Our key material issues

The issues set out on the following pages are those that we believe underpin our strategic risks and opportunities and have the highest potential impact—positive and negative—on stakeholder value.

Governance

Related SDGs

  Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels       Strengthen the means of implementation and revitalise the global partnership for sustainable development

 

Key material issue

  Ethical behaviour and corruption
Background

In South Africa, in particular, various incidents in state-owned enterprises and private and public entities have led to outrage and criticism at the lack of governance and ethical leadership at all levels of our society.

  Our response
Code of Ethics

Sappi’s high premium on adherence to ethical behaviour is entrenched in our Code of Ethics (Code). In addition to training all new employees during induction, we conduct ongoing awareness training. In the past year this included online or in-person awareness training on various topics covered in the Code. These ranged from dawn raid awareness to the protection of personal information. In addition, all relevant new employees in all regions were trained on anti-fraud and corruption as well as Competition Law.

Regretfully, notwithstanding these training initiatives, there were breaches of the Code. We have investigated these incidents with the assistance of internal audit and/or external advisers, addressed the issues and where required, taken steps to seriously sanction the underlying relationships—an indication of the seriousness with which we view these transgressions.

Sappi continues to provide avenues to stakeholders to communicate breaches or apparent breaches of the Code either through hotlines or via email (ethics@sappi.com). All complaints are registered and investigated by Sappi’s internal audit and then reported into the Audit and Risk Committee on a quarterly basis. (Read more)

During March 2019, we will once again be rolling out the engagement survey, part of which tests values and ethical leadership as perceived by employees. The results in this area will be a useful guide to understanding the culture of ethical behaviour and conduct in Sappi and where improvements can be made.

We are also in the process of rolling out a Supplier Code of Conduct which calls on suppliers to commit to ethical behaviour, human rights, health and safety, diversity and equal opportunity and environmental awareness.

KPMG

In 2017, we reported that our auditors, KPMG South Africa, had been implicated in allegations related to patronage and corruption at other clients which caused us to reassess their provision of services to Sappi. We have engaged with KPMG International in this regard and are satisfied that more stringent checks and balances have been established which will prevent a reoccurrence of incidents of a similar nature.

Value impact

  • Greater understanding of the ‘One Sappi’ approach to ethics and human rights
  • More stable and sustainable business

 

Prosperity

Prosperity

Related SDGs

  Ensure sustainable consumption and production patterns       Build resilient infrastructure, promote inclusive and sustainable industrialisation and foster innovation

 

Key material issue

See 3 and targets.
  Ongoing investment and cost containment
Background

Ongoing investment and cost containment are strategic pillars of competitive advantage.

  Our response

We continued to make significant investments in line with our 2020Vision, the aims of which include diversifying group EBITDA by remaining an industry leader in printing and writing papers manufacturing; expanding specialities and packaging papers and growing dissolving wood pulp (DWP) capacity.

Ongoing investment
  • We completed a capital investment at Cloquet Mill to replace the headbox on PM12. This investment enabled the mill to maintain capacity by adding a state-of-the-art, dilution profiled headbox—the part of the paper machine responsible for spreading the pulp fibres evenly to form the sheet—that produces excellent basis weight profiles.
  • In September 2018, we announced the completion of a year-long rebuild of PM1 at Somerset Mill to increase the mill’s annual production capacity to almost one million tons per year. The rebuild has enabled the launch of new paperboard grades (See New products) which provide luxury packaging and folding carton applications that complement our existing speciality packaging products. We also completed the modernisation of Somerset Mill’s woodyard.
  • We advanced our work in increasing chipping capacity and modernising the Saiccor Mill woodyard. The new equipment for the woodyard is scheduled to be delivered and installed at the end of 2018, with start-up planned in 2019. The woodyard investments will result in cost, quality, environmental and efficiency benefits to Saiccor Mill and is also a major step towards preparing the mill to expand further.
  • We also completed the rebuild of the PM6 at Maastricht Mill. This involved the installation of a new three-layer headbox and metal belt calender. This has facilitated improved board surface quality and reduced costs.

Going forward, investment plans include:

  • A €30 million upgrade of PM9 at Gratkorn Mill. The upgrade at this mill, due for completion in 2019, will optimise raw materials to reduce production costs and wil lalso result in reduced energy demand.
  • At Lanaken Mill, the PM8 will be rebuilt to support our coated woodfree paper business.
  • An investment at Alfeld Mill will add speciality paper capacity of up to 10,000 tons.
  • A debottlenecking project at Cloquet Mill, due for completion in 2019, will increaseDWP production by around 30,000 tons.
  • Significant investment plans in Southern Africa which are described in further detail.
Cost containment

We work to lower fixed and variable costs, increase cost efficiencies and invest for cost advantages. Building on the global procurement and efficiency savings drive launched in 2016 whereby we achieved US$57 million more in savings than target three years ahead of schedule, in 2018 we achieved an additional US$81 million in group efficiency and procurement initiatives.

We achieved upgrades at Maastricht and Ehingen Mills on time and within budget. However, capital costs and timing overran at Somerset Mill, negatively impacting production volumes. We also experienced delayed start-ups at both Ngodwana and Saiccor Mills post machine upgrades.

We have analysed the reasons behind the costs and timing overruns and implemented a strategy to ensure that these issues will not be repeated.

Value impact

  • Delayed project execution impacted on volumes and income
  • Ongoing investment and cost containment increase investor value
  • Continuous improvement enhances our competitive position
  • Investments at key mills/machines lower costs, support our existing position in printing and writing papers and establish a strong platform for growth in paperboard packaging
  • Investments have added to the diversification of our packaging line to meet a variety of needs

Key material issue

See 4
  Growth in the specialities and packaging papers sector
Background

Growing concerns about the negative impacts of fossil-fuel based packaging, in particular its impact on the world’s oceans, have resulted in bans on single-use plastics in many countries around the world. At the 2018 World Economic Annual Forum in Davos, 11 industry leaders committed to 100% recyclable packaging by 2025. This is driving demand for paper based packaging, which is set to intensify going forward.

  Our response

We significantly expanded our specialities and packaging papers capacity in 2018, as set out below:

Cham Paper Group

We concluded the acquisition of the speciality paper business of Cham Paper Group Holding AG (CPG). The transaction includes the acquisition of CPG’s Carmignano and Condino Mills (Italy) and its digital imaging business located in Cham (Switzerland), as well as all brands and know-how. Significantly, the acquisition has added 160,000 tons of speciality paper to our capacity, supporting our diversification strategy and 2020Vision to grow in higher margin growth segments. In terms of financial impact, the acquisition will add €183 million of sales and approximately €20 million of EBITDA before taking synergies into account.

