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Group overview

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.

Delivering sustained value

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.

Responding to our context

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.

Governance and compensation

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.

Appendices

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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Corporate governance

Sappi is committed to the highest standards of corporate governance, which form the foundation for the long-term sustainability of our company and the creation of value for our stakeholders.

100%

overall committee attendance rate

Good governance at Sappi contributes to living our values through enhanced accountability, a transparent and ethical culture, strong risk management, a focus on effective control of the business, legitimacy and good performance. Governance is one of our key enablers to unlocking and protecting value, as we optimise the use of our capitals, address our key risks whilst taking advantage of exciting opportunities (refer to Risk management), whilst minimising the negative impacts of trade-offs that have to be made, as set out in the presentation of Our key material issues.

Sappi is listed on the JSE Limited and complies in all material respects with the JSE Listings Requirements. Sappi subscribes to full compliance with the Companies Act, and the relevant laws governing its establishment, specifically related to its incorporation. Sappi operates in conformity with its memorandum of incorporation (MOI). Furthermore, Sappi endorses the recommendations contained in the King Code of GovernanceTM* for South Africa 2016 (King IV) and applies the various principles in the achievement of the following good governance outcomes.

An application register of how Sappi applies the King IV principles is provided on the group's website (www.sappi.com)

The board of directors

The basis for good governance at Sappi is laid out in the board charter, which sets out the division of responsibilities between the board and executive management. The board creates and protects sustainable value by collectively determining strategies, approving major policies and plans, taking responsibility for risk management, and providing oversight as well as monitoring, to help to ensure accountability. The basis for good governance at Sappi is laid out in the board charter, which sets out the division of responsibilities between the board and executive management. The board creates and protects sustainable value by collectively determining strategies, approving major policies and plans, taking responsibility for risk management, and providing oversight as well as monitoring, to help to ensure accountability. The board is comfortable that the board charter ensures a clear division of responsibilities between management and the board and that no director has unfettered authority. The board is satisfied that it has fulfilled its responsibilities in accordance with its charter for the reporting period.

For further information about the board and the board charter please refer to www.sappi.com

The Sappi board and diversity

Sappi operates globally and across a variety of markets, jurisdictions and cultures, requiring a diverse mix of experience, skills, gender, age, culture and backgrounds. It is important that our board composition reflects this diversity, both in a South African context as well as globally. Diversity gives Sappi access to an increased range of talent, which helps to provide insight into the needs and motivations of a broader stakeholder base.

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

Board experience (%)

Sappi's board members have experience across multiple industries and leadership roles

The composition of the board and attendance at board meetings and board committee meetings is set out in the table below for the period 01 October 2022 to year ended September 2023:

    Board   Board committees   AGM  
                           
Name         Audit and Risk   Nomination and Governance   Human
Resources
and
Compensation		   SETS* % attendance during tenure      
Independent Non-executive Directors                              
BR Beamish                
100
   
MA Fallon              
100
   
JM Lopez                  
100
   
NP Mageza              
100
   
ZN Malinga                  
100
   
B Mehlomakulu                
100
   
MV Moosa            
100
   
RJAM Renders                
100
   
Sir Nigel Rudd  
95
   
LL von Zeuner                  
100
   
NL Sowazi              
90
   
E Istavridis              
100
   
Executive Directos                              
SR Binnie (CEO)      
100
   
GT Pearce (CFO)                
100
   
Lead director
Committee member (present)
Chairman
Ex officio
Absent
By invitation

Appointed 01/10/2022

* Due to unforeseen circumstances, one of the SETS meetings was rescheduled just after the financial year-end. Included here for completeness of reporting for the 2023 financial year.

Directors' independence (%)

Directors' ages (%)
(average 62 years old)

Directors' tenure (%)
as at year-end) (average 8 years)

Diversity (%)

Strategic and other focus areas

In addition to the standard items on the board's agenda, the 2023 focus areas included:

All the top risks as well as emerging risks have been focused on by the board during 2023.

The following areas will receive specific focus by the board in 2024:

Induction and training of directors

Stakeholder communication

The board is responsible for presenting a balanced and understandable assessment of the group's position in reporting to stakeholders. The group's reporting addresses material matters of significant interest and is based on principles of openness and substance over form. The reporting includes information on key trade-offs that have to be made. Various policies have been developed to guide engagement with Sappi's stakeholders such as the group stakeholder engagement policy and group corporate citizenship policy on www.sappi.com/policies. Sappi has a policy addressing alternate dispute resolution (ADR) and relevant ADR clauses are generally included in contracts with customers and suppliers. There have been no requests for information for the period under review in terms of the Promotion of Access to Information Act (South African legislation).

Refer to Our key relationships for more information.

Sappi board and management committees

Board and management committees have been established and are discussed below.

Audit and Risk Committee

Board committees

The board has established committees to assist it to discharge its duties. The committees operate within written terms of reference set by the board.

