Climate change

Our top 10 risks

• 4 Sustainability expectations
• 6 Evolving technologies and consumer preferences
• 7 Supply chain disruption

How this issue links to other aspects of our business

Our global priority SDGs

Our strategic fundamentals

	Grow our business
	Drive operational excellence
	Enhance trust

Our highlights

SEU increased its share of renewable energy by 15 percentage points compared to last year. This significant increase is mainly due to Kirkniemi Mill eliminating coal as fuel source in their multi-fuel boiler, switching to biomass residues such as bark, sawdust and wood chips

The closure of our Stockstadt and Lanaken Mills contributed positively to a reduction in Scope 1 emissions as these mills relied heavily on fossil fuel sources

SNA continues to operate at a high level of renewable energy of 77% in FY2024

In SSA, Saiccor Mill increased its renewable energy consumption by adding purchased biofuel, Mkomazi alien fuels, as fuel source into its biomass bark boiler

Promoted Verve and the importance of working forests to transition to a low carbon economy with value chain partners through keynote addresses, organised learning journeys and participation in industry panels

Background

Compared to our 2019 baseline, Sappi's absolute GHG emissions have decreased by over 30%. The increased use of renewable energy, more efficient self-generation of electricity and efficient energy management all contributed significantly to the decrease in GHG emissions.

In FY2024, our Scope 1 and 2 GHG emission intensity in all three regions decreased compared to the previous year. The significant decrease of 33.5% in SEU compared to last year is due to ongoing decarbonisation and renewable energy projects, including the boiler fuel switch at Kirkniemi Mill and closure of Stockstadt and Lanaken Mills. SNA and SSA also contributed positively with decreases of 5.2% and 5%, respectively, to the overall decrease in GHG Scope 1 and 2 intensity of 13%.

The improvement in production and decrease in market-related production curtailments in FY2024 improved operational efficiencies, contributing to the decrease in Scope 1 and 2 GHG emissions intensity compared to last year.

Sappi is committed to addressing climate change through a comprehensive climate strategy that aligns with climate science and supports a just energy transition. To this end, we have set a validated science-based emission reduction target for 2030 and estimate a capital investment of US$60 million to US$70 million per annum to achieve our decarbonisation efforts.

Our approach embeds carbon impacts into our capital allocation processes, using an internal carbon price to guide decision-making. We employ physical and transitional scenario modelling to assess climate risks and opportunities, informing our mitigation and adaptation strategies. We continuously monitor and transparently report on our climate KPIs, and we have integrated our science-based targets into long-term remuneration awards. In South Africa, we acknowledge the challenges posed by reliance on coal and the social implications of decarbonisation, which drives us to engage with regulators and stakeholders to advocate for a just transition that ensures no one is left behind.

Our TCFD Report which provides comprehensive disclosures on our climate governance, strategy, risks and opportunities and our transition plan can be found here.

Please refer to Our 2024 Planet indicators for the graphs in this section together with other graphs detailing:

• Specific NOx emissions
• Specific SOx emissions
• Specific particulate matter emissions
• Absolute emissions related to the above.

Specific GHG emissions (Scope 1 and 2) (kg CO₂e/adt)

* Restatement of 2020 to 2023 data due to improved data quality.

Direct emissions (Scope 1) (kg CO₂e/adt)

* Restatement of 2020 to 2023 data due to improved data quality for SNA, SSA and Global.

A global decrease in Scope 1 direct emissions was observed, driven by various region-specific initiatives and improvements aimed at reducing fossil fuel consumption and enhancing energy efficiency. In SEU, the decrease was primarily attributed to Kirkniemi Mill's transition to biomass as a fuel source. This shift not only reduced reliance on fossil fuels but also significantly improved the facility's overall emissions performance. The closure of Lanaken and Stockstadt Mills further contributed to the reduction, as both mills had historically relied heavily on fossil fuels, and their closure eliminated the associated emissions. In SNA, there was a slight decrease due to improved operational efficiencies across several mills. At Cloquet, Matane, and Westbrook Mills, reductions in specific emissions were largely driven by decreased market downtime, which allowed for more stable operations and enhanced process efficiencies. Cloquet Mill, in particular, achieved a reduction in absolute Scope 1 emissions due to a shift from natural gas to increased biomass usage in the boilers.

