MASSMART'S PROGRESS UPDATE

In this section we provide feedback about our corporate
accountability progress with reference to the three
accountability themes that were introduced in our
2011 Corporate Accountability Report.

As communicated in 2011, each theme comprises shared Group and Division-specific
accountability initiatives.

It is mandatory for the Divisions to implement shared Group initiatives whilst Division-specific
initiatives are entirely discretionary, reflecting accountability commitments identified by the
Divisional management teams.

In a further development we have prioritised shared and Division-specific accountability initiatives
in line with the following considerations:

What is the legislative/regulatory driver for this initiative?

What direct commercial benefit will flow from
this initiative?

What resonance
does this initiative have with government and civil society-driven public discourse?

What relevance does this initiative have for Walmart’s global sustainability commitments?

What positive leverage does this initiative present for Massmart-Walmart’s reputation
in Africa?


Each initiative, and its associated level of prioritisation, is revisited, based on stakeholder input, on
a bi-annual basis. A practical consequence is that levels of prioritisation change, new initiatives may
be introduced and existing initiatives are sometimes discontinued.

The matrix below indicates the relative prioritisation of our active accountability initiatives, each of
which is discussed in further detail in the remainder of this section:

 

ENABLE SUSTAINABLE SUPPLY
AND CONSUMERISM

MINIMISE ENVIRONMENTAL FOOTPRINT

CHAMPION SOCIAL EQUALITY INITIATIVES

  • Direct farm
  • Global ethical sourcing (M)
  • Primary packaging rationalisation
  • Energy efficiency (M)
  • Broad-based black economic empowerment (M)
  • Socio-economic development (M)
  • Women’s economic empowerment (M)
  • Local supplier advocacy
  • Secondary packaging re-cycling (M)
  • Socio-economic impact of the Massmart-Walmart merger
  • Consumer e-waste recycling
  • Post-consumer waste recycling
  • Eco-label advocacy
  • Consumer empowerment
  • Water efficiency
  • Employee healthcare benefits (M)
  • Employee HIV/Aids benefits (M)

*(M) - Mandatory intiatives

   

OBJECTIVE:
To support and integrate emerging farmers into Massmart’s fresh produce supply chain

 

As a part of our focus on food-producer security and job creation, we have initiated a direct farm programme that aims to provide emerging farmers with market access by integrating them into Massmart’s fresh produce supply chain. Based on Walmart’s direct farm experience in India, the programme provides access to services that include mentoring by larger commercial farmers and training by our NGO partner, Technoserve. A pilot programme comprising 40 small-scale farmers has been set up in Ofcalaco in Limpopo Province. The average holding size of each farm is between five and 10 hectares, with crops that include tomatoes, onions, butternut, spinach and carrots. Additional communities have been identified in other parts of South Africa.

REFER TO WEB:
http://www.massmart.co.za/pdf/2012/massmart_direct_farm_programme.pdf

* Initiative name changed from "Sustainable Agriculture" to "Direct Farm".

   

OBJECTIVE:
To partner with private label, direct import and non-branded merchandise suppliers to ensure adherence to Walmart Supplier Standards

 

Walmart strives to positively impact global supply chain practices by raising its own standards and partnering with other retailers, brands, NGOs and government leaders to find innovative and sustainable ways to improve working conditions and protect the environment. With this in mind, Massmart has committed to implementing Walmart’s ethical sourcing programme, starting in 2013. Covering the sourcing of private brand, non-branded and imported merchandise, the objectives of the programme include: improving working conditions for factory workers around the globe; supporting strong social and environmental conditions in factories; and empowering workers through supplier development and women’s empowerment initiatives.

REFER TO WEB:
http://corporate.walmart.com/global-responsibility/ethical-sourcing/standards-for-suppliers

*New initiative.