Sappi Digital Solutions, formed by the acquisition of CPG was established at the beginning of 2018. The business unit’s broad portfolio of dye sublimation papers supports many industries in their quest to meet demand for individualisation and speed to market.

The CPG acquisition has enabled us to:

  • Increase our relevance in speciality papers, opening up new customers and markets to Sappi’s existing products and generating economies of scale and synergies
  • Gain greater share-of-wallet with valued brand owners, thereby accelerating innovation and new product development
  • Improve near-term profitability and serve as platform for organic growth and further acquisitions
  • Build on the investments currently underway to increase speciality paper capacity at our Somerset, Maastricht and Alfeld Mills, and
  • Unlock the growth potential of the CPG speciality paper business.

The value-add of the CPG acquisition to our business was highlighted when we presented solutions in the fields of dye sublimation papers, inkjet papers, silicone base papers and containerboard at the FESPA Berlin. FESPA is a global federation of 37 national associations for the screen, digital and textile printing industries.

Here, in addition to our specialities and packaging papers, we showed Transjet dye sublimation transfer papers for textiles previously marketed by CPG, along with a line of wide format inkjet papers. We also showed tear-resistant Scrolljet wide format inkjet paper at the show. This 100% recyclable speciality paper is suitable for use with solvent, UV-curable and latex inks. Its special surface treatment ensures brilliant colour results that provide exceptional luminosity for front- and back-lit applications.

Value impact

  • Expanded capacity strengthens our speciality paper business both in Europe and globally by combining CPG’s strong brands and assets with Sappi’s global reach
  • Increases profitability and unlocks the significant growth and innovation potential inherent within the speciality paper market
  • Helps us to realise our 2020Vision goal
New products
  • Following the rebuild of the PM1 at Somerset Mill, we introduced the new packaging grades Spectro C1S and Proto Litho C1S. Spectro is a single-ply paperboard with enhanced optics, making it ideal for premium applications. End-use markets include luxury beverages, cosmetics and perfumes, health and beauty care, covers (books/magazines), greeting cards/folders/lottery, calendars, shopping bags, point of sale (POS) material, menus, direct mail, pharmaceutical, confectionery, fashion and lifestyle, as well as consumer electronics. Proto is a lightweight paperboard suitable for displays, mailing envelope, fashion and lifestyle, consumer electronics, beverage, food packaging, POS material and shelf-ready packaging.
  • In 2016, Sappi was the first manufacturer to launch a packaging paper with integrated sealing functionality. This generated considerable market interest and has gradually been developed further, culminating in the launch of Seal. Designed to replace hot seal laminates made from plastic with materials containing a high proportion of renewable raw materials, Seal is single side coated. A dispersion coating on the reverse side makes it ideal for use as flexible standard packaging in the food and non-food sectors, where hot sealing properties are required. The market includes both primary packaging—sachets, and secondary packaging—flow-wraps for sweets, toys and do-it-yourself (DIY) goods.
  • Based on the paper concept for our successful Fusion Topliner, we launched Fusion Uncoated. With a natural, uncoated surface, the product is an alternative to brown liner papers. Applications include inner packaging such as white corrugated board inserts for high-end perfume boxes as well as food packaging.
  • We added to our shopping bag portfolio with Fashion White and Fashion White OF. Both these uncoated, machine finished grades feature high whiteness and offer good printability in a wide range of virgin fibre grades and grammages between 70 g/m2 and 130 g/m2. They are both ISEGA-certified for direct food contact and DIN EN71-certified for toy safety.
  • Atelier, a premium folding boxboard available in weights from 220 g/m2 to 350 g/m2. With a brightness level of 100% on the top side, Atelier exceeds the current industry top value of around 92%. On the reverse side, Atelier offers a brightness factor of 98,5% to accommodate the increasing demand for printing on both sides of the board for added impact.

Value impact

  • New products meet the needs of brand manufacturers and consumers looking for more environmentally friendly, lighter weight packaging
  • Proto and Spectro enable greater product differentiation in a crowded marketplace
  • Seal meets the needs of changing market dynamics by offering functionality and convenience
  • Fusion Uncoated targets the high-volume corrugated board market
  • Atelier folding boxboard introduces a completely unique concept to the paperboard market

Key material issue

See 4.
  Growing demand for cellulosic based fibres
Background

While cellulosic based fibres are globally popular, Asia is the primary market for DWP. Rising urbanisation and higher standards of living in the greater Asian region are driving increasing demand for more comfortable clothing. This trend is set to continue, with the Asian middle-class population and attendant consumer consumption growing rapidly—accounting, by some estimates, for 43% of total global consumption by 2030. Research by Hawkins Wright shows the five-year outlook for DWP expanding at an average annual growth rate of 4.9%.

Demand for DWP could also increase in the short term, given China’s imposition of increased tariffs on cotton imported from the USA.

  Our response

Textiles are the primary market for our DWP, now branded as Verve, which is sold globally for use in viscose staple fibre (rayon) and solvent spun fibres (lyocell). We also supply smaller quantities into other DWP market segments.

Given tight supply in the DWP market and the limited new capacity in the medium term, we completed debottlenecking projects at Ngodwana and Saiccor Mills which have added 50,000 and 10,000 tons respectively. A further debottlenecking project at Cloquet Mill, due for completion in 2019, will increase DWP production by around 30,000 tons.

Looking ahead, we have started preparatory work under a project known as Vulindlela for the potential expansion of Saiccor Mill to add 110,000 tons of DWP capacity.

Value impact

  • Capacity growth:
    – Entrenches long-established relationships with key customers
    – Establishes capacity to meet current and future demand
  • Vulindlela:
    – Aligns with the South African government’s investment drive
    – Will create significant job opportunities—during the peak period, there will be between 2,500 and 2,800 contractors working onsite at one time
    – Will result in CO2 emissions halving and waste to landfill being reduced by 48%, SO2 reducing by 35% and water use efficiency increasing by 17%

Key material issue

See 7.
  Extracting maximum value from woodfibre in adjacent markets
Background

The world has moved away from a linear model of value creation that begins with extraction and concludes with end-of-life disposal to a more circular economy. One of the key focus areas of this approach is optimising resource yields.

  Our response

In keeping with the approach outlined above, our aim is to extract more value from each tree and in doing so, move into adjacent markets in order to strengthen our overall core business model. The Sappi Biotech business unit, established in 2016, continued successfully to drive innovation and commercialisation in terms of biomaterials and biochemicals.

Hemicellulose sugars

In 2017 in partnership with Valmet, we commissioned a hemicellulose sugar extraction demonstration plant at Ngodwana Mill. After operating for 12 months to demonstrate the extraction of C5 sugars from DWP production, the plant exceeded all efficiency targets for cost, cycle time and yield.

