for the year ended September 2023
S
a
p
p
i
A
n
n
u
a
l
I
n
t
e
g
r
a
t
e
d
R
e
p
o
r
t
f
o
r
t
h
e
y
e
a
r
e
n
d
e
d
S
e
p
t
e
m
b
e
r
2
0
2
3
About this report
Our reporting suite
S
a
p
p
i
A
n
n
u
a
l
I
n
t
e
g
r
a
t
e
d
R
e
p
o
r
t
f
o
r
t
h
e
y
e
a
r
e
n
d
e
d
S
e
p
t
e
m
b
e
r
2
0
2
3
www.sappi.com
www.sappi.com
2023
Annual
Integrated
Report
for the year ended September 2023
2023 Sappi Annual
Integrated Report
www.sappi.com/annual-reports
Frameworks
•
• Companies Act 71 of 2008
IR Framework
(as amended) of South Africa
(Companies Act)
• Johannesburg Stock Exchange
(JSE) Listings Requirements
• King IV Code on Governance™
for South Africa, 2016 (King IV)1.
2023
Group
Annual
Financial
Statements
for the year ended September 2023
2023 Sappi Group Annual
Financial Statements
www.sappi.com/annual-reports
Frameworks
•
International Financial Reporting
Standards (IFRS)
• Companies Act
• JSE Listings Requirements
• King IV.
Group
Sustainability
Report
2023 Sappi Group
Sustainability Report
www.sappi.com/2023GSDR
Frameworks
• Global Reporting Initiative
(GRI) standards
• United Nations Global
Compact (UNGC)
• United Nations
Sustainable Development
Goals (UN SDGs).
For our standalone King IV application register
and our risk report, please go to
www.sappi.com/annual-reports
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.
r o s perity
P
lan e t
P
P
e
o
p
l
e
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.
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.
Natural capital: Recognising that our business
depends on natural capital, we focus on understanding,
managing and mitigating our impacts.
Contents
About this report
Group overview
Our 2023 reporting theme
Who we are
Where we operate
Delivering sustained value
Introduction to our
strategy
Thrive
Our strategy and performance
Sappi and the SDGs
Our business model
Letter to the stakeholders from the
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
Climate Action: TCFD disclosure
IFC
4
5
6
10
11
20
24
28
35
40
44
52
66
68
86
Diving deeper into our performance
and prospects
Product review
106
Chief Financial Officer’s report
Governance and compensation
Our leadership and executive management
Corporate governance
Remuneration Report
Social, Ethics, Transformation and
Sustainability (SETS) Committee report
Appendices
Five-year review
Share statistics
Glossary
Notice to shareholders
Shareholders’ diary
Proxy form for the annual
general meeting
Notes to the proxy form
Administration
Forward-looking statements
118
140
148
170
194
198
200
202
207
218
219
220
222
IBC
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
Thrive
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 Galerie Silk
135 and 350 g/m2.
Sappi Annual Integrated Report 2023 1
ABOUT THIS REPORT About this report continued
Our Annual Integrated Report for the year ended 30 September 2023 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, our performance against financial and non-financial
objectives and 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
group and regional sustainability reports address a wider audience with more detail on stakeholder engagement and key material
issues. In addition to our Annual Integrated Report (pages
(pages
1 to 195), we have included supporting appendices
196 to 222).
Ensuring holistic value creation
At Sappi, we take a holistic view of value creation. We
understand that the long-term sustainability of our business
will only be ensured by delivering sustained value for our
stakeholders. Value for Sappi is not only about delivering
returns to our shareholders, but 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.
Integrated thinking and the 3Ps
In understanding our value creation process, we take an
integrated approach, considering the resources and
relationships upon which we depend and impact, either
positive or negative, through our business activities. Our
value creation process is articulated through the lens of
Prosperity, People and Planet (the 3Ps) – an approach aligned
with six capitals model of the International Integrated
Reporting Framework (2021).
Natural capital
Recognising that our business depends on natural capital, we focus on understanding, managing and mitigating our impacts.
Planet
Prosperity
People
Intellectual capital
Our technology centres and R&D initiatives promote a
culture of innovation to support the development of
commercially and environmentally sustainable solutions.
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 capital.
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. For more
information on how we create value and our business model,
refer to pages
24 to 27.
2 Sappi Annual Integrated Report 2023
Human capital
We require engaged and productive employees. We
create a safe and healthy workplace for our people in
which diversity is encouraged and valued, providing them
with ongoing development opportunities. This enhances
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 our licence to trade
and our competitive advantage, enabling shared value
creation.
Materiality
The materiality of the information presented was determined
based on extensive ongoing engagement with our
stakeholders. It was assessed against the backdrop of current
business operations and prevailing trends in our industry and
the global economy. In line with the double materiality
approach, our material issues aim to enhance our
stakeholders’ understanding of the impact of environmental
and social issues on Sappi’s enterprise value and the impact
of our activities on the environment and society (refer to
pages
68 to 84).
In determining our material matters and value creation over time, we consider the following timeframes:
Short term:
One to two years, in line with immediate risks and opportunities
Medium term: Three to five years in line with management accounting’s five-year financial forecast plan
Long term:
Five to 30 years, taking 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 and the EU’s plan for carbon neutrality
by 2050.
Our Annual Integrated Report boundary
Our operating context (page
40)
Our strategy and value creation
processes (page
11 and 24)
Our performance (page
106)
Financial reporting entity
• Sappi Europe
• Sappi North America
• Sappi Southern Africa
(page
7)
Our SDG commitments (page
20)
Our key relationships (page
52)
Our risks and opportunities (page
44)
Scope and boundary
This report covers the period from the beginning of
October 2022 to the end of September 2023.
We aim to present material, comparable, relevant and
complete information. 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.
Key to our materiality determination process is our reporting
boundary. Our reporting boundary considers all our
operations (refer to Where we operate on pages
In addition, we consider the risks and opportunities beyond
our financial reporting boundary that may significantly affect
our ability to create value. These include material matters
arising from our operating context, strategy, stakeholder
issues, opportunities, risk management processes and SDG
commitments, among others.
6 and 7).
Assurance
We obtained limited external assurance on selected
sustainability key performance indicators in our 2023 Sappi
Group Sustainability Report. The independent practitioner’s
limited assurance report is included in the 2023 Sappi Group
Sustainability Report. Our sustainability information is 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
and reviewing reported information and supporting
documentation. Most of our key operations undergo external
verification, including the Eco-Management and Audit
Scheme in Europe, ISO 50001 energy certification in Europe
and South Africa and globally, ISO 45001 environmental
certification, ISO 9001 quality certification and ISO 45001
health and safety certification. Some of our mills are certified
to the ISO 22000 food safety management standard and EN
15593 management of hygiene in the production of
packaging for foodstuffs.
We are 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 rating agency.
Collectively, these external assessments and certifications
and 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.
Our financial information is verified by our external auditors.
For information on the combined assurance framework
relevant to the disclosure in this report and the independent
auditors’ report, see Group Annual Financial Statements on
www.sappi.com/annual-reports
Board approval
The Sappi Limited board of directors (board) acknowledges its
responsibility for ensuring the integrity of the Annual Integrated
Report and, to the best of its knowledge and belief, the 2023
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 has
been prepared in accordance with the IR Framework and
speaks to Sappi’s use of and effect on the 3Ps (addressing
value creation, preservation and erosion), which are aligned
with the six capitals.
The board thus approved the 2023 Sappi Annual Integrated
Report on 08 December 2023.
Sir Nigel Rudd
Chairman
Steve Binnie
Chief Executive Officer (CEO)
Forward-looking statements
In line with the International IR Framework, this report contains
forward-looking statements to enable users to understand
the challenges and uncertainties Sappi is likely to encounter
in pursuing its strategy. This information is included
throughout the report.
For important information relating to these forward-looking
statements, refer to the inside back cover.
Sappi Annual Integrated Report 2023 3
ABOUT THIS REPORT Our 2023 reporting theme
As a company based on renewable
resources, our 2023 Annual
Integrated Report presents the
beautiful, intricate shapes found in
nature, reflecting the way we are
continually shaping our business
to achieve our vision of a thriving world.
There have been many challenges in
recent times, including the Covid-19
pandemic and associated lockdowns
which were swiftly followed by the
Russia-Ukraine war.
This sent energy and food prices rising, igniting
global supply chain and cost-of-living crises which in
turn led to social unrest in many parts of the world.
Extreme weather events in many parts of the world
compounded uncertainty.
These connected events, together with generally
subdued consumer sentiment, impacted the demand
for many of our products.
However, while these developments may shape our
world, they have increased our determination not just
to react to our environment but to shape a bold,
cohesive response. Based on our longstanding track
record of renewing, revitalising and redefining our
business and plans to continue our success, we are
well positioned to do so.
4 Sappi Annual Integrated Report 2023
There are no constant conditions in our
operating environment, but there are some
constants in our response: We will continue to
focus on growing our business, sustaining our
financial health, driving operational excellence
and enhancing trust.
We will do so by creating career and personal
development opportunities for our engaged,
inspired employees and promoting sustainable
livelihoods within our communities. Innovation
will continue to be key to delivering profit and
margin improvement, with sustainability and
our priority United Nations Sustainable
Development Goals (UN SDGs) an increasingly
important core value and development platform.
By shaping our purpose with positive, creative
force, we drive results sustainably, gain the trust
of and serve our shareholders, customers,
employees and society at large.
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.
Our raw material offerings (such as dissolving
pulp (DP), wood pulp and biomaterials) and
end-use products (packaging papers, speciality
papers, graphic papers, casting and release
papers, as well as forestry products) are
manufactured from woodfibre sourced from
sustainably managed forests and plantations,
in production facilities which, in many cases use
internally generated bioenergy. 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.
5.5 million tons
Paper production per year
2.6 million tons
Paper pulp production per year
1.5 million tons
Dissolving pulp production per year
Globally we have
12,329 employees1
400,000 ha
Owned and leased sustainably
managed forests in South Africa
1
Includes corporate and Sappi Trading employees.
Sappi Annual Integrated Report 2023 5
GROUP OVERVIEW 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
Hong Kong
México City
Johannesburg
Sydney
Nairobi
Shanghai
São Paulo
Where we operate
Europe
Employees
5,410
12
10
Production
facilities
Sales offices
North America
South Africa
Employees
2,o73
Sales offices 6
4
Production
facilities
Employees
4,591
Sales offices 3
5
Production
facilities
6 Sappi Annual Integrated Report 2023
Sappi Europe
Sappi Europe
Mills
Alfeld Mill
Carmignano Mill
Condino Mill
Ehingen Mill
Gratkorn Mill
Kirkniemi Mill
Lanaken Mill1
Maastricht Mill
Stockstadt Mill1
Total Sappi Europe
Products produced
Bleached chemical pulp for own consumption
Speciality paper; flexible packaging paper, paperboard, containerboard, release
liner, label paper, functional papers
Speciality paper; dye sublimation paper, flexible packaging paper, inkjet paper and
label paper
Speciality paper; dye sublimation paper, flexible packaging paper, inkjet paper
and silicone base paper
Bleached chemical pulp for own consumption and market pulp
Coated woodfree paper and containerboard
Bleached chemical pulp for own consumption
Coated woodfree paper and label paper, containerboard
Bleached mechanical pulp for own consumption
Coated mechanical paper
Bleached chemi-thermo mechanical pulp for own consumption
Coated woodfree paper
Coated woodfree paper and paperboard
Bleached chemical pulp for own consumption and market pulp
Coated woodfree paper and uncoated woodfree paper
Total Sappi Europe excluding mills being closed
Other operation
Rockwell Solutions Coated barrier film and paper
Products produced
Sappi North America
Sappi North America
Mills
Cloquet Mill
Matane Mill
Somerset Mill
Products produced
Dissolving pulp, bleached chemical pulp for own consumption and market pulp2
Coated woodfree paper and label paper
High-yield hardwood pulp for own consumption and market pulp
Bleached chemical pulp for own consumption and market pulp
Coated woodfree paper, paperboard and label papers
Converting for speciality casting and release paper
Westbrook Mill
Total Sappi North America
Sappi Southern Africa
Sappi Southern Africa
Plantations4
KwaZulu-Natal
Mpumalanga
Total Sappi Forests (owned and leased supply)
Products produced
Plantations (pulpwood and sawlogs)5
Plantations (pulpwood and sawlogs)5
Capacity*
Capacity*
(’000 m33))
(’000 m
Timber
86
Mills
Lomati Sawmill
Ngodwana Mill
Stanger Mill
Tugela Mill
Products produced
Sawn timber
Unbleached chemical pulp for own consumption
Mechanical pulp for own consumption
Kraft linerboard
Newsprint
Kraft papers
Bleached bagasse pulp for own consumption
Office paper and tissue paper
Neutral sulphite semi chemical pulp for own consumption
Corrugating medium
Waste paper collection and recycling for own consumption
Sappi ReFibre6
Total Sappi Paper and Paper Packaging
Capacity* (’000 tons)
Paper3
Packaging and
speciality
papers
Graphic
papers
275
100
60
115
100
70
720
720
165
880
750
530
190
220
2,735
1,985
Pulp
120
140
250
300
165
145
1,120
810
Capacity* (million m2)
100
Capacity* (’000 tons)
(’000 tons)
Capacity*
Paper3
Packaging and
speciality
papers
Graphic
papers
70
270
490
23
583
510
780
Pulp
370
285
525
1,180
Capacity11 (’000)
(’000)
Capacity
Hectares
165
235
400
Standing
tons
10,992
17,412
28,404
Capacity* (’000 tons)
Capacity* (’000 tons)
Paper3
Packaging and
speciality
papers
Graphic
papers
240
25
28
200
493
85
82
167
Pulp
230
110
60
170
75
645
255
890
1,145
1,790
Ngodwana Mill
Dissolving pulp
Saiccor Mill
Dissolving pulp
Total dissolving pulp
Total Sappi Southern Africa
86
493
167
* Capacity at maximum continuous run rate per annum.
1 Mills to potentially be closed in FY2024.
2 The stated capacity is for dissolving pulp, the capacity for kraft pulp is 17% higher.
3
The split between graphic papers and packaging and speciality papers is what we believe is technically and commercially possible. Some mills have the
capacity to swing between products.
4 Approximately 139,000 hectares of our land is set aside and maintained by Sappi Forests to conserve the natural habitat and biodiversity found there.
5 Plantations include owned and leased areas.
6 Sappi ReFibre collects waste paper in the South African market, which is used to produce packaging paper.
Sappi Annual Integrated Report 2023 7
GROUP OVERVIEW 8 Sappi Annual Integrated Report 2023
Evolve
Very little in nature is static – everything is constantly changing and evolving.
One miraculous example of this is the metamorphosis of the egg, the
caterpillar (larva) and the chrysalis (pupa) into the adult butterfly. This
process embodies fresh ideas, renewal and unexpected outcomes.
The caterpillar’s new form as a butterfly opens new horizons, but also new
risks, particularly in the form of climate change. Butterflies are particularly
sensitive to environmental changes like climatic shifts. That is because they
are strictly adapted to certain environmental conditions and their
development depends on certain larval food plants and specific
microhabitat structures.
In Sappi’s case, climate change presents both risks and opportunities. We
are addressing short- and long-term physical and transitional climate risks
identified through processes outlined by the Task Force on Climate-related
Financial Disclosures (TCFD) to build resilience. In addition, we are
determined, as a socially responsible business, to play our part in ensuring
a just transition in South Africa as the country faces the reality of reducing
its dependence on coal.
We are also determined to accelerate our science-based decarbonisation
trajectory which we see as an opportunity to future-proof our business.
So too, are the opportunities presented by evolving customer needs and
legislation – notably growing demand for sustainable packaging, based on
low-carbon impact, together with demand for more sustainable textile fibres.
We cannot achieve our vision of a thriving world without an evolving
response to climate change. By collaborating with a broad range of
stakeholders we are working to achieve energy security and climate
resilience and transform our vision into reality.
Sappi Annual Integrated Report 2023 9
Our Thrive strategy
Sappi is an established global pulp and paper business with
production facilities in South Africa, Europe and North
America. We produce a wide range of products including
dissolving pulp, graphic papers, packaging papers,
speciality papers and biomaterials.
The markets we serve continuously change and develop and to
this end we aim to adjust with these global trends. We invest in our
people, facilities and processes to ensure we create value for all our
stakeholders by creating products that are relevant, sustainable
and in growing markets. Our clear advantages in diversification,
global scale and local expertise help us to create prosperity
through sustainable solutions.
We assume our responsibility to be a
sustainability leader with pride and therefore
produce our products from woodfibre
sourced from sustainably managed
forests and plantations.
We are thoughtfully sourcing materials,
reducing material waste, abating carbon
and carefully considering product
end-of-life. We strictly monitor and control
our use of energy, water and other raw
materials and continually look to reduce our
reliance on fossil fuels.
Thrive
strategy is an iterative process
Our
seeking to implement opportunities to reduce
cost and/or grow the business while sustaining
a healthy balance sheet and enhancing
relationships. A fine balance of continuous
Thrive
Our
strategy is executed by our people and therefore we are focused on growing our human
potential, ensuring we have sustainably engaged people and are extending our positive influence to
the communities where we operate around the world to create shared value.
capital prioritisation.
Thrive
strategy responds to various global forces and market trends. It is built on four main
Our
objectives with annual and longer-term actions and targets, some set for delivery by 2025 while others,
including our Science Based Targets initiative (SBTi) commitments, are set for delivery beyond 2025.
10 Sappi Annual Integrated Report 2023
Our strategy and performance
Our strategy
Through
collaboration and
innovation, we
will grow
profitably, using
our strength as a
sustainable and
diversified global
woodfibre group,
focused on
dissolving pulp
(DP), graphic
papers,
packaging
papers, speciality
papers and
biomaterials.
* Earnings before interest, taxation,
depreciation and amortisation (EBITDA).
Grow our business
What this means
How we performed in 2023
• Grow DP capacity, matching market
demand
• Continue to expand and grow
packaging and speciality papers
in all regions
• Commence commercialisation of
biomaterials opportunities
• Optimise graphic papers segment
ensuring we balance supply and
demand.
• Continued successful ramp up of DP expansion project
at Saiccor Mill
• Packaging and speciality papers constitute 26% of group
sales volume (excluding forestry)
• Packaging and speciality papers contribute 29% of
group EBITDA*
• Initiated the expansion and conversion of Somerset PM2
from graphic paper to packaging and speciality paper
• Initiated the process for the further reduction of graphic paper
capacity in Europe by the closure of Stockstadt Mill and
potential closure of Lanaken Mill
• Strong growth in lignin sales and favourable advancement of
other biomaterials opportunities.
Sustain our financial health
What this means
How we performed in 2023
• 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 creation.
• Reduced net debt to US$1,085 million
• Generated US$210 million cash
• Focused capex on essential projects aligned to the strategy
• Sustained our contributions on graphic paper notwithstanding
weak demand
• Declared a dividend of 15 US cents
• Repurchased a portion of 2026 bond with a cash settlement
of US$206 million thereby reducing interest cost
• Signed the sale agreement to sell the Stockstadt Mill property.
Drive operational excellence
What this means
How we performed in 2023
• Drive our safety first culture
• Continuously improve our cost
position
• Continue to maximise the benefits
of our global footprint
• Best-in-class production
efficiencies to secure increased
volumes.
• Record safety performance
• Group efficiency, procurement and continuous improvement
savings > US$115 million
• Maximised the benefits of OneSappi to achieve cost
advantages
• Challenging macroenvironment resulting in weak trading
conditions in the paper business and thus significant
machine downtime
• Ramped up Saiccor Mill production.
Enhance trust
What this means
How we performed in 2023
• Improve our understanding of – and
proactively partnering with – all
stakeholders
• Drive sustainability solutions. Meet
the changing needs of every Sappi
employee.
• Performance against our science-based carbon emission
reduction target was severely impacted by production
curtailments
• Actively supported local communities through
community forums
• Improved 2023 Employee Engagement Survey
compared to 2021
• Expanded Supplier Code of Conduct compliance and
EcoVadis supplier assessments
• Sustained Level 1 BBBEE in South Africa
• Actively promoting gender diversity.
Sappi Annual Integrated Report 2023 11
DELIVERING SUSTAINED VALUE Our strategy and performance continued
Measuring our progress
Guided by our strategy, we measure our progress holistically against
our mission, collaborating and partnering with stakeholders as we
strive to be a trusted and sustainable organisation with an exciting
future in woodfibre.
ROCE (%)
Self-assessment of 2023 performance
Thrive
Link to
strategy objectives
Why is this important?
ROCE, is an important measure that assesses long-term
profitability by comparing how effectively assets are
performing with how these assets are financed.
Linked to executive remuneration
Link to 3Ps
and SDGs
Our strategic performance indicators
2021
5.4
2022
2023
12.3
2024 objectives
• Grow volumes in all segments and improve cost
position
27.9
• Optimise the packaging and speciality papers
volumes in all regions
• Further reduce our exposure to graphic papers.
0
5
10
15
20
25
30
EBITDA (US$ million)
Self-assessment of 2023 performance
Thrive
Link to
strategy objectives
Why is this important?
EBITDA measures how we performed operationally
as a company.
Link to 3Ps
and SDGs
Linked to executive remuneration
Our strategic performance indicators
2021
2022
2023
532
731
1,339
0
300
600
900
1,200
1,500
2024 objectives
• Grow volumes in all segments and sustain contributions
• Manage costs to maximise profitability
• Focus on maximising cash generation through
disciplined capital allocation and working capital
management.
12 Sappi Annual Integrated Report 2023
EBITDA margin (%)
Self-assessment of 2023 performance
Link to
Thrive
strategy objectives
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.
Link to 3Ps
and SDGs
Our strategic performance indicators
2021
2022
2023
10.1
12.6
2024 objectives
• Improve margins in all business segments
• Focus on reducing fixed and variable costs
• Reduce downtime and improve operating rates.
18.4
0
5
10
15
20
Sales (US$ million)
Self-assessment of 2023 performance
Thrive
Link to
strategy objectives
Why is this important?
While not the only determinant of financial success, sales
is a key measure of demand, customer loyalty and a critical
contributor to profit.
Link to 3Ps
and SDGs
Our strategic performance indicators
2021
2022
2023
5,265
7,296
2024 objectives
• Continue to grow and optimise the packaging and
speciality papers segments to fully operate our paper
machine assets
• Consolidate graphic paper sales to improve margins
• Maximise DP volumes to capacity with increased
5,809
volumes from Saiccor Mill.
0
2,000
4,000
6,000
8,000
Self-assessment
Strategic objectives
3Ps
SDGs
Outstanding
Satisfactory
Grow our business
Prosperity
Sustain our financial health
Progress to be made/ongoing
Drive operational excellence
People
Planet
Enhance trust
Linked to executive remuneration
Identified sustainability goal
Sappi Annual Integrated Report 2023 13
DELIVERING SUSTAINED VALUE
Our strategy and performance continued
Net debt (US$ million)
Self-assessment of 2023 performance
Thrive
Link to
strategy objectives
Our strategic performance indicators
2021
2022
2023
1,163
1,085
Link to 3Ps
and SDGs
1,946
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).
2024 objectives
• During 2024 we are targeting to spend an estimated
US$500 million on capital projects which includes
US$154 million of expansionary capex, resulting in
increased net debt.
0
500
1,000
1,500
2,000
Net debt:EBITDA (ratio)
Self-assessment of 2023 performance
Thrive
Link to
strategy objectives
Link to 3Ps
and SDGs
Why is this important?
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
Our strategic performance indicators
2021
3.7
2022
0.9
2023
1.5
0
1
2
3
4
5
6
2024 objectives
• With significantly reduced net debt targeting to sustain
this ratio at 1.5x through the cycle.
14 Sappi Annual Integrated Report 2023
Lost-time injury frequency rate
(LTIFR) (per million work hours)
Self-assessment of 2023 performance
Why is this important?
LTIFR is an important measure of our business’ safety.
We target zero harm and aim to improve LTIFR by at least
10% year-on-year.
Thrive
Link to
strategy objectives
Our strategic performance indicators
2021
2022
2023
0.30
0.24
Link to 3Ps
and SDGs
Linked to executive remuneration
Identified sustainability goal1
0.38
2024 objectives
• Continue to reduce LTIFR and zero fatalities.
0.0
0.1
0.2
0.3
0.4
Gender diversity (%)
Self-assessment of 2023 performance
Thrive
Link to
strategy objectives
Link to 3Ps
and SDGs
Why is this important?
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 senior positions.
Identified sustainability goal1
Our strategic performance indicators
2021
2022
2023
20.2
22.0
22.0
2024 objectives
• Stay on track to reach 23% of women in senior
positions – HRL19 and upwards by 2025.
0
5
10
15
20
25
1 For this indicator, we have clear targets for 2025 that we are working towards. See our 2023 Sappi Group Sustainability Report for more information
www.sappi.com/2023GSDR
Self-assessment
Strategic objectives
3Ps
SDGs
Outstanding
Satisfactory
Grow our business
Prosperity
Sustain our financial health
Progress to be made/ongoing
Drive operational excellence
People
Planet
Enhance trust
Linked to executive remuneration
Identified sustainability goal
Sappi Annual Integrated Report 2023 15
DELIVERING SUSTAINED VALUE
Our strategy and performance continued
Supplier Code of Conduct (%)
Self-assessment of 2023 performance
Thrive
Link to
strategy objectives
Link to 3Ps
and SDGs
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 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.
Identified sustainability goal1
Our strategic performance indicators
2021
2022
2023
59
74
81
0
20
40
60
80
100
2024 objectives
• Maintain 80% procurement spend with declared
compliance with Supplier Code of Conduct.
Sustainable engagement (%)
Self-assessment of 2023 performance
Thrive
Link to
strategy objectives
Our strategic performance indicators
2021
2022
Not measured
2023
79.3
80.3
Link to 3Ps
and SDGs
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 goal1
2024 objectives
• No survey will be done in 2024, but we will implement
learnings to continue to improve our 2025
engagement score.
0
20
40
60
80
100
1 For this indicator, we have clear targets for 2025 that we are working towards. See our 2023 Sappi Group Sustainability Report for more information
www.sappi.com/2023GSDR
16 Sappi Annual Integrated Report 2023
Specific GHG (Scope 1 and 2)
emissions (kg CO2e/adt)
Self-assessment of 2023 performance
Thrive
Link to
strategy objectives
Our strategic performance indicators
2021
2022
2023
Link to 3Ps
and SDGs
862.1
813.2
944.0
0
200
400
600
800
1,000
Share of renewable and clean
energy (%)
Self-assessment of 2023 performance
Thrive
Link to
strategy objectives
Our strategic performance indicators
2021
2022
2023
Link to 3Ps
and SDGs
54.9
55.0
57.9
Why is this important?
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
approved 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.
Linked to executive remuneration
Identified sustainability goal2
2024 objectives
• Stay on track to decrease specific greenhouse gas
(GHG) emissions (Scope 1 and 2) by 18% by 2025
against base year 2019 (893.3 kg CO2e/adt)
• Stay on track to decrease specific GHG emissions
(Scope 1 and 2) by 41.5% by 2030 against a base year
of 2019.
Why is this important?
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 goal1
2024 objectives
• Stay on track to increase share of renewable and clean
energy by 8% by 2025 against base year 2019
(53.5%).
0
10
20
30
40
50
60
1 For this indicator, we have clear targets for 2025 that we are working towards. See our 2023 Sappi Group Sustainability Report for more information
www.sappi.com/2023GSDR
2 For this indicator, we have clear targets for 2025 and 2030 that we are working towards. See our 2023 Sappi Group Sustainability Report for more
information www.sappi.com/2023GSDR
Self-assessment
Strategic objectives
3Ps
SDGs
Outstanding
Satisfactory
Grow our business
Prosperity
Sustain our financial health
Progress to be made/ongoing
Drive operational excellence
People
Planet
Enhance trust
Linked to executive remuneration
Identified sustainability goal
Sappi Annual Integrated Report 2023 17
DELIVERING SUSTAINED VALUE
Our strategy and performance continued
Energy intensity (GJ/adt)
Self-assessment of 2023 performance
Thrive
Link to
strategy objectives
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.
Identified sustainability goal1
Link to 3Ps
and SDGs
Our strategic performance indicators
2021
2022
2023
22.3
22.1
26.2
0
5
10
15
20
25
30
Specific process water usage (m3/adt)3
Self-assessment of 2023 performance
Thrive
Link to
strategy objectives
Our strategic performance indicators
2021
2022
2023
Link to 3Ps
and SDGs
46.6
48.6
48.4
2024 objectives
• Stay on track to reduce energy intensity by 5%
by 2025 against base year 2019 (22.1 GJ/adt).
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.
Identified sustainability goal1
2024 objectives
• Stay on track to reduce specific process water use by
23% by 2025 against base year 2019 (44.5m3/adt).
0
10
20
30
40
50
1 For this indicator, we have clear targets for 2025 that we are working towards. See our 2023 Sappi Group Sustainability Report for more information
www.sappi.com/2023GSDR
3 This indicator applies to mills in South Africa, as they are at risk of experiencing operational water challenges.
18 Sappi Annual Integrated Report 2023
Specific landfilled solid waste (kg/adt)
Self-assessment of 2023 performance
Thrive
Link to
strategy objectives
Link to 3Ps
and SDGs
Our strategic performance indicators
2021
2022
2023
52.1
51.1
73.6
0
20
40
60
80
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.
Identified sustainability goal1
2024 objectives
• Stay on track to reduce specific landfilled solid waste
by 15% by 2025 against base year 2019 (65.1 kg/adt).
Certified fibre4
Self-assessment of 2023 performance
Thrive strategy
Link to
objectives
Link to 3Ps
and SDGs
Why is this important?
We are committed to sourcing woodfibre from forests and
timber plantations in a manner that promotes their health
and supports community wellbeing.
Identified sustainability goal1
Our strategic performance indicators
2021
2022
2023
77
77
75
2024 objectives
• Maintain or improve percentage certified fibre
above 75%.
0
10
20
30
40
50
60
70
80
1 For this indicator, we have clear targets for 2025 that we are working towards. See our 2023 Sappi Group Sustainability Report for more information
www.sappi.com/2023GSDR
4 The quantity of the total certified chips procured by Matane Mill for Q4 is incomplete. Subsequently, the certified fibre procurement percentage is lower
and is expected to increase as all suppliers confirm their deliveries.
Self-assessment
Strategic objectives
3Ps
SDGs
Outstanding
Satisfactory
Grow our business
Prosperity
Sustain our financial health
Progress to be made/ongoing
Drive operational excellence
People
Planet
Enhance trust
Linked to executive remuneration
Identified sustainability goal
Sappi Annual Integrated Report 2023 19
DELIVERING SUSTAINED VALUE
Sappi and the SDGs
“ Embracing the UN SDGs is not
just our commitment to a better
world, it’s our strategic
investment in a future where
social responsibility and
business success converge
thereby securing a sustainable
legacy for generations to come.”
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
There has been a proliferation of sustainability standards and compliance
requirements in recent years. These have been issued by bodies like the International
Sustainability Standards Board (ISSB), the JSE, the European Financial Reporting
Advisory Group (EFRAG) and are embedded in the German Supply Chain Act. Are these
hindering or helping the achievement of the SDGs?
On the one hand, the reporting obligations being placed on companies through these standards look set to become increasingly
onerous. On the other hand, it appears that reporting bodies are looking to synchronise and align with pre-existing standards like
the GRI. This clearly stands Sappi in good stead, as we have been reporting against the GRI since 2008.
One of the key common denominators of the new reporting standards is the concept of double materiality which acknowledges
that a company should report simultaneously on sustainability matters that are firstly, financially material in influencing business
value and secondly, material to the market, the environment and people. Sappi welcomes this approach and we are increasingly
using it to drive our strategic sustainability work. Assessing the broader impacts of our operations enhances our reporting on
both internal and external issues to various stakeholders. It also deepens our understanding of the risks and opportunities that
amplify or detract from value in the broadest sense. This in turn means we can better plan strategic direction, develop tangible,
measurable key performance indicators and link these to operational development.
20 Sappi Annual Integrated Report 2023
Q2
The UN recently released its first
Global Stocktake, an assessment
of progress made toward
mitigating global warming since
the Paris Agreement in 2015. The
key takeaway message is that we
are not on track to meet the
target of the Paris Agreement.
What is your view on this?
Q3
Sappi reports transparently
against SDG-related 2025
targets in the Group
Sustainability Report, disclosing
whether targets are on track or
not. Has there been any fallout
from stakeholders when targets
are not met?
One of Sappi’s strategic fundamentals is ‘enhance trust’.
Reporting as we do strengthens our relationship with our
stakeholders. Our customers in particular need to know they
can rely on the information we provide as they look to meet
the needs of eco-conscious consumers around the
world and promote sustainability in their own supply chains.
This is particularly important because consumers are faced
with a wealth of claims on the ‘green’ nature of products. This
has become such a problem that there are regulations
pending around the world – like the European Commission’s
directive on green claims – aimed at counteracting
‘greenwashing’.
In FY2023, while we made significant strides in achieving
our People targets and attained our best ever safety
performance, we fell behind in our planet targets. We
acknowledge that sustainability is a journey and that
unexpected external and internal challenges will impede our
progress. Through our focus on innovation and agility we will
adapt where necessary to ensure continuous improvement.
Our firm view is that transparency heightens engagement
and builds loyalty and that our stakeholders understand that
we are steadfast in our commitment to meet or exceed all our
Thrive
(2025) sustainability goals.
The global economic crisis has meant that many countries,
particularly in Europe, are scaling back on climate ambitions.
While understandable, in the face of devastating climate
events, the world should not lose sight of the urgent need to
reduce GHG emissions. The report highlights the need to
reduce GHG emissions from 2019 levels by 43%, 60% and
84% by 2030, 2035 and 2050, respectively, to limit global
warming to 1.5°C.
Sappi’s key countries of operation appear committed to their
long-term GHG reduction goals. With reference to the 84%
reduction in GHG emissions by 2050 outlined by the Global
Stocktake, Canada and the European Union have committed
to net zero by the same date, as has South Africa in its
Nationally Determined Contribution (NDC) submission
(updated in 2021). The US has set an economy-wide goal
of net zero emissions by no later than 20501.
Unfortunately, in our own operations, production curtailments
significantly impeded our operational efficiency in FY2023,
causing us to fall short of several of our energy-related
targets which are intensity based. We remain committed to
meeting our science-based decarbonisation targets and
intend reducing our emission intensity by 41.5% by 2030.
We have developed a robust transition plan with associated
capital allocation. Our view is that decarbonisation is not
a choice, but an essential component of our long-term
success and viability as a business.
Among the actions proposed to achieve these targets, the
Stocktake recommends preserving forests and addressing
non-CO2 emissions: Agriculture, Forestry and Other Land
Uses were responsible for 22% of global GHG emissions in
2019. About half of these emissions are attributable to
deforestation. This means we can expect greater global focus
on deforestation, which gives us a competitive advantage,
as our woodfibre supply chains are deforestation-free.
1 The goal is on a net basis, including both sources of emissions and removals. It does not include emissions from international aviation or
international shipping.
Sappi Annual Integrated Report 2023 21
DELIVERING SUSTAINED VALUE Sappi and the SDGs continued
Q4
Which of the Planet
targets have been the most
difficult to meet?
Following this approach has helped to shape our response to
key material issues and made the concept of sustainability
more tangible for our own people and our external
stakeholders.
It has also helped to build our brand and enhance our
reputation. A recent study by Deloitte indicates that one in
four consumers (26%) are prepared to pay more to protect
biodiversity or for sustainable products and packaging (24%)
or for products or services of suppliers that respect human
rights or commit to ethical working practices (25%).1
In a changing talent landscape, articulating our sustainability
journey through the SDGs is important for attracting
millennials (those born between the early 1980s and the
late 1990s) and Gen-Zs (those born from 1997 onwards) to
the workforce. This is highlighted by another Deloitte study
which found that Gen-Zs and millennials continue to demand
greater climate action from their employers and believe
some have deprioritised sustainability strategies in
recent years. They also see a critical role for
employers to provide the necessary skills training
to prepare the workforce for the transition to a
low-carbon economy.2 Overall, aligning with
the SDGs has helped to mature our
sustainability strategy as we have
transitioned from compliance and
reactive measures to protect our licence
to operate to a more purpose-driven
position. This has anchored the Sappi
culture and business model in
sustainable thinking.
Taking a broader view, our world
today is battling with the lingering
effects of Covid-19, a high cost
of living, geopolitical instability
and extreme weather events.
This means it is more important
than ever before to be united by
a common framework and
universal set of goals if we are
to achieve a thriving world.
As discussed on the previous page, production curtailments
during the year have severely impacted our planet targets
which are based on an intensity metric (performance per
mass unit of product produced). These include energy
intensity, GHG emission intensity and solid waste intensity.
Notwithstanding the fact that our performance against these
targets was poor, our absolute GHG emissions and solid
waste sent to landfill were in fact lower than the prior year
with emissions substantially lower. This is of course due to
our low operating rates which had an adverse impact on our
profitability and is not at all sustainable for our business. This
clearly demonstrates the interconnectivity and trade-offs
between Prosperity and Planet. Absolute and intensity
targets represent two different approaches to setting goals
for environmental sustainability. Each approach has its
trade-offs, and the choice between them depends on various
factors, including the nature of the business, the industry and
the desired environmental outcomes. Ultimately, the choice
between absolute and intensity sustainability targets
depends on the specific goals of the organisation, the
industry context and the desired balance between overall
impact reduction and efficiency improvements. Our
underlying ambition is to reduce our impact on nature
while maintaining a sustainable balance between People,
Prosperity and Planet by doing more with less. We have
therefore selected intensity metrics as the appropriate
measure for some of our Planet indicators which drives us
to grow our circular and renewable product solutions with
an unrelenting focus on operational efficiencies.
Has aligning with the SDGs
amplified enterprise value?
Q5
The SDGs can be difficult to grasp and not everyone realises
there are many sub-indicators underpinning each SDG.
For example, the indicators under SDG8: Decent Work and
Economic Growth are broad, ranging from the promotion of
a safe working environment; to equal pay for equal work and
annual growth rates of gross domestic product (GDP) per
capita; among others. Before aligning with priority SDGs and
establishing our related targets, we established a global
working group which analysed each SDG and associated
sub-indicators.
https://www2.deloitte.com/uk/en/pages/consumer-business/articles/sustainable-consumer-what-consumers-care-about.html
1
2 https://www2.deloitte.com/content/dam/Deloitte/si/Documents/deloitte-2023-genz-millennial-survey.pdf
22 Sappi Annual Integrated Report 2023
Sappi Annual Integrated Report 2023 23
DELIVERING SUSTAINED VALUE Our business model
Our business model
Our business model is underpinned by our purpose: Sappi exists to build a thriving world by unlocking the power of
renewable resources to benefit people, communities and the planet. This is reinforced by our ongoing engagement with our
stakeholders (pages
40 to 43), both enabling
more tangible business creation.
52 to 63) and an in-depth understanding of our operating context (pages
Our six capital inputs are the basis of our value streams ...
Financial capital
• Total assets: US$5,796 million.
Intellectual capital
• Technology centres around the world
• Research and development (R&D) investment:
US$44 million
• Leading-edge tree improvement programmes
• World-class digital transformation strategy.
Manufactured capital
• 19 production facilities
• 28 paper/packaging machines.
Human capital
• 12,329 employees
• 10,000 contractor employees
• Strong safety culture.
Social and relationship capital
• Ongoing stakeholder engagement
• Corporate social investment: SEU €100,000,
Sappi North America (SNA) US$417,500, Sappi
Southern Africa (SSA) ZAR54 million.
Natural capital
• 400,000 ha owned and leased plantations.
Approximately one-third is unplanted and
managed for biodiversity conservation
• Energy purchased: 72,213,507 GJ/annum
• Energy generated on site: 59,364,623 GJ/annum
• Renewable energy: 57.9%, of which 67.2% own
black liquor
• Process water extracted: 220 million m3 (absolute),
44.1 m3/adt (specific)
• Certified fibre used: 75%.
Our SDGs
SDGs
8
12
17
SDGs
1
4
8
17
SDGs
6
7
12
13
15
17
Our values: As OneSappi, we do
business safely with integrity and
courage, making smart decisions
which we execute with speed.
24 Sappi Annual Integrated Report 2023
Leveraging these value streams ...
enables the realisation
of our strategy ...
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 leading-edge
tree improvement programmes ensure this advantage is
maintained and leveraged.
Manufacturing excellence
• We focus on enhancing machine efficiencies, digitising
our processes to make the smart factory a reality,
reducing variable costs through new logistics and
procurement practices and 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,
furfural, lignosulphonates and bioenergy. Extracting
more value from each tree is at the core of our business
model.
Pulp
• Our dissolving pulp (DP) 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.
Speciality papers
• Our customers use our speciality papers to add value to
niche markets and enable product differentiation. Our
focus on innovation helps our customers to meet and
anticipate the challenges of changing market dynamics.
Packaging papers
• Our packaging solutions offer environmentally
conscious consumers an alternative to fossil-fuel-based
packaging.
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.
Grow our
business
Sustain our
financial
health
Drive
operational
excellence
Enhance
trust
and generates
certain outputs
Products:
• 4,988,309 tons of saleable
production.
Waste:
• 1,432,165 tons of waste generated,
of which 1,064,482 tons (74.3%)
diverted from disposal.
Emissions:
• 3.5 million tCO2e absolute direct
(Scope 1) GHG, in specific terms:
0.70 tCO2e/adt.
Monitoring and reporting on our ambitious SDG-related 2025 goals aligns with our
being a trusted partner to all our stakeholders. See our 2023 Sappi Group Sustainability Report for
more information www.sappi.com/2023GSDR
strategy of
Thrive
Sappi Annual Integrated Report 2023 25
Our business activities create, preserve and
erode value, leading to certain key outcomes ...
which we work to enhance in the
following ways:
EBITDA excluding special items US$731 million
Net debt: US$1,085 million
US$992 million paid to employees as salaries, wages
and other benefits
US$540 million reinvested to grow the business
US$106 million paid to governments as taxation
US$97 million paid to lenders of capital as interest
US$85 million paid to shareholders as dividends
New products launched to meet evolving market
demands.
The most recent Employee Engagement Survey showed an
increased participation rate and an increase in the percentage
of engaged employees
Zero fatalities
Improvement in the LTIFR across all regions
Global training average (weighted) of 50.39 hours per
employee (FY2022: 46.89 hours)
Productivity 4.9 hours worked per ton of saleable production
(FY2022: 3.8 hours)
Maintained our Level 1 BBBEE contributor status.
• Lowest debt level in 30 years positions us well for growth
• New software was introduced to create a OneSappi
approach to R&D and ideation
• Digital transformation strategy is progressing well
• New warehouse at Carmignano Mill enables the mill to
offer a complete in-house solution for sublimation papers
• Modernisation (PM11 at Gratkorn Mill will allow us to
continue to serve the print market profitably)
• US$418 million investment at Somerset Mill to convert
PM2 to solid bleached sulphate paperboard (SBS) on track
• Capacity expansion and environmental upgrade
at Saiccor Mill had an improved climate impact on the
lyocell, viscose and pharmaceutical DP grades produced
at the mill.
