SOCIAL, ETHICS,
TRANSFORMATION AND
SUSTAINABILITY COMMITTEE REPORT

Introduction

The Social, Ethics, Transformation and Sustainability (SETS) Committee presents its report for the financial year ended September 2019. This is a statutory committee with a majority of independent non-executive members, whose duties are delegated to them by the board of directors. The committee conducted its affairs in compliance with a board-approved terms of reference and discharged all its responsibilities contained therein.

The committee was established during the 2012 financial year in response to the requirements of section 72(4) of the South African Companies Act 71 of 2008, read with regulation 43 of the Companies Regulations, 2011. These regulations required the establishment of a Social and Ethics Committee, to which were added the Transformation and Sustainability oversight roles previously contained in the Sustainability and Human Resources and Transformation Committees.

Multifunctional Regional Sustainability Councils provide strategic and operational support to a Group Sustainability Council which in turn provides support to the SETS Committee in dealing with key sustainability issues.

During the financial year, the committee formally met three times to deliberate on all aspects relating to its terms. A 100% attendance record was achieved by board committee members for 2019.

Objectives of the committee

The role of the SETS Committee is to assist the board with the oversight of the company and to provide guidance to management's work in respect of its duties in the fields of social, ethics, transformation and sustainability. The committee relies on international best practice as well as the laws and regulations under which Sappi's businesses operate to ensure that the group not only complies with, but also fully implements all requirements. The committee addresses issues relating to corporate social investment, ethical conduct, diversity, transformation and empowerment initiatives and targets and ongoing sustainability practices to ensure that our business, our environment and our people can prosper on an ongoing basis. The responsibilities include monitoring the company's activities, having regard to any relevant legislation, other legal requirements and prevailing codes of best practice. The committee meets a minimum of three times each year.

Membership of the committee

The members of the SETS Committee during the 2019 financial year were:

  • Mr MV Moosa (Chairman from 01 March 2016)
  • Mr SR Binnie
  • Dr B Mehlomakulu
  • Mr BR Beamish (from 01 August 2019)
  • Mr JM Lopez (from 01 August 2019)

Four members of the committee were independent non-executive directors and one the CEO. In addition, the Chairman of the board attends committee meetings ex officio. The regional Chief Executive Officers, the Group Head Strategy and Legal, the Group Head Technology, the Group Head Human Resources, the Group Head Corporate Affairs, the Executive Vice-President Dissolving Wood Pulp and the Group Head Investor Relations and Sustainability attend meetings by invitation.

Committee activities reviewed and actioned during the year

  • Reviewed and revised the committee terms of reference and annual work plan
  • Approved the Public Affairs and CSR programmes and policy
  • Reviewed the Corporate Social Development programme
  • Reviewed the UN Sustainable Development Goals most relevant to Sappi
  • Reviewed Sappi's standing in terms of:
    • The principles set out in the United Nations Global Compact
    • The OECD recommendations regarding corruption
    • The Employment Equity Act, and
    • The Broad-based Black Economic Empowerment Act
  • Reviewed the Code of Ethics, ethics programme and their effectiveness
  • Obtained feedback from the ethics reporting hotlines
  • Reviewed the South African skills audit as well as the training and development plan
  • Reviewed the staff training progress
  • Reviewed the company performance relative to the Employment Equity Act, Broad-based Black Economic Empowerment (BBBEE) Act and the company's transformation strategies
  • Reviewed the Sappi Southern Africa Transformation Charter
  • Reviewed Sappi's policy and standing in terms of the International Labour Organization (ILO) protocol on decent work and working conditions
  • Reviewed the group safety programmes, safety performance and actions being taken to improve the safety performance of the group
  • Reviewed the group unfair discrimination and equality policy
  • Reviewed the Group Sustainability Charter and Environmental Policy
  • Reviewed the material indicators of the group's environmental performance
  • Reviewed regional sustainability performance against goals for 2019
  • Reviewed regional and global public policy matters affecting the group and its operations
  • Reviewed the various production unit operating efficiencies, reliability and unscheduled downtime metrics for 2019
  • Indepth review of the European industry dynamics, particularly risks and opportunities related to the single use plastic directive and the transition to a low-carbon economy
  • Indepth review of factors influencing the sustainability of Sappi's timber plantations and related actions taken to mitigate risks and improve growth
  • Indepth review of Sappi North America's energy and carbon emissions strategy
  • Reviewed the SETS Committee Report for the Annual Integrated Report as well as sustainability information presented in the Annual Integrated Report.

At each meeting a topic is selected for an indepth review, typically matters which in the view of the committee represent key risks or opportunities for the business. In the past year the three focus areas were European industry dynamics, including the single-use plastic legislation, shift to paper packaging and the transition to a low-carbon economy. Secondly, factors influencing the sustainability of Sappi's South African timber plantations and new technologies being implemented to lower cost, enhance productivity and improve safety. Lastly, the committee reviewed Sappi North America's energy and carbon emissions reduction strategy.

Conclusion

The committee confirms that the group gives its social, ethics, transformation and sustainability responsibilities the necessary attention. Appropriate policies and programmes are in place to contribute to social and economic development, ethical behaviour of staff towards colleagues and other stakeholders, fair labour practices, environmental responsibility and good customer relations. In fulfilling their mandate, the committee has sought to ensure the needs of a wide set of stakeholders, including employees, local communities, customers and shareholders are considered and that key sustainability risks are identified and managed.

There were no substantive areas of non-compliance with legislation and regulation, nor non-adherence with codes of best practice applicable to the areas within the committee's mandate that were brought to its attention. The committee has no reason to believe that any such non-compliance or non-adherence has occurred.

MV Moosa

Chairman

Social, Ethics, Transformation and Sustainability Committee