chemical waste and pollution.
Ultracast Viva is the answer for customers dedicated to using
sustainable alternatives.
Opportunities for value creation
In 2022, we will be introducing new functional paper barrier coating technology at our speciality mill in Alfeld, Germany.
Expanding the use of our proprietary barrier coating technology underpins our drive to maintain our leading position in barrier
coated paper as well the commitment we have with our customers in developing innovative future-focused packaging solutions
which contribute toward a sustainable future.
The demand for paper and paperboard packaging continues to rise as consumers become increasingly mindful of the impact their
buying choices have on the environment. We are committed to supporting our customers in going beyond traditional film and
foil-based material solutions and growing our product ranges to meet the demands of our ever-changing world. Working directly
with brand owners we aim to create future-oriented circular solutions in line with growing collective global responsibilities.
Our 2017 acquisition of Rockwell Solutions has deepened our barrier paper manufacturing knowledge. Adding barrier coater
capacity at Alfeld Mill further upscales our capabilities, bringing the combination of paper, dispersion and coating technology to
more customers. Through this initiative we will continue to challenge the conventional packaging industry with new ideas and
solutions in order to make it easier for the world and the planet to follow a circular-economy strategy.
We expect to begin commissioning new products at the Alfeld Mill from mid-2022.
79
OUR PERFORMANCE REVIEW OUR PERFORMANCE REVIEW
Our key material issues continued
People
Ensuring the safety of our employees and contractors
Why it’s material
Safet(cid:92) is not onl(cid:92) a moral imperative, it is also an issue that affects productivit(cid:92) and hence, value add to all our stakeholders(cid:17) (cid:50)ur
approach to safety, a core value, is based on the principles of Project Zero – zero fatalities and zero injuries. In addition to
addressing ha(cid:93)ards in the workplace b(cid:92) means of the (cid:50)(cid:43)SAS (cid:20)(cid:27)(cid:19)(cid:19)(cid:20) and (cid:44)S(cid:50) (cid:23)(cid:24)(cid:19)(cid:19)(cid:20) related s(cid:92)stems in place at all our pulp and
paper mills, we also address ‘at risk behaviour’ of our employees through a behaviour-based safety (BBS) system.
(cid:43)(cid:82)(cid:90)(cid:3)t(cid:75)i(cid:86)(cid:3)i(cid:86)(cid:86)(cid:88)e(cid:3)(cid:79)i(cid:81)(cid:78)(cid:86)(cid:3)t(cid:82)(cid:3)(cid:82)t(cid:75)er(cid:3)(cid:68)(cid:86)(cid:83)ect(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)r(cid:3)(cid:69)(cid:88)(cid:86)i(cid:81)e(cid:86)(cid:86)
Our global priority SDGs Our top 10 risks
Our strategic fundamentals
The global forces shaping our
Thrive25
strategy
• Continued erosion of trust in
business, coupled with increasing
social activism
On a positive note, Injury Indices (II) for both own employee and
contractors showed an improvement over the past year and the
five preceding years.
Sappi Europe had a disappointing year with a LTIFR of 0.78 which
was a deterioration from the previous year’s 0.59. On a positive
note, contractor LTIFR showed continued improvement from
previous years. A safety communication campaign is underway to
bring more attention to frequent injuries and reinforce the fact that
nothing is so important than it cannot be done safely.
Sappi North America completed FY2021 with a LTIFR for own
employees of 0.33 compared with best ever of 0.20 in FY2020.
As in the previous year, there were no contractor LTIs – an
excellent achievement.
Safety performance in Sappi Southern Africa was highly
satisfactory, with the best ever LTIFR for own employees at 0.29.
The previous best ever achieved was 0.41 in 2020.
Looking forward, regions will continue to encourage the reporting
of near misses and non-lost time injuries (NLTIs) and ongoing
improvements in safety suggestion schemes. We remain
committed to reducing the impact of injuries on our workforce. By
involving all personnel, sharing information, and managing risk in
accordance with accepted best practice, we will aim to reduce the
occurrence and severity of accidents and NLTIs.
1
10
Safety
Employee relations
(cid:46)e(cid:92)(cid:3)de(cid:89)e(cid:79)(cid:82)(cid:83)(cid:80)e(cid:81)t(cid:86)(cid:3)i(cid:81)(cid:3)F(cid:60)(cid:21)(cid:19)(cid:21)(cid:20)
Covid-19
The year was dominated by the Covid-19 pandemic with all
operations and sites continuing with the required sanitising
and hygiene protocols, social distancing, self-declaration
health check requirements with ongoing engagement and
communications for the necessity of self-awareness at work
and at home. While the pandemic appears to have heightened
safety awareness and reinforced safe attitudes and behaviours,
complacency remains a risk. We have made a concerted effort
to encourage our people to vaccinate through ongoing
communication campaigns and, in South Africa, we have set up
vaccinations stations at our operational sites to enable access
to our people, their families and our contractors.
Occupational safety
In 2021 we were delighted to achieve our primary goal of zero
fatalities. This can be attributed to consistent messaging around
Project Zero and the ‘I Value Life’ safety campaign, including the
maturing Stop. Think before you Act journey in Sappi Forests.
Our continuous sharing of incidents, near misses and best
practices across the group has also played a key role, as has
the online Sappi Learning annual performance enablement
objective setting. This included a required statement of
each person’s commitment together with ‘walk the talk’
leadership behaviour demonstration examples.
In terms of group safety performance, LTIFR for both own
employees and contractors declined slightly from the previous
year but has shown steady improvement over the past six years.
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Comment: We calculate LTIFR by
dividing the product of lost-time
injuries and a group-wide standard for
man hours by the unit’s man hours, ie
LTIFR = LTI * 200,000/unit’s actual man
hours. As from this year, we have
excluded LTIs that result in light duty
from the calculations.
Comment: The theme for Global
Safety Awareness Week continued
with ‘I Value Life’ – aligned with
personal commitment to your own
and your colleague’s life.
Group LTIFR
1
7
0
.
0.80
0.60
0.40
0.20
0
2014
●
1
7
0
.
6
5
0
.
9
5
0
.
8
5
0
.
5
5
0
.
8
3
0
.
1
4
0
.
4
3
0
.
4
3
0
.
6
3
0
.
1
4
0
.
3
4
0
.
8
4
0
.
9
2
0
.
1
3
0
.
2015
2016
2017
2018
2019
2020
2021
100
80
60
40
20
0
Sappi LTIFR (lhs)
●
Contractor LTIFR (lhs)
Sappi II (rhs)
Contractor II (rhs)
Global Safety Awareness Week
14 - 18 June 2021
Taking
care of our
well-being
Being
responsible
Caring for
each other
Making safe
informed
decisions
I value life
means
Protecting
life
Always
behaving
safely
Always putting
safety fi rst
“As OneSappi, we do business safely with integrity and courage,
making smart decisions that we execute with speed.”
I value life
Opportunities for value creation
Currently, safety of own employees is included in our management incentive schemes. In FY2022, this will be expanded to include
contractors, highlighting our view that contractor safety is as important as that of our own employees.
81
OUR PERFORMANCE REVIEW
OUR PERFORMANCE REVIEW
Our key material issues continued
People continued
Engaging more closely with our employees
Why it’s material
When emplo(cid:92)ees are engaged, their discretionar(cid:92) effort goes up(cid:17) When leaders and managers channel that energ(cid:92) and effort in
the right direction, business and personal outcomes are positively impacted. Recognising that our people are our greatest lever
for achieving our
purpose, we conduct employee engagement surveys every second year. Input in previous surveys has
shaped programmes and initiatives that have significantl(cid:92) improved the wa(cid:92) we work(cid:17)
Thrive25
(cid:43)(cid:82)(cid:90)(cid:3)t(cid:75)i(cid:86)(cid:3)i(cid:86)(cid:86)(cid:88)e(cid:3)(cid:79)i(cid:81)(cid:78)(cid:86)(cid:3)t(cid:82)(cid:3)(cid:82)t(cid:75)er(cid:3)(cid:68)(cid:86)(cid:83)ect(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)r(cid:3)(cid:69)(cid:88)(cid:86)i(cid:81)e(cid:86)(cid:86)
Our global priority SDGs Our top 10 risks
Our strategic fundamentals
1
4
10
Safety
Sustainability
expectations
Employee relations
The global forces shaping our
Thrive25
strategy
• Continued erosion of trust in
business, coupled with increasing
social activism
• Changing consumer and
employee profiles
• Globalisation and high levels of
connectivity
(cid:46)e(cid:92)(cid:3)de(cid:89)e(cid:79)(cid:82)(cid:83)(cid:80)e(cid:81)t(cid:86)(cid:3)i(cid:81)(cid:3)F(cid:60)(cid:21)(cid:19)(cid:21)(cid:20)
We appointed a new service provider to conduct our most recent
employee engagement survey. Permanent employees in all
regions were given the opportunity to participate in the survey
which was made available in Dutch, English, Finnish, French
(Quebec), German, isiZulu and Italian. The key issues
covered were:
• Manager and senior manager relationships
•
Inter-departmental relationships
• Company potential and strategy
• Ethics
• Safety.
In the new survey, the following definitions were used for
engagement levels:
• Engaged: Engaged employees consistently exceed
expectations. They are energised and passionate about their
work, leading them to exert discretionary effort to drive
organisational performance.
• Almost Engaged: Employees who sometimes exceed
expectations and are generally passionate about their work.
•
At times they exert discretionary effort to help achieve
organisational goals.
(cid:44)(cid:81)di(cid:428)ere(cid:81)t(cid:29) Employees who are satisfied and comfortable are
generally able to meet minimum expectations. They see their
work as ʽjust a job’, prioritising their needs before
organisational goals.
• Disengaged: Employees who usually fail to meet minimum
expectations, putting in time rather than effort. They have little
interest in their jobs and often display negative attitudes.
Globally, participation in the 2021 survey was 84%, with the
following regional levels: 81% (SEU), 66% (SNA), 96% (SSA) and
100% (Sappi Trading).
The survey tool provides a priority matrix that overlays the Sappi
results with the factors that have the highest impact on
engagement levels. Using the matrix, we have established areas
of improvement for each region. On a global level these include
senior manager relationships, department relationships, manager
relationships, together with learning and development.
Opportunities for value creation
A central action tracker has been developed which enables our human resources colleagues to update the status of action items
for their internal clients on a monthly basis. Comprehensive business unit-level reporting takes place quarterly and a summary of
the themes and progress are provided to the senior leadership team twice annually. In addition, the close-out of engagement
action items has now been included in the performance objectives of each line manager and supervisor across the business.
In addition, through the new service provider, we are able to run interim pulse surveys in targeted areas. Once interventions are
complete, these interim surveys will be used to measure the impact and capacitate local human resources teams to react faster to
support the business through required improvements.
(cid:55)hese actions will not onl(cid:92) affirm that the voices of our people are important, but will also help give us greater clarit(cid:92) as we work to
demonstrate added value in line with
Thrive25
.
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Supporting sound labour relations
Why it’s material
Sound labour relations are important for business continuity. We are committed to fostering positive stakeholder relationships and
believe that effective communication is essential to sound labour relations, enhanced emplo(cid:92)ee engagement and ultimatel(cid:92), overall
business success. We continue to endorse the principles of fair labour practice as entrenched in the UNGC and the Universal
Declaration of Human Rights. At a minimum, we conform to and often exceed, the labour legislation requirements in countries in which we
operate. Sappi promotes freedom of association and engages extensively with representative trade unions. Globally, approximately
(cid:24)(cid:25)(cid:17)(cid:23)(cid:22)(cid:8) of our workforce is unionised, with (cid:26)(cid:20)(cid:17)(cid:24)(cid:22)(cid:8) belonging to a bargaining unit(cid:17)
(cid:43)(cid:82)(cid:90)(cid:3)t(cid:75)i(cid:86)(cid:3)i(cid:86)(cid:86)(cid:88)e(cid:3)(cid:79)i(cid:81)(cid:78)(cid:86)(cid:3)t(cid:82)(cid:3)(cid:82)t(cid:75)er(cid:3)(cid:68)(cid:86)(cid:83)ect(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)r(cid:3)(cid:69)(cid:88)(cid:86)i(cid:81)e(cid:86)(cid:86)
Our global priority SDGs Our top 10 risks
Our strategic fundamentals
1
7
10
Safety
Cyclical macro-
economic factors
Employee relations
(cid:46)e(cid:92)(cid:3)de(cid:89)e(cid:79)(cid:82)(cid:83)(cid:80)e(cid:81)t(cid:86)(cid:3)i(cid:81)(cid:3)F(cid:60)(cid:21)(cid:19)(cid:21)(cid:20)
We continued to enjoy relatively positive industrial relations with
trade unions at all manufacturing sites and forests plantations
across the group in the year under review.
Overall, FY2021 was again characterised by very tough collective
bargaining process given the continued impact of Covid-19 and
global economic conditions. Community engagement continued
to be another key focus area, especially in South Africa as the
country experienced an unprecedented wave of community
unrest largely in the Gauteng and KwaZulu-Natal provinces.
In SEU, 62% of employees are members of a union, and 87%
of employees fall within a bargaining unit. We engage with
various unions in each country where we operate and Collective
Labour Agreements are in place at all mills with the exception
of Carmignano and Condino Mills in Italy and Lanaken Mill in
Belgium.
In SNA, 65.2% of employees are members of a union, with 64.9%
belonging to a bargaining unit. SNA has 12 collective bargaining
The global forces shaping our
Thrive25
strategy
• Continued erosion of trust in
business, coupled with increasing
social activism
• Changing consumer and
employee profiles
agreements with its hourly employees across various categories
of work.
Union representation in SSA declined slightly to 50%. The region
continues to recognise two trade unions, namely, the Chemical
Energy, Pulp, Printing, Wood and Allied Workers Union – the majority
union across all mills and forestry – and the United Association of
South Africa. However, we also continue to engage with other trade
unions that are substantively represented in some of our
operations, but not currently fully recognised. These are the
Association of Mining and Construction Union organising at Lomati
Sawmill in Barberton as well as the National Union of Metal Workers
of South Africa, organising at our Ngodwana and Tugela Mills.
In SSA, 59% employees fall within the scope of the bargaining
unit. Collective bargaining in SSA was concluded well ahead of
the deadline for implementation, in both the pulp and paper and
forestry sectors.
Opportunities for value creation
In order to improve labour/management relationships across all operations, SSA has developed and adopted a roadmap facilitated
b(cid:92) an independent Senior Commissioner(cid:17) (cid:55)he ke(cid:92) elements of the roadmap include a specific review of the (cid:49)ational Partnership
Forum (including senior members of management and senior union leaders who hold regular meeting where business, safety and
union challenges are discussed), business unit engagement structures, communication with employees and capacity building for
union officials(cid:17) Work is alread(cid:92) underwa(cid:92) in various task teams consisting of management and labour representatives to develop
and implement action plans.
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OUR PERFORMANCE REVIEW
Our key material issues continued
People continued
Attracting, developing and retaining key skills
Why it’s material
Our employee value proposition whereby we seek to add value to our people and our business is based on making a purpose-
driven and meaningful contribution towards the wellbeing and development of our employees and our communities. This in turn
is(cid:123)based on sourcing talent strategicall(cid:92) and retaining it, accelerating development, providing performance feedback and creating
development opportunities. Skills are the backbone of our success.
(cid:43)(cid:82)(cid:90)(cid:3)t(cid:75)i(cid:86)(cid:3)i(cid:86)(cid:86)(cid:88)e(cid:3)(cid:79)i(cid:81)(cid:78)(cid:86)(cid:3)t(cid:82)(cid:3)(cid:82)t(cid:75)er(cid:3)(cid:68)(cid:86)(cid:83)ect(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)r(cid:3)(cid:69)(cid:88)(cid:86)i(cid:81)e(cid:86)(cid:86)
Our global priority SDGs Our top 10 risks
Our strategic fundamentals
10
Employee relations
Our additional SSA
priority SDGs
The global forces shaping our
Thrive25
strategy
• Continued erosion of trust in
business, coupled with increasing
social activism
• Globalisation and high levels of
connectivity
• Changing consumer and
employee profiles
packaging and speciality paper groups was also implemented.
We also expanded our curriculum-based training system using
the Convergence platform – workforce training and compliance
management software that offers a single platform from which to
deliver training programmes – at Somerset Mill for both hourly
employees and entry level engineers. In addition, we expanded
Cloquet Mill’s supervisor training module, provided introductory
production training at the same mill and introduced new
supervisor training at Somerset Mill. Westbrook Mill continued
with multi-craft training to move to a single craft shop.
In Sappi Southern Africa there was a concerted effort for mill
foremen and superintendents to complete the safety and
performance improvement programme called Lean on Me. A
total of 403 employees across the mills are currently enrolled in
the programme and are completing a combined average of
1,500 online courses, classrooms and practical assignments
on a monthly basis. The region refreshed the content of the
Manager in Training and LeadX – a leadership development
programme targeting future heads of department – programmes
with the new leadership culture requirements from
deployed this content to new groups of participants. We also
continued to utilise online Pulp and Paper training from
Convergence to improve awareness of key processes and
competence in the mills.
Thrive25
and
Training in Sappi Trading was varied, ranging from leadership
training for senior managers in Hong Kong, to Portuguese
language courses in Mexico.
(cid:46)e(cid:92)(cid:3)de(cid:89)e(cid:79)(cid:82)(cid:83)(cid:80)e(cid:81)t(cid:86)(cid:3)i(cid:81)(cid:3)F(cid:60)(cid:21)(cid:19)(cid:21)(cid:20)
We are committed to implementing a consistent approach to
learning that is linked to talent management, succession and the
improvement of skills and productivity across our business. Our
primary aim is to increase and improve our employees’
productive output and shorten the time to competence. As can
be seen from the table detailing training hours, our training focus
is on the lower levels of the organisation.
Globally, all employees undergo Code of Ethics and safety
training. However, each region has targeted learning and
development programmes focused on meeting its own particular
needs. Some of the regional initiatives are set out below.
In Sappi Europe, we continued with implementation of the
Cornerstone learning, talent and performance management
systems which automates and improves processes around
performance reviews, goal management, competency
management and development planning. The region continued
with the three to four-year apprentice vocational training
programme implemented initially at our four German-speaking
mills, now also in operation in Finland and Belgium. This involves
approximately 240 apprentices and is helping to build a technical
skills pool that will be used to replace staff going on retirement
over the next three to four years.
In Sappi North America, the internship programmes at Sappi’s
three US mills are helping to create a pipeline for entry level
talent, specifically engineers and some functional positions
to offset the losses associated with the ongoing wave of
retirements. Targeted salesforce training for the graphics and
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Training hours per region in 2021: all employees
No grade
Unskilled
25.19
117.63
320.86
65.35
–
–
28.96
28.96
SEU
SNA
SSA
Total
Semi-
skilled
5.03
19.17
40.75
39.41
Skilled
technical
and junior
management
Professional
and middle
management
Senior
management
Top
management
7.28
29.78
37.59
31.68
15.17
33.86
26.50
23.33
14.07
18.25
10.88
14.07
8.86
9.33
3.36
6.61
Total
22.74
85.10
63.65
48.29
Opportunities for value creation
South Africa has a critical need for technical and artisan skills. We continued to focus on technical development through a
combination of technical online training and specialised classrooms – our partnership with the Southern African Institute of
Welding for accredited welding training at Saiccor Mill is an example. Another milestone was the attainment of full apprentice and
trade test accreditation at the Skills Centre at (cid:49)godwana (cid:48)ill(cid:17) (cid:55)he first phase training for apprentices from Stanger and Saiccor
(cid:48)ills was completed at the (cid:49)godwana Skills Centre, with further benefit gained from local Sappi-owned accommodation ad(cid:77)acent
to the centre. The cost savings from the accommodation are being used to provide further training.
By contributing to technical competency levels in South Africa, we are ensuring a pipeline of skills which meets our needs while
creating positive social impact and contributing to the wellbeing of our communities.
85
OUR PERFORMANCE REVIEW
Our key material issues continued
People continued
Creating a positive social impact in our communities
commitment to being a trusted partner, we work to promote shared value and create positive social impact
Why it’s material
Thrive25
In line with our
beyond the fence lines of our mills and plantations. Our aim is to create positive, meaningful and sustainable systems change for the
benefit of our communities, particularl(cid:92) for those at a disadvantage as a result of comple(cid:91), long-term s(cid:92)stemic issues(cid:17) (cid:44)n doing so, we
foster positive community relationships, enhance our reputation, become a more attractive employer and secure our licence to
operate – and thrive.
(cid:43)(cid:82)(cid:90)(cid:3)t(cid:75)i(cid:86)(cid:3)i(cid:86)(cid:86)(cid:88)e(cid:3)(cid:79)i(cid:81)(cid:78)(cid:86)(cid:3)t(cid:82)(cid:3)(cid:82)t(cid:75)er(cid:3)(cid:68)(cid:86)(cid:83)ect(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)r(cid:3)(cid:69)(cid:88)(cid:86)i(cid:81)e(cid:86)(cid:86)
Our global priority SDGs Our top 10 risks
Our strategic fundamentals
Our additional SSA
priority SDGs
4
7
Sustainability
expectations
Cyclical macro-
economic factors
The global forces shaping our
Thrive25
strategy
• Rising social inequality
• Continued erosion of trust in
business, coupled with increasing
social activism
(cid:46)e(cid:92)(cid:3)de(cid:89)e(cid:79)(cid:82)(cid:83)(cid:80)e(cid:81)t(cid:86)(cid:3)i(cid:81)(cid:3)F(cid:60)(cid:21)(cid:19)(cid:21)(cid:20)
Our corporate citizenship initiatives and programmes are in line
with, and supportive of, our business strategy and are developed
with input from key stakeholder groups. They are also being
matched against our UN SDG commitments. Our support is
focused on our employees, our customers and the communities
where we have an impact. We have prioritised community support
projects with a particular focus on education, environment, health
and welfare. Our preference is for multi-year programmes which
create sustained impact in our communities. The majority of
spend is allocated to South Africa, given the development needs
of the country. Each region has its own programmes which are
detailed extensively in our Group Sustainability Report, available
at www.sappi.com
In FY2021, the Covid-19 global pandemic continued to dominate
the business and social landscapes. We adjusted our regular
corporate citizenship programmes to meet community needs.
We responded swiftly to protect the safety of our employees
and communities as well as to address the negative economic
and social impacts, including the provision of personel protective
equipment, sanitiser, food parcels and other localised support.
During the year Sappi joined the Circular Bioeconomy Alliance
(CBA), a voluntary organisation working to accelerate the transition
to a circular bioeconomy through tangible local activities, such as
Sappi’s own Project Khulisa tree grower scheme.
In Europe the previously established Covid Hardship Fund
continued to receive contributions from staff, and it made
donations to the WHO Covid-19 Solidarity Response Fund.
In North America the Ideas that Matter (ITM) grant programme,
which was suspended for 2020 due to the focus on our Covid-19
response, was revised and relaunched. As from 2021 designers
from around the world will be able to submit ideas that include
paper packaging projects in addition to print and digital
communications projects, aligned with at least one of the
17 UN SDGs. Submissions should show how print design can
improve the lives of others. An amount of US$250,000 has been
made available for ITM grants.
In South Africa a review of support programmes led to the
adoption of a new Social Impact Strategy for SSA which will inform
planning for the corporate citizenship programme from FY2022
onwards. The strategy will ensure that disparate current initiatives
are reworked into a single coherent framework enhancing our
strategic approach to local communities and national and local
government.
Sappi Southern Africa partnered with the National Business
Initiative to establish a small business development hub within the
Ilembe District in KwaZulu-Natal, where Sappi’s Tugela and
Stanger Mills are located.
During FY2021 Sappi Southern Africa formally joined the Shared
Value Africa Initiative. The move aligns with our corporate purpose
and our new approach to social impact. The membership enables
us to collaborate and partner on mutually beneficial business
relationships with likeminded organisations with values and
principles that focus on creating economic value and value
for society – Profit with Purpose.
Spend in 2021
Sappi Europe
Sappi North America
Sappi Southern Africa
2021
€100,000
US$145,100
ZAR48 million
Note: The figure for SNA is much lower than in previous years because
we suspended our longstanding ITM programme (spend: US$250,000) for
FY2021. The grant programme has been revised and relaunched for 2022.
Opportunities for value creation
(cid:44)n South Africa we anticipate that the newl(cid:92) adopted social impact strateg(cid:92) will enable us to leverage our financial commitment,
enhance the efficac(cid:92) of our programmes and promote greater levels of collaboration(cid:17)
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Planet
Sourcing sustainable woodfibre
Why it’s material
Healthy, resilient forests are the foundation of our business. Sustainable forest management can maintain or enhance forest
carbon stocks and sinks, while wood products store carbon and act as substitutes for emissions-intensive materials. Responsibly
managed forests play an important role in mitigating climate change, and we are determined to be part of the solution to this
challenge b(cid:92) acting as a custodian of land and forests(cid:17) We believe that robust, internationall(cid:92) recognised and third-part(cid:92) verified
forest certification s(cid:92)stems are effective tools for promoting sustainable consumption and production, as well as combating
deforestation and illegal logging through proof of legality and responsible practices.
Accordingl(cid:92), we strive to increase the amount of certified fibre supplied to our mills and prioritise responsible management on our
plantations in South Africa. As sustainably managed forests are more productive, by doing so we ensure a sustainable supply of
woodfibre(cid:17)
(cid:43)(cid:82)(cid:90)(cid:3)t(cid:75)i(cid:86)(cid:3)i(cid:86)(cid:86)(cid:88)e(cid:3)(cid:79)i(cid:81)(cid:78)(cid:86)(cid:3)t(cid:82)(cid:3)(cid:82)t(cid:75)er(cid:3)(cid:68)(cid:86)(cid:83)ect(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)r(cid:3)(cid:69)(cid:88)(cid:86)i(cid:81)e(cid:86)(cid:86)
Our global priority SDGs Our top 10 risks
Our strategic fundamentals
2
3
4
5
Evolving technologies
and consumer
preferences
Supply chain disruption
Sustainability
expectations
Climate change
The global forces shaping our
Thrive25
strategy
• Climate change continuing to
impact businesses and reshape
societies
• Resource scarcity and growing
concern for natural capital
(cid:46)e(cid:92)(cid:3)de(cid:89)e(cid:79)(cid:82)(cid:83)(cid:80)e(cid:81)t(cid:86)(cid:3)i(cid:81)(cid:3)F(cid:60)(cid:21)(cid:19)(cid:21)(cid:20)
Promoting responsible forestry
All Sappi’s mills in Europe, United States, and Canada are both
Programme for the Endorsement of Forest Certification (PEFC) and
Forest Stewardship Council (FSC), and in the United States also
Sustainable Forestry Initiative (SFI) Chain of Custody (CoC) certified.
Sappi’s own tree plantations in South Africa are both PEFC and
FSC-certified. The mills in South Africa are FSC CoC-certified and
will achieve PEFC CoC certification soon. This approach enables us
to offer a wide product portfolio of certified products, and gives us
full traceability of purchased wood-based raw material. In so doing,
we hope to drive responsible production and consumption patterns
and demand for wood-based products originating from certified
forests.
In 2021, 77% (2020: 73%) of all the wood-based raw material
supplied to Sappi’s mills originated from FSC or PEFC (incl. SFI)
certified forests. In Europe, North America and South Africa, the
share of certified woodfibre supplied in 2021 was respectively:
87% (2020: 80%), 57% (2020: 55%), and 85% (2020: 83%). Much
of the woodfibre we use is dual certified. In 2020 and 2021, the
CoC processes were extended to new products such as Valida
fibrillated cellulose, as well as Symbio composite materials
combining cellulose from wood and thermoplastics.
We engage with wood and pulp suppliers to promote and increase
the share of certified forests and wood, and actively participate in
the development of FSC, PEFC and SFI systems. In South Africa,
we operate a FSC group scheme, which offers FSC certification for
42 private members with 41,000 ha of land as at the end of FY2021.
We offer growers in this scheme a premium for certified timber,
thereby encouraging them to invest in sustainable management
practices.
In the United States, the Sappi Maine Forestry Programme and the
Sappi Lake State Private Forest Programme assist forest landowners
to meet their objectives for managing their woodland. Sappi’s trained
foresters are able to develop a forest management plan geared to
the interests of the landowner including wildlife management and
aesthetics, marketing of timber to generate maximum return and
providing an extensive network of environmental and marketing
resources. In South Africa, qualified extension officers provide
growers in our Sappi Khulisa enterprise development scheme
with ongoing growing advice and practical assistance.
E(cid:81)(cid:86)(cid:88)ri(cid:81)(cid:74)(cid:3)(cid:86)ec(cid:88)rit(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)fi(cid:69)re(cid:3)(cid:86)(cid:88)(cid:83)(cid:83)(cid:79)(cid:92)
Sappi Forests enhances our fibre base in South Africa through
leading-edge tree improvement programmes which aim to produce
high-quality wood with the required pulping characteristics,
increase yield per hectare and mitigate against pests and diseases.
In South Africa, 56% of our plantations can be classified as having
high site sensitivity. Sappi has developed a site sensitivity risk
map that includes various site risks (slope, erodibility, soil depth,
soil organic carbon content, soil texture, etc). Specific
management operational guidelines have been or are being
developed based on the different site sensitivity classes.
Silvicultural practices on these sites are reviewed and changed
to use practices like mulching to mitigate site impacts.
87
OUR PERFORMANCE REVIEW
Our key material issues continued
Planet continued
Sappi and the fi rst ever PEFC forest management certifi cate
in South Africa
(cid:44)n earl(cid:92) (cid:21)(cid:19)(cid:21)(cid:20), Sappi was awarded the fi rst ever
PEFC forest management certifi cate in South
Africa. This achievement validates that Sappi’s
forest management practices in South Africa meet
the requirements for sustainable forest
management set out in the PEFC-endorsed
standard for the region – Sustainable African
Forestry Assurance Scheme (SAFAS).
(cid:55)he certifi cation will enable Sappi to off er PEFC-
certifi ed wood from our plantations in South
Africa, giving further assurance to Sappi’s local
and global customers that the wood raw material
originates from responsibly managed forests. This
is in addition to the longstanding FSC certifi cation
that we hold for all our plantations in South Africa.
The potential of SAFAS in South Africa is that it
incorporates cutting-edge, innovative and
eff ective approaches to also make forest
certifi cation more accessible to South Africa(cid:111)s
small landowners. We believe that this has great
promise for ensuring certifi cation that not onl(cid:92)
delivers social and environmental values, but also
supports socio-economic and development
priorities.
What makes PEFC-
endorsed national forest
certifi cation systems, such
as the SAFAS, so relevant
is that they are locally
developed and owned, and
that they respect the
country’s operational and
cultural conditions. This is
important because it
ensures that the advantages
of certifi cation are accessible
to all forest owners, with a
particular emphasis on
smallholders.
Ben Gunneberg PEFC International, CEO and
Secretary General
Committed to zero deforestation
(cid:50)ur commitment to (cid:93)ero deforestation means knowing the source of woodfi bre(cid:30) ensuring that suppliers implement practices
to promptl(cid:92) regenerate forests post-harvest, which is re(cid:84)uired under the global forest certifi cation standards that we are
committed to upholding. It also means implementing our Supplier Code of Conduct to assess supply-chain, ethical and legal
risk continually; and not sourcing from suppliers associated with deforestation.
Opportunities for value creation
Traditional tree breeding is a relatively slow process. Our adaptation strategy to mitigate the impacts of environmental
change, is to select and produce the most optimally suited hybrid varieties for each climatic zone through our Sappi Forests’
tree breeding programme. Our tree breeding division has a target of developing a hybrid varietal solution for all our sites by
(cid:21)(cid:19)(cid:21)(cid:24)(cid:17) We are also making use of genetic tools, like (cid:39)(cid:49)A fi ngerprinting, to enhance and accelerate our breeding and selection
process(cid:17) (cid:44)n addition, as(cid:123)pine and eucal(cid:92)pt h(cid:92)brids are more successfull(cid:92) propagated through rooted cuttings rather than
seed, a strategy is being rolled out to meet future requirements. In addition to the recent construction of Clan Nursery and
the rebuild of the Ngodwana Nursery, we plan to upgrade Richmond Nursery in 2023 to enable the production of additional
hybrid cuttings in addition to seedlings.
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Prioritising renewable and clean energy
Why it’s material
This issue is inextricably linked to mitigating greenhouse gas emissions in order to address climate change. Decarbonisation
strategies involve the replacement of fossil-based fuels with either renewable or clean energy sources. Evolving legislation
supporting ambitious decarbonisation targets within the regions in which we operate and sell our products, together with
increasing consumer awareness of the need for low carbon products are informing our decarbonisation strategy. So too, is our
responsibility to contribute to a thriving world.
(cid:43)(cid:82)(cid:90)(cid:3)t(cid:75)i(cid:86)(cid:3)i(cid:86)(cid:86)(cid:88)e(cid:3)(cid:79)i(cid:81)(cid:78)(cid:86)(cid:3)t(cid:82)(cid:3)(cid:82)t(cid:75)er(cid:3)(cid:68)(cid:86)(cid:83)ect(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)r(cid:3)(cid:69)(cid:88)(cid:86)i(cid:81)e(cid:86)(cid:86)
Our global priority SDGs Our top 10 risks
Our strategic fundamentals
2
4
5
Evolving technologies
and consumer
preferences
Sustainability
expectations
Climate change
The global forces shaping our
Thrive25
strategy
• Climate change continuing to
impact businesses and reshape
societies
(cid:46)e(cid:92)(cid:3)de(cid:89)e(cid:79)(cid:82)(cid:83)(cid:80)e(cid:81)t(cid:86)(cid:3)i(cid:81)(cid:3)F(cid:60)(cid:21)(cid:19)(cid:21)(cid:20)
In FY2021, 52.3% of the energy we used was
renewable, mostly from own black liquor.
The global drive for decarbonisation is
manifested in each region where we
operate. It includes developments such as
the European Green Deal, the American
Energy Innovation Act and in South Africa,
the Renewable Energy Independent Power
Producer programme and the carbon tax
implemented in 2019. We have increased
our focus on energy efficiency measures
and low-carbon initiatives.
Ngodwana Energy, our biomass-based
project at Ngodwana Mill in which we have
a 30% stake, has now been commissioned.
In addition, construction of our fuel rod
project which uses biomass,
lignosulphonate and coal slurry to
manufacture fuel rods to replace coal and
anthracite, is complete. Burning these fuel
rods has a far lower environmental impact
than coal or anthracite.
Setting emission reduction targets
Recognising the role that industry needs to
fulfil to be part of the solution in responding
to climate change, Sappi has been placing
increased strategic focus on decarbonisation.
Each region has established decarbonisation
plans and our mills are heavily invested in
implementing projects like the Saiccor Mill
expansion project, as well as analysing and
preparing projects, plans and pathways
to further reduce emissions. We initiated
our Science Based Targets initiative (SBTi)
target validation process in June 2021
and expect validation to be complete in
FY2022.
Related to climate action, in FY2020,
we made a global commitment to a 17%
reduction in specific GHG emissions
(Scope 1 and 2 combined) by 2025 –
aligned with a well below 2°C pathway.
This is the first time that we have
established a groupwide
GHG emissions reduction target.
Carbon pricing
Carbon pricing influences business
decisions and company strategy and is
used in our capital project assessments
and expenditure at all our operations, as well
as in our energy budget processes. We use
differentiated shadow pricing where the
internal price on carbon varies per region
because there are different requirements
and objectives in different regions.
Decisions on capital projects now take into
account the carbon impact.
Additionally, aligning with our global SBTi
decarbonisation target, in 2022 we will set
up a task team to establish a global carbon
pricing standard/metric to ensure that
decarbonisation capital is optimised on
a global basis. While meeting regional
Renewable energy (%)
legislative decarbonisation targets is
our first priority in order to maintain our
licences to operate, we recognise that
a more holistic approach is required to
ensure the greatest returns on our
decarbonisation capital expenditure as we
strive to reduce our global carbon footprint.
Using a high level of renewable energy
In some instances, Somerset (North
America), Alfeld, Ehingen, Stockstadt,
Gratkorn and Maastricht Mills (Europe)
and Ngodwana Mill (South Africa), excess
energy is generated which is sold back
into the power grid. This energy is used for
district heating in the vicinity of Sappi’s
plants and for export into the public grid.
Emissions are avoided by using renewable
fuel energy sources instead of fossil fuel
sources. In addition, emissions are avoided
by power self-sufficiency instead of
purchased power from an external power
supplier with higher emissions than
self-produced power.
100
80
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SEU
SNA
SSA
Global
●
2017
●
2018
●
2019
●
2020
●
2021
89
OUR PERFORMANCE REVIEW
Our key material issues continued
Planet continued
SEU’s decarbonisation roadmap
The European Union (EU) Green Deal aims to lead the world in achieving
climate neutrality. With the adoption of the European Climate Law, together
with the tabling of a suite of legislative proposals within the Fit for 55
legislative package, 2021 was an unprecedented year for policy reform. The
EU’s transition towards a climate neutral economy is ambitious and the
forest sector is well positioned to play a leading role. For SEU, this legislation
has affi rmed our decarbonisation investments and accelerated our progress
in 2021 and beyond.
Sappi’s decarbonisation plan in Europe
(cid:50)ur European (cid:21)(cid:19)(cid:21)(cid:20)-(cid:21)(cid:19)(cid:21)(cid:24) decarbonisation
plan(cid:123)includes over (cid:27)(cid:19) proposed pro(cid:77)ects for
implementation that should contribute to
our(cid:123)regional (cid:21)(cid:19)(cid:21)(cid:24) target to reduce specifi c
greenhouse gas emissions b(cid:92) (cid:21)(cid:24)(cid:8)(cid:17)
(cid:55)he(cid:123)plan(cid:111)s(cid:123)main priorities include(cid:29)
• Exiting coal and increasing the share
of(cid:123)renewable energ(cid:92)
• Sourcing green electricity
• (cid:44)ncreasing eco-eff ectiveness to reduce
energ(cid:92)(cid:123)consumption(cid:17)
Latest investment decisions
In 2021, major investments were approved for
three of the four key projects outlined in our
decarbonisation plan. One of these projects at
Kirkniemi Mill in Lohja, Finland enables a switch
in(cid:123)energ(cid:92) sourcing to renewable bio-energ(cid:92)(cid:17) With
this investment the mill’s direct fossil greenhouse
gas emissions will reduce by approximately 90%,
which is e(cid:84)uivalent to (cid:21)(cid:22)(cid:19),(cid:19)(cid:19)(cid:19) tons of(cid:123)carbon
dioxide annually.
The project, set for completion in early 2023, will
contribute signifi cantl(cid:92) to SE(cid:56)(cid:111)s decarbonisation
roadmap by exiting coal at one of our last facilities
partially using this fuel type. Biomass will then be
used in (cid:46)irkniemi(cid:111)s multi-fuel boiler, built in (cid:21)(cid:19)(cid:20)(cid:24)(cid:17)
The investment will establish the equipment
needed to receive, store and handle woody
biomass like the bark, sawdust and wood chips
used for energy production. By using these
biomass types for energy production, we derive
further value from this forest resource.
Project advancements at Gratkorn Mill
(cid:55)he fi rst ma(cid:77)or pro(cid:77)ect initiated within our
decarbonisation plan was the complete
modernisation of boiler 11 at Gratkorn Mill.
Approved in 2020, the investment into state-of-
the-art technology makes the shift to a multi-fuel
boiler in two phases, with the end goal of only
using sustainable and renewable fuels. This
project was initiated in mid-2021 and in early
August the last coal was fi red onsite(cid:17)
Running from August 2021 through early 2022,
the project envisages full refurbishment of the
boiler, as well as equipping it with modern
technologies, systems and installations to handle
new fuel types and meet progressive
environmental standards. The rebuild will enable
the mill to eventually reduce carbon emissions by
30%. In addition, the chosen technology for the
project will additionally allow us to reduce dust
and nitrous oxide (NOx) emissions, further
improving our impact on air quality.
Scope 2 reductions in Germany
In addition to our focus on Scope 1 emission
reductions, in (cid:21)(cid:19)(cid:21)(cid:20), (cid:24)(cid:19)(cid:8) of the electricit(cid:92)
purchased at our three mills in Germany was
green. This helped to contribute directly to the
specifi c carbon emission reductions we realised
in 2021.