At Somerset Mill, however, Scope 1 emissions increased slightly due to higher natural gas consumption during a cold mill outage and other process disruptions. Despite this, improvements at other facilities helped mitigate the overall impact, leading to a net reduction in the region's Scope 1 emissions. In SSA, there was a slight decrease. Saiccor Mill consumed less coal and heavy fuel oil due to better boiler availability and increased use of renewable energy sources (black liquor and alternative biomass). Stanger Mill experienced a reduction in steam demand, which led to lower coal usage, primarily due to an extended off-crop bagasse season. Lomati Sawmill consumed less diesel for on-site transportation, contributing to overall emissions reductions. Tugela Mill's improved efficiency was evident through a better steam-to-coal ratio in high-pressure boilers and reduced gas usage in low-pressure boilers, thanks to less downtime on the high-pressure boilers.

Fuel sources (%)

Renewable and clean energy breakdown (%)

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Indirect emissions (Scope 2) (kg CO₂e/adt)

* Restatement of 2023 data due to improved data quality for SEU and Global.

Specific GHG (Scope 1 and Scope 2) emissions per revenue (t CO₂e/US$ million)

* Restatement of 2020 to 2023 data due to improved data quality.

Globally there was a decrease in Scope 2 indirect emissions, reflecting significant steps taken across regions to reduce reliance on purchased power and increase renewable and self-generated energy sources. In SEU, the decrease was largely driven by Kirkniemi Mill's switch to cleaner, purchased power, which significantly lowered Scope 2 emissions. In SNA, improvements in Scope 2 emissions were achieved through a combination of reduced purchased power at Cloquet Mill and the increased purchase of Renewable Energy Certificates (RECs) at Somerset Mill. In SSA, a decrease was observed across several facilities. Ngodwana Mill's decision to discontinue sale of RECs allowed the facility to use more of its internally produced renewable energy, thereby decreasing reliance on purchased power. Tugela Mill enhanced its power self-sufficiency, further reducing its dependence on purchased electricity. Additionally, Saiccor Mill's higher production levels increased availability of black liquor, a renewable fuel used for internal power generation, which reduced the need for externally sourced power.

Key developments in FY2024

Each of our three regions have crafted a comprehensive decarbonisation roadmap that aligns with our science-based targets. We adopt a holistic strategic approach to carbon abatement, assessing projects globally to ensure cost-effective decarbonisation. This methodology optimises our efforts and helps future-proof our strategic assets in expanding markets.

Decarbonising our mill operations

Decarbonisation in Europe

Leveraging fuel switching to renewables

In Europe, we have successfully leveraged fuel switching in our boilers to drive decarbonisation efforts. In 2022, we modernised Boiler 11 at Gratkorn Mill, enabling a transition from coal to a fuel mix of biomass and natural gas, which resulted in an impressive 30% reduction in the mill's carbon footprint. The second phase of this initiative, known as Project BioFit, began in 2023 and has been making steady progress throughout 2024. This project is focused on enhancing the mill's biomass handling capacity by establishing essential storage and handling systems. A key milestone was achieved in September 2024 with the commissioning of a conveyor system that transports biomass from the wood yard to the newly installed storage silos, paving the way for subsequent project phases in 2025 that will facilitate a complete conversion to biomass. Despite the current limitations in biomass capacity, the mill increased its renewable energy use to over 56% in 2024, reflecting a 16-percentage point improvement from pre-project levels.

This percentage is expected to rise further with completion of the biomass handling infrastructure.

Successful completion of the boiler fuel switching project at Kirkniemi Mill in FY2023 marked a significant advancement in our commitment to sustainability by enabling a complete transition from coal to biomass. This shift to clean and renewable energy sources, alongside necessary infrastructure modifications, resulted in substantial performance improvements in 2024. Notably, the mill achieved an impressive emissions intensity reduction of over 90% compared to pre-project levels, while its share of clean and renewable energy soared to 95% in the current reporting year. This transformation enhances our environmental footprint and positions Kirkniemi Mill as an industry leader in sustainable energy practices.

