Vigourexplore our theme

Lizards are estimated to have been around for 240 million years. Little wonder, given that they make use of a variety of antipredator adaptations, including venom, camouflage, reflex bleeding and the ability to sacrifice and regrow their tails. What’s more, as with other reptiles, the skin of lizards is covered in overlapping scales made of keratin, providing protection from the environment and reducing water loss through evaporation. This characteristic enables them to thrive in some of the driest deserts on earth.

Vigour, strength and adaptability have ensured lizards’ ability to thrive over the course of time.

So, too, at Sappi, our commitment to growing our business and maintaining a healthy balance sheet, has sustained us for almost 90 years. We are vigorous in our commitment to deliver on our Thrive strategy, including by reducing exposure to graphic paper markets while investing for growth in our target markets and capitalising on our leadership position in pulp supply to the lyocell market.

Evolveexplore our theme

Very little in nature is static – everything is constantly changing and evolving. One miraculous example of this is the metamorphosis of the egg, the caterpillar (larva) and the chrysalis (pupa) into the adult butterfly. This process embodies fresh ideas, renewal and unexpected outcomes.

The caterpillar’s new form as a butterfly opens new horizons, but also new risks, particularly in the form of climate change. Butterflies are particularly sensitive to environmental changes like climatic shifts. That is because they are strictly adapted to certain environmental conditions and their development depends on certain larval food plants and specific microhabitat structures.

In Sappi’s case, climate change presents both risks and opportunities. We are addressing short- and long-term physical and transitional climate risks identified through processes outlined by the Task Force on Climate-related Financial Disclosures (TCFD) to build resilience. In addition, we are determined, as a socially responsible business, to play our part in ensuring a just transition in South Africa as the country faces the reality of reducing its dependence on coal.

We are also determined to accelerate our science-based decarbonisation trajectory which we see as an opportunity to future-proof our business. So too, are the opportunities presented by evolving customer needs and legislation – notably growing demand for sustainable packaging, based on low-carbon impact, together with demand for more sustainable textile fibres.

We cannot achieve our vision of a thriving world without an evolving response to climate change. By collaborating with a broad range of stakeholders we are working to achieve energy security and climate resilience and transform our vision into reality.

Postureexplore our theme

Beauty and confidence. Pride and upright posture. These attributes have meant that many cultures over the ages have associated peacocks with royalty and power.

This image is appropriate to Sappi because we too, can stand tall with pride when we consider our past achievements and drive to create not just enterprise value, but value for our people and for communities.

We have achieved enterprise value through our ability to be nimble and optimise profitability in ever-changing markets, reshaping our products and processes to create value and growth for our own business and our customers. We continue to offer our customers a broad range of solutions based on the power of renewable resources that enable them to achieve their sustainability goals and contribute to the low-carbon, circular economy. In doing so, we have continued to focus on treading more lightly on the Planet.

Creating value for our people and communities is underpinned by the structures and programmes we have established which facilitate open, authentic communication, by our ongoing investment in training, development and transformative community programmes, as well as by our collaborative partnerships focused on workable solutions to industry challenges.

Our commitment to delivering sustainable value to our stakeholders is based on our focus on living our values at all times: At Sappi we do business safely with integrity and courage, making smart decisions which we execute with speed.

Diving deeper into our,
performance and prospects

Fortifyexplore our theme

Hermit crabs are shapeshifters, moulting as they grow, continually shedding their exoskeletons and growing new ones. As their exoskeletons are fragile, they need shells for protection. Rather than produce their own shell, as they grow, they use shells abandoned by other marine creatures. This process is not a one-off, but continues throughout their lifespan, depending on water temperature, habitat and species.

Many species will enhance their chances of survival by encouraging anemones to attach to their shell, as the latter’s stinging tentacles may deter predators. The crabs even transfer the anemones from shell to shell when they move house.

We can draw parallels with Sappi, fortified as we are by our iterative Thrive strategy and by our agility in responding to changes in our operating context to emerge stronger and better positioned for growth. This process is underpinned by ongoing engagement with our stakeholders, whose input helps us shape our response to our environment as we collaborate to build a thriving world.

Balanceexplore our theme

Bubbles are things of fragility, wonder – and balance. That’s because the inward surface tension forces of the water film are exactly balanced by the outward-pushing pressure of the air inside.

Blowing more air in to make a bigger bubble means more air pressure inside and also means the bubble must get thinner in the process, because there is only so much water to go around. Should one keep blowing more air in, the film eventually won’t have enough reserve water to spread out into a bigger surface, and the ultimate catastrophe occurs: the bubble bursts.

The success of Sappi’s business is also based on balance. This includes continuous capital prioritisation as we look to reduce costs and grow the business while sustaining a healthy balance sheet. It involves reshaping our product portfolio to meet changing market needs and taking advantage of growth opportunities while being mindful of the risks. It means balancing the needs of people and communities with our responsibility to our shareholders.

As we move forward into the future, we know we can rely on the expertise and passion of our people and the ongoing cooperation of our stakeholders to maintain this balance and drive sustainable value creation.

Connectexplore our theme

Some mushrooms are bioluminescent, due to luciferins, the same compounds that make fireflies light up at night. This ability is used to attract insects which then spread the mushroom spores elsewhere in the forest, allowing the fungi to reproduce.

But that’s not where connection ends. Beneath every forest and wood lies a complex network of roots and fungi that connects trees and plants to one another. This network – sometimes called the Wood Wide Web – is almost 500 million years old and is vital for most plants on earth. Trees and plants obtain nutrients that the fungi acquire from the soil, such as nitrogen and phosphorus by means of enzymes that the trees do not possess. In return, the fungi receive carbon-rich sugar from the roots of the trees.

This symbiotic relationship enables all connected organisms to thrive.

Similarly, at Sappi our connection with our stakeholders shapes our work to build a thriving world. This connection enables us to meet the changing needs of every employee at Sappi and to offer our partners the renewable innovation they need to be successful. By understanding and connecting with community needs, we drive positive social impact, playing a role beyond making and selling.

Like mushrooms, our business is a living organism – growing, adapting and evolving in a continually shifting context. As we shape our response to this context, we prioritise value creation for all stakeholders.