Opportunities for value creation
(cid:44)n (cid:21)(cid:19)(cid:21)(cid:19) we established the (cid:20)(cid:17)(cid:24) Future Energ(cid:92) (cid:55)echnologies (cid:9) (cid:39)ecarbonisation cluster, tasked with e(cid:91)ploring and developing novel
technologies for fuel shift and deep decarbonisation in terms of Scope 1 and 2 emissions. This aligns with our commitment to
decarbonising our operations in the decades ahead to (cid:21)(cid:19)(cid:24)(cid:19) (cid:115) with specifi c targets defi ned in our science-based targets(cid:17) (cid:55)he initial
part of our decarbonisation journey will largely involve the deployment of known technology such as biomass boilers – but we
cannot achieve net zero with today’s technology.
Accordingly, the cluster’s role is to identify, assess and champion new and emerging technologies which will be fundamental to
meeting our net zero aspirations. The cluster has a particular focus on scanning or developing the future and new technologies
required to dramatically reduce energy requirements in pulp and papermaking processes and energy supplies.
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Responding to climate change
Why it’s material
The Sixth Assessment Report conducted by the Intergovernmental Panel on Climate Change (IPCC) concludes that “Human-induced
climate change is alread(cid:92) affecting man(cid:92) weather and climate e(cid:91)tremes in ever(cid:92) region across the globe(cid:17) Evidence of observed
changes in extremes such as heatwaves, heavy precipitation, droughts and tropical cyclones and, in particular, their attribution to
human influence, has strengthened since A(cid:53)(cid:24)(cid:17)(cid:113)(1)
Accordingl(cid:92), we have identified climate change as a top (cid:20)(cid:19) risk that underpins all four ke(cid:92) fundamentals of our business strateg(cid:92)(cid:17)
Responding to climate change in a meaningful manner is not only key to our business success, it is also important for the greater
good of our communities, stakeholders and our customers. There is clear alignment between our response to climate change and
how it directl(cid:92) links with five of the seven (cid:56)(cid:49) S(cid:39)(cid:42)s that we have prioritised at global level(cid:17)
(cid:43)(cid:82)(cid:90)(cid:3)t(cid:75)i(cid:86)(cid:3)i(cid:86)(cid:86)(cid:88)e(cid:3)(cid:79)i(cid:81)(cid:78)(cid:86)(cid:3)t(cid:82)(cid:3)(cid:82)t(cid:75)er(cid:3)(cid:68)(cid:86)(cid:83)ect(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)r(cid:3)(cid:69)(cid:88)(cid:86)i(cid:81)e(cid:86)(cid:86)
Our global priority SDGs Our top 10 risks
Our strategic fundamentals
2
4
5
Evolving technologies
and consumer
preferences
Sustainability
expectations
Climate change
The global forces shaping our
Thrive25
strategy
• Climate change continuing to
impact businesses and reshape
societies
(cid:46)e(cid:92)(cid:3)de(cid:89)e(cid:79)(cid:82)(cid:83)(cid:80)e(cid:81)t(cid:86)(cid:3)i(cid:81)(cid:3)F(cid:60)(cid:21)(cid:19)(cid:21)(cid:20)
We continue to develop our climate strategy and have made
significant progress in developing our near-term plans to mitigate
our greenhouse gas emissions with the identification of key
projects that will decarbonise our operational impact over the
next five years.
documented past climatic events, costs and mitigation strategies
in order to understand the physical and transitional risk more fully.
We made very good progress in assessing how we can embed
the consideration of climate change in our current risk register
methods, thereby improving our overall approach to risk.
We also made significant progress in assessing our resiliency
to the physical risk and transitional risks and opportunities of
climate change as framed by the Task Force on Climate-related
Financial Disclosures (TCFD).
Within the context of the TCFD, in the past year we focused on
our primary assets. This included 18 of our mills covering all
three regions, as well as all our plantations in South Africa.
Over 60 employees participated in the initiative. Leveraging
the operational risk teams from each region, they
(cid:54)(cid:83)ecific(cid:3)(cid:42)(cid:43)(cid:42)(cid:3)(cid:11)(cid:54)c(cid:82)(cid:83)e(cid:3)(cid:20)(cid:3)(cid:68)(cid:81)d(cid:3)(cid:21)(cid:12)(cid:3)e(cid:80)i(cid:86)(cid:86)i(cid:82)(cid:81)(cid:86)(cid:3)(kg CO2e/adt)
We worked with outside consultancy, S&P Global and the Global
Change Institute (GCI) at the University of the Witwatersrand
(WITS), to help us establish long-term climate change trends and
implications to 2050, primarily for South Africa. Due to the nature
of our operations – in other words, capital intensive assets that are
not easily relocated – we adopted a conservative view on physical
climate projections, aligning with Representative Concentration
Pathway (RCP) 8.5.
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Comment: (cid:42)loball(cid:92), specific
Scope (cid:20)(cid:123)and (cid:21) emissions
have declined by 8.3% over
five (cid:92)ears(cid:17)
(1) https://www.ipcc.ch/report/ar6/wg1/
91
OUR PERFORMANCE REVIEW
Our key material issues continued
Planet continued
Responding to climate change continued
(cid:46)e(cid:92)(cid:3)de(cid:89)e(cid:79)(cid:82)(cid:83)(cid:80)e(cid:81)t(cid:86)(cid:3)i(cid:81)(cid:3)F(cid:60)(cid:21)(cid:19)(cid:21)(cid:20)
Mitigating chronic physical risks
Our most vulnerable assets to physical climate change are our
plantations in South Africa. Our scientists have developed a
high level of expertise in assessing physical climate change
impacts. Their knowledge is supplemented by our strong
partnership with the WITS GCI. A preliminary climate change
investigation conducted by Sappi Forests’ scientists indicated
that chronic physical risks are our key risk mitigation focus.
One of the ways in which we mitigate physical risks is through
continuous assessment of the health of our growing stock.
This is measured through continuous evaluation of trees with
emphasis on growth rate, age, utilisation efficiency. Annual
measurement programmes using a pre-harvest measurement
of 20,000 hectares per annum (8%), as well as an airborne laser
scan of all the plantations conducted every second year
together with analysis of growth trends and drivers from, for
example, permanent sample plot programmes and actual
versus planned yields per compartment are used to
continuously adjust the annual cut and detect emerging
problems.
C(cid:79)i(cid:80)(cid:68)te(cid:3)(cid:80)(cid:82)de(cid:79)(cid:79)i(cid:81)(cid:74)(cid:3)i(cid:81)(cid:3)(cid:54)(cid:82)(cid:88)t(cid:75)(cid:123)(cid:36)(cid:73)ric(cid:68)
We continued our work on a project with other industry
members and the WITS GCI in South Africa. Phase 1, which
began in 2020, involved the generation of raster climate
surfaces for the entire forestry domain of South Africa, at 8 km
resolution, with monthly time resolution, for the years 2020,
2030 and 2040 to 2100. Global Climate Models were regionally
downscaled using a conformal-cubic atmospheric model.
Raster climate surface data for the entire forestry domain of
South Africa, at 9 x 11 km resolution, with monthly and daily
time steps from 1961 to 2100 was supplied. Each dataset
contained 17 climatic variables as set out below.
Summarised data was shared with S&P Global Trucost and
used in quantifying our global climate risks for TCFD reporting.
The 17 climatic variables regionally downscaled by WITS GCI
1
24-hour accumulated rainfall (mm)
10 number of low fire-danger days per year
2 maximum temperature
11 number of medium fire-danger days per year
3 minimum temperature
12 number of high fire-danger days per year
4
average temperature
13 number of very high fire-danger days per year
5 maximum relative humidity (%)
14 number of extreme fire-danger days per year
6 minimum relative humidity (%)
15 KB drought index
7
8
9
wind speed at 10 m (m/s)
16 number of heat-wave days per year
number of very hot days per year
17 number of very cold days per year
number of extreme rainfall days per year
In terms of Phase 2, a proposal has been made for further support to the WITS GCI to continue climate modelling
activities and develop downscaled products (possibly using two or more future scenarios such as RCP 4.5 and RCP 8.5)
while simultaneously maintaining underlying climate projections; to enhance knowledge and insight on impacts of
climate change specific to forestry and to develop human capacity for the generation and interpretation of regional
downscaled climate surfaces.
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Opportunities for value creation
Sappi’s tree breeding programme has seen an important shift from planting pure species to more productive, better adapted and
more pest and disease resistant hybrids of both hardwood and softwood trees grown in our plantations in South Africa. This
change in strategy is being driven by the need to respond more rapidly to the combined challenges of increased globalisation and
changing weather patterns (driven by climate change) that are resulting in significant increases in pest and diseases in the tree
crop. Sappi Forests’ tree breeding programme is producing and selecting the most optimally suited hybrid varieties for each
climatic zone, with a target of developing a hybrid varietal solution for all Sappi sites by 2025. The benefit of developing new
hybrids is that breeders can additively combine the benefits from two or more species and develop varieties that have improved
fibre yield and wood quality as well as better disease/pest tolerance. Tree improvement is aimed at increasing pulp yield per
hectare by testing various species and hybrids across Sappi’s diverse landholdings. As well as growth improvements, trees are
bred for superior wood properties and resistance to biotic and abiotic threats including frost, drought, pests and diseases.
93
OUR PERFORMANCE REVIEW OUR PERFORMANCE REVIEW
Our key material issues continued
Planet continued
Focusing on water stewardship
Why it’s material
Water is essential for the health of the forests and plantations from which we source woodfibre(cid:17) (cid:44)n addition, pulp and paper
operations are highly dependent on the use and responsible management of water resources. Water is used in all major process
stages, including raw materials preparation (wood chip washing), pulp cooking, washing and screening, and paper machines (pulp
slurry dilution and fabric showers). Water is also used for process cooling, materials transport, equipment cleaning, general facilities
operations, and to generate steam for use in processes and onsite power generation and various other purposes. Against this
backdrop, responsible water stewardship is essential for Sappi and for a thriving world.
(cid:43)(cid:82)(cid:90)(cid:3)t(cid:75)i(cid:86)(cid:3)i(cid:86)(cid:86)(cid:88)e(cid:3)(cid:79)i(cid:81)(cid:78)(cid:86)(cid:3)t(cid:82)(cid:3)(cid:82)t(cid:75)er(cid:3)(cid:68)(cid:86)(cid:83)ect(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)r(cid:3)(cid:69)(cid:88)(cid:86)i(cid:81)e(cid:86)(cid:86)
Our global priority SDGs Our top 10 risks
Our strategic fundamentals
2
4
5
Evolving technologies
and consumer
preferences
Sustainability
expectations
Climate change
Our additional SSA
priority SDGs
The global forces shaping our
Thrive25
strategy
• Climate change continuing to
impact businesses and reshape
societies
(cid:46)e(cid:92)(cid:3)de(cid:89)e(cid:79)(cid:82)(cid:83)(cid:80)e(cid:81)t(cid:86)(cid:3)i(cid:81)(cid:3)F(cid:60)(cid:21)(cid:19)(cid:21)(cid:20)
Collaborating for water stewardship
We have finalised a Water Stewardship agreement with the World Wide Fund for Nature South Africa (WWF-SA), aimed at improving
water security in the uMkhomazi catchment area. With our significant manufacturing and forestry footprint in this catchment area,
which forms part of the Southern Drakensberg Strategic Water Source Area in KwaZulu-Natal, it makes sense for us to focus our
collaborative efforts here, where our Saiccor Mill and 42,000 ha of our forestry land is situated.
The catchment also serves commercial farmers, subsistence farmers and domestic users in dispersed settlements across the area.
To meet the future needs of all users, sufficient water at an acceptable level of assurance and quality must be secured. We believe that
this can only be achieved through multi-stakeholder collaboration across the landscape. To help coordinate and facilitate the
approach, we have launched a two-year project with WWF-SA to engage local communities, civil organisations, leadership and
regulatory authorities in dialogue and cooperation focused on water stewardship. This collaborative approach is an extension of an
innovative structure, known as the Integrated Community Forum, which we pioneered and through which we engage with local
adjacent communities.
Improved water governance through multi-stakeholder engagement
The multi-stakeholder engagement will provide a platform for open dialogue regarding water resources in the catchment and will
concentrate on four main focus areas to improve water security in the uMkhomazi, namely:
•
• Water-use efficiency
• Removal of alien invasive plants and wetland rehabilitation
• Capacity development of local communities in natural resource management.
Thrive25
The World Resources Institute has categorised South Africa as being characterised by medium/high water stress(1), while a publication
issued by UN Water puts the country in the medium risk category.(2) Water stress is defined as freshwater withdrawn as a proportion of
available freshwater resources. Use of the WRI’s Aqueduct tool(3) which goes into a level of granular detail, indicates that two of our
mills are in areas of low/medium risk, two in an area classified as medium/high risk and one in an area of high risk. Our decision to
targets in South Africa was based on stakeholders’ general perception that the country is facing
establish water-related
extremely high levels of water stress. This is based on devastating droughts in recent years and on the fact that South Africa’s rainfall,
at 490 mm per year, is half the world average.
targets in South Africa
Thrive25
(1) https://www.wri.org/insights/17-countries-home-one-quarter-worlds-population-face-extremely-high-water-stress.
(2) https://www.unwater.org/publications/summary-progress-update-2021-sdg-6-water-and-sanitation-for-all/.
(3) https://www.wri.org/aqueduct.
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OUR PERFORMANCE REVIEW
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Comment: (cid:60)ear on (cid:92)ear, specific
process water extracted decreased
b(cid:92)(cid:123)(cid:25)(cid:8)(cid:17)
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Opportunities for value creation
The interconnected nature of the UN SDGs is clearly highlighted by the impact of climate change on water. The Water
Stewardship(cid:123)pro(cid:77)ect with WWF-SA will not onl(cid:92) impact on SDG6: Clean Water and Sanitation, but also on SDG1: No Poverty,
which(cid:123)is one of Sappi SA(cid:111)s additional priorit(cid:92) targets(cid:17) (cid:55)he opportunit(cid:92) for green (cid:77)obs through the partnership(cid:111)s focus on alien
invasive plant clearing is also full(cid:92) aligned with Sappi(cid:111)s commitment to ES(cid:39) that promotes(cid:123)sustainable livelihoods through capacit(cid:92)
building of small and medium enterprises(cid:17) (cid:11)(cid:39)escribed in further detail(cid:123)on page
(cid:25)(cid:23) of this report(cid:12)
95
OUR PERFORMANCE REVIEW
Our key material issues continued
Planet continued
Accelerating circular business models
Why it’s material
Circular thinking such as we practise at Sappi goes be(cid:92)ond mere waste beneficiation(cid:17) We approach our environmental impact
from a holistic perspective grounded in life-cycle thinking, from procurement of raw materials and energy through manufacturing,
use and the ne(cid:91)t life of our products(cid:17) (cid:55)he benefits of this approach align with our purpose of contributing to a thriving world, one
with less waste, lower costs and reduced environmental impact.
(cid:43)(cid:82)(cid:90)(cid:3)t(cid:75)i(cid:86)(cid:3)i(cid:86)(cid:86)(cid:88)e(cid:3)(cid:79)i(cid:81)(cid:78)(cid:86)(cid:3)t(cid:82)(cid:3)(cid:82)t(cid:75)er(cid:3)(cid:68)(cid:86)(cid:83)ect(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)r(cid:3)(cid:69)(cid:88)(cid:86)i(cid:81)e(cid:86)(cid:86)
Our global priority SDGs Our top 10 risks
Our strategic fundamentals
2
4
5
Evolving technologies
and consumer
preferences
Sustainability
expectations
Climate change
The global forces shaping our
Thrive25
strategy
• The move towards a circular
economy
• Climate change continuing to
impact businesses and reshape
societies
• Resource scarcity and growing
concern for natural capital
(cid:46)e(cid:92)(cid:3)de(cid:89)e(cid:79)(cid:82)(cid:83)(cid:80)e(cid:81)t(cid:86)(cid:3)i(cid:81)(cid:3)F(cid:60)(cid:21)(cid:19)(cid:21)(cid:20)
In keeping with our focus on circular
economy principles, we are working to
increase our use of renewable energy and
eliminate waste through superior product
and process design. As an example, we
increased the percentage of solid waste
beneficiated from 65.65% in 2017 to
76.62% - an increase of 16.7% over
five years.
Other developments, including our
ongoing progress in adjacent markets and
collaboration in a textile recycling project,
together with new products, are detailed
on pages
report.
75 and 77 respectively of this
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Recognition for our circular project in North
America
In FY2021, in North America, we were a recipient of the
Leadership in Sustainability – Water Award from the American
Forest & Paper Association (AF&PA) as part of its Better
Practices, Better Planet 2020 Sustainability Awards
programme. We were recognised for our ‘Caustic Reclaim and
Reuse’ project at Somerset Mill, Maine.
The project reduces the volume of purchased chemicals
required to meet the mill's boiler flue-gas desulphurisation
(FGD) environmental goals, as well as offset the acid usage in
its onsite waste treatment plant. Somerset Mill operates a large
steam plant and utilises demineralised water as a main makeup
water source for its recovery boiler and two multi-fuel power
boilers. This project repurposes a large source of spent
caustic from the demineraliser regeneration operation to
meet FGD goals, as well as offsets purchased acid usage in
our onsite waste water treatment plant as a consequence of
the spent caustic utilisation.
The project significantly reduces overall caustic purchases
as well as acid usage for effluent treatment. The reclaimed
caustic concentration to the wet industrial scrubber is
significantly lower than the concentration of fresh caustic.
Accordingly, not only is the spent caustic reclaimed from the
sewer, but so is the water that dilutes it to the lower
concentration. This added reclaimed water in turn reduces
the fresh water demand to meet the FGD scrubber
evaporation requirements by 45,425 litres per day. The
process can be replicated at other mills which can reduce
chemical demand by reusing demineralised regeneration
caustic, thereby improving both environmental footprint
and the bottom line.
Opportunities for value creation
In the year under review we joined the CBA which was established by His Royal Highness, the Prince of Wales, under his
Sustainable Markets Initiative in 2020. The alliance aims to accelerate the transition to a circular bioeconomy that is climate
neutral, inclusive and prospers in harmony with nature, by providing knowledge-informed support and a learning and networking
platform. It connects the dots between investors, companies, local communities, governmental and non-governmental
organisations to advance the circular bioeconomy – while also restoring biodiversity. Current activities include forest landscape
restoration and agroforestry projects in Africa, South America and Asia.
While our membership is still in its early days, we believe that collaboration with the alliance and leveraging our agroforestry
knowledge gained through our Sappi Khulisa programme will present significant opportunities going forward.
97
OUR PERFORMANCE REVIEW OUR PERFORMANCE REVIEW
Our key material issues continued
Planet continued
Safeguarding and restoring biodiversity
Why it’s material
Experts concur that connected, diverse and extensive ecosystems can help stabilise the climate and will have a better chance of
thriving in a world permanently altered by rising emissions. Stable, resilient ecosystems are important to Sappi given that our primary
input, woodfibre is a renewable natural resource and depends on ecos(cid:92)stem services such as health(cid:92) soils, clean water, pollination
and a stable climate. Safeguarding and restoring biodiversity is important for our business, our stakeholders and the planet.
(cid:43)(cid:82)(cid:90)(cid:3)t(cid:75)i(cid:86)(cid:3)i(cid:86)(cid:86)(cid:88)e(cid:3)(cid:79)i(cid:81)(cid:78)(cid:86)(cid:3)t(cid:82)(cid:3)(cid:82)t(cid:75)er(cid:3)(cid:68)(cid:86)(cid:83)ect(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)r(cid:3)(cid:69)(cid:88)(cid:86)i(cid:81)e(cid:86)(cid:86)
Our global priority SDGs Our top 10 risks
Our strategic fundamentals
4
5
Sustainability
expectations
Climate change
The global forces shaping our
Thrive25
strategy
• The move towards a circular
economy
• Climate change continuing to
impact businesses and reshape
societies
• Resource scarcity and growing
concern for natural capital
The issues-based risk assessment
complements draft targets that have
already been identified. In general, four
hazards were identified as high risks:
• Soil erosion and sedimentation
• Stream flow reduction
• Ecosystem modification (caused by the
spread of plantation species off our land)
Invasion by alien species such as wattle,
lantana and bugweed which we do
not grow.
•
Thrive25
Mapping vegetation
One of the pillars of Sappi’s
strategy is that we will act as a custodian
of land and forests. In alignment with this,
we identify, monitor and manage Important
Conservation Areas (ICAs) on our
landholdings in South Africa. In FY2020,
we reported that we had made progress in
biodiversity target by
terms of our
addressing our first biodiversity objective
underpinning this task. This involved
understanding what types of vegetation
are present on our plantations, as well
as their conservation value, thereby
enabling the compilation of appropriate
management plans for implementation.
Thrive25
Assessing Important Conservation Areas
In FY2021, we completed the assessment
of ICAs for all our plantations in
Mpumalanga. ICAs are areas that are
important at the local level and are
classified using a systematic conservation
planning approach. Criteria used include
the presence of both plant and animal red
data species, the threat status of the
ecosystem, the size, connectedness,
condition and aesthetic and recreational
value of the area. The ICA assessment is
currently in progress for our plantations in
KwaZulu-Natal.
Approximately 160 sites on Sappi-owned
land are currently classified as ICAs, adding
up to about 39,500 ha of a diverse range of
habitats including grasslands, wetlands and
riverine areas and natural forest patches.
Thrive25
, Sappi Forests has
Plantations are now required to identify
three projects from the list of ICAs that
can be actioned over the next few years to
improve scores from the baseline condition
assessment. To assist in moving towards
achieving the 10% biodiversity improvement
envisaged by
developed an ICA projects template to
ensure that the progress of the projects
can be measured in a standardised manner.
Based on the findings of the initial
assessment of each area, suggestions for
improvement can range from increased
weed control to attain a maintenance
status, improvements in sub-standard
crossings to improve stream flow and
reduce sedimentation, and the prevention
of overgrazing and frequent burning of
important grasslands.
(cid:46)e(cid:92)(cid:3)de(cid:89)e(cid:79)(cid:82)(cid:83)(cid:80)e(cid:81)t(cid:86)(cid:3)i(cid:81)(cid:3)F(cid:60)(cid:21)(cid:19)(cid:21)(cid:20)
Implementing a Biodiversity Strategy
and Action Plan
The development of a Biodiversity Strategy
and Action Plan (BSAP) for Sappi Forests
was initiated in November 2020. The BSAP
refers to the UN SDGs, the South African
National Biodiversity Strategy and Action
Plan, and the South African National
Biodiversity Institute (SANBI) biodiversity
targets. The seven steps which form the
framework for the development of the
strategy are aligned with the stakeholder
requirements of the Textile Exchange
Biodiversity Module. Guidance from the
Science Based Targets Network has also
been used as reference. The latter aims to
transform economic systems and protect
the global commons – air, water, land,
biodiversity and oceans.
A key component of the strategy is to
undertake a biodiversity risk assessment.
There are two components to the risk
assessment: a spatial assessment and an
issues-based risk assessment. The spatial
component of this assessment involves
identifying high conservation values on
our plantations. This is a certification
requirement and, drawing on past
knowledge and more recent
methodologies, assessments of critical
biodiversity areas and vegetation types
present on Sappi land have been
completed for both provinces.
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Opportunities for value creation
We see promising opportunities for value creation by working with a broad range of stakeholders on biodiversity- and forestry-
related issues, including the following:
• In collaboration with Meat Naturally and other stakeholders (Zikhali community and the traditional authority), we are working on
the uMhlathuze Grazing Project which involves the communities bordering our Mooiplaas plantation. It is proposed that an
association will be formed by the community to run the project and that eco-rangers from the community will be trained to herd
and manage the cattle. With the community’s buy-in, the project will mitigate the negative impacts associated with overgrazing
and indiscriminate fires which are a risk to Sappi plantations. Positive benefits include grassland restoration to be measured by
veld condition assessments, improved community relations and enhanced regional economic development.
• Under the auspices of Forestry South Africa (FSA), we are participating in a Farmers’ Guideline Working Group. Steps have been
taken to determine material and methods for developing environmental guidelines such as burning (residue management) and
weeding specifically for farmers.
• Again under the auspices of FSA, we are chairing a Soil Conservation Working Group, established due to increasing concerns
related to soil loss, sedimentation in streams from forestry operations and operational procedures that exacerbate this problem.
This is in collaboration with various industry representatives in the Environmental Management Committee of FSA, soil and
forestry specialists, both independent and based at the University of Stellenbosch.
99
OUR PERFORMANCE REVIEW OUR PERFORMANCE REVIEW
Product review
Pulp
Our renowned dissolving and kraft
pulps provide a sustainable, versatile
approach, to creating a better
tomorrow.
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Our dissolving pulp (DP) brand, Verve, creates
renewable alternatives for raw material feedstock to
renewable alternatives for raw material feedstock to
textiles, pharmaceuticals, foodstuff s, and more.
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OUR PERFORMANCE REVIEW
Product review continued
Product review continued
Pulp*
We continue to invest in all three
of our world-class production
sites – further entrenching our
leadership position as a trusted
source for responsible and
sustainable DP.”
Our pulp segment predominantly comprises two product categories, namely, DP and
high-yield pulp (HYP). Occasionally, excess kraft pulp produced at Cloquet Mill,
Somerset Mill and Ngodwana Mill is sold externally and included in the Pulp segment.
Our Verve brand, is a significant player in the DP market. With capacity of 1.4 million
tons per annum and 17% share of the DP market, Verve is a truly sustainable brand.
From textiles to pharmaceuticals and food applications, Sappi has the expertise,
technology and the track record to meet almost any challenge from these DP
market segments.
DP is a highly purified form of cellulose extracted from sustainably grown and
responsibly managed trees using unique cellulose chemistry technology. The
majority of DP is consumed to make textiles, such as viscose and lyocell, where
DP is converted to viscose and lyocell staple fibres. From there, the fibre is spun
into yarns and ultimately woven into textiles, providing naturally soft and
breathable fabrics which are smooth to the touch, hold colour and drape well.
The fibres produced from DP also act as good blend partners in fabric with
cotton and polyester. Man-made cellulosic fibre, however, far exceeds cotton
and polyester when it comes to sustainability. What consumers want are goods
that are renewable, biodegradable and have superior resource efficiency. This is
where man-made cellulosic fibres differentiate themselves versus the alternatives.
Viscose staple fibre (VSF) is the most prominent of the man-made cellulosic
fibres, and accounts for approximately 73% of global DP demand. VSF is most
commonly used in fashion, home and decorating textiles as well as non-
woven applications such as the fibre component in face masks, health and
hygiene clothing and sanitation. Verve DP provides both the quality and
the sustainability assurance into this major market segment.
Lyocell represents the next generation of man-made cellulosic fibres.
With its sustainable DP raw material, reduced chemical processing and
closed loop systems, Lyocell continues to be the most sustainable wood-
based cellulosic fibre. Our commitment to and investment in sustainability shows
in that approximately 60% of the world’s Lyocell fibre is manufactured from DP
produced at Sappi’s DP manufacturing sites.
DP can also be processed into products that are used in food and beverages,
health and hygiene, wrapping and packaging, pharmaceuticals and many more
applications that touch our daily lives.
* In the prior report this segment was listed
as Dissolving Pulp.
Demand for DP used in textiles, particularly viscose and lyocell fibres, is expected to
continue to grow post the Covid-19 pandemic. Based on the growth rate in the overall
textile market, driven by factors such as population growth, rising urbanisation, wealth
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and the shift towards more comfortable,
environmentally friendly natural fi bres, we
expect long-term growth in demand to
be between 4% to 6% per annum for DP.
Market prices for DP are infl uenced by
VSF and other textile market dynamics,
paper pulp market pricing which
infl uences swing mills, as well as
general macro-economic uncertainties
pertaining to the ongoing US/China
trade dispute and US$/RMB exchange
rates fl uctuations.
Sappi’s Matane Mill, located in Quebec,
Canada, has the capacity to produce
270,000 tons of HYP. Approximately
40% of Matane’s pulp production is
consumed internally within our packaging
business, thereby increasing the pulp
integration. The higher levels of pulp
integration lowers our cost of pulp,
reduces its volatility on earnings through
the pulp cycle and provides certainty
of supply. External HYP sales to third
parties are included in the Pulp segment.
The pulp produced at Matane Mill is a
high-quality, high-yield pulp made from
either Aspen or Maple hardwood. Sappi
Matane Aspen pulp is a high-yield fi bre
with good bulk, excellent brightness
and exceptional drainage. It is ideal for
the manufacturing of tissue grades as
well as graphic paper grades. Sappi
Matane Maple is a high-yield pulp with
superior bulk and drainage properties,
as well as excellent opacity and
formation. It is an excellent fi bre for the
manufacturing of paperboard and
linerboard products as well as
speciality papers, tissue and towelling.
In FY2021, the Pulp segment made up
18% of Sappi’s sales. This fi gure
includes HYP from Matane Mill and
kraft pulp produced at Ngodwana Mill.
A severe second wave of Covid-19
infections in South Africa necessitated
a prioritisation of oxygen supplies into
the health care sector. Consequent
restrictions on the procurement and
transport of oxygen to the South
African mills resulted in a temporary
curtailment of DP production at the
Ngodwana Mill, resulting in the mill
producing a few thousand tons of kraft
pulp in the second quarter.
Our markets in 2021 and
outlook for 2022
DP market conditions rallied strongly
from the fi rst quarter on the back of
improved apparel retail demand in the
US and Asia, which favourably impacted
demand for all textile fi bres. Low DP
and VSF inventory levels, high paper
pulp prices and a weaker US$/Renminbi
exchange rate were all factors that
further contributed to the positive
sentiment in the sector. The market
price(1) for hardwood DP surged from a
base of US$624 per ton in October
2020 to a peak of US$1,106 per ton in
April 2021 and closed the year at the
end of September 2021 at US$1,000
per ton.
Buoyant demand and signifi cantly better
market prices resulted in EBITDA ex SI
for the year being substantially higher
than the prior year. EBITDA ex SI
margins for this segment improved from
approximately 8% to 21% as a result of
the higher US$ prices, slightly off set by
a stronger ZAR/US Dollar exchange rate,
which impacts our South African
operations.
Segment volumes decreased 6%, or
79,000 tons compared to last year. The
ongoing global supply chain challenges,
exacerbated by the impact from the
South African civil unrest and a cyber
security breach at the Durban port,
constrained sales resulting in a backlog
of 100,000 tons at year end which
reduced EBITDA ex SI by approximately
US$30 million. In addition, once off
events at the South African mills
including a labour strike, shortage of
oxygen due to Covid-19, an extended
annual shut at Saiccor Mill and civil
unrest, which forced Saiccor Mill to
close temporarily, signifi cantly reduced
production volumes. Construction
work at our 110,000 ton expansion
project at Saiccor Mill was impacted
negatively by Covid-19 lockdowns and
associated travel restrictions, which
delayed the project schedule.
Commissioning of the plant began
during the fourth quarter and additional
production will commence in the fi rst
quarter of the 2022 fi nancial year. The
project is additionally expected to yield
long-term safety, effi ciency and
reliability improvements. This
investment is a key part of our strategic
vision as we expand into fast-growing,
higher-margin segments.
Overall market conditions for DP continue
to be strong. However, short-term
demand in China is impacted by the
recent implementation of energy
savings regulations which impose
�1� Market price for imported hardwood DP into
China issued daily by the CCF group.
curtailments for energy intensive
manufacturing operations across the
country. The textile value chain in China
has been negatively impacted thereby
reducing VSF production and DP
demand. Consequently, DP market
prices dropped to US$940 per ton in
October 2021. The lower VSF supply
and a widening price diff erential to
cotton fuelled a signifi cant rise in VSF
pricing, which should be positive for DP
pricing. Sappi’s sales volumes are not
expected to be impacted by the
weaker Chinese DP demand as we see,
in contrast to China, DP demand in
South-East Asia, Europe, North America
and the near East remains strong.
Global logistical challenges and vessel
shortages are expected to continue
through FY2022, which may have an
ongoing negative impact on our export
sales. It is unlikely that any signifi cant
improvement in supply chain reliability
will be realised in the fi rst quarter and
hence the backlog of 100,000 tons of
DP sales volumes will take time to
resolve. We aim to remain focused on
meeting and exceeding the needs of
our customers. We will continue to
capitalise on our competitive
advantages: our world-class and
sustainably managed plantations, our
geographic positioning and our sterling
reputation as a reliable partner, to bring
our customers sustainable products
that create shared value for everyone.
Matane Mill volumes have been fully
sold out with strong Asian demand
off setting any weakness we have
experienced in other markets. Our
focus remains on meeting our own
growing need for high-quality high-
yield pulp for our packaging and
speciality papers businesses in Europe
and North America, as well as external
sales to third parties.
Pulp segment
made up(cid:123)
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Packaging and
speciality
papers
Developing and
delivering innovative,
sustainable solutions
is at the heart of
our philosophy.
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We off er a broad range of
paper based sustainable
solutions as an alternative
to fossil fuel-based, non-
renewable packaging in many
of our product segments.
105
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Packaging
and speciality
papers
Innovative packaging
and speciality paper
products and
services with a
commitment to
sustainability and a
circular economy.
Working closely
with brand owners,
converters, printers,
designers and
communications
agencies, we pride
ourselves in being a
reliable and global
business partner”.
Legislative changes and growing consumer pressure are forcing brands to re-think
their packaging choices. Governments, retailers, brand owners and their consumers
are demanding paper-based packaging solutions that are biodegradable, recyclable,
compostable and provide the functionality of plastic-based materials. We estimate
that the increasing demand for more sustainable and environmentally friendly
packaging solutions will lead to demand growth of 3-6% per year globally, across
the spectrum of our products.
Sappi’s evolution within this segment is supported by the suitability of our
technically advanced and efficient paper machines for
conversion to packaging grades that require a
variety of surface treatments or coatings for
functionality. Ahead of commissioning
conversion projects, we carefully
analysed our assets, specifically their
production capabilities and cost of
production, the cost to serve
customers, demand growth and
competitive threats. We chose
only those projects where we
believed we held a significant
advantage.
We have made progress in growing our
business with a compelling value
proposition, a propensity for innovation,
and a superlative service record. We aim to
create solutions that solve our customers'
most critical challenges, helping them grow their
sales, lower costs, improve their sustainability
metrics and minimise their risk.
We work in partnerships based on trust and respect.
For that reason, we place great value on reliability. Our
well-maintained assets, financial stability, global availability
and consistent premium quality are vital to our customers.
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In FY2021, 30% of Sappi’s sales were
packaging and speciality papers, up
from 27% last year.
Sappi off ers products and solutions
in many diff erent product categories
including:
Flexible packaging: innovative
paper-based solutions with integrated
functionalities such as barrier
technology from water, oxygen and
grease as well as sealing properties
are suitable for various applications,
notably in packaging for food as well
as non-food markets.
Label papers and self-adhesives:
label papers are used for both wet glue
and wet strength labels processes in
the beverage, food and packaging
applications. Our clay coated kraft
and glassine release liners provide
solutions not only for labels but
applications such as self-adhesive
tapes, medical and industrial
applications.
Containerboard: includes liners and
fl uting, for corrugated boxes. Sappi’s
products are found in applications like
consumer packaging, shelf-ready
packaging and transport packaging
for agricultural and industrial uses.
Paperboard: high-quality coated
boards for use in luxury packaging
applications that require functionality
and superior graphics across a range
of market segments, including health
and beauty, confectionery, premium
beverages and food packaging.
Casting and release papers: used
by suppliers to the fashion, textile,
automobile and laminate industries.
Our papers serve as moulds to impart
textures on other surfaces, ranging
from decorative laminates and
synthetic leather to engineered fi lms
and rubber.
Dye sublimation papers: for digital
transfer printing with water-based
dye sublimation inks. Designed for
the transfer of an image onto
various materials, such as apparel,
outdoor advertising and home
textiles.
OUR PERFORMANCE REVIEW
Digital imaging papers: for large
format inkjet printing. Posters, for
indoor/outdoor applications and
technical printing in the construction
industry (CAD/Engineering).
Tissue paper: used for bathroom
tissue, kitchen towels, serviettes and
medical and industrial wipes.
We manufacture at sites throughout
Europe, North America and South
Africa, ensuring scale-based
effi ciencies and security of supply.
Globally, we are well positioned to
support and benefi t from the paper
for plastic packaging movement. For
example, in 2019, the European Union
introduced new rules to reduce marine
litter by banning certain single-use
plastic items, alongside a measure
which holds those plastic producers
responsible for the cost of cleaning
these items from European beaches.
The industry will also be given
incentives to develop less-polluting
alternatives for these products. With
this comprehensive product range on
three continents, R&D centres in each
region, sharing best practices and
collaborating with customers to
develop new solutions, our customers
can expect reliability of supply from a
broad geographic footprint, and a
leader in innovation within the sector.
Our markets in 2021 and
outlook for 2022
The highlight of the year for this
business segment was the
achievement of record profi tability as
Covid-19 lockdowns eased and global
economic activity resumed. Volumes
were 21% higher than last year which
was primarily driven by the successful
was primarily driven by the successful
ramp-up of sales volumes from
Somerset Mill PM1 in North America.
The line ran paperboard at the
investment target levels from the
second quarter and the focus shifted
to product mix and margin
optimisation. Containerboard demand
in South Africa was robust on the back
of strong fruit exports which
contributed to sales for the segment
increasing 26% year on year. Growth in
the European packaging and speciality
paper sales volumes was hampered by
weaker demand for certain non-
essential luxury product categories
and prolonged speciality paper
qualifi cations, however, certain
packaging grades within this segment
did grow. Profi tability in the European
region was also impacted by higher
purchased pulp, energy, chemicals and
delivery costs resulting in EBITDA ex SI
margins for the segment decreasing
from 14.1% last year to 13.6% in
fi scal 2021.
This business segment has proven
to be resilient in diffi cult economic
circumstances and supports our
strategy to diversify the product
portfolio into higher margin and
growing segments. We believe we will
achieve additional volume growth in
2022, aided by the shift from plastics
to paper in various packaging and
speciality paper categories. We expect
continued success from our
conversion projects which were
completed in 2018. Customer
qualifi cations and trial-runs of our
new products prove we are capable
of developing innovative and quality
products on which our customers
can depend.
Packaging
Packaging
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Graphic
papers
Our wide range of versatile surfaces
and superior papers make any
project outstanding
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Create impactful brand experiences with
our brilliant, high-performing range of
graphic papers.
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Product review continued
Product review continued
Graphic
papers
When companies build brands, picking the
right paper can mean the difference between
creating something average and something
memorable.”
At Sappi, we understand this difference and use our expertise to
develop a variety of graphic papers designed to meet specific needs,
whether a high-end product with the extra wow factor, a comprehensive
solution that caters to numerous requirements or a paper that is more
budget friendly. We at Sappi deliver, so that brands can have a more
memorable impact.
Our markets in 2021 and outlook for 2022
Global demand for graphic papers has generally been in secular decline.
The outbreak of Covid-19 in the prior year led to a significant decline in
graphic paper usage across the globe, however, as Covid-19 lockdowns
eased and economic activity resumed, global demand for graphic paper
grades progressively improved through the course of the year. Market
recovery in Europe lagged North America due to stricter lockdowns in
the European Union. Capacity closures in North America, in combination
with constrained imports into the region due to supply chain challenges,
contributed to a favourable shift in the supply and demand balance and
enabled domestic producers to operate at full capacity. Our strategy
remains to reduce our exposure to graphic markets and align this
business over time with market demand. To this end, in 2017 and 2018,
we converted various paper machines within our portfolio from graphic
paper to packaging and speciality paper grades, where demand is
growing worldwide and in 2020 closed two paper machines. Our focus
is on maximising the segment’s significant cash flow generation,
continuously improving our cost position, and optimising the utilisation
of our best-in-class production assets.
In our fiscal 2021, industry statistics show volume declines of
approximately 14% relative to the prior year for European coated
woodfree and coated mechanical papers largely as a result of the severe
impact of the Covid-19 pandemic related lockdowns and the economic
after-effect on the industry. Our graphic papers segment volumes
increased 3% relative to the prior year but was 83% of fiscal 2019.
The lagging European demand recovery necessitated 367,000 tons of
graphic papers production curtailment in our European operations.
Average prices realised were 3% up relative to 2020, however, EBITDA
ex SI deteriorated from US$131 million to US$120 million, driven primarily
by substantial cost inflation in purchased pulp, chemicals, energy and
delivery costs. Our EBITDA ex SI margin declined relative to last year,
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from 5.1% to 4.4%, due to rising input
costs in combination with a lag in selling
price increases.
woodfree paper increased by
approximately 1% with Sappi gaining
market share.
with limited growth coming from
emerging markets.
In 2022, we expect to sell higher
volumes of graphic paper as the
recovery of demand combined with
industry capacity closures has
tightened the market balance. In North
America, ongoing restrictions on
imports due to global supply chain
disruptions have contributed to a
positive environment in this region.