We are now progressing the development of our biorefinery capacity with the construction of a demonstration plant to further scale up our novel Xylex technology—acquired in 2017—for the clean-up of the extracted sugars stream, to allow production of xylose, xylitol and furfural. A low-calorie sweetener, xylitol has positive dental properties and produces no insulin response, so is suitable for diabetics. Furfural is a versatile green industrial chemical derived from C5 sugars with a diverse range of derivatives.

The Xylex demonstration plant will be located adjacent to the existing sugars extraction plant at Ngodwana Mill, and will be commissioned in 2019. Pending successful results, we may construct commercial xylose, xylitol and furfural plants adjacent to our mills in North America and Southern Africa.

The combination of Sappi’s operational excellence and the proposed co-location of the commercial plants at existing mill sites delivers strong integration synergies. In addition, the cost advantages offered by Sappi’s scale and the Xylex technology give us a globally competitive cost base for C5 sugar extraction and beneficiation to xylose, xylitol and furfural.

Going forward, our strategic intent is to enter the xylitol value chain with a world-scale production plant. Furan markets are showing strong market pull for new investments due to growth as well as the phasing out of older and smaller unviable assets. Against this backdrop, sugars extraction from our DWP assets combined with our Xylex capabilities will allow us to pursue various partnerships in either the xylitol or furan chemistry value chains.

Value impact

  • Valorisation of C5 sugars produced as a co-product of our DWP production, and from the lignin produced in our global pulp production
  • Product offering of second-generation sugars does not impact food security
  • Meaningful revenue from a new business segment
Lignin

Sappi Biotech offers Hansa and Collex, two lignin-based dispersants used extensively in the concrete industry as plasticisers, produced from our lignin sources in Europe and Southern Africa and sold to global markets.

Our Lignex product was initially launched at Tugela Mill in 2012. Lignex is used as an effective wetting and binding agent to suppress dust and bind unpaved road surfaces, with many health, safety and cost benefits. It has been used extensively in the mining industry for several years and its benefits are now attracting a lot of interest in the agriculture and forestry sectors.

The focus of interest for the forestry industry is the use of Lignex to improve high traffic, unpaved plantation roads, timber depots and woodyards. Mixed into the road materials and/or sprayed onto the road surface it acts as a surfactant which gives excellent dust suppressant properties. The binding power of lignin also aids in binding the aggregate material together and sealing the road. This result in safer, more durable and longer lasting roads with reduced maintenance costs. There is strong interest in using the product in the citrus industry where dust contaminates the fruit, both in the orchards and around the packhouses.

Our Zewilex product is aimed at end-use applications in the resin industry, an area where research into lignin modification is an ongoing effort to meet performance and sustainability requirements of customers.

Currently, our research in the lignin area involves assessing the extraction of high value aromatic compounds from lignin using advanced chemical and technical processes for various end-use applications where the common theme is to offer brand owners renewable and sustainable alternatives.

Value impact

  • As a co-product, lignin increases the value derived from trees and supports the core cellulose business
Valida nanocellulose

Valida is a lightweight, solid substance which is comprised of nano-sized fibrils—the high strength building blocks of cellulose fibres. At our pilot-scale Valida plant at the Brightlands Chemelot Campus in the Netherlands, we use woodpulp obtained from various accredited sources as feedstock.

Work progressed at the plant with the development of technology to produce dry redispersible nanocellulose. This high-quality product, which has been branded as Valida, is easily dispersed into a variety of matrices. Valida technology uses an environmentally friendly production process which is also compatible with the requirements of the targeted applications. While naturally hydrophilic, Valida can also be subjected to surface modification to suit hydrophobic applications. Valida is suitable for many applications, including:

  • Biobased composites: Improves the mechanical properties of plastics, rubber, latex, thermosetting resins, soya protein and starch-based matrices
  • Food: Used for thickening, stabilising and enhancing the texture of food
  • Cosmetics: Acts as a powerful, natural rheology modifier in personal and home care products
  • Paper: Improves paper strength
  • Packaging: Enhances barrier properties on packaging materials to prolong food shelf life
  • Medicine: Performs as an advanced excipient in medicines, thereby facilitating drug delivery and active ingredient release, and
  • Paint and adhesives: Used for thickening and stabilising.

We are conducting third-party market development work with prominent global brand owners and technology institutions.

Value impact

Valida:

  • Derived from cellulose, the most abundant polymer on earth, and a renewable resource
  • Holds great potential in helping the world shift to materials that do not require fossil based fuels as feedstock
  • Biocompatible and biodegradable
Symbio

Over many years, Sappi has developed advanced technologies to combine cellulose fibres with other polymers and materials with emphasis on both function and aesthetics. Symbio, developed in 2016, is a good example of where we have leveraged our fibre expertise to launch an innovative product.

Symbio is a cellulose fibre plastics composite combining up to 55% high quality cellulose from woodfibre and a polypropylene plastic material. Delivered as granules, it can be injection moulded and therefore deployed in various industrial sectors, including automotive, furniture, appliances and consumer electronics.

We are currently developing Symbio Vivid, an exciting new look and feel for uniquely coloured decorative plastic composites.

We are in discussions with automotive original equipment manufacturers (OEMs) regarding the use of Symbio in vehicle applications. The key benefits of Symbio lie in positive touch and feel (haptics), durability and lighter weight. The latter is particularly important in the drive to reduce carbon emissions.

Value impact

Symbio:

  • Meets the need for lightweight products with strong environmental credentials
  • Woodfibre used is FSC®- or PEFC™-certified
  • Renewable resource to replace fossil-fuel based sources
Bio-energy

Biomass energy project

In 2018, Sappi Southern Africa reached financial close with the Department of Energy to build a renewable energy plant at Ngodwana Mill in Mpumalanga province. The project, whereby Sappi and consortium partners KC Africa and African Rainbow Energy and Power will establish a 25 MW biomass energy unit at the mill, falls under the South African government’s Renewable Energy Independent Power Producer Programme (REIPPP).

Sappi will have a 30% stake in the facility, which is expected to contribute to the national grid from July 2020.

The project will use biomass recovered from surrounding plantations and screened waste material from the mill production process. The power plant will burn up to 35 tons per hour of biomass in a boiler to generate steam and drive a turbine to generate electricity which will be fed into the grid as from 2020.

Sappi already contributes to the national grid by selling surplus energy from Ngodwana Mill to the state power utility, Eskom.

With this project, Sappi has become one of only a few companies in South Africa to embark on a biomass energy project.

Fuel rods

Some 150 years of intensive coal mining in South Africa have produced about a billion tons of discarded thermal-grade coal fines.

