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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Our key material issues

Our key material issues are those that we believe underpin our strategic risks and opportunities and have the highest potential impact – negative and positive – on stakeholder value.

The following pages set out a summary of why we believe these issues are material to Sappi, both in financial and impact terms, as well as their links to other aspects of our business, FY2023 highlights and the developments that present opportunities for value creation.

A comprehensive background to each material issue, together with key developments in FY2023 can be found in our 2023 Sappi Group Sustainability Report www.sappi.com/2023GSDR


Our double materiality approach

Principles

Ethical behaviour and compliance

Financial materiality

Our strong ethical culture underpins our reputation, built up over many years. However, just one breach of ethics could destroy our reputation and negatively erode stakeholder value. Accordingly, we place a high premium on adherence to ethical behaviour as encapsulated in our Code of Ethics.

Impact materiality

Sappi’s objective is to be a ‘trusted partner to all our stakeholders’. We cannot achieve this unless we all ‘live’ our values of integrity and courage and act when these values are threatened. In doing so, we protect the viability of our business and the interests of all our stakeholders.

How this issue links to other aspects of our business
Our global priority SDGs
Our strategic fundamentals
The global forces shaping our Thrive strategy
  • Rapid pace of technological innovation and threats including cyber threats
  • Changing consumer and employee behaviour
  • Shifting demographics.
Our top 10 risks

3Cyber security

8Uncertain and evolving regulatory landscape

9Employee relations

Our highlights

  • Comprehensive ethics training
  • Ethics issues incorporated into employee engagement survey.

Opportunities for value creation

We constantly strive to develop and update relevant policies to support our efforts to maintain and improve our high ethical standards. The group whistle-blowing policy has been carefully reviewed and updated to align with the latest global standards and best practices.

These policies will help to drive value creation by strengthening our commitment to transparency, integrity and ethical conduct and are critical components of your ethical framework, empowering employees to report any concerns or suspected violations of policies, laws, or moral standards without fear of reprisal.

See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR

Responsible procurement

Financial materiality

With over 16,000 suppliers, maintaining a well-organised supply chain is integral to our business and key to meeting our strategic pillars which include growing our business, sustaining our financial health and driving operational excellence. It also underpins our licence to operate.

Impact materiality

In today’s environmentally and socially conscious world, ethical supply chains are a key concern. By avoiding negative sourcing impacts, giving our customers and consumers transparent insight into our supply chain and collaborating with our suppliers to promote responsible business, we are enhancing trust – the fourth pillar of our strategy – and working towards our vision of a thriving world.

How this issue links to other aspects of our business
Our global priority SDGs
Our strategic fundamentals
The global forces shaping our Thrive strategy
  • Rapid pace of technological innovation and threats including cyber threats
  • Changing consumer and employee behaviour
  • Shifting demographics.
Our top 10 risks

4Sustainability expectations

6Evolving technologies and consumer preferences

7Supply chain disruption

Our highlights

  • 81% of our global eligible procurement spend covered by a signed Supplier Code of Conduct
  • In terms of procurement spend, in SEU 72% of spend was covered by suppliers on EcoVadis, 37% in SNA and 48% in SSA.

Opportunities for value creation

In a survey of approximately 27,000 global customers published in September 2021, approximately 88% of the participants said they would prioritise purchases from companies that implement ethical sourcing practices. Around 83% of them are ready to pay extra for a product that has a guaranteed ethical source. Moreover, close to 64% of 18 to 24-year-olds, representing almost two-thirds of the youngest adult buyers, mentioned that they would not buy from a company again if it was accused of engaging with unethical suppliers.1

As we continue to expand our responsible sourcing practices, so we are honing our competitive advantage across global markets.

1 This research was conducted by 3Gem in April 2021. Commissioned by OpenText, 27,000 consumers were anonymously surveyed globally, across the UK, Germany, France, Spain, Italy, USA, Canada, Brazil, Japan, India, Australia and Singapore.