Recent spikes in global energy prices
for gas, power and coal are anticipated
to have an adverse impact on our fi rst
quarter results, principally in Europe. To
off set rising costs, we have announced
selling price increases across all paper
grades. In addition, energy specifi c
surcharges have been implemented
for all European shipments from
25 October 2021.
In FY2021, 52% of Sappi’s sales were
from the graphic papers segment. The
four major grades of graphic paper are
discussed below:
Coated woodfree paper
Printers and publishers use coated
woodfree paper for a variety of
marketing promotions including
brochures, catalogues, calendars,
corporate reports, direct mail, books
and magazines. Coated woodfree
paper provides a smooth and uniform
surface for optimal print fi delity. We
manufacture coated woodfree paper
in our North American and European
businesses but sell to customers all
over the world. Coated woodfree paper
products are sold through large paper
merchants, as well as directly to
commercial printers.
Demand trends: Global advertising
expenditure is forecast to grow, but the
share of that spend relative to print is
expected to decline. However, we
believe there will always be a place for
paper within the marketing mix. Globally,
demand for coated woodfree paper is
forecast to decline from approximately
21 million tons in 2019 to approximately
16 million tons by 2024.
Sales: Sappi’s sales volumes for
coated woodfree paper increased 6%
from last year and sales were 8%
higher, largely due to a recovery in
demand, as Covid-19 lockdowns
eased, and global economic activity
resumed. Globally, demand for coated
Coated mechanical paper
Coated mechanical paper is primarily
used in magazines, catalogues,
newspaper inserts and other
advertising materials. Sappi’s coated
mechanical paper sales all come from
our European business. Customers for
this paper are typically large web
printers, publishing houses, retailers
and cataloguers.
Demand trends: Demand for coated
mechanical paper is more closely
linked to that of demand for magazines.
Readership, subscriptions, circulation,
pagination and advertising revenue per
page continue to decrease in larger
markets as consumers opt for digital
formats.
Sales: Sappi’s sales from coated
mechanical paper were 3% lower than
last year, as we took market-related
downtime in response to poor demand.
Volumes were approximately 1% lower
than the prior period. This year, the global
market contracted by approximately
1% relative to the prior year.
Uncoated woodfree paper
Uncoated woodfree paper is used for
letterheads, business stationery,
photocopy paper, books, brochures,
envelopes, pamphlets and magazines.
Sappi manufactures and sells
uncoated woodfree paper in our
European and South African
businesses. Our main customers
in this sector are paper merchants,
commercial printers and retailers.
Demand trends: Demand for uncoated
woodfree paper is not expected to
decline over the next several years,
Sales: Our sales from uncoated
woodfree paper were 1% higher
than last year, largely as a result of
the resumption of global economic
activity as Covid-19 lockdowns eased.
Globally, demand increased by
approximately 1% in the current
fi nancial year.
Newsprint paper
Newsprint is manufactured from
mechanical and bleached chemical
pulp, with uses including the printing
of newspapers and advertising inserts.
We manufacture and sell newsprint
from our South African business.
Demand trends: Demand for
newsprint is principally derived from
newspaper circulation and overall retail
advertising. Newspaper readership is
declining around the world. This
industry segment was hard hit by the
Covid-19 pandemic with an estimated
drop in demand of approximately 6%
during the current year and an estimated
decline of 3% to 6% annually through
to 2025. Publishers are consolidating,
while some titles have closed. Pockets
of growth exist in advertising-fi nanced
daily newspapers typically found in
large metropolitan cities.
Sales: Newsprint volumes continue to
be impacted by the negative impacts
of Covid-19 on the economy, however,
no production curtailment was
necessary in the current fi nancial year.
Our volumes and sales were above the
prior year by approximately 21% and
24%, respectively. Globally, newsprint
demand declined 6% versus 2020.
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Chief Financial Offi cer’s Report
“We are targeting reductions
in both our absolute GHG
emissions and emission intensity
and in the past year we have
committed to setting a science-
based target for our emissions
reduction initiatives.”
Glen Pearce Chief Financial (cid:50)ffi cer (cid:11)CF(cid:50)(cid:12)
Section 1
Financial highlights
US$ million
2021
2020 % change
Sales
EBITDA excluding special items
Operating profi t excluding special items
Profi t (loss) for the year
EBITDA excluding special items to sales %
Operating profi t excluding special items
to sales %
Operating profi t excluding special items
to capital employed (ROCE) %
Net cash (utilised) generated
Net debt
Basic earnings per share (US cents)
5,265
532
203
13
10.1%
4,609
378
57
(135)
8.2%
3.9%
1.2%
5.4%
29
1,946
2
1.6%
(257)
1,957
(25)
14
41
256
nm
n/a
n/a
n/a
nm
(1)
nm
The ubiquitous uncertainties of the global economic recovery from the pandemic made
for diffi cult forecasting during fi scal 2021. Supply chain optimisation, working capital and
liquidity management were focus areas throughout the year as we considered the
impact of the various forecasting outcomes. There was an initial emphasis on securing
liquidity due to the unpredictable speed of the recovery. The group issued convertible
bonds, refi nanced our 2023 bonds, increased our revolving credit facilities and extended
our covenant holiday to alleviate liquidity concerns.
The demand recovery in the majority of our markets exceeded expectations and
pressured supply chain processes. We experienced challenges at opposite
extremes with excessive stocks due to logistic problems in some regions and low
inventories as demand exceeded available capacity in other regions. Commodity
prices increased sharply during the year causing our variable costs per ton to
increase from US$431/ton in Q1 to US$483/ton in Q4. Selling prices increased
by US$61/ton to US$752/ton during the fi nal quarter, more than recovering the
increased costs and resulting in Q4 EBITDA ex SI margins improving to 12%
(8% during Q1).
Net fi nance costs of US$134 million included the revaluation of a derivative liability
of US$31 million and costs associated with the refi nancing of the 2023 bonds of
US$3 million. Excluding the above items, fi nance costs of US$100 million were in
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Section 1
Financial highlights continued
OUR PERFORMANCE REVIEW
line with expectations. The US$1 million tax recovery is mainly due to investment
allowances received from the Saiccor Mill expansion project. Profit for the year was
US$13 million (LY loss = US$135 million) and earnings per share excluding special
items increased from a loss of US5 cents to an earnings of US15 cents. The
directors have considered it prudent to temporarily halt dividends until such time
as market conditions improve.
Cash generated for the year of US$29 million includes capital expenditure of
US$374 million.
Segment reporting
Our reporting is based on the geographical location of our businesses, ie Europe,
North America and South Africa.
The selected product line information is reviewed by our Executive Committee in
addition to the geographical basis upon which the group is managed. This additional
information is presented in this report to assist our stakeholders in obtaining a
complete understanding of our business.
Exchange rates and their impact on the group’s results
The group reports its results in US Dollar and, as such, the main foreign exchange
rates used in the preparation of the financial statements were:
Income statement
average rates
Balance sheet
closing rates
2021
2020
2021
2020
EUR1 = US$
US$1 = ZAR
1.1955
14.8505
1.1195
16.2265
1.1716
14.9659
1.1632
17.1311
Two of our three geographic business units (Europe and South Africa) have home or
‘functional’ currencies of Euro and ZAR respectively. The results and cash flows of
these two non-US Dollar units are translated into US Dollar at the average exchange
rate for the reporting period in order to arrive at the consolidated US Dollar results
and cash flows. When exchange rates differ from one period to the next, the impact
of translation from the functional currency to reporting currency can be significant.
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Section 2
Financial performance
The discussion in this section focuses
on the group financial performance
in(cid:123)(cid:21)(cid:19)(cid:21)(cid:20) compared with (cid:21)(cid:19)(cid:21)(cid:19)(cid:17)
A(cid:123)detailed discussion, in local
currencies, of each of our three
operating regions follows in Section 3.
Income statement
Our group financial results can be summarised as follows:
Metric tons ’000
Sales volume
US$ million
Sales revenue
Variable manufacturing and delivery costs
Fixed costs
Sundry items(1)
Operating profit excluding special items
Special items
Operating profit
Net finance costs
Taxation
2021
7,339
5,265
(3,238)
(1,777)
(47)
203
(57)
146
(134)
1
2020 % change
6,788
8
4,609
(2,838)
(1,673)
(41)
57
(95)
(38)
(88)
(9)
14
14
6
15
256
n/a
nm
52
nm
nm
Net profit
EPS excluding special items (US cents)
nm
(1) Sundry items include all income and costs not directly related to manufacturing operations
such as debtor securitisation costs, commissions paid and received and results of equity
accounted investments.
(135)
(5)
13
15
Sales volume
In 2021, sales volume increased by 551,000 tons compared with 2020. The regional
and product segment contributions to sales volume are shown below:
Sales volume
Metric tons ’000
North America
Europe
South Africa
Group
Pulp
Packaging and speciality papers
Graphic papers
Forestry
2021
1,685
2,817
2,837
7,339
1,236
1,464
3,200
1,439
2020 % change
1,516
2,698
2,574
6,788
1,315
1,209
3,096
1,168
11
4
10
8
(6)
21
3
23
Pulp volumes were down 6% for the year, limited by global logistics challenges, civil
unrest and production problems at our South African operations. Customer demand
was strong throughout the year and approximately 100,000 tons were delayed into
the next fiscal as a result of these challenges.
Packaging and speciality papers segment volume growth was experienced in all our
regions as the conversion projects in North America and Europe started to take full
effect.
Graphic papers volumes improved steadily during the year with the recovery in
Europe lagging North America due to stricter lockdowns in the European Union.
Significant capacity closures in both markets assisted with improving capacity
utilisation in the remaining operating facilities. The European operations
nevertheless recorded 367,000 tons of commercial downtime for the year.
Capacity utilisation improved to an average of 84% for the group as improved
packaging and speciality papers and graphic paper markets assisted us in taking
less production downtime during the year.
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Sales volume to capacity
North America
Europe
South Africa
Group
2021
%
2020
%
Section 2
Financial performance continued
94
82
80
84
85
73
81
78
Sales revenue
Sales revenue increased by 14% from US$4.6 billion in 2020 to US$5.3 billion in 2021.
Selling price and mix improvements resulted in sales revenue improving by
US$395 million. Consolidated volumes were up on last year as discussed above
resulting in sales revenue improving by US$88 million. The weaker US Dollar resulted
in a positive US$173 million conversion impact.
Variable and delivery costs
Variable and delivery costs increased by US$400 million from 2020. The volume
increase of 8% contributed to the bulk of the increase. Delivery costs per ton
increased as a result of global supply chain challenges while fibre and chemical
costs followed general commodity increases as global markets recovered from
the low pricing experienced during the pandemic.
The net pulp purchases and sales of the Sappi group is detailed in the graph below.
Sappi group pulp balance (US$ million)
Net pulp sales
573
174
252
800
600
400
200
0
(200)
(400)
(600)
(495)
Europe
North America
South Africa
Global
The table below reflects the breakdown of variable and delivery costs by type.
Variable manufacturing and delivery costs
US$ million
2021
2020 % change
Wood
Energy
Chemicals
Pulp and other
Delivery
Group
573
437
784
958
486
561
352
679
851
395
3,238
2,838
2
24
15
13
23
14
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Chief Financial Officer’s Report continued
Fixed costs
Fixed costs increased by US$105 million from fiscal 2020. Furloughing, government subsidies and salary sacrifices recorded
during 2020 were not repeated in 2021 resulting in personnel costs increasing by 12%. Similarly, maintenance work delayed
during the height of the pandemic in 2020 was resumed during 2021. The reduction in ‘Other’ is mainly a credit to inventory
movement as a result of a stock build. The stronger ZAR and EUR resulted in an increase in US Dollar costs (US$76 million).
Excluding the currency impact fixed costs increased by US$28 million.
Details of the make-up of fixed costs are provided in the table below.
Fixed costs
US$ million
Personnel
Maintenance
Depreciation
Other
Group
2021
1,077
240
319
141
1,777
2020
% change
959
217
313
184
1,673
12
11
2
(23)
6
EBITDA and operating profit excluding special items
EBITDA excluding special items increased to US$532 million, 41% higher than the previous year. Operating profit excluding
special items increased from US$57 million last year to US$203 million in 2021.
The EBITDA ex SI bridge reflected in the graph below shows the impact on profitability from lower sales volumes and selling
prices offset by reduced variable and fixed costs.
Reconciliation of EBITDA excluding special items: 2021 compared to 2020(1) (US$ million)
Sales revenue
Variable and delivery costs
Fixed costs
1 200
1 000
800
600
400
200
0
88
378
173
(286)
395
(114)
(28)
2
(76)
532
FY2020
EBITDA ex SI
Sales
volume
Price and mix
Currency
conversion
Variable and
delivery costs
Currency
conversion
Fixed costs
Currency
conversion
Other
FY2021
EBITDA ex SI
(1) All variances were calculated excluding Sappi Forestry.
(2) ‘Current conversion’ reflects translation and transactional effect on consolidation.
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The tables below detail the EBITDA and operating profit excluding special items of
the business for both 2021 and 2020 and the margins of each.
Section 2
Financial performance continued
EBITDA excluding special items by region
US$ million
2021
2020
North America
Europe
South Africa
Corporate and other
Group
EBITDA ex SI margin by region (%)
20
15
10
5
0
.
4
2
1
7
5
.
2
6
.
8
3
.
209
94
228
1
532
79
143
151
5
378
.
6
9
1
.
4
5
1
.
1
0
1
2
8
.
North America
●
●
2020
2021
Europe
South Africa
Sappi group
EBITDA excluding special items by product category
US$ million
2021
2020
Pulp
Packaging and speciality papers
Graphic papers
Other
Group
197
214
120
1
532
63
179
131
5
378
(cid:50)(cid:83)er(cid:68)ti(cid:81)(cid:74)(cid:3)(cid:83)r(cid:82)fit(cid:3)e(cid:91)c(cid:79)(cid:88)di(cid:81)(cid:74)(cid:3)(cid:86)(cid:83)eci(cid:68)(cid:79)(cid:3)ite(cid:80)(cid:86)(cid:3)(cid:69)(cid:92)(cid:3)re(cid:74)i(cid:82)(cid:81)
US$ million
2021
2020
North America
Europe
South Africa
Corporate and other
Group
105
(52)
151
(1)
203
(27)
8
75
1
57
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Chief Financial Officer’s Report continued
Section 2
Financial performance continued
Operating profit margin by region (%)
20
15
10
0
(5)
2
6
.
)
0
2
(
.
4
0
.
)
1
2
(
.
.
0
3
1
.
7
7
2
1
.
.
9
3
North America
●
●
2020
2021
Europe
South Africa
Sappi group
(cid:50)(cid:83)er(cid:68)ti(cid:81)(cid:74)(cid:3)(cid:83)r(cid:82)fit(cid:3)e(cid:91)c(cid:79)(cid:88)di(cid:81)(cid:74)(cid:3)(cid:86)(cid:83)eci(cid:68)(cid:79)(cid:3)ite(cid:80)(cid:86)(cid:3)(cid:69)(cid:92)(cid:3)(cid:83)r(cid:82)d(cid:88)ct(cid:3)c(cid:68)te(cid:74)(cid:82)r(cid:92)
US$ million
2021
2020
Pulp
Packaging and speciality papers
Graphic papers
Other
Group
127
109
(32)
(1)
203
(2)
88
(30)
1
57
In the chart below, 77% of the group’s EBITDA ex SI originates from growing markets
in the pulp and packaging and speciality papers segments. The graphic papers
segment, which contributes 23% of the EBITDA ex SI remains an important strategic
component of our business.
EBITDA excluding special items by
product 2021: US$ 532 million
●
●
●
Pulp (US$197 million)
Packaging and speciality papers (US$214 million)
Graphic papers (US$120 million)
For information regarding the financial performance of the regions, please refer to
Section 3 of this report.
Key operating targets
Our financial targets and performance against the key operating targets are dealt
with in the Letter to Shareholders section.
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Special items
Special items consist of those items which management believe are material,
by nature or amount, to the results for the year and require separate disclosure.
A breakdown of special items for 2021 and 2020 is reflected in the table below:
Section 2
Financial performance continued
(cid:54)(cid:83)eci(cid:68)(cid:79)(cid:3)ite(cid:80)(cid:86)(cid:3)(cid:115)(cid:3)(cid:74)(cid:68)i(cid:81)(cid:3)(cid:11)(cid:79)(cid:82)(cid:86)(cid:86)(cid:12)
US$ million
Plantation price fair value adjustment
Acquisition costs
Net restructuring provisions
Profit (loss) on disposal and written off assets
Net asset (impairment) reversals
Equity accounted investees impairments
Insurance recoveries
Fire, flood, storm and other events
Total
2021
2020
(13)
–
(2)
1
(15)
(4)
(1)
(23)
(57)
20
(6)
(34)
1
(15)
(19)
–
(42)
(95)
The net impact of special items in 2021 was US$57 million. The major components
are described below:
• A negative non-cash US$13 million plantation price fair value adjustment was
recognised following decreases to the market price of timber.
• Asset impairments of US$7 million were recorded against our Lomati Sawmill
and the change to the PM2 newsprint machine at Ngodwana Mill, US$12 million
against our mechanical coated cash-generating unit and US$4 million against the
Forestry First equity investment. A gain on remeasurement of US$4 million was
recorded on our held-for-sale assets.
• Fire, flood, storm and other events includes fire and turbine damage at the Alfeld
and Maastricht Mills of US$7 million, flood damage at Matane Mill of US$4 million,
provision for environment claims of US$4 million, strike related costs in South
Africa of US$3 million and fire and hail damaged timber of US$2 million.
Net finance costs
US$ million
Finance costs
Finance income
Net foreign exchange gains
Net fair loss on financial instruments
Total
2021
2020
112
(8)
(1)
31
134
93
(5)
–
–
88
Finance costs of US$134 million were higher than the prior year primarily due to the
non-cash fair value adjustments arising from revaluation of the conversion rights for
the Sappi Southern Africa Limited’s US$123 million (R1.8 billion) convertible bond
issued in the first quarter and refinancing costs in the second quarter for the new
2028 bonds.
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Section 2
Financial performance continued
Taxation
A regional breakdown of the tax charge is provided below.
US$ million
Europe
North America
South Africa
Total
Profit (loss)
before tax
Tax (charge)
relief
Effective tax
rate %
(145)
77
80
12
7
(2)
(4)
7
5
5
4
(8)
The difference between the effective and statutory tax rates of the European
entities is mainly due to non-valued losses carried forward in Belgium, Netherlands,
Finland and Austria.
In North America, effective and statutory tax rates differ predominantly due to
non-valued losses carried forward in the United States of America.
The South African effective tax rate is mainly as a result of special and normal tax
allowances relating to the Saiccor Mill expansion.
Net profit, earnings per share and dividends
After taking into account net finance costs and taxation, our net profit and earnings
per share for 2021, with comparatives for 2020, were as follows:
US$ million
2021
2020
Operating profit
Net finance costs
Profit (loss) before taxation
Taxation
Profit (loss) for the period
Weighted average number of shares is issue (millions)
Basic earnings per share (US cents)
146
134
12
(1)
13
549.7
2
(38)
88
(126)
9
(135)
545.5
(25)
The directors have elected not to declare a dividend and temporarily halt dividends
until such time as market conditions improve.
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Section 3
(cid:37)e(cid:79)(cid:82)(cid:90)(cid:3)(cid:90)e(cid:3)di(cid:86)c(cid:88)(cid:86)(cid:86)(cid:3)t(cid:75)e(cid:3)(cid:83)er(cid:73)(cid:82)r(cid:80)(cid:68)(cid:81)ce(cid:3)(cid:82)(cid:73)(cid:3)t(cid:75)e(cid:3)re(cid:74)i(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:69)(cid:88)(cid:86)i(cid:81)e(cid:86)(cid:86)e(cid:86)(cid:17)(cid:3)(cid:55)(cid:75)e(cid:123)di(cid:86)c(cid:88)(cid:86)(cid:86)i(cid:82)(cid:81)(cid:3)i(cid:86)(cid:3)(cid:69)(cid:68)(cid:86)ed(cid:3)(cid:82)(cid:81)(cid:3)(cid:83)er(cid:73)(cid:82)r(cid:80)(cid:68)(cid:81)ce(cid:3)
in local currencies as we believe this facilitates a better understanding of the revenue and costs in the
European and South African operations.
North America
Metric tons ’000
Sales volume
Pulp
Packaging and speciality papers
Graphic papers
2021
1,685
453
485
747
2020 % change
1,516
453
330
733
11
–
47
2
US$ million
2021
US$ million
2020 % change
US$ per ton
2021
US$ per ton
2020 % change
Sales
Variable manufacturing and delivery costs
Contribution
Fixed costs
Sundry items and consolidation entries
Operating profit excluding special items
EBITDA excluding special items
1,688
(1,122)
566
(535)
74
105
209
1.385
(968)
417
(508)
64
(27)
79
22
16
36
5
16
nm
165
1,002
(666)
336
(318)
44
62
124
914
(639)
275
(335)
42
(18)
52
10
4
22
(5)
5
nm
138
The North American business recorded its best result in over 10 years. Volumes in the packaging and speciality papers segment
increased by 47% as the region improved the mix of products on the converted paper machine at Somerset Mill. The substantial
reduction of capacity in the North American graphic papers market combined with logistics challenges on imported graphic paper
products created tight market conditions and the opportunity to increase selling prices and restore margins in that segment. The
region also benefited from a recovery in DP selling prices resulting in overall EBITDA ex SI margins improving from 6% in 2020 to
12% in 2021. The integration of the Matane Mill systems and procedures were successfully completed during the year.
Europe
Metric tons ’000
Sales volume
Packaging and speciality papers
Graphic papers
2021
2,817
525
2,292
2020 % change
2,698
478
2,220
4
10
3
€ million
2021
€ million
2020 % change
€ per ton
2021
€ per ton
2020 % change
Sales
Variable manufacturing and delivery costs
2,090
(1,350)
2,067
(1,268)
Contribution
Fixed costs
Sundry items and consolidation entries
Operating profit excluding special items
EBITDA excluding special items
740
(702)
(82)
(44)
78
799
(722)
(70)
7
128
1
6
(7)
(3)
17
nm
nm
724
(479)
263
(249)
(30)
(16)
28
766
(470)
296
(268)
(25)
3
47
(3)
2
(11)
(7)
20
nm
(40)
The European region struggled to reverse the downward selling price trend which had started during the last quarter of the previous
fiscal. Selling prices remained at low levels for the first three quarters of the current fiscal and recovered during the last quarter.
There was a strong recovery in volumes with packaging and speciality papers volumes increasing by 10%. Logistics challenges
hampered a volume recovery in the graphics markets as container availability limited export volumes. The fourth quarter graphic
papers volumes were, however, 37% up on the same quarter last year as supply chain restrictions eased. Variable costs, in particular
purchased pulp, increased substantially during the year resulting in margin squeeze. The region managed to offset the reduced
contribution by reducing fixed costs by 3%. The European operations were nevertheless forced to take 376,000 tons of production
downtime during the year. EBITDA ex SI margins reduced from 6% to 4% as a consequence.
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Section 3 continued
South Africa*
Metric tons ’000
Sales volume*
Pulp
Packaging and speciality papers
Graphic papers
Sales*
Variable manufacturing and delivery costs
Contribution
Fixed costs
Sundry items and consolidation entries
Operating profit excluding special items
EBITDA excluding special items
* Excludes Forestry.
ZAR million
2021
ZAR million
2020 % change
16,083
(9,995)
6,088
(5,985)
2,139
2,242
3,386
14,928
(9,460)
5,468
(5,809)
1,558
1,217
2,450
8
6
11
3
37
84
38
2021
1,398
784
459
155
ZAR
per ton
2021
11,504
(7,149)
4,355
(4,281)
1,530
1,604
2,422
2020 % change
(1)
(9)
15
6
1,406
861
399
146
ZAR
per ton
2020 % change
10,617
(6,728)
3,889
(4,132)
1,190
866
1,743
8
6
12
4
38
85
39
The missed opportunities in the South African region dented the good year-on-year recovery. Net selling prices of DP increased
15% from the historic lows of the previous year while packaging selling prices remained in line with the previous year. Despite the
strong market demand for all the region’s products, sales volumes were restricted by civil unrest, production problems and
logistics challenges. DP sales volumes of 82,000 tons were delayed into the following fiscal due to unavailability of ocean freight
vessels. Vessel scarcity resulted in delivery costs increasing 6% during the year. Variable costs, predominantly energy and
chemicals, increased by 6% during the year as well. Commissioning of the Saiccor Mill expansion project began during the
fourth quarter and additional production will commence in the first quarter of fiscal 2022. Fixed costs were restricted to an
increase of 3% despite personnel cost increases matching inflationary increases of 5%. As a consequence of the above,
EBITDA ex SI margins increased from 16% in the previous year to 21%
The region’s capital expenditure focused on increasing DP capacity during the year.
Major sensitivities
Some of the more important factors which impact the group’s EBITDA excluding special items, based on current anticipated
revenue and cost levels, are summarised in the table below:
Sensitivities
Net selling prices
Dissolving pulp prices
Variable costs
Sales volume
Fixed costs
Paper pulp price
Oil price
ZAR/US$ (weakening)
Euro/US$ (weakening)
Europe
€ million
North
America
US$ million
South Africa
ZAR million
Translation
impact*
US$ million
Group
US$ million
25
–
15
8
7
6
3
–
(2)
18
3
9
7
5
1
–
–
(3)
233
158
120
96
57
6
–
83
–
–
–
–
–
–
–
–
(2)
63
14
34
23
16
8
3
3
(11)
(16)
Change
1%
US$10
1%
1%
1%
US$10
US$1
10 cents
10 cents
* Based on currency impact on translation of EBITDA ex SI.
The table demonstrates that EBITDA excluding special items is most sensitive to changes in the selling prices of our products.
The calculation of the impact of these sensitivities assumes all other factors remain constant and does not consider potential
management interventions to mitigate negative impacts or enhance benefits.
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In the table below, we present the group’s cash flow statement for 2021 and 2020 in
a summarised format:
Section 4
C(cid:68)(cid:86)(cid:75)(cid:3)(cid:432)(cid:82)(cid:90)
US$ million
2021
2020
Operating profit excluding special items
Depreciation and amortisation
EBITDA excluding special items
Contributions to post-employment benefits
Other non-cash items
Cash generated from operations
Movement in working capital
Net finance costs
Taxation
Dividend paid
Capital expenditure
Net proceeds on disposal of assets
Acquisition
Other
Net cash generated (utilised)
203
329
532
(49)
(11)
472
39
(102)
(2)
–
(374)
4
–
(8)
29
57
321
378
(40)
(15)
323
65
(102)
(26)
–
(351)
1
(160)
(7)
(257)
Net cash generated for the financial year was US$29 million (FY2020: US$257 million
utilised). The improvement in cash generation reflects the recovery from the impact
of Covid-19 relative to the comparative year. A reduction in net working capital
requirements was achieved despite the supply chain challenges which resulted in
increased stock holding. Good management of accounts receivables and payables
contributed to the reduced requirement. The increased capital expenditure includes
the majority of the Saiccor Mill expansion spend.
(cid:44)(cid:81)(cid:89)e(cid:86)t(cid:80)e(cid:81)t(cid:3)i(cid:81)(cid:3)fi(cid:91)ed(cid:3)(cid:68)(cid:86)(cid:86)et(cid:86)(cid:3)(cid:89)er(cid:86)(cid:88)(cid:86)(cid:3)de(cid:83)reci(cid:68)ti(cid:82)(cid:81)(cid:3)(US$ million)
1
4
5
1
7
4
7
5
3
4
7
3
1
5
3
600
500
400
300
200
100
0
2017
●
Cash flow capex
2018
2019
2020
2021
Depreciation
123
OUR PERFORMANCE REVIEW
Chief Financial Officer’s Report continued
Section 5
Balance sheet
Summarised balance sheet
US$ million
Property, plant and equipment
Right-of-use assets
Plantations
Net working capital
Other assets
Net post-employment liabilities
Other liabilities
Employment of capital
Equity
Net debt
Capital employed
2021
3,325
110
477
403
364
(197)
(566)
3,916
1,970
1,946
3,916
2020
3,103
101
419
441
296
(306)
(465)
3,589
1,632
1,957
3,589
Sappi has 19 production facilities in 10 countries, capable of producing approximately
3.9 million tons of pulp and 5.5 million tons of paper. For more information on our mills,
their production capacities and products, please refer to the Where we operate
section.
During 2021, capital expenditure for property, plant and equipment was US$374 million.
The capacity replacement value of property, plant and equipment for insurance
purposes has been assessed at approximately US$22 billion.
Property, plant and equipment
The cost and depreciation related to our property are set out in the table below.
Book value of property, plant and equipment
US$ million
Cost
Accumulated depreciation and impairment
Net book value
2021
9,908
6,583
3,325
2020
9,346
6,243
3,103
The group incurred capital expenditure of US$374 million during the year. This was
largely offset by depreciation of US$289 million while the weaker US Dollar resulted
in foreign currency translation gains of US$160 million.
Plantations
We regard ownership of our plantations in South Africa as a key strategic resource
as it provides access to low cost fibre for pulp production and ensures continuity
of supply on an important raw material input source.
The South African region has access to approximately 394,000 hectares of land of
which approximately 258,000 hectares are planted with pine and eucalyptus. These
plantations provide approximately 67% of the wood requirements for our South
African mills.
During the year, there were market price increases coupled with higher average fair
value rates. These increases were offset by the rising cost of fuel and an increase in
the discount rate. As we manage our plantations on a sustainable basis, the growth
for the year was offset by timber felled during the year.
Our plantations are valued on the balance sheet at fair value less the estimated
costs of delivery, including harvesting and transport costs. In notes 2.3.4 and 11
to the financial statements, we provide more detail on our accounting policies for
plantations, how we manage our plantations as well as the major assumptions used
in the calculation of fair value.
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Working capital
The component parts of our working capital at the 2021 and 2020 fiscal year ends
are shown in the table below:
Section 5
Balance sheet continued
Net working capital
US$ million
Inventories
Trade and other receivables
Trade and other payables and provisions
Net working capital
2021
841
703
(1,141)
403
2020
673
584
(816)
441
Optimising working capital remains a key focus area for us and appropriate targets
are incorporated into the management incentive schemes for all businesses. The
working capital investment is seasonal and typically peaks during the third quarter
of each financial year.
Net working capital decreased to US$403 million in 2021 from US$441 million
in 2020. The material movements in working capital are discussed below:
• Inventories increased by US$168 million, caused mainly by increased inventory
levels and an unfavourable currency translation impact of US$25 million.
• Receivables increased by US$119 million following higher net selling prices and
increased volumes in the fourth quarter combined with an unfavourable currency
translation impact of US$7 million.
• Payables increased by US$325 million largely due to increases in trade payables
on higher sales volumes, increases in bonus accruals and accruals for rebates
and a favourable currency translation impact of US$40 million.
Post-employment liabilities
We operate various defined benefit pension/lump sum plans, post-employment
healthcare subsidies and other employee benefits in the various countries in which
we operate. A summary of defined benefit assets and liabilities (pension and
post-employment healthcare subsidies) is as follows:
Defined benefit liabilities
US$ million
Defined benefit obligation
Fair value of plan assets
Net balance sheet liability
Cash contributions to defined benefit plans/subsidies
Income statement charge (credit) to profit or loss
2021
(1,523)
1,329
(194)
50
28
2020
(1,600)
1,294
(306)
36
25
16
Cash contributions deemed ‘catch-up’*
* ‘Catch-up’ is cash contributions paid to defined benefit plans in excess of current service cost.
30
Gross liabilities from all our plans reduced by US$77 million from US$1,600 million
to US$1,523 million over the year. The main cause of the reduction was due to an
increase in discount rates in regions where we hold significant liabilities.
Fair value of plan assets rose by US$35 million from US$1,294 million to
US$1,329 million over the year due to favourable investment returns of assets
in our funded plans from outperforming bonds.
Included in the net balance sheet liability above is a net loss of US$2 million
resulting from movements of local results relative to the reporting currency.
125
OUR PERFORMANCE REVIEW
Chief Financial Officer’s Report continued
Section 5 continued
The decrease in liabilities, coupled with the increase in assets, contributed to a reduction in the overall net liability by US$112 million
from US$306 million to US$194 million over the year. A reconciliation of the movement in the balance sheet over the year is
shown graphically below and disclosed in more detail in note 28 of the annual financial statements.
(cid:54)(cid:68)(cid:83)(cid:83)i(cid:3)(cid:47)i(cid:80)ited(cid:3)defi(cid:81)ed(cid:3)(cid:69)e(cid:81)efit(cid:3)(cid:83)e(cid:81)(cid:86)i(cid:82)(cid:81)(cid:86)(cid:3)(cid:69)(cid:68)(cid:79)(cid:68)(cid:81)ce(cid:3)(cid:86)(cid:75)eet(cid:3)(cid:80)(cid:82)(cid:89)e(cid:80)e(cid:81)t(cid:3)(US$ million)
150
100
50
0
(50)
(100)
(150)
(200)
(250)
–
Acquisition
(203)
2020
net liability
(22)
Pension
charge
–
(91)
87
47
Employer
contributions paid
Actuarial
gains
Translation
effect
2021
net liability
Sappi Limited post-retirement medical aid subsidy balance sheet movement (US$ million)
20
0
(20)
(40)
(60)
(80)
(100)
(120)
(103)
(6)
3
5
(2)
(103)
–
2020
net liability
Pension
charge
Employer
contributions paid
Actuarial
gains
Translation
effect
2021
net liability
Equity
Year-on-year, equity increased by US$338 million to US$1,970 million as summarised below:
Equity reconciliation
US$ million
Equity as at September 2020
Profit for the year
Dividend paid
Actuarial gains
Issue of shares
Convertible bond – equity portion
Share-based movements
Movement in hedging reserves
Foreign currency movements
Equity as at September 2021
2021
1,632
13
–
90
26
39
8
(2)
164
1,970
The group realised a profit for the year of US$13 million and recorded actuarial gains of US$90 million. Convertible bonds
were issued during the first quarter and subsequent to shareholder approval the equity portion of the convertible bond of
US$39 million was reclassified to equity. During the fourth quarter holders of the convertible bonds elected to convert, and
shares to the value of US$26 million were issued. Share-based payments of US$8 million and foreign currency movements
of US$164 million accounted for the remainder of the movement during the year.
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OUR PERFORMANCE REVIEW
Debt
Debt is a major source of funding for the group. In the management of debt, we focus on net debt, which is the sum of current
and non-current interest-bearing borrowings and bank overdrafts, net of cash and cash equivalents.
Debt funding structure
The Sappi group principally takes up debt in two legal entities. Sappi Southern Africa Limited issues debt in the local South
African market for its own funding requirements and Sappi Papier Holding GmbH (SPH), which is Sappi’s international holding
company, issues debt in the international money and capital markets to fund our non-South African businesses. SPH’s long-term
debt is supported by a Sappi Limited guarantee and the fi nancial covenants on certain of its debt agreements are based on the
ratios of the consolidated Sappi Limited group. The covenants applicable to the debt of these two entities and their respective
credit ratings are discussed on page
130.
The diagram below depicts our debt funding structure.
Sappi Limited Guarantee*
Sappi Limited
Sappi Southern Africa
(SSA)
South African
debt
Sappi Papier Holding
(SPH)
Non-South African debt
Sappi Europe
Sappi
North America
Sappi Trading
* Sappi Limited provides guarantees for long-term non-South African debt.
127
OUR PERFORMANCE REVIEW
Chief Financial Officer’s Report continued
Section 5
Balance sheet continued
Below we highlight the main financing activities that occurred during the year:
• In November 2020 Sappi Southern Africa placed a new seven-year Convertible
Bond, with an interest coupon of 5.25% and a conversion share price of
ZAR33.1636, a premium of 32.5% of the share price at the time of bond
placement.
• SPH’s securitisation programme of €330 million matured in January 2022 and
was extended to January 2024 during the fiscal year.
• SPH’s EUR350 million 2023 public bond was refinanced and upsized in March 2021,
with a new EUR400 million 2028 bond at a coupon of 3.625%.
Structure of net debt and liquidity
We consider the group liquidity position to be sufficient, with cash holdings of
US$366 million at financial year end, and US$732 million of unutilised committed
revolving credit facilities.
The structure of our net debt at September 2021 and 2020 is summarised below:
US$ million
Long-term debt
Senior unsecured debt
Securitisation funding
IFRS 16 Leases*
Less: Short-term portion
Net short-term debt/(cash)
Overdrafts, revolving credit facility (RCF)
and short-term loans
Short-term portion of long-term debt
Less: cash
2021
2,157
1,769
337
119
(67)
(211)
88
67
(366)
2020
1,942
1,649
256
105
(69)
15
225
69
(279)
Net debt
1,946
1,957
* IFRS 16 accounting standard adopted from fiscal 2020.
Movement in net debt
The movement of our net debt from fiscal 2020 to fiscal 2021 is summarised in the
table below:
Net debt at September 2020
Increase of IFRS 16 Leases
Net impact of SSA Convertible Bond
Net cash generated in 2021
Currency translation, fair value and other non-cash adjustments
Net debt at September 2021
US$ million
1,957
34
(48)
(29)
32
1,946
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OUR PERFORMANCE REVIEW
Group debt profile
We show the major components and maturities of our net debt at September 2021 below. These are split between our debt
in South Africa and our debt outside South Africa.
Amount
US$ million
Interest
rates (local
currencies)
6.00%
6.20%
9.25%
5.25%
1.70%
1.70%
Various
2.30%
4.10%
1.50%
0.30%
4.00%
3.63%
7.50%
20
72
100
89
281
(156)
125
126
210
120
134
102
87
68
469
527
221
(33)
2,031
(210)
1,821
1,946
South Africa
Short-term notes
SSA07 Public bond
SAA08 Public bond
Convertible bond
Gross debt
less cash
Net South African debt
Non-South African
Securitisation (US$)
Securitisation (EUR)
IFRS 16 Leases
OeKB term loan 1
OeKB term loan 2 (CAD)
OeKB term loan 2 (EUR)
Other bank debt (EUR)
2028 Public bonds (EUR)
2026 Public bonds (EUR)
2032 Bonds (US$)
IFRS adjustments
Gross debt
less cash
Net non-South African debt
Net group debt
Fixed/
variable
Variable
Fixed
Fixed
Fixed
Variable
Variable
Mixed
Fixed
Fixed
Fixed
Variable
Fixed
Fixed
Fixed
Maturity (Sappi fiscal years)
2022
2023
2024
2025 Thereafter
20
(156)
(136)
24
21
15
12
68
(210)
(70)
(206)
72
100
89
72
100
0
89
126
210
18
91
15
12
20
21
15
12
14
15
12
44
44
37
469
527
(33)
68
140
473
574
40
40
1,309
1,398
The majority of our non-South African long-term debt is guaranteed by Sappi Limited, the group holding company.
A diagram of the debt maturity profile for Sappi fiscal years is shown below:
(cid:39)e(cid:69)t(cid:3)(cid:80)(cid:68)t(cid:88)rit(cid:92)(cid:3)(cid:83)r(cid:82)fi(cid:79)e(cid:3)(US$ million)
20
0
(20)
(40)
(60)
(80)
(100)
(120)
7
3
3
9
1
1
0
0
1
8
6
8
04
2
2
7
8
4
4
5
5
9
8
7
2
7
2
6
9
4
(91)
1
2
2
0 – 1 years
1 – 2 years
2 – 3 years
3 – 4 years
4 – 5 years
5 – 6 years
6 – 7 years
7 – 8 years
>8 years
●
Short-term
●
RCF
●
Securitisation
●
SSA
●
SPH term debt
* Excludes IFRS 16 lease with an average time to maturity of approximately four years.
129
OUR PERFORMANCE REVIEW
Chief Financial Officer’s Report continued
Section 5
Balance sheet continued
Covenants
Non-South African covenants
Financial covenants apply to US$322 million of our non-South African bank debt, the
€525 million Revolving Credit Facility and the non-South African securitisation facility.
In view of the uncertainty due to Covid-19 the banking group agreed in 2020 to
suspend the measurement of financial covenants until September 2021. This suspension
is subject to normal conditions for this kind of assistance and included no dividend
payments, maximum capex spending limits, a minimum liquidity requirement and no
M&A activity without prior bank approval. Covenant measurement will commence
again with effect from the December 2021 quarter. The covenants applicable from
December 2021 are described below and are calculated on a rolling last four quarter
basis and must be met at the end of each quarter.
• Ratio of group net debt to EBITDA ex SI:
December
2021
March
2022
June
2022
September 2022
to December 2022
5.50
5.25
4.75
4.50
March
2023
4.25
• Ratio of group EBITDA ex SI to net interest expense should not be less than
2.50-to-1.