• Central action tracker facilitates the resolution of issues
identified in the Employee Engagement Survey
• Global safety performance exceeded the target
• Global target to increase proportion of women in
management roles on track
• Revised Code of Ethics launched to all employees in
line with our strong governance culture.
Increase in specific GHG Scope 1 and 2 emissions
Increase in global specific energy usage
Specific process water usage in SSA not achieved
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
75% certified fibre supplied to mills enhances our
competitive advantage.
• Sappi Chair in Climate Change and Plantation
Sustainability at the University of the Witwatersrand
will provide more accurate climate models and replicable,
workable methodologies which will benefit Sappi and the
industry
• Our World Wildlife Fund (WWF) Water Stewardship
project in the uMkhomazi catchment near Saiccor Mill
extended for another four years
• Sappi Rare, Threatened and Endangered Species
Stewardship Programme expanded with three new trees.
Value created
Value preserved
Value eroded
Sappi Annual Integrated Report 2023 26
Our business model continued
Our trade-offs
These are detailed throughout this report, with the key trade-offs
detailed below.
Risks
• We have stopped the development of Sappi
• Risk: 6 Evolving
Symbio, a natural composite material
combining high-quality cellulose from wood
with thermo-plastics, due to slow growth in
demand. We are now investing our resources
into projects showing greater short- and
medium-term promise.
technologies and
consumer
preferences
• Risk: 10 Liquidity.
Risks
• Risk: 9 Employee
relations.
• In response to market overcapacity and in line
with our strategy of reducing exposure to
graphic paper markets, we are closing
Stockstadt Mill and initiated a consultation
process for the potential closure of Lanaken
Mill shortly after year-end. This could potentially
impact employees and morale.
• Production curtailments significantly impeded
our operational efficiency, causing us to fall
short of our planet-related targets for the year.
For example Scope 1 (direct) and Scope 2
(indirect) GHG emissions intensity increased
by 16.1% year-on-year. However, we remain
steadfast in our commitment to meet and
surpass all our
(2025) sustainability
goals.
Thrive
Risks
• Risk: 4
Sustainability
expectations
• Risk: 5 Climate
change.
27 Sappi Annual Integrated Report 2023
Letter to the stakeholders from the
Chairman and CEO
Despite 2023 being one of the most
challenging downcycles experienced in
the pulp and paper industry, with demand
for our paper products falling below that of
the Covid-19 pandemic years, we achieved
some significant milestones. The South
African business delivered record EBITDA
(in SA Rand) and North America the second
highest ever EBITDA. Additionally, the
group generated significant cash enabling
a further reduction of net debt at year-
end to US$1,085 million, the lowest level
in 30 years.
Safety
Safety is intricately woven into our strategic
framework as a non-negotiable core value
and embedded in our values statement:
As OneSappi, we do business safely,
with integrity and courage, making smart
decisions that we execute with speed.
We recognise that a culture of safety is
paramount to our success and have
incorporated it into every facet of our
operations. This commitment to safety
is an integral and ingrained element of
Sappi’s overarching
aligning with our broader goals of
sustainability, operational excellence
and stakeholder trust.
strategy,
Thrive
We are very pleased to report that there
were no work-related fatalities during
the year and all regions achieved
their best ever LTIFR performance. The
relentless focus on robust safety training
programmes, regular audits, hazard
assessments and proactive risk
management combined with reward and
recognition programmes are essential to
ensuring the wellbeing of our employees
and the communities in which we operate.
A number of noteworthy milestones were
achieved during the year; Ehingen Mill
achieved 2 million zero lost-time man
hours, Stockstadt Mill achieved 1 million
zero lost-time man hours, Somerset Mill
achieved 5 million zero lost-time man
hours, Ngodwana Mill achieved 3 million
zero lost-time man hours and Sappi
Forests’ Zululand Coastal business unit
continued with their record-breaking safety
performance achieving 7 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.
Sir Nigel Rudd
Chairman
Operating review
“Against a backdrop of a volatile
and challenging macroeconomic
environment, Sappi delivered
EBITDA excluding special items of
US$731 million for the year ended
September 2023. The widespread
disruption caused by ongoing
geopolitical instability, weak global
economic growth, rising interest rates
and an underperforming Chinese
economy negatively impacted markets
for our products.”
The unfavourable trading conditions faced in 2023 were further exacerbated
by a prolonged period of downstream inventory destocking as buyers slowly
worked through inventories that had been built up in the second half of 2022.
In response to these headwinds, we concentrated on preserving selling
prices, efficiently managed our capacity and inventories to optimise working
capital and implemented various cost-saving initiatives across our operations,
all of which positively contributed to the earnings performance.
28 Sappi Annual Integrated Report 2023
in the latter part of the year by relatively
subdued VSF pricing and the weak Chinese
Renminbi exchange rate against the
US Dollar. Sales volumes for the pulp
segment increased by 7% compared to the
prior year but profitability was adversely
impacted by the lower average pricing and
cost inflation.
Strategic review
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.
Thrive
aims
Thrive
Thrive
strategy underscores the
Sappi’s
company’s commitment to creating a
sustainable future. Anchored in sustainability,
innovation and transparency,
to position Sappi as a trusted and innovative
partner in building a biobased circular
economy.
dedication to long-term growth, responsible
resource management and the wellbeing
of our workforce and the communities in
which we operate, ultimately reflecting
the company’s mission to thrive while
advancing the principles of a sustainable,
circular economy.
embodies Sappi’s
Thrive
Our
following four main objectives:
strategy encompasses the
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.
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.
Sappi Annual Integrated Report 2023 29
Steve Binnie
CEO
Markets
Graphic paper demand declined sharply and remained weak throughout
the year due to weak consumer confidence related to the slowing global
economy and an inventory destocking cycle which took longer than
anticipated. Sales volumes declined 38% year-on-year and production
curtailments were required to manage these weak demand dynamics.
Selling prices were 14% higher than the prior year and remained resilient.
However, cost inflation and operational inefficiencies associated with low
capacity utilisation significantly eroded profitability. The prolonged market
weakness with no immediate signs of a meaningful rebound suggests a
substantial erosion of underlying demand for graphic papers. As a result,
industry operating rates fell to an unsustainable level. In response to the
market overcapacity and in line with Sappi’s strategy to reduce exposure
to graphic paper markets, we made the difficult decision to close the
Stockstadt Mill and initiated a consultation process for the potential
closure of the Lanaken Mill shortly after year-end.
The packaging and speciality papers segment faced similar weak trading
conditions related to high levels of downstream inventory and muted
consumer demand. Positive year-on-year pricing gains of 7% were
insufficient to offset input cost inflation and a 22% reduction in sales
volumes leading to a decline in the segment’s profitability.
The same market dynamics of elevated stock levels and negative consumer
sentiments dampened demand and pricing for textile fibres in the early part
of the year. However, viscose staple fibre (VSF) operating rates in China improved
steadily as economic activity resumed from the third quarter onwards.
Operating rates in the VSF industry remained at a high level through the
remainder of the year and downstream VSF inventories dropped below
historical levels, which supported demand for DP. The hardwood DP market
price fell more than US$200 from the elevated levels of last year to reach a
low of US$840 in August. The movement was driven primarily in the early part
of the year by high-retail inventories and weak consumer sentiment and then
I
D
E
L
I
V
E
R
N
G
S
U
S
T
A
N
E
D
V
A
L
U
E
I
Letter to the stakeholders from the Chairman and CEO continued
Initiatives and actions undertaken in 2023 to support our
strategic objectives are outlined below.
Grow our business
The substantially reduced debt levels provide us with the
necessary headroom to navigate any market headwinds and
provide us with flexibility to accelerate our investments in
higher-margin businesses while reducing our exposure to
declining paper markets.
In 2023, the packaging and speciality paper segments
constituted 29% of group EBITDA and represented 26%
of sales volumes (excluding forestry). Within the context of
the challenging market conditions, this was a satisfactory
performance and demonstrates the resilience of the
segment. The long-term outlook for packaging and speciality
paper products remains favourable and we will continue to
maximise profitability by growing our capacity and optimising
our product mix. The conversion and expansion of Somerset
PM2 from coated woodfree graphic paper to solid bleached
sulphate paperboard commenced during the year and is
progressing well. The US$418 million investment is fully
aligned with our strategy to reduce exposure to graphic
papers and grow in the higher-margin packaging papers
segment. The project is on track for commissioning in
2025 and will add 470,000 tpa of capacity to our packaging
papers segment.
We made good progress in expanding our packaging and
speciality papers portfolio during the year with the
development of a number of new products.
We expanded our portfolio of wet-glue label papers with the
development of a new wet-strength, alkali-resistant Parade
Label Pro WS, produced at Gratkorn Mill. The product is
suitable for high-quality labels for returnable containers in
the beverage and food industry, such as returnable glass
and polyethylene bottles. Following successful technical
validation with selected customers, the product is scheduled
for full commercialisation in 2024. 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 in 2022 to produce barrier papers
at the speciality paper mill, Alfeld, in Germany. In 2023 we
made good progress on collaborations with key customers
to qualify our new functional papers which support the shift
away from fossil-based materials towards renewable,
paper-based packaging solutions that also provide
exceptional product protection.
In South Africa, the upgrade of the containerboard machine
at Ngodwana Mill was completed at the end of 2022.
The start up after the upgrade was challenging, which
negatively impacted production volumes in the early part of
2023 but operations stabilised in the second half of the year.
The investment has allowed us to extend our product range
to the lightweight grades which allowed us to optimise
our portfolio to better meet the needs of our customers.
Containerboard demand in South Africa is projected to grow,
driven by robust growth in the fruit export markets which
represents a strategic growth opportunity in the future.
The PrimePak Unbleached kraft bag product produced
at Ngodwana Mill has begun to generate pleasing results.
Launched towards the end of FY2020, sales growth and
market penetration have been impressive, and in FY2024 it
will represent more than 25% of the capacity of the newsprint
machine. The product has been particularly successful in
the South African quick service restaurant (QSR) segment
and retail bag applications have also begun to yield some
successes as the migration away from plastics continues.
In February 2023 we commissioned two machines for the
production of bagasse-based compostable thermo-moulded
food-grade bowls and plates at Stanger Mill. Commercial
sales in South Africa are progressing well and we will soon be
expanding the portfolio to fast food containers and exploring
opportunities in international markets.
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. In 2023 we made further progress in the
application of Valida (fibrillated cellulose) in our own paper
products where it is used to enhance the functionality and
performance of our Sappi paper and tissue products.
Our manufacturing capacity has been significantly increased
and now covers multiple sites in Europe and South Africa.
Late in 2022, we commissioned our furfural pilot plant at
Saiccor Mill. The pilot plant has successfully demonstrated
that Sappi’s furfural technology produces high-quality
furfural from hemicellulose sugars present in the spent
sulphite cooking liquor. The furfural produced in our pilot
plant has been tested by the market and meets even the
most stringent requirements. We have initiated a class
10 engineering design and costing project for a potential
commercial furfural plant which would position Sappi as
one of the largest producers of furfural globally. The value
of our lignin business continued to grow from the strong
performance of last year and we have accelerated the
development and commercialisation of higher value
lignin-based solutions. We progressed development of
Viscowell, our lignosulphonate-based product used in
oil-well drilling for mud thinning, fluid loss and as a retarder
for well cementing.
Sustain our financial health
Despite the challenging operating environment, we continued
to generate cash and reduced net debt to US$1,085 million
(FY2022 US$1,163 million). This was after taking into account a
negative currency translation effect on our Euro-denominated
debt being converted at a higher rate, which increased net debt
by US$76 million for the year, and the US$107 million returned
to shareholders through the dividend and share buyback
programmes. The closing net debt level is the lowest since the
early 1990s when the company embarked on its global merger
and acquisition strategy.
30 Sappi Annual Integrated Report 2023
Net finance costs for the year were significantly lower
than the prior year due predominantly to lower debt levels.
We repurchased US$206 million of the aggregate principal
amount of the 2026 bonds in a tender offer in the first quarter,
which yielded a capital gain of US$15 million (reflected
in net finance costs) and reduced interest payments by
US$6 million. We also settled the South African SSA07 bond
for US$60 million in the third quarter. There are no significant
maturities due before 2026 and we remain comfortable with
the maturity profile of our debt.
Our capital investment programme is focused on operational
efficiencies, enhancing our product offerings, improving our
environmental footprint and growing our packaging business.
Capital expenditure in FY2023 of US$382 million included
US$100 million for the conversion and expansion of
Somerset PM2 to packaging grades. Capital expenditure for
FY2024 is estimated to be in the region of US$500 million
including approximately US$154 million for the Somerset
PM2 project.
The stronger balance sheet with a significantly reduced debt
profile and healthy cash reserves provides us with the flexibility
to navigate the headwinds of cyclical downturns and positions
strategy to reduce
the business well to deliver on our
exposure to graphic paper markets while investing for growth
in our target markets.
Thrive
Drive operational excellence
Operational excellence is of paramount importance to Sappi,
as it serves as a foundational pillar for our success and
long-term sustainability and is the key to meeting the
evolving needs of customers while maintaining a competitive
edge in a dynamic market. By optimising operational processes,
we can enhance efficiency, reduce costs and minimise
environmental impacts, reinforcing our commitment to
sustainability. Moreover, operational excellence enables us
to consistently deliver high-quality products and services
to our customers, enhancing trust. This focus on excellence
also contributes to a safe and motivated workforce, further
reinforcing Sappi’s reputation as a responsible corporate
citizen. In a rapidly changing world, operational excellence
equips Sappi to adapt, innovate and stay ahead in the
industry, ultimately driving growth and delivering value to
both its shareholders and society at large.
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 significant
cost inflation in our raw materials experienced in FY2022
receded slowly during the year but variable costs still remain
elevated compared to historical levels. We set ourselves a
target of a US$61 million reduction in third-party expenditure
compared to 2022 through efficiency and raw material usage
improvements and delivering savings through various
procurement initiatives. We are pleased to report that savings
of US$115 million were realised, which helped offset the
significant increase in purchased pulp, chemicals and energy
costs. In 2024 we are targeting approximately US$60 million
in variable cost savings.
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’. In FY2023, of our
28 paper/packaging assets, 13 improved performances
year-on-year. This is remarkable within the context of the low
capacity utilisation, stop/starts and reduced operating rates
(speed) in North America and Europe. We continue to monitor
performance to enhance understanding of grade changes,
quality issues, sheet-breaks and mix impacts to ensure
continuous improvement.
Our decarbonisation programme aligned with our science-
based targets continued in 2023. Kirkniemi Mill took a big
leap forward in 2023 completely exiting coal and instead
became powered by renewable bioenergy. The modernisation
of the Gratkorn Mill power plant boiler in 2022 enabled the
shift from coal to a combined approach of biomass and
natural gas. In 2023, the mill embarked on the next step,
enhancing its infrastructure and therefore capacity to handle
the delivery, sorting and processing of increased biomass
levels. The improved biomass handling system at the mill as
well as decentralised intermediate storage terminals within
the surrounding regions will enable the boiler to transition
completely to renewable biomass over time.
We completed a modernisation project on Gratkorn Paper
Machine 11 (PM11), which included extensive modernisation
of automation and electrical equipment including drives,
control systems, quality control and inspection systems
as well as upgrades to the coating profile and other areas.
Gratkorn PM11 is the largest coated woodfree paper
machine in Europe and maintaining its competitive cost
position is critical to our graphic papers strategy. Our
investment ensures that we can continue to serve the
commercial print market profitably.
We have several information technology (IT) projects which
are critical for addressing both the risks and opportunities
offered by Industry 4.0 in progress. We anticipate piloting a
new manufacturing execution system (MES) in 2024 which
will enhance operational excellence and will support the
various advanced analytics projects 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.
Our commitment to conducting business with the utmost
integrity and responsibility is underpinned by a strong ethical
framework. The expected behaviour is encapsulated in our
Sappi Annual Integrated Report 2023 31
DELIVERING SUSTAINED VALUE Letter to the stakeholders from the Chairman and CEO continued
supply, while uplifting rural communities by equipping them to
become sustainable participants in the forestry value chain.
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 2023 we made further
progress towards our supplier engagement target with
81% of suppliers in compliance and thus we are well-
positioned to exceed our 2025 target of 80%. Our
partnership with EcoVadis continued to gain momentum in
2023 with 796 suppliers sharing their EcoVadis scorecards
with us and another 400 in progress to disclose on the
platform. The EcoVadis methodology allows us to assess
the sustainability performance of our suppliers and identify
risks within our supply chain.
Sustainability
Sappi recognises the impact of its operations on the
environment and communities. By prioritising sustainability,
we not only mitigate our environmental footprint but also
ensure the long-term viability of our business. Sappi’s
commitment to responsible resource management,
reduced carbon emissions and ethical practices solidifies
our position as a forward-thinking and socially responsible
industry leader. As we navigate the challenges of
decarbonising our value chain, we recognise that
collaboration is a critical element of our journey. We actively
participated in the work of the World Business Council for
Sustainable Development (WBCSD) Forest Solutions Group
(FSG), progressing Net Zero and Nature Positive roadmaps
that are appropriate for the Forest sector. In addition, we
were active participants in the development process for
the new Green House Gas Protocol: Land sector and
removals guidance.
In 2023 our operational efficiency was severely hampered by
production curtailments that were implemented in response
to the challenging market conditions. The result is that we
regrettably significantly exceeded our carbon emission and
waste intensity targets. Despite this poor performance, we
remain confident that our climate strategy and capital
investment programme are on track to deliver our 2025
and 2030 commitments.
We are making good progress towards our
goals and are confident that a resilient and growing Sappi is
well placed to lead as it adapts to an uncertain future.
sustainability
Thrive
Looking forward
Looking to the future, we are committed to consistently
generate lasting value for our stakeholders through our
unwavering focus on execution of our
delivery against clear actions and targets continuing
Thrive
strategy with
Code of Ethics, which guides our directors, employees,
suppliers and customers in their day-to-day interactions and
transactions and extends to every aspect of our operations,
from environmental stewardship and responsible sourcing
of raw materials to creating a diverse and inclusive workforce
and engaging with customers and local communities. Our
ethics training initiatives incorporate relevant and practical
examples and have been implemented to inculcate the
correct ethical behaviour and responses while avoiding a
tick-box approach to ethics.
Sappi aims to strengthen trust with our stakeholders through
a comprehensive approach that prioritises transparency and
active engagement. Through open communication of our
operating performance and sustainability initiatives, we
demonstrate our commitment to transparency, fostering
trust among investors, customers and the wider community.
Simultaneously, our people strategy places a strong emphasis
on leadership development and the cultivation of a unifying
culture that embodies the spirit of ‘OneSappi’. We seek to
enhance our organisational capabilities to meet both
present and future needs and enhance overall employee
engagement, thus reinforcing our commitment to excellence
and sustainable growth.
In 2023 we conducted our biennial employee engagement
survey. More than 85% of the actions that were raised in the
previous survey in 2021 were closed out ahead of the current
survey. We are very pleased to report that both employee
participation and employee engagement improved
compared to 2021. Our participation rate of 94% was noted
by our service provider as the highest they have seen to date
and gives us confidence that our employee feedback is both
comprehensive and representative. The wealth of data
obtained through the process will allow us to craft employee
solutions specific to regions, workplaces and levels. We
made good progress in our objective to increase gender
equality and continue to actively nurture emerging talent
and create inclusive growth opportunities.
Recognising that we are part of the communities beyond our
fence lines and that their prosperity and wellbeing are linked
to our own, we strive to make a purpose-driven, meaningful
contribution towards the wellbeing and development of our
neighbouring communities. We work to create positive social
impact by jointly identifying and leveraging opportunities,
aligning with and supporting business priorities and needs,
considering feedback from our stakeholders. The underlying
goals of our social impact programme are to create a
stronger social licence to operate; enhance customer loyalty,
attract talent and advance our priority UN SDGs (seven
globally and two in South Africa). Our Sappi Khulisa tree-
farming scheme in South Africa is a good example of positive
social impact and shared value and in 2023 we celebrated
40 years of success. The programme is an integral part of our
woodfibre supply chain, enhancing the security of fibre
32 Sappi Annual Integrated Report 2023
beyond 2025. Against the backdrop of an unpredictable
macroeconomic and geopolitical landscape, our proactive
risk management places risk appetite and tolerance at the
heart of our decision-making processes. This approach
guarantees that both our management and board possess
a well-rounded perspective on risks and opportunities,
enabling them to make informed strategic decisions and
ultimately deliver sustainable value to our stakeholders.
We recognise that persistent global macroeconomic
challenges and generally subdued consumer sentiment
continue to impact the demand for many of our products.
DP markets appear more positive as VSF operating rates
continue to be strong and the differential between cotton
and VSF pricing remains supportive. Hardwood DP market
pricing has increased in recent weeks to US$900 per ton.
Additionally, paper pulp pricing has also moved into an
upward trajectory, which will benefit our high-yield pulp (HYP)
sales. DP sales volumes in the first quarter will, however, be
lower than the prior quarter due to scheduled maintenance
shuts at all three of our DP mills.
It has become apparent that demand for graphic papers has
experienced a permanent structural decline. Sappi remains
committed to our stated strategy to reduce exposure to
graphic paper markets and will proactively manage
overcapacity through conversion and expansion of the
Somerset PM2 graphic paper asset to solid bleached
sulphate paperboard in the US in 2025 and rationalisation of
the European capacity through closure of the Stockstadt Mill
and potential closure of the Lanaken Mill. It is anticipated that
strategic action in the European region will significantly
improve the capacity utilisation of the graphic paper assets
and improve the fixed cost position of the business in the
second half of the year.
The long-term favourable outlook for our sustainably
produced packaging and speciality paper products remains
unchanged, however, in the short term challenges persist.
The destocking process in the segment is taking longer than
expected and the macroeconomic landscape remains
unpredictable, which is likely to continue to weigh on
consumer sentiment. We therefore do not expect any
meaningful recovery in the first quarter of the financial year.
Sappi is well positioned to benefit from the turn in the cycle.
Variable costs have reduced from the peak in the first half
of the 2023 financial year but remain high relative to historical
levels. Global pulp prices have started rising in recent weeks
and wood costs remain elevated. Additionally, recent
heightened geopolitical issues may cause additional volatility
in energy markets. Cost inflation is therefore a risk in the
coming quarters. We continue to proactively implement cost
containment initiatives to mitigate the risk of higher costs.
In the first quarter, the Ngodwana, Saiccor and Cloquet Mills
will take scheduled maintenance shuts, which will have an
estimated US$40 million impact on group profitability.
Capital expenditure for FY2024 is estimated to be in
the region of US$500 million including approximately
US$154 million for the Somerset PM2 project.
Deleveraging of our balance sheet has been material and
combined with substantial cash reserves we are well-
positioned to navigate any market challenges in the coming
year. We remain encouraged by the increasing resilience of
our business and opportunities for growth in our packaging
and pulp segments. Through our
committed to strengthening our competitive position and
delivering sustained shareholder value.
strategy we are
Thrive
Notwithstanding the gradual recovery in pulp and paper
markets and taking into consideration the impact of the
scheduled maintenance shuts, we anticipate that the EBITDA
for the first quarter of FY2024 will be below that of the fourth
quarter in FY2023.
Appreciation
Sappi expresses deep gratitude to its diverse stakeholders,
recognising their valuable contributions and support in
guiding the company’s actions and decisions. This includes
customers with whom Sappi collaborates to provide
sustainable biobased products, employees whose wellbeing
and dedication are pivotal to the company’s success and a
wide range of stakeholders whose ideas and feedback enrich
Sappi’s role as a responsible corporate citizen. Sappi values
these relationships and appreciates the role each
stakeholder plays in its development and performance.
Sappi acknowledges and highly values the efforts and
contributions of its board. The company recognises the
crucial role played by the board in guiding its strategic
decisions and overall governance. Sappi expresses deep
appreciation for the dedication, expertise and leadership
provided by its board members in steering the company
toward success and sustainable growth.
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 07 February 2024.
Changes to the board
Sir Nigel Rudd will retire as independent Chairman of the
board and from all other board positions including his
role as Chairman of the Nomination and Governance
Committee at the AGM on 07 February 2024. Sir Nigel was
appointed to the board in April 2006 and served as the Lead
Independent Director before being appointed Chairman on
01 March 2016. The board extends their sincere appreciation
Sappi Annual Integrated Report 2023 33
DELIVERING SUSTAINED VALUE Letter to the stakeholders from the Chairman and CEO continued
to Sir Nigel for his leadership which has enabled Sappi to
drive its growth strategy through expanded packaging and
speciality papers capacity and increased share of earnings
while reducing exposure to declining graphic paper markets
alongside a period of significant debt reduction which
enabled Sappi to weather the storms of Covid-19, high
inflation and interest rates, as well as macroeconomic
disruptions.
Mr Nkateko (Peter) Mageza will retire as an Independent
Non-executive Director (NED) of the board and Chairman
of the Audit and Risk Committee (ARC) at the AGM on
07 February 2024. Mr Mageza was appointed to the board
in January 2010 and was appointed to the ARC in
February 2010, serving as Chairman since February 2018.
The board extends their gratitude to Mr Mageza for his
significant contribution and support to the company.
Further to these retirements, the board has appointed
Mr Nkululeko Sowazi, who joined the board as Independent
NED with effect from 03 October 2022, as independent
Chairman of the company with effect from 08 February 2024.
Mr Sowazi will resign as a member of the ARC. In addition,
Ms Zola Malinga is appointed as Chairperson of the ARC as
of 08 February 2024, subject to the approval by shareholders
of Ms Malinga’s re-appointment to the board and the ARC.
Ms Malinga joined the Sappi board in October 2018 and has
been a member of the ARC since then.
Mr Mohammed (Valli) Moosa, a longstanding member of
the board currently serving as Lead Independent Director,
Chairman of the SETS Committee and member of the
Nomination and Governance Committee has indicated that
he would like to retire. The board and Mr Moosa have agreed
that he should continue in his role until his retirement at the
AGM in February 2025 to ensure a smooth transition to
his successor.
A personal message from the Chairman,
Sir Nigel Rudd
Reflecting on my tenure of seventeen years with the Sappi
board, the last seven as Chairman, I am struck by the number
of significant internal and external challenges that we
navigated during this period. I have been blessed to serve
alongside exceptional board members and wish to thank all
of them, past and present, for their support. I have also had
the privilege during my tenure of visiting almost all of Sappi’s
facilities and meeting the many people who make Sappi the
excellent company that it is. I wish to thank them for the
commitment, loyalty and hard work.
South Africa is a country I have come
to love over these past 20 years and I
am so pleased to have been able to
play a small part in establishing Sappi’s
bright future as a global company with
roots sunk deep in the African soil. Very
many projects have been undertaken
during the past 17 years across all three
operating regions, but I would be remiss in not
mentioned the largest ever expansion and
upgrade investment project in South Africa – the
‘Vulindlela project’ at our Saiccor Mill in KwaZulu-Natal,
South Africa. I was able to spend some quality time with
President Cyril Ramaphosa discussing the strategic
importance to South Africa of Sappi and the forest products
industry and hosted him at the ribbon cutting podium and
plaque unveiling ceremonies in September 2022. Equally, I
feel a great sense of satisfaction that management, with the
guidance and support of the board has been able to change
the strategic direction of the company in response to
fundamental changes in market demands and consumer
preferences. I retire from a diversified woodfibre company
rather than the narrow graphic paper focused company
I joined in 2006. The demand and preference for natural,
sustainable and renewable resource-based products shows
no sign of ending with Sappi continuing to invest to secure
an ever-larger share across a wide variety of market
segments, both paper (such as flexible packaging and
paperboard) and non-paper (such as Verve DP and
lignosulphonates). Any such change leads to disruption as
capacity in declining product segments is either converted
to growth segments or closed down, with the unavoidable
but regrettable impact on loyal and competent employees. At
the same time capital requirements increase which elevate
debt levels and the investment case is sometimes not clear
to external stakeholders over the short term. On each of
these challenges I am satisfied that I leave a company in very
good health. We have demonstrated how the diversification
strategy can deliver real enterprise value as is evident
through the transformation of the North American business.
Strategic investments and acquisitions have helped position
the company for growth, while astute financial management
has reduced debt to record low levels and enabled the
company to resume dividend payments, all bolstering the
long-term investment case for Sappi through sustainable
shareholder returns. I wish the board and the entire Sappi
family well on their journey to a thriving world.
34 Sappi Annual Integrated Report 2023
Q&A with the CEO
Steve Binnie
CEO
“ Our graphic papers markets
faced significant challenges
in 2023 due in part to an
extended destocking cycle.
In hindsight, the extraordinary
surge in demand we
experienced in 2022, which
nearly reached pre-Covid-19
levels, included a significant
element of forward buying by
our customers.”
Q1
Graphic paper demand was
extremely weak in 2023
necessitating widespread
production curtailments across
the industry. What is Sappi’s view
of demand in 2024 and how will
you address overcapacity?
Our graphic paper markets faced significant challenges
in 2023 due in part to an extended destocking cycle.
In hindsight, the extraordinary surge in demand we
experienced in 2022, which nearly reached pre-Covid-19
levels, included a significant element of forward buying by
our customers. The rebound in economic activity in 2022,
coupled with severely constrained supply chains created a
worldwide paper shortage. Against this backdrop of volatile
and uncertain global logistics, customers increased their
orders well beyond underlying demand levels. However, as
macroeconomic conditions deteriorated and supply chains
normalised late in 2022 our customers experienced a
substantial increase in inventory. The subsequent
destocking combined with weak global macroeconomics
led to a material decline in demand for graphic paper which
persisted throughout FY2023.
The historical rate of decline for graphic paper was
approximately 6% per annum. Taking this trajectory into
account and considering the demand rebound in 2022
to almost 2019 levels, demand in 2023 should have been
approximately 25% below that of 2022. However, sales
volumes for our graphic papers segment in FY2023 declined
by 38% year-on-year, which necessitated widespread
production curtailments in our European and North American
operations. While the extent of the demand weakness can
be partially attributed to the destocking cycle, graphic paper
markets continue to remain subdued, particularly in Europe.
This suggests that there has been an accelerated decline
and a permanent erosion of demand that is unlikely to return.
Order activity has improved slightly in recent months,
indicating a modest recovery, but our fundamental
assumption is that demand for graphic paper in FY2024
will be 30% below FY2022 levels.
Sappi Annual Integrated Report 2023 35
DELIVERING SUSTAINED VALUE Q&A with the CEO continued
With this anticipated level of demand, we continue to be
faced with significant overcapacity necessitating extended
periods of costly commercial downtime. Recognising these
low operating rates are unsustainable and aligned with our
strategy to reduce exposure to graphic paper markets, we will
proactively manage overcapacity. In the short term, we will
rationalise our graphic paper capacity in Europe through
closure of the Stockstadt Mill and potential closure of the
Lanaken Mill. This will remove approximately 750,000 tpa
(~30%) of our European graphic paper capacity in FY2024,
which will significantly improve the utilisation of our remaining
graphic paper assets and improve the fixed cost position of
the business in the second half of the year. We are confident
that we can shift the current sales volumes to our other
assets. Over the medium term, our conversion and expansion
of Somerset PM2 to solid bleached sulphate paperboard will
remove 235,000 tpa (~ 30%) of our North American graphic
paper capacity in 2025. Furthermore, the project at our
Gratkorn Mill in Europe to expand our label paper capability
will displace a further 200,000 tpa of graphic paper. Through
these actions, we will proactively reduce our graphic paper
capacity to match declining demand and in so doing ensure
that our assets are fully utilised generating cash. We continue
to evaluate further opportunities to reduce our exposure to
graphic paper through sale of assets or for potential
conversion opportunities to packaging and speciality paper
grades. Our strategic objective is to reduce graphic paper to
less than 30% of our sales volumes by 2027.
Q2
Has the demand weakness in
packaging and speciality papers
segment in FY2023 altered your
long-term view on growth
projections? Is there any impact
on the investment case and
timing of the Somerset
conversion and
expansion project?
The packaging and speciality papers segment faced weak
trading conditions related to high levels of downstream
inventory and muted consumer demand in FY2023. The
destocking process is taking longer than anticipated but all
indicators point to normalisation of inventories within our
value chains early in FY2024. The macroeconomic
landscape, however, remains unpredictable, which is likely to
continue to weigh on consumer sentiment in the short term
as some of our packaging and speciality papers are linked to
discretionary consumer goods. Nevertheless, our long-term
favourable outlook for our sustainably produced packaging
and speciality paper products remains unchanged. Paper-
based packaging offers a myriad of environmental
sustainability and functionality benefits. Our low-carbon,
renewable and circular packaging products, derived from
responsibly managed forests and deforestation-free
supply chains, offer consumers a more environmentally
friendly choice compared to non-renewable alternatives.
As industries and consumers increasingly prioritise
sustainability, the benefits of paper-based packaging align
with these values, making it a compelling and responsible
choice for packaging solutions.
36 Sappi Annual Integrated Report 2023
The short-term macroeconomic pressures on consumer
sentiment have not altered our investment case for the
conversion and expansion of our Somerset PM2
machine to solid bleached sulphate paperboard and we
remain on track for commissioning in mid-2025. Our folding
carton paperboard products are particularly versatile and
allow for exceptional print quality that enhances creative
design and brand visibility for luxury beverages, cosmetics
and perfumes, health and beauty care and consumer
electronics. Furthermore, demand for food service board
grades for disposable cups, plates and fast food packaging
continues to grow as the industry responds to consumer and
legislative pressures to switch from fossil-based products.
Our conservative market growth assumption of 2% per
annum remains unchanged and excludes the potential
growth opportunities based on substitution of fossil-based
packaging.
There have been a number of capacity closures in the North
American paperboard market during 2023, which we
estimate reduces solid bleached sulphate paperboard
capacity by approximately 7%. While some of the capacity
exiting the market is in areas such as liquid packaging where
we do not currently compete, we believe the overall impact is
positive and tightens the market ahead of our Somerset
expansion. In addition, one of our peers has reported that
they will not make a decision on the conversion of a graphic
paper asset to paperboard by the end of 2023 as previously
announced, which further extends the timeline for additional
capacity entering the North American market. The Somerset
PM2 project will add 470,000 tpa of SBS capacity in 2025,
which will double our market share. Sappi is well positioned to
benefit from the demand growth for paperboard in North
America and our anticipated returns on the investment are
expected to exceed a 20% internal rate of return (IRR).
Q3
Sappi’s capital expenditure is
expected to increase over the
next two years as you expand the
packaging capacity at Somerset
Mill. Should investors be
concerned about debt levels
in 2024?
Despite 2023 being one of the most challenging downcycles
experienced in the pulp and paper industry, with demand for
our paper products falling below that of the Covid-19
pandemic years, we continued to generate significant cash
which enabled a further reduction of net debt at year-end to
US$1,085 million, the lowest level in 30 years. This was after
taking into account a negative currency translation effect on
our Euro-denominated debt being converted at a higher rate,
which increased net debt by US$76 million for the year, and
the US$107 million returned to shareholders through the
dividend and share buyback programmes. Our strategic
focus on sustaining our financial health through disciplined
capital allocation and a strong emphasis on cash generation
has materially repositioned our balance sheet over the last
two years.
The significantly lower debt profile and healthy cash
reserves provide us with flexibility to navigate the headwinds
of cyclical downturns and have allowed us to begin the next
phase of investments for growth in our target markets with
the conversion and expansion of Somerset PM2 to solid
bleached sulphate paperboard. In line with our disciplined
approach to capital allocation, we will proactively manage
cash flows by phasing the US$418 million capital expenditure
for the Somerset PM2 project over three years (US$100 million
FY2023, US$154 million FY2024 and US$164 million
FY2025). Maintaining our existing operations and improving
our environmental footprint is also a high-level priority and is
a strategic investment in our existing assets to ensure future
safe, efficient and sustainable operations. We anticipate
capital expenditure will be in the region of US$500 million
for the next two years, which includes the expansionary
capex as outlined above together with maintenance and
sustainability capex of approximately US$350 million per
annum. We have no other large capital projects planned
during this period. We have committed to returning value to
our shareholders and declared a dividend of 15 US cents for
FY2023, which will result in a cash outflow of approximately
US$85 million in the second quarter of FY2024. We will
also potentially incur closure and restructuring costs of
approximately US$159 million for the closure of the
Lanaken Mill. The fixed costs benefit of the restructuring will
be partially realised in FY2024 and therefore we anticipate a
net cash outflow for FY2024. In the short term, we anticipate
our net debt will rise slightly from the FY2023 level but our
commitment to our target of US$1 billion remains intact and
we are confident that our strategic actions to reduce our
graphic paper exposure and grow our packaging business
will enhance our future cash generation and improve
profitability of our business.
Q4
New sustainability and
environmental, social and
governance (ESG) regulations
have been legislated in Europe
and globally ESG reporting
expectations are rapidly
expanding. How is Sappi
responding?
ESG reporting is crucial in today’s business landscape as it
serves as a fundamental tool for companies to communicate
their commitment to sustainable and responsible business
practices. By disclosing information on environmental
impact, social responsibility and governance structures,
we not only enhance transparency but also build trust among
stakeholders, including investors, customers, employees and
the broader community. The ESG reporting landscape has
undergone a rapid and transformative evolution over the last
few years, reflecting a paradigm shift in corporate
consciousness and stakeholder expectations. In recent
times, the landscape has witnessed a remarkable
mainstreaming of ESG considerations. Governments,
regulatory bodies and stock exchanges around the
world have increasingly recognised the importance of
ESG disclosure, establishing guidelines and frameworks
to standardise reporting practices. Simultaneously, investors
have recognised the material impact of ESG factors on
financial performance and risk management, driving a surge
in demand for comprehensive and comparable ESG data.
As a result, ESG reporting has transitioned from a voluntary
initiative to a critical component of corporate governance,
risk management and strategic decision-making, illustrating
a broader recognition of the connection between
sustainability and long-term business success.
Thrive
strategy.
As a company committed to environmental stewardship,
social responsibility and sound governance practices,
transparency serves as a cornerstone of our
Transparent reporting on key ESG metrics not only aligns
with Sappi’s values but also allows our stakeholders to make
informed decisions. Ultimately, for Sappi, transparency is not
just a compliance requirement but a strategic imperative that
enhances our reputation, fosters long-term relationships
and contributes to the company’s sustainable growth.
We have for many years used the GRI framework for our
ESG disclosures and more recently aligned our climate
reporting with the Task Force on Climate-related Financial
Disclosures (TCFD) framework. In addition, our CDP (formerly
the Carbon Disclosure Project) responses to climate, forests
and water are publicly available for stakeholder review. The
new European Union’s Corporate Sustainability Reporting
Directive (CSRD) went into force in January 2023. With our
large European footprint, we will be classified as a company
headquartered outside the EU operating in the region subject
to the CSDR and therefore plan to align with the European
Sustainability Reporting Standards (ESRS) for our FY2025
annual reporting period. Based on the high level of
interoperability between GRI and ESRS and our
comprehensive CDP disclosures, we are well placed
to adopt these new standards.
Sappi Annual Integrated Report 2023 37
DELIVERING SUSTAINED VALUE Posture
Beauty and confidence. Pride and upright posture. These attributes have
meant that many cultures over the ages have associated peacocks with royalty
and power.
This image is appropriate to Sappi because we too, can stand tall with pride
when we consider our past achievements and drive to create not just
enterprise value, but value for our people and for communities.
We have achieved enterprise value through our ability to be nimble and
optimise profitability in ever-changing markets, reshaping our products and
processes to create value and growth for our own business and our customers.
We continue to offer our customers a broad range of solutions based on the
power of renewable resources that enable them to achieve their sustainability
goals and contribute to the low-carbon, circular economy. In doing so, we have
continued to focus on treading more lightly on the Planet.
Creating value for our people and communities is underpinned by the
structures and programmes we have established which facilitate open,
authentic communication, by our ongoing investment in training, development
and transformative community programmes, as well as by our collaborative
partnerships focused on workable solutions to industry challenges.
Our commitment to delivering sustainable value to our stakeholders is
based on our focus on living our values at all times: At Sappi we do business
safely with integrity and courage, making smart decisions which we execute
with speed.
38 Sappi Annual Integrated Report 2023
Sappi Annual Integrated Report 2023 39
Our operating context
Our external operating environment presents us with both risks
and opportunities, impacts our ability to generate social and
enterprise value and informs our approach to our stakeholders,
as well as our approach to material matters.
Logistics problems in South Africa
Context
Our response
There are deep-rooted problems in South Africa’s
state-owned ports and rail companies related to
a shortage of freight trains, rail infrastructure and
inefficient ports. It is estimated that the negative
impact of rail and port’s poor performance
equates to 5 – 6% of the country’s GDP, thereby
diminishing South Africa’s competitiveness in the
global supply chain. Sappi Southern Africa (SSA)
exports the majority of the dissolving pulp (DP)
produced in the region and relies heavily on the
Durban port. The region has also traditionally
moved a large proportion of both raw material
and finished product by rail.
The unstable rail system was further
compromised following widespread floods in
KwaZulu-Natal in April 2022 – multiple railway line
bridges between Durban and Umkomaas where
our Saiccor Mill is situated became unusable.
These have still not been repaired and according
to authorities, the earliest we can expect the
95-year-old Illovo bridge south of Durban to be
operational is at the end of 2025.
On an operational level and in the face of robust demand for our DP, we adjusted to
these challenges by increasing road transport routes, working with our logistics
partners to contain costs and shipping DP from Ngodwana Mill to the port of
Maputo in Mozambique, rather than the port of Durban. In addition, we opened a
bonded warehouse for DP in China, with the first shipment taking place in March
this year. We are also deploying performance-based standard (PBS) road haul
vehicles to mitigate the impact on timber deliveries from the northern part of
KwaZulu-Natal.
At a strategic level, at the opening of the Saiccor Mill capacity expansion and
environmental enhancement project in September 2022, the Chairman of Sappi
Limited raised the issue of port inefficiencies and failing rail infrastructure with
South African President Cyril Ramaphosa. In addition, in February this year on the
eve of the State of the Nation address, the Sappi Limited CEO called for urgent
Government intervention to halt the negative effect of these issues on Sappi’s
business operations and the entire value chain.
In August, the national Government established a National Logistics Crisis
Committee (NLCC) with a direct reporting line to President Ramaphosa. The
committee, which will report to the President every six weeks, has been tasked
with overseeing short- and long-term interventions to fix South Africa’s freight
logistics system and formulate a logistics road map. Sappi is an active participant
in this committee, which is focused on immediate operational improvements in the
logistics system as well as longer-term reforms to improve efficiency and
competitiveness.
40 Sappi Annual Integrated Report 2023
Plastic pollution
Context
Our response
The global move away from plastic-based packaging offers Sappi significant
strategy of creating responsibly
growth opportunities and is in line with our
sourced and sustainable solutions as viable alternatives to fossil-based products.
Thrive
We are capitalising on consumer preferences and legislative shifts towards
environmentally sustainable packaging solutions in various ways. One of these
is our US$418 million investment at Somerset Mill to convert Paper Machine 2
from coated woodfree graphic paper to solid bleached sulphate paperboard
(as described on page
recyclable packaging solutions and to bring innovations like bagasse-based
compostable thermo-moulded food-grade bowls and plates (see page
to market.