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Climate Action: TCFD disclosure

The Task Force on Climate-related Financial Disclosures (TCFD) reporting plays a pivotal role in fostering financial transparency and resilience in the face of climate change.

As we navigate an era marked by environmental challenges, TCFD reporting provides a framework for us to disclose our climate-related risks, opportunities, and strategies. By doing so, we provide stakeholders with the assurance that we are proactively responding to the evolving landscape of climate-related risks and opportunities and building a more sustainable and resilient business which integrates climate considerations into our decision-making processes as we transition to a low-carbon future.

TCFD recommendations and disclosures

  Disclosure location   Further information links
Governance      
(a) Describe the board’s oversight of climate-related risks and opportunities. pages  87 – 88  

Corporate governance

(b) Describe management’s roles in assessing and managing climate-related risks and opportunities. pages  87 – 88  

Corporate governance

Strategy      
(a) Describe the climate-related risks and opportunities the organisation has identified over the short, medium, and long term. pages  89 – 101  

Our strategy and performance

(b) Describe the impact of climate-related risks and opportunities on the organisation’s business, strategy and financial reporting. pages  89 – 101  

Our strategy and performance

(c) Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios including a 2ºC or lower scenario. pages  89 – 93  

Our strategy and performance

Risk management      
(a) Describe the organisation’s processes for identifying and assessing climate-related risks. pages  94 – 95  

Risk management

Separate Risk report on
www.sappi.com/annual-reports

(b) Describe the organisation’s processes for managing climate-related risks. pages  94 – 95  

Risk management

Separate Risk report on
www.sappi.com/annual-reports

(c) Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the overall risk management. pages  94 – 95  

Risk management

Separate Risk report on
www.sappi.com/annual-reports

Metrics and targets      
(a) Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process. pages  102 – 103   2023 Sappi Group Sustainability Report
www.sappi.com/2023GSDR
(b) Disclose Scope 1, Scope 2 and if appropriate Scope 3 GHG emissions, and related risks. page  103   2023 Sappi Group Sustainability Report
www.sappi.com/2023GSDR
(c) Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets. page  102   2023 Sappi Group Sustainability Report
www.sappi.com/2023GSDR

Governance

In order to unlock the power of renewable resources to benefit people, communities, and the planet, we need to do so from a foundation of trust. This foundation is reinforced by our robust sustainability governance framework summarised below.

Sappi Sustainability Governance Framework

Sappi board
Social, Ethics,
Transformation
and Sustainability
(SETS) Committee
  Other board committees       Group
Sustainable
Development
Council (GSDC)
  Regional
Sustainability
Councils
  Audit and Risk Remuneration
and
Compensation
  Executive
Management
Committee
(EXCO)
   
Committees                  
Chaired by an Independent Non-executive Director (NED)   Chaired by an
Independent NED
Chaired by an
Independent NED
  Chaired by the
group CEO
  Chaired by the
Group Head:
Sustainability and
Investor Relations
  Chaired by
regional CEOs and
sustainability leads
Purpose                  
Oversees the group’s sustainability strategy, commitments, policies performance   Oversees the
group’s corporate
financial reporting,
internal control
systems, risk
management and
relationship with the
external auditor
Ensures that
incentives drive
the appropriate
behaviours that
deliver our strategy
  Management
responsibility for
execution of
sustainability
strategy and
policies guided by
the SETS
Committee
  Provides expert
insights and
support to the
business on
sustainable
development
matters
  Oversees the
integration of
sustainable
development into
the operations
Responsibility                  
Responsible for the governance of matters related to sustainable development including: environment, climate change, biodiversity, product stewardship, labour, human rights, diversity and transformation and ethics. Ensures alignment to best practice and disclosure standards   Oversees the
group’s corporate
financial reporting.
Oversees the risk
management
process including
sustainability risks.
Monitors
effectiveness of
internal control
systems including
hotline reporting
platform
Aligns
remuneration to
performance
against key
sustainability
targets and focus
areas
  Prioritises capital
allocation and
ensures business
unit line
management
holds primary
responsibility and
accountability for
sustainability
performance
  Keeps abreast of
best practice and
regulatory
compliance
requirements.
Develops
sustainability
related strategy
and policies for the
group
  Develops action
plans aligned with
strategy and
policies and
monitors progress
towards
sustainability
targets and
commitments.
Ensures integration
of sustainability
requirements into
operational systems
and processes
     
Oversight   Accountable   Advisory   Execution

The Social, Ethics, Transformation and Sustainability (SETS) Committee has an independent role with accountability to the board and comprises a majority of independent non-executive members, whose duties are delegated to them by the board in compliance with a board-approved terms of reference. The role of the SETS Committee, is to assist the board with the oversight of sustainability matters within the company, including climate-related issues, and to provide guidance to management's work in respect of its duties. The SETS Committee provides oversight on the group's sustainable development strategies, policies, objectives and targets and public disclosures. The committee addresses issues relating to environmental impact and climate change, corporate social investment, ethical conduct, diversity, transformation and empowerment and ongoing sustainability initiatives. Their responsibilities include monitoring the company's ESG activities, having regard to any relevant legislation, other legal requirements and prevailing codes of best practice.

The SETS Committee meets three times per year and the Chairman of the committee reports back to the board after every meeting. Progress against our Thrive sustainability targets is an integral component of the SETS Committee agenda and is reviewed twice per year. Each of the three regions and Sappi Forests presents a detailed report on progress against regional Thrive targets as well as feedback on key initiatives, action plans and challenges relating to sustainability and climate-related matters. Additionally, a detailed climate report is presented to SETS annually outlining the company's progress according to the TCFD framework. Further details on the activities of the SETS Committee can be found here.

Audit and Risk Committee (ARC) provides additional governance oversight on climate-related matters. The ARC oversees the group's corporate financial reporting and annual planning process, and the group's internal controls and risk assessment process, which includes sustainability and specifically climate-related risks. Further details on the activities of the ARC can be found here.