Peter Mageza (Chairman)

Membership details at September 2023:
  • NP Mageza
  • RJAM Renders
  • ZN Malinga
  • B Mehlomakulu
  • LL von Zeuner
  • NL Sowazi
  • E Istavridis

97%

overall committee attendance rate

Stakeholders

The ARC has helped to create and protect value for the following stakeholders: employees, customers, shareholders and regulators.

Refer to Our key relationships for further details.

Risks

The ARC has focused on all of the top 10 risks:

  • 1 Safety
  • 2 Cyclical macroeconomic factors
  • 3 Cyber security
  • 4 Sustainability expectations
  • 5 Climate change
  • 6 Evolving technologies and consumer preferences
  • 7 Supply chain disruption
  • 8Uncertain and evolving regulatory landscape
  • 9Employee relations
  • 10Liquidity

For further details refer to Risk management.

Key roles and responsibilities

The Audit and Risk Committee (ARC) consists of seven Independent NEDs. The committee assists the board in discharging its duties with oversight of:

  • The risk management function, including a special focus on business continuity, insurance incidents
  • Sustainability and climate change risks including the quality and transparency of sustainability information presented in the Annual Integrated Report and the external environmental, social and governance (ESG) assurance provided by KPMG
  • IT risks, related controls and governance. The committee continued its special focus on the increasing threats of cyber attacks and security in the operational technology area
  • Non-financial risks and controls
  • Safeguarding and efficient use of assets
  • Operation of adequate systems and control processes
  • The integrity of financial information and the preparing of accurate financial reports in compliance with applicable regulations and accounting standards. This included consideration of managements actions and responses with regard to the JSE Active Monitoring report, relating to the valuation of plantations
  • The certification process implemented by management to support the CEO and CFO confirmation of the fairness of the Annual Financial Statements and the system of internal control over financial reporting, required by section 3.84(k) of the JSE Limited Listings Requirements (refer to the Directors approval of the 2023 Group Annual Financial Statements). This included consideration of the evaluation report, including identified control deficiencies and managements remedial actions, as well as compensating measures and assurance from other sources in the combined assurance framework
  • Combined assurance
  • Compliance with the groups Code of Ethics and external regulatory requirements
  • The external auditors qualifications, experience, independence and performance, including the review of the IRBA report
  • The performance of the internal audit function, this included review of the results of the annual Internal Quality Assurance Review
  • The performance of the finance function
  • Group treasury policies, developments, refinancing arrangements and liquidity
  • Captive insurance matters
  • Retirement fund risks, developments and independent assurance
  • Pending litigation and legal compliance programme feedback
  • Land claims review, initiatives and outlook
  • Taxation policies, congruent with responsible corporate citizenship
  • Asset impairments, and treatment of assets held-for-sale
  • An internal review of the committees operating effectiveness and performance every two years by way of an assessment with feedback being provided to the board.
Strategic and other focus areas

The ARC helped to create and protect value by providing oversight and guidance for a wide range of topics, including the following areas related to Sappi's strategy:

  • Governance and risk aspects of projects to accelerate the group's ability to take advantage of opportunities in higher-margin growth segments, such as with projects' Balance and Elevate at Somerset Mill
  • Oversight of risks and controls relating to the SEU asset sale and restructuring activities, including the planned closure of Stockstadt Mill
  • Cyber security incidents and disaster recovery plans
  • Business and IT continuity arrangements, including disruptions to, production facilities, warehousing, logistics and supply chain
  • Review of issues relating to the hotline service provider and actions taken to improve the quality of information gathered, and whistle-blower arrangements.

Areas of oversight for the committee in 2024 will be:

  • Additional focus on IT continuity plans
  • Revised reporting for ESG matters and procedures for financial reporting attestations
  • Emerging IT risks
  • Capital, IT, and business projects governance.

For more information refer to the Audit and Risk Committee Report in our 2023 Group Annual Financial Statements.

The ARC confirms that it has received and considered sufficient and relevant information to fulfil its duties, as set out in the Audit and Risk Committee Report.

The external and internal auditors attended ARC meetings and had unrestricted access to the committee and Chairman. The external and internal auditors met privately with the ARC during 2023.

Mr Peter Mageza is the Chairman and designated financial expert of the ARC. Mr Mageza is due to retire from the board and the ARC in February 2024, and will be replaced, subject to approval by shareholders, at the AGM, as Chairperson and designated financial expert, by Ms ZN Malinga.

Mr Nkululeko Sowazi is due to resign from the ARC in February 2024 as he will take up the position as Chairman of Sappi Limited.

These changes to the membership of the ARC will reduce the membership to five members, which is aligned with the terms of reference of the committee.

The committee is satisfied that it has fulfilled its responsibilities as set out in its terms of reference.

