Annual
Integrated
Report
For the year ended September 2022
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
Sustain our
financial health
Drive operational
excellence
Enhance
trust
Our capitals
Intellectual capital
Human capital
Financial capital
Manufactured
capital
Social and
relationship capital
Natural 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.
Contents
About this report
Group overview
Our 2022 reporting theme
Who we are
Where we operate
Delivering sustained value
Our strategy and performance
Sappi and the SDGs
How we create value
Our business model
Letter to the stakeholders: Chairman and CEO
Q&A with the CEO
Responding to our context
Our operating context
Risk management
Our key relationships
Integrating our key material issues
Our key material issues
Diving deeper into our
performance and prospects
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 form of proxy
Administration
Forward-looking statements
1
4
5
6
10
20
24
26
30
36
42
46
54
76
78
110
122
144
150
168
192
198
200
202
207
218
219
220
222
IBC
About this
report
Our
Annual Integrated Report
for the year ended
September 2022 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 financial and non-financial 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 195), we have included supporting appendices
(pages
196 to 222).
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
Framework (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 financial capital, including
shareholders’ equity, debt and reinvested
capital to maintain a solid balance between
growth, profitability and liquidity.
Manufactured capital
Our operations require significant
investments in manufactured capital.
Investing in building, maintaining, operating
and improving this infrastructure requires
financial, 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.
Annual Integrated Report 2022 Sappi 1
ABOUT THISREPORT 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 influence 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 profit margins.
We then measure value created, preserved and eroded in
terms of our defined, holistic targets, as outlined and set out
in the Business model on pages
26 to 29.
SCOPE AND BOUNDARY
The scope of this report includes all our operations (refer
to Where we operate on page
information that is material, comparable, relevant and complete.
The issues and indicators we cover reflect our significant
economic, environmental and social impacts, and those we
believe would substantively influence the assessments and
decisions of investors.
6 and 7). We aim to present
FORWARD-LOOKING STATEMENTS
For important information relating to forward-looking
statements, refer to the inside back cover
.
At Sappi, we take a
holistic view of value
creation.
The materiality of the information presented has been
determined on the basis of extensive ongoing engagement
with our stakeholders and has been assessed against
the backdrop of current business operations, as well as
prevailing trends in our industry and the global economy
(refer to Integrating our key material issues on page
and 77).
76
In preparing this report, we have tracked environmental
findings and research, public opinion, employee views and
attitudes, the interests and priorities of environmental
and social groups, as well as the activities, profiles and
interests of investors, employees, suppliers and
customers, communities, governments and regulatory
authorities.
G l obal forces
UN SDGs
Risks and
opportunities
Operating
context
i a l
r
i t y determinatio
n
t e
a
M
Integrated reporting boundary
Sappi
Europe
Sappi North
America
Sappi Southern
Africa
Our
stakeholder
issues
Financial reporting boundary
2 Annual Integrated Report 2022 Sappi
2 Annual Integrated Report 2022 Sappi
OUR REPORTING SUITE
Annual
Integrated
Report
For the year ended September 2022
2022 Sappi Annual
Integrated Report
www.sappi.com/annual-reports
Group
Annual
Financial
Statements
For the year ended September 2022
2022 Sappi Group Annual
Financial Statements
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
1.
(King IVTM)
Frameworks
•
International Financial Reporting
Standards (IFRS)
• Companies Act
• JSE Listings Requirements
• King IV.
202 2
Group
Sustainability
Report
2022 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 2022 Sappi Group
Sustainability Report. The independent practitioner’s
limited assurance report is included in the 2022 Sappi Group
Sustainability Report. Our sustainability information is also
verified by our internal audit team. Their verification process
includes reviewing the procedures applied for collecting and/
or measuring, calculating and validating non-financial data,
as well as reviewing reported information and supporting
documentation. In addition, most of our key operations
undergo external verification including the Eco-Management
Audit System in Europe, ISO 50001 energy certification
in Europe and South Africa and globally, ISO 45001
environmental certification and ISO 9001 quality certification,
as well as OHS 18001 and ISO 45001 health and safety
certification.
We are also assessed in terms of the forest certification
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 certifications,
as well as interaction with our stakeholders, give us
confidence that our performance indicators are reliable,
accurate and pertinent. The Social, Ethics, Transformation
and Sustainability (SETS) Committee is satisfied 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 financials.
However, the full 2021 Sappi Annual Integrated Report with
financials 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 2022 Sappi Annual
Integrated Report addresses all issues material to the group’s
ability to create and preserve value in the short, medium
and long term, and fairly presents the group’s integrated
performance and outlook. The board believes that the Annual
Integrated Report speaks to Sappi’s use of and effect on the
3Ps (addressing value creation, preservation and erosion),
aligned with the six capitals, and how the availability of these
resources is shaping our business and impacting how we will
create value in the future.
We believe that this report has been prepared in accordance
with the Integrated Reporting Framework. The report has
been prepared in line with best practice and the board
approved the 2022 Sappi Annual Integrated Report on
9 December 2022.
Sir Nigel Rudd
Chairman
Steve Binnie
Chief Executive Officer (CEO)
Annual Integrated Report 2022 Sappi 3
ABOUT THISREPORT
GROUP OVERVIEW
Our 2022 reporting theme
In 2020, the Covid-19
pandemic precipitated a
public-health crisis which
quickly evolved into an
economic, social and, in
places, organisational
crisis. It completely
disrupted the way we
all lived, worked and
interacted. However, we
continued to focus on a
brighter future. Having
launched our Thrive25
strategy at the beginning
of 2020, we were well
positioned to evolve and
adapt within this context
of constantly shifting
global forces.
The following year, against the backdrop of the so-called ‘new
normal’, we advanced our strategy by moving from the short-
term need to secure our future to responding to a world
economy which re-opened for business faster than expected.
In FY2022, we experienced the convergence of global risks and
challenges, including the ongoing global pandemic, energy
scarcity, rapid inflation, geopolitical tensions, extreme weather
events and logistical bottlenecks. Realising that the ‘new
normal’ presents both challenges and opportunities, we
amplified our actions as a company providing renewable
woodfibre resource solutions, protecting the interests of our
communities and employees and continuing to help build a
more sustainable, inclusive world. The actions we prioritised
that delivered our record performance and moved us forward
in delivering on our purpose and our
detailed throughout this report.
strategy are
Thrive25
The steps we have taken to amplify our positive impact on the
world would not have been possible without close connection
and collaboration with our stakeholders, particularly our people.
Together, we will continue to anticipate challenges, innovate,
work towards a lighter footprint on the planet and live up to
our social compact.
Together we will continue to amplify value – not just enterprise
value – but value for all our stakeholders as we work to build
a thriving world.
Adapt. Advance. Amplify.
4 Annual Integrated Report 2022 Sappi
Who we are
Sappi is a leading global provider of
everyday materials made from woodfibre-
based renewable resources. As a diversified,
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.
G
R
O
U
P
O
V
E
R
V
E
W
I
Our raw material offerings (such
as dissolving pulp, wood pulp
and biomaterials) and end-use
products (packaging and
speciality papers, graphic papers,
casting and release papers and
forestry products) are
manufactured from woodfibre
sourced from sustainably
managed forests and plantations,
in production facilities powered, in
many cases, with bio-energy from
steam and existing waste
streams. Many of our operations
are energy self-sufficient.
Together with our partners, we
work to build a thriving world by
acting boldly to support the
planet, people and prosperity.
Paper
production per
year
5.5 million
tons
Paper pulp
production per year
Dissolving pulp
production per year
Globally
we have
2.6 million
tons
1.5 million
tons
12,495
employees1
1 Includes corporate and Sappi Trading employees.
Owned and leased
sustainably managed
forests in South Africa
400,000 ha
Annual Integrated Report 2022 Sappi 5
Page heading continuedGROUP OVERVIEW
GROUP OVERVIEW
Where we operate
Europe
Sales offices
Production
facilities
15
10
North America
Sales offices 6
4
Production
facilities
South Africa
Sales offices 6
5
Production
facilities
Employees
5,571
Employees
2,042
Employees
4,631
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.
Sales offices
Bogotá
Sydney
Hong Kong
Nairobi
México City
Shanghai
Johannesburg
São Paulo
6 Annual Integrated Report 2022 Sappi
Sappi Europe
Mills
Products produced
Alfeld Mill
Bleached chemical pulp for own consumption
Speciality paper; flexible packaging paper, paperboard, containerboard, release liner, label paper,
functional papers
Carmignano Mill
Speciality paper; dye sublimation paper, flexible packaging paper, inkjet paper and label paper
Condino Mill
Ehingen Mill
Speciality paper; dye sublimation paper, flexible packaging paper, inkjet paper and silicone base paper
Bleached chemical pulp for own consumption and market pulp
Coated woodfree paper and containerboard
Gratkorn Mill
Bleached chemical pulp for own consumption
Kirkniemi Mill**
Bleached mechanical pulp for own consumption
Coated woodfree paper and label paper, containerboard
Coated mechanical paper
Lanaken Mill
Bleached chemi-thermo mechanical pulp for own consumption
Coated woodfree paper
Maastricht Mill**
Coated woodfree paper and paperboard
Stockstadt Mill**
Bleached chemical pulp for own consumption and market pulp
Coated woodfree paper and uncoated woodfree paper
Total Sappi Europe
Total Sappi Europe excluding mills held for sale
Other operation
Products produced
Rockwell Solutions Coated barrier film and paper
Sappi North America
Mills
Products produced
Cloquet Mill
Dissolving pulp, bleached chemical pulp for own consumption and market pulp*
Coated woodfree paper
Matane Mill
High-yield hardwood pulp for own consumption and market pulp
Somerset Mill
Bleached chemical pulp for own consumption and market pulp
Westbrook Mill
Converting for speciality casting and release paper
Coated woodfree and packaging paper
Total Sappi North America
Sappi Southern Africa
Plantations***
Products produced
KwaZulu-Natal
Plantations (pulpwood and sawlogs) (tons)***
Mpumalanga
Plantations (pulpwood and sawlogs) (tons)***
Total Sappi Forests (owned and leased supply)
Mills
Products produced
Lomati Sawmill
Ngodwana Mill
Sawn timber (m3)
Unbleached chemical pulp for own consumption
Mechanical pulp for own consumption
Kraft linerboard
Newsprint
Stanger Mill
Bleached bagasse pulp for own consumption
Office paper and tissue paper
Tugela Mill
Neutral sulphite semi chemical pulp for own consumption
Corrugating medium
Sappi ReFibre****
Waste paper collection and recycling for own consumption
Total Sappi Paper and Paper Packaging
Ngodwana Mill
Dissolving pulp
Saiccor Mill
Dissolving pulp
Total dissolving pulp
Capacity1 (’000 tons)
Paper
Pulp
120
275
100
60
280
980
750
530
260
140
250
300
165
220
3,455
145
1,120
2,225
675
Capacity1 (million m2)
100
Capacity1 (’000 tons)
Pulp
370
285
525
Paper
340
970
23
1,333
1,180
Capacity1 (’000 tons)
Hectares
165
235
400
Standing
tons
10,666
17,260
27,926
240
140
110
200
690
210
110
60
170
83
633
255
890
1,145
1,778
Capacity (m3) Capacity (’000 tons)
Timber
Paper
Pulp
99
Capacity at maximum continuous run rate per annum.
The stated capacity is for dissolving pulp, the capacity for kraft pulp is 17% higher.
Total Sappi Southern Africa
1
*
** Mills held for sale.
*** Plantations include owned and leased areas.
**** Sappi ReFibre collects waste paper in the South African market, which is used to produce packaging paper.
99
690
Annual Integrated Report 2022 Sappi 7
GROUP OVERVIEW g row
As a company based on the power of renewable resources,
we are well placed to take lessons from nature: When plants
grow too quickly and are not properly rooted, they become
top heavy and prone to toppling over. Similarly, if there is not
enough light, even though tall, they can become spindly and
not fit for purpose.
So, while growth is one of our strategic fundamentals, our
approach to it is purposeful and phased. This means being
responsive to our environment and the impacts of constant
change on our stakeholders. It also means being rooted in our
legacy of innovation and excellence and grounded by our
Thrive25 strategy. Accordingly, we leverage our existing
strengths and grow our people to progress in high-impact,
high-value areas. We also partner to shape new marketing
opportunities and industry standards that will stimulate growth.
Above all, we recognise that growth can only be sustainable
insofar as it supports the health and repair of the natural
environment on which we depend. And it is only inclusive
when value is shared and society is positively impacted.
This is our focus as we work to build a thriving world.
8 Annual Integrated Report 2022 Sappi
g row
As a company based on the power of renewable resources,
we are well placed to take lessons from nature: When plants
grow too quickly and are not properly rooted, they become
top heavy and prone to toppling over. Similarly, if there is not
enough light, even though tall, they can become spindly and
not fit for purpose.
So, while growth is one of our strategic fundamentals, our
approach to it is purposeful and phased. This means being
responsive to our environment and the impacts of constant
change on our stakeholders. It also means being rooted in our
legacy of innovation and excellence and grounded by our
Thrive25 strategy. Accordingly, we leverage our existing
strengths and grow our people to progress in high-impact,
high-value areas. We also partner to shape new marketing
opportunities and industry standards that will stimulate growth.
Above all, we recognise that growth can only be sustainable
insofar as it supports the health and repair of the natural
environment on which we depend. And it is only inclusive
when value is shared and society is positively impacted.
This is our focus as we work to build a thriving world.
Annual Integrated Report 2022 Sappi 9
GROUP OVERVIEW DELIVERING SUSTAINED VALUE
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, packaging and speciality papers, and biomaterials with
an optimised graphic paper business.
What this means
How we performed in 2022
Grow our
business
• Grow dissolving pulp (DP) capacity, matching
• Packaging and speciality papers constitutes
market demand
25% of 2022 sales volumes
• Continue to expand and grow packaging and
speciality papers in all regions. Commence
commercialisation of biotech opportunities
• Optimise Graphic paper segment.
• Target net debt at approximately US$1 billion
and sustain net debt:EBITDA* at 1.5x through
the cycle
• Optimise capital management
• Maximise return on capital employed (ROCE)
• Review pricing strategies to secure optimal
value
• Continue to monitor bond market for
opportunities.
• Packaging and speciality papers EBITDA
increased 37% y-o-y and contributed 27%
of group EBITDA
Increased packaging and speciality papers
volumes y-o-y up 9% vs 2021
•
• Pulp sales increased 15% compared to the
prior year
• Successful commissioning of DP expansion
project at Saiccor
• Concluded the agreement to sell three
European graphic paper mills to consolidate
our graphic paper assets and focus on core
graphic paper categories
• Strong growth in lignin sales and favourable
advancement of other biotech opportunities.
• Reduced net debt to US$1,163 million
• Generated > US$500 million cash
• Focused capital expenditure (capex) on
essential projects to effectively manage
liquidity and cash flow
• Average net sales price per ton up 28% y-o-y.
• Drive our safety-first culture
• Continuously improve our cost position
• Continue to maximise the benefits of our global
footprint
• Record safety performance
• Group efficiency, procurement and continuous
improvement savings > US$110 million
• Volumes and pricing improved resulting in
• Best-in-class production efficiencies to secure
improved profitability
increased volumes.
• Maximised the benefits of OneSappi to achieve
cost advantages.
•
Improving our understanding of, and proactively
partnering with, all stakeholders
• Driving sustainability solutions
• Meeting the changing needs of every Sappi
• Validated our decarbonisation targets with the
Science Based Targets initiative (SBTi)
• Actively supported local communities through
community forums
employee.
• Followed Task Force on Climate-related
Financial Disclosures (TCFD) recommendations
• Expanded Supplier Code of Conduct
compliance and initiated EcoVadis partnership
• Sustained Level 1 broad-based black economic
empowerment (BBBEE) in South Africa.
Sustain our
financial
health
Drive
operational
excellence
Enhance
trust
* Earnings before interest, taxation, depreciation and amortisation (EBITDA).
10 Annual Integrated Report 2022 Sappi
MEASURING OUR PROGRESS
Guided by our strategy, we measure our progress holistically against our
mission, collaborating and partnering with stakeholders as we strive to be
a trusted and sustainable organisation with an exciting future in woodfibre.
ROCE
(%)
EBITDA
(US$ million)
Self-assessment of 2022 performance
Self-assessment of 2022 performance
Thrive25
Link to
strategic objectives
Link to 3Ps & SDGs
Thrive25
Link to
strategic objectives
Link to 3Ps & SDGs
Our strategic performance indicators
Our strategic performance indicators
2020 1.6
2021
2022
5.4
378
532
2020
2021
2022
27.9
1 339
0
5
10
15
20
25
30
0
300
600
900
1200
1500
Why is this important?
Why is this important?
ROCE is an important measure that assesses long-term
profitability by comparing how effectively assets are
performing with how these assets are financed.
EBITDA measures how we performed operationally
as a company.
Identified sustainability goal
Linked to executive remuneration
Linked to executive remuneration
2023 objectives
• Maximise volumes in all segments and improve
logistics constraints
• Further optimise the packaging and speciality papers
volumes in all regions.
2023 objectives
• Focus on maximising cash generation through efficient
capex and working capital management.
Self-assessment
Strategic objective
3Ps
SDGs
Outstanding
Satisfactory
Grow our business
Prosperity
Sustain our financial health
Progress to be made/ongoing
Drive operational excellence
Enhance trust
People
Planet
Annual Integrated Report 2022 Sappi 11
DELIVERING SUSTAINED VALUE
DELIVERING SUSTAINED VALUE
Our strategy and performance continued
EBITDA margin
(%)
Sales
(US$ million)
Self-assessment of 2022 performance
Self-assessment of 2022 performance
Thrive25
Link to
strategic objectives
Link to 3Ps & SDGs
Thrive25
Link to
strategic objectives
Link to 3Ps & SDGs
Our strategic performance indicators
Our strategic performance indicators
2020
2021
2022
8.2
10.1
2020
2021
2022
18.4
4,609
5,265
7,296
0
4
8
12
16
20
0
2,000
4,000
6,000
8,000
Why is this important?
Why is this important?
EBITDA margin is an important and comparable measure
of our profitability (excluding the impact of financing,
accounting treatments or tax implications) against our
revenue.
While not the only determinant of financial success, sales
is a key measure of demand, customer loyalty and a critical
contributor to profit.
2023 objectives
• Sustain margins in all business segments
• Focus on reducing fixed and variable costs
• Maintain high operating rates.
2023 objectives
• Continue to grow and optimise packaging and
speciality papers and to fully operate our paper
machine assets
• Maximise DP volumes to capacity with increased
volumes from Saiccor Mill.
12 Annual Integrated Report 2022 Sappi
Net debt
(US$ million)
Net debt:EBITDA
(ratio)
Self-assessment of 2022 performance
Self-assessment of 2022 performance
Thrive25
Link to
strategic objectives
Link to 3Ps & SDGs
Thrive25
Link to
strategic objectives
Link to 3Ps & SDGs
Our strategic performance indicators
Our strategic performance indicators
2020
2021
2022
1,957
1,946
2020
2021
5.2
3.7
1,163
2022
0.9
0
500
1,000
1,500
2,000
0
1
2
3
4
5
6
Why is this important?
Why is this important?
Given the capital-intensive nature of our operations, we
need to raise debt to complete significant projects that
enable our long-term success. Net debt comprises current
and non-current interest-bearing borrowings and bank
overdrafts (net of cash, cash equivalents and short-term
deposits).
The net debt to EBITDA ratio measures our ability to pay
off our debt should net debt and EBITDA remain consistent.
EBITDA focuses on the operating decisions of a business
as it looks at profitability from core operations before the
impact of capital structure.
Linked to executive remuneration
2023 objectives
• During 2023 our target is to reduce net debt to below
US$1 billion.
2023 objectives
• With significantly reduced net debt, we aim to sustain
this ratio to less than 1.5x through the cycle.
Self-assessment
Strategic objective
3Ps
SDGs
Outstanding
Satisfactory
Grow our business
Prosperity
Sustain our financial health
Progress to be made/ongoing
Drive operational excellence
Enhance trust
People
Planet
Annual Integrated Report 2022 Sappi 13
DELIVERING SUSTAINED VALUE
DELIVERING SUSTAINED VALUE
Our strategy and performance continued
Lost-time injury frequency rate
(LTIFR) (per million work hours)1
Gender diversity
(%)
Self-assessment of 2022 performance
Self-assessment of 2022 performance
Thrive25
Link to
strategic objectives
Link to 3Ps & SDGs
Thrive25
Link to
strategic objectives
Link to 3Ps & SDGs
Our strategic performance indicators
Our strategic performance indicators
2020
2021
2022
0.35
0.38
0.30
2020
2021
2022
19.3
20.2
22.5
0,0
0,1
0,2
0,3
0,4
0
5
10
15
20
25
Why is this important?
Why is this important?
LTIFR is an important measure of our business’s safety. We
target zero harm in the workplace Injury Index and aim for
at least 10% improvement year-on-year.
We view diversity as a key driver that enhances our
competitiveness and viability as a business and contributes
to a thriving world. We aim to appoint more women in
management roles.
Linked to executive remuneration
Identified sustainability goal2
Identified sustainability goal
2023 objectives
• Continue to reduce LTIFR and achieve zero fatalities.
2023 objectives
• Stay on track to reach 23% of women in senior
positions – HRL19 and upwards by 2025.
1 Combined employee and contractor LTIFR.
2 For this indicator, we have clear targets for 2025 that we are working towards. See our Group Sustainability Report for more information.
14 Annual Integrated Report 2022 Sappi
Supplier Code of Conduct
(%)
Sustainable engagement
(%)
Self-assessment of 2022 performance
Self-assessment of 2022 performance
Thrive25
Link to
strategic objectives
Link to 3Ps & SDGs
Thrive25
Link to
strategic objectives
Link to 3Ps & SDGs
Our strategic performance indicators
Our strategic performance indicators
2020
2021
2022
2020 Not measured
59
1,946
2021
75.6
74
2022
Not measured
0
20
40
60
80
100
0
20
40
60
80
100
Why is this important?
Research indicates that 85% of consumers are more likely
to buy from a company with a reputation for sustainability.
By working in partnership with suppliers, we can better
identify risk, assess social and environmental performance,
and encourage commitment to sustainable choices and the
SDGs throughout our value chain.
Why is this important?
We rely on a productive and engaged workforce. Employee
engagement has been linked to higher safety performance,
lower staff turnover, improved productivity and efficiency.
Identified sustainability goal
Identified sustainability goal
2023 objectives
• Stay on track to reach 80% procurement spend with
declared compliance with Supplier Code of Conduct.
2023 objectives
• Sustain and/or improve percentage of staff engaged
with our business from our base of 75%.
Self-assessment
Strategic objective
3Ps
SDGs
Outstanding
Satisfactory
Grow our business
Prosperity
Sustain our financial health
Progress to be made/ongoing
Drive operational excellence
Enhance trust
People
Planet
Annual Integrated Report 2022 Sappi 15
DELIVERING SUSTAINED VALUE
DELIVERING SUSTAINED VALUE
Our strategy and performance continued
Specific process water usage in water
stressed locations (m3/adt)
Share of renewable and clean energy
(%)
Self-assessment of 2022 performance
Self-assessment of 2022 performance
Thrive25
Link to
strategic objectives
Link to 3Ps & SDGs
Thrive25
Link to
strategic objectives
Link to 3Ps & SDGs
Our strategic performance indicators
Our strategic performance indicators
2020
2021
2022
45.5
46.6
48.6
2020
2021
2022
53.1
53.7
53.9
0
10
20
30
40
50
0
10
20
30
40
50
60
Why is this important?
Why is this important?
Water has been identified as one of the most serious
sustainability challenges facing the planet, partly due to the
impacts of climate change. Forests and plantations, pulp
and paper operations are highly dependent on the use and
responsible management of water resources.
This target supports our commitment to carbon emissions
reduction and focused action to future-proof our business
against the physical and transitional impacts of climate
change and be part of the solution.
Identified sustainability goal (for South Africa)
Identified sustainability goal
2023 objectives
• Stay on track to reduce specific process water in
water-stressed locations by 23% by 2025 against
base year 2019 (44.5 m3/adt).
2023 objectives
• Stay on track to increase share of renewable and clean
energy by 8% pts by 2025 against base year 2019
(51.6%).
16 Annual Integrated Report 2022 Sappi
Energy intensity
(GJ/adt)
Specific GHG (Scope 1 + 2) emissions
(kg CO2e/adt)
Self-assessment of 2022 performance
Self-assessment of 2022 performance
Thrive25
Link to
strategic objectives
Link to 3Ps & SDGs
Thrive25
Link to
strategic objectives
Link to 3Ps & SDGs
Our strategic performance indicators
Our strategic performance indicators
2020
2021
2022
23.7
22.3
22.1
2020
2021
2022
904.4
838.7
798.7
0
5
10
15
20
25
0
200
400
600
800
1000
Why is this important?
Why is this important?
Energy intensity is a measure of how efficiently we are
operating. By continually improving this metric, we manage
costs and lower our environmental impact.
Since the UN Climate Change Conference (COP26) in
Glasgow, Scotland in November 2021, climate impacts have
worsened and carbon emissions have risen to record levels.
We align with the climate science by having our targets
validated by the SBTi and are taking focused action to
future-proof our business against the physical and transitional
impacts of climate change and be part of the solution.
Identified sustainability goal1
Identified sustainability goal
2023 objectives
• Stay on track to reduce energy intensity by 5% by
2025 against base year 2019 (22.1 GJ/adt).
2023 objectives
• Stay on track to decrease specific GHG emissions
(Scope 1 + 2) by 18% by 2025 against base year
2019 (883.4 kg CO2e/adt).
1 For this indicator, we have clear targets for 2025 that we are working towards. See our Group Sustainability Report for more information.
Self-assessment
Strategic objective
3Ps
SDGs
Outstanding
Satisfactory
Grow our business
Prosperity
Sustain our financial health
Progress to be made/ongoing
Drive operational excellence
Enhance trust
People
Planet
Annual Integrated Report 2022 Sappi 17
DELIVERING SUSTAINED VALUE
DELIVERING SUSTAINED VALUE
Our strategy and performance continued
Solid waste to landfill
(kg/adt)
Certified fibre
(%)
Self-assessment of 2022 performance
Self-assessment of 2022 performance
Thrive25
Link to
strategic objectives
Link to 3Ps & SDGs
Thrive25
Link to
strategic objectives
Link to 3Ps & SDGs
Our strategic performance indicators
Our strategic performance indicators
2020
2021
2022
65.3
55.6
54.2
2020
2021
2022
73
77
77
0
10
20
30
40
50
60
70
0
20
40
60
80
Why is this important?
Why is this important?
Our continued focus to reduce solid waste to landfill supports
the move towards a circular economy. This approach aligns
with our purpose of contributing to a thriving world, one with
less waste, lower costs and reduced environmental impact.
We are committed to sourcing woodfibre from forests and
timber plantations in a manner that promotes their health
and supports community wellbeing.
Identified sustainability goal
Identified sustainability goal1
2023 objectives
• Stay on track to reduce solid waste to landfill by 14%
by 2025 against base year 2019 (52.1 kg/adt).
2023 objectives
• Maintain or improve share of certified fibre above 75%.
1 For this indicator, we have clear targets for 2025 that we are working towards. See our Group Sustainability Report for more information.
Self-assessment
Strategic objective
3Ps
SDGs
Outstanding
Satisfactory
Grow our business
Prosperity
Sustain our financial health
People
Planet
Progress to be made/ongoing
Drive operational excellence
Enhance trust
18 Annual Integrated Report 2022 Sappi
Annual Integrated Report 2022 Sappi 19
DELIVERING SUSTAINED VALUE DELIVERING SUSTAINED VALUE
Sappi and the SDGs
“In fulfilling our commitment to the UN SDGs,
we promote enterprise value while striving to
make a positive impact on people and
the planet.”
– Tracy Wessels
Sappi Limited Group Head Investor Relations and Sustainability
Q&A WITH DR TRACY WESSELS, GROUP HEAD INVESTOR RELATIONS AND
SUSTAINABILITY
Dr Tracy Wessels previously headed up the Centre of Excellence for DP at Saiccor Mill for several years and is now Group Head
Investor Relations and Sustainability.
Q1
You have been in your current
role for nearly two years now.
Are the SDGs gaining traction
within Sappi?
Q2
How do you measure progress
against your SDG commitments?
Yes, they are. People are increasingly referring to our
performance against our priority SDGs in both informal and
formal meetings and discussions – not just at senior levels,
but also at lower levels of the organisation. This is being
driven partly by focused internal communication campaigns.
SEU is highlighting awareness of the SDGS with a series of
eye-catching posters communicating relevant mill specific
initiatives. SNA’s Ideas that Matter initiative now incorporates
the SDGs (see page
SSA is also driving awareness of the SDGs by structuring
its annual corporate citizenship report around the SDGS,
posters linked to the SDGs and a swap shop initiative linked
to SDG12: Responsible Consumption and Production.
95 of this report for further details).
Globally and in each region, we have established targets
aligned with our priority SDGs. Performance against these
targets is tracked and presented at our quarterly Regional
Sustainability Council and Group Sustainable Development
Council meetings. Ultimately, they are also reviewed by the
Social, Ethics, Transformation and Sustainability (SETS)
Committee. Our progress is published in our annual
Group Sustainability Report and on the website.
20 Annual Integrated Report 2022 Sappi
Progetto
Apollo
Stabilimento di
Carmignano
Italia
Per raggiungere la decarbonizzazione
dobbiamo fare di più con meno. Collaborando
con un’azienda esterna (TEP), abbiamo investito
15 milioni di euro in tecnologie all’avanguardia
per il nostro impianto di cogenerazione.
Questa nuova tecnologia ci permette di estrarre
più energia dalla stessa quantità di combustibile,
di limitare gli inquinanti grazie ad un controllo
delle emissioni e della combustione più
effi ciente e di sfruttare le opportunità correlate
all’impiego di energia verde.
Oltre a ridurre la nostra impronta di carbonio, il
calore residuo potrà asciugare i fanghi prodotti
dall’impianto di trattamento delle acque refl ue,
riducendo notevolmente la quantità di rifi uti
smaltiti nelle discariche.
Questa tecnologia sarà anche in grado di
supportare l’impiego dei combustibili del futuro,
tra cui l’idrogeno e il biometano.
“Come Einstein soleva dire: non possiamo
risolvere i problemi con lo stesso tipo di
pensiero che abbiamo usato quando li
abbiamo creati. Per questa ragione Sappi sta
ripensando e reinventando tutti i processi nel
suo percorso verso la decarbonizzazione.”
Pierluigi Masi, Mill Director
Impatto
CO2
1.000-
tonnellate
all’anno
in
emissioni di
anidride carbonica
3.500-
tonnellate
all'anno
di rifi uti
i n
dis c aric a
Questo è solo uno dei nostri numerosi
progetti di decarbonizzazione.
Per saperne di più, scansiona il codice QR
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Sappi_A4_CARMIGANO_Poster_ Final.indd 1
07/06/2022 10:46
07/06/2022 10:46
Optimierung
der Prozesse in
der Zellstoff fabrik
Werk Alfeld
Deutschland
Dieses ehrgeizige, mehrjährige
Optimierungsprojekt in unserer
Zellstoff fabrik ist nun
abgeschlossen! Es umfasste
die Erweiterung der
Eindampfanlage für Dicklauge,
wodurch die Zellstoff produktion
gesteigert und zusätzliche grüne
Energie erzeugt wird.
Dicklauge ist ein Nebenprodukt
der Zellstoff herstellung und als
biobasierter Brennstoff eine
erneuerbare Energiequelle.
Dank des Projekts können wir
außerdem zusätzliche
Biogasmengen für die Nutzung
im Laugenkessel gewinnen.
“Der Abschluss dieses Projekts zeigt, dass die
Anforderungen unseres Werks auf dem Weg zur
Dekarbonisierung im Einklang mit der Erhöhung
der Integration von eigenem Zellstoff stehen.”
Richard Huster, Manager Utilities
Auswirkungen
jährliche
Zellstoff pro-
duktion um
6.000
Tonnen
CO2
jährliche
Treibhausgasemissionen
(Scope 1) um mehr als
7.000 Tonnen
weniger Einkauf von
geringere
Fremdzellstoff
Kohlenstoff emissionen
durch den Transport
=
Dies ist nur eines unserer vielen
Dekarbonisierungsprojekte.
Scannen Sie, um mehr zu erfahren
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Sappi_A4_ALFELD_Poster_ Final.indd 1
07/06/2022 10:36
07/06/2022 10:36
to make Sappi cleaner,
greener and leaner
Reducing, recycling and re-using keeps waste
out of landfill. That’s important because:
South Africa is
running out of
landfill space.
Landfills generate
methane, a
greenhouse gas
associated with
global warming.
5
reasons
to divert
waste away
from
landfill.
Waste can often be
beneficiated and
generate income.
Our Thrive25 target
is to reduce specific
landfilled solid waste
by 24% by 2025.
Less waste to landfill has a
positive impact on human health
and on the environment.
Imagine greener, discover cleaner, and live leaner.
past year?Q3
How does your SDG performance over the
last year live up to the theme of this year’s
report and what were the highlights of the
We are very proud of the way in which our people have adapted and advanced,
despite significant operating challenges. In line with ‘amplify’, the theme of
this year’s report, I would say our actions have been bolder than ever before.
Given that safety is one of our core values and that we strive to inculcate a
24/7 safety mindset within Sappi, under SDG8: Decent Work and Economic
Growth, I have to mention the group’s outstanding safety performance
in FY2022.
Another example is our newly developed Sustainable Financing Framework
under SDG17: Partnerships for the Goals which is linked to our international
RCF of €515 million.
This, our first financing facility with sustainability-linked KPIs, matures in
February 2027 and comprises a consortium of eight relationship banks.
The newly adopted Sustainable Financing Framework will now guide any
sustainability-linked characteristics of future financing solutions. The
framework was verified by ISS ESG with a second-party opinion that defines
material sustainability KPIs and provides a basis for future KPI-linked credit
and capital market activities for Sappi group.
These KPIs include:
• Decreasing specific GHG (Scope 1 and 2) emissions by 18% in 2025
• Ensuring certified fibre supplied to Sappi mills is in excess of 75% every year
• Reducing solid waste to landfill waste disposal by 15%
• Securing zero workplace injuries LTIFR for own employees.
Another significant milestone was the validation by the SBTi of our 2030
decarbonisation targets (SDG7: Renewable and Clean Energy and SDG13:
Climate Action (refer to page
committing to science-based targets but through an intensive collaboration
process with the SBTi, we revised our targets to be more ambitious and
have included a supplier engagement goal to include a Scope 3
component.
38)). We began the process in 2020 by
Since the Scope 3 target approved by the SBTi relates to our suppliers, it is
also driving progress towards SDG17. Our suppliers play an essential role in
our business, providing us with woodfibre and other materials and services
with an indirect emissions impact.
Recognising that the more suppliers we can inspire to decarbonise their
operations in the value chain, the faster the world can mitigate the effects
of climate change. We are engaging vigorously with them to establish
science-based targets of their own, striving towards our target that 44%
o our suppliers by spend should have science-based targets by 2026.
In addition, our transparent reporting of our emissions can better enable
our customers to reduce their own Scope 3 emissions and fulfil other
climate-related commitments.
Annual Integrated Report 2022 Sappi 21
DELIVERING SUSTAINED VALUE DELIVERING SUSTAINED VALUE
Sappi and the SDGs continued
Q4
How has a challenging operating
environment impacted Sappi’s
progress towards the SDGs?
In addition to energy, the Russia-Ukraine war has had a
knock-on effect on food security and prices. With people all
over the world having to spend more of their income on food,
progress towards SDG1: No Poverty, is lagging. World Bank
estimates warn that for each one percentage point increase
in food prices, 10 million people are thrown into extreme
poverty worldwide1. SDG1 is one of SSA’s priority SDGs.
Given that we are headquartered in South Africa and within
the context of high levels of unemployment and poverty
in the country, we have a particular responsibility to drive
progress towards this goal.
64). Our most significant ESD initiative
We are doing so through a concerted focus on ESD, aimed
at creating shared value and promoting systemic change
(refer to page
through which we strengthen participation in the forestry
value chain is Sappi Khulisa. This encompasses individual
and community tree farming. The total area managed
currently is 37,028 hectares. In 2022, under this programme,
217,339 tons of timber worth some ZAR184 million was
delivered to our operations. Since 1995, a total volume
of 4,908.850 tons to the value of ZAR3.03 billion has been
purchased from Khulisa growers. Currently, the value chain
extends from 4,143 growers to approximately 871 small,
medium and micro enterprises who are involved in
silviculture, harvesting, loading and short and long-haul
activities.
Sappi partners with community managed projects through
Forestry Enterprise Development agreements, to ensure
continuous productivity of timber farms and sustainable
supply of timber from land reform beneficiaries. In 2022, new
areas under timber production expanded by 2,874 hectares
on both Forestry Enterprise Development and Khulisa
agreements.
Initiatives in South Africa aimed at enhancing food security
and generating income include an aquaponics project at
Ngodwana Mill, beekeeping on our land, a peanut farming
venture started by a group of women on our land and a pilot
avocado farming project. These initiatives are described in
more detail on page
96 and in our Group Sustainability
Report, available at https://www.sappi.com/sustainability-
and-impact
We also remunerate, at least in accordance with the minimum
wage in South Africa, just over 9,300 contractor employees.
1 https://www.worldbank.org/en/news/statement/2022/04/13/
joint-statement-the-heads-of-the-world-bank-group-imf-wfp-and-
wto-call-for-urgent-coordinated-action-on-food-security
22 Annual Integrated Report 2022 Sappi
Q5
As Sappi’s business is based on
woodfibre, SDG15: Life on Land
is extremely important. Would
you say it’s the most important
SDG for Sappi?
I don’t think one can isolate one SDG as being more important
than another. It depends on context, which is why we have
prioritised the SDGs most relevant to Sappi. What is apparent
is that the SDGs are all interlinked. Sappi’s business is based
on woodfibre sourced from healthy forests and plantations.
When sustainably managed as these are, they provide robust
ecosystem services which contribute towards SDG1: No
Poverty, SDG8: Decent Work and Economic Growth and
SDG13: Climate Action.
Q6
In a few months’ time, the global
spotlight will be even more
intensively on SDG7: Renewable
and Clean Energy and SDG13:
Climate Action at COP27. How
achievable is a lower-carbon
global economy?
Global decarbonisation plans have been hampered by
the Russia-Ukraine conflict, which has caused energy prices
to spike as described in the operating context section.
Nevertheless, while there might be setbacks in the short term,
the world cannot afford to relax efforts in the medium term.
Financing will play a key role in helping to drive decarbonisation.
At COP27, the developed nations of the world need to progress
initiatives like the Just Energy Transition Partnership
announced at COP26, in which five developed countries
(France, Germany, the UK, the US and the EU) agreed to
channel US$8.5 billon to support a just, equitable transition in
South Africa. The initiative focuses on increasing renewable
energy capacity and a faster exit from coal, while spurring
innovation in electric vehicles and green hydrogen. Similarly,
in the US, the landmark IRA includes US$369 billion in climate
and energy related funding and incentives to ramp up
carbon-capture facilities, drive green hydrogen production and
boost US manufacturing of solar panels, wind turbines and
next-generation batteries.
Shortly after our year end, the South African Presidency released
a ZAR1.5 trillion investment plan for the next five years to
assist the country's Just Transition to a greener economy.
The bulk of the funding will go towards the electricity sector,
which is the biggest contributor to GHG emissions in the
country. More than 80% of Eskom’s electricity is generated by
coal and over the last three years, on average, approximately
35% of SSA’s power was sourced from Eskom.
It's important that the transition is achieved in a just manner.
The social implications of an exit from fossil fuels in countries
like South Africa where unemployment is already at record
highs are potentially catastrophic. Our hope is that significant
progress will be made on developing concrete action plans
and finance frameworks to deliver on the promise of a global
just transition where no-one is left behind.
“Addressing climate change requires significant and unprecedented
transformation across all sectors of the economy, with opportunities and
challenges. Workers, communities, and poor people, whose lives and
livelihoods are tied to high-emitting industries, may be particularly
affected. It is for that reason that the Presidential Climate Change
Commission developed the recommendations for the Just Transition
in a manner that supports and empowers impacted groups.”
– Valli Moosa
Deputy Chairperson of South Africa’s Climate Change
Commission and Chairman of Sappi’s SETS Committee
Annual Integrated Report 2022 Sappi 23
DELIVERING SUSTAINED VALUE Timber
Our Forest Stewardship Council™ (FSC™ N003159) and
Programme for the Endorsement of Forest Certification
(PEFC/01-44-43) certified tree plantations in South Africa
provide a high-quality woodfibre base and enhance our
competitive advantage.
Our dissolving pulp brand, Verve, creates renewable alternatives
for raw material feedstock to textiles, pharmaceuticals,
foodstuffs, and more – products that meet the needs of people
around the globe every day.
DELIVERING SUSTAINED VALUE
How we create value
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.
Our
leading-edge
tree improvement
programmes
ensure 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
satisfaction.
Biomaterials
We are unlocking the chemistry of trees and aligning with
the circular economy 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 at the core of our
core business model.
In FY2022,
of our 28
paper/packaging
assets,
16 improved
performance
year-on-year
25% sales
revenue
growth
in lignin
Our purpose
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Pulp
We have
strengthened
our competitive
position in the DP
market with the
110,000 tpa
capacity
expansion of
Saiccor Mill
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.
Graphic papers
Our market-leading range of coated and uncoated graphic
paper products is used in magazines, corporate reports and
accounts, direct mail, high-quality brochures, catalogues,
calendars and books.
Production
capacity for
high-barrier
papers
expanded at
Alfeld Mill
Record
EBITDA of
US$650 million
in the graphics
segment
in FY2022
M
A
G
M A G
M A G
Our products are
manufactured from
woodfibre sourced from
sustainably managed
forests and plantations,
in production facilities
powered, in many cases,
with bio-energy from
steam and existing
waste streams.
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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 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 – the 3Ps – in order
to thrive. We rely on certain
inputs to create value.
Our business activities
Our products, services and
What we create, preserve
The value streams set
out above reflect our
belief that it is our
responsibility to make
the most out of every
tree harvested.
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.
or erode – the broader
impacts of our business
activities
our business activities
have positive and negative
outcomes, we strive to
maximise the positive
consequences of our
value streams in terms of
the 3Ps.
(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
3P targets aligns with our
Thrive25
strategy of being a
trusted partner to all our
stakeholders.
While we acknowledge that
transparently on our ambitious
See page
54
See page
26
See above and refer to
See page 27
See page 27
page 27
See our 2022 Sappi Group
Sustainability Report
24 Annual Integrated Report 2022 Sappi
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.
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)
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(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)
Timber
Our Forest Stewardship Council™ (FSC™ N003159) and
Programme for the Endorsement of Forest Certification
(PEFC/01-44-43) certified tree plantations in South Africa
provide a high-quality woodfibre base and enhance our
competitive advantage.
Pulp
Our dissolving pulp brand, Verve, creates renewable alternatives
for raw material feedstock to textiles, pharmaceuticals,
foodstuffs, and more – products that meet the needs of people
around the globe every day.
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.
Biomaterials
We are unlocking the chemistry of trees and aligning with
the circular economy 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 at the core of our
core business model.
In FY2022,
of our 28
paper/packaging
assets,
16 improved
performance
year-on-year
Our
leading-edge
tree improvement
programmes
ensure this
advantage is
maintained and
enhanced
25% sales
revenue
growth
in lignin
We have
strengthened
our competitive
position in the DP
market with the
110,000 tpa
capacity
expansion of
Saiccor Mill
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.
Production
capacity for
high-barrier
papers
expanded at
Alfeld Mill
Graphic papers
Our market-leading range of coated and uncoated graphic
paper products is used in magazines, corporate reports and
accounts, direct mail, high-quality brochures, catalogues,
calendars and books.
Record
EBITDA of
US$650 million
in the graphics
segment
in FY2022
M A G
M A G
M
A
G
Our products are
manufactured from
woodfibre sourced from
sustainably managed
forests and plantations,
in production facilities
powered, in many cases,
with bio-energy from
steam and existing
waste streams.
(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)
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(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:31)
(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 –
Our business activities
As OneSappi, we do
business safely, with
Ongoing engagement
with our stakeholders,
integrity and courage,
conducted in a spirit of
the resources and
we rely
relationships on which
The value streams set
out above reflect our
belief that it is our
making smart decisions
trust and mutual respect,
Our integrated approach to
responsibility to make
that we execute with
based on an
sustainable development
the most out of every
speed.
understanding of their
acknowledges that we
tree harvested.
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.
operating context,
depend on striking a
enables more tangible
balance between
business value creation.
Prosperity, People and the
Planet – the 3Ps – in order
to thrive. We rely on certain
inputs to create value.
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
the 3Ps.
(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
3P targets aligns with our
Thrive25
strategy of being a
trusted partner to all our
stakeholders.
See page
54
See page
26
See above and refer to
See page 27
See page 27
page 27
See our 2022 Sappi Group
Sustainability Report
Annual Integrated Report 2022 Sappi 25
DELIVERING SUSTAINED VALUE DELIVERING SUSTAINED VALUE
Our business model
Inputs
The resources and relationships
on which we rely
1
• 19 production facilities around the globe (see
7)
• Technology centres in Europe, USA and South Africa
• Debt: US$1,163 million
• Equity and liabilities: US$6,229 million
• Research and development (R&D) investment: US$47.6 million
• Investment in growth: US$1,194 million.
Financial
Intellectual
l
s
a
t
i
p
a
C
Manufactured
SDGs:
• Employees: 12,495
• South African contractor employees: approx. 9,350 contractor
employees (average)
• Weighted average training spend per employee: US$602.42
• Ongoing stakeholder engagement
• Corporate social responsibility investment: SEU €100,000,
SNA US$417,000, SSA ZAR54 million.
l
s
a
t
i
p
a
C
Human
Social and
relationship
SDGs:
• Plantations:
– 399,996 hectares (ha) owned and leased, of which 261,605 ha
are planted
– the remainder is managed to conserve the natural habitat and
biodiversity found there
• Energy purchased: 2,661.7 MW
Natural
• Energy generated on site: 2,021.2 MW
• Renewable energy 53.9%, of which 66.5% own black liquor
• Water extracted: 300.82 million m3 in absolute terms, 34.4 m3/adt in
l
s
a
t
i
p
a
C
specific terms
• Certified fibre used: 77%.
SDGs:
Our SDGs
Denoted in
this table:
26 Annual Integrated Report 2022 Sappi
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:
• 6,657,941 tons of saleable production.
Waste:
• 1,494,161 tons of waste generated, of
which 1,146,618 tons (76.74%) diverted
from disposal.
Emissions:
• 4.1 million tCO2e absolute direct (Scope 1)
GHG, in specific terms: 0.61 tCO2e/adt.
Value
created
Value
preserved
Value
eroded
Total assets: US$6,229 million
EBITDA (excluding special items)
US$1,339 million
Net debt of US$1,163 million
US$104 million paid to governments as
taxation
US$1,070 million paid to employees as
salaries, wages and other benefits
Zero fatalities
Global training average (weighted) of
46.89 hours per employee
Productivity 3.8 hours worked per ton of
saleable production (FY2021: 4 hours)
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
Lighter weight packaging products
– lighter carbon footprint
Annual Integrated Report 2022 Sappi 27
Actions to
enhance
outcomes
5
US$108 million paid to lenders as interest
Resumption of dividend payments
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
Resumption
of dividend
payments
• Implemented a series of price increases in our paper
businesses to offset rising input costs
• Ongoing diversification of our product portfolio into
higher margin segments
• Commercialisation of biomaterials gaining traction
• Significant actions in all regions to resolve logistical
>
issues
• Sale of three mills in Europe will help to reduce debt.
Maintained our Level 1 BBBEE contributor
status
Globally, 74% of suppliers now in
compliance with the Sappi Supplier Code
of Conduct
Improved
productivity
levels
• 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, 65% allocated to skills training and 35%
allocated to compliance training
>
• Strong governance and ethical culture reinforced by
the Code of Ethics (refreshed shortly after year end)
• Social impact strategy in SSA gaining traction.
High levels of water withdrawal
77% certified fibre supplied to mills
enhances competitive advantage
Year-on-year decrease in specific
Scope 1 and 2 emissions of 4.8%
77% certified
fibre supplied
to mills
• Progressed our science-based targets which have
now been validated by the Science Based Targets
Initiative (SBTi)
• Finalised our climate change strategy
• Continued to shape our response to the impact of
climate change on our plantations.
>
Annual Integrated Report 2022 Sappi 28
DELIVERING SUSTAINED VALUE
Our business model continued
EXAMPLES OF OUR TRADE-OFFS
The most difficult decisions made during the year
Although we have proven the technology
to extract xylose sugars from our
prehydrolysis kraft cooking processes,
we have taken a step back as we identify
potential market partners to develop
commercial opportunities for bio-based
products from this sustainable feedstock.
Risk
Risk
4 Supply chain disruption
7
Cyclical macro-economic
factors
Risk
10
Liquidity
The sale of three mills in Europe could potentially
impact employees.
Risk
9 Employee
relations
The implementation of our science-based
targets will require significant capital
investment of approximately US$70 million
per annum.
Risk
Risk
3
5
Sustainability
expectations
Climate change
Risk
10
Liquidity
29
29 Annual Integrated Report 2022 Sappi
DELIVERING SUSTAINED VALUE
Letter to the stakeholders: Chairman and CEO
– Steve Binnie
CEO
– Sir Nigel Rudd
Chairman
OPERATING REVIEW
The group delivered record EBITDA excluding special items of US$1,339 million,
which was well above the previous record set in FY2000. Strong demand and
the implementation of higher sales prices to offset rising costs, combined with a
focus on product and customer mix optimisation, supported margin expansion
in all product segments.
