Group overview

Adapt. Advance. Amplify.

Delivering sustained value

growexplore our theme

As a company based on the power of renewable resources, we are well placed to take lessons from nature: When plants grow too quickly and are not properly rooted, they become top heavy and prone to toppling over. Similarly, if there is not enough light, even though tall, they can become spindly and not fit for purpose.

So, while growth is one of our strategic fundamentals, our approach to it is purposeful and phased. This means being responsive to our environment and the impacts of constant change on our stakeholders. It also means being rooted in our legacy of innovation and excellence and grounded by our Thrive25 strategy. Accordingly, we leverage our existing strengths and grow our people to progress in high-impact, high-value areas. We also partner to shape new marketing opportunities and industry standards that will stimulate growth.

Above all, we recognise that growth can only be sustainable insofar as it supports the health and repair of the natural environment on which we depend. And it is only inclusive when value is shared and society is positively impacted.

This is our focus as we work to build a thriving world.

Responding to our context

illumeexplore our theme

Sky lanterns – traditionally called Khoom Fay in China – can be traced back thousands of years to one of the early Chinese dynasties. They were used not only as decorative light sources but also as military signals that could communicate messages across long distances. Today, it is said they are released at traditional festivals to emphasise the unity of family coming together to celebrate the lunar new year. This is represented by the lanterns collecting in the sky and expressing the wholeness of family.

Sappi is situated in many different regions across many different cultures and countries. But we come together as one whole, OneSappi, united by our purpose which is our guiding light: Sappi exists to build a thriving world by unlocking the power of renewable resources to benefit people, communities and the planet.

Passion and excellence are the sparks that ignite thriving. And they're what keep our commitment to create a thriving future for the world and our business burning so brightly. They're also what will continue to illuminate our way forward – today and tomorrow.

Diving deeper into our,
performance and prospects

createexplore our theme

We are creators, relentless in our drive to make everyday solutions more sustainable. We understand that the power of the imagination is one of our biggest strengths and that opportunities don't just happen. Which is why we apply our creative energy to seeking them out and leveraging our partnerships to realise them.

In doing so, we harness the intellectual curiosity and critical thinking of our people to let go of certainties and develop breakthroughs that delight our customers, enable lasting outcomes for our stakeholders and a more positive impact on the planet. This aligns with our values of "making smart decisions which we execute with speed". So that when we fail, we fail fast and move on.

While innovation is key to delivering profit and margin improvement, we do not create merely because we have the available manufacturing assets, skills, technology and IP.

We do so to lead by example, inspire others and create the thriving tomorrow to which we are committed.

Governance and compensation

reflectexplore our theme

Only in still waters do things reflect undistorted. As a business, we take the time to reflect on our past actions – including assessing our relationship with our stakeholders, particularly our people – to understand more clearly where we have succeeded, where we could have done better and how we can continue to build sustainable competitive advantage. This investment in reflection enables us to calibrate the solutions we provide and our response to the world around us.

As OneSappi, we understand that like dropping a stone into a pond creates outward ripples, in today's interconnected world, our actions and decisions can have a significant impact. For example, our decarbonisation actions alone cannot bring the world to net zero, but they can have a ripple effect that influences and encourages others.

Many people think of excellence as an upward journey, but at Sappi we view it as going round and round in ever-expanding, infinite waves. This view is reflected in the use of irregular waves which symbolise energy and unity used as a design element throughout this report and in the above image.

Going forward, we will continue to focus on excellence with energy and clarity and unity of purpose.

Appendices

celebrateexplore our theme

Any sporting great will tell you that, even if they are an individual performer, their wins are due not just to their own prowess, but also to the work taking place behind the scenes. Most specifically, their win also belongs to the team backing them up – from the coaches who are with them every step of the way; to those who believe in them, even when obstacles seem insurmountable.