Nomination and Governance Committee

Sir Nigel Rudd (Chairman)

Membership details at September 2023:
  • ANR Rudd
  • MV Moosa
  • MA Fallon

100%

overall committee attendance rate

Stakeholders

The Nomination and Governance Committee has helped to protect value primarily for the following stakeholders: shareholders and regulators.

Refer to Our key relationships for further details.

Risks

The Nomination and Governance Committee focused on governance, independence, and composition of the board, board committees and executive management positions to effectively address all material risks facing the company including all the top 10 risks.

For further details refer to Risk management.

Key roles and responsibilities

The Nomination and Governance Committee consists of three independent directors. The committee considers the leadership and governance requirements of the company including a succession plan for the board. The committee identifies and nominates suitable candidates for appointment to the board in line with Sappi's policy on the promotion of gender and race diversity at board level, for board and shareholders' approval. The committee considers the independence of candidates as well as directors. The committee makes recommendations on corporate governance practices and disclosures, and reviews compliance with corporate governance requirements. The committee has oversight of appraising the performance of the board and all the board committees. The results of this process and recommended improvements are communicated to the chairman of each committee and the board. The committee had oversight of the actions to implement the policy on broader diversity at board level. The functioning and performance of Sappi's board and board committees were assessed internally in 2023 and established that the board and board committees functioned well. Review of the type of training provided to directors, including the online training made available during 2023.

Strategic and other focus areas

The Nomination and Governance Committee helped to protect value by providing oversight and guidance in 2023 over:

  • Corporate governance
  • Tone at the top
  • Succession plans for senior executives and the board with a focus on board composition, chairmanships, rotation and replacement of directors, as well as the appointment of replacements for direct reports of the CEO
  • The promotion of broader diversity at board level policy, which includes diversity indicators. This included the validation of gender and race targets for NEDs and in particular as relates to directors from the Southern African geographic region
  • Assessment of the board and board committee performance
  • Reviewed the Sappi Limited directors' shareholdings and dealings in securities
  • Recommended the appointment of directors to the Sappi Limited Board, for approval. The appointments of the new directors were confirmed by shareholders at the AGM held on 08 February 2023.

A focus area for 2024 will be onboarding directors appointed to new board and sub-committee roles and a handover process from the outgoing Chairman Sir Nigel Rudd to the new Chairman, Mr Nkululeko Sowazi.

The committee is satisfied that it has fulfilled its responsibilities as set out in its terms of reference.

Human Resources and Compensation Committee

Mike Fallon (Chairman)

Membership details at September 2023:
  • MA Fallon
  • NP Mageza
  • RJAM Renders
  • BR Beamish
  • Sir Nigel Rudd

95%

overall committee attendance rate

Stakeholders

The Human Resources and Compensation Committee has helped to protect value primarily for the following stakeholders: employees, shareholders and regulators.

Refer to Our key relationships and to the Remuneration Report for further details.

Residual risk ranking

The Human Resources and Compensation Committee has focused on the following of the top 10 risks:

  • 1 Safety
  • 2 Cyclical macroeconomic factors
  • 3 Cyber security
  • 4 Sustainability expectations
  • 5 Climate change
  • 6 Evolving technologies and consumer preferences
  • 8Uncertain and evolving regulatory landscape
  • 9Employee relations

For further details refer to Risk management.

Key roles and responsibilities

The Human Resources and Compensation Committee consists of five independent directors.

The Human Resources and Compensation Committee ensures that the policy governing compensation practices and structures within the group support the group's strategy and performance goals. The policy also enables the attraction, retention and motivation of executives and all employees.

The committee ensures that the compensation philosophy and practices of the group, including the CEO's performance objectives, are aligned to the group's Thrive strategy and performance goals. It reviews and agrees the various compensation programmes and in particular the compensation of Executive Directors and senior executives as well as employee benefits. It also reviews and agrees to executive proposals on the compensation of NEDs for approval by the board and ultimately by shareholders. The committee is updated on the Industrial Relations Climate Training initiatives and engagement survey results and action items.

Strategic and other focus areas

The 2022 report was supported at the annual general meeting (AGM) on the 8th of February 2023 with a vote of 94.86% on the Remuneration Policy and 84.80% on the implementation report. This has been a significant endorsement by the shareholders in relation to our ongoing commitment to good governance and disclosure.

Apart from its normal annual workplan, the key focus for the committee was on the following:

  • Feedback from AGM on the Remuneration Report
  • Monitoring of a voluntary minimum shareholding requirement for all prescribed officers to be achieved by December 2025
  • Disclosure of the vested performance share plan (PSP) award as part of the total remuneration in line with best practice
  • Review and approve amendments to the management incentive scheme (MIS) for 2023
  • Review and approve revised safety measures
  • Review and approve all benefits of employment for inclusion in the employees report to the group CEO
  • The HR investor road show with key shareholders
  • Oversight on key succession transitions across all regions
  • Annual review of Sappi group remuneration policies and practices
  • Review of the financial position of retirement benefit funds across the group
  • Review of the Employee Engagement Survey results and action plans
  • Annual review of variable pay plans
  • Annual review of compensation across the peer group
  • Approval of the rules and shares allocation pools for personal share plan awards for 2023
  • Review of wage negotiations
  • Review of training and development, and a skills update with a focus on engineers in training
  • Recommendation for compensation for NEDs.

