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.

Menu

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 2022 Sappi Group Sustainability Report available at www.sappi.com.

In line with the double materiality approach, the discussion of our material issues aims to enhance our stakeholders' understanding, not just of the impact of environmental and social issues on Sappi's enterprise value, but also of the impact of our activities on the environment and society. Our emphasis is on operating context, key developments and significant sustainability-related risks and opportunities. As an example, through the one lens of materiality, climate change and GHG emissions may have ramifications for enterprise value. Through the other lens, Sappi's own carbon footprint and actions have an impact on the environment and society.

We define short term as one to two years, in line with immediate risks and opportunities and medium term as three to five years in line with management accounting's five-year financial forecast plan. Our long-term time horizon is five to 30 years and takes into account the nature of our mill operations and capital investments for long-life assets, Sappi Forests research planning horizons in response to climate change, as well as the EU's plan for carbon neutrality by 2050.


Principles

Maintaining ethical behaviour and compliance

Why it's material

We live and work in a constantly changing environment and operate in many different jurisdictions with different ways of doing things. As OneSappi, we need to have a consistent set of ethical standards which apply across all regions. Integrity is one of our core values and trust is one of our strategic imperatives – demonstrating the high premium we place on ethical behaviour. Upholding such behaviour is integral to achieving our Thrive25 strategy and remaining true to our purpose of building a thriving world.

How this issue links to other aspects of our business

Our global priority SDGs

Our top 10 risks

  • 2/ Cyber security
  • 8/ Uncertain and evolving regulatory landscape
  • 9/ Employee relations

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Rapid pace of technological innovation and threats, including cyber threats
  • Changing consumer and employee behaviour
  • Shifting demographics.

Our highlights

Refreshed and relaunched the Code of Ethics shortly after year end

Smooth global transition to new Ethics Hotline service provider

Opportunities for value creation

The number of people using social media currently stands at over 4 billion, more than double the number of users in 2015. Social media doesn't recognise country borders. A tweet, comment or post – made not just by Sappi people but also by our stakeholders about something perceived as unethical – goes around the world in seconds. We have updated our social media policy and will be conducting relevant training to all regions in line with the updated policy in FY2023.

Key developments in FY2022

Shortly after year end, we launched our refreshed Code of Ethics (Code) to align more closely with our Thrive25 strategy and incorporate new examples of everyday situations that, like the original examples, explain the behaviour expected from Sappi people when faced with tricky situations. The Code, which has been translated into relevant languages, references several group policies, where heightened levels of awareness and compliance are required. In familiarising themselves with the Code, employees are encouraged to read these policies. Story pictures are used to assist in the messaging, which are also displayed on the media screens, lift lobbies and on Sappi desk calendars. In line with the refresh of the Code, global online training on the Code has been revamped with new scenarios and relevant examples.

In 2021, KPMG advised Sappi that as a measure to improve the perception of auditor independence, it would cease performing non-audit-related services to its JSE-listed audit clients. KPMG accordingly informed Sappi that they would be withdrawing from servicing our hotline for SEU and SSA from December 2021. Accordingly, we appointed a new service provider globally with effect from the beginning of calendar 2022. Several different communication channels were used to promote the use of the new Ethics Hotline, which helped to ensure a smooth transition.

Training initiatives – incorporating relevant and practical examples – aim to avoid a tick-box approach to ethics. A comprehensive training programme covered the following topics:

  • Anti-fraud and corruption (relevant new employees in all regions and a refresher course for all regions)
  • Code of Ethics online training (Matane Mill and relevant new employees in all regions)
  • Environmental law training (relevant new employees in all regions)
  • Competition law (relevant new employees in all regions)
  • Occupational health and safety compliance (relevant new employees in all regions)
  • Data governance including regional laws like South Africa's Protection of Personal Information Act (POPIA) and Europe's General Data Protection Regulation.

POPIA came into effect in South Africa in July 2021, following which we implemented the required privacy policies and procedures and appointed, trained and registered POPIA information officers with the applicable regulator. We reviewed implementation in FY2022 and established that it had been successful.

To help heighten awareness throughout Sappi, we participated in various international events, including Global Ethics Day, International Fraud Awareness Week and World Whistle-blower Day.

Procuring responsibly

Why it's material

Research indicates that 85% of consumers are more likely to buy from a company with a reputation for sustainability. By working together in partnership with suppliers, we can better identify risk, assess social and environmental performance, and encourage commitment to sustainable choices and the SDGs throughout our value chain.

How this issue links to other aspects of our business

Our global priority SDGs

Our top 10 risks

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

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Rapid pace of technological innovation and threats including cyber threats
  • Changing consumer and employee behaviour
  • Shifting demographics.

Our highlights

Significant increase in the number of our suppliers disclosing on the EcoVadis platform – from 90 in FY2021 to 199 in FY2022

74% of global procurement spend now in compliance with our Supplier Code of Conduct

Opportunities for value creation

Close collaboration with our suppliers helps to future-proof Sappi by mitigating the risks related to operational disruptions, as well as reputational and regulatory risks. It can also make us more attractive to potential investors and customers – according to the World Economic Forum, sustainable procurement practices lead to a 15% to 30% measurable increase in brand value.

Key developments in FY2022

Globally, since 2021 we have been using EcoVadis to assess the ESG performance of our suppliers.

By the end of FY2022, 199 suppliers were sharing their EcoVadis scorecards with us and another 19 were in progress to disclose on the platform. This equates to 59% of our global procurement spend.

The EcoVadis scorecards enable us to gain insights to suppliers' corporate social responsibility performance in an efficient way to inform our business decisions. They also help to identify risk and prioritise areas where further improvements are needed.

To date, we have focused on onboarding suppliers onto the EcoVadis platform and regularly reviewing scores – requesting improvements where necessary. Our Supplier Code of Conduct underpins this work. Our Thrive25 target is that 80% of procurement spend should comply with the code. In SEU, 83% of total spend was covered by agreements into which the provisions of the code are embedded, 72% in SNA and 58% in SSA. Globally, this translates to 74% of global procurement spend.

Recognising that we also have a responsibility to reduce our Scope 3 emissions from our value chain, we have also set a Scope 3 target of 44% of our suppliers (by spend) will have science-based targets by 2026 (see Planet section below).

Currently, in terms of suppliers and climate, the status is as follows: 86% of our suppliers disclosing on EcoVadis have action on energy consumption and GHG emissions, 70% use renewable energy, 65% report on CO2 emissions, 47% disclose to CDP climate, 37% report Scope 3 emissions, 26% are part of SBTi and 21% have ISO 50001 certification.

Prosperity

Maintaining and strengthening our competitive position through agility, innovation and operational efficiency

Why it's material

Our industry is highly capital intensive and investment cycles are long. Accordingly, competitive position cannot be based on investment alone, but also on natural and manufactured resource efficiency, technology and innovation (see below), together with responsiveness to changing global forces and market demands. Being agile and efficient 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

  • 4/ Supply chain disruption
  • 6/ Evolving technologies and consumer preferences
  • 7/ Cyclical macro-economic factors
  • 10/ Liquidity

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Changing consumer and employee behaviour
  • Shifting demographics.

Our highlights

Sale of three European mills to align more closely with our Thrive25 strategic focus

Commissioning of Saiccor Mill capacity expansion and environmental enhancement project

Opportunities for value creation

Our Stanger Mill currently uses a certain percentage of bagasse (sugar cane waste residue) in the production of tissue paper. Looking ahead, the mill will be expanding its use of bagasse in combination with pulp to produce compostable thermomoulded food grade utensils like plates and bowls. This aligns with resource efficiency, circularity and market demands for higher levels of biodegradability, particularly in fast food applications.

Key developments in FY2022

We demonstrated our agile, efficient response to a rapidly evolving competitive marketplace in the following ways:

Reducing exposure to the graphic paper segment

In September 2022, we reached an agreement with AURELIUS Investment Lux One S.à.r.l. for the sale of Kirkniemi Mill in Finland, Maastricht Mill in the Netherlands and Stockstadt Mill in Germany. The decision to sell the mills follows a detailed, thorough strategic review in line with Thrive25. The proceeds will be used to reduce debt further, which will provide a platform for future expansion in our identified growth market segments.

Although we are reducing exposure to the graphic papers segment, we are expanding our presence in growth segments including packaging and speciality papers, DP and biomaterials. While our drive to reduce our exposure to graphic papers has been influenced to some extent by digitisation, the strategic shift towards packaging and speciality papers has also been strongly driven by consumer concerns about fossil-based plastic packaging and a changing climate, as well as their preference for renewable paper-based packaging.

Going forward, as regards graphic papers, SEU's focus will be on the stronger commercial print market. In addition, in the packaging and speciality papers segment, the European business will focus predominantly on the flexible packaging, functional papers, self-adhesives including glassine and labels, as well as dye-sublimation categories.

Promoting manufacturing efficiency

Globally, to ensure and enhance operational efficiency, we track the overall machine efficiency of every single paper machine in all three regions and compare this against 'best own practice' and 'best realisable'. World-class benchmarks are considered for the different types of paper machines and product portfolios. Every year, the team challenge the new 'best realisable' figure during the budgeting process against new benchmarks, own improvements and records achieved. In FY2022, of our 28 paper/packaging assets, 16 improved performance year-on-year. We continue to monitor performance to enhance understanding of grade changes, quality issues, sheet-breaks and mix impacts in order to ensure continuous improvement.

Dye sublimation allows for printing on polyester and polyester resin coated products. Using a wide-format printer, dye-sublimination inks are printed on special transfer paper that SEU produces at Carmignano Mill for use in fashion, home textiles, sportswear and more. Responding to increased market demand in the dye-sublimation business, a timely investment at Carmignano Mill has expanded the mill's warehouse capacity and installed a fully automated winder and packaging infrastructure onsite. The business previously had to rely on external converters in Germany and Hungary to store and convert its dye-sublimation paper into various reel sizes. Following an extension of the warehouse by 6,500 m2, the mill now has sufficient onsite storage capability and space to continue growing the business. The savings are significant. Not only does Sappi save €1 million a year on storage and handling costs, but by keeping the product onsite and eliminating transport from Italy to the converters in Germany and Hungary, the mill will reduce its Scope 3 carbon emissions by an estimated 2,500 tons a year.

In SNA, some of our more significant process improvements in FY2022 included:

  • Process efficiency work at Somerset Mill to upgrade steam flow meters and increase condensate recovery
  • A further capital project at the same mill to improve mill steam recovery and complete a PM1 chiller upgrade
  • Water reduction projects at Cloquet Mill linked to steam savings
  • Enhancements to the Cloquet Mill recovery boiler, which led to operating efficiency improvement and helped to avoid downtime
  • An improved maintenance reliability effort and continuous focus by Matane Mill's production team to optimise productivity which resulted in a record production year.

