AGI
    LITYEXPAND

Group overview

Hummingbirds are the trapeze artists of the avian world. They can fly forwards, backwards, even upside down and are also the only vertebrae capable of hovering in place. In addition to being agile, hummingbirds are extraordinarily fast. They have been observed at speeds of nearly 48 kilometres per hour (km/h) in direct flight and over 72 km/h during courtship dives.

Adaptability is another hummingbird characteristic. These tiny birds have fewer feathers than other birds, because they need to have an efficient body that is as lightweight as possible in order for the flight aerobics they perform. As the insulation that they get from their feathers is insufficient, at night they go into torpor, a hibernation-like state that allows them to conserve energy by slowing down their metabolism, heartbeat and respiration rate. Furthermore, hummingbirds remember migration routes and every flower they’ve ever visited. They can also figure out how long to wait between visits so the flowers have time to generate more nectar.

Inherent in our approach is being agile to stay ahead of market changes, preferences, customer needs and expectations.

ON
    WARDSEXPAND

Creating value by responding strategically

When presented with a dandelion, few people can resist the urge to hold the flower and blow at it to see how far the seeds will travel. It’s the same when presented with a beautiful coffee table book or an impactful piece of print – there is an almost irresistible urge to pick it up, examine it and touch it. Studies have shown that even the simple act of touching objects, like premium packages, brochures and direct mail, can subconsciously increase the perceived value of a brand and its products in the eyes of customers.

Touch can make a stronger impact than sight or sound alone. That’s because touch has the power to shift the brain into a deeper level of engagement, one more conducive to building lasting knowledge. In fact, a number of studies have found that communication through physical media, particularly paper, is more likely to lead to knowledge than communication via digital media.

The haptics of paper and board, together with our need to touch and feel, have created high-growth, cash-generative niche opportunities for Sappi.

We continue to move onwards in terms of paper and paper packaging: Our paperboard packaging product lines are some of the most renowned and valued brands with high-finish premium solutions for cosmetics and perfume, health and beauty care, consumer electronics, confectionery, luxury drinks, food packaging and more. Our packaging brands constitute a great portion of the food packing and labels on shop shelves today. And our graphic papers are used to grab the attention of consumers all over the world.

BLO
    SSOMEXPAND

Our performance review

In mythology, the beautiful, delicate dragonfly symbolises change, transformation and adaptability. This change is said to be about understanding the deeper meaning of life, with the dragonfly’s scurrying flight across water representing an act of going beyond what’s on the surface to look into the deeper implications of life.

Looking beyond – and deeper – is reflected in our Thrive25 sustainability strategy which incorporates our belief that to continue thriving as a global business, we must create long-term value for all stakeholders by supporting a low-carbon circular economy through relevant products from sustainable woodfibre.

Our strategy also recognises that we must understand the forces that heavily impact our lives and work.

Dragonflies have huge compound eyes with thousands of lenses and photoreceptors sensitive to different wavelengths of light, each bringing in information about the insect's surroundings. In other words, they have near-360- degree vision. Which is why they’re able to go after their prey – butterflies, moths, bees and flies – with such accuracy.

At Sappi, we understand that by widening our scope to the broader ecosystem and a wide range of stakeholders, we can identify uncertainty and opportunity beyond our periphery of vision. We leverage insights into our operating context and patterns from our data, stay ahead of nascent technologies and draw on the acumen of our people, to embrace change and create innovative solutions that are relevant to all our stakeholders.

VELO
    CITYEXPAND

Governance and compensation

The cheetah’s light, streamlined body makes it well-suited to short, explosive bursts of speed, rapid acceleration and executing extreme changes in direction while moving at high speed. Contrary to the common belief that cheetahs – known to be the fastest land animal – hunt by simply chasing their prey at high speeds, they are in fact extremely strategic. They don’t randomly sprint towards anything, but wait until the timing is right, varying their speed during the chase. Speed and smartness are attributes that resonate with us at Sappi, given that ‘making smart decisions which we execute with speed’ are among our core values.

Under our Thrive25 strategy, we foster a safety-first culture, using collaboration and the power of partnerships to respond to changes in our environment, moving Sappi forward and deliver value to our customers.

AMP
    LIFYEXPAND

Governance and compensation

In a continuous flow of energy and life, water always finds the lowest level in an incredibly efficient manner. It penetrates any crevice or path that will facilitate its downward flow, steadily meandering and descending in search of lower planes.

In a similar fashion, our focus is on amplifying value creation for all our stakeholders. The landscape around us is changing rapidly. Stakeholders’ needs and expectations have shifted, in particular as regards the environment and social equity.