As we celebrate an outstanding year, we readily acknowledge that it is the outstanding perseverance, collaboration and commitment of our extraordinary people that delivered the results. We do not forget that it took tremendous courage from our people to implement the decisions that ultimately delivered so handsomely.

Together, over the last few years, we have been through some challenging times. We have taken some tough decisions and have had to make difficult calls.

Our people have countered volatility with agility, setbacks with courage and problems with perseverance and ingenuity. Through it all, they have held the flag of OneSappi and our purpose of building a thriving world high.

Together, even as we celebrate what we have accomplished, we are committed to maintaining our momentum.

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Corporate governance

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

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

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

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

 

98%

OVERALL COMMITTEE ATTENDANCE

THE BOARD OF DIRECTORS

The basis for good governance at Sappi is laid out in the board charter, which sets out the division of responsibilities between the board and executive management. The board creates and protects sustainable value by collectively determining strategies, approving major policies and plans, taking responsibility for risk management, and providing oversight as well as monitoring, to help to ensure accountability. The board is comfortable that the board charter ensures a clear division of responsibilities between management and the board and that no director has unfettered authority. The board confirms its compliance with the Companies Act and that the company is operating in conformity with its Memorandum of Incorporation. The board is satisfied that it has fulfilled its responsibilities in accordance with its charter for the reporting period.

For further information about the board and the board charter please refer to www.sappi.com

THE SAPPI BOARD AND DIVERSITY

Sappi operates globally and across a variety of markets, jurisdictions and cultures, requiring a diverse mix of experience, skills, gender, age and backgrounds. It is important that our board composition reflects this diversity, both in a South African context as well as globally. Diversity gives Sappi access to an increased range of talent, which helps to provide insight into the needs and motivations of a broader stakeholder base.

Board experience (%)

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

The composition of the board and attendance at board and committee meetings and the AGM is set out below for the period 27 September 2021 to year ended 02 October 2022:

    Board       Board committees     AGM  
Name       Audit and Risk   Nomination and Governance   Human Resources and Compensation   SETS % attendance during tenure    
Independent non-executives                          
BR Beamish              
100
 
MA Fallon            
100
 
JM Lopez                
100
 
NP Mageza            
100
 
ZN Malinga                
100
 
B Mehlomakulu              
100
 
MV Moosa          
85
 
RJAM Renders              
100
 
Sir Nigel Rudd
100
 
JE Stipp              
83
 
L Von Zeuner            
100
   
Executives                          
SR Binnie (CEO)    
100
 
GT Pearce (CFO)              
100
 
Lead director
Committee member (present)
Chairman
Ex officio
Absent
By invitation

Appointed 01/09/2022
Resigned 09/02/2022

Attendance by committee members I Total possible attendance by committee members I % of attendance by board and committee members
Board and committee attendance for the period October 2021 to September 2022

DIRECTORS’ INDEPENDENCE (%)

DIRECTORS’ AGES (%)

DIRECTORS’ TENURE (%)

DIVERSITY (%)


STRATEGIC FOCUS AREAS

In addition to the standard items on the board’s agenda, the 2022 focus areas included:

All the top risks as well as emerging risks have been focused on by the board during 2022.

The following areas will receive specific focus by the board in 2023:

INDUCTION AND TRAINING OF DIRECTORS

STAKEHOLDER COMMUNICATION

The board is responsible for presenting a balanced and understandable assessment of the group’s position in reporting to stakeholders. The group’s reporting addresses material matters of significant interest and is based on principles of openness and substance over form. The reporting includes information on key trade-offs that have to be made. Various policies have been developed to guide engagement with Sappi’s stakeholders such as the Group Stakeholder Engagement policy and Group Corporate Citizenship policy on www.sappi.com/policies Sappi has a policy addressing alternate dispute resolution (ADR) and relevant ADR clauses are generally included in contracts with customers and suppliers. There have been no requests for information for the period under review in terms of the Promotion of Access to Information Act (South African legislation).

See Our key relationships for more information.

