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- Delivering sustained value
- Responding to our context
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Diving deeper into our,
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Traction refers to the friction between a moving object and the surface it moves on. Just as traction allows a vehicle to move forward without slipping, it enables our business to progress steadily.
With the introduction of our Thrive25 business strategy in 2020, we moved through phases of Adapting, Advancing, and Reshaping. Now, having gained traction, our momentum is driving significant progress.
We also observe this traction in social settings, such as the growing consumer preference for renewable and recyclable products. In response, we continue to expand our range of renewable solutions, enabling society to meet sustainability goals and support the global transition to a low-carbon, circular economy.
We are also gaining traction in our efforts to extract value from the whole tree. Traditionally, papermaking used only half of the raw wood material. Sappi is continually developing new processes and applying innovative technology to extract more value from each tree. Our paper packaging reduces plastic use, and we utilise every part of the trees harvested – whether for our biomaterials, dissolving wood pulp, speciality papers, or bio-energy – finding eco-friendly alternatives for a better future.
‘Keeping pace’ in nature, refers to the ability of organisms to adapt and evolve in response to environmental changes. For species to survive, they must continuously adjust to shifting conditions, such as climate change, availability of resources, and interactions with other species. It’s a dynamic process that requires resilience, flexibility, and the capacity to innovate.
At Sappi, we see this as our competitive agility – our ability not to be outpaced by market trends, technological advancements and consumer demands. Momentum in business involves maintaining a steady flow of progress and growth, which we achieve through continuous improvement, innovation, being close to our customers and strategic planning.
It is this ability that allows us to progress steadily and consistently while always keeping pace and staying abreast of market changes through continuous innovation and adaptation. By understanding and responding to the latest environmental regulations and market innovations, we comply to and integrate global sustainability standards, ensuring that we remain effective and relevant in our commitment to the planet and our efforts to advance a circular economy.
Much like ships of old navigated through uncharted waters to discover new lands, ours is often a journey of discovery as we find new ways to develop technologies that address critical challenges, driving progress in fields like renewable energy and biotechnology.
We are making headway in reducing our carbon footprint through renewable energy projects and we have made significant strides in our sustainability efforts. Our milestone Power Purchase Agreement with EnPower will appreciably reduce our Scope 1 and Scope 2 emissions – not only supporting our own decarbonisation objectives – but also contributing to the transformation of the South African electricity supply industry by providing cleaner and more affordable power.
Sappi is also making headway as we enter exciting new markets with our innovative technology for producing furfural using the hemicellulose co-product from our Verve cellulose operations. By utilising this co-product, we maximise the portion of the tree used to create renewable, value-added products. This approach ensures that our furfural production is supported by the same sustainability and forest stewardship credentials as our Verve production, much like navigating new waters with a trusted and reliable vessel.
In a world where companies pursue accelerated growth through irresponsible and short-term actions, activities like deforestation and pollution, place a collective toll on natural resources. As a company reliant on sustainable woodfibre, we recognise the critical role of ecosystem services. By investing in sustainable forestry practices, we build resilience, safeguard resources, and potentially reduce long-term costs, all while pursuing accelerated growth in a responsible manner.
It’s vital to focus not only on net-zero targets and reducing greenhouse gas emissions but also on a nature-positive approach. We future-proof our business by restoring biodiversity and regenerating ecosystems, aligning with the Taskforce on Nature-related Financial Disclosures (TNFD). We disclose our actions not just because we must, but because we believe it’s the right way to secure our existence as a company committed to the circular economy.
Our plantations are designed with sustainability at their core, supporting biodiversity and ecosystem services. We integrate conservation areas within our plantations, setting aside significant portions of land for active protection. These areas include indigenous forests, wetlands and grasslands that serve as habitats for local wildlife, supporting a variety of species, some endangered or rare.