In SSA we achieved the following:

  • The major capacity expansion project at Saiccor Mill (see below) involved the conversion of all remaining pulping processes from calcium to magnesium and was successfully completed in March 2022. This has helped to reduce overall environmental footprint through reduction of coal-based steam and power generation and reduced chemical consumption
  • At Ngodwana Mill we upgraded the wet end, press section and the first dryer section of PM1 to improve the quality of kraft linerboard and enable the production of lower basis weights – important at a time when our customers are looking to lower their carbon footprint through lighter-weight packaging. The mill, which previously produced kraft linerboard in basis weights between 140 g/m2 to 400 g/m2, can now produce product ranging from 100 g/m2 to 400 g/m2. Production capacity has now increased from 240,000 to 250,000 tpa
  • Production at Tugela Mill has increased to 170,000 tpa through the installation of a log deck at the woodyard to improve chip quality and reduce rejects, a bottom scraper to improve outlet consistency and control, as well as a screw press to improve pulp washing and outlet consistency. These process improvements will allow for the additional production and sales of Ultraflute amounting to 15,000 tpa and increased liquid lignosulphonate sales of 4,725 tpa. Environmental benefits include a reduction in chemical oxygen demand due to the improved washing processes
  • Our furfural pilot plant at Saiccor Mill, which aims to prove the scalability of the Sappi technology for furfural extraction from magnesium oxide (MgO) thick liquor was commissioned in September 2022.

Saiccor Mill expansion: technical fast facts

  • The expansion and upgrades include a new evaporator, recovery boiler, screening and washing plant, as well as upgrades to the bleach plant and pulp machines, improved recovery circuits and additional magnesium digesters
  • New technology employed incorporates improved washing technology to optimise water and energy efficiency, optimised cooking technology for improved pulp quality control, the application of robotics to facilitate debottlenecking and shop-floor digitisation for improved commissioning, control and operational efficiency
  • Upgrades to the woodyard to enable smooth logistics supply chain operation include the installation of offloading equipment, side-arm rail carriage chargers and new chipper lines
  • Installation of the largest sulphite recovery boiler in the world, with the capacity to process up to 1,500 tons of dry solids per day.

Implementing innovative supply chain solutions

In SEU, under our wider supply chain strategy, we have implemented the Paperini initiative with the aim of achieving a more efficient and transparent digital supply chain. Paperini offers our customers a move away from traditional timely order tracking to an optimised, transparent delivery process enabling tracking of orders across the delivery process. Sappi is working with a renowned, trusted and neutral partner in the digital market, Shippeo, which provides a secure platform and guarantees to comply fully with applicable European data protection laws. Once our carriers are connected, they have full access to the Shippeo platform and its tracking data. Data shared via Shippeo is used to calculate the estimated time of arrival of a delivery based on an algorithm, which incorporates actual GPS positions, traffic and weather conditions. This enables us to inform our customers proactively in case of possible order delivery delays. Our objective is that eventually, at least 80% of our deliveries will be tracked in real time.

In SNA, we experienced several raw material supply issues during FY2022, particularly in terms of latex and starch which are used in all grades at Somerset Mill. Our R&D, procurement and manufacturing departments collaborated to redesign multiple products quickly in ways that would not impact customer quality expectations. Changes were tested through ongoing evaluations to ensure continued quality-first production. This resulted in minimal loss and no customer complaints.

Given the increase in supply chain uncertainty, network visibility grew in importance. To address this, proactive track and trace reporting for product shipments was provided to the customers that were most impacted via our collaboration with Schneider Logistics and Four Kites. In addition, detailed dashboards were created to highlight areas where service and cost issues were experienced, so mitigation measures could be implemented. Finally, visibility in emissions calculations and reporting has vastly improved and there is a dashboard in the beta phase of testing.

In SSA, we had to contend with challenging logistics problems at the port of Durban, due to severe backlogs. The situation was compounded after the floods earlier this year, when access was compromised by road and rail infrastructure being washed away. Rail efficiency has also been impacted by theft, vandalism and wagon availability.

We dealt with these challenges in the following ways:

  • Moving from containers to breakbulk
  • Utilising road, rather than rail
  • Shipping DP from Ngodwana Mill via the port of Maputo in Mozambique rather than Durban – Maputo is only 250 kilometres from the mill, while Durban is 650 kilometres.

In total, during FY2022, we exported approximately 20% of SSA's total DP production via breakbulk. While there are certain issues like congestion at the border related to exporting via Maputo, we will continue to assess the situation and maintain flexibility going forward.

Assessing electric vehicles in Europe

The EU has mandated the use of electric-vehicle and hydrogen fuel-cell power starting in 2030. Last year, our teams in Europe began looking into the future by evaluating the use of electric trucks between Gratkorn Mill in Austria and one of our supplier's locations. After the promising results of the pilot study, they expanded the research.

The project was led by Sappi's digital transformation team together with the research team of associate professor, Athanasios Rentizelas of the Industrial Engineering Laboratory, National Technical University of Athens, in collaboration with the Sappi Wesel distribution centre in Germany. Together, they conducted a research project to evaluate the potential benefits from using electric heavy-duty trucks (battery electric vehicles) and charging infrastructure for distribution of products to Sappi customers located in a distance up to 100 kilometres (km) from Wesel.

The study identified that on average, a fleet of three electric trucks could satisfy 64% of the customer orders and 73% of product weight demand within the 100 km distance. Using this fleet of electric trucks instead of EURO VI diesel ones could reduce the direct CO2 emissions by 144 tpa if renewable electricity is used for charging, or 38 tons per year if the average German grid electricity is used (based on year 2021 values). Following these promising results, Sappi Europe, together with local partners, is now looking for subsidies to support the realisation of the project.

Providing sustainable solutions for a circular bio-economy

Verve

Why it's material

More than ever, sustainability is dominating consumer priorities and the fashion agenda. Consumers want to know where materials come from, how products are made, and whether the people involved are treated fairly. In response, more and more companies are expanding their sustainable assortments and working to boost the sustainability of their supply chains. Demonstrating progress in sustainability is particularly important in gaining the trust of younger fashion consumers, as some 43% of Gen Zers say they actively seek out companies that have a solid sustainability reputation1.

Our DP brand, Verve, meets this need by creating renewable alternatives for raw material feedstock to pharmaceuticals, foodstuffs and textiles in particular. DP is a highly purified form of cellulose extracted from trees using unique cellulose chemistry technology. Sappi is one of the world's largest manufacturers of DP with a capacity of 1.4 million tpa and a 17% share of the global market.

1 Page 89 Catherine Salfino, "How to Cultivate Loyalty with Next Gen Shoppers", Sourcing Journal, August 12, 2021, https://sourcingjournal.com/topics/lifestyle-monitor/customer-loyalty-gen-z-shopperstiktoksalesforce-covid19-cottonclothing-295476/. Quoted below The State of Fashion 2022, McKinsey.
How this issue links to other aspects of our business

Our global priority SDGs

Our top 10 risks

  • 3/ Sustainability expectations
  • 5/ Climate change
  • 6/ Evolving technologies and consumer preferences
  • 7/ Cyclical macro-economic factors

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Changing consumer and employee behaviour
  • Shifting demographics
  • Climate change and climate transition
  • Resource scarcity and growing concern for natural capital.

Our highlights

Strengthened our competitive position in the DP market with the expansion of Saiccor Mill

Visit by members of the Textile Exchange and retail industry to Saiccor Mill helped to highlight the role the mill plays in the lyocell value chain and potentially the reduction in the value chain's science-based targets.

See Our key relationships in this report.

Opportunities for value creation

In the light of growing concerns about climate change, engagement with our customers on this topic is an opportunity to enhance trust in line with our Thrive25 strategy.

Our DP business is engaging on climate-related topics with four customers headquartered in Austria, China, India and Japan. Together they make up approximately 80% of DP supply from South Africa and North America. Engagement involves sharing our Scope 1, 2 and 3 emissions for DP – in other words, these customers' Scope 3 emissions. We report progress against targets annually to these customers. Through engagement with both our suppliers and our customers, we can collaborate to achieve meaningful decarbonisation through our entire value chain.

Key developments in FY2022

"Today, we are witnessing far more than a financial investment. We are witnessing an investment in infrastructure, people, innovation, technology and sustainability. It is an investment in community development, in the local economy, in our export capacity and in the industrialisation of our economy."

Those are the words of South African President Cyril Ramaphosa, who officially opened our ZAR7.7 billion DP capacity expansion project at Saiccor Mill in September 2022.

This significant investment secures our leading position in a rapidly growing market – estimated to be growing at 3.2% compound annual growth rate per annum1. In addition to expanding capacity by 110,000 tpa, the project has significant environmental benefits: The conversion of the calcium cooking line to the more sustainable magnesium bisulphite line has reduced the need for coal-based power generation, thereby halving fossil fuel carbon emissions. Other environmental benefits include the reduction of sulphur dioxide, specific water use efficiency improving by 17%, water consumption reducing by 5% and solid waste to landfill from coal ash decreasing by 48%.

1 Dissolving Pulp Market Size, Share, Growth, And Industry Growth by Type (Eucalyptus Type, Pinewood Type and Other Type) By Application (Viscose, Cellulose Acetate and Cellulose Ether, and Others), Regional Forecast (2022 – 2028), published September 2022.

New technology includes improved washing technology to optimise water and energy efficiency; optimised cooking technology for improved pulp quality control; the application of robotics to facilitate debottlenecking; as well as shop-floor digitisation for improved commissioning, control and operational efficiency.

A significant development from a marketing point of view was the segmentation of the Verve brand to reflect different target markets:

  • Verve Advantage – a lyocell grade primarily aimed at textile markets in which Sappi Verve supplies more than 50% of the global requirement
  • Verve Performer – a viscose grade for the textile and sponge markets
  • Verve Elements – a speciality grade focused on the pharmaceutical, microcrystalline cellulose and ethers markets.

This brand architecture has strengthened Verve as the fibre of choice by expanding our reach throughout the value chain and providing an identifier through to retailer level.

The Higg Index suite of tools, developed by the SAC, aims to standardise the measurement of value chain sustainability. Under our membership of the SAC, we are required to undertake Higg self-assessments for social and labour performance, facility social and labour module, together with environmental performance (facility environmental module) annually. Our Cloquet Mill was recently one of the first DP facilities to complete an external environmental management verification process. The mill achieved a final score of 84% on the Higg facility environmental module audit, receiving a verified score of 100% across energy, water, and wastewater management. These results highlight the mill's high levels of resource efficiency and emission control and reinforce our brand positioning. (See further details regarding our DP mills in South Africa in Our key relationships.)

Verve's partnership with Birla on 'Green Track' blockchain technology provides a forest-to-garment traceability solution for brand owners. Through this collaborative partnership, our branded DP, Sappi Verve, continues to strengthen its sustainability credentials within the textile industry. Providing a brand-owner traceability solution has been 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. This is a significant advantage, given the estimate that only 5% of textile brand owners can trace their raw materials to origin. Birla has recently agreed to two of South Africa's major fashion retailers joining Green Track.