   

OBJECTIVE:
*To partner with willing suppliers to identify and implement opportunities to rationalise private label product packaging
 

Inspired and informed by Walmart’s well-known packaging rationalisation expertise, Massmart hosted its first ever product packaging workshop with private label buyers in the Group. The workshop, which included support from Astrapak, Packaging Council of South Africa (PACSA) and South African Plastic Recycling Organisation (SAPRO), provided buyers with a practical framework to identify opportunities to improve resource efficiency and improve recyclability of private label product packaging. The workshop was a success and has resulted in the implementation by Builders Warehouse of a private label packaging audit. Our immediate priority is to expose all buyers in the Group to the workshops, after which a private label packaging rationalisation audit will be conducted within each Division. Through this process, and based upon Walmart’s experience, we are optimistic that we will optimise packaging resource use and improve the safety and recyclability attributes of our private label packaging.

REFER TO WEB:
http://www.massmart.co.za/pdf/2012/massmart_focuses_on_packaging_rationalisation.pdf

*Changed objective to read "rationalise" in place of "reduce".

   

OBJECTIVE:
To share knowledge with willing local suppliers to facilitate voluntary achievement of higher environmental and human rights standards in the retail supply chain
 

Massmart runs an active supplier advocacy process with the objective of encouraging responsible supplier conduct in our supply chain. The advocacy process incorporates a combination of self-assessment surveys, issue-specific workshops, random data verification site visits and sharing of comparative data. A combined total of 750 suppliers have participated in the process since it was launched in 2009. Our 2012 supplier advocacy agenda covered 117 suppliers and focused on understanding palm oil procurement practices of private label suppliers, fishery management practices of seafood suppliers and the integrated environmental planning commitment of strategic suppliers. A sustainable agriculture initiative will be added to our 2013 supplier advocacy agenda.

REFER TO WEB:
http://www.massmart.co.za/pdf/2012/massmart_defines_seafood_sourcing_policy.pdf
http://www.massmart.co.za/pdf/2011/profiling_supplier_environmental.pdf

   

OBJECTIVE:
To implement post-consumer
e-waste recycling schemes in major metropolitan areas
 

Currently in its fourth year of implementation, Makro’s e-waste partnership with Fujitsu-Siemens enables consumers to responsibly dispose of e-waste. We currently operate e-waste collection facilities at 10 Makro stores and estimate that 334 tons of e-waste have been collected since inception of the project. Approximately 98% of the associated components and materials have been diverted from landfill. The remaining 2% that could not be recovered, reused or recycled was safely disposed to landfill. We are grateful to Fujitsu-Siemens, who led the establishment of this programme. Given the success of the scheme, we are now exploring opportunities to involve a more representative spectrum of hi-technology brand owners in the initiative.

REFER TO WEB:
http://www.massmart.co.za/pdf/Fujitsu_ewaste.pdf

 

   

OBJECTIVE:
To implement, in line with customer demand, regionally-based post-consumer waste recycling schemes in our stores
 

As indicated in our 2011 Corporate Accountability Report, we have been pilot testing post-consumer waste take-back schemes at selected stores, including compact fluorescent light (CFL) and battery waste collection points at Builders Warehouse and Builders Express stores. Customer support of these schemes has however been indifferent and it is likely that we will discontinue them in favour of alternatives for which we can demonstrate greater customer demand. One such alternative involves a partnership between Builders Warehouse and Amalgamated Appliance Holdings, who are pilot testing a used small appliance customer take-back and recycling initiative. Whilst we do not operate specific customer-focused paper, board and plastic recycling schemes, we continue to accept and recycle modest volumes of packaging waste that are sometimes returned to our stores by environmentally aware customers.

   

OBJECTIVE:
To promote adoption by suppliers of independently verified eco-labels or equivalents such as Marine Stewardship Council
 

We indicated in our June 2011 report that we want to formalise our approach to eco-labelling. After researching and gauging the perspectives of external stakeholders, including suppliers, we have formalised an initial position on eco-labelling. Our position is that, whilst we will not enforce the adoption of eco-labels as a procurement screen, we will proactively facilitate interaction between eco-label owners, our buyers and key suppliers to build awareness of the benefits of participation in viable eco-label programmes. To this end we have scheduled eco-label awareness workshops with selected suppliers and eco-label programme owners and have prioritised energy efficiency, marine stewardship and forestry stewardship as immediate focus areas. We are disappointed that we have not made more demonstrable progress in the consistent application of energy efficiency labelling standards on the major appliances sold in our stores.