We are responding to natural resource constraints by seeking responsible alternatives to non-renewables and solutions that are truly sustainable from seed to final product. We strictly monitor and control our use of energy, water and other raw materials and are investing in reducing our reliance on fossil fuels.

We work to amplify value creation through innovation and R&D. Innovation is the way we operate that provides competitive advantages and ensures we grow, flourish and progress. R&D is focused on realising our ambitious but achievable strategy of extracting more value from each tree. Our strategy is supported by technology centres in each region which cover every section of the value chain. We deliver value by optimising our production processes, maximising existing capacity and work to constantly improve our best overall machine efficiency levels.

In the communities where we operate, we prioritise projects that support education, entrepreneurship and environment, as well as health and welfare, while working to break the cycle of poverty through stable, safe employment.

By amplifying value creation in this way, we accelerate and advance meaningful change.

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Corporate governance

Sappi is committed to the highest standards of corporate governance, which form the foundation for the long-term sustainability of our company and creation of value for our stakeholders.

Good governance at Sappi contributes to living our values through enhanced accountability, a transparent and ethical culture, strong risk management, a focus on effective control of the business, legitimacy and good performance. Governance is one of our key enablers to unlocking and protecting value, as we optimise the use of our capitals, address our key risks while taking advantage of exciting opportunities (refer to Risk management), while minimising the negative impacts of trade-offs that have to be made, as set out in the presentation of Our key material issues. The group endorses the recommendations contained in the King Code of Governance™ for South Africa 2016 (King IV) and applies the various principles in the achievement of good governance outcomes.

An application register of how Sappi applies the King IV principles is provided on the group’s website (www.sappi.com).

The group is listed on the JSE Limited and complies in all material respects with the JSE Listings Requirements, regulations and codes.

The board of directors

The basis for good governance at Sappi is laid out in the board charter, which sets out the division of responsibilities between the board and executive management. The board creates and protects sustainable value by collectively determining strategies, approving major policies and plans, taking responsibility for risk management, and providing oversight as well as monitoring, to help to ensure accountability. The board is 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 and backgrounds. It is important that our board composition reflects this diversity, both in a South African context as well as globally. Diversity gives Sappi access to an increased range of talent, which helps to provide insight into the needs and motivations of a broader stakeholder base.

Board experience (%)

Sappi’s board members have experience across multiple industries and leadership roles

Directors' independence (%)

Directors' ages (%)

Diversity (%)

Directors’ tenure (as at year end %)


The composition of the board and attendance at board meetings and board committee meetings is set out in the table below for the year ended September 2021:

      Board       Board committees     AGM  
Name Appointed
(Retiring)
from board
      Audit and Risk   Nomination and Governance   Human Resources and Compensation   SETS % attendance during tenure    
Independent non-executives                            
BR Beamish                
100
 
MA Fallon              
100
 
JM Lopez                  
100
 
NP Mageza              
100
 
ZN Malinga                  
100
 
B Mehlomakulu                
100
 
MV Moosa            
100
 
RJAM Renders                
100
 
Sir Nigel Rudd  
100
 
JE Stipp                  
100
 
Executives                            
SR Binnie (CEO)      
100
 
GT Pearce (CFO)                
100
 
Lead director
Committee member (present)
Chairman
Ex officio
Absent
By invitation

Strategic focus areas

In addition to the standard items on the board’s agenda, the 2021 focus areas included:

The following specific areas will be added to the board’s agenda in 2022:

Induction and training of directors

Following appointment to the board, directors receive induction and all directors receive training tailored to their individual needs, when required.

Stakeholder communication

The board is responsible for presenting a balanced and understandable assessment of the group’s position in reporting to stakeholders. The group’s reporting addresses material matters of 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. Sappi 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).

Refer to Our key relationships for more information.

Sappi board and management committees

Board and management committees have been established and are discussed below.

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.

Audit and Risk Committee

NP Mageza
(Chairman)

Membership details at September 2021:

  • NP Mageza
  • RJAM Renders
  • ZN Malinga
  • JE Stipp
  • B Mehlomakulu

The Audit and Risk Committee confirms that it has received and considered sufficient and relevant information to fulfil its duties, as set out in the Audit and Risk Committee Report.

The external and internal auditors attended Audit and Risk Committee meetings and had unrestricted access to the committee and Chairman. The external and internal auditors met privately with the Audit and Risk Committee during 2021.

Mr NP Mageza is the Chairman and designated financial expert of the Audit and Risk Committee.

The committee is satisfied that it has fulfilled its responsibilities as set out in its terms of reference.