By 2025, landfills in the EU will no longer accept textile waste in terms of recycled textiles. In the light of this and consumer pressure for recycled textiles, we continue to assess potential textile recycling partnership opportunities to produce pulp from recycled textiles. We plan to evaluate opportunities to pulp other sustainable materials in addition to wood but are not convinced that this is a viable growth avenue for Sappi.

Biotech

Why it's material

Our commitment is to do more with less by making the most out of every tree used in our production processes. Our focus on circular design and adjacent markets enables us to achieve stronger value chain relationships and enhanced revenue stream opportunities.

How this issue links to other aspects of our business

Our global priority SDGs

Our top 10 risks

  • 3/ Sustainability expectations
  • 6/ Evolving technologies and consumer preferences
  • 7/ Cyclical macro-economic factors
  • 10/ Liquidity

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Move towards a circular economy
  • Changing consumer and employee behaviour
  • Climate change and climate transition
  • Resource scarcity and growing concern for natural capital.

Our highlights

25% sales revenue growth in lignin

Accelerating sales of Pelletin

Development of translucent Valida

First commercial unit for Valida commissioned

Sappi Symbio option with 90% cellulose content launched

Opportunities for value creation

We support the drive to improve the productivity of food production and food security by harnessing the unique properties of wood acids, wood sugars and wood lignin in our bio-based products to replace potentially harmful current incumbents. In crop production our bio-based products are an important source of soil organic carbon, which contributes to soil organic matter and carbon sequestration. In addition, as a complexing agent; it makes critical trace elements available to plants. This holds significant promise for a world battling with issues of food security.

Key developments in FY2022

A positive development was accelerated demand for lignin, with y-o-y sales revenue growth of approximately 25%.

Our biotech lignin strategy has always been to expand beyond commodity markets to niche markets. We are achieving this, with strong demand allowing us to test value add in various applications. One such area is in crop protection and nutrition. Sappi Forests Shaw Research Centre is working with Cedara Agricultural College and the Seedling Growers Association of South Africa to establish nutritional uptake and protection against plant pathogens, which impact crops like avocadoes, potatoes and tomatoes and are a global challenge for food security. We have also developed several commercial products which enhance the efficacy of industrial fertilisers and help improve the absorption of macro and micro-nutrients for improved crop production.

Sales of Sappi Pelletin, first launched in 2020 and used as a binder in animal feed product to enhance durability and strength, continued to gain traction. The product has now been registered in several export markets with more registrations due.

Independent studies demonstrate that Sappi's lignin product has anti-microbial properties, which help in feed preservation. Use in animal feed can enhance gut health and lead to enhanced poultry and milk production.

Our Valida fibrillated cellulose offers a natural, biodegradable alternative for diverse applications ranging from automotive foam, light-weight concrete, multi-colour paint, pesticides, shampoo, skincare and wound care. Valida is also being assessed for use in adhesives, frost protection for fruit trees and industrial cleaning, to name a few. Other avenues of opportunity include controlled release fertilisers, sun protection and paper and packaging. We are already using Valida in our own paper production where its value lies in the strength it imparts to paper and its barrier functionality. Another important development in FY2022, in response to market demand, was the development of translucent Valida for use in cosmetics and other markets where this product property is highly valued.

Recognising that some applications require a dry Valida product, we have produced this at pilot scale and are testing the product with customers in the market.

Our Valida pilot plant in The Netherlands continues to run at capacity and we have commissioned our first commercial unit at Carmignano Mill in Italy. Plans to further scale-up capacity for Valida-S grades are ongoing.

Produced from C5 sugars (sugar derived from non-food biomass) in hemicellulose through hydrolysis and dehydration, furfural is a platform chemical for the production of numerous biochemicals. Its uses range from adhesives, antacids, fertilisers, flavouring compounds, inks and plastics, to solvents for the refining of lubricating oils.

It can also be used as a fungicide, nematicide and weed killer or converted to furfural alcohol for furan resins. We have established a pilot plant at Saiccor Mill and will be taking a decision on a commercial plant in 2023.

In terms of xylose, we have proven the technology to extract xylose sugars from our prehydrolysis kraft cooking processes and are in ongoing discussions with potential market partners to develop commercial opportunities for bio-based products from this sustainable feedstock.

Our Sappi Symbio product, a natural composite material combining high-quality cellulose from wood and thermoplastics, aligns with our drive to make everyday materials more sustainable. It can be used in standard processing equipment, such as injection moulding and extrusion and in a wide range of applications across furniture, consumer electronics and automotive components.

We have now developed a Sappi Symbio option with 90% cellulose content to offer enhanced sustainability advantages and higher value to compounders and end-users.

As reported in FY2021, commercialisation gained traction with uptake by a major automotive manufacturer in the US. Against the backdrop of the knock-on effect of Covid-19, development activities in the auto industry slowed. However, we continued to engage in testing and trials with several automotive manufacturers around the world, many of whom have defined green targets. We expect further momentum to commercialise Symbio in FY2023 as these projects move to completion.

Responding to evolving customer needs through innovation and collaboration

Why it's material

Innovation is critical to the future wellbeing of society and to driving economic growth. We are leveraging advances in AI, machine learning, robotics and other technologies to meet the rapidly evolving needs of our customers all over the world. This is underpinned by our technical teams, who help to deliver the new thinking, new products and new processes that establish the pathway to success. Our technical knowledge and prowess, along with a willingness to embrace innovation, helps to drive us forward firstly, by taking us into new markets and introducing new products. Secondly, by finding solutions for a new manufacturing reality in a low-carbon, bio-based circular economy.

How this issue links to other aspects of our business

Our global priority SDGs

Our top 10 risks

  • 3/ Sustainability expectations
  • 5/ Climate change
  • 6/ Evolving technologies and consumer preferences

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Move towards a circular economy
  • Climate change and climate transition
  • Resource scarcity and growing concern for natural capital.

Our highlights

R&D investment of US$46.6 million (FY2021: US$43 million)

Finalists' entries in the Technical Innovation Awards represent a five-year net present value of US$123.9 million at a 100% probability of success rate

Production capacity for high-barrier papers expanded at Alfeld Mill

Ultracast Viva™ named the product of the year in the Business Intelligence Group's 2022 Sustainability Awards programme

Opportunities for value creation

In North America, we are running a pilot programme for key customers which offers a carbon neutral option for our Spectro and Proto packaging products. We will take a decision on the way forward once the pilot ends in March 2023.

Key developments in FY2022

Exciter Innovation Programme

Our Exciter R&D programme comprised of global projects aligned with Thrive25 from all business segments: biotech, packaging and speciality papers, graphic papers and DP, as well as scoping for new ideas. The focus of the projects, which are global and based on the OneSappi approach, has shifted to emphasise sustainability, together with packaging and speciality papers. Projects are progressed to commercialisation through an internally developed stage gate model.

Our R&D portfolio is focused on the following:

  • Decarbonisation with a focus on energy, pulping, papermaking, bleaching and new technologies
  • Meeting the challenges of the packaging legislative environment with particular reference to single-use plastics, microplastics and recyclability
  • Developing lignin value-add products
  • Assessing alternative pulping technologies
  • Optimising the graphic papers sector and increasing focus on cost reduction
  • Progressing Valida dry development from laboratory scale to pilot
  • Environmental impact, including climate change risk; water treatment and product circularity in our products (recyclability, compostability and biodegradability).

Technical Innovation Awards

The theme for this year's annual Technical Innovation Awards was 'Think, Connect, Innovate!' The finalists' projects were all aligned with our Thrive25 strategy – growth in packaging, product diversification, efficiency, productivity, and quality, as well as innovative and sustainable solutions, which are a mix of new or improved products or optimised processes. Value delivery is integral to Thrive25 and finalists' projects ticked the boxes for economic and commercial value with a total calculated five-year net present value of US$123.9 million at a 100% probability of success rate.

This year we refreshed the awards process by removing the limit of five people for team recognition and introduced a new category: technical excellence – projects across a broad range of technical aspects that help us achieve our OneSappi objectives, but which may not have reached the economic or innovation thresholds. We also continued with the commendation awards for projects with sound commercial promise which have not yet reached commercialisation status.

The global winners this year were the team from Ngodwana Mill in South Africa. The newsprint market was severely impacted by the Covid-19 pandemic and the mill's PM2 faced significant commercial downtime. Against this backdrop, the team implemented modifications to PM2 and developed new packaging grades for the recycled liner and flexible packaging papers markets.

Expanding production capacity at Alfeld Mill

Building on our comprehensive portfolio of high-barrier papers that ensure the optimum protection, we expanded production capacity for high-barrier papers at Alfeld Mill. The mill can now produce papers with an exceptionally high barrier even under the most demanding climatic conditions.

Right on schedule for high-barrier paper innovation at Alfeld Mill

Beginning in September 2022, Alfeld Mill in Germany began putting its cutting-edge coating machine into operation for high-barrier papers that offer an exciting sustainable alternative to traditional film and foil-based materials.

While these papers are in extremely high demand, including to meet ever stricter regulatory requirements, industry has been slow to develop viable solutions. Given Sappi's in-house technology, we have been able to demonstrate a viable solution and are on schedule to begin production for the market in calendar 2023.

The highlighted in-house technology will not only increase Sappi's coating capabilities, but also boost development of more innovative solutions for sustainable packaging together with our customers. In addition, customers will benefit from higher production capacity and a shorter supply chain. Moreover, we intend to tap into new customer groups through the unique combination of paper and dispersion-coating technology, offering even more competitive and attractive paper packaging solutions.

The investment at Alfeld Mill strengthens our position as the leading global provider of sustainable paper packaging solutions. With the construction of two new buildings, the optimal infrastructure for the innovative machine was established in 2021. Commissioning of the coater is progressing according to plan with teams excited to be part of this industry-first breakthrough with completely novel technology.

Meeting evolving customer demand

We extended production of our successful Fusion Topliner white grade from Ehingen Mill in Germany to Gratkorn Mill in Austria. Fusion Topliner, a white virgin fibre liner for high-quality corrugated packaging, is now the most widely used corrugated liner made from pure virgin fibre. It is recommended for applications such as premium quality consumer goods packaging and point-of-sale displays – where high visual impact and differentiation are key. The product also stands out with exceptional strength and versatility. Volume availability will be increased month by month to support the expected growth of our customers, and to satisfy large requirements in the corrugated board business.

We launched Raw, a unique graphic paper that provides users with the reliable print performance typical of coated papers, but with the touch, feel and high whiteness/high bulk appearance of an uncoated paper. By stimulating the sense of touch in addition to vision, Raw helps create deeper connections for consumers. Available for litho printing in sheets from 115 g/m2 to 300 g/m2 and suitable for dry toner printing, the paper will run on HP Indigo digital presses without primer.