113). We continue to expand our range of compostable,
30),
According to the Organisation for Economic
Co-operation and Development (OECD),
currently, the world produces 430 million metric
tons of plastics each year of which over
two-thirds are short-lived products which soon
become waste (approximately one-third after
single use). The OECD also points out that plastic
production is set to triple by 2060 if ‘business
as usual’ continues. Increasingly, stakeholders
around the world are aware of the unintended
consequences of the current linear packaging
system and are looking for alternatives.
Against this backdrop, in a historic decision at the
fifth UN Environment Assembly in March 2022, all
193 UN Member States decided to end plastic
pollution. Negotiations regarding a binding legal
agreement by 2024 are underway.
Quantifying nature-related risk and opportunity
Context
Our response
Reports indicate that the planet’s biological
diversity is shrinking so rapidly that it threatens to
undermine the broader climate agenda and
enterprise value creation. In fact, the World
Economic Forum indicates that US$44 trillion of
economic value generation – over half the world’s
total GDP – is moderately or highly dependent
on nature and its services and consequently,
exposed to risks from nature loss1. In September
this year the Taskforce for Nature-related
Financial Disclosures (TNFD) published a
comprehensive document with
recommendations and guidance which builds
on the work of the TCFD, the ISSB and the GRI.
The document is based on the premise
that nature-related risks are a reality today in the
cash flows and balance sheets of businesses
and in the capital allocation portfolios of
financial institutions.
As a company based on the power of renewable natural resources, we recognise
that our ability to create and maintain value is linked to our interaction with healthy
ecosystems throughout our value chain. At the 15th Conference of the Parties to
the UN Convention on Biological Diversity (COP 15), 190 nations agreed on a
historic package of measures known as the Kunming-Montreal Global Biodiversity
Framework. This is deemed critical to addressing the dangerous loss of
biodiversity and restoring natural ecosystems.
Sappi’s work to incorporate the TCFD requirements and our longstanding
alignment with GRI indicators has given us a strong foundation for incorporating
TNFD recommended disclosures, including the LEAP approach:
• Locate where in the own operations and along the value chain the interface
with nature takes place
• Evaluate the pollution-related dependencies and impacts
• Assess the material risks and opportunities and
• Prepare and report the results of the materiality assessment.
Sappi Forests has assessed (and continues to assess) – nature-related risks
and opportunities, taking into consideration different scenarios. The TNFD has
provided guidance on scenario analysis and we will be using this going forward.
In addition, we have a biodiversity target related to important conservation areas
(ICAs) in South Africa which incorporates defined assessments.
1 https://www.weforum.org/press/2020/01/half-of-world-s-gdp-moderately-or-highly-dependent-on-nature-says-new-report/
Sappi Annual Integrated Report 2023 41
RESPONDING TO OUR CONTEXT
Our operating context continued
Transitional climate developments
Context
Our response
As the world experiences extreme weather
events in every region, governments
are intensifying their efforts to mitigate climate
change through carbon-related legislation.
SEU: The EU hopes to both exert global influence on combatting climate change
and addressing potential carbon leakage concerns through the implementation of
a Carbon Border Adjustment Mechanism Regulation (CBAM) under the Fit for 55
package. The CBAM, which came into effect on 01 October 2023, is designed to
counter the risk of carbon leakage. This is achieved by imposing a charge on the
embedded carbon content of certain imports that is equal to the charge imposed
on domestic goods under the European Trading Scheme, with adjustments being
made to this charge to take into account any mandatory carbon prices in the
exporting country. To ensure that there is no double benefit afforded to EU
producers, the CBAM will replace the free Emissions Trading Scheme (ETS)
allowances currently granted to EU producers assessed to be at high risk of
carbon leakage.
Currently, the CBAM covers aluminium, cement, energy, fertilisers, hydrogen, iron
and steel. We are monitoring developments closely to ensure that there are no
unintended consequences for developing countries like South Africa which is a
significant exporter of citrus – packed in Sappi products – to Europe.
Sappi North America (SNA): In the USA, the Inflation Reduction Act (IRA) offers
generous tax credits, rebates and subsidies to producers of green technology –
provided manufacturing takes place on North American soil.
SNA continues to look for opportunities to apply for both federal funding under the
IRA and local funding within our operating states. We received a US$1 million grant
from the Maine Technology Institute’s Forestry Recovery Initiative (FRI) in
December 2022 to improve productivity and reduce energy at Somerset Mill.
The grant funds are being used to improve pulp yield in at the mill, specifically
through a new chip treatment process that will improve productivity, lower energy
consumption and reduce the use of pulping chemicals.
SSA: To date, we have been governed by the Carbon Tax Act which came into
effect on 01 June 2019. The first phase from 01 June 2019 to 31 December 2022
applied to activities that directly emit greenhouse gas (GHG) emissions. The tax
includes various allowances in the first phase, including a 100% allowance for
forestry. We engaged with the Department of Forestry, Fisheries and Environment
(DFFE) to recognise carbon sequestration and the department has validated our
carbon sequestration calculation. Government then extended the first phase of
South Africa’s carbon tax by three years to 31 December 2025 to support
businesses in their clean transition endeavours. SSA’s carbon tax liability for the
2022 calendar year was zero. (Carbon tax works in calendar years, so we only
submit data for CY2023 in March 2024.)
We are now monitoring the Climate Change Bill, ambitious legislation which the
National Assembly voted to pass shortly after year-end. The adopted version of
the Bill will now go to the National Council of Provinces (NCOP) for consideration.
Recognising that human-induced climate change represents an urgent threat to
human societies and the planet, the Bill seeks to enable an effective climate
change response and to ensure a just transition to a low-carbon and climate-
resilient society.
42 Sappi Annual Integrated Report 2023
Community unrest in South Africa
Context
Our response
South Africa has one of the highest rates
of social inequality globally, with unemployment
and poverty levels exacerbated by Covid-19, the
escalating cost of living and the global economic
downturn. SSA supports local communities in
60 of the country’s 278 municipalities. These
comprise primary (within a 30km radius of Sappi
operations) and secondary communities (within
a 50km radius of Sappi’s operations), many
of whom have expectations of Sappi to
resolve social demands. While the risk of
community unrest and potential disruptive impact
on our operations has stabilised, as the country
prepares for 2024 national elections, political
activities can be expected to intensify. This could
have potentially negative consequences
for some of our operations.
We maintain close relationships with communities through our Integrated
Community Forums (ICFs) which incorporate a range of stakeholders from both
Sappi and local communities. The ICFs’ overarching focus is on building social
capital and strengthening community relationships. This is achieved through skills
development, enterprise and social development, as well as social responsibility
programmes, in line with SSA’s overall social impact strategy. In addition,
Community Management Committees at each mill identify shared value
opportunities which help identify and support local entrepreneurs, as well as
promote the sourcing of goods and services from local suppliers where possible.
Community Service Officers also play a key role in strengthening community
relationships, as do extension officers who work with Sappi Khulisa farmers.
Our focused Enterprise Supplier Development (ESD) department aligns with this
approach by working to incorporate small and medium enterprises (SMEs) into the
mainstream economy. In FY2023, SSA spent just over ZAR316 million with SMEs,
exceeding our annual target by ZAR160 million. In the process, 587 jobs were
sustained. Over and above this amount, through collaboration with our established
contractors, a total of ZAR27 million was spent with SMEs through a sub-
contracting arrangement and a further ZAR712,000 was invested in SME training
and development interventions. Our most significant ESD initiative through which
we strengthen participation in the forestry value chain is Sappi Khulisa (described
on page
78).
The rise of artificial intelligence
Context
Our response
In recent years, artificial intelligence (AI) has been
advancing at an exponential pace, with artificially
intelligent machines able to sift through and
interpret massive amounts of data from various
sources to carry out a wide range of tasks. AI is
part of our daily lives as consumers, often
providing services and support without us
realising it. AI is also being used by organisations
to undertake repetitive tasks, to analyse
and summarise large quantities of data, identify
trends and patterns which are used to improve
production, planning, auditing and other
functions. Generative AI (GenAI) is one small part
of the overall AI landscape, but it has become
publicly prominent with the launch of ChatGPT
from Microsoft and OpenAI and Bard from
Google.
We have adopted AI as part of our digital strategy, where multiple use cases exist
using machine learning and computer vision. Sappi is also leveraging the benefit
from AI solutions embedded in the solutions we use across our business
functions.
Some of our staff have tested these GenAI tools and have asked to be allowed
to explore how using GenAI could benefit their work. Our preference is to enable
and allow the use of GenAI rather than to ban it as some other companies have
done. Accordingly, we have published guidelines for the use of AI including
GenAI within Sappi to protect our confidential information. We are also working
on a comprehensive enterprise AI strategy which will ensure that both risk and
opportunities are appropriately addressed as GenAI capabilities are deployed.
Sappi Annual Integrated Report 2023 43
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.
Top 10 risks
Residual risk ranking
1
2
3
4
5
6
7
8
9
Safety
Cyclical macroeconomic factors
Cyber security
Sustainability expectations
Climate change
Evolving technologies and consumer
preferences
Supply chain disruption
Uncertain and evolving regulatory landscape
Employee relations
10 Liquidity
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.
44 Sappi Annual Integrated Report 2023
Group board
Assumes overall
responsibility for
risk governance
Group Audit
and Risk
Committee
(ARC)
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 2023 Sappi Group Annual Financial
Statements at www.sappi.com/annual-reports
Our 2023 Risk Management Report provides a detailed discussion of the group’s risk factors and can be accessed at
www.sappi.com/annual-reports
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
3
5
6
7
10
4
8
9
1
2
Very low
Very high
Impact
Sappi Annual Integrated Report 2023 45
RESPONDING TO OUR CONTEXT
Risk management continued
1
Safety
(2022: 1)
Root cause
Due to the nature of our manufacturing facilities and
forestry operations, our employees and contractors
operate in a hazardous environment. We continue to
prioritise their health and safety to ensure the
continuity of our business.
Thrive
strategy objectives impacted
3Ps impacted
Capitals 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.
Related material issues
• Employee and contractor safety
• Sappi talent
• Labour relations.
2
Cyclical macroeconomic factors
(2022: 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.
Thrive
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
• Agility and operational efficiency
• Innovation and collaboration
• Low-carbon, circular bioeconomy.
46 Sappi Annual Integrated Report 2023
3
Cyber security
(2022: 2)
Root cause
During the normal course of our business, we make
use of our digital platforms to access and transact
on confidential customer, employee, financial and
commercial information, through our transactional
and production systems. We also store, access and
share our trade and proprietary information in our
databases. These could be vulnerable/susceptible
to cyber attacks.
Thrive
strategy objectives 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
• Ethical behaviour and compliance
• Sappi talent.
3Ps impacted
Capitals impacted
4 Sustainability expectations
(2022: 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.
Mitigating actions
• Utilise product certifications
• Enhance 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 fibre certification
• Communicate our social and environmental credentials through all
media channels
• Leverage environmental, social and governance (ESG)-related
covenants.
Thrive
strategy objectives impacted
3Ps impacted
Capitals impacted
Related material issues
• Responsible procurement
• Innovation and collaboration
• Low-carbon, circular bioeconomy
• Biomaterials
• Sustainable woodfibre
• Renewable energy and climate change
• Water stewardship
• Circular bioeconomy and minimal waste
• Biodiversity.
Sappi Annual Integrated Report 2023 47
RESPONDING TO OUR CONTEXT
Risk management continued
5
Climate change
(2022: 5)
Root cause
Climate change will have 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.
Thrive
strategy objectives impacted
3Ps impacted
Capitals impacted
Mitigating actions
• Source pulp and woodfibre from a variety of sources and regions
• Invest in fire, pests and disease prevention protocols in South
Africa, as well as site species matching to withstand abnormal
weather events and reduce our water footprint in this region
• SSA has engaged National Treasury via Paper Manufacturers’
Association of South Africa (PAMSA) to motivate taking into account
carbon sequestration by companies that own their own forests
when calculating carbon tax
• Group-wide decarbonisation initiatives.
Related material issues
• Low-carbon, circular bioeconomy
• Sustainable woodfibre
• Renewable energy and climate change
• Water stewardship
• Circular bioeconomy and minimal waste
• Biodiversity.
48 Sappi Annual Integrated Report 2023
6 Evolving technologies and consumer preferences
(2022: 6)
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.
Thrive
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
• Responsible procurement
• Agility and operational efficiency
• Innovation and collaboration
• Low-carbon, circular bioeconomy
• Sustainable woodfibre
• Renewable energy and climate change.
7
Supply chain disruption
(2022: 4)
Root cause
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 condition.
Thrive
strategy objectives impacted
3Ps impacted
Capitals impacted
Mitigating actions
• Implement documented business continuity plans
• Operate via multiple transportation modes
• Utilise multiple ports for shipments, as well as alternative modes
of shipping
• Communicate with key stakeholders, including Government
• Fine-tune internal processes to enhance coordination between
departments
• Negotiate longer lead times.
Related material issues
• Responsible procurement
• Agility and operational efficiency
• Renewable energy and climate change.
Sappi Annual Integrated Report 2023 49
RESPONDING TO OUR CONTEXT
Risk management continued
8 Uncertain and evolving regulatory landscape
(2022: 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.
Mitigating actions
• Remain up to date on changes to applicable legislation
• Continue to enhance 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
• Cooperate across regions to apply best practices in sustainability.
Thrive
strategy objectives impacted
3Ps impacted
Capitals impacted
Related material issues
• Responsible procurement
• Employee and contractor safety
• Agility and operational efficiency
• Ethical behaviour and compliance
• Renewable energy and climate change
• Circular bioeconomy and minimal waste
• Water stewardship
• Biodiversity.
50 Sappi Annual Integrated Report 2023
9 Employee relations
(2022: 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.
Thrive
strategy objectives impacted
3Ps impacted
Capitals impacted
10 Liquidity
(2022: 10)
Root cause
Our principal sources of liquidity are cash generated
from operations and available under our credit
facilities and other debt arrangements. Our ability to
generate cash depends mainly on general economic,
financial, competitive, market and regulatory factors.
Our cash flow from operations may be adversely
impacted by a downturn in worldwide economic
conditions, which could result in a decline in global
demand for our products.
Thrive
strategy objectives impacted
3Ps impacted
Capitals impacted
Mitigating actions
• Interact and engage with union representatives and organised
labour regularly
• Build constructive work relationships.
Related material issues
• Employees and contractor safety
• Sappi talent
• Labour relations
• Social impact.
Mitigating actions
• Continue to implement cost-saving initiatives
• Re-prioritise various strategic initiatives
• Take commercial downtime to match supply to demand
• Defer non-critical capex projects.
Related material issues
• Agility and operational efficiency.
Sappi Annual Integrated Report 2023 51
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 accelerate the solutions a thriving
world requires. In addition to responsiveness, our approach
to engagement is based on the principles of inclusivity,
materiality, relevance and completeness.
Highlights in FY2023
• Actively engaged in the projects of the Forest Solutions Group of
the World Business Council on Sustainable Development (WBCSD)
which we joined in FY2022.
• Ongoing levels of involvement in strategic initiatives for our industry
such as the World Resources Institute’s GHG Protocol Carbon
Removals and Land Sector Initiative Project which benefit the
forestry industry as a whole.
• Sappi Southern Africa (SSA) launched the Sappi Chair in Climate
Change and Plantation Sustainability at the University of the
Witwatersrand (Wits) in Johannesburg, South Africa.
• Under the auspices of Business Leadership South Africa, our group
CEO joined CEOs from over 115 of South Africa’s leading
corporations in signing a pledge committing to help achieve
sustainable, inclusive economic growth in South Africa.
• Sappi’s Cloquet Mill was the recipient of the American Forest &
Paper Association’s (AF&PA) 2023 Leadership in Sustainability
Award for Water Management as part of its Better Practices, Better
Planet 2030 Sustainability Awards program
• SNA won two Gold Awards in the MUSE Creative Awards – one for
our Somerset Mill video in the Branded Content – Recruitment
category which focused on dispelling outdated perceptions of the
paper industry and another for the Ideas that Matter grant
programme in the Corporate Responsibility category. The latter
programme also won a Seal award.
• Shortly after year end, Volume 7 of The Standard, a Sappi
publication won Gold in the print promotion category of the Graphis
2024 design awards (see page
56) for further details.
• Our LinkedIn community has grown to over 200,000 followers.
• First-ever global forestry research review attended by participants
in all regions.
• Launch of Group Water Stewardship policy, Global Product Safety
policy and revised Group Human Rights policy.
Read more: Ethical behaviour and compliance on page
2023 Sappi Group Sustainability Report www.sappi.com/2023GSDR
more information on this material issue.
69 and see our
for
PRINCIPLE 10: Businesses should work against
corruption in all its forms, including extortion
and bribery.
52 Sappi Annual Integrated Report 2023
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
We establish and maintain proactive dialogue with our
stakeholders. In doing so we recognise that stakeholder
needs are dynamic, that we need to challenge the status
quo and be responsive to an evolving stakeholder
landscape. One such example – within the context of South
Africa’s volatile socio-economic context – is a study we
commissioned related to key political scenarios for the
national elections in 2024.
In determining those issues most material to our
stakeholders, as set out in this report, we have intensified
our focus on the impact of our activities on people and the
planet, in addition to enterprise value and in line with double
materiality.
We assess the quality of our relationships both informally,
as set out on the following pages and formally – through
regular employee engagement 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.
A thriving world is not possible without an ethical culture
underpinning our everyday activities. Accordingly, 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.
We regularly review our activities in terms of the 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 in Sappi with regards to
compliance with the Convention and Guidelines either
externally or internally. In FY2023, we also assessed the
countries in which we operate according to the Corruption
Perception Index 2022 which ranks 180 countries and
territories by their perceived levels of public sector
corruption. The index draws on 13 expert assessments and
surveys of business executives. None of the countries in
which we operate are below the average global score.
Our stakeholder engagement is also guided by our work
towards the realisation of the United Nations Sustainable
Development Goals (UN-SDGs), in particular our priority
SDGs. We have a long-standing membership of the United
Nations Global Compact (UNGC) which we joined in 2008.
The importance of this is demonstrated by the fact that
over the last 20 years, the UNGC has grown from a group
of 44 businesses into the world’s largest corporate
sustainability initiative and a global movement of more
than 17,000 businesses and 3,000 non-business
stakeholders across 160 countries.
Sappi Annual Integrated Report 2023 53
RESPONDING TO OUR CONTEXT Our key relationships continued
Employees
Self-assessment of quality of relationship: Good
Our strategic fundamentals
Grow our
business
Sustain our
financial health
Drive operational
excellence
Enhance
trust
Why we engage
As we position Sappi to be future-fit, our task is to meet the changing needs of
every Sappi employee within a diverse, inclusive, safe workplace where they can
develop their full personal and career potential. We recognise that our wellbeing
and financial prosperity are inextricably linked to our employees and the
communities in which we operate.
Shared priorities
• A safe workplace
• Focused wellness and wellbeing
• Effective recognition
• Connection with Sappi’s strategic goals and high levels of engagement
• Understanding of Sappi’s commitment to sustainability which underpins
our strategy
• Training and development that benefits Sappi and our employees
• Promotion of our industry
• Employee volunteerism.
Safety awareness at Saiccor Mill
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-Zs
• By establishing an ethical culture in which corporate citizenship is
promoted, we ensure the ongoing viability of our business, enhance
reputation and become an employer of choice.
54 Sappi Annual Integrated Report 2023
Challenges for value creation
• Recruitment and retention of
key skills
• Reluctance of younger generations
to take up employment in the
industry
• Loss of institutional memory as
older employees retire.
Unions
Self-assessment of quality of relationships: Fair to good
Our strategic fundamentals
Drive operational
excellence
Enhance
trust
Why we engage
A workplace where people feel they have been heard and in which they can make
a meaningful contribution enhances trust, helps to drive our safety-first culture
and enhances overall efficiency, productivity and stability. Our constructive
relationships with our employees and their representatives are based on mutual
respect and understanding.
Shared priorities
• Freedom of association, collective bargaining and disciplined behaviour
• Safety and wellness initiatives
• Remuneration, working hours and other conditions of service
• Resolving grievances
• Engaging on strategy and the long-term growth of the company.
Challenges for value creation
• Multi-union landscapes, particularly
in North America and Europe, add
to complexities in the labour
environment
• Lack of employee understanding
relative to appropriate practice
regarding wage and benefits.
PRINCIPLE 3: Businesses should uphold the freedom
of association and the effective recognition of the right
to collective bargaining.
PRINCIPLE 4: The elimination of all forms of forced and
compulsory labour.
Opportunities for value creation
• Constructive 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 engaged with Sappi, leading to positive benefits
all round.
Sappi Annual Integrated Report 2023 55
RESPONDING TO OUR CONTEXT Our key relationships continued
Customers and partners
Self-assessment of quality of relationships: Good
Our strategic fundamentals
Grow our
business
Sustain our
financial health
Drive operational
excellence
Enhance
trust
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.
Shared priorities
• New or enhanced products that meet rapidly
changing market demand
• More climate-friendly raw materials for textiles,
such as Verve, Sappi’s dissolving pulp
• Events, initiatives and conferences to encourage
the use of our paper, packaging and biomaterial
solutions and promote our innovation and
environmental credentials
• Information about the fibre sourcing and
production processes behind our brands
• Technical information and product safety.
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
• Advance our customers’ own sustainability
journeys
• Promote the power of haptics and thereby, the
power of print in line with our approach to
optimising our graphic papers segment
• Provide transparent information in line with
our strategic pillar of ‘enhancing trust’
• Leverage our position as a solution provider for
a low carbon and biobased economy to support
customers and policy making
• Showcase our products and promote the
Sappi brand.
Challenges for value creation
The Standard 7: Providing guidance on the
power of packaging perceptions
Sappi’s Volume 7 of The Standard series explores the growing
importance of haptics and sensory packaging in heightening brand
experience and driving sales. For over a decade, each edition of
The Standard has focused on a single aspect of the printing and
design process, allowing for a closer, more comprehensive look
at each phase.
Printed on Spectro, Sappi’s sustainably manufactured premium
paperboard, the publication highlights the importance of sensory
packaging in creating a memorable and profitable brand experience.
Today, brand loyalty is not only a competitive advantage but a
necessity. Against the backdrop, The Standard 7 equips brands
with specialty techniques to stand out from the crowd and foster
customer connection. It represents Sappi’s ongoing investment in
paper and packaging as a tool to enhance brand image for any
company.
The Standard 7 examines how packaging has become the pivotal
touchpoint that reinforces all the marketing efforts that preceded
it. Brands of any tier, from value to luxury, must appeal to customers
beyond cerebral logic. As customers form their opinions on the
quality, care and trustworthiness of a brand, it is imperative that
marketers understand the subconscious drivers of choice and
preference. The book dives into how brands big or small can
leverage the power of neuroscience to captivate audiences
and build emotional connections through multisensory elements
in packaging.
The Standard 7 continues to explore the value of touch and feel
within the consumers purchasing experience. This volume
represents part of Sappi’s continued commitment to creating
unique and valuable educational resources for professionals in
the print business.
• Conflation of harvesting from sustainably managed plantations with deforestation, together with lack of understanding
about the way the forests and plantations from which we source woodfibre help to mitigate global warming and enhance
biodiversity
• Promoting understanding of decarbonisation challenges.
56 Sappi Annual Integrated Report 2023
Communities and neighbours
Self-assessment of quality of relationships: Fair to good
Our strategic fundamentals
Enhance
trust
Why we engage
Recognising that we are part of the communities beyond our fence lines and that
their prosperity and wellbeing are linked to our own, we strive to make a purpose-
driven, meaningful contribution towards the wellbeing and development of our
neighbouring communities. We work to create positive social impact by jointly
identifying and leveraging opportunities, thereby demonstrating our commitment
to transparency and collaboration.
Community engagement meetings take various formats in our mills in the regions
where they 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.
Shared priorities
• Community support including employment, job creation, business
opportunities, economic and social impacts/contributions.
Opportunities for value creation
• Enhanced licence to operate and thrive
• Promoting socioeconomic 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
• In South Africa, 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, many of whom look to us to take on
Government’s role.
Sappi Annual Integrated Report 2023 57
RESPONDING TO OUR CONTEXT Our key relationships continued
Industry bodies, related
memberships and organised
business
Self-assessment of quality of relationships: Good
Our strategic fundamentals
Drive operational
excellence
Enhance
trust
Why we engage
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.
An important element of our strategy for achieving our business objectives is to enhance and support collaboration across
the forest-based sector to enhance responsible forestry and promote forest certification. Our aim is to be present in multi-
stakeholder conversations, support effective advocacy with policymakers and Government leaders, and support supply chain
initiatives. Close engagement is maintained through the industry organisations CEPI (Confederation of European Paper Industries)
AF&PA (American Forest and paper Association), PAMSA (Paper Manufacturers Association of South Africa) and FSA (Forestry
South Africa).
Challenges for value creation
• High costs of and resource
requirements for certain industry
memberships.
Shared priorities
• Ethics and governance
• Decarbonisation and net zero
• Nature and biodiversity
• Issues that affect the sustainability of our industry and initiatives
that promote sustainability, awareness and understanding
• Regulatory issues
• Enhanced forestry management
• Combatting deforestation and promoting certification
• Ensuring the integrity of natural resources like water
• Product development and innovation.
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.
58 Sappi Annual Integrated Report 2023
Shareholders, bondholders
and banks
Self-assessment of quality of relationships:
Good to excellent
Our strategic fundamentals
Grow our
business
Sustain our
financial health
Enhance
trust
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, as well as our plans to
achieve our growth ambitions, thereby facilitating informed decisions.
Shared priorities
• Understanding Sappi’s strategy
• Understanding Sappi’s performance
• Return on investment
• Transparent information about our 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.
Opportunities for value creation
• Understanding of and commitment to our strategic direction
• Enhanced reputation
• Greater investment confidence
• Easier financing.
Challenges for value creation
• Uncertainty about certain
environmental regulations.
Sappi Annual Integrated Report 2023 59
RESPONDING TO OUR CONTEXT Our key relationships continued
Government and regulatory
bodies
Self-assessment of quality of relationships: Fair to good
Our strategic fundamentals
Grow our
business
Enhance
trust
Drive operational
excellence
Why we engage
Dialogue with members of governments and regulatory authorities is an opportunity for all
stakeholders involved to better understand all aspects of the issue at hand. 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 approach supports 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
63.
Shared priorities
Challenges for value creation
• The social and economic benefits of our industry nationally as well as at
• Policies which take neither our high
a local level
• Energy issues and carbon taxation
• Emerging regulations
• Enhancing sustainable forest management and land use
• Progress towards the UN SDGs
• Transformation in South Africa.
Opportunities for value creation
• Promoting understanding of issues and challenges as well as the strategic
value of our industry helps to create a more receptive regulatory and policy
environment.
use of biobased energy into
account nor recognise the
important carbon sequestration
role played by the sustainably
managed forests and plantations
from which we source woodfibre
• Uncertainty about certain
regulatory developments like
carbon tax (global) and dams
(South Africa)
• Administrative and licensing delays.
60 Sappi Annual Integrated Report 2023
Suppliers and contractors
Self-assessment of quality of relationships: Good
Our strategic fundamentals
Grow our
business
Enhance
trust
Drive operational
excellence
Why we engage
Our suppliers are a core component of our business. We aim to establish mutually
respectful, value-based relationships with them 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.
Shared priorities
• Robust safety procedures and a strong culture of safety
• Transparency into the value chain
• Security of fibre supply
• Certification
• Income generation and job creation.
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 woodfibre
• 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.
Sappi Annual Integrated Report 2023 61
RESPONDING TO OUR CONTEXT Our key relationships continued
Civil society and media
Self-assessment of quality of relationships: Good
Our strategic fundamentals
Enhance
trust
Why we engage
We maintain an open relationship with the media.
We continue to update the media on our belief that it is 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.
Shared priorities
• Business developments
• The future of our industry
• Our impacts on our communities
• Protecting the environment.
Opportunities for value creation
• Inform and educate media
• Encourage civil society to share our sustainability and
Thrive
vision through
positive actions.
Challenges for value creation
• Misunderstanding of our
environmental impacts.
62 Sappi Annual Integrated Report 2023
Our key memberships and commitments
Our memberships at group level are set out below. Details of our key regional memberships are detailed in the Our key
relationships section. See our 2023 Sappi Group Sustainability Report www.sappi.com/2023GSDR
for more information.
Sappi Limited
Focus
African Business
Leaders Coalition
In the build-up to COP27 in Egypt, the United Nations Global Compact launched the African Business
Leaders Coalition, to advance Africa’s sustainable growth, prosperity and development by mobilising a
coalition of Africa’s business leaders to engage on the continent’s most pressing issues as an organised,
innovative, forward-looking, principles-based, and unified voice. Our group CEO joined 56 other business
leaders from African companies and signed the Africa Business Leaders’ Climate Statement ensuring that
African business had a collective voice to contribute to the outcome.
Business for Nature
#MakeitMandatory
We signed up to this campaign, which calls on all large businesses and financial institutions to assess and
disclose their impacts and dependencies on biodiversity.
Business Leadership
South Africa (BLSA)
BLSA promotes engagement between South Africa’s business leaders and key players in South African
society, including Government, civil society and labour, to exchange ideas in our national interest and to
create effective dialogue.
Circular Bio-
economy Alliance
Aims to accelerate the transition to a circular bioeconomy that is climate neutral, inclusive and prospers
in harmony with nature.
EcoVadis
We 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. In FY2023, we held a platinum rating (the highest
level) for all three regions.
Ethics Institute of SA
As we are headquartered and listed in SA, we belong to this institute.
FSC International
Both SNA and SSA belong to this international, non-governmental organisation dedicated to promoting
responsible management of the world’s forests
National Economic
Development and
Labour Council
(Nedlac)
Sappi Limited is an active participant in the 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 Social and Ethics Board Committees.
Paris Pledge for
Action
We signed this pledge in 2015 to add our voice to global calls to limit global temperature rise to well below
2 degrees Celsius – and pursue efforts to limit the increase to 1.5 degrees Celsius.
i
n
o
i
t
a
s
n
a
g
r
o
f
o
e
m
a
N
Programme for the
Endorsement of
Forest Certification
(PEFC) –
International
Stakeholder Member
Sustainable Apparel
Coalition (SAC)
Technical
Association of the
Pulp and Paper
Industry
The Textile Exchange
(TE) and TE
man-made cellulosic
fibre roundtable and
climate sub-
committee
WBCSD
PEFC is an independent, non-profit, non-governmental organisation, which promotes sustainably
managed forests through independent third-party certification.
A global, multi-stakeholder non-profit alliance for the consumer goods industry, this advocacy group is
supported by the Federation of European Sporting Goods Industry and Global Fashion Agenda. We use
the SAC’s sustainability measurement suite of tools, the Higg Index, to evaluate materials, products,
facilities, and processes based on environmental performance, social labour practices, and product
design choices (see page
72 for further details).
An international NGO of about 14,000 member engineers, scientists, managers, academics and others
involved in the areas of pulp and paper.
The TE launched their Climate+ Strategy in 2019, with a goal to reduce GHG emissions in the textile value
chain by 45% by 2030, while addressing other climate-related impact areas, like water, biodiversity and
soil health. Sappi was an advisory partner in the development of the TE’s biodiversity benchmarking
module and participated in the pilot launch of the tool. We also participate in the cellulosic roundtable
and climate sub-committee.
The organisation has three imperatives with climate being a primary focus, in addition to nature and
equity. The Forest Solutions Group (FSG) is a sector specific working group under the WBCSD umbrella.
One of the FSG key deliverables is developing a net zero roadmap for the sector. We contributed to phase
1 of the development of FSG’s roadmap which describes the imperative for climate action in the forest
sector. It then introduces the three main levers for the forest sector to enable this transition:
• Reduce GHG emissions in operations and across the value chain
• Increase carbon removals through sequestration in sustainable working forests and storage in forest
products
• Grow the circular bioeconomy through the substitution of non-renewable and fossil-based materials
with forest products.
Sappi Annual Integrated Report 2023 63
RESPONDING TO OUR CONTEXT
Vigour
Lizards are estimated to have been around for 240 million years.
Little wonder, given that they make use of a variety of antipredator
adaptations, including venom, camouflage, reflex bleeding and the
ability to sacrifice and regrow their tails. What’s more, as with other
reptiles, the skin of lizards is covered in overlapping scales made
of keratin, providing protection from the environment and reducing
water loss through evaporation. This characteristic enables them
to thrive in some of the driest deserts on earth.
Vigour, strength and adaptability have ensured lizards’ ability to
thrive over the course of time.
So, too, at Sappi, our commitment to growing our business and
maintaining a healthy balance sheet, has sustained us for almost
90 years. We are vigorous in our commitment to deliver on our
Thrive
strategy, including by reducing exposure to graphic paper
markets while investing for growth in our target markets and
capitalising on our leadership position in pulp supply to the
lyocell market
.
64 Sappi Annual Integrated Report 2023
Page heading Sappi Annual Integrated Report 2023 65
• Move towards a circular economy
• Climate change and
climate transition
• Resource scarcity and
growing concern for
natural capital
Integrating our key material issues
• Cyber security
• Sustainability expectations
• Uncertain and evolving
regulatory landscape
• Employee relations.
• Evolving technologies and
consumer preferences
• Supply chain disruption.
Risk
Ethical behaviour
and compliance
Responsible
procurement
Key
material
issue
• Workplace culture.
• Responsible procurement.
Stakeholder
issue
• Safety
• Employee
relations.
• Employee
relations.
• Safety
• Cyclical
macroeconomic
factors.
• Cyclical
macroeconomic
factors
• Employee
relations.
Risk
Employee and
contractor
safety
• Safety as
a core value.
Sappi talent
Labour
relations
Social impact
Key
material
issue
• Training and
development
• Remuneration
• Diversity and
inclusion.
• Social
responsibility
and social
inequity
• Community
upliftment
• Jobs.
Stakeholder
issue
• A fair,
equitable,
safe workplace
• Connection
to, and
understanding
of, our
business and
strategic
direction.
66 Sappi Annual Integrated Report 2023
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
• Changing consumer
and employee behaviour
• Deglobalisation, polarisation
and increased geopolitical
tensions
• Rapid pace of
technological innovation and
threat, including cyber risks
• Shifting demographics.
• Cyclical macroeconomic
• Cyclical macroeconomic
• Cyclical macroeconomic
• Sustainability expectations
factors
factors
factors
• Evolving technologies and
• Sustainability expectations
• Sustainability expectations
Risk
consumer preferences
• Supply chain disruption
• Liquidity.
• Climate change
• Evolving technologies and
consumer preferences.
• Evolving technologies and
consumer preferences.
consumer preferences
• Liquidity.
• Climate change
• Evolving technologies and
Key
material
issue
Stakeholder
issue
Agility and
Low carbon
operational efficiency
circular bioeconomy
Biomaterials
Innovation
and collaboration
• Return on
investment.
• Keeping abreast of market
• Climate concerns
• Reduced environmental
developments
• Products based on
renewable resources
• Making the most of every
tree harvested.
• Circular economy
Resource use.
impact
• Circular economy
• New or enhanced
products that meet rapidly
changing market demand
• Responsible
consumption.
• Sustainability
expectations
• Climate change
• Supply chain
disruption.
Risk
• Sustainability
expectations
• Sustainability
expectations
• Sustainability
expectations
• Sustainability
expectations
• Climate change
• Climate change
• Climate change
• Climate change.
• Evolving
technologies and
consumer
preferences.
• Evolving
technologies
and consumer
preferences.
• Evolving
technologies
and consumer
preferences.
Key
material
issue
Sourcing
Sustainable
sustainable
woodfire
woodfibre
Renewable energy
and climate
change
Water
stewardship
Circular
bioeconomy and
minimal waste
Biodiversity
Stakeholder
issue
• Deforestation.
• Reduction of
fossil fuel usage
• Global warming.
• Water quality
and quantity.
• Resource
scarcity.
• Biodiversity loss.
• Move towards a circular economy
• Climate change and
climate transition
• Resource scarcity and
growing concern for
natural capital
• Cyber security
• Sustainability expectations
• Uncertain and evolving
regulatory landscape
• Employee relations.
• Evolving technologies and
consumer preferences
• Supply chain disruption.
Risk
Ethical behaviour
and compliance
Responsible
procurement
Key
material
issue
• Workplace culture.
• Responsible procurement.
Stakeholder
issue
• Safety
• Employee
relations.
• Employee
relations.
• Safety
• Cyclical
macroeconomic
factors.
• Cyclical
macroeconomic
factors
• Employee
relations.
Risk
Employee and
contractor
safety
• Safety as
a core value.
Sappi talent
Social impact
Labour
relations
Key
material
issue
• Training and
development
• Remuneration
• Diversity and
inclusion.
• Social
responsibility
and social
inequity
• Community
upliftment
• Jobs.
Stakeholder
issue
• A fair,
equitable,
safe workplace
• Connection
to, and
understanding
of, our
business and
strategic
direction.
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
• Changing consumer
and employee behaviour
• Deglobalisation, polarisation
and increased geopolitical
tensions
• Rapid pace of
technological innovation and
threat, including cyber risks
• Shifting demographics.
• Cyclical macroeconomic
factors
• Cyclical macroeconomic
factors
• Cyclical macroeconomic
factors
Risk
• Evolving technologies and
consumer preferences
• Supply chain disruption
• Liquidity.
• Sustainability expectations
• Sustainability expectations
• Climate change
• Evolving technologies and
consumer preferences.
• Evolving technologies and
consumer preferences
• Liquidity.
• Sustainability expectations
• Climate change
• Evolving technologies and
consumer preferences.
Key
material
issue
Stakeholder
issue
Agility and
operational efficiency
Low carbon
circular bioeconomy
Biomaterials
Innovation
and collaboration
• Return on
investment.
• Keeping abreast of market
developments
• Products based on
renewable resources
• Making the most of every
tree harvested.
• Climate concerns
• Circular economy
Resource use.
• Reduced environmental
impact
• Circular economy
• New or enhanced
products that meet rapidly
changing market demand
• Responsible
consumption.
• Sustainability
expectations
• Climate change
• Supply chain
disruption.
Risk
• Sustainability
expectations
• Sustainability
expectations
• Sustainability
expectations
• Sustainability
expectations
• Climate change
• Climate change
• Climate change
• Climate change.
• Evolving
technologies and
consumer
preferences.
• Evolving
technologies
and consumer
preferences.
• Evolving
technologies
and consumer
preferences.
Key
material
issue
Sourcing
Sustainable
sustainable
woodfire
woodfibre
Renewable energy
and climate
change
Water
stewardship
Circular
bioeconomy and
minimal waste
Biodiversity
Stakeholder
issue
• Deforestation.
• Reduction of
fossil fuel usage
• Global warming.
• Water quality
and quantity.
• Resource
scarcity.
• Biodiversity loss.
Sappi Annual Integrated Report 2023 67
RESPONDING TO OUR CONTEXT Our key material issues
Our key material issues are those that we believe underpin our
strategic risks and opportunities and have the highest potential
impact – negative and positive – on stakeholder value.
The following pages set out a summary of why we believe these issues are material to Sappi, both in financial and impact terms,
as well as their links to other aspects of our business, FY2023 highlights and the developments that present opportunities for
value creation.
A comprehensive background to each material issue, together with key developments in FY2023 can be found in our 2023
Sappi Group Sustainability Report www.sappi.com/2023GSDR
Our double materiality approach
Financial materiality:
How sustainability
topics impact Sappi’s
financial health
Outside-in
perspective
Company
Planet and
society
Inside-out
perspective
Impact materiality:
How our operations and
upstream/downstream
business relationships
affect nature, climate
and communities
around Sappi
68 Sappi Annual Integrated Report 2023
Principles
Ethical behaviour and compliance
Financial materiality
Impact materiality
Our strong ethical culture underpins our
reputation, built up over many years. However,
just one breach of ethics could destroy our
reputation and negatively erode stakeholder
value. Accordingly, we place a high premium
on adherence to ethical behaviour as
encapsulated in our Code of Ethics.
Sappi’s objective is to be a ‘trusted partner to all our stakeholders’. We cannot
achieve this unless we all ‘live’ our values of integrity and courage and act
when these values are threatened. In doing so, we protect the viability of
our business and the interests of all our stakeholders.
How this issue links to other aspects of our business
Our global priority SDGs Our strategic fundamentals
The global forces shaping our
Thrive
strategy
• Rapid pace of technological innovation and threats
including cyber threats
• Changing consumer and employee behaviour
• Shifting demographics.
Our top 10 risks
3 Cyber security
8
Uncertain and evolving regulatory landscape
9 Employee relations
Our highlights
• Comprehensive ethics training
• Ethics issues incorporated into employee
engagement survey.
Opportunities for value creation
We constantly strive to develop and update relevant policies to
support our efforts to maintain and improve our high ethical
standards. The group whistle-blowing policy has been carefully
reviewed and updated to align with the latest global standards
and best practices.
These policies will help to drive value creation by strengthening
our commitment to transparency, integrity and ethical conduct
and are critical components of your ethical framework,
empowering employees to report any concerns or suspected
violations of policies, laws, or moral standards without fear of
reprisal.
See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR
Sappi Annual Integrated Report 2023 69
RESPONDING TO OUR CONTEXT Our key material issues continued
Principles continued
Responsible procurement
Financial materiality
Impact materiality
With over 16,000 suppliers, maintaining a
well-organised supply chain is integral to our
business and key to meeting our strategic
pillars which include growing our business,
sustaining our financial health and driving
operational excellence. It also underpins our
licence to operate.
In today’s environmentally and socially conscious world, ethical supply
chains are a key concern. By avoiding negative sourcing impacts, giving
our customers and consumers transparent insight into our supply chain
and collaborating with our suppliers to promote responsible business, we
are enhancing trust – the fourth pillar of our strategy – and working towards
our vision of a thriving world.
How this issue links to other aspects of our business
Our global priority SDGs Our strategic fundamentals
The global forces shaping our
Thrive
strategy
• Rapid pace of technological innovation and threats
including cyber threats
• Changing consumer and employee behaviour
• Shifting demographics.
Our top 10 risks
4 Sustainability expectations
6
Evolving technologies and consumer preferences
7 Supply chain disruption
Our highlights
• 81% of our global eligible procurement
spend covered by a signed Supplier Code
of Conduct
• In terms of procurement spend, in SEU 72% of
spend was covered by suppliers on EcoVadis,
37% in SNA and 48% in SSA.
Opportunities for value creation
In a survey of approximately 27,000 global customers published
in September 2021, approximately 88% of the participants said
they would prioritise purchases from companies that implement
ethical sourcing practices. Around 83% of them are ready to pay
extra for a product that has a guaranteed ethical source.
Moreover, close to 64% of 18 to 24-year-olds, representing
almost two-thirds of the youngest adult buyers, mentioned that
they would not buy from a company again if it was accused of
engaging with unethical suppliers.1
As we continue to expand our responsible sourcing practices, so
we are honing our competitive advantage across global markets.
See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR
1 This research was conducted by 3Gem in April 2021. Commissioned by OpenText, 27,000 consumers were anonymously surveyed globally, across the
UK, Germany, France, Spain, Italy, USA, Canada, Brazil, Japan, India, Australia and Singapore.