South African covenants
Separate covenants also apply to the Revolving Credit Facility of our Southern
African business.
These covenants are calculated on a rolling last four quarter basis and require that
at the end of March and September each year, with regard to Sappi Southern Africa
Limited and its subsidiaries:
• the ratio of net debt to equity at the end of March and September is not greater
than 65%; and
• the ratio of EBITDA ex SI to net interest paid is not less than 2.5-to-1.
Below we show that for the year ended September 2021 the South African financial
covenants were comfortably met.
South African covenants
Net debt to equity
EBITDA ex SI to net interest
2021
9.15%
8.14
Covenant
<65%
>2.50
In addition to the financial covenants referred to above, our bonds and certain of our
bank facilities contain customary affirmative and negative covenants restricting,
among other things, the granting of security, incurrence of debt, the provision of loans
and guarantees, mergers and disposals and certain restricted payments. As regards
dividend payments, in terms of the international bond indentures, any cash dividends
paid may not exceed 50% of net profit excluding special items after tax and certain
other adjustments, calculated on a cumulative basis.
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OUR PERFORMANCE REVIEW
Credit ratings
Global Credit Ratings: South African national scale rating Sappi Southern Africa Limited: AA (za)/A1+(za)/Stable Outlook
(June 2021)
Moody’s
Sappi Corporate Family Rating: Ba2/NP/Negative Outlook (December 2020)
SPH Debt Rating:
• 2028/2026 Bonds: Ba2/Negative Outlook (December 2020)
• 2032 Bonds: B1/Negative Outlook (December 2020)
S&P Global Ratings
Corporate Credit Rating: BB-/B/Stable Outlook (September 2020)
SPH Debt Rating:
• 2026/2028/2032 Bonds: BB- Stable Outlook (September 2020)
Section 6
Share price performance
Sappi share price – September 2019 to September 2021
60
50
40
30
20
10
0
9
1
0
2
r
e
b
m
e
t
p
e
S
9
1
0
2
r
e
b
m
e
c
e
D
0
2
0
2
h
c
r
a
M
0
2
0
2
e
n
u
J
0
2
0
2
r
e
b
m
e
t
p
e
S
0
2
0
2
r
e
b
m
e
c
e
D
1
2
0
2
h
c
r
a
M
1
2
0
2
e
n
u
J
1
2
0
2
r
e
b
m
e
t
p
e
S
Conclusion
Demand recovery post the peak of the pandemic exceeded expectations and contributed to an improved liquidity situation at
year end. Gearing ratios remain high and the near-term focus will be on strengthening the balance sheet but matching that with
delayed maintenance capital expenditure. Additionally, Science Based Targets will require committed capital expenditure and
managing cash flows with commitments will be the challenge.
Logistics challenges are expected to persist in the year ahead placing strain on the management of working capital. Finished
goods inventory levels and the availability of raw materials to service increased demand levels will require additional focus. The
sharp increase in variable costs has emphasised the commitment to driving operational excellence in order to restore margins
to sustainable levels.
The four key fundamentals of our
the subsequent recovery. The short-term focus will be to strengthen the balance sheet by reducing debt and maximising cash
generation. The medium to longer-term strategy will be to invest in growth opportunities and achieve our sustainability goals.
strategy are sufficiently flexible to accommodate the intervention of the pandemic and
Thrive25
GT Pearce
Chief Financial (cid:50)fficer
08 December 2021
131
V E L O
C I T Y
The cheetah’s light, streamlined body makes it well-suited to
short, explosive bursts of speed, rapid acceleration and executing
extreme changes in direction while moving at high speed.
Contrary to the common belief that cheetahs – known to be the
fastest land animal – hunt by simply chasing their prey at high
speeds, they are in fact extremely strategic. They don’t randomly
sprint towards anything, but wait until the timing is right, varying
their speed during the chase. Speed and smartness are attributes
that resonate with us at Sappi, given that ‘making smart decisions
which we execute with speed’ are among our core values.
Under our Thrive25 strategy, we foster a safety-first culture, using
collaboration and the power of partnerships to respond to changes
in our environment, moving Sappi forward and deliver value to
our customers.
132
V E L O
C I T Y
The cheetah’s light, streamlined body makes it well-suited to
short, explosive bursts of speed, rapid acceleration and executing
extreme changes in direction while moving at high speed.
Contrary to the common belief that cheetahs – known to be the
fastest land animal – hunt by simply chasing their prey at high
speeds, they are in fact extremely strategic. They don’t randomly
sprint towards anything, but wait until the timing is right, varying
their speed during the chase. Speed and smartness are attributes
that resonate with us at Sappi, given that ‘making smart decisions
which we execute with speed’ are among our core values.
Under our Thrive25 strategy, we foster a safety-first culture, using
collaboration and the power of partnerships to respond to changes
in our environment, moving Sappi forward and deliver value to
our customers.
133
GOVERNANCE AND COMPENSATION
Our leadership and executive
management
Non-executive directors
Sir Nigel
Rudd (74)
Brian Richard
Beamish (Brian) (64)
Michael Anthony
Fallon (Mike) (63)
James Michael
Lopez (Jim) (62)
Nkateko Peter
Mageza (Peter) (66)
Independent Chairman
Independent
Independent
Independent
Independent
(cid:52)ualifi cations(cid:29) DL, Chartered
Accountant
(cid:52)ualifi cations(cid:29) BSc (Mech
Eng): HBS PMD
(cid:52)ualifi cations(cid:29) BSc Hons
(First Class)
(cid:52)ualifi cations(cid:29) BA
(Economics)
Nationality: British
Appointed: April 2006
Skills, expertise and
experience:
Sir Nigel Rudd has held
various senior management
and board positions in a
career spanning more
than 35 years. He founded
Williams plc in 1982, one of
the largest industrial holding
companies in the United
Kingdom (UK). Sir Nigel Rudd
brings his expertise in
fi nance, management,
governance and leadership
to the Sappi board.
*
Nationality: British and
South African
Appointed: March 2019
Skills, expertise and
experience:
Mr Beamish, a qualifi ed
mechanical engineer,
brings more than 40 years’
experience in management,
business and leadership in
capital intensive industries
to the board.
Nationality: British
Nationality: American
Appointed: September 2011
Appointed: March 2019
Skills, expertise and
experience:
Skills, expertise and
experience:
Mr Fallon brings management
and leadership experience
that extends across a wide
range of functions from
research and development
(R&D), human resources,
fi nance, plant management,
sales and marketing and
supply chain to general
management, including
mergers and acquisitions.
Mr Lopez brings his
experience as the former
President and Chief Executive
Offi cer (CEO) of Tembec Inc
(2006 – 2017) a manufacturer
of lumber, pulp, paper/
paperboard and speciality
cellulose and a global leader
in sustainable forest
management practices.
*
(cid:52)ualifi cations(cid:29) FCCA (UK)
Nationality: South African
Appointed: January 2010
Skills, expertise and
experience:
Mr Mageza brings his
knowledge and experience
having held senior executive
positions across a wide range
of industries.
*
Average age 2021 (%)
Independence 2021 (%)
Tenure 2021 (%)
Diversity 2021 (%)
8
17
17
17
58
25
33
58
42
83
42
●
●
40s
50s
●
●
60s
70s
●
●
Independent non-executives
Executives
●
●
●
Zero to three years
Three to 10 years
Over 10 years
●
●
Diverse
Other
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134
GOVERNANCE AND COMPENSATION
Zola Nwabisa
Malinga (43)
Independent
Dr Bonakele
Mehlomakulu (Boni)
(48)
Mohammed Valli
Moosa (Valli) (64)
Independent
Robertus Johannes
Antonius Maria
Renders (Rob Jan) (68)
(cid:52)ualifi cations(cid:29) BCom, CA(SA)
Independent
Nationality: South African
Appointed: October 2018
Skills, expertise and
experience:
Ms Malinga has extensive
experience in investment
banking, corporate fi nance
and real estate, having held
senior roles at various
fi nancial institutions. She
is also the founder and
Executive Director of Jade
Capital Partners, a women-
owned investment holding
company.
(cid:52)ualifi cations(cid:29) PhD (Chemical
Engineering)
(cid:52)ualifi cations(cid:29) BSc
(Mathematics and Physics)
Nationality: South African
Nationality: South African
Appointed: August 2010
Appointed: March 2017
Skills, expertise and
experience:
With a PhD in chemical
engineering, Dr Mehlomakulu
has experience and expertise
in innovation policy,
management and leadership.
Skills, expertise and
experience:
Mr Moosa has held numerous
leadership positions across
business, government,
politics and civil society
in South Africa and
internationally. Mr Moosa
has expertise in fi nance,
general business and mining
and is an international expert
on sustainable development
and climate change.
*
Independent
(cid:52)ualifi cations(cid:29) MSc
(Mechanical Engineering),
MDP
Nationality: Dutch
Appointed: October 2015
Skills, expertise and
experience:
Mr Renders currently serves
as a business consultant and
independent director and
brings to the board his
extensive experience in
governance and leadership
as well as operational
expertise in manufacturing
and packaging internationally.
Janice Elaine Stipp
(Janice) (62)
Independent
(cid:52)ualifi cations(cid:29) BA
(Accounting), MBA
Nationality: American
Appointed: June 2019
Skills, expertise and
experience:
Ms Stipp brings with her a
wealth of experience in
leadership, fi nance and
treasury to the Sappi board.
Sappi board committee memberships:
Audit and Risk Committee
Human Resources and Compensation Committee
Nomination and Governance Committee
Social, Ethics, Transformation and Sustainability (SETS)
Committee
* Committee Chairman
135
GOVERNANCE AND COMPENSATION
Our leadership and executive management continued
Executive directors
Executive management
Stephen Robert
Binnie (Steve) (54)
Glen Thomas
Pearce (58)
Marco
Eikelenboom (54)
Michael George
Haws (Mike) (58)
Chief Executive Officer
Chief Financial Officer
(cid:52)ualifi cations(cid:29) BCom, BAcc,
CA(SA), MBA
(cid:52)ualifi cations(cid:29) BCom, BCom
Hons, CA(SA)
Nationality: British
Nationality: South African
Appointed: September 2012
Appointed: June 1997
Skills, expertise and
experience:
Skills, expertise and
experience:
Mr Binnie was appointed CEO
of Sappi Limited in July 2014
and brings extensive
experience in fi nancial
management, leadership,
corporate activity and
strategy to the role.
Mr Pearce joined Sappi
Limited in June 1997 and
was promoted to CFO and
Executive Director of Sappi
Limited in July 2014.
Mr Pearce has extensive
fi nancial management
experience, both locally
and abroad.
Chief Executive Officer
of Sappi Europe
(cid:52)ualifi cations(cid:29) MS (Business
Economics)
Appointed: September 1992
Skills, expertise and
experience:
Mr Eikelenboom was
appointed CEO of Sappi
Europe on 01 April 2021.
Mr Eikelenboom was
previously Vice President
Marketing and Sales for
Graphic Papers and was
integral in the successful
restructure and refocus of
Sappi’s European operations.
President and Chief
Executive Officer of Sappi
North America
(cid:52)ualifi cations(cid:29) BSc Paper
Science and Engineering
Appointed: January 2012
Skills, expertise and
experience:
Mr Haws brings his extensive
industry leadership and
strategy experience to the
business. Mr Haws was
integral to the development
and execution of Sappi’s
2020Vision and the
investments made in North
America to grow the
dissolving pulp and
packaging and speciality
papers businesses.
Alexander van Coller
Thiel (Alex) (60)
Chief Executive Officer of
Sappi Southern Africa
(cid:52)ualifi cations(cid:29) BSc
(Mechanical Engineering),
MBA (Financial Management
and Information Technology)
Appointed: December 1989
Skills, expertise and
experience:
Mr Thiel has a long history
with Sappi. His experience
and expertise includes
marketing, logistics,
procurement, strategy and
operations across Europe
and Southern Africa.
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GOVERNANCE AND COMPENSATION
Fergus Conan Salvador
Marupen (Fergus) (56)
Mohamed Iqbal
Mansoor (54)
Gary Roy
Bowles (61)
Group Head Human
Resources
Executive Vice President
of Sappi Dissolving Pulp
(cid:52)ualifi cations(cid:29) BA Hons
(Psychology), BEd (Education
Management), MBA
(Stellenbosch), LCOR
(Stanford University)
Appointed: March 2015
Skills, expertise and
experience:
Mr Marupen’s experience
across a variety of industries
in South Africa enables him
to off er insight into human
resources, governance and
management, among many
other fi elds.
(cid:52)ualifi cations(cid:29) BSc
(Chemistry and Mathematics),
BSc Hons (Chemistry), MBA
Appointed: August 1991
Skills, expertise and
experience:
Mr Mansoor’s expertise
includes contract negotiation
and management, supply
chain management, strategic
planning, sales management,
key account management,
dissolving pulp, international
logistics and technical
application support.
Group Head Technology
(cid:52)ualifi cations(cid:29) BSc (Electrical
Engineering), GCC, PR Eng,
PMD, EDP
Appointed: November 1990
Skills, expertise and
experience:
Mr Bowles brings more than
30 years of experience with
Sappi as well as expertise
in engineering, research,
manufacturing, project
execution, operational and
risk management to his role.
Maarten
van Hoven (48)
Group Head Strategy
and Legal
(cid:52)ualifi cations(cid:29) BProc, LLM
(International Business Law)
Appointed: December 2011
Skills, expertise and
experience:
As an admitted attorney of
the High Court in South
Africa, Mr van Hoven brings
expertise in corporate,
commercial and competition
law, in the private and public
sectors, as well as experience
in mergers and acquisitions.
137
GOVERNANCE AND COMPENSATION
Corporate governance
Sappi is committed to the highest standards
of corporate governance, which form the
foundation for the long-term sustainability
of our company and creation of value for
our stakeholders.
100%
Overall committee
attendance rate
Good governance at Sappi contributes
to living our values through enhanced
accountability, a transparent and
ethical culture, strong risk
management, a focus on eff ective
control of the business, legitimacy and
good performance. Governance is one
of our key enablers to unlocking and
protecting value, as we optimise the
use of our capitals, address our key
risks while taking advantage of exciting
opportunities (refer to page
34 Risk
management), while minimising the
negative impacts of trade-off s that
have to be made, as set out in the
presentation of Our key material
issues on page
70. The group
endorses the recommendations
contained in the King Code of
Governance™ for South Africa 2016
(King IV) and applies the various
principles in the achievement of good
governance outcomes.
An application register of how
Sappi applies the King IV principles
is provided on the group’s website
(www.sappi.com).
The group is listed on the JSE Limited
and complies in all material respects
with the JSE Listings Requirements,
regulations and codes.
The board of directors
The basis for good governance at Sappi is laid
out in the board charter, which sets out the
division of responsibilities between the board and executive management. The
board creates and protects sustainable value by collectively determining strategies,
approving major policies and plans, taking responsibility for risk management, and
providing oversight as well as monitoring, to help to ensure accountability. The board
is satisfi ed that it has fulfi lled its responsibilities in accordance with its charter for
the reporting period.
For further information about the board and the board charter please refer to
www.sappi.com.
The Sappi board and diversity
Sappi operates globally and across a variety of markets, jurisdictions and cultures,
requiring a diverse mix of experience, skills, gender, age and backgrounds. It is
important that our board composition refl ects this diversity, both in a South African
context as well as globally. Diversity gives Sappi access to an increased range of
talent, which helps to provide insight into the needs and motivations of a broader
stakeholder base.
Board experience (%)
Sappi’s board members have experience across multiple industries and leadership roles
100
80
60
40
20
0
100
67
50
50
42
42
33
58
50
33
Sustain-
ability
HR and
transform-
ation
Global,
multi-
national
M&A
Finance,
accounting
and
banking
Forestry,
pulp,
paper and
packaging
Manufacturing,
industrial and
mining
CFO
roles
Chairman
roles
CEO/
executive
director
roles
Directors’ independence (%)
Directors’ ages (%)
Diversity (%)
Directors’ tenure (as at year end %)
17
8
17
Average
60 years’ old
17
83
58
58
42
25
33
Average
seven years
42
●
●
Independent
non-executives
Executives
●
●
40s
50s
●
●
60s
70s
●
●
Diverse (female or
ethnically diverse)
Other
●
●
●
●
Zero to three years
Three to 10 years
Over 10 years
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GOVERNANCE AND COMPENSATION
The composition of the board and attendance at board meetings and board committee meetings is set out in the table below for
the year ended September 2021:
Appointed
(cid:11)(cid:53)etiri(cid:81)(cid:74)(cid:12)
from board
Name
Independent non-executives
Board
Board committees
(cid:43)(cid:88)(cid:80)(cid:68)(cid:81)(cid:3)
Resources
and
Compensation
Nomination
and
Governance
SETS
AGM
%
attendance
during
tenure
Audit and Risk
BR Beamish
MA Fallon
JM Lopez
NP Mageza
ZN Malinga
B Mehlomakulu
MV Moosa
RJAM Renders
Sir Nigel Rudd
JE Stipp
Executives
SR Binnie (CEO)
GT Pearce (CFO)
Lead director
Committee member (present)
Chairman
Ex officio
Absent
By invitation
100
100
100
100
100
100
100
100
100
100
100
100
Strategic focus areas
In addition to the standard items on the
board’s agenda, the 2021 focus areas
included:
• Review of progress in actioning the
Thrive25
strategic plan
–
–
• Deep dives into the following topics:
strategic reduction in exposure to
graphic paper and growth of
packaging and speciality papers
business in Sappi North America,
and Sappi Europe
shipping and supply chain
challenges due to the Covid-19
pandemic, impacting on
containers and vessels, and the
Suez Canal bottleneck
dissolving pulp business, including
the Saiccor Mill expansion project
Sappi Southern Africa paper
business and asset strategy
Sappi Biotech business review
external overviews of global and
regional economies and related
developments
–
–
–
–
• Long-term debt refinancing and
covenants and covenant waiver
period renegotiation
• Review of risks and opportunities
related to carbon emissions, the
reduction of Sappi’s carbon footprint
and climate change, in line with the
Task Force on Climate-related
Finance Disclosure (TCFD)
recommendations, and the link to
Sappi’s targets development under
the Science Based Target initiatives
(SBTis), as well as Sappi’s
environmental, social and
governance (ESG) disclosures
• Sappi Southern Africa transformation
and succession planning, training
and development
• Review of mill shuts and the project
management process
• Review of regional market
peculiarities, performance,
opportunities and challenges
• Feedback on action points from the
employee engagement survey
• A review of the Code of Ethics and
related policies, including the
anti-trust policy
• A review of cyber security risks and
management’s mitigation actions
All the top risks as well as emerging
risks have been focused on by the
board during 2021.
The following specific areas will be
added to the board’s agenda in 2022:
• Oversight of progress in achieving
Thrive25
the
strategic plan
• The revised approach for reviewing
the risks facing the group, including
risk appetite and tolerance will be
operationalised at board and
executive management levels
• Project management and oversight
for large capital projects
• Promoting and enabling innovation
• Commercialisation of Biotech
• Consideration of additional cost
improvement areas
• Increased focus on the responsibility
of the board in responding to climate
change
• Effective stakeholder engagement
within the context of remuneration
equity
139
GOVERNANCE AND COMPENSATION
Corporate governance continued
Induction and training of directors
Following appointment to the board, directors receive induction and all directors receive training tailored to their individual
needs, when required.
Stakeholder communication
The board is responsible for presenting a balanced and understandable assessment of the group’s position in reporting
to stakeholders. The group’s reporting addresses material matters of signifi cant interest and is based on principles of
openness and substance over form. The reporting includes information on key trade-off s that have to be made. Various
policies have been developed to guide engagement with Sappi’s stakeholders such as the Group Stakeholder
Engagement policy and Group Corporate Citizenship policy on www.sappi.com/policies.
addressing Alternate Dispute Resolution (ADR) and relevant ADR clauses are generally included in contracts with customers
and suppliers. There have been no requests for information for the period under review in terms of the Promotion of Access
to Information Act (South African legislation).
Sappi has a policy
Refer to Our key relationships on page
42 for more information.
Sappi board and management committees
Board and management committees have been established and are discussed from pages
141 to 147.
Board of directors
• Strategic leadership and guidance
• The board delegates certain oversight
responsibilities to board committees
• Ultimate oversight, accountability and responsibility
• The board assigns responsibilities for management
of the group to the CEO
Sappi’s board committees create and maintain sustainable value by focusing on these key areas:
Audit and Risk
Committee
Nomination and
Governance
Committee
Human
Resources and
Compensation
Committee
Social Ethics,
Transformation
and Sustainability
Committee
• Financial and sustainability
• Board size, composition
systems and reporting
and diversity
• Risk management
• Compliance and ethics
• Combined assurance
•
•
Internal and external audit
Information technology
(IT) governance
• Selection and recruitment
of directors
• Evaluation of board
performance
• Corporate governance
developments
• Directors’ remuneration
• Succession planning
• Remuneration policy
•
Incentive schemes
• Labour and industrial
relations management
• Group corporate
citizenship
• Ethics
• Environment
• Safety
• Broad-based black
economic empowerment
Executive
Committee
• Executive directors
(CEO and CFO)
• Other senior executives
• Execute strategic
decisions approved
by the board
Disclosure
Committee
Control
and
Assurance
Committee
(CAC)
Accounting
Standards
Committee
Treasury
Committee
Taxation
Committee
Global
Business
Systems
Council
Group Risk
Management
Committee
IT Steering
Committee
Project
Steering
Committees
Sustainability
Councils
Global Brand
Council
Technical
Committees
Management committees
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GOVERNANCE AND COMPENSATION
Board committees
The board has established committees to assist it to discharge its duties. The committees operate within written terms of
reference set by the board.
NP Mageza
Chairman
Membership details at
September 2021:
• NP Mageza
• RJAM Renders
• ZN Malinga
• JE Stipp
• B Mehlomakulu
The Audit and Risk
Committee confi rms that
it has received and
considered suffi cient and
relevant information to
fulfi l its duties, as set out
in the Audit and Risk
Committee Report.
The external and internal
auditors attended Audit
and Risk Committee
meetings and had
unrestricted access to
the committee and
Chairman. The external
and internal auditors met
privately with the Audit
and Risk Committee
during 2021.
Mr NP Mageza is the
Chairman and
designated fi nancial
expert of the Audit and
Risk Committee.
The committee is satisfi ed
that it has fulfi lled its
responsibilities as set out
in its terms of reference.
Audit and Risk Committee
Key roles and responsibilities
The Audit and Risk Committee consists of fi ve independent, non-executive
directors. The committee assists the board in discharging its duties with
oversight of:
• Safeguarding and effi cient use of assets
• The risk management function, including a special focus on the presentation
and evaluation of risk appetite, tolerance, key risk indicators and risk trends
Information and technology risks, related controls and governance. This
included the increasing threats of cyber-attacks and security in the operational
technology area
•
100%
Overall committee
attendance rate
• Non-fi nancial risks and controls, through a combined assurance model
• Operation of adequate systems and control processes
• The integrity of fi nancial information and the preparing of accurate fi nancial reports in compliance with
applicable regulations and accounting standards
• The certifi cation process implemented by management to support the CEO and CFO confi rmation of the
fairness of the annual fi nancial statements and the system of internal control over fi nancial reporting,
required by section 3.84(k) of the JSE Limited Listings Requirements (refer the directors’ approval in the
(cid:21)(cid:19)(cid:21)(cid:20)(cid:123)(cid:42)r(cid:82)(cid:88)(cid:83)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)Fi(cid:81)(cid:68)(cid:81)ci(cid:68)(cid:79)(cid:3)(cid:54)t(cid:68)te(cid:80)e(cid:81)t(cid:86)). This included consideration of the evaluation report, including
identifi ed control defi ciencies and management’s remedial actions, as well as compensating measures
and assurance from other sources in the combined assurance framework
• The quality and transparency of sustainability information included in the annual integrated report
• Compliance with the group’s Code of Ethics and external regulatory requirements
• The external auditors’ qualifi cations, experience, independence and performance
• The performance of the internal audit function, this included review of the results of the Internal Quality
Assurance Review performed during 2021
• The performance of the fi nance function
• Taxation policies, congruent with responsible corporate citizenship
• An internal review of the committee’s operating eff ectiveness and performance every two years by way of
an assessment with feedback being provided to the board
Strategic focus areas
The Audit and Risk Committee helped to create and protect value by providing oversight and guidance for a
wide range of topics, including the following areas related to Sappi’s strategy:
• Governance and risk aspects of projects to accelerate the group’s ability to take advantage of
opportunities in higher margin growth segments, such as in dissolving pulp, packaging and speciality
papers, the biotech and renewable energy fi elds
• Cyber security incidents impacting on specifi c outsourced service suppliers
• Business continuity arrangements, including logistics and supply chain
• The establishment of a CAC, which makes use of combined assurance to focus on risks facing the group
• Regulatory compliance with global privacy legislation, such as the Protection of Personal Information Act
and General Data Protection Regulation
• A revised approach to providing an overview of risks, including a new method of determining risk appetite
and tolerance per risk
Areas of oversight for the committee in 2022 will be:
• Operationalising of the revised approach developed for the risk framework, combined assurance and
oversight of risks
• Revised reporting for ESG matters and procedures for fi nancial reporting attestations
• The new whistleblower hotline
• The impact of the Covid-19 tail on the business and feedback on business recovery, liquidity, credit risks
and fi nancial reporting
• Emerging IT risks
• Capital, IT, and business projects governance
For more information refer to the Audit and Risk Committee Report in our Annual Financial Statements on
www.sappi.com/annual-reports.
Stakeholders
Risks
The Audit and Risk Committee has
helped to create and protect value
for the following stakeholders:
employees, customers, shareholders
and regulators.
Refer to Our key relationships on
page
42 for further details.
The Audit and Risk Committee has focused on all of the top 10 risks:
1
2
3
4
5
6
7
8
9
10
Safety
Evolving technologies and consumer preferences
Supply chain disruption context and competitive industry
Sustainability expectations
Climate change
Cyber security
Cyclical macro-economic factors
Uncertain and evolving regulatory landscape
Liquidity
Employee relations
For further details refer to Risk management on page
34.
141
GOVERNANCE AND COMPENSATION
Corporate governance continued
Sir N Rudd
Chairman
Membership details at
September 2021:
• Sir Nigel Rudd
• MV Moosa
• MA Fallon
Nomination and Governance Committee
Key roles and responsibilities
The Nomination and Governance Committee consists of three independent
directors. The committee considers the leadership and governance
requirements of the company including a succession plan for the board.
The committee identifi es and nominates suitable candidates for appointment
to the board in line with Sappi’s policy on the promotion of gender and race
diversity at board level, for board and shareholders’ approval. The committee
considers the independence of candidates as well as directors. The committee
makes recommendations on corporate governance practices and disclosures,
and reviews compliance with corporate governance requirements. The committee has oversight of
appraising the performance of the board and all the board committees. The results of this process and
recommended improvements are communicated to the chairman of each committee and the board.
The committee reviewed and approved a policy on broader diversity at board level. The functioning and
performance of Sappi’s board and board committees were assessed internally in 2021 and it was established
that the board and board committees functioned well, but that the directors would benefi t from additional
deep dives into specifi c topics. This has been implemented.
100%
Overall committee
attendance rate
Strategic focus areas
The Nomination and Governance Committee helped to protect value by providing oversight and guidance
in 2021 over:
• Corporate governance
• Tone at the top
• Succession plans for senior executives and the board with a focus on board composition
• Assessment of the board and board committee performance
• Rotation and replacement of directors
• Reviewed the Sappi Limited directors’ shareholdings and dealings in securities
• Oversight of the appointment of replacements for direct reports to the CEO
A focus area for 2022 will be executive succession planning and board committee chairmanships and
memberships.
The committee is satisfi ed that it has fulfi lled its responsibilities as set out in its terms of reference.
Stakeholders
Risks
The Nomination and Governance
Committee has helped to protect
value primarily for the following
stakeholders: shareholders and
regulators.
The Nomination and Governance Committee focused on
governance, independence, and composition of the board, board
committees and executive management positions to eff ectively
address all material risks facing the company including all the top 10
risks.
Refer to Our key relationships on
page
42 for further details.
For further details refer to Risk management on page
34.
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GOVERNANCE AND COMPENSATION
Human Resources and Compensation Committee
MA Fallon
Chairman
Membership details at
September 2021:
• MA Fallon
• NP Mageza
• RJAM Renders
• BR Beamish
Key roles and responsibilities
The Human Resources and Compensation Committee consists of fi ve
independent directors. The responsibilities of the Human Resources and
Compensation Committee are, among others, to provide oversight of the
group’s human capital, determine the group’s human resource policy and
strategy, assist with the hiring, and setting of terms and conditions of
employment of executives, the approval of retirement policies, and succession
planning for the CEO and management. The committee ensures that the
compensation philosophy and practices of the group, including the CEO’s
strategy and performance goals. It reviews and
performance objectives, are aligned to the group’s
agrees the various compensation programmes, and, in particular, the compensation of executive directors
and senior executives as well as employee benefi ts. It also reviews and agrees to executive proposals on the
compensation of non-executive directors for approval by the board and ultimately by shareholders. The
committee is updated on the Industrial Relations climate, training initiatives and engagement survey results
and action items.
100%
Overall committee
attendance rate
Thrive25
Strategic focus areas
The 2020 report was supported at the Annual General Meeting (AGM) on 03 February 2021 with a vote of
96,6% on the remuneration policy and 95.7% on the implementation report. This has been a signifi cant
endorsement by the shareholders in relation to our ongoing commitment to good governance and
disclosure.
Apart from its normal annual workplan, the key focus for the committee was on the following:
•
Implementation of return on capital employed (ROCE) as a measure in our short-term incentive plan from
2022, replacing working capital
Implementation of a voluntary minimum shareholding requirement for all prescribed offi cers to be achieved
by December 2025
•
• Disclosure of the vested Performance Share Plan (PSP) award as part of the total remuneration in line with
best practice
• ESG targets are included in the personal objectives of all senior managers
• Discussion on the King IV guidance paper on eff ective stakeholder engagement
• Oversight on key succession transitions across all regions, and
• A bespoke benchmark on non-executive directors’ fees
The strategic focus areas for the committee in 2022:
• Key activities for the committee in 2022 will be, inter alia, the approval of the remuneration and bonuses for
executive directors and
senior management
• Oversee the implementation of the human resources
•
In addition to the annual work plan as approved by the committee, the chairman of the committee and senior
executives from Sappi will,
if required, also be visiting key shareholders to discuss issues of mutual concern
Thrive25
plan
The committee is satisfi ed that it has fulfi lled its responsibilities as set out in its terms of reference.
For more information refer to the Remuneration Report on page
154.
Stakeholders
Risks
The Human Resources and
Compensation Committee has
helped to protect value primarily for
the following stakeholders:
employees, shareholders and
regulators.
42 and to the Remuneration
Refer to Our key relationships on
page
Report on page
details.
154 for further
The Human Resources and Compensation Committee has focused on
the following of the top 10 risks:
1
2
4
5
6
7
8
10
Safety
Evolving technologies and consumer preferences
Sustainability expectations
Climate change
Cyber security
Cyclical macro-economic factors
Uncertain and evolving regulatory landscape
Employee relations
For further details refer to Risk management on page
34.
143
GOVERNANCE AND COMPENSATION
Corporate governance continued
MV Moosa
Chairman
Membership details at
September 2021:
• MV Moosa
• SR Binnie
• B Mehlomakulu
• BR Beamish
• JM Lopez
Social, Ethics, Transformation and
Sustainability (SETS) Committee
Key roles and responsibilities
The SETS Committee comprises four independent non-executive directors,
and the CEO. A 100% attendance record was achieved by board committee
members for 2021. Other executive and group management committee
members attend SETS Committee meetings by invitation. It should be noted
that a number of other non-executive directors attend SETS Committee meetings
ex-offi cio. The chairmen of the Audit and Risk Committee and SETS Committee
attend each other’s committee meetings to avoid unnecessary repetition
of discussions.
100%
Overall committee
attendance rate
The committee's mandate is to oversee the group’s sustainability strategies, ethics management, good
corporate citizenship, labour and employment practices, as well as its contribution to social and economic
development and, with regards to the group’s South African subsidiaries, the strategic business priority of
transformation.
The SETS Committee is supported by the Global Sustainability Council as well as by regional sustainability
committees in dealing with day-to-day sustainability issues and helping to develop and entrench related
initiatives in the business.
Strategic focus areas
In 2021 the committee provided oversight of:
• Sappi’s social and economic development standing (United Nations Global Compact and the Organization
for Economic Co-operation and Development)
• Safety initiatives
• Progress on developing a group-wide approach for the TCFD
• The development and approval of science based targets for the group
• External assurance on lost-time injury frequency rate (LTIFR) and Scope 1 and Scope 2 emissions data as
well as environmental impact analyses for major investment projects
• Trade-off s between:
–
–
Productivity and safety advantages of mechanisation and the social and human capital implications
Financial and natural capitals relating to the use of coal versus other renewable energy fuels for our
heating requirements. This included further reductions in the group’s carbon footprint
• Sappi Southern Africa’s performance against the applicable Broad-based Black Economic Empowerment
(BBBEE) Legislation, the EE Act and the Forestry Charter, including unfair discrimination and equality policy
• Other ESG focus areas
The committee is satisfi ed that it has fulfi lled its responsibilities as set out in its terms of reference.
Implementation of science-based targets and a climate change strategy
The committee will provide oversight of the following strategic business areas in 2022
• TCFD developments
•
• Progress towards biodiversity improvement goal
• Production effi ciencies and events
• Consideration of feedback about the changes in the safety culture at operating units
•
Improved stakeholder engagement, making use of media developments and opportunities
For more information refer to the SETS Report and to Our global sustainability goals at www.sappi.com.
Stakeholders
Risks
The SETS Committee has a broad spread of
stakeholders for which it helps to protect (or
create) value: suppliers, customers,
employees, regulators, shareholders and
society.
The SETS Committee has focused on the following of the top 10
risks:
1
2
3
4
5
7
8
10
Safety
Evolving technologies and consumer preferences
Supply chain disruption
Sustainability expectations
Climate change
Cyclical macro-economic factors
Uncertain and evolving regulatory landscape
Employee relations
Refer to Our key relationships on
page
42 for further details.
For further details refer to Risk management on page
34.
For more information on sustainability at Sappi refer to the SETS Committee report on page
a summary of the group’s sustainability initiatives at www.sappi.com.
174 and for
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GOVERNANCE AND COMPENSATION
Management committees
The board assigns responsibility for the day-to-day management of the group to the CEO. To assist the CEO in discharging his
duties, a number of management committees have been formed. Some of these committees also provide support for specific
board committees. The management committees are key components of Sappi’s second line of defence and assurance. Refer to
page
149 for additional details of Sappi’s approach to risk, controls and assurance.
Executive
Committee
Disclosure
Committee
Treasury
Committee
Taxation
Committee
Project Steering
Committees
Technical
Committees
Group Risk
Management
Committee
>
>
>
>
>
>
>
This committee comprises executive directors and senior management from Sappi Limited as well as
the CE(cid:50)s of the three main regional business operations, and the pulp business(cid:17) (cid:55)he(cid:123)CE(cid:50) has assigned
responsibility to the executive committee for a number of functional areas relating to the management of
the group, including the development of policies and alignment of initiatives regarding strategic,
operational, financial, governance, sustainabilit(cid:92), social and risk processes(cid:17) (cid:55)he e(cid:91)ecutive committee
meets at least five times per annum(cid:17)
The Disclosure Committee comprises members of the executive committee and senior management
from various disciplines(cid:17) (cid:44)ts ob(cid:77)ective is to review and discuss financial and other information prepared
for public release. It is the ultimate decision-making body, apart from the board, with regards to
disclosure.
(cid:55)he (cid:55)reasur(cid:92) Committee meets monthl(cid:92) to assess financial risks on treasur(cid:92)-related matters(cid:17) Specific
focus areas in (cid:21)(cid:19)(cid:21)(cid:20) related to ensuring sufficient group li(cid:84)uidit(cid:92) during the ongoing Covid-(cid:20)(cid:28) pandemic,
arranging suitable financing for the remaining cape(cid:91) of the Saiccor (cid:48)ill pro(cid:77)ect, refinancing the (cid:56)S(cid:7)(cid:22)(cid:24)(cid:19)(cid:123)million
(cid:21)(cid:19)(cid:21)(cid:22) bond and negotiating new financial covenants(cid:17) (cid:46)e(cid:92)(cid:123)focus areas in (cid:21)(cid:19)(cid:21)(cid:21) will be the renewal of the
(cid:98)(cid:24)(cid:21)(cid:24) million and (cid:53)(cid:20)(cid:17)(cid:27) billion revolving credit facilities, including renegotiation of financial covenants and
the introduction of sustainability key performance indicators to the facilities.
The Taxation Committee meets monthly to discuss and address global taxation matters. The main focus
areas of the committee for 2021 included:
• Tax accounting and reporting
• Tax compliance including transfer pricing and basic earnings per share reporting
• Tax audits and international mitigation measures to avoid double taxation
• New tax legislation
These topics will continue to receive oversight from the committee in 2022.
For key strategic projects, steering committees are established to oversee successful execution
of(cid:123)the(cid:123)pro(cid:77)ect(cid:17)
(cid:55)he (cid:55)echnical Committees focus on global technical alignment, performance and efficienc(cid:92)
measurement as well as new product development.
The committee is known as the Group Risk Management Team (GRMT) and is mandated by the board to
establish, coordinate and drive the risk management process throughout Sappi. It has established a risk
management s(cid:92)stem to identif(cid:92) and manage significant risks(cid:17) (cid:55)he(cid:123)(cid:42)(cid:53)(cid:48)(cid:55) reports regularl(cid:92) on risks to
the Audit and Risk Committee and the board. Risk management software is used to support and report
upon the risk management process. During 2021 key initiatives included operationalisation of the
group’s risk appetite and tolerance framework, a dashboard summarising group risks and trends.
(cid:44)n(cid:123)(cid:21)(cid:19)(cid:21)(cid:21)(cid:123)the (cid:42)(cid:53)(cid:48)(cid:55) will(cid:123)review polic(cid:92), procedures and assurance, to address business continuit(cid:92) risk(cid:17)
145
GOVERNANCE AND COMPENSATION
Corporate governance continued
Control and
Assurance
Committee
IT Steering
Committee
The CAC is supported by the internal control function and multi-disciplinary combined assurance
workgroups (cid:11)CAWs(cid:12) and provides regular oversight and guidance to the(cid:123)business on internal controls
and combined assurance for financial, strategic and operational risks(cid:17) (cid:55)he committee is accountable to
the GRMT and the Audit and Risk Committee.
>
The IT Steering Committee, assisted operationally by the Group IT Committee, promotes IT governance
throughout the group and is the highest authority responsible for this aspect of Sappi’s business, apart
from the board. The committee has a charter approved by the Audit and Risk Committee and the board.
An IT governance framework has been developed and IT feedback reports are presented to the Audit
and Risk Committee and the board. Sappi IT has implemented a standardised approach to IT risk
management through a group-wide risk framework supported by the use of risk management software.
The committee has helped to create value for shareholders in 2021 by its oversight of:
• A Sappi IT security spend benchmarking exercise, and the development of a framework to further
evaluate third-party IT security risks
• The development of a global operational technology (OT) security methodology and
• The integration of the Matane Pulp Mill’s IT system into Sappi’s SAP system
• (cid:55)he preparation for ma(cid:77)or (cid:44)(cid:55) pro(cid:77)ects including S(cid:23) (cid:43)A(cid:49)A, S(cid:92)nerg(cid:92) (cid:11)(cid:48)ES(cid:12) and Pelati (cid:11)Sales, suppl(cid:92) chain
and finance harmonisation(cid:12), Simun(cid:92)e, and the (cid:39)igital Strateg(cid:92) and governance
• (cid:50)(cid:22)(cid:25)(cid:24) email securit(cid:92), which was enhanced and an email securit(cid:92) gatewa(cid:92) was deplo(cid:92)ed
• Expansion of the group security function with further security resource capacity scheduled for 2022,
>
making use of a cyber skills incubator
(cid:44)S(cid:50) (cid:21)(cid:26)(cid:19)(cid:19)(cid:20) certification preparation
Oversight by the committee will continue in 2022 for these IT initiatives, as well as:
• The due diligence for a cloud-based disaster recovery strategy
• Execution of the Digital Strategy and governance, via a global digital council
• Deployment of the global OT security methodology to the three largest mills in the group
• Pen testing with Insider threat assessment
•
• Establishment of a global (cid:21)(cid:23)(cid:18)(cid:26) Securit(cid:92) (cid:50)perations Centre
• Business continuity and cyber recovery vault
• Adoption of a dedicated emergency communications platform for cyber emergencies
• Formalisation of data classification framework and control technolog(cid:92)
• Third-party risk management implementation
• Centralisation of endpoint security, additional email security hardening, and a cloud security framework
• Global vulnerability management
Global Business
Systems Council
>
This council meets monthly to provide direction for strategic business improvement projects, in
particular, (cid:50)neSappi harmonisation initiatives, and effective use of resources(cid:17)
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GOVERNANCE AND COMPENSATION
The Sappi Group Sustainability Council leads on all sustainability related policies and practices and
provides support to the SETS Committee. Members meet quarterly to report progress against
sustainability goals and key initiatives, share best practices, and exchange information on emerging
issues. Members review regional information for various disclosure mechanisms, including the CDP’s
climate change and forests programmes and the annual Group Sustainability Report.
