Group overview

Adapt. Advance. Amplify.

Delivering sustained value

growexplore our theme

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

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

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

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

Responding to our context

illumeexplore our theme

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

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

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

Diving deeper into our,
performance and prospects

createexplore our theme

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

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

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

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

Governance and compensation

reflectexplore our theme

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

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

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

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

Appendices

celebrateexplore our theme

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

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

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

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

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

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Risk management

OUR RISK MANAGEMENT PHILOSOPHY
We have an established culture of managing key risks to our business. We believe effective risk management will safeguard the continuity of our operations and contribute to the achievement of our strategic objectives. Therefore, we ensure that our risk management processes are aligned and compatible with our strategy.

Over the years, we have implemented several processes, resources and structures to ensure our risks are managed adequately and efficiently. Among these, we have entrenched safety programmes, internal audit reviews, insurance, information technology (IT) security, compliance and governance processes throughout the group, along with quality management and a range of line management interventions. We are also working to implement the recommendations of the TCFD.

For an analysis of the principal financial risks we are exposed to, refer to note 32 of the Group Annual Financial Statements at www.sappi.com/annual-reports
  Our 2022 Risk Management Report provides a detailed discussion of the group's risk factors, and can be accessed at www.sappi.com/annual-reports

RISK APPETITE AND TOLERANCE

We have a board-approved framework for risk appetite and tolerance. Risk appetite is the total quantum that Sappi wishes to be exposed to on the basis of risk/return 
trade-offs for one or more desired and expected outcomes.

This is the quantum of risk that the board believes will provide an adequate margin of safety within the group's risk capacity while enabling the achievement of strategic objectives. Risk tolerance is the amount of uncertainty Sappi is prepared to accept. This is the maximum level of loss or reduced earnings that can be absorbed without compromising key objectives, eg, return on investment.


Top 10 risks

RESIDUAL RISK RANKING

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

 

1/

Safety

(2021: 1)

Root cause

Due to the nature of our manufacturing facilities and forestry operations, our employees and contractors operate in an inherently dangerous environment. We continue to prioritise their health and safety to ensure the continuity of our business.

Mitigating actions

  • Conduct root cause analyses of all major incidents and fatalities
  • Drive continuous improvement in safety performance
  • Ensure compliance with behaviour-based safety (BBS) principles
  • Host regular training sessions
  • Approach all transgressions of our safety policies with discipline
  • Encourage reporting of near-miss incidents
  • External safety reviews.

Related material issues

  • Ensuring the safety of our employees and contractors
  • Supporting sound labour relations
  • Attracting, developing and retaining Sappi talent.
  • Thrive25 strategy objectives impacted

  • 3Ps impacted

  • Capitals impacted


2/

Cyber security

(2021: 6)

Root cause

During the normal course of our business, we make use of our digital platforms to access and transact on confidential customer, employee, financial and commercial information, through our transactional and production systems. We also store, access and share our trade and proprietary information. Such stored content could be vulnerable to cyber attacks if not properly classified and protected by functional owners.

Mitigating actions

  • Mitigate against cyber-attacks and information security breaches through our multi-layered IT security programme
  • Adhere to relevant data protection laws in the jurisdictions where we operate
  • Provide relevant cyber security training to all our employees
  • Identify the employees susceptible to social engineering and phishing attacks.

Related material issues

  • Maintaining ethical behaviour and compliance
  • Attracting, developing and retaining Sappi talent.
  • Thrive25 strategy objectives impacted

  • 3Ps impacted

  • Capitals impacted


3/

Sustainability expectations

(2021: 4)

Root cause

The requirements from stakeholders are changing rapidly, challenging Sappi's ability to keep up to date, exceed or even lead with regard to regulatory, social, product and environmental demands. Our operational impact and environmental footprint need to support and demonstrate our sustainability commitments and actions.