Leveraging electrification

This year, we received approval and began construction on a second electric boiler at Maastricht Mill, a project aimed at further reducing our CO₂ emissions. This initiative builds on the success of the plant's first 20-megawatt electric steam boiler, which was commissioned in 2021. The electric boilers convert electrical power into steam to operate the plant, strategically coordinating peak electricity consumption with times of maximum renewable energy input to the grid, thus contributing to the stability of the national grid. As a result, we expect direct GHG emissions to decrease by 14% by 2026 and by 30% by 2030, compared to 2019 levels. Like its predecessor, the new electric boiler will primarily use power sourced from renewable energy, such as solar and wind.

Energy study concluded

Throughout 2024, we conducted a feasibility study to explore options for steam and power production at Alfeld, Condino and Ehingen Mills. The goal was to enhance the share of renewable and clean energy in line with our decarbonisation strategy while ensuring that mills maintain their production capacity. The study identified five potential strategies to achieve each mill's targets, evaluating options based on technical and economic viability. The final selected approach underwent further financial analysis and was assessed for related business opportunities connected to the mills' energy supply. With this comprehensive analysis now complete, we are better equipped to consider alternative energy systems at these mills. In future, we can leverage these findings to guide our decisions, support conceptual design, and ultimately execute decarbonisation projects effectively.

Decarbonisation in North America

In this region, we operate with an impressive 77.4% renewable energy, achieving best-in-class emissions performance in both the packaging and graphic papers sectors. As the states in which we operate have mandated an increase in the percentage of renewable power in their grids, our mills are positioned to benefit from this shift, extending our advantages into Scope 2 emissions. In 2020, we launched Lean Six Sigma projects focused on operational efficiency to ensure we continue to advance our renewable energy initiatives and optimise our fuel mix for the best possible emissions outcomes.

However, challenging market conditions and operational shutdowns affected our fuel choices in FY2024, leading to an increased reliance on fossil fuels. Despite this, our performance remains exemplary at 77.4% renewable energy, and we are committed to further increase our use of renewables and reduce our dependence on fossil fuels. Notably, four Lean Six Sigma projects aimed at steam and boiler optimisation have resulted in a reduction of approximately 10,000 tons of GHG emissions at Somerset Mill.

Decarbonisation in South Africa

Decarbonising our South African assets presents more challenges compared to other operating regions. Although we have achieved a relatively high level of renewable energy integration compared to other South African companies – thanks to our use of our own black liquor and biomass fuel sources (53% of our energy is derived from renewable sources) – SSA is not fully self-sufficient and relies on purchasing energy from the national utility provider, Eskom, which predominantly generates power from coal. With the slow pace of renewable energy development in the country, our decarbonisation roadmap assumes that we may need to invest in our own renewable energy assets to abate our Scope 2 emissions, but this is not our preferred strategy.

Climate action through sustainable procurement

In May 2024, we achieved a significant milestone by signing a 175 GWh per annum renewable energy Power Purchase Agreement (PPA) with Enpower Trading, one of the pioneer private electricity trading companies licensed by NERSA (National Energy Regulator of South Africa). This renewable energy initiative will enable SSA to reduce emissions by 6%. The power supplied to Sappi will come from SolarAfrica Energy's Sun Central PV project, one of South Africa's largest solar farms, located southeast of De Aar in the Northern Cape with a capacity of 1 GW. Power delivery is scheduled to start end December 2025. This agreement marks a groundbreaking first-of-its-kind PPA, allowing Enpower Trading to provide Sappi with a utility-scale renewable power solution over the next five years.

The joint venture Mkomazi Alien Fuels at Saiccor Mill incorporates an ZAR80 million biomass pellet manufacturing plant which uses wood shavings and other wood waste left over from the mill's manufacturing processes. It aims to avoid 57,000 tons of annual landfill waste, averting 322,000 tons of CO₂ emissions over a 10-year period. It will also avert 62,457 tons of CO₂ emissions annually through fossil fuel substitution. The project will create 68 full-time and 49 part-time jobs in local communities.

