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.

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.

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.

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.

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.

About this report

Our annual integrated report for the year ended September 2020 provides an overview of how we create value in terms of our purpose, vision and strategy. The report deals with key opportunities and risks in our markets as well as our performance against financial and non-financial objectives, together with our priorities and expectations for the year ahead. While the report addresses issues pertinent to a wide group of stakeholders, the primary audience is our shareholders. Our global and regional sustainability reports address the wider audience in more detail on key material issues. In addition to our annual integrated report, we have included supporting appendices here.

Integrated thinking and the 3Ps

We understand that the long-term sustainability of our business will only be ensured by delivering sustained value for our stakeholders. In understanding our value-creation process, we take an integrated approach, considering Prosperity, People and Planet (the 3Ps) – an approach that is aligned with the International Integrated Reporting Council’s (IIRC) six capitals model.

Prosperity

  • Intellectual capital Our technology centres and research and development (R&D) initiatives promote a culture of innovation to support the development of commercially and environmentally sustainable solutions for the company.
  • Financial capital We manage our financial capital, including shareholders’ equity, debt and reinvested capital to maintain a solid balance between growth, profitability and liquidity.
  • Manufactured capital Our operations require significant investments in manufactured capital. Investing in building, maintaining, operating and improving this infrastructure requires financial, human and intellectual capitals.

People

  • Human capital We require engaged and productive employees to create value. By creating a safe and healthy workplace for our people in which diversity is encouraged and valued, and providing them with ongoing development opportunities, we enhance productivity and our ability to service global markets.
  • Social and relationship capital Building relationships with our key stakeholders in a spirit of trust and mutual respect enhances both our licence to trade and our competitive advantage, thereby enabling shared value creation.

Planet

  • Natural capital Recognising that our business depends on natural capital, we focus on understanding, managing and mitigating our impacts.

Scope and boundary

The scope of this report includes all our operations (see Where we operate ). We aim to present information that is material, comparable, relevant and complete. The issues and indicators we cover reflect our significant economic, environmental and social impacts, and those we believe would substantively influence the assessments and decisions of investors.

The materiality of the information presented has been determined on the basis of extensive ongoing engagement with our stakeholders and has been assessed against the backdrop of current business operations, as well as prevailing trends in our industry and the global economy (see Materiality).

In preparing this report, we have tracked environmental findings and research, public opinion, employee views and attitudes, the interests and priorities of environmental and social groups, as well as the activities, profiles and interests of investors, employees, suppliers and customers, communities, governments and regulatory authorities.


Our reporting suite

  Report Frameworks
2020 Sappi Annual Integrated Report
  • IIRC's International <IR> Framework
  • Companies Act, No 71 of 2008, as amended (Companies Act)
  • JSE Listings Requirements
  • King IV Code on Corporate Governance (King IVTM 1)
2020 Sappi Group Annual Financial Statements
  • International Financial Reporting Standards (IFRS)
  • Companies Act
  • JSE Listings Requirements
  • King IV
2020 Sappi Group Sustainability Report
  • Global Reporting Initiative (GRI) standards
  • United Nations Global Compact (UNGC)
  • UN SDGs

For up-to-date information, please refer to our quarterly results announcements and analyst presentations (www.sappi.com/quarterly-reports).

1 Copyright and trademarks are owned by the Institute of Directors in South Africa NPC and all of its rights are reserved.

Assurance

We obtained external assurance on selected sustainability key performance indicators (KPIs) in our 2020 Sappi Group Sustainability Report. The independent practitioner’s limited assurance report is included in the 2020 Sappi Group Sustainability Report. Our sustainability information is also verified by our internal audit team. Their verification process includes reviewing the procedures applied for collecting and/or measuring, calculating and validating non-financial data, as well as reviewing reported information and supporting documentation. In addition, most of our key operations undergo external verification including the Eco-Management Audit System (EMAS) in Europe, ISO 50001 energy certification in Europe and South Africa and globally, ISO 14001 environmental certification, ISO 9001 quality certification and OHSAS 18001 health and safety certification.

We are also assessed in terms of the forest certification systems we use and, in South Africa, our broad-based black economic empowerment (BBBEE) performance is assessed by an external ratings agency. In 2020 Sappi Limited was a constituent of the FTSE/JSE Responsible Investment Index.

Collectively, these external assessments and certifications, as well as interaction with our stakeholders, give us confidence that our performance indicators are reliable, accurate and pertinent. The Social, Ethics, Transformation and Sustainability (SETS) Committee is satisfied that the sustainability information presented in this report has been provided with a reasonable degree of accuracy.

For information on the combined assurance framework relevant to the disclosure in this report, and for the independent auditors’report, see Group Annual Financial Statements on www.sappi.com/annual-reports. This year’s report does not include summarised financials. However, the full 2020 Sappi Annual Integrated Report with financials is available on www.sappi.com/annual-reports in interactive and PDF format.

Board approval

The Sappi Limited board acknowledges its responsibility for ensuring the integrity of the annual integrated report and, to the best of its knowledge and belief, the 2020 Sappi Annual Integrated Report addresses all issues material to the group’s ability to create value in the short, medium and long term, and fairly presents the integrated performance of the organisation and its impact. We believe that this report has been prepared in accordance with the International Framework. The report has been prepared in line with best practice and the board confirms that it has approved the 2020 Sappi Annual Integrated Report and authorised it for release on 17 December 2020.

Sir Nigel Rudd
Chairman
Steve Binnie
Chief Executive Officer (CEO)