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  Sustainability report
 
 

Approach to sustainability
 

Introduction
  Entrenched in Barloworld’s philosophy of creating value for all its stakeholders, is the appreciation of the societal roles corporates fulfil in the communities in which they operate.
   
  For Barloworld, the cornerstone of sustainable development is the ongoing ability to improve its value creation for all its stakeholders. Whilst the group has pursued this philosophy since its inception, it has become more defined and refined over the past 100 years of the group’s existence and, in 1999, was articulated through its Value Based Management approach.
   
  Central to this philosophy is the progressive improvement in value creation for all stakeholders, namely shareholders, customers, principals and suppliers, and employees, underscored by responsible corporate citizenship.
   
  This approach is encapsulated in Barloworld’s 10 Pillars of Sustainability which distil the group’s understanding, philosophy and requirements of its operations in order to deliver on its role and fulfil its objective of ongoing value creation.
   
  Encompassed in these 10 Pillars of Sustainability are the elements of the Global Reporting Initiative (GRI). These have been embraced by the group and form the structure for much of its reporting.
   
  Specifically, the GRI addresses the areas of:
 
  • Economic Performance
  • Environment Performance
  • Social Performance
  Whilst the annual report in its totality substantively addresses the GRI, various aspects are highlighted in this section of the report which contextualises such aspects and provides detail in respect thereof.
   
  Barloworld believes that all its activities are integrated and culminate in its sustainability as an enterprise and accordingly it is not the intention of the group to decouple and report on various aspects of its operations in a separate Sustainability Report.
   
 
Avis

Avis Rent a Car Southern Africa’s environmentally friendly stand wins award at INDABA
Avis won a platinum award for its striking and environmentally friendly stand as well as the professional and warm attitude of its exhibitors at South Africa’s travel trade show, INDABA 2008.
 
Creating an environmentally friendly stand is just one of the ways that Avis lives up to its “Avis Cares” slogan, which is all about focusing on people, environmental issues and the company’s drive to become carbon neutral.
 
Avis is aware of the critical importance of conserving the planet. It is a long-term effort and everyone at Avis is committed to finding new and unique ways to ensure the sustainable use of natural resources and the minimisation of carbon emissions.
 
 
 
 
 
   
  Consistent with this approach, responsibility and accountability for sustainability rests with the group’s board and CEO, although day-to-day responsibility is delegated to divisional CEOs and their respective boards.
   
  Given the nature of its commercial activities, its products and integrated solutions provided to its customers, a central aspect of Barloworld’s environment preservation and climate change programmes aims at reducing and off-setting its carbon footprint.
   
 

Barloworld’s 10 Pillars of Sustainability
  Barloworld’s 10 Pillars of Sustainability reflect the group’s philosophy, approach and commitment to various aspects of sustainability. These pillars act as a guide to all operations and form the backdrop of daily activities and a filter against which potential opportunities are assessed.
   
  10 Pillars
   
 

Barloworld and Food and Trees for Africa (FTFA)

  
Over many years Barloworld has supported Food and Trees for Africa’s Greening of Soweto and Trees for Homes programmes, with the aim of rehabilitating dusty, barren settlements to create a healthy environment and develop environmental awareness and education amongst the residents. This initiative also serves to offset carbon dioxide emissions, as well as providing a host of other social, environmental and economic benefits such as improving property values, enhancing community pride and beautifying the area.

For its centennial year in 2002, Barloworld planted 23 000 trees, one in celebration of each of its employees at the time, and has continued to work with Food and Trees for Africa on plantings each year since then.

Its latest corporate organised plantings involved the donation of 150 indigenous shade trees to a community in Soweto in supporting of the Greening of Soweto towards 2010 project objectives. 		   Barloworld corporate’s target for its 2009 plantings is more
ambitious, in line with its commitment to supplement the offsetting of the divisions’ carbon emissions. One thousand one hundred and ninety trees to the value of R100 000 will be planted in Eden Park in Gauteng, Khayelitsha in the Western Cape and the Quarry Heights settlement in KwaZulu Natal, as part of FTFA’s Trees for Homes programme. Apart from adding value in shade and food production, since some of the plantings will be fruit trees, this donation will contribute to urban and peri-urban land care and sustainable human settlements. Each tree will sequester half a ton of carbon over its estimated 15 year lifespan.		 Plants
 
 

Approach to data collection and reporting

  Barloworld maintains a leading status in financial reporting. Over the past years it has introduced systems and processes to collect non-financial data required for responsible management purposes which also served as the data reported under the GRI format.
   
  Barloworld includes in its annual reports aspects of the information outlined by the GRI. Whilst not all divisions and their operations have reached similar levels of sophistication, concerted efforts in this regard ensure continual improvement. In particular, this year the logistics and automotive divisions’ energy consumption in the form of electricity, petrol and diesel has been reviewed by the auditors and limited assurance obtained. It is anticipated that within the next year a similar assurance will also be obtained for this data from the remaining operations in the group.
   