The strategic focus areas for the committee in 2024:

  • Approve the inclusion of sustainability as part of the PSP
  • Review and approve the performance measures of the MIS
  • Review and approve the performance measures of the PSPs
  • Reviewing the current share scheme to modify for the inclusion of a restricted scheme
  • Gender representativity across all Sappi operations
  • SSA skills requirements
  • Oversee the implementation of the HR Thrive plan
  • Approval of the remuneration and bonuses for Executive Directors and senior management
  • Review of industrial relations
  • Review of the proposed changes to the Companies Act in South Africa
  • Mr Peter Mageza and Sir Nigel Rudd will retire from the committee and an onboarding process will be arranged for their successors.

The committee is satisfied that it has fulfilled its responsibilities as set out in its terms of reference.

For more information refer to the Remuneration Report.

Social, Ethics, Transformation and Sustainability Committee

Valli Moosa (Chairman)

Membership details at September 2023:
  • MV Moosa
  • SR Binnie
  • B Mehlomakulu
  • BR Beamish
  • JM Lopez

100%

overall committee attendance rate

Stakeholders

The SETS Committee has a broad spread of stakeholders for which it helps to protect (or create) value: suppliers, customers, employees, regulators, shareholders and society.

Refer to Our key relationships for further details.

Residual risk ranking

The Human Resources and Compensation Committee has focused on the following of the top 10 risks:

  • 1 Safety
  • 2 Cyclical macroeconomic factors
  • 4 Sustainability expectations
  • 5 Climate change
  • 6 Evolving technologies and consumer preferences
  • 7 Supply chain disruption
  • 8Uncertain and evolving regulatory landscape
  • 9Employee relations

For further details refer to Risk management.

Key roles and responsibilities

The Social, Ethics, Transformation and Sustainability (SETS) Committee comprises four independent NEDs and the CEO. A 100% attendance record was achieved by board committee members for 2023. Other executive and group management committee members attend SETS Committee meetings by invitation. It should be noted that a number of other NEDs attend SETS Committee meetings ex officio. The Chairmen of the ARC and SETS Committee attend each other's committee meetings to avoid unnecessary repetition of discussions.

The committee's mandate is to oversee the group's sustainability strategies, activities addressing climate change, ethics management, good corporate citizenship, labour and employment practices, health and safety, as well as its contribution to social and economic development and, with regards to the group's South African subsidiaries, the strategic business priority of transformation. The committee monitors progress towards and ensures that appropriate programmes are implemented to achieve the company's sustainability targets. The committee regularly reviews targets to ensure that they are both relevant to our operating context and reflective of an appropriate level of ambition.

As ESG reporting and disclosures become increasingly important to stakeholders and aligning with our strategic imperative to enhance trust, the committee is mandated to oversee the company's public disclosures ensuring that reporting is aligned with appropriate global standards and compliant with regulatory requirements.

The SETS Committee is supported by the Global Sustainability Council as well as by Regional Sustainability Committees in dealing with day-to-day sustainability issues and helping to develop and entrench related initiatives in the business.

Strategic and other focus areas

In 2023 the committee provided oversight of:

  • Sappi's social and economic development standing (United Nations Global Compact (UNGC) and OECD)
  • Safety initiatives, serious safety incidents and progress towards the 2025 sustainability targets
  • Progress on climate action aligned with the Task Force on Climate-related Financial Disclosures (TCFD) including the transition plan and progress towards 2030 science-based decarbonisation targets
  • External assurance on group lost-time injury frequency rate (LTIFR), Scope 1 and Scope 2 emissions, certified fibre, waste to landfill and water extraction
  • Sappi Southern Africa's performance against the applicable broad-based black economic empowerment (BBBEE) legislation, the EE Act and the Forestry Charter, including unfair discrimination and equality policy
  • Sappi's Code of Ethics, ethics training programme and its effectiveness
  • Group training and development programmes
  • Employee engagement survey results and action plans to address improvement opportunities
  • Production unit operating efficiencies, reliability and unscheduled downtime metrics Sappi's sustainability disclosures
  • Other ESG focus areas.

The committee is satisfied that it has fulfilled its responsibilities as set out in its terms of reference.

The committee will provide oversight of the following strategic business areas in 2024:

  • Development of an approach to nature-related disclosures aligned with the Taskforce on Nature related Financial Disclosure (TNFD)
  • Progress towards science-based targets and the climate change strategy
  • Alignment of group sustainability disclosures to comply with EU Corporate Sustainability Reporting Directive (CSRD) for FY2025 reporting period
  • Progress towards Thrive sustainability targets and realignment of targets as appropriate to account for the closure of one European mill in FY2024
  • Production efficiencies and events
  • Employee engagement action plans.