The Human Resources and Compensation Committee is responsible for ensuring that incentive schemes drive the appropriate behaviours that deliver our sustainability strategy, including the alignment of remuneration to performance against our key Thrive sustainability commitments and targets. Further details on how climate action is incorporated into incentive schemes can be found in the Remuneration report.

The Executive Management Committee (EXCO), chaired by the group CEO, is accountable for delivery of the sustainability strategy and responsible for ensuring that the strategic objectives and goals of the organisation are achieved. The committee is responsible for ensuring that capital allocation is aligned with business and sustainability objectives and prioritised appropriately to ensure timely delivery against our public commitments. The EXCO regularly reviews progress against our sustainability and climate commitments and targets. In addition, sustainability matters of a strategic nature, including those relating to climate change, are reviewed and discussed by the EXCO prior to submission to the SETS Committee. This allows the EXCO to provide their strategic input and ensures that there is complete management alignment on sustainability matters.

The Group Sustainable Development Council (GSDC) reviews key global and regional trends and developments and makes recommendations on strategy and policy that are fed through to the EXCO, the SETS Committee and ultimately, to the Sappi Limited board of directors. The Group Head of Sustainability and Investor Relations and the Group Head Technology are responsible for coordinating actions related to the group's climate change-related risks and opportunities and providing reports to the EXCO to enable it to discharge its responsibility.

The GSDC meets quarterly and reviews progress against Thrive sustainability targets at each meeting. Additionally, other climate-related topics such as regulatory changes and trends, sustainable procurement, SBTi, TCFD, TNFD and forestry related issues are discussed at the majority of the meetings. All climate change-related matters of strategic importance are raised by the Group Head of Sustainability and Investor relations at EXCO meetings for input and guidance. Additionally, the progress against our science-based decarbonisation targets, regional climate transition action plans and capital allocation is reviewed in detail by EXCO annually with the budget setting programme.

The group's Regional Sustainability Councils (RSCs), in Europe, North America and South Africa, are responsible for establishing and implementing our on-the-ground sustainability strategy and action plans. Their work is overseen and reviewed by the GSDC.

Strategy

Sustainability forms the foundation of our Thrive strategy and is fully integrated into our operations where the primary focus is on the sustainable management of our operations, increasing efficiency and maximising value from our sustainable natural resources.

As we look to the future, it is clear we have an obligation to play a role beyond making and selling. Policy measures to enable the transition to low-carbon economies, with a general goal for net zero emissions of GHG by 2050 are being rolled out globally. The private sector has a key role to play in this just transition and in line with this obligation, we have set 2030 science-based decarbonisation targets.

The core principles of Sappi's climate strategy are aligned with the overarching Thrive strategy as outlined below. Furthermore, detailed strategic objectives and actions aligned with our climate transition plan are disclosed below.

Sappi's climate strategy

   Grow our business
    What it means     Climate relevancy
   
  • Committing to core business segments while investing in innovation, growth opportunities and ongoing customer relationships
   
  • Purposeful innovation and collaboration to provide low-carbon, biobased solutions and accelerate climate action
   Sustain our financial health
    What it means     Climate relevancy
   
  • Reducing and managing our debt, growing EBITDA, maximising product value, optimising processes globally and strategically disposing of non-core assets
   
  • 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 it means     Climate relevancy
   
  • Strengthening our safety-first culture and reducing resource use while enhancing efficiency and making smart data investments
   
  • Continual focus on reducing our own and value-chain emissions; protecting biodiversity and promoting the responsible use of scarce water resources
   Enhance trust
    What it means     Climate relevancy
   
  • Improving our understanding of, and proactively partnering with clients and communities, driving sustainability solutions, and meeting the changing needs of every employee at Sappi
   
  • 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

Sappi's climate transition plan

Account and disclosure

Objective

We will be transparent in our accounting and disclosure of carbon impacts, risks and opportunities.

Key actions

  • Use GHG accounting standards to create full account of carbon footprint
  • Disclose emissions, reduction targets and strategic actions
  • Externally assure emissions
  • Use quantitative and qualitative scenario analysis of transition and physical impacts to identify and disclose climate-related risks and opportunities aligned with the TCFD framework.
Mitigate and decarbonise

Objective

We will reduce our own and value-chain emissions in line with science-based decarbonisation pathways towards net zero.

Key actions

  • Set 2030 decarbonisation targets for Scope 1, 2 and 3
  • Set energy efficiency/renewable energy targets
  • Align our decarbonisation trajectory where appropriate with market and regulatory expectations
  • Engage with suppliers and customers to mitigate value-chain emissions and establish a feedback mechanism for determining the success of engagements
  • Evaluate and implement emerging decarbonisation technologies where appropriate.
Value and integrate

Objective

We will value and integrate carbon into business processes.

Key actions

  • Utilise an internal price of carbon in capital allocation decision-making processes
  • Prioritise capex and opex aligned to science-based targets
  • Invest in innovation/ R&D for own mitigation and new product development for a low-carbon, circular economy
  • Identify/develop a taxonomy to classify products as low carbon
  • Leverage public and climate finance to augment mitigation actions
  • Integrate decarbonisation considerations into R&D and procurement business processes and decisions and establish a mechanism for monitoring progress and compliance.

Climate change risks have been identified as one of our strategic principal risks. The group's climate change related risks and opportunities are routinely considered in our strategic and financial planning, our capital allocation and our operational management decision-making processes.

In terms of climate-related risks, we recognise that our industry is energy intensive. In addition, our business is dependent on woodfibre and water, both of which are 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. 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. A significant portion of R&D is allocated to decarbonisation. We also focus on increasing pulp backward integration which brings renewable energy opportunities aligned with our strategy as well as fuel swaps and energy mix opportunities balanced with economics. In addition, our Future Energy Technologies and Decarbonisation cluster is exploring novel technologies for deep decarbonisation in terms of Scope 1 and 2 emissions, with a particular emphasis on technologies for renewable power generation, pulping, papermaking, bleaching and carbon capture.