To utilise this energy source, we constructed and tested a small fuel rod manufacturing plant at Ngodwana Mill. The fuel rods comprise a mixture of coal slurry, biomass and lignosulphonate, which can be used as a coal replacement. Initial fuel rod test results are positive and could lead to reduced greenhouse gas emissions when compared to low-grade coal.

Sappi has entered into a joint venture agreement with the Industrial Development Corporation (IDC) as a strategic equity and debt partner to provide the balance of the capital required for the demonstration plant.

The fuel rods will be tested in one of Sappi’s boilers at Tugela Mill for a 12-month period. The demonstration facility will be upgraded if the test results are positive.

Value impact

Biomass energy:

  • Catalyst for energy transition in South Africa
  • Positive monetary, job creation and socio-economic impacts:
    – Financial impact: ZAR13 billion direct value add over 20 years
    – Project will employ 350 South Africans during construction
    – Biomass collection from surrounding plantations will result in 50 new jobs, and
    – Significant empowerment component

Fuel rods:

  • Resolve an environmental issue
  • Created enterprise development opportunities in areas where coal fines are located

Key material issue

See 2,4,7
  Investing in innovation
Background

The challenge for the pulp and paper industry is how to transform in order to meet the challenges of inclusive growth, industrial transformation and the circular economy.

  Our response

Through our focus on innovation, we are developing ways of becoming much more effective tomorrow than we are today, both in our journey towards durable sustainability and the need for economic vitality and employment for future generations. We live in an age of hyper-innovation and we take responsibility for making it work positively in a number of different ways:

Cambridge Institute for Sustainability Leadership

In 2018, we announced a founding partnership with The Prince of Wales Global Sustainability Fellowship Programme at the Cambridge Institute for Sustainability Leadership (CISL). Together with other partners, we are funding research on Artificial Intelligence and bringing carbon emissions to net zero in the paper and pulp industry.

The three to five-year fellowships of which there are currently eight, will involve academics from around the world in identifying breakthrough solutions to meet the UN Sustainable Development Goals (SDGs).

The Sappi-supported Fellowship will focus on the UN SDG 9, which relates to industry and innovation. It aims to build on Sappi’s current engagement with the CISL by investigating how trends of innovation and sustainability will come together to reshape the future of industry—looking at the paper and pulp industry as an initial example and examining drivers including the rise of artificial intelligence and the need to bring carbon emissions to net zero.

The CISL continues to support our work with the European industry in issues related to the Green Growth Platform. These include the development of a new low carbon pulp technology (deep eutectic solvents), exploring financing options to support industry’s transformation and investigating block chain technology for timber certification. The latter would support risk assessment and Chain-of-Custody woodfibre audits from forest/plantation to retail shelf. Sappi is representing the paper industry in this project.

Value impact

  • The Fellowship programme will deliver students with a profound knowledge and understanding of issues which will help drive new solutions for us and others, creating exciting opportunities far into the future
R&D

Technology is a core pillar of competitive advantage in our industry and represents a risk if we do not make ongoing technology investments. With a strong focus on innovation and R&D, Sappi is committed to developing new processes and biomaterials which extract more value from each tree and support our business strategy to move into new and adjacent markets.

Cumulative global value generated versus expenditure

(Investment/value delivered (US$ ’000))

Cumulative global value generated versus expenditure

Our R&D initiatives focus on consolidating and growing our position in our targeted markets segments; driving cost competitiveness and cost reduction; as well optimising our equipment and forestry assets.

Total R&D spend in 2018 increased significantly from US$29.5 million in 2017 to US$41.6 million. This includes spend of approximately US$11.5 million on our Exciter programme (2017: US$9.8 million) which focuses on core business (Exciter 1) and new and adjacent business (Exciter II).

Core business support (Exciter I) included:

  • Cost reduction through novel innovations for the paper industry, latex replacement in particular
  • Processing in our pulp and paper mills, particularly the continuous optimisation of the cooking and bleaching processes to achieve cost reduction and increased fibre yields
  • Support for packaging grades like Seal
  • Transferring Rockwell Solutions’ coating concepts to paper substrates
  • The evaluation of alternative hardwood species for one of our Southern African mills
  • Viscose application testing at Saiccor Mill, and
  • The ongoing evaluation of new, disruptive technologies.

Work in terms of Exciter II was focused primarily on new technologies in adjacent areas to the current business, including Symbio, Valida development and applications, as well as work related to biorefinery—notably the scaled-up sugar demonstration plant at Ngodwana Mill.

Value impact

  • Market growth
  • Cost reduction
  • Continuous improvement
  • Efficiency optimisation
  • Competitive positioning

People

Related SDGs1

  End poverty in all its forms everywhere       Ensure healthy lives and promote wellbeing for all at all ages       Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all       Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all

 

Key material issue

See 10.
  Safety
Background

Unsafe practices and conditions can have devastating consequences—the impact of human loss and suffering on individuals and those around them is immeasurable.

  Our response

Our ongoing Project Zero campaign highlights our commitment to zero injuries. Our target remains a zero own employee and contractor combined Lost Time Injury Frequency Rate (LTIFR) with a minimum of a 10% improvement year-on-year.

We keep safety at the top of employees’ minds with relevant, actionable programmes that challenge them to proactively identify potential hazards and make safe choices. Once potential hazards are identified, teams seek first to understand them and then control and minimise exposures within our operations. We have a zero-tolerance approach to safety, both in terms of our own employees and contractors and believe it is unacceptable that a single life should be lost in the course of our business.

Globally, satisfaction with our safety performance, particularly in North America, must be tempered by our collective shock, regret and grief at two fatalities in 2018: At Ehingen Mill in Europe, an employee was cleaning the conveyor belts leading from the woodchip silos to the digesters when he was pulled in between a guiding roll and a conveyor belt and killed. In Sappi Forests (Southern Africa), a contractor lost control of his vehicle which left the road, resulting in his death.

Lost time frequency rate

Lost time frequency rate

Regrettably, the start of the 2019 year was marred by two contractor fatalities, one at Ngodwana Mill and one at Sappi Forests in KwaZulu-Natal. Sappi people around the world have joined the CEO and board in supporting the families, friends and colleagues of those who tragically passed away.

