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Introduction
• Sustained value creation for all stakeholders
• Integrated into strategy, management and reporting
• Minimise negative environmental consequences of activities
• Barloworld’s 10 Pillars of sustainability

Barloworld’s commitment to sustainable development is underpinned by a philosophy of creating value for all its stakeholders, who are defined as shareholders, customers, employees, principals, suppliers and communities in the context of broader society. This encompasses responsible custodianship of the environment and includes minimising the negative environmental consequences of its activities.

The group’s integrated approach to managing the financial, social, environmental and corporate governance aspects of its business assures its sustainability as an enterprise.

This approach is encapsulated in the group’s 10 Pillars of sustainability which inform and guide current activities and act as a filter against which future opportunities are assessed.

Responsibility and accountability for sustainable development rest with the group’s board and CEO, although the daily responsibility is delegated to divisional CEOs and their respective boards. Ultimately every employee is responsible for the sustainability of the organisation through a dedicated fulfilment of their respective roles in the context of the group’s values and ethics.

Accordingly, all sections of this annual report constitute Barloworld’s sustainability report, although specific aspects are highlighted, contextualised and explained in this section together with the relevant details.

Approach to data collection and reporting
• In terms of GRI framework
• Focus is on material aspects
• Structured reporting systems
• Relevant management information
• Boundaries as per financial consolidation and Greenhouse Gas (GHG) Protocol

Barloworld’s commitment to leadership in reporting is structured around those aspects of the group‘s activities that are considered material and to be of interest or concern to a broad grouping of stakeholders.

To ensure clarity, completeness and the comparability of the group’s information on a global basis, the Global Reporting Initiative’s (GRI’s) G3 indicators are used to inform coverage. The relevance of issues is continually reviewed in light of the group’s structure and the nature of its activities.

During the year there was an improvement in non-financial data collection and reporting systems. A concerted effort across the group has ensured that standard definitions and measurement systems are in place to ensure accuracy and year-on-year trends in data reported.

Organisational boundaries for the collection of data reflect those used for financial purposes to ensure that financial, social and environmental reporting are aligned. Reporting structures and boundaries for emissions are also aligned with the Greenhouse Gas (GHG) Protocol Corporate Standard (see Barloworld website for full disclosure in this regard). Integrated information is used to measure performance, interpret trends and set future objectives within the group.

Collated data is used for ongoing management purposes and is reported at group level on a quarterly basis through the Safety, Health and Environment (SHE) report which is reviewed by the Barloworld Risk and Sustainability Committee, a sub-committee of the Barloworld board.

While all areas of reporting improved, the collection of “Materials Used” data which incorporates a split between internal consumption and customer usage of important materials needs further improvement, as does the collection and reporting of “Waste” data, specifically the standardisation of reporting waste by weight rather than units. These aspects are being reviewed in light of their materiality and benefit and will be appropriately addressed in the year ahead.

Employee data for 2008 has been restated to include the Swift and Flynt figures. The 2008 reported data excluded 803 employees from these acquired businesses. Electricity consumption for corporate previously reflected the total consumption at Barloworld’s Corporate Office complex, which includes buildings occupied by divisions as well as external tenants. This year, the consumption has been proportionally allocated on a per capita basis to the various tenants and only the relevant consumption reported for Barloworld Corporate. This influenced reported 2009 corporate emissions data.

Assurance
• Third party verification of material aspects

The group is committed to ensuring that material streams of non-financial data are reported. Significant aspects of such data are verified by an independent third party. Independent verification from Deloitte is obtained (refer to page 95). It is envisaged that the group’s internal audit function will become more involved in non-financial reporting in future and that other important aspects, such as water consumption, will be verified.

Governance, ethics and values
• Entrenched group value system
• Established policies and procedures
• Anonymous Ethics Line and non-victimisation for whistleblowing
• Extensive internal and external audit
• Formal external expert involvement and training

Barloworld provides a policy framework within which its operations establish specific relevant and appropriate policies, and management and control systems in the context of their respective industries. It is the role of internal audit to ensure compliance with policies and assess the relevant procedures and management controls to ensure implementation. Financial compliance is assured through internal structures and controls as well as through an independent financial audit.

The group has its own code of ethics which is widely communicated through a variety of means, including the group’s intranet and internet systems, various publications, induction programmes and structured team forums. The code has the following overarching principles:

• Obey the law
• Respect others
• Be fair
• Be honest
• Protect the environment.

Barloworld is a signatory to the United Nations Global Compact which addresses Human Rights, Labour Standards, Environment and Anti-Corruption. The group adheres to these principles which are entrenched through group and divisional standards and policies.

See the Barloworld website for full scope of its Code of Ethics, Anti-Fraud Policy and the Barloworld Group Policy on Dealing with: Public Officials, Agents, Distributors, Intermediaries: Trade Restrictions, Export Controls and Sanctions (www.Barloworld. com/content/sustainability).

Corporate governance and Barloworld’s commitment in this regard are addressed from page 46 to 65. Together with formal processes and systems, Barloworld’s code of ethics, culture and value system ensure that corporate citizenship and social responsibility are integral to its business strategies. Formal processes to inculcate these into the group incorporate external training sessions for all divisions’ executives on appropriate legislation and compliance commitments from divisional leaders.