Sustainability
Council
>
Key focus areas for 2021 included:
• Oversite and review of the
• Sappi’s climate change strategy and action plans including:
sustainability targets
Thrive25
–
–
–
Alignment of Sappi(cid:111)s decarbonisation roadmap with the Science (cid:37)ased (cid:55)argets initiative(cid:123)(cid:11)S(cid:37)(cid:55)i(cid:12)
Assessment, and improvement, of our resiliency to risks and opportunities posed by climate
change, as framed by the Task Force on Climate-related Financial Disclosures (TCFD)
Integration of decarbonisation and sustainability metrics in capital investment procedures
• Sustainable procurement roll out of EcoVadis to our top suppliers
• Social impact strategy for South Africa
•
Identifying collaboration opportunities to further Sappi’s sustainability objectives and leverage Sappi
expertise to contribute to the Sustainable Development Goals (SGDs)
Brand Council
This council coordinates Sappi’s brand communication programme, monitors brand performance and
ensures effective brand management to enhance Sappi(cid:111)s reputation(cid:17)
>
147
GOVERNANCE AND COMPENSATION
Corporate governance continued
Ensuring leadership through ethics and integrity
Sappi is committed to doing business the right way. Trust is created by operating from a commonly accepted set of values,
enhancing and protecting our reputation. We require our directors and employees to act with integrity, to be courageous, to make
smart decisions and to execute with speed, in all transactions and in their dealings with all business partners and stakeholders.
Our values underpin the group’s Code of Ethics and commit
the group and its employees to sound business practices
and compliance with applicable legislation, which help to
promote legitimacy.
All new employees receive training on the Code of Ethics
and related topics, such anti bribery and corruption and
anti-competitive practices, as part of onboarding.
Refresher training was provided to all employees on
the Code of Ethics in 2021.
A group Supplier Code of Conduct has been developed to
help ensure that Sappi’s values and ethical standards are
clearly understood and supported by all our suppliers, their
fi rst-tier suppliers and other stakeholders.
Actions are taken against employees and suppliers who do
not abide by the spirit and provisions of our code.
This includes termination of contractual
arrangements, and criminal actions.
The programme is designed to increase awareness of, and
enhance compliance with, applicable legislation is in place.
The group compliance offi cer reports twice per annum to
the Audit and Risk Committee.
Sappi’s legal compliance programme has been boosted by:
• The implementation of legal compliance software
including Exclaim for Sappi Southern Africa, GEORG
Compliance Management for the German mills, and
Policy Passport for Group policies and procedures.
• The provision of online training to employees across
the group on relevant core legal compliance topics.
• The use of software tools and the related training and
online learning is helping to create and protect value
primarily for employees, customers, shareholders and
regulators.
Refer to www.sappi.com for the Code
of Ethics.
Code of
Ethics
Legal
compliance
programme
Insider
trading
The company has a code of
conduct for dealing in company
securities and follows the JSE
Limited Listings Requirements in
this regard.
For further information refer to the Insider
trading section of the Code of Ethics which
can be found at www.sappi.com.
Confl ict of
interests
The group has a policy that
obliges all employees to disclose
any interest in contracts or
business dealings with Sappi to
assess any possible confl ict of
interest. The policy also dictates that
directors and senior offi cers of the group
directors and senior offi cers of the group
must disclose any interest in contracts as well
must disclose any interest in contracts as well
as other appointments to assess any confl ict of
interest that may aff ect their fi duciary duties.
During the year under review, apart from that disclosed
in the fi nancial statements, none of the directors had a
signifi cant interest in any material contract or arrangement
entered into by the company or its subsidiaries.
For more information on how Sappi addresses confl ict
of interest please refer to the Preventing fraud and
corruption section of the Code of Ethics at
www.sappi.com.
Reporting on compliance and ethics concerns
Sappi employees and stakeholders can report any potential illegal or non-compliant behaviour they observe directly to
senior management, internal audit or legal counsel, or alternatively, report anonymously, via telephone or an online form.
Whistle-blower ‘hotlines’ have been implemented in all the regions in which the group operates. The hotline service,
operated by independent service providers, enables all stakeholders to anonymously report environmental, safety, ethics,
accounting, auditing, control issues or other concerns. Retaliation against whistle-blowers is not tolerated. The follow-up
on all reported matters is coordinated either by legal counsel or internal audit and reported to the Audit and Risk
Committee. The majority of calls and ethics reports received related to the Southern African region. Please refer to the
whistle-blower hotline and ethics report graphs for information on the number of hotline calls per 1,000 employees, the
categories of hotline calls and ethics reports, and the outcome of the investigations. The hotline report rates, categories of
reports and outcomes of cases broadly align with international whistle-blower benchmark data. For more information,
refer to the Reporting and whistle-blowing section of the Code of Ethics, at www.sappi.com
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GOVERNANCE AND COMPENSATION
Hotline report rate per 1,000 employees per annum
1
3
.
.
4
3
.
0
3
.
3
4
9
3
.
5.0
4.0
3.0
2.0
1.0
0
2017
2018
2019
2020
2021
●
Report rate per 1 000 employees
Hotline and ethics cases by category (%)
12%
13%
100
80
60
40
20
0
●
54%
34%
2017
Corruption, fraud and theft
14%
41%
20%
37%
45%
43%
6%
59%
35%
2019
2020
2021
Employment related matters
●
Environment, health, safety and other
39%
48%
2018
●
Hotline and ethics case outcomes (%)
2%
6%
44%
48%
100
80
60
40
20
0
2%
7%
61%
30%
7%
45%
4%
45%
48%
51%
2017
2018
2019
2020
7%
63%
30%
2021
●
●
Cleared, no action or unresolved
●
Criminal charges
Termination
●
Disciplined, counselled or other management action
Financial statements
The directors are responsible for overseeing the preparation and final approval of
the group annual financial statements, in accordance with International Financial
Reporting Standards issued by the International Accounting Standards Board.
The group’s results are reviewed prior to submission to the board, as follows:
• All quarterly results – by the Disclosure Committee as well as the Audit and Risk
Committee, and
• Interim and final results – by external audit.
Risk, controls and
assurance at Sappi
Risks facing the group are identified,
evaluated and managed by implementing
risk mitigations, such as insurance,
strategic actions or specific internal
controls. Sappi maintains a robust
framework of risks and controls which
assists in the application of the King IV
guidelines and the achievement of
governance outcomes by helping to:
create an ethical culture; establishing
effective control; and promoting
legitimacy, all of which help Sappi and
its stakeholders to benefit from good
performance. The framework includes
controls addressing our material
matters, by focusing on the main
drivers of Sappi and comprises both
financial and non-financial controls,
which support the achievement of our
strategy, within our risk appetite and
tolerance levels, across the economic,
social and environmental context in
which the organisation operates as
well as each of the six capitals set out
in the IIRC’s model. More information
on these capitals and Integrated
thinking in the context of Sappi’s
sustainable business model can
be found in (cid:50)(cid:88)r(cid:123)(cid:54)tr(cid:68)te(cid:74)(cid:92)(cid:3)(cid:68)(cid:81)d(cid:3)
Performance on page
10, as
well as Our global sustainability
(cid:74)(cid:82)(cid:68)(cid:79)(cid:86)(cid:123)at www.sappi.com.
The group’s internal controls and
systems are designed in accordance
with the COSO control framework to
support the achievement of the
group’s objectives including strategic,
operational and financial performance
goals, effective and efficient use of
resources, safeguarding assets against
material loss, integrity and reliability
of internal and external financial
and non-financial reporting, and
compliance with applicable laws
and regulations.
Sappi operates a combined assurance
framework, which aims to optimise the
assurance coverage obtained from
management, internal assurance
providers and external assurance
providers, on the risk areas affecting
the group. Combined assurance is
overseen by the CAC. The committee
and its CAWs provide holistic feedback
to the GRMT and Audit and Risk
Committee on the state of controls and
the quality and coverage of assurance
from the various assurance providers
149
GOVERNANCE AND COMPENSATION
Corporate governance continued
across Sappi’s three lines of assurance. The workgroups focused the following risk topics: capital projects management, cyber
security risks, human resources risks and maintenance risks, in 2021. In Financial Year 2022 the CAWs will assist the CAC to
create and protect value by undertaking reviews of combined assurance, risks and controls relating to taxation and business
continuity, as well as developing the risk and control framework particularly in the legal compliance, product safety and
IT security areas.
First line of
assurance
Second line of
assurance
Third line of
assurance
Oversight by
the board
Risk areas and value
drivers, capitals
Governance, risk, and
controls – general (core
business cycles)
Strategy and vision,
competition and markets,
socio-political
Financial, tax and treasury
Business management
operations supported by
appropriate controls and
systems
Monitoring and oversight
functions
>
Independent assurance
provided by external
audit, internal audit and
other assurance
providers
>
Control and Assurance Committee
management self-assessments
Internal audit
E(cid:91)ec(cid:88)ti(cid:89)e(cid:3)C(cid:82)(cid:80)(cid:80)ittee(cid:15)(cid:3)(cid:42)r(cid:82)(cid:88)(cid:83)(cid:3)(cid:43)e(cid:68)d(cid:3)
Strategy, Global Business Council,
Control and Assurance Committee,
management self-assessments
Internal audit
Board and
sub-board
committees
>
Audit and Risk
Committee
Nomination and
Governance
Committee
Control and assurance, accounting
standards, taxation, treasury and
Disclosure Committees,
management self-assessments
KPMG, tax authorities,
internal audit
Audit and Risk
Committee
Legal and compliance
Legal compliance programme,
Group Compliance Manager
Legal compliance audits,
internal audit
IT
Day-to-day risk
management activity
Established risk and
control environment
IT Steering Committee, group IT
governance functions,
management self-assessments
KPMG, ISA 3402s,
penetration testing,
internal audit
Audit and Risk,
(cid:54)E(cid:55)(cid:54)(cid:15)(cid:3)(cid:43)(cid:88)(cid:80)(cid:68)(cid:81)(cid:3)
Resources and
Compensation
Committees
Audit and Risk
Committee
Planet, environment,
natural capital
Executive, corporate and
regional lead teams
Sustainability councils,
E(cid:81)(cid:89)ir(cid:82)(cid:81)(cid:80)e(cid:81)t(cid:68)(cid:79)(cid:3)(cid:68)(cid:81)d(cid:3)E(cid:81)er(cid:74)(cid:92)(cid:3)(cid:11)E(cid:23)(cid:12)(cid:3)
Global Cluster, GRMT
ISO 14001, FSC, PEFC,
EMAS, KPMG, EcoVadis
SETS
Committee
Corporate and regional
business functions, eg sales,
finance, IT, human resources,
purchasing
Business units, eg forestry,
mills, sales offices
Business unit operations,
eg production, engineering,
controlling, materials
management
Ethics
People, human resource
and transformation
Research and development,
intellectual property
Manufacturing, supply
chain management,
quality, forestry
Stakeholders,
communication,
reputation, society
Safety
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Government reviews
e(cid:80)i(cid:86)(cid:86)i(cid:82)(cid:81)(cid:86)(cid:3)e(cid:434)(cid:88)e(cid:81)t(cid:3)etc(cid:15)(cid:3)
internal audit
Internal audit
Group Compliance Manager,
et(cid:75)ic(cid:86)(cid:123)(cid:86)(cid:88)r(cid:89)e(cid:92)(cid:86)(cid:15)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)e(cid:80)e(cid:81)t(cid:3)
self-assessments
(cid:42)(cid:79)(cid:82)(cid:69)(cid:68)(cid:79)(cid:3)(cid:43)(cid:88)(cid:80)(cid:68)(cid:81)(cid:3)(cid:53)e(cid:86)(cid:82)(cid:88)rce(cid:3)
C(cid:82)(cid:80)(cid:80)ittee(cid:15)(cid:3)re(cid:74)i(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:79)(cid:68)(cid:69)(cid:82)(cid:88)r(cid:123)(cid:73)(cid:82)r(cid:88)(cid:80)(cid:86)(cid:15)(cid:3)
employee engagement surveys,
management self-assessments
BBBEE audits, internal audit
Group technical cluster,
management self-assessments
ISO 17025, internal audit
Technical clusters and platforms,
regional safety, health, environment
and quality audits, supplier audits,
management self-assessments
ISO 9001, ISO 50001, FSC
PEFC, SFI, Matrix, internal
audit
(cid:42)r(cid:82)(cid:88)(cid:83)(cid:3)c(cid:82)r(cid:83)(cid:82)r(cid:68)te(cid:3)(cid:68)(cid:428)(cid:68)ir(cid:86)(cid:15)(cid:3)
sustainability and investor
relations functions
Internal audit
SETS
Committee,
Audit and Risk
Committee
Audit and Risk,
(cid:54)E(cid:55)(cid:54)(cid:15)(cid:3)(cid:43)(cid:88)(cid:80)(cid:68)(cid:81)(cid:3)
Resources and
Compensation
Committees
SETS
Committee
SETS
Committee
SETS
Committee
Group and regional risk
management teams, safety audits
(cid:50)(cid:43)(cid:54)(cid:36)(cid:54)(cid:3)(cid:20)(cid:27)(cid:19)(cid:19)(cid:19)(cid:15)(cid:3)(cid:44)(cid:54)(cid:50)(cid:3)(cid:21)(cid:21)(cid:19)(cid:19)(cid:19)(cid:3)
regulatory inspections,
internal audit
SETS
Committee
GOVERNANCE AND COMPENSATION
A key element of combined assurance at Sappi is derived from the annual control
self-assessments completed by control owners, which helps to protect value for
stakeholders by providing management and the board with assurance on the state
of controls throughout the group. The remediation of control gaps identified through
this process is monitored by management, relevant committees, auditors and the
board.
The Audit and Risk Committee advises the board on the state of risk management
and controls, as well as assurance, in Sappi’s operating environment. This
information is used as the basis for the board’s review, sign-off and reporting to
stakeholders, via the annual integrated report and annual financial statements, on risk
management and the effectiveness of internal controls and assurance within Sappi.
As part of combined assurance in respect of reported information, Sappi has obtained
assurance on the data in the annual integrated report from the following sources:
• Financial data is independently audited by KPMG
• External sustainability assurance was obtained from KPMG in 2021 for Scope 1
and 2 emissions information as well as specific safety information
• Specific planet (environment) related processes are subject to review by third
parties during the year. Certain local environmental and safety reporting is subject
to audit by local regulators
• Reviews of sustainability information have been undertaken by central technical
management and internal audit.
Internal audit
The group has an effective, suitably
resourced, risk-based internal audit
department. The department operates
in terms of a specific charter from the
Audit and Risk Committee and
independently appraises the adequacy
and effectiveness of the group’s
governance, risk management, systems,
internal controls and accounting
records. Internal audit coordinates
combined assurance and reports the
findings to local and divisional
management, the external auditors,
and the Audit and Risk Committee.
The head of internal audit reports to
the Audit and Risk Committee, meets
with board members, has direct access
to executive management and is invited
to attend certain management meetings.
The role of internal audit at Sappi is set
out in the following diagram:
Internal audit value proposition
Capitals
Stakeholders
Thrive25
strategic
objective
• Board, Audit and Risk Committee
• Management
• Employees
• Other (eg communities, business partners)
Governance, risk and opportunity management, controls:
(cid:114)(cid:797)Strategic(cid:798)(cid:114)(cid:797)(cid:50)perational(cid:798)(cid:114)(cid:797)Compliance(cid:798)(cid:114)(cid:797)(cid:53)eporting
Support
Internal audit activities
Support
Advisory and assistance
• Forensic, hotline and ethics management
• Projects, new business processes
• Governance, risk, controls consulting
• King IV, governance disclosures
• Ad hoc management requests, secondments
Internal control support (risk and control
•
framework, self-assessments, segregation of
duties, workgroups)
(cid:36)(cid:86)(cid:86)(cid:88)r(cid:68)(cid:81)ce(cid:3)(cid:11)ri(cid:86)(cid:78)(cid:3)(cid:69)(cid:68)(cid:86)ed(cid:12)
• Financial processes and systems
• Business processes and systems
• Operational and strategic risks
IT, GCC, security, operations
•
• Ethics, risk, legal compliance
• Sustainability data
• Combined assurance
• Annual opinion
Sustainability
OneSappi
Collaborate
and
innovate
Digital and
Analytics
Strategy
(cid:53)efi(cid:81)e(cid:3)
operating
model
Core
principles
Integrity
Competence
and due
professional
care
Objective and
independent
Aligned with
strategies,
risks and
objectives
Appropriately
positioned and
resourced
Commercialise
new products
Quality and
continuous
improvement
E(cid:428)ecti(cid:89)e(cid:3)
communication
Risk-based
assurance
Insightful,
future-focused
and proactive
Promotes
improvement
151
GOVERNANCE AND COMPENSATION
Corporate governance continued
During 2021, apart from the ongoing focus on financial controls, internal audit
helped to create and protect value for Sappi and our stakeholders by completing
reviews in support of the following strategic objectives:
• Achieve cost advantages: procurement audits, advisory services to the global
business systems projects (Requisition to Pay, Sales Order to Cash,
implementation of Robotics Process Automation)
• Rationalising declining businesses: Undertaken project management reviews
for business optimisation projects
• Accelerate growth in high margin products: Integration and control onboarding
reviews of Matane Mill. Assurance reviews of the Saiccor Mill expansion project
in SSA and Project Horse for the packaging and speciality papers business in
Sappi Europe.
The coverage plan for 2021 was substantially achieved despite the challenges
presented by the Covid-19 pandemic and associated travel bans and lockdowns.
We refocused our audit plan to address possible Covid-19 impacts: including raw
materials supply chain, treasury (eg cash flow and liquidity), credit risks, financial
reporting, cyber risk, and business continuity planning.
In 2022 internal audit will support the achievement of Sappi’s
strategic
objectives by completing advisory and assurance projects in the following areas:
Thrive25
(cid:54)(cid:88)(cid:86)t(cid:68)i(cid:81)(cid:3)(cid:82)(cid:88)r(cid:3)fi(cid:81)(cid:68)(cid:81)ci(cid:68)(cid:79)(cid:3)(cid:75)e(cid:68)(cid:79)t(cid:75)(cid:3)(cid:29) sales, procurement, treasury, and working
capital processes
Drive operational excellence: sales and operations, maintenance, energy,
strategic business and IT projects including digital innovation initiatives
Grow our business: R&D, packaging and speciality papers, capital projects
(Saiccor Mill expansion project in SSA and Taurus in Sappi Europe), and
new businesses eg biomaterials, integration and control onboarding
reviews of the Matane Pulp Mill in Canada
Enhance trust: ethics, governance, sustainability, and cyber security
reviews
Internal audit maintains an internal quality assurance programme. In 2020, an
external quality assurance review was conducted by the Institute of Internal Auditors
(IIA). A Generally Conforms rating was received, which is the highest of the three
levels of conformance to the IIA’s standards. The 2021 internal quality assurance
review highlighted a need for more attention to the documentation of effectiveness
testing. This will be addressed in 2022.
Board assessment of
t(cid:75)e(cid:123)c(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:111)(cid:86)(cid:3)ri(cid:86)(cid:78)(cid:3)
management, compliance
(cid:73)(cid:88)(cid:81)cti(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)d(cid:3)e(cid:428)ecti(cid:89)e(cid:81)e(cid:86)(cid:86)(cid:3)
of internal controls and
combined assurance
The board is responsible for the
group’s systems of internal financial
and operational control. As part of an
ongoing comprehensive evaluation
process, control self-assessments,
independent reviews by internal audit,
external audit and other assurance
providers, were undertaken across
the group to test the effectiveness
of various elements of the group’s
financial, disclosure and other
internal controls as well as
procedures and systems. Identified
areas of improvement are being
addressed to strengthen the group’s
controls further. The board has
assessed the combined assurance
provided in 2021. The results of the
reviews did not indicate any material
breakdown in the functioning of these
controls, procedures and systems
during the year. The internal controls
in place, including the financial
controls and financial control
environment, are considered to be
effective and provide a sound basis
for the preparation of the financial
statements, annual integrated report
and other reports used internally
for management decision making.
Company secretary
The Company Secretary does not fulfil executive management functions outside of the duties of Company Secretary and is
not a director. During the year, the board assessed the independence, competence, qualifications and experience of the
Company Secretary and has concluded that she is sufficiently independent (ie maintained an arm’s length relationship with
the executive team, the board and individual directors), qualified, competent and experienced to hold this position. The
Company Secretary is responsible for the duties set out in section 88 of the Companies Act 71 of 2008 (as amended) of
South Africa. Specific responsibilities include providing guidance to directors on discharging their duties in the best interests
of the group, informing directors of new laws affecting the group, as well as arranging for the induction of new directors.
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153
GOVERNANCE AND COMPENSATION GOVERNANCE AND COMPENSATION
Remuneration Report
“Dear shareholder, I present the
committee’s report on
remuneration for executive
directors, executive committee
members and non-executive
directors. This report details the
company’s compensation policy
and implementation thereof.”
Mike Fallon Chairman of the Human Resources and
Compensation Committee
The information provided in this report has been approved by the board as per the
recommendation by the Human Resources and Compensation Committee.
The report is split into three sections: Section A details previous voting outcomes,
focus and compliance statement of the committee, Section B gives an overview of
our remuneration policy and Section C addresses the implementation of the
remuneration policy in 2021.
Our report and disclosures fully comply with regulatory and statutory provisions
relating to remuneration governance in all the countries in which we operate. This
report is aligned with the principles and recommended practices of King IV as part
of our commitment to good corporate governance.
The previous report was supported at the Sappi Limited’s AGM on 3 February 2021,
with a vote of 96.6% endorsing the remuneration policy and a vote of 95.7% for the
implementation report.
Review of directors’ remuneration policy and
shareholder consultation
We aim to ensure that our policy will continue to support Sappi’s
Thrive25
objectives.
The key changes that have been made are:
• Implementation of return on capital employed (ROCE) as a measure in our
short-term incentive plan from 2022, replacing working capital
• Implementation of a voluntary minimum shareholding requirement for all
prescribed offi cers to be achieved by December 2025
• Disclosure of the vested PSP award as part of the total remuneration in line with
best practice
• ESG (environmental, social and governance) targets are included in the personal
objectives of all senior managers
We value the input of our shareholders and will continue to seek their input to ensure
good disclosure.
Succession planning
One of the key oversight
responsibilities of the committee is
to ensure strong succession plans
are in place to develop suitable
internal candidate succession for all
senior management and executive role
appointments. This includes oversight
of the group’s training and
development processes. As we
announced in October 2020,
Berry Wiersum retired as CEO of
our European operations and was
succeeded by Marco Eikelenboom.
The availability of an internal successor
for Berry and the smooth transition
process bears testimony of our
robust succession planning process
to manage the retirement risks.
Tracy Wessels was appointed as
Group Head Sustainability and Investor
Relations replacing Graeme Wild who
was appointed as VP Sales and
Marketing, Sappi Southern Africa.
Introduction of ROCE
Through various forums, stakeholders
have raised questions pertaining to
Sappi’s short-term incentive and
suggested that Sappi should consider
introducing a return measure in
determining performance. We value
the input of all stakeholders, and as we
drive forward with our Sappi
Thrive25
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strategic plans, Sappi will be
introducing ROCE as a measure for
their short-term incentives as from
2022. ROCE will be calculated for the
group and all regions will be measured
on the group ROCE to support and
drive our OneSappi philosophy.
The agreed target will be the budgeted
ROCE. We believe that this is a fair
measure considering the volatility in
the current business environment and
the cyclical nature of our business. The
targeted ROCE will be appropriately
adjusted on an annual basis depending
on the returns. We will aim to
outperform Sappi’s cost of capital over
time through the cycles. This measure
will replace working capital and amount
to 20% of the overall incentive. We will
continually review the appropriateness
of the 20% weighting and make
recommendations accordingly.
This is a significant development in our
continuous drive to improve the
business and has been fully supported
by our top 550 senior managers, who
will be subject to the revised basis of
measurement from October 2021.
Voluntary minimum
shareholding requirement
(cid:73)(cid:82)r(cid:3)(cid:68)(cid:79)(cid:79)(cid:3)(cid:83)re(cid:86)cri(cid:69)ed(cid:3)(cid:82)(cid:433)cer(cid:86)
I am also pleased to announce that
voluntary minimum shareholding
requirements have been introduced
for all prescribed officers. As you know,
the Group Chief Executive Officer,
Steve Binnie previously volunteered to
introduce this requirement in 2015. We
believe that this broader application will
further align senior management and
shareholder interest. All prescribed
officers in Sappi were engaged and
support the implementation
of a voluntary minimum shareholding
requirement.
GOVERNANCE AND COMPENSATION
(cid:44)(cid:81)ce(cid:81)ti(cid:89)e(cid:3)(cid:86)c(cid:75)e(cid:80)e(cid:86)(cid:3)(cid:115)(cid:3)(cid:86)(cid:75)(cid:82)rt-(cid:3)(cid:68)(cid:81)d(cid:3)(cid:79)(cid:82)(cid:81)(cid:74)-ter(cid:80)
Despite the challenging operating environment, both the EBITDA ex SI and the
working capital performance target were achieved for the Management Incentive
Scheme (MIS). The consolidated EBITDA ex SI of US$532 million was ahead of the
target of US$473 million. Our primary objective from a health and safety point of
view is to have zero injuries and zero fatalities. Although we did not achieve our
lost-time injury frequency rate (LTIFR) of 0.41, the group had no fatalities in 2021.
Our final LTIFR for the year was 0.48.
The overall vesting on the Issue 43 performance share was 12.5%.
Details of these are covered further in Section C of the report.
Executive objectives
For 2022, the focus of the Sappi leadership team will be to:
• Drive the safety-first programme
• Improve Sappi’s sustainability footprint
• Continue leading the Sappi values (integrity, speed, courage and smart
decision-making)
Thrive25
strategy
• Continue with the embedment of Sappi
• Grow the packaging and specialities business with optimal volumes
• Manage the graphics business capacity
• Drive operational excellence across all plants
• Develop plans to manage the current global logistic challenges
• Reduce debt levels towards the 2x EBITDA ex SI target
• Complete the commissioning of the Saiccor expansion project to ensure
the increased dissolving pulp volumes
• Talent management and succession – managing key retirements over the
next 12 months and near-term succession
Conclusion
Our remuneration policy is benchmarked continuously against the relevant industry
peers to ensure competitive reward and that it motivates our senior team to achieve
the group’s objectives and deliver sustainable returns and value creation for our
shareholders. The committee believes that the remuneration of executives during
2021 reflects our challenges and successes to date in the delivery of our strategy.
We have improved disclosures on our policy and the implementation report. We
have listened to you, our shareholders, and the developments in the short-term
bonus criteria and the voluntary minimum shareholding requirement reflects this
feedback. Thank you for your support and advice that you have given for our 2021
remuneration report.
Mike Fallon
Chairman of the Human Resources and Compensation Committee
155
GOVERNANCE AND COMPENSATION
Remuneration Report continued
Section A: Voting, focus and compliance statement
Statement of voting at Annual General Meeting
The AGM of Sappi Limited was held on 3 February 2021 and the requisite
resolutions endorsing the remuneration policy and the implementation report were
passed as follows:
Ordinary resolution number 7: Non-binding endorsement of remuneration
policy
For
Against
Shares voted
Abstain
484,202,272
17,189,481
501,391,753
96.57%
3.43%
100%
1,066,632
Ordinary resolution number 8: Non-binding endorsement
of implementation report
For
Against
Shares voted
Abstain
479,881,839
21,507,527
501,389,366
95.71%
4.29%
100%
1,069,019
At the February 2020 AGM, the results for the requisite ordinary resolutions endorsing
the remuneration policy and the implementation report were 80.22% and 83.11%,
respectively.
(cid:43)(cid:88)(cid:80)(cid:68)(cid:81)(cid:3)(cid:53)e(cid:86)(cid:82)(cid:88)rce(cid:86)(cid:3)(cid:68)(cid:81)d(cid:3)C(cid:82)(cid:80)(cid:83)e(cid:81)(cid:86)(cid:68)ti(cid:82)(cid:81)(cid:3)C(cid:82)(cid:80)(cid:80)ittee
The purpose of the committee is to oversee remuneration matters for all controlled
subsidiaries of Sappi Limited. Its key objectives are to:
• Make recommendations on remuneration policies and practices, including Sappi’s
employee share schemes
• Ensure effective executive succession planning
• Review compliance with all statutory and best practice requirements on labour
and industrial relations management
The committee consisted of four independent non-executive directors:
• Mr MA Fallon – Chairman
• Mr BR Beamish
• Mr NP Mageza
• Mr RJ Renders
The Chairman of the company, Sir Nigel Rudd, attends committee meetings
ex-officio while the Group CEO, Mr SR Binnie together with Group Head Human
Resources, Mr Fergus Marupen attend meetings by invitation.
Mrs A Mahendranath, Company Secretary, attends the meeting as secretary
to the committee.
The Human Resources and Compensation Committee met four times during the
year and held one telephone conference.
The Human Resources and
Compensation Committee ensures
that the policy governing compensation
practices and structures within the
group support the group’s strategy
and performance goals. The policy
also enables the attraction, retention
and motivation of executives and all
employees.
The key activities of the committee
during 2021 are summarised as follows:
Recommended and approved
• Implementation of ROCE as a
measure in the short-term incentive
from 2022, replacing working capital
• Implementation of a voluntary
minimum shareholding requirement
for all prescribed officers effective
May 2021
• The allocation of 2021 performance
share awards to executive directors
and all other eligible participants
• Salary increases and bonus
payments for executive directors and
other key senior managers for 2021
• Fee levels for non-executive
directors of the Sappi Limited Board
for consideration and
recommendation to shareholders for
approval
• The allocation model and the
comparator peer group for the
2021 PSP
• The 2022 MIS rules
• Retention bonuses for key staff on
Sappi strategic projects
Reviewed
• The 2020 Remuneration Report,
including the content of the
company compensation policy
and practices, which was put to
shareholders for a non-binding
vote at the AGM in February 2021
• Development of the 2021
Remuneration Report for
shareholder approval in February 2022
• The succession, retirement and
development plans for key
management positions
• The group’s industrial relations policy
Attendance at meetings by individual members is detailed on page
139.
and implementation
None of the committee members has any significant personal financial interest,
or conflict of interest, or any form of cross directorship, or day-to-day involvement
in the running of the business.
Executive directors and managers are not present during committee discussions
relating to their own compensation.
• The group’s training and development
policy and implementation
• Update on the HR2025 plan
• The Investor feedback on the 2020
Remuneration Report
• 2020 committee evaluation
• Sappi’s Covid-19 response and the
impact on employees
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GOVERNANCE AND COMPENSATION
Independent advice
Management engaged the services from the following organisations to assist
in compensation work during the course of the year:
• Mercer Kepler, United Kingdom
• Korn Ferry, South Africa
• KPMG Inc, South Africa
• Bowmans, South Africa
• PricewaterhouseCoopers Tax Services, South Africa
Compliance statement
The Human Resources and Compensation Committee is committed to maintaining
high standards of corporate governance and supports and applies the principles of
good governance advocated by King IV. Our remuneration approach and
disclosures fully comply with regulatory and statutory provisions relating to reward
governance in all the countries in which we operate. The committee ensures
compliance with legal and regulatory requirements as they pertain to compensation.
The Human Resources and Compensation Committee is of the view that the
objectives stated in the remuneration policy have been achieved for the period
under review. The committee is satisfied that it has fulfilled its responsibilities in
accordance with its terms of reference and with the status of remuneration and
incentives in the group.
Areas of focus for 2022
Key activities for the committee in 2022 will be, inter alia, the approval of the
remuneration and bonuses for executive directors and senior management.
In addition to the annual work plan as approved by the committee, the chairman of
the committee and senior executives from Sappi will, if required, also be visiting key
shareholders to discuss issues of mutual concern.
157
GOVERNANCE AND COMPENSATION
Remuneration Report continued
Section B: Overview of the remuneration policy
Compensation strategy and policy
Our compensation packages:
• Are designed to attract, retain and motivate executives and all employees to deliver on performance goals and strategy
• Are simple, transparent and aligned with the interests of shareholders
• Reflect the views of our investors, shareholder bodies and stakeholders
• Are structured in a way that substantial rewards are only paid for exceptional performance and that poor performance does not
earn an incentive award
• Encourage behaviour consistent with the group’s risk and reward philosophy
• Have an appropriate and balanced reward mix for executive directors and other executive managers based on base pay,
benefits and short and long-term incentives within the context of the industry sector
• Are applied consistently across the group to promote alignment and fairness
• Through the Deferred Shares Bonus Plan, provide for a voluntary deferral of 40% of the Group CEO’s annual bonus, and 30% of
the executive managers’ annual bonuses (to purchase Sappi shares), to ensure a long-term focus on the company’s
performance by the individual concerned and establish a personal stake in the company
• Are designed to pay at the market median for all components of pay, except for short-term incentives, which are targeted at the
75th percentile
• To support our
Thrive25
ambitions
Summary of reward components of executive directors and other members of the group executive
committee
The compensation of executive directors and other executive committee members comprises fixed and variable components.
Purpose
>
Structure
>
Fixed
Opportunity
>
Component
– Base salary
• (cid:55)o reflect market
value of the role,
individuals’ skills,
contribution,
experience and
performance
• To attract and retain
key talent
• Paid monthly in cash
• Reviewed annually with any increases to be
•
effective from (cid:19)(cid:20) (cid:45)anuar(cid:92) each (cid:92)ear
• Base salary reviews take into account
prevailing market practices, economic
conditions and the levels of base salary
increase mandates provided to the general
employee population
Increases are applied in
line with outcomes of
performance discussions
with the individuals
concerned and market
conditions
• To provide protection
and market
competitive benefits
to aid recruitment
and(cid:123)retention
Component
– Benefits
• Private medical insurance
•
Income in the event of death or disability
• None
These are:
• Appropriate in terms of level of seniority;
• Market related
• (cid:39)eath benefit is a multiple of base salar(cid:92), and
• Non-pensionable
Component
– Pension
• To provide market
related benefits
• Facilitate the
accumulation of
savings for post-
retirement years
• Comprises defined benefit and defined
contribution plans
• A large number of defined benefit plans are
closed to new hires
• Emplo(cid:92)ees in legac(cid:92)-defined benefit plans
continue to accrue benefits in such plans for
both past and future service
• (cid:53)etirement plans differ b(cid:92) region
• Executive members of
defined contribution
plans(cid:123)receive a compan(cid:92)
contribution of up to
(cid:20)(cid:27)(cid:17)(cid:23)(cid:26)(cid:8) of salar(cid:92)
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Purpose
>
• Focus participants on
targets relevant to the
group’s strategic
goals
• Drive performance
• Motivate executives
to achieve specific
and stretching
short-term goals
• Reward individuals
for(cid:123)their personal
contribution and
performance
• Deferred share
proportion of the
annual bonus aligns
interests with
shareholders
Component
– Annual cash
incentive
GOVERNANCE AND COMPENSATION
Structure
>
Variable
Opportunity
>
• All measures and objectives are reviewed and set
• The maximum
bonus for executive
directors is (cid:20)(cid:20)(cid:24)(cid:8)
of(cid:123)base salar(cid:92)
• Regional CEOs can
earn a maximum
bonus of (cid:28)(cid:24)(cid:8) of
base salary
• Executive
committee
members and
other(cid:123)senior
managers may
earn(cid:123)a ma(cid:91)imum
bonus of up to 88%
of base salary
• A cash award is
made
at the beginning of the financial (cid:92)ear
• Payments are reviewed and approved at year end
by the committee based on performance against
the targets
• Threshold is required to be met for any bonus
payment to occur
• (cid:55)arget level of bonuses varies from (cid:25)(cid:24)(cid:8) to (cid:27)(cid:24)(cid:8)
of(cid:123)base salar(cid:92)
• Weightings for (cid:21)(cid:19)(cid:21)(cid:20) were(cid:29) E(cid:37)(cid:44)(cid:55)(cid:39)A e(cid:91) S(cid:44) (cid:115) (cid:24)(cid:19)(cid:8)(cid:30)
•
•
Working Capital – 20% and safety – 10%; Individual
– 20%
If the agreed target for EBITDA ex SI is achieved,
a(cid:123)bonus award percentage of (cid:20)(cid:19)(cid:19)(cid:8) will be paid for
that component. A bonus award percentage of up
to(cid:123)(cid:20)(cid:24)(cid:19)(cid:8) can be earned if(cid:123)(cid:20)(cid:20)(cid:19)(cid:8) or more of the
agreed target is achieved
If the agreed target % for working capital is
achieved, a bonus award percentage of
(cid:20)(cid:19)(cid:19)(cid:8)(cid:123)will(cid:123)be paid for that component(cid:17) A(cid:123)bonus
Award percentage of up to (cid:20)(cid:24)(cid:19)(cid:8) can(cid:123)be earned
if(cid:123)(cid:28)(cid:19)(cid:8) or less than the target is(cid:123)achieved(cid:17) (cid:44)f the
working capital target is exceeded by more than
10% then no bonus award will be paid for
working(cid:123)capital
• Bonuses are paid in cash. The Group CEO and
executive committee members have volunteered
to purchase shares with (cid:23)(cid:19)(cid:8) and (cid:22)(cid:19)(cid:8) of their
after-tax cash bonus, respectively. The right to sell
the(cid:123)shares is deferred for up to three (cid:92)ears, sub(cid:77)ect
to individual members not being terminated for
cause
• Non pensionable
• Malus and clawback may be applied in the
following circumstances:
(i)
Financial results of the group or a company/
business unit in the Sappi group have been
materially misstated
(ii) A participant has ceased to be a director or
(iii)
(iv)
employee by reason of gross misconduct and
has resulted in significant losses to the business
There has been material breach of Code of
Ethics/Law
There has been an erroneous assessment
of(cid:123)the e(cid:91)tent to which an(cid:92) performance
conditions has been satisfied resulting
in(cid:123)a(cid:123)higher vesting outcome
159
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Remuneration Report continued
Section B: Overview of the remuneration policy
Compensation strategy and policy continued
Purpose
>
• Align the interests of
the executive
members with those
of the shareholder
• Reward the execution
of the strategy and
long-term
outperformance of
our competitors
•
• Encourage long-term
commitment to the
company
Is a wealth creation
mechanism for
executive members if
the company
outperforms the peer
group
Voluntary minimum
shareholding
requirement for
prescribed officers
Component –
Long-term share
incentive plans
Structure
>
Variable
Opportunity
>
• Conditional grants awarded annually to executive
directors, executive committee members and
other key senior managers of the company
• A higher share price
will benefit the
participants
• Straight-line vesting after four years
• Performance is measured relative to a peer
group(cid:123)of (cid:20)(cid:25) other industr(cid:92)-related companies
• The number of conditional shares allocated varies
between the CEO and each of the executive
committee members(cid:17) (cid:48)easures for(cid:123)(cid:21)(cid:19)(cid:21)(cid:20) awards
were relative total shareholder return (cid:11)(cid:55)S(cid:53)(cid:12) (cid:115) (cid:24)(cid:19)(cid:8)
and relative cash flow return on(cid:123)net assets
(cid:11)CF(cid:53)(cid:50)(cid:49)A(cid:12) (cid:115) (cid:24)(cid:19)(cid:8)
• Malus and clawback may be applied in the
following circumstances:
(i)
Financial results of the group or a company/
business unit in the Sappi group have been
materially misstated
(ii) A participant has ceased to be a director or
employee by reason of gross misconduct and
has resulted in significant losses to the business
(iii) There has been material breach of Code of
Ethics/Law
(iv) There has been an erroneous assessment of
the extent to which any performance
conditions have been satisfied resulting in
a(cid:123)higher vesting outcome
• The target holding as a multiple of annual base
salar(cid:92) needs to be achieved b(cid:92) (cid:39)ecember (cid:21)(cid:19)(cid:21)(cid:24)(cid:17)
The requirement is that the CEO should hold
(cid:22)(cid:123)times annual base salar(cid:92), up from his previous
(cid:21)(cid:123)times(cid:17) (cid:55)he CF(cid:50) (cid:21) times and all other prescribed
officers at (cid:20) times annual base salar(cid:92)
• The acquisition of shares will primarily be achieved
by vesting performance shares and through the
acquisition of shares under the executive
management share purchase scheme (whereby an
individual is required to purchase shares from a
designated portion of their after tax MIS bonus).
