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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Our key material issues

The issues set out on the following pages are those that we believe underpin our strategic risks and opportunities and have the highest potential impact – negative and positive – on stakeholder value. Further information on each of these issues can be found in our 2021 Sappi Group Sustainability Report available at www.sappi.com/2021GSDR

How we determine materiality



Principles

Maintaining ethical behaviour and compliance

Why it's material

Given that our reputation as an ethical company is key to our ability to unlock further growth opportunities, ethics constitutes the foundation of our business. Values and ethics are not only critical in maintaining a licence to operate but also for developing stakeholder trust and for driving performance. Recognising that our reputation is largely determined by the ethical behaviour of our employees and representatives, we place a high premium on adherence to ethical behaviour as encapsulated in our Code of Ethics. This is a practical tool to guide our directors, management, employees and other stakeholders as to what constitutes ethical behaviour whilst complying with the various laws, regulations and policies applicable to Sappi.

How this issue links to other aspects of our business

Our global priority SDGs

Our top 10 risks

  • 6 Cyber security
  • 8 Uncertain and evolving regulatory landscape
  • 10 Employee relations

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Continued erosion of trust in business, coupled with increasing social activism
Key developments in FY2021

In line with our emphasis on ethical behaviour, a comprehensive training programme in 2021 covered the following topics:

  • Anti-fraud and corruption (relevant new employees in all regions)
  • Code of Ethics online training refresher course (all regions)
  • Competition Law (relevant new employees in all regions and a refresher course for South Africa, Europe and Sappi Trading)
  • Environmental Law training (relevant new employees in all regions)
  • Occupational Health and Safety compliance (relevant new employees in all regions)
  • The Protection of Personal Information Act (POPIA) online training (South Africa)

These training initiatives – incorporating relevant and practical examples – have been implemented to inculcate the correct ethical behaviour and responses and to avoid a tick box approach to ethics.

Privacy in the workplace training to employees was prioritised in the year under review due to the recent enactment of POPIA in South Africa. Privacy is a constitutionally protected right and accordingly, is an ethical imperative for Sappi. To this end, Sappi's POPIA Information Officers have been appointed, trained and registered with the applicable regulator and the required privacy policies and procedures are in place.

Sappi continues to provide avenues to employees to communicate breaches or apparent breaches of the code either through the telephonic ethics hotline or via e-mail to Ethics@sappi.com. All complaints are registered and investigated by Sappi's internal audit team which are then reported into Sappi's Audit and Risk Committee on a quarterly basis. (Further details see Corporate governance in this report.)

Opportunities for value creation

Fraud, including bribery and corruption awareness is critical at a time when organisations around the world lose an estimated 5%(1) of their annual revenues to fraud. By working together as OneSappi to combat fraud and ensure ethical outcomes, we can significantly enhance our ability to produce positive economic and social outcomes and enhance our overall competitive advantage.

(1) https://www.fraudweek.com.

Procuring responsibly

Why it's material

Worldwide, we have over 16,000 suppliers and it's important that they understand – and abide by – our values and ethical standards. This is important from both a moral and reputational perspective, particularly given the intensified global focus on responsible supply chains.

How this issue links to other aspects of our business

Our global priority SDGs

Our top 10 risks

  • 2 Evolving technologies and consumer preferences
  • 3 Supply chain disruption
  • 4 Sustainability expectations

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Resource scarcity and growing concern for natural capital
  • Continued erosion of trust in business, coupled with increasing social activism
Key developments in FY2021

During the year, we initiated our first campaign to onboard suppliers onto EcoVadis. Approximately 100 priority suppliers were contracted directly and invited to share an EcoVadis scorecard. By the end of the year, 90 suppliers were sharing their scorecards with us and another 19 were in progress to disclose on the platform. This equates to 33% of Sappi's global procurement spend. Our suppliers' scorecards enable us to evaluate their performance actively, as well as identify risk and priority areas where further improvements are needed.

The EcoVadis methodology focuses on 21 sustainability criteria that are grouped into four themes: Environment, Labour and Human Rights, Ethics and Sustainable Procurement. These criteria are aligned with international sustainability standards such as the 10 Principles of the UNGC, the International Labour Organization conventions, the Global Reporting Initiative (GRI) standards and the ISO 26000 standard.

We also continued the roll out of our Supplier Code of Conduct and made good progress against our Thrive25 target of 80% of procurement spend with declared compliance with our code of conduct by 2025. In SEU, 67% of total spend was covered by agreements into which the provisions of the code are embedded, 53% in SNA and 44% in SSA.

Opportunities for value creation

By working collaboratively with our suppliers to promote and maintain responsible environmental, social and governance (ESG) practices, we enhance their understanding of our requirements, thereby helping to realise our vision of a thriving world.

Prosperity

Demonstrating agility

Why it's material

One of the key lessons of the Covid-19 pandemic has been the need for agility. In seeking to grow our business and sustain our financial health, we have had to be agile in response to an operating environment which is constantly changing. Being flexible underpins our ability to achieve our vision of being a sustainable business with an exciting future in woodfibre that provides relevant solutions, delivers enhanced value and is a trusted partner to all our stakeholders.

How this issue links to other aspects of our business

Our global priority SDGs

Our top 10 risks

  • 3 Supply chain disruption
  • 7 Cyclical macro-economic factors
  • 9 Liquidity

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Changing consumer and employee profiles
  • Growing populations with increasing rates of urbanisation
Key developments in FY2021

In Europe we have agreed to sell the south-western part of our site at Maastricht Mill in the Netherlands. The sale has had no negative impact on employment at the mill. Given the decline in market demand for graphic paper, approximately three years ago the mill began to transition into the manufacturing of luxury packaging board. As this activity mainly takes place on the north side of the company site, the southwestern part is therefore less intensively used and was eligible for sale. We will relocate our activities currently taking place on the sold land to the remaining Sappi site. Proceeds of the sale will be used to improve internal logistics and additionally improve the sustainability of our production processes.

In North America we are selling our hydroelectric assets on the Presumpscot River in Maine to Dichotomy Power LLC, pending satisfactory completion of regulatory and other approvals. The move will enhance our focus on our core competencies and is consistent with our permanent shut of PM9 and major components of the energy complex at our Westbrook Mill. The sale will allow us to redeploy resources to further develop our growing businesses. The deal is expected to close by the end of calendar 2021 subject to regulatory and other approvals.

In South Africa, the delays in completion and commissioning of our Saiccor Mill expansion project highlight the need for agility. In 2020, we were forced to declare force majeure on the project which then ceased construction. In 2021, construction was further delayed by the social unrest halfway through the year, as well as ongoing Covid-19 travel restrictions which meant certain essential service providers could not enter the country. Commissioning of the plant began in Q4 FY2021 and will be completed in Q1 FY2022.

In this region, we are positioning Tugela Mill for further growth by increasing production of neutral sulphite semi chemical pulp by approximately 15,000 tons per annum in response to the anticipated increase in packaging demand. This will enable us to concomitantly increase production of Ultraflute Plus (fluting containerboard), used primarily for fruit exports. It will also partially fill the gap created by the closure of LignoTech South Africa at Saiccor Mill in 2020.

Opportunities for value creation

In focusing on cost containment, we recognise that the graphic sector of the market is in decline. However, our graphics assets are cash generative. In recent years, our strategy has been, rather than closing or disposing of those assets, to try and convert them into higher margin segments like packaging. We see the big push for paper-based solutions for packing purposes as a strong opportunity on which we will continue to capitalise.

Reinforcing Verve as the Fibre of Choice

Why it's material

Under our Thrive25 strategy, one of Sappi's key drivers is to grow DP capacity and develop our Verve brand as the industry standard. This is based on our belief that as global textile demand grows, driven by population growth, fashion and rising wealth in developing economies, the need to develop more climate-friendly solutions, derived from renewable materials that are not fossil-fuel based, will drive increasing market share for viscose, which is derived from DP. Hawkins Wright(1) reported a rebound in global DP shipments of 16% for the first six months of calendar 2021 and are expecting growth of 14% for the remainder of the year. Our growth ambitions are underpinned by our focus on sustainability (including the aspect of traceability) which, we believe, will become increasingly important as a key differentiator and determinate in defining value for our customers and for Sappi.

(1) Hawkins Wright: The outlook for dissolving pulp: Demand, supply, costs and prices, September 2021.

How this issue links to other aspects of our business

Our global priority SDGs

Our top 10 risks

  • 4 Sustainability expectations
  • 5 Climate change
  • 9 Liquidity

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Changing consumer and employee profiles
  • Growing populations with increasing rates of urbanisation
Key developments in FY2021

Partnering for a forest-to-garment traceability solution

While fashion brand owners want to understand their climate related sourcing risks and opportunities for wood-based fibres, it's estimated that only 5% of them are able to trace their raw materials to origin of feedstock through the entire value chain. In FY2021, Sappi Verve (DP) partnered with Birla Cellulose, one of the leading viscose manufacturers in the textile value chain, to provide a forest-to-garment traceability solution for 22 global brand owners. This was made possible with the use of Birla's pioneering 'Green Track' blockchain technology, coupled with Sappi's comprehensive database on wood origin for its DP operations in South Africa and the US.