Key roles and responsibilities

The Audit and Risk Committee consists of five independent, non-executive directors. The committee assists the board in discharging its duties with oversight of:

  • Safeguarding and efficient use of assets
  • The risk management function, including a special focus on the presentation and evaluation of risk appetite, tolerance, key risk indicators and risk trends
  • Information and technology risks, related controls and governance. This included the increasing threats of cyber-attacks and security in the operational technology area
  • Non-financial risks and controls, through a combined assurance model
  • Operation of adequate systems and control processes
  • The integrity of financial information and the preparing of accurate financial reports in compliance with applicable regulations and accounting standards
  • The certification process implemented by management to support the CEO and CFO confirmation of the fairness of the annual financial statements and the system of internal control over financial reporting, required by section 3.84(k) of the JSE Limited Listings Requirements (refer the directors’ approval in the 2021 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
  • The quality and transparency of sustainability information included in the annual integrated report
  • Compliance with the group’s Code of Ethics and external regulatory requirements
  • The external auditors’ qualifications, experience, independence and performance
  • The performance of the internal audit function, this included review of the results of the Internal Quality Assurance Review performed during 2021
  • The performance of the finance function
  • Taxation policies, congruent with responsible corporate citizenship
  • An internal review of the committee’s operating effectiveness and performance every two years by way of an assessment with feedback being provided to the board

Strategic focus areas

The Audit and Risk Committee helped to create and protect value by providing oversight and guidance for a wide range of topics, including the following areas related to Sappi’s strategy:

  • Governance and risk aspects of projects to accelerate the group’s ability to take advantage of opportunities in higher margin growth segments, such as in dissolving pulp, packaging and speciality papers, the biotech and renewable energy fields
  • Cyber security incidents impacting on specific outsourced service suppliers
  • Business continuity arrangements, including logistics and supply chain
  • The establishment of a CAC, which makes use of combined assurance to focus on risks facing the group
  • Regulatory compliance with global privacy legislation, such as the Protection of Personal Information Act and General Data Protection Regulation
  • A revised approach to providing an overview of risks, including a new method of determining risk appetite and tolerance per risk

Areas of oversight for the committee in 2022 will be:

  • Operationalising of the revised approach developed for the risk framework, combined assurance and oversight of risks  
  • Revised reporting for ESG matters and procedures for financial reporting attestations
  • The new whistleblower hotline
  • The impact of the Covid-19 tail on the business and feedback on business recovery, liquidity, credit risks and financial reporting  
  • Emerging IT risks  
  • Capital, IT, and business projects governance  

For more information refer to the Audit and Risk Committee Report in our Annual Financial Statements on
www.sappi.com/annual-reports.

Stakeholders     Risks

The Audit and Risk Committee has helped to create and protect value for the following stakeholders: employees, customers, shareholders and regulators.

Refer to Our key relationships for further details.

   

The Audit and Risk Committee has focused on all of the top 10 risks:

Safety
Evolving technologies and consumer preferences
Supply chain disruption context and competitive industry
Sustainability expectations
Climate change
Cyber security
Cyclical macro-economic factors
Uncertain and evolving regulatory landscape
Liquidity
Employee relations

For further details refer to Risk management.

Nomination and Governance Committee

Sir N Rudd
Chairman

Membership details at September 2021:

  • Sir Nigel Rudd
  • MV Moosa
  • MA Fallon

Key roles and responsibilities

The Nomination and Governance Committee consists of three independent directors. The committee considers the leadership and governance requirements of the company including a succession plan for the board. The committee identifies and nominates suitable candidates for appointment to the board in line with Sappi’s policy on the promotion of gender and race diversity at board level, for board and shareholders’ approval. The committee considers the independence of candidates as well as directors. The committee makes recommendations on corporate governance practices and disclosures, and reviews compliance with corporate governance requirements. The committee has oversight of appraising the performance of the board and all the board committees. The results of this process and recommended improvements are communicated to the chairman of each committee and the board. The committee reviewed and approved a policy on broader diversity at board level. The functioning and performance of Sappi’s board and board committees were assessed internally in 2021 and it was established that the board and board committees functioned well, but that the directors would benefit from additional deep dives into specific topics. This has been implemented.

Strategic focus areas

The Nomination and Governance Committee helped to protect value by providing oversight and guidance
in 2021 over:

  • Corporate governance
  • Tone at the top
  • Succession plans for senior executives and the board with a focus on board composition
  • Assessment of the board and board committee performance
  • Rotation and replacement of directors
  • Reviewed the Sappi Limited directors’ shareholdings and dealings in securities
  • Oversight of the appointment of replacements for direct reports to the CEO

A focus area for 2022 will be executive succession planning and board committee chairmanships and memberships.