Another new addition to our portfolio is Crystalcon, an uncoated, translucent paper. By combining Crystalcon with Sappi Seal, we can offer manufacturers a compostable, recyclable packaging solution that is well suited to both food and non-food applications. Although not completely transparent, the new paper allows sufficient visibility for consumers to examine the packaged product. It can be used as a sustainable alternative to film and is both recyclable and compostable. Potential applications range from pasta or rice packaging to magazines, as well as packaging for goods from virtually all product segments – from small electronic devices to clothes. It also significantly contributes to establishing paper as primary packaging material in the market.

In addition, a new board packaging offering called Proto Blister was provided to the North America market this year. This product's unique combination of surface strength, stiffness and printability allows for high-performance graphic backing for the clear blister pack which encloses the packaged product. This is yet another example of paper-based packaging quality.

Building on 80 years of experience in technological innovation and evolution in the release paper industry, we launched Arrio, a decorative laminate surface solution that delivers remarkable aesthetics, premium haptics and scratch and fingerprint resistance for high-wear surfaces. Arrio, which offers a superior surface to conventional melamine in aesthetics and performance, is a perfect solution for decorative and functional surfaces on furniture, work surfaces, kitchen cabinetry and more. The durable acrylic surface extends product lifetime and does not require application or removal of protective film layers, thus reducing manufacturing costs and waste. It also provides superior haptics, including super matte, smooth touch and high-colour intensity surfaces and it is suitable for single radius wrapping applications. Offered initially in a super matte, fingerprint resistant, soft-touch texture named Matte Haven on black décor, the Arrio platform will continue to develop with the future addition of texture and décor colour options.

Recognition for Ultracast Viva

Ultracast Viva™ (UC Viva), a textured release paper line, created the industry's first premium high-fidelity casting paper compatible with solvent-free systems. UC Viva was named the product of the year in the Business Intelligence Group's 2022 Sustainability Awards programme. The sustainability awards honour the people, teams and organisations who have made sustainability an integral part of their business practice or overall mission.

Amid a global movement to limit or eliminate the use of solvent-based casting systems, UC Viva is a revolutionary development showing that products developed for solvent-free systems can be reliable and high functioning. Using a proprietary process, UC Viva brings to market performance improvements that are more compatible than ever with green chemistry systems, including benefits from its increased reusability and easier handling with expanded temperature limits.

Created with a commitment to forward-looking sustainability practices and environmentally friendly manufacturing, UC Viva is the innovative answer for more responsible solutions to reduce pollution.

People

Ensuring the safety of our employees and contractors

Why it's material

Our vision of a thriving world is based on safety, which is why it is the core value on which all our other values are based: As OneSappi, we do business safely, with integrity and courage, making smart decisions that we execute with speed. Our maturing safety culture, which reinforces safety as a shared responsibility, is helping to save lives and empower people, while improving business performance and making a positive impact on our operations.

How this issue links to other aspects of our business

Our global priority SDGs

Our top 10 risks

  • 1/ Safety
  • 9/ Employee relations

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Rising social inequality and growing social activism with increased expectations of business.

Our highlights

Zero fatalities and continuous improvement in safety performance

Management incentives expanded to include LTIFR and lost-time injury severity rate (LTISR) for contractors in addition to own employees

Opportunities for value creation

In SNA, our safety platform, in conjunction with the employee engagement platform, developed the SNA Safety Impact Award Programme to recognise proactive initiatives that improve safety culture and enhance employee engagement related to safety, thereby leading to the reduction of injuries at our sites. Looking ahead, the platform will continue to emphasise site-specific injuries for reducing hand injuries – identified as a common incident – enhance recognition for achieving excellence in our leading indicators and continue to collaborate with our contractors.

Key developments in FY2022

Covid-19

The impacts of the Covid-19 pandemic lessened over the year. However, there were still sporadic cases which were dealt with through preventative absenteeism. In total, tragically, 17 colleagues have succumbed to the disease to date. All operations and sites continued with 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. As restrictions were lifted, the ongoing focus was on encouraging all to vaccinate. In South Africa we provided vaccination services in our onsite clinics for all employees and family members.

Global safety awareness week

For the third consecutive year, the theme of Global Safety Awareness Week was 'I value life', reinforcing the idea that safety is not a one-off event, but a daily choice. The lifting of Covid-19-related restrictions allowed for face-to-face engagements across the group. Activities, which were open to all Sappi staff and contractors across the group, focused on promoting situational awareness and understanding risks and hazards.

Occupational safety

All three regions within the group have safety programmes and processes that have the objective of creating an environment where no person will suffer permanent disability or loss of life. Our global I value life initiative aims to accelerate improved safety performance in areas of concern and to develop a safety awareness culture in all parts of our business. The initiative includes integrated health and safety planning and management, training at all levels, participative information and control structures and adherence to international best practice and safety standards.

Our view that injuries and accidents are not inevitable, is underpinned by risk assessments, group sharing of all incidents and root cause investigations, enforcement of compliance and leadership engagement with our people.

In terms of group safety performance, all regions showed continuous improvement. A key highlight was the fact that, for the second consecutive year, there were no fatalities. Safety performance was as follows:

  • The combined (own employees and contractors) LTIFR was 0.30 against a target of <0.37
  • The combined (own employees and contractors) LTISR was 9.31 – almost half the target of 17.08
  • The combined injury index was 2.81 compared with the target of 6.15.

Sappi Europe managed to reverse the previous year's disappointing performance, achieving a combined employee and contractor LTIFR of 0.55 vs a target of <0.66. The injury index for own employees and contractors also improved, showing the best-ever performance over the last five years. This performance was underpinned by a safety communication campaign featuring a handbook (see below) and posters, all of which focused attention on frequent injuries and reinforced the fact that nothing is so important than it cannot be done safely.

Safety performance in SNA was excellent, with a record low combined employee and contractor LTIFR of 0.18 compared to a target of 0.38.

Safety performance in SSA continued to improve, with a best-ever combined employee and contractor LTIFR of 0.26 versus a target of 0.29.

SEU safety handbook


We calculate LTIFR by dividing the product of lost-time injuries and a group-wide standard for work hours by the unit's work hours, ie LTIFR = LTI * 200 000/units actual work hours.

Group LTIFR


Supporting sound labour relations

Why it's material

One of the strategic fundamentals of Thrive25 is trust. Against this backdrop, sound labour relations are important because they form the foundation of trust between us and our employees. We provide them with a strong voice in our decision-making processes so that they develop a sense of ownership towards their work and Sappi. We also provide the proper channels that allow our people to voice their concerns. 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 55% of our workforce is unionised, with 71% 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
  • 9/ Employee relations

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Rising social inequality and growing social activism with increased expectations of business
  • Changing consumer and employee behaviour
  • Shifting demographics.

Our highlights

Relatively positive industrial relations with trade unions at all manufacturing sites and plantations

Opportunities for value creation

In SSA, within the context of community unrest and potential business disruption, our focus is on enhancing union-management relationships. Following engagements at the National Partnership Forum, it was agreed that Sappi would afford shop stewards the opportunities to have curated individual development plans, following the same process used for high-potential employees. A list of desired competencies was prepared and approved by the shop stewards. The list of competencies was then used for individual consultations with shop stewards to help them self-assess against the competencies. Based on the results of that assessment, customised development plans were developed for each shop steward. Development plans incorporate online training, classroom training, learning from others and many practical assignments. Business unit employee relations managers are supporting and mentoring the shop stewards.

Key developments in FY2022

The overall industrial relations climate in SEU was good. Approximately 61% of SEU employees are members of a union and approximately 87% of employees fall within a bargaining unit. We engage with various unions in each country where we operate and collective labour agreements (CLAs) are in place at all mills. Last year we reported that there were no CLAs in place at Carmignano and Condino Mills in Italy and Lanaken Mill in Belgium. However, at the Italian mills these are now in place until 2024 and a CLA is also in place at Lanaken Mill.

While we continued to be engaged in dynamic contract negotiations, consistent with increased labour activity nation-wide, the overall industrial relations climate in SNA was satisfactory. Approximately 65.2% of SNA's employees are members of a union and there are 12 collective bargaining agreements in place with hourly employees. In total, we negotiated eight collective bargaining agreements. We anticipate a comparatively light negotiation schedule in the next financial year. Negotiations with the United Steelworkers' Union will take place at Allentown Sheeting Facility and Westbrook Mill in March and August 2023 respectively.

Overall union representation in SSA workforce declined from 50% in FY2021 to 48%, with 61% of employees falling within the scope of the bargaining unit. SSA continues to recognise two trade unions – the Chemical Energy, Pulp, Printing, Wood and Allied Workers Union and United Association of South Africa, but also engages with other non-recognised trade unions.

Collective bargaining in SSA during FY2022 was concluded shortly after year end. In the Pulp and Paper Industry Chamber, a decentralised bargaining process which approved company-level negotiations, was adopted for the 2022 bargaining season. Industry wage settlements were satisfactorily concluded for the sawmilling and forestry sectors.

Attracting, developing and retaining Sappi talent

Why it's material

The Covid-19 pandemic has reshaped the traditional world of work, leading to increasing numbers of people to re-evaluate what they want from a job and from life. This has created a large pool of active and potential workers who are shunning the traditionalist path, resulting in what commentators have called The Great Resignation or The Great Attrition. The success of our business depends on our people, who we see as a core pillar of competitive advantage. Accordingly, we focus on energising our employees through meaningful work; promoting strong relationships with co-workers and managers; promoting a culture of development in which diversity and inclusion are encouraged; providing the resources and environment to balance stress and wellbeing and offering both financial and non-financial incentives. That we are succeeding in this regard is highlighted by the fact that in FY2022, globally, voluntary staff turnover was 6.15%.

How this issue links to other aspects of our business

Our global priority SDGs

Our additional SSA priority SDGs

Our top 10 risks

  • 9/ Employee relations

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Deglobalisation, polarisation and increased geopolitical tensions
  • Rising social inequality and growing social activism with increased expectations of business
  • Changing consumer and employee behaviour
  • Shifting demographics.

Our highlights

Sappi Advance IT training platform was launched across all regions, thereby enhancing performance enablement

61.09% skills training, 38.91% compliance training

Increased training spend in all regions

Opportunities for value creation

In line with our strategic fundamental of 'enhance trust,' we have instituted a leave policy at senior levels of the organisation which allows people to self-determine the amount of leave they take. We believe this will enhance engagement and retention.

Key developments in FY2022

Attraction

The Great Resignation has impacted millennials and Gen Zers in particular. According to Deloitte, four in 10 Gen Zers (born between the mid to late 1990s and the early 2010s) and nearly a quarter of millennials (those born between 1981 and 1996) would like to leave their jobs within two years, and roughly a third would do so without another job lined up, signalling significant dissatisfaction levels1. The same survey highlights the fact that these groups want businesses and their own employer to do more. Only 18% of Gen Zers and 16% of millennials believe their employers are strongly committed to fighting climate change. Gen Zers and millennials want to see employers prioritise visible climate actions that enable employees to get directly involved, such as banning single-use plastics and providing training to help people make better environmental decisions.