However, individuals can also purchase shares
during the normal open period with the appropriate
approvals
• Provide an appropriate
level of protection to
both the executive and
to Sappi
• Executive committee members have notice periods
•
by the company of 12 months or less
• Separation agreements, when appropriate, are
negotiated with the individual concerned with prior
approval being obtained in terms of our governance
structures
Component
– Service
contracts
In circumstances
where(cid:123)there is a
significant likelihood
of a transaction
involving the Sappi
group or a business
unit, limited change
in(cid:123)control protections
ma(cid:92) be(cid:123)agreed and
implemented if
deemed necessary
for(cid:123)retention purposes
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Service contracts
Mr Binnie and Mr Pearce have an ongoing employment contract which requires six months’ notice of termination by the
employee and 12 months’ notice of termination by the company.
Depending on their location, executive committee members have ongoing employment contracts which require between three
to six months’ notice of termination by the employee and six to 12 months’ notice of termination by the company.
Other than in the case of termination for cause, the company may terminate the executive directors’ service contracts by making
payment in lieu of notice equal to the value of the base salary plus benefits which they would have received during the notice period.
Executive directors are required to retire from the company at the age of 63 years. The retirement age of executive committee
members is generally between the ages of 63 years and 65 years and differs by region.
Choice of performance measures and approach to target setting
Short-term incentive: MIS
The table below shows the metrics and why they were chosen and how targets are set.
Metric
Percentage
(%)
>
Relevance
>
How do we set the targets?
>
EBITDA ex SI
50
A ke(cid:92) indicator of the underl(cid:92)ing profit
performance of the group, reflecting both
revenues and costs. Aligns closely with our
strategic goals of achieving cost advantages
and growth(cid:17) (cid:48)ore efficient water, energ(cid:92) and
raw material usage is also encouraged.
Targets and ranges are set each year by the
board taking account of required progress
towards strategic goals, and the prevailing
market conditions.
Working
capital
20
Safety
10
A key indicator of accounts payable, accounts
receivable, cash management and stock levels.
Achieving optimum working capital levels in the
business re(cid:84)uires efficient use of resources
throughout the suppl(cid:92) chain and influences
cash management, a key pillar of our strategy.
A core value of the company and one of the
key indicators of whether the business is
meeting its(cid:123)sustainabilit(cid:92) goal of (cid:93)ero harm(cid:17)
Targets and ranges are set each year by
the(cid:123)board taking account of the re(cid:84)uired
progress towards strategic goals, and the
prevailing market conditions.
The committee considers input from the
SETS Committee and sets appropriate
standards and goals. The measurement
will(cid:123)be the LTIFR.
(cid:44)f there is a fatalit(cid:92) in a specific region, the
group executive committee, the regional
e(cid:91)ecutive committee and the affected
operations, will score zero.
Individual
performance
20
An indicator of the contribution of each
executive director, individual performance for
relevant managers. Includes several key
non-financial targets in relation to numerous
ESG, living the Sappi Values, major capital
projects and BBBEE in the case of South Africa.
Priorities are set for the CEO by the
Chairman of the board in line with the
business plan for the applicable year. Targets
and ranges are then cascaded to the rest of
the business teams. These are reviewed as
part of an annual review with the Chairman.
ROCE
(To be
implemented in
2022 replacing
working capital)
20
A key indicator of the underlying returns that
the group achieves on its capital employed.
Achieving a ROCE over time that outperforms
the group’s weighted cost of capital will ensure
alignment of the group’s returns targets with
those expected by the group’s shareholders.
Targets and ranges are set each year by the
board taking account of the required
progress towards strategic goals, and the
prevailing market conditions.
161
Performance Share Plan
The Sappi PSP provides for annual
awards of conditional performance
shares which are subject to meeting
performance targets measured over a
four-year period. These awards will only
vest if Sappi’s performance, relative to
a peer group of 16 other industry-
related companies is ranked at median
or above the median.
The performance criteria are relative
TSR and relative CFRONA.
GOVERNANCE AND COMPENSATION
Remuneration Report continued
Section B: Overview of the remuneration policy
Compensation strategy and policy continued
The bonus payment opportunity available to executive directors and executive
committee members is as follows:
Executive director
Regional CEO
On-target bonus
Stretch target
85% of base salary 115% of base salary
70% of base salary
95% of base salary
Other prescribed officers (ie executive
committee members)
65% of base salary
88% of base salary
(cid:53)e(cid:80)(cid:88)(cid:81)er(cid:68)ti(cid:82)(cid:81)(cid:3)(cid:68)t(cid:3)di(cid:428)ere(cid:81)t(cid:3)(cid:83)er(cid:73)(cid:82)r(cid:80)(cid:68)(cid:81)ce(cid:3)(cid:79)e(cid:89)e(cid:79)(cid:86)
The chart below illustrate the total potential remuneration (base pay and short-term
incentives) for executive director at different performance levels.
Remuneration levels CEO and CFO (% of base pay)
0
0
1
5
8
5
1
1
0
0
1
120
100
80
60
40
20
0
Target
●
Base pay
●
Short-term incentive (MIS)
Maximum
Long-term incentives are excluded from these scenarios as their vesting depends
on performance conditions being met.
The table below shows the metrics and why they were chosen and how targets are set.
Metric
TSR
CFRONA
Relevance
>
How do we set the targets?
>
TSR measures the total returns to Sappi’s
shareholders, providing close alignment with
shareholder interests.
A ke(cid:92) indicator of the effective use of capital(cid:17)
CFRONA is calculated as cash generated by
operations after working capital movements (before
interest, tax and dividends) divided by average total
assets (excluding cash) less interest-free liabilities.
This measure is calculated using a simple annual
average over the previous four-year period.
The committee sets the performance requirements
for each grant. A peer group of packaging and paper
sector companies is used. Nothing vests in positions
10 – 17 of the peer group. Vesting increases from
(cid:21)(cid:24)(cid:8) at position (cid:28) to (cid:20)(cid:19)(cid:19)(cid:8) for positions (cid:20) (cid:115) (cid:24)(cid:17)
The committee sets the performance requirements
for each grant. A peer group of packaging and paper
sector companies is used. No vesting occurs in
positions 10 – 17 of the peer group. Vesting increases
from (cid:21)(cid:24)(cid:8) at position (cid:28) to (cid:20)(cid:19)(cid:19)(cid:8) for positions (cid:20) (cid:115) (cid:24)(cid:17)
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GOVERNANCE AND COMPENSATION
The peer group for the PSP award consisted of the following 16 industry-related
companies:
Stora Enso
Lenzing
Graphic Packaging
International
UPM-Kymmene
Rayonier Advance
Materials
Borregaard Sun Paper
Metsá Board
BillerudKorsnäs
(cid:43)(cid:82)(cid:79)(cid:80)e(cid:81)
Mondi PLC
International Paper
West Rock
Verso
Suzano
Resolute Forest Products
Vesting schedule
The vesting schedule for 2017 allocation for both TSR and CFRONA is as follows:
Position
1 – 5
6
7
8
9
10 – 17
Vesting
100%
80%
65%
45%
25%
0%
Disclosure
In this report, Sappi discloses vested as well as grant performance share values.
In the 2020 report only the grant benefits were disclosed.
Malus and clawback
Awards made to the CEO, Chief Financial Officer and prescribed officers under
Sappi’s MIS and PSP are subject to both malus and clawback provisions which may
be applied during the period of two years after the date of vesting or granting.
Clawback refers to the recovery of paid or vested amounts and malus refers to the
reduction, including to nil, of unvested or unpaid amounts. Malus and clawback may
be applied in the following circumstances:
• Financial results of the group or a company/business unit in the Sappi group have
been materially misstated
• A participant has ceased to be a director or employee by reason of gross
misconduct and has resulted in significant losses to the business
• There has been material breach of Code of Ethics/Law
• There has been an erroneous assessment of the extent to which any
performance conditions have been satisfied resulting in a higher vesting
outcome.
Statement of fair and responsible remuneration
The group’s compensation policy for the remuneration of executive directors and
other senior executives is set taking appropriate account of remuneration and
employment conditions of other employees in the group.
The committee annually receives a report from management on pay practices across
the group, including salary levels and trends, collective bargaining outcomes and
bonus participation. At the time that salary increases are considered the committee
additionally receives a report on the approach management proposes to adopt for
general staff increases. Both these reports are taken into account in the committee’s
decisions regarding the remuneration of executive directors and other senior
executives.
In some countries where the group
operates, more formal consultation
arrangements with employee
representatives are in place relating
to employment terms and conditions,
in accordance with local legislation and
practice. The group also conducts
employee engagement surveys every
two years which gauge employees’
satisfaction with their working
conditions. The Sappi board is given
feedback on these survey results.
Approach to remuneration
benchmarks
Executive compensation is
benchmarked on data provided in
national executive compensation
surveys, for countries in which
executives are domiciled, as well as
information disclosed in the annual
reports of listed companies of the
Johannesburg Stock Exchange. Sappi
participates in global remuneration
surveys and uses data from global
remuneration survey, ie PwC, Mercer,
et al to determine appropriate
remuneration levels.
Ensuring an appropriate peer group
in order to retain the integrity and
appropriateness of the benchmark
data is a key task of the Human
Resources and Compensation
Committee. Executive pay is
benchmarked every alternate year.
The remuneration package for a newly
appointed executive director is set in
accordance with the terms of the
group’s approved remuneration policy
in force at the time of appointment.
The variable remuneration for a new
executive director is determined in the
same way as for existing executive
directors. For internal and external
appointments, the group may meet
certain relocation expenses, as
appropriate.
163
GOVERNANCE AND COMPENSATION
Remuneration Report continued
(cid:53)e(cid:80)(cid:88)(cid:81)er(cid:68)ti(cid:82)(cid:81)(cid:3)(cid:83)(cid:82)(cid:79)ic(cid:92)(cid:3)(cid:73)(cid:82)r(cid:3)(cid:81)(cid:82)(cid:81)-e(cid:91)ec(cid:88)ti(cid:89)e(cid:3)direct(cid:82)r(cid:86)(cid:3)(cid:11)(cid:73)ee(cid:86)(cid:12)
Element
Purpose
>
How it works?
>
Fees
>
Fixed
• The Chairman receives an
• The Chairman’s fees are
all-inclusive fee
Non-executive
Chairman (fees)
• To attract and retain a high-
calibre chairman, with the
necessary experience and
skills
• To provide fees which take
account of the time
commitment and
responsibilities of the role
• To attract and retain high-calibre
• The non-executives are paid
Other
non-executive
directors (fees)
non-executives, with the
necessary experience and
skills
• To provide fees which take
account of the time
commitment and
responsibilities of the role
a(cid:123)basic fee
• Attendance fees are also paid
to reflect the re(cid:84)uirement for
non-executive directors to
attend meetings in various
international locations
• The chairmen of the main
board committees and the
lead(cid:123)independent director are
paid additional fees to reflect
their extra responsibilities
reviewed periodically by the
committee
• Fees are set by reference to
market median data for
companies of similar size and
complexity to Sappi
• Non-executive directors’ fees
are reviewed periodically by
the Chairman and Human
Resources and Compensation
Committee
• Fees are set by reference to
market median data for
companies of similar size and
complexity to Sappi
Sappi may reimburse the reasonable
expenses of board directors that relate
to their duties on behalf of Sappi. Sappi
may also provide advice and assistance
with board directors’ tax returns where
these are impacted by the duties they
undertake on behalf of Sappi.
All non-executive directors have letters
of appointment with Sappi Limited
for an initial period of three years.
In accordance with best practice,
non-executive directors are subject
to re-election at the AGM after the
three-year period. Appointments may
be terminated by Sappi with six
months’ notice. No compensation is
payable on termination, other than
accrued fees and expenses.
Voting on remuneration
As required by King IV, Sappi’s remuneration policy and implementation report as
detailed in this Remuneration Report, need to be tabled for separate non-binding
advisory votes by shareholders at the upcoming AGM. In the event that either the
remuneration policy or the implementation report, or both, are voted against by 25%
or more of the voting rights entitled to be exercised by shareholders at such AGM,
then the committee will ensure that the following measures are taken in good faith
and with best reasonable efforts:
• An engagement process to ascertain the reasons for the dissenting votes, and
• Appropriately addressing legitimate and reasonable objections and concerns
raised which may include amending the remuneration policy or clarifying or
adjusting remuneration governance and/or processes.
You can also view the full Remuneration policy on www.sappi.com
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Section C: Remuneration implementation report
Compensation structure
Total compensation comprises fixed pay (ie base salary and benefits) and variable
performance-related pay, which is divided further into short-term incentives with
a one-year performance period and long-term incentives which have a four-year
performance period.
Compensation mix
The compensation mix for executive directors and executive committee members
is shown in the schematics below.
The long-term incentive awards are based on the vested value of the performance
plan shares issued on 04 December 2017 (share price at date of allocation: ZAR95,64).
Details of the executive directors’ remuneration can be found on page
169.
Executive directors
3.0
2.5
22%
34%
36%
2.0
1.5
)
n
o
i
l
l
i
m
$
S
U
(
1.0
44%
64%
0.5
0
2018
●
(cid:57)e(cid:86)te(cid:71)(cid:3)(cid:83)(cid:79)(cid:68)(cid:81)(cid:3)(cid:69)e(cid:81)e(cid:430)t
2019
●
4%
46%
51%
17%
83%
2020
2021
Short-term incentive
●
Guaranteed package
(cid:51)re(cid:86)(cid:70)ribe(cid:71) o(cid:433)(cid:70)er(cid:86) (cid:70)ompen(cid:86)ation mi(cid:91)
7.0
6.0
)
n
o
i
l
l
i
m
$
S
U
(
5.0
4.0
3.0
2.0
1.0
0
13%
30%
21%
6%
57%
73%
12%
88%
2
2
3%
31%
66%
2018
●
(cid:57)e(cid:86)te(cid:71)(cid:3)(cid:83)(cid:79)(cid:68)(cid:81)(cid:3)(cid:69)e(cid:81)e(cid:430)t
2019
●
2020
2021
Short-term incentive
●
Guaranteed package
In January 2021, Mr Binnie and
Mr Pearce received zero salary increases
on both their South African and offshore
portion.
The same salary increase percentages
were applied in determining the salary
increases for executive committee
members’ and general staff, dependent
on location.
(cid:53)etire(cid:80)e(cid:81)t(cid:3)(cid:69)e(cid:81)efit(cid:86)
Retirement benefits are largely in the
form of defined contribution schemes.
In some instances, legacy defined
benefit schemes exist. Almost all the
defined benefit schemes are closed
to new hires.
Mr Binnie and Mr Pearce are both
members of defined contribution funds
and the total employee and company
contribution is ZAR350,000 each.
No additional payments were made
to any retirement fund on behalf of
the executive directors.
Short-term incentive
A performance threshold of 85% of
budgeted EBITDA ex SI for the group is
required before any bonus can be paid
to participants in the group scheme.
Our compensation policy aims to have a balance between guaranteed, short- and
long-term incentives.
Base salary
The Human Resources and Compensation Committee approved the level of base
salary for each executive director, executive committee member and other key
senior managers.
The salary increases were based on individuals’ performances and contributions,
internal relativities, inflation rates in the countries of operation, general market salary
movement and overall affordability.
165
GOVERNANCE AND COMPENSATION
Remuneration Report continued
Section C : Remuneration implementation report continued
Short-term incentive continued
2021 MIS outcomes for executive directors
MIS EBITDA
US Dollar (million)
Points
Working capital
Percentage
Points
Safety
LTIFR
Points
Threshold
Target
Maximum
Actual
402
473
50
520
75
578
75
Threshold
Target
Maximum
Actual
13.6%
12.4%
20
11.2%
30
10.6%
30
Target
Actual
0.42
0.48
–
Personal objectives of executives for 2021 MIS
Performance objectives
Link to
strategic
fundamental
>
Description
>
Tasks and targets
>
Drive the safety-first
programme
Drive to ensure that Sappi
has sufficient liquidity and
capital resources to sustain
the business
Continue leading the
Sappi values
(cid:39)rive safet(cid:92)-first across
Sappi with continuous
improvement on overall
severity rates measured
by the Injury Index II of
Own and Contractors.
Ensure that Sappi will
have sufficient li(cid:84)uidit(cid:92)
and capital resources to
sustain the business.
• Zero fatalities
• (cid:42)roup own emplo(cid:92)ee (cid:47)(cid:55)(cid:44)F(cid:53) (cid:31)(cid:19)(cid:17)(cid:23)(cid:21)
• (cid:55)argets as per financial disclosures(cid:29)
–
–
–
Liquidity
Debt to EBITDA ex SI
Return on capital employed
Ensure continued
communication and
training around values.
Drive visible felt
leadership through more
direct engagement with
shop floor b(cid:92)(cid:123)all lead
team members.
• All employees to complete the three-yearly
cycle of Code of Ethics compliance training
• (cid:20)(cid:19)(cid:19)(cid:8) sign-off on Polic(cid:92) Passport
• Zero tolerance for discipline failures around
ethics
• Each group lead team member to visit their
allocated sites at least once every two years
Improvement in senior management
relationships score in the engagement survey
•
Drive Sappi’s
sustainability footprint
Meet Sappi’s annual
sustainability targets.
• All BP21 sustainability targets met
Drive operational
excellence across all plants
Govern implementation
of(cid:123)operational e(cid:91)cellence
programmes to drive
an(cid:123)e(cid:91)cellence culture(cid:17)
• OME group average target at group level
within (cid:20)(cid:8) of budget of (cid:27)(cid:19)(cid:17)(cid:24)(cid:8)
• OME average better than the previous year
achievement of 79%
• Project Ranulph cost savings of
(cid:56)S(cid:7)(cid:25)(cid:27)(cid:17)(cid:27)(cid:123)million
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Performance objectives
Link to
strategic
fundamental
>
Description
>
Tasks and targets
>
Execute Saiccor Mill
expansion project as
planned
Grow packaging and
speciality paper business
with optimal volumes
Manage graphic paper
business capacity
Governance oversight of
Saiccor Mill expansion
project.
• Project back on stream post Covid-19 delays
• Saiccor Mill expansion project success rating
using the post-project evaluation
Grow volumes in SSA and
SNA in line with increase
in demand.
• Packaging (cid:20)(cid:17)(cid:23)(cid:23)(cid:23)k tons
• Packaging E(cid:37)(cid:44)(cid:55)(cid:39)A margin (cid:20)(cid:21)(cid:17)(cid:24)(cid:8)
Manage graphics
capacity in line with
market demands.
• Manage volumes in line with adjusted Covid-19
recover(cid:92) plan to appro(cid:91)imatel(cid:92) (cid:22),(cid:24)(cid:19)(cid:19)k tons
• E(cid:37)(cid:44)(cid:55)(cid:39)A margin for graphics (cid:24)(cid:17)(cid:23)(cid:8)
Manage key retirements
and near-term succession
Successors identified for
all key retirees for the
next 12 months.
• 90% ready now successors for all key
retirements
Sappi Thrive25 strategy
Lead the roll-out of the
Thrive25
strategy across
all regions.
• Regional strategies in place supporting
Thrive25
• Significant progress on all four fundamentals
(cid:11)(cid:42)row our business, Sustain our financial
health, Drive operational excellence and
Enhance trust)
The Chairman conducted a formal review with the CEO and scored him out of 20 points on the achievement of the stated objectives,
namely objective achieved 2 points, partially achieved 1 point and non-achievement 0 points.
2021 MIS outcomes for executive directors
Points
Steve Binnie
Glen Pearce
EBITDA
ex SI
Working
capital
Safety
Personal
50
75
75
20
30
30
10
–
–
20
18
18
Total
100
123
123
For 2021, Mr Binnie and Mr Pearce achieved a bonus outcome of 105% of base salary before currency translations.
For ease of reference, the bonus calculation is based on the executive director bonus target of 85% (annual salary) multiplied
by 123% bonus outcome (reflected above), is equal to 105% of annual salary, as detailed in the remuneration tables.
Performance Share Plan outcomes for 2021
For the four-year period ending September 2021, Sappi’s performance relative to the peer group measured on TSR was ranked 15th,
resulted in a 0% vesting on the TSR component. The determination of the vesting of the shares was provided by Mercer Kepler,
an independent third party.
For the four-year period ending September 2021, Sappi’s performance relative to the peer group measured on CFRONA was
ranked 9th, resulted in 25% vesting on the CFRONA component. This result was verified by KPMG, our external auditors.
167
Dilution
If all outstanding plan shares were
to vest as at September 2021, the
resulting dilution effect would be
2.53% (2020: 2.12%, 2019: 2.3%)
of issued ordinary share capital
excluding treasury shares.
Voluntary minimum share
holding
This voluntary requirement has been
introduced for all prescribed officers.
The target holding as a multiple of
annual base salary needs to be
achieved by December 2025. The
requirement is that the CEO should
hold 3 times annual base salary, up
from his previous 2 times. The CFO
2 times and all other prescribed
officers at 1 times annual base salary.
The acquisition of shares will primarily
be achieved by vesting PSPs and
through the acquisition of shares under
the executive management share
purchase scheme (whereby an
individual is required to purchase
shares from a designated portion
of their after-tax MIS bonus). However,
individuals can also purchase shares
during the normal open period with
the appropriate approvals. SENS
announcements will be applicable.
GOVERNANCE AND COMPENSATION
Remuneration Report continued
In aggregate, therefore 12.5% of the total 2017 awards vested.
2017 TSR vesting schedule (% of awards vesting)
100
80
60
40
20
0
0
0
1
0
0
1
0
0
1
0
0
1
0
0
1
0
8
5
6
5
4
5
2
17
16
15
14
13
12
11
10
9
8
7
6
5
4
3
2
1
Sappi’s TSR ranking versus comparators
2017 CFRONA vesting schedule (% of awards vesting)
100
80
60
40
20
0
0
0
1
0
0
1
0
0
1
0
0
1
0
0
1
0
8
5
6
5
4
5
2
17
16
15
14
13
12
11
10
9
8
7
6
5
4
3
2
1
Sappi’s CFRONA ranking versus comparators
In December 2017, Mr Binnie was granted 137,000 conditional performance plan
shares, of which 12.5% of the allocation will vest in December 2021.
In December 2017, Mr Pearce was granted 63,000 conditional performance plan
shares, of which 12.5% of the allocation will vest in December 2021.
The historical vesting of PSP awards:
Share awards
TSR
CFRONA
Aggregate
2018
100%
100%
100%
2019
80%
100%
90%
2020
0%
100%
50%
2021
0%
25%
12.5%
Performance Share Plan allocations for 2021
Each year, Mercer Kepler provides management with a recommendation for an
appropriate pool size. For the 2021 allocation, it was approved to grant the number
of shares implied by the same ZAR value of the previous year PSP awards, where
value is based on trailing long-run average share price at grant (eg 12 months).
This approach has been applied for the last four years and is consistent with
recommendations by our shareholders, to disclose the allocation method.
Mr Binnie was awarded 180,000 conditional performance plan shares
in November 2021 that will vest in November 2025.
Mr Pearce was awarded 85,000 conditional performance plan shares
in November 2021 that will vest in November 2025.
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Pre(cid:86)cri(cid:69)ed(cid:3)(cid:82)(cid:433)cer
Target minimum
Shareholding
Number of shares
(Sept 2021)
Value of shares
Actual multiple
SR Binnie
GT Pearce
M Eikelenboom
M Haws
A Thiel
M van Hoven
G Bowles
F Marupen
3x
2x
1x
1x
1x
1x
1x
1x
M Mansoor
* Average share price of US$2.84 (R40.95) for September 2021.
** Based on the base salary as at 1 January 2021.
*** Based on base salary as at 1 April 2021 for M Eikelenboom.
1x
400,000
185,877
20,318
40,000
561,902
203,403
109,438
73,261
57,050
US$1,136,000
US$527,891
US$57,703
US$113,600
US$1,595,802
US$577,665
US$310,804
US$208,061
US$162,022
2.0
1.6
0.1
0.3
4.7
3.2
1.2
1.1
0.5
(cid:53)e(cid:80)(cid:88)(cid:81)er(cid:68)ti(cid:82)(cid:81)(cid:3)di(cid:86)c(cid:79)(cid:82)(cid:86)(cid:88)re(cid:3)(cid:82)(cid:73)(cid:3)e(cid:91)ec(cid:88)ti(cid:89)e(cid:3)direct(cid:82)r(cid:86)(cid:3)(cid:68)(cid:81)d(cid:3)(cid:83)re(cid:86)cri(cid:69)ed(cid:3)(cid:82)(cid:433)cer(cid:86)
Executive directors’ emoluments for 2021 (US Dollar)
Short-term compensation (STC)
LTSIP
(Value of
shares
vested
this year)*
Subtotal
STC
Total
Executive director
Base
salary
Annual
cash award
Other
allowances
Benefits
& pension
A
B
A + B
S Binnie
G Pearce
564,742
326,357
Total
* Long-term Share Incentive Plan (PSP) (LTSIP).
891,099
607,749
351,098
958,847
16,440
9,344
25,784
84,179
61,581
1,273,110
748,380
50,924
23,417
1,324,034
771,797
145,760
2,021,490
74,341
2,095,831
• Local earnings are translated into the reporting currency (US Dollar) using the average exchange rate over the financial year
The average rate for SA Rand and Swiss Franc appreciated by 8% and 6%, respectively against the US Dollar
• Due to the earnings currencies (ZAR) appreciating against the reporting currency (US$) over the year, this had the effect
of showing earnings in US Dollar terms to be higher
• Base salary – the actual salary earned during 2021
• Performance related remuneration – the actual value earned in 2021 based on the rules of the MIS
• Sums paid by way of expense allowance – expenses allowed
• Contributions paid under pension and medical aid schemes – the annual contribution paid by the company into a defined
benefit fund on behalf of the members determined as a percentage of their base salary
• Long-term shares vested in December 2021
LTSIP benefit: 2021 allocation (will vest in 2025)
Executive director
S Binnie
G Pearce
* Estimated share price.
** Assuming 100% vesting on both performance conditions.
Share
price at
allocation*
R
Total
awarded
benefit **
US$
42
42
504,000
238,000
Number
of shares
180,000
85,000
169
GOVERNANCE AND COMPENSATION
Remuneration Report continued
Executive directors’ emoluments for 2020 (US Dollar)
Short-term compensation (STC)
Base
salary
Annual
cash award
Other
allowances
Benefits
& pension
LTSIP
(Value of
shares
vested
this year)
Subtotal
STC
Total
A
B
A + B
504,410
291,478
–
–
15,531
8,827
74,296
56,126
594,237
356,431
132,823
61,492
727,060
417,923
Executive director
S Binnie(1)
G Pearce(2)
Total
1,144,983
24,358
(1) SR Binnie received a 4.6% increase on the South African portion (70% of total salary), and a 1.0% increase on the off-shore portion of his salary
795,888
950,668
130,422
194,315
–
(30% of total salary). Overall salary expressed in reporting currency was 6.5% lower than in 2019.
(2) GT Pearce received a 4.6% increase on the South African portion (70% of total salary), and a 1.0% increase on the off-shore portion of his salary
(30% of total salary). Overall salary expressed in reporting currency was 6.6% lower than in 2019.
• Local earnings are translated into the reporting currency (US Dollar) using the average exchange rate over the financial year
The average rate for SA Rand depreciated by 13% and appreciated for the Swiss Franc by 4%
• Due to the earnings currencies (ZAR) depreciating against the reporting currency (US Dollar) over the year, this had the effect
of showing earnings in US Dollar terms to be lower than last year
• Base salary – the actual salary earned during 2020, including the three-month 10% salary reduction
• Performance related remuneration – the actual volume earned in 2020 based on the rules of the MIS.
• Sums paid by way of expense allowance – expenses allowed
• Contributions paid under pension and medical aid schemes – the annual contribution paid by the company into a defined
benefit fund on behalf of the members determined as a percentage of their base salary
• Long-term shares vested in December 2020
Prescribed officers/executive committee members (US Dollar)
Prescribed officers are members of the group executive committee.
The table below sets out the remuneration for prescribed officers for 2021:
Short-term compensation (STC)
LTSIP
(Value of
shares
vested
this year)
Subtotal
STC
Total
Pre(cid:86)cri(cid:69)ed(cid:3)(cid:82)(cid:433)cer
Base
salary
Annual
cash award
Other
allowances
Benefits
& pension
A
B
A + B
B Wiersum(1)
M Eikelenboom
M Haws
A Thiel
M van Hoven
G Bowles
F Marupen
M Mansoor
Total
(1) Retired March 2021.
414,011
274,953
437,552
339,777
179,317
265,605
190,682
321,900
–
–
391,597
307,032
148,830
234,379
157,173
259,661
1,494
1,494
–
11,561
5,537
8,726
5,790
137,000
147,274
62,905
49,375
59,071
48,522
54,275
47,591
64,205
562,779
412,039
878,524
717,441
382,206
562,985
401,236
782,766
24,718
7,806
8,178
28,250
21,931
23,417
18,957
14,125
587,497
419,845
886,702
745,691
404,137
586,402
420,193
796,891
2,423,797
1,498,672
171,602
533,218
4,627,289
147,382
4,774,671
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GOVERNANCE AND COMPENSATION
LTSIP benefit: 2021 Allocation (will vest in 2025)
Pre(cid:86)cri(cid:69)ed(cid:3)(cid:82)(cid:433)cer
G Bowles
M van Hoven
F Marupen
A Thiel
M Eikelenboom
M Haws
M Mansoor
* Estimated share price.
** Assuming 100% vesting on both performance conditions.
The table below sets out the remuneration for prescribed officers for 2020:
Short-term compensation (STC)
Base
salary
US$
Annual
cash award
US$
Other
allowances**
US$
Benefits
& pension
US$
750,723
401,458
304,729
157,111
237,651
173,079
294,155
–
–
–
–
–
–
–
2,799
–
9,830
5,203
8,243
5,469
142,860
268,369
43,891
54,040
42,245
65,910
43,656
86,582
Pre(cid:86)cri(cid:69)ed(cid:3)(cid:82)(cid:433)cer
B Wiersum
M Haws
A Thiel
M van Hoven
G Bowles
F Marupen
M Mansoor
Share
price at
allocation*
R
Total
awarded
benefit**
US$
42
42
42
42
42
42
42
224,000
224,000
190,400
280,000
280,000
280,000
168,000
Number
of shares
80,000
80,000
68,000
100,000
100,000
100,000
60,000
LTSIP
(Value of
shares
vested
this year)(3)
B
US$
92,238
26,647
92,238
71,741
76,865
61,492
15,475
Total
A + B
US$
1,114,129
471,996
460,837
276,300
388,669
283,696
539,072
Subtotal
STC
A
US$
1,021,891
445,349
368,599
204,559
311,804
222,204
523,597
Total
174,404
2,318,906
(3) Vesting of issue 42 on 09 December 2020: Vesting share price R33.26.
** Other allowances include a significant salary sacrifice.
–
604,693
3,098,003
436,696
3,534,699
Non-executive directors’ fees
Directors are normally remunerated in the currency of the country in which they live or work from. Their remuneration is translated
into US Dollar, the group’s reporting currency, at the average exchange rate prevailing during the financial year. Directors’ fees are
established in local currencies to reflect market conditions in those countries.
Non-executive directors’ fees reflect their services as directors and services on various sub-committees on which they serve.
The quantum of committee fees depends on whether the director is an ordinary member or a chairman of the committee.
Non-executive directors do not earn attendance fees, however, additional fees are paid for attendance at board meetings more
than the five scheduled meetings per annum.
The Chairman of the Sappi Limited board receives a flat directors’ fee and does not earn committee fees. Non-executive
directors do not participate in any incentive schemes or plans of any kind.
In determining the fees for non-executive directors, due consideration is given to the fee practice of companies of similar
size and complexity in the countries in which the directors are based. The extreme volatility of currencies, in particular the
ZAR/US Dollar exchange rate in the past few years, caused distortions of the relative fees in US Dollar paid to individual
directors.
171
GOVERNANCE AND COMPENSATION
Remuneration Report continued
This year Korn Ferry conducted a bespoke benchmarking exercise in relation to the non-executive directors’ fees. Their conclusion
was that the fees are at the appropriate levels when compared to the market. They have recommended Sappi adjust all non-
executive directors’ fees by the relevant Consumer Price Index in the respective directors’ country of domicile for 2022.
As for the Chairman’s fee, no increase was recommended.
We will continue to review our non-executive directors’ fees against the market and our comparator group to ensure that our fees
are at the appropriate levels, taking into account the size and complexity of Sappi.
Non-executive directors’ fees are proposed by the executive committee, agreed by the Human Resources and Compensation
Committee, recommended by the board and approved at the AGM by the shareholders.
The non-executive directors’ fees for 2021 financial year were approved by shareholders. The table below sets out the
remuneration for non-executive directors for 2021:
Name
ANR Rudd
MA Fallon
BR Beamish
NP Mageza
MV Moosa
B Mehlomakulu
Z Malinga
RJAM Renders
JM Lopez
JE Stipp
Board
fees
Committee
fees
Travel
allowance
Total
GBP319,940
GBP46,670
GBP46,670
ZAR450,750
ZAR674,450
ZAR450,750
ZAR450,750
EUR62,290
US$70,540
US$70,540
GBP0
GBP47,890
GBP39,460
ZAR614,500
ZAR427,850
ZAR380,480
ZAR234,030
EUR58,120
US$25,500
US$35,680
GBP0
GBP0
GBP0
GBP319,940
GBP94,560
GBP86,130
ZAR56,868 ZAR1,122,118
ZAR56,868 ZAR1,159,168
ZAR888,098
ZAR56,868
ZAR741,648
ZAR56,868
EUR120,410
EUR0
US$99,840
US$3,800
US$110,020
US$3,800
Fees are benchmarked and comparable to the market fees payable to the directors’ residence.
Name
KR Osar (1)
JD McKenzie(1)
ANR Rudd
MA Fallon
BR Beamish
NP Mageza
MV Moosa
B Mehlomakulu
Z Malinga
RJAM Renders
JM Lopez
JE Stipp
(1) Retired from the board in December 2019.
2020
Board
fees
Committee
fees
Travel
allowance
US$17,635
ZAR168,613
GBP311,942
GBP45,503
GBP45,503
ZAR439,481
ZAR601,664
ZAR439,481
ZAR439,481
EUR60,733
US$68,777
US$8,920
ZAR73,225
GBP0
GBP47,718
GBP38,474
ZAR599,138
ZAR417,154
ZAR312,461
ZAR228,179
EUR56,667
US$24,863
US$7,600
ZAR0
GBP8,971
GBP8,971
GBP8,971
ZAR0
ZAR0
ZAR0
ZAR0
EUR10,374
US$11,400
Total
US$34,155
ZAR241,838
GBP320,913
GBP102,192
GBP92,948
ZAR1,038,619
ZAR1,018,818
ZAR751,942
ZAR667,661
EUR127,774
US$105,040
US$68,777
US$34,788
US$11,400
US$114,965
Statement by the board regarding compliance with the remuneration policy
The board annually receives a report from the Human Resources and Compensation Committee on pay practices across the
group, including salary levels and trends, collective bargaining outcomes and bonus participation.
The board endorses the Human Resources and Compensation Committee position that Sappi’s remuneration policy is set taking
appropriate account of remuneration and employment conditions of other employees in the group and external factors. It is the
view of the board that this policy as detailed herein, drives business performance and value creation for all stakeholders.
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173
GOVERNANCE AND COMPENSATION GOVERNANCE AND COMPENSATION
Social, Ethics, Transformation and
Sustainability Committee Report
Introduction
The Social, Ethics, Transformation
and Sustainability Committee
Report (SETS) Committee presents
its report for the fi nancial year
ended September 2021. This
committee is a statutory committee
with a majority of independent non-
executive members, whose duties
are delegated to them by the board
of directors. The committee
conducted its aff airs in compliance
with a board approved
terms of reference and discharged
all its responsibilities
contained therein.
MV Moosa
Chairman Social, Ethics, Transformation and
Sustainability Committee
Multi-functional regional sustainability councils provide strategic and operational
support to a group sustainability council which in turn provides support to the SETS
Committee in dealing with key sustainability issues.
During the fi nancial year the committee formally met three times at which meetings
it deliberated on all aspects relating to its terms. A 100% attendance record was
achieved by board committee members for 2021.
Objectives of the committee
The role of the SETS Committee is to assist the board with the oversight of the
company and to provide guidance to management’s work in respect of its duties
in the fi elds of SETS. The committee relies on international best practice as well as
the laws and regulations under which Sappi’s businesses operate to ensure that
the group not only complies with, but also fully implements all requirements. The
committee addresses issues relating to corporate social investment, ethical
conduct, diversity, transformation and empowerment initiatives and targets and
ongoing sustainability practices to ensure that our business, our environment and
our people can prosper on an ongoing basis. The responsibilities include monitoring
the company’s activities, having regard to any relevant legislation, other legal
requirements and prevailing codes of best practice. The committee meets a
minimum of three times each year.
Membership of the committee
The members of the SETS Committee during the 2021 fi nancial year were:
• Mr MV Moosa (Chairman from 01 March 2016)
• Mr SR Binnie
• Dr B Mehlomakulu
• Mr BR Beamish
• Mr JM Lopez
Four members of the committee were
independent non-executive directors
and one the CEO. In addition, the
Chairman of the board and the
Chairman of the Audit Committee
attends committee meetings ex offi cio.
The regional CEO, the Group Head
Strategy and Legal, the Group Head
Technology, the Group Head Human
Resources, the Group Head Corporate
Aff airs, the Executive Vice President
Dissolving Wood Pulp and the Group
Head Investor Relations and
Sustainability attend meetings
by invitation.
Committee activities
reviewed and actioned
during the year
• Reviewed and revised the
committee terms of reference
and annual work plan
• Approved the corporate citizenship
policy
• Reviewed and endorsed the public
aff airs and corporate citizenship
programmes
• Reviewed the UN SGDs most
relevant to Sappi
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• Reviewed Sappi’s standing in terms of:
The principles set out in the United
Global Compact Principles
The OECD recommendations
regarding corruption
The Employment Equity Act, and
The Broad-based Black Economic
Empowerment (BBBEE) Act
• Reviewed the Code of Ethics, ethics
programme and their effectiveness
• Obtained feedback from the ethics
–
–
reporting hotlines
• Reviewed the South African skills
audit as well as the training and
development plan
• Reviewed the staff training progress
• Reviewed the company performance
relative to the Employment Equity
Act, BBBEE Act and the company’s
transformation strategies
• Reviewed the Sappi Southern Africa
Transformation Charter
• Reviewed Sappi’s policy and standing
in terms of the International Labour
Organization protocol on decent work
and working conditions
• Reviewed the group safety
programmes, safety performance
and actions being taken to improve
the safety performance of the group
• Reviewed the group unfair
discrimination and equality policy
• Reviewed the group sustainability
charter and environmental policy
• Reviewed the material indicators
of the group’s environmental
performance
• Reviewed regional sustainability
performance against goals for 2021
• Reviewed regional and global public
policy matters affecting the group
and its operations
• Reviewed the various production
unit operating efficiencies, reliability
and unscheduled downtime metrics
for 2021
GOVERNANCE AND COMPENSATION
• In depth review and approval of 2030 Scope 1 and Scope 2 science-based
decarbonisation target and associated capital plans prior to submission to SBTi
for validation
• In-depth review of carbon intensity of Sappi business units and operations
against peer group companies
• In depth review of global energy intensity profiles, fuel sources and associated
carbon emissions
• Reviewed the SETS Committee report for the annual integrated report as well as
sustainability information presented in the annual integrated report
• Reviewed the external verification update report on selected group sustainability
metrics
At certain meetings, a topic is selected for an in-depth review, typically matters
which in the view of the committee represent key risks or opportunities for the
business. This year the focus area was on the company’s response to climate
change, more specifically decarbonisation. In 2020 we committed to set a well
below 2 degrees science-based 2030 decarbonisation target. In May 2021
The Scope 1 and Scope 2 emission intensity target was approved by the SETS
Committee and Sappi Limited board prior to submission to SBTi for validation.
In addition, a dedicated decarbonisation capital plan was developed and
presented which will be continually updated to ensure that the targets are met.