   

OBJECTIVE:
To empower consumers to make responsible consumer choices
more frequently
 

Consumer empowerment is about highlighting the responsible product choices that customers could make in the interests of minimising negative social and environmental impacts. We do this mostly through our Eco-wise environmental awareness programme. In our last report, we said that we intended launching an Eco-wise website and we have achieved this objective. Disappointingly, the number of visitors to the site has been lower than anticipated.

An important Eco-wise development has been the introduction of an Eco-wise product information panel that has been designed to inform and assist consumers to make better informed product choices that are good for the environment. To date these information panels are being trialled on 12 private label products including lawn dressing and potting soil.

We continue to run customer demand-driven environmentally-friendly product promotions, examples of which include the promotion of recycled office paper, solar-powered garden lighting, solar-powered desk lamps, and LED security lighting. Massbuild is working in partnership with Ellies to promote energy efficient products through the store within a store concept.

REFER TO WEB:
http://www.massmart.co.za/pdf/2011/eco-wise_brand_update.pdf
http://www.massmart.co.za/pdf/2011/making_saving_the_planet.pdf
   

   

OBJECTIVE:
To improve energy efficiency in line with format-
specific energy intensity
benchmark ranges

 

Walmart is an energy efficiency leader and has been instrumental in revitalising our focus in this area. A historical barrier to energy efficiency at Massmart has been the indifferent business case associated with implementing significant legacy store energy efficiency retrofits, such as the installation of specialised skylights to reduce reliance on electrical lighting. By assisting to procure skylights at considerably more affordable prices, Walmart has enabled Makro to embark on a legacy store retrofit programme that will see electrical lighting being supplemented by natural lighting. A retrofit at Makro Woodmead, the first store to be impacted by the programme, has already been completed.

In the same way, Walmart has reinforced the view that energy savings are dependent upon accurate measurement of electricity consumption, and that installation of independent metering should not be optional. It is now mandatory, rather than optional, for all Massmart stores to install independent energy tracking. Builders Warehouse had made most progress and is consolidating independently metered data centrally, enabling the implementation of better informed legacy store energy-saving initiatives.

We continue to embed energy efficient solutions in new store design. Makro’s five newest stores, starting with Makro Vaal, are on average 25% more energy efficient than their comparable legacy stores. Similarly, Game’s Foodco stores incorporate solutions such as advanced energy efficient refrigeration units to reduce electricity consumption. Walmart has an aspirational goal to be supplied by 100% renewable energy by 2025. We have therefore, with Walmart’s encouragement and assistance, revived an investigation to identify opportunities to deploy viable renewable energy options within the Group.

REFER TO WEB:
http://www.massmart.co.za/pdf/2011/energy_efficiency.pdf
   

OBJECTIVE:
To recycle secondary packaging (specifically board and plastic waste) that is generated in stores and distribution centres

 

As described in our 2011 Corporate Accountability Report, our objective is, ideally, to achieve a situation of zero paper, board and plastic secondary packaging waste to landfill, mainly through the implementation of store-based recycling sites. Last year we reported the existence of approximately 172 stores that were actively recycling waste. This year we can confirm that we have 226 stores, representing 71% of all South African stores. The majority of all store waste recycled is board (83.5%) followed by plastic (9.4%) and paper (7.1%). We estimate that approximately 9,600 tons of plastic, board and paper waste were diverted from landfill and recycled during the current reporting period. Following input received from Walmart, we conducted a survey of the waste management practices of all our South African stores. We achieved a 100% response rate to the survey and have identified opportunities to rationalise the number of recycling service providers, increase the number of participating stores and improve the accuracy of waste disposal data.

   

OBJECTIVE:
To harvest rainwater to supplement nurseries (at Builders Warehouse) and landscaping irrigation requirements
 

We harvest water at approximately 34 stand-alone store sites. This includes harvesting rainwater at all Builders Warehouse and Builders Express stores and condensate harvesting at our five new generation Makro stores. The water harvested in this way is used to supplement nursery irrigation needs at Builders Warehouse and store landscaping requirements at our new Makro stores. We estimate that, in the 2011 calendar year, 3,000 kilolitres of rainwater were harvested by Builders Warehouse and Builders Express, representing a 38% decrease on the 2010 calendar year.