See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR

Prosperity

Agility and operational efficiency

Financial materiality

Within the context of a persistent global economic downturn characterised by depressed markets, geopolitical instability and weak economic growth, acting boldly by being agile and prioritising operational efficiency are more important than ever before. With a keen focus on maintaining shareholder value, we continue to diligently manage working capital through production curtailments and by adapting our product and market mix to match demand. This aligns with our long-term Thrive strategy, which focuses on growing our portfolio in packaging and speciality papers, pulp and biomaterials. By investing in our business to pursue growing areas of demand, we can remain profitable and competitive in the global marketplace. As an example of the opportunities this represents, the global sustainable packaging market is predicted to grow at a compound annual growth rate (CAGR) of 7.7% between 2023 and 20311. Shareholder value is also enhanced by our focus on operational efficiency and making more with less where implementation of best available technology maintains our competitive cost position.

Impact materiality

By enhancing our operational efficiency and making more with less, we reduce the environmental impacts of our operations. Consumers, retailers and brand owners all over the world are looking for sustainable paper-based packaging solutions for their products, while eco-conscious consumers and shoppers are pressuring brand owners for more biodegradable, recyclable and compostable packaging, all reflecting a more circular economy. In addition, the environmental impact of packaging production, use and disposal continues to come under increasing scrutiny from regulators. We meet these needs by offering a broad range of paper-based sustainable solutions as an alternative to non-renewable-based packaging in many of our product segments.

1 https://straitsresearch.com/report/sustainable-packaging-market

How this issue links to other aspects of our business
Our global priority SDGs
Our strategic fundamentals
The global forces shaping our Thrive strategy
  • Changing consumer and employee behaviour
  • Shifting demographics.
Our top 10 risks

2Cyclical macroeconomic factors

6Evolving technologies and consumer preferences

7Supply chain disruption

10Liquidity

Our highlights

  • Inaugurated a new warehouse at Carmignano Mill
  • Modernised PM11 at Gratkorn Mill
  • Completed debottlenecking on PM1 at Somerset Mill
  • Initiated the conversion and expansion of Somerset PM2 from CWF to SBS
  • Accelerated our digital transformation journey.

Opportunities for value creation

Currently, all sodium sulphite (Na2SO3) used in South Africa is imported. Tugela Mill relies on this imported sodium sulphite for its NSSC digester with limited affordable domestic supply. To mitigate these supply risks and lower costs of production, the mill initiated a project aimed at in-house sodium sulphite production. This project is in its final stages and is scheduled for commissioning in early 2024. This project is perfectly aligned with Sappi’s Thrive strategy to reduce cost of production and de-risk raw material supply. It also will have the added advantage to supply product into various South African markets.

See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR

Low-carbon, circular bioeconomy

Verve

Financial materiality

As global textile demand grows, driven by population growth, fashion and rising wealth in developing economies, the need to develop more climate-friendly solutions, derived from renewable materials will drive increasing market share for dissolving pulp (DP), particularly wood-based cellulosics for which the bulk of Sappi’s DP is used.

Impact materiality

By improving traceability in the textile value chain and lowering the carbon footprint of Verve, we can help to grow a healthier planet and increase consumer confidence in the products they purchase.

How this issue links to other aspects of our business
Our global priority SDGs
Our strategic fundamentals
The global forces shaping our Thrive strategy
  • Changing consumer and employee behaviour
  • Shifting demographics
  • Climate change and climate transition
  • Resource scarcity and growing concern for natural capital.
Our top 10 risks

2Cyclical macroeconomic factors

4Sustainability expectations

5Climate change

6Evolving technologies and consumer preferences

Our highlights

  • Progressed collaborative textile value chain partnerships to develop circular solutions for fashion
  • Publicly disclosed our Higg Facility Environmental Management (FEM) and Facility Social & Labour Module (FSLM) scores for Cloquet Mill and Saiccor Mill respectively
  • Progressed the water stewardship project with WWF-SA in the uMkhomazi catchment near Saiccor Mill and extended the partnership for another four years.

Opportunities for value creation

In FY2024 we will be launching a campaign in South Africa spearheaded by a top local fashion designer and focused on positioning Verve as the Fibre of Choice for the more sustainable portfolio of fibres, ie lyocell and sustainable viscose fibres.

The campaign is underpinned by our focus on sustainability (including the aspect of traceability) as a key value differentiator. In addition, it aligns with the South African Government’s clothing, textiles, footwear and leather (CTFL) master plan which aims to stimulate the value chain feeding into South Africa’s major CTFL retailers.