SAPPI BOARD AND MANAGEMENT COMMITTEES

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

Audit and Risk Committee

– Peter Mageza
   Chairman

BOARD COMMITTEES

The board has established committees to assist it to discharge its duties. The committees operate within written terms of reference set by the board.

Membership details at September 2022

NP Mageza – Chairman
RJAM Renders
ZN Malinga
B Mehlomakulu
L von Zeuner

Key roles and responsibilities

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

  • Safeguarding and efficient use of assets
  • The risk management function, including a special focus on business continuity
  • Information and technology risks, related controls and governance. A focus area was the increasing threats of cyber attacks and security in the operational technology area
  • Non-financial risks and controls, including obtaining additional external ESG assurance
  • Operation of adequate systems and control processes
  • The integrity of financial information and the preparing of accurate financial reports in compliance with applicable regulations and accounting standards
  • The certification process implemented by management to support the CEO and CFO confirmation of the fairness of the Annual Financial Statements and the system of internal control over financial reporting, required by section 3.84(k) of the JSE Limited Listings Requirements (see the Directors’ approval on page 1 of the 2022 Group Annual Financial Statements). This included consideration of the evaluation report, including identified control deficiencies and management’s remedial actions, as well as compensating measures and assurance from other sources in the combined assurance framework
  • The quality and transparency of sustainability information included in the Annual Integrated Report
  • Compliance with the group’s Code of Ethics and external regulatory requirements
  • The external auditors’ qualifications, experience, independence and performance
  • The performance of the internal audit function, this included review of the results of the Internal Quality Assurance Review performed during 2022
  • The performance of the finance function
  • Taxation policies, congruent with responsible corporate citizenship
  • An internal review of the committee’s operating effectiveness and performance every two years by way of an assessment with feedback being provided to the board.

 

100%

OVERALL COMMITTEE ATTENDANCE

Strategic focus areas

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

  • Governance and risk aspects of projects to accelerate the group’s ability to take advantage of opportunities in higher margin growth segments, such as in dissolving wood pulp, packaging and speciality papers, the biotech and renewable energy fields
  • Cyber security incidents
  • Business continuity arrangements, including disruptions to warehousing, logistics and supply chain
  • Regulatory compliance with global privacy legislation, such as POPIA and GDPR.

Areas of oversight for the committee in 2023 will be:

  • Additional focus on business continuity plans
  • Revised reporting for ESG matters and procedures for financial reporting attestations
  • Emerging IT risks  
  • Capital, IT, and business projects governance  

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

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

The external and internal auditors attended Audit and Risk Committee meetings and had unrestricted access to the committee and Chairman. The external and internal auditors met privately with the Audit and Risk Committee during 2022.

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

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

Stakeholders

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

See Our key relationships for further details.

     

Risks

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

1/ Safety   2/ Cyber security
3/ Sustainability expectations   4/ Supply chain disruption
5/ Climate change   6/ Evolving technologies and consumer preferences
7/ Cyclical macro-economic factors   8/ Uncertain and evolving regulatory landscape
9/ Employee relations   10/ Liquidity

For further details see Risk management.

Nomination and Governance Committee

– Sir Nigel Rudd
   Chairman

Membership details: at September 2022:

ANR Rudd – Chairman
MV Moosa
MA Fallon

Key roles and responsibilities

The Nomination and Governance Committee consists of three independent directors. The committee considers the leadership and governance requirements of the company including a succession plan for the board. The committee identifies and nominates suitable candidates for appointment to the board in line with Sappi’s policy on the promotion of gender and race diversity at board level, for board and shareholders’ approval. The committee considers the independence of candidates as well as directors. The committee makes recommendations on corporate governance practices and disclosures, and reviews compliance with corporate governance requirements. The committee has oversight of appraising the performance of the board and all the board committees. The results of this process and recommended improvements are communicated to the chairman of each committee and the board. The committee had oversight of the actions to implement the policy on broader diversity at board level. The functioning and performance of Sappi’s board and board committees were assessed internally in 2022 and established that the board and board committees functioned well. Certain deep dives and additional training from the sponsor (RMB) were arranged during 2022.