Climate change
• The group appreciates the link between its activities and climate change
• The matter is reviewed by a sub-committee of the board
• Group climate change policy set
• Incorporated into strategic planning
• Appropriate measurement and targets in place
• Identified risks and opportunities
• Included in stakeholder dialogue

Barloworld appreciates the integrated nature of its commercial activities and the ensuing impact on climate, as well as the seriousness of climate change as a global issue that needs to be addressed.

While the group’s activities are neither environmentally aggressive nor result in substantial greenhouse gas emissions, it understands the need to conduct commercial activities in an environmentally responsible manner and to provide environmentally sustainable integrated customer solutions.

Accordingly, the group continues to measure, manage and report on aspects of its business that contribute to climate change and is committed to reduce, minimise and offset these activities where appropriate. This forms part of a quarterly Safety, Health and Environment (SHE) report that is tabled at the group’s risk and sustainability committee meetings.

The group has also identified risks and opportunities arising from climate change due to physical consequences (shortand long-term), changing regulatory frameworks, customer requirements and brand reputation. These are incorporated into the group’s strategic plans and related activities.

These risks and opportunities are disclosed in Barloworld’s response to the Carbon Disclosure Project, CDP 2009 (CDP7) which is available on www.cdproject.net.

Strategic planning
• Structured processes in all group operations culminate in thegroup strategy
• Endorsed by the board and subject to regular review
• Central to the group’s approach to sustainable development
• Identifies the group’s strategic focus areas which focusattention in all operations
• Ensures integrated and coherent group activities forsustainable development
• Employee implementation is central to the success of theStrategy

Strategic planning processes are systematic, integrated across the group and aligned across functional areas. A group strategic planning framework has been established that addresses five strategic focus areas:

• Integrated customer solutions
• People
• Empowerment, transformation and sustainable development
• Financial returns
• Profitable growth.

This framework is formally reviewed on an annual basis and revised where appropriate. These revisions are endorsed by the board. Notable in the group’s strategic framework is the integrated nature of its approach. Strategic plans in the group are appropriately communicated to all employees to ensure understanding, commitment and participation.

Employees ensure the implementation of the strategic plan through the application of alignment maps and scorecards which are put in place to ensure the realisation of objectives, hurdles and targets. Critical success factors are closely monitored through focused performance management systems and interventions which include mechanisms such as an integrated balanced scorecard system.

Accessing, harnessing and focusing the collective wisdom in the group, and enabling employees to participate in the value created, ensure commitment and progress in implementing the group’s strategic plan.

Group risks
• Structured process of risk identification
• Incorporated and addressed in strategic planning processes
• Comprehensive measures in place to address appropriately
• Regular review at executive, board as well as risk andsustainability committee meetings

The identification of risks and opportunities is robust, systematic and involves every level of the organisation. A comprehensive risk management policy is entrenched throughout the group, complemented by the Barloworld Limited Risk Management Philosophy, which is signed by the Barloworld CEO. This includes dedicated divisional risk assessment interventions at which internal audit and group risk services are present and risk also receives attention during the strategic planning process.

In accordance with international best practice, risks are assessed on their probability, severity and quality of the existing control environment. These measures result in residual risk scores which indicate the importance of the risk and allow assessment of progress made in addressing identified risk areas. Risks are detailed, comprehensively assessed and addressed through acceptance, transfer, avoidance or reduction. Risks are recorded in divisional and group risk registers.

Formal reporting to the risk and sustainability committee, a sub-committee of the board, takes place bi-annually. Initiatives to address identified risks include business continuity plans and disaster recovery plans for unscheduled events or occurrences and stakeholder concerns. These include information technology and communications solutions, as appropriate. While this planning is regularly reviewed at executive and board levels, internal audit also has a significant role in reviewing required processes and procedures.

Barloworld group top risks (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 and management of possible synergies.
Competitor actions Competitor actions will erode our competitive position and have a significant impact on the value we create for shareholders.	Competitor risk • Continually reduce costs by focusing on operational efficiencies and staff training. • Continually improve service and the provision of innovative solutions to customers. • Develop key customer plans which contain all the information and   strategies to satisfy the customer.
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 to be utilised. • 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 to our principals on market   movements and product competitiveness. • 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. • Align strategies and targets with those of our major principals as far as   possible.
Exposure to equipment and motor vehicle buybacks 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 businesses 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. • Develop new channels.
Global economic slowdown/credit crisis The effect of the slowdown on our businesses, customers, suppliers and funders and the risk that funding constraints within the supply chains will extend the recession or at least delay any recovery.	Financial risk • Inflationary pressures to be carefully monitored and managed, as   appropriate, in each business. • Reduce costs and improve operating efficiencies. • Monitor our customers’ ability to spend. • Reduce working capital, limit capital expenditure and improve cash flow. • Secure adequate committed short-term borrowing facilities.
Regulatory environment Many of the group’s activities are governed 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 and value creation competence. • 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 schemes ensures recognition,   value creation for employees and retention of high-performing employees. • Focused initiatives and arrangements have minimised the negative effects   of difficult economic conditions on employees and the company’s skill base.   These also ensure the required skills are in place to optimise any opportunities   presented by improved economic circumstances.