In terms of regional safety performance:

  • Sappi North America had the best-ever employee LTIFR on record and the severity rate in this region declined significantly.
  • Although there was no improvement in the LTIFR for own employees in Sappi Europe, which stayed constant, this figure was somewhat skewed by the recent integration of new business units. On average, with some exceptions, the existing business units improved safety performance, however, all the new entities were at a lower safety level with action plans put into place to reverse this trend. Ehingen Mill took immediate action following the fatality:
    – Activities previously classified as low risk were reassessed
    – Mill representatives participated in a workshop in South Africa held with external service providers (see below), and
    – Works Council members and safety representatives travelled to Cloquet Mill to share best practices.
  • At Sappi Southern Africa, employee LTIFR was the best ever, with the LTIFR for contractors just above the best ever figure. We believe these achievements are the result of safety initiatives launched in 2018 following three fatalities in 2017: – A team from an internationally recognised safety consultancy was tasked to perform a safety culture review and suggest mitigation actions
    – Sappi Forests initiated the ‘Stop and Think before you Act’ programme underpinned by an intense communication programme supported by graphic materials, and
    – We established a forum that involves contractors in safety plans and programmes and emphasises their inputs.
1 Figures for the digital imaging business and the Carmignano and Condino Mills acquired from Cham Paper Group are not included in the people data, but will be fully included in 2019. However, safety data from the new acquisitions has been included.

Sappi Forests’ ‘Stop and Think before you Act’ safety initiative, which adopted a storytelling approach, won a Gold Quill Award of Excellence for Safety Communication Management from the International Association of Business Communications (IABC) in 2018. In addition, the work was also selected as one of eight Best of the Best entries from 258 awarded entries. In total, 699 entries from 27 countries were judged.

In support of Sappi’s 2020Vision objectives, all regions have set specific safety targets to be achieved by 2020 and each region has compiled specific action plans to achieve these targets. (See Group Sustainability Report on www.sappi.com/sustainability for more detail).

The 13th Global Safety Awareness Week was held in June 2018. The theme, ‘Own Safety, Share Safety’ highlighted the message that every individual should be responsible not only for their safety, but also for their colleagues’ and family’s safety. The initiative was well supported with senior managers visiting and participating in events at all the Sappi sites. The safety theme for 2019 is ‘WE VALUE SAFETY’. This aims to reinforce the direct link to our values and the engagement of all within our group—I value my safety, I value your safety and Sappi values our safety.

Value impact

The safety and wellbeing of employees and contractors

Key material issue

See 10.
  Employee engagement
Background

When employees are engaged at work, they feel a connection with the company. They believe that the work they’re doing is important and therefore work harder. This has obvious implications for productivity, career development and overall job satisfaction.

  Our response

We hold an employee engagement survey every two years, with the last one rolled out in September 2017. The objectives of the survey are to measure:

  • Changes in employee opinions and perceptions of Sappi as a place to work since the first baseline survey conducted in 2013
  • The evolution of sustainable engagement within Sappi globally in order for us to understand what drives sustainable engagement among our employees, and
  • The employee value proposition to understand what motivates and drives our employees to work in our organisation.

The 2017 results were compared to industry benchmarks (global manufacturing norm), best in class benchmarks (high performing companies norm) and cultural benchmarks.

Sappi’s global participation rate was 85%—a significant 15% increase from 2015. The global manufacturing norm participation rate is 83% and the response rate for high performing companies is 87%. There was an overall improvement in all categories that were measured in the survey when compared to the 2015 results.

Globally the most improved scores were for leadership and direction; operational efficiency and talent and recognition. Areas that require focus were identified as image and customer focus and safety and wellbeing.

Value impact

  • Reduced staff turnover
  • Improved productivity and efficiency
  • Higher levels of customer retention and profitability
In 2018, we spent an average of US$500 on training per employee. Internal training is supported by external training initiatives in each region. See our Group Sustainability Report on www.sappi.com/sustainability for more information.

Key material issue

See 10.
  Labour relations
Background

Sound labour relations underpin the ongoing production and ability to generate income for any business.

  Our response

The Sappi employment landscape includes interaction with trade unions at all our manufacturing sites across the group. This interaction is based on transparent communication and mutual respect.

We endorse the principles entrenched in the United Nations Global Compact and the Universal Declaration of Human Rights. In many areas, at a minimum, we conform to and often exceed the labour legislation requirements in countries in which we operate. We also promote freedom of association and engage extensively with representative trade unions. Globally, approximately 62% of Sappi’s workforce is unionised, with 70% belonging to a bargaining unit.

Overall, 2018 was characterised by very tough negotiations, particularly in South Africa, but relatively good relationships with organised labour across the geographies. However, community unrest is starting to impact on businesses across South Africa. (See On our watchlist.)

In Europe, approximately 67% of employees are members of a union and are represented through Works Councils. European Works Council meetings at which Sappi is represented by the Chief Executive Officer and Human Resources Director, take place twice a year. There were no major disputes in this region and we concluded collective labour agreements (CLAs) at Alfeld, Ehingen, Stockstadt, Lanaken, Kirkniemi, Carmignano and Condino Mills. At Maastricht Mill, the current CLA is in place until November 2019.

In North America, approximately 64% of employees are unionised. SNA has 11 collective bargaining agreements with its hourly employees. The overall industrial relations climate in SNA remained good with no major disputes. We satisfactorily reached labour agreements with two unions at Cloquet Mill, while negotiations with one union at Somerset Mill are ongoing. SNA also has a number of negotiations planned for 2019.

In Southern Africa, 56% of our employees belong to a trade union. While the industrial relations climate has been volatile, with trade unions competing amongst each other for improved membership and existence, we have continued to maintain a stable industrial relations environment across our operations—the result of our proactive engagement strategy and initiatives. We continue to engage with trade union leadership.

Wage negotiations were tough, but amicably settled. The Pulp and Paper Chamber is currently reviewing its future of the chamber given the fact that no industry agreement has been reached over the last two years. This will assist the SSA leadership decision on how to approach the 2019 collective bargaining process.

We expect another tough wage negotiation process in 2019, with the country preparing for election and the majority union continuing to operate under pressure from other trade unions.

Value impact

  • Increased levels of engagement
  • Enhanced productivity
  • More harmonious working environment

Key material issue

  Shared value
Background

Creating shared value (CSV) is not about philanthropy or even corporate social responsibility. It is about creating meaningful economic and social value that benefits companies, communities and individuals.

  Our response

Our revised Group Corporate Citizenship Policy (available on www.sappi.com) recognises the importance of CSV in securing sustainable communities and increased profitability.

We take a very active approach to CSV both regionally and globally, driving key initiatives in support of our three primary stakeholder groups—employees, customers and the local communities in which we operate. Projects are aligned with and support business priorities and needs, taking into account feedback from our stakeholders.

The fact that Sappi is headquartered and listed in South Africa, coupled to the significant development needs of the country, dictates a higher focus on CSV activities by Sappi Southern Africa.

While each region has its own programmes, they conform to common themes that are aligned with our business needs and priorities, including education, local community support, the environment and health and welfare. We encourage employees to participate in outreach and community projects.

Our CSV initiatives in 2018 are described in more detail in our Group Sustainability Report on www.sappi.com/sustainability, but a snapshot of initiatives in each region gives some idea of our approach below.