The outstanding performance was
particularly noteworthy within the
context of a challenging macro-
economic environment. Significant
headwinds included extreme weather-
related events, lingering Covid-19
pandemic effects in China, as well as
extraordinary global inflation, which
was triggered by geopolitical
turmoil and ongoing global supply
chain disruptions. Amid this volatility,
we demonstrated resilience and
remained committed to our
strategy.
Thrive25
SAFETY
The Covid-19 pandemic has
transformed how we think about health
and safety in the workplace. The year
began with the onset of the highly
infectious Omicron sub-variant.
Although extremely contagious, it soon
became apparent that the Omicron
variants cause less severe illness
compared to previous strains of the
virus. A focused vaccination/booster
campaign allowed us to significantly
scale back on our Covid-19 operating
protocols and quarantine measures for
direct contacts. By year end, all our
operations were back to pre-Covid-19
operating conditions. Nevertheless,
we remain vigilant and fully prepared
to launch our Covid-19 protocols at
a moment’s notice if required.
We have worked very hard to create
a culture that prioritises safety for our
own employees and contractors at all
times. Therefore, it was a particularly
satisfying highlight for the year that we
achieved a record safety performance.
We do not accept that injuries and
accidents are inevitable and our
commitment to zero injuries underpins
our value system. We comply with
occupational health and safety
legislation in all our operations.
We are very pleased to report that there
were no work-related fatalities during
the year and our performance with
respect to safety improved in every
region. In 2022 we reset our safety key
performance indicator (KPIs) to include
contractors, recognising that we have
an obligation to keep every person
who steps onto a Sappi site safe,
regardless of whether they are an
employee or not. The revised KPI of
combined employee and contractor
LTIFR replaced employee LTIFR in our
management incentive schemes. A
renewed focus on training, safety
communication campaigns and reward
and recognition programmes yielded
results. Sappi Europe managed to
reverse the previous year’s
disappointing performance with a
positive turnaround and Sappi North
America and Sappi South Africa
continued with their steady
improvement trajectory, reaching their
best ever LTIFR levels. A number of
noteworthy milestones were achieved
during the year. Alfeld, Ehingen and
Stockstadt Mills achieved 1 million zero
lost-time man hours, Somerset Mill
achieved 3 million zero lost-time man
hours and Sappi Forests’ Zululand
Coastal business unit achieved a
record-breaking safety milestone of
working 6 million zero lost-time man
hours. Our safety ambition remains zero
injuries and we continue to implement
enhanced procedures and focus on
improved personal behaviour and
leadership engagement.
30 Annual Integrated Report 2022 Sappi
Letter to the stakeholders: Chairman and CEO
MARKETS
In terms of our markets, the graphic papers segment generated record EBITDA of
US$650 million. The remarkable turnaround from the lows of 2020 was driven by a
number of factors, which led to an unprecedented global shortage of graphic paper.
These included a surge in demand as economic activity normalised post-Covid-19
and a very tight market balance due to a combination of chronic global logistical
challenges and reduced supply. Market capacity was impacted by permanent closures
and a prolonged labour strike in Finland. The buoyant demand boosted sales volumes
for the segment by 8% compared to the prior year. Furthermore, the favourable market
conditions provided support for a series of selling price increases and energy/freight
surcharges, which were necessary to compensate for substantial cost inflation and
facilitated the material improvement in profitability for the segment.
The strategic priority to invest in packaging and speciality papers in recent years
reaped rewards. The segment continued to grow and achieved record EBITDA of
US$359 million compared to US$214 million in the prior year. Sales volumes increased
by 9%, driven by robust global demand and renewed growth in Europe. However,
sales were constrained by available capacity and low levels of inventory in South Africa
and North America where demand exceeded supply. Successful selling price increases
and mix improvement offset rising costs and lifted margins for the segment.
Sales volumes for the pulp segment increased by 15% compared to the prior year
on the back of strong market demand and improved logistics as we secured regular
breakbulk shipping alternatives for our South African exports. Demand for Verve1
during the year was particularly strong and sales were constrained by available
production. The hardwood DP market price2 rallied during the first half of the year,
peaking at US$1,220 per ton in July 2022. The rebound was primarily driven by
positive momentum in global commodity markets, including viscose staple fibre,
cotton and polyester combined with DP supply-side constraints including our
own losses due to a flood in South Africa and a major fire at another large market
player. DP pricing began to soften in late August as Covid-19 lockdowns in China
constrained viscose staple fibre (VSF) operating rates and global recessionary
fears began to dampen the outlook for textile markets.
STRATEGIC REVIEW
Heightened geopolitical tensions, extraordinary cost inflation, extreme weather events
and global supply chain disruptions continued to challenge businesses in 2022.
Within this extremely challenging context, we continued to make the tough decisions
necessary to protect and enhance our business’s resilience and sustainability; looking
beyond our current situation to the thriving future we wish to create.
Fiscal 2022 was the second year of our
Thrive25
strategic programme.
The five-year strategy leverages the power of OneSappi to drive real and sustained
value creation. We recognise that society in general and our people in particular
expect us to play a role beyond making and selling. Therefore, every action we
take is aligned to our ambition to build a thriving world by unlocking the power
of renewable resources to benefit people, communities and the planet.
Thrive25
Our
strategy encompasses the following four main objectives:
Grow our business – Committing to core business segments while investing
in innovation, growth opportunities and ongoing customer relationships
Sustain our financial health – Reducing and managing our debt, growing
EBITDA, maximising product value, optimising processes globally, and
strategically disposing of non-core assets
Drive operational excellence – Strengthening our safety-first culture and
reducing resource use while enhancing efficiency and making smart data
investments
1 Sappi Verve is the brand name for our DP products.
2 Market price for imported hardwood DP into China is issued on a daily basis by the CCF Group.
3 Eskom is the South African electricity public utility.
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
To achieve our ambition for a thriving
world, we acknowledge the need to
invest in a broader set of stakeholder
considerations that impact our ability
to attract capital, draw top talent, and
future-proof our businesses. There are
increasing expectations from investors
and other stakeholders such as
employees, our communities and
consumers in our product value chains
who want to be part of a sustainability
narrative. Sustainability forms the
foundation of our
strategy as
we strive to be a trusted, transparent,
and innovative partner in building a
bio-based circular economy.
Thrive25
Thrive25
We made significant progress against
the first phase of the
strategy
to deleverage the business. The priority
for 2022 was to strengthen the balance
sheet by maximising cash generation
and reducing debt.
Initiatives and actions undertaken in
2022 to support our strategic objectives
are outlined below.
Grow our business
In 2022 we focused on commissioning
of the 110,000 ton Saiccor Mill
expansion project and, growing the
sales volumes and optimising the
product mix to higher margin categories
from our packaging and speciality paper
assets in Europe and North America.
The Saiccor Mill expansion project was
successfully commissioned, and all
new equipment operated as anticipated.
However, production volumes were
below expectations and were negatively
impacted by a number of external factors
such as unplanned stoppages due to
the flood in KwaZulu-Natal, Eskom3
power outages and raw material supply
shortages, which severely disrupted
operational stability at the mill. The mill
operations stabilised in the fourth
quarter and the ramp-up will be
completed in the 2023 financial year.
Annual Integrated Report 2022 Sappi 31
Annual Integrated Report 2022 Sappi 31
DELIVERING SUSTAINED VALUE
DELIVERING SUSTAINED VALUE
Letter to the stakeholders: Chairman and CEO continued
The underlying demand for packaging
and speciality paper grades remained
resilient and in 2022 we continued to
optimise margins by shifting into more
high-end label and packaging markets
while expanding on our base folding
carton business. The segment achieved
a record EBITDA and is gaining critical
mass in terms of contribution to group
profitability. Over the last five years,
since 2017, the segment contribution
to group EBITDA increased from 15%
to 27% and sales volumes grew from
13% to 25% of group sales volumes.
The EBITDA margin of 17% for the
segment is the highest to date and
was boosted by selling price increases,
which offset rising costs.
In South Africa, the containerboard
market continued to grow, driven by
robust fruit exports and sales volumes
were constrained by capacity. A critical
quality upgrade and product range
extension was completed at Ngodwana
Mill to optimise our portfolio to better
meet the needs of our customers.
The tight supply situation was further
exacerbated by very strong sales early
in the year, which reduced inventories,
and the extended shut for the upgrade.
In Europe, market traction for our new
range of label papers from Gratkorn Mill
was better than anticipated and there
is significant opportunity to grow this
category further in 2023.
In North America, the focus in 2022
was on optimising product and
customer mix to higher margins on
Somerset paper machine (PM) 1. The
demand was particularly robust and
sales were constrained by capacity.
A debottlenecking project on PM1
was initiated, which will deliver a further
30,000 tons of paperboard in 2023. This
additional capacity will be absorbed by
our existing customers who are actively
seeking to increase their volumes with
Sappi. Demand from the foodservice
board sector is anticipated to increase
significantly in the coming years as
legislation banning the use of
polystyrene foam packaging products
in several US states catalyses the shift
from plastic to paper packaging.
In November, the board has therefore
approved a US$418 million investment
at Somerset Mill to convert PM2 from
coated woodfree graphic paper to solid
bleached sulphate board (SBS). The
32 Annual Integrated Report 2022 Sappi
machine capacity will also be increased
during the conversion from 240,000
tons per annum (tpa) to 470,000 tpa.
The project is expected to be
completed in early 2025 and will be
funded from free cash flow from
operations. The capex will be phased
over three years with the majority of
the spend taking place in 2024 and
2025. This investment is fully aligned
with our
reduce our exposure to graphic papers
and transition our portfolio to packaging
and speciality papers, pulp and
biomaterials.
strategic focus to
Thrive25
The graphic papers segment delivered
excellent profits in 2022, generating an
extraordinary EBITDA margin of 16%,
which was well above historical margins.
However, the favourable market
conditions are anticipated to decline
rapidly as recessionary fears soften
demand in 2023. A key element of our
Thrive25
strategy is to reduce our
exposure to declining graphic papers
markets. Aligned to this objective, on
29 September 2022, Sappi signed an
agreement with Aurelius Investment
Lux One S.à.r.l. to divest the Maastricht
Mill in the Netherlands, the Stockstadt
Mill in Germany and the Kirkniemi Mill
in Finland. The decision was taken
following a detailed and thorough
strategic review and will significantly
reduce our exposure to graphic papers
markets. The sale will be subject to
various standard suspensive conditions
and is anticipated to close in the second
financial quarter of 2023. The enterprise
value of the transaction amounts to
approximately €272 million. The
proceeds will be used to reduce debt
further, which will provide a platform for
future expansions in our identified
growth market segments.
We are committed to exploring
opportunities to utilise our graphic
papers assets to produce packaging
and speciality paper grades without
significant capital investment, hence
further reducing our exposure to
graphic papers markets and improving
the profitability of our assets. In
mid-2021, we expanded the product
portfolio at the Gratkorn Mill in Austria
to produce non-wet-strength, wet-glue
label papers. The product is ideal for
many different applications, such as
standard labels for bottles, tins and
jars, as well as wrappers for various
products. In January 2022, this was
followed by the launch of a high-
performance, semi-gloss face stock
paper for self-adhesive labels for a
wide range of applications – such as
food, non-food, beverages and health
and beauty care products. Today, these
products are firmly established in the
market and sales volumes in 2022
significantly exceeded expectations.
In 2023, the production capabilities for
label papers will be further extended at
the Gratkorn Mill. The relatively modest
investment in technological innovations,
such as a new embossing calendar, will
enable the mill to produce high-quality,
wet-strength wet-glue label paper used
in the beverage industry, for instance
on returnable beer bottles. With this
portfolio extension, Sappi will further
strengthen its market leadership in
label paper production.
In our quest to offer customers
state-of-the-art, sustainable alternatives
to traditional film and foil-based
packaging material solutions, we
expanded our capacity to produce
barrier papers at the speciality paper
mill Alfeld Mill in Germany. A cutting-
edge coating machine was
commissioned in September 2022.
This in-house technology will not only
increase coating capabilities, but also
boost the development of innovative
sustainable packaging solutions in
collaboration with our customers.
Our commitment is to do more with
less by making the most out of every
tree used in our production processes.
Therefore, our Sappi biotech business
remains a long-term strategic focus as
we develop new circular products for
adjacent markets. We made pleasing
progress in 2022 growing lignin and
commercialising our Symbio fibre
composite and Valida fibrillated
cellulose product offerings. A positive
development in 2022 was accelerated
demand for lignin, with year-on-year
sales revenue growth of approximately
25%. We are using Valida in our own
paper production where its value lies in
the strength it imparts to paper and its
barrier functionality. It is also being
assessed for use in adhesives, frost
protection for fruit trees and industrial
cleaning, to name a few. Furfural is a
platform chemical for the production
of numerous biochemicals. It is
produced from C5 sugars in
hemicellulose through hydrolysis and dehydration. Furfural is used in a large range
of products including adhesives, antacids, fertilisers, flavouring compounds, inks
and plastics, to solvents for the refining of lubricating oils. It can also be used as a
fungicide, nematicide and weed killer or converted to furfural alcohol for furan resins.
C5 sugars are present in large quantities in our Saiccor Mill spent cooking liquor
and therefore beneficiation of these hemicellulose sugars presents an interesting
commercial opportunity. We have established a pilot plant to determine the
feasibility for producing furfural at Saiccor Mill with the objective to taking a
decision on a commercial plant in 2023.
Thrive25
strategic objective to reset the balance sheet was largely achieved.
Sustain our financial health
Our
Substantial cash generation and a positive translation impact of a weaker EUR/US Dollar
exchange rate on the predominantly Euro-denominated debt facilitated a material
reduction in our net debt which reached the lowest level in over 20 years at year
end of US$1,163 million (FY2021: US$1,946 million). The covenant leverage ratio
also reduced substantially from 3.7 at the end of the prior year to 0.9, the lowest level
since global expansionary investments began in the early 1990s.
Thrive25
strategy, where
A healthy balance sheet is a prerequisite for phase two of our
we aim to grow the business by investing in higher margin and growing market
segments. We also recognise that global macro-economic volatility and uncertainty
remain significant risks to our business. We have therefore set a long-term strategic
objective to target net debt of approximately US$1 billion and a net debt to EBITDA
ratio of 1.5 times through the cycle. This materially lower debt level will provide more
flexibility to withstand market downturns and, combined with strong anticipated
future cash generation, should provide sufficient opportunity to fund growth in
our targeted market segments.
With interest rates rising sharply over the past year, future debt financing is likely to
become increasingly expensive. While there are no significant maturities due before
2026 and we remain comfortable with the maturity profile of our debt, the strong
cash generation in 2022 and relatively weak bond market presented an opportunity
to reduce absolute debt through the repurchase of a portion of the 2026 bonds
which were trading below par. Shortly after year end on 12 October 2022, a tender
offer to purchase for cash a portion of the outstanding 3.125% senior notes due
2026 was concluded. As a result, US$206 million of the aggregate principal amount
of the 2026 bonds in the tender offer was repurchased at a purchase price of
92.41% (plus accrued and unpaid interest). The transaction not only yielded a capital
gain of US$15 million but will also reduce gross annual interest payments by
US$6 million per annum.
A further highlight was a decision by the board on 10 November to resume the
payment of dividends, which have been suspended since 2018. The dividend decision
was considered in light of a number of strategic priorities including paying down
debt, converting graphic paper exposure to packaging and speciality paper, positioning
the business for growth. Paying the dividend does not supersede nor put any of these
priorities at risk given Sappi's robust cash generation and stabilised balance sheet.
Capex in FY2023 is estimated to be US$430 million and includes approximately
US$70 million for the Somerset PM2 conversion project, US$60 million for
sustainability projects and US$20 million capex spill-over from FY2022.
As a global leader in sustainable woodfibre products and solutions, sustainability
and moving towards a circular economy underpin Sappi’s business strategy. In 2022
we took an important step to create a bridge between Sappi’s financing and
sustainability strategies by establishing a sustainability-linked finance framework.
This is an important strategic step for Sappi and supports our long-term vision to be
a sustainable business with an ambitious sustainability strategy. The Sustainable
Financing Framework will be used to guide any sustainability-linked characteristics
of future financing solutions. The framework was verified by ISS ESG with a second
party opinion that defines four material
sustainability KPIs and provides a basis
for future KPI-linked credit and capital
market activities of the group. The KPIs
focus on decreasing specific GHG
(Scope 1 and 2) emissions, certified
fibre supplied to Sappi mills, reducing
solid waste to landfill and securing zero
workplace injuries. The renewal of our
international revolving credit facility
(RCF) in August 2022 marked the first
application of the framework. The new
facility of €515 million matures in
February 2027 and comprises a
consortium of eight relationship banks.
The RCF was structured with a margin
adjustment mechanism, linked to
progress in achieving the KPIs.
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.
The surge in costs for many of our raw
materials over the past year has put
significant pressure on the business. We
set ourselves a target of a US$41 million
reduction in third party expenditure
compared to 2021 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$110 million were realised, which
helped offset the significant increase
in purchased pulp, chemicals and
energy costs. In 2023 we are targeting
approximately US$45 million in variable
cost savings.
Annual Integrated Report 2022 Sappi 33
Annual Integrated Report 2022 Sappi 33
DELIVERING SUSTAINED VALUE DELIVERING SUSTAINED VALUE
Letter to the stakeholders: Chairman and CEO continued
We have committed to a capital
allocation of approximately
US$70 million per annum to achieve
our sustainability goals. In 2022 we
completed 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 Mill and
Kirkniemi Mill from coal to biomass and
an electric boiler at Maastricht Mill. In
2023 we will begin with phase two of
the Gratkorn Mill boiler conversion,
which is to install the biomass handling
equipment which will enable us to
switch completely from natural gas
to biomass. The 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. The
kraft liner board machine at Ngodwana
Mill was upgraded to improve quality
and efficiency which will 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. Over the next few
years, we will allocate capital for several
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.
Enhance trust
Maintaining a sound ethical culture forms
the foundation of Sappi’s long-term
value creation for our stakeholders. We
live and work in a constantly changing
environment and operate in many
different countries and jurisdictions.
As an ethical global corporate citizen,
presenting a coherent and consistent
culture of the highest integrity is a core
value and integral to our
strategy
and purpose to build a thriving world.
Thrive25
The expected behaviour is encapsulated
in our Code of Ethics, which guides our
directors, employees, suppliers and
customers in their day-to-day
34 Annual Integrated Report 2022 Sappi
interactions and transactions. We
continued to build on our commitment
with an ongoing communication and
training campaign. Shortly after year
end, we launched our refreshed Code
of Ethics to align more closely with our
Thrive25
strategy. The Code, which has
been translated into relevant languages,
references several group policies,
where heightened levels of awareness
and compliance are required. In line
with the refresh of the Code, global
online training has been revamped with
new scenarios and relevant examples.
For our Code to be effective, we must
live our core values of doing business
safely, with integrity and courage,
making smart decisions that we
execute with speed.
Thrive25
strategy recognises that
Our
we need to be more proactive in our
dealings with various stakeholder
groups and that we must become a
trusted partner to these groups and
create shared value while minimising
risk and pursuing growth opportunities
in a complex operating environment.
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 2022 we executed our action plans
to address issues raised in the employee
engagement survey conducted in
2021 and are confident that we will see
the benefits of this work in the 2023
survey. We are actively working to
increase gender equality, while finding
ways to nurture emerging talent and
creating inclusive growth opportunities.
Supporting the communities in which
we operate is one of the ways in which
we enhance trust. In South Africa
where poverty and unemployment are
key social imperatives, our community
engagement agreements commit both
ourselves and our communities to work
together in driving shared value for
mutual benefit. Integrated community
forums (ICFs) are the key platforms
which we use to build trust, gain
advocacy and achieve shared value.
Community participants range from
traditional leaders and councillors to
local business and environmental
groups. The ICFs focus on three key
areas: community skills development,
asset-based community development
(ABCD) and corporate social investment,
as well as enterprise and supplier
development (ESD). Through shared
value, our overarching aim is to move
our communities towards a sustainable
future independent of Sappi.
In 2022 the Russia-Ukraine conflict in
Europe and devastating floods in
KwaZulu-Natal, South Africa were
events that spurred Sappi to action to
support urgent humanitarian relief on
the ground. We made donations to the
Ukraine Humanitarian Fund and Gift of
the Givers, Robin Hood Foundation and
The Angel Network and launched
employee donation drives, which
encouraged Sappi employees to
make in-kind and monetary donations
towards the relief efforts.
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 2022 we made further
progress towards our supplier
engagement target with 74% of suppliers
in compliance. Thus we are well
positioned to achieve our 2025 target
of 80%. Our partnership with EcoVadis
gained momentum and we have almost
200 of our most strategic suppliers
onboarded to the platform. The EcoVadis
methodology allows us to assess the
sustainability performance of our
suppliers and identify risk within our
supply chain.
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 2022 our 2030 GHG
emission reduction target was validated
by the SBTi and our capital allocation
plan approved by the board.
SUSTAINABILITY
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. Policy measures
to enable the transition to low-carbon
economies, with a general goal for net
zero emissions of greenhouse gases
(GHG) by 2050 are being rolled out
globally. The private sector has a key
role to play in this just transition and in
line with this obligation, we have set
2030 science-based decarbonisation
targets which were validated by the
SBTi in July 2022. As we navigate the
challenges of decarbonising our value
chain, we recognise that collaboration
is a critical element of our journey. We
became a full member of the World
Business Council for Sustainable
Development (WBCSD) and, together
with our peers in the Forest Solutions
Group (FSG), we are developing net
zero and nature positive roadmaps that
are appropriate for the forest sector.
Thrive25
sustainability goals and
We are making great progress towards
our
are confident that a resilient and
growing Sappi is well placed to lead
as it adapts to an uncertain future.
LOOKING FORWARD
Looking ahead, our focus will be on the
Thrive25
execution of our
strategy, while
ensuring that we remain ahead of
emerging trends to deliver sustained
value creation for our stakeholders.
In a fluid operating context, a forward-
looking risk management capability is
crucial for proactive risk management,
with risk appetite and tolerance at the
core of our decision making. This will
ensure that management and the
board have a balanced view of risks
and opportunities to make informed
strategic choices and deliver sustainable
value for our stakeholders.
Macro-economic uncertainty has
increased considerably in the past
year. Ongoing lockdowns in China, the
geopolitical turmoil in Europe and
unprecedented inflation are increasing
the likelihood of a global recession in
2023. This poses a risk to our business
as weakening consumer sentiment and
diminishing discretionary spend will
likely weaken demand in our graphic
papers and DP segments in upcoming
quarters. Order activity in these
segments has slowed and destocking
is occurring across the value chain.
The Covid-19 pandemic demonstrated
that the underlying demand for
packaging and speciality papers is
more resilient in economic downturns,
particularly for product categories in
food, beverage and healthcare.
Furthermore, the shift from plastic to
paper offers significant opportunity
to grow this segment.
Rising input costs remain a risk in
the year ahead although the prices
for some raw materials, specifically
natural gas and pulp, have started to
decrease in the first quarter of FY2023.
We remain focused on maximising our
operational efficiency and will balance
our production with demand to
proactively manage our costs and
preserve pricing.
In South Africa, a fire at a municipal
electrical substation in KwaZulu-Natal
impacted production at our three local
mills for a few days in October 2022.
In addition, a strike at Transnet has
negatively impacted DP supply chains
once again and we anticipate that
severe congestion at the Durban port
may impact sales volumes in the first
quarter of FY2023. Sales volumes
for the first quarter of FY2023 in
North America will be impacted
by the annual maintenance shut
at Somerset Mill.
Deleveraging our balance sheet
has been material and combined with
substantial cash reserves, we are well
positioned to navigate any market
downturn. We remain encouraged
by the increasing resilience of our
business and opportunities for growth
in our packaging and speciality papers
segment.
Notwithstanding the inflationary cost
pressures and weakening demand in
some product segments, we anticipate
that the EBITDA for the first quarter of
FY2023 will be above that of equivalent
quarter in FY2022.
APPRECIATION
No business operates in isolation from
a wide and varied group of stakeholders
who all contribute to our development
and performance. We thank all our
stakeholders for their ideas, constructive
criticism and support, which guide our
thinking and actions and contribute
towards making Sappi a better
corporate citizen.
To our customers in all our different
markets and geographies, we extend
our gratitude. We are committed to
collaborating and will work together
to provide relevant bio-based products
and services, which provide
sustainable value while impacting our
natural capital as little as possible.
Our success depends on the wellbeing,
skills, knowledge, expertise, productivity,
motivation and behaviour of our
employees. We aim to resource the
company with a capable, engaged and
productive workforce and are committed
to ensuring no harm comes to any of
those who work with us. We thank
our employees for their unwavering
dedication, resilience and agility which
allowed us to meet every challenge
head on, achieving a record level of
profitability.
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. We
welcomed to the board non-executive
directors Mr Louis von Zeuner
with effect from 1 September 2022
and Mr Nkululeko Sowazi and
Ms Eleni Istavridis with effect from
3 October 2022.
Mr Peter Mageza, a longstanding
member of the board and Chairman of
the Audit and Risk Committee has
indicated that he would like to retire.
The board and Mr Peter Mageza have
agreed that he should continue in his
role until his retirement in 2024 to
ensure a smooth transition to
his successor.
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 Annual General Meeting (AGM)
on 8 February 2023.
Personal note from the Chairman,
Sir Nigel Rudd. My current term as
Chairman of the board ends in February
2024. I would like to inform shareholders
that I will not be seeking re-election in
2024. In line with governance best
practice, the board has established
a committee led by Mr Valli Moosa,
the Lead Independent Director, who
will be responsible for making a
recommendation to the board
for my successor.
Annual Integrated Report 2022 Sappi 35
DELIVERING SUSTAINED VALUE DELIVERING SUSTAINED VALUE
Q&A with the CEO
“The strong cash generation and substantial
debt reduction in FY2022 has fundamentally
repositioned the business and created a more
resilient balance sheet that can withstand any
potential headwinds in our markets and provides
a flexible platform for future growth.”
– Steve Binnie
CEO
Q1
The substantial cash generation in 2022 has facilitated a
significant debt reduction. Can you outline Sappi’s capital
allocation priorities over the next few years?
The strong cash generation and substantial debt reduction
in FY2022 has fundamentally repositioned the business and
created a more resilient balance sheet that can withstand any
potential headwinds in our markets and provides a flexible
platform for future growth. We recognise that a disciplined
approach to capital allocation is a necessity in times of
macro-economic uncertainty and our net debt target of
approximately US$1 billion and maintaining the net debt to
EBITDA ratio of 1.5 times through the cycle are our guiding
principles for all discretionary capital allocation.
Our first priority for capital is to maintain our licence to
operate as we must comply with all legislation in the regions
in which we operate. This periodically requires us to allocate
capital for certain environmental and regulatory compliance
initiatives. We also recognise that climate change, water
scarcity, waste/pollution and biodiversity loss represent both
physical and transitional risks to our business. We have a
duty of care to minimise our impact on the environment and
stakeholder expectations in this regard continue to mount.
To this end, we have recently committed to science-based
decarbonisation, which we anticipate will require a capital
outlay of approximately US$70 million per annum to achieve
our 2030 targets. Maintaining our existing operations is also
a high-level priority and we consider our annual maintenance
capex as a strategic investment in our existing assets to
ensure future safe and efficient operations. We estimate that
this first level capital priority to sustain our operations will
require in the region of US$350 million per annum.
Our second tier of capital allocation priorities is to improve
the profitability of the business. There are a number of
opportunities to improve profitably through smaller
36 Annual Integrated Report 2022 Sappi
investments in efficiency enhancements, which improve our
cost position and give us quick returns on our investment.
We are also continuously striving to reduce our exposure
to graphic paper markets and have an ongoing strategic
programme to identify modest investment opportunities
to modify and optimise our graphic paper assets to shift
production to higher-margin packaging and speciality paper
products. Our next priority for capital allocation is to return
value to our shareholders. Our healthier balance sheet and
large cash reserves means that we are now in a position to
resume sustainable dividends. However, we acknowledge
that there are significant uncertainties that lie ahead in
2023 and are thus taking a conservative approach with
our dividend ratio and aim to increase dividends over the
next few years to a cover of three times.
Thrive25
strategy to focus on further growth
Our stronger balance sheet now enables us to move into
phase two of our
in our higher-margin segments. We are excited about these
opportunities and recently announced an investment to convert
and expand the Somerset PM2 from coated paper to SBS
paperboard. The project will be funded through free cash
flow from operations, thus maintaining our net debt target.
Following its completion, this expansion will increase our
packaging and speciality paper capacity and is anticipated
to boost our ROCE.
Overall, we expect de-gearing and debt reduction to continue
in FY2023 as we receive the proceeds from the sale of three
of our European mills. We will continue to look for opportunities
to deliver the growth and returns envisaged in our
strategy and entrench our leading position in our selected
markets.
Thrive25
GROUP OVERVIEWPage heading
Q2
Thrive25
One of the key
strategic
objectives is to reduce exposure
to declining graphic paper
markets. What progress has
been made in 2022?
Q3
In 2022 we saw unprecedented
global inflation. How is Sappi
mitigating rising cost impacts and
what is the outlook for the year
ahead?
Our graphic papers segment delivered a record EBITDA
in 2022. The extremely tight market conditions that led to
this extraordinary achievement were driven primarily by
significant capacity closures in the last three years.
Combined with a stronger than anticipated rebound in
economic activity post-Covid-19 and constrained global
logistics, we experienced strong demand from our customers
and were able to implement multiple price increases over the
course of the year, which boosted margins substantially. We
do not believe that these conditions are sustainable and the
underlying demand for graphic paper continues to decline at
a rate of approximately 5% to 6% per annum. Nevertheless,
2022 has demonstrated that the graphic papers segment
has the potential to be profitable and generate substantial
cash if supply and demand are in balance.
Thrive25
strategy is to reduce our exposure
A key element of our
to declining graphic paper markets and we made great
progress against this objective with the sale of three of our
European graphic paper assets (Kirkniemi, Stockstadt and
Maastricht Mills). For the most part, the product categories
served by these assets (coated mechanical and uncoated
woodfree paper) are not a core focus for Sappi and this
divestment allows us to consolidate our portfolio and
concentrate on commercial print where we are a leader
and have competitive advantage. The sale removes
approximately 1.2 million tons of lower-margin graphic paper
capacity from our portfolio. The remaining graphic paper
assets in our portfolio are competitive and can generate
favourable returns in a balanced marketplace. The conversion
and expansion of Somerset PM2 will remove another
240,000 tons of graphic paper capacity and increase our
packaging capacity by 470,000 tpa. In addition, the modest
investments at Gratkorn Mill to produce label paper will over
the next few years swing a further 200,000 tpa from coated
woodfree to speciality paper. We will continue to optimise
our graphic papers business to contain costs and improve
productivity and are confident that we will be able to reduce
graphic papers to less than a third of our sales volumes in the
next five years while growing our packaging and speciality
papers portfolio.
We continue to evaluate our graphic paper machines globally
for potential conversion opportunities to packaging and
speciality paper grades. Our aim is to create the flexibility to
allocate capacity between graphic paper, where volume is
declining, to packaging and speciality paper grades, where
demand is growing and margins are higher. This helps to
maintain our graphic paper operating rates, maximise cash
generation and establish Sappi as a premium global supplier
of packaging and speciality papers, while maintaining a
strong position in graphic papers.
The strong economic recovery post-Covid-19 has created
havoc with global supply chains over the last two years.
Severe port congestion and resultant berthing delays
essentially locked up inventories on vessels outside ports
creating an artificial shortage of goods, which set in motion
a wave of inflation across the globe. Geopolitical turmoil in
Europe in 2022 further exacerbated the already uncertain
macro-economic environment and inflation escalated to
unprecedented highs. Our variable manufacturing and
delivery costs at a group level increased 35% y-o-y with every
input category rising substantially. On the back of constrained
raw materials availability, security of supply and aggressive
cost mitigation became strategic imperatives. The arduous
environment demanded agility and flexibility from our
procurement, operations and sales teams as customer
pressure mounted and our orderbooks reached record highs.
Innovation springs from adversity and our teams stepped up
to the challenge. We qualified alternate raw material suppliers,
modified product recipes, optimised delivery modes and
implemented product surcharges where appropriate to offset
rising costs. The intensified level of global co-operation truly
embodied our ‘OneSappi’ ethos and core values of doing
business safely, with integrity and courage, making smart
decisions that we execute with speed.
Globally, our variable costs are still at very high levels and some
categories continue to rise. However, with supply chains
easing and demand for commodities softening, we expect
that costs will begin to turn in 2023. Pulp prices have started
reducing in China and we anticipate that North America and
Europe pricing will follow shortly. Energy/gas costs in Europe
also started to decline in the first quarter of FY2023, which
will benefit our European business.
Q4
You have recently announced a
US$418 million capital investment
project at Somerset Mill. Can you
explain the rationale behind the
investment decision and timing
of the project?
In 2018, we successfully converted PM1 at the Somerset Mill.
The investment decision perfectly positioned Sappi to meet
the sharp increase in demand for high-quality folding carton
and food service paperboard products in North America. The
mill generated record sales volumes and EBITDA in FY2021
while achieving the full run rate on PM1 and repeated the
performance in FY2022 with another record performance.
The PM1 hybrid machine has the flexibility to produce
350,000 tpa of SBS paperboard and coated graphic paper
products. End-use markets for the packaging grades include
folding carton for luxury beverages, cosmetics and perfumes,
health and beauty care and consumer electronics, as well as
foodservice board for disposable cups, plates and fast-food
packaging.
Annual Integrated Report 2022 Sappi 37
DELIVERING SUSTAINED VALUE We consider climate change to be one of the most urgent
risks facing society and our operations today. Decarbonisation
is thus both a moral and strategic obligation for our business.
Sappi has a long track record of investing in our operations
to reduce our GHG emissions and the board’s support of our
science-based decarbonisation targets reinforces our ongoing
commitment to climate action. The SBTi has confirmed
that our well below 2° targets are in accordance with the
Paris Agreement. Validation of our targets is a concrete
demonstration to our increasingly sustainability conscious
stakeholders that we are committed to doing our fair share to
reduce global warming and contributing to a thriving world.
Achieving our science-based decarbonisation trajectory will
be a key enabler for future-proofing our business as we focus
our growth strategy on circular, nature based solutions for a
low-carbon economy. In the long-term, we anticipate that
decarbonisation investments will reduce costs, spur innovation,
provide resilience against regulation and boost investor
confidence. We have developed a clear roadmap and capital
allocation strategy to achieve our 2030 targets and we have
also committed to using our influence to encourage our
major suppliers to set their own science-based targets.
We acknowledge that decarbonisation of our South African
assets will be more challenging. Our mills in this region are still
reliant on coal-based power for a significant proportion of their
energy requirements. The South African energy landscape is
heavily dependent on coal, which is an abundant resource in
the country. While Sappi has a relatively high level of renewable
energy integration within the context of the region due to
our black liquor and biomass fuel sources, we are not fully
self-reliant. We thus need to purchase energy from the
national utility provider, Eskom, which is predominantly
based on coal. There is currently very little renewable energy
available for purchase within the country and therefore our
decarbonisation roadmap for the region assumes that we
will have to invest in our own renewable energy assets.
We are actively investigating opportunities for investment
in solar, wind and biomass power assets and will furthermore
collaborate and explore opportunities for purchasing
renewable energy from any new independent power
producers that are established. Within the context of the
national dependency on coal and high levels of unemployment
and social inequality, we recognise that a just transition is
critical for South Africa. We will therefore use our influence
to collaborate with other business leaders, communities and
government stakeholders to advocate for a just transition
where no-one is left behind.
DELIVERING SUSTAINED VALUE
Q&A with the CEO continued
The demand for Sappi’s foodservice board grades is particularly
robust as the industry responds to customer requests for more
sustainable and environmentally friendly packaging solutions.
Furthermore, demand is expected to accelerate in the next
few years as legislation banning the use of polystyrene foam
packaging took effect in several US states in 2022 and will
likely extend to additional states in future. Our customers are
actively seeking to grow their volumes with Sappi as their
preferred independent supplier. We have therefore made the
decision to convert and expand the PM2 machine at Somerset
Mill to 470,000 tpa of SBS. The PM2 conversion project will take
three years and start-up is expected to take place in early
calendar 2025.
Although the graphic paper assets in North America are
currently running full, the market is expected to continue to
decline. The 2025 timeline of the conversion is aligned with
the graphic paper market decline trajectory. In addition, the
hybrid capability of PM1 is a considerable strategic
advantage as we will be able to optimise our graphic paper
and paperboard mix across the three Somerset Mill paper
machines to ensure that our operating rates are maximised
during the ramp up of PM2. The technical risk associated with
the project is relatively low as the new equipment that will be
installed is similar to that on PM1 and the know-how already
exists to operate and produce high-quality SBS from this
type of machine. We will work closely with our customers to
secure sales volumes and expedite product qualifications.
Thrive25
strategy to reduce
The project is aligned with our
exposure to graphic paper markets and is more than just a
conversion, as the capacity of the machine will be doubled.
This is therefore a significant growth project for our
packaging and speciality papers segment and returns on
the investment are expected to exceed a 20% internal rate
of return (IRR).
Q5
Sappi’s 2030 science-based
decarbonisation targets were
validated by the SBTi in July
FY2022. What does this mean
for the business?
The physical impacts of climate change are already having a
direct impact on our business. Changing weather patterns and
more extreme weather events are occurring in every region in
which we operate. In the past few years, we have experienced
disruptions to our operations and supply chains as a result of
drought, wildfires, acute cold events and flooding. In 2022 the
catastrophic flooding that devastated the KwaZulu-Natal region
of South Africa interrupted operations at our three mills in the
region. Although the damage to our assets was fortunately
relatively minor, the impact on our communities and employees
was significant. Critical infrastructure surrounding our operations
including road, rail and port assets were severely impacted
and we were forced to close our mills for several days and a
large quantity of inventory was damaged at a port warehouse.
In total we lost 24,000 tons of production and 32,000 tons of
inventory. After insurance proceeds, the event cost the
business US$18 million.
38 Annual Integrated Report 2022 Sappi
Annual Integrated Report 2022 Sappi 39
DELIVERING SUSTAINED VALUE il lum e
Sky lanterns – traditionally called Khoom Fay in China –
can be traced back thousands of years to one of the early
Chinese dynasties. They were used not only as decorative
light sources but also as military signals that could
communicate messages across long distances. Today, it is
said they are released at traditional festivals to emphasise
the unity of family coming together to celebrate the lunar
new year. This is represented by the lanterns collecting in
the sky and expressing the wholeness of family.
Sappi is situated in many different regions across many
different cultures and countries. But we come together as
one whole, OneSappi, united by our purpose which is our
guiding light: Sappi exists to build a thriving world by
unlocking the power of renewable resources to benefit people,
communities and the planet.
Passion and excellence are the sparks that ignite thriving.
And they’re what keep our commitment to create a thriving
future for the world and our business burning so brightly.
They’re also what will continue to illuminate our way
forward – today and tomorrow.
40 Annual Integrated Report 2022 Sappi
il lume
Sky lanterns – traditionally called Khoom Fay in China –
can be traced back thousands of years to one of the early
Chinese dynasties. They were used not only as decorative
light sources but also as military signals that could
communicate messages across long distances. Today, it is
said they are released at traditional festivals to emphasise
the unity of family coming together to celebrate the lunar
new year. This is represented by the lanterns collecting in
the sky and expressing the wholeness of family.
Sappi is situated in many different regions across many
different cultures and countries. But we come together as
one whole, OneSappi, united by our purpose which is our
guiding light: Sappi exists to build a thriving world by
unlocking the power of renewable resources to benefit people,
communities and the planet.
Passion and excellence are the sparks that ignite thriving.
And they’re what keep our commitment to create a thriving
future for the world and our business burning so brightly.
They’re also what will continue to illuminate our way
forward – today and tomorrow.
Annual Integrated Report 2022 Sappi 41
RESPONDING TO OUR CONTEXT
Our operating context
Our external operating environment presents us with
both risks and opportunities, impacts our ability to
generate enterprise value and informs our approach
to our stakeholders, as well as our approach to
material matters.
The Russia-Ukraine war
Rising levels of cyber crime
Context
Context
Russia’s invasion of Ukraine in February this year
caused a global inflation, energy, food and supply
chain crisis. In addition, many customers were
concerned about the use of woodfibre from
conflict zones.
The ongoing conflict was exacerbated by Covid-19
lockdowns in China. These developments exerted
renewed pressure on global supply chains and
energy prices, resulting in further broad-based
inflation. Y-o-y variable manufacturing and delivery
costs rose by 35% and fixed costs were 4% higher
y-o-y due to escalating personnel and
maintenance costs.
Our response
Several European countries have scaled back on their
climate goals in the short term by reverting to coal. For
example, Germany is still committed to phasing out coal-fired
power plants by 2030. We intended to decommission the
coal boiler at Stockstadt Mill by September 2022 but have
had to delay this. However, the situation is temporary and
we remain committed to a sustainable, low-carbon future –
as envisaged by the Paris Agreement and the European
Green Deal.
Despite spiralling energy, raw materials and transportation
costs, there was strong global demand for paper, particularly
packaging, which remained resilient during the Covid-19
pandemic. Strong demand created an equally strong pricing
momentum, which we leveraged by increasing pricing of our
products. Other risk mitigation strategies included temporarily
reducing capacity at Carmignano Mill in Italy, due to the
continuing, sharp escalation of energy costs.
The FSC and PEFC (including SFI) withdrew their certifications
for Russia and Belarus, excluding wood originating from Russia
and Belarus, from their certification systems. We supported
stance of both certification bodies and immediately halted our
wood procurement from the region. In FY2021, of total
woodfibre sourced, less than 0.1% was sourced from Russia.
See issues related to supply chain and food security are
discussed on pages
83 to 84 and 64 respectively of
this report.
42 Annual Integrated Report 2022 Sappi
Digital transformation, the ongoing evolution
of malware and the transition to working from
home have meant that today, data is at greater
risk for a breach. Cyber crime is escalating,
causing immense, sometimes invisible damage
to businesses and societies. Earlier this year,
Sappi was the victim of a cyber attack when
a hacker accessed a subset of our internal
systems. Our global team identified the
anomalous behaviour on one of our file
servers and immediately initiated
containment protocols.
Our response
Due to the rapid response from our teams and existing
controls, there was no downtime experienced in any of
our operations. In addition, there were no financial
losses nor impact to any business systems. Limited,
non-business critical information was exfiltrated. There
was no access to core business systems nor to any live
customer or partner data. The incident affirmed that our
recent emphasis on cyber crime risk mitigation is highly
justified, as our ability to both detect and contain the
infiltration enabled us to avoid a potentially material
business interruption.
All files exfiltrated were reviewed and the following
proactive measures were applied:
• Limited non-essential and regional internet traffic
• Partnered with multiple industry-leading incident
response and forensic partners to capitalise on
diverse experience and skill depth
• Ensured all regulatory processes were adhered to
through our internal and external legal counsel
• Deployed advanced security detection and
•
response technology at a global scale
Initiated mandatory training on cyber security for
all our employees.
Extreme weather events
Context
The world saw significant weather events in 2022, including record-breaking heat
in Europe, wildfires in the US and Algeria, extreme heat and flooding in Pakistan,
the melting of Greenland's huge ice sheet, as well as drought in Africa and China.
In South Africa, floods in KwaZulu-Natal province damaged roads, warehouses,
railway lines and homes and resulted in the loss of 24,000 tons of production
and 32,000 tons of damaged inventory at our Durban port warehouse.
Our response
We halted production at our three mills in the KwaZulu-Natal province, Saiccor, Stanger, and
Tugela, to ensure the safety of our employees. The mills operated on a skeleton crew as a
precautionary measure until it was safe to return to work. Fortunately, there was no material
damage to our assets, and we were covered by insurance for property and inventory losses.
We provided support to affected communities (described on pages
63 and 64 of this report).
While we expect extreme weather events to continue, our global decarbonisation plans and
response to the impact of climate change on woodfibre should help to maintain and enhance
enterprise value going forward.
Shifting climate regulation
Context
Governments around the world are focusing on mitigating Scope 1, 2 and 3 carbon
emissions through various programmes ranging from carbon trading and taxes
– already in place in some regions in which we operate (South Africa and Europe)
– to actual mandates eliminating the use of coal, for example.
Our response
SEU: The EU Green Deal is aimed at making Europe the first climate neutral continent by 2050.
The first step is to reduce emissions by at least 55% by 2030, compared to 1990 levels. The EU
Green Deal continues to proceed through the European policy process. We are engaging with
policy development processes to support outcomes that are ambitious but also feasible to
implement.
SNA: In the US, the IRA which was signed into law August 2022, promotes the reduction of
carbon emissions by roughly 40% by 2030. SNA is currently assessing the implications of the
IRA, particularly opportunities for funding that might support our SBTi-related plans for
decarbonisation in the form of tax breaks and other financial benefits. In December 2020, the
Canadian federal government released A Healthy Environment and a Healthy Economy (Climate
Plan), a climate plan to exceed Canada's 2030 emission reduction targets and achieve net zero
GHG emissions by 2050. The federal government has also released an updated nationally
determined contribution plan to match its commitments in the Climate Plan. The province of
Quebec, in which our Matane Mill is situated, has its own emissions reduction commitment.
While we monitor emerging regulation here, we do not see it as a significant risk, given that Matane
Mill uses nearly 100% renewable energy and that electricity in the province is mainly derived
from hydropower. However, we also monitor emerging regulation related to Scope 3 emissions.
SSA: Developments in this region are discussed on page
50 of this report.
Annual Integrated Report 2022 Sappi 43
RESPONDING TO OUR CONTEXT Our operating context continued
Social unrest
Context
Levels of social disaffection in South Africa are high, fuelled by high unemployment rates of 34% for
the general population and over 60% for youth. The situation is exacerbated by slow economic recovery
from Covid-19, decaying infrastructure, high levels of crime and corruption, as well as escalating food
and fuel prices. Globally, the country has one of the highest social inequality rates with almost half of
all South Africans now relying on some financial support from the government. What this means is that
living conditions are poor and social mobility is limited. Against this backdrop, Sappi is faced with
increased militancy from unemployed youth and business forums. We are also expected to play a bigger
role than just business given communities’ high expectations for us to facilitate and resolve social ills.
Our response
We recognise that we need to ensure the stability of our operations within the context described above. Accordingly, we
adopt an approach beyond ‘business as usual’ in order to maintain our licence to operate and thrive. We do so by investing
in the rural economy by generating employment, creating shared value and leveraging our ICFs. Initiated in 2018, ICFs aim
to build trust, gain advocacy and achieve shared value.
Sappi participants include management, HR, communication, procurement, engineering and project teams. Community
participants range from traditional leaders and councillors to local business and environmental groups and the Abashintshi
(young community members, meaning ‘changers’ in isiZulu). Integral to this structure is forestry managers’ participation in
social impact programmes (speaking at schools, integrated fire awareness and training) and participating in social engagements
(sports days etc.). The ICF focuses on three key areas: community skills development, ABCD and corporate social
investment, as well as ESD.
Our community engagement structure
Our engagement approach is both short and long term.
In the short term we focus on disaster relief efforts,
donations – often in the form of paper, sports and
recreation, as well as access to potable water and road
and infrastructure support. In the longer term we focus
on systemic change and helping to build social capital.
This incorporates support throughout the education
value chain – from support for ECD, to the Sappi Skills
Centres at Ngodwana and Saiccor mills, which are
focused on technical training. It also extends to
environmental projects such as our partnership with
WWF-SA (described on page
104) that both mitigate
harm and create environmental benefit. Self-empowering
ABCD projects like the Abashintshi help to drive community
self-reliance. So too, do our collaborations with other
organisations aimed at shared value which include:
• Offering non-monetary developmental support for
SMEs through a memorandum of understanding with
the Small Enterprise Development Agency (SEDA)
• Funding the membership of 10 of our incumbent
SMEs for the Durban Chamber of Commerce and
Industry which offers training, development support,
networking and market expansion opportunities to
these SMEs
• Establishing memoranda of understanding with Ithala
Bank and the Industrial Development Corporation for
the provision of funding to SMEs within our value chain
• Contributing ZAR694,000 to the National Business
Initiative for the establishment of a business hub in
Mandeni aimed at developing technical skills among
identified SMEs and job-creation opportunities for
local youth – the other funders are the German and
Swiss governments
• Partnering with a major South African logistics company
to run a five-year incubation programme for the delivery
of finished product between Saiccor Mill and our Durban
warehouse.
Through shared value, our overarching aim, is to move our
communities towards a sustainable future independent of
Sappi.
Forestry
communications
relations team
Social
impact
executive
committee
Community
relations
national
manager
Mill community
relations team
Integrated
community
forums
Engagement with
traditional leaders
and councillors
Abashintshi youth development programme
44 Annual Integrated Report 2022 Sappi
RESPONDING TO OUR CONTEXT Biodiversity loss
Context
Earth’s wildlife populations have plunged by
an average of 69% in just under 50 years,
according to the WWF and Zoological Society
of London’s Living Planet Report1, as humans
continue to clear forests, consume beyond
the limits of the planet and pollute on an
industrial scale. The report highlights that
land use change is still the most important
driver of biodiversity loss across the planet.