The committee is satisfied that it has fulfi lled its responsibilities as set out in its terms of reference.

Stakeholders     Risks

The Nomination and Governance Committee has helped to protect value primarily for the following stakeholders: shareholders and regulators.

Refer to Our key relationships for further details.

   

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.

Human Resources and Compensation Committee

MA Fallon
Chairman

Membership details at September 2021:

  • MA Fallon
  • NP Mageza
  • RJAM Renders
  • BR Beamish

Key roles and responsibilities

The Human Resources and Compensation Committee consists of fi ve independent directors. The responsibilities of the Human Resources and Compensation Committee are, among others, to provide oversight of the group’s human capital, determine the group’s human resource policy and strategy, assist with the hiring, and setting of terms and conditions of employment of executives, the approval of retirement policies, and succession planning for the CEO and management. The committee ensures that the compensation philosophy and practices of the group, including the CEO’s performance objectives, are aligned to the group’s Thrive25 strategy and performance goals. It reviews and agrees the various compensation programmes, and, in particular, the compensation of executive directors and senior executives as well as employee benefi ts. It also reviews and agrees to executive proposals on the compensation of non-executive directors for approval by the board and ultimately by shareholders. The committee is updated on the Industrial Relations climate, training initiatives and engagement survey results and action items.

Strategic focus areas

The 2020 report was supported at the Annual General Meeting (AGM) on 03 February 2021 with a vote of 96,6% on the remuneration policy and 95.7% on the implementation report. This has been a 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:

  • Implementation of return on capital employed (ROCE) as a measure in our short-term incentive plan from 2022, replacing working capital
  • Implementation of a voluntary minimum shareholding requirement for all prescribed 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
  • ESG targets are included in the personal objectives of all senior managers
  • Discussion on the King IV guidance paper on effective stakeholder engagement
  • Oversight on key succession transitions across all regions, and
  • A bespoke benchmark on non-executive directors’ fees

The strategic focus areas for the committee in 2022:

  • Key activities for the committee in 2022 will be, inter alia, the approval of the remuneration and bonuses for executive directors and senior management
  • Oversee the implementation of the human resources Thrive25 plan
  • 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
  • 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.

Stakeholders     Risks

The Human Resources and Compensation Committee has helped to protect value primarily for the following stakeholders: employees, shareholders and regulators.

Refer to Our key relationships and to the Remuneration Report for further details.

   

The Human Resources and Compensation Committee has focused on the following of the top 10 risks:

Safety
Evolving technologies and consumer preferences
Sustainability expectations
Climate change
Cyber security
Cyclical macro-economic factors
Uncertain and evolving regulatory landscape
Employee relations

For further details refer to Risk management.

Social, Ethics, Transformation and Sustainability (SETS) Committee

MV Moosa
Chairman

Membership details at September 2021:

  • MV Moosa
  • SR Binnie
  • B Mehlomakulu
  • BR Beamish
  • JM Lopez

Key roles and responsibilities

The SETS Committee comprises four independent non-executive directors, and the CEO. A 100% attendance record was achieved by board committee members for 2021. Other executive and group management committee members attend SETS Committee meetings by invitation. It should be noted that a number of other non-executive directors attend SETS Committee meetings ex-officio. The chairmen of the Audit and Risk Committee and SETS Committee attend each other’s committee meetings to avoid unnecessary repetition of discussions.

The committee's mandate is to oversee the group’s sustainability strategies, ethics management, good corporate citizenship, labour and employment practices, as well as its contribution to social and economic development and, with regards to the group’s South African subsidiaries, the strategic business priority of transformation.

The SETS Committee is supported by the Global Sustainability Council as well as by regional sustainability committees in dealing with day-to-day sustainability issues and helping to develop and entrench related initiatives in the business.