1 https://www2.deloitte.com/content/dam/Deloitte/at/Documents/human-capital/at-gen-z-millennial-survey-2022.pdf

We have a significant advantage in that Sappi's business aligns with these priorities and that we are strongly focused on our purpose: Sappi exists to build a thriving world by unlocking the power of renewable resources to benefit people, communities and the planet.

In all regions, our people visit schools and universities to promote our industry. We also host mill and forestry visits. In South Africa we offer bursaries and have issued new bursaries in the priority areas of forestry science, industrial engineering and electrical/mechanical engineering.

Development

To build strong skills across Sappi and build leadership capability at all levels we provide training and development opportunities and give performance feedback.

In terms of young talent, SEU trains and develops approximately 225 young apprentices. To date, this three to four-year vocational training programme has been offered primarily at our four German-speaking mills but has now been introduced in Finland and Belgium. The programme is helping to build a technical talent pool to replace staff who will retire in the short to medium term. A specific programme for the upskilling of Lanaken Mill operational staff will be launched early in the next financial year.

In SNA, all salaried personnel received training on Sappi Advance including virtual and in-person sessions on developing, managing and reporting on performance enablement objectives; manager training on allocating and approving objectives; how to best use the tools available for development plans; check-ins and performance reviews; as well as how to link available training for development plans. To evaluate the transition to completing necessary training in Sappi Advance and allowing employees to demonstrate completion for compliance and gainshare purposes, a calendar of compliance-related courses was set up for pilot employees with staggered due dates.

The Lean Six Sigma team also resumed some in-person training, with facilitation from those skilled and certified in the methodologies. Specific departments including finance, sales and manufacturing are taking specific training actions in response to industry/workforce concerns and comments from engagement surveys. Somerset Mill provided in-person leadership development training while Cloquet Mill offered supervisory skills training and permanently adopted some of the modifications made in response to Covid-19 requirements, such as shorter modules, online learning and an overall reduced number of classroom hours. In addition, multiple departments have received in-person training on general management/self-awareness topics such as Myers-Briggs and communication, change agility and giving and receiving feedback.

In SSA, in terms of leadership development, the LeadX programme continued in South Africa with minor updates based on feedback from the previous group. Updates focused on the technical cluster engagements and creating psychological safety at work. Monthly check-ins continued with participants on the manager in training programme (72 managers in FY2022), which is now compulsory for all first-time managers going forward.

Lean & Me continued to gain momentum across manufacturing, with the creation of two customised business version based on business demands – Lean & Me Lite for senior managers and support services and Lean & Me for risk, health, safety and environmental teams.

Technical skills development received a further boost in the reporting period with the introduction of additional technical programmes including woodyard superintendent, paper machine operator (PM1 and PM2 Ngodwana Mill), maintenance planner, business process engineer and HR business partner. The programmes include online training, classrooms, mentoring and practical assignments.

Sappi Trading employees are encouraged and supported to improve their job performance and abilities for future career growth. In FY2022, training courses ranged from Portuguese, English and Japanese language courses attended by sales and customer service employees in Mexico and Shanghai to 'Introduction to Sappi graphics and speciality papers' attended by non-sales employees in Hong Kong.

Average training hours per employee in FY2022

Region   Hours
SEU   30
SNA   54
SSA   63
Sappi group (weighted average)   46.89

Retention

Diversity and inclusion play a key role in employee retention. In today's global marketplace, we recognise that diversity facilitates interaction with different cultures, colleagues and clients. We believe that the creation of an inclusive culture representative of such a diverse array of people, thoughts and ideas enables us to innovate, deliver and service our customers based on a broad palette of considerations. Diversity and inclusion are not just about fairness, morality and justice as being the right thing to do; nor just about legal compliance – they're also about enhancing enterprise value.

Under SDG8: Decent Work and Economic Growth, our Thrive25 target is to increase the proportion of women in management roles by 3.7 percentage points. This is reinforced by gender equity targets specific to each region. We are making excellent progress against our gender equity targets and at a group level the proportion of women in management positions in FY2022 was 22.5%, a 3.5% increase from the FY2019 baseline. SSA and SNA exceeded their FY2022 gender equity targets, but SEU is lagging and specific action plans were developed during the year to accelerate progress in the region.

In SSA, we continue to perform well against our transformation targets and are classified as a Level 1 BBBEE contributor. The representation of designated employees1 in the workplace continues to gather momentum with the profile as follows: top management: 43.8%; senior management: 55.6%; mid-management: 64.1%; junior management: 81.6%; semi-skilled and discretionary decision making: 98.4% and unskilled; and defined decision making: 98.7%.

1 Black people (including Coloureds and Indians), women and people with disabilities.

Employee engagement, which allows us to understand better our employees' needs and concerns and respond to these, continues to underpin our retention efforts. Our central action tracker provides regular updates on the action items identified in our last employee engagement survey in FY2021. Progress on action items has been accelerated by the fact that the close-out of action items is now included in the performance objectives of each line manager and supervisor across the business. Identified action items include work/life balance, culture, rewards and recognition, benefits and manager and co-worker relationships.

Average training spend per employee in FY2022

Region   Spend
US$
SEU   629.45
SNA   276
SSA   707.28
Sappi group (weighted average)   602.42
Creating a positive social impact in our communities

Why it's material

Our vision of a thriving world can only be achieved if we support and promote growth and development in the communities surrounding our operations. Our community investment programmes focus on creating stronger social licence to operate, demonstrating our commitment to active corporate citizenship, enhancing our reputation and customer loyalty, as well as attracting talent.

How this issue links to other aspects of our business

Our global priority SDGs

Our additional SSA priority SDGs

Our top 10 risks

  • 7/ Cyclical macro-economic factors
  • 9/ Employee relations

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Deglobalisation, polarisation and increased geopolitical tensions
  • Rising social inequality and growing social activism with increased expectations of business
  • Changing consumer and employee behaviour
  • Shifting demographics.

Our highlights

13% year-on-year increase in community investment in SSA

Significant progress on enterprise and supplier development in SSA

Opportunities for value creation

We are recalibrating our Abashintshi youth development programme in South Africa and are also intensifying our economic empowerment initiatives – developments which should lead to positive benefits.

Our approach

There is broad alignment between the three manufacturing regions on key themes including community welfare, education, environmental protection, conservation and biodiversity (with a strong focus on forestry), community training and economic opportunities. Projects are aligned with and support business priorities and needs, taking into account feedback from our stakeholders. We prioritise three key stakeholder groups – employees, local communities and customers.

At a community level, mills in each region support local projects ranging from youth clubs, community centres, vulnerable groups, sports clubs, environmental education and paper donations. Project support is provided to Sappi Forests' community schools based on requests and needs analyses. Projects include fresh water, ablution facilities, fencing, buildings and structures and vegetable gardens, as well as hospices and local clinics are supported in each community. Each region has its own programmes which are detailed extensively in our Group Sustainability Report, available at www.sappi.com/sustainability

The fact that Sappi is headquartered and listed in South Africa, coupled with the significant development needs of the country, dictates a higher focus on social impact activities in our country of origin.

Key developments in FY2022

Emergency relief and support is activated if and when required, both at a global and regional level. The Russian invasion of Ukraine created a humanitarian emergency which we responded to by donating funds and matching employee donations up to a set limit. in South Africa, the floods of April 2022 in KwaZulu-Natal caused significant damage and human tragedy. As in Europe, we donated funds and matched employee donations up to a set amount (see Our key relationships).

In North America we continued with our Ideas that Matter initiative which, for over two decades, has provided funding and resources for designers working with non-profit organisations to make social and environmental impact, to encourage reforms in justice, education and healthcare and to address diversity, equity and inclusion efforts across communities and around the world. Sappi has made global contributions totalling nearly US$14 million through the work of more than 500 projects toward addressing these causes. A condition of entry this year was that work should align with one of the UN SDGs. The winning entries championed causes ranging from child literacy, immigration and maternity care to rainforest preservation, anti-poverty programmes and resources for women of colour.

Our Social impact framework

We continued to progress our social impact framework which enables us to map and track our community approach across all segments, thereby increasing our positive impact on society. We used the framework to update the 2022 strategy with deliverables focused around economic, social and environmental outcomes and the following broad themes: promoting regional development, empowering communities and protecting resources.

The creation of local economic opportunity in South Africa has increased in importance and urgency. It is being addressed through a multi-pronged approach including increased community training as well as targeted shared value, supplier development and enterprise development programmes.

We are committed to developing SMEs so that, like Sappi Khulisa (Refer to Our key relationships for further detail), they are not CSI projects, but become part of Sappi's – and other enterprises – core business.

In 2018, we launched a focused ESD strategy and established a dedicated ESD unit tasked with helping to incorporate SMEs into the mainstream economy. Since then, we have made considerable progress, successfully integrating 133 SMEs into the value chain.

In FY2022, we spent over ZAR245 million with SMEs, significantly exceeding our set annual target by ZAR133 million. Services supplied ranged from alien invasive plant management to civil and mechanical work and from logistics and transportation to plumbing and electrical.

We engage with other corporates and contractors to contribute towards local SME development and recruitment of local community members. As an example, in FY2022 we had a total of 13 incubation initiatives in collaboration with contractors whereby SMEs were sub-contracted at a cost of ZAR30 million to perform services like scaffolding, civil works and piping, mechanical engineering works, harvesting, etc. Contractors have also invested in training SMEs and local community members to enhance their job-related skills and ensure quality of work.

Spend in FY2021 and FY2022

    2022 2021
SEU   €100,000 €100,000
SNA   US$417,500 US$145,100
SSA   ZAR54 million ZAR48 million

Planet

Sourcing sustainable woodfibre

Why it's material

Our forests are the lungs of our planet, helping to regulate our climate, while directly supporting the livelihoods of over a billion people. The social and economic benefits of these services are estimated to be in the trillions. Today, it's clearer than ever that there is no solution to climate change without a solution to tropical deforestation. Yet, despite recent efforts, deforestation increased by 12% between 2019 and 2021.1 Simply put, zero deforestation is not an option but a strategic necessity for companies like Sappi with land-based value chains to deliver on the UN SDGs.

1 Why net zero needs zero deforestation now: Initial research paper from the UN Climate Change High-Level Climate Champions, Global Canopy, The Accountability Framework initiative, WWF and the Science Based Targets initiative, available at: https://climatechampions.unfccc.int/wp-content/uploads/2022/06/Why-net-zero-needs-zero-deforestation-now-June-2022.pdf
How this issue links to other aspects of our business

Our global priority SDGs

Our top 10 risks

  • 3/ Sustainability expectations
  • 4/ Supply chain disruption
  • 5/ Climate change

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Climate change and climate transition
  • Resource scarcity and growing concern for natural capital.