Mitigating actions

  • Provide product information to customers
  • Enhanced health and safety specifications
  • Promote recyclability
  • Drive product innovation (including research and development (R&D))
  • Move fast to secure benefit from the high-value niche opportunities created by the 'paper-for-plastics' movement
  • Build on our strong position and commitment to forest certification
  • Communicate our social and environmental credentials through all media channels
  • Implement ESG-related covenants.

Related material issues

  • Procuring responsibly
  • Providing sustainable solutions for a circular bio-economy
  • Responding to evolving customer needs through innovation and collaboration
  • Sourcing sustainable woodfibre
  • Prioritising clean and renewable energy and responding to climate change
  • Focusing on water stewardship and circularity
  • Safeguarding and restoring biodiversity.
  • Thrive25 strategy objectives impacted

  • 3Ps impacted

  • Capitals impacted


4/

Supply chain disruption

(2021: 3)

Root cause

We depend on a reliable and efficient supply chain to procure raw materials from suppliers and deliver products to our customers, within a time frame that meets their expectations. A number of factors, many of which are beyond our control, could disrupt the operation of our supply chain. These factors include inclement weather, natural disasters, transportation interruptions or inefficiencies, port or traffic congestion, labour shortages or disruptions and oil price increases, as well as unrest and pandemics. These could impair our ability to supply our customers or maintain an appropriate logistics chain and levels of production and inventory, all of which could adversely affect our reputation, business, results of operations and financial status.

Mitigating actions

  • Documented business continuity plans
  • Ability to operate via multiple transportation modes
  • Operational plans to utilise multiple ports for shipments
  • Ongoing communication with key stakeholders, including government
  • Alternative modes of shipping
  • Fine-tuning internal processes to enhance co-ordination between departments
  • Negotiating longer lead times.

Related material issues

  • Procuring responsibly
  • Maintaining and strengthening our competitive position through agility, innovation and operational efficiency
  • Prioritising clean and renewable energy and responding to climate change.
  • Thrive25 strategy objectives impacted

  • 3Ps impacted

  • Capitals impacted


5/

Climate change

(2021: 5)

Root cause

Climate change is having an unavoidable effect on our business in the form of transitional, reputational and physical impacts. The latter includes the frequency and intensity of forest disturbances such as wildfires and extreme storms. This, in turn, could reduce forest productivity and change the distribution of tree species. The impact of climate change on our supply chain, including the availability of raw materials and the wood supply we need for our operations, may adversely impact our business.

Regarding transitional risk, governments around the world are focusing on carbon trading and taxes as a response to climate change and such taxes could impact profitability to an increasing extent in future.

Mitigating actions

  • Source pulp and woodfibre from a variety of sources and regions
  • Invest in fire, pest and disease prevention protocols in South Africa, as well as site species matching to withstand abnormal weather events and reduce our water footprint in this region
  • Following engagement with the South African Department of Forestry, Fisheries and Environment (DFFE), we anticipate our carbon tax liability to be zero, as in FY2021
  • Group-wide decarbonisation initiatives.

Related material issues

  • Providing sustainable solutions for a circular bio-economy
  • Sourcing sustainable woodfibre
  • Prioritising clean and renewable energy and responding to climate change
  • Focusing on water stewardship and circularity
  • Safeguarding and restoring biodiversity.
  • Thrive25 strategy objectives impacted

  • 3Ps impacted

  • Capitals impacted


6/

Evolving technologies and consumer preferences

(2021: 2)

Root cause

The advent of new technologies has an unavoidable impact on the way we operate. Similarly, changes in consumer preferences driven by emerging trends in advertising, electronic data transmission and storage, the internet and mobile devices, as well as digital alternatives to traditional paper applications, could materially affect the sustainability of our business.

Mitigating actions

  • Improve profitability by implementing restructuring and other cost-saving projects
  • Enhance productivity
  • Drive growth in our higher-margin packaging and speciality papers business
  • Leverage our position in the market to capture growth in the DP market.