Condensate harvesting at Makro involves collecting the condensate from store fridges and air-conditioning units, resulting in the use of less water for refrigeration and cooling. Interestingly, this integrated solution also improves refrigeration and cooling energy efficiency. Plans are in place to retrofit selected Makro stores with condensate harvesting technology. Furthermore, Game and DionWired’s three new regional distribution centres are fitted with water efficient fittings, such as low volume showers and taps, which has resulted in an estimated 40% reduction in water consumption.

REFER TO WEB:
http://www.massmart.co.za/pdf/2012/massmart_water_harvesting_strategies.pdf

   

   

OBJECTIVE:
To achieve and
maintain Level 4 BBBEE contributor status

 

Massmart’s current Level 4 BBBEE score of 72.82%, led to our being ranked second amongst all listed retailers in the 2012 FM Top Empowerment Companies Survey. Interestingly, the Massdiscounters (Game and DionWired) verified score of 77.41% is higher than the score of the top ranked retailer in the survey. Our Group score declined marginally as the result of the vesting of 3.4 million staff shares held by Thuthukani Employee Empowerment Trust. Although this resulted in a 7.16 point decline in the Ownership element of the Group scorecard, our overall BBBEE score decreased by only three points. The difference was offset, mainly, by improving Preferential Procurement performance from 12.9 to 15 points and improving Skills Development performance from 10.6 to 12.2 points.

The launch of a R100 million supplier development fund, which has already benefited black wine brand owners and black smallholder farmers, will provide a qualitative boost to Enterprise Development activities. In addition, Walmart has volunteered to advocate adoption of the BBBEE Codes to the global management teams of multi-national suppliers. We remain committed to improving Employment Equity and pleasingly black managers comprise 78.5% of all managers and professionals employed in the Group.

REFER TO WEB:
http://www.massmart.co.za/pdf/2011/reaping_the_benefits_of_share_ownership.pdf


   

OBJECTIVE:
To invest a minimum of 1.0% profit after tax (PAT) in education-focused social development initiatives that benefit the poorest of the poor

 

Massmart’s core SED focus is primary school nutrition, early childhood development (ECD) and school maintenance projects.

Massmart’s schools nutrition initiatives are led by the installation of mobile container kitchens. Initially funded by Game and Masscash, in partnership with the Department of Education, the Walmart Foundation joined the programme and donated a further $1.0 million, under the auspices of the Nelson Mandela Foundation and Basic Education Department’s 94+ campaign. Approximately 20.0 million meals are prepared, per annum, in operating container kitchens. Added to this, Builders Warehouse’s "Vegetables Under Construction" initiative enabled the sustainable cultivation of fresh vegetables at schools and Makro provided assistance to the Centaurus and African Children’s feeding schemes. Massmart, Cambridge Food and Game Foodco provided further support by way of food donations to FoodBank SA.

Our ECD focus is led by Makro who along with HOPE Worldwide have developed the Makro Growing Hope, Sowing Minds programme aimed at assisting crèches, caring for orphaned and vulnerable children, to achieve the minimum standards to qualify for government support. Game donated purpose designed ECD kits to under-resourced pre-schools and crèches. Filled with puzzles, books, building blocks, musical instruments – these “Tools to Play” kits aim to help develop young children’s abilities. Builders Warehouse has developed a solution for schools in need of maintenance. Sturdy, prefabricated storage sheds packed with maintenance tools, garden implements and other DIY supplies are donated to deserving schools.

3,500 back-to-school stationery hampers were donated to children of deceased South African Police Services officers and 5,000 goodwill food hampers to families who have members deployed in the South African National Defence Force. These projects are possible because of the generous support of key suppliers. All of these initiatives are, wherever possible, designed and implemented in consultation with the relevant government authorities.