Traceable and transparent supply chains are key to providing brand owners and consumers with the assurance and confidence that their products originate from sustainable and renewable sources of wood, free from deforestation, where biodiversity is promoted and where customary, traditional and civil rights of people are upheld. Our collaboration with Birla enables sustainability-focused consumers, brand owners and retailers to make more informed buying decisions.

The efforts were recognised by our inclusion in the Forbes Magazine 'Blockchain 50 List of 2021' which features companies that lead in employing distributed ledger technology and have revenue or a valuation of at least US$1 billion.

Partnering to deliver on the Textile Exchange Climate+ strategy

The Textile Exchange (TE) launched their Climate+ Strategy in 2019, with a goal to reduce GHG emissions in the textile value chain by 45% by 2030, while addressing other climate-related impact areas, like water, biodiversity and soil health.

To accelerate progress towards the Climate+ objective and to drive collective action, Sappi was one of 40 global brands that participated in a discussion with the Climate Board. The latter was appointed by the TE to uncover industry best practice in terms of reducing GHG emissions. Sappi is also a member of the TE man-made cellulosic fibre roundtable and climate sub-committee, working with other industry leaders to assess how forestry, pulp and fibre production can contribute to meeting the 2030 Climate+ goal.

We are an advisory partner in the development of the TE biodiversity module – containing good practice standards – and have participated in the pilot launch of the Biodiversity Benchmark and Index. The Biodiversity Benchmark will enable companies to understand their impacts and dependencies on nature in their materials sourcing strategies, chart a pathway to delivering positive biodiversity outcomes, and benchmark their progress. The tool is aimed at supporting and is being developed alongside the Science Based Targets Network in order to reinforce consistency in language, frameworks and measurements. Additionally, use of this module and its future iterations will help companies prepare for stakeholders' – including investors' – questions pertaining to nature-related risk.

Partnering to measure the sustainability performance of our DP operations

The Higg Facility Environment Module (Higg FEM) and the Facility Labour and Social Module are part of the Higg Index suite of tools developed by the Sustainable Apparel Coalition to enable the apparel industry to measure their sustainability performance and drive supply chain transparency and decision making. By standardising the process of measuring supply chain impacts in the textile industry, the index helps suppliers, manufacturers, brands, and retailers to evaluate materials, products, facilities, and processes based on environmental performance, social labour practices, and product design choices. It is utilised by over 250 brands and manufacturers.

The FEM and FSLM were used to measure environmental and social performance as well as to identify opportunities for improvement at Sappi Verve's operations in South Africa and North America. Cloquet Mill conducted a Higg FEM verification audit with an SAC-appointed auditor and received an excellent score. Furthermore, Saiccor Mill completed a Higg FSLM self-assessment which also resulted in a high score. We believe this to be significant, particularly in light of the poor reputation of the textile value chain in certain parts of the world.

Opportunities for value creation

  • The European Union's Single-Use Plastics Directive aims to combat environmental problems caused by single-use plastic products. This presents an opportunity for viscose fibre (and hence DP), which is considered a natural polymer, to substitute part of the 500,000 tons of petroleum based fibres that are used globally each year to produce single-use wipes.
  • One of our key Verve customers has requested a mill trial for DP produced from recycled textiles. Against this backdrop and in line with our commitment to the circular economy, we are exploring opportunities for local and international partnerships in the textile recycling space. We have identified a high potential South African start-up company with whom to collaborate. Initial discussions have highlighted numerous opportunities for engagement, including the option to progress Sappi SA's social impact strategy as well as the potential for raw material security.
Enhancing efficiency through machine learning and digitisation

Why it's material

Data is as an important asset to help optimise operations, create superior customer experiences and disruptive new business models. Advanced Analytics provide deeper, more advanced insight into patterns, trends, and themes that may be hidden within data. This allows businesses to understand their customers on a deeper level, predict future outcomes, reduce risk and enhance competitive edge.

How this issue links to other aspects of our business

Our global priority SDGs

Our top 10 risks

  • 2 Evolving technologies and consumer preferences
  • 6 Cyber security

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Globalisation and high levels of connectivity
  • The rapid pace of technological innovation, including AI
Key developments in FY2021

Our data driven culture and machine learning continued to be enabled by our Advanced Analytics team, who collaborate very closely with the business units. All Advanced Analytics' projects and innovation initiatives are defined, prioritised and managed by the business units and are subsequently developed and supported by the Advanced Analytics team, with a strong focus on enablement.

Beginning in 2019, our digital transformation journey started small, with different geographies tackling digital transformation projects individually. Every plant team utilised their own set of data tools for analytics, tracking production and other digitisation efforts. This experimentation process, together with insights from these individual projects, set the roadmap for our Industry 4.0 journey. The aim was to identify/develop a data analytics platform that could hold all our data, enable the setting of enterprise-wide governance and standards and empower domain experts with data science tools. Drawing on the efforts of our different teams enabled us to build a comprehensive Proof of Concept for an Industrial Internet of Things platform with cloud and edge solutions. We finalised this with the help of multiple vendors.

Key to our AI journey has been the development of digital twins – a virtual model of a process, semi-finished or finished product which transforms data from different production systems, formats, and time series into a usable database. While some plants had existing digital twins from previous projects, we set an ambitious goal to build approximately 165 digital twins across 18 mills by 2022. Accordingly, with the help of a vendor, we are now employing a templatised digital twin framework which makes it easier for us to capture and distil knowledge from internal teams. This framework makes it possible for Sappi to have greater autonomy as we grow, change and make new discoveries. It also makes it considerably easier to scale our solutions to other facilities.

While digital twins make it easy to update data and gain access to the right information, they do require resources or internal leaders to ensure data integrity, which is key to ensuring credibility and momentum when scaling a solution to other production lines, factories, or geographies. To meet this need, we have now created a new global department dedicated to the training, development and support of Advanced Analytics within Sappi to ensure our teams are enabled and invested. The combination of dedicated training and suitable software means that Sappi's data integrators now have the necessary skills to build and maintain any digital twin for their manufacturing processes which can then be leveraged by teams from all over the world.

CASE
    STUDY

Root cause analysis at Saiccor Mill

Our use of root cause analysis (RCA) at Saiccor Mill highlights the effectiveness of our Advanced Analytics tools. One of the challenges we have faced at the mill is inconsistent cooking liquor quality. To overcome this issue, we have developed a predictive model for liquor quality (soft sensor) together with an automated RCA, whereby whenever our predictions move out of a certain band, we start running a short range (hours) and long range (three days) RCA automatically.

A report is generated and sent to the operators and production managers which recommends a target setting range and thus enables more proactive correction of the process. Processes are not static; they fluctuate and the operating windows can shift based on equipment conditions and efficiencies. The predictive modelling helps us to take these shifts into account, so we have become more dynamic in our targeting of process settings.

Opportunities for value creation

Looking forward, advanced analytics will play a key role in delivering the digital strategy over the next five years. We have identified advanced analytics initiatives across different business functions, which has been included in the digital roadmap that will deliver value to Sappi and our stakeholders.

Increasing the sustainability of our products through circular design and adjacent markets

Why it's material

In line with our commitment to a thriving world, we believe it is our responsibility to obtain the maximum value from every tree used in our production process. Our clear advantages in diversification, global scale, and local expertise are helping us to achieve this.

How this issue links to other aspects of our business

Our global priority SDGs

Our top 10 risks

  • 2 Evolving technologies and consumer preferences
  • 5 Climate change
  • 9 Liquidity

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • The move towards a circular economy
  • Climate change continuing to impact businesses and reshape societies
  • Resource scarcity and growing concern for natural capital
Key developments in FY2021

Sappi Symbio is a natural fibre composite material combining high-quality cellulose from renewable, forestry certified woodpulp in a polymer matrix. Benefits include weight reduction in the application combined with a natural look: soft, warm touch; high rigidity and low density. Symbio aligns with our drive to make everyday materials more sustainable. In FY2021, commercialisation of this product gained considerable traction with uptake by a major automotive manufacturer in the United States for use in centre consoles, instrument and door panels, as well as cable trays, among others. In addition, various other brand owners have the product in their pre-commercial qualification phase. Symbio application in household and consumer goods is also under development.

Now that we have commercial uptake of Symbio, we are focusing on optimisation of the business model to grow offtake and unlock further capacity for scale-up, including:

  • Increasing the percentage of cellulose to make the product even more sustainable.
  • Simplifying manufacturing and lowering cost.
  • Developing Symbio composites with renewable polymers such as polylactic acid which could replace polypropylene to further improve the product's sustainability value proposition.

In terms of our Valida fibrillated cellulose, our pilot plant is running at capacity with repeat orders in diverse application fields such as concrete, cosmetics, personal care, paint and coatings, where it is valued as a dispersant, suspension stabiliser and rheology modifier. In addition, Valida is commercialised in wound care applications, with one of the advantages cited being reduced frequency of dressing changes.

We are moving ahead with our furfural pilot plant at Saiccor Mill. The plant, which uses the co-product of the DP process – xylan hemicellulose sugars – to create furfural, is scheduled for commissioning in the first half of calendar 2022. Established and future market uses for furfural include resins, solvents and as a sustainable platform chemical for the production of a variety of derivatives to replace oil-based chemicals. Pending successful results from the pilot plant and a viable business case, the intention is to build a commercial furfural plant at the mill.