Achieving our science-based decarbonisation trajectory will be a key enabler for future-proofing our business as we focus our growth strategy on circular, nature-based solutions for a low-carbon economy. In the long term, we anticipate that decarbonisation investments will reduce costs, spur innovation, provide resilience against regulation and boost investor confidence. We have developed a clear climate transition roadmap and capital allocation strategy to achieve our 2030 targets and we have also committed to using our influence to encourage our major suppliers to set their own science-based targets. The capital expenditure between FY2021 – 2030 required to achieve the targets is estimated to be in the region of US$60 to 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.

We acknowledge that decarbonisation of our South African assets will be challenging. Our mills in this region are still reliant on coal-based power for a significant proportion of their energy requirements. The South African energy landscape is heavily dependent on coal, which is an abundant resource in the country. While Sappi has a relatively high level of renewable energy integration within the context of the region due to our black liquor and biomass fuel sources, we are not fully self-reliant. We thus need to purchase energy from the national utility provider, Eskom, which is predominantly based on coal. There is currently very little renewable energy available for purchase within the country and therefore our decarbonisation roadmap for the region assumes that we will have to invest in our own renewable energy assets. We are investigating opportunities for investment in solar, wind and biomass power assets. Furthermore, we are actively collaborating and exploring opportunities for purchasing renewable energy from new independent power producers that are being established within the country. Within the context of the national dependency on coal and high levels of unemployment and social inequality, we recognise that a just transition is critical for South Africa. We will therefore use our influence to collaborate with other business leaders, communities and Government stakeholders to advocate for a just transition where no-one is left behind.

Sappi's climate transition plan

Advocate

Objective

We will advocate that the Forest and Forest Products Sector's contribution towards achieving net zero is recognised and valued.

Key actions

  • Engage with regulatory bodies and trade associations to advocate for policies consistent with achieving net zero by 2050
  • Secure recognition of carbon benefits derived from forests and woodfibre-based products
  • Engage and participate in GHG carbon accounting working groups to advocate for development/implementation protocols consistent with achieving net zero by 2050.
Innovate and collaborate

Objective

We will partner to develop solutions and accelerate climate action.

Key actions

  • Collaborate with peers, suppliers, customers, governments, civil society and employees to support decarbonisation efforts
  • Identify consortia and multi-stakeholder alliances to promote best practice sharing and collective climate action
  • Collaborate with value chains to develop carbon neutral offerings
  • Create shared value with our communities to improve livelihoods and ensure long-term resilience
Build resilience

Objective

We will address and adapt to climate change impacts.

Key actions

  • Develop and invest in adaptation technologies to ensure the continued sustainability of our forestry assets in South Africa
  • Promote biobased circular economy principles and leverage our forestry assets and know-how to support the development of rural community agroforestry
  • Address short-and-long-term physical and transitional climate risks identified through TCFD processes to build resilience
  • Play our part as a socially responsible business to ensure a just transition
  • Protect and improve biodiversity in our forestry landholding and reduce use of water in our operations located in water stressed regions
  • Collaborate with landscape level stakeholders to promote nature positive action.

Climate change is having a significant impact on our woodfibre supply. In both Europe and Southern Africa, the changing climate is impacting the health and resilience of the forests and plantations from which we source woodfibre. Increased drought, floods, wind, pest and disease outbreaks and wildfires are all accelerating forestry risks and could potentially significantly increase our wood costs.

Temperatures over the South African interior are projected to rise at about 1.5 to 2 times the global rate, with significant implications for our plantations. In addition to hotter, drier conditions, we expect shifting seasons with later summer rainfall, which will make our planting season shorter. We also anticipate that weather will become more extreme and that drought and floods, as well as wind, snow and hail will intensify. In response, we have developed climate smart forest management practices. Our Sappi Forests' scientists have developed high levels of expertise in assessing the impact of climate change on our plantations in South Africa. Their knowledge is supplemented by our strong partnership with the Global Change Institute (GCI) at the University of the Witwatersrand in Johannesburg. Recognising that there is a lack of data and expertise within South Africa for climate modelling, we launched the Sappi Chair in Climate Change and Plantation Sustainability at the University of the Witwatersrand in Johannesburg. The Research Chair will identify critical research needs and develop research outputs related to climate change and will also develop capacity in South Africa to manipulate and interpret climate modelling data. For more details see below.

Research and development (R&D) of genetically improved planting stock has been conducted at Sappi's Shaw Research Centre in Howick for over 25 years. Tree improvement is aimed at increasing pulp yield produced per hectare by testing various species and hybrids across Sappi's diverse landholdings. Besides growth improvements, trees are bred for superior wood properties and resistance to biotic and abiotic threats including frost, drought, pests and diseases. A broad genetic base, acquired over 25 years and a skilled breeding team exploiting new technologies are some of the assets of the programme. Nursery technologies research improve propagation techniques of elite genotypes. Land management and Pest and Disease 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, national pest and disease surveys etc. In addition to these initiatives and programmes, we also maintain a solid base of permanent sample and long-term soil monitoring plots, with the plot coordinates stored on our GIS database. These help us to monitor climate change based on geology, temperature zone and water availability. This enables us to keep track of forest litter, soil physical and chemical properties, allowing for early detection of site changes.

In terms of climate-related opportunities, we recognise that our sector is uniquely positioned to produce circular and low-carbon products, which can offer consumers alternatives to fossil-based products. There is a significant opportunity for Sappi to accelerate the transition to the circular biobased economy our planet demands.

Through our continued focus on innovating packaging and speciality papers solutions, we remain committed to partnerships with customers, who are increasingly focused on the social and environmental credentials of our products. We are committed to embracing the circular economy using sustainable materials based on certified woodfibre and replacing fossil-based chemistry and to working on new technologies that support transformation in Sappi and across our value-chain partners to reduce GHG emissions. There is significant potential to expand and unlock revenue streams with our paper-based packaging solutions to replace petroleum-based packaging in many sectors including the food and beverage, cosmetics, pharmaceuticals and electronics industries.