REFER TO WEB:
http://www.massmart.co.za/pdf/2012/massmart_approach_to_csi_2012.pdf
http://www.massmart.co.za/pdf/2012/massmart_champions_primary_school_feeding.pdf
http://www.massmart.co.za/pdf/2012/massmart_container_kitchen_initiative.pdf


   

OBJECTIVE:
To increase economic opportunities for women by improving employment, education and business opportunities
 

Walmart has a world-wide goal to empower women in employment and in the supply chain. At Massmart, women represent 45% of managers and professionals, the Massmart-WDB Rural Women’s Trust has disbursed micro-loans to 12,024 rural women, the Massmart bursary scheme is targeted exclusively at women undergraduates and one focus of our wholesale stores is to optimise procurement opportunities for women managed (stokvel) collective savings schemes. More recently we have, at Walmart’s instigation, started profiling women-owned suppliers in order to promote their merchandise to a broader audience of buyers within the Group. As important, is our initiative to better understand the career barriers that confront female employees at Massmart; we achieve this through the deployment of an empowerment survey to 1,409 females across all of our Divisions. We realise that we have a long way to go but hope through these initiatives to make a tangible difference to women in the community, the retail supply chain and our business.

REFER TO WEB:
http://www.massmart.co.za/pdf/2012/massmart_works_to_support_women_
entrepreneurs_July_2012.pdf

http://www.massmart.co.za/pdf/2012/Empowering_women_is_a_priority_for_
Massmart_June_2012.pdf

http://www.massmart.co.za/pdf/rural_women_18102011.pdf

*New initiative.
   

OBJECTIVE:
To commission an academic study of the socio-economic impact of Walmart’s entry into South Africa

 

Toward the end of 2012, Massmart issued a request for a proposal to researchers at the University of Cape Town Graduate School of Business. The objective of the research proposal was to assess the impact of the Massmart-Walmart merger on factors such as consumer pricing, job creation, emerging farmer development and local manufacturing. The implementation of the proposed research project was however superseded by the Competition Appeal Court (CAC), who directed the merging firm to commission and fund a study by an expert panel nominated by organised labour, various government departments and Massmart-Walmart. The expert study, which was intended to recommend to the Court a framework for the operation of the Massmart-Walmart Supplier Development programme, was completed and submitted to the court in May 2012. At the time of writing the court has still to hand down its decision in relation to the findings of the expert panel.

   

OBJECTIVE:
To increase permanent employees’ access to affordable subsidised private medical benefits

 

We estimate that 48.4% of permanent employees have access to private medical benefits, representing an improvement of 6% over last year, but still short of the target of 60% that we set in 2008. To achieve this target we have, since 2008, implemented a choice of four additional affordable private health benefit packages. Unfortunately employee uptake, which is voluntary for staff who were employed before 2008, has been modest. In an attempt to improve accessibility to private medical benefits we have introduced an annual window period where employees with pre-existing conditions can qualify for benefits cover without being penalised. In addition, we continue voluntary employee health risk assessment screening aimed at early detection of priority ailments such as diabetes, raised cholesterol, obesity and high blood pressure. Since July 2010 more than 17,000 tests have been conducted, resulting in health counselling for staff who were found to be at risk. More recently (August 2012) we used the opportunity presented by the appointment of a new health services provider to enhance this screening intervention by implementing improved chronic disease and employee assistance programmes.

REFER TO WEB:
http://www.massmart.co.za/pdf/2010/massmart_Health_and_Wellness_Report.pdf
   

OBJECTIVE:
To combat the rate of infection amongst employees and to provide all employees and their spouses with free access to pre-HAART and HAART programmes

 

Based on testing conducted in the last year, the estimated HIV-prevalence amongst employees is, at 6.63%, considerably lower than the national average of 11.0%. 43,723 voluntary HIV tests have been conducted since inception of the programme. Whilst we aspire to achieve a 70% HIV-testing penetration rate, our service providers’ data appears to be unreliable, creating uncertainty about our current testing penetration. As a result, a new service provider has been appointed to remedy this situation. Altogether 88% of HIV-positive staff and their spouses are receiving support and treatment, including antiretrovirals and nutritional supplements, from the Massmart Impilo Employee Wellness programme. The remaining 12% of HIV-positive employees cite factors such as fear of disclosure and a preference to consult traditional healers as reasons for not enrolling on the Impilo programme. We have been struggling, for some time, to reliably extend our HIV programme into other African countries, largely because of our own inability to source local service providers. However, this year we made modest, but still insufficient progress, by expanding coverage to Lesotho.

REFER TO WEB:
http://www.massmart.co.za/pdf/2011/impilo2011_ed.pdf