 

100%

OVERALL COMMITTEE ATTENDANCE

Strategic focus areas

The Nomination and Governance Committee helped to protect value by providing oversight and guidance in 2022 over:

  • Corporate governance
  • Tone at the top
  • Succession plans for senior executives and the board with a focus on board composition and chairmanships
  • The Promotion of Broader Diversity at Board Level policy, which includes diversity indicators
  • Assessment of the board and board committee performance
  • Rotation and replacement of directors
  • Reviewed the Sappi Limited directors shareholdings and dealings in securities
  • Oversight of the appointment of replacements for direct reports to the CEO.

A focus area for 2023 will be onboarding the new directors.

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

Stakeholders

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

See Our key relationships for further details.

     

Risks

The Nomination and Governance Committee focused on governance, independence, and composition of the board, board committees and executive management positions to effectively address all material risks facing the company including all the top 10 risks.

For further details see Risk management.

Human Resources and Compensation Committee

– Mike Fallon
   Chairman

Membership details at September 2022:

MA Fallon – Chairman
NP Mageza
RJAM Renders
BR Beamish
ANR Rudd

Key roles and responsibilities

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

 

100%

OVERALL COMMITTEE ATTENDANCE

Strategic focus areas

The 2021 report was supported at the Annual General Meeting on 9 February 2022 with a vote of 83.5% on the remuneration policy and 84.4% on the implementation report. This has been a significant endorsement by the shareholders in relation to our ongoing commitment to good governance and disclosure.

Apart from its normal annual workplan, the key focus for the committee was on the following:

  • Monitoring the implementation of return of capital employed (ROCE) as a measure in our short-term incentive plan from 2022, replacing working capital
  • Monitoring of a voluntary minimum shareholding requirement for all prescribed officers to be achieved by December 2025
  • Disclosure of the vested performance share plan award as part of the total remuneration in line with best practice
  • ESG targets are included in the personal objectives of all senior managers
  • Executive (HRL 19+) gender diversity target (the target for 2025 is 23%, actual performance in 2022 was 22%)
  • The HR investor roadshow with major shareholders
  • Oversight on key succession transitions across all regions, and
  • Re-evaluation of the retirement age.

The strategic focus areas for the committee in 2023:

  • Key activities for the committee in 2023 will be, inter alia, consideration of the report on SSA skills requirements
  • Oversee the implementation of the human resources Thrive25 plan
  • Approval of the remuneration and bonuses for executive directors and senior management

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

See the Remuneration report for more information.

Stakeholders

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

See Our key relationships and the Remuneration report for further details.

     

Risks

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

1/ Safety   2/ Cyber security
3/ Sustainability expectations   5/ Climate change
6/ Evolving technologies and consumer preferences   7/ Cyclical macro-economic factors
8/ Uncertain and evolving regulatory landscape   9/ Employee relations

For further details see Risk management.

Social, Ethics, Transformation and Sustainability Committee

– Valli Moosa
   Chairman

Membership details at September 2022

MV Moosa – Chairman
SR Binnie
B Mehlomakulu
BR Beamish
JM Lopez

Key roles and responsibilities

The Social, Ethics, Transformation and Sustainability (SETS) Committee comprises four independent non-executive directors, and the CEO. A 93% attendance record was achieved by Board Committee members for 2022. Other Executive and Group Management Committee members attend SETS Committee meetings by invitation. It should be noted that a number of other non-executive directors attend SETS Committee meetings ex officio. The chairmen of the Audit and Risk Committee and SETS Committee attend each other’s committee meetings to avoid unnecessary repetition of discussions.