Related material issues

  • Procuring responsibly
  • Providing sustainable solutions for a circular bio-economy
  • Maintaining and strengthening our competitive position through agility, innovation and operational efficiency
  • Sourcing sustainable woodfibre
  • Prioritising clean and renewable energy and responding to climate change
  • Responding to evolving customer needs through innovation and collaboration.
  • Thrive25 strategy objectives impacted

  • 3Ps impacted

  • Capitals impacted


7/

Cyclical macro-economic factors

(2021: 7)

Root cause

Our business is impacted by cyclical changes in global economic conditions, including fluctuations in exchange rates, periodic supply and demand imbalances, industry capacity and output levels. Global economic turmoil can lead to significant decreases in sales volumes, as well as pressure on our prices in the markets where we operate. We continue to operate in a highly competitive environment. Consolidation in the pulp and paper industry – leading to larger, more focused companies – has become more prevalent.

Mitigating actions

  • Monitor the balance between supply and demand
  • Monitor potential impairment of operating assets
  • Implement capacity closures as required
  • Improve efficiencies and reduce costs across the business
  • Enhance customer service, innovation, and efficient manufacturing and logistics processes
  • Drive performance to set our businesses apart from competitors
  • Increase pulp integration.

Related material issues

  • Maintaining and strengthening our competitive position through agility, innovation and operational efficiency
  • Providing sustainable solutions for a circular bio-economy
  • Responding to evolving customer needs through innovation and collaboration.
  • Thrive25 strategy objectives impacted

  • 3Ps impacted

  • Capitals impacted


8/

Uncertain and evolving regulatory landscape

(2021: 8)

Root cause

Our business is subject to various regulatory requirements across the regions where we operate, including requirements relating to environmental stewardship, health and safety. Significant changes to applicable laws and regulations – along with instabilities in political, financial and social spheres – could impact our competitiveness and profitability.

Mitigating actions

  • Remain up to date on changes to applicable legislation
  • Group-wide legal compliance programmes
  • Ensure compliance with all relevant laws and legislation
  • Report regularly on compliance to the group Audit and Risk Committee
  • Reduce the impact of our operations on the environment, as guided by relevant and recognised programmes
  • Invest in initiatives aimed at reducing our air emissions, wastewater discharges and waste generation
  • Monitor potential changes in pollution control laws, including GHG emission requirements, and take action accordingly
  • Co-operate across regions to apply best practices in sustainability.

Related material issues

  • Maintaining ethical behaviour and compliance
  • Procuring responsibly
  • Ensuring the safety of our employees and contractors.
  • Thrive25 strategy objectives impacted

  • 3Ps impacted

  • Capitals impacted


9/

Employee relations

(2021: 10)

Root cause

The majority of our employees are represented by labour unions and are subject to collective bargaining agreements. These agreements are negotiated and renewed periodically, and any corresponding wage increases or work stoppages could impact our business. The risk of workforce reductions, closures or restructuring remains a reality given the current economic climate.

Mitigating actions

  • Interact and engage with union representatives and organised labour regularly
  • Build constructive work relationships.

Related material issues

  • Ensuring the safety of our employees and contractors
  • Supporting sound labour relations
  • Attracting, developing and retaining Sappi talent
  • Creating a positive social impact in our communities.
  • Thrive25 strategy objectives impacted

  • 3Ps impacted

  • Capitals impacted


10/

Liquidity

(2021: 9)

Root cause

Our principal sources of liquidity are cash generated from operations and available under our credit facilities, and other debt arrangements. Our ability to generate cash depends mainly on general economic, financial, competitive, market and regulatory factors. Our cash flow from operations may be adversely impacted by a downturn in world-wide economic conditions, which could result in a decline in global demand for our products.

Mitigating actions

  • Cost-saving initiatives
  • Re-prioritising various strategic initiatives
  • Commercial downtime taken to match supply to demand
  • Deferral of non-critical capex projects.

Related material issues

  • Maintaining and strengthening our competitive position through agility, innovation and operational efficiency.
  • Thrive25 strategy objectives impacted

  • 3Ps impacted

  • Capitals impacted