Our response
As our business depends on healthy ecosystem
function, we have a particular interest in participating
in initiatives to arrest biodiversity loss. We do so
in the following ways:
• High levels of certification to independently
verified system
• Membership of the Circular Bioeconomy
Alliance aims to accelerate the transition to
a circular bio-economy that is climate neutral,
inclusive and prospers in harmony with nature
• Business for Nature’s #MakeitMandatory
campaign, which calls on all large businesses
and financial institutions to assess and disclose
their impacts and dependencies on biodiversity
• Communicating our support for COP15
• Utilise third-party forest certification systems
to advance responsible forest management,
identify and manage risk, continuously improve
Sappi’s operations and those of our suppliers
Implement detailed procedures and systems to
trace and document the origin of wood and the
species used in our products
•
• Conduct annual supply-chain risk assessments
coupled with rigorous supplier qualification
processes.
See our Woodfibre Procurement Policy at
https://www.sappi.com/
groupwoodprocurementpolicy
See other initiatives and programmes are
described on pages
106 to 107 of this report.
1 Available at https://wwwflpr.panda.org/
Annual Integrated Report 2022 Sappi 45
RESPONDING TO OUR CONTEXT RESPONDING TO OUR CONTEXT
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.
Over the years, we have implemented several processes, resources and structures to ensure
our risks are managed adequately and efficiently. Among these, we have entrenched safety
programmes, internal audit reviews, insurance, information technology (IT) security, compliance
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 TCFD.
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 the risk
management process
For an analysis of the principal financial risks we are exposed to, refer to note 32 of the Group Annual Financial
Statements at www.sappi.com/annual-reports
Our 2022 Risk Management Report provides a detailed discussion of the group’s risk factors, and can be accessed at
www.sappi.com/annual-reports
46 Annual Integrated Report 2022 Sappi
RESPONDING TO OUR CONTEXT 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,
eg, return on investment.
Strength of current mitigations
Weak
Satisfactory
Good
i
n
a
t
r
e
c
t
s
o
m
A
l
e
c
n
e
r
r
u
c
c
o
f
o
d
o
o
h
i
l
e
k
i
L
e
t
o
m
e
R
2
5
7
10
3
6
8
9
4
1
Very low
Impact
Very high
s
k
s
i
r
0
1
p
o
T
RESIDUAL RISK RANKING
1/ Safety
6/ Evolving technologies and
consumer preferences
2/ Cyber security
7/
Cyclical macro-economic factors
3/ Sustainability expectations
8/ Uncertain and evolving regulatory
landscape
4/ Supply chain disruption
9/ Employee relations
5/ Climate change
10/ Liquidity
Annual Integrated Report 2022 Sappi 47
RESPONDING TO OUR CONTEXT
Risk management continued
1/
Safety
(2021: 1)
Root cause
2/
Cyber
security
(2021: 6)
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.
Thrive25
strategy objectives impacted
3Ps impacted
Capitals impacted
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.
Such stored content could be vulnerable to cyber attacks if not
properly classified and protected by functional owners.
Thrive25
strategy objectives impacted
Mitigating actions
• Conduct root cause analyses of all major incidents
and 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.
3Ps impacted
Capitals impacted
Mitigating actions
• Mitigate against cyber-attacks and information security
breaches through our multi-layered IT 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.
Related material issues
Related material issues
• Ensuring the safety of our employees and contractors
• Supporting sound labour relations
• Attracting, developing and retaining Sappi talent.
• Maintaining ethical behaviour and compliance
• Attracting, developing and retaining Sappi talent.
48 Annual Integrated Report 2022 Sappi
RESPONDING TO OUR CONTEXT
3/
Sustainability
expectations
(2021: 4)
Root cause
4/
Supply chain
disruption
(2021: 3)
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.
Thrive25
strategy objectives impacted
3Ps impacted
Capitals impacted
Mitigating actions
• Provide product information to customers
• Enhanced health and safety specifications
• Promote recyclability
• Drive product innovation (including research and
development (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 forest
certification
• Communicate our social and environmental credentials
through all media channels
• Implement ESG-related covenants.
Related material issues
• Procuring responsibly
• Providing sustainable solutions for a circular bio-economy
• Responding to evolving customer needs through innovation
and collaboration
• Sourcing sustainable woodfibre
• Prioritising clean and renewable energy and responding
to climate change
• Focusing on water stewardship and circularity
• Safeguarding and restoring biodiversity.
We depend on a reliable and efficient supply chain to procure
raw materials from suppliers and 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. 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. 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 status.
Thrive25
strategy objectives impacted
3Ps impacted
Capitals impacted
Mitigating actions
• Documented business continuity plans
• Ability to operate via multiple transportation modes
• Operational plans to utilise multiple ports for shipments
• Ongoing communication with key stakeholders, including
government
• Alternative modes of shipping
• Fine-tuning internal processes to enhance co-ordination
between departments
• Negotiating longer lead times.
Related material issues
• Procuring responsibly
• Maintaining and strengthening our competitive position
through agility, innovation and operational efficiency
• Prioritising clean and renewable energy and responding
to climate change.
Annual Integrated Report 2022 Sappi 49
RESPONDING TO OUR CONTEXT
Risk management continued
5/
Climate
change
(2021: 5)
Root cause
Climate change is having an unavoidable effect on our business
in the form of transitional, reputational and physical impacts.
The latter includes 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.
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.
Thrive25
strategy objectives impacted
3Ps impacted
Capitals impacted
Mitigating actions
• Source pulp and woodfibre from a variety of sources and
regions
• Invest in fire, pest 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
• Following engagement with the South African Department
6/
Evolving technologies and
consumer preferences
(2021: 2)
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.
Thrive25
strategy objectives impacted
3Ps impacted
Capitals impacted
Mitigating actions
•
Improve profitability by implementing restructuring and
other cost-saving projects
• Enhance productivity
• Drive growth in our higher-margin packaging and speciality
papers business
• Leverage our position in the market to capture growth in
the DP market.
Related material issues
• Procuring responsibly
• Providing sustainable solutions for a circular bio-economy
• Maintaining and strengthening our competitive position
through agility, innovation and operational efficiency
of Forestry, Fisheries and Environment (DFFE), we anticipate
our carbon tax liability to be zero, as in FY2021
• Sourcing sustainable woodfibre
• Prioritising clean and renewable energy and responding
• Group-wide decarbonisation initiatives.
to climate change
Related material issues
• Providing sustainable solutions for a circular bio-economy
• Sourcing sustainable woodfibre
• Prioritising clean and renewable energy and responding
to climate change
• Focusing on water stewardship and circularity
• Safeguarding and restoring biodiversity.
• Responding to evolving customer needs through
innovation and collaboration.
50 Annual Integrated Report 2022 Sappi
RESPONDING TO OUR CONTEXT
7/
Cyclical macro-economic
factors
(2021: 7)
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 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.
Thrive25
strategy objectives impacted
3Ps impacted
Capitals impacted
8/
Uncertain and evolving
regulatory landscape
(2021: 8)
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.
Thrive25
strategy objectives impacted
3Ps impacted
Capitals impacted
Mitigating actions
• 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.
Related material issues
• Maintaining and strengthening our competitive position
through agility, innovation and operational efficiency
• Providing sustainable solutions for a circular bio-economy
• Responding to evolving customer needs through
innovation and collaboration.
Mitigating actions
• Remain up to date on changes to applicable legislation
• Group-wide legal compliance programmes
• 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
GHG emission requirements, and take action accordingly
• Co-operate across regions to apply best practices in
sustainability.
Related material issues
• Maintaining ethical behaviour and compliance
• Procuring responsibly
• Ensuring the safety of our employees and contractors.
Annual Integrated Report 2022 Sappi 51
RESPONDING TO OUR CONTEXT
Risk management continued
9/
Employee
relations
(2021: 10)
Root cause
10/
Liquidity
(2021: 9)
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.
Thrive25
strategy objectives impacted
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 world-wide economic conditions, which could
result in a decline in global demand for our products.
Thrive25
strategy objectives impacted
3Ps impacted
Capitals impacted
3Ps impacted
Capitals impacted
Mitigating actions
•
Interact and engage with union representatives and organised
labour regularly
• Build constructive work relationships.
Related material issues
• Ensuring the safety of our employees and contractors
• Supporting sound labour relations
• Attracting, developing and retaining Sappi talent
• Creating a positive social impact in our communities.
Mitigating actions
• Cost-saving initiatives
• Re-prioritising various strategic initiatives
• Commercial downtime taken to match supply to demand
• Deferral of non-critical capex projects.
Related material issues
• Maintaining and strengthening our competitive position
through agility, innovation and operational efficiency.
52 Annual Integrated Report 2022 Sappi
RESPONDING TO OUR CONTEXT
Annual Integrated Report 2022 Sappi 53
RESPONDING TO OUR CONTEXT RESPONDING TO OUR CONTEXT
Our key relationships
Our overarching aim is to partner proactively with our stakeholders
as we unlock the power of trees and their limitless potential to
offer sustainable nature-based solutions that benefit people and
the planet, thereby realising our vision of a thriving world. Doing
so requires bold, decisive action.
Highlights in FY2022
• Signed up for the United Nations Global Compact (UNGC) Early
Adopter Programme.
• Worked with a consortium of banks to develop the Sustainable
Financing Framework, our first financing facility with sustainability
linked KPIs.
• Became a member of the WBCSD.
• Higher levels of involvement in thought initiatives such as the World
Resources Institute’s GHG Protocol Carbon Removals and Land Sector
Initiative Project, which benefit the forestry industry as a whole.
• Opening of the Saiccor Mill capacity expansion and environmental
upgrade project by South African President Cyril Ramaphosa, marking
the fulfilment of Sappi’s commitment made at the first South Africa
Investment Conference in 2018.
54 Annual Integrated Report 2022 Sappi
RESPONDING TO OUR CONTEXT Together with our stakeholders, we’re 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 challenge the
status quo and be responsive to an evolving stakeholder
landscape. In addition to responsiveness, our approach
to engagement is based on the principles of inclusivity,
materiality, relevance and completeness.
In determining those issues most material to our stakeholders,
we assess not just enterprise value, but also the impact
of our activities on people and the planet. (Please see
page
76 for further details.)
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 Greenlight Movement community surveys in
South Africa.
Our stakeholder work is aligned to the governance framework
of King IV, namely performance and value creation, adequate
and effective controls and trust, as well as reputation,
legitimacy and ethics.
Thrive25
strategy
One of the strategic fundamentals of our
is to enhance trust. Achieving this 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 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.
Our stakeholder engagement is also guided by our membership
of and commitment to the United Nations Global Compact
(UNGC) as well as our work on the UN SDGs, in particular, the
SDGs which we have prioritised.
See Maintaining ethical behaviour and compliance on
page
80.
Principle 10: Businesses should work against
corruption in all its forms, including extortion and
bribery.
Annual Integrated Report 2022 Sappi 55
Employees
Unions
Customers and partners
Communities and neighbours
Industry bodies, related
memberships and organised
business
Shareholders, bondholders and
banks
Suppliers and contractors
Government and regulatory
bodies
Civil society and media
RESPONDING TO OUR CONTEXT
Our key relationships continued
Employees
Self-assessment of
quality of relationship:
Good
Thrive25
Why we engage
As we take Sappi into the future, based on the clear roadmap entrenched in
our
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
Constructive action
regarding Covid-19
Shared
priorities
Focused wellness and
wellbeing
Our response
Our response
We implemented a staggered return to our sites as restrictions
eased. Covid-19 information hubs continued to support our
staff, customers and their families, focusing specifically on
infection prevention and vaccination-related topics.
• Wellbeing and wellness programmes are tailored to the
•
needs of each region
In SSA, our HIV/Aids programme provides support for
employees and contractors. In this region, we also work with
government in terms of community health programmes.
Shared
priorities
Effective recognition
programmes
Our response
Our recognition programmes include:
Sappi Limited
• Technical Innovation Awards
• CEO Thrive Award.
SEU
• Long-service awards
• Annual Coryphaena Award.
SNA
• TOUTS Recognition Awards – a peer-to-peer recognition
programme whereby employees can recognise each other
for achievements
• Periodic regional President’s Awards
• Long-service recognition.
SSA
• Excellence in Achievement Awards (EAA)
• Annual safety awards
• CEO Award
• Long-service awards.
Sappi Trading
• SMART Awards.
Shared
priorities
Involvement in safety
Our response
• Our commitment to safety is entrenched in our company
value statement
• For the third year running, the theme for Global Safety
Awareness week was ‘I Value Life’. The key messages were:
– I value life
– I am aware of my environment and potential hazards in it
(situational awareness)
•
– understanding hazards and risks
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 Sappi Europe (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 Sappi North America (SNA), all unions can participate
in joint management-worker safety committees
– in Sappi Southern Africa (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.
See Ensuring the safety of our employees and contractors
on page
90.
56 Annual Integrated Report 2022 Sappi
RESPONDING TO OUR CONTEXT Shared
priorities
Connection with Sappi’s
strategic goals and high
levels of engagement
Shared
priorities
Training and development
that benefits Sappi and our
employees
Our response
Our response
• Group and regional CEOs engage with staff regarding
company performance at the end of each quarter
Globally, on average, each employee benefited from 46.89 hours
of training (FY2021: 48.3 hours).
• Targeted communication programmes are launched for any
major development supporting the strategic goals (project
launches, mergers and acquisitions (M&A) activities etc)
•
In SEU regular videos from the CEO are shared with staff
• Quarterly staff updates are undertaken by the SNA leadership
team
•
In SSA the Ask Alex initiative continues whereby employees
can pose questions to the CEO
• We conduct engagement surveys every second year, with
the most recent one in 2021. Results are communicated to
staff and workshopped with individual teams. A central action
tracker facilitates updates on action items identified in each
region in the last survey. A summary of themes and progress
is provided to senior leadership at least twice annually.
• 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
• We have relaunched our learning, talent and performance
tools under the Sappi Advance brand name with a
comprehensive communication campaign reminding
employees of the options for personal development that we
offer. Already available in English, a fully translated version is
being prepared by SEU for FY2023. SNA ensures that the
programme is also available in French Canadian for our
Matane Mill employees.
SEU
• The Leadership Talent Strategy and Sappi Leadership Academy
develop a leadership pipeline
See Engaging more closely with our employees on page
56.
• The Apprenticeship Programme and Graduate Trainee
Shared
priorities
Understanding Sappi’s
commitment to
sustainability which
underpins our strategy
Our response
Globally, targeted internal publications and social media
campaigns linked to days like Global Ethics Day, World
Environment Day1 and the International Day of Biodiversity2
enhance understanding of the sustainability landscape and our
role in promoting responsible biodiversity initiatives.
SEU’s Blue Couch series features a series of interviews with
speakers from the paper industry who provide insights about
new products, innovations and sustainability.
SNA runs an active sustainability ambassador programme
which promotes understanding and awareness of sustainability-
related issues.
All regions undertake internal sustainability communication
campaigns linked to our priority SDGs.
1 https://www.linkedin.com/company/sappi/videos/native/urn:li:ugcPo
st:6939487203391602688/
2 https://www.linkedin.com/company/sappi/videos/native/urn:li:ugcPo
st:6934024075312783362/
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 support 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.
SSA
• Sappi Leadx prepares future leaders
• Apprenticeships, engineers in training and foresters in
training programmes build our human capital for the future
• The Lean & Me programme, which involves basic leadership
practices, primarily targeted at supervisors and foremen in
the manufacturing business, continues to gain traction
across all mill sites
• The National Employment Equity and Learning Committee
ensures that we meet our legislative obligation to consult
and attempt to reach agreement, as placed on us by the
Employment Equity Act and Skills Development Act. The
committee, which meets at least twice a year, has been
reconfigured to include representation from the semi-skilled
and unskilled categories of employees
• We offer bursaries in a variety of fields related to our business
• We offer a number of internships each year to support key
business functions including IT, communications, human
resources (HR) and manufacturing operations.
In light of an ageing workforce within our industry, particularly in
North America, our employees in each region have been visiting
schools and becoming involved in initiatives that promote
career paths within forestry and the pulp and paper industry.
Annual Integrated Report 2022 Sappi 57
RESPONDING TO OUR CONTEXT 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 safety delivers benefits at
personal, team and operational levels
• By living up to our purpose, we become a more attractive
employer, particularly to Millennials and Gen Zers
• By establishing an ethical culture where corporate
citizenship is promoted, we ensure the ongoing viability
of 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.
Our key relationships continued
EMPLOYEES continued
Shared
priorities
Encourage employee
volunteerism through
initiatives
Our response
In FY2022, in addition to a corporate donation of US$100,000
to support humanitarian relief in Ukraine including through UN
Crisis Relief, Sappi matched employee donations to the value
of US$25,000 made to organisations including the International
Committee of the Red Cross, Save The Children and Doctors
without Borders.
SEU
• SEU supported various local education, cultural and
environmental projects based on annual requests and
identified needs
• Additionally, SEU focused their efforts on Poland where
hundreds of thousands of Ukrainians have found sanctuary.
From collecting essential goods and supplies to making
healthy meals, Sappi people in the Krakow Shared Service
Centre are doing their part to provide relief and support.
SNA
• Through the Employee Ideas that Matter initiative, we
provide grants to employees to benefit the non-profit
organisations about which they are most passionate.
The winners share US$25,000 in corporate giving to
support their selected causes. In 2022 the amount was
increased to US$50,000.
SSA
• Employee Wellbeing Committees at each mill support local
community projects and Mandela Day volunteering initiatives
• Following extensive floods in KwaZulu-Natal province earlier
this year, we launched an employee donation drive, collecting
over ZAR125,000 each for the Angel Network and Robin Hood
Foundation. In addition, Sappi donated ZAR1 million to the
Gift of the Givers organisation.
58 Annual Integrated Report 2022 Sappi
RESPONDING TO OUR CONTEXT Unions
Self-assessment of
quality of relationship:
Fair
Why we engage
In 2022, globally, 55% of our workforce was unionised, with 71% 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
Our response
Sappi endorses the principles of fair labour practice as entrenched
in the UNGC and Universal Declaration of Human Rights. At a
minimum, we conform to and often exceed labour legislation
requirements in the countries in which we operate. Protecting
the right to freedom of association and collective bargaining is
fundamental to the way 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 established
several 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, right to seek guidance and assistance from a
member of the HR department or their representative at any
time and the right to appeal to a higher authority, without
prejudice.
See Supporting sound labour relations page
92.
Principle 3: Businesses should uphold freedom of
association and the effective recognition of the right
to collective bargaining.
Shared
priorities
Resolving grievances,
engaging on strategy
Our response
• Well-established grievance channels, disciplinary procedures
and whistle-blower protocols provide a non-retributory
framework
• We regularly engage with unions on economic conditions,
market dynamics and growth plans.
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.
Shared
priorities
Remuneration, working
hours and other conditions
of service
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.
Principle 4: The elimination of all forms of forced and
compulsory labour.
Opportunities for value creation
• Good employee-management relations enable us to
resolve new and difficult labour issues as they develop
• 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
• There are unrealistic expectations about wage increases.
Annual Integrated Report 2022 Sappi 59
RESPONDING TO OUR CONTEXT
Our key relationships continued
Customers and
partners
Self-assessment of
quality of relationship:
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 and 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 packaging and speciality paper solutions, 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 embracing the circular
economy using sustainable materials based on certified wood and replacing fossil-based chemistry
and 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.
Traceable and transparent supply chains are key to providing brand owners and consumers with the assurance and
confidence that the woodfibre used for the wood-based products they buy originates from verified, responsibly managed
forests, is delivered through supply chains that do not cause deforestation, where biodiversity is enhanced and the customary,
traditional and civil rights of people are upheld. Against this backdrop, we are working across various forums to share our
experience and knowledge on sustainable, transparent supply chains with our customers.
Shared
priorities
New or enhanced products
that meet rapidly changing
market demand
Our response
Consumers have become increasingly aware of social and
environmental issues and our customers are looking to us for
help in this regard. Against this backdrop, our innovation and
sustainability departments enable 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 collaborate with partners and/or conduct
R&D and develop products to suit customers’ specific needs.
See Responding to evolving customer needs through
innovation and collaboration on page
88.
60 Annual Integrated Report 2022 Sappi
Shared
priorities
Information and initiatives
to encourage the use of our
paper and packaging
solutions and promote
Verve’s environmental
credentials
Our response
• We participated in the Challenge the Fabric summit in Paris,
held by the Ekman Group and the Swedish Fashion Council
• We also participated in several tradeshows including:
– AWA Global Release Liner Industry Conference & Exhibition
2022, where we had a small stand and gave a presentation
– FachPack in Germany, where we displayed samples of
packaging for food products and non-food applications;
new products in label papers, flexible packaging papers,
containerboard and paperboard and new packaging
solutions made with our barrier papers
– LuxePack in Monaco, where we showcased our high-quality
paperboard product Algro Design and our new Fusion Nature
Plus virgin fibre liner
– PCD Paris, which showcases perfume, cosmetics and
premium drinks packaging
• Shortly after year end we participated in LuxePack Monaco
•
and PRINTING United in Las Vegas
In July 2022, we hosted Textile Exchange (TE) executives,
with retail representatives and conservation consultants
on a learning journey to our operations in KwaZulu-Natal in
South Africa. TE’s 700 international members, who represent
leading brands, retailers and suppliers, provide a collective
driving force for urgent climate action by benchmarking the
industry and providing actionable tools for improvement. Their
goal is to guide the textile industry to achieve a 45% reduction
in GHG emissions within fibre and raw material production.
After visiting the Sappi WWF uMkhomazi Water Stewardship
project, delegates spent time at the Sappi Forests Shaw
Research Centre, seeing how the optimal woodfibre is developed
for the production of DP that goes into textiles like viscose and
lyocell and learning about the forestry value chain.
RESPONDING TO OUR CONTEXT Comments on the TE learning visit
So enlightening and eye
opening! I felt a powerful
sense of connectivity… to
how we can all better
partner and understand the
constraints and
opportunities to make
progress on our shared
goals. What a lovely group
of people and talent
your organisation has
attracted and retained.
Truly impressive.
It gave a wonderful
insight into the
production process of
dissolving pulp and the
complex context in
which you operate. It was
great to see everybody’s
expertise and passion for
their work.
Wish I had had this
insight years ago. So
excited to share with
our buying teams. The
Sappi family were so
welcoming and it is
obvious how passionate
they are about what they
do – the level of
experience is inspiring.
TE executive
Biodiversity Consultant
Retail Sustainability Manager
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 publish paper profiles and information sheets
for our papers. We also respond to many questionnaires from
our customers that collect data 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 emissions associated with a customer order
and how those emissions compare against the industry average
• At the request of our customers, we participate in EcoVadis
and hold a platinum rating for all three regions
• We also publish frequently asked questions (FAQs) covering
topics like climate change, as well as forests, energy and
certification.
Shared
priorities
Technical information
Our response
Globally, a series of technical brochures is available on our
website www.sappi.com
SEU
• The Sappi &You online knowledge platform for graphic
papers
• The packaging and speciality papers site provides targeted
information on packaging and speciality papers.
SNA
• The POP site is aimed at marketers, creatives, designers
and printers looking to innovate in their categories. As an
example, our booklet published on the site, ‘True or False?’
puts the same project side by side on coated paper and
uncoated paper to make it easier for our customers
to make a decision
• Sappi etc. is an educational platform for designers and
printers offering information on a wide range of topics
including paper basics, advanced print and design
techniques and special effects.
SSA
• Our paper and paper pulp product offerings are supported by
strong technical teams at each mill and the technology centre
in Pretoria. External testing services offered include water and
wastewater testing; wood, pulp and liquors testing; microscopy;
and together with paper and box testing which can be used to
conduct a wide range of ISO and TAPPI paper and paperboard
tests. Specialised services applicable to the pulp, paper and
related industries can be tailored around customer
requirements.
Annual Integrated Report 2022 Sappi 61
RESPONDING TO OUR CONTEXT
Our key relationships continued
CUSTOMERS AND PARTNERS continued
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
• Provide transparent information in line with our strategic
pillar of ‘enhancing trust’
• Leverage our position as a solution provider for a
low-carbon and bio-based economy to support
customers and policy making
• Showcase our products and promote the Sappi brand.
•
Challenges for value creation
• Conflation of harvesting from sustainably managed
plantations with deforestation, together with lack of
understanding about the manner in which the forests
and plantations from which we source woodfibre
help to mitigate global warming
• Promoting understanding of decarbonisation
The Sappi stand at FachPack 2022
challenges.
[case
study]
Co-creating digital solutions
To stay abreast of our customers’ evolving needs, SNA partnered with the Rochester Institute
of Technology (RIT) in New York to co-create next-generation digital solutions that add value
both to our customers’ business and ours.
Researchers in the newly launched Sappi-RIT Digital Innovation Lab will study the role of digital business solutions and
the user experience in the pulp and paper industry. The lab is situated in the School of Interactive Games and Media
within RIT's Golisano College of Computing and Information Sciences. The faculty is dedicated to advancing the fields
of computing and information sciences through creativity and innovation.
Sappi generates and captures considerable amounts of data, from our supply chain right through to customer behaviour.
The collaboration with RIT is designed to unlock business insights and value from the data. Initially, the team will focus
on leveraging the data to unlock a deeper understanding of our customers.
The lab is part of a wider innovation and efficiency drive within Sappi to accelerate the transition to a bio-based, circular
economy, reducing waste and maximising resources to achieve both our business and sustainability goals.
62 Annual Integrated Report 2022 Sappi
RESPONDING TO OUR CONTEXT Communities and
neighbours
Self-assessment of
quality of relationship:
Fair to good
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 their wellbeing and development. 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 are
situated. 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 South Africa, ICFs comprising Sappi employees and community members have helped to enhance our relationships
with communities. However, social unrest in the country continues to be an issue – the result of a disaffected population
impacted by lack of service delivery and job opportunities. In some instances, this negatively impacts our reputation and
relationships with communities.
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
• Sappi Europe donated €10,000 as part of the Sappi Global
Safety Awareness week activities linked to our I Value Life
principle to ASPIRE Education Hub in Krakow. This charity
focuses on the long-term wellbeing and education of Ukrainian
teenagers displaced by the war. Teens can access remote
learning facilities to connect with their Ukrainian schools as
well as new learning opportunities in technology and the arts.
SNA
• Each site hosts an employee 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
fields relevant to our operations.
• We provide financial support to several non-profit conservation
organisations to support regional biologist positions, landowner
and community outreach activities, advocacy efforts, etc.
Examples include funding and in-kind support for elementary
and secondary school field days, community forestry
workshops, landowner outreach projects in co-operation
with state agencies and industry associations, billboards
promoting Sappi's private lands forestry programme and
private landowner management assistance
• The Ideas that Matter programme continues to recognise and
support designers who support good causes. Since 1999 the
programme has funded over 500 non-profit projects and has
contributed more than US$14 million to a wide range of causes
around the world that use design as a positive force in society.
The programme was relaunched in FY2022 to align more
closely with the UN SDGs, thereby encouraging applicants
to use design to address local challenges. Grants in FY2022
ranged from support for child literacy, immigration and maternity
care to rainforest preservation, anti-poverty programmes and
resources for women of colour
• The Employee Ideas that Matter programme provides direct
funding to the non-profit organisations about which our
employees are most passionate.
The Ideas that Matter initiative was the winner in
Excellence in Community Service in the 2022
Communitas Awards, which recognise
organisations, companies and individuals for their
outstanding engagements to bring about change to
social and environmental issues affecting
communities across the globe.
Annual Integrated Report 2022 Sappi 63
RESPONDING TO OUR CONTEXT – education throughout the education value chain, including
early childhood development (ECD); and skills centres at
Saiccor and Ngodwana Mills train both Sappi employees
and unemployed youth. In addition, Khulisa Ulwazi, our
training centres for small growers are targeted at all
forestry value chain participants, including land reform
beneficiaries and Sappi Khulisa growers
– support for local tourism through our mountain biking and
trail running sponsorships and promoting recreational
riding on Sappi land
– support for Sappi forestry community schools based on
requests and needs analyses – projects include fresh
water, ablution facilities, fencing, buildings and structures
and vegetable gardens
• See Creating a positive social impact with communities for
more about ESD work on page
95.
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
• Creation of shared value, positive social impact and
promotion of inclusivity
• Closer alignment with authorities’ local development
plans.
•
Challenges for value creation
• Community expectations for jobs and service
delivery in South Africa.
Our key relationships continued
COMMUNITIES AND NEIGHBOURS continued
Shared
priorities
Community support
including employment, job
creation, business
opportunities, economic
and social impacts/
contributions and
community support
Our response
SSA
• Following extensive floods in KwaZulu-Natal province in
April 2022, Sappi donated ZAR1 million to the Gift of the
Givers organisation for relief efforts. This was supplemented
by an additional ZAR300,000 to Gift of the Givers from
CellMark (our lignin trading partner)
• Community support has been bolstered by the creation of
a dedicated multi-disciplinary team comprised of the enterprise
and supplier development (ESD) team, the HR team and the
corporate citizenship team. This structure, in at each mill site,
is referred to as the Community Management Committee
(CMC). The purpose of this 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 reports on
the employment of local people and ensures investment in
communities addresses specific needs. The CMC collaborates
with government, NGOs and the private sector for scale
• Given South Africa’s significant development needs, the bulk
of community support is allocated to this region in areas like
education, environment and socio-economic development.
The latter is based on helping communities help themselves
• Our focused ESD department aligns with this approach by
working to incorporate small and medium enterprises (SMEs)
into the mainstream economy
• Other initiatives include:
– Sappi Khulisa, our enterprise development scheme
for emerging timber farmers; we also support a honey
beekeeping programme in our Khulisa communities
– the Abashintshi Youth programme which mobilises
youth to create open channels of communication
between communities and Sappi and trains them to
mobilise their communities to develop themselves in line
with the ABCD model
64 Annual Integrated Report 2022 Sappi
RESPONDING TO OUR CONTEXT Industry bodies,
related memberships
and organised business
Self-assessment of
quality of relationship:
Good
Why we engage
We engage with industry bodies and organised business, believing that together we are
better equipped to meet the needs of a growing and changing society, as well as demonstrate
the value business brings to society. Our focus is on using our expertise and 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. During 2022 we formalised our
full membership of the WBCSD, adding our voice to those protecting, promoting and engaging on issues affecting our
industry and our business.
Thrive25
Under our
working closely and more often with those who share our values and commitment to our industry.
strategy which emphasises partnership and collaboration, we have been focusing more intensively on
Shared
priorities
Ethics and governance
Our response
Sappi Limited, being headquartered and listed in South Africa
(SA), is a member of the Ethics Institute of SA and has also signed
the Business Leadership South Africa Integrity Pledge, thereby
committing the group to actively combat corrupt practices
wherever encountered, preventing anti-competitive behaviour,
adopting a zero-tolerance approach to corrupt behaviour and
protecting whistle-blowers.
Sappi Limited is an active participant in the National Economic
Development and Labour Council (Nedlac) Companies Amendment
Bill Task Team, where representatives of labour, government and
business meet to discuss and seek consensus on the major
amendments proposed to the current South African Companies
Act and governance codes, as well as changes related to board
Social and Ethics Committees.
Shared
priorities
Decarbonisation and net zero
Our response
We engaged throughout the year with the SBTi until our targets
were validated in June 2022.
See Responding to climate change for more about ESD work
on page
96.
We are a project member of the WBCSD Forest Solutions Group.
This collaborative platform enables companies from across the
forest and forest products sector to support the development
of Net Zero and Roadmap to Nature Positive, for the forest
sector. The 2022 work priorities for the group included: Roadmap
to Nature Positive, the GHG protocol, TCFD reference scenarios
and phase two of the net zero roadmap. The Roadmap to Nature
Positive economy, aligns with guidance from the Science Based
Targets Network (SBTN) and the Taskforce on Nature-related
Financial Disclosure (TNFD); the first draft has been completed
and will be published at COP27.
The Programme Leader Land Management and Wood Properties,
Sappi Forests, spearheaded the carbon calculation and flows
methodology related to forests, as well as the quantification
and development of mitigating strategies for climate change
as related to forests for Sappi. This individual is a member of
the World Resources Institute technical working group on GHG
Protocol Carbon Removals and Land Sector Initiative Project,
which is developing new guidance on how companies account
for and report land use, land use change, carbon removals and
storage, bio-energy and other biogenic products. Sappi Forests
is participating in the GHG pilot for Scope 1 emissions reporting
from own land holdings in South Africa using a cradle-to-mill
gate system boundary.
The TE launched its 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, being developed
alongside the SBTN to reinforce consistency in language,
frameworks and measurements.
In the build-up to COP27 (climate change) Sappi joined the Africa
Business Leaders Coalition and signed its Africa Business
Leaders’ Climate Statement which was presented at COP27.
Annual Integrated Report 2022 Sappi 65
RESPONDING TO OUR CONTEXT Our key relationships continued
INDUSTRY BODIES, RELATED MEMBERSHIPS AND ORGANISED BUSINESS continued
Shared
priorities
Biodiversity
Our response
Global
Sappi Pulp was an advisory partner in the development of the
Biodiversity Benchmark for the TE.
Shortly after year end and in preparation for COP15, Sappi
joined other companies from 56 countries in signing the
Business for Nature Statement calling for mandatory
assessment and disclosure on nature to be included in the
Global Biodiversity Framework.
In SNA’s sourcing areas, a significant portion of forestland is
owned and managed by private landowners, often averaging
less than 10 hectares. This presents challenges for forest
health and biodiversity conservation. The Sappi Maine Forestry
Program and the Sappi Lake States Private Forestry Program,
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.
SNA also supports the University of Minnesota Sustainable
Forests Education Cooperative.
SSA supports South African National Biodiversity Institute
(SANBI), Birdlife SA and WWF-SA. In this region we have seven
declared nature reserves on our landholdings in Mpumalanga
and KwaZulu-Natal. These proclaimed nature reserves are part
of SANBI, are based on partnerships between landowners,
provincial conservation authorities and NGOs, and are aimed at
securing and enhancing biodiversity. The sites are declared
where important biodiversity or ecosystem services have been
identified.
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
support the Higg Index developed by the apparel industry to
evaluate materials, products, facilities and processes based
on environmental performance, social labour practices and
product design choices.
SEU
In FY2022 we participated actively in the 4Evergreen Alliance,
which is focused on improving fibre-based packaging circularity
and climate performance. The collaboration published Circularity
by Design Guidelines, which offers a collective view from experts
across the value chain on how different components of
fibre-based packaging impact the paper recycling process in
standard recycling mills, together with the different ways in which
they can be classified. The collaboration also published the
Collection & Sorting Guideline, together with three annex
materials which aim to improve the use and execution of the
Confederation of European Paper Industries (CEPI) harmonised
test method for recyclability.
66 Annual Integrated Report 2022 Sappi
We also participated in the Forests Dialogue (TFD), which 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.
Contributing to the Pulp and Paper Value Chain Information
System (P&P-VIS)
Together with other members of the CEPI and the European
Paper Chemicals Manufacturing Industry Group, SEU contributed
to the launch of the P&P-VIS in 2022. The system embodies
two essential elements of sustainability transformation:
collaboration and transparency. By working together to agree
on a harmonised questionnaire and develop an online platform,
important information can now flow accurately and efficiently
between chemical suppliers and their pulp and paper
manufacturing customers.
The information shared supports our ability to ensure our
products comply with requirements related to food contact,
Ecolabel, declarable substances, together with other regulatory
and market requirements. Through P&P-VIS, the paper industry
has enhanced its capacity to react rapidly to new product safety
regulations and to efficiently implement them throughout the
value chain.
SNA
Sappi continues to be a sponsor of the Paper & Packaging
Board’s How Life Unfolds® campaign, which highlights our
commitment to innovative, sustainable products.
We are a founding partner of The Recycling Partnership and
support their work to transform recycling nation-wide and
increase materials recovery.
SSA
Together with PAMSA and another industry member, we sponsored
Primestars to develop an infotainment programme for high school
learners from under-resourced communities. The programme
was aimed at highlighting opportunities in the green economy.
Shared
priorities
Product development
and innovation
Our response
• Sappi Biotech collaborated with Frankfurter Brett and
•
Kegelmann Technik to launch a sustainable kitchen console
made from Sappi Symbio
In the light of growing consumer demand for sustainable
packaging, SEU and packaging machine manufacturer
Kallfass signed a collaboration agreement to develop a
sustainable, paper-based alternative to film-based primary
and secondary packaging in the non-food packaging sector
• SNA is the co-lead of the committee operating under the
auspices of the Alliance for Pulp and Paper Technology
Innovation to demonstrate and deploy membrane-based
technology for black liquor. Other members of the committee
include the Georgia Institute of Technology (Georgia Tech),
members of the US forest products industry and membrane
system/ process developers. The work has progressed to mill
scale trials and we continue to help fund patent protection for
the invention.
RESPONDING TO OUR CONTEXT Shared
priorities
Regulatory issues
Our response
SEU
The European Green Deal aims to lead the world in achieving
climate neutrality under the Fit for 55 legislative package. Our
industry supports the objectives of the European Green Deal
and is leading the way in taking concrete actions to achieve
deep emissions reductions. Our main position in the context of
EU policy related to decarbonisation is to ensure a predictable
and enabling policy framework for EU industry. We engage
through CEPI.
One of the most recent proposals was to establish a broadened
framework for eco-design requirements for sustainable products.
The horizontal framework for eco-design requirements will
cover the broadest possible range of products, including
intermediate products and components, but excluding food,
feed, medicinal products, living plants and animals. We are
following the process closely.
Together with other members of the European pulp and paper
industry, we have been actively contributing to and keenly
monitoring the development of the new EU Forest Strategy and
the proposal for a regulation concerning certain commodities
and products associated with deforestation and forest
degradation.
SNA
In the USA, extended producer responsibility (EPR) legislative
activity has gathered momentum. 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. The state of
Maine, where our Somerset and Westbrook mills are located,
was the first state to pass EPR legislation. We are engaging
through our trade association, the American Forest & Paper
Association, who appointed a consultant to inform and
influence the conversation among the media, policymakers,
and the public surrounding EPR proposals.
See Our engagement with regulators regarding carbon taxes
on page
72.
SSA
We supported PAMSA in its engagement with the Department
of Forestry, Fisheries and the Environment (DFFE), which resulted
in the granting of an exclusion for specific waste streams from
the definition of waste to promote beneficiation opportunities
of the likes of paper sludge and ash in various products such as
brick and block manufacturing, soil conditioners, biofuels and
cement production.
Shared
priorities
Enhanced forestry
management
Our response
SNA
We belong to the Cooperative Forest Research Unit based at
the University of Maine, where scientists conduct applied
research that provides Maine’s forest landowners, forestry
community and policymakers with the information needed to
ensure both sustainable forestry practices and science-based
forest policy.
We continued our ongoing participation in Emerald Ash Borer
surveys and other pest/pathogen/invasive species quarantines
and studies.
The revised SFI Forest Management, COC and Fiber Sourcing
Standards went into effect on 1 January 2022. The new standards
bring clarity and rigour in key areas of due diligence systems
and avoidance of controversial sources, landscape biodiversity
conversation and logger training together with new climate
Smart Forestry practices and an optional climate change
adaptation module.
We are a member of Minnesota Forest Industries (MFI), which
meets quarterly with public agencies to discuss forest-related
challenges, industry needs, workforce challenges, and trends/
concerns/opportunities.
SSA
A milestone was reached last year when we were awarded the
first-ever PEFC forest management certificate in the country.
This means that all our plantations are now both FSC and the
PEFC certified. In addition to PEFC forestry management
certification, Ngodwana, Saiccor and Tugela Mills are now chain
of custody certified.
The Sappi Forests Vice-President spoke at the 15th World Forestry
Congress, held in Korea on the topic: Managing forests for the SDGs:
Creating value, equality and resilience from forest products and
ecosystem services.
Shared
priorities
Combatting deforestation
and promoting certification
Our response
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 PEFC’s international stakeholder member, and
collaborates to promote and expand forest certification, but also
to ensure that the systems continuously develop themselves to
sustain the integrity and robustness of certified supply chains.
Annual Integrated Report 2022 Sappi 67
RESPONDING TO OUR CONTEXT Our key relationships continued
INDUSTRY BODIES, RELATED MEMBERSHIPS AND ORGANISED BUSINESS continued
Shared
priorities
Promoting the sound
credentials of woodfibre
Our response
Sappi is a member of the SAC's policy advocacy task team
responsible for providing commentary on the development of
the EU textile strategy and associated policies, in line with the
EU Green Deal directive. One of the key aims is to ensure that
virgin wood-based raw materials are recognised as a sustainable
option. This advocacy group is supported by the Federation of
European Sporting Goods Industry and Global Fashion Agenda.
Opportunities for value creation
• Address complex topics through collaboration
• Develop sustainable, transparent supply chains
• Maintain and expand markets for our products
• Enhance understanding of our social and environmental
credentials
•
Influence policy and regulations
• Promote dialogue
• Share our experience and knowledge on sustainable,
transparent supply chains to help prevent deforestation.
•
Shared
priorities
Ensuring the integrity of
natural resources like water
Challenges for value creation
• High costs of and resource requirements for certain
industry memberships.
Our response
SSA has partnered with WWF-SA to proactively manage water
resources in the uMkhomazi catchment, in which our Saiccor
Mill is situated through multi-stakeholder collaboration across
the landscape. This collaborative approach is an extension of an
innovative structure, known as the ICF (see page
44), which
we pioneered and through which we engage with communities
close to our areas of operation. Under this project, we launched
the first community-based alien vegetation clearing and
maintenance project with the Nzinga community.
[case
study]
Progressing DNA fingerprinting for small growers
The DNA Fingerprinting for Small Growers initiative was launched in FY2022. Supported by
the South African Technology Innovation Agency, it aims to make DNA fingerprinting
technology developed by the Forest Molecular Genetics Programme, through the founding
members (of which Sappi is one), available to small growers and farmers.
This will help with the identification of clonal genotypes, confirmation of hybrids and with parentage and pedigree
reconstruction. This has become an indispensable tool in the forestry industry, aimed at ensuring the deployment of
fast-growing, resilient trees.
The Technology Innovation Agency, has provided ZAR500,000 per annum, which will support a dedicated technician and
subsidise the cost of DNA fingerprinting for small growers and private nurseries to a total of 800 to 1,000 samples per
year. In the next phase, there will be engagement between industry members and the outgrower community.
68 Annual Integrated Report 2022 Sappi
RESPONDING TO OUR CONTEXT Our membership of industry associations and
other organisations
Sappi Limited
• African Business Leaders Coalition
• Business Leadership South Africa
• CEO Initiative
• Circular Bio-economy Alliance
• EcoVadis
• Ethics Institute (South Africa)
•
• Nedlac
• Paris Pledge for Action
• Sustainable Apparel Coalition
• Technical Association of the Pulp and Paper
International Stakeholder member of the PEFC1
Industry
• TE
• UNGC
• WBCSD including the FSG.
SEU
• Biobased Industries Consortium
• BioChem Europe
• CELAB: Towards a Circular Economy for Labels
• CEFLEX: A circular economy for flexible packaging
• CEPI
• Eurograph
• European Joint Undertaking on Biobased Industries
• 4Evergreen Alliance
• Ligninclub
• Print Power
• The Alliance of Energy-Intensive Industries
• The Forests Dialogue.
SNA
• Alliance for Pulp and Paper Technology Innovation
• American BioFuels Association
• American Forests and Paper Association
• American Forest Foundation (AFF)
• Biorenewable Deployment Consortium
• Federal Forest Resources Coalition
• Forest Products Working Group
• Forest Resources Association
• FSC
• Great Lakes Timber Professionals Association
• Maine Forest Products Council
• Maine Tree Foundation
• Michigan Forest Products Council
• Minnesota Forest Industries
• Minnesota Timber Producers Association
• NH Timberland Owners Association
• Paper and Paper Packing Board
• Paperboard Packaging Council
• Pulp and Paper Products Council
• Sustainable Packaging Coalition
• Sustainable Forestry Initiative (SFI)
• The Recycling Partnership
• University of Maine Cooperative Research Unit
• University of Maine Paper Surface Science
Consortia
• University of Minnesota Sustainable Forests
Education Cooperative.
SSA
• Birdlife SA
• Business Unity South Africa
• Fibre Circle
• Fibre Processing and Manufacturing Skills
Education and Training Authority
• Forestry South Africa
• FSC
• National Business Initiative
• Manufacturing Circle
• Packaging SA
• PAMSA
• Recycle Paper ZA
• Shared Value Initiative
• SANBI
• South African Chamber of Commerce and Industry
and local chambers of commerce and industry
• 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
•
• South African Institute of Forestry
• The Tree Protection Co-operative Programme
Institute for Commercial Forestry Research
– founding member.
Annual Integrated Report 2022 Sappi 69
RESPONDING TO OUR CONTEXT Our key relationships continued
Shareholders,
bondholders and banks
Self-assessment of
quality of relationship:
Good to
excellent
Why we engage
Our aim is to provide investors (shareholders and bondholders) and analysts with
transparent, timely, relevant communication that provides them with an understanding
of our industry and our performance, setting out the manner in which we hope to achieve
growth ambitions to facilitate informed decisions.
• We engage with various ratings agencies, particularly in terms
of ESG performance
• We participate in the CDP Climate and Forest disclosure
projects every year, making our submissions publicly
available. This year, for the first time, we participated in
CDP Water
• Our Chief Financial Officer and Head of Treasury engage with
bondholders, banks and rating agencies continually on the
performance of the company. A key point of discussion was
our international RCF of €515 million benefits from the
group’s newly developed Sustainable Financing Framework.
Opportunities for value creation
• Understanding of and commitment to our strategic
direction
• Enhanced reputation
• Greater investment confidence
• Broader licence to invest.
•
Challenges for value creation
• Slow post-Covid-19 economic recovery
• Uncertainty about certain environmental regulations
• Cyclicality of our business.
Shared
priorities
Understanding Sappi’s
strategy
Understanding Sappi’s
performance
Return on investment
Transparent information
about risks, opportunities
and ESG performance, in
particular the impact of
climate change on strategic
and financial decisions
Ability to generate sufficient
cash flows 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 also engage with shareholders on
relevant issues
• We conduct ad hoc mill visits and road shows, and issue
announcements through the Johannesburg Stock Exchange
(JSE) – Stock Exchange News Services (SENS), in the press
and on our website (see www.sappi.com/SENS)
• We publish our Annual Integrated Report (see
www.sappi.com/annual-reports)
Reports (see www.sappi.com/sustainability)
group website
and Sustainability
on the
• Shareholders can attend and participate in the Annual
General Meeting as well as the four quarterly financial
results briefings
70 Annual Integrated Report 2022 Sappi
RESPONDING TO OUR CONTEXT [case
study]
About our RCF and Sustainable Financing Framework
The newly adopted Sustainable Financing Framework is our first financing facility with
sustainability-linked KPIs. The new facility of €515 million matures in February 2027 and
comprises a consortium of eight relationship banks. The RCF was structured with a margin
adjustment mechanism, linked to progress in achieving the KPIs and will be used to guide
any sustainability-linked characteristics of future financing solutions.
The framework was verified by ISS ESG with a second party opinion that defines four material sustainability KPIs
and provides a basis for future KPI-linked credit and capital market activities of the group. The KPIs focus on
decreasing specific GHG (Scope 1 + 2) emissions by 18% in 2025; ensuring that certified fibre supplied to Sappi
mills is more than 75% every year; reducing solid waste to landfill by 15%; and securing zero workplace injuries
(LTIFR) for own employees.
This is an important strategic step for Sappi and supports our long-term vision to be a sustainable business with an
ambitious sustainability strategy.
Annual Integrated Report 2022 Sappi 71
RESPONDING TO OUR CONTEXT Our key relationships continued
Government and
regulatory bodies
Self-assessment of
quality of relationship:
Fair to good
Why we engage
Dialogue with members of governments and regulatory authorities is seen as an
opportunity for all stakeholders involved to better understand all aspects and, as
such, hopefully make better decisions. We work to ensure that our position on a broad
range of priority issues is understood by politicians, decision makers, opinion formers
and other role-players in the regions where we operate. This is in order to support a policy
and legislative environment that helps us achieve our business objectives, as well as enhance
our reputation and brand. In addition to direct contact, we also work through a variety of industry
groups and associations as described on page
69.
The social and economic
benefits of our industry
nationally, as well as at a
local level
Increased investment
Shared
priorities
Energy issues and carbon
taxation
The impact of increased
regulations on business
Enhancing sustainable forest
management and land use
Our response
SEU
We are actively working in various forest-sector collaborations
to ensure a thriving forest bio-economy 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, thus boosting the transition
into a circular economy.
SNA
We actively engage through various industry trade associations
at the federal and state level to ensure that a thriving forest
resources industry remains a vibrant part of the US economy. In
August 2022, US President Biden signed the Inflation Reduction
Act (IRA) into law. Our response is described on page
this report.
43 of
72 Annual Integrated Report 2022 Sappi
SSA
• The Carbon Tax Act came into effect on 1 June 2019. The
first phase from 1 June 2019 to 31 December 2022 applies
to activities that directly emit GHG. The tax includes various
allowances in the first phase, including a 100% allowance for
forestry. We engaged with the DFFE, which agreed with our
carbon sequestration calculation and SSA's carbon tax
liability for the 2021 calendar year was zero. We also
anticipate zero liability in calendar 2022
• We engage with government to assist in the development
of rural areas, including the expansion of tree farms in the
Eastern Cape
• As a member of Forestry South Africa, we previously
participated in the development of the Masterplan for the
Commercial Forestry Sector in South Africa 2020 – 2025 and
the Public Private Growth Initiative. SSA is also participating in
the Public Private Growth Initiative, a forum enabling business
sectors to discuss economic growth plans with the
presidency
• Amendments to the Employment Equity Act have been
approved by parliament for public comments. SSA, together
with other members of organised business, submitted
consolidated comments, through Business Unity South Africa
as well as Forestry South Africa. It is hoped that comments
from business, particularly around concerns on the sectoral
targets, will be incorporated in the final paper.