In Europe, our focus is on adding to the wellbeing, safety and health of our communities. Each Sappi mill and sales office supports various local education, cultural and environmental projects based on annual requests and identified needs.

In North America, to encourage more engagement and involvement from employees, we have implemented a staff version of the long-standing Sappi Ideas that Matter (ITM) programme known as Employee Ideas that Matter. We established ITM 19 years ago to fund designers who apply their creative talents to causes that address significant issues facing our society. The employee programme operates on similar principles whereby US$25,000 is made available to staff for worthy causes close to their hearts. In 2018, 50 entries were received and 11 projects were supported. Each business unit in this region has a Community Connections Group to channel local support.

One of the Employee Ideas that Matter projects that received funding was a book called ‘The Rainbow Rescue’ written by a retired Sappi employee. The book aims to teach children about diversity and acceptance. The book is being used to promote literacy in the Westbrook area through the Westbrook Children’s Project, a programme of the United Way of Greater Portland that brings community resources together to help children through their school years. A number of copies have been donated to the Westbrook Community Centre and Westbrook schools. Additional copies may be donated to other school libraries in the area.

In Southern Africa, employee wellbeing committees at each Sappi mill support local community projects based on annual requests and identified needs. These are coordinated via the annual Mandela Day (67 minutes) initiative.

Our Alien Vegetation Removal Programme at our mills in KwaZulu-Natal province in collaboration with the non-governmental organisation WESSA (Wildlife and Environmental Society of SA) is a good example of our approach to CSV. It involves the removal of alien vegetation on the land surrounding our mills—important to us as weeds have been identified as one of the biggest threats to biodiversity. A total of 20 community members per mill are being trained and employed through the programme, with the goal of establishing viable businesses which would ultimately serve other customers.

First established in KwaZulu-Natal in 2015, the Abashintshi (isiZulu for ‘change agents’) programme includes life skills training for the youth, the Ifa Lethu programme for the elderly (protecting cultural heritage), holiday programmes for school children and Asset Based Community Development (ABCD). The latter is based on the premise that communities can drive the development process themselves by identifying and mobilising existing, but often unrecognised, assets.

The programme has been expanded to 65 Sappi communities across the KwaZulu-Natal and Mpumalanga provinces, with 117 Abashintshi now involved. They are generating an income for themselves through their own businesses and they are helping community members to improve their own businesses. During 2018, 190 micro- and small businesses were started or rejuvenated, earning an income for 268 people.

Social investment spend in 2018

Total Spend 2018    
Europe €100,000    
North America (ITM US$250,000) US$550,000    
South Africa ZAR56 million    
Spend by Sappi Forests on water, sanitation and general upgrades to villages ZAR8.3 million    

Value impact

  • Greater understanding of community issues
  • Socio-economic upliftment
  • Expanded channels of communication
  • Enhanced licence to trade

Planet

Related SDGs1

  Ensure availability and sustainable management of water and sanitation for all       Ensure access to affordable, reliable, sustainable and modern energy for all       Take urgent action to combat climate change and its impacts       Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss
1 Statistics for the digital imaging business and the Carmignano and Condino Mills acquired from Cham Paper Group are not included in the Plant graphs, but will be fully included in 2019.
Renewable energy (%)   Absolute direct emissions (Scope 1) and
indirect emissions (Scope 2)
(tCO2e million)
 

Key material issue

See 10.
  Energy
Background

Given the high energy intensity of our industry, the cost and availability of energy is a key consideration.

  Our response

We leverage the significant opportunities inherent in our business and processes to help us reduce energy usage and impact:

  • Using a high proportion of renewable energy as a fuel source, most of it self-generated in the form of black liquor
  • Operating combined heat and power (CHP) plants in many of our mills. These plants not only generate electricity but also heat, which is used at the paper machines to dry the paper. Such efficiencies mean our CHP units are twice as energy efficient as conventional power plants
  • Improving the energy efficiency of our mills, and
  • Selling surplus electricity from Alfeld, Ehingen, Gratkorn, Maastricht and Stockstadt Mills in Europe; Cloquet, Somerset and Westbrook Mills in North America and Ngodwana Mill in Southern Africa.

We track purchased energy costs as a percentage of cost of sales to assess whether we are succeeding in this regard. As indicated by the graph on the following page, in 2018, global energy costs in relation to cost of sales remained stable, largely due to reduced costs in Europe which offset the sharp increase in Southern Africa.

Our focus is on reducing externally purchased power to reduce costs and also on reducing our reliance on fossil fuels. Over time, we have slowly but steadily reduced our use of purchased energy (electricity and fossil fuel) and also reduced energy intensity. Globally, over five years, energy self-sufficiency has increased by 5.6%.

In addition, we have increased our use of renewable energy—an approach which ultimately results in a reduction in GHG emissions and has positive economic implications. Our use of renewable energy in 2018 was 46.8%, of which 71.5% was own black liquor. This not only helps to reduce greenhouse gas emissions, but also separates our operations from the volatility of energy prices. While we are committed to higher use of renewable energy, we have certain process constraints.

Value impact

  • We acknowledge that our industry is energy-intensive and that we generate greenhouse gas emissions. We believe that this is mitigated by the carbon sequestration of the plantations and forests from which we source woodfibre.

Key material issue

See 7 and targets.
  Woodfibre certification
Background

Forestry and mill Chain-of-Custody certification assures consumers that the forest products they buy originate from legally harvested and sustainably managed forests and plantations.

  Our response

With only 10% of the world’s forests certified, we work hard to expand our certified woodfibre basket and have targets in each region, as well as a global target in place to achieve this. Globally, 75.2% of fibre supplied to our mills is certified.

In Europe, all mills are FSC®- and PEFCTM-certified. In North America, Sappi includes fibre sourced from the Certified Logging Professional and Maine Master Logger programmes. Cloquet, Westbrook and Somerset Mills are FSC-, SFI®- and PEFC Chain of Custody-certified. We source only from controlled, non-controversial sources and 100% of wood and pulp is purchased in accordance with SFI Certified Sourcing Standard. The standards we use are a critical element of our due diligence for Lacey Act compliance. In Southern Africa, 100% of Sappi’s owned and managed plantations are FSC-FM certified, while Ngodwana, Saiccor, Stanger and Tugela Mills and Lomati Sawmill are FSC Chain of Custody-certified.

In Southern Africa, we recognised that we needed to obtain certification over and above the FSC Group Scheme certification, based on the difficulty of getting small growers certified and on customers’ requests for PEFC labelled products. PEFC endorses national certification schemes, which meant South Africa had to develop a new certification scheme including a forest management standard. This is now known as the South African Forest Assurance Scheme (SAFAS). We now await the finalisation of our SAFAS certification and as soon as PEFC endorses SAFAS, we will be able to label our woodfibre as being PEFC-certified.