The majority of dissolving pulp (DP) is consumed in the textile industry where pulp is converted through the value chain to yarn and ultimately textiles providing soft, breathable fabrics (eg, viscose and lyocell) which hold colour well and drape beautifully. The global textile fibre industry is facing unprecedented sustainability challenges. Issues such as a rising population, climate change, water scarcity, land use (food vs. fibre), deforestation and loss of biodiversity, plastic waste and marine pollution have combined to question the long-term credentials of the industry and its attempts to create a sustainable circular economy. Textile fibres derived from natural cellulose (DP) are therefore gaining interest and have been the fastest growing textile fibre over the last 10 years. With increasing concerns about microplastic pollution in the oceans, petroleum-based textile fibres will continue to come under pressure and cotton cannot expand its area any further, meaning cellulosic fibres remain at an advantage and their market share will continue to expand. Lyocell represents the next generation of cellulose textile fibres. With its sustainable DP raw material, reduced chemical processing and closed-loop systems, lyocell continues to be the most sustainable wood-based cellulosic fibre and is the fastest growing textile fibre group. Sappi is uniquely positioned as the world's largest non-integrated DP producer and largest supplier to the lyocell sector to benefit from the growth in cellulosic textiles.

Traditionally the papermaking process has only used approximately half of the raw wood material to manufacture pulp and paper products. The balance of the wood raw material is used to generate energy to power the mill or to sell into the electricity grid. Sappi is, however, developing new processes and biomaterials which extract more value from each tree and supports our business strategy to move into new and adjacent markets. Sappi's innovative technology enables us to derive specialty biobased chemicals from the parts of the tree which are not used for pulp and paper making. These high-performance products often displace non-sustainable petroleum-based alternatives. There is significant opportunity to unlock further revenue streams through commercialisation of these biomaterials.

Our Exciter R&D programme is fully aligned with our Thrive strategy. The focus of the projects, which are global and based on the OneSappi approach, has shifted to emphasise sustainability, together with a focus on our segments with significant growth opportunity ie, packaging and speciality papers, DP and biomaterials.

Our commitments to zero deforestation and wood sourcing from sustainably managed, healthy working forests with a high level of forestry certification enables us to offer products to our customers around the world that carry no risk of deforestation or forest degradation. Deforestation negatively impacts ecosystem services and climate. It also increases the transmission risk of zoonotic diseases. In addition to helping to respond to climate change and protect soils and water, forests hold more than three-quarters of the world's terrestrial biodiversity. This means that deforestation has serious negative impacts on biodiversity and climate change.

Trees and forests play an integral role in the global carbon cycle. Through sequestering carbon dioxide from the atmosphere and storing it in forest biomass and soils, forests store vast amounts of carbon and release oxygen back into the atmosphere. Recent studies point to the further contribution that trees and forests could deliver to mitigate climate change if afforestation, reforestation, and restoration efforts were scaled up substantially. Managing forests for wood production can help to maximise their contribution to carbon sequestration. Forest management practices which rely on scientific knowledge of silvicultural best practices applicable in respective vegetation zones, promote growth and carbon sequestration. In our plantations in South Africa and in the managed forests from which we source wood raw material, the cycle of regeneration, growing, thinning and harvesting is actively managed to enhance biodiversity, resilience, and maintain functional ecological condition.

The pulp and paper industry provides dependable markets for responsibly-grown woodfibre, thereby incentivising long-term forest management. This assurance of financial returns enables and encourages landowners to manage their forestlands as working forests, instead of selling the land for development or converting it to non-forest uses. Furthermore, the pulp and paper industry typically utilises different species and/or smaller diameter trees or portions of trees that are not desirable in the solid wood industry. By providing this market and revenue stream, the industry is supporting necessary holistic forest stand-improvement activities that are essential for maintaining and restoring forest health, species and age-class balance, wildlife habitat and biodiversity, wildfire mitigation and hazardous fuels reduction, watershed protection, soil conservation and carbon sequestration. By ensuring forests and plantations are sustainably managed through high levels of certification and prioritising traceability, we can help to combat climate change and enhance the ecosystems services that contribute to greater levels of economic and environmental wellbeing. Our opportunity is to invest in and promote healthy forests both for our benefit and the myriad of benefits they deliver to the planet.

There are many uncertainties around the potential impacts of climate change, and we therefore continue to enhance the quality of our scenario modelling to further understand these impacts.

In terms of physical climate risks, Sappi Forests has worked with the Global Change Institute (GCI) at the University of the Witwatersrand in Johannesburg and other industry members 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 forecast climate data in-house by algebraically adjusting the basic weather forecasts to a year 2,000 baseline.

To conduct physical climate change scenarios in our mills, we used Representative Concentration Pathways (RCPs):

Climate transition risk is assessed in terms of scenarios involving nationally determined contributions (NDCs) and their associated time frames. Each country in which we have manufacturing operations, as well as the EU region, has submitted NDCs to the United Nations Framework Convention on Climate Change (UNFCCC). Various scenarios within the parameters of key regulatory developments are also assessed against the backdrop of various issues (for example: our 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 market expectations).

We have also implemented an internal carbon price (within the capital evaluation process) to ensure that the impact of carbon for all large capital investments is understood. The internal carbon price is embedded in our cost calculations of capex and opex projects as a financial indicator.

Sappi's international revolving credit facility (RCF) of EUR515 million, which matures in 2027, is linked to the group's sustainable financing framework. The RCF is structured with a margin adjustment mechanism, linked to progress in achieving the framework KPIs. The framework defines four material sustainability KPIs and provides a basis for future KPI-linked credit and capital market activities of the group. The KPIs focus on specific GHG (Scope 1 and 2) emissions; certified fibre supplied to Sappi mills, solid waste to landfill the safety of our employees. This is an important strategic step for Sappi and supports our long-term vision to be a sustainable business and demonstrates that we are committed to delivering our ambitious sustainability strategy.

Risk management

Sappi has a well-established risk management process within a formal governance structure. The risk evaluation process is run annually, with comprehensive discussions which include climate change (led by regional risk managers) with each mill and central function. For climate-related risks and opportunities we have leveraged this process.

In addition, we have developed a unique approach where we incorporate historical experiences as identified by mill and forestry management teams in light of current short and medium-term predictions. This is supplemented by our environmental and legal teams' knowledge of emerging regulations and other transitional concerns.