For more information refer to the SETS Committee Report and to Our global sustainability goals.

Management committees

The board assigns responsibility for the day-to-day management of the group to the CEO. To assist the CEO in discharging his duties, a number of management committees have been formed. Some of these committees also provide support for specific board committees. The management committees are a key component of Sappi's second line of defence and assurance. Refer to below for additional details of Sappi's approach to risk, controls and assurance.

Executive Committee

This committee comprises Executive Directors and senior management from Sappi Limited as well as the CEOs of the three main regional business operations and the dissolving pulp (DP) business. The CEO has assigned responsibility to the Executive Committee for a number of functional areas relating to the management of the group, including the development of policies and alignment of initiatives regarding strategic, operational, financial, governance, sustainability, social and risk processes. The Executive Committee meets at least five times per annum. All key topics discussed at board level are subject to review and discussions by the Executive Committee.

Group Risk Management Committee

The committee is known as the Group Risk Management Team (GRMT) and is mandated by the board to establish, coordinate and drive the risk management process throughout Sappi. It has established a risk management system to identify and manage significant risks. The GRMT reports regularly on risks to the ARC and the board. Risk management software is used to support and report upon the risk management process. During 2023 key initiatives included operationalisation of the group's risk appetite and tolerance framework, dashboard summarising group risks and trends. Group business continuity plan guidelines were drafted, reviewed and approved. In 2024 the GRMT will review policy, procedures and assurance, and provide oversight of business units updating of their business continuity plans to address business continuity risk.

Group Sustainable Development Council

The Sappi Group Sustainable Development Council leads on all sustainability related policies and practices and provides support to the SETS Committee. Members meet quarterly to report progress against sustainability goals and key initiatives, share best practices, and exchange information on emerging issues. Members review regional information for various disclosure mechanisms, including the CDP's Climate Change, Forests and Water Programmes and the annual Group Sustainability Report.

Key focus areas for 2023 included:

  • Oversite and review of the Thrive sustainability targets
  • Sappi's climate change strategy and action plans including:
    – Alignment of Sappi's decarbonisation roadmap with the Science Based Targets initiative (SBTi)
    – Assessment, and improvement, of our resiliency to risks and opportunities posed by climate change, as framed by the TFCD
    – Integration of decarbonisation and sustainability metrics in capital investment procedures
  • Sustainable procurement, roll out of EcoVadis to our top suppliers
  • Social impact strategy for South Africa
  • Identifying collaboration opportunities to further Sappi's sustainability objectives and leverage Sappi expertise to contribute to the SDGs.
Brand Council

This council coordinates Sappi's brand communication programme, monitors brand performance and ensures effective brand management to enhance Sappi's reputation.

Project Steering Committees

For key strategic projects, steering committees are established to oversee successful execution of the project.

Technical Committees

The Technical Committees' focus is on global technical alignment, performance and efficiency measurement as well as new product development.

Disclosure Committee

The Disclosure Committee comprises members of the Executive Committee and senior management from various disciplines. Its objective is to review and discuss financial and other information prepared for public release. It is the ultimate decision-making body, apart from the board, with regards to disclosure.

IT Steering Committee

The IT Steering Committee, assisted operationally by the Group IT Council (GITCO), promotes IT governance throughout the group and is the highest authority responsible for this aspect of Sappi's business, apart from the board. The committee has a charter approved by the ARC and the board. An IT governance framework has been developed and IT feedback reports are presented to the ARC and the board. Sappi IT has implemented a standardised approach to IT risk management through a group-wide risk framework supported by the use of risk management software. The committee has helped to create value for shareholders in 2023 by its oversight of:

  • The implementation of major strategic projects to drive operational excellence in manufacturing, sales, supply chain, finance and logistics among other functions
  • The digital strategy and governance model to drive innovation at scale across all divisions
  • The expansion of the group security function and talent pipeline and tangible progress toward the security strategy
  • The framework to evaluate third-party IT security risks
  • Due diligence for a cohesive cloud infrastructure and security strategy
  • The deployment of global operational technology (OT) security solutions across the manufacturing landscape
  • Strategic planning around core enterprise solutions.

A significant part of the IT Steering Committee's responsibility is to monitor and direct Sappi's Information and Cyber Security activities. The ARC oversees these activities. Security matters are shared and discussed with the board at least quarterly. Sappi does have cyber risk insurance. Sappi's internal IT audit team undertakes reviews of information and cyber security.