Opportunities for value creation
• Promoting understanding of issues and challenges and
the strategic value of our industry helps to create a more
receptive regulatory and policy environment.
•
Challenges for value creation
• Policies which take neither our high use of bio-based
energy into account nor recognise the important
carbon sequestration role played by the sustainably
managed forests and plantations from which we
source woodfibre
• Slow granting of water use licences in South Africa
• Uncertainty about regulatory developments, for
example: carbon tax
• Administrative delays.
RESPONDING TO OUR CONTEXT Suppliers and
contractors
Self-assessment of
quality of relationship:
Good
Why we engage
The more than 16,000 suppliers that comprise our global value chain are essential to our
business. From providing woodfibre and other raw materials to energy and logistics, they
support us in making the everyday products that our customers need world-wide.
Ensuring these suppliers ‘do right’ by acting in accordance with our own policies, principles
and values is a strategic priority – one that is enshrined in our Supplier Code of Conduct and
supported by our collaboration with EcoVadis, a global platform providing business sustainability
ratings.
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 our communities.
We want to build long-term value partnerships, based on the importance of suppliers to a sustainable supply chain.
In relation to smallholders, in South Africa and North America, we engage directly with the small landowners supplying
wood to our mills. We also offer forestry services to support their forest management. In Europe, we have procurement
partners who do this on our behalf. Within the communities where we operate in South Africa, we also support small to
medium enterprise development, training initiatives and forestry outgrower schemes to stimulate value chain
development in rural areas.
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
We continued 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, 83% of
total procurement spend covered; SNA, 72% and SSA 58%.
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 and wood procurement partners 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.
In addition, we are a member of CEPI, which participates in
actions supporting and promoting forest management and
certification.
SNA
The Sappi Maine Forestry Program and the Sappi Lake States
Private Forestry Program, 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. The SNA stumpage programme
assists landowners with developing harvest plans and timber
stand improvement project plans with appropriate silvicultural
techniques that ensure prompt regeneration after harvest. SNA
stumpage foresters conduct inspections on all jobs to ensure
compliance with laws, policies and best management practices
to conserve soil and water quantity/quality, along with other
values such as biodiversity conservation, aesthetics management,
cultural resource protection, etc.
Annual Integrated Report 2022 Sappi 73
RESPONDING TO OUR CONTEXT Opportunities for value creation
•
Improved supplier relations
•
Increased uptake of the Supplier Code of Conduct
• Better understanding of the requirements of the
Sappi group
• Expanded basket of certified fibre
• Support for local economic development
• Support for emerging supplier-contractor development.
•
Challenges for value creation
• Security of woodfibre supply
• Ensuring that small, medium and micro enterprises
have the right social and environmental procedures
in place and monitoring compliance.
Our key relationships continued
SUPPLIERS AND CONTRACTORS continued
Shared
priorities
Security of fibre supply
Certification
Income generation and job
creation
Our response
SSA
Qualified extension officers provide growers in our Sappi Khulisa
enterprise development scheme with ongoing growing advice
and practical assistance.
Khulisa Ulwazi (growing knowledge) training centres are targeted
at Khulisa growers and land reform beneficiaries. Training covers
entrepreneurship, fire management, harvesting planning,
leadership and management development, as well as safety.
Sappi is involved in several land reform projects, helping
beneficiaries to manage their 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 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 2022 there were 39 members in the scheme with
plantations totalling 45,600.
Sappi was the first forestry company in South Africa to achieve
PEFC certification through the Sustainable African Forestry
Assurance Scheme (SAFAS). This incorporates a value-based
platform (VBP) approach, which is designed to look at integrated
risks across landscapes and is more suitable for smallholders.
Using the VBP approach, we are now assessing 13 grower
groups, covering 4, 443 hectares, for certification readiness.
74 Annual Integrated Report 2022 Sappi
RESPONDING TO OUR CONTEXT Civil society and media
Self-assessment of
quality of relationship:
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 continue to update the media on our belief that it’s our responsibility to use the full
potential of each tree we harvest. 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 the forest certification systems (FSC, PEFC and SFI). We
leverage these platforms to actively contribute to the growth of forest certification world-wide and
collaborate with diverse stakeholders.
Business developments
The future of our industry
Shared
priorities
Our impacts on our
communities
Protecting the environment
Our response
Global
• 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.
SNA
• SNA engages in a variety of roles in diverse collaboratives
as a participant, funder, partner and leader. Our staff serve in
roles ranging from interested stakeholder for consultative
purposes, committee members, leads/chairman and board
of directors. One example is Minnesota Forest Industries, to
which SNA belongs and which meets quarterly with public
agencies to discuss forest-related challenges, industry
needs, workforce challenges, and trends/concerns/
opportunities.
SSA
•
In terms of civil society, our forestry operations belong to
several fire associations, given that fire is a key risk on our
plantations
•
Initiated in 2014, our project to re-establish the Warburgia
salutaris (pepper-bark tree) in communities and the wild
continues to gain traction. A major breakthrough for the
project has been the discovery that the medicinal properties
so highly prized in the bark, are also abundant in the twigs and
leaves. Thus, the twigs and leaves of trees planted out in the
field can be harvested within four years – much earlier than
would be the case for bark harvesting which can only be done
on an adult tree. This ensures that the trees can be harvested
sustainably, providing health benefits and economic
opportunities for traditional healers and muti (medicine)
traders. Since inception of the project, together with our
working group partners, we have propagated and provided
over 60,000 seedlings to traditional healers and urban and
rural communities and created seed orchards in safe and
protected estates
• We are now following the same approach to three other
species of tree, all of which, like Warburgia, can be used in
traditional medicine and which are in danger of being
over-harvested.
Opportunities for value creation
•
Inform and educate media
• Encourage civil society to share our sustainability and
strategy through positive actions.
Thrive25
•
Challenges for value creation
• Misunderstanding of our environmental impacts.
A case study on our Warburgia work has been included by WBCSD
in their Roadmap to a Nature Positive Economy that was launched at
the 27th COP27 after year end.
Annual Integrated Report 2022 Sappi 75
RESPONDING TO OUR CONTEXT Integrating our key material issues
Safety
Sustainability expectations
Employee relations
Supply chain disruption
Evolving technologies
and consumer preferences
Risk
Maintaining ethical behaviour
and compliance
Procuring responsibly
Key
material
issue
Global forces
Move towards a
circular economy
Climate change and
climate transition
Resource scarcity and
growing concern for
natural capital
Rising social inequality and
growing social activism with
increased expectations of
business
Persistent supply chain
challenges
Workplace culture
Responsible procurement
Stakeholder
issue
Stakeholder
issue
Risk
Cyclical macro-economic factors
Cyber security
Supply chain disruption
Liquidity
Sustainability expectations
Climate change
Evolving technologies and
consumer preferences
Liquidity
Sustainability expectations
Climate change
Supply chain disruptions
Evolving technologies and
consumer preferences
Key
material
issue
Maintaining and strengthening our
competitive position through
agility, innovation and operational
efficiency
Providing sustainable
solutions for
a circular bio-economy
Responding to evolving
customer needs through
innovation and collaboration
Return on
investment
Keep abreast of market
developments
Products based on renewable
resources
Circulatory
Reduced environmental impact
Circulatory
New or enhanced products that
meet rapidly changing market
demand
Responsible consumption
The links
between our
stakeholder issues,
key material issues,
risks and global
forces shaping our
world
Changing consumer
and employee behaviour
Deglobalisation, polarisation
and increased geopolitical
tensions
Rapid pace of
technological innovation and
threat including cyber risks
Sustainability
expectations
Supply chain
disruptions
Climate change
Risk
Key
material
issue
Sourcing
sustainable
woodfibre
Sustainability
expectations
Climate change
Uncertain and evolving
regulatory landscape
Evolving
technologies and
consumer preferences
Supply chain disruptions
Prioritising clean
and renewable
energy and
responding to
climate change
Evolving
technologies
and consumer
preferences
Sustainability
expectations
Climate change
Supply chain
disruptions
Evolving
technologies
and consumer
preferences
Sustainability
expectations
Climate change
Focusing
on water
stewardship and
circularly
Safeguarding
and restoring
biodiversity
Stakeholder
issue
Shifting
demographics
Deforestation
Biodiversity loss
Reduction of
fossil fuel usage
Global warming
Water quality
and quantity
Resource scarcity
Stakeholder
issue
Safety
Employee
relations
Safety
Sustainability
expectations
Employee
relations
Sustainability
expectations
Sustainability
expectations
Employee
relations
Employee
relations
Risk
Ensuring the
safety of our
employees
and
contractors
Safety as
a core value
Supporting
sound labour
relations
Attracting,
developing
and retaining
Sappi talent
Creating a
positive social
impact in our
communities
Key
material
issue
Fair, equitable,
safe workplace
Connection
to, and
understanding
of, our
business and
strategic
direction
Training and
development
Remuneration
Diversity and
inclusion
Social
responsibility
and social
inequity
Community
upliftment
Jobs
76 Annual Integrated Report 2022 Sappi
RESPONDING TO OUR CONTEXT Safety
Sustainability expectations
Employee relations
Supply chain disruption
Evolving technologies
and consumer preferences
Risk
Cyber security
Supply chain disruption
Risk
Cyclical macro-economic factors
Liquidity
Sustainability expectations
Climate change
Evolving technologies and
consumer preferences
Liquidity
Sustainability expectations
Climate change
Supply chain disruptions
Evolving technologies and
consumer preferences
Maintaining ethical behaviour
and compliance
Procuring responsibly
Key
material
issue
Key
material
issue
Maintaining and strengthening our
competitive position through
agility, innovation and operational
efficiency
Providing sustainable
solutions for
a circular bio-economy
Responding to evolving
customer needs through
innovation and collaboration
Workplace culture
Responsible procurement
Stakeholder
issue
Stakeholder
issue
Return on
investment
Keep abreast of market
developments
Products based on renewable
resources
Circulatory
Reduced environmental impact
Circulatory
New or enhanced products that
meet rapidly changing market
demand
Responsible consumption
Global forces
Move towards a
circular economy
Climate change and
climate transition
Resource scarcity and
growing concern for
natural capital
Rising social inequality and
growing social activism with
increased expectations of
business
Persistent supply chain
challenges
The links
between our
stakeholder issues,
key material issues,
risks and global
forces shaping our
world
Safety
Employee
relations
Safety
Sustainability
expectations
Employee
relations
Sustainability
expectations
Sustainability
expectations
Employee
relations
Employee
relations
Risk
Ensuring the
safety of our
employees
and
contractors
Safety as
a core value
Supporting
sound labour
relations
Attracting,
developing
and retaining
Sappi talent
Creating a
positive social
impact in our
communities
Key
material
issue
Fair, equitable,
safe workplace
Connection
to, and
understanding
of, our
business and
strategic
direction
Training and
development
Remuneration
Diversity and
inclusion
Social
responsibility
and social
inequity
Community
upliftment
Jobs
Changing consumer
and employee behaviour
Deglobalisation, polarisation
and increased geopolitical
tensions
Rapid pace of
technological innovation and
threat including cyber risks
Stakeholder
issue
Shifting
demographics
Sustainability
expectations
Supply chain
disruptions
Climate change
Risk
Key
material
issue
Sourcing
sustainable
woodfibre
Sustainability
expectations
Climate change
Uncertain and evolving
regulatory landscape
Evolving
technologies and
consumer preferences
Supply chain disruptions
Prioritising clean
and renewable
energy and
responding to
climate change
Evolving
technologies
and consumer
preferences
Sustainability
expectations
Climate change
Supply chain
disruptions
Evolving
technologies
and consumer
preferences
Sustainability
expectations
Climate change
Focusing
on water
stewardship and
circularly
Safeguarding
and restoring
biodiversity
Deforestation
Reduction of
fossil fuel usage
Global warming
Water quality
and quantity
Resource scarcity
Biodiversity loss
Stakeholder
issue
Annual Integrated Report 2022 Sappi 77
RESPONDING TO OUR CONTEXT RESPONDING TO OUR CONTEXT
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 2022 Sappi Group
Sustainability Report available
at www.sappi.com
In line with the double materiality approach, the discussion of our material issues aims to enhance our
stakeholders’ understanding, not just of the impact of environmental and social issues on Sappi’s enterprise
value, but also of the impact of our activities on the environment and society. Our emphasis is on operating
context, key developments and significant sustainability-related risks and opportunities. As an example,
through the one lens of materiality, climate change and GHG emissions may have ramifications for enterprise
value. Through the other lens, Sappi’s own carbon footprint and actions have an impact on the environment
and society.
We define short term as one to two years, in line with immediate risks and opportunities and medium term as
three to five years in line with management accounting’s five-year financial forecast plan. Our long-term time
horizon is five to 30 years and takes into account the nature of our mill operations and capital investments
for long-life assets, Sappi Forests research planning horizons in response to climate change, as well as
the EU’s plan for carbon neutrality by 2050.
78 Annual Integrated Report 2022 Sappi
Enterprise value
(Market value of equity
and net debt)
Environment
(Climate, nature, forests,
water and waste)
Society
Impact on Sappi
(can be financially
material)
Sappi’s impact
(can be positive and/or
negative)
Primary stakeholders:
Primary stakeholders:
shareholders, bondholders
and banks
employees, unions, customers,
communities, industry bodies
and organised business,
suppliers and contractors,
government and regulatory
bodies, civil society
and media
S
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,
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ntal trends and developments, socie t a l
Associated risks and opp o r t u n i
Our purpos e
orld by unlocking the power of renewab l e r e s o u r c e s t o b
usiness safely, with integrity and coura g e , m a k i n g s m a r
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Annual Integrated Report 2022 Sappi 79
RESPONDING TO OUR CONTEXT
Our key material issues continued
Principles
Maintaining ethical behaviour and compliance
Why it’s material
Key developments in FY2022
strategy
Thrive25
Shortly after year end, we launched our refreshed Code of
Ethics (Code) to align more closely with our
and incorporate new examples of everyday situations that,
like the original examples, explain the behaviour expected
from Sappi people when faced with tricky situations. The
Code, which has been translated into relevant languages,
references several group policies, where heightened levels
of awareness and compliance are required. In familiarising
themselves with the Code, employees are encouraged to
read these policies. Story pictures are used to assist in the
messaging, which are also displayed on the media screens,
lift lobbies and on Sappi desk calendars. In line with the
refresh of the Code, global online training on the Code has
been revamped with new scenarios and relevant examples.
In 2021, KPMG advised Sappi that as a measure to improve the
perception of auditor independence, it would cease performing
non-audit-related services to its JSE-listed audit clients.
KPMG accordingly informed Sappi that they would be
withdrawing from servicing our hotline for SEU and SSA from
December 2021. Accordingly, we appointed a new service
provider globally with effect from the beginning of calendar
2022. Several different communication channels were used
to promote the use of the new Ethics Hotline, which helped
to ensure a smooth transition.
Training initiatives – incorporating relevant and practical
examples – aim to avoid a tick-box approach to ethics. A
comprehensive training programme covered the following
topics:
• Anti-fraud and corruption (relevant new employees in all
regions and a refresher course for all regions)
• Code of Ethics online training (Matane Mill and relevant new
employees in all regions)
• Environmental law training (relevant new employees in all
regions)
• Competition law (relevant new employees in all regions)
• Occupational health and safety compliance (relevant new
employees in all regions)
• Data governance including regional laws like South Africa’s
Protection of Personal Information Act (POPIA) and
Europe’s General Data Protection Regulation.
POPIA came into effect in South Africa in July 2021, following
which we implemented the required privacy policies and
procedures and appointed, trained and registered POPIA
information officers with the applicable regulator. We
reviewed implementation in FY2022 and established that
it had been successful.
To help heighten awareness throughout Sappi, we participated
in various international events, including Global Ethics Day,
International Fraud Awareness Week and World Whistle-
blower Day.
We live and work in a constantly changing environment and
operate in many different jurisdictions with different ways of
doing things. As OneSappi, we need to have a consistent set
of ethical standards which apply across all regions. Integrity is
one of our core values and trust is one of our strategic
imperatives – demonstrating the high premium we place on
ethical behaviour. Upholding such behaviour is integral to
achieving our
strategy and remaining true to our
purpose of building a thriving world.
Thrive25
How this issue links to other aspects of our business
Our global priority SDGs Our top 10 risks
Our strategic
fundamentals
2/ Cyber security
8/ Uncertain and evolving
regulatory landscape
9/ Employee relations
The global forces shaping our
Thrive25
strategy
• Rapid pace of technological
innovation and threats, including
cyber threats
• Changing consumer and
employee behaviour
• Shifting demographics.
Our highlights
Refreshed and relaunched
the Code of Ethics shortly
after year end
Smooth global transition
to new Ethics Hotline
service provider
Opportunities for value creation
The number of people using social media currently stands
at over 4 billion, more than double the number of users in
2015. Social media doesn’t recognise country borders.
A tweet, comment or post – made not just by Sappi people
but also by our stakeholders about something perceived as
unethical – goes around the world in seconds. We have
updated our social media policy and will be conducting
relevant training to all regions in line with the updated
policy in FY2023.
80 Annual Integrated Report 2022 Sappi
RESPONDING TO OUR CONTEXT
Procuring responsibly
Why it’s material
Key developments in FY2022
Globally, since 2021 we have been using EcoVadis to assess
the ESG performance of our suppliers.
By the end of FY2022, 199 suppliers were sharing their
EcoVadis scorecards with us and another 19 were in
progress to disclose on the platform. This equates to 59%
of our global procurement spend.
The EcoVadis scorecards enable us to gain insights to suppliers’
corporate social responsibility performance in an efficient
way to inform our business decisions. They also help to
identify risk and prioritise areas where further improvements
are needed.
To date, we have focused on onboarding suppliers onto the
EcoVadis platform and regularly reviewing scores – requesting
improvements where necessary. Our Supplier Code of
Conduct underpins this work. Our
target is that 80%
of procurement spend should comply with the code. In SEU,
83% of total spend was covered by agreements into which
the provisions of the code are embedded, 72% in SNA and
58% in SSA. Globally, this translates to 74% of global
procurement spend.
Thrive25
Recognising that we also have a responsibility to reduce our
Scope 3 emissions from our value chain, we have also set a
Scope 3 target of 44% of our suppliers (by spend) will have
science-based targets by 2026 (see page
99 for further
details).
Currently, in terms of suppliers and climate, the status is as
follows: 86% of our suppliers disclosing on EcoVadis have
action on energy consumption and GHG emissions, 70% use
renewable energy, 65% report on CO2 emissions, 47%
disclose to CDP climate, 37% report Scope 3 emissions, 26%
are part of SBTi and 21% have ISO 50001 certification.
Research indicates that 85% of consumers are more likely to
buy from a company with a reputation for sustainability. By
working together in partnership with suppliers, we can better
identify risk, assess social and environmental performance, and
encourage commitment to sustainable choices and the SDGs
throughout our value chain.
How this issue links to other aspects of our business
Our global priority SDGs Our top 10 risks
Our strategic
fundamentals
3/ Sustainability expectations
4/ Supply chain disruption
6/ Evolving technologies and
consumer preferences
The global forces shaping our
Thrive25
strategy
• Rapid pace of technological
innovation and threats including
cyber threats
• Changing consumer and
employee behaviour
• Shifting demographics.
Our highlights
Significant increase in
the number of our
suppliers disclosing on the
EcoVadis platform – from
90 in FY2021 to 199 in
FY2022
74% of global
procurement spend
now in compliance
with our Supplier
Code of Conduct
Opportunities for value creation
Close collaboration with our suppliers helps to future-proof
Sappi by mitigating the risks related to operational
disruptions, as well as reputational and regulatory risks. It
can also make us more attractive to potential investors and
customers – according to the World Economic Forum,
sustainable procurement practices lead to a 15% to 30%
measurable increase in brand value.
Annual Integrated Report 2022 Sappi 81
RESPONDING TO OUR CONTEXT
Our key material issues continued
Prosperity
Maintaining and strengthening our competitive position through agility,
innovation and operational efficiency
Why it’s material
Key developments in FY2022
Our industry is highly capital intensive and investment cycles
are long. Accordingly, competitive position cannot be based
on investment alone, but also on natural and manufactured
resource efficiency, technology and innovation (see page
together with responsiveness to changing global forces and
market demands. Being agile and efficient underpins our ability
to achieve our vision of being a sustainable business with an
exciting future in woodfibre that provides relevant solutions,
delivers enhanced value and is a trusted partner to all our
stakeholders.
85),
How this issue links to other aspects of our business
Our global priority SDGs Our top 10 risks
4/ Supply chain disruption
6/ Evolving technologies and
consumer preferences
7/ Cyclical macro-economic
factors
10/ Liquidity
Our strategic
fundamentals
The global forces shaping our
Thrive25
strategy
• Changing consumer and
employee behaviour
• Shifting demographics.
Our highlights
Sale of three European
mills to align more closely
with our Thrive25 strategic
focus
Commissioning of
Saiccor Mill capacity
expansion and
environmental
enhancement project
Opportunities for value creation
Our Stanger Mill currently uses a certain percentage of
bagasse (sugar cane waste residue) in the production of
tissue paper. Looking ahead, the mill will be expanding its
use of bagasse in combination with pulp to produce
compostable thermomoulded food grade utensils like
plates and bowls. This aligns with resource efficiency,
circularity and market demands for higher levels of
biodegradability, particularly in fast food applications.
82 Annual Integrated Report 2022 Sappi
We demonstrated our agile, efficient response to a rapidly
evolving competitive marketplace in the following ways:
Reducing exposure to the graphic paper segment
In September 2022, we reached an agreement with
AURELIUS Investment Lux One S.à.r.l. for the sale of Kirkniemi
Mill in Finland, Maastricht Mill in the Netherlands and
Stockstadt Mill in Germany. The decision to sell the mills
follows a detailed, thorough strategic review in line with
Thrive25
. The proceeds will be used to reduce debt further,
which will provide a platform for future expansion in our
identified growth market segments.
Although we are reducing exposure to the graphic papers
segment, we are expanding our presence in growth segments
including packaging and speciality papers, DP and
biomaterials. While our drive to reduce our exposure to graphic
papers has been influenced to some extent by digitisation, the
strategic shift towards packaging and speciality papers
has also been strongly driven by consumer concerns about
fossil-based plastic packaging and a changing climate, as well
as their preference for renewable paper-based packaging.
Going forward, as regards graphic papers, SEU’s focus will be
on the stronger commercial print market. In addition, in the
packaging and speciality papers segment, the European
business will focus predominantly on the flexible packaging,
functional papers, self-adhesives including glassine and
labels, as well as dye-sublimation categories.
Promoting manufacturing efficiency
Globally, to ensure and enhance operational efficiency,
we track the overall machine efficiency of every single paper
machine in all three regions and compare this against ‘best
own practice’ and ‘best realisable’. World-class benchmarks
are considered for the different types of paper machines and
product portfolios. Every year, the team challenge the new
‘best realisable’ figure during the budgeting process against
new benchmarks, own improvements and records achieved.
In FY2022, of our 28 paper/packaging assets, 16 improved
performance year-on-year. We continue to monitor
performance to enhance understanding of grade changes,
quality issues, sheet-breaks and mix impacts in order to
ensure continuous improvement.
Dye sublimation allows for printing on polyester and polyester
resin coated products. Using a wide-format printer, dye-
sublimination inks are printed on special transfer paper that
SEU produces at Carmignano Mill for use in fashion, home
textiles, sportswear and more. Responding to increased
market demand in the dye-sublimation business, a timely
investment at Carmignano Mill has expanded the mill’s
warehouse capacity and installed a fully automated winder
and packaging infrastructure onsite. The business previously
had to rely on external converters in Germany and Hungary to
store and convert its dye-sublimation paper into various reel
sizes. Following an extension of the warehouse by 6,500 m2,
RESPONDING TO OUR CONTEXT
the mill now has sufficient onsite storage capability and space to
continue growing the business. The savings are significant. Not
only does Sappi save €1 million a year on storage and handling
costs, but by keeping the product onsite and eliminating
transport from Italy to the converters in Germany and Hungary,
the mill will reduce its Scope 3 carbon emissions by an estimated
2,500 tons a year.
In SNA, some of our more significant process improvements in
FY2022 included:
• Process efficiency work at Somerset Mill to upgrade steam
flow meters and increase condensate recovery
• A further capital project at the same mill to improve mill steam
recovery and complete a PM1 chiller upgrade
• Water reduction projects at Cloquet Mill linked to steam savings
• Enhancements to the Cloquet Mill recovery boiler, which led to
operating efficiency improvement and helped to avoid downtime
• An improved maintenance reliability effort and continuous
focus by Matane Mill’s production team to optimise
productivity which resulted in a record production year.
In SSA we achieved the following:
• The major capacity expansion project at Saiccor Mill (see
85 in more detail) involved the conversion of all
page
remaining pulping processes from calcium to magnesium and
was successfully completed in March 2022. This has helped to
reduce overall environmental footprint through reduction of
coal-based steam and power generation and reduced
chemical consumption
• At Ngodwana Mill we upgraded the wet end, press section and
the first dryer section of PM1 to improve the quality of kraft
linerboard and enable the production of lower basis weights –
important at a time when our customers are looking to lower
their carbon footprint through lighter-weight packaging. The
mill, which previously produced kraft linerboard in basis weights
between 140 g/m2 to 400 g/m2, can now produce product
ranging from 100 g/m2 to 400 g/m2. Production capacity has
now increased from 240,000 to 250,000 tpa
• Production at Tugela Mill has increased to 170,000 tpa through
the installation of a log deck at the woodyard to improve chip
quality and reduce rejects, a bottom scraper to improve outlet
consistency and control, as well as a screw press to improve
pulp washing and outlet consistency. These process
improvements will allow for the additional production and sales
of Ultraflute amounting to 15,000 tpa and increased liquid
lignosulphonate sales of 4,725 tpa. Environmental benefits
include a reduction in chemical oxygen demand due to the
improved washing processes
• Our furfural pilot plant at Saiccor Mill, which aims to prove the
scalability of the Sappi technology for furfural extraction from
magnesium oxide (MgO) thick liquor was commissioned in
September 2022.
Saiccor Mill expansion: technical fast facts
• The expansion and upgrades include a new evaporator,
recovery boiler, screening and washing plant, as well as
upgrades to the bleach plant and pulp machines,
improved recovery circuits and additional magnesium
digesters
• New technology employed incorporates improved
washing technology to optimise water and energy
efficiency, optimised cooking technology for improved
pulp quality control, the application of robotics to facilitate
debottlenecking and shop-floor digitisation for improved
commissioning, control and operational efficiency
• Upgrades to the woodyard to enable smooth logistics
supply chain operation include the installation of offloading
equipment, side-arm rail carriage chargers and new
chipper lines
Installation of the largest sulphite recovery boiler in the
world, with the capacity to process up to 1,500 tons of dry
solids per day.
•
Implementing innovative supply chain solutions
In SEU, under our wider supply chain strategy, we have implemented
the Paperini initiative with the aim of achieving a more efficient
and transparent digital supply chain. Paperini offers our customers
a move away from traditional timely order tracking to an
optimised, transparent delivery process enabling tracking of
orders across the delivery process. Sappi is working with a
renowned, trusted and neutral partner in the digital market,
Shippeo, which provides a secure platform and guarantees to
comply fully with applicable European data protection laws. Once
our carriers are connected, they have full access to the Shippeo
platform and its tracking data. Data shared via Shippeo is used to
calculate the estimated time of arrival of a delivery based on an
algorithm, which incorporates actual GPS positions, traffic and
weather conditions. This enables us to inform our customers
proactively in case of possible order delivery delays. Our
objective is that eventually, at least 80% of our deliveries will be
tracked in real time.
In SNA, we experienced several raw material supply issues during
FY2022, particularly in terms of latex and starch which are used in
all grades at Somerset Mill. Our R&D, procurement and
manufacturing departments collaborated to redesign multiple
products quickly in ways that would not impact customer quality
expectations. Changes were tested through ongoing evaluations
to ensure continued quality-first production. This resulted in
minimal loss and no customer complaints.
Given the increase in supply chain uncertainty, network visibility
grew in importance. To address this, proactive track and trace
reporting for product shipments was provided to the customers
that were most impacted via our collaboration with Schneider
Logistics and Four Kites. In addition, detailed dashboards were
created to highlight areas where service and cost issues were
experienced, so mitigation measures could be implemented.
Finally, visibility in emissions calculations and reporting has vastly
improved and there is a dashboard in the beta phase of testing.
Annual Integrated Report 2022 Sappi 83
RESPONDING TO OUR CONTEXT Our key material issues continued
Prosperity continued
In SSA, we had to contend with challenging logistics problems
at the port of Durban, due to severe backlogs. The situation was
compounded after the floods earlier this year, when access was
compromised by road and rail infrastructure being washed away.
Rail efficiency has also been impacted by theft, vandalism and
wagon availability.
We dealt with these challenges in the following ways:
• Moving from containers to breakbulk
• Utilising road, rather than rail
• Shipping DP from Ngodwana Mill via the port of Maputo
in Mozambique rather than Durban – Maputo is only
250 kilometres from the mill, while Durban is 650 kilometres.
In total, during FY2022, we exported approximately 20% of SSA’s
total DP production via breakbulk. While there are certain issues
like congestion at the border related to exporting via Maputo, we
will continue to assess the situation and maintain flexibility going
forward.
Assessing electric vehicles in Europe
The EU has mandated the use of electric-vehicle and
hydrogen fuel-cell power starting in 2030. Last year, our
teams in Europe began looking into the future by evaluating
the use of electric trucks between Gratkorn Mill in Austria
and one of our supplier’s locations. After the promising
results of the pilot study, they expanded the research.
The project was led by Sappi’s digital transformation team
together with the research team of associate professor,
Athanasios Rentizelas of the Industrial Engineering
Laboratory, National Technical University of Athens, in
collaboration with the Sappi Wesel distribution centre in
Germany. Together, they conducted a research project to
evaluate the potential benefits from using electric heavy-
duty trucks (battery electric vehicles) and charging
infrastructure for distribution of products to Sappi
customers located in a distance up to 100 kilometres (km)
from Wesel.
The study identified that on average, a fleet of three electric
trucks could satisfy 64% of the customer orders and 73%
of product weight demand within the 100 km distance.
Using this fleet of electric trucks instead of EURO VI diesel
ones could reduce the direct CO2 emissions by 144 tpa if
renewable electricity is used for charging, or 38 tons per
year if the average German grid electricity is used (based on
year 2021 values). Following these promising results, Sappi
Europe, together with local partners, is now looking for
subsidies to support the realisation of the project.
1 Page 89 Catherine Salfino, “How to Cultivate Loyalty with Next Gen
Shoppers”, Sourcing Journal, August 12, 2021, https://sourcingjournal.
com/topics/lifestyle-monitor/ customer-loyalty-gen-z-shopperstiktok-
salesforce-covid19-cottonclothing-295476/. Quoted on page 89 The
State of Fashion 2022, McKinsey.
84 Annual Integrated Report 2022 Sappi
Providing sustainable solutions for a
circular bio-economy
Verve
Why it’s material
More than ever, sustainability is dominating consumer priorities
and the fashion agenda. Consumers want to know where materials
come from, how products are made, and whether the people
involved are treated fairly. In response, more and more companies
are expanding their sustainable assortments and working to
boost the sustainability of their supply chains. Demonstrating
progress in sustainability is particularly important in gaining the
trust of younger fashion consumers, as some 43% of Gen Zers
say they actively seek out companies that have a solid
sustainability reputation1.
Our DP brand, Verve, meets this need by creating renewable
alternatives for raw material feedstock to pharmaceuticals,
foodstuffs and textiles in particular. DP is a highly purified
form of cellulose extracted from trees using unique cellulose
chemistry technology. Sappi is one of the world’s largest
manufacturers of DP with a capacity of 1.4 million tpa and
a 17% share of the global market.
How this issue links to other aspects of our business
Our global priority SDGs Our top 10 risks
Our strategic
fundamentals
3/ Sustainability expectations
5/ Climate change
6/ Evolving technologies and
consumer preferences
7/ Cyclical macro-economic
factors
The global forces shaping our
Thrive25
strategy
• Changing consumer and
employee behaviour
• Shifting demographics
• Climate change and climate
transition
• Resource scarcity and growing
concern for natural capital.
Our highlights
Strengthened our
competitive position in
the DP market with the
expansion of Saiccor Mill
Visit by members of the
Textile Exchange and
retail industry to Saiccor
Mill helped to highlight
the role the mill plays in
the lyocell value chain and
potentially the reduction
in the value chain’s
science-based targets.
See page
report.
61 of the
RESPONDING TO OUR CONTEXT
Key developments in FY2022
“Today, we are witnessing far more than a financial
investment. We are witnessing an investment in
infrastructure, people, innovation, technology and
sustainability. It is an investment in community
development, in the local economy, in our export
capacity and in the industrialisation of our economy.”
Those are the words of South African President Cyril Ramaphosa,
who officially opened our ZAR7.7 billion DP capacity
expansion project at Saiccor Mill in September 2022.
This significant investment secures our leading position in
a rapidly growing market – estimated to be growing at 3.2%
compound annual growth rate per annum1. In addition to
expanding capacity by 110,000 tpa, the project has
significant environmental benefits: The conversion of the
calcium cooking line to the more sustainable magnesium
bisulphite line has reduced the need for coal-based power
generation, thereby halving fossil fuel carbon emissions. Other
environmental benefits include the reduction of sulphur
dioxide, specific water use efficiency improving by 17%,
water consumption reducing by 5% and solid waste to
landfill from coal ash decreasing by 48%.
New technology includes improved washing technology to
optimise water and energy efficiency; optimised cooking
technology for improved pulp quality control; the application
of robotics to facilitate debottlenecking; as well as shop-floor
digitisation for improved commissioning, control and
operational efficiency.
A significant development from a marketing point of view was
the segmentation of the Verve brand to reflect different
target markets:
• Verve Advantage – a lyocell grade primarily aimed at textile
markets in which Sappi Verve supplies more than 50% of
the global requirement
• Verve Performer – a viscose grade for the textile and
sponge markets
• Verve Elements – a speciality grade focused on the
pharmaceutical, microcrystalline cellulose and ethers
markets.
This brand architecture has strengthened Verve as the fibre of
choice by expanding our reach throughout the value chain and
providing an identifier through to retailer level.
The Higg Index suite of tools, developed by the SAC, aims to
standardise the measurement of value chain sustainability. Under
our membership of the SAC, we are required to undertake Higg
self-assessments for social and labour performance, facility
social and labour module, together with environmental
performance (facility environmental module) annually. Our
Cloquet Mill was recently one of the first DP facilities to complete
an external environmental management verification process. The
mill achieved a final score of 84% on the Higg facility
environmental module audit, receiving a verified score of 100%
across energy, water, and wastewater management. These results
highlight the mill’s high levels of resource efficiency and emission
control and reinforce our brand positioning. (See further details
regarding our DP mills in South Africa on page
60.)
Verve’s partnership with Birla on ‘Green Track’ blockchain
technology provides a forest-to-garment traceability
solution for brand owners. Through this collaborative
partnership, our branded DP, Sappi Verve, continues to
strengthen its sustainability credentials within the textile
industry. Providing a brand-owner traceability solution has
been 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. This is a significant
advantage, given the estimate that only 5% of textile brand
owners can trace their raw materials to origin. Birla has
recently agreed to two of South Africa’s major fashion
retailers joining Green Track.
By 2025, landfills in the EU will no longer accept textile waste in
terms of recycled textiles. In the light of this and consumer
pressure for recycled textiles, we continue to assess potential
textile recycling partnership opportunities to produce pulp from
recycled textiles. We plan to evaluate opportunities to pulp other
sustainable materials in addition to wood but are not convinced
that this is a viable growth avenue for Sappi.
Opportunities for value creation
In the light of growing concerns about climate change, engagement with our customers on this topic is an opportunity to
enhance trust in line with our
strategy.
Thrive25
Our DP business is engaging on climate-related topics with four customers headquartered in Austria, China, India and Japan.
Together they make up approximately 80% of DP supply from South Africa and North America. Engagement involves sharing our
Scope 1, 2 and 3 emissions for DP – in other words, these customers’ Scope 3 emissions. We report progress against targets
annually to these customers. Through engagement with both our suppliers and our customers, we can collaborate to achieve
meaningful decarbonisation through our entire value chain.
1 Dissolving Pulp Market Size, Share, Growth, And Industry Growth by Type (Eucalyptus Type, Pinewood Type and Other Type) By Application (Viscose,
Cellulose Acetate and Cellulose Ether, and Others), Regional Forecast (2022 – 2028), published September 2022.
Annual Integrated Report 2022 Sappi 85
RESPONDING TO OUR CONTEXT Our key material issues continued
Prosperity continued
Biotech
Why it’s material
Our commitment is to do more with less by making the most out
of every tree used in our production processes. Our focus on
circular design and adjacent markets enables us to achieve
stronger value chain relationships and enhanced revenue
stream opportunities.
How this issue links to other aspects of our business
Our global priority SDGs Our top 10 risks
3/ Sustainability expectations
6/ Evolving technologies and
consumer preferences
7/ Cyclical macro-economic
factors
10/ Liquidity
Our strategic
fundamentals
The global forces shaping our
Thrive25
strategy
• Move towards a circular economy
• Changing consumer and
employee behaviour
• Climate change and climate
transition
• Resource scarcity and growing
concern for natural capital.
Our highlights
25% sales revenue growth
in lignin
Accelerating sales of
Pelletin
Development of
translucent Valida
First commercial unit for
Valida commissioned
Sappi Symbio option with
90% cellulose content
launched
Opportunities for value creation
We support the drive to improve the productivity of food
production and food security by harnessing the unique
properties of wood acids, wood sugars and wood lignin in
our bio-based products to replace potentially harmful
current incumbents. In crop production our bio-based
products are an important source of soil organic carbon,
which contributes to soil organic matter and carbon
sequestration. In addition, as a complexing agent; it
makes critical trace elements available to plants. This
holds significant promise for a world battling with issues
of food security.
86 Annual Integrated Report 2022 Sappi
Key developments in FY2022
A positive development was accelerated demand for lignin,
with y-o-y sales revenue growth of approximately 25%.
Our biotech lignin strategy has always been to expand beyond
commodity markets to niche markets. We are achieving this,
with strong demand allowing us to test value add in various
applications. One such area is in crop protection and nutrition.
Sappi Forests Shaw Research Centre is working with Cedara
Agricultural College and the Seedling Growers Association of
South Africa to establish nutritional uptake and protection
against plant pathogens, which impact crops like avocadoes,
potatoes and tomatoes and are a global challenge for food
security. We have also developed several commercial products
which enhance the efficacy of industrial fertilisers and help
improve the absorption of macro and micro-nutrients for
improved crop production.
Sales of Sappi Pelletin, first launched in 2020 and used as a
binder in animal feed product to enhance durability and
strength, continued to gain traction. The product has now
been registered in several export markets with more
registrations due.
Independent studies demonstrate that Sappi’s lignin product
has anti-microbial properties, which help in feed preservation.
Use in animal feed can enhance gut health and lead to
enhanced poultry and milk production.
Our Valida fibrillated cellulose offers a natural,
biodegradable alternative for diverse applications ranging
from automotive foam, light-weight concrete, multi-colour
paint, pesticides, shampoo, skincare and wound care. Valida
is also being assessed for use in adhesives, frost protection
for fruit trees and industrial cleaning, to name a few. Other
avenues of opportunity include controlled release fertilisers,
sun protection and paper and packaging. We are already
using Valida in our own paper production where its value lies
in the strength it imparts to paper and its barrier functionality.
Another important development in FY2022, in response to
market demand, was the development of translucent Valida
for use in cosmetics and other markets where this product
property is highly valued.
Recognising that some applications require a dry Valida
product, we have produced this at pilot scale and are testing
the product with customers in the market.
Our Valida pilot plant in The Netherlands continues to run
at capacity and we have commissioned our first commercial
unit at Carmignano Mill in Italy. Plans to further scale-up
capacity for Valida-S grades are ongoing.
Produced from C5 sugars (sugar derived from non-food
biomass) in hemicellulose through hydrolysis and
dehydration, furfural is a platform chemical for the
production of numerous biochemicals. Its uses range from
adhesives, antacids, fertilisers, flavouring compounds, inks
and plastics, to solvents for the refining of lubricating oils.
RESPONDING TO OUR CONTEXT
It can also be used as a fungicide, nematicide and
weed killer or converted to furfural alcohol for furan
resins. We have established a pilot plant at Saiccor
Mill and will be taking a decision on a commercial
plant in 2023.
In terms of xylose, we have proven the technology
to extract xylose sugars from our prehydrolysis
kraft cooking processes and are in ongoing
discussions with potential market partners to
develop commercial opportunities for bio-based
products from this sustainable feedstock
Our Sappi Symbio product, a natural composite
material combining high-quality cellulose from
wood and thermoplastics, aligns with our drive to
make everyday materials more sustainable. It can
be used in standard processing equipment, such
as injection moulding and extrusion and in a wide
range of applications across furniture, consumer
electronics and automotive components.
We have now developed a Sappi Symbio option
with 90% cellulose content to offer enhanced
sustainability advantages and higher value to
compounders and end-users.
As reported in FY2021, commercialisation gained
traction with uptake by a major automotive
manufacturer in the US. Against the backdrop of
the knock-on effect of Covid-19, development
activities in the auto industry slowed. However,
we continued to engage in testing and trials with
several automotive manufacturers around the
world, many of whom have defined green targets.
We expect further momentum to commercialise
Symbio in FY2023 as these projects move to
completion.
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Annual Integrated Report 2022 Sappi 87
RESPONDING TO OUR CONTEXT
Our key material issues continued
Prosperity continued
Responding to evolving customer needs through innovation and collaboration
Why it’s material
Key developments in FY2022
Innovation is critical to the future wellbeing of society and to
driving economic growth. We are leveraging advances in AI,
machine learning, robotics and other technologies to meet the
rapidly evolving needs of our customers all over the world. This
is underpinned by our technical teams, who help to deliver the
new thinking, new products and new processes that establish
the pathway to success. Our technical knowledge and prowess,
along with a willingness to embrace innovation, helps to drive us
forward firstly, by taking us into new markets and introducing
new products. Secondly, by finding solutions for a new
manufacturing reality in a low-carbon, bio-based circular
economy.
How this issue links to other aspects of our business
Our global priority SDGs Our top 10 risks
3/ Sustainability expectations
5/ Climate change
6/ Evolving technologies and
consumer preferences
Our strategic
fundamentals
The global forces shaping our
Thrive25
strategy
• Move towards a circular economy
• Climate change and climate
transition
• Resource scarcity and growing
concern for natural capital.
Our highlights
R&D investment of
US$46.6 million
(FY2021: US$43 million)
Finalists’ entries in the
Technical Innovation
Awards represent a
five-year net present value
of US$123.9 million at
a 100% probability of
success rate
Production capacity for
high-barrier papers
expanded at Alfeld Mill
Ultracast Viva™ named the
product of the year in the
Business Intelligence
Group’s 2022 Sustainability
Awards programme
Opportunities for value creation
In North America, we are running a pilot programme for
key customers which offers a carbon neutral option for
our Spectro and Proto packaging products. We will take
a decision on the way forward once the pilot ends in
March 2023.
88 Annual Integrated Report 2022 Sappi
Thrive25
Exciter Innovation Programme
Our Exciter R&D programme comprised of global projects
aligned with
from all business segments: biotech,
packaging and speciality papers, graphic papers and DP, as
well as scoping for new ideas. The focus of the projects,
which are global and based on the OneSappi approach, has
shifted to emphasise sustainability, together with packaging
and speciality papers. Projects are progressed to
commercialisation through an internally developed
stage gate model.
Our R&D portfolio is focused on the following:
• Decarbonisation with a focus on energy, pulping,
papermaking, bleaching and new technologies
• Meeting the challenges of the packaging legislative
environment with particular reference to single-use plastics,
microplastics and recyclability
• Developing lignin value-add products
• Assessing alternative pulping technologies
• Optimising the graphic papers sector and increasing focus
on cost reduction
• Progressing Valida dry development from laboratory
scale to pilot
• Environmental impact, including climate change risk; water
treatment and product circularity in our products
(recyclability, compostability and biodegradability).
Thrive25
strategy – growth in
Technical Innovation Awards
The theme for this year’s annual Technical Innovation
Awards was ‘Think, Connect, Innovate!’ The finalists’ projects
were all aligned with our
packaging, product diversification, efficiency, productivity,
and quality, as well as innovative and sustainable solutions,
which are a mix of new or improved products or optimised
processes. Value delivery is integral to
projects ticked the boxes for economic and commercial value
with a total calculated five-year net present value of
US$123.9 million at a 100% probability of success rate.
and finalists’
Thrive25
This year we refreshed the awards process by removing the
limit of five people for team recognition and introduced a new
category: technical excellence – projects across a broad
range of technical aspects that help us achieve our OneSappi
objectives, but which may not have reached the economic
or innovation thresholds. We also continued with the
commendation awards for projects with sound commercial
promise which have not yet reached commercialisation
status.
The global winners this year were the team from Ngodwana
Mill in South Africa. The newsprint market was severely
impacted by the Covid-19 pandemic and the mill’s PM2 faced
significant commercial downtime. Against this backdrop, the
team implemented modifications to PM2 and developed new
packaging grades for the recycled liner and flexible packaging
papers markets.
RESPONDING TO OUR CONTEXT
Expanding production capacity at Alfeld Mill
Building on our comprehensive portfolio of high-barrier papers
that ensure the optimum protection, we expanded production
capacity for high-barrier papers at Alfeld Mill. The mill can now
produce papers with an exceptionally high barrier even under the
most demanding climatic conditions.
Right on schedule for high-barrier paper innovation at
Alfeld Mill
Beginning in September 2022, Alfeld Mill in Germany began
putting its cutting-edge coating machine into operation for
high-barrier papers that offer an exciting sustainable
alternative to traditional film and foil-based materials.
While these papers are in extremely high demand, including
to meet ever stricter regulatory requirements, industry has
been slow to develop viable solutions. Given Sappi’s
in-house technology, we have been able to demonstrate a
viable solution and are on schedule to begin production for
the market in calendar 2023.
The highlighted in-house technology will not only increase
Sappi’s coating capabilities, but also boost development of
more innovative solutions for sustainable packaging together
with our customers. In addition, customers will benefit from
higher production capacity and a shorter supply chain.
Moreover, we intend to tap into new customer groups
through the unique combination of paper and dispersion-
coating technology, offering even more competitive and
attractive paper packaging solutions.
The investment at Alfeld Mill strengthens our position as
the leading global provider of sustainable paper packaging
solutions. With the construction of two new buildings, the
optimal infrastructure for the innovative machine was
established in 2021. Commissioning of the coater is
progressing according to plan with teams excited to be part
of this industry-first breakthrough with completely novel
technology.
Meeting evolving customer demand
We extended production of our successful Fusion Topliner white
grade from Ehingen Mill in Germany to Gratkorn Mill in Austria.
Fusion Topliner, a white virgin fibre liner for high-quality
corrugated packaging, is now the most widely used corrugated
liner made from pure virgin fibre. It is recommended for
applications such as premium quality consumer goods
packaging and point-of-sale displays – where high visual impact
and differentiation are key. The product also stands out with
exceptional strength and versatility. Volume availability will be
increased month by month to support the expected growth of
our customers, and to satisfy large requirements in the
corrugated board business.
We launched Raw, a unique graphic paper that provides users
with the reliable print performance typical of coated papers, but
with the touch, feel and high whiteness/high bulk appearance of
an uncoated paper. By stimulating the sense of touch in addition
to vision, Raw helps create deeper connections for consumers.
Available for litho printing in sheets from 115 g/m2 to 300 g/m2
and suitable for dry toner printing, the paper will run on HP Indigo
digital presses without primer.
Another new addition to our portfolio is Crystalcon, an uncoated,
translucent paper. By combining Crystalcon with Sappi Seal, we
can offer manufacturers a compostable, recyclable packaging
solution that is well suited to both food and non-food
applications. Although not completely transparent, the new paper
allows sufficient visibility for consumers to examine the packaged
product. It can be used as a sustainable alternative to film and is
both recyclable and compostable. Potential applications range
from pasta or rice packaging to magazines, as well as packaging
for goods from virtually all product segments – from small
electronic devices to clothes. It also significantly contributes to
establishing paper as primary packaging material in the market.
In addition, a new board packaging offering called Proto Blister
was provided to the North America market this year. This
product’s unique combination of surface strength, stiffness and
printability allows for high-performance graphic backing for the
clear blister pack which encloses the packaged product. This is
yet another example of paper-based packaging quality.
Building on 80 years of experience in technological innovation
and evolution in the release paper industry, we launched Arrio,
a decorative laminate surface solution that delivers remarkable
aesthetics, premium haptics and scratch and fingerprint
resistance for high-wear surfaces. Arrio, which offers a superior
surface to conventional melamine in aesthetics and performance,
is a perfect solution for decorative and functional surfaces on
furniture, work surfaces, kitchen cabinetry and more. The durable
acrylic surface extends product lifetime and does not require
application or removal of protective film layers, thus reducing
manufacturing costs and waste. It also provides superior haptics,
including super matte, smooth touch and high-colour intensity
surfaces and it is suitable for single radius wrapping applications.
