Our operating context
Our external operating environment presents risks and opportunities, impacts our ability to generate value and informs our response to our stakeholders as well as our approach to material matters.
The ongoing Covid-19 pandemic
The pandemic and associated lockdowns continued through most of FY2021 across the world.
With safety as our core value and top priority, we continued to emphasise the importance of safety protocols. As at year end, just over 1,600 members of our workforce of 12,492 people had been infected, with numbers peaking in December 2020 and January 2021. We embarked on an extensive awareness campaign to encourage people to get vaccinated. In South Africa, where the roll out was slow, we introduced on-site vaccination stations from the beginning of August for employees, their families and for contractors.
In each region where we operate, we responded to the needs of society by donating funds and supplies.
Social unrest and need
Halfway through 2021, South Africa was engulfed by the worst unrest and mass violence since the end of apartheid, triggered by ex-President Jacob Zuma’s imprisonment for contempt of court. Described as an insurrection targeting the country’s economy and infrastructure, the root causes go far deeper to ongoing lack of service delivery, the economic and social fall outs of Covid-19, endemic corruption and the fact that almost half of South Africa’s adult population of 35 million live below the breadline. While there was no material damage to any of our plants as a result of the civil unrest, work at our three mills in KwaZulu-Natal and associated logistical supply chains was halted at the height of the unrest. We incurred a permanent loss of sales volumes of about 28,000 tons of dissolving pulp (DP) and 7,000 tons of paper.
While we deplore the violence and regret the loss of sales volumes, working as closely with the communities surrounding our operations as we do, we understand and empathise with the underlying root causes. We cannot fulfil the functions of government; nevertheless, we have intensified our focus on working with communities to help resolve their challenges.
Our work to uplift the communities around us began as far back as 1983 when we launched our flagship enterprise and supplier development (ESD) programme, Sappi Khulisa (previously known as Project Grow). The total area currently managed under this programme, which encompasses individual and community tree farming, is 34,755 hectares. In 2021, under this programme, 225,509 tons of timber (2020: 284,038 tons) worth some ZAR207 million (2020: ZAR232 million) was delivered to our operations. Since 1995, a total volume of 4,731,488 tons to the value of ZAR2.9 billion has been purchased from small growers under this programme.
Our ESD strategy, first initiated in 2018, has gathered sustained momentum. With the ESD strategy now embedded in the business and commitment and support at all levels of the organisation, we have seen positive improvement in stakeholder and community relations. Sappi SA has successfully integrated a total of 145 small and medium enterprises (SMEs) into the value chain. These businesses account for procurement spend of over US$9.4 million, exceeding the set annual target by US$2.45 million. In addition to the ESD spend figures, 587 jobs were sustained by the active local SMEs.
In addition, our Community Management Committees at each mill site continue to provide support to communities. (See here for further details.)
In 2021, we partnered with the National Business Institute (NBI) to develop a small business development hub within the Ilembe District in KwaZulu-Natal, where both Tugela and Stanger Mills operate. Sappi’s community members will benefit from this partnership.
The Sappi Skills Centres at our Saiccor and Ngodwana Mills train both Sappi employees and unemployed youth both for employment and for starting new businesses. The centres produced fabric face masks for internal use during lockdown and have expanded to making workwear and other items.
During the year, we also concluded two community engagement agreements at the above mills which commit both ourselves and our communities to work together in driving shared value for mutual benefit.
Intensified focus on climate change and social issues
The spotlight on climate change has been intensifying, given the extreme weather events that took place in FY2021: floods in Germany and China; fires in Canada, California and Greece; rain, rather than snow falling in Greenland and a ‘heat dome’ along the Pacific northwest coast in the USA and Canada, among others.
The Deloitte Global 2021 Millennial and Gen Z survey* highlights the importance of social change and accountability for these sectors of the population. As consumers, these sectors of the population often stop or initiate relationships based on how companies treat the environment, protect personal data and position themselves on social and political issues.
Consumers are already aware of the need for less carbon intensive products. However, as they are exposed to the extreme weather events just described, we expect this focus to gather momentum, accelerated by the increased purchasing power of Millennials and Gen Z-ers for whom environmental principles are just as important as social ones. We have an advantage in that our manufacturing process begins with sustainably harvested, renewable forest resources and we operate according to circular economy principles. We can offer a broad range of products that meet the needs of eco-conscious consumers.
Our ability to offer more environmentally friendly papers with barrier coatings was enhanced by our 2017 acquisition of Rockwell Solutions.
In terms of social considerations, we facilitate social and economic wellbeing by using labour drawn from local communities, and the services of small and medium enterprises situated in the areas around plantations and production facilities.
Banning single use plastics
Just before our year end, the first-ever global Ministerial Conference on marine litter and plastic pollution took place, with nations across the world moving to ban single use plastics.
The ban on single use plastics represents an opportunity for Sappi in that our packaging products are based on renewable, rather than petroleum-based, resources. The move to ban single use plastics is in line with the principles of the circular economy to which we are committed and with our Thrive25 commitment to creating responsibly sourced and sustainable solutions as viable alternatives to fossil-based products.