Value impact

  • Ensures strong environmental credentials and promotes environmental responsibility
  • Enhances reputation
  • Meets customer needs
  • While certification undoubtedly adds value, the drive for certification can negatively impact on small growers, who help to promote healthy forest and plantation landscapes, but for whom the costs of certification are onerous.

Key material issue

See 7.
  Climate change
Background

The fifth IPCC assessment report1 indicates that each of the last three decades has been successively warmer at the Earth’s surface than any preceding decade since 1850. The globally averaged combined land and ocean surface temperature data, as calculated by a linear trend, show an average warming of 0.85°C over the period 1880 to 2012. Anthropogenic greenhouse gas emissions have increased since the pre-industrial era to levels that are unprecedented in at least the last 800,000 years. Their effects, together with those of other anthropogenic drivers, have been detected throughout the climate system and are extremely likely to have been the dominant cause of the observed warming since the mid-20th century. The effects of climate change are already noticeable in changing weather patterns.

  Our response
Energy self-sufficiency (%)   Purchased energy costs as a percentage of cost of sales (%)   Reduction of energy intensity (GJ/adt)
Energy self-sufficiency (%)   Purchased energy costs as a percentage of cost of sales (%)   Reduction of energy intensity (GJ/adt)
1 IPCC, 2014: Climate Change 2014: Synthesis Report. Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Core Writing Team, RK Pachauri and LA Meyer (eds.)]. IPCC, Geneva, Switzerland, 151 pp.
2 Specific total energy (STE).

In 2018, there were record high temperatures in Europe. There were also major wildfires in northern England, Sweden and Greece. The 2017 fire year in the United States of America (USA) was one of the most destructive on record and the most expensive in USA history, with damage estimates topping US$10 billion. To date, the damage in the 2018 season has also been extensive, with extreme temperatures across large parts of North America.

While our business is wholly dependent on woodfibre, given SEU’s general risk mitigation strategy of sourcing pulp and woodfibre from a variety of sources and regions, we do not anticipate any material impact to raw material supply from climate change in the short to medium term. In SNA, our operations do not currently face material risks associated with climate change. With the exception of fibre from Brazil for Westbrook Mill, we source from northern hardwood and softwood wood baskets that have not suffered under any drought conditions or from fire.

However, the situation is different in Southern Africa, where Sappi Forests owns and leases 379,000 ha of land, with contracted supply covering a further 129,000 ha. Climate change has already impacted some of our plantations and has the potential to significantly impact our woodfibre base. Accordingly, we take concerted action to mitigate the risk, beginning with understanding where the largest risks of climate change will be to Sappi, how climate is likely to change further into the future and to formulate a multi-pronged response which involves:

  • Climate change investigations — to determine which plantations are most at risk, and also to identify which climatic variables are likely to change, as well as the magnitude and direction of such change. The preliminary study showed that maximum temperatures are more likely to increase than minimum temperatures, especially during spring and summer. It is also likely that spring rainfall will decrease, with more high-intensity rainfall during summer. The combined effect of higher temperatures and lower rainfall in spring is likely to exacerbate tree stress, thereby increasing susceptibility to pests and diseases, as well as fire. (Further details are set out in the Planet section of our Group Sustainability Report on www.sappi.com/sustainability).
  • Replacing pure species with hybrids — on the Mpumalanga highveld, Sappi experienced the impact of the changes described above with Eucalyptus (E.) nitens becoming unsuitable due to pest and disease issues, on plantations with the highest risk of climate change. E. nitens has a very narrow ideal temperature range and is very sensitive to changes in temperature. Subsequently, after evaluating management options and associated risks across the entire value chain, the decision was taken to replace E. nitens in KwaZulu-Natal by replacing it with E. grandis x E. nitens hybrid varieties.
  • Adjusting and directing our tree breeding strategy — through the use of modelled future climate data. Traditional tree breeding is a relatively slow process and in order to keep up with environmental changes, Sappi’s tree breeding programme is producing and selecting the most optimally suited hybrid varieties for each climatic zone. Our tree breeding division has a target of developing a hybrid varietal solution for all our sites by 2025. We are also making use of genetic tools, like DNA fingerprinting, to enhance and accelerate their breeding and selection process.
  • Facilitating the production of more rooted cuttings — as pine and eucalypt hybrids are more successfully propagated through rooted cuttings rather than seed, a strategy is being rolled out to meet future requirements. In addition to the recent construction of Clan Nursery and the rebuild of the Ngodwana Nursery, we plan to upgrade Richmond Nursery in 2023 to enable the production of additional hybrid cuttings in addition to seedlings.
  • Implementing rapid detection techniques — together with rapid understanding of the relative tolerance/susceptibility of our growing stock to newly introduced pests or disease, these techniques are critical in successfully managing the viability of our woodfibre base. Accordingly, we have instituted a series of Sentinel trials across various climatic regions. These trials are made up of many genotypes—both currently commercially planted and also pre-commercial varieties. In addition to different genotypes, different ages (life stages) of trees are also represented. Using these trials, our objective is to rapidly identify a new pest or disease, and immediately determine which genotypes are susceptible or tolerant, and also which life stage of the tree is impacted. This puts us in a position to react very quickly.

    In addition to these trials, we have recently completed a pilot study on the use of automated change detection using satellite imagery focused on rapidly detecting and reacting to damage—drought, pests, diseases, etc—to our plantations. The study entailed the acquisition of Sentinel 2 imagery which gives a new image every five days. Newly acquired images are compared to the previous image via cloud processing using complex change detection algorithms. The resultant change is fed live to the Sappi GIS system, and integrated with enterprise data (age, species, tree size, etc). Given the success of the project, we are now rolling it out to all our plantations, while making use of the higher resolution and daily Planet satellite images (www.planet.com) which offer daily change detection.

  • Long-term soil monitoring — under hotter and drier climatic conditions, the importance of soil organic matter will increase because of its ability to reduce soil temperature, and also to increase the soil water infiltration rate and soil water holding capacity. A major barrier to monitoring slow-changing soil attributes is the scarcity of long-term data sets. Against this backdrop, in 2018 Sappi Forests established long-term soil monitoring plots through a collaborative research project managed by the Institute for Commercial Forestry Research. These monitoring plots will form part of the current inventory plot network (permanent sample plots) and will be used to interpret and relate changes in soil quality parameters to stand productivity and site management.

Value impact

  • Global potential to impact our woodfibre base if we do not take concerted action
  • Sappi Forests:
    – Rapid response to climatic conditions.
    – Enhanced soil and woodfibre productivity.
    – More sustainable woodfibre base.