Leveraging climate action through our value chains

Our Verve dissolving pulp team actively engages through the textile value chain to drive climate action and advocate for the positive role of forests and wood-based products to mitigate climate change.

To support a low carbon circular textile bioeconomy, we actively promoted Verve and the role of working forests to advance a low-carbon economy through keynote addresses and organised learning journeys, industry panels and targeted marketing communication. The Verve team hosted its second learning journey in South Africa in 2024, welcoming local and international stakeholders to see firsthand how Sappi invests in climate resilience and decarbonisation. Participants learned about our advanced R&D initiatives aimed at breeding trees resilient to future climate change and saw how Sappi creates shared value through impactful community programmes within its forestry operations.

With the textile value chain struggling to meet its 2030 decarbonisation goals and adaptation to extreme weather becoming a priority, Sappi Verve was invited to join a panel discussion at Cascale's annual membership meeting with leading fashion brands and manufacturers. The panel explored climate action and how to overcome barriers to accelerate progress. We shared learnings from our engagement with governments on the just transition and our approach in creating community-driven shared value. Sappi also participated in the Challenge the Fabric event in Milan where brands, designers and producers discussed the future of wood-based cellulosic fibres. This event was an opportunity for Sappi to reinforce its sustainability leadership and promote principles of inclusive sustainability.

Responding to climate change on Sappi's plantations

Sappi Research, Planning and Nurseries maintain a strong focus on mitigating the effects of climate change and water stress through tree breeding and enhanced silvicultural practices. Our tree breeding and tree biotechnology research programmes aim to develop trees that are resistant to biotic and abiotic threats, including frost, drought, pests and diseases, which are expected to increase in frequency due to climate change. Additionally, Sappi's land management and pest and disease programmes conduct research on stress detection, climate change predictions, site classification for improved site-genotype matching, risk mapping, nutritional studies, site resilience, and biological control measures along with a national pest and disease survey.

Sappi is also participating in a collaborative project to simulate reduced rainfall on various genotypes while conducting a tree physiology study to explore the interaction between drought tolerance and recovery. Approved by Forestry South Africa in 2023, this project receives partial funding from the Department of Science and Innovation through the Sector Innovation Fund. The first phase will involve eight genotypes grown under controlled irrigation conditions within a nursery tunnel structure. Through these extensive R&D efforts, we are adapting our plantations to the realities of climate change, ensuring their future resilience.

Sappi Chair in Climate Change and Plantation Sustainability at the University of the Witwatersrand (Wits) in Johannesburg

Professor Mary Scholes, an internationally recognised authority on tree physiology and climate change affiliated with the Wits School of Animal, Plants and Environmental Sciences, serves as the Research Chair. Her primary aim is to identify critical research needs and outputs related to climate change. In addition to mentoring young academics, she funds a post-doctoral fellow and provides bursaries for Master's and Honours students. Professor Scholes also works to enhance the capacity to interpret climate modelling data, addressing the global demand for accurate GHG emissions accounting from forests, land, and agriculture. Sappi's initial sponsorship extends until 2026. Since 2020, Wits, in collaboration with the Wits Global Change Institute, has focused on developing more accurate climate models and methodologies to inform resource management and investment decisions for forestry as a long-term crop.

University of the Witwatersrand (Wits) Global Change Institute (GCI) climate change project

Since 2020, Sappi has collaborated with industry partners and the Wits Global Change Institute (GCI) to address climate data relevant to the forestry sector. This partnership has included workshops and training sessions that have identified key priorities, with Dr Yolandi Ernst playing a pivotal role in the initiatives. Critical climatic data derived from six downscaled CMIP 5 Global Climate Models is currently being uploaded to the University of Pretoria Information Hub for testing purposes. As part of this effort, a PhD candidate was selected to study the impact of climate change on fire behaviour, while a post-doctoral researcher is focusing on interpreting climate modelling data specifically for the forest industry. Sappi employees actively participate in these projects to ensure that the research remains operationally applicable.