In the xylose field we continue to monitor and assess market opportunities.

Our lignin business continued with its expansion trajectory in FY2021 and for the third year in a row, growth exceeded 30%. We have made considerable progress in moving beyond traditional commodity markets such as dust suppression and concrete admixtures to higher value markets. We have, for example, entered the oil well drilling, ceramics, carbon black and agrochemical markets. Our lignin products are used in resin applications for the production of particleboard, in particular Oriented Strand Board to improve the product's safety features and reduce use of isocyanate and potentially also other oil-based chemicals such as phenol. In addition, together with a technology partner, we are working to test lignin-based intermediates as a substitute for oil-based alternatives in foams in a wide variety of applications where thermal performance, moisture resistance, fire retardancy and structural strength are key performance criteria.

As part of Sappi Biotech's ongoing strategy to enter adjacent markets, the development of our lignin product for the animal feed industry culminated in the launch of our Sappi Pelletin product in this market with first sales reported in 2020. Pelletin is a natural glue which binds the feed ingredients and additives together to produce cost-effective compound feed pellets with enhanced durability and strength. The anti-caking and dispersing properties of lignin promote mixing uniformity and homogenous blending, while reduced friction offers lower equipment wear and energy costs.

The next generation of animal feed products focus on value beyond pellet binding into functionalities that will aid the drive to find alternatives to antibiotic growth promoters with natural prebiotic and probiotic additives, together with mycotoxin binders. Specialist studies in partnership with industry specialists have been initiated to determine whether our natural lignin-based products offer improved animal gut health and performance.

Opportunities for value creation

Frost can have a catastrophic impact on many agricultural crops around the world. To date, farmers have used wind machines and/or heaters to mitigate this risk. In conjunction with a leading university, we have successfully demonstrated that Valida can effectively protect susceptible plant buds from frost damage. In addition, we have also obtained a grant from P3Nano, a public-private partnership aimed at the rapid commercialisation of cellulosic nanomaterials, to further develop this avenue of usage.

Developing and commercialising innovations in addition to adjacent businesses

Why it's material

Without critical thinking, new products and improved processes, we cannot succeed in a highly competitive industry and world. Accordingly, innovation is embedded in our DNA and in our Thrive25 strategy which reinforces a culture whereby our people challenge conventional thinking with new ideas and solutions which contribute to a more sustainable world and add practical value to Sappi, our customers and society. We make ongoing investments into R&D (US$43 million in FY2021) and promote a culture of innovation through the annual Technical Innovation Awards (TIA). The combined five-year net present value for the eight finalists in the most recent TIA is approximately US$60 million with an estimated annual EBITDA ex SI of US$9 million.

How this issue links to other aspects of our business

Our global priority SDGs

Our top 10 risks

  • 2 Evolving technologies and consumer preferences
  • 4 Sustainability expectations
  • 5 Climate change

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • The move towards a circular economy
  • Climate change continuing to impact businesses and reshape societies
  • Resource scarcity and growing concern for natural capital
Key developments in FY2021

Sustainable food packaging solutions

Flexible packaging is essential to protect foods from air and moisture during transportation and storage. Traditionally, heat-sealing laminates comprising paper and a polyethylene (PE) sealing layer have been the standard materials to keep food unspoiled and fresh. However, this kind of flexible packaging requires the additional converting step of applying a PE layer to the paper. Generally, these synthetic polymer coated paper products are neither recyclable nor compostable.

To address our clients' needs for sustainable alternatives, we developed Sappi Seal. While not new, this product is included here as it was the overall winner of the most recent Sappi TIA. Sappi Seal is a paper-based packaging solution with an integrated sealable layer. The integrated barrier eliminates the need to apply any other PE extrusion coatings. Designed to be heat sealable and moisture resistant, Sappi Seal is the first paper-based solution with dispersion technology competing with extrusion/lamination in the market.

Sappi Guard Gloss Nature 4-OHG is another paper product offering a safe, sustainable alternative to laminate constructions in food packaging. It is a one-side coated glossy paper with functional high barrier coating and heat sealability that is suitable for both food and non-food applications.

The product incorporates a new base paper architecture, modified coating recipes and a unique drying process. We have filed a patent application for the latter. The packaging can be heat sealed without the need for additional sealants because of its unique barrier coating. The product is safe to use for direct food contact and protects the contents from oxygen, water vapour, grease and mineral oil. Its integrated barrier ensures a long shelf life of the end product, an essential food packaging requirement. Furthermore, Guard Gloss fulfils the high market demands for excellent printability and good converting performance.

Introducing new dye sublimation papers

In FY2021 we introduced Transjet Tacky Industrial, a coated dye sublimation paper for digital transfer printing, specially developed for high-speed inkjet printing on highly elastic textiles. The paper is first printed with the desired image or pattern which is then transferred to the elastic polyester fabric by means of heat and pressure. Transjet Tacky Industrial has a high ink load capacity so the print can be better accentuated due to strong colour saturation. The design remains clearly visible when the fabric is stretched to its maximum, which is particularly beneficial for sportswear.

We also added Basejet uncoated dye sublimation paper to our portfolio, thereby providing an additional solution for the digital printing of fashion and home textiles in consistent print quality.

Both Transjet Tacky Industrial and Basejet are FSC-certified.

Expanding our portfolio of label paper solutions

We expanded our portfolio of label paper solutions with the Parade Label Pro non-wet-strength wet-glue label paper, targeted at the beverage, food and consumer goods sectors. The paper is suitable for a wide range of applications, such as labels for disposable bottles, food and non-food containers, as well as wrappers for a wide variety of products. It is distinguished by a glossy, single-side double-coated quality with a very smooth surface and a high degree of whiteness – ideally suited for outstanding printing and finishing results.

Meeting the need for packaging with a natural look and feel

Driven in part by the booming ecommerce business, demand for corrugated board packaging has been increasing rapidly. In response, we launched Fusion Nature Plus, a complement to our well-established Fusion Topliner. The former is an uncoated, fully bleached recyclable virgin fibre liner with excellent printability in flexographic, digital and offset printing. The product's high whiteness, brilliant colour reproduction and consistently high quality make it a good choice for corrugated or solid board packaging where a bright white appearance is required for topliner, inner liner and fluting – and for ensuring an exceptional unpacking experience for the customer. It can be used in a wide number of applications, from pharmaceutical to food packaging. Moreover, given its strength properties, as well as an appealing look and feel, the new virgin fibre liner is also ideally suited for producing paper carrier bags.

CASE
    STUDY

Ultracast Viva's® green credentials recognised

In April 2021, our Ultracast Viva release paper won the Green Product Award 2021 jury prize in the fashion category. The award programme recognises companies and start-ups that have distinguished themselves by their sustainable practices and product results. Over a thousand applicants from 51 countries were screened for this year's nomination.

An industry breakthrough, Viva is the first premium high-fidelity casting paper compatible with solvent-free systems. This textured release paper is now the new standard for high-fidelity polyvinyl chloride, polyurethane (PU), semi-PU and solvent-free casting systems for high quality coated fabrics and textured materials.

There is a global movement to limit or eliminate solvent-based casting systems to reduce chemical waste and pollution. Ultracast Viva is the answer for customers dedicated to using sustainable alternatives.

Opportunities for value creation

In 2022, we will be introducing new functional paper barrier coating technology at our speciality mill in Alfeld, Germany.

Expanding the use of our proprietary barrier coating technology underpins our drive to maintain our leading position in barrier coated paper as well the commitment we have with our customers in developing innovative future-focused packaging solutions which contribute toward a sustainable future.

The demand for paper and paperboard packaging continues to rise as consumers become increasingly mindful of the impact their buying choices have on the environment. We are committed to supporting our customers in going beyond traditional film and foil-based material solutions and growing our product ranges to meet the demands of our ever-changing world. Working directly with brand owners we aim to create future-oriented circular solutions in line with growing collective global responsibilities.

Our 2017 acquisition of Rockwell Solutions has deepened our barrier paper manufacturing knowledge. Adding barrier coater capacity at Alfeld Mill further upscales our capabilities, bringing the combination of paper, dispersion and coating technology to more customers. Through this initiative we will continue to challenge the conventional packaging industry with new ideas and solutions in order to make it easier for the world and the planet to follow a circular-economy strategy.

We expect to begin commissioning new products at the Alfeld Mill from mid-2022.

People

Ensuring the safety of our employees and contractors

Why it's material

Safety is not only a moral imperative, it is also an issue that affects productivity and hence, value add to all our stakeholders. Our approach to safety, a core value, is based on the principles of Project Zero – zero fatalities and zero injuries. In addition to addressing hazards in the workplace by means of the OHSAS 18001 and ISO 45001 related systems in place at all our pulp and paper mills, we also address 'at risk behaviour' of our employees through a behaviour-based safety (BBS) system.