Strategic focus areas

In 2021 the committee provided oversight of:

  • Sappi’s social and economic development standing (United Nations Global Compact and the Organization for Economic Co-operation and Development)
  • Safety initiatives
  • Progress on developing a group-wide approach for the TCFD
  • The development and approval of science based targets for the group
  • External assurance on lost-time injury frequency rate (LTIFR) and Scope 1 and Scope 2 emissions data as well as environmental impact analyses for major investment projects
  • Trade-offs between:
    – Productivity and safety advantages of mechanisation and the social and human capital implications
    – Financial and natural capitals relating to the use of coal versus other renewable energy fuels for our heating requirements. This included further reductions in the group’s carbon footprint
  • Sappi Southern Africa’s performance against the applicable Broad-based Black Economic Empowerment (BBBEE) Legislation, the EE Act and the Forestry Charter, including unfair discrimination and equality policy
  • Other ESG focus areas

The committee is 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 2022

  • TCFD developments
  • Implementation of science-based targets and a climate change strategy
  • Progress towards biodiversity improvement goal
  • Production effi ciencies and events
  • Consideration of feedback about the changes in the safety culture at operating units
  • Improved stakeholder engagement, making use of media developments and opportunities
  • For more information refer to the SETS Report and to Our global sustainability goals at www.sappi.com.

Stakeholders     Risks

The SETS Committee has a broad spread of stakeholders for which it helps to protect (or create) value: suppliers, customers, employees, regulators, shareholders and society.

Refer to Our key relationships for further details.

   

The SETS Committee has focused on the following of the top 10 risks:

Safety
Evolving technologies and consumer preferences
Supply chain disruption
Sustainability expectations
Climate change
Cyclical macro-economic factors
Uncertain and evolving regulatory landscape
Employee relations

For further details refer to Risk management.

For more information on sustainability at Sappi refer to the SETS Committee report and for a summary of the group’s sustainability initiatives at www.sappi.com.

Management committees

The board assigns responsibility for the day-to-day management of the group to the CEO. To assist the CEO in discharging his duties, a number of management committees have been formed. Some of these committees also provide support for specific board committees. The management committees are key components of Sappi’s second line of defence and assurance. Refer below 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 pulp business. The CEO has assigned responsibility to the executive committee for a number of functional areas relating to the management of the group, including the development of policies and alignment of initiatives regarding strategic, operational, financial, governance, sustainability, social and risk processes. The executive committee meets at least five times per annum.


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.


Treasury
Committee

The Treasury Committee meets monthly to assess financial risks on treasury-related matters. Specific focus areas in 2021 related to ensuring sufficient group liquidity during the ongoing Covid-19 pandemic, arranging suitable financing for the remaining capex of the Saiccor Mill project, refinancing the US$350 million 2023 bond and negotiating new financial covenants. Key focus areas in 2022 will be the renewal of the €525 million and R1.8 billion revolving credit facilities, including renegotiation of financial covenants and the introduction of sustainability key performance indicators to the facilities.


Taxation
Committee

The Taxation Committee meets monthly to discuss and address global taxation matters. The main focus areas of the committee for 2021 included:

  • Tax accounting and reporting
  • Tax compliance including transfer pricing and basic earnings per share reporting
  • Tax audits and international mitigation measures to avoid double taxation
  • New tax legislation

These topics will continue to receive oversight from the committee in 2022.


Project Steering
Committees

For key strategic projects, steering committees are established to oversee successful execution of the project.


Technical
Committees

The Technical Committees focus on global technical alignment, performance and efficiency measurement as well as new product development.


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 Audit and Risk Committee and the board. Risk management software is used to support and report upon the risk management process. During 2021 key initiatives included operationalisation of the group’s risk appetite and tolerance framework, a dashboard summarising group risks and trends. In 2022 the GRMT will review policy, procedures and assurance, to address business continuity risk.


Control and
Assurance Committee

The CAC is supported by the internal control function and multi-disciplinary combined assurance workgroups (CAWs) and provides regular oversight and guidance to the business on internal controls and combined assurance for financial, strategic and operational risks. The committee is accountable to the GRMT and the Audit and Risk Committee.


IT Steering
Committee

The IT Steering Committee, assisted operationally by the Group IT Committee, promotes IT governance throughout the group and is the highest authority responsible for this aspect of Sappi’s business, apart from the board. The committee has a charter approved by the Audit and Risk Committee and the board. An IT governance framework has been developed and IT feedback reports are presented to the Audit and Risk Committee and the board. Sappi IT has implemented a standardised approach to IT risk management through a group-wide risk framework supported by the use of risk management software. The committee has helped to create value for shareholders in 2021 by its oversight of:

  • A Sappi IT security spend benchmarking exercise, and the development of a framework to further evaluate third-party IT security risks
  • The development of a global operational technology (OT) security methodology and
  • The integration of the Matane Pulp Mill’s IT system into Sappi’s SAP system
  • The preparation for major IT projects including S4 HANA, Synergy (MES) and Pelati (Sales, supply chain and finance harmonisation), Simunye, and the Digital Strategy and governance
  • O365 email security, which was enhanced and an email security gateway was deployed
  • Expansion of the group security function with further security resource capacity scheduled for 2022, making use of a cyber skills incubator