This risk approach is supplemented by ongoing review of industry dynamics, particularly risks and opportunities related to single use plastics, lightweighting of products and the transition to a low-carbon economy. This work is captured by regular meetings with our customers together with our global R&D teams.

Once the risks have been identified by the working groups, they go through the review process of our risk governance structure. This begins with the Group Head: Technology, the Group Head: Sustainability and Investor Relations and the Global Risk Manager who review the work of the regional risk management leads in order to develop a consolidated view. A recommendation is then made to the two board committees, the SETS Committee and the ARC, both of which share responsibility for climate-related risks. These committees are responsible for overseeing Sappi's combined assurance framework, which also aims to optimise assurance coverage obtained from management, internal assurance providers and external assurance providers (globally: ISO 14 001, 9 0001 and forest certification; Europe and South Africa: ISO 50001 (energy management), Europe: EMAS), on the risk areas affecting the group, including climate change.

We have identified seven material physical risks associated with our South African plantations, mill operations and supply chains and one material transition risk. In terms of opportunities, we have identified two transitional opportunities and one operational opportunity. We define our timeframes for assessment as follows.

Timeframe:
Short term 1-2 years, Medium term 3-5 years, Long term 5-30 years

Sappi's climate-related physical risks

Opportunity   Description   Timeframe   Financial
impact (p.a.)
  Action   Financial cost of
actions
Physical risks
South African plantation losses  

Acute physical

Increased severity and frequency of extreme weather events may results in damage to our standing forests and nurseries and disruptions to harvesting operations in our managed plantations in South Africa. Extreme weather event could be flooding, frost/snow, heatwave.

  Medium term   US$0.5 to
US$1 million
 

R&D of genetically improved planting stock has been conducted at Sappi’s Shaw Research Centre in Howick for over 25 years. Tree improvement is aimed at increasing pulp yield produced per hectare by testing various species and hybrids across Sappi’s diverse landholdings. Besides growth improvements, trees are bred for superior wood properties and resistance to biotic and abiotic threats including frost, drought, pests and diseases. A broad genetic base, acquired over 25 years and a skilled breeding team exploring new technologies are some of the assets of the programme. Nursery technologies research improve propagation techniques of elite genotypes.

Land management and pest and disease 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, national pest and disease surveys etc.

 

US$3 to
US$5 million

The combined direct annual R&D expenditure p.a. of the Sappi Nursery Technologies, land management, pest and diseases and tree breeding programmes

South African plantation losses  

Acute physical

More frequent, longer lasting and more severe droughts are anticipated over the Southern African region due to climate change. As the planet continues to warm, rainfall reductions over the summer rainfall region are expected to become more pronounced, and the rising temperature drives evaporation. Accordingly, the 'water balance' is more strongly negative than the decline in rainfall alone. Levels of global warming of 2°C or higher are associated with substantial increases in risk in the summer rainfall parts of Southern Africa where Sappi's plantations are situated. When several dry years follow directly on one another, the impact on plant production is extremely negative.

  Medium term   US$5 to
US$20 million
 
South African plantation losses  

Chronic physical

Mean annual temperatures are expected to increase by between 3°C and 7°C. This increase in temperature in association with small changes in rainfall as well as potential changes in interannual rainfall patterns that will extend the annual dry period in the summer rainfall region will increase plant stress and will have a negative impact on tree growth.

In addition, extension of the dry season or changes to rainfall seasonality could negative impact re-establishment plantings, by extending the area that is temporarily unplanted by one month or up to one year.

  Long term   US$5 to
US$10 million
 
South African plantation losses  

Higher temperatures and changing climatic conditions may increase vulnerability to pests and diseases. Given that temperature is the most important environmental factor affecting insect behaviour, distribution, development and reproduction, the general impact of increased temperature on insect pests might result in: increased reproduction and flight duration; expansion of geographic range (naturally or through severe weather such as storms and strong wind); increased survival rates of overwintering populations; increased risk of introductions of invasive insect species; increased evidence of insect-transmitted plant disease due to range expansion and rapid reproduction of insect vectors and reduced effectiveness of biological control agents and natural enemies. Thus, the additional temperature and water stress are likely to increase pest and disease-related growth losses. Stricter rules regarding use of pesticides by Government and certification bodies will make it more difficult and expensive to control pest and disease outbreaks, as well as invasive plants.

  Long term   US$2 to
US$10 million
 
South African plantation losses  

Fire remains a high risk to our plantations and is exacerbated by periods of drought.

  Short to long term   US$15 to
US$130 million
 

Sappi Forests has a comprehensive risk management system which comprises risk assessments, monthly compliance checks, management procedures, standards and general back-up information. Fuel load maps are prepared for all districts to assess in the management of fuel loads and identification of major risks. When re-planting, Sappi is increasingly making use of mulchers as a more expensive but lower risk alternative to burning of harvest residue. Regular weeding helps reduce fuel loads. Each plantation/district has a weather monitoring station that is strategically placed to keep track of the Fire Danger Index (FDI). The FDI data is reported automatically using a cell phone or the camera detection data network to a central database (Vital Fire Weather – VFW) which sends alerts via SMS and email. When the FDI reaches a pre-determined level, all aerial and ground firefighting resources are strategically located, all airstrips are manned and detection centres are instructed to activate aircraft immediately should a fire be detected within or near plantations.

 

US$15 to
US$20 million

(Plantation insurance and fire protection costs p.a.)

Physical risks
Interruptions to mill operations and supply chains  

Acute physical

Increased severity and frequency of extreme weather events may result in damage to our infrastructure and that of our supply chain partners. Extreme weather events could be flooding, hail of frost/snow.

  Medium term   US$10 to
US$50 million
 

Sappi has comprehensive insurance coverage in place which covers both our assets and business interruption.

 

US$35 to
US$45 million

(General insurance costs p.a.)

Interruptions to mill operations and supply chains  

Chronic physical

More frequent, longer lasting and more severe droughts are anticipated over the Southern African region due to climate change. As the planet continues to warn, rainfall reductions of the summer rainfall region are expected to become more pronounced and the rising temperature drives rising evaporation. Levels of global warming of 2°C or higher are associated with substantial increases in drought risk in the summer rainfall parts of Southern Africa where Sappi's operations are situated. When several dry years follow directly on each other, the impact on available ground water in the water river basins that serve our operations could be severely impacted. Our pulp and paper operations are water intensive and any reduction in water availability could result in extended water shortages which could disrupt our operations.