Oversight by the committee will continue in 2024 for these IT initiatives, as well as:

  • Support for new business priorities to address evolving market conditions in alignment with Thrive priorities
  • Additional security improvements including enhanced recovery capabilities, global OT security standards, central vulnerability management, and further smart partnerships to extend security best practices and capacity
  • Infrastructure simplification through further global harmonisation opportunities and cloud consolidation.
Treasury Committee

The Treasury Committee meets monthly to assess financial risks on treasury related matters. Specific focus areas in 2023 related to:

  • Renewal of the €330 million securitisation programme at Sappi Papier Holding (SPH)
  • Using €195 million of surplus cash to tender for and repay €210 million of the SPH 2026 bond, at a discount
  • Repaying the R1.1 billion SSA07 bond in South Africa from cash resources.

Key focus areas in 2024 will be:

  • The effective management of cash and interest costs due to rising interest rates
  • Consider appropriate action for upcoming debt maturities.
Sappi Accounting Standards Committee

The Sappi Accounting Standards Committee (SASC) meets regularly to discuss and decide on the accounting treatment and the application of accounting standards at Sappi. SASC comprises finance, treasury and accounting officers throughout the group. Internal and external audit attend meetings by invitation. A main topic of discussion in FY2023 was the discount rate calculation methodology used in the plantation valuation.

Taxation Committee

The Taxation Committee meets monthly to discuss and address global taxation matters. The main focus areas of the committee for 2023 included:

  • Tax accounting and reporting
  • Tax compliance, including transfer pricing and BEPS reporting
  • Tax audits and international mitigation measures to avoid double taxation
  • Tax implications of strategic projects
  • New tax legislation.

These topics will continue to receive oversight from the committee in 2024.

Control and Assurance Committee

The Control and Assurance Committee (CAC) comprises group and regional heads of department representing all the main operating and support functions at Sappi. The CAC is supported by the internal control function and internal audit. A multi-disciplinary Combined Assurance Workgroup (CAW) provides oversight and guidance to the business on internal controls and combined assurance for financial, strategic and operational risks. The CAW provides input to the CAC, which in turn, is accountable to the GRMT and the ARC.

Ensuring leadership through ethics and integrity

Sappi is committed to doing business the right way. Trust is created by operating from a commonly accepted set of values, enhancing and protecting our reputation. We require our directors and employees to act with integrity, to be courageous, to make smart decisions and to execute with speed, in all transactions and in their dealings with all business partners and stakeholders.

Code of Ethics

Our values underpin the group's Code of Ethics and commit the group and its employees to sound business practices and compliance with applicable legislation, which help to promote legitimacy.

All new employees receive training on the Code of Ethics and related topics, such anti-bribery and corruption and anti-competitive practices, as part of onboarding. The code was refreshed during 2022 and released in 2023. All employees receive refresher training on these courses every three years.

A group Supplier Code of Conduct (Code) has been developed and communicated to help ensure that Sappi's values and ethical standards are clearly understood and supported by all our suppliers, their first-tier suppliers and other stakeholders.

Actions are taken against employees and suppliers who do not abide by the spirit and provisions of our code. This includes termination of contractual arrangements, and criminal actions.

Refer to www.sappi.com for the Code of Ethics.

Legal compliance programme

The programme is designed to increase awareness of, and enhance compliance with, applicable legislation in place. The group compliance officer reports twice per annum to the ARC.

Sappi's legal compliance programme has been boosted by:

  • The implementation of legal compliance software including Exclaim for SSA, GEORG Compliance Management for the German mills, Syneris is being used as a compliance management application in Austria, and Policy Passport for Group policies and procedures
  • The provision of online training to employees across the group on relevant core legal compliance topics. This included health and safety, and conflict of interest training 2023
  • Ad hoc training on specific topics, for example intellectual property, GDPR and POPIA was provided to relevant employees.

Key focus areas in 2024 will be:

  • Anti-bribery and corruption certification
  • Group-wide consolidation of legal compliance reporting
  • Code of Ethics refresher training and online social media training
  • Training on combatting modern slavery.

The use of software tools and the related training and online learning is helping to create and protect value primarily for employees, customers, shareholders and regulators.

Conflict of interests

The group has a policy that obliges all employees to disclose any interest in contracts or business dealings with Sappi to assess any possible conflict of interest. The policy also dictates that directors and senior officers of the group must disclose any interest in contracts as well as other appointments to assess any conflict of interest that may affect their fiduciary duties. Sappi undertook a conflict of interest policy relaunch with refresher training in FY2023.

During the year under review, apart from that disclosed in the financial statements, none of the directors had a significant interest in any material contract or arrangement entered into by the company or its subsidiaries.

For more information on how Sappi addresses conflict of interest please refer to the Preventing fraud and corruption section of the Code of Ethics at www.sappi.com

Insider trading

The company has a code of conduct for dealing in company securities and follows the JSE Limited Listings Requirements in this regard.