Oversight by the committee will continue in 2022 for these IT initiatives, as well as:

  • The due diligence for a cloud-based disaster recovery strategy
  • Execution of the Digital Strategy and governance, via a global digital council
  • Deployment of the global OT security methodology to the three largest mills in the group
  • Pen testing with Insider threat assessment
  • ISO 27001 certification preparation
  • Establishment of a global 24/7 Security Operations Centre
  • Business continuity and cyber recovery vault
  • Adoption of a dedicated emergency communications platform for cyber emergencies
  • Formalisation of data classification framework and control technology
  • Third-party risk management implementation
  • Centralisation of endpoint security, additional email security hardening, and a cloud security framework
  • Global vulnerability management

Global Business
Systems Council

This council meets monthly to provide direction for strategic business improvement projects, in particular, OneSappi harmonisation initiatives, and effective use of resources.


Sustainability Council

The Sappi Group Sustainability Council leads on all sustainability related policies and practices and provides support to the SETS Committee. Members meet quarterly to report progress against sustainability goals and key initiatives, share best practices, and exchange information on emerging issues. Members review regional information for various disclosure mechanisms, including the CDP’s climate change and forests programmes and the annual Group Sustainability Report.

Key focus areas for 2021 included:

  • Oversite and review of the Thrive25 sustainability targets
  • Sappi’s climate change strategy and action plans including
    – Alignment of Sappi’s decarbonisation roadmap with the Science Based Targets initiative (SBTi)
    – Assessment, and improvement, of our resiliency to risks and opportunities posed by climate change, as framed by the Task Force on Climate-related Financial Disclosures (TCFD)
    – Integration of decarbonisation and sustainability metrics in capital investment procedures
  • Sustainable procurement roll out of EcoVadis to our top suppliers
  • Social impact strategy for South Africa
  • Identifying collaboration opportunities to further Sappi’s sustainability objectives and leverage Sappi expertise to contribute to the Sustainable Development Goals (SGDs)

Brand Council

This council coordinates Sappi’s brand communication programme, monitors brand performance and ensures effective brand management to enhance Sappi’s reputation.


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

Our values underpin the group’s Code of Ethics and commit the group and its employees to sound business practices and compliance with applicable legislation, which help to promote legitimacy.

All new employees receive training on the Code of Ethics and related topics, such anti bribery and corruption and anti-competitive practices, as part of onboarding. Refresher training was provided to all employees on the Code of Ethics in 2021.

A group Supplier Code of Conduct has been developed to help ensure that Sappi’s values and ethical standards are clearly understood and supported by all our suppliers, their 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 for the Code of Ethics.

Legal compliance programme

The programme is designed to increase awareness of, and enhance compliance with, applicable legislation is in place. The group compliance officer reports twice per annum to the Audit and Risk Committee.

Sappi’s legal compliance programme has been boosted by:

  • The implementation of legal compliance software including Exclaim for Sappi Southern Africa, GEORG Compliance Management for the German mills, and Policy Passport for Group policies and procedures.
  • The provision of online training to employees across the group on relevant core legal compliance topics.
  • The use of software tools and the related training and online learning is helping to create and protect value primarily for employees, customers, shareholders and regulators.
Conflict of interests

The group has a policy that obliges all employees to disclose any interest in contracts or business dealings with Sappi to assess any possible conflict of interest. The policy also dictates that directors and senior officers of the group must disclose any interest in contracts as well as other appointments to assess any conflict of interest that may affect their fiduciary duties.

During the year under review, apart from that disclosed in the financial statements, none of the directors had a significant interest in any material contract or arrangement entered into by the company or its subsidiaries.

For more information on how Sappi addresses conflict of interest please refer to the Preventing fraud and corruption section of the Code of Ethics at www.sappi.com.

Insider trading

The company has a code of conduct for dealing in company securities and follows the JSE Limited Listings Requirements in this regard.

For further information refer to the Insider trading section of the Code of Ethics which can be found at www.sappi.com.

Reporting on compliance and ethics concerns

Sappi employees and stakeholders can report any potential illegal or non-compliant behaviour they observe directly to senior management, internal audit or legal counsel, or alternatively, report anonymously, via telephone or an online form. Whistle-blower ‘hotlines’ have been implemented in all the regions in which the group operates. The hotline service, operated by independent service providers, enables all stakeholders to anonymously report environmental, safety, ethics, accounting, auditing, control issues or other concerns. Retaliation against whistle-blowers is not tolerated. The follow-up on all reported matters is coordinated either by legal counsel or internal audit and reported to the Audit and Risk Committee. The majority of calls and ethics reports received related to the Southern African region. Please refer to the whistle-blower hotline and ethics report graphs for information on the number of hotline calls per 1,000 employees, the categories of hotline calls and ethics reports, and the outcome of the investigations. The hotline report rates, categories of reports and outcomes of cases broadly align with international whistle-blower benchmark data. For more information, refer to the Reporting and whistle-blowing section of the Code of Ethics, at www.sappi.com.