While we pursue accelerated growth, we do so with foresight, mindful of the impacts of our actions and the measures needed to balance them. Embracing a nature-positive strategy enhances ecological outcomes and drives value creation, positioning Sappi to thrive in a future where nature, alongside carbon, becomes a central element of sustainability.
In business, gathering speed is crucial for driving progress and achieving goals. Equally important is to control this speed to prevent things from spiralling out of control. This balance is essential for sustainable growth and long-term success.
In our efforts towards sustainability, speed determines whether we meet customer expectations and whether we are ready for new rules whether domestic or global. However, we must also keep a steady hand on the ship, steering it in the right direction towards success with careful planning and execution.
Our move towards digitisation exemplifies this balance. By streamlining our IT systems and processes for greater efficiency along our entire value chain – from procurement, through logistics, and into manufacturing systems like the Manufacturing Execution System (MES) at our mills – we are making headway in enhancing our operational capabilities. Additionally, aligning our Sales, Supply Chain, Logistics, and Finance processes through SAP marks a significant milestone in our journey towards a streamlined, data-driven future.
Through global collaboration, we are paving the way for enhanced productivity, transparency and operational excellence across our organisation. We are driving this transformation with a sense of urgency, but also with the necessary caution. By thoroughly testing systems and taking a phased approach, we ensure that our efforts are sustainable and effective.
Together, we are navigating new waters, gathering speed and steering our ship towards a successful and sustainable future.
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Our external operating environment presents us with both risks and opportunities, impacts our ability to generate social and enterprise value and informs our approach to our stakeholders, as well as our approach to material matters.
Since the Covid-19 pandemic, global economic growth has decelerated under persistent inflationary pressures. Central banks worldwide have responded by tightening monetary policies, raising interest rates to contain inflation, which has further slowed economic expansion. Higher interest rates have reduced consumer purchasing power and confidence, leading consumers to cut back on non-essential spending, particularly in economies driven by consumer demand. Heightened global tensions, including US-China trade frictions and the conflict in Ukraine, add to economic uncertainty. Ongoing supply chain disruptions, initially triggered by the pandemic and exacerbated by geopolitical conflicts, have resulted in increased costs for businesses and consumers. Sappi, whose business segments include packaging and speciality papers for consumer goods, dissolving wood pulp (DWP) for the textile value chain, and graphic papers for commercial print, is directly impacted by these consumer-driven economic challenges.
Sappi is proactively addressing weak demand dynamics within our markets by carefully managing capacity utilisation to align with current demand levels, optimising production efficiency, and controlling costs. This approach is complemented by a strong focus on cost-saving initiatives, strengthening customer relationships, and practising disciplined capital allocation, all aimed at sustaining our financial health during this challenging period. By maintaining flexibility and prioritising financial resilience, Sappi is well-positioned to capitalise on future economic recovery, ensuring we are prepared to support growing demand as market conditions improve.
Global supply chains have endured a decade of major disruptions, from the US-China trade war and Covid-19 pandemic to the Russia-Ukraine conflict, leaving lasting effects on how goods and resources flow worldwide. Although supply chain operations stabilised somewhat in 2023, new challenges and risks have emerged for 2024. Economic pressures, such as inflation and recession, continued to pose significant threats to demand and pricing. Geopolitical tensions, with crises in the Red Sea and around Taiwan, amplified risks in key shipping routes. Extreme weather events, like hurricanes, floods, fire, drought and freezing events increasingly impacted supply continuity. Rising cyber threats and labour shortages exacerbated vulnerabilities, alongside infrastructure limitations as seen in the fallout from the Baltimore bridge collapse. Capacity constraints persist, across all transport modes (maritime, air and land transport). In 2024 we have observed more frequent interruptions across labour, geopolitical, cyber, and climate domains, reinforcing the need for strategic supply chain flexibility and resilience amid unpredictable global conditions.