70 Sappi Annual Integrated Report 2023
Prosperity
Agility and operational efficiency
Financial materiality
Impact materiality
Within the context of a persistent global economic downturn
characterised by depressed markets, geopolitical instability and
weak economic growth, acting boldly by being agile and
prioritising operational efficiency are more important than ever
before. With a keen focus on maintaining shareholder value, we
continue to diligently manage working capital through production
curtailments and by adapting our product and market mix to
match demand. This aligns with our long-term
which focuses on growing our portfolio in packaging and
speciality papers, pulp and biomaterials. By investing in our
business to pursue growing areas of demand, we can remain
profitable and competitive in the global marketplace. As an
example of the opportunities this represents, the global
sustainable packaging market is predicted to grow at a compound
annual growth rate (CAGR) of 7.7% between 2023 and 20311.
Shareholder value is also enhanced by our focus on operational
efficiency and making more with less where implementation of
best available technology maintains our competitive cost position.
strategy,
Thrive
By enhancing our operational efficiency and making
more with less, we reduce the environmental impacts
of our operations. Consumers, retailers and brand owners
all over the world are looking for sustainable paper-based
packaging solutions for their products, while eco-
conscious consumers and shoppers are pressuring
brand owners for more biodegradable, recyclable and
compostable packaging, all reflecting a more circular
economy. In addition, the environmental impact of
packaging production, use and disposal continues to
come under increasing scrutiny from regulators. We meet
these needs by offering a broad range of paper-based
sustainable solutions as an alternative to non-renewable-
based packaging in many of our product segments.
How this issue links to other aspects of our business
Our global priority SDGs Our strategic fundamentals
The global forces shaping our
Thrive
strategy
• Changing consumer and employee behaviour
• Shifting demographics.
Our top 10 risks
2 Cyclical macroeconomic factors
10 Liquidity
6
Evolving technologies and consumer preferences
7 Supply chain disruption
Our highlights
• Inaugurated a new warehouse at
Carmignano Mill
• Modernised PM11 at Gratkorn Mill
• Completed debottlenecking on PM1 at
Somerset Mill
• Initiated the conversion and expansion of
Somerset PM2 from CWF to SBS
• Accelerated our digital transformation
journey.
Opportunities for value creation
Currently, all sodium sulphite (Na2SO3) used in South Africa is
imported. Tugela Mill relies on this imported sodium sulphite for
its NSSC digester with limited affordable domestic supply. To
mitigate these supply risks and lower costs of production, the
mill initiated a project aimed at in-house sodium sulphite
production. This project is in its final stages and is scheduled for
commissioning in early 2024. This project is perfectly aligned
with Sappi’s
strategy to reduce cost of production and
de-risk raw material supply. It also will have the added advantage
to supply product into various South African markets.
Thrive
See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR
1 https://straitsresearch.com/report/sustainable-packaging-market
Sappi Annual Integrated Report 2023 71
RESPONDING TO OUR CONTEXT Our key material issues continued
Prosperity continued
Low-carbon, circular bioeconomy
Verve
Financial materiality
Impact materiality
As global textile demand grows, driven by population growth,
fashion and rising wealth in developing economies, the need to
develop more climate-friendly solutions, derived from renewable
materials will drive increasing market share for dissolving pulp (DP),
particularly wood-based cellulosics for which the bulk of Sappi’s
DP is used.
How this issue links to other aspects of our business
By improving traceability in the textile value chain and
lowering the carbon footprint of Verve, we can help to
grow a healthier planet and increase consumer
confidence in the products they purchase.
Our global priority SDGs
Our strategic fundamentals
The global forces shaping our
Thrive
strategy
• Changing consumer and employee behaviour
• Shifting demographics
• Climate change and climate transition
• Resource scarcity and growing concern for natural capital.
Our top 10 risks
2 Cyclical macroeconomic factors
6
Evolving technologies and consumer preferences
4
Sustainability expectations
5 Climate change
Our highlights
• Progressed collaborative textile value chain
partnerships to develop circular solutions
for fashion
• Publicly disclosed our Higg Facility
Environmental Management (FEM) and Facility
Social & Labour Module (FSLM) scores for
Cloquet Mill and Saiccor Mill respectively
• Progressed the water stewardship project
with WWF-SA in the uMkhomazi catchment
near Saiccor Mill and extended the partnership
for another four years.
Opportunities for value creation
In FY2024 we will be launching a campaign in South Africa
spearheaded by a top local fashion designer and focused on
positioning Verve as the Fibre of Choice for the more sustainable
portfolio of fibres, ie lyocell and sustainable viscose fibres.
The campaign is underpinned by our focus on sustainability
(including the aspect of traceability) as a key value differentiator.
In addition, it aligns with the South African Government’s
clothing, textiles, footwear and leather (CTFL) master plan which
aims to stimulate the value chain feeding into South Africa’s
major CTFL retailers.
See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR
About Higg
Developed by the Sustainable Apparel Coalition (SAC), the Higg FEM is part of a suite of
tools that enables manufacturing facilities of all sizes to measure and score their
environmental performance against a standard set of criteria, allowing for meaningful
and credible performance benchmarking in the apparel and textile sector. Across
topics such as water use, carbon emissions and waste management, the Higg Index
can be used by consumer goods brands, retailers, manufacturers, governments, NGOs
and consumers to inform their individual sustainability strategies and drive collective
industry transformation.
The Higg FSLM measures the social impact of manufacturing across areas such as
wages, working hours, health and safety, and employee treatment.
72 Sappi Annual Integrated Report 2023
Biomaterials
Financial materiality
Impact materiality
Thrive
strategy, one of our stated objectives is to
Under our
pursue circular ecosystems and economies – including utilising
100% of each tree we harvest. Our innovative technology enables
us to derive biochemicals and biomaterials from the parts of the
tree which are not used for pulp and papermaking, thereby
creating additional revenue generation opportunities.
By harnessing the unique properties of wood acids, wood
sugars and wood lignin to provide a range of biobased
products, we are enhancing environmental sustainability
to the benefit of people and the planet.
How this issue links to other aspects of our business
Our global priority SDGs
Our strategic fundamentals
The global forces shaping our
Thrive
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 top 10 risks
2 Cyclical macroeconomic factors
10 Liquidity
4
Sustainability expectations
6
Evolving technologies and consumer preferences
Our highlights
• Progressed development of Viscowell, our
lignosulphonate-based product used in oil-well
drilling for mud thinning, fluid loss and as a
retarder for well cementing
• Commissioned a furfural plant at Saiccor Mill,
with plans for a commercial plant at the same
mill well advanced.
Opportunities for value creation
We support the drive to improve the impact of everyday
products on the environment, particularly on precious
water resources. Our biomaterials such as Valida offer
unique opportunities for the manufacturers of home and
personal care products to significantly reduce the negative
consequences of daily use products which deposit
unrecoverable and non-biodegradable particles into the soil,
ocean and freshwater resources. Ever-increasing controls and
pending legislative changes regarding the use of harmful
chemicals in pesticides will create further opportunities for our
lignin, furfural and Valida products which are being tested in a
range of products aimed at reducing the impact of agriculture
on the environment.
See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR
About furfural
Furfural is produced from C5 sugars (sugar derived from non-food biomass) in hemicellulose through hydrolysis
and dehydration. Essentially, it 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. It can also be used as a fungicide, nematicide and weed killer. A large component of the world’s
furfural production is converted to furfural alcohol for furan resins.
Sappi Annual Integrated Report 2023 73
RESPONDING TO OUR CONTEXT Our key material issues continued
Prosperity continued
Innovation and collaboration
Financial materiality
Impact materiality
Technology is a core pillar of competitive advantage in our industry
and relevant, ongoing technology investments are key to
maintaining and amplifying enterprise value.
By developing new, competitive technologies we can
lower energy consumption and increase our use of
renewable energy, expand product lifecycles and reduce
waste. We work to meet market supply and demand and
grow profitability while respecting the boundaries of
the planet.
How this issue links to other aspects of our business
Our global priority SDGs
Our strategic fundamentals
The global forces shaping our
Thrive
strategy
• Move towards a circular economy
• Climate change and climate transition
• Resource scarcity and growing concern for natural capital.
Our top 10 risks
4
Sustainability expectations
5 Climate change
6
Evolving technologies and consumer preferences
Our highlights
• The top three finalists’ entries in the Technical Innovation
Awards represent a five-year net present value (NPV) of
US$34.3 million at a 100% probability of success rate
• Launch of new wet-strength, alkali-resistant Parade Label Pro WS
• Commercialisation of bagasse-based compostable thermo-
moulded food-grade bowls and plates
• Collaboration with Xeikon – a company focused on digital
printing engines, both toner-based and inkjet, for a variety of
packaging applications – to develop printed, recyclable paper-
based flexible packaging
• New cloud-based Stage-Gate R&D platform rolled out across
the group.
Opportunities for value creation
The Decarbonisation and Future Technology
1.5 team has been exploring carbon capture
initiatives as part of the road to
decarbonisation. Feasibility studies for a few
selected mills are under evaluation. As the
pulping process is energy and water
intensive, this team has also been exploring
low energy pulping technologies for the
future. An alternative pulping technology is
being evaluated with the potential to increase
yield, reduce cooking time, increase pulp
strength and reduce water usage.
See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR
About our Stage Gate process
New software was introduced to create a OneSappi approach to R&D and ideation. It uses a structured Stage Gate
process to develop technologies, deliver products to market, and process improvements to the mill, ensuring positive
financial contribution or cost savings. The software was designed to fit Sappi’s existing approach to R&D and adapted
to cater for future improvements recommended by the group technology management team. The platform incorporates
forecasts for financial value delivery and using the NPV (net present value) metric for every R&D project.
The process assesses the viability of projects in small steps using a cross-functional team of individuals to decide
whether to progress the project to launch. The process is designed to fail-fast early, improve the success rate of
launching projects that deliver financial value delivery and shorten time to market. Using a standard set of in-house
questions, the platform was designed to ensure that only projects that align with Sappi’s strategy for growth, improved
environmental performance and meet the voice of the customer, are progressed to launch. The project risk is
assessed across several elements to create a project scorecard to inform decision-making.
74 Sappi Annual Integrated Report 2023
People
Employee and contractor safety
Financial materiality
Impact materiality
Impact materiality
Entrenching a strong safety culture is the moral responsibility of
every employer. However, a strong safety culture also makes
good financial sense. If a worker is injured on the job, it costs the
company in terms of lost working hours, increased insurance
costs, workers’ compensation premiums and potential legal action.
Productivity and morale suffer when workplaces are
unsafe. When a workplace is safe, employees feel more
engaged and connected with the company. We strive
to ensure that all our people have a 24/7 safety mindset,
inculcating this through various initiatives and leading
by example.
How this issue links to other aspects of our business
Our global priority SDGs
Our strategic fundamentals
The global forces shaping our
Thrive
strategy
• Rising social inequality and growing social activism
with increased expectations of business.
Our top 10 risks
1 Safety
9 Employee relations
Our highlights
• Zero fatalities
• Continuous improvement in the lost-time injury frequency rate
(LTIFR) across all regions
• Safety recognition awards launched in SNA
• Safety awards in SSA extended to include environmental
awards, thereby gaining higher visibility.
Opportunities for value creation
Based on the success of similar programmes
in SNA and SSA, in FY2024, we will be rolling
out a safety award in SEU to recognise
proactive initiatives that improve safety
culture and enhance employee engagement
related to safety.
Sappi group – LTIFR and LTISR combined
0.53
0.48
●
91
0.46
●
93
0.44
●
91
0.60
0.50
0.40
0.30
0.20
0.10
●
0
16
2014
●
0.54
●
98
0.43
●
49
0.35
●
48
0.38
●
20
120
100
80
60
40
20
0
0.31
●
10
2022
0.24
●
12
2023
2015
2016
2017
2018
2019
2020
2021
LTIFR
LTISR
Note: 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.
LTISR is the lost-time injury severity rating
and in a similar manner to the frequency
rate, is calculated by dividing the product
of the number of days lost to the injury
and the group-wide standard hours by the
unit’s man hours, ie LTISR = Number of
days lost * 200,000/actual man hours.
See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR
Sappi Annual Integrated Report 2023 75
RESPONDING TO OUR CONTEXT
Our key material issues continued
People continued
Sappi talent
Financial materiality
Impact materiality
Companies that are diverse, equitable and inclusive are better able to respond
to challenges, win top talent, and meet the needs of different customer bases.
Accordingly, we strive to create a diverse, inclusive working environment that
establishes a sense of belonging among employees and shared sense of purpose.
In addition, our people are encouraged and supported to upgrade their job-related
skills and knowledge to improve their job performance and abilities for future career
growth. These approaches further entrench our strategic pillar of ‘trust’ and lead to
greater levels of retention, connection and productivity, translating directly into
improved performance and stronger business results and profits.
Developing potential in a diverse, inclusive
working environment is important for both
business performance and individual
wellbeing. A workplace which encourages
people to reach their full potential is not
only more productive, but employees are
likely to be more engaged and fulfilled.
How this issue links to other aspects of our business
Our global priority SDGs
Our strategic fundamentals
The global forces shaping our
Thrive
strategy
Our additional SSA
priority SDGs
Our top 10 risks
9 Employee relations
• 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
• Exceptional participation in the employee engagement survey
• Progress in revised human resources (HR) strategy
• Two new simpler, more modern management training
programmes launched
• Significant uptake of advanced training and performance
development system.
Opportunities for value creation
The richness in data of the engagement survey
will allow us to craft HR solutions specific to
regions, workplaces and levels.
Group employee engagement levels, 2021, 2023
comparison and benchmark comparison (%)
120
100
80
60
40
20
0
61.7
58.2
18.6
8.2
11.5
21.1
9.8
11.0
62.4
19.4
8.5
9.8
Current survey
Previous survey
Benchmark
●
Above 50
●
Below 30
●
Between 30 and 50
●
Group total
Overall engagement results
Engaged employees consistently exceed expectations.
They are energised and passionate about their work,
leading them to exert discretionary effort to drive
organisational performance.
Almost engaged employees sometimes exceed
expectations and are generally passionate about their work.
At times they exert discretionary effort to help achieve
organisational goals.
Indifferent employees are satisfied, comfortable and
generally able to meet minimum requirements. They
see their work as ‘just a job’, prioritising their needs before
organisational goals.
Disengaged employees usually fail to meet minimum
expectations, putting in time rather than effort. They have
little interest in their job and the organisation and often
display negative attitudes.
See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR
76 Sappi Annual Integrated Report 2023
Labour relations
Financial materiality
Impact materiality
Impact materiality
Sound labour relations based on trust – one of our strategic
fundamentals – are important in maintaining the smooth running of
our operations and reputation, as well as enhancing productivity.
These factors, in turn, drive financial value.
Effective communication underpins sound labour
relations. Understanding Sappi’s strategic direction and
purpose helps to elevate engagement, while transparent,
constructive discussions related to issues, opportunities
and challenges reduce the possibility of conflict and
create a positive working environment.
How this issue links to other aspects of our business
Our global priority SDGs
Our strategic fundamentals
The global forces shaping our
Thrive
strategy
• Rising social inequality and growing social activism
with increased expectations of business
• Changing consumer and employee behaviour
• Shifting demographics.
Our top 10 risks
1 Safety
2 Cyclical macroeconomic factors
9 Employee relations
Our highlights
• Good labour relations in all regions
• Across the group, the FY2023 collective
bargaining process was stable
• Development plans were compiled for 36 shop
stewards in SSA.
Opportunities for value creation
The labour market has become very competitive in all regions
and the healthy relationships we have established with organised
labour will help to ensure retention of critical technical skills.
See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR
Sappi Annual Integrated Report 2023 77
RESPONDING TO OUR CONTEXT Our key material issues continued
People continued
Social impact
Financial materiality
Impact materiality
Our focus on profit with purpose in alignment with our vision of
a thriving world drives us in our creation of economic value for
Sappi and value for society.
By investing in communities, we promote socio-
economic growth and establish mutually beneficial
relationships.
How this issue links to other aspects of our business
Our global priority SDGs
Our strategic fundamentals
The global forces shaping our
Thrive
strategy
Our additional SSA
priority SDGs
Our top 10 risks
• 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.
2 Cyclical macroeconomic factors
9 Employee relations
Our highlights
• Ongoing success of Ideas that Matter
initiative in SNA
• Highly successful enterprise and ESD
programme in SSA.
Opportunities for value creation
Given the proven causal link between early childhood development
(ECD) and success and wellbeing later in life, we expect positive
outcomes from our ECD programmes in SSA, and are planning to launch
a ‘Follow the Child’ tracking initiative. This will give us greater
understanding of our ECD programmes, allowing us to recalibrate
if necessary.
Corporate social investment spend
FY2023
SEU
SNA
SSA
€100,000
US$417,500
ZAR54 million
See our 2023 Sappi Group Sustainability
Report for more information
www.sappi.com/2023GSDR
Sappi Khulisa: Celebrating 40 years of success
Our Sappi Khulisa tree-farming scheme, initiated in 1983 is a good example of positive social impact and shared value: It is an integral part
of our woodfibre supply chain, enhancing security of fibre supply, while uplifting rural communities by equipping them to become
sustainable participants in the forestry value chain.
Initially, the programme focused on supporting subsistence farmers with access to one to 20 hectares of land to grow trees. First known
as Project Grow and starting with only three beneficiaries in the Zululand South area, in 2013, Sappi Khulisa expanded to include
community forestry projects and forestry projects handed to land-reform beneficiaries. Today the project stretches from the far north of
the KwaZulu-Natal province to the far south and into Mpumalanga and the Eastern Cape. Today the total area managed is 37,269 hectares
(ha). In 2023, under this programme, 318,116 tons of timber worth some ZAR332.6 million was delivered to our operations. Since 1995, a
total volume of 5,187,906 tons to the value of ZAR3.334 billion has been purchased from small growers under this programme. In 2013,
Sappi Khulisa expanded to include community forestry projects and forestry projects handed to land-reform beneficiaries.
Currently, the programme involves 4,143 growers and approximately 942 small, medium and micro enterprises (SMMEs) who are involved
in silviculture, harvesting, loading, short on and long-haul activities.
We offer training at three Khulisa Ulwazi (‘Growing knowledge’) to all value chain participants, including land-reform beneficiaries and cover
all aspects of forestry, including core operational skills as well as safety, legal compliance and business management. During 2023, Ulwazi
trained 471 individuals on 20 different courses related to forestry business management.
Shortly after year-end, The Sappi Khulisa team was honoured with The Trialogue Strategic CSI award.
78 Sappi Annual Integrated Report 2023
Planet
Sustainable woodfibre
Financial materiality
Impact materiality
Thrive
business strategy and maintain returns to
To meet our
shareholders, we need to secure a reliable supply of sustainably
sourced woodfibre that enables us to offer products to our
customers around the world that carry no risk of deforestation
or forest degradation. This is particularly important not only given
stakeholder concerns, but also within the context of legislative
requirements such as the new EU Deforestation Regulation
(EUDR). See box on page
80.
By ensuring forests and plantations are sustainably
managed through high levels of certification and
prioritising traceability, we can help to combat climate
change and enhance the ecosystems services that
contribute to greater levels of economic, social and
environmental wellbeing.
How this issue links to other aspects of our business
Our global priority SDGs
Our strategic fundamentals
The global forces shaping our
Thrive
strategy
• Climate change and climate transition
• Resource scarcity and growing concern for natural capital.
Our top 10 risks
4
Sustainability expectations
5 Climate change
7 Supply chain disruption
Our highlights
• Progressing PEFC1 – endorsed
South African Forestry Assurance
Scheme (SAFAS) forest certification
in South Africa
• Meeting our performance against
our fibre certification target within
the context of challenging global
markets.
Opportunities for value creation
Based on the success of our use of bagasse as a fibre source, we are looking
at non-woodfibre sources such as grasses, cereal straws, maize stalks and
bamboo. The Sappi Technology Centre in Tshwane, South Africa has
evaluated wheat straw and were able to produce good quality pulp with
comparable yield and bleachability to bagasse, under the same cooking and
bleaching conditions. The wheat straw pulp also demonstrated certain key
strength properties, including tensile, burst and tear strength.
Following trials at Stanger Mill, we are now assessing other alternative plants
that could be grown close to the mill in collaboration with Khulisa farmers.
This offers opportunities not only in terms of expanded fibre sources, but
also in the form of expanded income generation for Khulisa farmers.
Alternatives like Bana Grass and Elephant grass are still being sourced for
further testing.
See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR
1 Programme for the Endorsement of Forest Certification (PEFC).
Sappi Annual Integrated Report 2023 79
RESPONDING TO OUR CONTEXT Our key material issues continued
Planet continued
The EU’s new deforestation regulation
The EUDR, which came into force in June 2023, aims to minimise deforestation and forest degradation. It states
that relevant products placed on the EU market, or exported from the EU, must demonstrate that their supply chains
have not contributed to the destruction of forests around the world.
What is Sappi doing?
Sappi is firmly committed to zero deforestation and thus shares the aims of the EUDR. With the new regulation
leaving several important issues related to its practical implementation open, Sappi is working alongside other
stakeholders and peers to ensure a robust yet workable implementation of the regulation. We are working together
especially within the community of Confederation of European Paper Industries (CEPI) to build a common
understanding and approach to EUDR across the value chain.
Forest certification systems will, of course, continue to play a key role in helping to oversee and validate supply
chains. Sappi already has in place measures to ensure that its supply chains are deforestation-free – which is why,
Sappi’s mills are certified in most cases by both PEFC and FSC Chain of Custody. We also employ our own due
diligence systems to monitor woodfibre sourcing. Everything that enters our mills must at least meet the
requirements of the FSC Controlled Wood Standard and PEFC Controlled Sources.
Renewable energy and climate change
Financial materiality
Impact materiality
The use of fossil fuels and climate
change has negative impacts on
ecosystems, water, biodiversity
and human health. It is our
responsibility to decrease our
use of fossil fuels, the emission
intensity of our products and do
our part towards climate change
mitigation.
Climate change: Climate change has the potential to have a significant impact on our
woodfibre supply. In both Europe and Southern Africa, the changing climate is impacting
the health and resilience of the forests and plantations from which we source woodfibre.
Increased drought, floods, wind, pest and disease outbreaks and wildfires are all
accelerating risks and potentially, higher costs. In addition, the urgent need to address
GHG emissions affects our operations globally. Tackling climate change is one of the
biggest and most daunting challenges of our time – and we are committed to taking
positive action by mitigating both physical and transitional risks.
Renewable energy: According to the United Nations, fossil fuels – coal, oil and gas – are
by far the largest contributor to global climate change, accounting for over 75% of global
GHG emissions and 90% of all carbon dioxide emissions. While we recognise the need
to increase our use of renewable energy, our business is highly capital intensive and
implementing additional and modified machinery that facilitates the use of renewable
energy takes time and money. Nevertheless, we are committed to meeting our science-
based GHG emission reduction targets (approved by the SBTi in FY2022). We have
identified capital projects within our existing five-year plan as well as further longer-term
interventions, to facilitate the required emissions reduction. The global capital
expenditure between FY2021 to FY2030 required to achieve the targets is estimated to
be US$60-70 million per annum. While significant, these costs should be considered
within the context of the competitive advantage created by reduced GHG emissions and
higher levels of renewable energy.
How this issue links to other aspects of our business
Our global priority SDGs
Our strategic fundamentals
The global forces shaping our
Thrive
strategy
• Climate change and climate transition
• Resource scarcity and growing concern for natural capital.
Our top 10 risks
4
Sustainability expectations
5 Climate change
6
Evolving technologies and consumer preferences
80 Sappi Annual Integrated Report 2023
Opportunities for value creation
In South Africa we are looking into biodiesel
opportunities in KwaZulu-Natal province.
Our highlights
• SNA continues to operate with a high level of renewable
energy – 78% in FY2023
• Ongoing decarbonisation and renewable energy projects
in SEU
• Launch of the Sappi Chair in Climate Change and
Plantation Sustainability at the University of the
Witwatersrand. Given that forestry is a long-term crop, we
need to know well in advance where to direct our resources
and investment. The work by Wits will facilitate this by
providing more accurate climate models and replicable,
workable methodologies
• Project at Saiccor Mill to generate steam from pellets
made from wood shavings and other wood waste left over
from the mill’s manufacturing processes.
Specific GHG (Scope 1 and 2) emissions (kg CO2e/adt)
2,000
1,500
1,000
500
0
.
3
2
5
8
1
,
.
5
8
0
7
1
,
.
1
8
4
7
1
,
.
6
6
9
7
1
,
.
9
5
1
7
1
,
.
0
8
9
6
.
6
9
1
7
.
6
4
3
6
.
4
5
2
6
.
3
2
7
5
.
4
3
2
4
.
2
1
4
4
.
4
9
3
4
.
2
9
4
3
.
8
0
6
3
.
3
3
9
8
.
9
4
1
9
.
1
2
6
8
.
0
4
4
9
.
2
3
1
8
EU
●
2020
●
2019
NA
SA
Global
●
2021
●
2022
●
2023
Note: Regrettably, in FY2023 our emissions
intensity increased significantly. The rise
can be attributed to a significant reduction
in energy efficiency associated with the
high levels of production curtailment that
were required throughout the year due to
challenging market conditions. The fluctuating
start-stop operations and the need
to maintain equipment heating during
cold winter months, even when production
was halted, significantly hampered our
operational efficiencies. Despite the poor
performance relative to our targets, we remain
confident that our decarbonisation strategy
and capital investment programme is on track
to deliver our 2025 and 2030 commitments.
See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR
Sappi Annual Integrated Report 2023 81
RESPONDING TO OUR CONTEXT Our key material issues continued
Planet continued
Water stewardship
Financial materiality
Impact materiality
Direct use of freshwater is vital in our manufacturing operations and for our
nurseries in South Africa. Our 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; pulp cooking, washing and
screening; and paper machines; process cooling, generating steam for process
use and onsite power generation. In terms of indirect use, both our plantations
in South Africa and the forests from which we source woodfibre are dependent
on rainfall.
To sum up: Water is integral to achieving our long-term strategic business objectives.
All our mills use and treat water in accordance with comprehensive environmental
permits. These play a key role in achieving our strategy of growing our business,
sustaining our financial health and enhancing trust. To drive operational excellence,
water management is included in our operational environmental management plans,
which are reviewed and updated annually. Operational excellence is also based on
water-related risks – both internal and external developments, together with climate
change trends – and opportunities being built into our opex and capex plans and
overall long-term strategic objectives.
Climate change is exacerbating both
water scarcity and water-related hazards
(such as floods and droughts), as rising
temperatures disrupt precipitation
patterns and the entire water cycle.
This is impacting socioeconomic
growth, food security and health.
Recognising the pressure on a finite
resource that is core to our processes,
we focus on identifying opportunities
to save water throughout our pulp and
papermaking production process,
recycling extensively within these
processes and improving the quality of
the wastewater (effluent) we discharge.
Globally, 93% of our water intake is
treated and returned to the watershed
from which it came.
How this issue links to other aspects of our business
Our global priority SDGs
Our strategic fundamentals
The global forces shaping our
Thrive
strategy
• Climate change and climate transition
• Resource scarcity and growing concern for natural capital.
Our top 10 risks
4
Sustainability expectations
5 Climate change
6
Evolving technologies and consumer preferences
Our highlights
• Group Water Stewardship Policy approved
• Cloquet Mill honoured with 2023 AF&PA
Leadership in Sustainability Award for Water
Management
• Water reduction projects implemented at
SEU mills
• Globally, total water withdrawal decreased
by 8% year-on-year in FY2023 and by 7% over
five years.
Opportunities for value creation
Under South African legislation, commercial forestry is defined
as a stream flow reduction activity and thus a water use licence
for planting is required, even though our plantations are not
irrigated. Research indicates that commercial forestry accounts
for only 3% of South Africa’s water use, while irrigation/
agriculture account for 60%.
We continue to engage with national and local government and
communities to accelerate afforestation in KwaZulu-Natal and
the northern region of the Eastern Cape. Development in the
rural areas of these provinces is limited and expansion of
plantations in these regions would promote socioeconomic
development in line with the South African Government’s
ambitions and the Forestry sector master plan.
See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR
82 Sappi Annual Integrated Report 2023
Circular bioeconomy and minimal waste
Financial materiality
Impact materiality
Establishing a more sustainable production and consumption
model in which raw materials are kept longer in production
cycles and can be used repeatedly, therefore generating much
less waste has both environmental and economic benefits.
Minimising waste and promoting sustainable use of
natural resources through smarter product design, longer
use and innovative waste minimisation, can help solve
other complex challenges such as climate change and
biodiversity loss, with positive benefits for people and
the planet.
How this issue links to other aspects of our business
Our global priority SDGs
Our strategic fundamentals
The global forces shaping our
Thrive
strategy
• Move towards a circular economy
• Climate change and climate transition
• Resource scarcity and growing concern for natural capital.
Our top 10 risks
4
Sustainability expectations
5 Climate change
6
Evolving technologies and consumer preferences
Our highlights
• Successful waste sludge project at
Carmignano Mill
• SSA mills continue to actively pursue
beneficiation opportunities specifically
for ash, fibre sludge and biomass with a
beneficiation increase of 5% in FY2023,
year-on-year, and reduction of specific waste
to landfill of 12%.
Opportunities for value creation
SNA is planning to launch LusterFSB Compostable in FY2024.
The new certified compostable paperboard will be used for
paper plates and bowls.
See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR
Sappi Annual Integrated Report 2023 83
RESPONDING TO OUR CONTEXT Our key material issues continued
Planet continued
Biodiversity
Financial materiality
Impact materiality
Sappi’s view is that nature and biodiversity-related risks are financial
risks and must be seen as a strategic risk management priority
which, if handled correctly, is a source of competitive and
commercial advantage.
People around the world are reliant on the ecosystem
services that nature provides including pollination,
carbon sequestration, erosion control, flood and storm
protection, disease control and soil quality. Ecosystem
services are essential for human health and survival, from
freshwater to food and fuel.
How this issue links to other aspects of our business
Our global priority SDGs
Our strategic fundamentals
The global forces shaping our
Thrive
strategy
• Move towards a circular economy
• Climate change and climate transition
• Resource scarcity and growing concern for natural capital.
Our top 10 risks
4
Sustainability expectations
5 Climate change
Our highlights
• The SFI® Maine Committee was the winner of the 2023 SFI
Implementation Committee Achievement Award
• Expansion of the Sappi Rare, Threatened and Endangered
Species Stewardship Programme which began with the
Warburgia salutaris, (the pepper-bark tree or ‘isibhaha’ in isiZulu).
The next phase of the project, after consultation with local
communities and conservation agencies, focuses on Prunus
africana (African Cherry), Ocotea bullata (Black Stinkwood) and
Curtisia dentata (Assegai tree).
Opportunities for value creation
In 2024, a formal reassessment of all ICAs will
provide an updated rating to be compared
with from the initial assessment rating in
2021-2022, thereby giving us a more accurate
overview of the success – or lack thereof – of
our interventions.
See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR
The SFI Maine Committee, of which Sappi is an active member and supporter, was honoured with the 2023 SFI
Implementation Committee Achievement Award. The committee was selected for its collaborative leadership
in addressing key enhancements to the SFI Forest Management and Fibre Sourcing Standards related to climate
smart forestry, fire resilience and forests of exceptional conservation value. In terms of the latter, the Maine
Committee worked with the Maine Natural Areas Program, the Maine Department of Inland Fisheries and Wildlife,
and Maine’s Certified Logging Professionals program to assess forests of exceptional conservation value – a
new requirement of the SFI Fibre Sourcing Standard. The assessment produced a map of these forests and a list
of nearby towns. A video explaining steps to take if forestry activities intersect with forests of exceptional
conservation value was developed and shared broadly with Maine’s community of loggers, foresters, and
landowners. The list of forests of exceptional conservation value will be revisited annually.
84 Sappi Annual Integrated Report 2023
Sappi Annual Integrated Report 2023 85
Sappi Annual Integrated Report 2023 85
RESPONDING TO OUR CONTEXT Climate Action: TCFD disclosure
The Task Force on Climate-related Financial Disclosures (TCFD)
reporting plays a pivotal role in fostering financial transparency and
resilience in the face of climate change.
As we navigate an era marked by environmental challenges, TCFD reporting provides a framework for us to disclose our climate-
related risks, opportunities, and strategies. By doing so, we provide stakeholders with the assurance that we are proactively
responding to the evolving landscape of climate-related risks and opportunities and building a more sustainable and resilient
business which integrates climate considerations into our decision-making processes as we transition to a low-carbon future.
TCFD recommendations and disclosures
Governance
(a) Describe the board’s oversight of climate-related risks
and opportunities.
(b) Describe management’s roles in assessing and
managing climate-related risks and opportunities.
Strategy
(a) Describe the climate-related risks and opportunities the
organisation has identified over the short, medium, and
long term.
(b) Describe the impact of climate-related risks and
opportunities on the organisation’s business, strategy
and financial reporting.
(c) Describe the resilience of the organisation’s strategy,
taking into consideration different climate-related
scenarios including a 2ºC or lower scenario.
Risk management
(a) Describe the organisation’s processes for identifying
and assessing climate-related risks.
Disclosure
location
Further
information links
pages
87 – 88
pages
87 – 88
Corporate governance
pages
148 – 168
Corporate governance
pages
148 – 168
pages
89 – 101
Our strategy and performance
pages
10 – 19
pages
89 – 101
Our strategy and performance
pages
10 – 19
pages
89 – 93
Our strategy and performance
pages
10 – 19
pages
94 – 95
Risk management
pages
44 – 51
(b) Describe the organisation’s processes for managing
pages
94 – 95
climate-related risks.
Separate Risk report on
www.sappi.com/annual-reports
Risk management
pages
44 – 51
Separate Risk report on
www.sappi.com/annual-reports
(c) Describe how processes for identifying, assessing, and
managing climate-related risks are integrated into the
overall risk management.
pages
94 – 95
Risk management
pages
44 – 51
Separate Risk report on
www.sappi.com/annual-reports
Metrics and targets
(a) Disclose the metrics used by the organisation to assess
climate-related risks and opportunities in line with its
strategy and risk management process.
pages
102 – 103
2023 Sappi Group Sustainability Report
www.sappi.com/2023GSDR
(b) Disclose Scope 1, Scope 2 and if appropriate Scope 3
page
103
GHG emissions, and related risks.
2023 Sappi Group Sustainability Report
www.sappi.com/2023GSDR
(c) Describe the targets used by the organisation to
manage climate-related risks and opportunities and
performance against targets.
page
102
2023 Sappi Group Sustainability Report
www.sappi.com/2023GSDR
86 Sappi Annual Integrated Report 2023
Governance
In order to unlock the power of renewable resources to benefit people, communities, and the planet, we need to do so from a
foundation of trust. This foundation is reinforced by our robust sustainability governance framework summarised below.
Sappi Sustainability Governance Framework
Sappi board
s
e
e
t
t
i
m
m
o
C
e
s
o
p
r
u
P
y
t
i
l
i
i
b
s
n
o
p
s
e
R
Social, Ethics,
Transformation
and Sustainability
(SETS) Committee
Other board committees
Audit and Risk
Remuneration
and
Compensation
Executive
Management
Committee
(EXCO)
Group
Sustainable
Development
Council (GSDC)
Regional
Sustainability
Councils
Chaired by an
Independent
Non-executive
Director (NED)
Oversees the group’s
sustainability strategy,
commitments,
policies performance
Responsible for
the governance
of matters related
to sustainable
development
including:
environment, climate
change, biodiversity,
product stewardship,
labour, human rights,
diversity and
transformation and
ethics. Ensures
alignment to best
practice and
disclosure standards
Chaired by an
Independent NED
Chaired by an
Independent NED
Chaired by the
group CEO
Chaired by the
Group Head:
Sustainability and
Investor Relations
Chaired by
regional CEOs and
sustainability leads
Oversees the
group’s corporate
financial reporting,
internal control
systems, risk
management and
relationship with the
external auditor
Oversees the
group’s corporate
financial reporting.
Oversees the risk
management
process including
sustainability risks.
Monitors
effectiveness of
internal control
systems including
hotline reporting
platform
Ensures that
incentives drive
the appropriate
behaviours that
deliver our strategy
Management
responsibility for
execution of
sustainability
strategy and
policies guided by
the SETS
Committee
Provides expert
insights and
support to the
business on
sustainable
development
matters
Oversees the
integration of
sustainable
development into
the operations
Aligns
remuneration to
performance
against key
sustainability
targets and focus
areas
Prioritises capital
allocation and
ensures business
unit line
management
holds primary
responsibility and
accountability for
sustainability
performance
Keeps abreast of
best practice and
regulatory
compliance
requirements.
Develops
sustainability
related strategy
and policies for the
group
Develops action
plans aligned with
strategy and
policies and
monitors progress
towards
sustainability
targets and
commitments.
Ensures integration
of sustainability
requirements into
operational systems
and processes
Oversight
Accountable
Advisory
Execution
Sappi Annual Integrated Report 2023 87
CLIMATE ACTION: TCFD DISCLOSURERESPONDING TO OUR CONTEXT Climate Action: TCFD disclosure continued
EXCO prior to submission to the SETS Committee. This
allows the EXCO to provide their strategic input and ensures
that there is complete management alignment on
sustainability matters.
The Group Sustainable Development Council (GSDC)
reviews key global and regional trends and developments
and makes recommendations on strategy and policy that are
fed through to the EXCO, the SETS Committee and ultimately,
to the Sappi Limited board of directors. The Group Head of
Sustainability and Investor Relations and the Group Head
Technology are responsible for coordinating actions related
to the group’s climate change-related risks and opportunities
and providing reports to the EXCO to enable it to discharge
its responsibility.
The GSDC meets quarterly and reviews progress against
Thrive
sustainability targets at each meeting. Additionally,
other climate-related topics such as regulatory changes and
trends, sustainable procurement, SBTi, TCFD, TNFD and
forestry related issues are discussed at the majority of the
meetings. All climate change-related matters of strategic
importance are raised by the Group Head of Sustainability
and Investor relations at EXCO meetings for input and
guidance. Additionally, the progress against our science-
based decarbonisation targets, regional climate transition
action plans and capital allocation is reviewed in detail by
EXCO annually with the budget setting programme.
The group’s Regional Sustainability Councils (RSCs), in
Europe, North America and South Africa, are responsible
for establishing and implementing our on-the-ground
sustainability strategy and action plans. Their work
is overseen and reviewed by the GSDC.
The Social, Ethics, Transformation and Sustainability (SETS)
Committee has an independent role with accountability to the
board and comprises a majority of independent non-executive
members, whose duties are delegated to them by the board in
compliance with a board-approved terms of reference. The
role of the SETS Committee, is to assist the board with the
oversight of sustainability matters within the company,
including climate-related issues, and to provide guidance
to management’s work in respect of its duties. The SETS
Committee provides oversight on the group’s sustainable
development strategies, policies, objectives and targets and
public disclosures. The committee addresses issues relating
to environmental impact and climate change, corporate social
investment, ethical conduct, diversity, transformation and
empowerment and ongoing sustainability initiatives. Their
responsibilities include monitoring the company’s ESG
activities, having regard to any relevant legislation, other
legal requirements and prevailing codes of best practice.
Thrive
The SETS Committee meets three times per year and the
Chairman of the committee reports back to the board after
every meeting. Progress against our
sustainability
targets is an integral component of the SETS Committee
agenda and is reviewed twice per year. Each of the three
regions and Sappi Forests presents a detailed report on
progress against regional
on key initiatives, action plans and challenges relating to
sustainability and climate-related matters. Additionally, a
detailed climate report is presented to SETS annually outlining
the company’s progress according to the TCFD framework.
Further details on the activities of the SETS Committee can
be found on page
targets as well as feedback
Thrive
158.
Audit and Risk Committee (ARC) provides additional
governance oversight on climate-related matters. The ARC
oversees the group’s corporate financial reporting and annual
planning process, and the group’s internal controls and risk
assessment process, which includes sustainability and
specifically climate-related risks. Further details on the
activities of the ARC can be found on page
152.
The Human Resources and Compensation Committee
is responsible for ensuring that incentive schemes drive
the appropriate behaviours that deliver our sustainability
strategy, including the alignment of remuneration to
performance against our key
sustainability
commitments and targets. Further details on how
climate action is incorporated into incentive schemes
can be found on page
171.
Thrive
The Executive Management Committee (EXCO),
chaired by the group CEO, is accountable for delivery
of the sustainability strategy and responsible for
ensuring that the strategic objectives and goals of the
organisation are achieved. The committee is responsible
for ensuring that capital allocation is aligned with business
and sustainability objectives and prioritised appropriately
to ensure timely delivery against our public commitments.
The EXCO regularly reviews progress against our sustainability
and climate commitments and targets. In addition,
sustainability matters of a strategic nature, including those
relating to climate change, are reviewed and discussed by the
88 Sappi Annual Integrated Report 2023
Strategy
Sustainability forms the foundation of our Thrive strategy and is fully integrated into our operations
where the primary focus is on the sustainable management of our operations, increasing efficiency
and maximising value from our sustainable natural resources.
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 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.
The core principles of Sappi’s climate strategy are aligned with the overarching
detailed strategic objectives and actions aligned with our climate transition plan are disclosed below.
strategy as outlined below. Furthermore,
Thrive
Sappi’s climate strategy
Grow our business
Sustain our financial health
What it means
Climate relevancy
What it 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,
biobased 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
Drive operational excellence
Enhance trust
What it means
Climate relevancy
What it means
Climate relevancy
• 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
• Being a transparent,
understanding of, and
proactively partnering
with clients and
communities, driving
sustainability
solutions, and
meeting the changing
needs of every
employee at Sappi
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
Sappi Annual Integrated Report 2023 89
CLIMATE ACTION: TCFD DISCLOSURERESPONDING TO OUR CONTEXT Climate Action: TCFD disclosure continued
Sappi’s climate transition plan
Account and disclosure
Mitigate and decarbonise
Value and integrate
Objective
We will be transparent in our accounting
and disclosure of carbon impacts, risks
and opportunities.
Objective
We will reduce our own and value-chain
emissions in line with science-based
decarbonisation pathways towards
net zero.
Objective
We will value and integrate carbon into
business processes..
Key actions
• Use GHG accounting standards to
create full account of carbon footprint
• Disclose emissions, reduction targets
and strategic actions
• Externally assure emissions
• Use quantitative and qualitative
scenario analysis of transition and
physical impacts to identify and
disclose climate-related risks and
opportunities aligned with the TCFD
framework.
Key actions
• Set 2030 decarbonisation targets for
Scope 1, 2 and 3
• Set energy efficiency/renewable
energy targets
• Align our decarbonisation trajectory
where appropriate with market and
regulatory expectations
• Engage with suppliers and customers
to mitigate value-chain emissions and
establish a feedback mechanism for
determining the success of
engagements
• Evaluate and implement emerging
decarbonisation technologies where
appropriate.
Key actions
• Utilise an internal price of carbon in
capital allocation decision-making
processes
• Prioritise capex and opex aligned to
science-based targets
• Invest in innovation/ R&D for own
mitigation and new product
development for a low-carbon,
circular economy
• Identify/develop a taxonomy to
classify products as low carbon
• Leverage public and climate finance
to augment mitigation actions
• Integrate decarbonisation
considerations into R&D and
procurement business processes and
decisions and establish a mechanism
for monitoring progress and
compliance.
