Management approach disclosures: Environmental

Overall

The group’s strategic intent is to develop products and services to capitalise on emerging sustainable business opportunities, realise cost savings through energy efficiency and other sustainable business practices as well as enhance Barloworld’s reputation by leading in sustainable development. We are committed to providing leading customer solutions that address environmental stewardship and customer competitiveness and adopt a similar approach to our internal operations. This is incorporated into strategy and addressed by:

  • An integrated management approach entrenching accountability for economic, environmental and social activities in each of our businesses
  • An interim aspirational group target of a 2% efficiency improvement in non-renewable energy and greenhouse gas (GHG) emissions (scope 1 and 2) efficiency by the end of our 2015 financial year, off a 2014 baseline against a business as usual scenario that again tracks revenue as a proxy for business activity. This interim one-year target allowed the group to align its subsequent target period to its medium term strategic period of 2016 to 2020.
  • Minimise our carbon footprint and off-set where appropriate to achieve a carbon-neutral status
  • Provide solutions that create value for our customers by assisting them to achieve their sustainable development objectives
  • Identify and pursue emerging sustainable business opportunities as well as cost-saving opportunities
  • Integrated sustainability reporting ensuring credibility, transparency, completeness and compatibility.

The group is a signatory to the UN Global Compact, of which Principles 7 to 9 specifically address the Environment. The group Chief Executive has expressed continuing support for the UNGC’s 10 Principles (see GRI 1.1, Barloworld Sustainable Development – Chief Executive’s Message and Barloworld’s 2015 COP). For details on the UN Global Compact, see: www.unglobalcompact.org

The methods and means of environmental reporting are constantly being evaluated and enhanced where appropriate to ensure we are leading in this aspect of our business. Two systems implementations were embarked on in the current reporting period. These will enhance data integrity, governance and the efficiency of current reporting processes as well as allow for greater integration between financial and non-financial reporting aspects within the group which support our integrated management approach. It is anticipated that our enhanced data measurement and management will improve day-to-day management and monitoring of environmental issues.

Our current reporting systems have been assured by both internal and external audit (Deloitte). Both assurance providers are involved in the above-mentioned systems implementation to ensure integration of adequate governance processes and controls within the systems.

The group’s internal audit function continues to be involved in the assurance process for non-financial data, particularly of fuel, water, electricity and safety data. During the year the Equipment southern Africa, Equipment Russia (Vostochnaya Technica), and Handling Agriculture divisions were formally reviewed by the group’s internal audit function. The principal issue centred on the structure of the data collection process. This has been addressed by ensuring this data is collected on the financial reporting platform.

Exceptions noted in the above reviews have been tabled to the respective management teams and at the group Audit Committee. Management have undertaken to implement the necessary mitigation to eliminate or reduce to a satisfactory level, the risk/s associated with identified control weaknesses.

In addition to the above assurance engagements, the group’s internal audit function also conducted two follow-up consulting engagements in our South African operations, one of which was at Avis Rent a Car and the other at Avis Fleet Services.

To assist the group in preparing credible and accurate integrated reporting, Internal Audit prepared an Assurance Matrix which reflects the assurance status of various aspects addressed in the group’s integrated reporting.

The matrix will assist the Audit Committee in fulfilling its responsibility for overseeing the group’s integrated reporting, as defined by the King III principles.

External auditors provide assurance over reporting of material indicators as agreed with the Audit Committee. This review is conducted in line with the ISAE 3000 standards.

Refer to the Independent auditors’ non-financial assurance report.

Mindful of our responsibilities in our value chain, a number of initiatives have been implemented to assess and limit any potential risks emanating through our supply chain. We have assessed our principals that account for the majority (some 70%) of our procurement spend, for environmental, labour, human rights, bribery and corruption, and corporate citizenship risks. Save for the area of concern reflected below, the remainder have been assessed as low risk rating. We are aware of the well-publicised Volkswagen and Audi emission issues affecting customers internationally. We recognise the associated risks and are engaging with our principal. The Volkswagen and Audi vehicles sold by us in our dealership territories meet local emissions compliance standards, and our operations have consequently not been directly impacted. We regret any anxiety or uncertainty our customers, or any other stakeholders, may have experienced because of this matter.

Material aspects

The Barloworld executive and the group’s risk and sustainability committees are involved in the process to identify material environment issues reflected below:

  • Energy consumption
  • Greenhouse gas emissions
  • Water stewardship
  • Waste management, including recycling and extended lifecycle (rebuild and remanufacture), and responsible waste disposal
Materials

Materials are sourced from Original Equipment Manufacturers (OEMs) and other suppliers and used to support the retail and service nature of the group’s operations. Materials that have a high impact on the environment are monitored.