Additionally, in South Africa there are deep-rooted challenges within the state-owned ports and rail company related to a shortage of freight trains, rail infrastructure and inefficient port operations. It is estimated that the negative impact of rail and port’s poor performance equates to 5% – 6% of the country’s GDP, thereby diminishing South Africa’s competitiveness in the global supply chain. Sappi Southern Africa exports the majority of the DWP produced in the region and relies heavily on the Durban port. The region has also traditionally moved a large proportion of both raw material and finished product by rail.
To mitigate the risks from supply chain disruptions, we have taken a proactive approach across all of our regions, strengthening partnerships with suppliers and logistics providers and revisiting our best practices and contractual guidelines to enhance agility and resilience. Recognising the need for flexibility, we have also prioritised innovation in product formulation, exploring recipe modifications to manage raw material shortages while adapting to new, qualified chemicals and additives that enable us to diversify our supplier network effectively. By establishing relationships with multiple vendors and prioritising domestic suppliers where feasible, we are positioning ourselves to better navigate the macroeconomic volatility, geopolitical tensions, and extreme weather patterns shaping the global landscape. This flexible strategy allows us to make swift adjustments to our supply chain as conditions change, ensuring our operational continuity and supply stability amid uncertainty.
In South Africa we have adjusted to the rail and port challenges by increasing road transport routes, working with our logistics partners to contain costs and developed an alternate shipping route from the port of Maputo in Mozambique, rather than the port of Durban. In addition, Sappi is an active participant in the National Logistics Crisis Committee (NLCC) reporting directly to President Ramaphosa, which is focused on immediate operational improvements in the national logistics system as well as longer-term reforms to improve efficiency and competitiveness.
Global sustainability expectations are evolving rapidly, driven by growing awareness of the environmental impact of fossil-based products and an urgent desire for greener alternatives. Consumers, businesses, and regulators increasingly recognise the role of traditional materials in contributing to climate change, pollution and resource depletion, leading to stronger demand for sustainable products. This shift is particularly pronounced in sectors where fossil-based products are prevalent, such as packaging and textiles. Many are now seeking biobased, renewable and recyclable options that offer reduced carbon footprints and minimal environmental harm, pushing companies to innovate and transition toward materials that support a circular economy and long-term environmental health.
Aligned with our Thrive strategy, Sappi is ideally positioned to respond to these evolving expectations as we focus on creating responsibly sourced, eco-friendly alternatives to fossil-based materials such as sustainable packaging solutions and dissolving wood pulp for wood-based textile fibres. The sustainability benefits of wood-based textile fibres, being renewable, biodegradable, and offering a lower environmental impact than synthetic alternatives, have been a key driver for Sappi’s ongoing strategic focus on dissolving wood pulp. By prioritising dissolving wood pulp, we are not only meeting the growing demand for sustainable, wood-based textile fibres but also advancing our commitment to reducing reliance on fossil fuels and promoting a circular economy in the textile industry. Similarly, the global shift away from plastic packaging driven by both consumer demand and new environmental regulations presents substantial growth opportunities for us. In line with this vision, we are investing US$418 million in our Somerset Mill to convert PM2 from producing coated woodfree graphic papers to solid bleached sulphate, (SBS) paperboard a versatile material that supports environmentally sustainable packaging. We are also broadening our portfolio of compostable and recyclable packaging options, including innovative products like bagasse-based, compostable, thermomoulded foodgrade bowls and plates and paper-based label paper solutions for all consumer goods applications. These initiatives reflect our commitment to leading the way in sustainable packaging, providing viable, plastic-free options that benefit consumers and the environment alike.
The ‘nature-positive’ movement is transforming how we interact with and value the natural world, emphasising the restoration and sustainable management of ecosystems rather than mere conservation. This global shift recognises that reversing biodiversity loss and addressing ecosystem degradation are essential not only for environmental health but also for economic resilience and human wellbeing. By integrating nature-positive principles into decision making, businesses, governments, and communities are rethinking how they assess impacts, risks and opportunities, viewing biodiversity as a core asset. This approach is reshaping industries, promoting regenerative practices, and driving policies that prioritise ecological balance, ultimately aiming for a future where human progress and nature thrive together.