For further information refer to the Insider trading section of the Code of Ethics which can be found at www.sappi.com

Reporting on compliance and ethics concerns

Sappi employees and stakeholders can report any potential illegal or non-compliant behaviour they observe directly to senior management, internal audit or legal counsel, or alternatively, report anonymously, via telephone or by completing an online web-portal form. Whistle-blower 'hotlines' have been implemented in all the regions in which the group operates. The hotline and web-portal service, operated by independent service providers, enables all stakeholders to anonymously report environmental, safety, ethics, accounting, auditing, control issues or other concerns. Retaliation against whistle-blowers is not tolerated. The follow up on all reported matters is coordinated either by legal counsel or internal audit and reported to the ARC. The majority of calls and ethics reports received related to the Southern African region.

Please refer to the whistle-blower hotline and ethics report graphs for information on the:

  • Number of hotline calls per 1,000 employees
  • Number of forensic cases closed and average time spent per case
  • Categories of hotline calls and ethics reports
  • Outcome of the investigations.

The hotline report rates categories of reports and outcomes of cases broadly align with international whistle-blower benchmark data. For more information, refer to the Reporting and whistle-blowing section of the Code of Ethics, at www.sappi.com

Financial statements

The directors are responsible for overseeing the preparation and final approval of the group annual financial statements, in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board.

The group's results are reviewed prior to submission to the board, as follows:

Hotline report rate per 1,000 employees per annum

Forensic cases closed and average time taken to close


Hotline and ethics cases by category (%)

Hotline and ethics case outcomes (%)


Risk, controls and assurance at Sappi

Risks facing the group are identified, evaluated and managed by implementing risk mitigations, such as insurance, strategic actions or specific internal controls. Sappi maintains a robust framework of risks and controls which assists in the application of the King IV guidelines and the achievement of governance outcomes by helping to: create an ethical culture; establishing effective control; and promoting legitimacy, all of which help Sappi and its stakeholders to benefit from good performance. The framework includes controls addressing our material matters, by focusing on the main drivers of Sappi and comprises both financial and non-financial controls, which support the achievement of our strategy, within our risk appetite and tolerance levels, across the economic, social and environmental context in which the organisation operates as well as each of the six capitals set out in the IIRC's model. More information on these capitals and Integrated thinking in the context of Sappi's sustainable business model can be found in Our business model, as well as Risk management.

The group's internal controls and systems are designed in accordance with the COSO control framework to support the achievement of the group's objectives including strategic, operational and financial performance goals, effective and efficient use of resources, safeguarding assets against material loss, integrity and reliability of internal and external financial and non-financial reporting, and compliance with applicable laws and regulations.

Sappi operates a combined assurance framework, which aims to optimise the assurance coverage obtained from management, internal and external assurance providers, on the risk areas affecting the group. Combined assurance is overseen by the CAC. The committee and its CAW provide holistic feedback to the GRMT and ARC on the state of controls and the quality and coverage of assurance from the various assurance providers across Sappi's three lines of assurance. The workgroup focused on the following risk topics in 2023: fraud and ethics management, cyber security, operational technology, legal compliance, business continuity, taxation, contractors and maintenance, energy, waste and safety.

In FY2024 CAW will assist CAC to create and protect value by further developing combined assurance, risks and controls relating to IT security, continuity, regulatory compliance and sustainability.

Sappi's combined assurance framework, incorporating three lines of assurance and oversight by the board and board sub-committees

  First line of
assurance		   Second line of
assurance		   Third line of
assurance		   Oversight by
the board
Risk areas and value drivers, capitals Business management operations supported by appropriate controls and systems   Monitoring and oversight functions   Independent assurance provided by external audit, internal audit and other assurance providers   Board and board sub-committees
Governance, risk and controls – general (core business cycles)
  • Day-to-day risk management activity
  • Established risk and control environment
  • Executive, corporate and regional lead teams
  • Corporate and regional business functions, eg sales, finance, IT, human resources (HR), purchasing
  • Business units, eg forestry, mills, sales offices
  • Business unit operations, eg production, engineering, controlling, materials management.
   CAC, management self- assessments   Internal audit   Audit and Risk sub-committee
Strategy and vision, competition and markets, sociopolitical   Executive Committee, Group Head Strategy, Global Business Council, CAC, management self-assessments   Internal audit   Nomination and Governance Committee
Financial, tax and treasury   Control and assurance, accounting standards, taxation, treasury and Disclosure Committees, management
self-assessments		   KPMG, tax authorities, internal audit   Audit and Risk Committee
Legal and compliance   Legal compliance programme, Group Compliance Manager   Legal compliance audits, internal audit   Audit and Risk, SETS Committee, Human Resources and Compensation Committees
IT   IT Steering Committee, group IT governance functions, management self-assessments   KPMG, ISA 3402s,
penetration testing, internal audit		   Audit and Risk Committee
Planet, environment, natural capital   Sustainability councils, Environmental and Energy (E4) Global Cluster, GRMT   ISO 14001, FSC, PEFC, SFI, EMAS,
KPMG, EcoVadis
Government reviews emissions effluent etc, internal audit		   SETS Committee
Ethics   Group Compliance Manager, ethics surveys, management self-assessments   Internal audit   SETS Committee, Audit and Risk Committee
People, HR and transformation   Global Human Resource Committee, regional labour forums, employee engagement surveys, management
self-assessments		   BBBEE audits, internal audit   Audit and Risk, SETS Committee, Human Resources and Compensation Committees
Research and development (R&D), intellectual property   Group technical cluster, management self-assessments   ISO 17025, internal audit   SETS Committee
Manufacturing, supply chain management, quality, forestry   Technical clusters and platforms, regional safety, health, environment and quality audits, supplier audits, management self-assessments   ISO 9001, ISO 50001, FSC, PEFC, SFI, Matrix,
internal audit		   SETS Committee
Stakeholders, communication, reputation, society   Group corporate affairs, sustainability and investor relations functions   Internal audit   SETS Committee
Safety   Group and regional risk management teams, safety audits   ISO 45001, ISO 22000
regulatory inspections, internal audit		   SETS Committee

