SFPNA Sustainability Report 2012: Sustainability as a Business Strategy

By integrating social and environmental goals with financial goals, we have reduced our operating costs, secured a talented workforce, strengthened our company’s brand value and attracted investment.

Our achievements reflected throughout this report are the result of numerous efforts across all three of our business units—coated papers, release papers and market pulp. Each business unit has contributed toward key business initiatives, from procurement of energy and materials through manufacturing and efficient distribution of our products.

We can look back at some very significant decisions we’ve made over the past five years to keep our company strong and reinvestable, including product redesign to eliminate unnecessary material costs, SKU reduction to eliminate costly complexity and implementation of incentive compensation plans designed to keep the whole organization focused on the same goals.

In 2007, we established our first year of public tracking and reporting of our sustainability performance. A top priority from the first year centered on driving revenue from products and services developed within the past five years or less. This goal reflects our attention to changing customer needs and the ability to respond to those needs in a timely manner. Our product portfolio, supported by strategic marketing and sales efforts, has earned us improved market share in targeted business segments. When up against the competition, our achievements in the realm of environmental and social responsibility have enabled us to win key pieces of business.

Our highly trained and skilled workforce has made significant improvements in our pulping and papermaking operations. In 2012, we made 1.1 million metric tons of paper on six paper machines, which is almost as much as we made on seven paper machines in 2008, prior to the closure of the Muskegon, Michigan mill. This “invisible paper machine” reflects our more efficient operations, increased focus on waste reduction and working smarter throughout the manufacturing process.

Efficient use of capital, coupled with cost control, has delivered strong financial results and allowed us to attract the capital necessary to diversify our business portfolio. We are exiting the kraft pulp business at a time when global competition has degraded prices. Through a US$170 million investment, we are converting our pulp mill at Cloquet from producing kraft pulp to dissolving pulp (also known as chemical cellulose) and expanding SFPNA’s product portfolio into a growing market with higher margins. With operations at the Cloquet Mill in North America and the Ngodwana Mill and Saiccor Mill in Southern Africa, Sappi Limited has become the leading global supplier of chemical cellulose.

Along with our diversification, we are also continuing to invest in each of our three business units. We are rebuilding an off-machine coater at our Westbrook Mill, which will enable the mill to have greater productivity along with improved quality and operational flexibility. This investment positions us for growth in our Classics release business as well as opening up opportunities for new products.

At both our Somerset and Cloquet facilities, we continue to make investments in the core coated fine paper business. The Cloquet Mill is modifying refining equipment and the stock preparation area to be better suited for using purchased dry fiber. At the same time, our Somerset Mill is replacing the forming section on the PM #3. Both of these investments are expected to deliver increased production rates and result in better returns through material savings.

As we look ahead to the next five years, we will continue to report on our performance with a dedication to transparency. The outcome of our strategy is ultimately reflected in our financial performance—and we believe that our overall return on net operating assets is one of the most powerful metrics to illustrate our achievements.

To read the full report, please download a PDF from our website link: 2012 Sustainability Report.