Social, Ethics, Transformation and Sustainability Committee report
– Valli Moosa
Chairman Social, Ethics, Transformation and Sustainability Committee
– Valli Moosa
Chairman Social, Ethics, Transformation and Sustainability Committee
The Social, Ethics, Transformation and Sustainability (SETS) Committee presents its report for the financial year ended September 2022. This committee is a statutory committee with a majority of independent non-executive members, whose duties are delegated to them by the board of directors. The committee conducted its affairs in compliance with a board approved terms of reference and discharged all its responsibilities contained therein.
Multi-functional regional sustainability councils provide strategic and operational support to a group sustainability council which in turn provides support to the SETS Committee in dealing with key sustainability issues.
During the financial year the committee formally met three times at which meetings it deliberated on all aspects relating to its terms. A 100% attendance record was achieved by board committee members Mr Binnie, Dr Mehlomakulu, Mr Beamish and Mr Lopez for 2022. The chairman, Mr Moosa, attended two of the three meetings for 2022.
The world has endured much in recent years – rapidly increasing global temperatures leading to extreme weather events, rising income inequality, deepening geopolitical tensions, a global pandemic and unprecedented inflation driving economies into recession. These events severely disrupted our status quo; they affected our health, environment, society and economies. We recognise that the private sector has a key role to play in addressing the challenges the world is facing today and the SETS Committee is our social conscience, ensuring that the company is a responsible corporate citizen. We enhance our long-term stakeholder value by focusing our actions to deliver more sustainable shared value outcomes, both minimising the impacts of our activities on society and the environment.
The role of the SETS Committee is to assist the board with the oversight of the company and to provide guidance to management’s work in respect of its duties in the fields of social, ethics, transformation and sustainability. The committee relies on international best practice as well as the laws and regulations under which Sappi’s businesses operate to ensure that the group not only complies with, but also fully implements all requirements. The committee addresses issues relating to corporate social investment, ethical conduct, diversity, transformation and empowerment initiatives and targets and ongoing sustainability practices to ensure that our business, our environment and our people can prosper on an ongoing basis.
The responsibilities include monitoring the company’s activities, having regard to any relevant legislation, other legal requirements and prevailing codes of best practice. The committee meets a minimum of three times each year.
The members of the SETS Committee during the 2022 financial year were:
Four members of the committee were independent non-executive directors and one the Chief Executive Officer. In addition, the Chairman of the board attends committee meetings ex officio. The regional Chief Executive Officers, the Group Head Strategy and Legal, the Group Head Technology, the Group Head Human Resources, the Group Head Corporate Affairs, the Executive Vice President Pulp and the Group Head Investor Relations and Sustainability attend meetings by invitation.
Committee activities reviewed and actioned during the year
In 2022 a key focus remained the company’s response to climate change. A climate strategy aligned with the principles of our Thrive25 business strategy was approved by the committee.
Within the climate strategy framework, Sappi commits to:
A highlight for the year was the validation of our 2030 decarbonisation targets by the Science Based Targets initiative (SBTi). The SETS Committee reviewed and approved the group targets and capital plans associated with the targets. Furthermore, for the first time, a comprehensive and dedicated climate report was presented to the committee outlining the company’s progress on climate-related activities aligned with the TCFD framework.
At each committee meeting a topic is selected for an in-depth review. Typically, the subject of these reviews are matters which the committee believes represent key risks or opportunities for the business. In 2022 the review topics focused on risk/opportunity and potential impacts associated with wildfires in our forestry assets; sustainable procurement – our progress with respect to integration of ESG factors into our procurement processes; and a review of our community engagement strategy and action plans in South Africa.
Climate change driven extreme weather events such as floods, droughts and fires are the greatest physical risk to our business. Our forestry assets in South Africa are particularly exposed to these risks. Specifically, the likelihood of wildfires increases as global temperatures rise, which could lead to increased fire management expenses; increased growing stock losses; infrastructure damage; increased soil erosion and flooding; negative impacts on human mental and physical health (eg, smoke pollution); as well as reputational risk through impacts on neighbouring communities. The integrated fire risk management strategy for our Forestry assets was therefore reviewed by the committee to ensure that our mitigation activities are appropriate. In addition to a comprehensive risk assessment framework, significant investment in recent years has improved fire detection capabilities, while fire crew training and enhanced equipment has improved response times to fires. Sappi staff play key roles in the provincial and local fire protection associations, ensuring better optimal integrated fire risk management. Technical knowledge, resources and skills are shared with broader neighbouring communities, which reduces risk in a holistic manner. More specific Sappi fire risk mitigation activities include: fire protection (preparation of firebreaks); managing fuel loads; managing open areas and non-commercial areas; improving response time through strategic placement of water tankers and response vehicles as well as participation in fire protection agencies and use of camera systems to detect fires as soon as possible. In addition, weather forecasting, weather monitoring and prediction of fire danger index (FDI) are conducted and utilised to prioritise fire-fighting resources. The committee was satisfied that the appropriate fire risk mitigation measures are in place.