The group remains committed to reporting material use by weight to ensure consistency and comparability.

As Barloworld predominantly represents OEMs and principals, opportunities for using recycled materials are limited. Re-treaded tyres are the most significant in this regard. Barloworld Equipment has significant rebuild and remanufacture facilities in Russia and South Africa which provide extended and multiple lives to equipment and components reducing the demand for new materials as well as reducing waste volumes.

Energy

As a responsible corporate citizen and aligned with global imperatives, in 2014 Barloworld set an interim aspirational group target of a 2% efficiency improvement in its non-renewable energy consumption by the end of this 2015 financial year, off a 2014 baseline, against a business as usual scenario that again tracks revenue as a proxy for business activity.

This interim one-year target allowed the group to align its subsequent target period to its medium-term strategic period of 2016 to 2020. In addition to the efficiency improvement target set for the end of 2020, the group has also set a target for renewable energy consumption over the same period.

The group did not achieve its aspirational 2% efficiency improvement target for non-renewable energy due to growing operations with relatively high intensity levels as well as base consumption patterns of businesses with decreased activity levels during the period.

At 2015FYE, the group energy intensity was 49.8 (GJ/Rm revenue), which is 7% behind its aspirational energy intensity target of 46.6 (GJ/Rm revenue).

The targets have nonetheless presented the group with benefits which include mitigating rapidly rising costs, particularly electricity in South Africa, (including related ‘pass-through’ costs), organisational resilience and the associated need to reduce greenhouse gas emissions. These are entrenched in the group’s strategic planning processes and operations. The group focuses on improving the efficiency of non-renewable energy consumption, mainly in the form of electricity and fuel for vehicles. In terms of the former, the group’s divisions and their operations have a range of initiatives to reduce consumption spanning timers on light switchers to more energy efficient building designs – in short, any measure that will reduce consumption and cost. Some divisions are now considering alternate energy sources, having sufficiently reduced their non-renewable energy consumption. In terms of fuel consumption, vehicles are recent models with the latest engines designed to use less fuel and emit less pollutants. At an operational level, the efficiency of related fleets are monitored against the most appropriate drivers and indicators.

Regular maintenance ensures that engines run optimally and consume less fuel. The group also sources products from its OEMs with the latest fuel saving technologies.

Divisions utilise the skills and resources within their respective operations to assist in identifying and maximising efficiency opportunities internally within the group.

Water

Barloworld is committed to being a responsible custodian of water by measuring, monitoring, managing and reporting its water use as standard business practice and, where necessary, proactively implementing initiatives that conserve water or mitigate the effects of its use for business operations.

The group recognises that water is an increasingly scarce and critical global resource. Although none of its operations are particularly water intensive, Barloworld is committed to more efficient water consumption through reduced use, increased recycling and water-harvesting initiatives.

Through these initiatives, the group strives to minimise the risk of any future water constraints and realise the commercial benefits of effective and efficient water usage.

Barloworld will continue to assess the physical, regulatory and reputational risks associated with water use and, where feasible, adapt its operations, processes and procedures accordingly. It will also pursue identified opportunities.

The group endeavours to reduce consumption through a range of water savings measures and technologies throughout its divisions. These must make economic sense before being implemented but, where commercially sensible, including enhanced resilience, the group would typically adopt them. Where water-savings technologies are part of the group’s product offerings, these new products are added to the group’s portfolio. The main users of water in the group are motor retail operations, vehicle hire companies such as Avis Budget and the trucks in the logistics operations. The group completed the 2015 CDP Water disclosure for use as a tool to understand its water use, identify associated risks and opportunities, contribute to general knowledge and global databases, and identify further interventions to reduce consumption.

Barloworld is committed to responsible water stewardship with group aspirational 2020 targets set.

Biodiversity

Barloworld’s operations do not have a material direct impact on biodiversity. This is due to the mainly urban location of its operations and the nature of its business. As such, an approach to managing biodiversity is not required as it would be for a mining company, for example. Despite this, the group’s impact on biodiversity will continue to be monitored and should this necessitate a response, a strategy will be developed and implemented.

However, if one of our suppliers was judged to have had a severe impact on an area of high biodiversity value, and therefore be in breach of Barloworld’s own Code of Ethics, the group would consider an appropriate response.