How this issue links to other aspects of our business

Our global priority SDGs

Our top 10 risks

  • 1 Safety
  • 10 Employee relations

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Continued erosion of trust in business, coupled with increasing social activism
Key developments in FY2021

Covid-19

The year was dominated by the Covid-19 pandemic with all operations and sites continuing with the required sanitising and hygiene protocols, social distancing, self-declaration health check requirements with ongoing engagement and communications for the necessity of self-awareness at work and at home. While the pandemic appears to have heightened safety awareness and reinforced safe attitudes and behaviours, complacency remains a risk. We have made a concerted effort to encourage our people to vaccinate through ongoing communication campaigns and, in South Africa, we have set up vaccinations stations at our operational sites to enable access to our people, their families and our contractors.

Occupational safety

In 2021 we were delighted to achieve our primary goal of zero fatalities. This can be attributed to consistent messaging around Project Zero and the 'I Value Life' safety campaign, including the maturing Stop. Think before you Act journey in Sappi Forests. Our continuous sharing of incidents, near misses and best practices across the group has also played a key role, as has the online Sappi Learning annual performance enablement objective setting. This included a required statement of each person's commitment together with 'walk the talk' leadership behaviour demonstration examples.

In terms of group safety performance, LTIFR for both own employees and contractors declined slightly from the previous year but has shown steady improvement over the past six years.

On a positive note, Injury Indices (II) for both own employee and contractors showed an improvement over the past year and the five preceding years.

Sappi Europe had a disappointing year with a LTIFR of 0.78 which was a deterioration from the previous year's 0.59. On a positive note, contractor LTIFR showed continued improvement from previous years. A safety communication campaign is underway to bring more attention to frequent injuries and reinforce the fact that nothing is so important than it cannot be done safely.

Sappi North America completed FY2021 with a LTIFR for own employees of 0.33 compared with best ever of 0.20 in FY2020. As in the previous year, there were no contractor LTIs – an excellent achievement.

Safety performance in Sappi Southern Africa was highly satisfactory, with the best ever LTIFR for own employees at 0.29. The previous best ever achieved was 0.41 in 2020.

Looking forward, regions will continue to encourage the reporting of near misses and non-lost time injuries (NLTIs) and ongoing improvements in safety suggestion schemes. We remain committed to reducing the impact of injuries on our workforce. By involving all personnel, sharing information, and managing risk in accordance with accepted best practice, we will aim to reduce the occurrence and severity of accidents and NLTIs.

Comment: We calculate LTIFR by dividing the product of lost-time injuries and a group-wide standard for man hours by the unit's man hours, ie LTIFR = LTI * 200,000/unit's actual man hours. As from this year, we have excluded LTIs that result in light duty from the calculations.

Group LTIFR


Comment: The theme for Global Safety Awareness Week continued with 'I Value Life' – aligned with personal commitment to your own and your colleague's life.


Opportunities for value creation

Currently, safety of own employees is included in our management incentive schemes. In FY2022, this will be expanded to include contractors, highlighting our view that contractor safety is as important as that of our own employees.

Engaging more closely with our employees

Why it's material

When employees are engaged, their discretionary effort goes up. When leaders and managers channel that energy and effort in the right direction, business and personal outcomes are positively impacted. Recognising that our people are our greatest lever for achieving our Thrive25 purpose, we conduct employee engagement surveys every second year. Input in previous surveys has shaped programmes and initiatives that have significantly improved the way we work.

How this issue links to other aspects of our business

Our global priority SDGs

Our top 10 risks

  • 1 Safety
  • 4 Sustainability expectations
  • 10 Employee relations

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Continued erosion of trust in business, coupled with increasing social activism
  • Changing consumer and employee profiles
  • Globalisation and high levels of connectivity
Key developments in FY2021

We appointed a new service provider to conduct our most recent employee engagement survey. Permanent employees in all regions were given the opportunity to participate in the survey which was made available in Dutch, English, Finnish, French (Quebec), German, isiZulu and Italian. The key issues covered were:

  • Manager and senior manager relationships
  • Inter-departmental relationships
  • Company potential and strategy
  • Ethics
  • Safety.

In the new survey, the following definitions were used for engagement levels:

  • Engaged: Engaged employees consistently exceed expectations. They are energised and passionate about their work, leading them to exert discretionary effort to drive organisational performance.
  • Almost Engaged: Employees who sometimes exceed expectations and are generally passionate about their work. At times they exert discretionary effort to help achieve organisational goals.
  • Indifferent: Employees who are satisfied and comfortable are generally able to meet minimum expectations. They see their work as 'just a job', prioritising their needs before organisational goals.
  • Disengaged: Employees who usually fail to meet minimum expectations, putting in time rather than effort. They have little interest in their jobs and often display negative attitudes.

Globally, participation in the 2021 survey was 84%, with the following regional levels: 81% (SEU), 66% (SNA), 96% (SSA) and 100% (Sappi Trading).

The survey tool provides a priority matrix that overlays the Sappi results with the factors that have the highest impact on engagement levels. Using the matrix, we have established areas of improvement for each region. On a global level these include senior manager relationships, department relationships, manager relationships, together with learning and development.

Opportunities for value creation

A central action tracker has been developed which enables our human resources colleagues to update the status of action items for their internal clients on a monthly basis. Comprehensive business unit-level reporting takes place quarterly and a summary of the themes and progress are provided to the senior leadership team twice annually. In addition, the close-out of engagement action items has now been included in the performance objectives of each line manager and supervisor across the business.

In addition, through the new service provider, we are able to run interim pulse surveys in targeted areas. Once interventions are complete, these interim surveys will be used to measure the impact and capacitate local human resources teams to react faster to support the business through required improvements.

These actions will not only affirm that the voices of our people are important, but will also help give us greater clarity as we work to demonstrate added value in line with Thrive25.

Supporting sound labour relations

Why it's material

Sound labour relations are important for business continuity. We are committed to fostering positive stakeholder relationships and believe that effective communication is essential to sound labour relations, enhanced employee engagement and ultimately, overall business success. We continue to endorse the principles of fair labour practice as entrenched in the UNGC and the Universal Declaration of Human Rights. At a minimum, we conform to and often exceed, the labour legislation requirements in countries in which we operate. Sappi promotes freedom of association and engages extensively with representative trade unions. Globally, approximately 56.43% of our workforce is unionised, with 71.53% belonging to a bargaining unit.

How this issue links to other aspects of our business

Our global priority SDGs

Our top 10 risks

  • 1 Safety
  • 7 Cyclical macro-economic factors
  • 10 Employee relations

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Continued erosion of trust in business, coupled with increasing social activism
  • Changing consumer and employee profiles
Key developments in FY2021

We continued to enjoy relatively positive industrial relations with trade unions at all manufacturing sites and forests plantations across the group in the year under review.

Overall, FY2021 was again characterised by very tough collective bargaining process given the continued impact of Covid-19 and global economic conditions. Community engagement continued to be another key focus area, especially in South Africa as the country experienced an unprecedented wave of community unrest largely in the Gauteng and KwaZulu-Natal provinces.

In SEU, 62% of employees are members of a union, and 87% of employees fall within a bargaining unit. We engage with various unions in each country where we operate and Collective Labour Agreements are in place at all mills with the exception of Carmignano and Condino Mills in Italy and Lanaken Mill in Belgium.

In SNA, 65.2% of employees are members of a union, with 64.9% belonging to a bargaining unit. SNA has 12 collective bargaining agreements with its hourly employees across various categories of work.

Union representation in SSA declined slightly to 50%. The region continues to recognise two trade unions, namely, the Chemical Energy, Pulp, Printing, Wood and Allied Workers Union – the majority union across all mills and forestry – and the United Association of South Africa. However, we also continue to engage with other trade unions that are substantively represented in some of our operations, but not currently fully recognised. These are the Association of Mining and Construction Union organising at Lomati Sawmill in Barberton as well as the National Union of Metal Workers of South Africa, organising at our Ngodwana and Tugela Mills.

In SSA, 59% employees fall within the scope of the bargaining unit. Collective bargaining in SSA was concluded well ahead of the deadline for implementation, in both the pulp and paper and forestry sectors.

Opportunities for value creation

In order to improve labour/management relationships across all operations, SSA has developed and adopted a roadmap facilitated by an independent Senior Commissioner. The key elements of the roadmap include a specific review of the National Partnership Forum (including senior members of management and senior union leaders who hold regular meeting where business, safety and union challenges are discussed), business unit engagement structures, communication with employees and capacity building for union officials. Work is already underway in various task teams consisting of management and labour representatives to develop and implement action plans.

Attracting, developing and retaining key skills

Why it's material

Our employee value proposition whereby we seek to add value to our people and our business is based on making a purpose-driven and meaningful contribution towards the wellbeing and development of our employees and our communities. This in turn is based on sourcing talent strategically and retaining it, accelerating development, providing performance feedback and creating development opportunities. Skills are the backbone of our success.

How this issue links to other aspects of our business

Our global priority SDGs


Our additional SSA priority SDGs

Our top 10 risks

  • 10 Employee relations

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Continued erosion of trust in business, coupled with increasing social activism
  • Globalisation and high levels of connectivity
  • Changing consumer and employee profiles
Key developments in FY2021

We are committed to implementing a consistent approach to learning that is linked to talent management, succession and the improvement of skills and productivity across our business. Our primary aim is to increase and improve our employees' productive output and shorten the time to competence. As can be seen from the table detailing training hours, our training focus is on the lower levels of the organisation.

