Our external operating environment
presents risks and opportunities,
impacts our ability to generate
value and informs our response
to stakeholders and approach to
material matters. Below we set out
key developments in our operating
context in 2019 and our response.
Slowing global growth and trade tensions
The global economy in 2019 is on course for its
weakest year of growth since the financial crisis.
The International Monetary Fund is expecting
global growth to slow to 3% this year, from 3.2%
in July 2019.
In South Africa, shortly after year-end, we announced
our intention to make investments totalling up to
ZAR14 billion over the next six years in our South African operations.
We took commercial downtime at certain mills in
2019 and began a review of our assets in Europe and
Slow global growth has been exacerbated by
ongoing trade wars between the USA on the one
side and Europe and China on the other, which
have impacted the global economy.
We have dissolving wood pulp (DWP) sites in the USA
and South Africa. Asia is the biggest market for our
DWP and one of our major customers has a production
site in China. However, we can supply this customer
and others in the same country from our Saiccor and
Ngodwana Mills in South Africa which currently have
capacity of 800,000 and 250,000 tons per annum,
Regulatory and environmental issues
In Belgium, Germany, Latvia, Poland and the
United Kingdom, to promote recyclability, there
are fees for manufacturers that place packaging
in the market. More countries are looking at
introducing similar fees.
SEU has formed an internal recyclability task force with
representatives across R&D, new business development,
sustainability, and innovation and marketing.
SNA initiated similar work focused on increasing
The European Union's climate and energy
framework promotes decarbonisation by setting
2030 targets for greenhouse gas emissions
to decline by at least 40% below 1990 levels,
renewables to deliver 32% of our energy and
energy efficiency to improve by 32.5%.
SEU is leading the process of developing
decarbonisation plans for each mill in Europe, while SNA
and SSA are focusing on mills in their regions.
In South Africa, carbon tax was introduced
on 01 June 2019. Our liability from implementation
to the end of September is estimated at
ZAR20 million (or ZAR60 million/annum).
Together with other industry members, we are working
with consultants appointed by the Department of
Environmental Affairs on rules for recognition of carbon
in harvested wood products.
Parts of South Africa are still suffering from the
effects of a devastating drought.
We achieved our specific water use target in South Africa
and have funded the rehabilitation of water infrastructure
in villages close to our areas of operation.
The rise of populism, social disruption and Generation Z
Globally, we have witnessed mass protests about
climate change in the form of the Extinction
Rebellion and #FridaysForFuture. In South Africa,
there have been marches to protest gender-based
violence which has now come under the
Close to many of our operations in South Africa,
there have been protests and incidents of
violence, the result of a disaffected population
protesting about lack of service delivery and job
opportunities – the official unemployment rate
is 29%, with the unofficial rate significantly higher
and youth being most affected.
The Sustainability Council is reviewing how to integrate the
recommendations of the Task Force on Climate-related
Financial Disclosure (TCFD) into our climate change
response. A target for gender equity will form part of our
2025 sustainability goals. We continue to raise awareness
about gender-based violence across the organisation
through our employee wellbeing programme.
The recently announced ZAR14 billion investment
programme (described earlier) will help to create direct
and indirect jobs. In addition, we continue to promote
participation in the forestry value chain through our
Sappi Khulisa enterprise development programme
which encompasses community tree farming. The total
area managed is currently 34,139 hectares. In 2019,
under this programme, 425,001 tons of timber (2018:
483,359 tons) worth approximately ZAR382 million
(2018: ZAR387 million) was delivered to our operations.
Since 1995, a total volume of 4,221,941 tons to the value
of ZAR4.2 billion has been purchased from small growers
in terms of this programme.
We have intensified our enterprise and supplier
development (ESD) drive by establishing a separate ESD
department which identifies procurement opportunities
and oversees mentoring programmes and capability
training. A total of 129 small, medium and micro
enterprises (SMMEs) have been assessed and trained
by our partners and 28 SMMEs integrated into the value
chain across the business.
We have established skills centres at Ngodwana
and Saiccor Mills which provide training for our own
employees and target unemployed youth with the
overarching aim of stimulating SMME growth.
According to Bloomberg, Generation Z accounts
for 32% of the global population in 2019. This
generation wants companies to have a positive
purpose that improves the world in some way.
They're also more digitally connected than any
The fact that our business is based on woodfibre, a
renewable resource from sustainably managed forests
and plantations which help mitigate the impacts of global
warming, is widely communicated across social media.
So too is our shared-value approach to doing business.
Increasingly, we are offering our employee learning in
Increasing consumer and brand owner concerns about sustainability-related issues
According to the United Nations Environment
Programme (UNEP), every year an estimated
8 million tons of plastic land up in oceans
and 60-90% of the litter that accumulates on
shorelines, the surface and the seafloor is made
up of plastic. The most common items are
cigarette butts, bags, and food and beverage
We are taking advantage of anti-plastic sentiment by
increasing capacity in packaging papers, particularly
of recyclable packaging. (See Our key material issues – Prosperity for details of
our collaborative work to support the launch of a new
confectionery snack bar wrapped in recyclable paper.)
SNA solicits direct brand owner feedback through
the Sustainability Customer Council, strengthening
positioning against plastic end use.
Concerns about the impact of fast fashion
on natural resources, and on deforestation in
particular, are driving a move to ethical fashion.
Forest certification systems with third-party verified
forest management and chain-of-custody processes
ensure that responsible forest management practices
are implemented in the forest and woodfibre from
certified forests can be identified throughout the supply
chain. Globally, in 2019, 74.8% of fibre supplied to our
mills was certified.
Increasing consumer and brand owner concerns about sustainability-related issues
In terms of global warming, scientists officially
pronounced July 2019 the warmest month the
world has experienced since record-keeping
began more than a century ago. Alaska's sea
ice melted for the first time in recorded history. Climate change activism around the world
accelerated, with teenager Greta Thunberg
generating global attention.
Trees and forests play an integral role in the global
carbon cycle. By sequestering carbon dioxide from the
atmosphere and storing it in forest biomass and soils,
forests store vast amounts of carbon and release oxygen
back into the atmosphere. Harvesting managed seminatural
forests in a sustainable manner, in accordance
with internationally recognised forest certification
systems as Sappi does, promotes growth and carbon
uptake. So too does balancing harvesting with continual
replanting and regrowth, as in our plantations in South
SNA highlights its superior carbon footprint compared to
other key players in graphics and packaging segments
through the EQ tool on our e-commerce platform.
Biodiversity loss is unprecedented: The
Intergovernmental Science- Policy Platform on
Biodiversity and Ecosystem Services (IPBES),
the first intergovernmental report of its kind, finds
that around one million animal and plant species
are now threatened with extinction, many within
decades, more than ever before in human history.
It is in our own interests to promote biodiversity in the
forests and plantations from which we source woodfibre,
discussed in Key material issues on page 33. SNA has
invested in Forests in Focus, a platform using United
States Department of Agriculture (USDA) forest inventory
data to assess and promote forest health, including