  Medium term   US$10 to
US$50 million
 

Sappi has water management plans for each operation in South Africa which focus on implementing water efficiency projects and implementing closed-loop and water recycling initiatives to reduce water intensity of our operations. We also engage local authorities, other industrial users and local communities within critical water basins to identify solutions and enhance water stewardship.

 

US$1 to
US$3 million

(Estimated SSA capital requirement p.a.)

Transition risk
GHG regulatory changes and changing downstream requirements for low-carbon products  

Sappi's European operations fall under the EU ETS. As EU ETS allowances decrease over time and if our decarbonisation efforts do not keep pace with the required trajectory there is potential that some operations may have deficits which will require purchasing of ETSs. Similarly SSA's operations are subject to carbon taxes which are anticipated to increase steadily over time. Currently there are no carbon tax regulations in North America but this could change over time.

Many of our downstream markets are positioning their value proposition on a low-carbon footprint with science-based decarbonisation commitments, including net zero by 2050, gaining momentum. This will apply pressure on our business to decarbonise to support these commitments within our value chains.

As legislation and customer preferences shift to low-carbon impact, achieving our science-based decarbonisation trajectory will be a key enabler for future-proofing our business as we focus our growth strategy on circular, nature-based solutions for a low-carbon economy. Not being able to realise our decarbonisation strategy through improved energy efficiency and the use of renewable energy represents a significant reputational and financial risk.

  Medium to long term   US$30 to
US$150 million
 

We have developed a climate transition roadmap and capital allocation strategy to achieve our 2030 targets and we have also committed to using our influence to encourage our major suppliers to set their own science-based targets.

We acknowledge that the decarbonisation of our South African assets will be more challenging than in our other operating regions. Our mills in this report are all reliant on coal-based power for a significant proportion of their energy requirements. The South African energy landscape is heavily dependent on coal which is an abundant resource in the country. Accordingly, our decarbonisation roadmap for the region assumes that we will have to invest in our own renewable energy assets. We are actively investigating opportunities for investment in solar, wind and biomass power assets and will furthermore continue to collaborate and explore opportunities for purchasing renewable energy from independent power producers. Within the context of South Africa's national dependency on coal and high levels of unemployment and social inequality, we recognise that a just transition is critical for South Africa. We will therefore use our influence to collaborate with other business leaders, communities and Government stakeholders to advocate for a just transition where no-one is left behind.

 

US$60 to
US$70 million

(Estimated SBTi capital requirement p.a.)

Transition opportunity
Changing consumer behaviour and preference for renewable, circular, low-carbon products  

The global demand for sustainable packaging solutions is prompting increasing investment and collaboration to develop innovative solutions to cater to changing customer preferences. Paper-based packaging being renewable and circular, emerges as an excellent substitute for less eco-friendly options. By capitalising on our sustainable packaging solutions, we aim to address the growing demand for a wider range of paper-based packaging products.

Likewise, the surge in demand of sustainable textile fibres opens up possibilities for our dissolving pulp business. Our prominent role in supplying pulp to the lyocell fibre market positions us favourably, given the improved environmental impact lyocell fibres, which are expected to double in market share over the next five years.

  Short to long term   US$100 to
US$200 million
 

To meet the growing demand for packaging papers we have initiated a capital project at Somerset Mill to convert PM2 from coated woodfree graphic paper to solid bleached sulphate paperboard. The machine capacity will also be increased during the conversion from 240,000 tpa to 470,000 tpa. The project is expected to be completed in early 2025.

 

US$418

Total capex for Somerset PM2

Transition opportunity
Beneficiation of wood by-products  

Furfural is an important biobased platform chemical which is used in a wide variety of applications including foundry resins, solvents and crop protection products. In many cases, biobased furfural replaces products which would otherwise be made from fossil fuels. Sappi has developed innovative technology for the production of furfural using the hemicellulose co-product of our DP operations. By using this co-product, we are able to maximise the portion of the tree used to make renewable value-added products. The Sappi technology is fully integrated with the pulp production technology, enabling a significant reduction in the carbon footprint of furfural production.

  Medium term   US$20 to
US$30 million
 

Sappi has invested in a pilot plant at Saiccor Mill which has successfully demonstrated the technology for furfural production and testing of product with customers which is progressing well. A class 10 capex estimate for a full-scale plant with the capacity to produce 25,000 tpa is being explored.

 

US$50

High level capex estimate for 25,000 tpa furfural plant

Operational opportunity
Reduced operating costs through energy efficiency and use of renewable energy  

The production of pulp and paper is energy intensive and energy generation is the major source of our GHG emissions. In many geographies where we have operations, renewable fuel sources such as biomass are cheaper than fossil fuels such as coal and gas. In addition, it is anticipated that renewable power (for purchase) will, over the medium to long term, become cheaper than fossil-based power. By improving the efficiency of our energy plants and manufacturing operations and creating the flexibility to utilise different fuel sources, we have the opportunity to realise cost savings.

  Short to long term   US$20 to
US$50 million
 

Based on our corporate commitment to reduce emissions and meet our SBTi targets, together with increasing market and regulatory pressure to reduce the carbon footprint of our products, we have implemented a comprehensive capital investment programme to reduce GHG emissions. Projects focus on energy efficiency, fuel switching to allow replacement of fossil fuels in our boilers with biomass and renewable energy projects. Many of these projects improve the efficiency of our manufacturing operations and allow for significant savings through fuel and power arbitrage opportunities.

 

US$60 to
US$70 million

(Estimated SBTi capital requirement p.a.)

Note: Cost to realise the transitional opportunities for packaging and biomaterials is focused exclusively on two specific projects (conversion and expansion of Somerset PM2 and furfural at Saiccor Mill) which are the two most advanced and likely to reach commercialisation opportunities in the current portfolio. R&D initiatives are ongoing in this space and opportunities will be added as they emerge. Cost to realise the transitional opportunities does not include the R&D spend which will be added in future reports.