See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR

About Higg

Developed by the Sustainable Apparel Coalition (SAC), the Higg FEM is part of a suite of tools that enables manufacturing facilities of all sizes to measure and score their environmental performance against a standard set of criteria, allowing for meaningful and credible performance benchmarking in the apparel and textile sector. Across topics such as water use, carbon emissions and waste management, the Higg Index can be used by consumer goods brands, retailers, manufacturers, governments, NGOs and consumers to inform their individual sustainability strategies and drive collective industry transformation.

The Higg FSLM measures the social impact of manufacturing across areas such as wages, working hours, health and safety, and employee treatment.

Biomaterials

Financial materiality

Under our Thrive strategy, one of our stated objectives is to pursue circular ecosystems and economies – including utilising 100% of each tree we harvest. Our innovative technology enables us to derive biochemicals and biomaterials from the parts of the tree which are not used for pulp and papermaking, thereby creating additional revenue generation opportunities.

Impact materiality

By harnessing the unique properties of wood acids, wood sugars and wood lignin to provide a range of biobased products, we are enhancing environmental sustainability to the benefit of people and the planet.

How this issue links to other aspects of our business
Our global priority SDGs
Our strategic fundamentals
The global forces shaping our Thrive strategy
  • Move towards a circular economy
  • Changing consumer and employee behaviour
  • Climate change and climate transition
  • Resource scarcity and growing concern for natural capital.
Our top 10 risks

2Cyclical macroeconomic factors

4Sustainability expectations

6Evolving technologies and consumer preferences

10Liquidity

Our highlights

  • Progressed development of Viscowell, our lignosulphonate-based product used in oil-well drilling for mud thinning, fluid loss and as a retarder for well cementing
  • Commissioned at furfural plant at Saiccor Mill, with plans for a commercial plant at the same mill well advanced.

Opportunities for value creation

In FY2024 we will be launching a campaign in South Africa spearheaded by a top local fashion designer and focused on positioning Verve as the Fibre of Choice for the more sustainable portfolio of fibres, ie lyocell and sustainable viscose fibres.

We support the drive to improve the impact of everyday products on the environment, particularly on precious water resources. Our biomaterials such as Valida offer unique opportunities for the manufacturers of home and personal care products to significantly reduce the negative consequences of daily use products which deposit unrecoverable and non-biodegradable particles into the soil, ocean and freshwater resources. Ever-increasing controls and pending legislative changes regarding the use of harmful chemicals in pesticides will create further opportunities for our lignin, furfural and Valida products which are being tested in a range of products aimed at reducing the impact of agriculture on the environment.

See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR

About furfural

Furfural is produced from C5 sugars (sugar derived from non-food biomass) in hemicellulose through hydrolysis and dehydration. Essentially, it is a platform chemical for the production of numerous biochemicals. Its uses range from adhesives, antacids, fertilisers, flavouring compounds, inks and plastics, to solvents for the refining of lubricating oils. It can also be used as a fungicide, nematicide and weed killer. A large component of the world’s furfural production is converted to furfural alcohol for furan resins.

Innovation and collaboration

Financial materiality

Technology is a core pillar of competitive advantage in our industry and relevant, ongoing technology investments are key to maintaining and amplifying enterprise value.

Impact materiality

By developing new, competitive technologies we can lower energy consumption and increase our use of renewable energy, expand product lifecycles and reduce waste. We work to meet market supply and demand and grow profitability while respecting the boundaries of the planet.

How this issue links to other aspects of our business
Our global priority SDGs
Our strategic fundamentals
The global forces shaping our Thrive strategy
  • Move towards a circular economy
  • Climate change and climate transition
  • Resource scarcity and growing concern for natural capital.
Our top 10 risks

4Sustainability expectations

5Climate change

6Evolving technologies and consumer preferences

Our highlights

  • The top three finalists’ entries in the Technical Innovation Awards represent a five-year net present value (NPV) of US$34.3 million at a 100% probability of success rate
  • Launch of new wet-strength, alkali-resistant Parade Label Pro WS
  • Commercialisation of bagasse-based compostable thermo-moulded food-grade bowls and plates
  • Collaboration with Xeikon – a company focused on digital printing engines, both toner-based and inkjet, for a variety of packaging applications – to develop printed, recyclable paper-based flexible packaging
  • New cloud-based Stage-Gate R&D platform rolled out across the group.