Globally, all employees undergo Code of Ethics and safety training. However, each region has targeted learning and development programmes focused on meeting its own particular needs. Some of the regional initiatives are set out below.

In Sappi Europe, we continued with implementation of the Cornerstone learning, talent and performance management systems which automates and improves processes around performance reviews, goal management, competency management and development planning. The region continued with the three to four-year apprentice vocational training programme implemented initially at our four German-speaking mills, now also in operation in Finland and Belgium. This involves approximately 240 apprentices and is helping to build a technical skills pool that will be used to replace staffgoing on retirement over the next three to four years.

In Sappi North America, the internship programmes at Sappi's three US mills are helping to create a pipeline for entry level talent, specifically engineers and some functional positions to offset the losses associated with the ongoing wave of retirements. Targeted salesforce training for the graphics and packaging and speciality paper groups was also implemented. We also expanded our curriculum-based training system using the Convergence platform – workforce training and compliance management software that offers a single platform from which to deliver training programmes – at Somerset Mill for both hourly employees and entry level engineers. In addition, we expanded Cloquet Mill's supervisor training module, provided introductory production training at the same mill and introduced new supervisor training at Somerset Mill. Westbrook Mill continued with multi-craft training to move to a single craft shop.

In Sappi Southern Africa there was a concerted effort for mill foremen and superintendents to complete the safety and performance improvement programme called Lean on Me. A total of 403 employees across the mills are currently enrolled in the programme and are completing a combined average of 1,500 online courses, classrooms and practical assignments on a monthly basis. The region refreshed the content of the Manager in Training and LeadX – a leadership development programme targeting future heads of department – programmes with the new leadership culture requirements from Thrive25 and deployed this content to new groups of participants. We also continued to utilise online Pulp and Paper training from Convergence to improve awareness of key processes and competence in the mills.

Training in Sappi Trading was varied, ranging from leadership training for senior managers in Hong Kong, to Portuguese language courses in Mexico.

Training hours per region in 2021: all employees

    No grade Unskilled Semi-
skilled
Skilled
technical
and junior
management
Professional
and middle
management
Senior
management
Top
management
Total
SEU   25.19 5.03 7.28 15.17 14.07 8.86 22.74
SNA   117.63 19.17 29.78 33.86 18.25 9.33 85.10
SSA   320.86 28.96 40.75 37.59 26.50 10.88 3.36 63.65
Total   65.35 28.96 39.41 31.68 23.33 14.07 6.61 48.29

Opportunities for value creation

South Africa has a critical need for technical and artisan skills. We continued to focus on technical development through a combination of technical online training and specialised classrooms – our partnership with the Southern African Institute of Welding for accredited welding training at Saiccor Mill is an example. Another milestone was the attainment of full apprentice and trade test accreditation at the Skills Centre at Ngodwana Mill. The first phase training for apprentices from Stanger and Saiccor Mills was completed at the Ngodwana Skills Centre, with further benefit gained from local Sappi-owned accommodation adjacent to the centre. The cost savings from the accommodation are being used to provide further training.

By contributing to technical competency levels in South Africa, we are ensuring a pipeline of skills which meets our needs while creating positive social impact and contributing to the wellbeing of our communities.

Creating a positive social impact in our communities

Why it's material

In line with our Thrive25 commitment to being a trusted partner, we work to promote shared value and create positive social impact beyond the fence lines of our mills and plantations. Our aim is to create positive, meaningful and sustainable systems change for the benefit of our communities, particularly for those at a disadvantage as a result of complex, long-term systemic issues. In doing so, we foster positive community relationships, enhance our reputation, become a more attractive employer and secure our licence to operate – and thrive.

How this issue links to other aspects of our business

Our global priority SDGs


Our additional SSA priority SDGs

Our top 10 risks

  • 4 Sustainability expectations
  • 7 Cyclical macro-economic factors

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Rising social inequality
  • Continued erosion of trust in business, coupled with increasing social activism
Key developments in FY2021

Our corporate citizenship initiatives and programmes are in line with, and supportive of, our business strategy and are developed with input from key stakeholder groups. They are also being matched against our UN SDG commitments. Our support is focused on our employees, our customers and the communities where we have an impact. We have prioritised community support projects with a particular focus on education, environment, health and welfare. Our preference is for multi-year programmes which create sustained impact in our communities. The majority of spend is allocated to South Africa, given the development needs of the country. Each region has its own programmes which are detailed extensively in our Group Sustainability Report, available at www.sappi.com/2021GSDR.

In FY2021, the Covid-19 global pandemic continued to dominate the business and social landscapes. We adjusted our regular corporate citizenship programmes to meet community needs. We responded swiftly to protect the safety of our employees and communities as well as to address the negative economic and social impacts, including the provision of personel protective equipment, sanitiser, food parcels and other localised support.

During the year Sappi joined the Circular Bioeconomy Alliance (CBA), a voluntary organisation working to accelerate the transition to a circular bioeconomy through tangible local activities, such as Sappi's own Project Khulisa tree grower scheme.

In Europe the previously established Covid Hardship Fund continued to receive contributions from staff, and it made donations to the WHO Covid-19 Solidarity Response Fund.

In North America the Ideas that Matter (ITM) grant programme, which was suspended for 2020 due to the focus on our Covid-19 response, was revised and relaunched. As from 2021 designers from around the world will be able to submit ideas that include paper packaging projects in addition to print and digital communications projects, aligned with at least one of the 17 UN SDGs. Submissions should show how print design can improve the lives of others. An amount of US$250,000 has been made available for ITM grants.

In South Africa a review of support programmes led to the adoption of a new Social Impact Strategy for SSA which will inform planning for the corporate citizenship programme from FY2022 onwards. The strategy will ensure that disparate current initiatives are reworked into a single coherent framework enhancing our strategic approach to local communities and national and local government.

Sappi Southern Africa partnered with the National Business Initiative to establish a small business development hub within the Ilembe District in KwaZulu-Natal, where Sappi's Tugela and Stanger Mills are located.

During FY2021 Sappi Southern Africa formally joined the Shared Value Africa Initiative. The move aligns with our corporate purpose and our new approach to social impact. The membership enables us to collaborate and partner on mutually beneficial business relationships with likeminded organisations with values and principles that focus on creating economic value and value for society – Profit with Purpose.

Spend in 2021

    2021
Sappi Europe   €100,000
Sappi North America   US$145,100
Sappi Southern Africa   ZAR48 million

Note: The figure for SNA is much lower than in previous years because we suspended our longstanding ITM programme (spend: US$250,000) for FY2021. The grant programme has been revised and relaunched for 2022.

Opportunities for value creation

In South Africa we anticipate that the newly adopted social impact strategy will enable us to leverage our financial commitment, enhance the efficacy of our programmes and promote greater levels of collaboration.

Planet

Sourcing sustainable woodfibre

Why it's material

Healthy, resilient forests are the foundation of our business. Sustainable forest management can maintain or enhance forest carbon stocks and sinks, while wood products store carbon and act as substitutes for emissions-intensive materials. Responsibly managed forests play an important role in mitigating climate change, and we are determined to be part of the solution to this challenge by acting as a custodian of land and forests. We believe that robust, internationally recognised and third-party verified forest certification systems are effective tools for promoting sustainable consumption and production, as well as combating deforestation and illegal logging through proof of legality and responsible practices.

Accordingly, we strive to increase the amount of certified fibre supplied to our mills and prioritise responsible management on our plantations in South Africa. As sustainably managed forests are more productive, by doing so we ensure a sustainable supply of woodfibre.

How this issue links to other aspects of our business

Our global priority SDGs

Our top 10 risks

  • 2 Evolving technologies and consumer preferences
  • 3 Supply chain disruption
  • 4 Sustainability expectations
  • 5 Climate change

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Climate change continuing to impact businesses and reshape societies
  • Resource scarcity and growing concern for natural capital
Key developments in FY2021

Promoting responsible forestry

All Sappi's mills in Europe, United States, and Canada are both Programme for the Endorsement of Forest Certification (PEFC) and Forest Stewardship Council (FSC), and in the United States also Sustainable Forestry Initiative (SFI) Chain of Custody (CoC) certified. Sappi's own tree plantations in South Africa are both PEFC and FSC-certified. The mills in South Africa are FSC CoC-certified and will achieve PEFC CoC certification soon. This approach enables us to offer a wide product portfolio of certified products, and gives us full traceability of purchased wood-based raw material. In so doing, we hope to drive responsible production and consumption patterns and demand for wood-based products originating from certified forests.

In 2021, 77% (2020: 73%) of all the wood-based raw material supplied to Sappi's mills originated from FSC or PEFC (incl. SFI) certified forests. In Europe, North America and South Africa, the share of certified woodfibre supplied in 2021 was respectively: 87% (2020: 80%), 57% (2020: 55%), and 85% (2020: 83%). Much of the woodfibre we use is dual certified. In 2020 and 2021, the CoC processes were extended to new products such as Valida fibrillated cellulose, as well as Symbio composite materials combining cellulose from wood and thermoplastics.

We engage with wood and pulp suppliers to promote and increase the share of certified forests and wood, and actively participate in the development of FSC, PEFC and Sfisystems. In South Africa, we operate a FSC group scheme, which offers FSC certification for 42 private members with 41,000 ha of land as at the end of FY2021.