Our highlights

77% of fibre supplied to our mills certified

We are piloting the Sustainable African Forestry Assurance Scheme for small growers in South Africa

Opportunities for value creation

A new FSC CoC standard came into effect in September 2021, incorporating a new chapter 7 on FSC core labour standards. With this new step, the principles of the International Labour Organisation's (ILO) Core Conventions and the ILO Declaration on Fundamental Principles and Rights at Word (1998) are integrated into FSC's CoC standards. The revised FSC CoC standards now include core labour requirements which are auditable and include the effective abolition of child labour, elimination of all forms of forced or compulsory labour, the elimination of discrimination in respect of employment and occupation, respect of freedom of association and the effective recognition of the right to collective bargaining.2 This puts workers' rights on the agenda for around 45,000 FSC CoC certificate holders all over the world.

2 https://fsc.org/en/document-centre/documents/resource/302

These standards are already in place for forestry management but will now apply to our mill CoC certificate holders. Certification for Sappi is expected within the next 12 months. While the key topics are already covered in our company policies and operating/HR procedures, the new standards will strengthen our reputation and standing in terms of social issues and workers' rights.

Key developments in FY2022

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.

Implementing robust certification systems

Following PEFC CoC certification for SSA's pulp and paper mills in FY2022, all our mills in Canada, Europe, South Africa (except for Stanger Mill) and the US hold both PEFC and FSC CoC-certification. Our mills in the US are also SFI CoC certified and we hold SFI fibre sourcing certifications for Cloquet and Somerset Mills.

In FY2022, 77% (2021: 77%) of all the wood-based raw material supplied to Sappi's mills originated from FSC or PEFC (including SFI) certified forests. In SEU, SNA and SSA, the share of certified woodfibre supplied in FY2022 was respectively: 87% (2021: 87%), 59% (2021: 57%) and 85% (2021: 85%).

These high levels of certification enable us to offer a wide product portfolio of certified products and give us full traceability of purchased wood-based raw material. By striving for increasing levels of certification in line with our global and regional Thrive25 targets, we hope to drive responsible production and consumption patterns, as well as demand for wood-based products originating from certified forests.

Much of the woodfibre we use is dual-certified. We have rigorous tracing protocols in place regarding the documentation of the origin of woodfibre. In addition, suppliers must provide evidence that all woodfibre is sourced from controlled, non-controversial sources in accordance with the FSC Controlled Wood Standard, as well as PEFC (and SFI in the United States) risk-based due diligence systems. All suppliers are requested to provide wood origin information (country of harvest and where applicable, sub-national region and/or concession of harvest) and a list of tree species at least annually and/or upon request. Based on the data, Sappi prepares mill-specific wood origin declarations which are available for all interested stakeholders on www.sappi.com

Our continuous commitment to zero deforestation, as well as sustainable forestry and sourcing, are embedded in our Group Woodfibre Procurement Policy which incorporates core requirements on woodfibre and its origin; clear requirements on traceability and supply chain integrity; and further action points to ensure zero deforestation, sustainable forestry and sourcing. This policy was revised for clarity and added rigour in FY2022.

Expanding certification outside our operations

We continue to participate in efforts to expand sustainable forestry practices and certification: SNA works closely with a variety of programmes dedicated to providing logger education and continuous education, including SFI State Implementation Committees, Maine Forest Products Council, Maine Tree Foundation, and numerous academic programmes (providing financial and in-kind support).

In SSA, we helped to develop the SAFAS and have also established a group FSC scheme for small and medium-sized growers, paying growers in the scheme a premium for certified timber delivered. In FY2022, the scheme had 39 members representing a planted area of 45,600 hectares and 306,400 tons delivered. We are currently piloting SAFAS certification for small growers.

Enhancing supply chain sustainability

In SNA, written stumpage and wood supply agreements include requirements to comply with applicable laws, including the use of best management practices to ensure that wood procurement operations adapt appropriately to seasonal adverse weather conditions and other weather events to ensure that soil productivity and water quality resources are protected. A key procurement provision is to build inventory at mills during the winter months to avoid logging activities during the spring breakup/mud season. We specify that wetlands and other wet areas should be logged when soils are in a frozen condition and that best management practice guidelines appropriate to the site should be adhered to. We also identify, mitigate and avoid adverse impacts on Forests with Exceptional Conservation Value, which includes areas identified by NatureServe with a G1 (Globally Critically Imperilled) or G2 (Globally Imperilled) ranking for species and native plant communities.

In SSA, R&D play a significant role in tree growth and improved supply chain efficiency. (See below for Sappi Forests' response to climate change). Conventional breeding methods are no longer viable as change is rapid, breeding cycles are too long, and species variation is insufficient to respond to future threats. Molecular technology and biotechnology tools are used to ensure forest sustainability and precision agriculture. Other methods include hybrid varieties where desired traits of two species are combined to increase adaptability to marginal areas; and mulching not burning, as mulched areas hold more soil water and have a positive impact on growth.

In addition, our work with land reform beneficiaries and our Sappi Khulisa programme (see Our key relationships and Sappi and the SDGs), help to ensure security of woodfibre supply.

Prioritising clean and renewable energy and responding to climate change

Why it's material

Since the UN COP26 in Glasgow, Scotland in November 2021, climate impacts have worsened and carbon emissions have risen to record levels, affecting businesses around the world and hitting vulnerable communities the hardest.

Our industry is energy intensive. In addition, our business is dependent on woodfibre which is impacted by climate change. Against the backdrop of these transitional and physical risks, we have long recognised our responsibility to be part of the climate solution. A significant portion of R&D is allocated to decarbonisation including pulp backward integration which brings green energy opportunities aligned with our strategy; energy swaps and energy change opportunities balanced with economics. In addition, our Future Energy Technologies and Decarbonisation cluster is exploring and developing novel technologies for fuel shift and deep decarbonisation in terms of Scope 1 and 2 emissions, with a particular emphasis on energy, pulping, papermaking and bleaching.

We align with climate science and are taking focused action to future-proof our business against the physical and transitional impacts of climate change and be part of the solution.

How this issue links to other aspects of our business

Our global priority SDGs

Our top 10 risks

  • 3/ Sustainability expectations
  • 5/ Climate change
  • 6/ Evolving technologies and consumer preferences

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Climate change and climate transition
  • Resource scarcity and growing concern for natural capital.

Our highlights

Validation of our science-based targets by the SBTi

12.7% reduction of specific GHG (Scope 1 and Scope 2) emissions over five years

Opportunities for value creation

By accelerating our decarbonisation journey and motivating our suppliers to adopt science-based targets, we are working to realise our vision of a thriving world. This, we believe, is important to enhance our reputation, motivate customers to buy our products and attract investment, all of which ultimately contribute to increased enterprise value.

Key developments in FY2022

Approval of our science-based targets

In June, the SBTi approved our science-based targets. Related to climate action, under our Thrive25 targets, globally we had committed to an 18% reduction in specific GHG emissions (Scope 1 and 2 combined). This ambition has now accelerated: Under our science-based targets, we commit to reduce Scope 1 and 2 GHG emissions by 41.5% per ton of product by 2030 from a 2019 base year. We have also committed that 44% of our suppliers (by spend) will have science-based targets by 2026.

Our science-based targets hold significant competitive advantage in that they will help to:

  • Build trust with our customers in line with one of our key strategic fundamentals
  • Highlight our commitment to continuous improvement
  • Ensure that our operations remain lean and efficient
  • Enhance enterprise value and investor confidence
  • Promote resilience against a future where resources, particularly those derived from fossil fuels, will become increasingly scarce and expensive.

Actioning our targets

A capital plan has identified capital projects within our existing five-year plan as well as further longer-term interventions, to facilitate the required emissions reduction. The capital expenditure between FY2021 – FY2030 required to achieve the targets is estimated to be in the region of US$70 million per annum.

Decarbonisation projects include process efficiency improvements, transitioning to low-carbon energy generation, as well as upgrading of certain plants which allow for fuel switching from fossil to biogenic fuels and increased purchases of renewable energy. In FY2022, globally 53.9% (FY2021: 53.7%) of energy used was renewable, mostly from own black liquor. In SNA, we already use a high percentage of renewable energy – 76.7% in FY2022.

Decarbonisation plans that have already been implemented or that are in progress in our other regions include:

SEU

  • The recently completed €35 million phase 1 modernisation of the power plant boiler at Gratkorn Mill, Europe's largest paper mill. During the transitional phase, the new state-of-the-art boiler will run predominantly on natural gas. In FY2023 phase 2 will install the necessary biomass handling equipment to enable a full conversion to biomass.
  • A €16 million investment in a biomass boiler at Kirkniemi Mill, completed earlier this year. The investment established the equipment needed to receive, store and handle woody biomass like the bark, sawdust and wood chips used for biofuel production.
  • The installation of an e-boiler at Maastricht Mill. With an investment of close to €6 million, the mill's yearly emissions of CO2 will be reduced by some 13% (compared to 2019) following commissioning. The reduction in CO2 emissions will be achieved by replacing part of the gas generated steam by electric generated steam via a newly to-be-installed e-boiler. The electricity used will be generated through renewable energy sources such as solar power and wind energy.

SSA

  • Ngodwana Energy, a 25 MW biomass energy plant at Ngodwana Mill in which SSA holds a 30% stake together with consortium partners KC Africa and African Rainbow Energy and Power. The plant, which was commissioned in March 2022, uses biomass recovered from Sappi's surrounding double certified plantations1 and screened waste material from the mill production process. Up to 35 tons an hour of biomass is burned in a boiler to generate steam and drive a turbine to generate electricity which is fed into the national grid. The project falls under the South African Government's Renewable Energy Independent Power Producer Programme.
  • Our capacity expansion project at Saiccor Mill involved conversion from calcium to magnesium pulping and was commissioned in FY2022. The technology used has enabled halving of fossil fuel emissions and a reduction in gas emissions of 40%. (Please see Prosperity section above.)
1 Sappi's plantations are both 100%: FSC™ (N003159); and Programme for the Endorsement of Forest Certification (PEFC/01-44-43) certified.

Our assessment of our suppliers' climate performance (Scope 3) is discussed in the Principles section above of this report.

We are meeting regularly with key suppliers to advocate that they set science-based emission reduction targets by 2026. We also discuss strategies for decarbonisation, as well as developments related to new or alternative materials and innovation that could support reduced carbon footprints.


Globally, over five years, specific Scope 1 and 2 GHG emissions have declined by 12.7%. Year-on-year, the decrease was 4.8%.

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


Progressing our climate strategy

We made progress on our climate strategy, which is aligned with our Thrive25 strategic pillars as set out below:

Grow our
business

What this means

  • Committing to core business segments while investing in innovation, growth opportunities and ongoing customer relationships.

Climate relevancy

  • Purposeful innovation and collaboration to provide low-carbon, bio-based solutions and accelerate climate action.

Sustain our
financial health

What this means

  • Reducing and managing our debt, growing EBITDA, maximising product value, optimising processes globally and strategically disposing of non-core assets.

Climate relevancy

  • Optimise allocation of capital for profitable growth while ensuring that it reduces our impact on climate change and positions us competitively for a low-carbon future.

Drive operational
excellence

What this means

  • Strengthening our safety-first culture and reducing resource use while enhancing efficiency and making smart data investments.

