Online Annual Report 2009

Priority Sustainability risks

We pay close attention to the sustainability risks that confront our business, through a comprehensive sustainability risks register. From time to time however, there are certain risks that will receive more attention.

The following five sustainability risks are currently receiving priority in our business:

Priority Sustainability risks
         

Human capital

 

Broad-based black economic empowerment

  Failure to respond effectively to the retail skills shortage     Failure to sustain BBBEE performance in line with stakeholder expectations
In retail, the disciplines of buying, planning, supply chain and store operations are most affected by the skills shortage. One result we often see is that vacant positions take longer to fill and this results in control risks, overloading of existing employees and a loss of momentum in affected areas.   BBBEE performance by South African companies is constantly improving. So too must our performance if we are to continue meeting society’s evolving expectations. While a demonstrated commitment to BBBEE confers social relevance with employees, government, media and sections of civil society, BBBEE performance is credible only in comparison to that of other responsible South African corporations.
The Massmart Corporate University focuses on executive and leadership development programmes to build skills in areas of scarcity. Specialist functional training programmes, such as merchant development, are also being implemented as a response to the problem and we anticipate that over time our graduate trainee programme will result in more new entrants pursuing careers in buying, planning and supply chain management.   Massmart tracks and compares our BBBEE performance to that of the top 50 listed companies identified in the FM Top Empowerment Companies Survey. Divisional BBBEE performance is analysed during biannual performance review workshops and improvement opportunities are prioritised with reference to their transformation impact, achievability, scorecard impact and affordability.
         

Climate change and environment

 

African operations

  Failure to adapt merchandise proposition to needs of a low-carbon society     Failure to accurately predict and adapt climate change impact on foreign African economies
Awareness of the causes and impacts of climate change is growing. Add to this increasing environmental legislation and you’ll find personal lifestyle and consumption decisions increasingly demand merchandise suited to a low-carbon society. We expect higher demand for energy efficient, water wise, recyclable and less toxic merchandise. Failure to respond effectively has potential to result in insufficient environmentally responsible options and/or environmentally irrelevant merchandise in our stores.   An insufficient understanding of the impacts of climate change may put our operations in foreign countries at risk. All are regarded as being exposed to high or extreme climate risk with regard to water security, natural resources and ecosystems, social conflict, poverty levels, agricultural production, food security and capacity to contain infectious diseases. We need more data on how these factors might affect government policy, economic wellbeing and consumer buying power.
Massmart has implemented an efficient customer intercept research process to track consumer attitudes quickly and inexpensively. Regular assessment and a better understanding of merchandise categories most vulnerable to changed consumer attitudes are assessed. To ensure the data is comprehensive, we also engage suppliers on improving the environmental attributes of their products and we look into what alternative merchandise options are available.   Our Group tracks independently compiled country climate vulnerability indices to prioritise individual country risks and understand the specific nature of those risks. We’re investigating the availability and validity of economic models that demonstrate the anticipated impact of climate change on African retail markets. We’re also developing an engagement process with scientists and economists who have an intimate understanding of the impacts of climate change in sub-Saharan Africa.
         

Ethical supply chain

     
  Failure to identify irresponsible social and environmental supplier behaviour      
We procure merchandise from a wide variety of suppliers in People’s Republic of China, Hong Kong, Vietnam, Taiwan, Indonesia, UAE , Brazil, India Malaysia, USA, United Kingdom and elsewhere. The number and geographic dispersion of suppliers, together with our high merchandise volumes, exposes us to inadvertently partnering with organisations who are wittingly or unwittingly engaged in irresponsible or unethical social and environmental practices.      
Massmart attempts to detect suspect practice through regular interaction with supplier executives, supplier self-assessment surveys and site visits. We also contract with foreign suppliers who trade with global retailers with an established reputation for ethical procurement practice. In addition, we are in discussions with SGS – an inspection, verification, testing and certification company – to conduct independent reviews of those private label suppliers about whom we have limited information.