We offer growers in this scheme a premium for certified timber, thereby encouraging them to invest in sustainable management practices.

In the United States, the Sappi Maine Forestry Programme and the Sappi Lake State Private Forest Programme assist forest landowners to meet their objectives for managing their woodland. Sappi's trained foresters are able to develop a forest management plan geared to the interests of the landowner including wildlife management and aesthetics, marketing of timber to generate maximum return and providing an extensive network of environmental and marketing resources. In South Africa, qualified extension officers provide growers in our Sappi Khulisa enterprise development scheme with ongoing growing advice and practical assistance.

Ensuring security of fibre supply

Sappi Forests enhances our fibre base in South Africa through leading-edge tree improvement programmes which aim to produce high-quality wood with the required pulping characteristics, increase yield per hectare and mitigate against pests and diseases.

In South Africa, 56% of our plantations can be classified as having high site sensitivity. Sappi has developed a site sensitivity risk map that includes various site risks (slope, erodibility, soil depth, soil organic carbon content, soil texture, etc). Specific management operational guidelines have been or are being developed based on the different site sensitivity classes. Silvicultural practices on these sites are reviewed and changed to use practices like mulching to mitigate site impacts.

Sappi and the first ever PEFC forest management certificate in South Africa

In early 2021, Sappi was awarded the first ever PEFC forest management certificate in South Africa. This achievement validates that Sappi's forest management practices in South Africa meet the requirements for sustainable forest management set out in the PEFC-endorsed standard for the region – Sustainable African Forestry Assurance Scheme (SAFAS).

The certification will enable Sappi to offer PEFC-certified wood from our plantations in South Africa, giving further assurance to Sappi's local and global customers that the wood raw material originates from responsibly managed forests. This is in addition to the longstanding FSC certification that we hold for all our plantations in South Africa. The potential of SAFAS in South Africa is that it incorporates cutting-edge, innovative and effective approaches to also make forest certification more accessible to South Africa's small landowners. We believe that this has great promise for ensuring certification that not only delivers social and environmental values, but also supports socio-economic and development priorities.

What makes PEFC-endorsed national forest certification systems, such as the SAFAS, so relevant is that they are locally developed and owned, and that they respect the country's operational and cultural conditions. This is important because it ensures that the advantages of certification are accessible to all forest owners, with a particular emphasis on smallholders.

Ben Gunneberg PEFC International, CEO and Secretary General

Committed to zero deforestation

Our commitment to zero deforestation means knowing the source of woodfibre; ensuring that suppliers implement practices to promptly regenerate forests post-harvest, which is required under the global forest certification standards that we are committed to upholding. It also means implementing our Supplier Code of Conduct to assess supply-chain, ethical and legal risk continually; and not sourcing from suppliers associated with deforestation.

Opportunities for value creation

Traditional tree breeding is a relatively slow process. Our adaptation strategy to mitigate the impacts of environmental change, is to select and produce the most optimally suited hybrid varieties for each climatic zone through our Sappi Forests' tree breeding programme. Our tree breeding division has a target of developing a hybrid varietal solution for all our sites by 2025. We are also making use of genetic tools, like DNA fingerprinting, to enhance and accelerate our breeding and selection process. In addition, as pine and eucalypt hybrids are more successfully propagated through rooted cuttings rather than seed, a strategy is being rolled out to meet future requirements. In addition to the recent construction of Clan Nursery and the rebuild of the Ngodwana Nursery, we plan to upgrade Richmond Nursery in 2023 to enable the production of additional hybrid cuttings in addition to seedlings.

Prioritising renewable and clean energy

Why it's material

This issue is inextricably linked to mitigating greenhouse gas emissions in order to address climate change. Decarbonisation strategies involve the replacement of fossil-based fuels with either renewable or clean energy sources. Evolving legislation supporting ambitious decarbonisation targets within the regions in which we operate and sell our products, together with increasing consumer awareness of the need for low carbon products are informing our decarbonisation strategy. So too, is our responsibility to contribute to a thriving world.

How this issue links to other aspects of our business

Our global priority SDGs

Our top 10 risks

  • 2 Evolving technologies and consumer preferences
  • 4 Sustainability expectations
  • 5 Climate change

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Climate change continuing to impact businesses and reshape societies
Key developments in FY2021

In FY2021, 52.3% of the energy we used was renewable, mostly from own black liquor.

The global drive for decarbonisation is manifested in each region where we operate. It includes developments such as the European Green Deal, the American Energy Innovation Act and in South Africa, the Renewable Energy Independent Power Producer programme and the carbon tax implemented in 2019. We have increased our focus on energy efficiency measures and low-carbon initiatives.

Ngodwana Energy, our biomass-based project at Ngodwana Mill in which we have a 30% stake, has now been commissioned. In addition, construction of our fuel rod project which uses biomass, lignosulphonate and coal slurry to manufacture fuel rods to replace coal and anthracite, is complete. Burning these fuel rods has a far lower environmental impact than coal or anthracite.

Setting emission reduction targets

Recognising the role that industry needs to fulfil to be part of the solution in responding to climate change, Sappi has been placing increased strategic focus on decarbonisation. Each region has established decarbonisation plans and our mills are heavily invested in implementing projects like the Saiccor Mill expansion project, as well as analysing and preparing projects, plans and pathways to further reduce emissions. We initiated our Science Based Targets initiative (SBTi) target validation process in June 2021 and expect validation to be complete in FY2022.

Related to climate action, in FY2020, we made a global commitment to a 17% reduction in specific GHG emissions (Scope 1 and 2 combined) by 2025 – aligned with a well below 2°C pathway. This is the first time that we have established a groupwide GHG emissions reduction target.

Carbon pricing

Carbon pricing influences business decisions and company strategy and is used in our capital project assessments and expenditure at all our operations, as well as in our energy budget processes. We use differentiated shadow pricing where the internal price on carbon varies per region because there are different requirements and objectives in different regions. Decisions on capital projects now take into account the carbon impact.

Additionally, aligning with our global SBTi decarbonisation target, in 2022 we will set up a task team to establish a global carbon pricing standard/metric to ensure that decarbonisation capital is optimised on a global basis. While meeting regional legislative decarbonisation targets is our first priority in order to maintain our licences to operate, we recognise that a more holistic approach is required to ensure the greatest returns on our decarbonisation capital expenditure as we strive to reduce our global carbon footprint.

Using a high level of renewable energy

In some instances, Somerset (North America), Alfeld, Ehingen, Stockstadt, Gratkorn and Maastricht Mills (Europe) and Ngodwana Mill (South Africa), excess energy is generated which is sold back into the power grid. This energy is used for district heating in the vicinity of Sappi's plants and for export into the public grid.

Emissions are avoided by using renewable fuel energy sources instead of fossil fuel sources. In addition, emissions are avoided by power self-sufficiency instead of purchased power from an external power supplier with higher emissions than self-produced power.

Renewable energy (%)

SEU's decarbonisation roadmap

The European Union (EU) Green Deal aims to lead the world in achieving climate neutrality. With the adoption of the European Climate Law, together with the tabling of a suite of legislative proposals within the Fit for 55 legislative package, 2021 was an unprecedented year for policy reform. The EU's transition towards a climate neutral economy is ambitious and the forest sector is well positioned to play a leading role. For SEU, this legislation has affirmed our decarbonisation investments and accelerated our progress in 2021 and beyond.

Sappi's decarbonisation plan in Europe

Our European 2021-2025 decarbonisation plan includes over 80 proposed projects for implementation that should contribute to our regional 2025 target to reduce specific greenhouse gas emissions by 25%.

The plan's main priorities include:

  • Exiting coal and increasing the share of renewable energy
  • Sourcing green electricity
  • Increasing eco-effectiveness to reduce energy consumption.

Latest investment decisions

In 2021, major investments were approved for three of the four key projects outlined in our decarbonisation plan. One of these projects at Kirkniemi Mill in Lohja, Finland enables a switch in energy sourcing to renewable bio-energy. With this investment the mill's direct fossil greenhouse gas emissions will reduce by approximately 90%, which is equivalent to 230,000 tons of carbon dioxide annually.

The project, set for completion in early 2023, will contribute significantly to SEU's decarbonisation roadmap by exiting coal at one of our last facilities partially using this fuel type. Biomass will then be used in Kirkniemi's multi-fuel boiler, built in 2015. The investment will establish the equipment needed to receive, store and handle woody biomass like the bark, sawdust and wood chips used for energy production. By using these biomass types for energy production, we derive further value from this forest resource.

Project advancements at Gratkorn Mill

The first major project initiated within our decarbonisation plan was the complete modernisation of boiler 11 at Gratkorn Mill. Approved in 2020, the investment into state-of-the-art technology makes the shift to a multi-fuel boiler in two phases, with the end goal of only using sustainable and renewable fuels. This project was initiated in mid-2021 and in early August the last coal was fired onsite.

Running from August 2021 through early 2022, the project envisages full refurbishment of the boiler, as well as equipping it with modern technologies, systems and installations to handle new fuel types and meet progressive environmental standards. The rebuild will enable the mill to eventually reduce carbon emissions by 30%. In addition, the chosen technology for the project will additionally allow us to reduce dust and nitrous oxide (NOx) emissions, further improving our impact on air quality.