Climate relevancy

  • Continual focus on reducing our own and value chain emissions, protecting biodiversity and promoting the responsible use of scarce water resources.

Enhance
trust

What this means

  • Improving our understanding of, and proactively partnering with clients and communities, driving sustainability solutions, and meeting the changing needs of every employee at Sappi.

Climate relevancy

  • Being a transparent, proactive and responsible company and partner with a long-term, solutions-oriented approach to address climate change mitigation, adaptation and resilience; playing our part to ensure a socially inclusive just transition.

Implementing an implicit price of carbon

Prior to the reporting year, we used a shadow price of carbon per region. This created awareness of carbon impact across the business and helped to prioritise low-carbon initiatives and stress-test investments. In line with our accelerated climate-related ambition and based on technical analysis, we are now using an implicit carbon price1 in capital investment decision making. We will review the price – which is differentiated per region due to the varying costs of carbon abatement – annually.

1 This price is based on how much it costs Sappi to implement emissions reduction projects, such as renewable energy purchases or energyefficiency upgrades.

Conducting climate change scenarios

Each country in which we have manufacturing operations, as well as the EU region, has submitted NDCs to the UN Framework Convention on Climate Change. Transition risk is assessed in terms of scenarios involving these NDCs and the associated time frames. Various scenarios within the parameters of key regulatory developments are also assessed against the backdrop of various issues (such as Sappi's own decarbonisation plans and possible carbon taxes to drive behavioural change, reputational impact if site emissions reduction plans do not align with the relevant NDC) and the related opportunities (health benefits).

With the help of external consultants, we have conducted climate change scenarios for our mills, with data from Global Climate Change Institute (GCI) at the University of the Witwatersrand in Johannesburg also being used. Our baseline was 2020, with scenarios to 2030 and 2050. The climate hazard indicators we used were water stress, flood, heatwave, cold wave, hurricane, wildfire and sea level rise. Under Representative Concentration Pathways 2.6 (low), 4.5 (moderate) and 8.5 (high), each indicator was then assigned a risk rating. This has helped to embed climate change aspects into our current risk register methods, thereby improving our overall approach to risk. Overall, the scenarios helped us to establish that in terms of our mills, Sappi faces moderate risk, with the greatest exposure to water stress and cold wave. The latter is set to decline over time due to climate change, but risks are more pronounced for individual sites.

Responding to climate change on Sappi's plantations

As a semi-arid region with high inter and intra-seasonal precipitation variability, Southern Africa is very vulnerable to climate change. Evidence is mounting that changes are occurring in many of the region's climate characteristics, such as rising temperatures with indications that the rate of warming has been increasing, especially in the last two decades. Plantation forestry in South Africa is sensitive to climate change as projected increases in temperature and changes in rainfall can result in some areas not being climatically suitable for a specific genotype while some areas might become climatically unsuitable for forestry. Although other areas might become climatically suitable, expansion of plantation forests is limited in South Africa due to availability of suitable land and due, also, to water legislation.

The assets of the Sappi's tree improvement programme based at the Shaw Research Centre in Howick, include a broad genetic base, acquired over 25 years and a skilled breeding team exploiting innovative technologies and nursery technologies research into improved propagation techniques for elite genotypes. The land management and pest and diseases programmes conduct research on stress detection, climate change predictions, site classification to improve site-genotype matching, risk mapping, nutritional research, site resilience, biological control measures and national pest and disease surveys.

Key developments in FY2022 are set out below:

  • Site classification upgrade to include moisture index
    In response to hotter and drier climatic conditions, Sappi Forests Research has developed an updated evapotranspiration-based moisture index classification system. The index was developed by:
    • leveraging climate model data from the University of the Witwatersrand (WITS) GCI with which Sappi has a strong partnership
    • calculating a moisture index for each decade from 2000 to 2100
    • using an internationally accepted model developed by the Food and Agriculture Organisation, which requires data on temperature, relative humidity, wind speed and solar radiation
    • summarising the data and developing an app on the Sappi Map Centre to visualise some of the data layers.

The findings indicated that while most of Sappi's landholdings fall within the moist and dry classes, a significant portion are in the wet class. A small percentage of Sappi land is in areas that are known to be very dry, approaching arid, but is managed accordingly.

The improved classification system of potentially available moisture for tree growth is useful in showing the impact of climate change on future growth potential and risk. In addition, it can be used to indicate areas at greatest risk of drought and flag areas of potential seasonal drought. This will allow Sappi to prepare for the future by contributing to tree breeding objectives and site by genotype matching, as well as risk management research and planning.

  • WITS GCI downscaled climate change forecast and recorded weather trends for Sappi Southern Africa
    As reported in our 2021 Annual Integrated Report, we worked with other industry members and the WITS GCI to identify six representative climate change models and downscaled these to local conditions at a finer resolution for years between 1960 and 2100.

    The data was processed to various beneficial data products to inform on a range of factors, including drought, heat and fire risk. Sappi further processed the forecasted climate data in-house by algebraically adjusting the basic weather forecasts to a year 2000 baseline. Summarised data products are available on a Sappi Forests block and compartment level and can be visualised on the Sappi Map Centre Climatic Data Web Application. The data shows a shifting of rainfall seasonality, less rainfall in many areas and shifting climate zones from cool to warm and warm to sub-tropical. Cool areas and the Mpumalanga regions will be most impacted by temperature increases. Forecasts, while not as severe, align with long-term weather records.

    Having information on future climate and translating this into future site classification and risk maps provides tools which can be used to inform research and development and prepare for future management practices. As human activity is unlikely to change soon, climate models and projections will need to be frequently updated and the impact of future climate on tree survival and growth will be modelled on an ongoing basis.

    We will continue to downscale further to finer resolutions and are already using model projections for contextualising future climate on site by genotype matching and for our tree breeding strategy. Adaptions of this work will be used in pest and disease projections and monitoring. Looking forward, we will be implementing research projects to test strategies to adapt to hotter and drier climates and shifting seasons.

    Future climate predictions from WITS GCI.

  • Using biological control to manage pests
    As with other agricultural products, trees are susceptible to pests and diseases. This susceptibility is expected to be exacerbated by climate change. In efforts to identify and register more sustainable pest control products for use in plantation forestry, the pests and diseases programme has been collaborating with the South African company, Andermatt Madumbi, regarding some of their biological products which showed promise in laboratory studies as part of an MSc study conducted in 2019 to 2020. The company has since been collaborating with Sappi in the testing of some of their products under commercial conditions at Clan Nursery. The aims of the trials are to investigate the possible use of their biological products for the control of Quambalaria eucalypti and other pathogens, as well as to improve general hedge vigour, cutting production and enhance cutting survival and rooting.

    Results of the studies indicate that the Madumbi products are having a positive effect on both hedge production and cutting survival and rooting, as well as reducing the incidence of powdery mildew and Quambalaria eucalypti. The impact of two of their biological control products (Eco 77 and Double Nickel) has been very promising. Consequently, formal label extension trials have now been initiated. This is a significant breakthrough as there are currently only two fungicides registered for use in forestry nurseries. Having biological products that are less hazardous will be a significant milestone in integrated pathogen management in forestry.

    Differences in disease incidence in the Clan Nursery Hedge-camp after Andermatt Madumbi biological control agent applications. Healthy green, lush plot treated with Andermatt Madumbi products in foreground, next to the control plot to which no pathogen control treatments were applied. note white/grey fungal growth on leaves of the control plot, as well as reduced shoot growth.

Focusing on water stewardship and circularity

Water

Why it's material

Water issues have been identified as one of the most serious sustainability challenges facing the planet, partly due to the impacts of climate change. Increasing populations, accelerating industrialisation and growing levels of urbanisation will put even greater pressure on this limited resource going forward.

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, on-site 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 top 10 risks

  • 3/ Sustainability expectations
  • 5/ Climate change
  • 6/ Evolving technologies and consumer preferences

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Climate change and climate transition
  • Resource scarcity and growing concern for natural capital.

Our highlights

Successful backwash project at Stanger Mill

Water stewardship partnership with WWF-SA gaining traction

Opportunities for value creation

Our partnership with WWF-SA has created a replicable, scalable model which can be leveraged in line with our social impact framework.

Key developments in FY2022

Our water use is lower in Europe since the relative pulp integration is lower than in North America and South Africa. Pulp production is relatively more water intensive than paper production.

Most of our mills are situated in the vicinity of rivers from which they draw water. Withdrawal from surface sources (mostly rivers) accounts for the largest percentage of water use. This withdrawal is subject to licence conditions in each area where we operate. Water and effluent testing is routinely conducted at all mill sites. Water management is included in our operational environmental management plans, which are reviewed and updated annually.

Our plantations are not irrigated, and fertiliser is generally only used once in each rotation.

Progressing water stewardship in our operations

Two notable water-related projects were completed at Ngodwana Mill. In the first project, the team identified the potential to use a non-hazardous chemical in the oxygen reactor to preserve pulp viscosity thereby allowing for the use of lower-density timber for customers who require higher pulp viscosity. This allowed for lower levels of chlorine dioxide usage in the bleaching process, which in turn has reduced the formation of adsorbable organic halides by approximately 30%.

Good pulp washing ensures recovery of valuable chemicals and lower bleaching additives. At the mill's DP plant, wash presses were retrofitted with enhanced dewatering devices. This has enabled the recovery of chemicals and reduced the need for bleaching additives, thereby enhancing effluent quality.

A significant project was also completed at Stanger Mill which abstracts water under licence from the Mvoti River, but cannot sustain processes when there is low flow, forcing some plants to shut. Through process modelling and mass balances it was established that approximately 2,000 cubic metres (m3) of water per day – a significant amount – was used for backwashing filters at the process water plant. The backwash water was then discharged into the nearby Mbozambo lake.

The backwash recovery project involved sampling and testing the backwash stream for turbidity, suspended solids, as well as the cations and anions. An ion balance was conducted, from which the mill concluded that the backwash stream could be utilised in the process if the suspended solids were removed. The recommendation was made that the backwashed water be pumped upstream to the nearby water clarifier, allowing settling of the suspended solids, and the clean supernatant to overflow back to the process water plant for reuse.


Globally, specific process water extracted decreased by 1.7%

Specific process water extracted (m3/adt)


This was achieved by connecting the backwash and forward wash outlet pipes from each of the six filters to a newly installed common header which discharges the water into the newly constructed sump. Construction began in June 2022 and the project was successfully commissioned in September 2022. The system is currently recovering 2,000 m3/day on average, an amount which represents 11.5% of the mill's total water usage.