Climate change risks have been identified as one of our
strategic principal risks. The group’s climate change related
risks and opportunities are routinely considered in our
strategic and financial planning, our capital allocation and
our operational management decision-making processes.
In terms of climate-related risks, we recognise that our
industry is energy intensive. In addition, our business is
dependent on woodfibre and water, both of which are
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. 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. A significant
portion of R&D is allocated to decarbonisation. We also
focus on increasing pulp backward integration which brings
renewable energy opportunities aligned with our strategy as
well as fuel swaps and energy mix opportunities balanced
with economics. In addition, our Future Energy Technologies
and Decarbonisation cluster is exploring novel technologies
for deep decarbonisation in terms of Scope 1 and 2
emissions, with a particular emphasis on technologies
for renewable power generation, pulping, papermaking,
bleaching and carbon capture.
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 climate
transition 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. The capital expenditure between
FY2021 – 2030 required to achieve the targets is estimated
to be in the region of US$60 to 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.
We acknowledge that decarbonisation of our South African
assets will be 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
90 Sappi Annual Integrated Report 2023
Sappi’s climate transition plan
Advocate
Innovate and collaborate
Build resilience
Objective
We will advocate that the Forest and
Forest Products Sector’s contribution
towards achieving net zero is recognised
and valued.
Key actions
• Engage with regulatory bodies and
trade associations to advocate for
policies consistent with achieving net
zero by 2050
• Secure recognition of carbon benefits
derived from forests and woodfibre-
based products
• Engage and participate in GHG carbon
accounting working groups to
advocate for development/
implementation protocols consistent
with achieving net zero by 2050.
Objective
We will partner to develop solutions and
accelerate climate action.
Objective
We will address and adapt to climate
change impacts
Key actions
• Collaborate with peers, suppliers,
customers, governments, civil society
and employees to support
decarbonisation efforts
• Identify consortia and multi-
stakeholder alliances to promote best
practice sharing and collective climate
action
• Collaborate with value chains to
develop carbon neutral offerings
• Create shared value with our
communities to improve livelihoods
and ensure long-term resilience
Key actions
• Develop and invest in adaptation
technologies to ensure the continued
sustainability of our forestry assets in
South Africa
• Promote biobased circular economy
principles and leverage our forestry
assets and know-how to support the
development of rural community
agroforestry
• Address short- and long-term physical
and transitional climate risks identified
through TCFD processes to build
resilience
• Play our part as a socially responsible
business to ensure a just transition
• Protect and improve biodiversity in
our forestry landholding and reduce
use of water in our operations located
in water stressed regions
• Collaborate with landscape level
stakeholders to promote nature
positive action.
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 investigating opportunities for
investment in solar, wind and biomass power assets.
Furthermore, we are actively collaborating and exploring
opportunities for purchasing renewable energy from new
independent power producers that are being established
within the country. 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.
Climate change is having a significant impact on our
woodfibre supply. In both Europe and Southern Africa, the
changing climate is impacting the health and resilience of
the forests and plantations from which we source woodfibre.
Increased drought, floods, wind, pest and disease outbreaks
and wildfires are all accelerating forestry risks and could
potentially significantly increase our wood costs.
Temperatures over the South African interior are projected to
rise at about 1.5 to 2 times the global rate, with significant
implications for our plantations. In addition to hotter, drier
conditions, we expect shifting seasons with later summer
rainfall, which will make our planting season shorter. We also
anticipate that weather will become more extreme and that
drought and floods, as well as wind, snow and hail will
intensify. In response, we have developed climate smart
forest management practices. Our Sappi Forests’ scientists
have developed high levels of expertise in assessing the
impact of climate change on our plantations in South Africa.
Their knowledge is supplemented by our strong partnership
with the Global Change Institute (GCI) at the University of the
Witwatersrand in Johannesburg. Recognising that there is a
lack of data and expertise within South Africa for climate
modelling, we launched the Sappi Chair in Climate Change
and Plantation Sustainability at the University of the
Witwatersrand in Johannesburg. The Research Chair will
identify critical research needs and develop research outputs
related to climate change and will also develop capacity in
South Africa to manipulate and interpret climate modelling
data. For more details see page
93.
Sappi Annual Integrated Report 2023 91
CLIMATE ACTION: TCFD DISCLOSURERESPONDING TO OUR CONTEXT Climate Action: TCFD disclosure continued
Research and development (R&D) of genetically improved
planting stock has been conducted at Sappi’s Shaw
Research Centre in Howick for over 25 years. Tree
improvement is aimed at increasing pulp yield produced per
hectare by testing various species and hybrids across
Sappi’s diverse landholdings. Besides growth improvements,
trees are bred for superior wood properties and resistance to
biotic and abiotic threats including frost, drought, pests and
diseases. A broad genetic base, acquired over 25 years and a
skilled breeding team exploiting new technologies are some
of the assets of the programme. Nursery technologies
research improve propagation techniques of elite genotypes.
Land management and Pest and Disease 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, national pest and disease
surveys etc. In addition to these initiatives and programmes,
we also maintain a solid base of permanent sample and
long-term soil monitoring plots, with the plot coordinates
stored on our GIS database. These help us to monitor climate
change based on geology, temperature zone and water
availability. This enables us to keep track of forest litter, soil
physical and chemical properties, allowing for early detection
of site changes.
In terms of climate-related opportunities, we recognise
that our sector is uniquely positioned to produce circular
and low-carbon products, which can offer consumers
alternatives to fossil-based products. There is a significant
opportunity for Sappi to accelerate the transition to the
circular biobased economy our planet demands.
Through our continued focus on innovating packaging
and speciality papers solutions, we remain committed to
partnerships with customers, who are increasingly focused
on the social and environmental credentials of our products.
We are committed to embracing the circular economy using
sustainable materials based on certified woodfibre and
replacing fossil-based chemistry and to working on new
technologies that support transformation in Sappi and
across our value-chain partners to reduce GHG emissions.
There is significant potential to expand and unlock revenue
streams with our paper-based packaging solutions to replace
petroleum-based packaging in many sectors including the
food and beverage, cosmetics, pharmaceuticals and
electronics industries.
The majority of dissolving pulp (DP) is consumed in the
textile industry where pulp is converted through the value
chain to yarn and ultimately textiles providing soft, breathable
fabrics (eg, viscose and lyocell) which hold colour well and
drape beautifully. The global textile fibre industry is facing
unprecedented sustainability challenges. Issues such as a
rising population, climate change, water scarcity, land use
(food vs. fibre), deforestation and loss of biodiversity, plastic
waste and marine pollution have combined to question
the long-term credentials of the industry and its attempts
to create a sustainable circular economy. Textile fibres
derived from natural cellulose (DP) are therefore gaining
interest and have been the fastest growing textile fibre over
92 Sappi Annual Integrated Report 2023
the last 10 years. With increasing concerns about
microplastic pollution in the oceans, petroleum-based textile
fibres will continue to come under pressure and cotton
cannot expand its area any further, meaning cellulosic fibres
remain at an advantage and their market share will continue
to expand. Lyocell represents the next generation of cellulose
textile 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 and is the fastest growing textile fibre group. Sappi is
uniquely positioned as the world’s largest non-integrated DP
producer and largest supplier to the lyocell sector to benefit
from the growth in cellulosic textiles.
Traditionally the papermaking process has only used
approximately half of the raw wood material to manufacture
pulp and paper products. The balance of the wood raw
material is used to generate energy to power the mill or to
sell into the electricity grid. Sappi is, however, developing new
processes and biomaterials which extract more value from
each tree and supports our business strategy to move into
new and adjacent markets. Sappi’s innovative technology
enables us to derive specialty biobased chemicals from the
parts of the tree which are not used for pulp and paper
making. These high-performance products often displace
non-sustainable petroleum-based alternatives. There is
significant opportunity to unlock further revenue streams
through commercialisation of these biomaterials.
Thrive
Our Exciter R&D programme is fully aligned with our
strategy. The focus of the projects, which are global and
based on the OneSappi approach, has shifted to emphasise
sustainability, together with a focus on our segments with
significant growth opportunity ie, packaging and speciality
papers, DP and biomaterials.
Our commitments to zero deforestation and wood sourcing
from sustainably managed, healthy working forests with a
high level of forestry certification enables us to offer products
to our customers around the world that carry no risk of
deforestation or forest degradation. Deforestation negatively
impacts ecosystem services and climate. It also increases
the transmission risk of zoonotic diseases. In addition to
helping to respond to climate change and protect soils and
water, forests hold more than three-quarters of the world’s
terrestrial biodiversity. This means that deforestation has
serious negative impacts on biodiversity and climate change.
Trees and forests play an integral role in the global carbon
cycle. Through sequestering carbon dioxide from the
atmosphere and storing it in forest biomass and soils, forests
store vast amounts of carbon and release oxygen back
into the atmosphere. Recent studies point to the further
contribution that trees and forests could deliver to mitigate
climate change if afforestation, reforestation, and restoration
efforts were scaled up substantially. Managing forests for
wood production can help to maximise their contribution to
carbon sequestration. Forest management practices which
rely on scientific knowledge of silvicultural best practices
applicable in respective vegetation zones, promote growth
and carbon sequestration. In our plantations in South Africa
In terms of physical climate risks, Sappi Forests has
worked with the Global Change Institute (GCI) at the
University of the Witwatersrand in Johannesburg and
other industry members 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 forecast climate
data in-house by algebraically adjusting the basic
weather forecasts to a year 2,000 baseline.
To conduct physical climate change scenarios in our mills,
we used Representative Concentration Pathways (RCPs):
• 2.5 (a low climate change scenario, involving aggressive
mitigation actions to halve emissions by 2050)
• 4.5 (a moderate climate change scenario involving strong
mitigation actions to reduce emissions to half of current
levels by 2080)
• 8.5 (a high climate change scenario representing
continuation of business as usual with emissions at
current rates).
Climate transition risk is assessed in terms of scenarios
involving nationally determined contributions (NDCs) and
their associated time frames. Each country in which we
have manufacturing operations, as well as the EU region,
has submitted NDCs to the United Nations Framework
Convention on Climate Change (UNFCCC). Various scenarios
within the parameters of key regulatory developments are
also assessed against the backdrop of various issues (for
example: our 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 market expectations).
We have also implemented an internal carbon price (within
the capital evaluation process) to ensure that the impact of
carbon for all large capital investments is understood. The
internal carbon price is embedded in our cost calculations
of capex and opex projects as a financial indicator.
Sappi’s international revolving credit facility (RCF) of
EUR515 million, which matures in 2027, is linked to the
group’s sustainable financing framework. The RCF is
structured with a margin adjustment mechanism, linked to
progress in achieving the framework KPIs. The framework
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 specific GHG (Scope 1 and 2)
emissions; certified fibre supplied to Sappi mills, solid waste
to landfill the safety of our employees. This is an important
strategic step for Sappi and supports our long-term vision
to be a sustainable business and demonstrates that we are
committed to delivering our ambitious sustainability strategy.
Sappi Annual Integrated Report 2023 93
and in the managed forests from which we source wood raw
material, the cycle of regeneration, growing, thinning and
harvesting is actively managed to enhance biodiversity,
resilience, and maintain functional ecological condition.
The pulp and paper industry provides dependable markets
for responsibly-grown woodfibre, thereby incentivising
long-term forest management. This assurance of financial
returns enables and encourages landowners to manage
their forestlands as working forests, instead of selling the
land for development or converting it to non-forest uses.
Furthermore, the pulp and paper industry typically utilises
different species and/or smaller diameter trees or portions
of trees that are not desirable in the solid wood industry.
By providing this market and revenue stream, the industry is
supporting necessary holistic forest stand-improvement
activities that are essential for maintaining and restoring
forest health, species and age-class balance, wildlife habitat
and biodiversity, wildfire mitigation and hazardous fuels
reduction, watershed protection, soil conservation and
carbon sequestration. By ensuring forests and plantations
are sustainably managed through high levels of certification
and prioritising traceability, we can help to combat climate
change and enhance the ecosystems services that
contribute to greater levels of economic and environmental
wellbeing. Our opportunity is to invest in and promote healthy
forests both for our benefit and the myriad of benefits they
deliver to the planet.
There are many uncertainties around the potential impacts of
climate change, and we therefore continue to enhance the
quality of our scenario modelling to further understand these
impacts.
CLIMATE ACTION: TCFD DISCLOSURERESPONDING TO OUR CONTEXT Climate Action: TCFD disclosure continued
Risk management
Sappi has a well-established risk management process within a formal governance structure. The
risk evaluation process is run annually, with comprehensive discussions which include climate
change (led by regional risk managers) with each mill and central function. For climate-related
risks and opportunities we have leveraged this process.
In addition, we have developed a unique approach where we incorporate historical experiences as identified by mill and forestry
management teams in light of current short and medium- term predictions. This is supplemented by our environmental and legal
teams’ knowledge of emerging regulations and other transitional concerns.
This risk approach is supplemented by ongoing review of industry dynamics, particularly risks and opportunities related to single
use plastics, lightweighting of products and the transition to a low-carbon economy. This work is captured by regular meetings
with our customers together with our global R&D teams.
Sappi’s climate-related physical risks
Risk
Description
Acute physical
Increased severity and frequency of extreme weather events may results in damage to our
standing forests and nurseries and disruptions to harvesting operations in our managed
plantations in South Africa. Extreme weather event could be flooding, frost/snow, heatwave.
Acute physical
More frequent, longer lasting and more severe droughts are anticipated over the Southern African
region due to climate change. As the planet continues to warm, rainfall reductions over the summer
rainfall region are expected to become more pronounced, and the rising temperature drives
evaporation. Accordingly, the ‘water balance’ is more strongly negative than the decline in rainfall
alone. Levels of global warming of 2°C or higher are associated with substantial increases in risk in
the summer rainfall parts of Southern Africa where Sappi’s plantations are situated. When several
dry years follow directly on one another, the impact on plant production is extremely negative.
s
k
s
i
r
l
i
a
c
s
y
h
P
South
African
plantation
losses
Chronic physical
Mean annual temperatures are expected to increase by between 3°C and 7°C. This increase in
temperature in association with small changes in rainfall as well as potential changes in inter-
annual rainfall patterns that will extend the annual dry period in the summer rainfall region will
increase plant stress and will have a negative impact on tree growth.
In addition, extension of the dry season or changes to rainfall seasonality could negative impact
re-establishment plantings, by extending the area that is temporarily unplanted by one month or
up to one year.
Higher temperatures and changing climatic conditions may increase vulnerability to pests and
diseases. Given that temperature is the most important environmental factor affecting insect
behaviour, distribution, development and reproduction, the general impact of increased
temperature on insect pests might result in: increased reproduction and flight duration; expansion
of geographic range (naturally or through severe weather such as storms and strong wind);
increased survival rates of overwintering populations; increased risk of introductions of invasive
insect species; increased evidence of insect-transmitted plant disease due to range expansion
and rapid reproduction of insect vectors and reduced effectiveness of biological control agents
and natural enemies. Thus, the additional temperature and water stress are likely to increase pest
and disease-related growth losses. Stricter rules regarding use of pesticides by Government and
certification bodies will make it more difficult and expensive to control pest and disease
outbreaks, as well as invasive plants.
94 Sappi Annual Integrated Report 2023
Financial cost of
mitigation
US$3 to
US$5 million
The combined direct annual
R&D expenditure p.a. of
the Sappi Nursery
Technologies, land
management, pest and
diseases and tree breeding
programmes.
Timeframe
Financial
impact (p.a.)
Mitigation
Medium term
US$0.5 to
US$1 million
Medium term
US$5 to
US$20 million
Long term
US$5 to
US$10 million
genotypes.
R&D of genetically improved planting stock
has been conducted at Sappi’s Shaw
Research Centre in Howick for over 25 years.
Tree improvement is aimed at increasing pulp
yield produced per hectare by testing various
species and hybrids across Sappi’s diverse
landholdings. Besides growth improvements,
trees are bred for superior wood properties
and resistance to biotic and abiotic threats
including frost, drought, pests and diseases.
A broad genetic base, acquired over 25 years
and a skilled breeding team exploring new
technologies are some of the assets of the
programme. Nursery technologies research
improve propagation techniques of elite
Land management and pest and disease
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,
national pest and disease surveys etc.
Long term
US$2 to
US$10 million
Once the risks have been identified by the working groups, they go through the review process of our risk governance structure.
This begins with the Group Head: Technology, the Group Head: Sustainability and Investor Relations and the Global Risk Manager
who review the work of the regional risk management leads in order to develop a consolidated view. A recommendation is then
made to the two board committees, the SETS Committee and the ARC, both of which share responsibility for climate-related
risks. These committees are responsible for overseeing Sappi’s combined assurance framework, which also aims to optimise
assurance coverage obtained from management, internal assurance providers and external assurance providers (globally:
ISO 14 001, 9 0001 and forest certification; Europe and South Africa: ISO 50001 (energy management), Europe: EMAS), on
the risk areas affecting the group, including climate change.
We have identified seven material physical risks associated with our South African plantations, mill operations and supply chains
and one material transition risk. In terms of opportunities, we have identified two transitional opportunities and one operational
opportunity. We define our timeframes for assessment as follows.
Timeframe:
Short term 1-2 years, Medium term 3-5 years, Long term 5-30 years
Risk
Description
Timeframe
Financial
impact (p.a.)
Mitigation
Increased severity and frequency of extreme weather events may results in damage to our
standing forests and nurseries and disruptions to harvesting operations in our managed
plantations in South Africa. Extreme weather event could be flooding, frost/snow, heatwave.
Acute physical
Acute physical
More frequent, longer lasting and more severe droughts are anticipated over the Southern African
region due to climate change. As the planet continues to warm, rainfall reductions over the summer
rainfall region are expected to become more pronounced, and the rising temperature drives
evaporation. Accordingly, the ‘water balance’ is more strongly negative than the decline in rainfall
alone. Levels of global warming of 2°C or higher are associated with substantial increases in risk in
the summer rainfall parts of Southern Africa where Sappi’s plantations are situated. When several
dry years follow directly on one another, the impact on plant production is extremely negative.
s
k
s
i
r
l
a
c
i
s
y
h
P
South
African
plantation
losses
Chronic physical
Mean annual temperatures are expected to increase by between 3°C and 7°C. This increase in
temperature in association with small changes in rainfall as well as potential changes in inter-
annual rainfall patterns that will extend the annual dry period in the summer rainfall region will
increase plant stress and will have a negative impact on tree growth.
In addition, extension of the dry season or changes to rainfall seasonality could negative impact
re-establishment plantings, by extending the area that is temporarily unplanted by one month or
up to one year.
Higher temperatures and changing climatic conditions may increase vulnerability to pests and
diseases. Given that temperature is the most important environmental factor affecting insect
behaviour, distribution, development and reproduction, the general impact of increased
temperature on insect pests might result in: increased reproduction and flight duration; expansion
of geographic range (naturally or through severe weather such as storms and strong wind);
increased survival rates of overwintering populations; increased risk of introductions of invasive
insect species; increased evidence of insect-transmitted plant disease due to range expansion
and rapid reproduction of insect vectors and reduced effectiveness of biological control agents
and natural enemies. Thus, the additional temperature and water stress are likely to increase pest
and disease-related growth losses. Stricter rules regarding use of pesticides by Government and
certification bodies will make it more difficult and expensive to control pest and disease
outbreaks, as well as invasive plants.
Medium term
US$0.5 to
US$1 million
Medium term
US$5 to
US$20 million
Long term
US$5 to
US$10 million
Long term
US$2 to
US$10 million
R&D of genetically improved planting stock
has been conducted at Sappi’s Shaw
Research Centre in Howick for over 25 years.
Tree improvement is aimed at increasing pulp
yield produced per hectare by testing various
species and hybrids across Sappi’s diverse
landholdings. Besides growth improvements,
trees are bred for superior wood properties
and resistance to biotic and abiotic threats
including frost, drought, pests and diseases.
A broad genetic base, acquired over 25 years
and a skilled breeding team exploring new
technologies are some of the assets of the
programme. Nursery technologies research
improve propagation techniques of elite
genotypes.
Land management and pest and disease
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,
national pest and disease surveys etc.
Financial cost of
mitigation
US$3 to
US$5 million
The combined direct annual
R&D expenditure p.a. of
the Sappi Nursery
Technologies, land
management, pest and
diseases and tree breeding
programmes.
Sappi Annual Integrated Report 2023 95
CLIMATE ACTION: TCFD DISCLOSURERESPONDING TO OUR CONTEXT
Climate Action: TCFD disclosure continued
Risk
Description
Fire remains a high risk to our plantations and is exacerbated by periods of drought.
South African
plantation losses
s
k
s
i
r
l
i
a
c
s
y
h
P
Interruptions to mill
operations and
supply chains
Acute physical
Increased severity and frequency of extreme weather events may result in damage
to our infrastructure and that of our supply chain partners. Extreme weather events
could be flooding, hail of frost/snow.
Chronic physical
More frequent, longer lasting and more severe droughts are anticipated over the
Southern African region due to climate change. As the planet continues to warn,
rainfall reductions of the summer rainfall region are expected to become more
pronounced and the rising temperature drives rising evaporation. Levels of global
warming of 2°C or higher are associated with substantial increases in drought risk in
the summer rainfall parts of Southern Africa where Sappi’s operations are situated.
When several dry years follow directly on each other, the impact on available ground
water in the water river basins that serve our operations could be severely impacted.
Our pulp and paper operations are water intensive and any reduction in water
availability could result in extended water shortages which could disrupt our
operations.
Medium term
US$10 to
US$50 million
Sappi has comprehensive insurance
coverage in place which covers both our
assets and business interruption.
US$35 to
US$45 million
(General insurance costs p.a.)
Medium term
US$10 to
US$50 million
Sappi has water management plans for each
operation in South Africa which focus on
implementing water efficiency projects and
implementing closed-loop and water
US$1 to
US$3 million
(Estimated SSA capital
recycling initiatives to reduce water intensity
requirement p.a.)
of our operations. We also engage local
authorities, other industrial users and local
communities within critical water basins to
identify solutions and enhance water
stewardship.
Timeframe
Financial
impact (p.a.)
Mitigation
Short to long
term
US$15 to
US$130 million
Financial cost of
mitigation
US$15 to
US$20 million
(Plantation insurance and fire
protection costs p.a.)
Sappi Forests has a comprehensive risk
management system which comprises risk
assessments, monthly compliance checks,
management procedures, standards and
general back-up information. Fuel load maps
are prepared for all districts to assess in the
management of fuel loads and identification
of major risks. When re-planting, Sappi is
increasingly making use of mulchers as a
more expensive but lower risk alternative to
burning of harvest residue. Regular weeding
helps reduce fuel loads. Each plantation/
district has a weather monitoring station that
is strategically placed to keep track of the Fire
Danger Index (FDI). The FDI data is reported
automatically using a cell phone or the
camera detection data network to a central
database (Vital Fire Weather – VFW) which
sends alerts via SMS and email. When the FDI
reaches a pre-determined level, all aerial and
ground firefighting resources are strategically
located, all airstrips are manned and detection
centres are instructed to activate aircraft
immediately should a fire be detected within
or near plantations.
96 Sappi Annual Integrated Report 2023
Risk
Description
Timeframe
Financial
impact (p.a.)
Mitigation
Fire remains a high risk to our plantations and is exacerbated by periods of drought.
Short to long
term
US$15 to
US$130 million
Sappi Forests has a comprehensive risk
management system which comprises risk
assessments, monthly compliance checks,
management procedures, standards and
general back-up information. Fuel load maps
are prepared for all districts to assess in the
management of fuel loads and identification
of major risks. When re-planting, Sappi is
increasingly making use of mulchers as a
more expensive but lower risk alternative to
burning of harvest residue. Regular weeding
helps reduce fuel loads. Each plantation/
district has a weather monitoring station that
is strategically placed to keep track of the Fire
Danger Index (FDI). The FDI data is reported
automatically using a cell phone or the
camera detection data network to a central
database (Vital Fire Weather – VFW) which
sends alerts via SMS and email. When the FDI
reaches a pre-determined level, all aerial and
ground firefighting resources are strategically
located, all airstrips are manned and detection
centres are instructed to activate aircraft
immediately should a fire be detected within
or near plantations.
South African
plantation losses
s
k
s
i
r
l
a
c
i
s
y
h
P
Acute physical
Increased severity and frequency of extreme weather events may result in damage
to our infrastructure and that of our supply chain partners. Extreme weather events
could be flooding, hail of frost/snow.
Medium term
US$10 to
US$50 million
Sappi has comprehensive insurance
coverage in place which covers both our
assets and business interruption.
Chronic physical
Interruptions to mill
operations and
supply chains
More frequent, longer lasting and more severe droughts are anticipated over the
Southern African region due to climate change. As the planet continues to warn,
rainfall reductions of the summer rainfall region are expected to become more
pronounced and the rising temperature drives rising evaporation. Levels of global
warming of 2°C or higher are associated with substantial increases in drought risk in
the summer rainfall parts of Southern Africa where Sappi’s operations are situated.
When several dry years follow directly on each other, the impact on available ground
water in the water river basins that serve our operations could be severely impacted.
Our pulp and paper operations are water intensive and any reduction in water
availability could result in extended water shortages which could disrupt our
operations.
Medium term
US$10 to
US$50 million
Sappi has water management plans for each
operation in South Africa which focus on
implementing water efficiency projects and
implementing closed-loop and water
recycling initiatives to reduce water intensity
of our operations. We also engage local
authorities, other industrial users and local
communities within critical water basins to
identify solutions and enhance water
stewardship.
Financial cost of
mitigation
US$15 to
US$20 million
(Plantation insurance and fire
protection costs p.a.)
US$35 to
US$45 million
(General insurance costs p.a.)
US$1 to
US$3 million
(Estimated SSA capital
requirement p.a.)
Sappi Annual Integrated Report 2023 97
CLIMATE ACTION: TCFD DISCLOSURERESPONDING TO OUR CONTEXT
Climate Action: TCFD disclosure continued
Sappi’s climate-related transition risks
Risk
Description
Sappi’s European operations fall under the EU ETS. As EU ETS allowances decrease
over time and if our decarbonisation efforts do not keep pace with the required
trajectory there is potential that some operations may have deficits which will require
purchasing of ETSs. Similarly SSA’s operations are subject to carbon taxes which are
anticipated to increase steadily over time. Currently there are no carbon tax
regulations in North America but this could change over time.
Many of our downstream markets are positioning their value proposition on a
low-carbon footprint with science-based decarbonisation commitments, including
net zero by 2050, gaining momentum. This will apply pressure on our business to
decarbonise to support these commitments within our value chains.
As legislation and customer preferences shift to low-carbon impact, 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. Not being able to realise our decarbonisation strategy
through improved energy efficiency and the use of renewable energy represents
a significant reputational and financial risk.
k
s
i
r
n
o
i
t
i
s
n
a
r
T
GHG regulatory
changes and
changing
downstream
requirements for
low-carbon products
Timeframe
(p.a.)
Mitigation
Financial impact
Medium to
long term
US$30 to
US$150 million
Financial cost of
mitigation
US$60 to
US$70 million
(Estimated SBTi capital
requirement p.a.)
We have developed a climate transition
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 the decarbonisation
of our South African assets will be more
challenging than in our other operating regions.
Our mills in this report are all 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.
Accordingly, 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 continue
to collaborate and explore opportunities
for purchasing renewable energy from
independent power producers. Within the
context of South Africa’s 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.
98 Sappi Annual Integrated Report 2023
Risk
Description
Timeframe
Financial impact
(p.a.)
Mitigation
Sappi’s European operations fall under the EU ETS. As EU ETS allowances decrease
over time and if our decarbonisation efforts do not keep pace with the required
trajectory there is potential that some operations may have deficits which will require
purchasing of ETSs. Similarly SSA’s operations are subject to carbon taxes which are
anticipated to increase steadily over time. Currently there are no carbon tax
regulations in North America but this could change over time.
Many of our downstream markets are positioning their value proposition on a
low-carbon footprint with science-based decarbonisation commitments, including
net zero by 2050, gaining momentum. This will apply pressure on our business to
decarbonise to support these commitments within our value chains.
As legislation and customer preferences shift to low-carbon impact, 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. Not being able to realise our decarbonisation strategy
through improved energy efficiency and the use of renewable energy represents
a significant reputational and financial risk.
k
s
i
r
n
o
i
t
i
s
n
a
r
T
GHG regulatory
changes and
changing
downstream
requirements for
low-carbon products
Medium to
long term
US$30 to
US$150 million
We have developed a climate transition
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 the decarbonisation
of our South African assets will be more
challenging than in our other operating regions.
Our mills in this report are all 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.
Accordingly, 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 continue
to collaborate and explore opportunities
for purchasing renewable energy from
independent power producers. Within the
context of South Africa’s 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.
Financial cost of
mitigation
US$60 to
US$70 million
(Estimated SBTi capital
requirement p.a.)
Sappi Annual Integrated Report 2023 99
CLIMATE ACTION: TCFD DISCLOSURERESPONDING TO OUR CONTEXT
Climate Action: TCFD disclosure continued
Sappi’s climate-related opportunities
Opportunity
Description
Changing
consumer
behaviour and
preference for
renewable,
circular,
low-carbon
products
Beneficiation
of wood
by-products
The global demand for sustainable packaging solutions is prompting increasing investment
and collaboration to develop innovative solutions to cater to changing customer preferences.
Paper-based packaging being renewable and circular, emerges as an excellent substitute for
less eco-friendly options. By capitalising on our sustainable packaging solutions, we aim to
address the growing demand for a wider range of paper-based packaging products.
Likewise, the surge in demand of sustainable textile fibres opens up possibilities for our
dissolving pulp business. Our prominent role in supplying pulp to the lyocell fibre market
positions us favourably, given the improved environmental impact f lyocell fibres, which are
expected to double in market share over the next five years.
Furfural is an important biobased platform chemical which is used in a wide variety of
applications including foundry resins, solvents and crop protection products. In many cases,
biobased furfural replaces products which would otherwise be made from fossil fuels. Sappi
has developed innovative technology for the production of furfural using the hemicellulose
co-product of our DP operations. By using this co-product, we are able to maximise the
portion of the tree used to make renewable value-added products. The Sappi technology is
fully integrated with the pulp production technology, enabling a significant reduction in the
carbon footprint of furfural production.
The production of pulp and paper is energy intensive and energy generation is the major
source of our GHG emissions. In many geographies where we have operations, renewable fuel
sources such as biomass are cheaper than fossil fuels such as coal and gas. In addition, it is
anticipated that renewable power (for purchase) will, over the medium to long term, become
cheaper than fossil-based power. By improving the efficiency of our energy plants and
manufacturing operations and creating the flexibility to utilise different fuel sources, we have
the opportunity to realise cost savings.
Short to long
term
US$20 to
US$50 million
US$60 to
US$70 million
(Estimated SBTi capital
requirement p.a.)
Reduced
operating
costs through
energy
efficiency
and use of
renewable
energy
y
t
i
n
u
t
r
o
p
p
o
n
o
i
t
i
s
n
a
r
T
y
t
i
n
u
t
r
o
p
p
o
l
a
n
o
i
t
a
r
e
p
O
Timeframe
Financial
impact (p.a.)
Action
Financial cost of actions
Short to long
term
US$100 to
US$200
million
To meet the growing demand for packaging
papers we have initiated a capital project at
Somerset Mill to convert PM2 from coated
woodfree graphic paper to solid bleached
PM2
US$418
Total capex for Somerset
sulphate paperboard. 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.
Medium term
US$20 to
US$30 million
Sappi has invested in a pilot plant at Saiccor
Mill which has successfully demonstrated the
US$50
technology for furfural production and testing
High level capex estimate for
of product with customers which is
25,000 tpa furfural plant
progressing well. A class 10 capex estimate
for a full-scale plant with the capacity to
produce 25,000 tpa is being explored.
Based on our corporate commitment to
reduce emissions and meet our SBTi targets,
together with increasing market and
regulatory pressure to reduce the carbon
footprint of our products, we have
implemented a comprehensive capital
investment programme to reduce GHG
emissions. Projects focus on energy
efficiency, fuel switching to allow replacement
of fossil fuels in our boilers with biomass and
renewable energy projects. Many of these
projects improve the efficiency of our
manufacturing operations and allow for
significant savings through fuel and power
arbitrage opportunities.
Note: Cost to realise the transitional opportunities for packaging and biomaterials is focused exclusively on two specific projects (conversion and expansion
of Somerset PM2 and furfural at Saiccor Mill) which are the two most advanced and likely to reach commercialisation opportunities in the current
portfolio. R&D initiatives are ongoing in this space and opportunities will be added as they emerge. Cost to realise the transitional opportunities does
not include the R&D spend which will be added in future reports.
100 Sappi Annual Integrated Report 2023
Opportunity
Description
Timeframe
Financial
impact (p.a.)
Action
Changing
consumer
behaviour and
preference for
renewable,
circular,
low-carbon
products
Beneficiation
of wood
by-products
The global demand for sustainable packaging solutions is prompting increasing investment
and collaboration to develop innovative solutions to cater to changing customer preferences.
Paper-based packaging being renewable and circular, emerges as an excellent substitute for
less eco-friendly options. By capitalising on our sustainable packaging solutions, we aim to
address the growing demand for a wider range of paper-based packaging products.
Likewise, the surge in demand of sustainable textile fibres opens up possibilities for our
dissolving pulp business. Our prominent role in supplying pulp to the lyocell fibre market
positions us favourably, given the improved environmental impact f lyocell fibres, which are
expected to double in market share over the next five years.
Furfural is an important biobased platform chemical which is used in a wide variety of
applications including foundry resins, solvents and crop protection products. In many cases,
biobased furfural replaces products which would otherwise be made from fossil fuels. Sappi
has developed innovative technology for the production of furfural using the hemicellulose
co-product of our DP operations. By using this co-product, we are able to maximise the
portion of the tree used to make renewable value-added products. The Sappi technology is
fully integrated with the pulp production technology, enabling a significant reduction in the
carbon footprint of furfural production.
The production of pulp and paper is energy intensive and energy generation is the major
source of our GHG emissions. In many geographies where we have operations, renewable fuel
sources such as biomass are cheaper than fossil fuels such as coal and gas. In addition, it is
anticipated that renewable power (for purchase) will, over the medium to long term, become
cheaper than fossil-based power. By improving the efficiency of our energy plants and
manufacturing operations and creating the flexibility to utilise different fuel sources, we have
the opportunity to realise cost savings.
y
t
i
n
u
t
r
o
p
p
o
n
o
i
t
i
s
n
a
r
T
y
t
i
n
u
t
r
o
p
p
o
l
a
n
o
i
t
a
r
e
p
O
Reduced
operating
costs through
energy
efficiency
and use of
renewable
energy
Short to long
term
US$100 to
US$200
million
Medium term
US$20 to
US$30 million
Short to long
term
US$20 to
US$50 million
To meet the growing demand for packaging
papers we have initiated a capital project at
Somerset Mill to convert PM2 from coated
woodfree graphic paper to solid bleached
sulphate paperboard. 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.
Sappi has invested in a pilot plant at Saiccor
Mill which has successfully demonstrated the
technology for furfural production and testing
of product with customers which is
progressing well. A class 10 capex estimate
for a full-scale plant with the capacity to
produce 25,000 tpa is being explored.
Based on our corporate commitment to
reduce emissions and meet our SBTi targets,
together with increasing market and
regulatory pressure to reduce the carbon
footprint of our products, we have
implemented a comprehensive capital
investment programme to reduce GHG
emissions. Projects focus on energy
efficiency, fuel switching to allow replacement
of fossil fuels in our boilers with biomass and
renewable energy projects. Many of these
projects improve the efficiency of our
manufacturing operations and allow for
significant savings through fuel and power
arbitrage opportunities.
Financial cost of actions
US$418
Total capex for Somerset
PM2
US$50
High level capex estimate for
25,000 tpa furfural plant
US$60 to
US$70 million
(Estimated SBTi capital
requirement p.a.)
Sappi Annual Integrated Report 2023 101
CLIMATE ACTION: TCFD DISCLOSURERESPONDING TO OUR CONTEXT
Climate Action: TCFD disclosure continued
Metrics and targets
The United National Sustainable
Development Goals (UN SDGs) inspire us
all to strive for a better future, setting out a
roadmap for where we collectively need to go
and how to get there. We have identified seven
priority goals at global level – and a further
two in South Africa – where we believe we
can make the most impact and where we
are concentrating our efforts.
We use a variety of metrics to measure the current and
potential impact of our climate change-related risks and
opportunities including metrics related to GHG emissions,
water use, forestry certification and biodiversity. Direct GHG
emissions are from our energy plants through combustion of
fuels to generate the power required for our manufacturing
operations (Scope 1). We also purchase power from the grid
(Scope 2) and have indirect GHG emissions throughout the
value chain, mainly as a result of our purchase of raw
materials, fuel and transportation, which make up the majority
of our Scope 3 emissions. We are acting across all three
Scopes and working closely with our partners to reduce
GHG emissions for our business and our value chain. In 2022,
our 2030 science-based decarbonisation targets, including
a Scope 3 advocacy target, were approved by the SBTi. We
remain committed to zero deforestation in our woodfibre
supply chains and to maintaining carbon sinks in forestry
through implementation of best forest management and
silviculture practices.
Thrive
strategy.
Given the strategic importance of sustainability, the group’s
Executive Directors remuneration is linked to their
contribution to the overall success of our
Specifically, 6% of the short-term management incentive is
directly linked to climate change through emission reduction,
forestry certification and waste to landfill performance
targets (MIS: sustainability = 30% of the 20% personal
objectives). Additionally, in FY2023 we initiated a process
to explore the inclusion of sustainability into the long-term
incentives (PSP: proposal for 10% linked to performance
against SBTi targets) and consultation with shareholders
has so far been positive.
For further details on our remuneration policy, see our
Remuneration Report on page
170.
Our performance against our global planet targets, which
have an impact on climate change, is shown below.
FY2023 group performance against 2025 climate targets
FY2023 snapshot of Thrive (2025) and SBTi targets
Sappi KPI
Clean water and sanitation
Specific process water usage (SSA)
Renewable and clean energy
Share of renewable energy
Specific energy intensity
Responsible consumption and production
Specific landfilled solid waste
Climate action
Specific GHG emission
s
t
e
g
r
a
t
t
e
n
a
P
l
Life on land
i
T
B
S
s
t
e
g
r
a
t
Climate action
Share of certified fibre
Biodiversity (SSA)
Scope 1 and 2
Scope 3 engagement
For more details on performance against planet targets see our 2023 Sappi Group Sustainability Report at
www.sappi.com/2023GSDR
102 Sappi Annual Integrated Report 2023
Global targets for FY2023 for specific total energy, share of
renewable and clean energy, specific GHG emissions and
specific waste to landfill were not achieved. The primary
reason for the poor performance against our targets is the
high levels of production curtailment that was required during
the year which significantly reduced the efficiency of our
operations. Unstable stop/start operating conditions require
more energy and produce more waste on an intensity basis
(per ton of product). Additionally, in Europe and North America
energy efficiency during the winter months was particularly
poor due to the requirement to keep certain lines and parts
of the plants heated during periods of curtailment to prevent
freezing. The waste to landfill was also impacted by a number
of ‘once-off’ issues in all three regions. These included;
Matane Mill instability in the anaerobic reactor in the water
treatment system which required sludge disposal, Kirkniemi
Mill decarbonisation project where some soil was removed
from the site, Ngodwana Mill increase in sludge landfilled from
the cleaning of emergency dams, Stanger Mill disposal of
building rubble from the black liquor tank project.
FY2023 GHG emissions data and five-year trend
Specific water usage is a SSA specific target. The target
was not achieved due to incidences of unstable operating
conditions and product quality challenges which required
additional water usage as well as lower production volumes
than planned for FY2023. The global certified fibre target
>75% and biodiversity in Sappi Forests conservation areas
was achieved.
The FY2023 Scope 1 and 2 emissions intensity of
0.94 tons CO2/adt was substantially above our SBTi trajectory
and is indicative of the very challenging year from a production
curtailment and energy inefficiency perspective. Absolute
Scope 1 and Scope 2 emissions were however below the
prior year due to the lower operating rates. In terms of our
engagement target for Scope 3 to have 44% of our suppliers
by spend with science-based targets, globally we achieved
21% with each region achieving the following. SEU 25%,
SNA 18%, SSA 15%. In FY2024 we will launch a focused
Scope 3 engagement initiative through the efforts of our
Sustainable Procurement Steering Committee with a
targeted questionnaire to suppliers.
GRI reference
Unit
2019
2020
2021
2022
2023
Scope 1
305-1a
million kg CO2eq/annum
4,421
4,078
4,269
4,079
3,474
305-4
kg CO2eq/adt
661.1
706.0
677.8
612.9
696.5
Biogenic
emissions
Scope 2
Scope 3
Scope 1 and
Scope 2 GHG
emissions
305-1c
million kg CO2eq/annum
7,074
6,803
6,622
6,877
6,730
305-2a
million kg CO2eq/annum
305-4
kg CO2eq/adt
305-3a
million kg CO2eq/annum
305-4
kg CO2eq/adt
1,553
232.3
3,977
594.7
1,207
208.9
3,365
582.6
1,161
184.3
3,512
557.7
1,333
200.3
3,784
568.7
1,234
247.5
3,472
695.9
million kg CO2eq/annum
5,974
5,285
5,429
5,411
4,709
305-4
kg CO2eq/adt
893.3
914.9
862.1
813.2
944.0
kg CO2eq/US$ million
1,039.7
1,146.7
1,031.4
741.7
810.7
Despite the poor emission performance in FY2023 we remain confident that the decarbonisation capital projects in our climate
transition plan and a return to full operating rates will allow us to achieve our
(2025) targets and SBTi (2030) target.
Thrive
In 2023 we engaged KPMG to perform limited assurance on the following planet variables:
• Scope 1 and 2 GHG emissions
• Solid waste to landfill
• Certified fibre
• Water usage (SSA only).
Looking forward
A number of physical and transitional risks and opportunities have been identified related to
climate change and we continue to monitor developments with respect to legislation, markets,
technology and disclosure requirements.
Further climate-related scenario analysis for both physical and transitional impacts will be undertaken in FY2024. Risks,
opportunities and financial impacts will continue to be refined.
We believe that we have the right strategy to address the risks and opportunities arising from climate change and will continuously
enhance our scenario modelling to expand our thinking and ensure that our strategy and transition plan remains resilient.
Sappi Annual Integrated Report 2023 103
CLIMATE ACTION: TCFD DISCLOSURERESPONDING TO OUR CONTEXT Fortify
Hermit crabs are shapeshifters, moulting as they grow,
continually shedding their exoskeletons and growing new
ones. As their exoskeletons are fragile, they need shells for
protection. Rather than produce their own shell, as they
grow, they use shells abandoned by other marine creatures.
This process is not a one-off, but continues throughout
their lifespan, depending on water temperature, habitat
and species.
Many species will enhance their chances of survival by
encouraging anemones to attach to their shell, as the
latter’s stinging tentacles may deter predators. The
crabs even transfer the anemones from shell to shell
when they move house.