Offered initially in a super matte, fingerprint resistant, soft-touch
texture named Matte Haven on black décor, the Arrio platform will
continue to develop with the future addition of texture and décor
colour options.
Recognition for Ultracast Viva
Ultracast Viva™ (UC Viva), a textured release paper line,
created the industry’s first premium high-fidelity casting
paper compatible with solvent-free systems. UC Viva was
named the product of the year in the Business Intelligence
Group’s 2022 Sustainability Awards programme. The
sustainability awards honour the people, teams and
organisations who have made sustainability an integral part
of their business practice or overall mission.
Amid a global movement to limit or eliminate the use of
solvent-based casting systems, UC Viva is a revolutionary
development showing that products developed for
solvent-free systems can be reliable and high functioning.
Using a proprietary process, UC Viva brings to market
performance improvements that are more compatible than
ever with green chemistry systems, including benefits from
its increased reusability and easier handling with expanded
temperature limits.
Created with a commitment to forward-looking sustainability
practices and environmentally friendly manufacturing, UC
Viva is the innovative answer for more responsible solutions
to reduce pollution.
Annual Integrated Report 2022 Sappi 89
RESPONDING TO OUR CONTEXT Our key material issues continued
People
Ensuring the safety of our employees and contractors
Why it’s material
Key developments in FY2022
Our vision of a thriving world is based on safety, which is why it
is the core value on which all our other values are based: As
OneSappi, we do business safely, with integrity and courage,
making smart decisions that we execute with speed. Our
maturing safety culture, which reinforces safety as a shared
responsibility, is helping to save lives and empower people,
while improving business performance and making a positive
impact on our operations.
How this issue links to other aspects of our business
Our global priority SDGs Our top 10 risks
Our strategic
fundamentals
1/ Safety
9/ Employee relations
The global forces shaping our
Thrive25
strategy
• Rising social inequality and
growing social activism with
increased expectations of
business.
Our highlights
Zero fatalities and
continuous improvement in
safety performance
Management incentives
expanded to include
LTIFR and lost-time
injury severity rate
(LTISR) for contractors in
addition to own employees
Opportunities for value creation
In SNA, our safety platform, in conjunction with the
employee engagement platform, developed the SNA Safety
Impact Award Programme to recognise proactive initiatives
that improve safety culture and enhance employee
engagement related to safety, thereby leading to the
reduction of injuries at our sites. Looking ahead, the
platform will continue to emphasise site-specific injuries for
reducing hand injuries – identified as a common incident –
enhance recognition for achieving excellence in our leading
indicators and continue to collaborate with our contractors.
Covid-19
The impacts of the Covid-19 pandemic lessened over the
year. However, there were still sporadic cases which were
dealt with through preventative absenteeism. In total,
tragically, 17 colleagues have succumbed to the disease to
date. All operations and sites continued with 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. As restrictions were lifted, the ongoing focus
was on encouraging all to vaccinate. In South Africa we
provided vaccination services in our onsite clinics for all
employees and family members.
Global safety awareness week
For the third consecutive year, the theme of Global Safety
Awareness Week was 'I value life', reinforcing the idea that
safety is not a one-off event, but a daily choice. The lifting
of Covid-19-related restrictions allowed for face-to-face
engagements across the group. Activities, which were open
to all Sappi staff and contractors across the group, focused
on promoting situational awareness and understanding risks
and hazards.
Global Safety
Awareness Week
Be
responsible
Put
safety fi rst
Make
safe
decisions
I value life
means
Care for and
protect ourselves
and others
Commit to
zero injuries
I value life
90 Annual Integrated Report 2022 Sappi
RESPONDING TO OUR CONTEXT
performance, achieving a combined employee and contractor LTIFR of 0.55 vs a target of
<0.66. The injury index for own employees and contractors also improved, showing the
best-ever performance over the last five years. This performance was underpinned by a
safety communication campaign featuring a handbook (see below) and posters, all of
which focused attention on frequent injuries and reinforced the fact that nothing is so
important than it cannot be done safely.
Safety performance in SNA was excellent, with a record low combined employee and
contractor LTIFR of 0.18 compared to a target of 0.38.
Safety performance in SSA continued to improve, with a best-ever combined employee
and contractor LTIFR of 0.26 versus a target of 0.29.
Occupational safety
All three regions within the group have
safety programmes and processes that
have the objective of creating an
environment where no person will suffer
permanent disability or loss of life. Our
global I value life initiative aims to
accelerate improved safety performance
in areas of concern and to develop a safety
awareness culture in all parts of our
business. The initiative includes
integrated health and safety planning
and management, training at all levels,
participative information and control
structures and adherence to international
best practice and safety standards.
Our view that injuries and accidents are not
inevitable, is underpinned by risk
assessments, group sharing of all
incidents and root cause investigations,
enforcement of compliance and
leadership engagement with our people.
In terms of group safety performance, all
regions showed continuous improvement.
A key highlight was the fact that, for the
second consecutive year, there were no
fatalities. Safety performance was as
follows:
• The combined (own employees and
contractors) LTIFR was 0.30 against a
target of <0.37
• The combined (own employees and
contractors) LTISR was 9.31 – almost
half the target of 17.08
• The combined injury index was 2.81
compared with the target of 6.15.
Sappi Europe managed to reverse the
previous year’s disappointing
SEU safety handbook
We calculate LTIFR by dividing
the product of lost-time
injuries and a group-wide
standard for work hours by
the unit’s work hours, ie LTIFR
= LTI * 200 000/units actual
work hours.
Group LTIFR
1
7
0
.
0.80
0.60
0.40
0.20
0
1
7
0
.
6
5
0
.
1
4
0
.
8
3
0
.
9
5
0
.
8
5
0
.
5
5
0
.
6
3
0
.
4
3
0
.
4
3
0
.
1
4
0
.
3
4
0
.
8
4
0
.
9
2
0
.
7
3
0
.
1
3
0
.
5
2
0
.
100
80
60
40
20
0
2014
2015
2016
2017
2018
2019
2020
2021
2022
●
Sappi LTIFR
●
Contractor LTIFR
Sappi injury index
Contractor injury index
Annual Integrated Report 2022 Sappi 91
RESPONDING TO OUR CONTEXT
Our key material issues continued
People continued
Supporting sound labour relations
Why it’s material
Key developments in FY2022
The overall industrial relations climate in SEU was good.
Approximately 61% of SEU employees are members of a union
and approximately 87% of employees fall within a bargaining
unit. We engage with various unions in each country where we
operate and collective labour agreements (CLAs) are in place
at all mills. Last year we reported that there were no CLAs in
place at Carmignano and Condino Mills in Italy and Lanaken
Mill in Belgium. However, at the Italian mills these are now in
place until 2024 and a CLA is also in place at Lanaken Mill.
While we continued to be engaged in dynamic contract
negotiations, consistent with increased labour activity
nation-wide, the overall industrial relations climate in SNA
was satisfactory. Approximately 65.2% of SNA’s employees
are members of a union and there are 12 collective
bargaining agreements in place with hourly employees. In
total, we negotiated eight collective bargaining agreements.
We anticipate a comparatively light negotiation schedule in
the next financial year. Negotiations with the United
Steelworkers’ Union will take place at Allentown Sheeting
Facility and Westbrook Mill in March and August 2023
respectively.
Overall union representation in SSA workforce declined from
50% in FY2021 to 48%, with 61% of employees falling within
the scope of the bargaining unit. SSA continues to recognise
two trade unions – the Chemical Energy, Pulp, Printing, Wood
and Allied Workers Union and United Association of South
Africa, but also engages with other non-recognised trade
unions.
Collective bargaining in SSA during FY2022 was concluded
shortly after year end. In the Pulp and Paper Industry
Chamber, a decentralised bargaining process which
approved company-level negotiations, was adopted for the
2022 bargaining season. Industry wage settlements were
satisfactorily concluded for the sawmilling and forestry
sectors.
Thrive25
is trust. Against
One of the strategic fundamentals of
this backdrop, sound labour relations are important because they
form the foundation of trust between us and our employees. We
provide them with a strong voice in our decision-making
processes so that they develop a sense of ownership towards
their work and Sappi. We also provide the proper channels that
allow our people to voice their concerns. 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 55% of our workforce is
unionised, with 71% belonging to a bargaining unit.
How this issue links to other aspects of our business
Our global priority SDGs Our top 10 risks
1/ Safety
7/ Cyclical macro-economic
factors
9/ Employee relations
Our strategic
fundamentals
The global forces shaping our
Thrive25
strategy
• Rising social inequality and growing
social activism with increased
expectations of business
• Changing consumer and
employee behaviour
• Shifting demographics.
Our highlights
Relatively positive industrial relations with trade unions
at all manufacturing sites and plantations
Opportunities for value creation
In SSA, within the context of community unrest and potential
business disruption, our focus is on enhancing union-
management relationships. Following engagements at the
National Partnership Forum, it was agreed that Sappi would
afford shop stewards the opportunities to have curated
individual development plans, following the same process
used for high-potential employees. A list of desired
competencies was prepared and approved by the shop
stewards. The list of competencies was then used for
individual consultations with shop stewards to help them
self-assess against the competencies. Based on the results
of that assessment, customised development plans were
developed for each shop steward. Development plans
incorporate online training, classroom training, learning from
others and many practical assignments. Business unit
employee relations managers are supporting and mentoring
the shop stewards.
92 Annual Integrated Report 2022 Sappi
RESPONDING TO OUR CONTEXT
Attracting, developing and retaining Sappi talent
Why it’s material
Key developments in FY2022
The Covid-19 pandemic has reshaped the traditional world of
work, leading to increasing numbers of people to re-evaluate
what they want from a job and from life. This has created a large
pool of active and potential workers who are shunning the
traditionalist path, resulting in what commentators have called
The Great Resignation or The Great Attrition. The success of
our business depends on our people, who we see as a core
pillar of competitive advantage. Accordingly, we focus on
energising our employees through meaningful work; promoting
strong relationships with co-workers and managers; promoting
a culture of development in which diversity and inclusion are
encouraged; providing the resources and environment to
balance stress and wellbeing and offering both financial and
non-financial incentives. That we are succeeding in this regard
is highlighted by the fact that in FY2022, globally, voluntary staff
turnover was 6.15%.
How this issue links to other aspects of our business
Our global priority SDGs Our top 10 risks
9/ Employee relations
Our additional SSA
priority SDGs
Our strategic
fundamentals
The global forces shaping our
Thrive25
strategy
• Deglobalisation, polarisation and
increased geopolitical tensions
• Rising social inequality and growing
social activism with increased
expectations of business
• Changing consumer and
employee behaviour
• Shifting demographics.
Our highlights
Sappi Advance IT training
platform was launched
across all regions, thereby
enhancing performance
enablement
61.09% skills training,
38.91% compliance
training
Increased training spend
in all regions
Opportunities for value creation
In line with our strategic fundamental of ‘enhance trust,’
we have instituted a leave policy at senior levels of the
organisation which allows people to self-determine the
amount of leave they take. We believe this will enhance
engagement and retention.
Attraction
The Great Resignation has impacted millennials and Gen Zers
in particular. According to Deloitte, four in 10 Gen Zers
(born between the mid to late 1990s and the early 2010s)
and nearly a quarter of millennials (those born between 1981
and 1996) would like to leave their jobs within two years, and
roughly a third would do so without another job lined up,
signalling significant dissatisfaction levels1. The same survey
highlights the fact that these groups want businesses and
their own employer to do more. Only 18% of Gen Zers and
16% of millennials believe their employers are strongly
committed to fighting climate change. Gen Zers and millennials
want to see employers prioritise visible climate actions that
enable employees to get directly involved, such as banning
single-use plastics and providing training to help people make
better environmental decisions.
We have a significant advantage in that Sappi’s business aligns
with these priorities and that we are strongly focused on our
purpose: Sappi exists to build a thriving world by unlocking the
power of renewable resources to benefit people, communities
and the planet.
In all regions, our people visit schools and universities to promote
our industry. We also host mill and forestry visits. In South
Africa we offer bursaries and have issued new bursaries in the
priority areas of forestry science, industrial engineering and
electrical/mechanical engineering.
Development
To build strong skills across Sappi and build leadership
capability at all levels we provide training and development
opportunities and give performance feedback.
In terms of young talent, SEU trains and develops approximately
225 young apprentices. To date, this three to four-year
vocational training programme has been offered primarily at
our four German-speaking mills but has now been introduced
in Finland and Belgium. The programme is helping to build a
technical talent pool to replace staff who will retire in the short
to medium term. A specific programme for the upskilling of
Lanaken Mill operational staff will be launched early in the next
financial year.
In SNA, all salaried personnel received training on Sappi
Advance including virtual and in-person sessions on
developing, managing and reporting on performance
enablement objectives; manager training on allocating and
approving objectives; how to best use the tools available for
development plans; check-ins and performance reviews; as
well as how to link available training for development plans.
To evaluate the transition to completing necessary training
in Sappi Advance and allowing employees to demonstrate
completion for compliance and gainshare purposes, a
calendar of compliance-related courses was set up for pilot
employees with staggered due dates.
1 https://www2.deloitte.com/content/dam/Deloitte/at/Documents/
human-capital/at-gen-z-millennial-survey-2022.pdf
Annual Integrated Report 2022 Sappi 93
RESPONDING TO OUR CONTEXT
Our key material issues continued
People continued
The Lean Six Sigma team also resumed some in-person
training, with facilitation from those skilled and certified in the
methodologies. Specific departments including finance, sales
and manufacturing are taking specific training actions in
response to industry/workforce concerns and comments from
engagement surveys. Somerset Mill provided in-person
leadership development training while Cloquet Mill offered
supervisory skills training and permanently adopted some
of the modifications made in response to Covid-19
requirements, such as shorter modules, online learning and
an overall reduced number of classroom hours. In addition,
multiple departments have received in-person training on
general management/self-awareness topics such as
Myers-Briggs and communication, change agility and
giving and receiving feedback.
In SSA, in terms of leadership development, the LeadX
programme continued in South Africa with minor updates
based on feedback from the previous group. Updates focused
on the technical cluster engagements and creating
psychological safety at work. Monthly check-ins continued
with participants on the manager in training programme
(72 managers in FY2022), which is now compulsory for all
first-time managers going forward.
Lean & Me continued to gain momentum across
manufacturing, with the creation of two customised business
version based on business demands – Lean & Me Lite for
senior managers and support services and Lean & Me for risk,
health, safety and environmental teams.
Technical skills development received a further boost in the
reporting period with the introduction of additional technical
programmes including woodyard superintendent, paper
machine operator (PM1 and PM2 Ngodwana Mill),
maintenance planner, business process engineer and HR
business partner. The programmes include online training,
classrooms, mentoring and practical assignments.
Sappi Trading employees are encouraged and supported to
improve their job performance and abilities for future career
growth. In FY2022, training courses ranged from Portuguese,
English and Japanese language courses attended by sales
and customer service employees in Mexico and Shanghai to
‘Introduction to Sappi graphics and speciality papers’ attended
by non-sales employees in Hong Kong.
Average training hours per employee in FY2022
Retention
Diversity and inclusion play a key role in employee retention.
In today’s global marketplace, we recognise that diversity
facilitates interaction with different cultures, colleagues and
clients. We believe that the creation of an inclusive culture
representative of such a diverse array of people, thoughts and
ideas enables us to innovate, deliver and service our customers
based on a broad palette of considerations. Diversity and
inclusion are not just about fairness, morality and justice as
being the right thing to do; nor just about legal compliance –
they’re also about enhancing enterprise value.
Thrive25
Under SDG8: Decent Work and Economic Growth, our
target is to increase the proportion of women in management
roles by 3.7 percentage points. This is reinforced by gender
equity targets specific to each region. We are making excellent
progress against our gender equity targets and at a group level
the proportion of women in management positions in FY2022
was 22.5%, a 3.5% increase from the FY2019 baseline. SSA and
SNA exceeded their FY2022 gender equity targets, but SEU is
lagging and specific action plans were developed during the
year to accelerate progress in the region.
In SSA, we continue to perform well against our transformation
targets and are classified as a Level 1 BBBEE contributor. The
representation of designated employees1 in the workplace
continues to gather momentum with the profile as follows: top
management: 43.8%; senior management: 55.6%; mid-
management: 64.1%; junior management: 81.6%; semi-skilled
and discretionary decision making: 98.4% and unskilled; and
defined decision making: 98.7%.
Employee engagement, which allows us to understand better
our employees’ needs and concerns and respond to these,
continues to underpin our retention efforts. Our central action
tracker provides regular updates on the action items identified in
our last employee engagement survey in FY2021. Progress on
action items has been accelerated by the fact that the close-out
of action items is now included in the performance objectives
of each line manager and supervisor across the business.
Identified action items include work/life balance, culture, rewards
and recognition, benefits and manager and co-worker
relationships.
Average training spend per employee in FY2022
Spend
US$
629.45
276
707.28
602.42
Region
SEU
SNA
SSA
Hours
Region
30
54
63
SEU
SNA
SSA
Sappi group (weighted average)
46.89
Sappi group (weighted average)
1
Black people (including Coloureds and Indians), women and people with disabilities.
94 Annual Integrated Report 2022 Sappi
RESPONDING TO OUR CONTEXT Creating a positive social impact in our communities
Why it’s material
Our vision of a thriving world can only be achieved if we support
and promote growth and development in the communities
surrounding our operations. Our community investment
programmes focus on creating stronger social licence to
operate, demonstrating our commitment to active corporate
citizenship, enhancing our reputation and customer loyalty, as
well as attracting talent.
How this issue links to other aspects of our business
Our global priority SDGs Our top 10 risks
7/ Cyclical macro-economic
factors
9/ Employee relations
Our additional SSA
priority SDGs
Our strategic
fundamentals
The global forces shaping our
Thrive25
strategy
• Deglobalisation, polarisation and
increased geopolitical tensions
• Rising social inequality and growing
social activism with increased
expectations of business
• Changing consumer and
employee behaviour
• Shifting demographics.
Our highlights
13% year-on-year
increase in community
investment in SSA
Significant progress on
enterprise and supplier
development in SSA
Opportunities for value creation
We are recalibrating our Abashintshi youth development
programme in South Africa and are also intensifying our
economic empowerment initiatives – developments which
should lead to positive benefits.
Our approach
There is broad alignment between the three manufacturing
regions on key themes including community welfare,
education, environmental protection, conservation and
biodiversity (with a strong focus on forestry), community
training and economic opportunities. Projects are aligned with
and support business priorities and needs, taking into account
feedback from our stakeholders. We prioritise three key
stakeholder groups – employees, local communities and
customers.
At a community level, mills in each region support local
projects ranging from youth clubs, community centres,
vulnerable groups, sports clubs, environmental education and
paper donations. Project support is provided to Sappi Forests’
community schools based on requests and needs analyses.
Projects include fresh water, ablution facilities, fencing,
buildings and structures and vegetable gardens, as well as
hospices and local clinics are supported in each community.
Each region has its own programmes which are detailed
extensively in our Group Sustainability Report, available at
www.sappi.com/sustainability
The fact that Sappi is headquartered and listed in South Africa,
coupled with the significant development needs of the country,
dictates a higher focus on social impact activities in our
country of origin.
Key developments in FY2022
Emergency relief and support is activated if and when required,
both at a global and regional level. The Russian invasion of
Ukraine created a humanitarian emergency which we
responded to by donating funds and matching employee
donations up to a set limit. in South Africa, the floods of
April 2022 in KwaZulu-Natal caused significant damage and
human tragedy. As in Europe, we donated funds and matched
employee donations up to a set amount. (See pages
and 64.)
58
In North America we continued with our Ideas that Matter
initiative which, for over two decades, has provided funding
and resources for designers working with non-profit
organisations to make social and environmental impact, to
encourage reforms in justice, education and healthcare and
to address diversity, equity and inclusion efforts across
communities and around the world. Sappi has made global
contributions totalling nearly US$14 million through the work
of more than 500 projects toward addressing these causes.
A condition of entry this year was that work should align with
one of the UN SDGs. The winning entries championed causes
ranging from child literacy, immigration and maternity care to
rainforest preservation, anti-poverty programmes and
resources for women of colour.
Annual Integrated Report 2022 Sappi 95
RESPONDING TO OUR CONTEXT
Our key material issues continued
People continued
Our Social impact framework
t
c
a
p
m
I
1
PRODUCTS
how impact feeds into our
products and services
4 PEOPLE –
how we positively
impact staff
2 PHILOSOPHY
the underlying values, principles
and culture of the company
5 COMMUNITIES –
our relationship with local
communities
3
PARTNERSHIPS
the health of stakeholder
relationships
6 PLANET –
our impact on the environment
We continued to progress our social impact framework which
enables us to map and track our community approach across all
segments, thereby increasing our positive impact on society. We
used the framework to update the 2022 strategy with deliverables
focused around economic, social and environmental outcomes
and the following broad themes: promoting regional development,
empowering communities and protecting resources.
The creation of local economic opportunity in South Africa has
increased in importance and urgency. It is being addressed through
a multi-pronged approach including increased community training
as well as targeted shared value, supplier development and
enterprise development programmes.
We are committed to developing SMEs so that, like Sappi Khulisa
(Refer to page
but become part of Sappi’s – and other enterprises – core
business.
64 for further detail), they are not CSI projects,
In FY2022, we spent over ZAR245 million with SMEs, significantly
exceeding our set annual target by ZAR133 million. Services
supplied ranged from alien invasive plant management to civil and
mechanical work and from logistics and transportation to plumbing
and electrical.
We engage with other corporates and contractors to contribute
towards local SME development and recruitment of local
community members. As an example, in FY2022 we had a total of
13 incubation initiatives in collaboration with contractors whereby
SMEs were sub-contracted at a cost of ZAR30 million to perform
services like scaffolding, civil works and piping, mechanical
engineering works, harvesting, etc. Contractors have also invested
in training SMEs and local community members to enhance their
job-related skills and ensure quality of work.
Spend in FY2021 and FY2022
2022
2021
€100,000
US$417,500
€100,000
US$145,100
ZAR54 million ZAR48 million
In 2018, we launched a focused ESD strategy and established a
dedicated ESD unit tasked with helping to incorporate SMEs into
the mainstream economy. Since then, we have made considerable
progress, successfully integrating 133 SMEs into the value chain.
SEU
SNA
SSA
96 Annual Integrated Report 2022 Sappi
RESPONDING TO OUR CONTEXT Planet
Sourcing sustainable woodfbre
Why it’s material
Key developments in FY2022
Our forests are the lungs of our planet, helping to regulate our
climate, while directly supporting the livelihoods of over a billion
people. The social and economic benefits of these services are
estimated to be in the trillions. Today, it’s clearer than ever that
there is no solution to climate change without a solution to tropical
deforestation. Yet, despite recent efforts, deforestation increased
by 12% between 2019 and 2021.1 Simply put, zero deforestation
is not an option but a strategic necessity for companies like Sappi
with land-based value chains to deliver on the UN SDGs.
How this issue links to other aspects of our business
Our global priority SDGs Our top 10 risks
Our strategic
fundamentals
3/ Sustainability expectations
4/ Supply chain disruption
5/ Climate change
The global forces shaping our
Thrive25
strategy
• Climate change and climate
transition
• Resource scarcity and growing
concern for natural capital.
Our highlights
77% of fibre
supplied to our
mills certified
We are piloting the Sustainable
African Forestry Assurance Scheme
for small growers in South Africa
Opportunities for value creation
A new FSC CoC standard came into effect in September
2021, incorporating a new chapter 7 on FSC core labour
standards. With this new step, the principles of the
International Labour Organisation’s (ILO) Core Conventions
and the ILO Declaration on Fundamental Principles and
Rights at Word (1998) are integrated into FSC’s CoC
standards. The revised FSC CoC standards now include
core labour requirements which are auditable and include
the effective abolition of child labour, elimination of all
forms of forced or compulsory labour, the elimination of
discrimination in respect of employment and occupation,
respect of freedom of association and the effective
recognition of the right to collective bargaining.2 This puts
workers’ rights on the agenda for around 45,000 FSC CoC
certificate holders all over the world.
These standards are already in place for forestry
management but will now apply to our mill CoC certificate
holders. Certification for Sappi is expected within the next
12 months. While the key topics are already covered in our
company policies and operating/HR procedures, the new
standards will strengthen our reputation and standing in
terms of social issues and workers’ rights.
We believe that robust, internationally recognised and third-party
verified forest certification systems are effective tools for
promoting sustainable consumption and production, as well as
combating deforestation and illegal logging through proof of
legality and responsible practices.
Accordingly, 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.
Implementing robust certification systems
Following PEFC CoC certification for SSA’s pulp and paper mills in
FY2022, all our mills in Canada, Europe, South Africa (except for
Stanger Mill) and the US hold both PEFC and FSC CoC-
certification. Our mills in the US are also SFI CoC certified and we
hold SFI fibre sourcing certifications for Cloquet and Somerset
Mills.
In FY2022, 77% (2021: 77%) of all the wood-based raw material
supplied to Sappi’s mills originated from FSC or PEFC (including SFI)
certified forests. In SEU, SNA and SSA, the share of certified
woodfibre supplied in FY2022 was respectively: 87% (2021: 87%),
59% (2021: 57%) and 85% (2021: 85%).
These high levels of certification enable us to offer a wide
product portfolio of certified products and give us full traceability
of purchased wood-based raw material. By striving for increasing
Thrive25
levels of certification in line with our global and regional
targets, we hope to drive responsible production and
consumption patterns, as well as demand for wood-based
products originating from certified forests.
Much of the woodfibre we use is dual-certified. We have rigorous
tracing protocols in place regarding the documentation of the origin
of woodfibre. In addition, suppliers must provide evidence that all
woodfibre is sourced from controlled, non-controversial sources
in accordance with the FSC Controlled Wood Standard, as well as
PEFC (and SFI in the United States) risk-based due diligence
systems. All suppliers are requested to provide wood origin
information (country of harvest and where applicable, sub-
national region and/or concession of harvest) and a list of tree
species at least annually and/or upon request. Based on the data,
Sappi prepares mill-specific wood origin declarations which
are available for all interested stakeholders on
www.sappi.com
Our continuous commitment to zero deforestation, as well as
sustainable forestry and sourcing, are embedded in our Group
Woodfibre Procurement Policy which incorporates core
requirements on woodfibre and its origin; clear requirements on
traceability and supply chain integrity; and further action points to
ensure zero deforestation, sustainable forestry and sourcing. This
policy was revised for clarity and added rigour in FY2022.
1 Why net zero needs zero deforestation now: Initial research paper from
the UN Climate Change High-Level Climate Champions, Global
Canopy, The Accountability Framework initiative, WWF and the
Science Based Targets initiative, available at: https://climatechampions.
unfccc.int/wp-content/uploads/2022/06/Why-net-zero-needs-zero-
deforestation-now-June-2022.pdf
2 https://fsc.org/en/document-centre/documents/resource/302
Annual Integrated Report 2022 Sappi 97
RESPONDING TO OUR CONTEXT
Our key material issues continued
Planet continued
Expanding certification outside our operations
We continue to participate in efforts to expand sustainable
forestry practices and certification: SNA works closely with a
variety of programmes dedicated to providing logger
education and continuous education, including SFI State
Implementation Committees, Maine Forest Products Council,
Maine Tree Foundation, and numerous academic
programmes (providing financial and in-kind support).
In SSA, we helped to develop the SAFAS and have also
established a group FSC scheme for small and medium-
sized growers, paying growers in the scheme a premium for
certified timber delivered. In FY2022, the scheme had 39
members representing a planted area of 45,600 hectares
and 306,400 tons delivered. We are currently piloting SAFAS
certification for small growers.
Enhancing supply chain sustainability
In SNA, written stumpage and wood supply agreements
include requirements to comply with applicable laws,
including the use of best management practices to ensure
that wood procurement operations adapt appropriately to
seasonal adverse weather conditions and other weather
events to ensure that soil productivity and water quality
resources are protected. A key procurement provision is to
build inventory at mills during the winter months to avoid
logging activities during the spring breakup/mud season. We
specify that wetlands and other wet areas should be logged
when soils are in a frozen condition and that best
management practice guidelines appropriate to the site
should be adhered to. We also identify, mitigate and avoid
adverse impacts on Forests with Exceptional Conservation
Value, which includes areas identified by NatureServe with a
G1 (Globally Critically Imperilled) or G2 (Globally Imperilled)
ranking for species and native plant communities.
101 and
In SSA, R&D play a significant role in tree growth and
improved supply chain efficiency. (See pages
102 for Sappi Forests’ response to climate change).
Conventional breeding methods are no longer viable as
change is rapid, breeding cycles are too long, and species
variation is insufficient to respond to future threats. Molecular
technology and biotechnology tools are used to ensure
forest sustainability and precision agriculture. Other methods
include hybrid varieties where desired traits of two species
are combined to increase adaptability to marginal areas; and
mulching not burning, as mulched areas hold more soil water
and have a positive impact on growth.
In addition, our work with land reform beneficiaries and our
Sappi Khulisa programme (see pages
respectively), help to ensure security of woodfibre supply.
74 and 22
98 Annual Integrated Report 2022 Sappi
Prioritising clean and renewable
energy and responding to climate
change
Why it’s material
Since the UN COP26 in Glasgow, Scotland in November 2021,
climate impacts have worsened and carbon emissions have
risen to record levels, affecting businesses around the world
and hitting vulnerable communities the hardest.
Our industry is energy intensive. In addition, our business is
dependent on woodfibre which is impacted by climate change.
Against the backdrop of these transitional and physical risks, we
have long recognised our responsibility to be part of the climate
solution. A significant portion of R&D is allocated to
decarbonisation including pulp backward integration which
brings green energy opportunities aligned with our strategy;
energy swaps and energy change opportunities balanced with
economics. In addition, our Future Energy Technologies and
Decarbonisation cluster is exploring and developing novel
technologies for fuel shift and deep decarbonisation in terms
of Scope 1 and 2 emissions, with a particular emphasis on
energy, pulping, papermaking and bleaching.
We align with climate science and are taking focused action to
future-proof our business against the physical and transitional
impacts of climate change and be part of the solution.
How this issue links to other aspects of our business
Our global priority SDGs Our top 10 risks
3/ Sustainability expectations
5/ Climate change
6/ Evolving technologies and
consumer preferences
The global forces shaping our
Thrive25
strategy
• Climate change and climate
transition
• Resource scarcity and growing
concern for natural capital.
Our strategic
fundamentals
Our highlights
Validation of our
science-based targets
by the SBTi
12.7% reduction of
specific GHG (Scope 1
and Scope 2) emissions
over five years
Opportunities for value creation
By accelerating our decarbonisation journey and motivating
our suppliers to adopt science-based targets, we are
working to realise our vision of a thriving world. This, we
believe, is important to enhance our reputation, motivate
customers to buy our products and attract investment, all of
which ultimately contribute to increased enterprise value.
RESPONDING TO OUR CONTEXT
Key developments in FY2022
Approval of our science-based
targets
In June, the SBTi approved our
science-based targets. Related to
Thrive25
climate action, under our
targets, globally we had committed to
an 18% reduction in specific GHG
emissions (Scope 1 and 2 combined).
This ambition has now accelerated:
Under our science-based targets, we
commit to reduce Scope 1 and 2 GHG
emissions by 41.5% per ton of
product by 2030 from a 2019 base
year. We have also committed that
44% of our suppliers (by spend) will
have science-based targets by 2026.
Our science-based targets hold
significant competitive advantage in
that they will help to:
• Build trust with our customers in
line with one of our key strategic
fundamentals
• Highlight our commitment to
continuous improvement
• Ensure that our operations remain
lean and efficient
• Enhance enterprise value and
investor confidence
• Promote resilience against a future
where resources, particularly those
derived from fossil fuels, will
become increasingly scarce and
expensive.
Actioning our targets
A capital plan has identified capital
projects within our existing five-year
plan as well as further longer-term
interventions, to facilitate the required
emissions reduction. The capital
expenditure between FY2021 –
FY2030 required to achieve the
targets is estimated to be in the
region of US$70 million per annum.
Decarbonisation projects include process efficiency improvements, transitioning to
low-carbon energy generation, as well as upgrading of certain plants which allow for fuel
switching from fossil to biogenic fuels and increased purchases of renewable energy. In
FY2022, globally 53.9% (FY2021: 53.7%) of energy used was renewable, mostly from own
black liquor. In SNA, we already use a high percentage of renewable energy – 76.7% in
FY2022.
Decarbonisation plans that have already been implemented or that are in progress in our
other regions include:
SEU
• The recently completed €35 million phase 1 modernisation of the power plant boiler
at Gratkorn Mill, Europe’s largest paper mill. During the transitional phase, the new
state-of-the-art boiler will run predominantly on natural gas. In FY2023 phase 2 will
install the necessary biomass handling equipment to enable a full conversion to
biomass.
• A €16 million investment in a biomass boiler at Kirkniemi Mill, completed earlier this
year. The investment established the equipment needed to receive, store and handle
woody biomass like the bark, sawdust and wood chips used for biofuel production.
• The installation of an e-boiler at Maastricht Mill. With an investment of close to €6 million,
the mill’s yearly emissions of CO2 will be reduced by some 13% (compared to 2019)
following commissioning. The reduction in CO2 emissions will be achieved by replacing
part of the gas generated steam by electric generated steam via a newly to-be-installed
e-boiler. The electricity used will be generated through renewable energy sources such
as solar power and wind energy.
SSA
• Ngodwana Energy, a 25 MW biomass energy plant at Ngodwana Mill in which SSA
holds a 30% stake together with consortium partners KC Africa and African Rainbow
Energy and Power. The plant, which was commissioned in March 2022, uses biomass
recovered from Sappi’s surrounding double certified plantations1 and screened waste
material from the mill production process. Up to 35 tons an hour of biomass is burned
in a boiler to generate steam and drive a turbine to generate electricity which is fed into
the national grid. The project falls under the South African Government’s Renewable
Energy Independent Power Producer Programme.
• Our capacity expansion project at Saiccor Mill involved conversion from calcium
to magnesium pulping and was commissioned in FY2022. The technology used
has enabled halving of fossil fuel emissions and a reduction in gas emissions of 40%.
(Please see page
85 of this report for further details.)
Our assessment of our suppliers’ climate performance (Scope 3) is discussed on
page
81 of this report.
We are meeting regularly with key suppliers to advocate that they set science-based
emission reduction targets by 2026. We also discuss strategies for decarbonisation, as
well as developments related to new or alternative materials and innovation that could
support reduced carbon footprints.
Specific GHG (Scope 1 and 2) emissions (kg CO2e/adt)
Globally, over five years,
specific Scope 1 and 2 GHG
emissions have declined by
12.7%. Year-on-year, the
decrease was 4.8%.
2 000
1 500
1 000
500
0
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SEU
SNA
SSA
Global
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2019
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2020
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2021
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2022
1 Sappi’s plantations are both 100%: FSC™ (N003159); and Programme for the Endorsement of Forest Certification (PEFC/01-44-43) certified.
Annual Integrated Report 2022 Sappi 99
RESPONDING TO OUR CONTEXT
Our key material issues continued
Planet continued
Progressing our climate strategy
We made progress on our climate strategy, which is aligned with our
Thrive25
strategic pillars as set out below:
Grow our
business
Sustain our
fnancial
health
Drive
operational
excellence
Enhance
trust
What this means
Climate relevancy
• Committing to core business segments while
investing in innovation, growth opportunities
and ongoing customer relationships.
• Purposeful innovation and collaboration to
provide low-carbon, bio-based solutions and
accelerate climate action.
• Reducing and managing our debt, growing
EBITDA, maximising product value, optimising
processes globally and strategically disposing
of non-core assets.
• Optimise allocation of capital for profitable
growth while ensuring that it reduces our
impact on climate change and positions us
competitively for a low-carbon future.
• Strengthening our safety-first culture and
reducing resource use while enhancing
efficiency and making smart data
investments.
• Continual focus on reducing our own and
value chain emissions, protecting biodiversity
and promoting the responsible use of scarce
water resources.
•
Improving our understanding of, and
proactively partnering with clients and
communities, driving sustainability solutions,
and meeting the changing needs of every
employee at Sappi.
• Being a transparent, proactive and
responsible company and partner with a
long-term, solutions-oriented approach to
address climate change mitigation,
adaptation and resilience; playing our part to
ensure a socially inclusive just transition.
Implementing an implicit price of carbon
Prior to the reporting year, we used a shadow price of carbon
per region. This created awareness of carbon impact across
the business and helped to prioritise low-carbon initiatives
and stress-test investments. In line with our accelerated
climate-related ambition and based on technical analysis,
we are now using an implicit carbon price1 in capital
investment decision making. We will review the price –
which is differentiated per region due to the varying costs
of carbon abatement – annually.
Conducting climate change scenarios
Each country in which we have manufacturing operations,
as well as the EU region, has submitted NDCs to the
UN Framework Convention on Climate Change. Transition
risk is assessed in terms of scenarios involving these NDCs
and the associated time frames. Various scenarios within
the parameters of key regulatory developments are also
assessed against the backdrop of various issues (such
as Sappi’s own decarbonisation plans and possible carbon
taxes to drive behavioural change, reputational impact if site
emissions reduction plans do not align with the relevant NDC)
and the related opportunities (health benefits).
With the help of external consultants, we have conducted climate
change scenarios for our mills, with data from Global Climate
Change Institute (GCI) at the University of the Witwatersrand in
Johannesburg also being used. Our baseline was 2020, with
scenarios to 2030 and 2050. The climate hazard indicators we
used were water stress, flood, heatwave, cold wave, hurricane,
wildfire and sea level rise. Under Representative Concentration
Pathways 2.6 (low), 4.5 (moderate) and 8.5 (high), each indicator
was then assigned a risk rating. This has helped to embed climate
change aspects into our current risk register methods, thereby
improving our overall approach to risk. Overall, the scenarios
helped us to establish that in terms of our mills, Sappi faces
moderate risk, with the greatest exposure to water stress and cold
wave. The latter is set to decline over time due to climate change,
but risks are more pronounced for individual sites.
1 This price is based on how much it costs Sappi to implement emissions reduction projects, such as renewable energy purchases or energy-
efficiency upgrades.
100 Annual Integrated Report 2022 Sappi
RESPONDING TO OUR CONTEXT Responding to climate change on Sappi’s plantations
As a semi-arid region with high inter and intra-seasonal
precipitation variability, Southern Africa is very vulnerable to
climate change. Evidence is mounting that changes are occurring
in many of the region’s climate characteristics, such as rising
temperatures with indications that the rate of warming has been
increasing, especially in the last two decades. Plantation forestry
in South Africa is sensitive to climate change as projected
increases in temperature and changes in rainfall can result in
some areas not being climatically suitable for a specific genotype
while some areas might become climatically unsuitable for
forestry. Although other areas might become climatically suitable,
expansion of plantation forests is limited in South Africa due to
availability of suitable land and due, also, to water legislation.
The assets of the Sappi’s tree improvement programme based at
the Shaw Research Centre in Howick, include a broad genetic base,
acquired over 25 years and a skilled breeding team exploiting
innovative technologies and nursery technologies research into
improved propagation techniques for elite genotypes. The land
management and pest and diseases programmes conduct
research on stress detection, climate change predictions, site
classification to improve site-genotype matching, risk mapping,
nutritional research, site resilience, biological control measures and
national pest and disease surveys.
Key developments in FY2022 are set out below:
• Site classification upgrade to include moisture index
–
In response to hotter and drier climatic conditions, Sappi Forests
Research has developed an updated evapotranspiration-based
moisture index classification system. The index was developed by:
–
leveraging climate model data from the University of the
Witwatersrand (WITS) GCI with which Sappi has a strong
partnership
calculating a moisture index for each decade from 2000
to 2100
using an internationally accepted model developed by the
Food and Agriculture Organisation, which requires data on
temperature, relative humidity, wind speed and solar
radiation
summarising the data and developing an app on the Sappi
Map Centre to visualise some of the data layers.
–
–
The findings indicated that while most of Sappi’s landholdings fall
within the moist and dry classes, a significant portion are in the wet
class. A small percentage of Sappi land is in areas that are known to
be very dry, approaching arid, but is managed accordingly.
The improved classification system of potentially available
moisture for tree growth is useful in showing the impact of climate
change on future growth potential and risk. In addition, it can be
used to indicate areas at greatest risk of drought and flag areas of
potential seasonal drought. This will allow Sappi to prepare for the
future by contributing to tree breeding objectives and site by
genotype matching, as well as risk management research and
planning.
• WITS GCI downscaled climate change forecast and
recorded weather trends for Sappi Southern Africa
As reported in our 2021 Annual Integrated Report, we worked
with other industry members and the WITS GCI to identify six
representative climate change models and downscaled these
to local conditions at a finer resolution for years between 1960
and 2100.
The data was processed to various beneficial data products to
inform on a range of factors, including drought, heat and fire
risk. Sappi further processed the forecasted climate data
in-house by algebraically adjusting the basic weather forecasts
to a year 2000 baseline. Summarised data products are
available on a Sappi Forests block and compartment level and
can be visualised on the Sappi Map Centre Climatic Data Web
Application. The data shows a shifting of rainfall seasonality,
less rainfall in many areas and shifting climate zones from cool
to warm and warm to sub-tropical. Cool areas and the
Mpumalanga regions will be most impacted by temperature
increases. Forecasts, while not as severe, align with long-term
weather records.
Having information on future climate and translating this into
future site classification and risk maps provides tools which
can be used to inform research and development and prepare
for future management practices. As human activity is unlikely
to change soon, climate models and projections will need to be
frequently updated and the impact of future climate on tree
survival and growth will be modelled on an ongoing basis.
We will continue to downscale further to finer resolutions and
are already using model projections for contextualising future
climate on site by genotype matching and for our tree breeding
strategy. Adaptions of this work will be used in pest and
disease projections and monitoring. Looking forward, we will be
implementing research projects to test strategies to adapt to
hotter and drier climates and shifting seasons.
Annual Integrated Report 2022 Sappi 101
RESPONDING TO OUR CONTEXT
Our key material issues continued
Planet continued
Future climate predictions from WITS GCI.
• Using biological control to manage pests
As with other agricultural products, trees are susceptible
to pests and diseases. This susceptibility is expected to be
exacerbated by climate change. In efforts to identify and
register more sustainable pest control products for use in
plantation forestry, the pests and diseases programme has
been collaborating with the South African company,
Andermatt Madumbi, regarding some of their biological
products which showed promise in laboratory studies as
part of an MSc study conducted in 2019 to 2020. The
company has since been collaborating with Sappi in the
testing of some of their products under commercial
conditions at Clan Nursery. The aims of the trials are to
investigate the possible use of their biological products for
the control of Quambalaria eucalypti and other pathogens,
as well as to improve general hedge vigour, cutting
production and enhance cutting survival and rooting.
Results of the studies indicate that the Madumbi products
are having a positive effect on both hedge production and
cutting survival and rooting, as well as reducing the
incidence of powdery mildew and Quambalaria eucalypti.
The impact of two of their biological control products (Eco
77 and Double Nickel) has been very promising.
Consequently, formal label extension trials have now been
initiated. This is a significant breakthrough as there are
currently only two fungicides registered for use in forestry
nurseries. Having biological products that are less
hazardous will be a significant milestone in integrated
pathogen management in forestry.
102 Annual Integrated Report 2022 Sappi
Differences in disease incidence in the Clan Nursery Hedge-
camp after Andermatt Madumbi biological control agent
applications. Healthy green, lush plot treated with Andermatt
Madumbi products in foreground, next to the control plot to which
no pathogen control treatments were applied. note white/grey
fungal growth on leaves of the control plot, as well as reduced
shoot growth.
RESPONDING TO OUR CONTEXT Focusing on water stewardship and circularity
Water
Why it’s material
Water issues have been identified as one of the most serious
sustainability challenges facing the planet, partly due to the
impacts of climate change. Increasing populations, accelerating
industrialisation and growing levels of urbanisation will put even
greater pressure on this limited resource going forward.
Water is essential for the health of the forests and plantations
from which we source woodfibre. In 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, on-site power generation and various other
purposes. Against this backdrop, responsible water stewardship
is essential for Sappi and for a thriving world.
How this issue links to other aspects of our business
Our global priority SDGs Our top 10 risks
Our strategic
fundamentals
3/ Sustainability expectations
5/ Climate change
6/ Evolving technologies and
consumer preferences
The global forces shaping our
Thrive25
strategy
• Climate change and climate
transition
• Resource scarcity and growing
concern for natural capital.
Our highlights
Successful backwash
project at Stanger Mill
Water stewardship
partnership with
WWF-SA gaining traction
Opportunities for value creation
Our partnership with WWF-SA has created a replicable,
scalable model which can be leveraged in line with our
social impact framework.
Key developments in FY2022
Our water use is lower in Europe since the relative pulp
integration is lower than in North America and South Africa.
Pulp production is relatively more water intensive than paper
production.
Most of our mills are situated in the vicinity of rivers from
which they draw water. Withdrawal from surface sources
(mostly rivers) accounts for the largest percentage of water
use. This withdrawal is subject to licence conditions in each
area where we operate. Water and effluent testing is routinely
conducted at all mill sites. Water management is included in
our operational environmental management plans, which are
reviewed and updated annually.
Our plantations are not irrigated, and fertiliser is generally only
used once in each rotation.
Progressing water stewardship in our operations
Two notable water-related projects were completed at
Ngodwana Mill. In the first project, the team identified the
potential to use a non-hazardous chemical in the oxygen
reactor to preserve pulp viscosity thereby allowing for the use
of lower-density timber for customers who require higher
pulp viscosity. This allowed for lower levels of chlorine
dioxide usage in the bleaching process, which in turn has
reduced the formation of adsorbable organic halides by
approximately 30%.
Good pulp washing ensures recovery of valuable chemicals
and lower bleaching additives. At the mill’s DP plant, wash
presses were retrofitted with enhanced dewatering devices.
This has enabled the recovery of chemicals and reduced the
need for bleaching additives, thereby enhancing effluent
quality.
A significant project was also completed at Stanger Mill which
abstracts water under licence from the Mvoti River, but cannot
sustain processes when there is low flow, forcing some plants
to shut. Through process modelling and mass balances it was
established that approximately 2,000 cubic metres (m3) of
water per day – a significant amount – was used for
backwashing filters at the process water plant. The backwash
water was then discharged into the nearby Mbozambo lake.
The backwash recovery project involved sampling and
testing the backwash stream for turbidity, suspended solids,
as well as the cations and anions. An ion balance was
conducted, from which the mill concluded that the backwash
stream could be utilised in the process if the suspended
solids were removed. The recommendation was made that
the backwashed water be pumped upstream to the nearby
water clarifier, allowing settling of the suspended solids, and
the clean supernatant to overflow back to the process water
plant for reuse.
Annual Integrated Report 2022 Sappi 103
RESPONDING TO OUR CONTEXT
Our key material issues continued
Planet continued
Specific process water extracted (m3/adt)
Globally, specific
process water extracted
decreased by 1.7%
50
40
30
20
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Global
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2022
The opportunity for green jobs is fully aligned with Sappi’s
commitment to ESD, which promotes sustainable livelihoods
through capacity building of SMEs. (See page
for further details.)
95 of this report
The project in the uMkhomazi catchment is also aligned with the
uMhlathuze Water Stewardship Partnership, where we play an
active role in supporting improved rangeland health and
community cattle management in the uMhlathuze catchment in
northern KwaZulu-Natal near eSigcalabeni. Sappi and WWF have
proactively worked with community members to form the
eSigcalabeni Grazing Association, in partnership with Meat
Naturally. Meat Naturally is an organisation that partners with
NGOs and land users to offer community-based cattle owners
formal training on regenerative grazing techniques, rangeland
restoration practices, cattle management, stock theft patrol,
predator control, and importantly marketing their cattle through
mobile cattle auctions.
Supporting water stewardship in Europe
Water stewardship is an integral part of our journey to build a
thriving world for people, communities and the planet. The
unprecedented droughts affecting all parts of the world have
made water stewardship more important than ever.
In 2022, Sappi Europe launched an internal initiative to further
articulate our vision, approach and strategy on water stewardship
across the region. A taskforce was created bringing together
experts from each mill. Their objective is to build upon current
practice to strengthen and broaden our approach and maturity
to managing water-related risks and opportunities. Together, the
group conducted an exercise to identify Sappi Europe’s current
water stewardship maturity, gaps and opportunities. Based on the
findings, the group is now working on water management plans
for each mill, aligning water-related metrics and elevating water
as a priority issue.
The taskforce is aligning its approach with international
organisations and lessons learned from peer companies. The
experience of a Sappi taskforce member at World Water Week in
Stockholm in 2022 has helped the group to focus on ensuring
plans are as integrated and inclusive as possible.
This was achieved by connecting the backwash and forward
wash outlet pipes from each of the six filters to a newly
installed common header which discharges the water into
the newly constructed sump. Construction began in June
2022 and the project was successfully commissioned in
September 2022. The system is currently recovering 2,000
m3/day on average, an amount which represents 11.5% of
the mill’s total water usage.
