Group overview

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Evolve

Evolution in the natural world is a slow process. But in the hyperconnected world in which we live and work, it’s
fast – and becoming faster all the time. As an example, twenty years ago, very few people had ever heard of the ‘Internet of Things’. Ten years ago, the term ‘Industry 4.0’ had not yet been coined. At the start of 2020, few people had paid attention to terms such as coronavirus, social distancing, lockdowns or infection waves. Yet today, these terms are part of our everyday vocabulary, showing just how fast the world around us is changing.

In response to our rapidly changing landscape, five years ago, we embarked on a strategy of intentional evolution, which involved diversifying our product portfolio in higher margin segments. By 2020, despite market challenges, we had essentially met and in many ways, exceeded this ambition.

Evolution is based on a series of events, processes and responses. Around the world, people are responding to natural resources constraints by seeking responsible alternatives to non-renewables and solutions that are truly sustainable from seed to final product.

We are responding to these needs by building on our success in intentional evolution to accelerate an enhanced journey of evolution aligned with our Thrive25 strategy. We are doing so from a foundation based on a coalition of diverse perspectives and expertise; as well as a history of seeking out and investing in breakthroughs that enable lasting outcomes for our partners and a lighter footprint on the world. We are building on these to ensure that every solution we create supports our goal of making everyday products more sustainable and that we accelerate meaningful change.

Creating value by responding strategically

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Reimagine

Stars form when celestial clouds collapse, feeding a rotating disc of gas and dust into a dense, hot central core. Amongst other things, pulsating stars give off carbon, a key ingredient for life as we know it. From chaos, something beautiful – and essential – is created.

We can view this as a metaphor for the coronavirus pandemic that infected and affected people regardless of nationality, class or wealth, leaving intense disruption in its wake. However, it also ushered in a global drive to reimagine our way of being on the planet. A new agenda for change is emerging, gaining traction and raising questions that will not go away.

Questions like: How do we reimagine a collective future where changed behaviours will allow us to live more in balance with nature than before? How do we

maintain and even intensify the sense of connection, caring and community that was one of the unexpected, but welcome, impacts of the pandemic? How do we deal with the uncertainty on the horizon when future surges of Covid-19 occur?

At Sappi we are taking bold, decisive action to respond to these challenges by extracting the full potential of trees and woodfibre to develop practical innovations for everyday impact and innovate what we should, not just what we can. We’re also establishing and maintaining proactive dialogue with all our stakeholders as well as working with and supporting local communities.

In doing so, we can not only create a more sustainable future, but also unlock significant long-term value for all our stakeholders.

Our performance review

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Resilience

Rocks are the ultimate symbol of resilience. They are fused together over time from solid crystals of different minerals. These natural processes bind them all together, imparting strength and resilience. But even rocks are shaped and reshaped over time by natural forces like water, wind and sun.

They’re a reminder that none of us are impervious to the global forces shaping our world. Forces like climate change, urbanisation, social inequality and of course, the new reality brought about by the coronavirus pandemic and Covid-19.

We’ve proven our resilience to succeed in the ‘new normal’ and we will continue to do so as we work to accelerate our decarbonisation journey, meet the changing needs of rapidly urbanising populations while managing our environmental footprint and promoting a diverse, inclusive workforce.

At Sappi we operate across different geographies, meeting the needs of customers from New Zealand to New Mexico, but our common purpose makes us stronger and more resilient: Sappi exists to build a thriving world by unlocking the power of renewable resources to benefit people, communities, and the planet. This is our inspiration and our call to create a brighter future for the world and for our business.

Governance and compensation

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Emerge

Collectively, the world is drawing a deep breath as we slowly emerge from the coronavirus pandemic and impact of Covid-19.

During the crisis, the safety of our people was our top priority. After which, like many enterprises across the world, our underlying goal was economic survival. To achieve this, we focused on the preservation of liquidity, lowering costs by deferring non-critical capex projects and postponing some annual maintenance shuts. We also took commercial downtime across all segments as required, in order to match supply to demand and prevent the build-up of inventory.

The verb ‘emerge’ is derived from the classical Latin ēmergere, meaning ‘to rise out or up’. We are proud

to say that we are rising from the impact of Covid-19 with strong growth in sales and profitability for the packaging and speciality papers segment, quickly recovering dissolving pulp market and steady month-on-month improvement for graphic papers.

As OneSappi we are steely in our determination to emerge from survival mode back onto a growth curve. A curve based on our strategy of diversifying our product portfolio into higher margin and growing segments – a strategy fully justified during the events of the past year.

Doing so is challenging, but we believe we can realise our vision of a thriving world by collaborating with all our stakeholders to create solutions for our collective needs and emerge stronger than ever before.

Appendices

2020 Sappi Annual
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Momentum

Linear momentum is defined as the product of a system’s mass multiplied by its velocity. The greater an object’s mass or the greater its velocity, the greater its momentum. In other words, momentum is about both magnitude and direction.

It can be difficult to maintain momentum in times of profound change or crisis, but it’s important to do so. That’s because action creates movement which in turn can create unanticipated opportunities.

Recognising this, at Sappi we responded to the coronavirus pandemic and Covid-19 in order to keep our forward momentum. We swiftly implemented a comprehensive Covid-19 action plan that ensured the health and safety of our employees and enabled us to operate in a safe, uninterrupted manner where demand permitted. Working closely with our

customers and suppliers we systematically increased activity and output in response to improved market demand. Our support for local communities helped mitigate the impact of the pandemic and the ensuing socio-economic consequences on them.