Critical to the sustainable production of timber is the impact that management operations have on the environment, and specifically the soil in which the trees grow. Because of its effect on physical, chemical and biological properties, soil organic matter exerts a dominating influence on crop productivity and environmental quality. The objective of our long-term monitoring programme is to overcome the scarcity of long-term data sets key to analysing forest site productivity questions.

Long-term monitoring provides an opportunity to assess changes across rotations and is an essential requirement for monitoring attributes that may change slowly or that are cumulative over time. A number of international forestry research organisations and companies have implemented long-term monitoring plots.

During June to August 2018, the first five long-term soil monitoring plots were initiated on Sappi land holdings through a collaborative research project managed by the Institute for Commercial Forestry Research based in Pietermaritzburg. The goal is to establish 10 twin-plots per year (five on Sappi land and five on land owned by other collaborating members). On one plot, harvest residue will be removed and on the other plot harvest residue will be retained. This will allow evaluation of the effect of biomass removal on growth and soil properties of the sites, providing additional information on site nutritional resilience and will assist with the extrapolation of results from a separate set of Nutrient Depletion Studies.

These monitoring plots will form part of the current inventory plot network (permanent sample plots). Data from this monitoring network will be used to interpret and relate changes in soil quality parameters to stand productivity and site management. More detailed studies will be conducted at selected sites which will be aimed at developing a better understanding of the process that can be used to further refine indicators.

Key material issue

See 7.
  Water
Background

Our operations are highly dependent on the use and responsible management of water resources. Water is used in all major process stages, including raw materials preparation (woodchip washing), pulp washing and screening, and paper machines (pulp slurry dilution and fabric showers). Water is also used for process cooling, materials transport, equipment cleaning and general facilities operations.

  Our response

Most of our mills are situated in the vicinity of rivers from which they draw water. Withdrawal from surface sources (mostly rivers) accounts for the largest percentage of water use. This withdrawal is subject to licence conditions in each area where we operate.

Specific water return to extracted (m3/adt)

Specific water return to extracted (m<sup>3</sup>/adt)

The World Resources Institute has identified South Africa and Belgium as having high levels of water stress. We have embarked on a number of water efficiency projects in South Africa (described in more detail in our Group Sustainability Report on www.sappi.com/sustainability) and in terms of Saiccor Mill, by having access to the Sappi-owned Comrie Dam where we completed a project to raise the dam wall in 2016. Our response in terms of Lanaken Mill in Belgium is also described in our Group Sustainability Report.

In Europe, exceptionally low water levels in most of the region’s rivers are not affecting our mills directly, but are having an impact on transport logistics.

In North America, our mills draw water from surface sources (rivers and lakes) and return treated water to the same primary sources. The areas in the two states where our mills operate have been identified as having low levels of water stress.

It is important to note that globally, 95% of the process water we use is returned to the environment. While it is difficult to improve this metric due to the nature of our processes, over five years specific water extracted has reduced by 3.8%.

Water used for pulp and paper production is mostly recycled in the system. However, minerals from woodfibre make it necessary to discharge some amount of water which is purified in high-end waste water treatment facilities.

Water and effluent testing are routinely conducted at mill sites.

Globally, over five years, we have achieved a positive result in effluent concentration by reducing chemical oxygen demand (COD) by 5.2% and total suspended solids (TSS) by 17.2%. In accordance with previous years, Saiccor Mill has been excluded from the global trend COD reporting. The mill is building up the biodispersion COD dataset, which will be used for future reporting. This value, tested in the marine environment, supports the historical environmental impact studies and the recently conducted biodegradation test, performed on the waste water. The use of this value was also endorsed and used by Quantis for a recent Lifecycle Assessment (LCA). (For a five-year trend of effluent discharge quality, see the Planet section of our Group Sustainability Report on www.sappi.com/sustainability.)

In terms of our plantations in Southern Africa, these are not irrigated and fertiliser use is kept to a minimum—being used only once in each rotation. This limits the potential impact on water sources in terms of nutrient load. In addition, our minimal use of pesticides is strictly controlled by the forest certification systems to which we conform.

Value impact

  • We do have an impact on water sources from which we draw and return water. However, this has to be offset against the high level of economic value added by our water usage and by the percentage of water (95%) returned to the environment
On our watchlist
Land restitution

Sappi is currently engaged in 65 land claims in South Africa. Six claims have been settled and the extent of the land agreed, but we are waiting for finalisation from the KwaZulu-Natal and Mpumalanga regional land claims commissioners. To date, 20 claims have been agreed to, but the extent of the land still has to be finalised with the regional commissioners or claimants. Of the 65 claims, 20 have been referred to court, either because we questioned their validity or the extent of the claim. In the past 10 years, we have settled 37 claims involving 8,151 ha in which claimants took ownership of the land and claims for 11,629 ha in which claimants preferred to seek compensation.

For many of the land claims in which we have been involved, and where there has been a change in ownership, we continue to buy the timber and help to manage those plantations.

While we support the land claims initiatives generally, we have been frustrated around the implementation of the policies and slow levels of bureaucracy. The forestry industry is a key driver of rural growth. If government could unlock some of the bureaucratic lagging, the attendant benefit would flow directly to rural communities.

Social unrest

There have been incidents of social unrest in South Africa, the result of a disaffected population who are protesting about lack of service delivery and job opportunities. Officially, the country’s unemployment is standing at 27.5%. In certain regions of the country, particularly the rural areas, it is much higher.

We played a role in helping to alleviate the situation by spending ZAR8.3 million on upgrading infrastructure in villages close to our forests in 2018. We also promote socio-economic development in rural areas, in particular through our Abashintshi programme and our enterprise development initiative, Sappi Khulisa (‘Khulisa’ means ‘to grow’ in isiZulu). The latter initiative, which began in 1983, is aimed at community tree farming and has successfully uplifted impoverished communities in KwaZulu-Natal and the Eastern Cape. The total area currently managed under this programme amounts to 27,080 ha. In 2018, under the programme 483,359 (2017: 448,221 tons) worth approximately ZAR387 million was delivered to our operations. Since 1995, a total volume of 3,796,940 tons to the value of ZAR2.1 billion, has been purchased from small growers in terms of this programme.

As rotation times, and the associated cash flows, in forestry are long, growers receive advances. In addition, qualified extension officers advise on all aspects of tree farming.

In recent years, we have expanded Sappi Khulisa beyond the borders of KwaZulu-Natal to the Eastern Cape. We believe the government’s expedition of planting licences in this area where 100,000 ha are available for planting would play a significant role in promoting rural development.

We are intensifying our focus on enterprise development to cover other areas apart from forestry and have appointed a specialist to drive this forward.