We recognise that our sustainability obligations extend beyond our own operations,
and we are committed to utilising our sphere of influence to drive sustainability
through our upstream value chains.
A co-ordinated global approach is necessary to ensure that supplier risk and opportunity is prioritised for the group. The Sustainable Procurement Committee was established in 2021 and presented to the SETS Committee in 2022 their focus areas and progress.
The roll out of our Supplier Code of Conduct gained significant traction in 2022 and our efforts in terms of sustainable procurement were enhanced by our partnership with EcoVadis. We are actively collaborating with suppliers to assess their sustainability performance through ratings and evaluations using the EcoVadis methodology. This collaboration is empowering us to gain a clearer view of our supply chain and help us to evaluate and promote responsible business practices. It also enhances our risk identification capabilities as our suppliers’ EcoVadis scorecards enable us to actively evaluate their performance and identify risk and priority areas where further improvements are needed. The EcoVadis methodology focuses on 21 sustainability criteria that are grouped into four themes: environment, labour and human rights, ethics and sustainable procurement. These criteria are aligned with international sustainability standards such as the 10 principles of the UN Global Compact, the International Labour Organisation (ILO) conventions, the Global Reporting Initiative (GRI) standards and the ISO 26000 standard. The Sustainable Procurement Committee is making good progress in developing measurement and monitoring tools which are integrated into the procurement business systems. The approach with respect to Scope 3 engagements with suppliers was reviewed. The SETS Committee recognises that Scope 3 is an area that will require more resources in years to come as we strive to enhance our climate action impacts through value chain engagements.
In July 2021, South Africa was engulfed by the worst unrest and mass violence since the end of apartheid. Described as an insurrection targeting the country’s economy and infrastructure, the root causes go far deeper to ongoing lack of service delivery, the economic and social fall-outs of Covid-19, endemic corruption and the fact that almost half of South Africa’s adult population of 35 million live below the breadline. While we were fortunate to escape direct damage to our operations, the rioting and looting cut off supply chains and created unsafe conditions for our employees to travel to work. Our three mills in KwaZulu-Natal were forced to close temporarily until order was restored. A year later in July 2022, South African finance minister Enoch Godongwana, warned that deteriorating service delivery at the municipal level is likely to lead to more instability and protest action in South Africa.
The potential risk of further community uprising and associated negative impacts on our assets and business activities is unquestionable. While we deplore violence of any kind, working as closely with the communities surrounding our operations as we do, we understand and empathise with the underlying root causes. We have thus intensified our focus on working with our local communities to help resolve their challenges. Our community engagement agreements commit both ourselves and our communities to work together in driving shared value for mutual benefit. The deep dive on community engagement in South Africa reviewed the programme initiatives and governance framework.
Integrated community forums (ICFs) are the key platforms used to build trust, gain advocacy and achieve shared value. Sappi participants include management, HR, communication, procurement, engineering and project teams. Community participants range from traditional leaders and councillors to local business and environmental groups and the Abashintshi (young community members, meaning “changers” in isiZulu). The ICFs focus on three key areas: community skills development, asset-based community development (ABCD) and corporate social investment, as well as enterprise and supplier development (ESD). Short-term initiatives typically focus on disaster relief efforts, donations – often in the form of paper, sports and recreation, as well as access to potable water and road and infrastructure support. The longer-term focus is on systemic change and helping to build social capital. This incorporates support throughout the education value chain – from support for early childhood development to the Sappi skills centres at Ngodwana and Saiccor Mills which are focused on technical training. It also extends to environmental projects such as our partnership with WWF-SA that both mitigate harm and create environmental benefit. Through shared value, our overarching aim, is to move our communities towards a sustainable future independent of Sappi. The committee was satisfied with the excellent progress that has been made in community engagement through the ICF framework.
The committee confirms that the group gives its social, ethics, transformation and sustainability responsibilities the necessary attention. Appropriate policies and programmes are in place to contribute to social and economic development, ethical behaviour of staff towards colleagues and other stakeholders, fair labour practices, environmental responsibility and good customer relations. In fulfilling their mandate, the committee has sought to ensure the needs of a wide set of stakeholders, including employees, local communities, customers and shareholders are considered and that key sustainability risks are identified and managed.
There were no substantive areas of non-compliance with legislation and regulation, nor non-adherence with codes of best practice applicable to the areas within the committee’s mandate that were brought to the committee’s attention. The committee has no reason to believe that any such non-compliance or non-adherence has occurred.
Social, Ethics, Transformation and Sustainability Committee