We can draw parallels with Sappi, fortified as we are by our
iterative Thrive strategy and by our agility in responding to
changes in our operating context to emerge stronger and
better positioned for growth. This process is underpinned
by ongoing engagement with our stakeholders, whose
input helps us shape our response to our environment as
we collaborate to build a thriving world.
104 Sappi Annual Integrated Report 2023
Sappi Annual Integrated Report 2023 105
Product review
Our renowned
dissolving, high-yield
and kraft pulps provide
a sustainable, versatile
approach to creating
a better tomorrow.
Our dissolving pulp (DP) brand, Verve, creates renewable
alternatives for raw material feedstock to textiles,
pharmaceuticals, foodstuffs and more.
106 Sappi Annual Integrated Report 2023
Sappi Annual Integrated Report 2023 107
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Product review continued
“ 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 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 tons per annum and 15% share of the
DP market, Verve is a truly sustainable brand. From textiles
to pharmaceuticals and food applications, Sappi has the
expertise, technology and 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
108 Sappi Annual Integrated Report 2023
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. Fibres produced
from DP, however, far exceed 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 fibres produced from
DP differentiate themselves from the alternatives.
Viscose staple fibre (VSF) is the most prominent fibre,
accounting for approximately 70% 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 quality and sustainability
assurance in 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
55% 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
Additionally, paper pulp pricing has also
moved into an upward trajectory, which
will benefit our HYP sales. DP sales
volumes in the first quarter of FY2024
will, however, be lower than the prior
quarter due to scheduled maintenance
shuts at all three of our DP mills.
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.
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. 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 approximately 4% per annum for DP.
Market prices for DP are influenced by VSF and other textile market dynamics,
paper pulp market pricing which influences swing mills and US Dollar/RMB
exchange rate fluctuations.
Sappi’s Matane Mill, located in Quebec, Canada, has the capacity to produce
285,000 tons of HYP. Approximately 30% of Matane’s pulp production was
consumed internally within our packaging business during FY2023, thereby
increasing 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 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 FY2023, the pulp segment made up 22% of Sappi’s sales revenue.
Sales volumes of 1,517,000 tons included 180,000 tons of HYP from Matane Mill
and 21,000 tons of kraft pulp produced at Somerset Mill.
Our markets in 2023 and outlook for 2024
During the early part of the year, DP demand and pricing were dampened by
elevated stock levels and negative consumer sentiments. However, VSF operating
rates in China improved steadily as economic activity resumed from the third
quarter onwards. Operating rates in the VSF industry remained at a high level
through the remainder of the year and downstream VSF inventories
dropped below historical levels, which supported demand for DP. The
hardwood DP market price1 fell more than US$200 from the elevated
levels of last year to reach a low of US$840 in August. The movement
was driven primarily in the early part of the year by high-retail inventories
and weak consumer sentiment and then in the latter part of the year by
relatively subdued VSF pricing and the weak Chinese Renminbi
exchange rate against the US Dollar.
Demand for DP remained robust during the year with segment sales
volumes increasing by 7% or 96,000 tons, however, lower average
pricing and cost inflation adversely impacted profitability resulting in
EBITDA for the year being lower than the prior year with EBITDA margins
reducing from approximately 26% to 18%.
Due to production curtailments on our packaging paper assets in Europe
and North America, more BCTMP capacity became available for external
sales. Production at Saiccor Mill improved year-on-year due to more stable
operations.
Dissolving pulp markets appear more positive as VSF operating rates continue to
be strong and the differential between cotton and VSF pricing remains supportive.
Hardwood DP market pricing has increased in recent weeks to US$900 per ton.
1 Market price for imported hardwood DP into
China issued daily by the CCF group.
Sappi Annual Integrated Report 2023 109
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Product review continued
Packaging
and speciality
papers
Developing and
delivering innovative
sustainable solutions
is at the heart of our
philosophy.
We offer a broad range of paper-
based sustainable solutions as an
alternative to non-renewable, fossil
fuel-based packaging in many of
our product segments.
110 Sappi Annual Integrated Report 2023
Sappi Annual Integrated Report 2023 111
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Product review continued
“ 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 on being a reliable and 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 FY2023, 30% of Sappi’s sales revenue was packaging and speciality
papers, 1% higher compared to last year.
Sappi offers products and solutions in many different product
categories including:
Packaging papers and boards
Legislative changes and growing consumer pressure
are forcing brands to rethink 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 – 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 the growth potential and
technical requirements of a wide range of packaging
market segments to match those requirements with
our assets, specifically our production capabilities and
cost of production, the cost to serve customers, and
competitive threats. We choose only those projects
where we believe we hold a significant advantage.
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.
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.
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.
112 Sappi Annual Integrated Report 2023
470,000 tons per annum. The project
is progressing well and on track to
start-up in early 2025. The capital
expenditure will be phased over three
years with the majority of the spend
taking place in FY2024 and FY2025.
The FY2023 capital expenditure on the
project was approximately US$100
million and the estimated spend for
FY2024 is US$154 million. Refer to
Letter to the stakeholders –
Grow our business section of this
report on page
information on investments made in
our packaging and speciality papers
segment. These investments are fully
Thrive
aligned with our
to reduce our exposure to declining
graphic paper markets.
strategic focus
30 for further
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. The long-term
favourable outlook for our sustainably
produced packaging and speciality
paper products remains unchanged,
however, in the short term challenges
persist. The destocking process in the
segment is taking longer than expected
and the macroeconomic landscape
remains unpredictable, which is likely
to continue to weigh on consumer
sentiment. We therefore do not expect
any meaningful recovery in the first
quarter of the next financial year. Sappi
is well positioned to benefit from the
turn in the cycle. We believe we will
achieve year-on-year volume growth in
2024, aided by the shift from plastics to
paper in various packaging and
speciality paper categories.
Packaging
and speciality papers
Label papers and self-adhesives
Label papers are used for both wet glue (cut and stack) and wet strength label
processes in beverage, food and packaging applications. Our clay-coated kraft and
glassine release liners provide solutions not only for labels but applications such as
self-adhesive tapes, medical and industrial applications.
Casting and release papers
Used by suppliers in 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 local and state legislation in several US states
has passed, banning the use of polystyrene foam packaging. 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 2023 and outlook for 2024
The packaging and speciality papers segment faced weak trading
conditions related to high levels of downstream inventory and muted
consumer demand. Positive year-on-year pricing gains of 7% were
insufficient to offset input cost inflation and a 22% reduction in
sales volumes leading to a decline in the segment’s profitability.
EBITDA margins for the segment decreased from 17% last year
to 12% in fiscal 2023.
Demand for packaging and speciality papers in North America
is particularly robust and our customers are actively seeking
to increase their volumes with Sappi. In November 2022, the
board approved a US$418 million investment at Somerset Mill
to convert PM2 from coated woodfree graphic paper to solid
bleached sulphate paperboard (SBS). The machine capacity
will be increased during the conversion from 235,000 tons to
Sappi Annual Integrated Report 2023 113
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Product review continued
Product review continued
Graphic
papers
Our wide range
of brilliant, high-
performing graphic
papers create impactful
brand experiences.
When companies build
brands, selecting the right
paper can mean the difference
between creating something
average and something
memorable.
114 Sappi Annual Integrated Report 2023
Sappi Annual Integrated Report 2023 115
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Product review continued
116 Sappi Annual Integrated Report 2023
“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 2023 and outlook for 2024
Global demand for graphic papers has generally been in
secular decline. The remarkable turnaround in FY2022 from
the Covid-19 pandemic lows was driven by a number of
factors which led to an unprecedented global shortage of
graphic paper in the prior year. Graphic paper demand
declined sharply and remained weak throughout the year due
to weak consumer confidence related to the slowing economy
and an inventory destocking cycle that took longer than
anticipated.
Sales volumes declined 38% year-on-year and production
curtailments were required to manage these weak demand
dynamics. Selling prices were 14% higher than the prior year and
remained resilient. However, cost inflation and operational
inefficiencies associated with low capacity utilisation significantly
eroded profitability. The graphic paper segment generated EBITDA
of US$271 million with EBITDA margins decreasing from 16.4% in the
prior year to 9.7%.
It has become apparent that demand for graphic papers has experienced
a permanent structural decline. In response to the market overcapacity and
in line with Sappi’s strategy to reduce exposure to graphic paper markets, we
made the difficult decision to close the Stockstadt Mill and initiated a
consultation process for the potential closure of the Lanaken Mill shortly
after year-end.
It is anticipated that strategic action in the European region will significantly
improve the capacity utilisation of the graphic paper assets in the second half
of the next financial year.
In FY2023, 48% of Sappi’s sales revenue was from the graphic papers
segment.
The four major grades of graphic paper are discussed below:
Coated woodfree paper
Printers and publishers use coated woodfree paper for a variety of marketing
promotions including brochures, catalogues, calendars, corporate reports,
direct mail, books and magazines. Coated woodfree paper provides a smooth
and uniform surface for optimal print 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: The share of global advertising 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
Graphic
papers
is forecast to decline from approximately 21 million tons
in 2019 to approximately 15 million tons by 2024.
Sales: Sappi’s sales volumes for coated woodfree paper
decreased 42% from last year and sales revenue was 33%
lower, due to a challenging macroeconomic environment
where demand for graphic paper remained suppressed.
Globally, demand for coated woodfree paper decreased
by approximately 13%.
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 32% lower than last year, due to the unfavourable
economic climate. Volumes were approximately 38% lower
than the prior period. This year, the global market contracted
by approximately 13% 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.
Sales: Our sales revenue from uncoated woodfree paper was
13% lower than last year, largely as a result of the challenging
market conditions. Globally, demand decreased by
approximately 5% 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 challenging
macroeconomic environment with an estimated drop in
demand of approximately 8% during the current year and an
estimated decline of 5 – 6% annually through to 2027.
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
volatile and challenging macroeconomic environment,
however, no production curtailment was necessary in the
current financial year. Relative to the prior year our volumes
were 3% down and sales revenue was 8% higher. Globally,
newsprint demand declined 8% versus 2022.
Sappi Annual Integrated Report 2023 117
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Chief Financial Officer’s report
“ The strength of our balance
sheet has enabled us to
comfortably manage the
challenges without deviating
from the Thrive strategy”
Glen Pearce Chief Financial Officer (CFO)
Section 1:
Financial highlights
US$ million
Sales
EBITDA excluding special items
Operating profit excluding special items
Profit 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 generated
Net debt
Basic earnings per share (US cents)
2023
5,809
731
432
259
12.6
7.4
12.3
210
1,085
46
2022
7,296
1,339
1,038
536
18.4
14.2
27.9
506
1,163
95
%
change
(20)
(45)
(58)
(52)
n/a
n/a
n/a
(58)
(7)
(52)
Lower end demand combined with substantial destocking across the value chain generated weak order books and low capacity
utilisation throughout fiscal 2023. Destocking continued to below-average inventory levels in anticipation of reduced selling
prices as intermediaries delayed placing orders by favouring just-in-time processes. Selling prices peaked during the first quarter
and progressively weakened the remainder of the fiscal year yielding to the pressure of lower demand. Delivery, chemical and
energy costs reduced during the last nine months of the fiscal, however, wood costs remained at elevated levels. The net
reduction in variable input costs resulted in variable contribution margins per ton improving relative to the previous year. Under
these challenging circumstances, the South African business delivered record EBITDA (in ZAR) and North America the second
highest ever EBITDA.
Sales volumes reduced by 21% and caused overhead absorption rates to increase which offset the improved variable contribution
margins. The average operating rate of the group dropped from 91% last year to 69% resulting in consolidated EBITDA margins
reducing from 18% to 13% in the current year.
118 Sappi Annual Integrated Report 2023
Section 1 continued
Financial highlights
continued
The graphic papers segment recorded a 38% reduction in sales volumes as
merchants and printers destocked and responded to reduced end demand.
The low occupancy rates in Europe forced a review of available capacity resulting
in the announced closure of the Stockstadt Mill and a consultation process for the
potential closure of the Lanaken Mill. The North American operating rates recovered
towards the end of the year and will be assisted by the conversion of a paper
machine at the Somerset Mill due for completion early 2025. The packaging and
speciality papers segment experienced similar destocking activity and lower end
demand as sales volumes reduced by 22%.
The pulp segment experienced strong demand throughout the year and sales
volumes increased by 7% supported by improved production performances at
Saiccor Mill and Ngodwana Mill. Pulp selling prices followed general commodity
prices and reduced by 4% relative to last year. The resultant lower margins reduced
EBITDA from US$325 million to US$238 million in the current year.
The group generated cash of US$210 million after a reduction in net working capital
of US$178 million and capex of US$382 million. The net working capital reduction
reflected the reduced level of operations as the group managed net working capital
as a percentage of sales within the target of 9%. Cash generated was partially offset
by adverse exchange rate movements as net debt reduced by US$78 million to
US$1,085 million. Profit for the year of US$259 million (2022: US$536 million)
included special item costs of US$52 million. Earnings per share excluding special
items reduced from US138 cents to US52 cents. The directors declared a dividend
of US15 cents per share at three times earnings cover adjusted for non-cash items.
Segment reporting
Our reporting is based on the geographical location of our businesses, ie, Europe,
North America and South Africa.
The selected product line information is reviewed by our Executive Committee in
addition to the geographical basis upon which the group is managed. This additional
information is presented in this report to assist our stakeholders in obtaining a
complete understanding of our business.
Exchange rates and their impact on the group’s results
The group reports its results in US Dollar and, as such, the main foreign exchange
rates used in the preparation of the financial statements were:
Income statement
average rates
Balance sheet
closing rates
2023
2022
2023
2022
€1 = US$
US$1 = ZAR
1.0679
18.1791
1.0853
15.7829
1.0572
18.9299
0.9801
18.1537
Two of our three geographic business units (Europe and South Africa) have home or
‘functional’ currencies of Euro and ZAR respectively. The results and cash flows of
these two non-US Dollar units are translated into US Dollar at the average exchange
rate for the reporting period in order to arrive at the consolidated US Dollar results
and cash flows. When exchange rates differ from one period to the next, the impact
of translation from the functional currency to reporting currency can be significant.
Sappi Annual Integrated Report 2023 119
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Chief Financial Officer’s report continued
Section 2:
Financial performance
The discussion in this section focuses on the group’s financial performance in 2023 compared to 2022. A detailed discussion,
in local currencies, of each of our three operating regions follows in Section 3.
Income statement
Our group’s financial results can be summarised as follows:
Sales volume (metric tons ‘000)
US$ million
Sales revenue
Variable manufacturing and delivery costs
Fixed costs
Sundry items1
Operating profit excluding special items
Special items
Operating profit
Net finance costs
Taxation
Net profit
2023
6,282
5,809
(3,538)
(1,788)
(51)
432
(52)
380
(49)
(72)
259
2022
7,937
7,296
(4,380)
(1,832)
(46)
1,038
(268)
770
(97)
(137)
536
%
change
(21)
(20)
(19)
(2)
11
(58)
n/a
(51)
(49)
(47)
(52)
EPS excluding special items (US cents)
1 Sundry items include all income and costs not directly related to manufacturing operations such as debtor securitisation costs, commissions paid and
138
52
(62)
received and results of equity accounted investments.
Sales volume
In 2023, sales volume decreased by 1,655,000 tons compared to 2022. The regional and product segment contributions to
sales volume are shown below:
Sales volume
metric tons ‘000
North America
Europe
South Africa
Group
Pulp
Packaging and speciality papers
Graphic papers
Forestry
2023
1,373
1,909
3,000
6,282
1,517
1,251
2,124
1,390
2022
1,758
3,175
3,004
7,937
1,421
1,600
3,447
1,469
%
change
(22)
(40)
–
(21)
7
(22)
(38)
(5)
Pulp volumes were up 7% for the year. Elevated stock levels and concerns over negative consumer sentiments dampened demand
for textile fibres in the early part of the year. However, viscose staple fibre (VSF) operating rates in China improved steadily as
economic activity resumed from the third quarter onwards. Operating rates in the VSF industry remained at a high level through
the remainder of the year and downstream VSF inventories dropped below historical levels, which supported demand for
dissolving pulp (DP).
Packaging and speciality papers volumes decreased by 22% for the year driven by weak trading conditions related to high levels
of downstream inventory and muted consumer demand.
Graphic papers volumes decreased by 38% for the year. Graphic papers markets began softening in late 2022 dragged
downwards by weak consumer confidence related to the slowing global economy. Demand declined sharply and remained weak
throughout the year as inventory destocking took longer than anticipated. Production curtailments were required to manage the
weak demand dynamics.
120 Sappi Annual Integrated Report 2023
Section 2 continued
Financial performance
continued
Capacity utilisation reduced to an average of 69% for the group as weak packaging
and speciality papers and graphic papers markets forced us to take 1.9 million tons
of production downtime during the year.
Sales volume to capacity
North America
Europe
South Africa
Group
2023
%
74
55
89
69
2022
%
97
92
84
91
Sales revenue
Consolidated volumes were down on last year as discussed above resulting in sales
revenue reducing by US$704 million. The stronger US Dollar resulted in a negative
US$120 million conversion impact.
Variable and delivery costs
Variable and delivery costs decreased by US$726 million from 2022. The lower sales
volumes accounted for 21% of the decrease. Wood costs and chemical costs per
ton of product sold increased by 41% and 8% year-on-year respectively whilst other
main cost categories decreased by between 2% and 6%.
The net pulp purchases and sales of the Sappi group are detailed in the graph below.
Sappi group pulp balance (US$ million)
1,000
800
600
400
200
0
(200)
(400)
(600)
853
Net pulp sales
749
255
(359)
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
Pulp and other
Delivery
Group
2023
2022
%
change
829
569
852
835
453
3,538
779
801
1,042
1,127
631
4,380
6
(29)
(18)
(26)
(28)
(19)
Sappi Annual Integrated Report 2023 121
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Chief Financial Officer’s report continued
Section 2 continued Financial performance continued
Fixed costs
Fixed costs decreased by US$44 million from fiscal 2022. Reduction in bonuses resulted in personnel costs decreasing by 7%.
The increase in ‘Other’ is mainly a charge to inventory movement during fiscal 2023 as a result of a stock reduction. The weaker
ZAR and EUR resulted in a reduction in US Dollar costs (US$63 million). Excluding the currency impact fixed costs increased by
US$19 million.
Details of the make-up of fixed costs are provided in the table below.
Fixed costs
US$ million
Personnel
Maintenance
Depreciation
Other
Group
2023
2022
%
change
1,024
248
292
224
1,788
1,104
247
292
189
1,832
(7)
0
0
19
(2)
EBITDA and operating profit excluding special items
EBITDA excluding special items decreased to US$731 million, 45% lower than the previous year. Operating profit excluding
special items decreased from US$1.038 billion last year to US$432 million in 2023.
The EBITDA bridge reflected in the graph below shows the impact on profitability from lower sales volumes and selling prices
offset by reduced variable and fixed costs.
Reconciliation of EBITDA excluding special items: 2023 compared to 20221 (US$ million)
1,600
1,300
1,000
700
400
100
(200)
Sales revenue
Variable and delivery costs
Fixed costs
1,339
(704)
726
116
63
731
(19)
(7)
FY2022
EBITDA
Sales
volume
(663)
Price
and mix
(120)
Currency
conversion
Variable and
delivery costs
Currency
conversion
Fixed costs
Currency
conversion
Other
FY2023
EBITDA
1 All variances were calculated excluding Sappi Forestry.
2 “Currency conversion” reflects translation and transactional effect on consolidation.
122 Sappi Annual Integrated Report 2023
Section 2 continued
Financial performance
continued
The tables below detail the EBITDA and operating profit excluding special items of
the business for both 2023 and 2022 and the margins of each.
EBITDA excluding special items by region
US$ million
North America
Europe
South Africa
Corporate and other
Group
EBITDA excluding special items margin by region (%)
2023
2022
267
124
332
8
731
464
536
334
5
1,339
25
20
15
10
5
0
21.1
14.8
14.1
23.4
22.2
18.4
12.6
4.7
North America
Europe
South Africa
Sappi group
●
2022
■
●
2023
Base pay
■
Short-term incentive (MIS)
EBITDA excluding special items by product category
US$ million
2023
2022
Pulp
Packaging and speciality papers
Graphic papers
Other
Group
238
214
271
8
731
325
359
650
5
1,339
Operating profit excluding special items by region
US$ million
2023
2022
North America
Europe
South Africa
Corporate and other
Group
175
8
244
5
432
369
416
250
3
1,038
Sappi Annual Integrated Report 2023 123
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 (%)
20
15
10
5
0
16.8
17.5
16.3
9.7
10.9
14.2
7.4
North America
Europe
South Africa
Sappi group
0.3
●
2022
●
2023
Operating profit excluding special items by
product category
US$ million
Pulp
Packaging and speciality papers
Graphic papers
Other
Group
2023
2022
162
119
145
6
432
250
264
521
3
1,038
In the chart below, 63% of the group’s EBITDA originates from growing markets
in the pulp and packaging and speciality papers segments. The graphic papers
segment, which contributes 37% of the EBITDA remains an important strategic
component as we focus on the commercial print market.
EBITDA excluding special items by product
2023: US$731 million
8
271
2023
238
214
●
●
●
●
Pulp
Packaging and speciality papers
Graphic papers
Unallocated and eliminations
For information regarding the financial performance of the regions, please refer to
section 3 of this report.
Key operating targets
Our financial targets and performance against the key operating targets are dealt
with in the Strategy and Performance section.
124 Sappi Annual Integrated Report 2023
Special items
Special items consist of those items which management believes are material by
nature or amount, to the results for the year and require separate disclosure. A
breakdown of special items for 2023 and 2022 is reflected in the table below.
Section 2 continued
Financial performance
continued
Special items – gain/(loss)
US$ million
Plantation price fair value adjustment
Net restructuring provisions
Profit/(loss) on disposal, written-off assets and
incremental costs
Asset impairments
Reversal of loss/(loss) on held-for-sale assets
Profit/(loss) on disposal of held-for-sale assets
Equity-accounted investees impairment reversal
Insurance recoveries
Fire, flood, storm and other events
Total
2023
2022
123
(77)
3
(233)
181
(1)
–
7
(55)
(52)
(38)
–
(63)
–
(183)
–
3
30
(17)
(268)
The net impact of special items in 2023 was US$52 million. The major components
are described below:
• A positive non-cash US$123 million plantation price fair value adjustment was
recognised following increases to the market price of timber and a change in the
valuation technique which resulted in a favourable US$78 million adjustment
• Restructuring provisions of US$77 million were raised for the closure of our
Stockstadt Mill
• Asset impairments were recorded at the Lanaken Mill and Stockstadt Mill within
the European segment of US$146 million and US$51 million respectively, at our
Westbrook Mill in our North American segment of US$33 million and at our
Lomati Mill in our South African segment of US$3 million
• During the current year the group changed its intention to sell the Kirkniemi,
Stockstadt and Maastricht Mills and removed the mills from held-for-sale,
resulting in a reversal of its loss of US$181 million from the prior year
• Insurance recoveries of US$7 million were recorded related to the flood damage
in South Africa in the prior year
• A number of additional special item charges were recorded which include among
others, the Stockstadt Mill closure costs of US$16 million, business interruption
losses at Matane, Saiccor and Ngodwana Mills of US$10 million, US$8 million
and US$3 million respectively, fire-damaged timber of US$1 million, incremental
insurance costs of US$6 million and a pension curtailment loss of US$1 million.
Net finance costs
US$ million
Finance costs
Finance income
Net foreign exchange gains
Total
2023
2022
107
(48)
(10)
49
108
(10)
(1)
97
Finance costs of US$49 million were lower than the prior year due to the gain
recorded on the tender settlement of the 2026 bonds during Q1 and a positive
foreign exchange gain of US$10 million.
Sappi Annual Integrated Report 2023 125
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Chief Financial Officer’s report continued
Section 2 continued
Financial performance
continued
Taxation
A regional breakdown of the tax charge is provided below.
US$ million
Europe
North America
Southern Africa
Total
Profit/(loss)
before tax
Tax
(charge)/
relief
Effective
tax rate
%
(156)
137
350
331
38
(34)
(76)
(72)
25
25
22
22
In Europe, the difference between the effective and statutory tax rates are mainly
due to unrecognised losses carried forward in several countries.
In North America, the effective and statutory tax rates are aligned.
The South African effective tax rate is below the statutory tax rate, mainly due to
special tax allowances.
Net profit, earnings per share and dividends
After taking into account net finance costs and taxation, our net profit and earnings
per share for 2023, with comparatives for 2022, were as follows:
US$ million
Operating profit
Net finance costs
Profit before taxation
Taxation
Profit for the period
Weighted average number of shares issued (millions)
Basic earnings per share (US cents)
2023
2022
380
49
331
72
259
563.6
46
770
97
673
137
536
563.3
95
The directors have elected to declare a dividend of US15 cents per share at three
times earnings cover adjusted for non-cash items.
126 Sappi Annual Integrated Report 2023
Section 3:
Regional businesses performance
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
2023
1,373
483
375
515
2022
1,758
483
523
752
%
change
(22)
–
(28)
(32)
US$ million
2023
US$ million
2022
%
change
US$ per ton
2023
US$ per ton
2022
%
change
Sales
Variable manufacturing and delivery
costs
Contribution
Fixed costs
Sundry items and consolidation entries
Operating profit excluding
special items
EBITDA excluding special items
1,810
2,200
(1,199)
(1,386)
611
(551)
115
175
267
814
(560)
115
369
464
(18)
(13)
(25)
(2)
–
(53)
(42)
1,318
1,251
(873)
445
(401)
83
127
194
(788)
463
(319)
66
210
264
5
11
(4)
26
26
(40)
(27)
The North American sales volumes reduced by 22% registering a 74% capacity utilisation. Good management of net selling
prices relative to variable cost movements ensured the business maintained contribution per ton at levels similar to the previous
year. Fixed costs were well controlled at a 2% reduction relative to last year. Full year EBITDA of US$267 million was the second
highest in the region’s history. The lower sales volumes increased the overhead absorption rate by 26% per ton, and resulted in
EBITDA margin reducing from 21% to 15%. The strategic project to convert and expand Somerset PM2 from coated woodfree
paper to solid bleached sulphate paperboard incurred approximately US$100 million capital expenditure during the year.
The project is planned to start up in 2025 at a total cost of US$418 million.
Sappi Annual Integrated Report 2023 127
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Chief Financial Officer’s report continued
Section 3: continued
Regional businesses performance continued
Europe
Metric tons ’000
Sales volume
Packaging and speciality papers
Graphic papers
2023
1,909
452
1,457
2022
3,175
636
2,539
%
change
(40)
(29)
(43)
€ million
2023
€ million
2022
%
change
€ per ton
2023
€ per ton
2022
%
change
Sales
Variable manufacturing and delivery
costs
Contribution
Fixed costs
Sundry items and consolidation entries
Operating profit excluding
special items
EBITDA excluding special items
2,455
3,504
(1,550)
905
(774)
(124)
7
116
(2,177)
1,327
(781)
(164)
382
493
(30)
(29)
(32)
(1)
(24)
(98)
(76)
1,286
1,104
(812)
474
(405)
(65)
4
61
(686)
418
(246)
(52)
120
155
16
18
13
65
25
(97)
(61)
The weak European economy and downstream destocking severely impacted the profitability of the European business.
Substantial production curtailments were required to manage the weak demand for our products. The sales volume reduction
of 40% created selling price pressure towards the end of the year, however, year-on-year net selling prices improved by 16%.
Variable cost increases were offset by the increased selling prices resulting in an improved contribution per ton of 13%. The
significant drop in demand more than offset any contribution per ton improvement resulting in EBITDA margins reducing from
14 – 5%. The packaging and speciality papers segment was influenced by elevated downstream inventories throughout the fiscal
and although destocking was nearing completion, depressed macroeconomic conditions suppressed underlying demand for
consumer goods. The graphic papers markets showed signs of recovery during quarter four of the fiscal but demand was unlikely
to return to previous levels. The region recognised the low operating rates were unsustainable and capacity reduction was
required to reduce the overhead structure. The region announced the consultation process for the closure of Stockstadt Mill
during July 2023 and initiated a consultation process for the potential closure of the Lanaken Mill.
128 Sappi Annual Integrated Report 2023
Section 3: continued
Regional businesses performance continued
South Africa*
Metric tons ’000
Sales volume*
Pulp
Packaging and speciality papers
Graphic papers
2023
1,610
1,034
424
152
2022
1,535
938
444
153
%
change
5
10
(5)
(1)
ZAR million
2023
ZAR million
2022
%
change
ZAR per ton
2023
ZAR per ton
2022
%
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.
25,687
21,133
(15,997)
(13,463)
9,690
(7,453)
2,199
4,436
6,035
7,670
(6,708)
2,984
3,946
5,271
22
19
26
11
(26)
12
14
15,955
13,767
(9,936)
6,019
(4,629)
1,365
2,755
3,748
(8,771)
4,996
(4,370)
1,945
2,571
3,434
16
13
20
6
(30)
7
9
The South African business delivered a record EBITDA of ZAR6.035 billion for the year in a challenging environment. Pulp volumes
increased by 10% compared to the prior year due to improved plant stability and operating rates. Strong demand and improved
logistics supported the increased production levels. Containerboard volumes were 5% lower as high inventory levels in the
downstream value chain and competition from imports suppressed demand. The lower demand was offset by selling price
increases. Increased wood, energy and chemical costs were partially offset by lower ocean freight costs. Fixed costs increased
by 11% due to higher personnel, maintenance and insurance costs.
Major sensitivities
Some of the more important factors which impact the group’s EBITDA excluding special items, based on current anticipated
revenue and cost levels, are summarised in the table below:
Sensitivities
Net selling prices
Dissolving pulp prices
Variable costs
Energy costs
Sales volume
Fixed costs
Paper pulp price
Oil price
ZAR/US$ (weakening)
Euro/US$ (weakening)
Europe
€ million
North
America
US$ million
South Africa
ZAR million
Translation
impact*
US$ million
Group
US$ million
27
–
16
3
9
7
5
3
-
(12)
19
3
9
1
7
5
1
2
–
(5)
285
195
160
26
104
69
1
2
97
–
–
–
–
–
–
–
–
–
(2)
63
13
34
6
23
17
7
5
4
(13)
(32)
Change
1%
US$10
1%
1%
1%
1%
US$10
US$1
10 cents
10 cents
*
Based on currency impact on translation of EBITDA.
The table demonstrates that EBITDA excluding special items is most sensitive to changes in the selling prices of our products.
The calculation of the impact of these sensitivities assumes all other factors remain constant and does not consider potential
management interventions to mitigate negative impacts or enhance benefits.
Sappi Annual Integrated Report 2023 129
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Chief Financial Officer’s report continued
Section 4:
Cash flow
In the table below, we present the group’s cash flow statement for 2023 and 2022 in
a summarised format:
US$ 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
Dividend paid
Capital expenditure
Net proceeds on disposal of assets
Other
Net cash generated
2023
432
299
731
(32)
(40)
659
178
(91)
(56)
(85)
(382)
16
(29)
210
2022
1,038
301
1,339
(25)
(47)
1,267
(270)
(92)
(23)
–
(368)
2
(10)
506
Net cash generated for the financial year was US$210 million (FY2022: US$506 million).
Lower profitability resulted in lower cash generation from operations of US$659 million
compared to the prior year. The lower operating activity resulted in a working
capital inflow of US$178 million. Capital expenditure of US$382 million included
US$100 million for the conversion and expansion of Somerset PM2 to
packaging grades.
Investment in fixed assets versus depreciation (US$ million)
351
●
313
374
●
319
361
●
291
382
●
291
471
●
277
500
400
300
200
100
0
2019
2020
2021
2022
2023
●
Cash flow capex
Depreciation
130 Sappi Annual Integrated Report 2023
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
2023
2,886
69
488
447
317
(114)
(563)
3,530
2,445
1,085
3,530
2022
2,705
76
382
670
567
(85)
(794)
3,521
2,358
1,163
3,521
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.
During 2023, capital expenditure for property, plant and equipment was US$377 million. The capacity replacement value of
property, plant and equipment for insurance purposes has been assessed at approximately US$19 billion.
Property, plant and equipment
The cost and depreciation related to our properties are set out in the table below.
Book value of property, plant and equipment
US$ million
Cost
Accumulated depreciation and impairment
Net book value
2023
9,321
6,435
2,886
2022
7,919
5,214
2,705
The group incurred capital expenditure of US$378 million during the year. This was offset by depreciation of US$266 million,
impairments of US$229 million whilst transfers back from held-for-sale assets amounted to US$291 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 hectares of land of which approximately 261,000 hectares are planted
with pine and eucalyptus. These plantations provide approximately 62% of the wood requirements for our South African mills.
Sappi amended its plantation valuation technique in the fourth quarter from using a 12-quarter weighted average fair value price
for immature and mature timber to be felled 12 months after the reporting date to a market trend related fair value price that
closely approximates the spot fair value price. The effect of this change in estimate resulted in a favourable US$78 million
adjustment included in the US$123 million adjustment for the year. In addition to this, there were market price increases coupled
with higher average fair value rates. These increases were offset by the rising cost of fuel and an increase in the discount rate.
As we manage our plantations on a sustainable basis, the growth for the year was offset by timber felled during the year.
Our plantations are valued on the balance sheet at fair value less the estimated costs of delivery, including harvesting and
transport costs. In notes 2, 3, 4 and 11 to the Annual Financial Statements, we provide more detail on our accounting policies
for plantations, how we manage our plantations as well as the major assumptions used in the calculation of fair value.
Sappi Annual Integrated Report 2023 131
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Chief Financial Officer’s report continued
Section 5 continued
Balance sheet
continued
Working capital
The component parts of our working capital at the 2023 and 2022 fiscal year-ends
are shown in the table below:
Net working capital
US$ million
Inventories
Trade and other receivables
Trade and other payables and provisions
Net working capital
2023
777
659
(987)
449
2022
780
939
(1,049)
670
Optimising working capital remains a key focus area for us and appropriate targets
are incorporated into the management incentive schemes (MIS) for all businesses.
The working capital investment is seasonal and typically peaks during the third
quarter of each financial year.
Net working capital decreased to US$448 million in 2023 from US$670 million
in 2022. The material movements in working capital are discussed below:
• Inventories decreased by US$3 million, caused mainly due to decreased
inventory levels partially offset by an unfavourable currency translation impact
of US$20 million
• Receivables reduced by US$280 million on lower sales volumes partially offset
by an unfavourable currency translation impact of US$21 million
• Payables decreased by US$62 million largely due to lower trade payables on lower
sales volumes, decreases in bonus accruals and accruals for rebates, offset by a
favourable currency translation impact of US$32 million.
Post-employment liabilities
We operate various defined benefit pension/lump sum plans, post-employment
healthcare subsidies and other employee benefits in the various countries in which
we operate. A summary of defined benefit assets and liabilities (pension and
post-employment healthcare subsidies) is as follows:
Defined benefit liabilities
US$ million
Defined benefit obligation
Fair value of plan assets
Asset ceiling
Net balance sheet liability
Cash contributions to defined benefit plans/subsidies
Income statement charge/(credit) to profit or loss
Cash contributions deemed ‘catch-up’*
2023
2022
(481)
373
(5)
(113)
28
(24)
18
(610)
525
–
(85)
24
4
6
*
‘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$129 million from US$610 million
to US$481 million over the year. The main cause of the reduction was exercising the
‘buy-out’ option of the UK Pension Fund. The scheme’s liabilities and assets were
transferred using the buy-out option to an insurance scheme.
Fair value of plan assets decreased by US$152 million from US$525 million to
US$373 million. The main driver of this was the abovementioned exercising
of the buy-out option.
132 Sappi Annual Integrated Report 2023
Section 5 continued Balance sheet continued
Sappi Limited defined benefit pensions balance sheet movement (US$ million)
40
20
0
(20)
(40)
(60)
(80)
(100)
(6)
24
(26)
(14)
(12)
(8)
2022
net liability
Reclassified from
held-for-sale
Pension
charge
Employer
contributions paid
Actuarial
gains
Translation
effect
(42)
2023
net liability
Sappi Limited post-retirement medical aid subsidy balance sheet movement (US$ million)
–
20
0
(20)
(40)
(60)
(80)
(100)
(120)
40
20
0
(20)
(40)
(60)
(80)
(100)
(120)
(79)
(6)
4
8
2
(71)
2022
net liability
Pension
charge
Employer
contributions paid
Actuarial
gains
Translation
effect
2023
net liability
Equity
Year-on-year, equity increased by US$87 million to US$2,445 million as summarised below.
Equity reconciliation
US$ million
Equity as at September 2022
Profit for the year
Dividend paid
Share repurchases
Issue of shares
Share-based movements
Movement in hedging reserves
Actuarial losses
Foreign currency movements
Equity as at September 2023
2023
2,358
259
(85)
(22)
3
6
26
(5)
(95)
2,445
The group realised a profit for the year of US$259 million. This was offset by the dividend declared of US$85 million, share
repurchases of US$22 million, actuarial losses of US$5 million and foreign currency movements of US$95 million. Share-based
payments of US$6 million were recorded and shares to the value of US$3 million were issued during the year to holders of the
convertible bonds who elected to convert.
Sappi Annual Integrated Report 2023 133
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Chief Financial Officer’s report continued
Section 5 continued Balance sheet continued
Debt
Debt is a major source of funding for the group. In the management of debt, we focus on net debt, which is the sum of current
and non-current interest-bearing borrowings and bank overdrafts, net of cash and cash equivalents.
Debt funding structure
The Sappi group principally takes up debt at two legal entities. Sappi Southern Africa Limited (SSA) 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.
Below we highlight the main financing activities that occurred during the year:
• A tender offer was launched to repurchase a portion of the outstanding 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
• The €330 million SPH securitisation programme was renewed until January 2026
• The maturing SSA07 ZAR1.5 billion bond in South Africa was repaid from cash resources.
134 Sappi Annual Integrated Report 2023
Sappi Southern Africa (SSA)* Sappi Limited provides guarantees for long-term non-South African debt.Sappi Limited guarantee*Sappi LimitedSappi EuropeNon-South African debtSouth African debtSappi North AmericaSappi TradingSappi Papier Holding (SPH) 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$601 million at financial year-end, and
US$650 million of unutilised committed revolving credit facilities.
The structure of our net debt as at September 2023 and 2022 is summarised below.
US$ 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.
Movement in net debt
The movement of our net debt from fiscal 2022 to fiscal 2023 is summarised in the table below.
Net debt at September 2022
Increase of IFRS 16 Leases
Net impact of convertible bond conversions
Net cash generated in 2023
Sappi Limited share repurchase
Currency translation, fair value and other non-cash adjustments
Net debt at September 2023
2023
1,397
1,213
280
91
(187)
(312)
101
187
(601)
2022
1,754
1,463
322
84
(115)
(591)
74
115
(780)
1,085
1,163
US$ million
1,163
31
(3)
(210)
22
82
1,085
Sappi Annual Integrated Report 2023 135
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Chief Financial Officer’s report continued
Section 5 continued Balance sheet continued
Group debt profile
We show the major components and maturities of our net debt at September 2023 below. These are split between the debt in
South Africa and the debt outside South Africa.
Amount
US$ million
Interest
rates (local
currencies)
South Africa
Short-term notes
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
9.10%
9.25%
5.25%
7.10%
5.40%
Various
2.10%
3.90%
1.30%
4.60%
3.63%
3.13%
7.50%
40
79
62
180
(88)
92
110
170
92
63
68
56
62
423
254
221
(13)
1,505
(512)
993
1,085
Fixed/
variable
Variable
Fixed
Fixed
Variable
Variable
Mixed
Fixed
Fixed
Fixed
Variable
Fixed
Fixed
Fixed
Maturity
(Sappi fiscal years)
2024
2025
2026
2027 Thereafter
40
79
(88)
31
23
63
14
11
62
(512)
(340)
(310)
62
0
62
0
0
16
14
11
110
170
12
14
11
254
12
14
11
41
41
571
632
37
37
29
14
11
423
221
(13)
685
685
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
62
0
448
280
279
119
88
25
62
25
(91)
221
2024
2025
2026
2027
2028
2029
2030
2032
2033
●
Short-term
●
RCF
●
Securitisation
●
SSA
●
SPH term debt
Excludes IFRS 16 Leases with and average time to maturity of approximately four years.
136 Sappi Annual Integrated Report 2023
Section 5 continued Balance sheet continued
Covenants
Non-South African covenants
Financial covenants apply to US$187 million of our non-South
African bank debt, the €515 million revolving credit facility
(RCF) and the non-South African securitisation facility.
The covenants applicable from December 2023 to
December 2026 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 should not be more than
4.0 times
Credit ratings
Global Credit Ratings: South African national scale
rating: Sappi Southern Africa Limited: AAA (za)/A1+(za)/Stable
Outlook (June 2023)
Moody’s
Sappi Corporate Family Rating: Ba2/NP/Positive Outlook
(December 2022)
SPH Debt Rating:
• 2028/2026 Bonds: Ba2/Positive Outlook (December 2022)
• 2032 Bonds: B1/Positive Outlook (December 2022).
• Ratio of group EBITDA to net interest expense should not
be less than 2.50 to 1.
S&P Global Ratings
Corporate Credit Rating: BB/B/Positive Outlook (January 2023)
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 (SSA)
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 to 1.
Below we show that for the financial year ended September
2023, 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
2023
Covenant
1.41
11.00
8.84%
19.09
<4.00
>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. With regards to 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.
SPH Debt Rating:
• 2026/2028/2032 Bonds: BB Positive Outlook (January 2023).
Fitch Ratings
Group Long-Term Issuer Default Rating: BB+ Stable Outlook
(April 2023).
SPH Unsecured Debt Rating:
• 2026/2028/2032 Bonds: BB+ Stable Outlook (April 2023).
Thrive
strategy and commitment to implement was
Conclusion
The challenges experienced during fiscal 2023
demonstrated the resilience of the group and the ability
to adapt to a changing environment. The suitability of
the
apparent in the company’s response to the lower volume
demand and pricing volatility. Improved systems
and processes supported decisions to counter the reduced
capacity utilisation with a focus on managing operating
margins and working capital requirements. The strength of
the balance sheet enabled the group to comfortably manage
the challenges and make decisions to address the structural
market demand decline in our graphics segment. The
packaging and speciality and pulp segments are projected to
provide growth opportunities and the
designed to take advantage of the opportunities.
strategy is
Thrive
Thrive
strategy. The South African and North American
The uncertain macroeconomic and political climate is
expected to persist with the group being well placed to
manage the short-term challenges without deviating from
the
regions are structurally sound and operating in strong market
demand environments. The European region is in the process
of implementing structural changes to meet the changing
market demand requirements that will restore profitability to
targeted levels.
The medium to longer-term strategy to invest in growth
opportunities and achieve our sustainability goals remains
intact.
Glen Pearce
Chief Financial Officer
08 December 2023
Sappi Annual Integrated Report 2023 137
DIVING DEEPER INTO OUR PERFORMANCE AND PROSPECTS Balance
Bubbles are things of fragility, wonder – and balance. That’s
because the inward surface tension forces of the water film are
exactly balanced by the outward-pushing pressure of the air inside.