Opportunities for value creation

The Decarbonisation and Future Technology 1.5 team has been exploring carbon capture initiatives as part of the road to decarbonisation. Feasibility studies for a few selected mills are under evaluation. As the pulping process is energy and water intensive, this team has also been exploring low energy pulping technologies for the future. An alternative pulping technology is being evaluated with the potential to increase yield, reduce cooking time, increase pulp strength and reduce water usage.

See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR

About our Stage Gate process

New software was introduced to create a OneSappi approach to R&D and ideation. It uses a structured Stage Gate process to develop technologies, deliver products to market, and process improvements to the mill, ensuring positive financial contribution or cost savings. The software was designed to fit Sappi’s existing approach to R&D and adapted to cater for future improvements recommended by the group technology management team. The platform incorporates forecasts for financial value delivery and using the NPV (net present value) metric for every R&D project.

The process assesses the viability of projects in small steps using a cross-functional team of individuals to decide whether to progress the project to launch. The process is designed to fail-fast early, improve the success rate of launching projects that deliver financial value delivery and shorten time to market. Using a standard set of in-house questions, the platform was designed to ensure that only projects that align with Sappi’s strategy for growth, improved environmental performance and meet the voice of the customer, are progressed to launch. The project risk is assessed across several elements to create a project scorecard to inform decision-making.

People

Employee and contractor safety

Financial materiality

Entrenching a strong safety culture is the moral responsibility of every employer. However, a strong safety culture also makes good financial sense. If a worker is injured on the job, it costs the company in terms of lost working hours, increased insurance costs, workers’ compensation premiums and potential legal action.

Impact materiality

Productivity and morale suffer when workplaces are unsafe. When a workplace is safe, employees feel more engaged and connected with the company. We strive to ensure that all our people have a 24/7 safety mindset, inculcating this through various initiatives and leading by example.

How this issue links to other aspects of our business
Our global priority SDGs
Our strategic fundamentals
The global forces shaping our Thrive strategy
  • Rising social inequality and growing social activism with increased expectations of business.
Our top 10 risks

1Safety

9Employee relations

Our highlights

  • Zero fatalities
  • Continuous improvement in the lost-time injury frequency rate (LTIFR) across all regions
  • Safety recognition awards launched in SNA
  • Safety awards in SSA extended to include environmental awards, thereby gaining higher visibility

Opportunities for value creation

Based on the success of similar programmes in SNA and SSA, in FY2024, we will be rolling out a safety award in SEU to recognise proactive initiatives that improve safety culture and enhance employee engagement related to safety.

Sappi group – LTIFR and LTISR combined

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

LTISR is the lost-time injury severity rating and in a similar manner to the frequency rate, is calculated by dividing the product of the number of days lost to the injury and the group-wide standard hours by the unit’s man hours, ie LTISR = Number of days lost * 200 000/actual man hours.

See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR

Sappi talent

Financial materiality

Companies that are diverse, equitable and inclusive are better able to respond to challenges, win top talent, and meet the needs of different customer bases. Accordingly, we strive to create a diverse, inclusive working environment that establishes a sense of belonging among employees and shared sense of purpose. In addition, our people are encouraged and supported to upgrade their job-related skills and knowledge to improve their job performance and abilities for future career growth. These approaches further entrench our strategic pillar of ‘trust’ and lead to greater levels of retention, connection and productivity, translating directly into improved performance and stronger business results and profits.

Impact materiality

Developing potential in a diverse, inclusive working environment is important for both business performance and individual wellbeing. A workplace which encourages people to reach their full potential is not only more productive, but employees are likely to be more engaged and fulfilled.

How this issue links to other aspects of our business
Our global priority SDGs
Our additional SSA priority SDGs
Our strategic fundamentals
The global forces shaping our Thrive strategy
  • Deglobalisation, polarisation and increased geopolitical tensions
  • Rising social inequality and growing social activism with increased expectations of business
  • Changing consumer and employee behaviour
  • Shifting demographics.
Our top 10 risks

9Employee relations

Our highlights

  • Exceptional participation in the employee engagement survey
  • Progress in revised human resources (HR) strategy
  • Two new simpler, more modern management training programmes launched
  • Significant uptake of advanced training and performance development system.