Advancing our external water stewardship
partnership
South Africa’s key challenges include water scarcity, water
management and community upliftment. In 2021, SSA
finalised a two-year water stewardship agreement with
the WWF-SA, aimed at improving water security in the
uMkhomazi catchment where our Saiccor Mill and 42,000
hectares of our forestry land are situated. The project aims
to achieve sufficient water for all users at an acceptable
level of assurance and quality through multi-stakeholder
collaboration focused on:
•
Improved water governance through multi-stakeholder
engagement:
–
–
–
the uMkhomazi Catchment Working Group is now
established
we have engaged with the Impendle local municipality to
ensure water stewardship is prioritised and engaged
with the Department of Water and Sanitation (DWS) to
establish the Upper uMkhomazi Catchment
Management Forum
contributed to the development of a Catchment
Management Strategy in collaboration with DWS
•
•
Enhanced water-use efficiency
Green jobs in the form of removal of alien invasive plants
and wetland rehabilitation:
–
40.3 ha of invasive alien plants cleared at Nzinga, with
10 individuals employed – follow-up clearing planned
for FY2023
the uMkhomazi catchment has also been mapped to
inform the priority areas for project implementation. In
addition, a database of the uMkhomazi catchment to
share and demonstrate the work and investment has
been established
–
•
Capacity development of local communities in natural
resource management:
–
supported the Qhutshini and Nzinga Grazing
Associations in implementing improved rangeland
management on 20,000 ha in the upper catchment.
104 Annual Integrated Report 2022 Sappi
RESPONDING TO OUR CONTEXT
Circularity
Why it’s material
Closing raw material loops is important for the environment.
The circular economy is regenerative by design and aims to
gradually decouple growth from the consumption of finite
resources. For many years now, we have been moving away
from the 'take-make-waste' linear model to align with this
approach and generate additional revenue.
How this issue links to other aspects of our business
Our global priority
SDGs
Our top 10 risks
3/ Sustainability expectations
5/ Climate change
6/ Evolving technologies and
consumer preferences
Our strategic
fundamentals
The global forces shaping our
Thrive25
strategy
• Move towards a circular economy
• Climate change and climate
transition
• Resource scarcity and growing
concern for natural capital.
Our highlights
Over five years, the
percentage of waste
diverted from disposal
has increased by 5.2%
Solid waste to landfill
has decreased by 19%
over five years
Opportunities for value creation
In Europe, the Confederation of Paper Industries (CEPI)
has developed an updated test method to evaluate the
recyclability of paper products in laboratory conditions.
Additionally, the 4evergreen Alliance launched a Design
of Circularity guideline and Guideline for the improved
collection and sorting of fibre-based products. These
tools support value chain actors to make all paper
packaging recyclable and reach a recycling rate of
90% by 2030.
Key developments in FY2022
Our commitment to the circular economy begins with maximising
our use of every tree harvested and continues throughout our
manufacturing processes. Highlighting this approach, in FY2022, we
diverted 76.7% of solid waste from landfill for beneficial purposes. In
addition, specific landfilled solid waste has declined by 19.08% over
five years.
We are a strong advocate for recycling and waste minimisation of all
valuable material types, and we encourage our customers, suppliers
and community partners to promote recycling and to themselves
recycle as much, as often and as responsibly as they can.
Packaging for the food industry that meets stringent health and
safety standards and that is also recyclable is a longstanding
challenge. Sappi has been working with leading consumer brand
owners to develop and supply renewable paper-based packaging
solutions by understanding and supporting the goals of making their
packaging recyclable without compromising on food protection and
shelf life.
One example of this is the Sappi Guard range of products. These
innovative papers for flexible packaging come with integrated
barriers against oxygen, water vapour, grease, aroma and mineral oil.
Thanks to the integrated barriers, there is no need to apply special
coatings or laminations. The work was enabled by our 2017
acquisition of barrier film technology company, Rockwell Solutions.
Yet another example is Sappi Seal, the first paper-based solution with
dispersion technology competing with extrusion/lamination in the
market. Sappi Seal is also recyclable.
EPR legislation is in place across all our manufacturing regions. In the
US, the state of Maine, where both the Somerset and Westbrook Mills
are located, was the test case for the first successful EPR adoption,
shortly followed by the state of Oregon. 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. We will continue to
monitor the Maine regulatory development process and engage as
draft proposals emerge, presently slated for late 2022. In addition, we
are actively participating with our Trade Association, American Forest &
Paper Association, in steering their position to participate in the
regulatory development process relevant to the various states.
Like the US, there is presently no federal approach in Canada.
However, legislation is in place in the province of Quebec, where our
Matane Mill is situated. We continue to monitor developments in this
regard.
In South Africa, under EPR, a differentiated fee for the various paper
and paper packaging categories has been calculated. This is based
on current levels of collection and ease of recycling and will be
payable for each ton of paper and paper packaging that is placed
on the domestic market. 2022 is the first year of implementation.
Annual Integrated Report 2022 Sappi 105
RESPONDING TO OUR CONTEXT
Our key material issues continued
Planet continued
Beneficial use of solid waste (%)
100
80
60
40
20
0
.
2
3
9
.
9
6
8
.
2
6
8
.
9
7
8
.
1
8
8
.
0
6
8
.
0
8
7
.
0
9
7
.
9
7
7
.
2
5
7
.
6
2
7
.
3
0
7
.
1
8
6
.
9
2
6
.
6
8
5
.
8
5
7
.
5
7
7
.
7
6
7
.
9
2
7
.
9
2
7
SEU
SNA
SSA
Global
■
2018
■
2019
■
2020
■
2021
■
2022
Ngodwana and Tugela Mills in SSA each use approximately 17%
recovered paper and board. Much of this is supplied by Sappi
ReFibre, SSA’s secondary fibre division, which sources used
paper products from an extensive network of agents across the
Southern African region as well as from waste producers. The
recovered board and paper are used to supplement virgin fibre in
the manufacturing of packaging paper grades. Stanger Mill uses a
certain percentage of bagasse (sugar cane waste residue) in the
manufacture of paper products and going forward, this will now also
be used to produce moulded fibre products (discussed further on
page
103).
Safeguarding and restoring biodiversity
Why it’s material
Despite enormous progress in development in every sphere of our lives, there is a dramatic loss in biodiversity, fuelled by human
activity. This has been highlighted by UN Secretary General, António Guterres who said: “Humanity is waging a war on nature. This is
suicidal. Making peace with nature is the defining task of the 21st century. It must be the top, top priority of everyone, everywhere1.”
Given that we are a renewable resource company, biodiversity is the foundation of our business. We promote healthy ecosystems in the
forests and plantations from which we source woodfibre – biodiversity indicators are incorporated into the internationally
acknowledged, independent forest certification systems we use, including the FSC, PEFC and the SFI. In addition, we are increasingly
involved in global initiatives aimed at nature positive solutions (for further detail, please see Our key relationships on page
54.)
How this issue links to other aspects of our business
Our global priority SDGs Our top 10 risks
3/ Sustainability expectations
5/ Climate change
Our strategic
fundamentals
The global forces shaping our
Thrive25
strategy
• Move towards a circular economy
• Climate change and climate
transition
• Resource scarcity and growing
concern for natural capital.
Our highlights
Significant progress towards our biodiversity-related
Thrive25 target
Opportunities for value creation
We welcome global moves to put nature and biodiversity
more firmly in the spotlight as highlighted by the TNFD.
We will be reviewing v0.3 of the TNFD framework due to
be released shortly after year end. We see it as an
opportunity to provide guidance on further
mainstreaming biodiversity into all aspects of our
business. We are also collaborating with peers within the
Forest Solutions Group of WBCSD to develop a
Roadmap to Nature Positive for the forest and forest
products sector. The first draft of the roadmap (available
at wbcsd.org) was published at COP27 and will be
presented at COP15. This draft offers a shared definition
of nature positive for the forest sector that is closely
aligned with emerging frameworks from the SBTN and
the TNFD and aims to contribute to their development.
1 https://unfccc.int/news/un-secretary-general-making-peace-with-nature-is-the-defining-task-of-the-21st-century
106 Annual Integrated Report 2022 Sappi
RESPONDING TO OUR CONTEXT
Key developments in FY2022
In SSA, where we are one of the country’s major landowners, we
own and lease 399,996 hectares (ha) of land, of which 262,000 ha
are planted, and 138,000 ha are unplanted natural areas that are
managed for biodiversity in accordance with best practice
principles. All our land – including the 136,000 ha managed for
biodiversity conservation – is FSC and PEFC certified.
An improvement in biodiversity can refer to the identification
of threatened or protected species on Sappi property and
implementing appropriate management, or it can mean an
improvement in habitat condition and reduction in impacts
caused by the forestry operation.
We consider both aspects to be important. Where information is
available on rare, threatened or protected species, efforts are made
to safeguard these areas, such as blue swallows on the Roelton
Nature Reserve in KwaZulu-Natal and the population of the
grass aloe, Aloe craibii on the Angle Ridge Nature Reserve in
Mpumalanga – two of our seven declared nature reserves. At the
operational level, the second interpretation is of relevance: namely
the clearing of alien weeds from natural areas, a reduction in
sediment reaching streams, improved flow of water courses, and
the provision of a mosaic of habitats that can provide suitable
conditions for a variety of species. Keeping pristine areas in a
natural state and ensuring that burning frequencies for grassland
habitats are appropriate are also mechanisms for enhancing
species diversity.
Thrive25
Thrive25
Progressing our
Our
conservation areas (ICAs) on our plantations by 10% by 2025.
target is to enhance biodiversity in important
target
There are approximately 156 sites on Sappi owned land classified
as ICAs, adding up to about 38,320 ha of a diverse range of
habitats including grasslands, wetlands, riverine areas and natural
forest patches. Essentially, ICAs are areas that are important at
the local level and are classified using a systematic conservation
planning approach. Criteria that are 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.
In terms of habitat type, 28 of our ICAs are forests, 67 are grasslands,
20 are wetlands and 41 are river systems. The habitat condition of
all our ICAs has been assessed and they have now been rated
according to the following categories: natural (18 sites), good
(78 sites), moderate (55 sites) and poor (five sites).
Key action plans identified to enhance biodiversity relate to:
•
• Examining the burning regime to ensure that it is at the
Implementing alien weed control
appropriate frequency, depending on fire risk
• Managing cattle
•
Implementing erosion control measures such as stream
crossing upgrades and identified erosion features within ICAs.
Progress on implementation of identified actions is monitored
annually and in 2024, a formal re-assessment of all ICAs will provide
a rating to be compared with that allocated when undertaking the
initial assessment in 2021 to 2022.
Expanding our nature reserves
We currently have seven proclaimed nature reserves on our land,
covering approximately 6,350 ha. A further potential nature reserve
has been identified for proclamation through the biodiversity
stewardship programme in KwaZulu-Natal to protect a critically
endangered butterfly, the Karkloof Blue Butterfly.
C
O
N
T
E
X
T
I
R
E
S
P
O
N
D
N
G
T
O
O
U
R
Annual Integrated Report 2022 Sappi 107
RESPONDING TO OUR CONTEXT
c re ate
We are creators, relentless in our drive to make everyday
solutions more sustainable. We understand that the power
of the imagination is one of our biggest strengths and that
opportunities don’t just happen. Which is why we apply our
creative energy to seeking them out and leveraging our
partnerships to realise them.
In doing so, we harness the intellectual curiosity and critical
thinking of our people to let go of certainties and develop
breakthroughs that delight our customers, enable lasting
outcomes for our stakeholders and a more positive impact
on the planet. This aligns with our values of “making smart
decisions which we execute with speed”. So that when we
fail, we fail fast and move on.
While innovation is key to delivering profit and margin
improvement, we do not create merely because we have the
available manufacturing assets, skills, technology and IP.
We do so to lead by example, inspire others and create the
thriving tomorrow to which we are committed.
108 Annual Integrated Report 2022 Sappi
c reate
We are creators, relentless in our drive to make everyday
solutions more sustainable. We understand that the power
of the imagination is one of our biggest strengths and that
opportunities don’t just happen. Which is why we apply our
creative energy to seeking them out and leveraging our
partnerships to realise them.
In doing so, we harness the intellectual curiosity and critical
thinking of our people to let go of certainties and develop
breakthroughs that delight our customers, enable lasting
outcomes for our stakeholders and a more positive impact
on the planet. This aligns with our values of “making smart
decisions which we execute with speed”. So that when we
fail, we fail fast and move on.
While innovation is key to delivering profit and margin
improvement, we do not create merely because we have the
available manufacturing assets, skills, technology and IP.
We do so to lead by example, inspire others and create the
thriving tomorrow to which we are committed.
Annual Integrated Report 2022 Sappi 109
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS
Product review
110 Annual Integrated Report 2022 Sappi
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Page heading continued Product review continued
Pulp
112 Annual Integrated Report 2022 Sappi
“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 1.5 million tpa 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.
Sappi’s 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 apparel, home textiles and non-woven
products. 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. DP, 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
DP fibres differentiate themselves versus the alternatives.
Viscose staple fibre (VSF) is the most prominent fibre, accounting 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 DP 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 dissolving pulp 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.
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 and the shift towards more comfortable, environmentally friendly natural
fibres, we expect long-term growth in demand to be between 4% to 6% per
annum for DP.
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Market prices for DP are influenced by VSF and other textile market dynamics,
paper pulp market pricing which influences swing mills, as well as general macro-
economic uncertainties pertaining to the ongoing US-China trade dispute and
US Dollar/RMB exchange rates fluctuations.
Sappi’s Matane Mill, located in Quebec, Canada, has the capacity to produce
285,000 tons of HYP. Approximately 45% 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 HYP made from either Aspen or
Maple hardwood. Sappi Matane Aspen pulp is a high-yield fibre with good bulk,
excellent brightness and exceptional drainage. It is ideal for the manufacturing of
printing paper grades. Sappi Matane Maple is a HYP with superior bulk and drainage
properties, as well as excellent opacity and formation. It is an excellent fibre for the
manufacturing of paperboard and linerboard products, as well as speciality papers.
In FY2022, the DP segment made up 17% of Sappi’s sales revenue. Sales volumes
of 1,421,000 tons included 175,000 tons of HYP from Matane Mill and 12,000 tons
of kraft pulp produced at Somerset Mill.
OUR MARKETS IN 2022 AND OUTLOOK FOR 2023
The hardwood DP market price1 rallied during the first half of the year, peaking at
US$1,220 per ton in July 2022. The rebound was primarily driven by positive
momentum in global commodity markets including viscose staple fibre, cotton and
polyester combined with DP supply-side constraints including our own losses due
to a flood in South Africa and a major fire at another large market player. DP pricing
began to soften in late August 2022 as Covid-19 lockdowns in China constrained
VSF operating rates and global recessionary fears began to dampen the outlook for
textile markets.
Strong market demand and improved logistics resulted in EBITDA for the year
being substantially higher than the prior year with EBITDA margins improving
from approximately 21% to 26%.
Segment sales volumes increased by 15%, or 185,000 tons compared to the prior
year on the back of strong market demand and improved logistics as we secured
regular breakbulk shipping alternatives for our South African exports. Demand for
Verve during the year was particularly strong and sales were constrained by available
production. The Saiccor Mill expansion project was successfully commissioned
during the year and all new equipment operated as anticipated. However, production
volumes were below expectations and were negatively impacted by a number of
external factors such as unplanned stoppages due to the flood, Eskom2 power
outages and raw material supply shortages, which severely disrupted operational
stability at the mill.
Macroeconomic uncertainty has increased considerably during the latter part
of 2022. Ongoing lockdowns in China, the geopolitical turmoil in Europe and
unprecedented inflation are increasing the likelihood of a global recession in 2023.
This poses a risk to our pulp business as weakening consumer sentiment and
diminishing discretionary spend will likely weaken demand in our dissolving pulp
segment in upcoming quarters. Order activity has slowed in the first quarter of
FY2023 and destocking is occurring across the value chain.
Pulp segment
made up
17%
OF SALES
IN FY2022
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.
Moderate HYP demand growth
continues to be driven by increased
packaging demand due to single-use
plastic replacement, e-commerce-
driven packaging demand and limited
recovered paper availability. Significant
board capacity expansion is planned,
particularly for Asia, but much of this
will be accompanied by integrated
HYP capacity additions. Recession is
a risk to HYP demand from both paper
and packaging segments. Our focus
remains on meeting our own growing
need for high-quality HYP for our
packaging and speciality papers
businesses in Europe and North
America, as well as external sales
to third parties.
1 Market price for imported hardwood DP
into China issued daily by the CCF Group.
2 Eskom is a South African electricity
public utility.
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Product review continued
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DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Product review continued
Packaging
and speciality
papers
“We manufacture 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
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 necessary functionality
for their applications. We estimate that the increasing
demand for more sustainable and environmentally
friendly packaging solutions will lead to demand
growth of 3% to 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 analyse our assets,
specifically their production capabilities and cost of
production, the cost to serve customers, demand
growth and competitive threats. We choose only
those projects where we believe we hold a significant
advantage.
global
business
partner.”
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.
In FY2022, 29% of Sappi’s sales revenue was
packaging and speciality papers, fairly flat
compared to last year.
116 Annual Integrated Report 2022 Sappi
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Sappi offers products and solutions in many different 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 also applications such as self-adhesive tapes, and medical and industrial
applications.
Containerboard: includes liners and fluting, 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
films 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.
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 efficiencies and security of supply. Globally, we are well
positioned to support and benefit 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. Similarly, in 2022 legislation in several US states banning the
use of polystyrene foam packaging was passed. The industry will also be given
incentives to develop less-polluting alternatives for these products. With our
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 2022 AND OUTLOOK FOR 2023
The strategic priority to invest in packaging and speciality papers in recent years
reaped rewards. The highlight of the year for this business segment was the
achievement of record profitability driven by robust global demand and renewed
growth in Europe. Sales volumes were 9% higher than last year, however, sales were
constrained by available capacity and low levels of inventory in South Africa and
North America where demand exceeded supply. Successful selling price increases
and mix improvement offset rising costs and lifted margins for the segment. EBITDA
margins for the segment increased from 13.6% last year to 17.0% in fiscal 2022.
Packaging and
speciality papers
segment made up
29%
OF SALES
IN FY2021
Demand for packaging and speciality
papers in North America is particularly
robust and our customers are actively
seeking to increase their volumes with
Sappi. The board has therefore approved
a US$418 million investment at Somerset
Mill to convert PM2 from coated woodfree
graphic paper to solid bleached sulphate
board (SBS). The machine capacity will
also be increased during the conversion
from 240,000 tpa to 470,000 tpa. The
project is expected to be completed in
early 2025 and will be funded from free
cash flow from operations. The capital
expenditure will be phased over three
years with the majority of the spend
taking place in FY2024 and FY2025.
This investment is fully aligned with our
Thrive25
strategic focus to reduce our
exposure to declining graphic paper
segments.
The Covid-19 pandemic demonstrated
that the underlying demand for packaging
and speciality papers is more resilient
in economic downturns, particularly
for product categories in food, beverage
and healthcare. Furthermore, the shift
from plastic to paper offers significant
opportunity to grow this segment.
We believe we will achieve additional
volume growth in 2023, aided by the
shift from plastics to paper in various
packaging and speciality paper
categories.
Annual Integrated Report 2022 Sappi 117
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Product review continued
118 Annual Integrated Report 2022 Sappi
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DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS 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 premium product for delivering a premium
brand message, 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 2022 AND OUTLOOK FOR 2023
Global demand for graphic papers has generally been in secular decline. The outbreak of
Covid-19 in 2020 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. The remarkable turnaround from the lows of 2020 was
driven by a number of factors, which led to an unprecedented global shortage of graphic paper.
These included a surge in demand as economic activity normalised post-Covid-19 and a very
tight market balance due to a combination of chronic global logistical challenges and reduced
supply. Market capacity was impacted by permanent closures and a prolonged labour strike
in Finland.
The buoyant demand boosted sales volumes for the segment by 8% compared to the
prior year. Furthermore, the favourable market conditions provided support for a series
of selling price increases and energy/freight surcharges, which were necessary to
compensate for substantial cost inflation and facilitated the material improvement
in profitability for the segment. The graphic papers segment generated record
EBITDA of US$650 million with EBITDA margins increasing from 4.4% in the
prior year to 16.4%.
Despite the extraordinarily tight market conditions in FY2022, the graphic
paper markets are in long-term decline and indications are that demand
in FY2023 will again be under pressure. A key element of our
strategy is to reduce our exposure to declining graphic paper markets.
Aligned to this objective, on 29 September 2022, Sappi signed an agreement
Thrive25
with Aurelius Investment Lux One S.à.r.l. to divest the Maastricht Mill in the
Netherlands, the Stockstadt Mill in Germany and the Kirkniemi Mill in Finland. The
decision was taken following a detailed and thorough strategic review and will
significantly reduce our exposure to graphic paper markets. For the most part,
the product categories served by these assets (coated mechanical and uncoated
woodfree paper) are no longer a core focus for Sappi and this divestment allows
us to consolidate our portfolio and concentrate on commercial print (high-
quality books, flyers, brochures, posters, manuals, special interest magazines,
photobooks) where we have a competitive advantage. The sale will be subject
to various standard suspensive conditions and is anticipated to close in the
second financial quarter of 2023. The enterprise value of the transaction
amounts to approximately €272 million. The proceeds will be used to reduce
debt further, which will provide a platform for future expansion in our identified
growth market segments.
120 Annual Integrated Report 2022 Sappi
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS
Macro-economic uncertainty has increased considerably during the latter part
of 2022. Ongoing lockdowns in China, the geopolitical turmoil in Europe and
unprecedented inflation are increasing the likelihood of a global recession in 2023.
This poses a risk to our graphic papers business as weakening consumer sentiment
and diminishing discretionary, advertising spend will likely weaken demand in this
segment in upcoming quarters. Order activity in this segment has slowed in the first
quarter of FY2023 and destocking is occurring across the value chain.
In FY2022, 54% of Sappi’s sales revenue was from the graphic papers segment.
The four major grades of graphic papers 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 fidelity. 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 5% from last
year and sales revenue was 44% higher, due to a surge in demand as economic
activity normalised post-Covid-19 and a very tight market balance due to a
combination of chronic global logistical challenges and reduced supply. Globally,
demand for coated woodfree paper decreased by approximately 2%, however,
Sappi gained market share.
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, publishers, 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 continue to decrease in larger markets as consumers opt
for digital formats.
Sales: Sappi’s sales revenue from coated mechanical paper was 74% higher than
last year, due to reduced supply as economic activity resumed post-Covid-19.
Volumes were approximately 26% higher than the prior period. This year, the global
market contracted by approximately 8% 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 expected to marginally
decline over the next several years.
Graphic papers
segment made up
54%
OF SALES
IN FY2022
Sales: Our sales revenue from
uncoated woodfree paper was 26%
higher than last year, largely as a result
of the resumption of global economic
activity as Covid-19 lockdowns eased.
Globally, demand decreased by
approximately 1% in the current
financial 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 5% during the current
year and an estimated decline of 5% to
6% annually through to 2025. Publishers
are consolidating, while some titles
have closed. Pockets of growth exist in
advertising-financed 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 financial year. Relative to
the prior year, our volumes were 4%
down and sales revenue was 3% higher.
Globally, newsprint demand declined
5% versus 2021.
Annual Integrated Report 2022 Sappi 121
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS
Chief Financial Officer’s report
“Despite a challenging macroeconomic
environment, guided by our Thrive25 strategy, our
focus on innovation, efficiencies and adaptability
supported record results for the 2022 financial year.”
– Glen Pearce
Chief Financial Officer (CFO)
SECTION 1
Financial highlights
US$ million
Sales
EBITDA excluding special items
Operating profit excluding special items
Profit/(loss) for the year
EBITDA excluding special items to sales %
Operating profit excluding special items to sales %
Operating profit excluding special items to capital
employed (ROCE) %
Net cash (utilised) generated
Net debt
Basic earnings per share (US cents)
2022
2021
%
change
7,296
1,339
1,038
536
18.4
14.2
27.9
506
1,163
95
5,265
532
203
13
10.1
3.9
5.4
29
1,946
2
39
152
256
4,023
n/a
n/a
n/a
1,645
(40)
4,650
The group experienced vastly divergent fortunes from the lows of fiscal 2020 to
peak record earnings during fiscal 2022. During the current year, commodity product
price hikes, supply-side contraction and energy price escalations triggered selling
price increases across all our product categories. Global supply chain capacity
restraints favoured demand for local deliveries providing opportunities to optimise
mix, increase market share and improve margins. The resultant strong cash generation
alleviated liquidity concerns and reduced the leverage ratios from a high of seven
times to 0.9 times.
Total variable costs increased by 26% to US$577 per ton. Energy cost increases,
particularly gas prices in Europe, were the catalyst for sharp increases in chemical
and fibre costs. Freight forwarders took advantage of tight market conditions by
increasing charges, resulting in consolidated delivery costs increasing by 21%. The
implementation of energy and delivery cost surcharges restored sales margins and
were replaced by selling price increases as markets adjusted to the higher pricing
levels supported by strong demand and capacity reductions. Consolidated selling
prices increased by 28% to US$919 per ton to offset the variable cost increases
resulting in EBITDA margin increasing to 18% (FY2021: 10%).
122 Annual Integrated Report 2022 Sappi
SECTION 1 continued
Financial highlights continued
The graphic papers segment benefited from numerous positive influences to generate
a record EBITDA performance of US$650 million. The combination of industry capacity
reductions in Europe and North America and prolonged global port congestions led
to a global shortage of graphic paper. An extended labour strike in Finland curtailed
supply further, providing favourable market conditions to support a series of price
increases that offset a spike in input costs. The packaging and speciality papers
segment is largely managed through periodic contractual commitments and
although selling prices increased by 22%, there was a delay in margin recovery
following the initial input cost increases. Demand in all regions was favourable and
sales volumes increased 9% but were restricted by capacity constraints and low
inventory levels. The segment nevertheless posted record EBITDA earnings of
US$359 million. Strong market demand in the pulp segment and the availability of
breakbulk shipping alternatives improved volumes by 15%. Hardwood DP prices
peaked at US$1,220 per ton driven by strong global commodity markets. The South
African pulp operations were unable to take full advantage of the favourable conditions
as production volumes were restricted by external factors due to extreme weather
conditions, power outages and raw material supply shortages.
The group generated cash of US$506 million after an increase in net working capital
of US$270 million and capex of US$368 million. The net working capital increase
was linked to inflationary increases in inventory and receivables as the group managed
net working capital as a percentage of sales within the target of 9%. Cash generated
and favourable exchange rate movements reduced net debt by US$783 million to
US$1,163 million. Profit for the year of US$536 million (FY2021: US$13 million)
included special item costs of US$268 million of which US$183 million related to a
write-down to fair value of our held-for-sale European assets. Earnings per share
excluding special items increased from US15 cents to US138 cents. The directors
declared a dividend of US15 cents per share at nine times earnings cover adjusted
for non-cash items.
Segment reporting
Our reporting is based on the geographical location of our businesses, ie Europe,
North America and South Africa.
The selected product line information is reviewed by our Executive Committee in
addition to the geographical basis upon which the group is managed. This additional
information is presented in this report to assist our stakeholders in obtaining a complete
understanding of our business.
Exchange rates and their impact on the group’s results
The group reports its results in US Dollar and, as such, the main foreign exchange
rates used in the preparation of the financial statements were:
Income statement
average rates
Balance sheet
closing rates
2022
2021
2022
2021
EUR1 = US$
US$1 = ZAR
1.0853
15.7829
1.1955
14.8505
0.9801
18.1537
1.1716
14.9659
Two of our three geographic business units (Europe and South Africa) have home or
‘functional’ currencies of € and ZAR respectively. The results and cash flows of these
two non-US Dollar units are translated into US Dollar at the average exchange rate
for the reporting period in order to arrive at the consolidated US Dollar results and
cash flows. When exchange rates differ from one period to the next, the impact of
translation from the functional currency to reporting currency can be significant.
Annual Integrated Report 2022 Sappi 123
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Chief Financial Officer’s report continued
SECTION 2
Financial performance
The discussion in this section focuses
on the group financial performance in
2022 compared with 2021. A detailed
discussion, in local currencies, of each
of our three operating regions follows
in section 3.
2021 % change
7,339
Income statement
Our group financial results can be summarised as follows:
Metric tons '000
Sales volume
US$ million
2022
7,937
Sales revenue
Variable manufacturing and
delivery costs
Fixed costs
Sundry items1
Operating profit excluding special items
Special items
Operating profit
Net finance costs
Taxation
7,296
5,265
(4,380)
(1,832)
(46)
1,038
(268)
770
(97)
(137)
(3,238)
(1,777)
(47)
203
(57)
146
(134)
1
8
39
35
3
(2)
411
n/a
427
(28)
nm
Net profit
EPS excluding special items (US cents)
1 Sundry items include all income and costs not directly related to manufacturing operations, such as
4,023
820
536
138
13
15
debtor securitisation costs, commissions paid and received and results of equity-accounted
investments.
Sales volume
In 2022, sales volume increased by 598,000 tons compared with 2021. The regional
and product segment contributions to sales volume are shown below:
Sales volume (metric tons ‘000)
North America
Europe
South Africa
Group
DP
Packaging and speciality papers
Graphic papers
Forestry
2022
1,758
3,175
3,004
7,937
1,421
1,600
3,447
1,469
2021 % change
1,685
2,817
2,837
7,339
1,236
1,464
3,200
1,439
4
13
6
8
15
9
8
2
Pulp volumes were up 15% for the year, on the back of strong market demand and
improved logistics as we secured regular breakbulk shipping alternatives for our
South African exports. Demand for Verve (Sappi Verve – brand name for DP) during
the year was particularly strong and sales were constrained by available production.
Packaging and speciality papers volumes were up 9% for the year driven by robust
global demand and renewed growth in Europe. However, sales were constrained by
available capacity and low levels of inventory in South Africa and North America where
demand exceeded supply.
Graphic papers volumes were up 8% for the year. The remarkable turnaround from
the lows of 2020 was driven by a number of factors which led to an unprecedented
global shortage of graphic papers. These included a surge in demand as economic
activity normalised post-Covid-19 and a very tight market balance due to a combination
of chronic global logistical challenges and reduced supply. Market capacity was
impacted by permanent closures and a prolonged labour strike in Finland.
Capacity utilisation improved to an average of 91% for the group as improved DP,
packaging and speciality papers and graphic papers markets assisted us in taking
less production downtime during the year.
124 Annual Integrated Report 2022 Sappi
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Sales volume to capacity
North America
Europe
South Africa
Group
2022
%
2021
%
SECTION 2 continued
Financial performance continued
97
92
84
91
94
82
80
84
Sales revenue
Sales revenue increased by 39% from US$5.3 billion in 2021 to US$7.3 billion in
2022. Selling price and mix improvements resulted in sales revenue improving by
US$2.2 billion. Consolidated volumes were up on last year as discussed above,
resulting in sales revenue improving by US$192 million. The stronger US Dollar
resulted in a negative US$357 million conversion impact.
Variable and delivery costs
Variable and delivery costs increased by US$1.1 billion from 2021. The higher sales
volumes accounted for 8% of the increase. Energy costs per ton of product sold
increased by 83% year-on-year while other main cost categories, exclusive of DP,
increased by between 30% and 36%.
The net DP purchases and sales of the Sappi group is detailed in the graph below.
Sappi group DP balance (US$ million)
Net pulp sales
817
144
263
1 000
800
600
400
200
0
(200)
(400)
(600)
(800)
(698)
Europe
North America
South Africa
Sappi group
■
Net sales
■
Net purchases
The table below reflects the breakdown of variable and delivery costs by type.
Variable manufacturing and delivery costs
US$ million
Wood
Energy
Chemicals
DP and other
Delivery
Group
2022
779
801
1,042
1,127
631
4,380
2021 % change
573
437
784
958
486
3,238
36
83
33
18
30
35
Annual Integrated Report 2022 Sappi 125
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Chief Financial Officer’s report continued
Fixed costs
Fixed costs increased by US$55 million from fiscal 2021. Inflationary pressures resulted in personnel costs and maintenance
increasing by 3%. The increase in ‘Other’ is mainly a credit to inventory movement during fiscal 2021 as a result of a stock build.
The weaker ZAR and € resulted in a reduction in US Dollar costs (US$101 million). Excluding the currency impact fixed costs
increased by US$156 million.
Details of the make-up of fixed costs are provided in the table below.
Fixed costs
US$ million
Personnel
Maintenance
Depreciation
Other
Group
2022
1,104
247
292
189
1,832
2021 % change
1,077
240
319
141
1,777
3
3
(8)
34
3
EBITDA and operating profit excluding special items
EBITDA excluding special items increased to US$1.34 billion, 152% higher than the previous year. Operating profit excluding
special items increased from US$203 million last year to US$1.038 billion in 2022.
The EBITDA bridge reflected in the graph below shows the impact on profitability from higher sales volumes and selling prices
offset by increased variable and fixed costs.
Reconciliation of EBITDA excluding special items: 2022 compared to 20211 (US$ million)
Sales revenue
Variable and delivery costs
Fixed costs
2,196
(357)
213
(1,355)
(156)
101
(27)
1,339
3,000
2,500
2,000
1,500
1,000
500
0
192
532
FY2021
EBITDA
Sales
volume
Price
and mix
Currency
conversion
Variable and
delivery costs
Currency
conversion
Fixed costs
Currency
conversion
Other
FY2022
EBITDA
1 All variances were calculated excluding Sappi Forestry.
2 “Currency conversion” reflects translation and transactional effect on consolidation.
126 Annual Integrated Report 2022 Sappi
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS The tables below detail the EBITDA and operating profit excluding special items of
the business for both 2022 and 2021 and the margins of each.
EBITDA excluding special items by region
US$ million
2022
2021
SECTION 2 continued
Financial performance continued
North America
Europe
South Africa
Corporate and other
Group
464
536
334
5
1,339
209
94
228
1
532
EBITDA excluding special items margin by region (%)
.
1
1
2
.
4
2
1
25
20
15
10
5
0
.
1
4
1
8
3
.
.
4
3
2
.
6
9
1
.
4
8
1
.
1
0
1
North America
■
■
2022
2021
■
Base pay
Europe
South Africa
Sappi group
■
Short-term incentive (MIS)
EBITDA excluding special items by product category
US$ million
2022
2021
DP
Packaging and speciality papers
Graphic papers
Other
Group
325
359
650
5
1,339
197
214
120
1
532
Operating profit excluding special items by region
US$ million
2022
2021
North America
Europe
South Africa
Corporate and other
Group
369
416
250
3
1,038
105
(52)
151
(1)
203
Annual Integrated Report 2022 Sappi 127
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Chief Financial Officer’s report continued
SECTION 2 continued
Financial performance continued
Operating profit excluding special items margin by region (%)
.
8
6
1
.
2
6
20
15
10
5
0
(5)
.
9
0
1
)
1
2
(
.
.
5
7
1
.
0
3
1
.
2
4
1
.
9
3
North America
■
■
2021
2022
Europe
South Africa
Sappi group
Operating profit excluding special items by product
category
US$ million
DP
Packaging and speciality papers
Graphic papers
Other
Group
■
2021
■
2022
2022
2021
250
264
521
3
1,038
127
109
(32)
(1)
203
EBITDA excluding special items by
product 2022: US$1,339 million
In the chart below, 51% of the group’s EBITDA originates from growing markets in
the DP and packaging and speciality papers segments. The graphic papers segment,
which contributes 49% of the EBITDA remains an important strategic component as
we focus on the commercial print market.
■
EBITDA excluding special items by
product 2022:
US$1,339 million
5
■
325
2021
2022
EBITDA excluding special items by
product 2022: US$1,339 million
EBITDA excluding special items by
product 2022:
US$1,339 million
5
650
2022
650
2022
325
359
359
■
■
■
■
Pulp
Packaging and speciality papers
Graphic papers
Unallocated and eliminations
Pulp
For information regarding the financial performance of the regions, please refer to
Packaging and speciality papers
section 3 of this report.
Graphic papers
Unallocated and eliminations
■
■
■
■
Key operating targets
Our financial targets and performance against the key operating targets are dealt
with in the Our strategy and performance section on page
10.
128 Annual Integrated Report 2022 Sappi
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Special items
Special items consist of those items which management believe are material
by nature or amount, to the results for the year and require separate disclosure.
A breakdown of special items for 2022 and 2021 is reflected in the table below:
SECTION 2 continued
Financial performance continued
Special items – gain/(loss)
US$ million
Plantation price fair value adjustment
Net restructuring provisions
Profit/(loss) on disposal, written off assets and
incremental costs
Net asset (impairment) reversals
(Loss)/gain on measurement of held for sale assets
Equity-accounted investees impairment reversal
(impairment)
Insurance recoveries
Fire, flood, storm and other events
Total
2022
2021
(38)
–
(63)
–
(183)
3
30
(17)
(268)
(13)
(2)
1
(19)
4
(4)
(1)
(23)
(57)
The net impact of special items in 2022 was US$268 million. The major components
are described below:
• A negative non-cash US$38 million plantation price fair value adjustment was
recognised following decreases to the market price of timber
• Our European region wrote off assets of US$20 million while our South African
region wrote off inventory and incurred incremental costs related to the April
floods in KwaZulu-Natal as well as equipment failures and power utility outages
resulting in a total combined cost of US$81 million. Insurance recoveries to the
value of US$30 million have been recognised related to flood damage
• A write-down to fair value less costs to sell of US$183 million was recorded
following the divestment of our held-for-sale European assets. A related
US$4 million of selling costs was also incurred prior the write-down
• Pension settlement gains of US$26 million and US$3 million were recorded in
our North American and Swiss pension funds respectively.
Net finance costs
US$ million
Finance costs
Finance income
Net foreign exchange gains
Net fair loss on financial instruments
Total
2022
2021
108
(10)
(1)
–
97
112
(8)
(1)
31
134
Finance costs of US$97 million were lower than the prior year primarily due to a fair
value loss on financial instruments in the prior year and Euro-denominated interest
charges converted at a weaker Euro/US Dollar exchange rate.
Annual Integrated Report 2022 Sappi 129
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Chief Financial Officer’s report continued
SECTION 2 continued
Financial performance continued
Taxation
A regional breakdown of the tax charge is provided below.
US$ million
Europe
North America
South Africa
Total
Profit/
(loss)
before tax
Tax
(charge)/
relief
Effective
tax rate
%
134
378
161
673
(30)
(79)
(28)
(137)
23
21
17
20
In Europe, the difference between the effective and statutory tax rates is due to
non-valued losses carried forward in Belgium, the Netherlands, Finland and Austria
and offset by the impairment for assets held for sale being non-deductible.
In North America, the difference between the effective and statutory tax rates is
predominantly due to non-valued losses utilised.
The South African effective tax rate was reduced by special tax allowances in
addition to tax relief due to a reduction in the statutory tax rate (from 28% to 27%).
Net profit, earnings per share and dividends
After taking into account net finance costs and taxation, our net profit and earnings
per share for 2022, with comparatives for 2021, were as follows:
US$ million
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)
2022
2021
770
97
673
137
536
563.3
95
146
134
12
(1)
13
549.7
2
The directors have elected to declare a dividend of US15 cents per share at nine
times earnings cover adjusted for non-cash items.
130 Annual Integrated Report 2022 Sappi
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS SECTION 3
Below we discuss the performance of the regional businesses. The discussion is based on
performance 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
2022
1,758
483
523
752
2021 % change
1,685
453
485
747
4
7
8
1
US$ million
2022
US$ million
2021 % change
US$ per ton
2022
US$ per ton
2021 % change
Sales
Variable manufacturing and delivery
costs
Contribution
Fixed costs
Sundry items and consolidation entries
Operating profit excluding special items
EBITDA excluding special items
2,200
1,688
(1,386)
(1,122)
814
(560)
115
369
464
566
(535)
74
105
209
30
24
44
5
55
251
122
1,251
1,002
(788)
463
(319)
66
210
264
(666)
336
(318)
44
62
124
25
18
38
0
50
239
113
Strategic investments in the Matane Pulp Mill and the conversion of PM1 at Somerset Mill to packaging and speciality paper grades
contributed substantially to another record earnings year for the North American region. The success was pervasive across all
product segments as tight US graphic paper markets supported selling price increases. Strong demand exceeded available capacity
and the region was able to capitalise on favourable mix opportunities resulting in a 38% contribution per ton improvement. Fixed
costs increased by 5% due to inflationary impacts on personnel costs and short-term incentives in recognition of the record annual
performance for the region. EBITDA margin for the region improved from 12% in the previous year to 21%.
Europe
Metric tons ’000
Sales volume
Packaging and speciality papers
Graphic papers
2022
3,175
636
2,539
2021 % change
2,817
525
2,292
13
21
11
€ million
2022
€ million
2021 % change
€ per ton
2022
€ per ton
2021 % change
Sales
Variable manufacturing and delivery costs
Contribution
Fixed costs
Sundry items and consolidation entries
Operating profit excluding special items
EBITDA excluding special items
3,504
(2,177)
1,327
(781)
(164)
382
493
2,090
(1,350)
740
(702)
(82)
(44)
78
68
61
79
11
100
nm
532
1,104
(686)
418
(246)
(52)
120
155
724
(479)
263
(249)
(30)
(16)
28
49
43
59
(1)
73
nm
454
Graphic paper capacity reductions coupled with an extended Finnish strike and strong demand recovery contributed to an 11%
volume improvement in the graphic paper segment. The favourable conditions supported selling price increases to offset the spike
in variable cost increases. The packaging and speciality papers segment volumes were ahead of last year by 21% buoyed by strong
market traction for the label paper offerings from Gratkorn Mill. Variable cost increases per ton of 43% were mainly driven by energy
and delivery cost increases due to geopolitical disruptions in the region. Fixed costs were 11% up on last year, primarily due to inflationary
impacts on personnel costs and short-term incentives in recognition of the record performance for the region. EBITDA margins
increased from 4% to an unprecedented 14% in the current year. On 29 September 2022, Sappi signed an agreement with Aurelius
Investment Lux One S.à.r.l. to divest the Maastricht Mill in the Netherlands, the Stockstadt Mill in Germany and the Kirkniemi Mill in
Finland. The sale will be subject to various standard suspensive conditions and is anticipated to close in the second financial quarter
of 2023. The enterprise value of the transaction amounts to approximately €272 million.
Annual Integrated Report 2022 Sappi 131
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Chief Financial Officer’s report continued
SECTION 3 continued
South Africa*
Metric tons ’000
Sales volume*
Pulp
Packaging and speciality papers
Graphic papers
2022
1,535
938
444
153
ZAR
per ton
2022
2021 % change
10
20
(3)
(1)
1,398
784
459
155
ZAR
per ton
2021 % change
ZAR million
2022
ZAR million
2021 % change
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.
21,133
16,083
(13,463)
7,670
(6,708)
2,964
3,946
5,271
(9,995)
6,088
(5,985)
2,139
2,242
3,386
31
35
26
12
40
76
56
13,767
11,504
(8,771)
4,996
(4,370)
1,945
2,571
3,434
(7,149)
4,355
(4,281)
1,530
1,604
2,422
20
23
15
2
27
60
42
Pulp volumes increased by 20% compared to the prior year due to strong demand and improved logistics through the addition
of breakbulk vessels and alternative routes of supply. Volumes were, however, restricted by unplanned power outages, raw material
supply disruptions, severe floods and a general transport strike during the year. Packaging paper volumes were down 3% on last
year despite strong demand from the agricultural sector and constrained paper imports into South Africa, which created tight
supply conditions. Low inventory levels and a product extension and quality upgrade at the Ngodwana Mill restricted supply. The
robust demand in both segments supported selling price increases of 20% to offset 23% variable cost increases of particularly
wood, chemicals and delivery costs. Fixed costs increased by 12% due to higher personnel, maintenance and depreciation
costs. As a consequence of the above, EBITDA margins increased from 20% in the previous year to 23%.
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
DP prices
Variable costs
Energy costs
Sales volume
Fixed costs
Paper pulp price
Oil price
ZAR/US$ (weakening)
€/US$ (weakening)
Europe
€ million
North
America
US$ million
South
Africa
ZAR million
Translation
impact*
US$ million
Group
US$ million
28
–
18
5
8
6
7
2
–
(3)
23
3
11
2
8
5
3
2
–
(4)
284
176
145
22
111
62
7
1
93
–
–
–
–
–
–
–
–
–
(2)
(17)
68
14
39
8
22
15
11
5
3
(24)
Change
1%
US$10
1%
1%
1%
1%
US$10
US$1
10 cents
10 cents
* Based on currency impact on translation of EBITDA.
The table demonstrates that EBITDA excluding special items is most sensitive to changes in the selling prices of our products.
The calculation of the impact of these sensitivities assumes all other factors remain constant and does not consider potential
management interventions to mitigate negative impacts or enhance benefits.
132 Annual Integrated Report 2022 Sappi
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS In the table below, we present the group’s cash flow statement for 2022 and 2021 in
a summarised format:
SECTION 4
Cash flow
US$ million
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
Capital expenditure
Net proceeds on disposal of assets
Other
Net cash generated (utilised)
2022
1,038
301
1,339
(25)
(47)
1,267
(270)
(92)
(23)
(368)
2
(10)
506
2021
203
329
532
(49)
(11)
472
39
(102)
(2)
(374)
4
(8)
29
Net cash generated for the financial year was US$506 million (FY2021: US$29 million).
The significant improvement in cash generation was largely due to substantially
higher profitability despite a large investment in working capital of US$270 million
related to inflationary pressures for inventories and accounts receivables. Capital
expenditure of US$368 million for the year was below expectations due to the timing
of vendor payments and consequently approximately US$20 million will roll over in
to the 2023 financial year.
Investment in fixed assets versus depreciation (US$ million)
1
4
5
1
7
4
1
7
4
1
5
3
4
7
3
1
6
3
600
500
400
300
200
100
0
2018
■
Cash flow capex
2019
2020
2021
2022
Depreciation
Annual Integrated Report 2022 Sappi 133
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS
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
2022
2,705
76
382
670
567
(85)
(794)
3,521
2,358
1,163
3,521
2021
3,325
110
477
403
364
(197)
(566)
3,916
1,970
1,946
3,916
Sappi has 19 production facilities in 10 countries, capable of producing approximately
4.1 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 on page
6.
During 2022, capital expenditure for property, plant and equipment was US$346 million.
The capacity replacement value of property, plant and equipment for insurance
purposes has been assessed at approximately US$19 billion.
Property, plant and equipment
The cost and depreciation related to our property are set out in the table below.
Book value of property, plant and equipment
US$ million
Cost
Accumulated depreciation and impairment
Net book value
2022
7,919
5,214
2,705
2021
9,908
6,583
3,325
The group incurred capital expenditure of US$346 million during the year. This was
offset by depreciation of US$265 million, transfers to held for sale of US$295 million,
while the stronger US Dollar resulted in foreign currency translation losses of
US$401 million.
Plantations
We regard ownership of our plantations in South Africa as a key strategic resource
as it provides access to low cost fibre for pulp production and ensures continuity
of supply on an important raw material input source.
The South African region has access to approximately 400,000 ha of land of which
approximately 262,000 ha are planted with pine and eucalyptus. These plantations
provide approximately 71% of the wood requirements for our South African mills.
During the year, there were market price increases coupled with higher average fair
value rates. These increases were offset by the rising cost of fuel and an increase in
the discount rate. As we manage our plantations on a sustainable basis, the growth
for the year was offset by timber felled during the year.
Our plantations are valued on the balance sheet at fair value less the estimated
costs of delivery, including harvesting and transport costs. In notes 2.3.4 and 12
to the financial statements, we provide more detail on our accounting policies for
plantations, how we manage our plantations, as well as the major assumptions used
in the calculation of fair value.
134 Annual Integrated Report 2022 Sappi
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Working capital
The component parts of our working capital at the 2022 and 2021 fiscal year ends
are shown in the table below:
SECTION 5 continued
Balance sheet continued
Net working capital
US$ million
Inventories
Trade and other receivables
Trade and other payables and provisions
Net working capital
2022
2021
780
939
841
703
(1,049)
(1,141)
670
403
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 increased to US$670 million in 2022 from US$403 million in
2021. The material movements in working capital are discussed below:
• Inventories decreased by US$61 million, caused mainly due to the US$121 million
held-for-sale reclassification offset by increased inventory levels due to cost
inflation and a favourable currency translation impact of US$99 million
• Receivables increased by US$236 million following higher net selling prices
and increased volumes in the fourth quarter, partially offset by a US$48 million
reclassification to held for sale, and a favourable currency translation impact
of US$104 million
• Payables decreased by US$92 million, largely due to a US$198 million reclassification
to held for sale an unfavourable currency translation impact of US$154 million
partially offset by increases in trade payables on higher sales volumes, increases
in bonus accruals and accruals for rebates.
Post-employment liabilities
We operate various defined benefit pension/lump sum plans, post-employment
healthcare subsidies and other employee benefits in the various countries in
which we operate. A summary of defined benefit assets and liabilities (pension
and post-employment healthcare subsidies) is as follows:
Defined benefit liabilities
US$ 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
Cash contributions deemed catch-up*
2022
2021
(609)
524
(85)
24
4
6
(1,540)
1,346
(194)
50
28
30
* ‘Catch-up’ is cash contributions paid to defined benefit plans in excess of current service cost.
Gross liabilities from all our plans reduced by US$931 million from US$1,540 million
to US$609 million over the year. The main cause of the reduction was due to a
combination of the transferal of pension liabilities of US$535 million related to
the North American region’s retiree pension obligations to an insurance company,
translation of regional currency to a strengthened US Dollar reporting currency and
an increase in discount rates in regions where we hold significant liabilities.
Fair value of plan assets decreased by US$822 million from US$1,346 million to
US$524 million over the year due to unfavourable investment returns of assets
in our funded plans. The largest portion of the reduction relates to the transfer of
assets of US$508 million associated with the ‘Metlife’ agreement in Sappi North
America.
Annual Integrated Report 2022 Sappi 135
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Chief Financial Officer’s report continued
SECTION 5 continued
Balance sheet
Included in the net balance sheet liability above is a net loss of US$26 million resulting from movements of local results relative
to the reporting currency.