Scope 2 reductions in Germany

In addition to our focus on Scope 1 emission reductions, in 2021, 50% of the electricity purchased at our three mills in Germany was green. This helped to contribute directly to the specific carbon emission reductions we realised in 2021.

Opportunities for value creation

In 2020 we established the 1.5 Future Energy Technologies & Decarbonisation cluster, tasked with exploring and developing novel technologies for fuel shift and deep decarbonisation in terms of Scope 1 and 2 emissions. This aligns with our commitment to decarbonising our operations in the decades ahead to 2050 – with specific targets defined in our science-based targets. The initial part of our decarbonisation journey will largely involve the deployment of known technology such as biomass boilers – but we cannot achieve net zero with today's technology.

Accordingly, the cluster's role is to identify, assess and champion new and emerging technologies which will be fundamental to meeting our net zero aspirations. The cluster has a particular focus on scanning or developing the future and new technologies required to dramatically reduce energy requirements in pulp and papermaking processes and energy supplies.

Responding to climate change

Why it's material

The Sixth Assessment Report conducted by the Intergovernmental Panel on Climate Change (IPCC) concludes that "Human-induced climate change is already affecting many weather and climate extremes in every region across the globe. Evidence of observed changes in extremes such as heatwaves, heavy precipitation, droughts and tropical cyclones and, in particular, their attribution to human influence, has strengthened since AR5."(1)

Accordingly, we have identified climate change as a top 10 risk that underpins all four key fundamentals of our business strategy. Responding to climate change in a meaningful manner is not only key to our business success, it is also important for the greater good of our communities, stakeholders and our customers. There is clear alignment between our response to climate change and how it directly links with five of the seven UN SDGs that we have prioritised at global level.

(1) https://www.ipcc.ch/report/ar6/wg1/.

How this issue links to other aspects of our business

Our global priority SDGs

Our top 10 risks

  • 2 Evolving technologies and consumer preferences
  • 4 Sustainability expectations
  • 5 Climate change

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Climate change continuing to impact businesses and reshape societies
Key developments in FY2021

We continue to develop our climate strategy and have made significant progress in developing our near-term plans to mitigate our greenhouse gas emissions with the identification of key projects that will decarbonise our operational impact over the next five years.

We also made significant progress in assessing our resiliency to the physical risk and transitional risks and opportunities of climate change as framed by the Task Force on Climate-related Financial Disclosures (TCFD).

Within the context of the TCFD, in the past year we focused on our primary assets. This included 18 of our mills covering all three regions, as well as all our plantations in South Africa. Over 60 employees participated in the initiative. Leveraging the operational risk teams from each region, they documented past climatic events, costs and mitigation strategies in order to understand the physical and transitional risk more fully. We made very good progress in assessing how we can embed the consideration of climate change in our current risk register methods, thereby improving our overall approach to risk.

We worked with outside consultancy, S&P Global and the Global Change Institute (GCI) at the University of the Witwatersrand (WITS), to help us establish long-term climate change trends and implications to 2050, primarily for South Africa. Due to the nature of our operations – in other words, capital intensive assets that are not easily relocated – we adopted a conservative view on physical climate projections, aligning with Representative Concentration Pathway (RCP) 8.5.

Specific GHG (Scope 1 and 2) emissions (kg CO2e/adt)

Comment: Globally, specific Scope 1 and 2 emissions have declined by 8.3% over five years.

Mitigating chronic physical risks

Our most vulnerable assets to physical climate change are our plantations in South Africa. Our scientists have developed a high level of expertise in assessing physical climate change impacts. Their knowledge is supplemented by our strong partnership with the WITS GCI. A preliminary climate change investigation conducted by Sappi Forests' scientists indicated that chronic physical risks are our key risk mitigation focus.

One of the ways in which we mitigate physical risks is through continuous assessment of the health of our growing stock. This is measured through continuous evaluation of trees with emphasis on growth rate, age, utilisation efficiency. Annual measurement programmes using a pre-harvest measurement of 20,000 hectares per annum (8%), as well as an airborne laser scan of all the plantations conducted every second year together with analysis of growth trends and drivers from, for example, permanent sample plot programmes and actual versus planned yields per compartment are used to continuously adjust the annual cut and detect emerging problems.

Climate modelling in South Africa

We continued our work on a project with other industry members and the WITS GCI in South Africa. Phase 1, which began in 2020, involved the generation of raster climate surfaces for the entire forestry domain of South Africa, at 8 km resolution, with monthly time resolution, for the years 2020, 2030 and 2040 to 2100. Global Climate Models were regionally downscaled using a conformal-cubic atmospheric model. Raster climate surface data for the entire forestry domain of South Africa, at 9 x 11 km resolution, with monthly and daily time steps from 1961 to 2100 was supplied. Each dataset contained 17 climatic variables as set out below.

Summarised data was shared with S&P Global Trucost and used in quantifying our global climate risks for TCFD reporting.

The 17 climatic variables regionally downscaled by WITS GCI

In terms of Phase 2, a proposal has been made for further support to the WITS GCI to continue climate modelling activities and develop downscaled products (possibly using two or more future scenarios such as RCP 4.5 and RCP 8.5) while simultaneously maintaining underlying climate projections; to enhance knowledge and insight on impacts of climate change specific to forestry and to develop human capacity for the generation and interpretation of regional downscaled climate surfaces.

Opportunities for value creation

Sappi's tree breeding programme has seen an important shift from planting pure species to more productive, better adapted and more pest and disease resistant hybrids of both hardwood and softwood trees grown in our plantations in South Africa. This change in strategy is being driven by the need to respond more rapidly to the combined challenges of increased globalisation and changing weather patterns (driven by climate change) that are resulting in significant increases in pest and diseases in the tree crop. Sappi Forests' tree breeding programme is producing and selecting the most optimally suited hybrid varieties for each climatic zone, with a target of developing a hybrid varietal solution for all Sappi sites by 2025. The benefit of developing new hybrids is that breeders can additively combine the benefits from two or more species and develop varieties that have improved fibre yield and wood quality as well as better disease/pest tolerance. Tree improvement is aimed at increasing pulp yield per hectare by testing various species and hybrids across Sappi's diverse landholdings. As well as growth improvements, trees are bred for superior wood properties and resistance to biotic and abiotic threats including frost, drought, pests and diseases.

Focusing on water stewardship

Why it's material

Water is essential for the health of the forests and plantations from which we source woodfibre. In addition, pulp and paper operations are highly dependent on the use and responsible management of water resources. Water is used in all major process stages, including raw materials preparation (wood chip washing), pulp cooking, washing and screening, and paper machines (pulp slurry dilution and fabric showers). Water is also used for process cooling, materials transport, equipment cleaning, general facilities operations, and to generate steam for use in processes and onsite power generation and various other purposes. Against this backdrop, responsible water stewardship is essential for Sappi and for a thriving world.

How this issue links to other aspects of our business

Our global priority SDGs


Our additional SSA priority SDGs

Our top 10 risks

  • 2 Evolving technologies and consumer preferences
  • 4 Sustainability expectations
  • 5 Climate change

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Climate change continuing to impact businesses and reshape societies
Key developments in FY2021

Collaborating for water stewardship

We have finalised a Water Stewardship agreement with the World Wide Fund for Nature South Africa (WWF-SA), aimed at improving water security in the uMkhomazi catchment area. With our significant manufacturing and forestry footprint in this catchment area, which forms part of the Southern Drakensberg Strategic Water Source Area in KwaZulu-Natal, it makes sense for us to focus our collaborative efforts here, where our Saiccor Mill and 42,000 ha of our forestry land is situated.

The catchment also serves commercial farmers, subsistence farmers and domestic users in dispersed settlements across the area. To meet the future needs of all users, sufficient water at an acceptable level of assurance and quality must be secured. We believe that this can only be achieved through multi-stakeholder collaboration across the landscape. To help coordinate and facilitate the approach, we have launched a two-year project with WWF-SA to engage local communities, civil organisations, leadership and regulatory authorities in dialogue and cooperation focused on water stewardship. This collaborative approach is an extension of an innovative structure, known as the Integrated Community Forum, which we pioneered and through which we engage with local adjacent communities.

The multi-stakeholder engagement will provide a platform for open dialogue regarding water resources in the catchment and will concentrate on four main focus areas to improve water security in the uMkhomazi, namely:

  • Improved water governance through multi-stakeholder engagement
  • Water-use efficiency
  • Removal of alien invasive plants and wetland rehabilitation
  • Capacity development of local communities in natural resource management.

Thrive25 targets in South Africa

The World Resources Institute has categorised South Africa as being characterised by medium/high water stress(1), while a publication issued by UN Water puts the country in the medium risk category.(2) Water stress is defined as freshwater withdrawn as a proportion of available freshwater resources. Use of the WRI's Aqueduct tool(3) which goes into a level of granular detail, indicates that two of our mills are in areas of low/medium risk, two in an area classified as medium/high risk and one in an area of high risk. Our decision to establish water-related Thrive25 targets in South Africa was based on stakeholders' general perception that the country is facing extremely high levels of water stress. This is based on devastating droughts in recent years and on the fact that South Africa's rainfall, at 490 mm per year, is half the world average.