Opportunities for value creation

The richness in data of the engagement survey will allow us to craft HR solutions specific to regions, workplaces and levels.

Group employee engagement levels, 2021, 2023 comparison and benchmark comparison (%)

  • Engaged employees consistently exceed expectations. They are energised and passionate about their work, leading them to exert discretionary effort to drive organisational performance.
  • Almost engaged employees sometimes exceed expectations and are generally passionate about their work. At times they exert discretionary effort to help achieve organisational goals.
  • Indifferent employees are satisfied, comfortable and generally able to meet minimum requirements. They see their work as ‘just a job’, prioritising their needs before organisational goals.
  • Disengaged employees usually fail to meet minimum expectations, putting in time rather than effort. They have little interest in their job and the organisation and often display negative attitudes.
See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR

Labour relations

Financial materiality

Sound labour relations based on trust – one of our strategic fundamentals – are important in maintaining the smooth running of our operations and reputation, as well as enhancing productivity. These factors, in turn, drive financial value.

Impact materiality

Effective communication underpins sound labour relations. Understanding Sappi’s strategic direction and purpose helps to elevate engagement, while transparent, constructive discussions related to issues, opportunities and challenges reduce the possibility of conflict and create a positive working environment.

How this issue links to other aspects of our business
Our global priority SDGs
Our strategic fundamentals
The global forces shaping our Thrive strategy
  • Rising social inequality and growing social activism with increased expectations of business
  • Changing consumer and employee behaviour
  • Shifting demographics
Our top 10 risks

1Safety

2Cyclical macroeconomic factors

9Employee relations

Our highlights

  • Good labour relations in all regions
  • Across the group, the FY2023 collective bargaining process was stable
  • Development plans were compiled for 36 shop stewards in SSA.

Opportunities for value creation

The labour market has become very competitive in all regions and the healthy relationships we have established with organised labour will help to ensure retention of critical technical skills.

See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR

Social impact

Financial materiality

Our focus on profit with purpose in alignment with our vision of a thriving world drives us in our creation of economic value for Sappi and value for society.

Impact materiality

By investing in communities, we promote socio-economic growth and establish mutually beneficial relationships.

How this issue links to other aspects of our business
Our global priority SDGs
Our additional SSA priority SDGs
Our strategic fundamentals
The global forces shaping our Thrive strategy
  • Deglobalisation, polarisation and increased geopolitical tensions
  • Rising social inequality and growing social activism with increased expectations of business
  • Changing consumer and employee behaviour
  • Shifting demographics.
Our top 10 risks

2Cyclical macroeconomic factors

9Employee relations

Our highlights

  • Ongoing success of Ideas that Matter initiative in SNA
  • Highly successful enterprise and ESD programme in SSA.

Opportunities for value creation

Given the proven causal link between early childhood development (ECD) and success and wellbeing later in life, we expect positive outcomes from our ECD programmes in SSA, and are planning to launch a ‘Follow the Child’ tracking initiative. This will give us greater understanding of our ECD programmes, allowing us to recalibrate if necessary.

Corporate social investment spend FY2023
SEU €100,000
SNA US$417,500
SSA ZAR54 million
See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR

Sappi Khulisa: Celebrating 40 years of success

Our Sappi Khulisa tree-farming scheme, initiated in 1983 is a good example of positive social impact and shared value: It is an integral part of our woodfibre supply chain, enhancing security of fibre supply, while uplifting rural communities by equipping them to become sustainable participants in the forestry value chain.

Initially, the programme focused on supporting subsistence farmers with access to one to 20 hectares of land to grow trees. First known as Project Grow and starting with only three beneficiaries in the Zululand South area, in 2013, Sappi Khulisa expanded to include community forestry projects and forestry projects handed to land-reform beneficiaries. Today the project stretches from the far north of the KwaZulu-Natal province to the far south and into Mpumalanga and the Eastern Cape. Today the total area managed is 37,269 hectares (ha). In 2023, under this programme, 318,116 tons of timber worth some ZAR332.6 million was delivered to our operations. Since 1995, a total volume of 5,187,906 tons to the value of ZAR3.334 billion has been purchased from small growers under this programme. In 2013, Sappi Khulisa expanded to include community forestry projects and forestry projects handed to land-reform beneficiaries.