 

Hotline report rate per 1,000 employees per annum

Hotline and ethics cases by category (%)

Hotline and ethics case outcomes (%)

Financial statements

The directors are responsible for overseeing the preparation and final approval of the group annual financial statements, in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board.

The group’s results are reviewed prior to submission to the board, as follows:

  • All quarterly results – by the Disclosure Committee as well as the Audit and Risk Committee, and
  • Interim and final results – by external audit.

Risk, controls and assurance at Sappi

Risks facing the group are identified, evaluated and managed by implementing risk mitigations, such as insurance, strategic actions or specific internal controls. Sappi maintains a robust framework of risks and controls which assists in the application of the King IV guidelines and the achievement of governance outcomes by helping to: create an ethical culture; establishing effective control; and promoting legitimacy, all of which help Sappi and its stakeholders to benefit from good performance. The framework includes controls addressing our material matters, by focusing on the main drivers of Sappi and comprises both financial and non-financial controls, which support the achievement of our strategy, within our risk appetite and tolerance levels, across the economic, social and environmental context in which the organisation operates as well as each of the six capitals set out in the IIRC’s model. More information on these capitals and Integrated thinking in the context of Sappi’s sustainable business model can be found in Our Strategy and Performance, as well as Our global sustainability goals at www.sappi.com.

The group’s internal controls and systems are designed in accordance with the COSO control framework to support the achievement of the group’s objectives including strategic, operational and financial performance goals, effective and efficient use of resources, safeguarding assets against material loss, integrity and reliability of internal and external financial and non-financial reporting, and compliance with applicable laws and regulations.

Sappi operates a combined assurance framework, which aims to optimise the assurance coverage obtained from management, internal assurance providers and external assurance providers, on the risk areas affecting the group. Combined assurance is overseen by the CAC. The committee and its CAWs provide holistic feedback to the GRMT and Audit and Risk Committee on the state of controls and the quality and coverage of assurance from the various assurance providers across Sappi’s three lines of assurance. The workgroups focused the following risk topics: capital projects management, cyber security risks, human resources risks and maintenance risks, in 2021. In Financial Year 2022 the CAWs will assist the CAC to create and protect value by undertaking reviews of combined assurance, risks and controls relating to taxation and business continuity, as well as developing the risk and control framework particularly in the legal compliance, product safety and IT security areas.

    First line of assurance   Second line of assurance   Third line of assurance   Oversight by the board
Risk areas and value drivers, capitals   Business management operations supported by appropriate controls and systems   Monitoring and oversight functions   Independent assurance provided by external audit, internal audit and other assurance providers   Board and sub-board committees
 
Governance, risk, and controls – general (core business cycles)       Control and Assurance Committee management self-assessments   Internal audit   Audit and Risk Committee
Strategy and vision, competition and markets, socio-political       Executive Committee, Group Head Strategy, Global Business Council,
Control and Assurance Committee, management self-assessments
  Internal audit   Nomination and Governance Committee
Financial, tax and treasury       Control and assurance, accounting standards, taxation, treasury and
Disclosure Committees, management self-assessments
  KPMG, tax authorities, internal audit   Audit and Risk Committee
Legal and compliance       Legal compliance programme, Group Compliance Manager   Legal compliance audits, internal audit   Audit and Risk, SETS, Human
Resources and Compensation
Committees
IT  

Day-to-day risk
management activity

Established risk and
control environment

Executive, corporate and
regional lead teams

Corporate and regional
business functions, eg sales,
finance, IT, human resources,
purchasing

Business units, eg forestry,
mills, sales offices

Business unit operations,
eg production, engineering,
controlling, materials
management

  IT Steering Committee, group IT governance functions, management self-assessments   KPMG, ISA 3402s, penetration testing, internal audit   Audit and Risk Committee
Planet, environment, natural capital     Sustainability councils, Environmental and Energy (E4) Global Cluster, GRMT  