Looking ahead, we are confident that we can accelerate our momentum to navigate forward: We have the mass in the form of wide-ranging expertise, extensive infrastructure, strong foundation of research and development, together with our range of sustainable solutions produced from renewable woodfibre. And we have the velocity in the form of our ambitious but achievable Thrive25 strategy, which allows us to take advantage of the changing dynamics between the environment, consumers and the products they require. Above all, our passionate, committed people provide the impetus to power us forward.


Moving towards our Thrive25 strategy

While we’re proud of all we’ve achieved and learnt over the past 80 years, we know that a proud history doesn’t necessarily mean a bright future. To thrive as a business, we need to embrace the future and respond to the megatrends that continue to shape our world with a view to be more resilient and adaptive. That’s why we’re proud to launch our new strategy – Thrive25 – designed to deliver value for our stakeholders in a constantly evolving world.


At the heart of all we do – as individuals, as an organisation and a society – is the essential need to not only survive, but to thrive. This principle gave rise to Thrive25. However, just like us, our business is a living organism – growing, adapting and evolving in a continually shifting context.

Global forces

To continue thriving as a global business, we must understand the forces that heavily impact our lives and work. These are listed below, along with how Sappi responds.


Our strategy is uniquely Sappi, but influenced by global forces.

Global forces Our response
The move towards a circular economy Pursuing circular ecosystems and
economies – including utilising 100% of
each tree we harvest
Climate change continuing to impact businesses and
reshape societies		 Creating responsibly sourced and
sustainable solutions as viable alternatives
to fossil-based products
Coronavirus pandemic and the impact of Covid-19 Ensuring employees' safety, supporting our
customers and communities and adjusting
our business priorities
Resource scarcity and growing concern for natural capital Promoting the responsible management of
natural resources and leading by example
Rising social inequality Helping local communities prosper, and
promoting a diverse and inclusive
workforce
Continued erosion of trust in business, coupled with increasing social activism Partnering with all stakeholders, including
non-governmental organisations (NGOs)
and our communities, to ensure we are
creating solutions for our collective needs
Changing consumer and employee profiles Evaluating our product mix to align with
evolving needs and demand
Globalisation and high levels of connectivity Collaborating with our partners and
providing an integrated OneSappi
approach
The rapid pace of technological innovation, including artificial intelligence (AI) Capitalising on emerging technologies with
corresponding internal systems
Growing populations with increasing rates of urbanisation Addressing the changing needs of
these populations while managing our
environmental footprint



The strategy we've unfolded marks a pivotal moment in Sappi's history. Harnessing this momentum will ensure that our business – and our world – thrives for years to come.

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Our purpose
Our vision
Our values
Our business strategy
Our sustainability strategy

Sappi exists to build a thriving world by unlocking the power of renewable resources to benefit people, communities, and the planet

Context

A purpose is so much more than words on a page – it’s why we exist. It is our definition, our inspiration, our call to create a brighter future for the world and our business

Our purpose Why we exist

We will be a sustainable business with an exciting future in woodfibre that provides relevant solutions, delivers enhanced value, and is a trusted partner to all our stakeholders

Context

Our vision keeps us clearly focused – bolstering our commitment to reaching our organisational goals over the next five years

Our vision What we’re
striving to achieve

As OneSappi, we do business safely, with integrity and courage, making smart decisions that we execute with speed

Context

At Sappi, our values are the backbone of our everyday attitude, conduct, and operations

Our values How we do
business

Through collaboration and innovation, we will grow profitably, using our strength as a sustainable and diversified global woodfibre group, focused on dissolving pulp, graphic, packaging and speciality papers, and biomaterials

Context

Thrive25, our new business strategy, builds upon the hard work we began with our 2020Vision - leveraging the power of OneSappi to drive real and sustained value creation

Our strategy demands a clear focus on four key fundamentals:

Grow our business
Committing to core business segments while investing in innovation, growth opportunities, and ongoing customer relationships

Sustain our financial health
Reducing and managing our debt, growing EBITDA, maximising product value, optimising processes globally, and strategically disposing of our non-core assets

Drive operational excellence
Strengthening our safety-first culture and reducing resource use while enhancing efficiency and making smart data investments

Enhance trust
Improving our understanding of – and proactively partnering with – clients and communities, driving sustainability solutions, and meeting the changing needs of every employee at Sappi

How it will be applied to each business segment

Dissolving pulp
Focusing on the completion of projects – all while reducing costs and driving sustainability. This happens by optimising product mix, managing South African forestry risks,and carefully tracking timber usage

Graphic papers
Strengthening our competitive position in these contracting markets, realising their strategic importance to the group, and maximising their significant cash flow generation

Packaging and speciality papers
Capitalising on existing strengths and commercialising new products. We will continue to advance paperboard in North America and Europe, cautiously expand paperboard in South Africa, and create new solutions to address global forces

Biomaterials
Responding to a world looking for more sustainable chemical and material solutions. We will extract value from our biorefinery stream

Our
business
strategy How we’ll get there

Our commitment to sustainability is based on being a trusted, transparent, and innovative partner in building a biobased circular economy

Context

We will create long-term value for all stakeholders from relevant sustainable woodfibre products and through ongoing improvement in key areas.

Our
sustainability
strategy How sustainability
will drive value