A key element of combined assurance at Sappi is derived from the annual control self-assessments completed by control owners, which helps to protect value for stakeholders by providing management and the board with assurance on the state of controls throughout the group. The remediation of control gaps identified through this process is monitored by management, relevant committees, auditors and the board.

The ARC advises the board on the state of risk management and controls, as well as assurance, in Sappi's operating environment. This information is used as the basis for the board's review, sign-off and reporting to stakeholders, via the Annual Integrated Report and Annual Financial Statements, on risk management and the effectiveness of internal controls and assurance within Sappi.

As part of combined assurance in respect of reported information, Sappi has obtained assurance on the data in the Annual Integrated Report from the following sources:

Internal audit

The group has an effective, suitably resourced, risk-based internal audit department. The department operates in terms of a specific charter from the ARC and independently appraises the adequacy and effectiveness of the group's governance, risk management, systems, internal controls and accounting records. Internal audit coordinates combined assurance and reports the findings to local and divisional management, the external auditors, and the ARC.

The head of internal audit reports to the ARC, meets with board members, has direct access to executive management and is invited to attend certain management meetings. The role of internal audit at Sappi is set out in the following diagram:

Internal audit value proposition

During 2023, the risk-based coverage plan was substantially achieved. Apart from the ongoing focus on financial controls, internal audit helped to create and protect value for Sappi and our stakeholders by completing reviews in support of the following strategic objectives:

In 2024 internal audit will support the achievement of Sappi's Thrive strategic objectives by completing advisory and assurance projects in the following areas:

Grow our business: R&D, packaging and speciality papers, capital projects (Project Elevate in Sappi North America), and new businesses eg biomaterials
Sustain our financial health: sales, procurement, treasury, and working capital processes, mill closure activities
Drive operational excellence: sales and operations, maintenance, energy, strategic business and IT projects including global MES projects
Enhance trust: ethics, governance, sustainability, regulatory compliance and cyber security reviews

Internal audit maintains an internal quality assurance programme. Our last external quality assurance review was conducted by the Institute of Internal Auditors (IIA) in 2021. A Generally Conforms rating was received, which is the highest of the three levels of conformance to the IIA's standards. The 2022 internal quality assurance review highlighted a need for upgrading our automated audit software solution. This was addressed in 2023. Our internal quality assurance review in 2023 confirmed our Generally Conforms rating. A focus area in 2024 will be adapting certain aspects of our procedures to comply with the Global Internal Audit Standards expected to be issued in 2024.

Board assessment of the company's risk management, compliance function and effectiveness of internal controls and combined assurance

The board is responsible for the group's systems of internal financial and operational control. As part of an ongoing comprehensive evaluation process, control self-assessments, independent reviews by internal audit, external audit and other assurance providers, were undertaken across the group to test the effectiveness of various elements of the group's financial, disclosure and other internal controls as well as procedures and systems. Identified areas of improvement are being addressed to strengthen the group's controls further. The board has assessed the combined assurance provided in 2023. The results of the reviews did not indicate any material breakdown in the functioning of these controls, procedures and systems during the year. The internal controls in place, including the financial controls and financial control environment, are considered to be effective and provide a sound basis for the preparation of the Annual Financial Statements, Annual Integrated Report and other reports used internally for management decision-making.

Company Secretary

The Company Secretary does not fulfil executive management functions outside of the duties of Company Secretary and is not a director. During the year, the board has assessed the independence, competence, qualifications and experience of the Company Secretary and has concluded that she is sufficiently independent (ie, maintained an arm's length relationship with the executive team, the board and individual directors), qualified, competent and experienced to hold this position. The Company Secretary is responsible for the duties set out in section 88 of the Companies Act 71 of 2008 (as amended) of South Africa. Specific responsibilities include providing guidance to directors on discharging their duties in the best interests of the group, informing directors of new laws affecting the group, as well as arranging for the induction of new directors.