The committee's mandate is to oversee the group’s sustainability strategies, activities addressing climate change, ethics management, good corporate citizenship, labour and employment practices, as well as its contribution to social and economic development and, with regards to the group’s South African subsidiaries, the strategic business priority of transformation. The committee monitors progress towards and ensures that appropriate programmes are implemented to achieve the company’s sustainability targets. The committee regularly reviews targets to ensure that they are both relevant to our operating context and reflective of an appropriate level of ambition.

As ESG (environment, social and governance) reporting and disclosures become increasingly important to stakeholders and aligning with our strategic imperative to enhance trust, the committee is mandated to oversee the company’s public disclosures ensuring that reporting is aligned with appropriate global standards and compliant with regulatory requirements.

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

 

93%

OVERALL COMMITTEE ATTENDANCE

Strategic focus areas

In 2022 the committee provided oversight of:

  • Sappi’s social and economic development standing (UNGC and OECD)
  • Safety initiatives
  • Approval of a climate change strategy
  • Progress on climate action aligned with the Task Force on Climate-related Financial Disclosures (TCFD)
  • Validation of 2030 science-based decarbonisation targets for the group by the Science Based Targets initiative (SBTi)
  • Approval of capital allocation plan required for the science-based decarbonisation targets
  • Progress on implementation of sustainable procurement initiatives (supplier code of conduct and onboarding of suppliers to the EcoVadis platform)
  • External assurance on Group LTIFR, Scope 1 and Scope 2 emissions, certified fibre, waste to landfill and water extraction for the South African region
  • Trade-offs between:
    – productivity and safety advantages of mechanisation and the social and human capital implications
    – financial and natural capitals relating to the use of coal versus other renewable energy fuels for our heating requirements. This    included further reductions in the group’s carbon footprint
  • Sappi Southern Africa’s performance against the applicable BBBEE legislation, the EE Act and the Forestry Charter, including unfair discrimination and equality policy
  • Other ESG focus areas.

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

The committee will provide oversight of the following strategic business areas in 2023 :

  • TCFD developments
  • Development of an approach to nature related disclosures aligned with the Taskforce on Nature-related Financial Disclosures (TNFD)
  • Progress towards science based targets and the climate change strategy
  • Review emerging global sustainability disclosure standards and implement changes to group annual reporting as appropriate
  • Progress towards Thrive25 sustainability targets and realignment of targets as appropriate to account for the divestment of three European mills in FY2023
  • Production efficiencies and events
  • Consideration of feedback about the changes in the safety culture at operating units
  • Review and approve the social media policy, as part of the making use of media developments and opportunities.

See the SETS report and Our global sustainability goals at https://www.sappi.com/2025-global-sustainability-targets

Stakeholders

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

See Our key relationships further details.

     

Risks

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

1/ Safety   3/ Sustainability expectations
4/ Supply chain disruption   5/ Climate change
6/ Evolving technologies and consumer preferences   7/ Cyclical macro-economic factors
8/ Uncertain and evolving regulatory landscape   9/ Employee relations

For further details see Risk management.


MANAGEMENT COMMITTEES

The board assigns responsibility for the day-to-day management of the group to the CEO. To assist the CEO in discharging his duties, a number of management committees have been formed. Some of these committees also provide support for specific board committees. The management committees are a key component of Sappi’s second line of defence and assurance. See below for additional details of Sappi’s approach to risk, controls and assurance.

Executive
Committee

This committee comprises executive directors and senior management from Sappi Limited as well as the CEOs of the three main regional business operations, and the dissolving wood pulp business. The CEO has assigned responsibility to the Executive Committee for a number of functional areas relating to the management of the group, including the development of policies and alignment of initiatives regarding strategic, operational, financial, governance, sustainability, social and risk processes. The Executive Committee meets at least five times per annum. All key topics discussed at board level are subject to review and discussions by the Executive Committee.


Disclosure
Committee

The Disclosure Committee comprises members of the Executive Committee and senior management from various disciplines. Its objective is to review and discuss financial and other information prepared for public release. It is the ultimate decision-making body, apart from the board, with regards to disclosure.