Currently, the programme involves 4,143 growers and approximately 942 small, medium and micro enterprises (SMMEs) who are involved in silviculture, harvesting, loading, short on and long-haul activities.

We offer training at three Khulisa Ulwazi (‘Growing knowledge’) to all value chain participants, including land-reform beneficiaries and cover all aspects of forestry, including core operational skills as well as safety, legal compliance and business management. During 2023, Ulwazi trained 471 individuals on 20 different courses related to forestry business management.

Shortly after year-end, The Sappi Khulisa team was honoured with The Trialogue Strategic CSI award.

Planet

Sustainable woodfibre

Financial materiality

To meet our Thrive business strategy and maintain returns to shareholders, we need to secure a reliable supply of sustainably sourced woodfibre that enables us to offer products to our customers around the world that carry no risk of deforestation or forest degradation. This is particularly important not only given stakeholder concerns, but also within the context of legislative requirements such as the new EU Deforestation Regulation (EUDR). See box here.

Impact materiality

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, social and environmental wellbeing.

How this issue links to other aspects of our business
Our global priority SDGs
Our strategic fundamentals
The global forces shaping our Thrive strategy
  • Climate change and climate transition
  • Resource scarcity and growing concern for natural capital.
Our top 10 risks

4Sustainability expectations

5Climate change

7Supply chain disruption

Our highlights

  • Progressing PEFC1 – endorsed South African Forestry Assurance Scheme (SAFAS) forest certification in South Africa
  • Meeting our performance against our fibre certification target within the context of challenging global markets.

Opportunities for value creation

Based on the success of our use of bagasse as a fibre source, we are looking at non-woodfibre sources such as grasses, cereal straws, maize stalks and bamboo. The Sappi Technology Centre in Tshwane, South Africa has evaluated wheat straw and were able to produce good quality pulp with comparable yield and bleachability to bagasse, under the same cooking and bleaching conditions. The wheat straw pulp also demonstrated certain key strength properties, including tensile, burst and tear strength.

Following trials at Stanger Mill, we are now assessing other alternative plants that could be grown close to the mill in collaboration with Khulisa farmers. This offers opportunities not only in terms of expanded fibre sources, but also in the form of expanded income generation for Khulisa farmers. Alternatives like Bana Grass and Elephant grass are still being sourced for further testing.

1 Programme for the Endorsement of Forest Certification (PEFC).

See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR

The EU’s new deforestation regulation

The EUDR, which came into force in June 2023, aims to minimise deforestation and forest degradation. It states that relevant products placed on the EU market, or exported from the EU, must demonstrate that their supply chains have not contributed to the destruction of forests around the world.

What is Sappi doing?

Sappi is firmly committed to zero deforestation and thus shares the aims of the EUDR. With the new regulation leaving several important issues related to its practical implementation open, Sappi is working alongside other stakeholders and peers to ensure a robust yet workable implementation of the regulation. We are working together especially within the community of Confederation of European Paper Industries (CEPI) to build a common understanding and approach to EUDR across the value chain.

Forest certification systems will, of course, continue to play a key role in helping to oversee and validate supply chains. Sappi already has in place measures to ensure that its supply chains are deforestation-free – which is why, Sappi’s mills are certified in most cases by both PEFC and FSC Chain of Custody. We also employ our own due diligence systems to monitor woodfibre sourcing. Everything that enters our mills must at least meet the requirements of the FSC Controlled Wood Standard and PEFC Controlled Sources.

Renewable energy and climate change

Financial materiality

Climate change: Climate change has the potential to have 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 risks and potentially, higher costs. In addition, the urgent need to address GHG emissions affects our operations globally. Tackling climate change is one of the biggest and most daunting challenges of our time – and we are committed to taking positive action by mitigating both physical and transitional risks.