The decrease in liabilities, coupled with the reduction in assets, contributed to a reduction in the overall net liability by
US$109 million from US$194 million to US$85 million over the year. A reconciliation of the movement in the balance sheet over
the year is shown graphically below and disclosed in more detail in note 29 of the Annual Financial Statements.
Sappi Limited defined benefit pensions balance sheet movement (US$ million)
(91)
40
20
0
(20)
(40)
(60)
(80)
(100)
24
(17)
19
27
9
23
(6.0)
2021
net liability
Acquisition
Pension
charge
Employer
contributions paid
Settlement gain
recognised
through P&L
–
Actuarial
gains
Translation
effect
2022
net liability
Sappi Limited post-retirement medical aid subsidy balance sheet movement (US$ million)
40
20
0
(20)
(40)
(60)
(80)
(100)
(120)
20
0
(20)
(40)
(60)
(80)
(100)
(120)
(103)
2021
net liability
(79)
(6)
Pension
charge
5
22
(3)
Employer
contributions paid
Actuarial
gains
Translation
effect
2022
net liability
Equity
Year-on-year, equity increased by US$388 million to US$2,358 million as summarised below:
Equity reconciliation
US$ million
Equity as at September 2021
Profit for the year
Actuarial gains
Issue of shares
Share-based payments
Movement in hedging reserves
Foreign currency movements
Equity as at September 2022
2022
1,970
536
35
6
7
(44)
(152)
2,358
The group realised a profit for the year of US$536 million and recorded net actuarial gains of US$35 million. During the third
quarter holders of the convertible bonds elected to convert and shares to the value of US$6 million were issued. Share-based
payments of US$7 million, movement in hedging reserves of US$44 million and foreign currency movements of US$152 million
accounted for the remainder of the movement during the year.
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.
136 Annual Integrated Report 2022 Sappi
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS 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 financial 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 below.
The diagram below depicts our debt funding structure.
SECTION 5
Balance sheet continued
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.
Below we highlight the main financing activities that occurred during the year:
• In February 2022 the previous €525 million RCF at Sappi Papier Holding maturing
in February 2023 was renewed with a new €515 million facility with a maturity
of February 2027
• In August 2022 the previous ZAR1.8 billion RCF at Sappi Southern Africa Limited
maturing in August 2023 was renewed with a new ZAR2.0 billion facility with a
maturity of August 2027
• For the first time, both the above RCFs now contain KPIs related to Sappi’s
long-term sustainability goals
• Shortly after year end a tender offer was launched to repurchase a portion of
the outstanding Sappi Papier Holding (SPH) 2026 senior notes. SPH purchased
€209.6 million of the 2026 notes, at an effective price of 92.41%, yielding a capital
gain of €15.9 million.
Annual Integrated Report 2022 Sappi 137
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Chief Financial Officer’s report continued
SECTION 5 continued
Balance sheet continued
Structure of net debt and liquidity
We consider the group liquidity position to be strong, with cash holdings of US$780 million
at financial year end, and US$615 million of unutilised committed RCFs.
The structure of our net debt at September 2022 and 2021 is summarised below:
US$ million
Long-term debt
Senior unsecured debt
Securitisation funding
IFRS 16 Leases*
Less: Short-term portion
Net short-term debt/(cash)
Overdrafts, RCF and short-term loans
Short-term portion of long-term debt
Less: cash
Net debt
*
IFRS 16 accounting standard adopted from fiscal 2020.
2022
1,754
1,463
322
84
(115)
(591)
74
115
(780)
1,163
2021
2,157
1,769
337
118
(67)
(211)
88
67
(366)
1,946
Movement in net debt
The movement of our net debt from fiscal 2021 to fiscal 2022 is summarised in the
table below:
Net debt at September 2021
Increase of IFRS 16 Leases
Net impact of Convertible Bond conversions
Net cash generated in 2022
Currency translation, fair value and other non-cash adjustments
Net debt at September 2022
US$ million
1,946
1
(6)
(506)
(272)
1,163
138 Annual Integrated Report 2022 Sappi
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Group debt profile
We show the major components and maturities of our net debt at September 2022 below. These are split between the debt in
South Africa and the debt outside South Africa.
Maturity (Sappi fiscal years)
2023
2024
2025
2026 Thereafter
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$)
Securitisation (€)
IFRS 16 Leases
OeKB term loan 1
OeKB term loan 2 (CAD)
OeKB term loan 2 (€)
Other bank debt (€)
2028 public bonds (€)
2026 public bonds (€)
2032 bonds (US$)
IFRS adjustments
Gross debt
less cash
Net non-South African debt
Net group debt
Amount
US$ million
Interest
rates (local
currencies)
8.20%
8.30%
9.25%
5.25%
4.50%
2.10%
Various
2.30%
4.10%
1.50%
1.90%
3.63%
3.13%
7.50%
17
59
83
67
226
(86)
139
77
245
85
76
80
62
57
392
441
221
(20)
1,717
(694)
1,023
1,163
Fixed/
variable
Variable
Variable
Fixed
Fixed
Variable
Variable
Mixed
Fixed
Fixed
Fixed
Variable
Fixed
Fixed
Fixed
17
59
(86)
(10)
19
18
13
10
57
83
83
77
245
18
59
13
10
(694)
(577)
(587)
423
505
36
36
473
540
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:
Debt maturity profile (US$ million)
500
400
300
200
100
0
2
2
3
3
8
3
8
7
5
6
7
2
4
5
6
4
6
1
4
7
6
4
2
4
2
2023
■
Short-term
2024
■
RCF
■
2025
■
Securitisation
2026
2027
2028
2029
2030
2032
■
SSA
SPH term debt
2021
Excludes IFRS 16 leases with and average time to maturity of approximately four years.
2019
2018
2020
2022
■
■
■
■
■
Annual Integrated Report 2022 Sappi 139
67
0
67
0
12
13
10
8
13
10
441
29
27
21
392
221
(20)
670
670
1
2
2
(91)
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Chief Financial Officer’s report continued
SECTION 5 continued
Balance sheet continued
Covenants
Non-South African covenants
Financial covenants apply to US$218.6 million of our non-South African bank debt,
the €515 million RCF and the non-South African securitisation facility.
In view of the uncertainty due to Covid-19, the non-South African banking group
agreed in 2020 to suspend the measurement of financial covenants until
September 2021. Covenant measurement commenced again with effect from
the December 2021 quarter. The covenants applicable from December 2022 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:
December 2022
March 2023 to December 2026
4.25
4.00
• Ratio of group EBITDA to net interest expense should not be less than 2.5:1.
South African covenants
Separate covenants also apply to the RCF 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%
• The ratio of EBITDA to net interest paid is not less than 2.5:1.
Below we show that for the financial year ended September 2022 the group financial
covenants were comfortably met.
Non-South African covenants
Net debt to EBITDA
EBITDA to net interest
South African covenants
Net debt to equity
EBITDA to net interest
Sept 2022
Covenant
0.89
15.29
10.85%
13.10
<4.50
>2.50
<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.
140 Annual Integrated Report 2022 Sappi
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Credit ratings
Global Credit Ratings: South African national scale rating
Sappi Southern Africa Limited: AA+ (za)/A1+(za)/Positive Outlook (June 2022).
SECTION 5 continued
Balance sheet continued
Moody’s
Sappi Corporate Family Rating: Ba2 /NP/Stable Outlook (May 2022).
SPH debt rating:
• 2028/2026 bonds: Ba2/Stable Outlook (May 2022)
• 2032 bonds: B1/Stable Outlook (May 2022).
S&P Global Ratings
Corporate Credit Rating: BB-/B/Stable Outlook (July 2022).
SPH debt rating:
• 2026/2028/2032 bonds: BB- Stable Outlook (July 2022).
Conclusion
Fiscal 2022 was transformative as the group emerged with a significantly strengthened
balance sheet following strong cash generated from operations and good working
capital management. We were able to counter the sharp increase in input costs with
selling price increases and in the process improve margins and capitalise on strong
local demand in all our product segments. Strategically, the cost base in our
packaging and speciality papers business benefited from the purchase of the
Matane Mill in Canada. The announcement of the sale of the three graphics mills in
Europe is further evidence of the advancement of our
reduce our exposure to declining markets.
strategy as we
Thrive25
Macro-economic uncertainties are more pronounced, increasing volatility and
reducing the accuracy of forecasting. Flexibility and agility in a capital-intensive
business are difficult to manage, but the strength of the balance sheet offers greater
options than before. Optimising systems and processes and successfully transferring
the sold operations to the new owners will utilise a major portion of our internal
resources but we have built a strong foundation to measure up to the challenges.
Thrive25
The four key fundamentals of our
given the significant progress accomplished during the current year. The short-term
focus will be to maintain the strong balance sheet and improve operational
efficiencies. The medium to longer term strategy will be to invest in growth
opportunities and achieve our sustainability goals.
strategy remain relevant and achievable
Glen Pearce
Chief Financial Officer
09 December 2022
Annual Integrated Report 2022 Sappi 141
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS ref lec t
Only in still waters do things reflect undistorted. As a business, we take the
time to reflect on our past actions – including assessing our relationship
with our stakeholders, particularly our people – to understand more clearly
where we have succeeded, where we could have done better and how we
can continue to build sustainable competitive advantage. This investment
in reflection enables us to calibrate the solutions we provide and our
response to the world around us.
As OneSappi, we understand that like dropping a stone into a pond creates
outward ripples, in today’s interconnected world, our actions and decisions
can have a significant impact. For example, our decarbonisation actions
alone cannot bring the world to net zero, but they can have a ripple effect
that influences and encourages others.
Many people think of excellence as an upward journey, but at Sappi we view
it as going round and round in ever-expanding, infinite waves. This view is
reflected in the use of irregular waves which symbolise energy and unity
used as a design element throughout this report and in the above image.
Going forward, we will continue to focus on excellence with energy and
clarity and unity of purpose.
142 Annual Integrated Report 2022 Sappi
ref lec t
Only in still waters do things reflect undistorted. As a business, we take the
time to reflect on our past actions – including assessing our relationship
with our stakeholders, particularly our people – to understand more clearly
where we have succeeded, where we could have done better and how we
can continue to build sustainable competitive advantage. This investment
in reflection enables us to calibrate the solutions we provide and our
response to the world around us.
As OneSappi, we understand that like dropping a stone into a pond creates
outward ripples, in today’s interconnected world, our actions and decisions
can have a significant impact. For example, our decarbonisation actions
alone cannot bring the world to net zero, but they can have a ripple effect
that influences and encourages others.
Many people think of excellence as an upward journey, but at Sappi we view
it as going round and round in ever-expanding, infinite waves. This view is
reflected in the use of irregular waves which symbolise energy and unity
used as a design element throughout this report and in the above image.
Going forward, we will continue to focus on excellence with energy and
clarity and unity of purpose.
Annual Integrated Report 2022 Sappi 143
Our leadership and executive management
NON-EXECUTIVE DIRECTORS
3
6
9
12
1
4
7
10
2
5
8
11
EXECUTIVE DIRECTORS
13
14
144 Annual Integrated Report 2022 Sappi
GOVERNANCE AND COMPENSATION *
9
Robertus Johannes Antonius Maria Renders
(Rob Jan) (69)
1 Sir Nigel Rudd (75)
Independent Chairman
Qualifications: DL, Chartered Accountant
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 finance, management, governance
and leadership to the Sappi board.
2 Brian Richard Beamish (Brian) (65)
Independent
Qualifications: BSc (Mech Eng): HBS PMD
Nationality: British and South African
Appointed: March 2019
Skills, expertise and experience:
Mr Beamish, a qualified mechanical engineer, brings more than 40 years’
experience in management, business and leadership in capital intensive
industries to the board.
3 Michael Anthony Fallon (Mike) (64)
Independent
Qualifications: BSc Hons (First Class)
Nationality: British
Appointed: September 2011
*
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, finance, plant management, sales and marketing and
supply chain to general management, including mergers and acquisitions.
4 James Michael Lopez (Jim) (63)
Independent
Qualifications: BA (Economics)
Nationality: American
Appointed: March 2019
Skills, expertise and experience:
Mr Lopez brings his experience as the former President and CEO of
Tembec Inc (2006 to 2017) a manufacturer of lumber, pulp, paper/
paperboard and speciality cellulose and a global leader in sustainable
forest management practices.
5 Nkateko Peter Mageza (Peter) (67)
Independent
*
Qualifications: 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.
6 Zola Nwabisa Malinga (44)
Independent
Qualifications: BCom, CA(SA)
Nationality: South African
Appointed: October 2018
Skills, expertise and experience:
Ms Malinga has extensive experience in investment banking, corporate
finance and real estate and corporate governance, having held senior roles
at various financial institutions. She is also the founder and Executive
Director of Jade Capital Partners, a women-owned investment company.
7 Dr Bonakele Mehlomakulu (Boni) (49)
Independent
Qualifications: PhD (Chemical Engineering)
Nationality: South African
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.
8 Mohammed Valli Moosa (Valli) (65)
Independent
Qualifications: BSc (Mathematics and Physics)
Nationality: South African
Appointed: August 2010
*
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 finance, general business and mining and is an
international expert on sustainable development and climate change.
Independent
Qualifications: 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.
10 Nkululeko Leonard Sowazi (59)
Independent
Qualifications: Master’s Degree in Urban Planning
Nationality: South African
Appointed: October 2022
Skills, expertise and experience:
Mr Sowazi has over 30 years senior executive and investment
management experience and has served on numerous boards of both
listed and unlisted companies. Mr Sowazi has a strong commercial and
entrepreneurial business track record and presents with an impeccable
reputation in the market.
11 Louis Leon Von Zeuner (61)
Independent
Qualifications: BEcon (Economics)
Nationality: South African
Appointed: September 2022
Skills, expertise and experience:
Mr von Zeuner holds a Bachelor of Economics from the University of
Stellenbosch and is a Charted Director (SA). His role as board member,
aside from the normal focus on strategy profitability and sustainability, is a
key focus on governance status. Despite his role change from executive
to non-executive Mr von Zeuner has been able to continue to play a
leadership role in the activities of various organisations and contribute
to growing the businesses. He is results driven and supports growing
customer relationships.
12 Eleni Istavridis (65)
Independent
Qualifications: Bachelor of Arts (BA) (MBA) (MIA)
Nationality: American
Appointed: October 2022
Skills, expertise and experience:
Ms Istavridis is a seasoned leader with international experience, including
17 years in the United States and 22 years in Asia in financial services and
manufacturing. She has deep expertise in strategy, finance and global
operations. Most recently she was Executive Vice President at Bank of
New York Mellon as Head of Global Client Management for Asia and later
Head of Investment Services, Asia Pacific. Earlier she served in a variety of
senior leadership roles including: President and COO of Tristate, an Asia
based manufacturer, and Managing Director at Bankers Trust Company.
She is currently an independent board member of two public companies
and has committee assignments focused on audit, financial policy,
employees and public responsibility areas.
13 Stephen Robert Binnie (Steve) (55)
Chief Executive Officer
Qualifications: BCom, BAcc, CA(SA), MBA
Nationality: British
Appointed: September 2012
Skills, expertise and experience:
Mr Binnie was appointed CEO of Sappi Limited in July 2014 and brings
extensive experience in financial management, leadership, corporate
activity and strategy to the role.
14 Glen Thomas Pearce (59)
Chief Financial Officer
Qualifications: BCom, BCom Hons, CA(SA)
Nationality: South African
Appointed: June 1997
Skills, expertise and experience:
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 financial management experience, both locally and abroad.
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
Member of the Executive Committee.
Annual Integrated Report 2022 Sappi 145
GOVERNANCE AND COMPENSATION
Our leadership and executive management continued
EXECUTIVE MANAGEMENT
2
6
1
5
9
CORPORATE MANAGEMENT
10
14
11
15
146 Annual Integrated Report 2022 Sappi
3
7
12
16
4
8
13
GOVERNANCE AND COMPENSATION 1 Stephen Robert Binnie (Steve) (55)
Chief Executive Officer
Qualifications: BCom, BAcc, CA(SA), MBA
Nationality: British
Appointed: September 2012
Skills, expertise and experience:
Mr Binnie was appointed CEO of Sappi Limited in July 2014 and brings
extensive experience in financial management, leadership, corporate
activity and strategy to the role.
2 Glen Thomas Pearce (59)
Chief Financial Officer
Qualifications: BCom, BCom Hons, CA(SA)
Nationality: South African
Appointed: June 1997
Skills, expertise and experience:
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 financial management experience, both locally and abroad.
3 Marco Eikelenboom (55)
Chief Executive Officer of Sappi Europe
Qualifications: 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.
4 Michael George Haws (Mike) (59)
Chief Executive Officer of Sappi North America
Qualifications: 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.
8 Gary Roy Bowles (62)
Group Head Technology
Qualifications: 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.
9 Maarten van Hoven (49)
Group Head Strategy and Legal
Qualifications: 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.
10 Richard Wells (52)
Chief Executive Officer of Sappi Trading
Qualifications: BCom (Accounting), BCompt Hons, CA(SA), GEDP, EDP
Appointed: October 1997
11 Ami Mahendranath (54)
Group Company Secretary
Qualifications: BCom ACIS, Certificate in Corporate Governance
Appointed: November 2017
12 Tracy Wessels (47)
Group Head Investor Relations and Sustainability
Qualifications: PhD (Organic Chemistry), PMD
Appointed: January 2021
13 Andre Oberholzer (55)
Group Head Corporate Affairs
5 Alexander van Coller Thiel (Alex) (61)
Qualifications: BCom (Law), Strategic Communication Management
Professional (SCMP®)
Chief Executive Officer of Sappi Southern Africa
Qualifications: BSc (Mechanical Engineering), MBA (Financial Management
14 Louis Kruyshaar (52)
Executive Vice-President of Sappi Biotech
Qualifications: BTech (Pulp and Paper), BEng (Chemical Engineering),
MBA, EDP
15 Marjorie Boles (51)
Chief Information Officer
Qualifications: BA (Economics and Mathematics), MBA (Entrepreneurship)
16 Jörg Pässler (61)
Group Treasurer
Qualifications: B.Com (Hons) Cum Laude, M. Com, H. Dip. Tax,
CAIB (SA), FT Non-Executive Director Diploma
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.
6 Fergus Conan Salvador Marupen (Fergus) (57)
Group Head Human Resources
Qualifications: 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 offer insight into human resources, governance and
management, among many other fields.
7 Mohamed Iqbal Mansoor (55)
Executive Vice President of Sappi Pulp
Qualifications: 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.
Sappi board committee memberships:
Social, Ethics, Transformation and Sustainability (SETS) Committee
Member of the Executive Committee.
Member of the Group Management Committee.
Annual Integrated Report 2022 Sappi 147
GOVERNANCE AND COMPENSATION
Our leadership and executive management continued
Sappi Europe lead team
1. Marco Eikelenboom (55)
5. Flavio Froehli (51)
Chief Executive Officer
MS (Business Economics)
2. Stephen Blyth (48)
VP and Chief Financial
Officer
BCom Hons, CA (SA),
H Dip Tax (Law)
3. Steffen Wurdinger (62)
VP Manufacturing and
Technology
MS (Paper Technology
Engineering), Dr.-Ing
(specialisation in CTMP)
4. Rainer Neumann (60)
VP Human Resources
MS Industrial Relations
& Human Resources/
MS Administrative Sciences
VP Marketing & Sales
Master of Business
Administration (MBA)
6. Hannes Boner (59)
VP General Counsel
lic iur, DHEE,
Admitted Attorney
7. Jan Sander Van Tuijl (46)
VP Supply Chain &
Procurement
MSc in Forestry and
Wood Science
8. Louis Kruyshaar (52)
VP Innovation and Biotech
B.Eng (Chemical
Engineering), MBA
1. Mike Haws (59)
4. Deece Hannigan (60)
President and CEO
BS in Paper Science and
Engineering
2. Anne Ayer (57)
Vice President, Pulp
Business and Supply Chain
MBA from Stanford
University and a BA in
Psychology from Harvard
3. Beth Cormier (59)
Vice President Research,
Development and
Sustainability
BS in Engineering Physics
from University of Maine
and an MBA from Boston
University
Vice President Graphics,
Packaging and Specialties
Graduate of North Carolina
State University with a BA in
Political Science
5. Annette Luchene (60)
Vice President and Chief
Financial Officer
MBA from Loyola University
of Chicago and a BS in
Accounting from Northern
Illinois University
6. Sarah Manchester (57)
Vice President, Human
Resources and General
Counsel
BA in History from
Dartmouth College and a JD
from Cornell Law School
7. Mike Schultz (58)
Vice President,
Manufacturing
BS in Paper Science and
Engineering from the
University of Wisconsin,
Stevens Point
3
6
1
4
7
2
5
8
Sappi North America lead team
2
5
3
6
1
4
7
148 Annual Integrated Report 2022 Sappi
GOVERNANCE AND COMPENSATION Sappi Southern Africa Executive Committee
3
7
1
5
8
2
6
9
4. Mpho Lethoko (40)
General Manager
Communications of Sappi
Southern Africa
BA (Corporate
Communications), PGDip
(General Management), MBA
5. Beverley Sukhdeo (55)
Vice President
Manufacturing, R&D
and Engineering of
Sappi Southern Africa
BSc (Chemistry), DBA
6. Naresh Naidoo (51)
Chief Procurement Officer
of Sappi Southern Africa
BSc (Chemical Engineering),
MBA
7. Graeme Wild (50)
Vice President Sales
and Marketing of Sappi
Southern Africa
BSc (Forestry), MBA
8. Duane Roothman (50)
Vice-President of
Sappi Forests
BSc (Forestry), MBA
9. Morgan Moodley (54)
Vice President Supply
Chain
B-Compt (AGA SA)
4
1. Alex Thiel (61)
Chief Executive Officer of
Sappi Southern Africa
BSc (Mechanical
Engineering), MBA
(Financial Management and
Information Technology)
2. Fergus Marupen (57)
Group Head Human
Resources of Sappi
Limited
BA Hons (Psychology),
BEd (Education
Management), MBA, LCOR
3. Pramy Moodley (46)
Chief Financial Officer of
Sappi Southern Africa
BAcc, CA(SA), PMD
Annual Integrated Report 2022 Sappi 149
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.
Good governance at Sappi contributes to living our values through enhanced
accountability, a transparent and ethical culture, strong risk management, a focus on
effective 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
(see Risk management on page
46), while minimising the negative impacts of
trade-offs that have to be made, as set out in the presentation of Our key material
issues on page
78. 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 the following 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 comfortable that the board charter ensures a clear
division of responsibilities between management and the board and that no director
has unfettered authority. The board confirms its compliance with the Companies
Act and that the company is operating in conformity with its Memorandum of
Incorporation. The board is satisfied that it has fulfilled 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
98%
OVERALL
COMMITTEE
ATTENDANCE
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 reflects 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
58
58
67
58
58
33
33
42
25
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
150 Annual Integrated Report 2022 Sappi
GOVERNANCE AND COMPENSATION The composition of the board and attendance at board and committee meetings and the AGM is set out below for the period
27 September 2021 to year ended 02 October 2022:
Board
Board committees
AGM
Name
Audit and Risk
Nomination
and
Governance
Human
Resources
and
Compensation
%
attendance
during
tenure
SETS
s
e
v
i
t
u
c
e
x
e
-
n
o
n
t
n
e
d
n
e
p
e
d
n
I
BR Beamish
MA Fallon
JM Lopez
NP Mageza
ZN Malinga
B Mehlomakulu
MV Moosa
RJAM Renders
Sir Nigel Rudd
JE Stipp
L Von Zeuner
s
e
v
i
t
u
c
e
x
E
SR Binnie (CEO)
GT Pearce (CFO)
100
100
100
100
100
100
85
100
100
83
100
100
100
Lead director
Appointed 01/09/2022
Committee member (present)
Resigned 09/02/2022
Chairman
Ex officio
Absent
By invitation
Attendance by committee members I Total possible attendance by committee members I % of attendance by board and committee members
Board and committee attendance for the period October 2021 to September 2022
DIRECTORS’ INDEPENDENCE (%)
DIRECTORS’ AGES (%)
DIRECTORS’ TENURE (%)
DIVERSITY (%)
17
8
17
8
33
2022
2022
17
42
2022
50
2022
83
■
■
Independent non-executive
Executives
■
■
58
40s
50s
■
■
60s
70s
■
■
0-3 years
3-10 years
■
Over
10 years
67
■
■
Diverse
Other
Annual Integrated Report 2022 Sappi 151
GOVERNANCE AND COMPENSATION
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 significant interest and is based on
principles of openness and substance
over form. The reporting includes
information on key trade-offs 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
has a policy 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
See Our key relationships on
page
54 for more information.
Corporate governance continued
STRATEGIC FOCUS AREAS
In addition to the standard items on the board’s agenda, the 2022 focus areas included:
• Oversight of progress in executing the
• Deep dives into the following topics:
strategic plan
Thrive25
–
–
–
project to introduce wet strength label paper at Gratkorn Mill as part of the
strategic reduction in exposure to graphic papers and growth of packaging
and speciality papers business in Sappi Europe
shipping and supply chain challenges
dissolving pulp business, including the Saiccor Mill expansion project and
external overviews of global and regional economies and related developments
• Long-term debt refinancing and covenants
• Consideration of: paying a dividend, a share repurchase, and secondary listing
alternatives
• 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 Financial Disclosures (TCFD) recommendations, the link to
Sappi’s SBTi’s, as well as Sappi’s 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
• A review of the Code of Ethics refresh and related policies
• An update on cyber security and management’s mitigations
• Appointment of the new sponsor (RMB).
All the top risks as well as emerging risks have been focused on by the board
during 2022.
The following areas will receive specific focus by the board in 2023:
• Oversight of progress in achieving the
• Project management and oversight for large capital projects, including the Somerset
strategic plan
Thrive25
Mill PM2 conversion and expansion
• Promoting and enabling innovation
• Review of the development of the furfural pilot plant at Saiccor Mill
• Consideration of additional diversification of assets
• Increased focus on the responsibility of the board in responding to climate change
including the monitoring of progress towards the company’s 2030 scienced-based
decarbonisation targets and capital allocation plan
• Oversight of HR’s project to upgrade HR system technology.
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
• RMB (sponsor) provided training to the board on governance topics, such as
directors’ liability, price sensitivity, dealing in securities.
152 Annual Integrated Report 2022 Sappi
GOVERNANCE AND COMPENSATION
SAPPI BOARD AND MANAGEMENT COMMITTEES
Board and management committees have been established and are discussed from pages
144 to 150.
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
C
O
M
P
E
N
S
A
T
O
N
I
G
O
V
E
R
N
A
N
C
E
A
N
D
Annual Integrated Report 2022 Sappi 153
GOVERNANCE AND COMPENSATION
Corporate governance continued
Audit and Risk Committee
– Peter Mageza
Chairman
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.
Membership details at September 2022
NP Mageza – Chairman
RJAM Renders
ZN Malinga
B Mehlomakulu
L von Zeuner
Key roles and responsibilities
The Audit and Risk Committee consists of five independent, non-executive directors.
The committee assists the board in discharging its duties with oversight of:
• Safeguarding and efficient use of assets
• The risk management function, including a special focus on business continuity
• Information and technology risks, related controls and governance. A focus area
was the increasing threats of cyber attacks and security in the operational
technology area
• Non-financial risks and controls, including obtaining additional external ESG
assurance
• Operation of adequate systems and control processes
• The integrity of financial information and the preparing of accurate financial
reports in compliance with applicable regulations and accounting standards
• The certification process implemented by management to support the CEO
and CFO confirmation of the fairness of the Annual Financial Statements and
the system of internal control over financial reporting, required by section 3.84(k)
of the JSE Limited Listings Requirements (see the Directors’ approval on
page
consideration of the evaluation report, including identified control deficiencies
and management’s remedial actions, as well as compensating measures and
assurance from other sources in the combined assurance framework
1 of the 2022 Group Annual Financial Statements). This included
• 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’ qualifications, 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 2022
• The performance of the finance function
• Taxation policies, congruent with responsible corporate citizenship
• An internal review of the committee’s operating effectiveness and performance
every two years by way of an assessment with feedback being provided to
the board.
154 Annual Integrated Report 2022 Sappi
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 wood pulp, packaging and speciality papers, the biotech and
renewable energy fields
• Cyber security incidents
• Business continuity arrangements, including disruptions to warehousing,
logistics and supply chain
• Regulatory compliance with global privacy legislation, such as POPIA
and GDPR.
Areas of oversight for the committee in 2023 will be:
• Additional focus on business continuity plans
• Revised reporting for ESG matters and procedures for financial reporting
attestations
• 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
The Audit and Risk Committee confirms that it has received and considered
sufficient and relevant information to fulfil 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 2022.
Mr Mageza is the Chairman and designated financial expert of the Audit and Risk
Committee.
The committee is satisfied that it has fulfilled its responsibilities as set out in its
terms of reference.
100%
overall committee
attendance rate
Stakeholders
The Audit and Risk Committee has
helped to create and protect value
for the following stakeholders:
employees, customers,
shareholders and regulators.
See Our key relationships for
54.
further details on page
Risks
The Audit and Risk Committee has
focused on all of the top 10 risks:
1/ Safety
2/ Cyber security
3/ Sustainability expectations
4/ Supply chain disruption
5/ Climate change
6/ Evolving technologies and
consumer preferences
7/ Cyclical macro-economic
factors
8/ Uncertain and evolving
regulatory landscape
9/ Employee relations
10/ Liquidity
For further details see Risk
management on page
46.
Annual Integrated Report 2022 Sappi 155
GOVERNANCE AND COMPENSATION
GOVERNANCE AND COMPENSATION
Corporate governance continued
Nomination and Governance Committee
100%
overall committee
attendance rate
– Sir Nigel Rudd
Chairman
Membership details: at September 2022:
ANR Rudd – Chairman
MV Moosa
MA Fallon
Stakeholders
The Nomination and Governance
Committee has helped to protect
value primarily for the following
stakeholders: shareholders and
regulators.
See Our key relationships on
page
54 for further details.
Risks
The Nomination and Governance
Committee focused on governance,
independence, and composition of
the board, board committees and
executive management positions to
effectively address all material risks
facing the company including all the
top 10 risks.
See Risk management on
page
46 for further details.
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 identifies
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 had oversight of the actions to implement
the policy on broader diversity at board level. The functioning and performance of
Sappi’s board and board committees were assessed internally in 2022 and
established that the board and board committees functioned well. Certain deep
dives and additional training from the sponsor (RMB) were arranged during 2022.
Strategic focus areas
The Nomination and Governance Committee helped to protect value by providing
oversight and guidance in 2022 over:
• Corporate governance
• Tone at the top
• Succession plans for senior executives and the board with a focus on board
composition and chairmanships
• The Promotion of Broader Diversity at Board Level policy, which includes diversity
indicators
• 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 2023 will be onboarding the new directors.
The committee is satisfied that it has fulfilled its responsibilities as set out in its
terms of reference.
156 Annual Integrated Report 2022 Sappi
Human Resources and Compensation Committee
100%
overall committee
attendance rate
– Mike Fallon
Chairman
Key roles and responsibilities
The Human Resources and Compensation Committee consists of five 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 performance
objectives, are aligned to the group’s
strategy and performance goals. It
reviews and agrees the various compensation programmes and in particular the
compensation of executive directors and senior executives as well as employee benefits.
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.
Thrive25
Strategic focus areas
The 2021 report was supported at the Annual General Meeting on 9 February 2022
with a vote of 83.5% on the remuneration policy and 84.4% on the implementation
report. This has been a significant 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:
• Monitoring the implementation of return of capital employed (ROCE) as a measure
in our short-term incentive plan from 2022, replacing working capital
• Monitoring of a voluntary minimum shareholding requirement for all prescribed
officers to be achieved by December 2025
• Disclosure of the vested performance share plan award as part of the total
remuneration in line with best practice
• ESG targets are included in the personal objectives of all senior managers
• Executive (HRL 19+) gender diversity target (the target for 2025 is 23%, actual
performance in 2022 was 22%)
• The HR investor roadshow with major shareholders
• Oversight on key succession transitions across all regions, and
• Re-evaluation of the retirement age.
The strategic focus areas for the committee in 2023:
• Key activities for the committee in 2023 will be, inter alia, consideration of the report
on SSA skills requirements
Thrive25
• Oversee the implementation of the human resources
• Approval of the remuneration and bonuses for executive directors and senior
plan
management
The committee is satisfied that it has fulfilled its responsibilities as set out in its terms
of reference.
See the Remuneration report on page
168 for more information.
Annual Integrated Report 2022 Sappi 157
Membership details at September 2022:
MA Fallon – Chairman
NP Mageza
RJAM Renders
BR Beamish
ANR Rudd
Stakeholders
The Human Resources and
Compensation Committee has helped
to protect value primarily for the
following stakeholders: employees,
shareholders and regulators
See Our key relationships on
page
report on page
details.
54 and the Remuneration
172 for further
Risks
The Human Resources and
Compensation Committee has focused
on the following of the top 10 risks:
1/ Safety
2/ Cyber security
3/ Sustainability expectations
5/ Climate change
6/ Evolving technologies and
consumer preferences
7/ Cyclical macro-economic factors
8/ Uncertain and evolving
regulatory landscape
9/ Employee relations
See Risk management on
page
46 for more information.
GOVERNANCE AND COMPENSATION GOVERNANCE AND COMPENSATION
Corporate governance continued
Social, Ethics, Transformation and Sustainability Committee
Membership details at September 2022
MV Moosa – Chairman
SR Binnie
B Mehlomakulu
BR Beamish
JM Lopez
– Valli Moosa
Chairman
Key roles and responsibilities
The Social, Ethics, Transformation and Sustainability (SETS) Committee comprises
four independent non-executive directors, and the CEO. A 93% attendance record
was achieved by Board Committee members for 2022. 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 officio. The chairmen of the Audit and Risk Committee and
SETS Committee attend each other’s committee meetings to avoid unnecessary
repetition of discussions.
The committee's mandate is to oversee the group’s sustainability strategies,
activities addressing climate change, 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 committee
monitors progress towards and ensures that appropriate programmes are
implemented to achieve the company’s sustainability targets. The committee
regularly reviews targets to ensure that they are both relevant to our operating
context and reflective of an appropriate level of ambition.
As ESG (environment, social and governance) reporting and disclosures become
increasingly important to stakeholders and aligning with our strategic imperative
to enhance trust, the committee is mandated to oversee the company’s public
disclosures ensuring that reporting is aligned with appropriate global standards
and compliant with regulatory requirements.
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.
158 Annual Integrated Report 2022 Sappi
Strategic focus areas
In 2022 the committee provided oversight of:
• Sappi’s social and economic development standing (UNGC and OECD)
• Safety initiatives
• Approval of a climate change strategy
• Progress on climate action aligned with the Task Force on Climate-related
Financial Disclosures (TCFD)
• Validation of 2030 science-based decarbonisation targets for the group by
the Science Based Targets initiative (SBTi)
• Approval of capital allocation plan required for the science-based
decarbonisation targets
• Progress on implementation of sustainable procurement initiatives (supplier
code of conduct and onboarding of suppliers to the EcoVadis platform)
• External assurance on Group LTIFR, Scope 1 and Scope 2 emissions, certified
fibre, waste to landfill and water extraction for the South African region
• Trade-offs 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 BBBEE
legislation, the EE Act and the Forestry Charter, including unfair discrimination
and equality policy
• Other ESG focus areas.
The committee is satisfied that it has fulfilled its responsibilities as set out in its
terms of reference.
The committee will provide oversight of the following strategic business areas
in 2023 :
• TCFD developments
• Development of an approach to nature related disclosures aligned with the
Taskforce on Nature-related Financial Disclosures (TNFD)
• Progress towards science based targets and the climate change strategy
• Review emerging global sustainability disclosure standards and implement
changes to group annual reporting as appropriate
Thrive25
• Progress towards
sustainability targets and realignment of targets as
appropriate to account for the divestment of three European mills in FY2023
• Production efficiencies and events
• Consideration of feedback about the changes in the safety culture at
operating units
• Review and approve the social media policy, as part of the making use
of media developments and opportunities.
See the SETS report on page
https://www.sappi.com/2025-global-sustainability-targets
192 and Our global sustainability goals at
93%
overall committee
attendance rate
Stakeholders
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.
See Our key relationships on
54 for further details.
page
Risks
The SETS Committee has focused
on the following of the top 10 risks:
1/ Safety
3/ Sustainability expectations
4/ Supply chain disruption
5/ Climate change
6/ Evolving technologies and
consumer preferences
7/ Cyclical macro-economic
factors
8/ Uncertain and evolving
regulatory landscape
9/ Employee relations
See Risk management on
page
46 for further details.
Annual Integrated Report 2022 Sappi 159
GOVERNANCE AND COMPENSATION
Corporate governance continued
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 a key component of Sappi’s second line of defence and assurance. See
page
164 for additional details of Sappi’s approach to risk, controls and assurance.
Executive
Committee
Disclosure
Committee
This committee comprises executive directors and senior management from Sappi Limited as well as the
CEOs of the three main regional business operations, and the dissolving wood pulp business. The CEO 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, sustainability, social and risk processes. The Executive
Committee meets at least five times per annum. All key topics discussed at board level are subject to review
and discussions by the Executive Committee.
The Disclosure Committee comprises members of the Executive Committee and senior management from
various disciplines. Its objective 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.
The Treasury Committee meets monthly to assess financial risks on treasury-related matters. Specific focus
areas in 2022 related to:
• Ensuring sufficient group liquidity with the renewal to 2027 of the €515 million and R2.0 billion revolving
credit facilities at Sappi Papier Holding (SPH) and Sappi Southern Africa respectively. For the first time
these facilities now also include sustainability KPIs
• Renegotiation of financial covenants as the covenant suspension period agreed during the Covid-19
Treasury
Committee
pandemic came to an end.
Key focus areas in 2023 will be:
• The effective management of cash and interest costs due to rising interest rates
• Repurchasing debt with surplus cash will reduce gross debt and therefore interest charges. All debt
maturities will be considered for cash settlement rather than refinancing
• The SPH securitisation programme has to be renewed for another three-year term.
Taxation
Committee
The Taxation Committee meets monthly to discuss and address global taxation matters. The main focus
areas of the committee for 2022 included:
• Tax accounting and reporting
• Tax compliance including transfer pricing and BEPS reporting
• Tax audits and international mitigation measures to avoid double taxation
• Tax implications of strategic projects
• New tax legislation.
These topics will continue to receive oversight from the committee in 2023.
Project Steering
Committees
For key strategic projects, steering committees are established to oversee successful execution of
the project.
Technical
Committees
The Technical Committees focus on global technical alignment, performance and efficiency measurement
as well as new product development.
160 Annual Integrated Report 2022 Sappi
GOVERNANCE AND COMPENSATION
Group Risk
Management
Committee
The committee is known as the group risk management team (GRMT) and is mandated by the board to
establish, co-ordinate and drive the risk management process throughout Sappi. It has established a risk
management system to identify and manage significant risks. The GRMT reports regularly 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 2022 key initiatives included operationalisation of the group’s risk appetite
and tolerance framework, dashboard summarising group risks and trends. Group business continuity plan
guidelines were drafted, reviewed and approved. In 2023 the GRMT will review policy, procedures and
assurance, and provide oversight of business units updating of their business continuity plans to address
business continuity risk.
Control and
Assurance
Committee
The Control and Assurance Committee (CAC) is supported by the internal control function and multi-disciplinary
combined assurance workgroups and provides regular oversight and guidance to the business on internal
controls and combined assurance for financial, strategic and operational risks. The committee is accountable to
the group risk management team (GRMT) and the Audit and Risk Committee.
IT Steering
Committee
The IT Steering Committee, assisted operationally by the Group IT Council (GITCO), 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 2022 by its oversight of:
• Preparations and support for major strategic projects to drive operational excellence in manufacturing,
sales, supply chain and finance and logistics among other functions
• The digital strategy and governance model to drive innovation at scale across all divisions
• Expansion of the group security function, the additional security resource capacity and cyber skills incubator
• The framework to evaluate third-party IT security risks
• Due diligence for a cloud-based security strategy
• The operationalisation of the global operational technology (OT) security methodology.
A significant part of the IT Steering Committee’s responsibility is to monitor and direct Sappi’s Information
and cyber security activities. The board’s Audit and Risk Committee oversees these activities and its
membership consists entirely of independent non-executive directors. Security matters are shared and
discussed with the board at least quarterly. Sappi did experience a minor breach of non-critical information
in May 2022. The hackers were timeously detected and removed from the network without operational
impact. Sappi does have cyber risk insurance. Sappi’s internal IT audit team undertakes reviews of
information and cyber security.
Oversight by the committee will continue in 2023 for these IT initiatives, as well as:
• Support for new business priorities to address evolving market conditions in alignment with
Thrive25
priorities
• Additional security improvements including enhanced recovery capabilities, global OT security standards,
central vulnerability management, and further smart partnerships to extend security best practices and
capacity
Infrastructure simplification through further global harmonisation opportunities.
•
Annual Integrated Report 2022 Sappi 161
GOVERNANCE AND COMPENSATION
Corporate governance continued
Global Business
Systems Council
This council meets monthly to provide direction for strategic business improvement projects, in particular,
OneSappi harmonisation initiatives, and effective use of resources.
Sustainability
Council
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, forests and water
programmes and the annual group Sustainability Report.
Key focus areas for 2022 included:
• Oversite and review of the
• Sappi’s climate change strategy and action plans including:
sustainability targets
Thrive25
–
–
–
alignment of Sappi’s decarbonisation roadmap with the Science Based Targets initiative (SBTi)
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 SDGs.
Brand Council
This council co-ordinates Sappi’s brand communication programme, monitors brand performance and
ensures effective brand management to enhance Sappi’s reputation.
162 Annual Integrated Report 2022 Sappi
GOVERNANCE AND COMPENSATION
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.
Code of Ethics:
Legal compliance programme:
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 as 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 first-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.
See www.sappi.com for the Code of Ethics
The programme is designed to increase awareness of, and
enhance compliance with, applicable legislation in place. The
group compliance officer 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.
Conflict of interests:
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 see the Insider trading section of the
Code of Ethics which can be found at www.sappi.com
The group has a policy that obliges all employees
to disclose any interest in contracts or business
dealings with Sappi to assess any possible conflict
of interest.
The policy also dictates that directors and senior officers of the
group must disclose any interest in contracts as well as other
appointments to assess any conflict of interest that may affect
their fiduciary duties.
During the year under review, apart from that disclosed in the
financial statements, none of the directors had a significant
interest in any material contract or arrangement entered into by
the company or its subsidiaries.
For more information on how Sappi addresses conflict
of interest please see 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 co-ordinated 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, see the Reporting and whistle-blowing section of
the Code of Ethics, at www.sappi.com
Annual Integrated Report 2022 Sappi 163
GOVERNANCE AND COMPENSATION
Corporate governance continued
Hotline report rate per 1,000 employees per annum
3
4
.
9
3
.
4
3
.
.
0
4
0
3
.
5.0
4.0
3.0
2.0
1.0
0
2018
2019
2020
2021
2022
■
Report rate per 1,000 employees
Hotline and ethics cases by category (%)
14%
41%
45%
20%
37%
6%
59%
44%
35%
5%
48%
47%
100
80
60
40
20
0
■
13%
39%
49%
2018
Corruption, fraud and theft
2019
■
2020
2021
2022
Employment-related matters
■
Environment, health, safety and other
Hotline and ethics case outcomes (%)
100
80
60
40
20
0
2%
7%
61%
30%
2018
7%
45%
49%
4%
45%
51%
2019
2020
7%
63%
30%
2021
2%
11%
62%
25%
2022
■
■
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
• 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
164 Annual Integrated Report 2022 Sappi
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 Our Strategy
and Performance on page
10, as
well as Our global sustainability goals
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 Control and Assurance
Committee (CAC). The committee and
its combined assurance workgroups
(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 across
Sappi’s three lines of assurance. The
workgroups focused on the following
risk topics in 2022: capital projects
management, cyber security risks,
human resources risks, production
recording and quality, energy, waste
and safety. In financial year 2023 the
CAWs will assist the CAC to create and
protect value by undertaking reviews
of combined assurance, risks and
controls relating to business continuity,
as well as developing the risk and
control framework particularly in the
legal compliance, taxation, and IT
security areas.
GOVERNANCE AND COMPENSATION Sappi’s Combined Assurance Framework, incorporating three lines of assurance and oversight by the
board and board sub-committees
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
Legal and compliance
IT
Planet, environment,
natural capital
Ethics
People, human
resource and
transformation
Research and
development,
intellectual property
Manufacturing, supply
chain management,
quality, forestry
Stakeholders,
communication,
reputation, society
Safety
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
Board and
sub-board
committees
• Day-to-day risk
management activity
• Established risk and
control environment
• Executive, corporate
and regional lead
teams
• 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.
Control and Assurance Committee
management self-assessments
Internal audit
Audit and Risk
Committee
Executive Committee, Group Head
Strategy, Global Business Council,
Control and Assurance Committee,
management self-assessments
Internal audit
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 compliance programme,
Group Compliance Manager
Legal compliance audits,
internal audit
IT Steering Committee, group IT
governance functions, management
self-assessments
KPMG, ISA 3402s,
penetration testing,
internal audit
Sustainability councils,
Environmental and Energy (E4)
Global Cluster, GRMT
Group Compliance Manager,
ethics surveys, management
self-assessments
ISO 14001, FSC, PEFC,
EMAS, KPMG, EcoVadis
Government reviews
emissions effluent etc,
internal audit
Internal audit
Global Human Resource Committee,
regional labour forums, employee
engagement surveys, management
self-assessments
BBBEE audits, internal
audit
Audit and Risk,
SETS Committee,
Human
Resources and
Compensation
Committees
Audit and Risk
Committee
SETS Committee
SETS Committee,
Audit and Risk
Committee
Audit and Risk,
SETS Committee,
Human
Resources and
Compensation
Committees
Group technical cluster,
management self-assessments
ISO 17025, internal audit
SETS Committee
Technical clusters and platforms,
regional safety, health, environment
and quality audits, supplier audits,
management self-assessments
Group corporate affairs,
sustainability and investor relations
functions
ISO 9001, ISO 50001, FSC
PEFC, SFI, Matrix, internal
audit
SETS Committee
Internal audit
SETS Committee
Group and regional risk management
teams, safety audits
OHSAS 18000,
ISO 22000 regulatory
inspections, internal audit
SETS Committee
Annual Integrated Report 2022 Sappi 165
GOVERNANCE AND COMPENSATION Corporate governance continued
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
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 2022 for Scope 1 and 2 emissions information, water usage
in South Africa, waste 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 co-ordinates 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:
• Strategic • Operational • Compliance • Reporting
Support
Internal audit activities
Support
Governance, risk, controls consulting
Advisory and assistance
• Forensic, hotline and ethics management
• Projects, new business processes
•
• King IV, governance disclosures
• Ad hoc management requests, secondments
Internal control support (risk and control
•
framework, self-assessments, segregation of
duties, workgroups).
Assurance (risk based)
• 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
Refine
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
Effective
communication
Risk-based
assurance
Insightful,
future-focused
and proactive
Promotes
improvement
166 Annual Integrated Report 2022 Sappi
GOVERNANCE AND COMPENSATION
During 2022, 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: advisory services to the global business systems
projects (Requisition to Pay, Sales Order to Cash, implementation of RPA (Robotics
Process Automation), reviews of production recording and quality, procurement,
as well as contractor charges)
• Rationalising declining businesses: Undertaken project management reviews
for business optimisation projects
• Accelerate growth in high margin products: Assurance reviews of product
innovation and research and development. Project Vulindlela in SSA and
Project Horse for the Packaging and Specialities Business in Sappi Europe).
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 has 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.
The coverage plan for 2022 was substantially achieved. We had refocused our
audit plan to address 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 2023 internal audit will support the achievement of Sappi’s
strategic
objectives by completing advisory and assurance projects in the following areas:
Thrive25
• Grow our business
Thrive25
: R&D, packaging and specialities, capital
projects (Project Elevate in Sappi North America), and new businesses
eg biomaterials
• Sustain our financial health
Thrive25
: sales, procurement, treasury,
and working capital processes, Project Silver Carve-out in Sappi
Europe
• Drive operational excellence
Thrive25
: sales and operations,
maintenance, energy, strategic business and IT projects including
digital innovation initiatives (eg implementation of process mining
software)
• Enhance trust
security reviews
Thrive25
: ethics, governance, sustainability, and cyber
Internal audit maintains an internal quality assurance programme. Our last external
quality assurance review was conducted by the Institute of Internal Auditors (IIA) in
2021. 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 was addressed in 2022. Our internal quality assurance review in 2022
confirmed our Generally Conforms rating. A focus area in 2023 will be the upgrade
and replacement of our automated audit software.
BOARD ASSESSMENT OF THE COMPANY’S RISK
MANAGEMENT, COMPLIANCE FUNCTION AND
EFFECTIVENESS 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 2022. The results of the reviews did not indicate
Annual Integrated Report 2022 Sappi 167
GOVERNANCE AND COMPENSATION GOVERNANCE AND COMPENSATION
Social, Ethics, Transformation and
Sustainability Committee report
– Valli Moosa
Chairman Social, Ethics, Transformation and Sustainability Committee
INTRODUCTION
The Social, Ethics, Transformation and Sustainability (SETS) Committee presents its
report for the financial year ended September 2022. 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
affairs in compliance with a board approved terms of reference and discharged
all its responsibilities contained therein.