Blowing more air in to make a bigger bubble means more air
pressure inside and also means the bubble must get thinner in the
process, because there is only so much water to go around. Should
one keep blowing more air in, the film eventually won’t have enough
reserve water to spread out into a bigger surface, and the ultimate
catastrophe occurs: the bubble bursts.
The success of Sappi’s business is also based on balance. This
includes continuous capital prioritisation as we look to reduce
costs and grow the business while sustaining a healthy balance
sheet. It involves reshaping our product portfolio to meet changing
market needs and taking advantage of growth opportunities while
being mindful of the risks. It means balancing the needs of people
and communities with our responsibility to our shareholders.
As we move forward into the future, we know we can rely on the
expertise and passion of our people and the ongoing cooperation
of our stakeholders to maintain this balance and drive sustainable
value creation.
138 Sappi Annual Integrated Report 2023
Sappi Annual Integrated Report 2023 139
Our leadership and executive management
Non-executive Directors
Sir Nigel Rudd
(76)
Brian Richard Beamish
(Brian) (66)
Michael Anthony Fallon
(Mike) (65)
James Michael Lopez
(Jim) (64)
*
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.
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.
*
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,
human resources, finance, plant
management, sales and marketing
and supply chain to general
management, including mergers
and acquisitions.
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.
Nkateko Peter Mageza
(Peter) (68)
Zola Nwabisa Malinga
(45)
Dr Bonakele Mehlomakulu
(Boni) (50)
Mohammed Valli Moosa
(Valli) (66)
*
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.
Independent
Qualifications: BCom, CA(SA)
Nationality: South African
Appointed: October 2018
Skills, expertise and experience:
Ms Malinga has extensive
experience in investment banking,
real estate, corporate finance and
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.
Independent
Qualifications: PhD (Chemical
Engineering)
Nationality: South African
Appointed: March 2017
Skills, expertise and experience:
Dr Mehlomakulu has experience
and expertise in innovation policy,
environmental, social and
governance (ESG) oversight;
corporate management and
leadership.
*
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.
140 Sappi Annual Integrated Report 2023
Robertus Johannes Antonius
Maria Renders (Rob Jan) (70)
Nkululeko Leonard Sowazi
(60)
Louis Leon von Zeuner
(62)
Eleni Istavridis
(66)
Independent
Qualifications: MSc (Mechanical
Engineering), MDP
Nationality: Dutch
Appointed: October 2015
Skills, expertise and experience:
Mr Renders currently serves as a
business consultant as independent
director and brings to the board his
extensive experience in governance
and leadership as well as operational
expertise in manufacturing and
packaging internationally.
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.
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 Chartered
Director (SA). His role as board
member, aside from the normal
focus on strategy profitability,
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.
Executive Directors
Stephen Robert Binnie (Steve) (56)
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.
Glen Thomas Pearce (60)
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.
Independent
Qualifications: 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.
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
Sappi Annual Integrated Report 2023 141
GOVERNANCE AND COMPENSATION
Our leadership and executive management continued
Executive management
Stephen Robert Binnie
(Steve) (56)**
Glen Thomas Pearce
(60)**
Marco Eikelenboom
(56)**
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.
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.
Chief Executive Officer of
Sappi Europe
Qualifications: MS (Business
Economics)
Nationality: Dutch
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.
Michael George Haws
(Mike) (60)**
Alexander van Coller Thiel
(Alex) (62)**
Fergus Conan Salvador Marupen
(Fergus) (58)**
Chief Executive Officer of
Sappi North America
Qualifications: BSc Paper Science
and Engineering
Nationality: American
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.
Chief Executive Officer of
Sappi Southern Africa
Qualifications: BSc (Mechanical
Engineering), MBA (Financial
Management and Information
Technology)
Nationality: South African
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.
Group Head Human Resources
Qualifications: BA Hons
(Psychology), BEd (Education
Management), MBA (Stellenbosch
University), Maters Diploma in HR
Management (University of
Johannesburg), LCOR (Stanford
University)
Nationality: South African
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.
142 Sappi Annual Integrated Report 2023
Mohamed Iqbal Mansoor
(56)**
Gary Roy Bowles
(63)**
Maarten van Hoven
(50)**
Group Head Technology
Qualifications: BSc (Electrical
Engineering), GCC, PMD, EDP
Nationality: South African
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.
Group Head Strategy and Legal
Qualifications: BProc, LLM
(International Business Law)
Nationality: South African
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.
Executive Vice President of
Sappi Pulp
Qualifications: BSc (Chemistry and
Mathematics), BSc Hons
(Chemistry), MBA
Nationality: South African
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.
** Member of the Executive Committee.
Sappi Annual Integrated Report 2023 143
GOVERNANCE AND COMPENSATION Our leadership and executive management continued
Corporate management
Richard Wells
(54)***
Ami Mahendranath
(55)***
Tracy Wessels
(48)***
André Oberholzer
(56)***
Chief Executive Officer of
Sappi Trading
Qualifications: BCom
(Accounting), BCompt Hons,
CA(SA), GEDP, EDP
Group Company Secretary
Qualifications: BCom ACIS,
Certificate in Corporate
Governance
Group Head Investor Relations
and Sustainability
Qualifications: PhD (Organic
Chemistry), PMD
Group Head Corporate Affairs
Qualifications: BCom (Law),
Strategic Communication
Management Professional (SCMP®)
Louis Kruyshaar
(53)***
Marjorie Boles
(53)
Jörg Pässler
(62)
VP Innovation and Biotech
Qualifications: B.Eng (Chemical
Engineering), B.Tech (Pulp and
Paper), MBA, EDP
Chief Information Officer
Qualifications: BA (Economics
and Mathematics), MBA
(Entrepreneurship)
Group Treasurer
Qualifications: B.Com (Hons) Cum
Laude, M. Com, H. Dip. Tax,
CAIB (SA), FT Non-Executive
Director Diploma
*** Member of the Group Management Committee.
144 Sappi Annual Integrated Report 2023
Sappi Europe lead team
Marco Eikelenboom
(56)
Stephen Blyth
(49)
Steffen Wurdinger
(63)
Rainer Neumann
(61)
Chief Executive Officer
Qualifications: MS (Business
Economics)
VP and Chief Financial Officer
Qualifications: BCom Hons,
CA (SA), H Dip Tax (Law)
VP Manufacturing and
Technology
Qualifications: MS (Paper
Technology Engineering), Dr.-Ing
(specialisation in CTMP)
VP Human Resources
Qualifications: MS Industrial
Relations & Human Resources/MS
Administrative Sciences
Flavio Froehli
(52)
Hannes Boner
(60)
Jan Sander Van Tuijl
(47)
Louis Kruyshaar
(53)
VP Marketing & Sales
Qualifications: Master of Business
Administration (MBA)
VP General Counsel
Qualifications: lic iur, DHEE,
Admitted Attorney
VP Supply Chain & Procurement
Qualifications: MSc (Forestry,
specialisation Wood Science)
VP Innovation and Biotech
Qualifications: B.Eng (Chemical
Engineering), B.Tech (Pulp and
Paper), MBA, EDP
Sappi Annual Integrated Report 2023 145
GOVERNANCE AND COMPENSATION Our leadership and executive management continued
Sappi North America lead team
Mike Haws
(60)
Anne Ayer
(58)
Beth Cormier
(60)
Deece Hannigan
(61)
President and CEO
Qualifications: BS in Paper
Science and Engineering
VP Pulp Business and Supply
Chain
Qualifications: MBA from Stanford
University and a BA in Psychology
from Harvard
VP Research, Development and
Sustainability
Qualifications: BS in Engineering
Physics from University of Maine
and an MBA from Boston University
VP Graphics, Packaging and
Specialties
Qualifications: Graduate of North
Carolina State University with a BA
in Political Science
Annette Luchene
(61)
Sarah Manchester
(58)
Mike Schultz
(59)
VP and Chief Financial Officer
Qualifications: MBA from Loyola
University of Chicago and a BS in
Accounting from Northern Illinois
University
VP Human Resources and
General Counsel
Qualifications: BA in History from
Dartmouth College and a JD from
Cornell Law School
VP Manufacturing
Qualifications: BS in Paper
Science and Engineering from
the University of Wisconsin,
Stevens Point
146 Sappi Annual Integrated Report 2023
Sappi Southern Africa lead team
Alex Thiel
(62)
James Manana
(50)
Pramy Moodley
(47)
Chief Executive Officer
Qualifications: BSc (Mechanical
Engineering), MBA (Financial
Management and Information
Technology)
VP Human Resources
Qualifications: BA (Human
Resources Management),
Advanced Diploma in Labour Law,
Institute of People Management
Diploma, Leadership Development
Programme
Chief Financial Officer
Qualifications: BAcc, CA(SA), PMD
Mpho Lethoko
(41)
Beverley Sukhdeo
(56)
Naresh Naidoo
(52)
Head of Corporate Affairs
Qualifications: BA (Corporate
Communications), PGDip (General
Management), MBA
VP Manufacturing, R&D and
Engineering
Qualifications: MBA, BSc
(Chemistry), DBA
Chief Procurement Officer
Qualifications: BSc (Chemical
Engineering), MBA
Graeme Wild
(51)
Duane Roothman
(51)
Morgan Moodley
(55)
VP Sales and Marketing
Qualifications: BSc (Forestry), MBA
VP of Sappi Forests
Qualifications: BSc (Forestry), MBA
VP Supply Chain
Qualifications: B-Compt (AGA SA)
Sappi Annual Integrated Report 2023 147
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
the creation of
value for our
stakeholders.
100%
overall
committee
attendance rate
148 Sappi Annual Integrated Report 2023
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 whilst taking advantage
of exciting opportunities (refer to Risk management on page
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
44), whilst
68.
Sappi is listed on the JSE Limited and complies in all material respects with the
JSE Listings Requirements. Sappi subscribes to full compliance with the
Companies Act, and the relevant laws governing its establishment, specifically
related to its incorporation. Sappi operates in conformity with its memorandum
of incorporation (MOI). Furthermore, Sappi 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 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 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 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
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, culture 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.
* Copyright and trademarks are owned by the Institute of Directors in South Africa NPC and all of
its rights are reserved.
Board experience (%)
Sappi’s board members have experience across multiple industries and leadership roles
100
71
57
50
57
57
43
43
29
21
100
80
60
40
20
0
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
The composition of the board and attendance at board meetings and board committee meetings is set out in the table below for
the period 01 October 2022 to year ended September 2023:
Board
Board committees
AGM
Nomination
and
Governance
Human
Resources
and
Compensation
%
attendance
during
tenure
SETS*
Audit and Risk
100
100
100
100
100
100
100
100
95
100
90
100
100
100
Name
BR Beamish
MA Fallon
JM Lopez
NP Mageza
ZN Malinga
B Mehlomakulu
MV Moosa
RJAM Renders
Sir Nigel Rudd
LL von Zeuner
NL Sowazi
E Istavridis
s
r
o
t
c
e
r
i
D
e
v
i
t
u
c
e
x
e
-
n
o
N
t
n
e
d
n
e
p
e
d
n
I
e
v
i
t
u
c
e
x
E
s
r
o
t
c
e
r
i
D
SR Binnie (CEO)
GT Pearce (CFO)
Lead director
Appointed 01/10/2022
Committee member (present)
Chairman
Ex officio
Absent
By invitation
* Due to unforeseen circumstances, one of the SETS meetings was rescheduled just after the financial year-end. Included here for completeness of
reporting for the 2023 financial year.
Directors’ independence (%)
14
Directors’ ages (%)
(average 62 years old)
7
14
2023
2023
86
●
●
Independent Non-executive
Directors
Executive Directors
●
●
40s
50s
●
●
60s
70s
Directors’ tenure (%)
(as at year-end) (average 8 years)
Diversity (%)
14
65
36
2023
21
43
57
2023
43
●
●
0 – 3 years
3 – 10 years
●
Over
10 years
●
●
Diverse (female or
ethnically diverse)
Other
Sappi Annual Integrated Report 2023 149
GOVERNANCE AND COMPENSATION
Corporate governance continued
Strategic and other focus areas
In addition to the standard items on the board’s agenda,
the 2023 focus areas included:
• Oversight of progress in executing the
strategic
plan, in the light of the economic bubble post-Covid-19
Thrive
• Deep dives into the following topics:
–
–
–
–
–
–
–
–
European political instability and high inflationary
environment, impact on Sappi Europe
Review and approval of the global shipping tender
Post-completion audits of the Cham acquisition
(Carmignano and Condino Mills in Italy) as well as
Project Horse
Tour of Somerset Mill and review of the capex projects
Balance and Elevate
Review of the macroeconomic outlook, conditions
impacting on Asia, China, Europe, North America
Review of logistics infrastructure in the Sappi
Southern Africa (SSA) Region
Pulp strategy
Consideration of: paying a dividend.
• Review of risks and opportunities related to carbon
emissions, the reduction of Sappi’s carbon footprint and
climate change, in line with the Task Force on Climate-
related Finance Disclosure (TCFD) recommendations, the
link to Sappi’s SBTis, as well as Sappi’s environmental,
social and governance (ESG) disclosures
• SSA transformation and succession planning, training and
development
• Approval of voluntary diversity targets, in accordance with
the JSE Listings Requirements relating to the policy on the
promotion of broader diversity at board level. Achievement
of the gender target (applicable to the board as a whole) of
30% is expected to be achieved in 2024. The race target
(applicable to directors from South Africa) of 50%, for 2023,
was achieved
• Review of regional market peculiarities, performance,
opportunities and challenges
• A review of the Code of Ethics and related policies
• Post-completion audit of project Silver, which had lapsed,
and a review and discussion of the way forward for the
restructuring of Sappi Europe
• Review of strategy, share performance and board
composition
• Review of the safety report, statistics and initiatives
• Review and approval of the group authorities framework
• Review of Sappi’s captive insurance entity (strategy,
governance, insurance claims)
• Review of information technology (IT) risks, security and
cyber risk developments
• Internal board evaluation, using the online tool provided by
The Board Practice. This included a follow up of the 2022
external review of the board, and opportunities identified
relating to: succession plans, increasing dialogue regarding
organisational culture, consideration of new ideas to unlock
value, risk management tools, board sub-committee
structure, risk and transformation matters
• Employee engagement survey results and actions plans
• Review of the stakeholder relations report and corporate
social responsibility report
• Review of credit exposure (semi-annual)
• Review of the loan guarantee schedule
• Treasury policy review
• Group insurance renewal
• Share repurchase approval.
150 Sappi Annual Integrated Report 2023
All the top risks as well as emerging risks have been focused
on by the board during 2023.
The following areas will receive specific focus by the board
in 2024:
• Oversight of progress in achieving the
• Project management and oversight for large capital
Thrive
strategic plan
projects, including the Somerset PM2 conversion and
expansion, Project Elevate
• Review the technical and innovation initiatives
• Review of the 2024 business plan
• Monitoring and approval of the restructuring plans for
Sappi Europe, including closure of:
–
Operations at Stockstadt Mill, and potentially operations
at Lanaken Mill
Symbio and specific Biotech projects in Sappi Europe
–
• Review of the development of the furfural pilot plant at
Saiccor Mill
• Monitoring of the expected economic recovery in Europe
and North America
• Review the progress of the mill shuts, scheduled for 2024
• Increased focus on the responsibility of the board in
responding to climate change including the monitoring of
progress towards the company’s 2030 science-based
decarbonisation targets and capital allocation plan
• Oversight of the human resources (HR) project to upgrade
HR system technology, including the development of an
employee app
• Monitoring of voluntary diversity targets
• Monitor the actions resulting from the employee
engagement survey
• Review the HR strategy
• Review the technology landscape
• External evaluation of the board.
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. This includes the implementation of online
training for Officers, Executives and Non-executive Directors
(NEDs) on various governance, regulatory and risk topics.
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
Refer to Our key relationships on page
information.
52 for more
Sappi board and management committees
Board and management committees have been established and are discussed from pages
152 to 162.
Board of directors
• Strategic leadership and guidance
• The board delegates certain oversight responsibilities
• Ultimate oversight, accountability and responsibility
• The board assigns responsibilities for management of
to board committees
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 systems
and reporting
• Risk management
• Compliance and ethics
• Combined assurance
• Internal and external audit
• Information technology
(IT) governance.
• Board size, composition
and diversity
• 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
(BBBEE).
Executive
Committee
• Executive Directors
(CEO and CFO)
• Other senior executives
• Execute strategic
decisions approved
by the board.
Disclosure
Committee
Control and
Assurance
Committee
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
Sappi Annual Integrated Report 2023 151
GOVERNANCE AND COMPENSATION Corporate governance continued
Audit and Risk
Committee
• IT risks, related controls and governance. The committee
continued its special focus on the increasing threats of
cyber attacks and security in the operational technology
area
• Non-financial risks and controls
• Safeguarding and efficient use of assets
• 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. This included
consideration of managements actions and responses
with regard to the JSE Active Monitoring report, relating
to the valuation of plantations
• 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
(refer the Directors’ approval on page
2023 Group Annual Financial Statements). This included
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
• Combined assurance
• Compliance with the group’s Code of Ethics and external
regulatory requirements
• The external auditors’ qualifications, experience,
independence and performance, including the review
of the IRBA report
• The performance of the internal audit function, this
included review of the results of the annual Internal
Quality Assurance Review
• The performance of the finance function
• Group treasury policies, developments, refinancing
arrangements and liquidity
• Captive insurance matters
• Retirement fund risks, developments and independent
assurance
• Pending litigation and legal compliance programme
feedback
• Land claims review, initiatives and outlook
• Taxation policies, congruent with responsible corporate
citizenship
• Asset impairments, and treatment of assets held-for-sale
• 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.
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
2023:
NP Mageza
RJAM Renders
ZN Malinga
B Mehlomakulu
LL von Zeuner
NL Sowazi
E Istavridis
Key roles and responsibilities
The Audit and Risk Committee (ARC) consists of seven
Independent NEDs. The committee assists the board in
discharging its duties with oversight of:
• The risk management function, including a special
focus on business continuity, insurance incidents
• Sustainability and climate change risks including the
quality and transparency of sustainability information
presented in the Annual Integrated Report and the
external environmental, social and governance (ESG)
assurance provided by KPMG
152 Sappi Annual Integrated Report 2023
Strategic and other focus areas
The ARC 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 with projects’ Balance and Elevate at
Somerset Mill
• Oversight of risks and controls relating to the SEU asset sale and
restructuring activities, including the planned closure of
Stockstadt Mill
• Cyber security incidents and disaster recovery plans
• Business and IT continuity arrangements, including disruptions
to, production facilities, warehousing, logistics and supply chain
• Review of issues relating to the hotline service provider
and actions taken to improve the quality of information gathered,
and whistle-blower arrangements.
Areas of oversight for the committee in 2024 will be:
• Additional focus on IT 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
www.sappi.com/annual-reports
The ARC 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 ARC meetings and had
unrestricted access to the committee and Chairman. The external
and internal auditors met privately with the ARC during 2023.
Mr Peter Mageza is the Chairman and designated financial expert
of the ARC. Mr Mageza is due to retire from the board and the ARC
in February 2024, and will be replaced, subject to approval by
shareholders, at the AGM, as Chairperson and designated financial
expert, by Ms ZN Malinga.
97%
overall committee
attendance rate
Stakeholders
The ARC has helped to create and protect value for
the following stakeholders: employees, customers,
shareholders and regulators.
Refer to Our key relationships for further details on
page
52.
Risks
The ARC has focused on all of the top 10 risks:
1
2
3
4
5
6
7
8
9
Safety
Cyclical macroeconomic factors
Cyber security
Sustainability expectations
Climate change
Evolving technologies and consumer
preferences
Supply chain disruption
Uncertain and evolving regulatory landscape
Employee relations
Mr Nkululeko Sowazi is due to resign from the ARC in February 2024
as he will take up the position as Chairman of Sappi Limited.
10 Liquidity
These changes to the membership of the ARC will reduce the
membership to five members, which is aligned with the terms of
reference of the committee.
The committee is satisfied that it has fulfilled its responsibilities
as set out in its terms of reference.
For further details refer to Risk management on
page
44.
Sappi Annual Integrated Report 2023 153
GOVERNANCE AND COMPENSATION Corporate governance continued
Nomination and
Governance Committee
Sir Nigel Rudd (Chairman)
Key roles and responsibilities
Membership
details at
September
2023:
ANR Rudd
MV Moosa
MA Fallon
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 2023 and established
that the board and board committees functioned well. Review
of the type of training provided to directors, including the
online training made available during 2023.
154 Sappi Annual Integrated Report 2023
Strategic and other focus areas
The Nomination and Governance Committee helped to protect
value by providing oversight and guidance in 2023 over:
• Corporate governance
• Tone at the top
• Succession plans for senior executives and the board with a
focus on board composition, chairmanships, rotation and
replacement of directors, as well as the appointment of
replacements for direct reports of the CEO
• The promotion of broader diversity at board level policy, which
includes diversity indicators. This included the validation of
gender and race targets for NEDs and in particular as relates
to directors from the Southern African geographic region
• Assessment of the board and board committee performance
• Reviewed the Sappi Limited directors’ shareholdings and dealings
in securities
• Recommended the appointment of directors to the Sappi Limited
Board, for approval. The appointments of the new directors were
confirmed by shareholders at the AGM held on 08 February 2023.
A focus area for 2024 will be onboarding directors appointed to
new board and sub-committee roles and a handover process
from the outgoing Chairman Sir Nigel Rudd to the new Chairman,
Mr Nkululeko Sowazi.
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 Nomination and Governance Committee has
helped to protect value primarily for the following
stakeholders: shareholders and regulators.
Refer to Our key relationships for further details on
page
52.
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.
For further details refer to Risk management on
page
44.
Sappi Annual Integrated Report 2023 155
GOVERNANCE AND COMPENSATION Corporate governance continued
Human Resources and
Compensation Committee
Key roles and responsibilities
Mike Fallon (Chairman)
The Human Resources and Compensation Committee
consists of five independent directors.
The Human Resources and Compensation Committee ensures
that the policy governing compensation practices and
structures within the group support the group’s strategy and
performance goals. The policy also enables the attraction,
retention and motivation of executives and all employees.
Thrive
strategy and
The committee ensures that the compensation philosophy
and practices of the group, including the CEO’s performance
objectives, are aligned to the group’s
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 NEDs 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.
Strategic and other focus areas
The 2022 report was supported at the annual general
meeting (AGM) on the 8th of February 2023 with a vote of
94.86% on the Remuneration Policy and 84.80% 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:
• Feedback from AGM on the Remuneration Report
• Monitoring of a voluntary minimum shareholding
requirement for all prescribed officers to be achieved by
December 2025
• Disclosure of the vested performance share plan (PSP)
award as part of the total remuneration in line with best
practice
Membership
details at
September
2023:
MA Fallon
NP Mageza
RJAM Renders
BR Beamish
Sir Nigel Rudd
156 Sappi Annual Integrated Report 2023
• Review and approve amendments to the management incentive
scheme (MIS) for 2023
• Review and approve revised safety measures
• Review and approve all benefits of employment for inclusion in the
employees report to the group CEO
• The HR investor road show with key shareholders
• Oversight on key succession transitions across all regions
• Annual review of Sappi group remuneration policies and practices
• Review of the financial position of retirement benefit funds across
the group
• Review of the Employee Engagement Survey results and action
plans
• Annual review of variable pay plans
• Annual review of compensation across the peer group
• Approval of the rules and shares allocation pools for personal
share plan awards for 2023
• Review of wage negotiations
• Review of training and development, and a skills update with
a focus on engineers in training
• Recommendation for compensation for NEDs.
The strategic focus areas for the committee in 2024:
• Approve the inclusion of sustainability as part of the PSP
• Review and approve the performance measures of the MIS
• Review and approve the performance measures of the PSPs
• Reviewing the current share scheme to modify for the inclusion
of a restricted scheme
• Gender representativity across all Sappi operations
• SSA skills requirements
• Oversee the implementation of the HR
• Approval of the remuneration and bonuses for Executive Directors
Thrive
plan
and senior management
• Review of industrial relations
• Review of the proposed changes to the Companies Act in
South Africa
• Mr Peter Mageza and Sir Nigel Rudd will retire from the committee
and an onboarding process will be arranged for their successors.
The committee is satisfied that it has fulfilled its responsibilities as
set out in its terms of reference.
For more information refer to the Remuneration Report
from page
170.
.
95%
overall committee
attendance rate
Stakeholders
The Human Resources and Compensation
Committee has helped to protect value primarily
for the following stakeholders: employees,
shareholders and regulators.
52 and
Refer to Our key relationships on page
to the Remuneration Report for further details on
page
170.
Residual risk ranking
The Human Resources and Compensation
Committee has focused on the following of
the top 10 risks:
1
2
3
4
5
6
8
9
Safety
Cyclical macroeconomic factors
Cyber security
Sustainability expectations
Climate change
Evolving technologies and consumer
preferences
Uncertain and evolving regulatory landscape
Employee relations
For further details refer to Risk management on
page
44.
Sappi Annual Integrated Report 2023 157
GOVERNANCE AND COMPENSATION Corporate governance continued
Social, Ethics,
Transformation and
Sustainability Committee
Key roles and responsibilities
The Social, Ethics, Transformation and Sustainability (SETS)
Committee comprises four independent NEDs and the
CEO. A 100% attendance record was achieved by board
committee members for 2023. Other executive and group
management committee members attend SETS Committee
meetings by invitation. It should be noted that a number of
other NEDs attend SETS Committee meetings ex officio.
The Chairmen of the ARC 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, health and safety, 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 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.
Valli Moosa (Chairman)
Membership
details at
September
2023:
MV Moosa
SR Binnie
B Mehlomakulu
BR Beamish
JM Lopez
158 Sappi Annual Integrated Report 2023
Strategic and other focus areas
In 2023 the committee provided oversight of:
• Sappi’s social and economic development standing (United
Nations Global Compact (UNGC) and OECD)
• Safety initiatives, serious safety incidents and progress towards
the 2025 sustainability targets
• Progress on climate action aligned with the Task Force on
Climate-related Financial Disclosures (TCFD) including the
transition plan and progress towards 2030 science-based
decarbonisation targets
• External assurance on group lost-time injury frequency rate
(LTIFR), Scope 1 and Scope 2 emissions, certified fibre, waste
to landfill and water extraction
• Sappi Southern Africa’s performance against the applicable
broad-based black economic empowerment (BBBEE) legislation,
the EE Act and the Forestry Charter, including unfair
discrimination and equality policy
• Sappi’s Code of Ethics, ethics training programme and its
effectiveness
• Group training and development programmes
• Employee engagement survey results and action plans to
address improvement opportunities
• Production unit operating efficiencies, reliability and unscheduled
downtime metrics Sappi’s sustainability disclosures
• 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 2024:
• Development of an approach to nature-related disclosures
aligned with the Taskforce on Nature related Financial Disclosure
(TNFD)
• Progress towards science-based targets and the climate
change strategy
• Alignment of group sustainability disclosures to comply with EU
Corporate Sustainability Reporting Directive (CSRD) for FY2025
reporting period
• Progress towards
sustainability targets and realignment
Thrive
of targets as appropriate to account for the closure of one
European mill in FY2024
• Production efficiencies and events
• Employee engagement action plans.
For more information refer to the SETS Committee Report
on page
www.sappi.com/sustainability-targets
194 and to Our global sustainability goals
100%
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.
Refer to Our key relationships for further details on
page
52.
Residual risk ranking
The SETS Committee has focused on the
following of the top 10 risks:
1
2
4
5
6
7
8
9
Safety
Cyclical macroeconomic factors
Sustainability expectations
Climate change
Evolving technologies and consumer
preferences
Supply chain disruption
Uncertain and evolving regulatory landscape
Employee relations
For further details refer to Risk management on
page
44.
Sappi Annual Integrated Report 2023 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. Refer
to page
165 for additional details of Sappi’s approach to risk, controls and assurance.
Executive 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 pulp (DP) 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.
Group Risk Management Committee
The committee is known as the Group Risk Management Team (GRMT) and is mandated by the board to establish,
coordinate and drive the risk management process throughout Sappi. It has established a risk management system to
identify and manage significant risks. The GRMT reports regularly on risks to the ARC and the board. Risk management
software is used to support and report upon the risk management process. During 2023 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 2024 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.
Group Sustainable Development Council
The Sappi Group Sustainable Development 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 2023 included:
• Oversite and review of the
• Sappi’s climate change strategy and action plans including:
sustainability targets
Thrive
–
–
–
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 TFCD
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.
160 Sappi Annual Integrated Report 2023
Brand Council
This council coordinates Sappi’s brand communication programme, monitors brand performance and ensures
effective brand management to enhance Sappi’s reputation.
Project Steering Committees
For key strategic projects, steering committees are established to oversee successful execution of the project.
Technical Committees
The Technical Committees’ focus is on global technical alignment, performance and efficiency measurement as well
as new product development.
Disclosure 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.
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 ARC and the board. An IT governance framework has been
developed and IT feedback reports are presented to the ARC 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 2023 by its oversight of:
• The implementation of major strategic projects to drive operational excellence in manufacturing, sales, supply
chain, finance and logistics among other functions
• The digital strategy and governance model to drive innovation at scale across all divisions
• The expansion of the group security function and talent pipeline and tangible progress toward the security strategy
• The framework to evaluate third-party IT security risks
• Due diligence for a cohesive cloud infrastructure and security strategy
• The deployment of global operational technology (OT) security solutions across the manufacturing landscape
• Strategic planning around core enterprise solutions.
A significant part of the IT Steering Committee’s responsibility is to monitor and direct Sappi’s Information and Cyber
Security activities. The ARC oversees these activities. Security matters are shared and discussed with the board at
least quarterly. 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 2024 for these IT initiatives, as well as:
• Support for new business priorities to address evolving market conditions in alignment with
• Additional security improvements including enhanced recovery capabilities, global OT security standards, central
priorities
Thrive
vulnerability management, and further smart partnerships to extend security best practices and capacity
• Infrastructure simplification through further global harmonisation opportunities and cloud consolidation.
Sappi Annual Integrated Report 2023 161
GOVERNANCE AND COMPENSATION Corporate governance continued
Treasury Committee
The Treasury Committee meets monthly to assess financial risks on treasury related matters. Specific focus areas
in 2023 related to:
• Renewal of the €330 million securitisation programme at Sappi Papier Holding (SPH)
• Using €195 million of surplus cash to tender for and repay €210 million of the SPH 2026 bond, at a discount
• Repaying the R1.1 billion SSA07 bond in South Africa from cash resources.
Key focus areas in 2024 will be:
• The effective management of cash and interest costs due to rising interest rates
• Consider appropriate action for upcoming debt maturities.
Sappi Accounting Standards Committee
The Sappi Accounting Standards Committee (SASC) meets regularly to discuss and decide on the accounting
treatment and the application of accounting standards at Sappi. SASC comprises finance, treasury and accounting
officers throughout the group. Internal and external audit attend meetings by invitation. A main topic of discussion in
FY2023 was the discount rate calculation methodology used in the plantation valuation.
Taxation Committee
The Taxation Committee meets monthly to discuss and address global taxation matters. The main focus areas of the
committee for 2023 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 2024.
Control and Assurance Committee
The Control and Assurance Committee (CAC) comprises group and regional heads of department representing all the
main operating and support functions at Sappi. The CAC is supported by the internal control function and internal audit.
A multi-disciplinary Combined Assurance Workgroup (CAW) provides oversight and guidance to the business on
internal controls and combined assurance for financial, strategic and operational risks. The CAW provides input to the
CAC, who in turn, is accountable to the GRMT and the ARC.
162 Sappi Annual Integrated Report 2023
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 anti-bribery and corruption and anti-competitive
practices, as part of onboarding. The code was refreshed during
2022 and released in 2023. All employees receive refresher training
on these courses every three years.
A group Supplier Code of Conduct (Code) has been developed and
communicated 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.
Refer to www.sappi.com
Code of Ethics.
for the
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 ARC.
Sappi’s legal compliance programme has been boosted by:
• The implementation of legal compliance software including Exclaim
for SSA, GEORG Compliance Management for the German mills,
Syneris is being used as a compliance management application in
Austria, and Policy Passport for Group policies and procedures
• The provision of online training to employees across the group on
relevant core legal compliance topics. This included health and
safety, and conflict of interest training 2023
• Ad hoc training on specific topics, for example
intellectual property, GDPR and POPIA was
provided to relevant employees.
Key focus areas in 2024 will be:
• Anti-bribery and corruption certification
• Group-wide consolidation of legal
compliance reporting
• Code of Ethics refresher training and
online social media training
• Training on combatting modern
slavery.
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 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. Sappi undertook a conflict of interest policy relaunch with
refresher training in FY2023.
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
refer to the Preventing fraud and corruption section of the Code of Ethics
at www.sappi.com
The company has a code of conduct for dealing in company securities
and follows the JSE Limited Listings Requirements in this regard.
For further information refer to the Insider trading section of the Code
of Ethics which can be found at www.sappi.com
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 by
completing an online web-portal form. Whistle-blower
‘hotlines’ have been implemented in all the regions in which
the group operates. The hotline and web-portal service,
operated by independent service providers, enables all
stakeholders to anonymously report environmental, safety,
ethics, accounting, auditing, control issues or other concerns.
Retaliation against whistle-blowers is not tolerated. The follow
up on all reported matters is coordinated either by legal
counsel or internal audit and reported to the ARC. 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
• Number of forensic cases closed and average time
spent per case
• Categories of hotline calls and ethics reports
• Outcome of the investigations.
The hotline report rates categories of reports and
outcomes of cases broadly align with international whistle-
blower benchmark data. For more information, refer to the
Reporting and whistle-blowing section of the Code of Ethics,
at www.sappi.com
Sappi Annual Integrated Report 2023 163
GOVERNANCE AND COMPENSATION
Corporate governance continued
Hotline report rate per 1,000 employees per annum
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
ARC
• Interim and final results – by external
audit.
5.0
4.0
3.0
2.0
1.0
0
4.3
3.9
4.0
3.1
4.9
2019
2020
2021
2022
2023
●
Report rate per 1,000 employees
Forensic cases closed and average time taken to close
100
80
60
40
20
0
76
●
71
74
●
75
●
93
67
76
●
75
85
●
67
2019
2020
2021
2022
2023
●
Number of cases closed
Average of days to close
Hotline and ethics cases by category (%)
14
41
45
100
80
60
40
20
0
20
37
44
5
54
41
7
44
49
8
53
39
2019
2020
2021
2022
2023
●
Corruption, fraud and theft
●
Employment-related matters
●
Environment, health, safety and other
164 Sappi Annual Integrated Report 2023
Hotline and ethics case outcomes (%)
7
45
49
100
80
60
40
20
0
4
44
51
2019
2020
●
●
Cleared, no action or unresolved
●
Criminal charges
Termination
5
71
24
2021
1
8
5
67
24
2022
3
55
36
2023
●
Disciplined, counselled or other action
Risk, controls and assurance at Sappi
Risks facing the group are identified, evaluated and managed by implementing risk
mitigations, such as insurance, strategic actions or specific internal controls. Sappi
maintains a robust framework of risks and controls which assists in the application
of the King IV guidelines and the achievement of governance outcomes by helping
to: create an ethical culture; establishing effective control; and promoting legitimacy,
all of which help Sappi and its stakeholders to benefit from good performance. The
framework includes controls addressing our material matters, by focusing on the
main drivers of Sappi and comprises both financial and non-financial controls,
which support the achievement of our strategy, within our risk appetite and
tolerance levels, across the economic, social and environmental context in which
the organisation operates as well as each of the six capitals set out in the IIRC’s
model. More information on these capitals and Integrated thinking in the context
of Sappi’s sustainable business model can be found in Our business model on
page
24, as well as Risk management on page
44.
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 and external assurance
providers, on the risk areas affecting the group. Combined assurance is overseen
by the CAC. The committee and its CAW provide holistic feedback to the GRMT and
ARC 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 workgroup
focused on the following risk topics in 2023: fraud and ethics management, cyber
security, operational technology, legal compliance, business continuity, taxation,
contractors and maintenance, energy, waste and safety.
In FY2024 CAW will assist CAC to create and protect value by further developing
combined assurance, risks and controls relating to IT security, continuity, regulatory
compliance and sustainability.
Sappi Annual Integrated Report 2023 165
GOVERNANCE AND COMPENSATION Corporate governance continued
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,
sociopolitical
Financial, tax
and treasury
Legal and
compliance
IT
Planet,
environment,
natural capital
Ethics
People, HR and
transformation
Research and
development (R&D),
intellectual property
Manufacturing,
supply chain
management,
quality, forestry
Stakeholders,
communication,
reputation, society
Safety
Business management
operations supported
by appropriate controls
and systems
Independent
assurance
provided by
external audit,
internal audit and
other assurance
providers
Internal audit
Internal audit
Board and board
sub-committees
Audit and Risk
sub-committee
Nomination and
Governance
Committee
KPMG, tax authorities,
internal audit
Audit and Risk
Committee
Monitoring and oversight
functions
CAC, management self-
assessments
Executive Committee, Group
Head Strategy, Global Business
Council, CAC, management
self-assessments
Control and assurance,
accounting standards, taxation,
treasury and Disclosure
Committees, management
self-assessments
• 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 (HR),
purchasing
• Business units,
eg forestry, mills,
sales offices
• Business unit
operations,
eg production,
engineering,
controlling, materials
management.
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
ISO 14001, FSC,
PEFC, SFI, EMAS,
KPMG, EcoVadis
Government reviews
emissions effluent
etc, internal audit
Internal audit
BBBEE audits, internal
audit
Group Compliance Manager,
ethics surveys, management
self-assessments
Global Human Resource
Committee, regional labour
forums, employee engagement
surveys, management
self-assessments
Group technical cluster,
management self-assessments
ISO 17025, 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
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
ISO 45001, ISO 22000
regulatory inspections,
internal audit
SETS Committee
166 Sappi Annual Integrated Report 2023
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 ARC advises the board on the state of risk management
and controls, as well as assurance, in Sappi’s operating
environment. This information is used as the basis for the
board’s review, sign-off and reporting to stakeholders, via the
Annual Integrated Report and Annual Financial Statements,
on risk management and the effectiveness of internal
controls and assurance within Sappi.
As part of combined assurance in respect of reported
information, Sappi has obtained assurance on the data in
the Annual Integrated Report from the following sources:
• Financial data is independently audited by KPMG
• External sustainability assurance was obtained from KPMG
in 2023 for Scope 1 and 2 emissions information, water
usage in South Africa, fibre certification, solid waste to
landfill, as well as specific safety information
Internal audit value proposition
• 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 ARC and independently
appraises the adequacy and effectiveness of the group’s
governance, risk management, systems, internal controls and
accounting records. Internal audit coordinates combined
assurance and reports the findings to local and divisional
management, the external auditors, and the ARC.
The head of internal audit reports to the ARC, 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:
Capitals
Stakeholders
Objectives
• Board, ARC
• Management
• Employees
• Other (eg communities, business partners).
Governance, risk and opportunity management, controls:
• Strategic • Operational • Compliance • Reporting
Support
Internal audit activities
Support
Advisory and assistance
• Forensic, hotline and ethics management
• Projects, new business processes
• Governance, risk, controls consulting
• King IV, governance disclosures
• Ad hoc management requests, secondments
• Internal control support (risk and control framework, self-
assessments, segregation of duties, workgroups).
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.
Core internal
audit
principles
Ethics and
professionalism
• Integrity
• Objectivity
• Competency
• Due professional care
• Confidentiality.
Governance
Management
Performing audit
services
• Authorised and overseen
by the ARC
• Positioned independently.
• Plans strategically
• Manages resources
• Communicates effectively
• Enhances quality.
• Plans and conducts
engagements
• Communicates
engagement conclusions
and monitors action
plans.
Sappi Annual Integrated Report 2023 167
GOVERNANCE AND COMPENSATION
Corporate governance continued
During 2023, the risk-based coverage plan was substantially
achieved. 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: project management
reviews for business optimisation projects
• Accelerate growth in high-margin products: assurance
reviews of Product Innovation and R&D. Project Elevate
in Sappi North America (SNA) and a follow up. Review of
Project Horse for the Packaging and Specialities Business
in Sappi Europe.
In 2024 internal audit will support the achievement of Sappi’s
Thrive
strategic objectives by completing advisory and
assurance projects in the following areas:
Grow our business: R&D, packaging and
speciality papers, capital projects (Project Elevate
in Sappi North America), and new businesses eg
biomaterials
Sustain our financial health: sales, procurement,
treasury, and working capital processes, mill
closure activities
Drive operational excellence: sales and
operations, maintenance, energy, strategic
business and IT projects including global MES
projects
Enhance trust: ethics, governance, sustainability,
regulatory compliance and cyber security reviews
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 2022 internal quality assurance review
highlighted a need for upgrading our automated audit
software solution. This was addressed in 2023. Our internal
quality assurance review in 2023 confirmed our Generally
Conforms rating. A focus area in 2024 will be adapting certain
aspects of our procedures to comply with the Global Internal
Audit Standards expected to be issued in 2024.
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 2023. The results of the reviews did
not indicate any material breakdown in the functioning of
these controls, procedures and systems during the year.
The internal controls in place, including the financial controls
and financial control environment, are considered to be
effective and provide a sound basis for the preparation of the
Annual 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.
168 Sappi Annual Integrated Report 2023
Sappi Annual Integrated Report 2023 169
GOVERNANCE AND COMPENSATION Remuneration Report
Mike Fallon
Chairman of the Human Resources and
Compensation Committee
“ Dear shareholder, I present
the committee’s report on
remuneration for Executive
Directors, Executive
Committee members and
Non-executive Directors. This
report details the company’s
compensation policy and
implementation thereof.
The information provided in
this report has been approved
by the board as per the
recommendation of the Human
Resources and Compensation
Committee.”
170 Sappi Annual Integrated Report 2023
THE MAIN SECTIONS OF
THE REPORT ARE AS
FOLLOWS:
Section
A Voting and governance
Section
B
Key functions of the
Human Resources and
Compensation Committee
Section
C Overview of the
Remuneration Policy
Section
D Remuneration
implementation report
Our report and disclosures fully comply with regulatory and
statutory provisions relating to remuneration governance in
all the countries in which we operate. This report is aligned
with the principles and recommended practices of the King
Report on Corporate Governance (King IV).
The previous report was supported at the Sappi Limited’s
annual general meeting (AGM) on 08 February 2023, with a
vote of 94.86% endorsing the Remuneration Policy and a vote
of 84.80% in favour of the implementation report.
Key shareholders consultation
Both our Remuneration Policy and implementation report
received the prerequisite shareholder approval. Despite there
being no mandatory requirement to do so, and as part of our
good governance process, we met with major shareholders
over the last 12 months to seek their guidance and input on
key remuneration issues. We were encouraged by the level
of engagement and the guidance provided to ensure that
Sappi’s Remuneration Policy and implementation report
remains robust. Key issues discussed during these
engagements were:
• Key elements of our remuneration philosophy and strategy
• Environmental, social and governance (ESG) measures in
relation to executive remuneration measures
• Science-based decarbonisation targets that will be used
• Non-executive Director (NED) fees, Chairman fees and
as basis to include sustainability into our long-term
incentive measures for 2024
• Early considerations for executive remuneration to drive
business performance and to ensure that compensation
remains competitive for 2025 and beyond
succession
• Diversity and inclusion and Sappi’s performance against
key metrics.
