Online Annual Report 2009

Achievements

  Extended access to medical benefits to an additional 9.75% of employees.
     
  Increased BBBEE score by 6.23% achieving level 5 contributor status.
     
  Ranked third by Carbon Disclosure Project (CDP) for quality of carbon reporting.
     
  Increased local procurement in foreign African operations by 8% to 19% of total procurement.
     
  Exceeded CSI policy guideline by investing an additional 0.6% profit after tax.

Letter from the CEO

A meaningful approach to sustainability reporting requires the confidence to not only draw attention to our successes but also to our failings.

This perspective has informed the approach that I have taken in drafting my letter about Massmart’s sustainability performance.

Preamble

In this report we have described many things that we’re doing well, but we’ve also identified numerous areas in which our performance leaves something to be desired. We’ve done this so that we can present a sensible balance of data covering both our successes and our failures. For example, while our most recent broadbased black economic empowerment performance is commendable, our environmental track record is not where it should be, particularly in terms of our progress on improving operational energy efficiency and promoting environmentally responsible merchandise.

Our achievements are well documented throughout this report, so I’d like to use this letter to spell out our plans for addressing some of our shortcomings.

Human capital

We have made significant efforts to detect HIV/Aids infection in our permanent staff and offer treatment to our employees, their husbands and wives. I am deeply disappointed that although we have achieved success in our efforts to increase voluntary counselling and testing, we still have a high percentage (31%) of employees who choose not to register for treatment on our programme. I’m sensitive to the fact that there is still stigmatisation associated with being HIV-positive, but it is our failure as a company that we have not been more successful in allaying these fears within our own people. There is a clear need for our human capital community to significantly step up their efforts to find and implement innovative responses to this problem. Pearl Maphoshe, our Group Human Capital Executive, has undertaken the responsibility to lead us forward to achieve this.

Climate change and environment

The requirements of a low-carbon society and the increasing cost of electricity require that we become more aggressive and innovative in our search for energy savings. We are committed to continuing to look for intelligent opportunities to reduce costs, including reducing energy consumption in stores, but success in this requires clear targets, carefully coordinated action and determined executive leadership. To date, these critical factors have not received sufficient attention. If not addressed immediately, we’re endangering our ability to achieve the goals we set for ourselves. I have asked our Group Commercial Executive, Llewellyn Steeneveldt, to coordinate a group-wide project for achieving a minimum saving of 12% in our energy intensity within the next two years.

We’ve also recognised the need to develop environmental awareness amongst consumers in our stores by improving their knowledge about the environmental choices they make. In 2008, we developed a mechanism for promoting environmentally responsible merchandise, the Eco-wise initiative. It was designed to include options for creating awareness about energy efficiency, water efficiency and recyclability. Sadly, the adoption of this programme has been slow across our Group and we have only introduced four Eco-wise products in the space of 12 months. Our experience was that price is an impediment for some products, but with greater focus and commitment I am confident we can achieve much more. Now, I am personally tracking our progress on environmental issues during my regular one-on-one meetings with divisional chief executives. I will be responsible for placing more emphasis on selecting opportunities to drive our Eco-wise initiative.

African operations

I am deeply embarrassed that we have not met our corporate social investment policy guideline to invest a minimum of 1% profit after tax in our foreign African operations. This is particularly disturbing given the prevailing perspectives some people have that South African businesses practise double standards in Africa. My awareness of this perspective was reinforced when I met with diplomats from 12 African countries on 17 July this year. The goal of this meeting was to gain a better understanding of their expectations of our conduct in their countries and after hearing their concerns, I appreciate how important it is that we show them that Massmart is different. Our executives operating in Africa have therefore been tasked to ensure that the CSI target is achieved in the 2009/10 financial year. In addition we have also agreed targets for local procurement and the indigenisation of executive store management in these countries.

Conclusion and next steps

I believe, that more thought needs to be given to evolving an Afro-centric response to sustainability issues in our supply chain in general. Our approach has always been largely influenced by the practices of our peers in Europe, North America and the United Kingdom. Now, my colleagues and I find ourselves questioning the wisdom of committing too much of our efforts towards monitoring the sustainability practices of importers and suppliers of global brands that are already receiving considerable attention from the world’s biggest retailers. We’re looking into this issue and I have asked our Corporate Affairs Executive, Brian Leroni, to research the merits of focusing more of our sustainability dialogue on uniquely African challenges. For example, perhaps we should specifically encourage hardwood-based product suppliers to support the establishment of FSC certified producers in the Congo basin.

Finally, I have used this opportunity to express my concerns but I would be remiss if I didn’t also say how proud I am of the reputation that we’re earning as a socially accountable organisation. Most importantly, we need to remember that failure is an inevitable consequence of progress and through it, we learn. On the back of previous failed efforts we find exciting new opportunities, new directions in which to go. I’m eager to get started on one of our newest initiatives, for instance, to tackle ethical supply chain management. I’m also looking forward to overcoming the challenges we’re finding in formalising our sustainability efforts. We’re moving on with greater wisdom and I am deeply grateful to every one at Massmart who is involved in our endeavour to build a more sustainable business.

Grant Pattison
Massmart CEO