Renewable energy: According to the United Nations, fossil fuels – coal, oil and gas – are by far the largest contributor to global climate change, accounting for over 75% of global GHG emissions and 90% of all carbon dioxide emissions. While we recognise the need to increase our use of renewable energy, our business is highly capital intensive and implementing additional and modified machinery that facilitates the use of renewable energy takes time and money. Nevertheless, we are committed to meeting our science-based GHG emission reduction targets (approved by the SBTi in FY2022). We have identified capital projects within our existing five-year plan as well as further longer-term interventions, to facilitate the required emissions reduction. The global capital expenditure between FY2021 to FY2030 required to achieve the targets is estimated to be US$60-70 million per annum. While significant, these costs should be considered within the context of the competitive advantage created by reduced GHG emissions and higher levels of renewable energy.

Impact materiality

The use of fossil fuels and climate change has negative impacts on ecosystems, water, biodiversity and human health. It is our responsibility to decrease our use of fossil fuels, the emission intensity of our products and do our part towards climate change mitigation.

How this issue links to other aspects of our business
Our global priority SDGs
Our strategic fundamentals
The global forces shaping our Thrive strategy
  • Climate change and climate transition
  • Resource scarcity and growing concern for natural capital.
Our top 10 risks

4Sustainability expectations

5Climate change

6Evolving technologies and consumer preferences

Our highlights

  • SNA continues to operate with a high level of renewable energy – 78% in FY2023
  • Ongoing decarbonisation and renewable energy projects in SEU
  • Launch of the Sappi Chair in Climate Change and Plantation Sustainability at the University of the Witwatersrand. Given that forestry is a long-term crop, we need to know well in advance where to direct our resources and investment. The work by Wits will facilitate this by providing more accurate climate models and replicable, workable methodologies
  • Project at Saiccor Mill to generate steam from pellets made from wood shavings and other wood waste left over from the mill’s manufacturing processes.

Opportunities for value creation

In South Africa we are looking into biodiesel opportunities in KwaZulu-Natal province.

Group employee engagement levels, 2021, 2023 comparison and benchmark comparison (%)

Note: Regrettably, in FY2023 our emissions intensity increased significantly. The rise can be attributed to a significant reduction in energy efficiency associated with the high levels of production curtailment that were required throughout the year due to challenging market conditions. The fluctuating start-stop operations and the need to maintain equipment heating during cold winter months, even when production was halted, significantly hampered our operational efficiencies. Despite the poor performance relative to our targets, we remain confident that our decarbonisation strategy and capital investment programme is on track to deliver our 2025 and 2030 commitments.

See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR

Water stewardship

Financial materiality

Direct use of freshwater is vital in our manufacturing operations and for our nurseries in South Africa. Our pulp and paper operations are highly dependent on the use and responsible management of water resources. Water is used in all major process stages, including raw materials preparation; pulp cooking, washing and screening; and paper machines; process cooling, generating steam for process use and onsite power generation. In terms of indirect use, both our plantations in South Africa and the forests from which we source woodfibre are dependent on rainfall.

To sum up: Water is integral to achieving our long-term strategic business objectives. All our mills use and treat water in accordance with comprehensive environmental permits. These play a key role in achieving our strategy of growing our business, sustaining our financial health and enhancing trust. To drive operational excellence, water management is included in our operational environmental management plans, which are reviewed and updated annually. Operational excellence is also based on water-related risks – both internal and external developments, together with climate change trends – and opportunities being built into our opex and capex plans and overall long-term strategic objectives.

Impact materiality

Climate change is exacerbating both water scarcity and water-related hazards (such as floods and droughts), as rising temperatures disrupt precipitation patterns and the entire water cycle. This is impacting socioeconomic growth, food security and health. Recognising the pressure on a finite resource that is core to our processes, we focus on identifying opportunities to save water throughout our pulp and papermaking production process, recycling extensively within these processes and improving the quality of the wastewater (effluent) we discharge. Globally, 93% of our water intake is treated and returned to the watershed from which it came.

How this issue links to other aspects of our business
Our global priority SDGs
Our strategic fundamentals
The global forces shaping our Thrive strategy
  • Climate change and climate transition
  • Resource scarcity and growing concern for natural capital.
Our top 10 risks

4Sustainability expectations

5Climate change

6Evolving technologies and consumer preferences

Our highlights

  • Group Water Stewardship Policy approved
  • Cloquet Mill honoured with 2023 AF&PA Leadership in Sustainability Award for Water Management
  • Water reduction projects implemented at SEU mills
  • Globally, total water withdrawal decreased by 8% year-on-year in FY2023 and by 7% over five years.