Emissions, effluents and waste

Indirectly we reduce emissions by using less electricity and, directly, by using fuel more efficiently in our vehicles as well as in our building heating ventilation and cooling systems (HVAC). In line with our interim group aspirational non-renewable energy efficiency improvement target, the group had set an interim aspirational target of a 2% efficiency improvement in its greenhouse gas emissions (GHG) (scope 1 and 2) by the end of this 2015 financial year, off a 2014 baseline, against a business as usual scenario that again tracks revenue as a proxy for business activity.

This interim one-year target allowed the group to align its subsequent target period to its medium-term strategic period of 2016 to 2020. In addition to the efficiency improvement target set for the end of 2020, the group has also set a target for renewable energy consumption over the same period which will also positively impact greenhouse gas emissions.

The group did not achieve its aspirational 2% efficiency improvement target for greenhouse gas emissions (scope 1 and 2) due to growing operations with relatively high intensity levels as well as base consumption patterns of businesses with decreased activity levels during the period.

At 2015FYE, the group GHG emission (scope 1 and 2) intensity was 4.6 (tCO2e/Rm revenue), which is 7% worse than its aspirational emission intensity target of 4.3 (tCO2e/Rm revenue).

The group has implemented a wide range of energy-reduction initiatives to reduce GHG emissions. These include communication, monitoring and reporting as well as operational initiatives such as the efficient maintenance of vehicle fleets using the latest clean-engine technologies from OEMs. Other initiatives include the installation of renewable energy and the purchase of carbon credits within certain operations.

Car Rental South Africa’s customer rental emissions generated are classified as scope 3 emissions and have been disclosed from our 2010 financial year. These emissions have been expanded to cover rental fleets from other operations during the 2013 financial period. While the expanded reporting has resulted in more complete data being reported internally, these are not included in the disclosed scope 3 – rental fleet emissions data in the current reporting period. Barloworld’s internal audit department has reviewed the reporting processes to ensure assertions around accuracy and completeness are adequately addressed. The review has identified some recommendations which management are in the process of implementing, prior to disclosure.

Emissions identified by Barloworld include carbon dioxide, nitrous oxide and methane from combustion of petrol and diesel in trucks, machinery, equipment and vehicles, and from purchasing electricity. This is in line with the nature of our operations and the sources of our emissions. There are no significant ozone depleting substances as emissions sources in Barloworld’s operations.

Barloworld does have other non-Kyoto protocol greenhouse gas emissions sources, namely oxides of nitrogen (NOx) and oxides of sulphur (SOx), given the nature of its automotive operations. Measures to mitigate these non-greenhouse gas emissions rely on consumption of low sulphur fuels and advanced engine technology for cleaner fuel combustion. These measures are outside the control of Barloworld although they are adopted and used internally where feasible.

Effluents emanate from cleaning vehicles, plant and equipment. All effluent is cleaned of pollutants and clean water discharged into municipal reticulation systems. The group endeavours to dispose of waste materials through legitimate contractors at certified waste disposal facilities. Barloworld is committed to responsible waste management, including disposal, with group aspirational 2020 targets set. Our Worldwide Code of Conduct addresses this under our value of Sustainability: We focus on environmental responsibility and preventing waste.

The group does not generate significant volumes of waste. Both hazardous and non-hazardous waste streams are monitored by type, volume, disposal method and destination. The group is committed to reporting all waste by weight or volume to ensure consistency and comparability.

A critical aspect of the group’s waste management and product life-cycle stewardship addresses extended product use. This includes ensuring products have a number of useful lives, facilitated in part through our remanufacture and rebuild programmes.

The group completed the 2015 CDP Climate Change disclosure for use as a tool to understand its carbon footprint, identify associated risks and opportunities, contribute to general knowledge and global database, and identify further interventions to reduce emissions.

Mindful of our responsibilities in our value chain and a number of initiatives have been implemented to assess and limit any potential risks emanating through our supply chain. We have assessed our principals that account for the majority (some 70%) of our procurement spend, for environmental, labour, human rights, bribery and corruption, and corporate citizenship risks. Save for the area of concern reflected below, the remainder have been assessed as low risk rating.

We are aware of the well-publicised Volkswagen and Audi emission issues affecting customers internationally. We recognise the associated risks and are engaging with our principal. The Volkswagen and Audi vehicles sold by us in our dealership territories meet local emissions compliance standards, and our operations have consequently not been directly impacted. We regret any anxiety or uncertainty our customers, or any other stakeholders, may have experienced because of this matter.

For comparability, the group has continued to use energy and emission conversion factors from 2009 to avoid any impact in the resultant energy and emissions from a change in factors. As we embark on our target period 2016 to 2020, we will give consideration to updating these in the new financial period.