Conclusion
The committee confirms that the group gives its SETS responsibilities the
necessary attention. Appropriate policies and programmes are in place to
contribute to social and economic development, ethical behaviour of staff towards
colleagues and other stakeholders, fair labour practices, environmental
responsibility and good customer relations. In fulfilling their mandate, the committee
has sought to ensure the needs of a wide set of stakeholders, including employees,
local communities, customers and shareholders are considered and that key
sustainability risks are identified and managed.
There were no substantive areas of non-compliance with legislation and regulation,
nor non-adherence with codes of best practice applicable to the areas within
the committee’s mandate that were brought to the committee’s attention.
The committee has no reason to believe that any such non-compliance or
non-adherence has occurred.
MV Moosa
Chairman
Social, Ethics, Transformation and Sustainability Committee
175
A M P
L I F Y
In a continuous flow of energy and life, water always finds the lowest level in an
incredibly efficient manner. It penetrates any crevice or path that will facilitate its
downward flow, steadily meandering and descending in search of lower planes.
In a similar fashion, our focus is on amplifying value creation for all our stakeholders.
We do so by prioritising low-cost mills and maximising existing capacity, optimising pulp
integration and targeting best overall machine efficiency levels.
We also work to amplify value creation through innovation and R&D. Innovation is a way of
operating that provides competitive advantages and ensures we grow, flourish and progress.
R&D is focused on realising our ambitious but achievable strategy of extracting more value from
each tree. Our strategy is supported by technology centres in each region which cover every
section of the value chain.
The landscape around us is changing rapidly. Stakeholders’ needs and expectations have shifted,
in particular as regards the environment and social equity.
We are responding to natural resources constraints by seeking responsible alternatives to
non-renewables and solutions that are truly sustainable from seed to final product. We strictly
monitor and control our use of energy, water and other raw materials and are investing in
reducing our reliance on fossil fuels.
In the communities where we operate, we prioritise projects that support education,
entrepreneurship and environment, as well as health and welfare, while working to break the
cycle of poverty through stable, safe employment.
By amplifying value creation in this way, we accelerate and advance meaningful change.
176
A M P
L I F Y
In a continuous flow of energy and life, water always finds the lowest level in an
incredibly efficient manner. It penetrates any crevice or path that will facilitate its
downward flow, steadily meandering and descending in search of lower planes.
In a similar fashion, our focus is on amplifying value creation for all our stakeholders.
We do so by prioritising low-cost mills and maximising existing capacity, optimising pulp
integration and targeting best overall machine efficiency levels.
We also work to amplify value creation through innovation and R&D. Innovation is a way of
operating that provides competitive advantages and ensures we grow, flourish and progress.
R&D is focused on realising our ambitious but achievable strategy of extracting more value from
each tree. Our strategy is supported by technology centres in each region which cover every
section of the value chain.
The landscape around us is changing rapidly. Stakeholders’ needs and expectations have shifted,
in particular as regards the environment and social equity.
We are responding to natural resources constraints by seeking responsible alternatives to
non-renewables and solutions that are truly sustainable from seed to final product. We strictly
monitor and control our use of energy, water and other raw materials and are investing in
reducing our reliance on fossil fuels.
In the communities where we operate, we prioritise projects that support education,
entrepreneurship and environment, as well as health and welfare, while working to break the
cycle of poverty through stable, safe employment.
By amplifying value creation in this way, we accelerate and advance meaningful change.
177
APPENDICES
Five year review
for the year ended September 2021
US$ million
2021
2020
2019
2018
2017
Income statement
Sales
Variable manufacturing and delivery costs
Fixed costs
Sundry expenses (income)(1)
Operating profit excluding special items
Special items – (gains) losses
Operating profit (loss)
Net finance costs
Profit (loss) before taxation
Taxation charge
Profit (loss) for the year
EBITDA excluding special items
Balance sheet
Total assets
Non-current assets
Current assets
Current liabilities
Shareholders' equity
Net debt
Gross interest-bearing debt
Cash
Capital employed
Cash flow
Cash generated from operations
Decrease (increase) in working capital
Finance costs paid
Finance income received
Taxation paid
Dividends paid
Cash generated from operating activities
Net cash generated (utilised)
Cash effects of financing activities
Capital expenditure (gross)
To maintain operations
To expand operations
5,265
3,238
1,777
47
203
57
146
134
12
(1)
13
532
6,186
4,255
1,931
1,309
1,970
1,946
2,312
(366)
3,916
472
39
(110)
8
(2)
–
407
29
33
374
176
198
4,609
2,838
1,673
41
57
95
(38)
88
(126)
9
(135)
378
5,455
3,891
1,564
1,123
1,632
1,957
2,236
(279)
3,589
323
65
(108)
6
(26)
–
260
(257)
138
351
126
225
5,746
3,530
1,771
43
402
19
383
85
298
87
211
687
5,623
3,789
1,834
1,214
1,948
1,501
1,894
(393)
3,449
673
(15)
(51)
9
(51)
(92)
473
1
56
471
148
323
5,806
3,521
1,767
38
480
(9)
489
68
421
98
323
762
5,670
3,766
1,904
1,173
1,947
1,568
1,931
(363)
3,515
709
(79)
(84)
18
(73)
(81)
410
(254)
68
541
167
374
5,296
3,147
1,601
22
526
-
526
80
446
108
338
785
5,247
3,378
1,869
1,043
1,747
1,322
1,872
(550)
3,069
748
(27)
(96)
15
(100)
(59)
481
108
(279)
357
140
217
Exchange rates
1,181
US$ per one Euro exchange rate – closing
1,106
US$ per one Euro exchange rate – average (financial year)
13,556
ZAR to one US$ exchange rate – closing
ZAR to one US$ exchange rate – average (financial year)
13,381
(1) Sundry items include all income and costs not directly related to manufacturing operations such as debtor securitisation costs, commissions
1,172
1,196
14,966
14,851
1,161
1,190
14,147
13,052
1,163
1,120
17,131
16,226
1,094
1,128
15,156
14,346
paid and received and results of equity-accounted investments.
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APPENDICES
US$ million
2021
2020
2019
2018
2017
Statistics
Number of ordinary shares (millions)(1)
In issue at year end
Basic weighted average number of shares in issue
during the year
Per share information (US cents)
Basic earnings (loss)
Diluted earnings (loss)
Headline earnings (loss)
Diluted headline earnings (loss)
EPS excluding special items (US cents)
Net asset value
Profitability ratios (%)
Operating profit (loss) to sales
Operating profit excluding special items to sales
EBITDA excluding special items to sales
Operating profit excluding special items to capital
employed (ROCE)
Net debt to EBITDA excluding special items
Interest cover
Return on average equity (ROE)
Debt ratios (%)
Net debt to total capitalisation
Efficiency ratios
Asset turnover (times)
Inventory turnover ratio
Liquidity ratios
Current asset ratio
Trade accounts receivable days outstanding
(including receivables securitised)
Cash interest cover (times)
Other non-financial information(2)
Sales volumes
Number of full-time equivalent employees
Lost time injury frequency rate (including contract employees)
Energy
Energy intensity (GJ/adt)
Renewable energy to total energy(%)
Water
Specific process water extracted (m3/adt)
Waste
561.5
546.1
542.8
539.3
535.0
549.7
545.5
542.0
538.1
533,9
2
2
5
5
15
351
2.8
3.9
10.1
5.4
3.7
5.5
0.7
(25)
(25)
(19)
(19)
(5)
299
(0.8)
1.2
8.2
1.6
5.2
4.7
(7.5)
39
39
42
42
44
359
6.7
7.0
12.0
11.0
2.2
9.3
10.0
60
59
59
58
60
361
8.4
8.3
13.1
14.6
2.1
11.0
17.5
63
62
64
63
64
327
9.9
9.9
14.8
18.0
1.7
9.1
21.6
49.7
54.5
43.5
44.6
43.1
0.9
5.6
1.5
47
4.5
0.8
6.3
1.4
44
3.7
1.0
7.0
1.5
46
7.6
1.0
6.7
1.6
45
9.3
1.0
7.0
1.8
45
8.1
7,339
12,492
0.38
6,788
12,805
0.35
7,622
12,821
0.54
7,591
12,645
0.43
7,410
12,158
0.44
22.35
52.44
23.70
53.06
22.12
51.65
22.56
50.33
22.82
52.33
34.86
37.09
34.51
34.49
34.18
Specific total landfill (tonne/adt)
0.053
0.061
0.066
0.064
0.079
Emissions
Specific scope 1 emissions (ton CO2 eq/adt)
Absolute Scope 1 (ton CO2e)
Specific scope 2 emissions (ton CO2 eq/adt)
Absolute Scope 2 (ton CO2e)
0.68
4,273,189
0.16
1,022,586
0.71
4,082,708
0.20
1,152,771
0.66
4,425,323
0.22
1,482,328
0.69
4,451,642
0.23
1,483,552
0.68
4,327,137
0.24
1,545,343
Refer to share statistics section for other market and share-related information.
(1) Net of treasury shares (refer to note 19 to the group financial statements).
(2) Certain energy, water, waste and emissions data for the comparative years have been restated using the latest reporting standards and
measurement methodology.
Note: Definitions for various terms and ratios used above are included in the glossary section.
179
APPENDICES
Share statistics
as at September 2021
Shareholding
Ordinary shares in issue
1 – 5,000
5,001 – 10,000
10,001 – 50,000
50,001 – 100,000
100,001 - 1,000,000
Over 1,000,000
Number of
shareholders
8,373
250
423
170
376
83
9,675
Number of
shares(1)
% of shares
in issue
3,592,022
1,866,934
10,166,003
12,368,505
119,312,712
414,216,140
0.6
0.3
1.8
2.2
21.2
73.9
%
86.4
2.6
4.4
1.8
3.9
0.9
100.0
561,522,316
100.0
(1) The number of shares excludes 5,457,921 treasury shares held by the group.
Shareholder spread
Type of shareholder
Non-public
Sappi Limited directors and prescribed officers
Associates of group directors
Trustees of the company's share and retirement funding schemes
Shareowners who, by virtue of any agreement, have the right to nominate board members
Share owners interested in 10% or more of the issued shares
Public (the number of public shareholders as at September 2021 was 9,663)
% of shares
in issue
0.5
0.5
–
0.0
–
–
99.5
100.0
Sappi has a primary listing on the JSE Limited and a Level 1 ADR programme that trades in the over-the-counter market in the
United States.
A large number of shares are held by nominee companies for beneficial shareholders. Pursuant to section 56(7) of the
Companies Act 71 of 2008 of South Africa, the directors have investigated the beneficial ownership of shares in Sappi Limited,
including those which are registered in the nominee holdings. These investigations revealed as of September 2021, the following
are beneficial holders of more than 5% of the issued share capital of Sappi Limited:
(cid:37)e(cid:81)efici(cid:68)(cid:79)(cid:3)(cid:75)(cid:82)(cid:79)der
Public Investment Corporation
Alexander Forbes Investments
Allan Gray Balanced Fund
Shares
90,846,857
34,224,444
30,787,959
%
16.2
6.1
5.5
Further, as a result of these investigations, the directors have ascertained that some of the shares registered in the names of the
nominee holders are managed by various fund managers and that, as of September 2021, the following fund managers were
responsible for managing 5% or more of the share capital of Sappi Limited:
Fund manager
Public Investment Corporation
Allan Gray Pty Limited
Prudential Investment Managers
Ninety One Plc
Old Mutual Limited
Shares
78,821,182
78,235,288
67,240,327
64,917,106
37,930,522
%
14.0
13.9
12.0
11.6
6.8
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Share statistics
Ordinary shares in issue (millions)(1)
Net asset value per share (US cents)
Number of shares traded (millions)
JSE
New York
Value of shares traded
JSE (ZAR million)
New York (US$ million)
Percentage of issued shares traded
Market price per share
- year end
- highest
- lowest
JSE (South African cents)
New York (US cents)
JSE (South African cents)
New York (US cents)
JSE (South African cents)
New York (US cents)
APPENDICES
2021
2020
2019
2018
2017
561.5
351
444.5
0.7
546.1
299
736.3
2.0
542.8
359
537.1
0.3
539.3
361
557.4
0.4
535.0
327
630.7
3.1
17,073.0
1.6
79.3
24,509.3
4.0
135.2
33,141.3
1.5
99.0
49,837.1
2.9
103.4
54,760.0
20.3
118.5
3,861
260
5,269
359
2,265
135
0.78
128.99
2,377
151
4,799
345
1,720
107
negative
negative
3,629
251
9,059
640
3,542
241
16.29
6.14
8,875
639
10,579
749
7,180
613
9.56
10.46
9,206
681
10,438
797
6,953
509
9.28
10.78
3,633
Earnings yield (%)(2)
Price/earnings ratio (times)(2)
Total market capitalisation (US$ million)(2)
(1) The number of shares excludes 5,457,921 treasury shares held by the group.
(2) Based on financial year-end closing prices on the JSE Limited. Income statement amounts have been converted at average year-to-date
1,449
3,383
1,300
758
exchange rates.
Note: Definitions for various terms and ratios used above are included in the Glossary section.
181
APPENDICES
Glossary
(cid:42)e(cid:81)er(cid:68)(cid:79)(cid:3)defi(cid:81)iti(cid:82)(cid:81)(cid:86)
AGM – Annual General Meeting.
AF&PA – American Forest and Paper
Association.
air dry tons (ADT) – Meaning dry solids
content of 90% and moisture content of
10%.
BCTMP – Bleached Chemi-Thermo
Mechanical Pulp.
biochemicals – Enzymes, hormones,
pheromones etc, which either occur
naturally or are manufactured to be
identical to naturally occurring
substances. Biochemicals have many
environment-friendly applications, such
as natural pesticides that work in
non-lethal ways as repellents or by
disrupting the mating patterns of the
pests.
biofuels – Organic material such as
wood, waste and alcohol fuels, as well
as gaseous and liquid fuels produced
from these feedstocks.
biomaterials – New developments in
wood processing supports the move
to a biobased economy that utilises
materials that are renewable and
biodegradable and in the case of wood
feedstocks do not compete with food
sources.
black liquor – The spent cooking liquor
from the pulping process which arises
when pulpwood is cooked in a digester
thereby removing lignin, and other
extractives from the wood to free the
cellulose fibres. The resulting black
liquor is an aqueous solution of lignin
residues and the inorganic chemicals
used in the pulping process. Black liquor
contains slightly more than half of the
energy content of the wood fed into the
digester.
bleached pulp – Pulp that has been
bleached by means of chemical
additives to make it suitable for higher
brightness fine paper production.
casting and release paper –
Embossed paper used to impart design
in polyurethane or polyvinyl chloride
plastic films for the production of
synthetic leather and other solid
textured surfaces.
CEPI – Confederation of European
Paper Industries.
Cham Paper Group Holding AG (CPG)
– Speciality paper business acquired by
Sappi, which included CPG’s Carmignano
and Condino Mills (Italy) and its digital
imaging business located in Cham
(Switzerland) as well as all brands and
know-how.
chemical oxygen demand (COD) – The
amount of oxygen required to break
down the organic compounds in
effluent.
chemical pulp – A generic term for pulp
made from woodfibre that has been
produced in a chemical process.
CHP – Combined heat and power.
coated mechanical paper (CM)
– Coated paper made from groundwood
pulp which has been produced in a
mechanical process, primarily used for
magazines, catalogues and advertising
material.
coated paper – Papers that contain a
layer of coating material on one or both
sides. The coating materials, consisting
of pigments and binders, act as a filler
to improve the printing surface of the
paper.
coated woodfree paper (CWF)
– Coated paper made from chemical
pulp which is made from woodfibre that
has been produced in a chemical
process, primarily used for high-end
publications and advertising material.
corrugating medium – Paperboard
made from chemical and semi-
chemical pulp, or waste paper, that is to
be converted to a corrugated board by
passing it through corrugating cylinders.
Corrugating medium between layers of
linerboard form the board from which
corrugated boxes are produced.
CSI and CSR – Corporate social
investment and corporate social
responsibility.
CSV – Corporate shared value involves
developing profitable business strategies
that deliver tangible social benefits.
dissolving pulp (DP) – Highly purified
chemical pulp derived primarily from
wood and in some instances cotton
linters, intended primarily for conversion
into chemical derivatives of cellulose
and used mainly in the manufacture
of viscose staple fibre, solvent spin fibre
and filament.
DP market price - Market price for
imported hardwood dissolving pulp into
China issued daily by the CCF Group
EIA – Environmental impact
assessment.
ESG – Environmental, social and
corporate governance.
energy – Is present in many forms such
as solar, mechanical, thermal, electrical
and chemical. Any source of energy can
be tapped to perform work. In power
plants, coal is burned and its chemical
energy is converted into electrical
energy. To generate steam, coal and
other fossil fuels are burned, thus
converting stored chemical energy into
thermal energy.
fibre – Fibre is generally referred to as
pulp in the paper industry. Wood is
treated chemically or mechanically to
separate the fibres during the pulping
process.
fine paper – Paper usually produced
from chemical pulp for printing and
writing purposes and consisting of
coated and uncoated paper.
FMCG – Fast-moving consumer goods.
Examples include non-durable goods
such as packaged foods, beverages,
toiletries, over-the-counter medicines
and many other consumables.
FSA – Forestry South Africa.
Forest Stewardship CouncilTM (FSCTM)
– A global, not-for-profit organisation
dedicated to the promotion of
responsible forest management
world-wide. (https://ic.fsc.org/en).
full-time equivalent employee – The
number of total hours worked divided by
the maximum number of compensable
hours in a full-time schedule as defined
by law.
graphic papers – A generic term
for a group of papers intended for
commercial printing use such as coated
woodfree, coated mechanical, uncoated
woodfree and newsprint.
greenhouse gases (GHG) – The GHGs
included in the Kyoto Protocol are
carbon dioxide, methane, nitrous oxide,
hydrofluorocarbons, perfluorocarbons
and sulphur hexafluoride.
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APPENDICES
hemicellulose sugars – The biorefinery
process for second generation
hemicellulose sugars involves
recovering them from the prehydolysate
liquor, and then separating them mostly
from lignin.
high-yield pulp – Pulp that has a higher
yield from wood logs than pure chemical
pulps. High-yield pulp is processed
either through mechanical processes
or combined mechanical chemical
processes such as Matane high-yield
bleached chemi-thermo mechanical
pulp (BCTMP).
mechanical pulp – Pulp produced by
means of the mechanical grinding or
refining of wood or woodchips.
nanocellulose – Cellulose is the main
component of plant stems, leaves and
roots. Traditionally, its main commercial
use was in producing paper and textiles.
Nanocellulose is derived from further
processing cellulose to a smaller size
fraction or nano scale. These
engineered celluloses open up
opportunities for advanced, planet-
friendly solutions in place of
environmentally harmful products.
ISO – The International Organization for
Standardization.
natural/indigenous forest – Pristine
areas not used commercially.
JSE Limited – The main securities
exchange in South Africa.
kraft paper – Packaging or other paper
(bleached or unbleached) made from
kraft pulp.
kraft pulp – Chemical wood pulp
produced by digesting wood by means
of the sulphate pulping process.
Kyoto Protocol – A document signed
by over 160 countries at Kyoto, Japan
in December 1997 which commits
signatories to reducing their emission of
GHG relative to levels emitted in 1990.
lignosulphonate – Lignosulphonate is a
highly soluble lignin derivative and a
product of the sulphite pulping process.
linerboard – The grade of paperboard
used for the exterior facings of
corrugated board. Linerboard is
combined with corrugating medium
by converters to produce corrugated
board used in boxes.
liquor – White liquor is the aqueous
solution of sodium hydroxide and
sodium sulphide used to extract lignin
during kraft pulping. Black liquor is the
resultant combination of lignin, water
and chemicals.
lost-time injury frequency rate
(LTIFR) – Number of lost time injuries x
200,000 divided by man hours.
managed forest – Naturally occurring
forests that are harvested and managed
commercially.
NBHK – Northern Bleached Hardwood
Kraft pulp. One of the varieties of market
pulp, produced from hardwood trees (ie
birch or aspen) in Scandinavia, Canada
and northern United States of America.
NBSK – Northern Bleached Softwood
Kraft pulp. One of the main varieties of
market pulp, produced from coniferous
trees (ie spruce, pine) in Scandinavia,
Canada and northern United States
of America. The price of NBSK is a
benchmark widely used in the pulp and
paper industry for comparative
purposes.
newsprint – Paper produced for the
printing of newspapers mainly from
mechanical pulp and/or recycled waste
paper.
NGO – Non-governmental organisation.
NPO – Non-profit organisation.
OHSAS – An international health and
safety standard.
OTC – Over-the-counter trading of
shares.
Packaging and speciality papers –
A generic term for a group of papers
intended for commercial and industrial
use such as flexible packaging, label
papers, functional papers,
containerboard, paperboard, silicone
base papers, casting and release
papers, dye sublimation papers, inkjet
papers and tissue paper.
packaging paper – Paper used for
packaging purposes.
PAMSA – Paper Manufacturers’
Association of South Africa.
Programme for the Endorsement of
Forest Certification (PEFC) – An
international non-profit, NGO dedicated
to promoting sustainable forest
management (SFM) through
independent third-party certification.
PEFC works by endorsing national forest
certification systems and is represented
in 49 countries through national
organisations such as SFI® in North
America (https://www.pefc.org).
plantation – Large scale planted
forests, intensively managed, highly
productive and grown primarily for wood
and fibre production.
PM – Paper machine.
power – The rate at which energy
is used or produced.
pulpwood – Wood suitable for
producing pulp – usually not of sufficient
standard for sawmilling.
raster – A rectangular pattern of parallel
scanning lines followed by the electron
beam on a television screen or
computer monitor.
release paper – Based paper used in
the production of making release liners,
the backing paper for self-adhesive
labels.
sackkraft – Kraft paper used to
produce multi-wall paper sacks.
Sappi Biotech – The business unit
within Sappi which drives innovation and
commercialisation of biomaterials and
biochemicals.
Sappi Europe (SEU) – The business
unit within Sappi which oversees
operations in the European region.
Sappi Dissolving Pulp (DP) – The
business unit within Sappi which
oversees the production and
marketing of DP.
Sappi North America (SNA) – The
business unit within Sappi which
oversees operations in the North
American region.
183
APPENDICES
Glossary continued
Sappi Southern Africa (SSA) – The
business unit within Sappi which
oversees operations in the Southern
Africa region.
specific total energy (STE) – The
energy intensity ratio defined by the
total energy consumption in the context
of the saleable production.
(cid:42)e(cid:81)er(cid:68)(cid:79)(cid:3)fi(cid:81)(cid:68)(cid:81)ci(cid:68)(cid:79)(cid:3)
defi(cid:81)iti(cid:82)(cid:81)(cid:86)
acquisition date – The date on which
control in respect of subsidiaries, joint
control in respect of joint arrangements
and significant influence in associates
commences.
associate – An entity over which the
investor has significant influence.
basic earnings per share – Net profit
for the year divided by the weighted
average number of shares in issue
during the year.
Sustainable Forestry Initiative® (SFI®)
– A solutions-oriented sustainability
organisation that collaborates on forest-
based conservation and community
initiatives. The SFI forest management
standard is the largest forestry
certification standard in the PEFC
programme. (https://www.forests.org).
TCFD – Task Force on Climate-related
Financial Disclosures.
thermo-mechanical pulp – Pulp
produced by processing woodfibres
using heat and mechanical grinding
or refining wood or woodchips.
commissioning date – The date that an
item of property, plant and equipment,
whether acquired or constructed, is
brought into use.
ton – Metric ton of 1,000 kg.
total suspended solids (TSS) – Refers
to matter suspended or dissolved in
effluent.
tons per annum (tpa) – Term used in
this report to denote tons per annum
(tons a year). Capacity figures in this
report denote tons per annum at
maximum continuous run rate.
uncoated woodfree paper – Printing
and writing paper made from bleached
chemical pulp used for general printing,
photocopying and stationery, etc.
Referred to as uncoated as it does not
contain a layer of pigment to give it a
coated surface.
United Nations Global Compact
(UNGC) – A principle-based framework
for businesses, stating 10 principles in
the areas of human rights, labour,
environment and anticorruption.
UN SDGs – United Nations Sustainable
Development Goals.
compound annual growth rate –
Is the mean annual growth rate of an
investment over a specified period
of time longer than one year.
control – An investor controls an
investee when it is exposed, or has
rights, to variable returns from its
involvement with the investee and has
the ability to affect those returns
through its power over the investee.
diluted earnings per share – Is
calculated by assuming conversion or
exercise of all potentially dilutive shares,
share options and share awards unless
these are anti-dilutive.
discount rate – This is the pre-tax
interest rate that reflects the current
market assessment of the time value of
money for the purposes of determining
discounted cash flows. In determining
the cash flows the risks specific to the
asset or liability are taken into account
in determining those cash flows and are
not included in determining the discount
rate.
viscose staple fibre (VSF) – A natural
fibre made from purified cellulose,
primarily from DP that can be twisted
to form yarn.
disposal date – The date on which
control in respect of subsidiaries, joint
arrangements and significant influence
in associates ceases.
woodfree paper – Paper made from
chemical pulp.
World Wide Fund for Nature (WWF)
– The world’s largest conservation
organisation, focused on supporting
biological diversity.
fair value – The price that would be
received to sell an asset or paid to
transfer a liability in an orderly
transaction between market
participants at the measurement date.
SBTi - The Science Based Targets
initiative (SBTi) is a partnership between
Carbon Disclosure Project (CDP), the
United Nations Global Compact (UNGC),
World Resources Institute (WRI) and the
World Wide Fund for Nature (WWF). The
objective of SBTi is to drive ambitious
climate action in the private sector by
enabling companies to set science-
based GHG emissions reduction
targets. SBTi provides technical
assistance and expert resources to
companies who set science-based
targets in line with the latest climate
science and provides companies with
independent assessment and validation
of decarbonisation targets.
Scope 1 and 2 GHG emissions – The
Greenhouse Gas Protocol defines
Scope 1 (direct) and Scope 2 (indirect)
emissions as follows:
• Direct GHG emissions are emissions
from sources that are owned or
controlled by the reporting entity, and
• Indirect GHG emissions are emissions
from purchased electricity, steam,
heat or cooling.
SDGs – see UN SDGs.
SETS – Social, ethics, transformation
and sustainability.
silviculture costs – Growing and tending
costs of trees in forestry operations.
solid waste – Dry organic and inorganic
waste materials.
specific – When data is expressed in
specific form, this means that the actual
quantity consumed during the year
indicated, whether energy, water,
emissions or solid waste, is expressed
in terms of a production parameter. For
Sappi, as with other pulp and paper
companies, this parameter is air dry
tons of saleable product.
specific purchased energy – The term
‘specific’ indicates that the actual
quantity during the year indicated, is
expressed in terms of a production
parameter. For Sappi, as with other pulp
and paper companies, the parameter is
air dry tons of product.
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financial results – Comprise the
financial position (assets, liabilities and
equity), results of operations (revenue
and expenses) and cash flows of an
entity and of the group.
foreign operation – An entity whose
activities are based or conducted in a
country or currency other than that of
the reporting entity.
functional currency – The currency of
the primary economic environment in
which the entity operates.
group – The group comprises Sappi
Limited, its subsidiaries and its interest
in joint ventures and associates.
joint arrangement – Is an arrangement
of which two or more parties have joint
control.
joint venture – Is a joint arrangement
whereby the parties that have joint
control of the arrangement have rights
to the net assets of the arrangement.
operation – A component of the group:
• That represents a separate major line
of business or geographical area of
operation that is distinguished
separately for financial and operating
purposes.
operating profit – A profit from
business operations before deduction
of net finance costs and taxes.
presentation currency – The currency
in which the financial results of an entity
are presented.
qualifying asset – An asset that
necessarily takes a substantial period
(normally in excess of six months) to get
ready for its intended use.
recoverable amount – The recoverable
amount of an asset or cash-generating
unit is the higher of its fair value less
costs of disposal and its value in use. In
determining the value in use, expected
future cash flows are discounted to their
net present values using the discount
rate.
related party – Parties are considered
to be related if one party directly or
indirectly has the ability to control the
other party or exercise significant
influence over the other party in making
financial and operating decisions or is a
member of the key management of
Sappi Limited.
share-based payment – A transaction
in which Sappi Limited issues shares or
share options to group employees as
compensation for services rendered.
significant influence – Is the power to
participate in the financial and operating
policy decisions of an entity but is not
control or joint control of those policies.
(cid:49)(cid:82)(cid:81)-(cid:42)(cid:36)(cid:36)P(cid:3)fi(cid:81)(cid:68)(cid:81)ci(cid:68)(cid:79)(cid:3)
defi(cid:81)iti(cid:82)(cid:81)(cid:86)
The group believes that it is useful to
report certain non-GAAP measures for
the following reasons:
• These measures are used by the
group for internal performance
analysis
• The presentation by the group’s
reported business segments of these
measures facilitates comparability
with other companies in our industry,
although the group’s measures may
not be comparable with similarly titled
profit measurements reported by
other companies, and
• It is useful in connection with
discussion with the investment
analyst community and debt rating
agencies.
These non-GAAP measures should not
be considered in isolation or construed
as a substitute for GAAP measures in
accordance with International Financial
Reporting Standards (IFRS).
asset turnover (times) – Sales divided
by total assets.
average – Averages are calculated as
the sum of the opening and closing
balances for the relevant period divided
by two.
BEE transaction implemented in 2010 in
terms of BEE legislation in South Africa.
capital employed – Shareholders’
equity plus net debt.
cash interest cover – Cash generated
by operations divided by finance costs
less finance revenue.
current asset ratio – Current assets
divided by current liabilities.
dividend yield – Dividends per share,
which were declared after year end, in
US cents divided by the financial year-end
closing prices on the JSE Limited
converted to US cents using the closing
financial year-end exchange rate.
earnings yield – Earnings per share
divided by the financial year-end closing
prices on the JSE Limited converted to
US cents using the closing financial
year-end exchange rate.
EBITDA excluding special items
– Earnings before interest (net finance
costs), taxation, depreciation,
amortisation and special items.
EPS excluding special items –
Earnings per share excluding special
items and certain once-off finance and
tax items.
fellings – The amount charged against
the income statement representing the
standing value of the plantations
harvested.
GAAP – Generally accepted accounting
principles.
headline earnings – As defined in
Circular 1/2019, issued by the South
African Institute of Chartered
Accountants in December 2019, which
separates from earnings all separately
identifiable remeasurements. It is not
necessarily a measure of sustainable
earnings. It is a Listings Requirement of
the JSE Limited to disclose headline
earnings per share.
black economic empowerment (BEE)
charge – Represents the IFRS 2
non-cash charge associated with the
inventory turnover (times) – Cost of
sales divided by inventory on hand at
balance sheet date.
185
gains or losses on the price fair value
adjustment of plantations and
alternative fuel tax credits receivable
in cash.
total market capitalisation – Ordinary
number of shares in issue (excluding
treasury shares held by the group)
multiplied by the financial year-end
closing prices on the JSE Limited
converted to US cents using the
closing financial year-end exchange
rate.
trade receivables days outstanding
(including securitised balances) –
Gross trade receivables, including
receivables securitised, divided by
sales multiplied by the number of days
in the year.
APPENDICES
Glossary continued
net assets – Total assets less total
liabilities.
net asset value per share – Net assets
divided by the number of shares in
issue at balance sheet date.
price/earnings ratio – The financial
year-end closing prices on the
JSE Limited converted to US cents
using the closing financial year-end
exchange rate divided by earnings
per share.
net cash (utilised) generated – Cash
flows from operating activities less
cash flows from investing activities.
revolving credit facility (RCF) –
A variable line of credit used by public
and private businesses.
net debt – Current and non-current
interest-bearing borrowings and lease
liabilities, and bank overdraft (net of
cash, cash equivalents and short-term
deposits).
net debt to total capitalisation – Net
debt divided by capital employed.
ROCE – Return on average capital
employed. Operating profit excluding
special items divided by average capital
employed.
ROE – Return on average equity. Profit
for the period divided by average
shareholders’ equity.
net operating assets – Total assets
(excluding deferred taxation and cash
and cash equivalents) less current
liabilities (excluding interest-bearing
borrowings, lease liabilities and
overdraft).
ordinary dividend cover – Profit for
the period divided by the ordinary
dividend declared, multiplied by the
actual number of shares in issue at
year end.
ordinary shareholders’ interest per
share – Shareholders’ equity divided by
the actual number of shares in issue at
year end.
RONOA – Return on average net
operating assets. Operating profit
excluding special items divided by
average net operating assets.
SG&A – Selling, general and
administrative expenses.
special items – Special items cover
those items which management believe
are material by nature or amount to the
operating results and require separate
disclosure. Such items would generally
include profit or loss on disposal of
property, investments and businesses,
asset impairments, restructuring
charges, non-recurring integration
costs related to acquisitions, financial
impacts of natural disasters, non-cash
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Notice to shareholders
Notice of Annual General Meeting
This document is important and requires your immediate attention.
If you are in any doubt as to what action you should take, please consult your stockbroker, banker, attorney, accountant or other
professional adviser immediately.
Sappi Limited
(Registration number: 1936/008963/06)
JSE share code: SAP
ISIN: ZAE000006284
(Sappi or the Company)
Notice is hereby given to the shareholders of the Company (Shareholders) in terms of section 62(1) of the Companies Act, No. 71
of 2008 as amended (Companies Act) that the eighty fifth (85th) Annual General Meeting of the company will be held entirely
through electronic communication on Wednesday, 09 February 2022 at 14:00 (South African Standard Time). This annual general
meeting, and any resumption thereof pursuant to an adjournment or recommencement thereof pursuant to a postponement, is
referred to hereinafter as the AGM.
Record dates
The record date on which shareholders must be recorded as such in the register maintained by Computershare Investor Services
Proprietary Limited, the transfer secretaries of the company (transfer secretaries) in order to be entitled to receive this Notice of
AGM is Friday, 03 December 2021. This Notice of AGM is sent to shareholders on Friday, 17 December 2021 and this will be
announced on the Stock Exchange News Service (SENS), on the same date.
The last day to trade in order to be eligible to attend and vote at the AGM is Tuesday, 01 February 2022.
The record date to determine which shareholders are entitled to attend and vote at the AGM is Friday, 04 February 2022
(Attendance Record Date).
Order of business
A To present:
i.
ii.
the audited consolidated annual financial statements of the company for the financial year ended September 2021,
including the reports of the auditors, the directors and the Audit and Risk Committee, such annual financial statements
having been approved by the board of directors of the company (board) as required by section 30(3)(c) of the Companies
Act, and
the report of the Social, Ethics, Transformation and Sustainability Committee in the annual integrated report
(see page
174).
The complete audited consolidated annual financial statements of the company for the financial year ended 2021 are
available on the Sappi website: www.sappi.com.
B To present the annual integrated report, containing the disclosures required as per the JSE Listings Requirements. The
annual integrated report is available on the Sappi website: www.sappi.com.
C To consider and, if deemed fit, pass (with or without modification) the ordinary and special resolutions set out below:
1. Ordinary resolution number 1: Re-election of the directors retiring by rotation in terms of the Sappi’s
memorandum of incorporation
Each of the board and the Nomination and Governance Committee has evaluated the performance of each of the
following directors who are retiring by rotation and recommends and supports the re-election of each of them. For brief
biographical details of these directors, refer to note 1 in Notice to Shareholders on page
194.
It is intended that all the directors who retire by rotation will, if possible, attend the AGM, by means of videoconferencing.
In order for these resolutions to be adopted, in each case the support of more than 50% of the voting rights exercised
on the resolution by shareholders present or represented by representative or proxy at the AGM and entitled to exercise
voting rights on the resolution is required:
Ordinary resolution number 1.1
“Resolved that Mr SR Binnie be and is hereby re-elected as a director of Sappi.”
187
APPENDICES
Notice to shareholders continued
Ordinary resolution number 1.2
“Resolved that Mr JM Lopez be and is hereby re-elected as a director of Sappi.”
Ordinary resolution number 1.3
“Resolved that Mr BR Beamish be and is hereby re-elected as a director of Sappi.”
Ms J E Stipp will retire effective 09 February 2022 and has notified the board that she will not offer herself for re-election.
Sappi thanks Ms Stipp for her invaluable contribution to the board.
2. Ordinary resolution number 2: Election of Audit and Risk Committee members
Ordinary resolution number 2 is proposed to elect the members of the Audit and Risk Committee in accordance with
section 94(2) of the Companies Act and the King IV Report on Corporate Governance for South Africa 2016 (King IV).
Section 94 of the Companies Act requires that, at each AGM, shareholders must elect an Audit and Risk Committee
comprising at least three members.
The Nomination and Governance Committee has assessed the performance and independence of each of the
directors proposed to be members of the Audit and Risk Committee, and recommends their election to the Audit and Risk
Committee. The board considered and accepted the findings of the Nomination and Governance Committee. The board
is satisfied that the proposed members meet the requirements of section 94(4) of the Companies Act, that they are
independent according to King IV and that they possess the required qualifications and experience as prescribed in
regulation 42 of the Companies Regulations, 2011, which requires that at least one-third of the members of a company’s
Audit Committee at any particular time must have academic qualifications or experience in economics, law, corporate
governance, finance, accounting, commerce, industry, public affairs or human resource management.
Brief biographical details of each proposed member of the Audit and Risk Committee are included in the biographies
of the directors contained under Our Leadership in the annual integrated report (see page
134).
Ordinary resolution number 2.1
“Resolved that Mr NP Mageza be and is hereby elected as a member (and chairperson) of the Audit and Risk Committee.”
Ordinary resolution number 2.2
“Resolved that Ms ZN Malinga be and is hereby elected as a member of the Audit and Risk Committee.”
Ordinary resolution number 2.3
“Resolved that Dr B Mehlomakulu be and is hereby elected as a member of the Audit and Risk Committee.”
Ordinary resolution number 2.4
“Resolved that Mr RJAM Renders be and is hereby elected as a member of the Audit and Risk Committee.”
Ms JE Stipp, member of the Audit and Risk Committee has notified the board that she will not offer herself for re-election
to the board and as such, will not offer herself for re-election as a member of the Audit and Risk Committee. An
announcement on her replacement will be made in due course.
In terms of the Companies Act, each proposed member of the Audit and Risk Committee will, if elected, hold office until
the conclusion of the next AGM and perform the duties and responsibilities stipulated in section 94(7) of the Companies
Act, in the JSE Listings Requirements and in King IV and such other duties and responsibilities as may from time to time
be determined by the board.
In order for each of the resolutions in this paragraph 2 to be adopted, the support in each case of more than 50% of the
voting rights exercised on the resolution by shareholders present or represented by representative or proxy at the AGM
and entitled to exercise voting rights on the resolution is required.
3. Ordinary resolution number 3: Appointment of auditors
The board has evaluated the performance of KPMG Inc and recommends their re-appointment as auditors of Sappi.
“Resolved that KPMG Inc (with the designated registered auditor to be Mr Coenie Basson) be and is hereby re-appointed
as the auditors of Sappi for the financial year ending 2022 and remain in office until the conclusion of the next Annual
General Meeting.”
In order for this ordinary resolution number 3 to be adopted, the support of more than 50% of the voting rights exercised
on the resolution by shareholders present or represented by representative or proxy at the AGM and entitled to exercise
voting rights on the resolution is required.
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APPENDICES
4. Ordinary resolution number 4: Remuneration policy
“Resolved that the company’s remuneration policy as contained under Remuneration Report in the annual integrated
report (see page
154), be and is hereby endorsed by way of a non-binding advisory vote.”
This non-binding advisory vote is being proposed in accordance with the recommendations of King IV.
In order for this ordinary resolution number 4 to be adopted, the support of more than 50% of the voting rights exercised
on the resolution by shareholders present or represented by representative or proxy at the AGM and entitled to exercise
voting rights on the resolution is required.
The endorsement of each of the remuneration policy (in this ordinary resolution number 4) and the remuneration
implementation report (in ordinary resolution number 5) is tabled as a non-binding advisory vote. However, the outcome
of each vote will be acknowledged when considering the remuneration policy and the implementation thereof. If either
the remuneration policy or the remuneration implementation report, or both, is/are voted against by 25% or more of the
voting rights exercised, the board will, as recommended by King IV and required by the JSE Listings Requirements, in its
voting results announcement invite the dissenting shareholders to engage with Sappi, and state the manner and timing
of such engagement.
5. Ordinary resolution number 5: Remuneration implementation report
“Resolved that the company’s remuneration implementation report under Remuneration Report in the annual integrated
report (see page
154), be and is hereby endorsed by way of a non-binding advisory vote.”
This non-binding advisory vote is being proposed in accordance with the recommendations of King IV.