Given our high dependency on sustainable woodfibre for our raw material, Sappi is actively integrating nature-positive actions into our sustainability strategy to protect and enhance the natural ecosystems upon which we rely. Through our membership in the WBCSD Forest Solutions Group, we are collaborating with industry peers to define nature-positive actions specifically for our sector and to identify meaningful metrics that can be used to set appropriate targets and track progress. In line with our commitment to transparency and stakeholder trust, Sappi is aligning with the TNFD disclosure framework to better understand and communicate our nature-related impacts, risks and opportunities. Additionally, aligned with the goals of the Global Biodiversity Framework (GBF), we have designated 30% of our forestry landholdings for conservation and have set biodiversity improvement targets within these areas to help drive positive outcomes for nature.
Transitional climate impacts – such as the shift toward a low-carbon economy – are driving significant regulatory changes in our operating regions which represent risk to our licence to operate. In Europe, ambitious emissions reduction targets under the European Green Deal are prompting stricter climate policies, including carbon pricing and renewable energy mandates. North America, particularly the United States and Canada, is advancing climate regulations focused on clean energy incentives, emissions reporting, and supply chain transparency as part of broader sustainability goals. South Africa, meanwhile, is implementing carbon taxes and developing climate adaptation policies to align with global standards and address its unique vulnerabilities to climate change. These regulatory shifts aim to curb emissions, increase resilience and accelerate a just transition to more sustainable economies across these regions.
Sappi mitigates transitional risk by actively monitoring regulatory developments and engaging with policymakers to help shape climate-related policies that recognise the critical role of forests and forest products in addressing climate change. Our advocacy emphasises the unique benefits of sustainable forestry and renewable products in supporting a low-carbon future. To reinforce our commitment, we have set science-based 2030 decarbonisation targets and established a comprehensive climate transition plan, backed by dedicated decarbonisation capital, to meet our climate action goals. This proactive approach not only secures our licence to operate but also strengthens our competitive edge as a leading provider of renewable, low-carbon solutions for a circular bio-economy. Through these actions, Sappi continues to create long-term value aligned with global climate action priorities.
The rapid advancements in artificial intelligence (AI) are fundamentally transforming the way companies operate, enabling them to analyse vast amounts of data from diverse sources to streamline processes and improve decision making. AI technologies are now seamlessly integrated into daily consumer experiences and are extensively used within organisations to automate repetitive tasks, interpret large datasets, and identify patterns and trends to enhance production, planning and auditing functions. However, the increased use of public AI tools, such as ChatGPT by Microsoft and OpenAI, and Bard by Google, introduces risks, especially around data security and confidentiality. When sensitive information is input into public AI systems, there is a risk that proprietary or confidential data could unintentionally enter the public domain, potentially compromising intellectual property or customer privacy. Additionally, the integration of AI in business operations increases the potential for cyber security vulnerabilities, as AI systems themselves can be targeted by cyber threats. This dual risk of data exposure and heightened cyber security concerns necessitates rigorous data governance and secure AI practices to protect corporate information and maintain customer trust in an increasingly AI-driven business environment.
We have adopted AI as part of our digital strategy and are using it within existing enterprise resource planning (ERP), security and infrastructure systems as well as machine learning across business functions.
Some of our staff have tested these GenAI tools and have asked to be allowed to explore how using GenAI could benefit their work. Our preference is to enable and allow the use of GenAI rather than to ban it as some other companies have done. Accordingly, we have published guidelines for the use of GenAI within Sappi to protect our confidential information. We are also working on a comprehensive enterprise GenAI strategy which will ensure that both risk and opportunities are appropriately addressed as GenAI capabilities are deployed.