Products and services

Barloworld recognises the environmental impact of its customer solutions and, supported by its principals, is committed to providing leading products and solutions that foster environmental stewardship. The group works with its Original Equipment Manufacturers (OEMs) to ensure customers’ sustainability objectives are met and their competitive position enhanced.

Represented OEMs focus on improving the life-cycle environmental footprint of products that the group offers to customers.

Energy and emission efficiencies as well as product life-cycle and disposal are core aspects being addressed.

The group does not manufacture or extract as part of its operation. It transports items through its logistics operations where it endeavours to plan routes to minimise energy consumption and greenhouse gas emissions. The group communicates to its suppliers information on the latest sustainability technologies and interacts with principals on customers’ requirements for product safety and environmental stewardship.

As part of its customer offerings Avis Budget Rent a Car provides emissions data on its rental invoices. This promotes awareness to customers of their environmental footprint and enables emissions reporting for corporate clients.

Compliance

Entrenched in our group Code of Ethics and Worldwide Code of Conduct is the requirement to ‘Obey the law’ and ‘Protect the environment’. This is regarded as the minimum requirement and the group strives to conduct its operations as a responsible corporate citizen. Where possible, we also participate in the formulation of responses to draft policy and legislation.

Transport

Aside from emissions caused by air-travel and business vehicle trips, the group is aware of the potential for accidents as a result of transportation. The group strives to operate modern fleets using the latest technologies as well as to provide appropriate driver training and development, to maximise safety aspects and minimise fuel consumption and emissions.

Drivecam and Drive Smart systems have been implemented in our Logistics fleet that assists in managing both driver and public safety.

Supply-chain environment assessment

Our commitment to environmental responsibility is carried into our supply-chain through our Worldwide Code of Conduct, the applicable aspects are:

  • Sustainability Value includes:
    o We focus on environmental responsibility and preventing waste: '...We are committed to complying with environmental laws and regulations and expect our suppliers to do the same'.

Third party service providers and suppliers (TPSP&S) in all business divisions have been subjected to a risk assessment and due-diligence process in relation to bribery and corruption. This due diligence process involves the integration a more rigorous screening of TPSP&S into the existing procurement processes and setting clearly defined minimum requirements. This process is now applied to new TPSP&S and is ongoing for existing TPSP&S, in accordance with the Barloworld due diligence policy. To date some 16 500 suppliers are being covered by such assessment. As part of this process, some 3 330 suppliers have signed the Barloworld Supplier Code of Conduct which includes, among other things, the following voluntary undertaking from suppliers:

“The supplier understands that it has responsibility for its own supply chain and for managing standards of conduct within its supply chain. It therefore agrees to encourage and promote high ethical standards and adherence to international best practices in human rights, health, safety and environmental standards when undertaking its contractual obligations towards Barloworld.”

The Supplier Code of Conduct also specifically requires our suppliers to comply with environmental laws and to recognise their responsibility towards the environment and maintain proper systems to prevent and/or minimise potential hazards.

An internal review has also been conducted on all our major principals and Original Equipment Manufacturers for risks relating to the environment, in addition to other aspects. These suppliers account for the majority (some 70%) of our procurement spend in the group. Save for the area of concern reflected below, the remainder have been assessed as low risk rating.

We are aware of the well-publicised Volkswagen and Audi emission issues affecting customers internationally. We recognise the associated risks and are engaging with our principal. The Volkswagen and Audi vehicles sold by us in our dealership territories meet local emissions compliance standards, and our operations have consequently not been directly impacted. We regret any anxiety or uncertainty our customers, or any other stakeholders, may have experienced because of this matter.

Reporting of environmental violations and grievance mechanisms

The Barloworld Whistleblowing policy sets out procedures for reporting improprieties or improper conduct so that the rights of employees and other associated persons are protected where such disclosures are made in good faith.

All operations have well established grievance procedures in place. These are formal, documented and easily accessible to all employees. In addition, Barloworld’s Worldwide Code of Conduct specifically covers process for reporting violations of the code. It includes an anonymous Barloworld Ethics Line, and provides assurance that the group does not tolerate any reprisals against an employee for raising a concern or making a report in good faith.

Coverage

Responses to the indicators cover the performance of Barloworld Limited in all the geographic regions in which the Barloworld group and its subsidiaries operate. The consolidated data incorporates the company and all entities controlled by Barloworld as if they are a single economic entity. There are no other entities over which the group has significant influence that it believes should be included in the report. Associates and joint ventures are equity accounted.