In order for this ordinary resolution number 5 to be adopted, the support of more than 50% of the voting rights exercised
on the resolution by shareholders present or represented by representative or proxy at the AGM and entitled to exercise
voting rights on the resolution is required.
6. Special resolution number 1: Non-executive directors’ fees
“Resolved that, with effect from 01 October 2021 and until otherwise determined in general meeting, the remuneration
of the non-executive directors for their services shall be as follows:
Fee structure
1. Sappi Board fees(cid:11)(cid:20)(cid:12)
Chairperson
If United Kingdom resident
Lead Independent Director
If South African resident
If United Kingdom resident
If United States of America resident
If European resident
Other directors
If South African resident
If United Kingdom resident
If United States of America resident
If European resident
2. Audit and Risk Committee fees(cid:11)(cid:20)(cid:12)
Chairperson
If South African resident
If United Kingdom resident
If United States of America resident
If European resident
Other directors
If South African resident
If United Kingdom resident
If United States of America resident
If European resident
From
To
£319,940
£319,940(2)
ZAR674,450
£70,070
US$105,820
€93,500
ZAR704,800
£71,121
US$108,466
€94,435
ZAR450,750
£46,670
US$70,540
€62,290
ZAR471,034
£47,370
US$72,304
€62,913
ZAR468,050
£47,390
US$73,060
€63,240
ZAR489,112
£48,101
US$74,887
€63,872
ZAR234,030
£23,830
US$35,680
€31,790
ZAR244,561
£24,187
US$36,572
€32,108
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APPENDICES
Notice to shareholders continued
3. Fee(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:43)(cid:88)(cid:80)(cid:68)(cid:81)(cid:3)(cid:53)e(cid:86)(cid:82)(cid:88)rce(cid:86)(cid:3)(cid:68)(cid:81)d(cid:3)C(cid:82)(cid:80)(cid:83)e(cid:81)(cid:86)(cid:68)ti(cid:82)(cid:81)(cid:3)C(cid:82)(cid:80)(cid:80)ittee(cid:15)(cid:3)
Nomination and Governance Committee, Social, Ethics,
Sustainability and Transformation Committee and any other
c(cid:82)(cid:80)(cid:80)ittee(cid:3)(cid:11)(cid:68)d(cid:3)(cid:75)(cid:82)c(cid:3)(cid:82)r(cid:3)(cid:82)t(cid:75)er(cid:90)i(cid:86)e(cid:12)(cid:11)(cid:20)(cid:12)
Chairperson
If South African resident
If United Kingdom resident
If United States of America resident
If European resident
Other directors
If South African resident
If United Kingdom resident
If United States of America resident
If European resident
4. (cid:36)dditi(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:80)eeti(cid:81)(cid:74)(cid:3)(cid:73)ee(cid:86)(cid:3)(cid:73)(cid:82)r(cid:3)(cid:69)(cid:82)(cid:68)rd(cid:3)(cid:80)eeti(cid:81)(cid:74)(cid:86)(cid:3)i(cid:81)(cid:3)e(cid:91)ce(cid:86)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)fi(cid:89)e(cid:3)(cid:80)eeti(cid:81)(cid:74)(cid:86)
(cid:83)er(cid:3)fi(cid:81)(cid:68)(cid:81)ci(cid:68)(cid:79)(cid:3)(cid:92)e(cid:68)r(cid:3)(cid:90)(cid:75)et(cid:75)er(cid:3)(cid:68)tte(cid:81)ded(cid:3)i(cid:81)(cid:3)(cid:83)er(cid:86)(cid:82)(cid:81)(cid:3)(cid:82)r(cid:3)(cid:69)(cid:92)(cid:3)te(cid:79)ec(cid:82)(cid:81)(cid:73)ere(cid:81)ce(cid:18)
videoconference
If South African resident
If United Kingdom resident
If United States of America resident
If European resident
5. Travel compensation
(applicable to long-haul flights with a duration of at least 10 hours)
If South African resident
If United Kingdom resident
If United States of America resident
If European resident
From
To
ZAR281,400
£28,160
US$41,750
€37,570
ZAR294,063
£28,582
US$42,794
€37,946
ZAR146,450
£19,730
US$25,500
€26,330
ZAR153,040
£20,026
US$26,138
€26,593
ZAR45,190
per meeting
£4,630
per meeting
US$7,050
per meeting
ZAR47,224
per meeting
£4,699
per meeting
US$7,226
per meeting
€6,170
per meeting
€6,232
per meeting
US$3,800
per meeting
US$3,800
per meeting
US$3,800
per meeting
US$3,800
per meeting
US$3,800
per meeting
US$3,800
per meeting
US$3,800
per meeting
US$3,800
per meeting
(1) Fees per financial year excluding VAT and taxes unless otherwise indicated.
(2) Inclusive of all board committee fees. If a future Chairperson is not a United Kingdom resident, appropriate benchmark information
in relation to his/her domicile will be used to determine fees payable.
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Sappi’s practice, as advised previously, is to review directors’ fees annually. Special resolution number 1 increases the
remuneration currently paid to non-executive directors and board committee members by between approximately
1.0% and 4.6% per annum depending generally on the domicile of the directors and the currency in which they are paid,
with effect from 01 October 2021. A bespoke benchmarking exercise in relation to the fees was carried out this year. The
conclusion was that the fees are at the appropriate and market-related levels. The recommendation is that Sappi adjust
all fees by the relevant consumer price index in the respective directors’ country of domicile for the 2022 financial year.
As for the Chairperson’s fee, no adjustment is proposed.
The review also takes into account that the responsibility of non-executive directors continues to increase substantially
flowing from legislative, regulatory and corporate governance developments and requirements in South Africa and
elsewhere.
Non-executive directors’ fees are paid quarterly (in March, June, September, and December each year) and the proposed
increase, if approved, will be applicable to payments to be made in December 2021 onwards. Initially the December 2021
payment will be made on the basis of the existing fee structure, and following shareholder approval of the proposed
increases, the shortfall in the December 2021 payment will be made up in the March 2022 payment.
The practice has been and will continue to be that directors’ fees and board committee fees are paid to non-executive
directors only.
In order for this special resolution number 1 to be adopted, the support of at least 75% of the voting rights exercised
on the resolution by shareholders present or represented by representative or proxy at the AGM and entitled to exercise
voting rights on the resolution is required.
7. Special resolution number 2: Loans or other financial assistance to related or inter-related companies
The Companies Act provides that the board of directors of a company may authorise that company to provide direct
or indirect financial assistance (which includes, without limitation, lending money, guaranteeing a loan or other obligation
and securing any debt or obligation) to a related or inter-related company, provided that such authorisation shall be
made pursuant to a special resolution of the shareholders adopted within the previous two years, which approved such
assistance either for the specific recipient or generally for a category of potential recipients and the specific recipient
falls within that category. The board of directors of a company can only approve financial assistance if it is satisfied that:
(i) immediately after providing the financial assistance, the company would satisfy the solvency and liquidity test
contained in the Companies Act, and (ii) the terms under which the financial assistance is proposed to be given are fair
and reasonable to the company.
“Resolved that the board be and is hereby authorised, in accordance with the Companies Act, to authorise the company
to provide direct or indirect financial assistance which the board may deem fit to any company (wheresoever incorporated
or registered) which is from time to time related or inter-related to the company, on such terms and conditions and in such
amounts as the board may determine.”
In order for this special resolution number 2 to be adopted, the support of at least 75% of the voting rights exercised
on the resolution by shareholders present or represented by representative or proxy at the AGM and entitled to exercise
voting rights on the resolution is required.
8. Ordinary resolution number 6: Signature of documents
“Resolved that any director and Group Company Secretary of Sappi (each being entitled to act individually) is authorised
to sign all such documents and do all such things as may be necessary or reasonably desirable for or incidental to the
implementation of the resolutions passed at this AGM.”
In order for this ordinary resolution number 6 to be adopted, the support of more than 50% of the voting rights exercised
on the resolution by shareholders present or represented by representative or proxy at the AGM and entitled to exercise
voting rights on the resolution is required.
191
APPENDICES
Notice to shareholders continued
D. Other matters:
To transact such other business as may be transacted at an AGM.
Identification
(cid:44)(cid:81)(cid:3)ter(cid:80)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:86)ecti(cid:82)(cid:81)(cid:3)(cid:25)(cid:22)(cid:11)(cid:20)(cid:12)(cid:3)(cid:82)(cid:73)(cid:3)t(cid:75)e(cid:3)C(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)ie(cid:86)(cid:3)(cid:36)ct(cid:15)(cid:3)(cid:69)e(cid:73)(cid:82)re(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:83)er(cid:86)(cid:82)(cid:81)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:83)(cid:68)rtici(cid:83)(cid:68)te(cid:3)i(cid:81)(cid:3)t(cid:75)e(cid:3)(cid:36)(cid:42)(cid:48)(cid:15)(cid:3)t(cid:75)(cid:68)t(cid:3)(cid:83)er(cid:86)(cid:82)(cid:81)(cid:3)(cid:80)(cid:88)(cid:86)t(cid:3)
(cid:83)re(cid:86)e(cid:81)t(cid:3)re(cid:68)(cid:86)(cid:82)(cid:81)(cid:68)(cid:69)(cid:79)e(cid:3)(cid:86)(cid:68)ti(cid:86)(cid:73)(cid:68)ct(cid:82)r(cid:92)(cid:3)ide(cid:81)tific(cid:68)ti(cid:82)(cid:81)(cid:3)t(cid:82)(cid:3)t(cid:75)e(cid:3)c(cid:75)(cid:68)ir(cid:83)er(cid:86)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)t(cid:75)e(cid:3)(cid:80)eeti(cid:81)(cid:74)(cid:15)(cid:3)(cid:90)(cid:75)(cid:82)(cid:3)(cid:80)(cid:88)(cid:86)t(cid:3)(cid:69)e(cid:3)re(cid:68)(cid:86)(cid:82)(cid:81)(cid:68)(cid:69)(cid:79)(cid:92)(cid:3)(cid:86)(cid:68)ti(cid:86)fied(cid:3)t(cid:75)(cid:68)t(cid:3)
such person has the right to listen in to, participate in, and vote in, the meeting, either as a shareholder or as a
re(cid:83)re(cid:86)e(cid:81)t(cid:68)ti(cid:89)e(cid:3)(cid:82)r(cid:3)(cid:83)r(cid:82)(cid:91)(cid:92)(cid:3)(cid:73)(cid:82)r(cid:3)(cid:68)(cid:3)(cid:86)(cid:75)(cid:68)re(cid:75)(cid:82)(cid:79)der(cid:17)(cid:3)(cid:36)cce(cid:83)t(cid:68)(cid:69)(cid:79)e(cid:3)(cid:73)(cid:82)r(cid:80)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)ide(cid:81)tific(cid:68)ti(cid:82)(cid:81)(cid:3)i(cid:81)c(cid:79)(cid:88)de(cid:3)(cid:68)(cid:3)(cid:89)(cid:68)(cid:79)id(cid:3)ide(cid:81)tit(cid:92)(cid:3)d(cid:82)c(cid:88)(cid:80)e(cid:81)t(cid:15)(cid:3)
passport or driver’s license.
Certificated shareholders and own-name dematerialised shareholders
Shareholders who are recorded as such in the register maintained by the transfer secretaries on the attendance record date
(qualifying shareholders) and who:
• hold Sappi shares in certificated form, or
• have dematerialised their shares (ie have replaced the paper share certificates with electronic records of ownership under
JSE’s electronic settlement system) and are recorded in the sub-register in own name dematerialised form (ie shareholders
who have specifically instructed their Central Securities Depositary Participant (CSDP) or broker to hold their shares in their
own name on Sappi’s sub-register), are entitled to:
–
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participate in, speak at, and/or vote at, the AGM, or
appoint one or more proxies to participate in, speak at, and/or vote at, the AGM in their stead. A proxy need not be a
shareholder. The form of proxy is enclosed.
It is requested, for administrative reasons, that forms of proxy be emailed, posted or delivered to the transfer secretaries at the
following addresses to be received by no later than (cid:20)(cid:23)(cid:29)(cid:19)(cid:19)(cid:3)(cid:11)(cid:54)(cid:82)(cid:88)t(cid:75)(cid:3)(cid:36)(cid:73)ric(cid:68)(cid:81)(cid:3)(cid:54)t(cid:68)(cid:81)d(cid:68)rd(cid:3)(cid:55)i(cid:80)e(cid:12)(cid:3)(cid:82)(cid:81)(cid:3)(cid:48)(cid:82)(cid:81)d(cid:68)(cid:92)(cid:15)(cid:3)(cid:19)(cid:26)(cid:3)Fe(cid:69)r(cid:88)(cid:68)r(cid:92)(cid:3)(cid:21)(cid:19)(cid:21)(cid:21).
(cid:43)(cid:68)(cid:81)d(cid:3)de(cid:79)i(cid:89)erie(cid:86)(cid:3)t(cid:82)(cid:29)
Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank
Johannesburg, 2196
South Africa
Postal deliveries to:
Computershare Investor Services Proprietary Limited
Private Bag X9000, Saxonwold, Johannesburg, 2132, South Africa
Email deliveries to:
proxy@computershare.co.za
If a certificated shareholder or own-name dematerialised shareholder does not email, post or deliver forms of proxy to the
transfer secretaries so as to be received by that time, such shareholder will nevertheless be entitled to email the form of
proxy to the transfer secretaries at proxy@computershare.co.za to be received prior to the commencement of the AGM.
Beneficial owners of dematerialised shares
Beneficial owners of Sappi shares who have dematerialised their Sappi shares and who are not registered as own name
dematerialised shareholders and who:
• wish to participate in, speak at, and/or vote at, or wish their representatives to participate in, speak at, and/or vote at, the
AGM (electronically) must instruct their CSDPs or brokers to provide them or their representatives with a letter of
representation to enable them or their representatives to participate in, speak at, and/or vote at, such meeting or
• do not wish to participate in, speak at, and vote at, the AGM, should provide their CSDPs or brokers with their voting
instructions in terms of the relevant custody agreement between them and their CSDPs or brokers.
Such a beneficial owner must not complete the attached form of proxy.
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APPENDICES
Electronic participation in the AGM
The company intends to make provision for shareholders, or their representatives or proxies, to participate in, speak at, and/or
vote at, the AGM by way of electronic communication as provided for in terms of Sappi’s Memorandum of Incorporation and
section 63(2) of the Companies Act. In this regard, qualifying shareholders or their representatives or proxies may participate
in, speak at, and/or vote at, the AGM by way of an interactive electronic platform and, if they wish to do so, should note the
following:
• the company will offer a qualifying shareholder (or its representative or proxy) reasonable access through electronic
facilities and a virtual meeting platform to participate in the AGM
• a qualifying shareholder (or its representative or proxy) will, if (and only if) the qualifying shareholder requests that access
be granted to it (or its representative or proxy) to do so, be able to:
–
–
participate in the AGM through electronic facilities
vote during the AGM through a virtual meeting platform.
• a qualifying shareholder (or its representative or proxy) is invited to request such access by:
sending an email (a participation request) to the transfer secretaries at proxy@computershare.co.za or
registering at www.smartagm.co.za.
Following receipt of a participation request, the transfer secretaries will email the relevant contact link and logon details to the
qualifying shareholder concerned (or its representative or proxy) to enable it (or its representative or proxy) to participate in,
speak at, and/or vote at, the AGM (a connection details notice).
• the participation request must specify:
the name of the qualifying shareholder (and, if applicable, of the representative or proxy)
an email address at which the qualifying shareholder (and, if applicable, the representative or proxy) can be contacted.
• reasonably satisfactory identification (and a letter of representation or a duly completed form of proxy, if applicable) must
be attached to a participation request.
It is requested, for administrative reasons, that a participation request, complying with the above requirements, be emailed
to the transfer secretaries at proxy@computershare.co.za, to be received by no later than (cid:20)(cid:23)(cid:29)(cid:19)(cid:19)(cid:3)(cid:11)(cid:54)(cid:82)(cid:88)t(cid:75)(cid:3)(cid:36)(cid:73)ric(cid:68)(cid:81)(cid:3)(cid:54)t(cid:68)(cid:81)d(cid:68)rd(cid:3)
Time) on Monday, 07 February 2022. If a qualifying shareholder does not email a participation request complying with the
above requirement to reach the transfer secretaries by that time, that qualifying shareholder (or its representative or proxy)
will nevertheless be entitled to email a participation request complying with the above requirements to the transfer
secretaries at proxy@computershare.co.za, to be received prior to the commencement of the AGM. Qualifying shareholders
(and their representatives or proxies) should nevertheless be aware that if they send a participation request near to the time
of commencement of the AGM, there is a risk, and they accept the risk, that: (i) the participation request will not reach the
transfer secretaries prior to the commencement of the AGM; (ii) the transfer secretaries will not have sufficient time to send
the connection details notice prior to the commencement of the AGM; or (iii) the connection details notice will not reach the
qualifying shareholder (or representative or proxy) prior to the commencement of the AGM.
In relation to a participation request complying with the above requirements received by the transfer secretaries from a
qualifying shareholder (or its representative or proxy):
• by (cid:20)(cid:23)(cid:29)(cid:19)(cid:19)(cid:3)(cid:11)(cid:54)(cid:82)(cid:88)t(cid:75)(cid:3)(cid:36)(cid:73)ric(cid:68)(cid:81)(cid:3)(cid:54)t(cid:68)(cid:81)d(cid:68)rd(cid:3)(cid:55)i(cid:80)e(cid:12)(cid:3)(cid:82)(cid:81)(cid:3)(cid:48)(cid:82)(cid:81)d(cid:68)(cid:92)(cid:15)(cid:3)(cid:19)(cid:26)(cid:3)Fe(cid:69)r(cid:88)(cid:68)r(cid:92)(cid:3)(cid:21)(cid:19)(cid:21)(cid:21), the transfer secretaries will use reasonable
endeavours to email the connection details notice by no later than (cid:20)(cid:26)(cid:29)(cid:19)(cid:19)(cid:3)(cid:11)(cid:54)(cid:82)(cid:88)t(cid:75)(cid:3)(cid:36)(cid:73)ric(cid:68)(cid:81)(cid:3)(cid:54)t(cid:68)(cid:81)d(cid:68)rd(cid:3)(cid:55)i(cid:80)e(cid:12)(cid:3)(cid:82)(cid:81)(cid:3)(cid:55)(cid:88)e(cid:86)d(cid:68)(cid:92)(cid:15)(cid:3)
(cid:19)(cid:27)(cid:123)Fe(cid:69)r(cid:88)(cid:68)r(cid:92)(cid:3)(cid:21)(cid:19)(cid:21)(cid:21) or
• after (cid:20)(cid:23)(cid:29)(cid:19)(cid:19)(cid:3)(cid:11)(cid:54)(cid:82)(cid:88)t(cid:75)(cid:3)(cid:36)(cid:73)ric(cid:68)(cid:81)(cid:3)(cid:54)t(cid:68)(cid:81)d(cid:68)rd(cid:3)(cid:55)i(cid:80)e(cid:12)(cid:3)(cid:82)(cid:81)(cid:3)(cid:48)(cid:82)(cid:81)d(cid:68)(cid:92)(cid:15)(cid:3)(cid:19)(cid:26)(cid:3)Fe(cid:69)r(cid:88)(cid:68)r(cid:92)(cid:3)(cid:21)(cid:19)(cid:21)(cid:21) but prior to the commencement of the AGM,
the transfer secretaries will use reasonable endeavours to email the connection details notice as soon as reasonably
practicable after receipt of the participation request.
For information purposes only, a guide for electronic shareholders meetings will be available on the company’s website
(cid:11)www.sappi.com) and can also be obtained from the transfer secretaries. Should you have any further questions on
electronic participation, please send an email to proxy@computershare.co.za.
Sappi will make the electronic facilities and platform available at no cost to the user. However, any third-party costs relating to
the use of, or access to, the electronic facilities and platform will be for the user’s account.
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APPENDICES
Notice to shareholders continued
Sappi does not accept responsibility, and will not be held liable, under any applicable law or otherwise, for:
• any action of, or omission by, the transfer secretaries or
• any loss arising in any way from the use of the electronic facilities or platform including, without limitation, any
malfunctioning or other failure of the facilities or platform, or any failure of any email to reach, or delay in any email
reaching, its intended destination.
Questions
The board encourages shareholders to participate and to ask questions at the AGM. In order to facilitate efficient responses
to questions at the meeting, shareholders can ask questions in advance by submitting their questions in writing to the Group
Company Secretary so as to be received by (cid:20)(cid:26)(cid:29)(cid:19)(cid:19)(cid:3)(cid:11)(cid:54)(cid:82)(cid:88)t(cid:75)(cid:3)(cid:36)(cid:73)ric(cid:68)(cid:81)(cid:3)(cid:54)t(cid:68)(cid:81)d(cid:68)rd(cid:3)(cid:55)i(cid:80)e(cid:12)(cid:3)(cid:82)(cid:81)(cid:3)Frid(cid:68)(cid:92)(cid:15)(cid:3)(cid:21)(cid:27)(cid:3)(cid:45)(cid:68)(cid:81)(cid:88)(cid:68)r(cid:92)(cid:3)(cid:21)(cid:19)(cid:21)(cid:21) at:
108 Oxford Road
Houghton Estate
Johannesburg, 2198
South Africa
or
PO Box 52264
Saxonwold, 2132
South Africa
or
By email to ami.mahendranath@sappi.com
By order of the board
Secretaries: per A Mahendranath
Group Company Secretary
Sappi Southern Africa Limited
108 Oxford Road
Houghton Estate
Johannesburg, 2198
South Africa
17 December 2021
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APPENDICES
Notes
1. Directors retiring by rotation who are seeking re-election
Stephen Robert Binnie (Steve) (54)
(Chief Executive Officer (CEO))
(cid:52)(cid:88)(cid:68)(cid:79)ific(cid:68)ti(cid:82)(cid:81)(cid:86)(cid:29) BCom, BAcc, CA(SA), MBA
Nationality: British
Appointed: September 2012
Sappi board committee memberships
• Social, Ethics, Transformation and Sustainability Committee
• Attends meetings of all other board committees by invitation
Skills, expertise and experience
Mr Binnie was appointed CEO of Sappi in July 2014. He joined Sappi in July 2012 as CFO designate and was appointed
CFO and Executive Director from 01 September 2012. Before joining Sappi, he held various senior finance roles and was
previously CFO of Edcon for 10 years after having been in a senior finance role at Investec Bank Limited for four years.
James Michael Lopez (Jim) (62)
(Independent)
(cid:52)(cid:88)(cid:68)(cid:79)ific(cid:68)ti(cid:82)(cid:81)(cid:86)(cid:29) BA (Economics)
Nationality: American
Appointed: March 2019
Sappi board committee memberships
Social, Ethics, Transformation and Sustainability Committee
Skills, expertise and experience
Mr Lopez is the former President and CEO of Tembec Inc (2006 to 2017) having progressed through management, senior
management and executive positions in Tembec since 1989. In 2017, Mr Lopez successfully negotiated the sale of Tembec
Inc, a manufacturer of lumber, pulp, paper/paperboard and speciality cellulose and a global leader in sustainable forest
management practices. Mr Lopez previously served as Co-Chairperson of the Bi-National Softwood Lumber Council.
Previous Chairmanships included the Softwood Lumber Board, Forest products Innovation, Ontario Forest Products
Association and Forest Products Association of Canada.
Brian Richard Beamish (Brian) (64)
(Independent)
(cid:52)(cid:88)(cid:68)(cid:79)ific(cid:68)ti(cid:82)(cid:81)(cid:86)(cid:29) BSc (Mech Eng): HBS PMD
Nationality: British and South African
Appointed: March 2019
Sappi board committee memberships
• Social, Ethics, Transformation and Sustainability Committee
• Human Resources and Compensation Committee
Other board and organisation memberships
• Nordgold (Member of the Audit and Risk Committee and Remuneration Committee, as well as Chairperson of the Safety
and Sustainable Development Committee)
Skills, expertise and experience:
Mr Beamish is a qualified mechanical engineer with over 40 years of relevant management, business and leadership
experience in capital-intensive industries. He was appointed to the Lonmin board in 2013 and served as Chairperson from
May 2014 until June 2019 when the corporate action with Sibanye Stillwater concluded. He also served as Chair of the
Nomination Committee and as a member of the Remuneration and Safety, Health and Environment Committees. His senior
executive career was spent within Anglo American, where his final role until retirement was Group Director Mining and
Technology, before which he was the CEO of the Base Metals division.
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APPENDICES
Shareholders’ diary
Annual General Meeting
First quarter results released
Second quarter and half-year results released
Third quarter results released
Financial year end
Preliminary fourth quarter and year results
Annual integrated report posted to shareholders and posted on website
09 February 2022
February 2022
May 2022
August 2022
September 2022
November 2022
December 2022
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APPENDICES
Proxy form
for the Annual General Meeting
Sappi Limited
(Registration number: 1936/008963/06)
JSE share code: SAP
ISIN: ZAE000006284
(Sappi or the Company)
For use only by shareholders who:
• hold shares in certificated form, or
• hold dematerialised shares (ie where the paper share certificates have been replaced with electronic records of ownership
under the JSE’s electronic settlement system and are recorded in Sappi's sub register with own name registration (ie
shareholders who have specifically instructed their Central Securities Depository Participant (CSDP) or broker to record the
holding of their shares in their own name in Sappi's sub register).
If you are unable to attend the eighty-fifth (85th) annual general meeting of the Company to be held at (cid:20)(cid:23)(cid:29)(cid:19)(cid:19)(cid:3)(cid:11)(cid:54)(cid:82)(cid:88)t(cid:75)(cid:3)(cid:36)(cid:73)ric(cid:68)(cid:81)(cid:3)
Standard Time). on Wednesday, 09 February 2022 through electronic communication, you should complete and return this
form of proxy. The Annual General Meeting, and any resumption thereof pursuant to an adjournment or recommencement
thereof pursuant to a postponement, is referred to hereinafter as the AGM. It is requested, for administrative reasons, that this
form of proxy be sent to Computershare Investor Services Proprietary Limited, the transfer secretaries of the company (transfer
secretaries) by email, post or physical delivery, to the addresses set out later on in the form of proxy, to be received by no later
than (cid:20)(cid:23)(cid:29)(cid:19)(cid:19)(cid:3)(cid:11)(cid:54)(cid:82)(cid:88)t(cid:75)(cid:3)(cid:36)(cid:73)ric(cid:68)(cid:81)(cid:3)(cid:54)t(cid:68)(cid:81)d(cid:68)rd(cid:3)(cid:55)i(cid:80)e(cid:12)(cid:3)(cid:82)(cid:81)(cid:3)(cid:48)(cid:82)(cid:81)d(cid:68)(cid:92)(cid:15)(cid:3)(cid:19)(cid:26)(cid:3)Fe(cid:69)r(cid:88)(cid:68)r(cid:92)(cid:3)(cid:21)(cid:19)(cid:21)(cid:21). If a certificated shareholder or own-name
dematerialised shareholder does not email, post or deliver forms of proxy to the transfer secretaries to be received by that time,
such shareholder will nevertheless be entitled to email, post or deliver the form of proxy to the transfer secretaries to be received
prior to the commencement of the AGM.
Beneficial owners of Sappi shares who have dematerialised their Sappi shares and who are not registered as own name
dematerialised shareholders and who wish to:
• attend the AGM (electronically) must instruct their CSDPs or brokers to provide them with a letter of representation to enable
them to attend such meeting, or
• vote at, but not to attend, the AGM, must provide their CSDPs or brokers with their voting instructions in terms of the relevant
custody agreement between them and their CSDPs or brokers.
(cid:54)(cid:88)c(cid:75)(cid:3)(cid:69)e(cid:81)efici(cid:68)(cid:79)(cid:3)(cid:82)(cid:90)(cid:81)er(cid:86)(cid:3)(cid:80)(cid:88)(cid:86)t(cid:3)(cid:81)(cid:82)t(cid:3)c(cid:82)(cid:80)(cid:83)(cid:79)ete(cid:3)t(cid:75)i(cid:86)(cid:3)(cid:73)(cid:82)r(cid:80)(cid:3)(cid:82)(cid:73)(cid:3)(cid:83)r(cid:82)(cid:91)(cid:92)(cid:17)
I/We (please print names in full)
of (address)
Telephone/Cellphone number:
Email address:
being a shareholder(s) of Sappi holding
Sappi shares and entitled to vote at the AGM, hereby appoint
or failing him/her
or failing him/her
or failing him/her, the chairperson of the meeting as my/our proxy to attend, speak and vote for me/us on the resolutions to be
proposed (with or without modification) at the AGM, as follows:
Number of shares
For
Against Abstain
Ordinary resolution number 1 – Re election of the directors retiring by rotation in terms of
Sappi’s Memorandum of Incorporation
Ordinary resolution number 1.1 – Re-election of Mr SR Binnie as a director of Sappi
Ordinary resolution number 1.2 – Re-election of Mr JM Lopez as a director of Sappi
Ordinary resolution number 1.3 – Re-election of Mr BR Beamish as a director of Sappi
Ordinary resolution number 2 – Election of Audit and Risk Committee members
Ordinary resolution number 2.1 – Election of Mr NP Mageza as member and chairperson of
the Audit and Risk Committee
Ordinary resolution number 2.2 – Election of Ms ZN Malinga as a member of the Audit and
Risk Committee
Ordinary resolution number 2.3 – Election of Dr B Mehlomakulu as a member of the Audit
and Risk Committee
Ordinary resolution number 2.4 – Election of Mr RJAM Renders as a member of the Audit
and Risk Committee
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APPENDICES
Proxy form continued
Number of shares
Against
Abstain
For
Ordinary resolution number 3 – Re-appointment of KPMG Inc as auditors of Sappi for the
year ending 2022 and until the conclusion of the next Annual General Meeting of Sappi
Ordinary resolution number 4 – Non-binding endorsement of remuneration policy
Ordinary resolution number 5 – Non-binding endorsement of remuneration implementation
report
Special resolution number 1 – Non-executive directors’ fees
Special resolution number 2 – Loans or other financial assistance to related or inter-related
companies
Ordinary resolution number 6 – Authority for directors and Group Company Secretary to sign
all documents and do all such things necessary to or reasonably desirable for or incidental
to the implementation of the above resolutions
Insert X in the appropriate block if you wish to vote all your shares in the same manner. If not, insert the number of votes in the
appropriate block. If no indication is given, the proxy will vote as he/she thinks fit.
Signed at
Signature
this
day of
Assisted by me, where applicable (name and signature)
Please read the notes and instructions on the following pages.
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Notes to the form of proxy
1. This form of proxy is only to be completed by certificated shareholders and own-name dematerialised shareholders.
2. A shareholder may insert the name of a proxy or the names of two alternative proxies of the shareholder’s choice in the
space provided, provided that, in the case of concurrent proxies, this form of proxy clearly states the order in which the
concurrent proxies votes are to take precedence in the event that both or all of the concurrent proxies are present, and vote,
at the AGM. If such order is not set out and the chairperson is permitted to, and does, waive such non-compliance, then the
person whose name stands first on this form of proxy and who is present at the AGM will be entitled to act to the exclusion
of those whose names follow.
3. A shareholder may appoint more than one proxy to exercise voting rights attached to different shares held by the
shareholder.
4. On a show of hands, every shareholder present or represented by proxy or by representative shall have only one vote
irrespective of the number of shares such shareholder holds. On a poll, every shareholder present or represented by proxy
or by representative shall be entitled to cast one vote per share held.
5. A shareholder’s instructions to the proxy must be indicated by inserting the relevant numbers of votes exercisable by the
proxy in the appropriate box or by inserting X should the shareholder wish to vote all shares held by it. Failure to comply will be
deemed to authorise the proxy to vote or to abstain from voting, as the case may be, in respect of all the shareholder’s votes,
in such manner as the proxy decides. A shareholder or the proxy is not obliged to exercise all the votes exercisable by the
shareholder or by the proxy, but the total of votes cast and in respect of which abstention is recorded may not exceed the
total of votes exercisable by the shareholder or by the proxy.
6. Forms of proxy must be dated and signed by the shareholder appointing a proxy.
7.
It is requested, for administrative reasons, that this form of proxy be sent to the transfer secretaries, in accordance with the
details provided below, so as to reach the transfer secretaries by no later than (cid:20)(cid:23)(cid:29)(cid:19)(cid:19)(cid:3)(cid:11)(cid:54)(cid:82)(cid:88)t(cid:75)(cid:3)(cid:36)(cid:73)ric(cid:68)(cid:81)(cid:3)(cid:54)t(cid:68)(cid:81)d(cid:68)rd(cid:3)(cid:55)i(cid:80)e(cid:12)(cid:3)(cid:82)(cid:81)(cid:3)
Monday, 07 February 2022:
(cid:43)(cid:68)(cid:81)d(cid:3)de(cid:79)i(cid:89)erie(cid:86)(cid:3)t(cid:82)(cid:29)
Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank
Johannesburg, 2196
South Africa
Postal deliveries to:
Computershare Investor Services Proprietary Limited
Private Bag X9000, Saxonwold, Johannesburg, 2132, South Africa
Email deliveries to: proxy@computershare.co.za
If a certificated shareholder or own-name dematerialised shareholder does not email, post or deliver forms of proxy to the
transfer secretaries to be received by that time, such shareholder will nevertheless be entitled to email, post or deliver the
form of proxy to the transfer secretaries to be received prior to the commencement of the AGM.
8. Completing and lodging this form of proxy will not preclude the relevant shareholder from attending the AGM and speaking
and voting in person to the exclusion of any proxy appointed in terms hereof.
9. Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity or other
legal capacity must be attached to this form of proxy, unless previously recorded by the transfer secretaries or waived by the
chairperson of the AGM.
10. The completion of blank spaces need not be initialled. Any alteration or correction made to this form of proxy must be
initialled by the signatory/ies.
11. If any shares are jointly held, all joint shareholders must sign this form of proxy. If more than one of those shareholders is
present at the AGM either in person or by proxy, the person whose name appears first in the securities register will be entitled
to vote to the exclusion of the others.
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APPENDICES
Notes to the form of proxy continued
12. Despite the aforegoing, the chairperson of the AGM may waive any formalities that would otherwise be a prerequisite for a
valid form of proxy.
Transfer secretaries’ offices
South Africa
Computershare Investor Services Proprietary Limited
(Registration number: 2004/003647/07)
Rosebank Towers, 15 Biermann Avenue, Rosebank
Johannesburg, 2196, South Africa
(Private Bag X9000, Saxonwold, 2132, South Africa)
Tel: +27 11 370 5000
Email: proxy@computershare.co.za
(cid:54)(cid:88)(cid:80)(cid:80)(cid:68)r(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)ter(cid:80)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:86)ecti(cid:82)(cid:81)(cid:3)(cid:24)(cid:27)(cid:11)(cid:27)(cid:12)(cid:11)(cid:69)(cid:12)(cid:11)i(cid:12)(cid:3)(cid:82)(cid:73)(cid:3)t(cid:75)e(cid:3)(cid:54)(cid:82)(cid:88)t(cid:75)(cid:3)(cid:36)(cid:73)ric(cid:68)(cid:81)(cid:3)C(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)ie(cid:86)(cid:3)(cid:36)ct(cid:15)(cid:3)(cid:21)(cid:19)(cid:19)(cid:27)(cid:15)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:80)e(cid:81)ded
Section 58(8)(b)(i) provides that the form of proxy supplied by a company for the purpose of appointing a proxy must bear
a reasonably prominent summary of the rights established by section 58 of the Companies Act, 2008, as amended, which
summary is set out below:
• A shareholder of a company may, at any time, appoint any individual, including an individual who is not a shareholder of that
company, as a proxy to, among other things, participate in, and speak and vote at, a shareholders meeting on behalf of the
shareholder.
• A shareholder may appoint two or more persons concurrently as proxies; provided that Sappi’s Memorandum of Incorporation
requires that the instrument appointing the concurrent proxies clearly states the order in which the concurrent proxies votes
are to take precedence in the event that both or all of the concurrent proxies are present, and vote, at the relevant meeting.
• A shareholder may appoint more than one proxy to exercise voting rights attached to different securities held by the
shareholder.
• A proxy may delegate the proxy’s authority to act on behalf of the shareholder to another person. Note however that Sappi’s
Memorandum of Incorporation prohibits such delegation.
• A proxy appointment must be in writing, and dated and signed by the shareholder, and remains valid only until the meeting
(including any resumption thereof pursuant to an adjournment or recommencement thereof pursuant to a postponement)
ends, unless the proxy appointment is revoked, in which case the proxy appointment will be cancelled with effect from such
revocation.
• A shareholder may revoke a proxy appointment in writing.
• A proxy appointment is suspended at any time and to the extent that the shareholder chooses to act directly and in person
in the exercise of any rights as a shareholder.
• A proxy is entitled to exercise, or abstain from exercising, any voting right of the shareholder without direction, except to the
extent the form of proxy provides otherwise.
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APPENDICES
Administration
Investor relations
Tracy Wessels
Group Head Investor Relations and Sustainability
Tel +27 (0)11 407 8391
Tracy.Wessels@sappi.com
(cid:45)(cid:54)E(cid:3)(cid:54)(cid:83)(cid:82)(cid:81)(cid:86)(cid:82)r
UBS South Africa Proprietary Limited
144 Oxford Road
8th Floor South Wing
Melrose
Johannesburg
2196
PO Box 522194
Saxonwold
Rosebank
2196
Tel +27 (0)11 322 7000
Fax +27 (0)11 784 8280
United States ADR depositary
BNY Mellon Shareowner Services
PO Box 505000
Louisville, KY 40233-5000
United States of America
462 South 4th Street
Suite 1600
Louisville, KY 40202
United States of America
shrrelations@cpushareownerservices.com
www.mybnymdr.com
Sappi Limited
Registration number: 1936/008963/06
JSE code: SAP
ISIN code: ZAE 000006284
Group Company Secretary
Ami Mahendranath
Secretaries
Sappi Southern Africa Limited
108 Oxford Road
Houghton Estate
Johannesburg, 2198
South Africa
PO Box 52264
Saxonwold, 2132
South Africa
Tel +27 (0)11 407 8464
Ami.Mahendranath@sappi.com
www.sappi.com
Transfer secretaries
Computershare Investor Services Proprietary Limited
Rosebank Towers
15 Biermann Avenue
Rosebank, 2196
South Africa
Private Bag X9000
Saxonwold, 2132
South Africa
Tel +27 (0)11 370 5000
Fax +27 (0)11 688 5238
proxy@computershare.co.za
www.computershare.com
C(cid:82)r(cid:83)(cid:82)r(cid:68)te(cid:3)(cid:68)(cid:428)(cid:68)ir(cid:86)
André Oberholzer
Group Head Corporate Affairs
Tel +27 (0)11 407 8044
Andre.Oberholzer@sappi.com
201
APPENDICES
Forward-looking statements
Certain statements in this release that are neither reported financial results nor other historical information are forward-looking
statements, including but not limited to statements that are predictions of or indicate future earnings, savings, synergies, events,
trends, plans or objectives. The words “believe”, “anticipate”, “expect”, “intend”, “estimate”, “plan”, “assume”, “positioned”, “will”,
“may”, “should”, “risk” and other similar expressions, which are predictions of or indicate future events and future trends and which
do not relate to historical matters, may be used to identify forward-looking statements. You should not rely on forward-looking
statements because they involve known and unknown risks, uncertainties and other factors which are in some cases beyond
our control and may cause our actual results, performance or achievements to differ materially from anticipated future results,
performance or achievements expressed or implied by such forward-looking statements (and from past results, performance
or achievements). Certain factors that may cause such differences include but are not limited to:
• the highly cyclical nature of the pulp and paper industry (and the factors that contribute to such cyclicality, such as levels
of demand, production capacity, production, input costs including raw material, energy and employee costs, and pricing);
• the Covid-19 pandemic
• the impact on our business of adverse changes in global economic conditions
• unanticipated production disruptions (including as a result of planned or unexpected power outages)
• changes in environmental, tax and other laws and regulations
• adverse changes in the markets for our products
• the emergence of new technologies and changes in consumer trends including increased preferences for digital media
• consequences of our leverage, including as a result of adverse changes in credit markets that affect our ability to raise capital
when needed
• adverse changes in the political situation and economy in the countries in which we operate or the effect of governmental
efforts to address present or future economic or social problems
• the impact of restructurings, investments, acquisitions, dispositions and other strategic initiatives (including related financing),
any delays, unexpected costs or other problems experienced in connection with dispositions or with integrating acquisitions
or implementing restructuring and other strategic initiatives and achieving expected savings and synergies, and
• currency fluctuations.
We undertake no obligation to publicly update or revise any of these forward-looking statements, whether to reflect new
information or future events or circumstances or otherwise.
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www.www.