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 financial 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 Mr Binnie, Dr Mehlomakulu,
Mr Beamish and Mr Lopez for 2022. The chairman, Mr Moosa, attended two
of the three meetings for 2022.
OBJECTIVES OF THE COMMITTEE
The world has endured much in recent years – rapidly increasing global temperatures
leading to extreme weather events, rising income inequality, deepening geopolitical
tensions, a global pandemic and unprecedented inflation driving economies into
recession. These events severely disrupted our status quo; they affected our health,
environment, society and economies. We recognise that the private sector has a
key role to play in addressing the challenges the world is facing today and the SETS
Committee is our social conscience, ensuring that the company is a responsible
corporate citizen. We enhance our long-term stakeholder value by focusing our
actions to deliver more sustainable shared value outcomes, both minimising the
impacts of our activities on society and the environment.
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 fields of social, ethics, transformation and sustainability. 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 2022 financial year were:
MV Moosa – Chairman
(from 01 March 2016)
SR Binnie
B Mehlomakulu
BR Beamish
JM Lopez
Four members of the committee were
independent non-executive directors
and one the Chief Executive Officer.
In addition, the Chairman of the board
attends committee meetings ex officio.
The regional Chief Executive Officers,
the Group Head Strategy and Legal,
the Group Head Technology, the Group
Head Human Resources, the Group
Head Corporate Affairs, the Executive
Vice President Pulp and the Group
Head Investor Relations and
Sustainability attend meetings
by invitation.
192 Annual Integrated Report 2022 Sappi
GOVERNANCE AND COMPENSATION 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 affairs and social impact programmes
• Reviewed the UN sustainable development goals most relevant to Sappi
• Reviewed Sappi’s standing in terms of:
–
–
the principles set out in the United Global Compact Principles
the OECD recommendations regarding corruption
• Reviewed the Code of Ethics, ethics programme and its 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,
Broad-based Black Economic Empowerment (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
Organisation (ILO) 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 and approved the updated group sustainability charter and
environmental policy
• Reviewed the material indicators of the group’s environmental performance
• Reviewed regional sustainability performance against goals for 2022
• Reviewed and approved the climate strategy
• Reviewed the company’s progress on climate-related activities and performance
against climate KPIs using the TCFD framework
• 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 2022
• In-depth review and approval of 2030 Scope 1 and 2 and Scope 3 science-based
decarbonisation targets and associated capital plans prior to submission to SBTi
for validation
• In-depth review of the fire integrated risk management strategy and activities for
Sappi Forests
• In-depth review of the Sappi Southern Africa community engagement programme
and risk mitigation strategy
• In-depth review of progress towards sustainable procurement objectives and
targets and longer-term Scope 3 considerations
• Reviewed the sustainability content for the Annual Integrated Report
• Reviewed the external verification update report on selected group sustainability
metrics.
In 2022 a key focus remained the company’s response to climate change. A climate
business strategy was approved
strategy aligned with the principles of our
by the committee.
Thrive25
Within the climate strategy framework, Sappi commits to:
• Reduce our own and value-chain emissions; protect biodiversity and promote
responsible use of scarce water resources
• Optimise allocation of capital for profitable growth while ensuring that it reduces
our impact on climate change and positions us competitively for a low-carbon
future
• Drive purposeful innovation and collaboration to provide low-carbon, bio-based
solutions and accelerate climate action
• Be a transparent, proactive and
responsible company and partner
with a long-term, solutions-oriented
approach to address climate change
mitigation, adaptation and resilience.
Play our part to ensure a socially
inclusive just transition.
A highlight for the year was the
validation of our 2030 decarbonisation
targets by the Science Based Targets
initiative (SBTi). The SETS Committee
reviewed and approved the group
targets and capital plans associated
with the targets. Furthermore, for the
first time, a comprehensive and
dedicated climate report was
presented to the committee outlining
the company’s progress on climate-
related activities aligned with the
TCFD framework.
At each committee meeting a topic
is selected for an in-depth review.
Typically, the subject of these reviews
are matters which the committee
believes represent key risks or
opportunities for the business.
In 2022 the review topics focused
on risk/opportunity and potential
impacts associated with wildfires
in our forestry assets; sustainable
procurement – our progress with
respect to integration of ESG factors
into our procurement processes; and
a review of our community engagement
strategy and action plans in South Africa.
Annual Integrated Report 2022 Sappi 193
GOVERNANCE AND COMPENSATION
Social, Ethics, Transformation and Sustainability Committee report continued
Climate change driven extreme weather events such as floods, droughts and fires
are the greatest physical risk to our business. Our forestry assets in South Africa are
particularly exposed to these risks. Specifically, the likelihood of wildfires increases
as global temperatures rise, which could lead to increased fire management
expenses; increased growing stock losses; infrastructure damage; increased soil
erosion and flooding; negative impacts on human mental and physical health (eg,
smoke pollution); as well as reputational risk through impacts on neighbouring
communities. The integrated fire risk management strategy for our Forestry assets
was therefore reviewed by the committee to ensure that our mitigation activities are
appropriate. In addition to a comprehensive risk assessment framework, significant
investment in recent years has improved fire detection capabilities, while fire crew
training and enhanced equipment has improved response times to fires. Sappi staff
play key roles in the provincial and local fire protection associations, ensuring better
optimal integrated fire risk management. Technical knowledge, resources and skills
are shared with broader neighbouring communities, which reduces risk in a holistic
manner. More specific Sappi fire risk mitigation activities include: fire protection
(preparation of firebreaks); managing fuel loads; managing open areas and non-
commercial areas; improving response time through strategic placement of water
tankers and response vehicles as well as participation in fire protection agencies
and use of camera systems to detect fires as soon as possible. In addition, weather
forecasting, weather monitoring and prediction of fire danger index (FDI) are
conducted and utilised to prioritise fire-fighting resources. The committee was
satisfied that the appropriate fire risk mitigation measures are in place.
We recognise that our sustainability obligations extend beyond our own operations,
and we are committed to utilising our sphere of influence to drive sustainability
through our upstream value chains. A co-ordinated global approach is necessary to
ensure that supplier risk and opportunity is prioritised for the group. The Sustainable
Procurement Committee was established in 2021 and presented to the SETS
Committee in 2022 their focus areas and progress.
2022
FOCUS
AREAS AND
PROGRESS
1
2
3
4
Focus area 1: Roll out of our Supplier
Code of Conduct
Focus Area 2: Assessing risk of supplier
non-compliance; Monitor and evaluate
supplier performance using EcoVadis
platform
Focus Area 3: Integrating responsible
procurement practices throughout the
company; Developing measurement and
monitoring tools
Focus Area 4: Developing an approach
to Scope 3 supplier engagements
The roll out of our Supplier Code of Conduct gained significant traction in 2022 and
our efforts in terms of sustainable procurement were enhanced by our partnership
with EcoVadis. We are actively collaborating with suppliers to assess their
sustainability performance through ratings and evaluations using the EcoVadis
methodology. This collaboration is empowering us to gain a clearer view of our
supply chain and help us to evaluate and promote responsible business practices.
It also enhances our risk identification capabilities as our suppliers’ EcoVadis
scorecards enable us to actively
evaluate their performance and 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 UN
Global Compact, the International
Labour Organisation (ILO) conventions,
the Global Reporting Initiative (GRI)
standards and the ISO 26000 standard.
The Sustainable Procurement
Committee is making good progress
in developing measurement and
monitoring tools which are integrated
into the procurement business
systems. The approach with respect to
Scope 3 engagements with suppliers
was reviewed. The SETS Committee
recognises that Scope 3 is an area that
will require more resources in years to
come as we strive to enhance our
climate action impacts through value
chain engagements.
In July 2021, South Africa was engulfed
by the worst unrest and mass violence
since the end of apartheid. 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 we were fortunate
to escape direct damage to our
operations, the rioting and looting cut
off supply chains and created unsafe
conditions for our employees to travel
to work. Our three mills in KwaZulu-
Natal were forced to close temporarily
until order was restored. A year later
in July 2022, South African finance
minister Enoch Godongwana, warned
that deteriorating service delivery at
the municipal level is likely to lead to
more instability and protest action in
South Africa.
194 Annual Integrated Report 2022 Sappi
GOVERNANCE AND COMPENSATION The potential risk of further community uprising and associated negative impacts
on our assets and business activities is unquestionable. While we deplore violence
of any kind, working as closely with the communities surrounding our operations as
we do, we understand and empathise with the underlying root causes. We have thus
intensified our focus on working with our local communities to help resolve their
challenges. Our community engagement agreements commit both ourselves and
our communities to work together in driving shared value for mutual benefit. The
deep dive on community engagement in South Africa reviewed the programme
initiatives and governance framework.
Integrated community forums (ICFs) are the key platforms used to build trust, gain
advocacy and achieve shared value. Sappi participants include management,
HR, communication, procurement, engineering and project teams. Community
participants range from traditional leaders and councillors to local business and
environmental groups and the Abashintshi (young community members, meaning
“changers” in isiZulu). The ICFs focus on three key areas: community skills
development, asset-based community development (ABCD) and corporate social
investment, as well as enterprise and supplier development (ESD). Short-term
initiatives typically focus on disaster relief efforts, donations – often in the form
of paper, sports and recreation, as well as access to potable water and road and
infrastructure support. The longer-term focus is on systemic change and helping
to build social capital. This incorporates support throughout the education value
chain – from support for early childhood development to the Sappi skills centres at
Ngodwana and Saiccor Mills which are focused on technical training. It also extends
to environmental projects such as our partnership with WWF-SA that both mitigate
harm and create environmental benefit. Through shared value, our overarching aim,
is to move our communities towards a sustainable future independent of Sappi. The
committee was satisfied with the excellent progress that has been made in
community engagement through the ICF framework.
CONCLUSION
The committee confirms that the group gives its social, ethics, transformation
and sustainability 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.
Valli Moosa
Chairman
Social, Ethics, Transformation and Sustainability Committee
Annual Integrated Report 2022 Sappi 195
GOVERNANCE AND COMPENSATION c elebrate
Any sporting great will tell you that, even if they are an individual performer,
their wins are due not just to their own prowess, but also to the work taking
place behind the scenes. Most specifically, their win also belongs to the team
backing them up – from the coaches who are with them every step of the way; to
those who believe in them, even when obstacles seem insurmountable.
As we celebrate an outstanding year, we readily acknowledge that it is the
outstanding perseverance, collaboration and commitment of our extraordinary
people that delivered the results. We do not forget that it took tremendous
courage from our people to implement the decisions that ultimately delivered
so handsomely.
Together, over the last few years, we have been through some challenging times.
We have taken some tough decisions and have had to make difficult calls.
Our people have countered volatility with agility, setbacks with courage and
problems with perseverance and ingenuity. Through it all, they have held the
flag of OneSappi and our purpose of building a thriving world high.
Together, even as we celebrate what we have accomplished, we are committed
to maintaining our momentum.
196 Annual Integrated Report 2022 Sappi
APPENDICES c elebrate
Any sporting great will tell you that, even if they are an individual performer,
their wins are due not just to their own prowess, but also to the work taking
place behind the scenes. Most specifically, their win also belongs to the team
backing them up – from the coaches who are with them every step of the way; to
those who believe in them, even when obstacles seem insurmountable.
As we celebrate an outstanding year, we readily acknowledge that it is the
outstanding perseverance, collaboration and commitment of our extraordinary
people that delivered the results. We do not forget that it took tremendous
courage from our people to implement the decisions that ultimately delivered
so handsomely.
Together, over the last few years, we have been through some challenging times.
We have taken some tough decisions and have had to make difficult calls.
Our people have countered volatility with agility, setbacks with courage and
problems with perseverance and ingenuity. Through it all, they have held the
flag of OneSappi and our purpose of building a thriving world high.
Together, even as we celebrate what we have accomplished, we are committed
to maintaining our momentum.
Annual Integrated Report 2022 Sappi 197
APPENDICES Five-year review
FOR THE YEAR ENDED SEPTEMBER 2022
US$ million
2022
2021
2020
2019
2018
7,296
4,387
1,853
18
1,038
268
770
97
673
137
536
1,339
6,229
3,430
2,799
1,524
2,358
1,163
1,943
(780)
3,521
1,267
(270)
(102)
10
(23)
–
882
506
(43)
368
196
172
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
0,980
1,085
18,154
15,783
1,172
1,196
14,966
14,851
1,163
1,120
17,131
16,226
1,094
1,128
15,156
14,346
1,161
1,190
14,147
13,052
Exchange rates
US$ per one Euro exchange rate – closing
US$ per one Euro exchange rate – average (financial year)
ZAR to one US$ exchange rate – closing
ZAR to one US$ exchange rate – average (financial year)
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.
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
198 Annual Integrated Report 2022 Sappi
APPENDICES US$ million
2022
2021
2020
2019
2018
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 information2
Sales volumes
Number of full-time equivalent employees
Lost-time injury frequency rate (including contract
employees)
Energy
Energy intensity (GJ/adt)
Renewable and clean energy to total energy (%)
Water
Specific process water extracted (m3/adt)
Waste
Specific total landfill (kg/adt)
Emissions
565.2
561.5
546.1
542.8
539.3
563.3
549.7
545.5
542.0
538.1
95
90
130
122
138
417
10.6
14.2
18.4
27.9
0.9
15.6
24.8
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
33.0
49.7
54.5
43.5
44.6
1.2
7.6
1.8
44
12.9
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
7,937
12,495
7,339
12,492
6,788
12,805
7,622
12,821
7,591
12,645
0.30
0.38
0.35
0.54
0.43
22.10
53.90
22.30
53.70
23.70
53.10
22.10
51.70
22.50
50.30
34.40
35.00
37.20
34.60
34.60
52.100
53.100
60.900
65.900
64.300
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)
0.61
4,072,052
0.19
1,245,892
0.68
4,264,077
0.16
1,019,103
0.71
4,073,453
0.20
1,152,771
0.66
4,415,554
0.22
1,482,329
0.69
4,443,906
0.23
1,483,552
Refer to share statistics section for other market and share-related information.
1
2
Net of treasury shares (refer to note 19 to the group financial statements).
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.
Annual Integrated Report 2022 Sappi 199
APPENDICES Share statistics
AS AT SEPTEMBER 2022
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
8,730
251
491
179
352
77
%
86.5
2.5
4.9
1.8
3.5
0.8
Number
of shares1
% of shares
in issue
3,538,635
1,843,770
12,393,793
12,969,862
112,622,652
421,856,820
0.6
0.3
2.2
2.3
19.9
74.7
10,080
100.0
565,225,532
100.0
1
The number of shares excludes 5,163,562 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 2022 was 10,068)
% of shares
in issue
0.5
0.5
–
–
–
–
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 2022 the following
are beneficial holders of more than 5% of the issued share capital of Sappi Limited:
Beneficial holder
Public Investment Corporation
Allan Gray Balanced Fund
Alexander Forbes Investments
Shares
107,256,752
37,805,103
31,179,908
%
19,0
6,7
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 2022, 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
M&G plc
Ninety One Plc
Shares
95,814,302
95,612,336
71,525,705
53,456,551
%
17.0
16.9
12.7
9.5
200 Annual Integrated Report 2022 Sappi
APPENDICES Share statistics
2022
2021
2020
2019
2018
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)
Earnings yield (%)2
Price/earnings ratio (times)2
Total market capitalisation (US$ million) 2
1
2
565.2
417
590.9
0.5
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
29,491.0
1.6
104.6
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
4,402
268
6,348
420
3,785
235
39.18
2.55
1,371
3,861
260
5,269
359
2,265
135
0.78
128.99
1,449
2,377
151
4,799
345
1,720
107
negative
negative
758
3,629
251
9,059
640
3,542
241
16.29
6.14
1,300
8,875
639
10,579
749
7,180
613
9.56
10.46
3,383
The number of shares excludes 5,163,562 treasury shares held by the group.
Based on financial year-end closing prices on the JSE Limited. Income statement amounts have been converted at average year-to-date
exchange rates.
Note: Definitions for various terms and ratios used above are included in the glossary section.
Annual Integrated Report 2022 Sappi 201
APPENDICES Glossary
GENERAL DEFINITIONS
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.
bio-fuels – 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 bio-based 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
texture in polyurethane or polyvinyl
chloride plastic films for the production
202 Annual Integrated Report 2022 Sappi
of synthetic leather and other 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.
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.
chemical oxygen demand
(COD) – The amount of oxygen
required to break down the organic
compounds in effluent.
CSV – Corporate shared value
involves developing profitable business
strategies that deliver tangible social
benefits.
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 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.
COP15 – The 15th Conference of the
Parties to the United Nations
Convention on Biological Diversity
(CBD), scheduled to take place in
Montreal, Canada in December 2022.
COP27 – The 27th Conference of the
Parties to the United Nations
Framework Convention on Climate
Change (COP27), that took place in the
Egyptian city of Sharm el-Sheikh in
November 2022.
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 spun 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.
Eskom – Eskom is the South African
national electricity public utility.
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.
APPENDICES 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 Council®
(FSC®) – Is a global, not-for-profit
organisation dedicated to the
promotion of responsible forest
management world-wide.
(FSC-C015022) (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.
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).
ISO –The International Organisation
for Standardisation.
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
commercially.
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.
natural/indigenous forest
– Natural forests include old growth
and primary forests as well as
managed forests where most of the
principal characteristics and key
elements of native ecosystems such
as complexity, structure, wildlife and
biological diversity are present.
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.
Annual Integrated Report 2022 Sappi 203
APPENDICES Glossary continued
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.
(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.
release paper – The backing paper
for self-adhesive labels.
SDGs – see UN SDGs.
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 Pulp – 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.
Sappi Southern Africa (SSA)
– The business unit within Sappi which
oversees operations in the Southern
Africa region.
SBTi - The Science Based Targets
initiative (SBTi) is a partnership
between Carbon Disclosure Project
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.
specific total energy (STE)
– The energy intensity ratio defined by
204 Annual Integrated Report 2022 Sappi
the total energy consumption in the
context of the saleable production.
Sustainable Forestry
Initiative® (SFI®) – Is 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 within the
PEFC programme.
http://forests.org/
TCFD – Task Force on Climate-related
Financial Disclosures.
TNFD – Taskforce on Nature-related
Financial Disclosures
thermo-mechanical pulp – Pulp
produced by processing woodfibres
using heat and mechanical grinding
or refining wood or woodchips.
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.
Transnet – Transnet is the state
owned South African rail, port and
pipeline company.
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
anti-corruption.
UN SDGs – United Nations
Sustainable Development Goals.
APPENDICES Verve – brand name for Sappi
dissolving pulp.
viscose staple fibre (VSF)
– A natural fibre made from purified
cellulose, primarily from DP that can
be twisted to form yarn.
WBCSD – World Business Council
For Sustainable Development.
woodfree paper – Paper made
from chemical pulp.
World Wildlife Fund (WWF)
– The world’s largest conservation
organisation, focused on supporting
biological diversity.
GENERAL FINANCIAL
DEFINITIONS
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.
commissioning date – The date
that an item of property, plant and
equipment, whether acquired or
constructed, is brought into use.
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.
disposal date – The date on which
control in respect of subsidiaries, joint
arrangements and significant influence
in associates ceases.
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.
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.
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.
NON-GAAP FINANCIAL
DEFINITIONS
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 IFRS.
Annual Integrated Report 2022 Sappi 205
APPENDICES Glossary continued
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.
black economic empowerment
(BEE) charge – Represents the IFRS
2 non-cash charge associated with the
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.
206 Annual Integrated Report 2022 Sappi
headline earnings – As defined in
Circular 1/2019, issued by the South
African Institute of Chartered
Accountants in March 2021, 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.
inventory turnover (times)
– Cost of sales divided by inventory on
hand at balance sheet date.
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.
net cash (utilised) generated
– Cash flows from operating activities
less cash flows from investing
activities.
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.
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.
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.
revolving credit facility (RCF)
– A variable line of credit used by public
and private businesses.
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.
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 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 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 sixth (86th) Annual General Meeting of the company will be held at Sappi’s
registered office, in the Oxford Room, Ground Floor, 108 Oxford Road (entrance on Ninth Street) Houghton Estate, Johannesburg,
2198, Republic of South Africa and through electronic communication on Wednesday, 08 February 2023 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 company’s securities 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, 09 December 2022. This Notice of AGM is being distributed to Shareholders
on Thursday, 15 December 2022 and this will be announced on the Stock Exchange News Service of the JSE, on the same date.
The last day to trade in order to be eligible to attend and vote at the AGM is Tuesday, 31 January 2023.
The record date to determine which Shareholders are entitled to attend and vote at the AGM is Friday, 03 February 2023
(Attendance Record Date).
ORDER OF BUSINESS
A
To present:
i. as required in terms of section 30(3)(d) read with section 61(8)(a) of the Companies Act, the audited consolidated annual
financial statements of the company for the financial year ended 30 September 2022, 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
ii. the report of the Social, Ethics, Transformation and Sustainability Committee in terms of regulation 43(5)(c) of the
Companies Regulations, 2011, as contained in the company’s 2022 Annual Integrated Report (Annual Integrated
Report) (see page
192).
The complete audited consolidated annual financial statements of the company for the financial year ended 2022 are
available on the Sappi website: www.sappi.com
B
To present the Annual Integrated Report, containing the disclosures required as per the JSE Limited Listings Requirements
(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. Re-election of the directors retiring by rotation in terms of Sappi’s memorandum of
incorporation (Sappi’s MOI)
The following ordinary resolutions numbers 1, 2, 3 and 4 propose the re-election of those directors of the company who
retire as directors by rotation in accordance with Sappi’s MOI and who, being eligible for re-election, offer themselves for
re-election.
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 to this Notice of AGM on page
216.
It is intended that all the directors who retire by rotation will, if possible, attend the AGM, either in person or by means of
videoconferencing.
In order for these ordinary resolutions numbers 1, 2, 3 and 4 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.
Annual Integrated Report 2022 Sappi 207
APPENDICES
Notice to shareholders continued
Ordinary resolution number 1
“Resolved that Mr MA Fallon be and is hereby re-elected as a director of Sappi.”
Ordinary resolution number 2
“Resolved that Mr NP Mageza be and is hereby re-elected as a director of Sappi.”
Ordinary resolution number 3
“Resolved that Dr B Mehlomakulu be and is hereby re-elected as a director of Sappi.”
Ordinary resolution number 4
“Resolved that Mr GT Pearce be and is hereby re-elected as a director of Sappi.”
2. Election of directors appointed since the last annual general meeting
In terms of section 68(3) of the Companies Act, the board of directors of a company can appoint a person to fill a vacancy
and serve as a director of the company on a temporary basis until the vacancy has been filled by an election by
Shareholders.
The following ordinary resolutions numbers 5, 6 and 7 propose the election by Shareholders of the persons who have been
appointed as directors by the board subsequent to the conclusion of the last annual general meeting.
Ordinary resolution number 5
“Resolved that Mr LL von Zeuner be and is hereby elected as a director of the company.”
Ordinary resolution number 6
“Resolved that Ms E Istavridis be and is hereby elected as a director of the company.”
Ordinary resolution number 7
“Resolved that Mr NL Sowazi be and is hereby elected as a director of the company.”
Each of the board and the Nomination and Governance Committee has conducted an assessment of the performance of
each of Mr LL von Zeuner, Ms E Istavridis and Mr NL Sowazi and recommends and supports their election as directors. For
brief biographical details of these directors, refer to note 1 to this Notice of AGM on page
216.
In order for these ordinary resolutions numbers 5, 6 and 7 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.
3. Election of Audit and Risk Committee members
The following ordinary resolutions numbers 8 to 14 are 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 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 has considered and accepted the findings of the Nomination and Governance Committee in this
regard. 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
144).
Ordinary resolution number 8
“Resolved that Mr NP Mageza1 be and is hereby elected as a member (and chairperson) of the Audit and Risk Committee.”
Ordinary resolution number 9
“Resolved that Ms ZN Malinga be and is hereby elected as a member of the Audit and Risk Committee.”
Ordinary resolution number 10
“Resolved that Dr B Mehlomakulu2 be and is hereby elected as a member of the Audit and Risk Committee.”
208 Annual Integrated Report 2022 Sappi
APPENDICES
Ordinary resolution number 11
“Resolved that Mr RJAM Renders be and is hereby elected as a member of the Audit and Risk Committee.”
Ordinary resolution number 12
“Resolved that Mr LL von Zeuner3 be and is hereby elected as a member of the Audit and Risk Committee.”
Ordinary resolution number 13
“Resolved that Ms E Istavridis4 be and is hereby elected as a member of the Audit and Risk Committee.”
Ordinary resolution number 14
“Resolved that Mr NL Sowazi5 be and is hereby elected as a member of the Audit and Risk Committee.”
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 annual general meeting and perform the duties and responsibilities stipulated in section 94(7) of the
Companies Act, the JSE Listings Requirements and King IV and such other duties and responsibilities as may from time to
time be determined by the board.
In order for ordinary resolutions numbers 8 to 14 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.
4. Appointment of auditors
The board has evaluated the performance of KPMG Inc and recommends its re-appointment as auditors of Sappi. The
Audit and Risk committee has considered and is satisfied as to the independence of KPMG Inc in accordance with section
94(8) of the Companies Act. The board has also considered and is satisfied as to the suitability of KPMG Inc pursuant to
paragraph 3.84(g)(iii) of the JSE Listings Requirements. Furthermore, the board has, pursuant to paragraph 3.86 of the JSE
Listings Requirements, considered and satisfied itself that KPMG Inc is accredited and recorded on the JSE list of Auditors
and Accounting Specialist and that Ms Guiseppina Aldrighetti is not on the JSE list of disqualified individual auditors.
Ordinary resolution number 15
“Resolved that KPMG Inc (with the designated registered auditor to be Ms Guiseppina Aldrighetti) be and is hereby
re-appointed as the auditors of Sappi for the financial year ending 30 September 2023 and remain in office until the
conclusion of the next annual general meeting.”
In order for this ordinary resolution number 15 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.
5. Remuneration policy
Ordinary resolution number 16
“Resolved that the company’s remuneration policy as contained in the Remuneration Report in the Annual Integrated
Report (see page
168), 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 and paragraph
3.84(j) of the JSE Listings Requirements.
In order for this ordinary resolution number 16 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 16) and the remuneration
implementation report (in ordinary resolution number 17) 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.
1 Subject to his re-election as a director pursuant to ordinary resolution number 2.
2 Subject to her re-election as a director pursuant to ordinary resolution number 3.
3 Subject to his election as a director pursuant to ordinary resolution number 5.
4 Subject to her election as a director pursuant to ordinary resolution number 6.
5 Subject to his election as a director pursuant to ordinary resolution number 7.
Annual Integrated Report 2022 Sappi 209
APPENDICES
Notice to shareholders continued
6. Remuneration implementation report
Ordinary resolution number 17
“Resolved that the company’s remuneration implementation report as contained in the Remuneration Report in the
Annual Integrated Report (see page
168), 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 and paragraph
3.84(j) of the JSE Listings Requirements.
In order for this ordinary resolution number 17 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.
7. General authority to repurchase shares
Special resolution number 1
“Resolved that the board be and is hereby authorised, by way of a general authority, to approve the repurchase from time to
time by the company of its own issued ordinary shares (Sappi shares), and to approve the purchase from time to time of
Sappi shares in the company by any subsidiary from time to time of the company upon such terms and conditions and in
such amounts as the board may from time to time determine, but subject to (re)purchases by the company and/or its
subsidiaries pursuant to this general authority not exceeding in total 10% (ten percent) of the number of Sappi shares in
issue on the date on which this general authority is granted, and subject to the provisions of the Companies Act, Sappi’s
MOI and the JSE Listings Requirements, when applicable, and any other relevant authority. It is recorded that the JSE
Listings Requirements currently require, inter alia, the following in relation to a general authority to repurchase securities:
(a) this general authority shall be valid until the next annual general meeting or for 15 months from the date on which the
general authority is granted, whichever period is shorter;
(b) authorisation thereto must be given by the company’s memorandum of incorporation;
(c) no acquisition may be made at a price more than 10% (ten percent) above the weighted average of the market price
of the Sappi shares for the 5 (five) business days immediately preceding the date of such acquisition;
(d) the repurchase of the Sappi shares must be effected through the order book operated by the JSE trading system and
done without any prior understanding or arrangement between the company and the counterparty (reported trades
are prohibited);
(e) the company may only appoint one agent at any point in time to effect any repurchase(s) on the company’s behalf;
(f)
the company and/or any of its subsidiaries may not acquire Sappi shares during a prohibited period as defined in the
JSE Listings Requirements unless a repurchase programme is in place. The company must instruct only one
independent third party, which makes its investment decisions in relation to the Sappi shares independently of, and
uninfluenced by, the company prior to the commencement of the prohibited period to execute the repurchase
programme. The repurchase programme must be submitted to the JSE in writing prior to the commencement of the
prohibited period and must include certain details including (i) the name of the independent agent; (ii) the date on
which the independent agent was appointed by the company; and (iii) the commencement and termination date
of the repurchase programme;
(g) the general authority may be varied or revoked by special resolution of the Shareholders prior to the next annual
general meeting of the company;
(h) should the company and/or its subsidiaries cumulatively repurchase 3% of the initial number of Sappi shares (i.e., the
number of Sappi shares in issue at the time that the general authority from Shareholders is granted), and for each 3%
in aggregate of the initial number acquired thereafter, an announcement must be made in terms of paragraph 11.27 of
the JSE Listings Requirements; and
the board must have resolved to authorise the repurchase, that the company and the relevant subsidiaries have
passed the solvency and liquidity test contained in the Companies Act and that, since the test was performed, there
have been no material changes in the financial position of the group.
(i)
The company will not affect a repurchase of Sappi shares under the general authority as contemplated in special resolution
number 1 unless the following requirements are met:
• the company will meet a solvency and liquidity test as contemplated in the Companies Act;
• each of the company and the group will be able to pay its debts for a period of 12 (twelve) months following the date of
the repurchase;
• the assets of each of the company and the group will be in excess of the liabilities of the company and the group for a
period of 12 (twelve) months following the date of the repurchase, such assets and liabilities having been valued in
accordance with the accounting policies used in the audited consolidated annual financial statements of the company
for the year ended 30 September 2022;
• the share capital and reserves of each of the company and the group will be adequate for the ordinary course of
business purposes for a period of 12 (twelve) months following the date of the repurchase; and
• the working capital of each of the company and group is considered adequate for ordinary business purposes for a
period of 12 (twelve) months following the date of the repurchase.
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.
210 Annual Integrated Report 2022 Sappi
APPENDICES
The board will exercise the general authority to repurchase Sappi shares should the opportunity arise and should the
directors deem it in all respects to be advantageous to the company to repurchase such shares.
Disclosure in terms of paragraph 11.26 of the JSE Listings Requirements
The JSE Listings Requirements require the following disclosures in relation to special resolution number 1, which are
included in the Annual Integrated Report
– major Shareholders of the company – page
– share capital of the company – page
200 of the Annual Integrated Report; and
200 of the Annual Integrated Report.
Directors’ responsibility statement
The directors, whose names are set out on pages
individually accept full responsibility for the accuracy of the information pertaining to special resolution number 1 and
certify that to the best of their knowledge and belief there are no facts that have been omitted which would make any
statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that the
abovementioned resolution contains all information required by the JSE Listings Requirements.
144 to 145 of the Annual Integrated Report, collectively and
No material change
There have been no material change in the financial or trading position of the company and the group since 30 September 2022.
Statement of board’s intention
The board has not passed any resolution to effect, and has no current specific intention to effect, a repurchase pursuant
to the general authority as contemplated in special resolution number 1. The board will continually review the company’s
position, having regard to prevailing circumstances and market conditions, in considering whether to effect such a
repurchase.
8. Non-executive directors’ fees
Special resolution number 2
“Resolved that, for the period commencing on 1 October 2022 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 fees1
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 fees1
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
£319,9402
ZAR704,800 ZAR747,088
£71,121
£74,677
US$108,466 US$112,804
€94,435
€99,157
ZAR471,034 ZAR499,296
£47,370
£49,739
US$72,304
US$75,196
€62,913
€66,059
ZAR489,112 ZAR518,459
£48,101
£50,506
US$74,887
US$77,882
€63,872
€67,066
ZAR244,561 ZAR259,235
£24,187
£25,397
US$36,572
US$38,035
€32,108
€33,713
Annual Integrated Report 2022 Sappi 211
APPENDICES
Notice to shareholders continued
3. Fees of Human Resources and Compensation Committee, Nomination and
Governance Committee, Social, Ethics, Sustainability and Transformation
Committee and any other committee established from time to time (ad hoc
or otherwise)1
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. Additional meeting fees for board meetings in excess of five meetings
per financial year whether attended in person or by teleconference/
videoconference and other ad hoc duties
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
ZAR294,063
£28,582
US$42,794
€37,946
ZAR311,707
£30,012
US$44,506
€39,843
ZAR153,040
£20,026
US$26,138
€26,593
ZAR162,223
£21,027
US$27,183
€27,923
ZAR47,224
per meeting
£4,699
per meeting
US$7,226
per meeting
€6,232
per meeting
ZAR50,057
per meeting
£4,934
per meeting
US$7,515
per meeting
€6,543
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, with payments for a part of a financial year being determined
2
on a pro rata basis.
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.
Sappi’s practice, as advised previously, is to review directors’ fees annually. Special resolution number 2 increases the
remuneration currently paid to non-executive directors and board committee members. The recommendation is that all
non-executive directors’ fees will be adjusted in line with executive management increases globally. No adjustment is
recommended for the Chairman’s fee. The fees would be increased by between 4% and 6% per annum, depending on the
domicile of the director, with effect from 01 October 2022. 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 review takes into account that the responsibilities of non-executive directors continue 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 accordingly be applicable to payments to be made in December 2022 onwards. Initially the
December 2022 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 2022 payment will be made up in the March 2023 payment.
Directors’ fees and board committee fees are paid to non-executive directors only.
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.
212 Annual Integrated Report 2022 Sappi
APPENDICES
9.
Loans or other financial assistance to related or inter-related companies or corporations, and to
any person related to the company and any such company or corporation
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 and to any person related to any such company or
corporation, 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.
Special resolution number 3
“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 or corporation (wheresoever
incorporated or registered) which is from time to time related or inter-related to the company, and to any person related
from time to time to the company or any such company or corporation, on such terms and conditions and in such amounts
as the board may determine, subject to the board being satisfied that:
• immediately after providing the financial assistance, the company would satisfy the solvency and liquidity test contained
in the Companies Act; and
• the terms under which the financial assistance is proposed to be given are fair and reasonable to the company.
For the avoidance of doubt, this special resolution number 3 does not authorise the company to provide direct or indirect
financial assistance to a director or prescribed officer, or to a director or prescribed officer of a related or inter-related
company or corporation”.
In order for this special resolution number 3 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.
10. Signature of documents
Ordinary resolution number 18
“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 18 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.
D. Other matters:
To transact such other business as may be transacted at an AGM.
Identification
In terms of section 63(1) of the Companies Act, before any person may participate in the AGM, that person must present
reasonable satisfactory identification to the chairperson of the meeting, who must be reasonably satisfied that such
person has the right to listen in to, participate in, and vote at, the meeting, either as a Shareholder or as a representative or
proxy for a Shareholder. Acceptable forms of identification include a valid identity document, passport or driver’s licence.
Certificated shareholders and own-name dematerialised shareholders
Shareholders who are recorded as such in the securities register on the attendance record date (Qualifying Shareholders)
and who:
• hold Sappi shares in certificated form, or
• have dematerialised their shares (i.e., have replaced the paper share certificates with electronic records of ownership
under the JSE’s electronic settlement system) and are recorded in the sub-register in own name dematerialised form
(i.e., 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:
–
–
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.
Annual Integrated Report 2022 Sappi 213
APPENDICES
Notice to shareholders continued
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 14:00 (South African Standard Time) on Monday, 06 February 2023.
Hand deliveries to:
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 (other than own-name dematerialised shareholders)
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 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.
Electronic participation in the AGM
The company intends to make provision for Qualifying 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 MOI 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; and
vote during the AGM through a virtual meeting platform; and
• a Qualifying Shareholder (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 14:00 (South African Standard Time)
on Monday, 06 February 2023. If a Qualifying Shareholder does not email a participation request complying with the above
requirements to reach the Transfer Secretaries by that time, that Qualifying Shareholder 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 a participation request is sent 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.
214 Annual Integrated Report 2022 Sappi
APPENDICES
In relation to a participation request complying with the above requirements received by the Transfer Secretaries from a
Qualifying Shareholder:
• by 14:00 (South African Standard Time) on Monday, 06 February 2023, the Transfer Secretaries will use reasonable
endeavours to email the connection details notice by no later than 17:00 (South African Standard Time) on Tuesday,
07 February 2023 or
• after 14:00 (South African Standard Time) on Monday, 06 February 2023 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 (www.sappi.com
questions on electronic participation, please send an email to proxy@computershare.co.za.
) and can also be obtained from the Transfer Secretaries. Should you have any further
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.
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, CSDPs or brokers; 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.
Sappi shares held by a share trust or scheme
Sappi shares held by a share trust or scheme will not have their votes taken into account at the AGM for the purposes
of resolutions proposed in terms of the JSE Listings Requirements.
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 submit questions in advance in writing to the Group Company
Secretary so as to be received by 17:00 (South African Standard Time) on Friday, 27 January 2023 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
15 December 2022
Annual Integrated Report 2022 Sappi 215
APPENDICES
Notice to shareholders continued
NOTES
1. Directors retiring by rotation who are
seeking re-election
Michael Anthony Fallon (Mike) (64)
(Independent)
Qualifications: BSc Hons (First Class)
Nationality: British
Appointed: September 2011
Sappi board committee memberships
• Human Resources and Compensation Committee
(Chairman)
• Nomination and Governance Committee
Skills, expertise, and experience
Mr Fallon retired as an executive director of Nippon
Sheet Glass Company Limited (NSG Group) at the
end of June 2012. Before retiring, Mr Fallon was
President of NSG’s Global Automotive division, with
17,500 employees, heading up all the glass and glazing
operations in the key automotive regions across the
world. With annual sales of around €6 billion, the NSG
Group is one of the world’s largest manufacturers of
glass and glazing products for the building, automotive
and speciality glass sectors. His management and
leadership experience extends across a wide range of
functions from plant management, sales and marketing
and supply chain to general management, including
mergers and acquisition experience. During his 30-year
career in a highly competitive industry, he held several
positions, including President of Pilkington operations
in North America and director and Chairman of
companies in the UK, New Zealand and Finland. In his
last four years at NSG group, he was both a main board
director and leader of its Global Automotive division. He
was responsible for leading and developing the
strategic direction and ultimately the performance and
governance of this business. His leadership and
experience covered all aspects of the business, from
its research and development, sales and marketing,
30 manufacturing sites, supply chain, including
150 warehouses and distribution centres, purchasing,
human resources and finance.
Nkateko Peter Mageza (Peter) (67)
(Independent)
Qualifications: FCCA (UK)
Nationality: South African
Appointed: January 2010
Sappi board committee memberships
• Audit and Risk Committee (Chairman)
• Human Resources and Compensation Committee
Other board and organisation memberships
• Anglo American Platinum Ltd
• RCL Foods Ltd
• Remgro Ltd
216 Annual Integrated Report 2022 Sappi
Skills, expertise, and experience:
Mr Mageza joined the Sappi board after holding senior
executive positions across several industries. He is a
former Group Chief Operating Officer and Executive
Director of Absa Group Limited, assistant General
Manager at Nedcor Limited and CEO of Autonet, the
Road Passenger and Freight Logistics division of
Transnet Limited. He was previously a director at
MTN Group Limited.
Dr Bonakele Mehlomakulu (Boni) (49)
(Independent)
Qualifications: PhD (Chemical Engineering)
Nationality: South African
Appointed: March 2017
Sappi board committee memberships
• Social, Ethics, Transformation and Sustainability
Committee
• Audit and Risk Committee
Other board and organisation memberships
• Hulamin Limited
• Yokogawa South Africa
Skills, expertise, and experience
Dr Boni Mehlomakulu holds a PhD in Chemical
Engineering from the University of Cape Town. Her
career started at Sasol before joining the Department
of Science and Technology occupying various
management roles. Her recent executive role was CEO
of the South African Bureau of Standards; a position
she held for nine years. In addition to her non-executive
directorship at Sappi Limited, she also serves as a
non-executive director at Hulamin Limited and
Yokogawa South Africa. Her past directorships include
PBMR (Pty) Limited, Nuclear Energy Corporation of
South Africa, Eskom Holdings SOC Limited and the
Technology Innovation Agency, she also served as the
Deputy Chair of Unisa Council and was a country
representative on the Council of International
Organization for Standardization (ISO, Geneva).
Glen Thomas Pearce (59)
(Chief Financial Officer)
Qualifications: BCom, BCom Hons, CA(SA)
Nationality: South African
Appointed: July 2014
Sappi board committee memberships
• Expected to attend Audit and Risk Committee
meetings by invitation
Skills, expertise, and experience
Mr Pearce joined Sappi Limited in June 1997 as
Financial Manager and subsequently held various
senior finance roles in South Africa and in Belgium
before being promoted to Chief Financial Officer and
executive director of Sappi Limited in July 2014. Prior
to joining Sappi, he worked at Murray & Roberts Limited
from 1992 to 1996.
APPENDICES
2. Appointment and confirmation of directors
Mr Louis Leon von Zeuner (61)
(Independent)
Qualifications: BEcon (Economics)
Nationality: South African
Appointed: September 2022
Sappi board committee memberships
• Audit and Risk Committee
Other board and organisation memberships
• Telkom SOC, Independent Non-Executive Director,
(Chair Audit & Risk)
• Transnet SOC, Independent Non-Executive Director,
(Audit, Finance, and Investment, Risk member)
• FirstRand Group, Independent Non-Executive
Director, (Chair REM)
• University of Free State, Council Member
Skills, expertise, and experience
Mr von Zeuner holds a Bachelor of Economics from the
University of Stellenbosch and is a Chartered Director
(SA). His role as board member, aside from the normal
focus on strategy profitability and sustainability, has a
key focus on governance status. Despite his role
change from executive to non-executive, Mr von
Zeuner has been able to continue to play a leadership
role in the activities of various organisations and
contribute to growing the businesses. He is results
driven and supports growing customer relationships.
Ms Eleni Istavridis (65)
(Independent)
Qualifications: Bachelor of Arts (BA) (MBA) (MIA)
Nationality: American
Appointed: October 2022
Sappi board committee memberships
• Audit and Risk Committee
Other board and organisation memberships
• Sonoco Products Company, Independent Non-
Executive Director (Financial Policy Committee,
Employee and Public Responsibility Committee,
Audit Committee)
Skills, expertise, and experience.
Ms Istavridis is a seasoned leader with international
experience, including 17 years in the United States and
22 years in Asia in Financial Services and
Manufacturing. She has deep expertise in strategy,
finance and global operations. Most recently she was
Executive Vice President at Bank of New York Mellon as
Head of Global Client Management for Asia and later
Head of Investment Services, Asia Pacific. Earlier she
served in a variety of senior leadership roles including,
President and COO of Tristate, an Asia based
manufacturer, and Managing Director at Bankers Trust
Company. She is currently an Independent board
member of two public companies and has committee
assignments focused on Audit, Financial Policy,
Employees and Public Responsibility areas.
Mr Nkululeko Leonard Sowazi (59)
(Independent)
Qualifications: Master’s Degree in Urban Planning
Nationality: South African
Appointed: October 2022
Sappi board committee memberships
• Audit and Risk Committee
Other board and organisation memberships
• Grindrod Limited, Lead Independent Non-Executive
Director, (Member of Remuneration), (Member of
Investment), (Member of Social & Ethics), (Member of
Risk)
• MTN Group, Independent Non-Executive Director,
(Member of Nominations), (Remuneration and Human
Resources Member), (Finance Member), (Chair of
S&E), (Climate Change member)
• Sanlam Private Equity Fund (Investment Committee
Chair)
• Tiso Foundation (co-founder and Trustee)
Skills, expertise, and experience.
Mr Sowazi has over 30 years′ senior executive and
investment management experience and has served
on numerous boards of both listed and unlisted
companies. Mr Sowazi has a strong commercial and
entrepreneurial business track record and presents
with an impeccable reputation in the market.
Annual Integrated Report 2022 Sappi 217
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
08 February 2023
February 2023
May 2023
August 2023
September 2023
November 2023
December 2023
218 Annual Integrated Report 2022 Sappi
APPENDICES Proxy form
FOR THE ANNUAL GENERAL MEETING
Sappi Limited
(Registration number: 1936/008963/06)
JSE code: SAP
ISIN code: ZAE000006284
(Sappi or the company)
For use only by shareholders who:
•
•
hold shares in certificated form, or
hold dematerialised shares (i.e., 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 (i.e., 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-sixth (86th) Annual General Meeting of the company to be held at 14:00 (South African Standard Time) on
Wednesday, 08 February 2023 at Sappi’s registered office, in the Oxford Room, Ground Floor, 108 Oxford Road (entrance on Ninth Street) Houghton
Estate, Johannesburg, 2198, Republic of South Africa and 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 14:00 (South African Standard Time) on Monday, 06 February 2023. 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 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 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 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.
Such beneficial owners must not complete this form of proxy.
I/We (please print names in full)
of (address)
Telephone/Cellphone number:
Email address:
being a shareholder(s) of Sappi holding
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:
Sappi shares and entitled to vote at the AGM, hereby appoint
Number of shares
For
Against Abstain
Re-election of the directors retiring by rotation in terms of Sappi’s MOI
Ordinary resolution number 1 – Re-election of Mr MA Fallon as a director of Sappi
Ordinary resolution number 2 – Re-election of Mr NP Mageza as a director of Sappi
Ordinary resolution number 3 – Re-election of Dr B Mehlomakulu as a director of Sappi
Ordinary resolution number 4 – Re-election of Mr GT Pearce as a director of Sappi
Election of directors appointed since the last annual general meeting
Ordinary resolution number 5 – Election of Mr LL von Zeuner as a director of Sappi
Ordinary resolution number 6 – Election of Ms E Istavridis as a director of Sappi
Ordinary resolution number 7 – Election of Mr NL Sowazi as a director of Sappi
Election of Audit and Risk Committee members
Ordinary resolution number 8 – Election of Mr NP Mageza as a member and chairperson of the Audit and Risk
Committee
Ordinary resolution number 9 – Election of Ms ZN Malinga as a member of the Audit and Risk Committee
Ordinary resolution number 10 – Election of Dr B Mehlomakulu as a member of the Audit and Risk Committee
Ordinary resolution number 11 – Election of Mr RJAM Renders as a member of the Audit and Risk Committee
Ordinary resolution number 12 – Election of Mr LL von Zeuner as a member of the Audit and Risk Committee
Ordinary resolution number 13 – Election of Ms E Istavridis as a member of the Audit and Risk Committee
Ordinary resolution number 14 – Election of Mr NL Sowazi as a member of the Audit and Risk Committee
Ordinary resolution number 15 – Re-appointment of KPMG Inc as auditors of Sappi for the financial year ending
30 September 2023 and until the conclusion of the next annual general meeting of Sappi
Ordinary resolution number 16 – Non-binding endorsement of remuneration policy
Ordinary resolution number 17 – Non-binding endorsement of remuneration implementation report
Special resolution number 1 – General authority to repurchase shares
Special resolution number 2 – Non-executive directors’ fees
Special resolution number 3 – Loans or other financial assistance to related or inter-related companies and to any
person related to the company or any such company or corporation
Ordinary resolution number 18 – Authority for directors and Group Company Secretary to sign all documents and do
all such things necessary 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
Assisted by me, where applicable (name and signature)
Please read the notes and instructions on the following pages.
this
day of
Annual Integrated Report 2022 Sappi 219
APPENDICES Notes to the form of proxy
1.
2.
3.
4.
5.
6.
7.
8.
9.
This form of proxy is only to be completed by certificated shareholders and own-name dematerialised shareholders.
A shareholder may insert the name of a proxy or the names of alternative proxies of the shareholder’s choice in the space
provided, provided that, in the case of concurrent proxies, this form of proxy must clearly state 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 waives 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.
A shareholder may appoint more than one proxy to exercise voting rights attached to different shares held by the
shareholder.
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.
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.
Forms of proxy must be dated and signed by the shareholder appointing a proxy.
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 14:00 (South African Standard Time) on
Monday, 06 February 2023:
Hand deliveries to:
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 a form of proxy to the
transfer secretaries to be received by that time, such shareholder will nevertheless be entitled to email the form of proxy to
the transfer secretaries to be received prior to the commencement of the AGM.
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.
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.
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.
220 Annual Integrated Report 2022 Sappi
APPENDICES
Transfer secretaries’ offices
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
Summary of terms of section 58(8)(b)(i) of the South African Companies Act, 2008, as amended
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 MOI 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
MOI 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.
Annual Integrated Report 2022 Sappi 221
APPENDICES Investor relations
Tracy Wessels
Group Head Investor Relations and Sustainability
Tel +27 (0)11 407 8391
Tracy.Wessels@sappi.com
JSE Sponsor
RAND MERCHANT BANK
(A division of FirstRand Bank Limited)
Registration number: 1929/001225/06
1 Merchant place, corner Rivonia Road and Fredman Drive
Sandton, 2146, South Africa
PO Box 786273
Sandton
2146
www.rmb.co.za
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
Administration
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
Corporate affairs
André Oberholzer
Group Head Corporate Affairs
Tel +27 (0)11 407 8044
Andre.Oberholzer@sappi.com
222 Annual Integrated Report 2022 Sappi
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.
www.sappi.com