Metrics and targets

The United National Sustainable Development Goals (UN SDGs) inspire us all to strive for a better future, setting out a roadmap for where we collectively need to go and how to get there. We have identified seven priority goals at global level – and a further two in South Africa – where we believe we can make the most impact and where we are concentrating our efforts.

We use a variety of metrics to measure the current and potential impact of our climate change-related risks and opportunities including metrics related to GHG emissions, water use, forestry certification and biodiversity. Direct GHG emissions are from our energy plants through combustion of fuels to generate the power required for our manufacturing operations (Scope 1). We also purchase power from the grid (Scope 2) and have indirect GHG emissions throughout the value chain, mainly as a result of our purchase of raw materials, fuel and transportation, which make up the majority of our Scope 3 emissions. We are acting across all three Scopes and working closely with our partners to reduce GHG emissions for our business and our value chain. In 2022, our 2030 science-based decarbonisation targets, including a Scope 3 advocacy target, were approved by the SBTi. We remain committed to zero deforestation in our woodfibre supply chains and to maintaining carbon sinks in forestry through implementation of best forest management and silviculture practices.

Given the strategic importance of sustainability, the group's Executive Directors remuneration is linked to their contribution to the overall success of our Thrive strategy. Specifically, 6% of the short-term management incentive is directly linked to climate change through emission reduction, forestry certification and waste to landfill performance targets (MIS: sustainability = 30% of the 20% personal objectives). Additionally, in FY2023 we initiated a process to explore the inclusion of sustainability into the long-term incentives (PSP: proposal for 10% linked to performance against SBTi targets) and consultation with shareholders has so far been positive.

For further details on our remuneration policy, see our Remuneration report.

Our performance against our global planet targets, which have an impact on climate change, is shown below.

FY2023 group performance against 2025 climate targets

FY2023 snapshot of Thrive (2025) and SBTi targets   Sappi KPI  
Planet targets
  Clean water and sanitation
 

Specific process water usage (SSA)

  Renewable and clean energy
  Share of renewable energy
Specific energy intensity
  Responsible consumption and production
  Specific landfilled solid waste
  Climate action
  Specific GHG emission
  Life on land
  Share of certified fibre
Biodiversity (SSA)
SBTi targets
  Climate action
  Scope 1 and 2
Scope 3 engagement

For more details on performance against planet targets see our 2023 Sappi Group Sustainability Report at www.sappi.com/2023GSDR

Global targets for FY2023 for specific total energy, share of renewable and clean energy, specific GHG emissions and specific waste to landfill were not achieved. The primary reason for the poor performance against our targets is the high levels of production curtailment that was required during the year which significantly reduced the efficiency of our operations. Unstable stop/start operating conditions require more energy and produce more waste on an intensity basis (per ton of product). Additionally, in Europe and North America energy efficiency during the winter months was particularly poor due to the requirement to keep certain lines and parts of the plants heated during periods of curtailment to prevent freezing. The waste to landfill was also impacted by a number of 'once-off' issues in all three regions. These included; Matane Mill instability in the anaerobic reactor in the water treatment system which required sludge disposal, Kirkniemi Mill decarbonisation project where some soil was removed from the site, Ngodwana Mill increase in sludge landfilled from the cleaning of emergency dams, Stanger Mill disposal of building rubble from the black liquor tank project.

Specific water usage is a SSA specific target. The target was not achieved due to incidences of unstable operating conditions and product quality challenges which required additional water usage as well as lower production volumes than planned for FY2023. The global certified fibre target >75% and biodiversity in Sappi Forests conservation areas was achieved.

The FY2023 Scope 1 and 2 emissions intensity of 0.94 tons CO2/adt was substantially above our SBTi trajectory and is indicative of the very challenging year from a production curtailment and energy inefficiency perspective. Absolute Scope 1 and Scope 2 emissions were however below the prior year due to the lower operating rates. In terms of our engagement target for Scope 3 to have 44% of our suppliers by spend with science-based targets, globally we achieved 21% with each region achieving the following. SEU 25%, SNA 18%, SSA 15%. In FY2024 we will launch a focused Scope 3 engagement initiative through the efforts of our Sustainable Procurement Steering Committee with a targeted questionnaire to suppliers.

FY2023 GHG emissions data and five-year trend

GRI reference GRI reference Unit 2019 2020 2021 2022 2023
Scope 1 305-1a million kg CO2eq/annum 4,421 4,078 4,269 4,079 3,474
305-4 kg CO2eq/adt 661.1 706.0 677.8 612.9 696.5
Biogenic emissions 305-1c million kg CO2eq/annum 7,074 6,803 6,622 6,877 6,730
Scope 2 305-2a million kg CO2eq/annum 1,553 1,207 1,161 1,333 1,234
305-4 kg CO2eq/adt 232.3 208.9 184.3 200.3 247.5
Scope 3 305-3a million kg CO2eq/annum 3,977 3,365 3,512 3,784 3,472
305-4 kg CO2eq/adt 594.7 582.6 557.7 568.7 695.9
Scope 1 and Scope 2 GHG emissions 305-4 million kg CO2eq/annum 5,974 5,285 5,429 5,411 4,709
kg CO2eq/adt 893.3 914.9 862.1 813.2 944.0
kg CO2eq/US$ million 1,039.7 1,146.7 1,031.4 741.7 810.7

 

Despite the poor emission performance in FY2023 we remain confident that the decarbonisation capital projects in our climate transition plan and a return to full operating rates will allow us to achieve our Thrive (2025) targets and SBTi (2030) target.

In 2023 we engaged KPMG to perform limited assurance on the following planet variables:

Looking forward

A number of physical and transitional risks and opportunities have been identified related to climate change and we continue to monitor developments with respect to legislation, markets, technology and disclosure requirements.

Further climate-related scenario analysis for both physical and transitional impacts will be undertaken in FY2024. Risks, opportunities and financial impacts will continue to be refined.

We believe that we have the right strategy to address the risks and opportunities arising from climate change and will continuously enhance our scenario modelling to expand our thinking and ensure that our strategy and transition plan remains resilient.