ISO 14001, FSC, PEFC, EMAS, KPMG, EcoVadis

Government reviews emissions effluent etc, internal audit

  SETS Committee
Ethics     Group Compliance Manager, ethics surveys, management self-assessments   Internal audit   SETS Committee, Audit and Risk Committee
People, human resource and transformation     Global Human Resource Committee, regional labour forums,
employee engagement surveys, management self-assessments
  BBBEE audits, internal audit   Audit and Risk, SETS, Human
Resources and Compensation Committees
Research and development, intellectual property       Group technical cluster, management self-assessments   ISO 17025, internal audit   SETS Committee
Manufacturing, supply chain management, quality, forestry       Technical clusters and platforms, regional safety, health, environment and quality audits, supplier audits, management self-assessments   ISO 9001, ISO 50001, FSC PEFC, SFI, Matrix, internal audit   SETS Committee
Stakeholders, communication, reputation, society       Group corporate affairs, sustainability and investor relations functions   Internal audit   SETS Committee
Safety       Group and regional risk management teams, safety audits   OHSAS 18000, ISO 22000 regulatory inspections, internal audit   SETS Committee

A key element of combined assurance at Sappi is derived from the annual control self-assessments completed by control owners, which helps to protect value for stakeholders by providing management and the board with assurance on the state of controls throughout the group. The remediation of control gaps identified through this process is monitored by management, relevant committees, auditors and the board.

The Audit and Risk Committee advises the board on the state of risk management and controls, as well as assurance, in Sappi’s operating environment. This information is used as the basis for the board’s review, sign-off and reporting to stakeholders, via the annual integrated report and annual financial statements, on risk management and the effectiveness of internal controls and assurance within Sappi.

As part of combined assurance in respect of reported information, Sappi has obtained assurance on the data in the annual integrated report from the following sources:

Internal audit

The group has an effective, suitably resourced, risk-based internal audit department. The department operates in terms of a specific charter from the Audit and Risk Committee and independently appraises the adequacy and effectiveness of the group’s governance, risk management, systems, internal controls and accounting records. Internal audit coordinates combined assurance and reports the findings to local and divisional management, the external auditors, and the Audit and Risk Committee.

The head of internal audit reports to the Audit and Risk Committee, meets with board members, has direct access to executive management and is invited to attend certain management meetings. The role of internal audit at Sappi is set out in the following diagram:

Internal audit value proposition

During 2021, apart from the ongoing focus on financial controls, internal audit helped to create and protect value for Sappi and our stakeholders by completing reviews in support of the following strategic objectives:

The coverage plan for 2021 was substantially achieved despite the challenges presented by the Covid-19 pandemic and associated travel bans and lockdowns. We refocused our audit plan to address possible Covid-19 impacts: including raw materials supply chain, treasury (eg cash flow and liquidity), credit risks, financial reporting, cyber risk, and business continuity planning.

In 2022 internal audit will support the achievement of Sappi’s Thrive25 strategic objectives by completing advisory and assurance projects in the following areas:

Sustain our financial health: sales, procurement, treasury, and working capital processes
Drive operational excellence: sales and operations, maintenance, energy, strategic business and IT projects including digital innovation initiatives
Grow our business: R&D, packaging and speciality papers, capital projects (Saiccor Mill expansion project in SSA and Taurus in Sappi Europe), and new businesses eg biomaterials, integration and control onboarding reviews of the Matane Pulp Mill in Canada
Enhance trust: ethics, governance, sustainability, and cyber security reviews

Internal audit maintains an internal quality assurance programme. In 2020, an external quality assurance review was conducted by the Institute of Internal Auditors (IIA). A Generally Conforms rating was received, which is the highest of the three levels of conformance to the IIA’s standards. The 2021 internal quality assurance review highlighted a need for more attention to the documentation of effectiveness testing. This will be addressed in 2022.

Board assessment of 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 2021. The results of the reviews did not indicate any material breakdown in the functioning of these controls, procedures and systems during the year. The internal controls in place, including the financial controls and financial control environment, are considered to be effective and provide a sound basis for the preparation of the financial statements, annual integrated report and other reports used internally for management decision making.

Company secretary

The Company Secretary does not fulfil executive management functions outside of the duties of Company Secretary and is not a director. During the year, the board assessed the independence, competence, qualifications and experience of the Company Secretary and has concluded that she is sufficiently independent (ie maintained an arm’s length relationship with the executive team, the board and individual directors), qualified, competent and experienced to hold this position. The Company Secretary is responsible for the duties set out in section 88 of the Companies Act 71 of 2008 (as amended) of South Africa. Specific responsibilities include providing guidance to directors on discharging their duties in the best interests of the group, informing directors of new laws affecting the group, as well as arranging for the induction of new directors.