Advancing our external water stewardship partnership

South Africa's key challenges include water scarcity, water management and community upliftment. In 2021, SSA finalised a two-year water stewardship agreement with the WWF-SA, aimed at improving water security in the uMkhomazi catchment where our Saiccor Mill and 42,000 hectares of our forestry land are situated. The project aims to achieve sufficient water for all users at an acceptable level of assurance and quality through multi-stakeholder collaboration focused on:

  • Improved water governance through multi-stakeholder engagement:
    • the uMkhomazi Catchment Working Group is now established
    • we have engaged with the Impendle local municipality to ensure water stewardship is prioritised and engaged with the Department of Water and Sanitation (DWS) to establish the Upper uMkhomazi Catchment Management Forum
    • contributed to the development of a Catchment Management Strategy in collaboration with DWS
  • Enhanced water-use efficiency
  • Green jobs in the form of removal of alien invasive plants and wetland rehabilitation:
    • 40.3 ha of invasive alien plants cleared at Nzinga, with 10 individuals employed – follow-up clearing planned for FY2023
    • the uMkhomazi catchment has also been mapped to inform the priority areas for project implementation. In addition, a database of the uMkhomazi catchment to share and demonstrate the work and investment has been established
  • Capacity development of local communities in natural resource management:
    • supported the Qhutshini and Nzinga Grazing Associations in implementing improved rangeland management on 20,000 ha in the upper catchment.

The opportunity for green jobs is fully aligned with Sappi's commitment to ESD, which promotes sustainable livelihoods through capacity building of SMEs. (See People section above of this report for further details.)

The project in the uMkhomazi catchment is also aligned with the uMhlathuze Water Stewardship Partnership, where we play an active role in supporting improved rangeland health and community cattle management in the uMhlathuze catchment in northern KwaZulu-Natal near eSigcalabeni. Sappi and WWF have proactively worked with community members to form the eSigcalabeni Grazing Association, in partnership with Meat Naturally. Meat Naturally is an organisation that partners with NGOs and land users to offer community-based cattle owners formal training on regenerative grazing techniques, rangeland restoration practices, cattle management, stock theft patrol, predator control, and importantly marketing their cattle through mobile cattle auctions.

Supporting water stewardship in Europe

Water stewardship is an integral part of our journey to build a thriving world for people, communities and the planet. The unprecedented droughts affecting all parts of the world have made water stewardship more important than ever.

In 2022, Sappi Europe launched an internal initiative to further articulate our vision, approach and strategy on water stewardship across the region. A taskforce was created bringing together experts from each mill. Their objective is to build upon current practice to strengthen and broaden our approach and maturity to managing water-related risks and opportunities. Together, the group conducted an exercise to identify Sappi Europe's current water stewardship maturity, gaps and opportunities. Based on the findings, the group is now working on water management plans for each mill, aligning water-related metrics and elevating water as a priority issue.

The taskforce is aligning its approach with international organisations and lessons learned from peer companies. The experience of a Sappi taskforce member at World Water Week in Stockholm in 2022 has helped the group to focus on ensuring plans are as integrated and inclusive as possible.

Circularity

Why it's material

Closing raw material loops is important for the environment. The circular economy is regenerative by design and aims to gradually decouple growth from the consumption of finite resources. For many years now, we have been moving away from the 'take-make-waste' linear model to align with this approach and generate additional revenue.

How this issue links to other aspects of our business

Our global priority SDGs

Our top 10 risks

  • 3/ Sustainability expectations
  • 5/ Climate change
  • 6/ Evolving technologies and consumer preferences

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Move towards a circular economy
  • Climate change and climate transition
  • Resource scarcity and growing concern for natural capital.

Our highlights

Over five years, the percentage of waste diverted from disposal has increased by 5.2%

Solid waste to landfill has decreased by 19% over five years

Opportunities for value creation

In Europe, the Confederation of Paper Industries (CEPI) has developed an updated test method to evaluate the recyclability of paper products in laboratory conditions. Additionally, the 4evergreen Alliance launched a Design of Circularity guideline and Guideline for the improved collection and sorting of fibre-based products. These tools support value chain actors to make all paper packaging recyclable and reach a recycling rate of 90% by 2030.

Key developments in FY2022

Our commitment to the circular economy begins with maximising our use of every tree harvested and continues throughout our manufacturing processes. Highlighting this approach, in FY2022, we diverted 76.7% of solid waste from landfill for beneficial purposes. In addition, specific landfilled solid waste has declined by 19.08% over five years.

We are a strong advocate for recycling and waste minimisation of all valuable material types, and we encourage our customers, suppliers and community partners to promote recycling and to themselves recycle as much, as often and as responsibly as they can.

Packaging for the food industry that meets stringent health and safety standards and that is also recyclable is a longstanding challenge. Sappi has been working with leading consumer brand owners to develop and supply renewable paper-based packaging solutions by understanding and supporting the goals of making their packaging recyclable without compromising on food protection and shelf life.

One example of this is the Sappi Guard range of products. These innovative papers for flexible packaging come with integrated barriers against oxygen, water vapour, grease, aroma and mineral oil. Thanks to the integrated barriers, there is no need to apply special coatings or laminations. The work was enabled by our 2017 acquisition of barrier film technology company, Rockwell Solutions.

Yet another example is Sappi Seal, the first paper-based solution with dispersion technology competing with extrusion/lamination in the market. Sappi Seal is also recyclable.

EPR legislation is in place across all our manufacturing regions. In the US, the state of Maine, where both the Somerset and Westbrook Mills are located, was the test case for the first successful EPR adoption, shortly followed by the state of Oregon. The biggest impact of such legislation is likely to be increased costs to our customers and possible mandates for greater recycled content which could disadvantage and add costs to Sappi products. We will continue to monitor the Maine regulatory development process and engage as draft proposals emerge, presently slated for late 2022. In addition, we are actively participating with our Trade Association, American Forest & Paper Association, in steering their position to participate in the regulatory development process relevant to the various states.

Like the US, there is presently no federal approach in Canada. However, legislation is in place in the province of Quebec, where our Matane Mill is situated. We continue to monitor developments in this regard.

In South Africa, under EPR, a differentiated fee for the various paper and paper packaging categories has been calculated. This is based on current levels of collection and ease of recycling and will be payable for each ton of paper and paper packaging that is placed on the domestic market. 2022 is the first year of implementation.

Beneficial use of solid waste (%)

Ngodwana and Tugela Mills in SSA each use approximately 17% recovered paper and board. Much of this is supplied by Sappi ReFibre, SSA's secondary fibre division, which sources used paper products from an extensive network of agents across the Southern African region as well as from waste producers. The recovered board and paper are used to supplement virgin fibre in the manufacturing of packaging paper grades. Stanger Mill uses a certain percentage of bagasse (sugar cane waste residue) in the manufacture of paper products and going forward, this will now also be used to produce moulded fibre products (discussed above in the Planet section).

Safeguarding and restoring biodiversity

Why it's material

Despite enormous progress in development in every sphere of our lives, there is a dramatic loss in biodiversity, fuelled by human activity. This has been highlighted by UN Secretary General, António Guterres who said: "Humanity is waging a war on nature. This is suicidal. Making peace with nature is the defining task of the 21st century. It must be the top, top priority of everyone, everywhere1."

1 https://unfccc.int/news/un-secretary-general-making-peace-with-nature-is-the-defining-task-of-the-21st-century

Given that we are a renewable resource company, biodiversity is the foundation of our business. We promote healthy ecosystems in the forests and plantations from which we source woodfibre – biodiversity indicators are incorporated into the internationally acknowledged, independent forest certification systems we use, including the FSC, PEFC and the SFI. In addition, we are increasingly involved in global initiatives aimed at nature positive solutions (for further detail, please see Our key relationships).

How this issue links to other aspects of our business

Our global priority SDGs

Our top 10 risks

  • 3/ Sustainability expectations
  • 5/ Climate change

Our strategic fundamentals

The global forces shaping our Thrive25 strategy

  • Move towards a circular economy
  • Climate change and climate transition
  • Resource scarcity and growing concern for natural capital.

Our highlights

Significant progress towards our biodiversity-related Thrive25 target

Opportunities for value creation

We welcome global moves to put nature and biodiversity more firmly in the spotlight as highlighted by the TNFD. We will be reviewing v0.3 of the TNFD framework due to be released shortly after year end. We see it as an opportunity to provide guidance on further mainstreaming biodiversity into all aspects of our business. We are also collaborating with peers within the Forest Solutions Group of WBCSD to develop a Roadmap to Nature Positive for the forest and forest products sector. The first draft of the roadmap (available at wbcsd.org) was published at COP27 and will be presented at COP15. This draft offers a shared definition of nature positive for the forest sector that is closely aligned with emerging frameworks from the SBTN and the TNFD and aims to contribute to their development.

Key developments in FY2022

In SSA, where we are one of the country's major landowners, we own and lease 399,996 hectares (ha) of land, of which 262,000 ha are planted, and 138,000 ha are unplanted natural areas that are managed for biodiversity in accordance with best practice principles. All our land – including the 136,000 ha managed for biodiversity conservation – is FSC and PEFC certified.

An improvement in biodiversity can refer to the identification of threatened or protected species on Sappi property and implementing appropriate management, or it can mean an improvement in habitat condition and reduction in impacts caused by the forestry operation.

We consider both aspects to be important. Where information is available on rare, threatened or protected species, efforts are made to safeguard these areas, such as blue swallows on the Roelton Nature Reserve in KwaZulu-Natal and the population of the grass aloe, Aloe craibii on the Angle Ridge Nature Reserve in Mpumalanga – two of our seven declared nature reserves. At the operational level, the second interpretation is of relevance: namely the clearing of alien weeds from natural areas, a reduction in sediment reaching streams, improved flow of water courses, and the provision of a mosaic of habitats that can provide suitable conditions for a variety of species. Keeping pristine areas in a natural state and ensuring that burning frequencies for grassland habitats are appropriate are also mechanisms for enhancing species diversity.

Progressing our Thrive25 target

Our Thrive25 target is to enhance biodiversity in important conservation areas (ICAs) on our plantations by 10% by 2025.

There are approximately 156 sites on Sappi owned land classified as ICAs, adding up to about 38,320 ha of a diverse range of habitats including grasslands, wetlands, riverine areas and natural forest patches. Essentially, ICAs are areas that are important at the local level and are classified using a systematic conservation planning approach. Criteria that are 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.

In terms of habitat type, 28 of our ICAs are forests, 67 are grasslands, 20 are wetlands and 41 are river systems. The habitat condition of all our ICAs has been assessed and they have now been rated according to the following categories: natural (18 sites), good (78 sites), moderate (55 sites) and poor (five sites).

Key action plans identified to enhance biodiversity relate to:

  • Implementing alien weed control
  • Examining the burning regime to ensure that it is at the appropriate frequency, depending on fire risk
  • Managing cattle
  • Implementing erosion control measures such as stream crossing upgrades and identified erosion features within ICAs.

Progress on implementation of identified actions is monitored annually and in 2024, a formal re-assessment of all ICAs will provide a rating to be compared with that allocated when undertaking the initial assessment in 2021 to 2022.

Expanding our nature reserves

We currently have seven proclaimed nature reserves on our land, covering approximately 6,350 ha. A further potential nature reserve has been identified for proclamation through the biodiversity stewardship programme in KwaZulu-Natal to protect a critically endangered butterfly, the Karkloof Blue Butterfly.