Treasury
Committee

The Treasury Committee meets monthly to assess financial risks on treasury-related matters. Specific focus areas in 2022 related to:

  • Ensuring sufficient group liquidity with the renewal to 2027 of the €515 million and R2.0 billion revolving credit facilities at Sappi Papier Holding (SPH) and Sappi Southern Africa respectively. For the first time these facilities now also include sustainability KPIs
  • Renegotiation of financial covenants as the covenant suspension period agreed during the Covid-19 pandemic came to an end.

Key focus areas in 2023 will be:

  • The effective management of cash and interest costs due to rising interest rates
  • Repurchasing debt with surplus cash will reduce gross debt and therefore interest charges. All debt maturities will be considered for cash settlement rather than refinancing
  • The SPH securitisation programme has to be renewed for another three-year term.

Taxation
Committee

The Taxation Committee meets monthly to discuss and address global taxation matters. The main focus areas of the committee for 2022 included:

  • Tax accounting and reporting
  • Tax compliance including transfer pricing and BEPS reporting
  • Tax audits and international mitigation measures to avoid double taxation
  • Tax implications of strategic projects
  • New tax legislation.

These topics will continue to receive oversight from the committee in 2023.


Project Steering
Committees

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


Technical
Committees

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


Group Risk
Management Committee

The committee is known as the group risk management team (GRMT) and is mandated by the board to establish, co-ordinate and drive the risk management process throughout Sappi. It has established a risk management system to identify and manage significant risks. The GRMT reports regularly on risks to the Audit and Risk Committee and the board. Risk management software is used to support and report upon the risk management process. During 2022 key initiatives included operationalisation of the group’s risk appetite and tolerance framework, dashboard summarising group risks and trends. Group business continuity plan guidelines were drafted, reviewed and approved. In 2023 the GRMT will review policy, procedures and assurance, and provide oversight of business units updating of their business continuity plans to address business continuity risk.


Control and
Assurance Committee

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


IT Steering Committee

The IT Steering Committee, assisted operationally by the Group IT Council (GITCO), promotes IT governance throughout the group and is the highest authority responsible for this aspect of Sappi’s business, apart from the board. The committee has a charter approved by the Audit and Risk Committee and the board. An IT governance framework has been developed and IT feedback reports are presented to the Audit and Risk Committee and the board. Sappi IT has implemented a standardised approach to IT risk management through a group-wide risk framework supported by the use of risk management software. The committee has helped to create value for shareholders in 2022 by its oversight of:

  • Preparations and support for major strategic projects to drive operational excellence in manufacturing, sales, supply chain and finance and logistics among other functions
  • The digital strategy and governance model to drive innovation at scale across all divisions
  • Expansion of the group security function, the additional security resource capacity and cyber skills incubator
  • The framework to evaluate third-party IT security risks
  • Due diligence for a cloud-based security strategy
  • The operationalisation of the global operational technology (OT) security methodology.

A significant part of the IT Steering Committee’s responsibility is to monitor and direct Sappi’s Information and cyber security activities. The board’s Audit and Risk Committee oversees these activities and its membership consists entirely of independent non-executive directors. Security matters are shared and discussed with the board at least quarterly. Sappi did experience a minor breach of non-critical information in May 2022. The hackers were timeously detected and removed from the network without operational impact. Sappi does have cyber risk insurance. Sappi’s internal IT audit team undertakes reviews of information and cyber security.

Oversight by the committee will continue in 2023 for these IT initiatives, as well as:

  • Support for new business priorities to address evolving market conditions in alignment with Thrive25 priorities
  • Additional security improvements including enhanced recovery capabilities, global OT security standards, central vulnerability management, and further smart partnerships to extend security best practices and capacity
  • Infrastructure simplification through further global harmonisation opportunities.