  As part of its commitment to improve non-financial reporting, Barloworld is in the process of reviewing the aspects of the GRI which it believes to be most significant and appropriate in terms of its operations. It is anticipated that reported information will be reviewed in future in order to concentrate on those aspects which are material, given the nature of Barloworld’s operations, its products and customer solutions.
   
  In addition to annual reporting, a group safety, health and environment (SHE) report is compiled on a quarterly basis and reviewed by the group risk and sustainability committee, and the board.
   
 

Assurance
  The group is committed to ensuring that the non-financial information provided in this report is verified by a third party. This is an ongoing process involving independent auditors. For the past few years Deloitte has provided limited assurance on specific aspects in the sustainability section of the annual report. For these aspects the systems and procedures are in place to record the relevant data and are regularly reviewed. This is continued for the current year, with third party review expanded to include the fuel and electricity consumption of the logistics and automotive divisions. The intention is to progress with the standardisation and implementation of reporting systems throughout the group with a view to having assurance for all information reported. It is anticipated that a web-based data collection system for all divisions will be implemented in the next financial year.
   
 

Governance, ethics and values
  This is central to the group’s activities and is comprehensively addressed in the corporate governance section of this report. Legal compliance is assured through a strong legal department in the company and a series of structured workshops and interventions involving external legal practitioners. In particular, during the year the group and all divisions conducted externally facilitated workshops involving executives and senior management at which compliance issues in general were discussed, whilst competition legislation received specific attention. Financial compliance is assured through internal structures and controls as well as independent financial audit. Not only are external requirements subscribed and adhered to, but the group has its own internal set of values and ethics which guide all its activities and relationships, both individual and corporate.
   
 

Code of ethics
 
  • Obey the law
  • Respect others
  • Be fair
  • Be honest
  • Protect the environment
 

Group risks
  Entrenched throughout the group is a detailed and systematic process requiring executive, senior and local management to continually review, assess and address the risks and challenges for the group and related operations. This process requires detailed reviews at all levels of the organisation including regular review and update at all management, executive and board meetings. In addition, quarterly risk and sustainability meetings are held at which these aspects for the group are reviewed. Importantly, the strategic planning initiatives and processes throughout the group require the identification of the risks at each level in the group and detailed action plans prepared to manage such risks. These cover the acceptance, reduction or transfer of the risks as appropriate for the group. These plans are also reviewed at executive and board level. The internal audit function is charged with reviewing the adopted processes that ensure this risk management methodology is in place. Contingency plans and procedures are prepared to deal with unscheduled occurrences and stakeholder concerns. Consistent with this approach, all operations have detailed business continuity plans as well as disaster recovery plans in place. These are prepared in conjunction with the information technology departments.
   
 

Barloworld group top risks – 2008
 

(in alphabetical order)
   
 
Key risks Category of risk and management response

Acquisition underperformance
The risk of future net cash flows from acquisitions failing to realise the projections upon which the initial purchase consideration was based may lead to value destruction for shareholders and a need to impair the related goodwill or assets.

Acquisition risk
  • A business acquisition policy and procedure is in place that sets out a structured approach and framework to be used when acquisitions are being made. This includes a pre-acquisition phase that includes the requirement to conduct a comprehensive strategic analysis of intended targets, development of acquisition criteria, both strategic and financial, and quantification of risk adjusted value creation potential for the respective business unit and the group.
  • The CEOs and CFOs of each business unit are responsible for ensuring that the policy and procedures are adhered to.
  • Following acquisitions, planning and task teams are established to focus on the realisation of possible synergies.
 

Competitor actions

The risk that competitors will take individual actions that will erode our competitive position and have a significant impact on the value we create for shareholders.

Currency risk

  • Continually reduce costs by focusing on operational efficiencies and
    staff training.
  • Continually improve service and the provision of innovative solutions
    to customers.
 

Currency volatility
Movement of currencies against one another, mainly the movement of other currencies against the rand which creates risks relative to the translation of non-rand profits, the marking-to-market of financial instruments taken out to hedge currency exposures and the cost of imports into South Africa.

Financial risk
  • The responsibility for monitoring and managing these risks is that of line management. A group treasury policy is in place which clearly sets out the philosophy of hedging, guideline parameters within which to operate and permissible financial instruments.
  • Preventative measures are implemented around determination of pricing mechanisms and structuring of commercial contracts to negate the impact of any adverse currency fluctuations.
 

Dependence on principals and suppliers

Some of the businesses in the group are dependent on a small number of principals and/or suppliers.

Our success is therefore linked to their ongoing financial stability, the competitiveness of their products and services and the availability of equipment to meet customers’ needs.

In order to ensure sustainable value creation, we depend on suppliers of infrastructure in the countries in which we operate. Most of our businesses are dependent, inter alia, on reliable power and water supply and appropriate transport networks.

Strategic risk
  • Add value by giving constant feedback on market movements and product competitiveness to our principals.
  • Continually improve/build our relationships with our principals and major suppliers and attempt to ensure that we are the preferred dealer/customer.
  • Provide excellent customer service and lead in our markets.
  • Build Smart Partnerships with customers.
  • Build relationships with local authorities.
 