(1) https://www.wri.org/insights/17-countries-home-one-quarter-worlds-population-face-extremely-high-water-stress.
(2) https://www.unwater.org/publications/summary-progress-update-2021-sdg-6-water-and-sanitation-for-all/.
(3) https://www.wri.org/aqueduct.

Specific process water extracted (m3/adt)

Comment: Year on year, specific process water extracted decreased by 6%.

Opportunities for value creation

The interconnected nature of the UN SDGs is clearly highlighted by the impact of climate change on water. The Water Stewardship project with WWF-SA will not only impact on SDG6: Clean Water and Sanitation, but also on SDG1: No Poverty, which is one of Sappi SA's additional priority targets. The opportunity for green jobs through the partnership's focus on alien invasive plant clearing is also fully aligned with Sappi's commitment to ESD that promotes sustainable livelihoods through capacity building of small and medium enterprises. (Described in further detail in Our operating context of this report)

Accelerating circular business models

Why it's material

Circular thinking such as we practise at Sappi goes beyond mere waste beneficiation. We approach our environmental impact from a holistic perspective grounded in life-cycle thinking, from procurement of raw materials and energy through manufacturing, use and the next life of our products. The benefits of this approach align with our purpose of contributing to a thriving world, one with less waste, lower costs and reduced environmental impact.

How this issue links to other aspects of our business

Our global priority SDGs

Our top 10 risks

  • 2 Evolving technologies and consumer preferences
  • 4 Sustainability expectations
  • 5 Climate change

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • The move towards a circular economy
  • Climate change continuing to impact businesses and reshape societies
  • Resource scarcity and growing concern for natural capital
Key developments in FY2021

In keeping with our focus on circular economy principles, we are working to increase our use of renewable energy and eliminate waste through superior product and process design. As an example, we increased the percentage of solid waste beneficiated from 65.65% in 2017 to 76.62% - an increase of 16.7% over five years.

Other developments, including our ongoing progress in adjacent markets and collaboration in a textile recycling project, together with new products, are detailed above.

Beneficial use of solid waste (%)

CASE
    STUDY

Recognition for our circular project in North America

In FY2021, in North America, we were a recipient of the Leadership in Sustainability – Water Award from the American Forest & Paper Association (AF&PA) as part of its Better Practices, Better Planet 2020 Sustainability Awards programme. We were recognised for our 'Caustic Reclaim and Reuse' project at Somerset Mill, Maine.

The project reduces the volume of purchased chemicals required to meet the mill's boiler flue-gas desulphurisation (FGD) environmental goals, as well as offset the acid usage in its onsite waste treatment plant. Somerset Mill operates a large steam plant and utilises demineralised water as a main makeup water source for its recovery boiler and two multi-fuel power boilers. This project repurposes a large source of spent caustic from the demineraliser regeneration operation to meet FGD goals, as well as offsets purchased acid usage in our onsite waste water treatment plant as a consequence of the spent caustic utilisation.

The project significantly reduces overall caustic purchases as well as acid usage for effluent treatment. The reclaimed caustic concentration to the wet industrial scrubber is significantly lower than the concentration of fresh caustic. Accordingly, not only is the spent caustic reclaimed from the sewer, but so is the water that dilutes it to the lower concentration. This added reclaimed water in turn reduces the fresh water demand to meet the FGD scrubber evaporation requirements by 45,425 litres per day. The process can be replicated at other mills which can reduce chemical demand by reusing demineralised regeneration caustic, thereby improving both environmental footprint and the bottom line.

Opportunities for value creation

In the year under review we joined the CBA which was established by His Royal Highness, the Prince of Wales, under his Sustainable Markets Initiative in 2020. The alliance aims to accelerate the transition to a circular bioeconomy that is climate neutral, inclusive and prospers in harmony with nature, by providing knowledge-informed support and a learning and networking platform. It connects the dots between investors, companies, local communities, governmental and non-governmental organisations to advance the circular bioeconomy – while also restoring biodiversity. Current activities include forest landscape restoration and agroforestry projects in Africa, South America and Asia.

While our membership is still in its early days, we believe that collaboration with the alliance and leveraging our agroforestry knowledge gained through our Sappi Khulisa programme will present significant opportunities going forward.

Safeguarding and restoring biodiversity

Why it's material

Experts concur that connected, diverse and extensive ecosystems can help stabilise the climate and will have a better chance of thriving in a world permanently altered by rising emissions. Stable, resilient ecosystems are important to Sappi given that our primary input, woodfibre is a renewable natural resource and depends on ecosystem services such as healthy soils, clean water, pollination and a stable climate. Safeguarding and restoring biodiversity is important for our business, our stakeholders and the planet.

How this issue links to other aspects of our business

Our global priority SDGs

Our top 10 risks

  • 4 Sustainability expectations
  • 5 Climate change

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • The move towards a circular economy
  • Climate change continuing to impact businesses and reshape societies
  • Resource scarcity and growing concern for natural capital
Key developments in FY2021

Implementing a Biodiversity Strategy and Action Plan

The development of a Biodiversity Strategy and Action Plan (BSAP) for Sappi Forests was initiated in November 2020. The BSAP refers to the UN SDGs, the South African National Biodiversity Strategy and Action Plan, and the South African National Biodiversity Institute (SANBI) biodiversity targets. The seven steps which form the framework for the development of the strategy are aligned with the stakeholder requirements of the Textile Exchange Biodiversity Module. Guidance from the Science Based Targets Network has also been used as reference. The latter aims to transform economic systems and protect the global commons – air, water, land, biodiversity and oceans.

A key component of the strategy is to undertake a biodiversity risk assessment. There are two components to the risk assessment: a spatial assessment and an issues-based risk assessment. The spatial component of this assessment involves identifying high conservation values on our plantations. This is a certification requirement and, drawing on past knowledge and more recent methodologies, assessments of critical biodiversity areas and vegetation types present on Sappi land have been completed for both provinces.

The issues-based risk assessment complements draft targets that have already been identified. In general, four hazards were identified as high risks:

  • Soil erosion and sedimentation
  • Stream flow reduction
  • Ecosystem modification (caused by the spread of plantation species off our land)
  • Invasion by alien species such as wattle, lantana and bugweed which we do not grow.

Mapping vegetation

One of the pillars of Sappi's Thrive25 strategy is that we will act as a custodian of land and forests. In alignment with this, we identify, monitor and manage Important Conservation Areas (ICAs) on our landholdings in South Africa. In FY2020, we reported that we had made progress in terms of our Thrive25 biodiversity target by addressing our first biodiversity objective underpinning this task. This involved understanding what types of vegetation are present on our plantations, as well as their conservation value, thereby enabling the compilation of appropriate management plans for implementation.

Assessing Important Conservation Areas

In FY2021, we completed the assessment of ICAs for all our plantations in Mpumalanga. ICAs are areas that are important at the local level and are classified using a systematic conservation planning approach. Criteria used include the presence of both plant and animal red data species, the threat status of the ecosystem, the size, connectedness, condition and aesthetic and recreational value of the area. The ICA assessment is currently in progress for our plantations in KwaZulu-Natal.

Approximately 160 sites on Sappi-owned land are currently classified as ICAs, adding up to about 39,500 ha of a diverse range of habitats including grasslands, wetlands and riverine areas and natural forest patches.

Plantations are now required to identify three projects from the list of ICAs that can be actioned over the next few years to improve scores from the baseline condition assessment. To assist in moving towards achieving the 10% biodiversity improvement envisaged by Thrive25, Sappi Forests has developed an ICA projects template to ensure that the progress of the projects can be measured in a standardised manner. Based on the findings of the initial assessment of each area, suggestions for improvement can range from increased weed control to attain a maintenance status, improvements in sub-standard crossings to improve stream flow and reduce sedimentation, and the prevention of overgrazing and frequent burning of important grasslands.

Opportunities for value creation

We see promising opportunities for value creation by working with a broad range of stakeholders on biodiversity- and forestry-related issues, including the following:

  • In collaboration with Meat Naturally and other stakeholders (Zikhali community and the traditional authority), we are working on the uMhlathuze Grazing Project which involves the communities bordering our Mooiplaas plantation. It is proposed that an association will be formed by the community to run the project and that eco-rangers from the community will be trained to herd and manage the cattle. With the community's buy-in, the project will mitigate the negative impacts associated with overgrazing and indiscriminate fires which are a risk to Sappi plantations. Positive benefits include grassland restoration to be measured by veld condition assessments, improved community relations and enhanced regional economic development.
  • Under the auspices of Forestry South Africa (FSA), we are participating in a Farmers' Guideline Working Group. Steps have been taken to determine material and methods for developing environmental guidelines such as burning (residue management) and weeding specifically for farmers.
  • Again under the auspices of FSA, we are chairing a Soil Conservation Working Group, established due to increasing concerns related to soil loss, sedimentation in streams from forestry operations and operational procedures that exacerbate this problem. This is in collaboration with various industry representatives in the Environmental Management Committee of FSA, soil and forestry specialists, both independent and based at the University of Stellenbosch.