Global Business
Systems Council

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


Sustainability Council

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

Key focus areas for 2022 included:

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

Brand Council

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


ENSURING LEADERSHIP THROUGH ETHICS AND INTEGRITY

Sappi is committed to doing business the right way. Trust is created by operating from a commonly accepted set of values, enhancing and protecting our reputation. We require our directors and employees to act with integrity, to be courageous, to make smart decisions and to execute with speed, in all transactions and in their dealings with all business partners and stakeholders.

Code of Ethics

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

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

A group Supplier Code of Conduct has been developed to help ensure that Sappi’s values and ethical standards are clearly understood and supported by all our suppliers, their first-tier suppliers and other stakeholders.

Actions are taken against employees and suppliers who do not abide by the spirit and provisions of our code. This includes termination of contractual arrangements, and criminal actions.

See www.sappi.com for the Code of Ethics.

Legal compliance programme

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

Sappi’s legal compliance programme has been boosted by:

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

The group has a policy that obliges all employees to disclose any interest in contracts or business dealings with Sappi to assess any possible conflict of interest.

The policy also dictates that directors and senior officers of the group must disclose any interest in contracts as well as other appointments to assess any conflict of interest that may affect their fiduciary duties.

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

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

Insider trading

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

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

Reporting on compliance and ethics concerns

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


Hotline report rate per 1,000 employees per annum

Hotline and ethics cases by category (%)

Hotline and ethics case outcomes (%)

FINANCIAL STATEMENTS

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

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

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

RISK, CONTROLS AND ASSURANCE AT SAPPI

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

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

Sappi operates a combined assurance framework, which aims to optimise the assurance coverage obtained from management, internal assurance providers and external assurance providers, on the risk areas affecting the group. Combined assurance is overseen by the Control and Assurance Committee (CAC). The committee and its combined assurance workgroups (CAWs) provide holistic feedback to the GRMT and Audit and Risk Committee on the state of controls and the quality and coverage of assurance from the various assurance providers across Sappi’s three lines of assurance. The workgroups focused on the following risk topics in 2022: capital projects management, cyber security risks, human resources risks, production recording and quality, energy, waste and safety. In financial year 2023 the CAWs will assist the CAC to create and protect value by undertaking reviews of combined assurance, risks and controls relating to business continuity, as well as developing the risk and control framework particularly in the legal compliance, taxation, and IT security areas.


Sappi’s Combined Assurance Framework, incorporating three lines of assurance and oversight by the board and board sub-committees

      First line of assurance     Second line of assurance     Third line of assurance     Oversight by the board
Risk areas and value drivers, capitals     Business management
operations supported by
appropriate controls and
systems
    Monitoring and oversight functions     Independent assurance provided
by external audit, internal audit and other assurance providers
    Board and sub-board
committees
Governance, risk, and
controls – general
(core business cycles)
          Control and Assurance Committee
management self-assessments
    Internal audit     Audit and Risk Committee
Strategy and vision,
competition and
markets, socio-political
          Executive Committee, Group Head Strategy, Global Business Council, Control and Assurance Committee, management self-assessments     Internal audit     Nomination and Governance Committee
Financial, tax
and treasury
          Control and assurance, accounting standards, taxation, treasury and Disclosure Committees, management self-assessments     KPMG, tax authorities, internal audit     Audit and Risk Committee
Legal and compliance           Legal compliance programme, Group Compliance Manager     Legal compliance audits, internal audit     Audit and Risk,
SETS Committee,
Human
Resources and
Compensation
Committees
IT    
  • Day-to-day risk management activity
  • Established risk and control environment
  • Executive, corporate and regional lead teams
  • Corporate and regional business functions, eg sales, finance, IT, human resources, purchasing
  • Business units, eg forestry, mills, sales offices
  • Business unit operations, eg production, engineering, controlling, materials management.
    IT Steering Committee, group IT governance functions, management self-assessments     KPMG, ISA 3402s, penetration testing, internal audit     Audit and Risk Committee
Planet, environment,
natural capital
        Sustainability councils, Environmental and Energy (E4) Global Cluster, GRMT     ISO 14001, FSC, PEFC, EMAS, KPMG, EcoVadis
Government reviews emissions effluent etc, internal audit
    SETS Committee
Ethics         Group Compliance Manager, ethics surveys, management self-assessments     Internal audit     SETS Committee, Audit and Risk Committee
People, human
resource and
transformation
        Global Human Resource Committee, regional labour forums, employee engagement surveys, management self-assessments     BBBEE audits, internal audit     Audit and Risk, SETS Committee, Human Resources and Compensation Committees
Research and
development,
intellectual property
          Group technical cluster, management self-assessments     ISO 17025, internal audit     SETS Committee
Manufacturing, supply
chain management,
quality, forestry
          Technical clusters and platforms, regional safety, health, environment and quality audits, supplier audits, management self-assessments     ISO 9001, ISO 50001, FSC PEFC, SFI, Matrix, internal audit     SETS Committee
Stakeholders,
communication,
reputation, society
          Group corporate affairs, sustainability and investor relations functions     Internal audit     SETS Committee
Safety           Group and regional risk management teams, safety audits     OHSAS 18000, ISO 22000 regulatory inspections, internal audit     SETS Committee