Exposure to equipment and motor vehicle buy-backs and residual values
Some of the group’s businesses could be exposed to losses due to contractual obligations to buy back equipment or motor vehicles previously sold or rented out, at prices above market or replacement cost at the time of being compelled to repurchase. This risk could arise, inter alia, through inadequate valuation skills at the time of determining the buy-back amount, poor condition of equipment and motor vehicles repurchased or significant shifts in the economic environment adversely impacting used values.

Financial risk
  • This is managed by ensuring adequate valuation competencies, managing inventory levels, optimally structuring contracts, modelling transactions to ensure adequate economic return, continually scanning market conditions, hedging currency risks and monitoring the use and condition of equipment and motor vehicles in respect of which obligations exist.
 

Exposure to political risks, terrorism and crime in the countries in
which we operate
The group's people and assets are spread through numerous countries around the world while our activities are conducted in many more. The possibility exists that our people and assets, and the viability of the businesses are exposed through acts of terrorism, political turmoil or crime in some of the regions in which the group operates as well as in those that may be the subject of expansion. Business growth initiatives require that new markets and territories are the focus of our business expansion. These opportunities come with their own distinct risk exposures.

Operational risk
  • Minimise exposure in high-risk countries through thorough and in-depth risk assessments coupled with the application of preventative and corrective risk management activities.
  • Maintain flexible business models.
  • Maintain Business Continuity Plans that incorporate emergency response actions, crisis management and business recovery plans specific to the business and the respective territories in which the businesses operate.
 

Exposure to significant customers and dependence on channels to market
The risk that we are exposed to certain large customers and/or industries and that well-established distribution channels may change or consolidate.
 

Market risk
  • Build Smart Partnerships with customers.
  • Develop customer solutions which differentiate and expand our offering from product-based businesses.
  • Diversify customer base.
 

Global economic slowdown/credit crisis
The risk that we are exposed to a sudden slowdown in economic activity and/or that our ability to access short- and long-term funding may be negatively impacted and the financial viability of existing service providers in both insurance as well as banking, may be threatened.

Financial risk
  • Inflationary pressures to be carefully monitored and managed as appropriate in each business.
  • Analysis of the impact of high energy prices on the pricing of our products and services.
  • Monitor our customer’s ability to spend.
  • Convert short-term debt to longer-term committed maturities.
  • Secure adequate short-term funding committed facilities.
 

Regulatory environment
Many of the group’s activities are governed, one way or another, by regulations. Due to the complexity and changing nature of these regulations across the industries and geographical spectrum of the group’s activities, there are challenges in staying abreast of all developments and maintaining full compliance.

Regulatory risk
  • Management is responsible for the ongoing monitoring of all pending and actual changes to the group’s regulatory environment. Due to the large number of jurisdictions which govern the group’s activities, this monitoring occurs in each relevant country of operation.
  • Where feasible, the group will comment on proposed changes to the regulatory environment that may adversely affect the group in a particular jurisdiction.
 

Strategic employee skills
Barloworld’s key asset is the intellectual capacity and skills of its employees. This necessitates ongoing management of the challenges regarding recruitment, succession planning, skills retention and development.

Employee risk
  • Barloworld has a comprehensive employee approach and related set of initiatives to align employees with the strategy of the organisation.
  • These identify and align all employee elements of a value-creating organisation to ensure sustainable intellectual capacity.
  • Through performance management systems, employees’ purpose, role, function and accountabilities are defined, and using competency-based assessments, employees are regularly reviewed to ensure the appropriate skill sets are available to enable performance at optimum levels. Extensive training resources and facilities are in place to assist and encourage employees to enhance their levels of competence and performance.
  • An appropriate suite of reward and incentive scheme has been implemented to ensure recognition and retention of high-performing employees.
   
 

Strategic planning

  Robust strategic planning processes are entrenched at all levels of the organisation to ensure appropriate participation and to access the collective wisdom within the group. All such processes are informed by the group framework and address five strategic focus areas as identified by the group. The planning process also encompasses the annual financial forecasts, generating both short and long-term forecasts. The interests of all stakeholders are kept in equilibrium and plans are aligned with those of the many represented principals.
   
  At a conference held in February 2008, Barloworld’s strategic framework was revisited, discussed and refined by the delegates who comprised Barloworld’s top global leaders. This formed the backdrop against which all strategic planning in the group took place during the year.
   
  The group’s five strategic focus areas were endorsed. These are:
 
  • Integrated customer solutions
  • People
  • Empowerment and transformation
  • Financial returns
  • Profitable growth
   
  All operations in the group have included and addressed these aspects in their respective strategic plans.
   
  The implementation of strategic plans in the group is closely monitored against stated targets and objectives through alignment maps, a balanced scorecard system and methodologies which include the Six Sigma project methodology. In addition to ensuring implementation, this approach also ensures a balance is maintained between the interests of all stakeholders.