Opportunities for value creation

Under South African legislation, commercial forestry is defined as a stream flow reduction activity and thus a water use licence for planting is required, even though our plantations are not irrigated. Research indicates that commercial forestry accounts for only 3% of South Africa’s water use, while irrigation/ agriculture account for 60%.

We continue to engage with national and local government and communities to accelerate afforestation in KwaZulu-Natal and the northern region of the Eastern Cape. Development in the rural areas of these provinces is limited and expansion of plantations in these regions would promote socioeconomic development in line with the South African Government’s ambitions and the Forestry sector master plan.

See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR

Circular bioeconomy and minimal waste

Financial materiality

Establishing a more sustainable production and consumption model in which raw materials are kept longer in production cycles and can be used repeatedly, therefore generating much less waste has both environmental and economic benefits.

Impact materiality

Minimising waste and promoting sustainable use of natural resources through smarter product design, longer use and innovative waste minimisation, can help solve other complex challenges such as climate change and biodiversity loss, with positive benefits for people and the planet.

How this issue links to other aspects of our business
Our global priority SDGs
Our strategic fundamentals
The global forces shaping our Thrive strategy
  • Move towards a circular economy
  • Climate change and climate transition
  • Resource scarcity and growing concern for natural capital.
Our top 10 risks

4Sustainability expectations

5Climate change

6Evolving technologies and consumer preferences

Our highlights

  • Successful waste sludge project at Carmignano Mill
  • SSA mills continue to actively pursue beneficiation opportunities specifically for ash, fibre sludge and biomass with a beneficiation increase of 5% in FY2023, year-on-year, and reduction of specific waste to landfill of 12%.

Opportunities for value creation

SNA is planning to launch LusterFSB Compostable in FY2024. The new certified compostable paperboard will be used for paper plates and bowls.

See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR

Biodiversity

Financial materiality

Sappi’s view is that nature and biodiversity-related risks are financial risks and must be seen as a strategic risk management priority which, if handled correctly, is a source of competitive and commercial advantage.

Impact materiality

People around the world are reliant on the ecosystem services that nature provides including pollination, carbon sequestration, erosion control, flood and storm protection, disease control and soil quality. Ecosystem services are essential for human health and survival, from freshwater to food and fuel.

How this issue links to other aspects of our business
Our global priority SDGs
Our strategic fundamentals
The global forces shaping our Thrive strategy
  • Move towards a circular economy
  • Climate change and climate transition
  • Resource scarcity and growing concern for natural capital.
Our top 10 risks

4Sustainability expectations

5Climate change

Our highlights

  • The SFI® Maine Committee was the winner of the 2023 SFI Implementation Committee Achievement Award
  • Expansion of the Sappi Rare, Threatened and Endangered Species Stewardship Programme which began with the Warburgia salutaris, (the pepper-bark tree or ‘isibhaha’ in isiZulu). The next phase of the project, after consultation with local communities and conservation agencies, focuses on Prunus africana (African Cherry), Ocotea bullata (Black Stinkwood) and Curtisia dentata (Assegai tree).

Opportunities for value creation

In 2024, a formal reassessment of all ICAs will provide an updated rating to be compared with from the initial assessment rating in 2021-2022, thereby giving us a more accurate overview of the success – or lack thereof – of our interventions.

See our 2023 Sappi Group Sustainability Report for more information www.sappi.com/2023GSDR

The SFI Maine Committee, of which Sappi is an active member and supporter, was honoured with the 2023 SFI Implementation Committee Achievement Award. The committee was selected for its collaborative leadership in addressing key enhancements to the SFI Forest Management and Fibre Sourcing Standards related to climate smart forestry, fire resilience and forests of exceptional conservation value. In terms of the latter, the Maine Committee worked with the Maine Natural Areas Program, the Maine Department of Inland Fisheries and Wildlife, and Maine’s Certified Logging Professionals program to assess forests of exceptional conservation value – a new requirement of the SFI Fibre Sourcing Standard. The assessment produced a map of these forests and a list of nearby towns. A video explaining steps to take if forestry activities intersect with forests of exceptional conservation value was developed and shared broadly with Maine’s community of loggers, foresters, and landowners. The list of forests of exceptional conservation value will be revisited annually.