Recent improvements in remuneration policies
PSP
Introduced an allocation
approach to deal with
the fluctuation in the
share price
Streamlined and
standardised the
allocations per level
and individuals
Introduction of
minimum
shareholder
requirement for
prescribed
officers
Implemented a reserve
list for peer group
companies
Changed the definition
of the cash flow return
on net assets (CFRONA)
calculation
2016 onwards
2020
2021
2022
2023
MIS
Implemented a
well-defined malus
and clawback
provision in relation
to both long and
short-term
incentive (STI) plans
Streamline and
standardised the
on-target bonus
percentage across
the regions
Sustainability
measures
accounting for
30% of personal
objectives
Introducing
sustainability in
the long-term
incentive measure
– 10% of the
overall incentive
from October
2024
PSP – Performance share plan
MIS – Management incentive scheme
We value the input of our shareholders and will continue to
seek their input to ensure good disclosure.
Our sustainability journey
As reported in 2022 our sustainability journey is on track.
Sustainability is firmly embedded in our short-term
management incentive scheme (MIS) where implementation
of our
executives’ personal objectives. The key focus areas cover
our three most material planet issues, which relate directly to
our commitment to mitigate climate change; GHG emissions,
solid waste to landfill and fibre certification.
sustainability targets constitutes 30% of
Thrive
Our science-based decarbonisation targets have been
approved by SBTi and communicated externally. This provided
us with an excellent opportunity to track our progress in terms
of our Scope 1, 2 and 3 carbon emission targets set for the
period until 2030.
The focus for 2024 will be to finalise the details of our
sustainability measure for inclusion in our long-term incentive
plan. This measure will be based on our decarbonisation plan
and will account for 10% of the overall long-term measures.
Sappi Limited have committed to reduce Scope 1 and
Scope 2 GHG emissions by a significant 41.5% per ton
of product by 2030 using 2019 as base year.
Health and safety
We have worked tirelessly to create a culture where safety is
a priority for our employees and contractors. Again, we had
an excellent safety year with all the regions achieving record
safety performances. The group achieved their best ever
lost-time injury frequency rate (LTIFR) performance. We are
incredibly pleased to again report there were no work-related
fatalities during this year. In addition, several noteworthy
milestones were achieved during this period, namely:
• Sappi Forest Zululand Coastal Business achieved a
record-breaking safety milestone of working 7 million zero
lost-time man hours
• Sappi Southern Africa (SSA) achieved a LTIFR of 0.22
• Sappi North America (SNA) achieved a LTIFR of 0.14
• Sappi Europe (SEU) achieved a LTIFR 0.44.
Sappi Annual Integrated Report 2023 171
GOVERNANCE AND COMPENSATION Remuneration Report continued
Our safety ambition remains zero injuries and we will continue
to implement enhanced procedures and focus on improved
personal behaviour and leadership engagement.
Subject to shareholder approval, Ms Zola Malinga has been
appointed as the new ARC Chairperson as from 08 February
2024. A detailed handover process is underway.
Employee Engagement Survey
The engagement survey was completed in April 2023. Again,
excellent participation at 94% from all Sappi employees.
Engagement levels also improved from the levels in 2021.
Leadership’s dedication to close the gaps identified in a very
structured way is commendable.
Continued strengthening of our Non-
executive Director team
The Nomination and Governance Committee reviews the
composition of the board three times per annum, considering
size, skills, independence, tenure, experience/expertise,
diversity and the overall mix of the board. The board
Chairman and the Lead Independent Director also have
individual consultations with board members regarding their
performance. Every second year there is an independent
evaluation of the board, the sub-committees and individual
member effectiveness. These evaluations get discussed by
the board and action plans are prepared and tracked.
Sappi’s approach and process to the appointment of NEDs
is based on criteria which look at the diversity of tenure, race,
gender, geographical location and expertise. We are
committed to ensuring that our board composition will
continue to reflect the benefits of our rigorous NED
succession planning.
In September and October 2022, we appointed
Ms Eleni Istavridis, Mr Louis von Zeuner and
Mr Nkululeko Sowazi as Independent NEDs. They have
undergone a rigorous induction programme that included
the following:
• An onboarding by the group Company Secretary to
provide an understanding of both the role of a director
and the framework in which the board operates
• Compulsory directors’ briefings by Sappi’s sponsor.
One-on-one sessions with the executive management
team and key management personnel
• Visits to operational sites in North America, Europe and
South Africa
• Visits to all R&D facilities across the group
• All three of the newly appointed directors were appointed
to the Audit and Risk Committee (ARC)
• Extensive engagements with the various board sub-
committees.
The current Chairman, Sir Nigel Rudd, and Mr Peter Mageza
(Chairman of the ARC), will retire from the Sappi board in
February 2024. As announced, the board has agreed that
Mr Nkululeko Sowazi will be the future Chairman of the board.
Mr Sowazi will complete the detailed handover and will take
over as Chairman from 08 February 2024. Sappi used Mercer
to assist with a recommendation on the appropriate fee
levels for the new Chairman. Details of the fee can be found
on pages
184 and 185 of this report.
172 Sappi Annual Integrated Report 2023
Further changes to the composition on the board sub-
committees will be announced in 2024.
Executive capacity building
During the reporting period Louis Kruyshaar was appointed
as Group Head Manufacturing and Innovation. He succeeds
Gary Bowles who retires from Sappi at the end of January 2024.
All other senior management changes that took place in 2022
and 2023 have now been bedded down. Carefully planned
succession is bearing fruit as evidenced by the smooth
business transition and the continued high performance
of the various teams.
Several key retirements will take place between now and
2030. The committee is working with management to ensure
smooth management transitions over the next few years.
Development opportunities for all employees remains
a key focus area with particular attention given to technical
development in operations and engineering. Targeted
development for high-potential employees, using role-specific
competency assessments, has significantly improved the
bench strength of candidates who are ready to step into other
roles. Leadership capacity building at three levels (head of
department, managers, and supervisors) also gained significant
traction with satisfactory progress on all our leadership
programmes. This is a key focus for the committee.
2023 Management Incentive Scheme (MIS)
outcomes
The group achieved an EBITDA of US$731 million for the
year, substantially below the record achieved in 2022. As per
the rules of the scheme, an EBITDA threshold of 85% of
target should be achieved before any bonuses get paid.
Therefore, the Chief Executive Officer (CEO) and the Chief
Financial Officer (CFO) did not receive a bonus payment for
the financial elements. The executives had the potential of
the 20 points in their personal objectives as an incentive.
Details of these are covered further in Section D of the
report.
A transformational 2024 ahead
The budget for 2024 anticipates a recovery relative to low
operating rates experienced during 2023. However, European
graphic papers are declining at an unprecedent rate of more
than 10% per annum. This will result in more graphic papers
capacity being taken out and will unfortunately lead to the
closure or sale of some operations. The committee will,
however, work on plans with management to ensure that
teams are kept motivated and incentivised to complete all
these transformational projects on time and within budget.
The 2024 work plan for the committee will include several key
issues as discussed with key shareholders in 2023. The aim
of these anticipated changes will both drive the business
performance and ensure that Sappi remains competitive and
is able to attract and retain key talent.
Mr Steve Binnie and his leadership team will focus on
the following:
• Driving our world-class safety performance
• Transforming and repositioning the European business
• Remaining cost competitive in a high inflationary
environment
• Maximising the pulp production to ensure improved
profitability
• Delivering the Somerset PM2 conversion against robust
time and cost parameters
• Continuing to develop and optimising the packaging and
speciality papers portfolio in all regions
• Optimally managing cash flows throughout the year
• Continuing to deliver on the transformational strategic
plans and projects
• Driving progress to achieve our ambitious sustainability
targets
• Ensuring high levels of employee engagement through the
close-out of actions as identified from the 2023 Employee
Engagement Survey.
Compliance statement
The Human Resources and Compensation Committee is
committed to maintaining high standards of corporate
governance. They support and apply the principles of good
governance advocated by King IV. Our remuneration
approach and disclosures fully comply with regulatory and
statutory provisions relating to reward governance in all
the countries in which we operate. The committee ensures
compliance with legal and regulatory requirements around
compensation.
The Human Resources and Compensation Committee is
of the view that the objectives stated in the Remuneration
Policy have been achieved for the period under review. The
committee is satisfied that it has fulfilled its responsibilities
in accordance with its terms of reference and with the
status of remuneration and incentives in the group.
Conclusion
Our Remuneration Policy is benchmarked continuously against
the relevant industry peers to ensure competitive reward. It
motivates our senior team to achieve the group’s objectives,
deliver sustainable returns, and value creation for our
shareholders. Thank you for the support given for our 2022
Remuneration Report and for the guidance provided in 2023,
which will form the basis of our future work plan. The committee
believes that the remuneration of executives during 2023
reflects our challenges and successes to date in the delivery
of our strategy.
Mike Fallon
Chairman of the Human Resources and Compensation
Committee
Sappi remuneration at a glance
Base salary
Short-term incentive (MIS)
Long-term incentives (PSP)
Positioned at the
50th percentile of
the market
EBITDA
50%
ROCE
20%
Safety
10%
TSR
50%
CFRONA
50%
Personal objectives
20%*
Pool size for allocation recommended
by external party Mercer
Benchmarking
Use Mercer, PwC
and other local
remuneration consultants
EBITDA threshold of 85%
required before
any bonus is payable
Maximum opportunity of 119%
of annual
base salary
Vesting after four years
Adjustments
Based on consumer
price index (CPI),
performance
and market movements
• Defined contribution funds
• Leave
• Car schemes (Europe only)
• Medical/healthcare.
Competitive benefits
* Growing emphasis on sustainability and ESG targets as part of the personal objectives
Sappi Annual Integrated Report 2023 173
GOVERNANCE AND COMPENSATION Remuneration Report continued
Section A: Voting and governance
Statement of voting at AGM
The AGM of Sappi Limited was held on 08 February 2023 and
the requisite resolutions endorsing the Remuneration Policy
and the implementation report were passed as follows:
Ordinary resolution number 16: Non-binding
endorsement of Remuneration Policy
For
94.86%
Against
4.84
Abstain
0.3%
Ordinary resolution number 17: Non-binding endorsement
of implementation report
For
84.80%
Against
14.99%
Abstain
0.21%
Voting on remuneration
As required by King IV, Sappi’s Remuneration Policy and
implementation report as detailed in this Remuneration
Report, need to be tabled for separate non-binding advisory
votes by shareholders at the upcoming AGM. In the event
that either the Remuneration Policy or the implementation
report, or both, are voted against by 25% or more of the
voting rights entitled to be exercised by shareholders at
such AGM, then the committee will ensure that the following
measures are taken in good faith and with best reasonable
efforts:
• An engagement process to ascertain the reasons for the
dissenting votes
• Appropriately addressing legitimate and reasonable
objections and concerns raised which may include
amending the Remuneration Policy or clarifying or
adjusting remuneration governance and/or processes.
Statement by the board regarding
compliance with the Remuneration Policy
The board annually receives a report from the Human
Resources and Compensation Committee on pay practices
across the group, including salary levels and trends,
collective bargaining outcomes and bonus participation.
The board endorses the Human Resources and
Compensation Committee position that Sappi’s Remuneration
Policy is set taking appropriate account of remuneration and
employment conditions of other employees in the group and
external factors. It is the view of the board that this policy as
detailed herein, drives business performance and value
creation for all stakeholders.
Statement of fair and responsible
remuneration
The group’s compensation policy for the remuneration of
Executive Directors and other senior executives is set taking
appropriate account of remuneration and employment
conditions of other employees in the group.
The committee annually receives a report from management
on pay practices across the group, including salary levels
and trends, collective bargaining outcomes and bonus
participation. At the time that salary increases are considered
the committee additionally receives a report on the approach
management proposes to adopt for general staff increases.
Both these reports are considered in the committee’s
decisions regarding the remuneration of Executive Directors
and other senior executives.
In some countries where the group operates, more formal
consultation arrangements with employee representatives
are in place relating to employment terms and conditions,
in accordance with local legislation and practice. The group
also conducts employee engagement surveys every two
years which gauge employees’ satisfaction with their working
conditions. The Sappi board is given feedback on these
survey results.
174 Sappi Annual Integrated Report 2023
Section B: Key functions of the Human Resources and
Compensation Committee
Human Resources and
Compensation Committee
The purpose of the committee is to oversee
remuneration matters for all controlled subsidiaries
of Sappi Limited. Its key objectives are to:
• Make recommendations on remuneration
policies and practices, including Sappi’s
employee share schemes
• Ensure effective executive succession planning
• Review compliance with all statutory and best
practice requirements on labour and industrial
relations management.
The committee consisted
of four Independent Non-
executive Directors
MA Fallon – Chairman
BR Beamish
NP Mageza
RJAM Renders
The Chairman of the company, Sir Nigel Rudd,
attends committee meetings ex officio while
the Group Chief Executive Officer, Mr Steve Binnie
together with Group Head Human Resources,
Mr Fergus Marupen attend meetings by invitation.
Mrs Ami Mahendranath, Company Secretary,
attends the meeting as secretary to the committee.
The Human Resources and Compensation
Committee met four times during the year and
held one telephone conference.
Attendance at meetings by individual members is
detailed on page
149.
The Chairman of the Human Resources and
Compensation Committee, Mr Mike Fallon,
Mr Steve Binnie, Group CEO, Ms Tracy Wessels,
Group Head Sustainability and Investor Relations
and Mr Fergus Marupen, Group Head of Human Resources met with key
shareholders in September 2023 to discuss the Remuneration Policy.
These shareholders were the Public Investment Corporation (PIC),
Allan Gray, Ninety One and M&G Investments.
None of the committee members has any significant personal financial
interest, or conflict of interest, or any form of cross directorship, or
day-to-day involvement in the running of the business.
Executive Directors and managers are not present during committee
discussions relating to their own compensation.
The Human Resources and Compensation Committee ensures that
the policy governing compensation practices and structures within the
group support the group’s strategy and performance goals. The policy
also enables the attraction, retention and motivation of executives and all
employees.
The key activities of the committee during 2023 are summarised as follows:
Recommended and approved
• The allocation of 2023 performance share awards to Executive
Directors and all other eligible participants
• Salary increases and bonus payments for Executive Directors and
other key senior managers for 2023
• Fee levels for NEDs of the Sappi Limited board for consideration and
recommendation to shareholders for approval
• The allocation model and the comparator peer group for the 2023
PSP
• The 2024 MIS rules
• Reviewed and approved the CFRONA
• Changed the SSA retirement age
• Designed a sustainability measure for inclusion in the PSP
• Fees for the new Sappi Chairman of the board.
Reviewed
• The 2022 Remuneration Report, including the content of the company
compensation policy and practices, which was put to shareholders for
a non-binding vote at the AGM in February 2023
• Development of the 2023 Remuneration Report for shareholder
approval in February 2024
• The succession, retirement, and development plans for key
management positions
• The group’s industrial relations policy and implementation
• The group’s training and development policy and implementation
• The investor feedback on the 2022 Remuneration Report
• 2022 committee evaluation
• Progress on SSA skills requirements
• The status of all benefits funds
• Future ESG considerations for MIS
• The share repurchase update.
Sappi Annual Integrated Report 2023 175
GOVERNANCE AND COMPENSATION Remuneration Report continued
Section B: Key functions of the Human Resources and
Compensation Committee continued
Independent advice
Management engaged the services from the following organisations to assist in compensation work during the year:
Consultancy
Engagement
Mercer
Recommendations in relation to the PSP with reference to:
• Allocations and calculation of the Total Shareholder Return (TSR) performance
condition
• Peer group additions
• Long and short-term incentive measures for future
• Recommendation on appointment fee levels for the Chairman.
KPMG
External verification and auditing of the CFRONA performance condition of the PSPs
PricewaterhouseCoopers
Tax Services, South Africa
Tax advice to NEDs
Areas of focus for 2024
Key activities for the committee in 2024 will be, inter alia, the approval of the remuneration and bonuses for Executive Directors
and senior management. Reviewing and approval of measures for both long and short-term incentives.
After the visits to some key shareholders in 2023, the committee will also focus on the following:
• Approve the inclusion of sustainability as part of the PSP
• Review and approve the performance measures of the MIS
• Review and approve the performance measures of the PSPs
• Reviewing the current share scheme
• Gender representativity across all Sappi operations.
In addition to the annual work plan as approved by the committee, the Chairman of the committee and senior executives from
Sappi will, if required, also be visiting key shareholders to discuss issues of mutual concern.
176 Sappi Annual Integrated Report 2023
Section C: Overview of the Remuneration Policy
Compensation strategy and policy
Our compensation packages:
• Are designed to attract, retain and motivate executives and all employees to deliver on performance goals and strategy
• Are simple, transparent, and aligned with the interests of shareholders
• Reflect the views of our investors, shareholder bodies and stakeholders
• Are structured in a way that substantial rewards are only paid for exceptional performance and that poor performance does not
earn an incentive award
• Encourage behaviour consistent with the group’s risk and reward philosophy
• Have an appropriate and balanced reward mix for Executive Directors and other executive managers based on base pay
benefits, and short and long-term incentives within the context of the industry sector
• Are applied consistently across the group to promote alignment and fairness
• Through the deferred shares bonus plan, provide for a voluntary deferral of 40% of the group CEO’s annual bonus, and 30%
of the executive managers’ annual bonuses (to purchase Sappi shares), to ensure a long-term focus on the company’s
performance by the individual concerned and establish a personal stake in the company. This proves to be an effective
retention tool
• Are designed to pay at the market median for all components of pay, except for short-term incentives, which are targeted at
the 75th percentile
• Are designed to support our
Thrive
ambitions.
Summary of reward components of Executive Directors and other members of the group
Executive Committee
The compensation of Executive Directors and other Executive Committee members comprises of fixed and variable components.
Purpose
Structure
Opportunity
Component –
Base salary
Component –
Benefits
• To reflect market
value of the role,
individuals’ skills,
contribution,
experience and
performance
• To attract and retain
key talent.
• To provide
protection and
market competitive
benefits to aid
recruitment and
retention.
Fixed
• Paid monthly in cash
• Reviewed annually with any increases to be effective
from 01 January each year
• Base salary reviews consider prevailing market practices,
economic conditions and the levels of base salary
increase mandates provided to the general employee
population.
• Increases are applied
in line with outcomes
of performance
discussions with the
individuals concerned
and market conditions.
• None.
• Private medical insurance
• Income in the event of death or disability.
These are:
• Appropriate in terms of level of seniority
• Market related
• Death benefit is a multiple of base salary
• Non-pensionable.
Component –
Pension
• To provide market-
related benefits
• Comprises defined benefit and defined contribution
plans
• Facilitate the
accumulation of
savings for
post-retirement
years.
• Many defined benefit plans are closed to new hires
• Employees in legacy defined benefit plans continue to
accrue benefits in such plans for both past and future
service
• Retirement plans differ by region.
• Executive members of
defined contribution
plans receive a
company contribution
of up to 18.47% of
salary.
Sappi Annual Integrated Report 2023 177
GOVERNANCE AND COMPENSATION Remuneration Report continued
Section C: Overview of the Remuneration Policy continued
Purpose
Structure
Opportunity
Component –
Annual cash
incentive
• Focus participants
on targets relevant
to the group’s
strategic goals
• Drive performance.
Motivate executives
to achieve specific
and stretching
short-term goals
• Reward individuals
for their personal
contribution and
performance
• Deferred share
proportion of the
annual bonus aligns
interests with
shareholders.
• If targets are exceeded,
the maximum bonus
for Executive Directors
is 119% of base salary
• Regional CEO’s can
earn a maximum bonus
of 98% of base salary
• Executive committee
members and other
senior managers may
earn a maximum bonus
of up to 91% of base
salary
• A cash award is made.
Variable
• All measures and objectives are reviewed and set at the
beginning of the financial year
• Payments are reviewed and approved at year-end by the
committee based on performance against the targets
• Threshold is required to be met for any bonus payment
to occur
• Target level of bonuses varies from 65% to 85% of
base salary
• Weightings for 2023 were: EBITDA – 50%; Return on
capital employed (ROCE) – 20% and Safety – 10%;
Individual – 20%
• If the agreed target for EBITDA is achieved, a bonus award
percentage of 100% will be paid for that component. A
bonus award percentage of up to 150% can be earned if
110% or more of the agreed target is achieved. If the
EBITDA is less than 85 % of target, no bonus is paid
• If the group achieves the agreed target for ROCE, a bonus
award percentage of 100% will be paid. A bonus award
percentage of up to 150% can be earned if the group
achieves 115% or more of the agreed target. If the group
achieves less than 75% of the target, then no bonus award
will be paid. ROCE is only measured at a group level
• Safety performance (employees and contractors) is
measured against lost-time injury frequency rate (LTIFR)
as well as lost-time injury severity rate (LTISR). If the group
or a region achieves the LTIFR and LTISR of less than or
equal to the agreed target for safety, a bonus award
percentage of 100% will be paid. If either LTIFR or LTISR is
worse than the target, then a 50% bonus award will be
available. If both are worse than target, then no bonus will
be paid for this measurement. An additional bonus award
of 200% can be earned on the combined LTIFR
(employees and contractors) if 85% or better is achieved
of the agreed LTIFR target, and this achievement is equal
or better than the best achieved during the past five years
• Bonuses are paid in cash
• Executive bonus scheme (share purchase). The
group CEO and Executive Committee members have
volunteered to purchase shares with 40% and 30% of
their after-tax cash bonus respectively. They must retain
the shares for a period of three years. A cash bonus
is paid on 20% of the original number of shares. See
page
189
• Non-pensionable
• Malus and clawback may be applied in the following
circumstances:
(i) Financial results of the group or a company/business
unit in the Sappi group have been materially misstated
(ii) A participant has ceased to be a director or employee
by reason of gross misconduct and has resulted in
significant losses to the business
(iii) There has been material breach of Code of Ethics/Law
(iv) There has been an erroneous assessment of the
extent to which any performance conditions have
been satisfied resulting in a higher vesting outcome.
178 Sappi Annual Integrated Report 2023
Component
– Long-term
share
incentive
plans (LTSIP)
Purpose
Structure
Opportunity
Variable
• Align the interests of
• Conditional grants awarded annually to Executive
• A higher share price
will benefit the
participants.
the executive
members with those
of the shareholder
• Reward the
execution of the
strategy and
long-term
outperformance of
our competitors
• Encourage
long-term
commitment to the
company
• Is a wealth creation
mechanism for
executive members
if the company
outperforms the
peer group.
Directors, Executive Committee members and other
key senior managers of the company
• Straight-line vesting after four years
• Performance is measured relative to a peer group of
16 other industry-related companies
• The number of conditional shares allocated varies
between the group CEO and each of the Executive
Committee members
• Measures for 2023 awards were relative TSR – 50% and
relative CFRONA – 50%
• Malus and clawback may be applied in the following
circumstances:
(i) Financial results of the group or a company/business
unit in the Sappi group have been materially misstated
(ii) A participant has ceased to be a director or employee
by reason of gross misconduct and has resulted in
significant losses to the business
(iii) There has been material breach of Code of Ethics/Law
(iv) There has been an erroneous assessment of the
extent to which any performance conditions have
been satisfied resulting in a higher vesting outcome.
• Voluntary minimum
• The target holding as a multiple of annual base salary
shareholding
requirement for
prescribed officers.
needs to be achieved by December 2025. The
requirement is that the CEO should hold 3x annual base
salary, up from his previous 2x. The CFO 2x and all other
prescribed officers at 1x annual base salary
• The acquisition of shares will primarily be achieved by
vesting Performance Shares and through the acquisition
of shares under the executive management bonus
scheme (whereby an individual may purchase shares
from a designated portion of their after-tax MIS bonus).
However, individuals can also purchase shares during the
normal open period with the appropriate approvals.
Component
– Service
contracts
• Provide an
• Executive Committee members have notice periods by
appropriate level of
protection to both
the executive and to
Sappi.
the company of 12 months or less
• Separation agreements, when appropriate, are
negotiated with the individual concerned with prior
approval being obtained in terms of our governance
structures.
• In circumstances
where there is a
significant likelihood of
a transaction involving
the Sappi group or a
business unit, limited
change in control
protections may be
agreed and
implemented if
deemed necessary
for retention purposes.
Approach to remuneration benchmarks
Executive compensation is benchmarked on data provided in national executive compensation surveys, for countries in which
executives are domiciled, as well as information disclosed in the annual reports of listed companies of the Johannesburg Stock
Exchange. Sappi participates in and uses data from global remuneration surveys, ie PwC, Mercer, et al to determine appropriate
remuneration levels.
Ensuring an appropriate peer group to retain the integrity and appropriateness of the benchmark data is a key task of the Human
Resources and Compensation Committee. Executive pay is benchmarked every alternate year.
The remuneration package for a newly appointed Executive Director is set in accordance with the terms of the group’s approved
Remuneration Policy in force at the time of appointment. The variable remuneration for a new Executive Director is determined in
the same way as for existing Executive Directors. For internal and external appointments, the group may meet certain relocation
expenses, as appropriate.
Sappi Annual Integrated Report 2023 179
GOVERNANCE AND COMPENSATION Remuneration Report continued
Section C: Overview of the Remuneration Policy continued
Service contracts
Mr Steve Binnie and Mr Glen Pearce have ongoing employment contracts which require six months’ notice of termination by the
employee and 12 months’ notice of termination by the company.
Depending on their location, Executive Committee members have ongoing employment contracts which require between three
to six months’ notice of termination by the employee and six to 12 months’ notice of termination by the company.
Other than in the case of termination for cause, the company may terminate the Executive Directors’ service contracts by making
payment in lieu of notice equal to the value of the base salary plus benefits which they would have received during the notice period.
Executive Directors are required to retire from the company at the age of 65 years. The retirement age of Executive Committee
members is generally between the ages of 65 years and 67 years and differs by region.
Choice of performance measures and approach to target setting
Short-term incentive: MIS
The table below shows the metrics and why they were chosen and how targets are set.
Metric
Relevance
How do we set the targets?
EBITDA50%
A key indicator of the underlying profit
performance of the group, reflecting both
revenues and costs. Aligns closely with
our strategic goals of achieving cost
advantages and growth. More efficient
water, energy and raw material usage is
also encouraged.
Targets and ranges are set each year by the board
taking account of required progress towards
strategic goals, and the prevailing market conditions.
ROCE20%
A key indicator of the underlying returns
that the group achieves on its capital
employed.
Targets and ranges are set each year by the board
taking account of the required progress towards
strategic goals, and the prevailing market conditions.
Achieving a ROCE over time that
outperforms the groups weighted cost
of capital (WACC + 2% over the cycle) will
ensure alignment of the group’s returns
targets with those expected by the
group’s shareholders.
A key measure for capital expenditure
decision-making.
Safety10%
A core value of the company and one of
the key indicators of whether the business
is meeting its sustainability goal of zero
harm.
The committee considers input from the SETS
Committee and sets appropriate standards and
goals. Safety performance is measured against LTIFR
(LTIFR – 50%) as well as LTISR (LTISR – 50%).
An additional bonus award of 200% can be earned
on the combined LTIFR (employees and contractors)
if 85% or better is achieved of the agreed LTIFR
target, and this achievement is equal or better than
the best achieved during the past five years.
Priorities are set for the CEO by the Chairman of the
board in line with the business plan for the applicable
year. Targets and ranges are then cascaded to the
rest of the business teams. These are reviewed as
part of an annual review with the Chairman.
Individual
performance
20%
An indicator of the contribution of each
Executive Director, individual performance
for relevant managers. Includes several key
non-financial targets in relation to ESG,
major capital projects, gender equality
and broad-based black economic
empowerment (BBBEE) in the case of
South Africa.
180 Sappi Annual Integrated Report 2023
The bonus payment opportunity available to Executive Directors and Executive Committee members is as follows:
Executive Director
Regional CEO
On-target bonus
Maximum bonus potential
85% of base salary
119% of annual base salary
70% of base salary
98% of annual base salary
Other prescribed officers (ie Executive Committee members)
65% of base salary
91% of annual base salary
Executive bonus scheme (share purchase): Overview
How it
works
Short-term incentive (STI)
received at the end
of the year
Purchase
shares
% value
of MIS
30%
(prescribed
officers)
40%
(CEO)
Period
Vesting
Retain the
shares for
three years
Cash bonus paid
on 20% of the original
number of shares
purchased
Strong retention tool
Remuneration at different performance levels
The chart below illustrates the total potential remuneration
(base pay and short-term incentives) for Executive Director at
different performance levels.
Remuneration levels – CEO and CFO (% of base pay)
120
100
80
60
40
20
0
100
85
119
100
Target
Maximum
●
Base pay
●
Short-term incentive (MIS)
Long-term incentives are excluded from these scenarios as
their vesting depends on longer-term performance
conditions being met.
Performance Share Plan (PSP)
The PSP provides for annual awards of conditional
performance shares which are subject to meeting performance
targets measured over a four-year period. These awards will
only vest if Sappi’s performance, relative to a peer group of
16 other industry-related companies is ranked at median or
above the median.
The performance criteria are relative TSR and relative
CFRONA.
The table below shows the metrics and why they were
chosen and how targets are set.
Sappi Annual Integrated Report 2023 181
GOVERNANCE AND COMPENSATION Remuneration Report continued
Section C: Overview of the Remuneration Policy continued
Metric
Relevance
How do we set the targets?
TSR
TSR measures the total returns to Sappi’s
shareholders, providing close alignment with
shareholder interests.
CFRONA
A key indicator of the effective use of capital.
CFRONA is calculated as cash available from
operating activities, divided by average
total assets (excluding cash) less interest-free
liabilities. This measure is calculated using
a simple annual average over the previous
four-year period.
The committee sets the performance
requirements for each grant. A peer group of
packaging and paper sector companies is
used. Nothing vests in positions 10 – 17 of
the peer group. Vesting increases from 25%
at position 9 to 100% for positions 1 – 5.
The committee sets the performance
requirements for each grant. A peer group of
packaging and paper sector companies is
used. No vesting occurs in positions 10 – 17
of the peer group. Vesting increases from
25% at position 9 to 100% for positions 1 – 5.
Including sustainability (decarbonisation) as part of the long-term incentive from October 2024
Climate change is one of Sappi’s top 10 risks identified. Sappi is committed to the reduction of GHG emissions and have set
decarbonisation targets. These decarbonisation targets were validated by SBTi in 2022. Sappi commits to reducing Scope 1
and Scope 2 GHG emissions by 41.5% per ton of product by 2030 from a 2019 base year.
The Sappi SBTi target is included in our sustainability linked revolving credit facility (RCF).
Performance against the decarbonisation pathway is directly influenced by:
• Timing of capital projects
• Operational factors
• Operational rates (low operating = continuous stop/start conditions, which are more energy intensive)
• Unplanned operational interruptions (eg floods, equipment failure, which results in stop/start conditions).
Metric
Relevance
How do we set the targets?
Sustainability
(10%)
The commitment is to reduce Scope 1 and
Scope 2 GHG emissions 41.5% per ton of
product by 2030 from a 2019 base year.
Average over a four-year period against the
approved SBTi pathway.
Envisaged PSP changes for October 2024
Measure
TSR
CFRONA
Sustainability
Was
50%
50%
0%
New
50%
40%
10%
182 Sappi Annual Integrated Report 2023
Summary of the incentive categories for October 2024
Long-term incentive – PSP
Short-term measures – MIS
TSR (50%): TSR measures the total returns to Sappi’s
shareholders, providing close alignment with shareholder
interests. Measured against a peer group by Mercer.
EBITDA (50%): A key indicator of the underlying profit
performance of the group, reflecting both revenues and costs.
Aligns closely with our strategic goals of achieving cost
advantages and growth.
CFRONA (40%): CFRONA is calculated as cash available
from operating activities, divided by average total assets
(excluding cash) less interest-free liabilities. This measure
is calculated using a simple annual average over the
previous four-year period. Measures against a peer group
and audited by KPMG.
ROCE (20%): A key indicator of the underlying returns that
the group achieves on its capital employed.
Safety (10%): A core value of the company and one of the
indicators of whether the business is meeting its sustainability
goal of zero harm. Includes own employees and contractors
and measured against LTIFR and LTISR.
Sustainability (10%): Sustainability measured against the
achievement of the science-based targets. Target verified
by SBTi.
Personal objectives (20%): Priorities are set in line with the
business plan for the applicable year. Targets and ranges are
then cascaded to the rest of the business teams. 30% of
personal objectives allocated to ESG.
Peer group
The peer group
for the PSP award
consisted of the
following 16
industry-related
companies
• Stora Enso
• Lenzing
• Graphic Packaging
International
• UPM-Kymmene
• Rayonier Advance
Materials
• Borregaard
• Navigator
Company SA
• Metsá Board
• BillerudKorsnäs
• Holmen
• Mondi PLC
• International Paper
• DS Smith
• Clearwater Papers
• Suzano
• Smurfit Kappa/
WestRock
Vesting schedule
The original vesting schedule for 2019 allocation for both
TSR and CFRONA is as follows:
Position
1 – 5
6
7
8
9
10 – 17
Vesting
100%
80%
65%
45%
25%
0%
To date, Sappi has applied the ‘follow the money’
methodology for all in flight PSPs impacted by M&A. By
removing peers that have been subject to M&A activity and
adjusting the vesting schedule, Sappi can ensure that the
targets remain as challenging as before. The recalibration of
this kind follows a set of standard principles that will ensure
fairness for shareholders and participants. This will result in
fewer peers for the mentioned outstanding cycles.
The adjusted schedule for the 2019 allocation for both TSR
and CFRONA is as follow:
Adjusted vesting schedule for 2019 and 2020
allocations
There has been an increase in merger and acquisition (M&A)
activity in Sappi peer group. Since 2019 Ahlstrom-Munksjö,
Domtar and now Verso Corporation have been replaced in
the comparator group. Sappi has tasked Mercer, a specialist
remuneration consultancy, to provide alternatives in this
regard to ensure the robustness of the comparator group
and the integrity of the vesting schedule.
Position
1 – 4
5
6
7
8 – 13
Vesting
100%
75%
50%
25%
0%
Sappi Annual Integrated Report 2023 183
GOVERNANCE AND COMPENSATION Remuneration Report continued
Section C: Overview of the Remuneration Policy continued
Reserve list
To retain the robustness of the comparator peer group, a reserve list of companies has been agreed to provide replacements to
cater for any future merger and acquisition activities. These companies are:
• Klabin
• Sylvamo Corporation.
The inclusion of these companies will ensure that the comparator group remains robust in terms of product and regional diversity.
Disclosure
In this report, Sappi discloses vested as well as grant performance share values.
Malus and clawback
Awards made to the Chief Executive Officer (CEO), Chief Financial Officer (CFO) and prescribed officers under Sappi’s MIS and PSP
are subject to both malus and clawback provisions which may be applied during the period of two years after the date of vesting
or granting. Clawback refers to the recovery of paid or vested amounts and malus refers to the reduction, including to nil,
of unvested or unpaid amounts. Malus and clawback may be applied in the following circumstances:
• Financial results of the group or a company/business unit in the Sappi group have been materially misstated
• A participant has ceased to be a director or employee by reason of gross misconduct and has resulted in significant losses
to the business
• There has been material breach of Code of Ethics/Law
• There has been an erroneous assessment of the extent to which any performance conditions have been satisfied resulting
in a higher vesting outcome.
Remuneration Policy for NEDs (fees)
Element
Purpose
How it works
Fees
Non-executive
Chairman (fees)
• To attract and retain high-
calibre Chairman, with the
necessary experience
and skills
• To provide fees which
take account of the time
commitment and
responsibilities of the role.
• The Chairman receives an
all-inclusive fee.
• The Chairman’s fees are
reviewed periodically by
the committee
• Fees are set by reference
to market median data
for companies of similar
size and complexity
to Sappi.
Other NEDs (fees)
• To attract and retain high-
• The non-executives are paid
• NEDs’ fees are reviewed
calibre non-executives, with
the necessary experience
and skills
• To provide fees which
take account of the time
commitment and
responsibilities of the role.
a basic fee
• Attendance fees are also paid
to reflect the requirement for
NEDs to attend meetings in
various international locations
• The Chairmen of the main
board committees and the
Lead Independent Director
are paid additional fees to
reflect their extra
responsibilities.
periodically by the
Chairman and Human
Resources and
Compensation
Committee
• Fees are set by
reference to market
median data for
companies of similar
size and complexity
to Sappi.
Sappi may reimburse the reasonable expenses of board directors that relate to their duties on behalf of Sappi. Sappi may also provide
advice and assistance with board directors’ tax returns where these are impacted by the duties they undertake on behalf of Sappi.
All NEDs have letters of appointment with Sappi Limited for an initial period of three years. In accordance with best practice,
NEDs are subject to re-election at the AGM after the three-year period. Appointments may be terminated by Sappi with
six months’ notice. No compensation is payable on termination, other than accrued fees and expenses.
184 Sappi Annual Integrated Report 2023
NED succession: An overview
A. Key consideration
Expertise
• Relevant expertise.
Tenure
• Having the right mix of
NEDs with a focus on
experience and new
thinking.
Diversity and inclusion
considered
• Gender, race and
location.
Understanding the
Sappi business
environment
• Understanding the
cyclical nature of the pulp
and paper industry.
B. Annual review of the composition and effectiveness of the board
• Every second year an independent evaluation of the board and individual member effectiveness
• Nomination and Governance Committee reviews that composition of the board three times per annum, looking at size,
independence, tenure, expertise, diversity and overall mix of the board.
C. Process
Succession/vacancy
• Nomination and
Governance Committee
consider the key issues
and criteria.
Appointment
of a specialist
recruitment agency
• Provide a shortlist on
candidates to the
Nomination and
Governance Committee.
Interviews
• Completed by the
Nomination and
Governance Committee.
Appointment
• Followed by a detailed
induction plan.
Three new NEDs were appointed since September 2022, namely; Mr Louis von Zeuner, Ms Eleni Istavridis and Mr Nkululeko
Sowazi. As announced in November 2023, Mr Sowazi has been appointed as the new Chairman.
Sappi Annual Integrated Report 2023 185
GOVERNANCE AND COMPENSATION Remuneration Report continued
Section D: Remuneration implementation report
Remuneration structure
Total remuneration comprises fixed pay (ie base salary and
benefits) and variable performance-related pay, which is
divided further into short-term incentives with a one-year
performance period and long-term incentives which have
a four-year performance period as detailed in Section C.
Reward mix
The reward mix for Executive Directors and Executive
Committee members is shown in the schematics below.
The long-term incentive awards are based on the vested value
of the performance plan shares issued on 19 November 2019
(share price at date of allocation: ZAR82.49). Details of
the Executive Directors’ remuneration can be found on
page
190.
Executive Directors' compensation mix
3.0
2.5
22
34
44
36
64
17
83
3
46
14
44
14%
14
10
51
42
76
2.0
1.5
)
n
o
i
l
l
i
m
$
S
U
(
1.0
0.5
0
Base salary
The Human Resources and Compensation Committee
approved the level of base salary for each Executive Director,
Executive Committee member and other key senior
managers.
The salary increases were based on individuals’
performances and contributions, internal relativities, inflation
rates in the countries of operation, general market salary
movement and overall affordability.
In January 2023, Mr Binnie and Mr Pearce received a salary
increase of 6.5% on the South African portion of their salaries
and 3.5% on the offshore portion of their salaries. Their
salaries were US$549,940 per annum and US$317,426 per
annum, respectively.
The same salary increase percentages were applied in
determining the salary increases for Executive Committee
members’ and general staff, dependent on location.
Retirement benefits
Retirement benefits are largely in the form of defined
contribution schemes. In some instances, legacy defined
benefit schemes exist. Almost all the defined benefit
schemes are closed to new hires.
2018
2019
2020
2021
2022
2023
●
Vested plan benefit
●
Short-term incentive
●
Guaranteed package
Mr Binnie and Mr Pearce are both members of defined
contribution funds and the total employee and company
contribution is ZAR350,000 each.
■
●
Vested plan benefit
Above 50
●
■
Below 30
●
Short-term incentive
Between 30 and 50
●
Group total
Guaranteed package
■
Short-term incentive
A performance threshold of 85% of budgeted EBITDA for the
group is required before any bonus can be paid to participants
in the group scheme.
Achievement against short-term incentive
metrics: Executive Directors 2023
The group achieved an EBITDA of US$731 million for the year,
substantially below the record achieved in 2022. As per the
rules of the scheme, an EBITDA threshold of 85% of target
should be achieved before any bonuses get paid. Therefore,
the CEO and the CFO did not receive a bonus payment for
the financial elements. The executives had the potential of
the 20 points in their personal objectives as an incentive.
All regions achieved both their LTIFR and LTISR targets which
resulted in the additional safety award.
Prescribed officers’ compensation mix
7.0
6.0
5.0
)
n
o
i
l
l
i
m
$
S
U
(
4.0
3.0
2.0
1.0
0
13
30
57
6
21
73
12
88
3
31
66
10
40
50
9
18
72
2018
2019
2020
2021
2022
2023
●
Vested plan benefit
●
Short-term incentive
●
Guaranteed package
●
Vested plan benefit
●
Short-term incentive
●
Guaranteed package
Our compensation policy aims to have a balance between
guaranteed package, short and long-term incentives.
186 Sappi Annual Integrated Report 2023
Personal objectives of executives for 2023 MIS
Description
Comments
Weighting
Performance
objectives
Drive safety
programme
Execute on strategic
plans and projects
• Drive safety first across Sappi with
continuous improvement on overall
severity rates measured by LTIFR
and LTISR of own and contractors.
• Safety continuously improving
• The group’s rolling 12-month
combined LTIFR improved from
0.31 to 0.24
• Implementation of key strategic
plans aligned to the five-year
capital plan:
–
–
Reduce graphic papers
Grow packaging and speciality
papers
Maximise pulp opportunities
Grow Biotech.
–
–
• The group’s rolling 12-month
combined LTISR increased
from 10 to 12
• No fatalities since 2021.
• Execute the project to reduce
Europe’s graphic papers
exposure (Project Silver)
• Execute the Saiccor Mill
dissolving pulp (DP) expansion
(Vulindlela)
• Execute on the expansion of
Sappi North America (SNA)
packaging and speciality
papers grades (Project Elevate)
• Grow the pulp business furfural
pilot plant successfully
commissioned.
Continue to improve
Sappi’s profitability
• Achieve the EBITDA and ROCE
targets for 2023.
• EBITDA was US$731 million
• ROCE of 12.3% achieved.
Continue to ensure the
financial stability of
Sappi, through:
• Appropriate capex
management plans
• Cost improvement
measures to kerb
rising input costs
• Further reduction on
the Sappi debt.
Focus on the stability
of production across
the mills, particularly
Saiccor. Develop
mitigation plan for
supply chain
challenges in
South Africa
• Ensure that Sappi will have
sufficient liquidity and capital
to sustain the business
• Reduced debt from US$2 billion
in 2019 to US$1.08 billion in
2023
• Maintain net debt
Continue reading text version or see original annual report in PDF
format above