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

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

As part of combined assurance in respect of reported information, Sappi has obtained assurance on the data in the Annual Integrated Report from the following sources:

INTERNAL AUDIT

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

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

Internal audit value proposition

During 2022, apart from the ongoing focus on financial controls, internal audit helped to create and protect value for Sappi and our stakeholders by completing reviews in support of the following strategic objectives:

The coverage plan for 2022 was substantially achieved. We had refocused our audit plan to address Covid-19 impacts: including raw materials supply chain, treasury (eg cash flow and liquidity), credit risks, financial reporting, cyber risk, and business continuity planning.

In 2023 internal audit will support the achievement of Sappi’s Thrive25 strategic objectives by completing advisory and assurance projects in the following areas:

  • Grow our business Thrive25: R&D, packaging and specialities, capital projects (Project Elevate in Sappi North America), and new businesses eg biomaterials
  • Sustain our financial health Thrive25: sales, procurement, treasury, and working capital processes, Project Silver Carve-out in Sappi Europe
  • Drive operational excellence Thrive25: sales and operations, maintenance, energy, strategic business and IT projects including digital innovation initiatives (eg implementation of process mining software)
  • Enhance trust Thrive25: ethics, governance, sustainability, and cyber security reviews

Internal audit maintains an internal quality assurance programme. Our last external quality assurance review was conducted by the Institute of Internal Auditors (IIA) in 2021. A Generally Conforms rating was received, which is the highest of the three levels of conformance to the IIA’s standards. The 2021 internal quality assurance review highlighted a need for more attention to the documentation of effectiveness testing. This was addressed in 2022. Our internal quality assurance review in 2022 confirmed our Generally Conforms rating. A focus area in 2023 will be the upgrade and replacement of our automated audit software.

BOARD ASSESSMENT OF THE COMPANY’S RISK MANAGEMENT, COMPLIANCE FUNCTION AND EFFECTIVENESS OF INTERNAL CONTROLS AND COMBINED ASSURANCE

The board is responsible for the group’s systems of internal financial and operational control. As part of an ongoing comprehensive evaluation process, control self-assessments, independent reviews by internal audit, external audit and other assurance providers, were undertaken across the group to test the effectiveness of various elements of the group’s financial, disclosure and other internal controls as well as procedures and systems. Identified areas of improvement are being addressed to strengthen the group’s controls further. The board has assessed the combined assurance provided in 2022. The results of the reviews did not indicate any material breakdown in the functioning of these controls, procedures and systems during the year. The internal controls in place, including the financial controls and financial control environment, are considered to be effective and provide a sound basis for the preparation of the financial statements, Annual Integrated Report and other reports used internally for management decision making.

COMPANY SECRETARY

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