development and we’re still learning. Through our ...financials.massmart.co.za/invest_profile/financial_results/2009/mas... · Ask us any question about retailing and we can answer

Ask us any question about retailing and we can answer it.

Ask us anything about sustainable development and we’re still learning.

Through our successes and our failures.

But we’re getting there.

This is our Sustainability Report 2009.

1Massmart Sustainability Report 2009

The Sustainability Report 2009 comprises three books.

Book one Offers everything in broad brushstrokes, from a brief company profile to our approach to sustainable development – for the reader who wants a quick understanding of Massmart and its sustainability context.

Book Two, the Big Book, picks up on key aspects introduced in Book One and covers these in detail – for the reader who wants to gain insight into how Massmart is putting sustainable development into practice.

Book ThRee offers a Q&A on the company’s performance and disclosures against the GRI III standards – for the reader who wants specific questions answered, in an easy-to-read format.

Together, the books give the reader a comprehensive insight into Massmart and its commitment to sustainable development.

21 3

Book one : SuStainaBility context

2

Book one: Sustainability context

Book One of this year’s Sustainability Report provides an overview of Massmart and its approach to sustainable development. We start with a geographic (p4) and divisional (p6) profile of the company’s operations, giving context to our sustainability proposition (p8). We continue with the value added statement (p12) and 2008 JSE Socially Responsible Investment (SRI) Index performance table (p14) that show different accounts of our progress towards sustainable development. And towards the end, we explore examples of what retailers can do in the value chain to achieve maximum sustainable development, before outlining Massmart’s core set of beliefs that underlie the company’s approach to sustainable development.


1 1

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Namibia

Zambia malawimoZambique

Zimbabwe

lesotho

botswaNa

taNZaNia

ugaNda

south africa

NigeriaghaNa

Massmart is the third largest distributor of consumer goods in Africa, the leading retailer of general merchandise, liquor and home improvement equipment and supplies, and the leading wholesaler of basic foods.

24 storesInternatIonal

GeoGraphic and climate vulneraBility profile

Mean Climate Change Vulnerability Index, economy sub-index*

0 to 2,5 Extreme risk

2,5 to 5 High risk

5 to 7,5 Medium risk

7,5 to 10 Low risk

* Source: Maplecroft Climate Change risk report; www.Maplecroft.com

4

weSTeRn cape

noRTheRn cape

eaSTeRn cape

fRee STaTe

leSoTho

noRTh weST

limpopo

kwazulu-naTal

mpumalangaSwaziland

7

1

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1 11

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1

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1

2

1

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91

1

1

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1

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232 storesSouth afrICa

Massdiscounters 93 stores

Masswarehouse* 13 stores

Massbuild 71 stores

Masscash 79 stores

* two Makro Zimbabwe stores have not been included since their results have not been consolidated.

gauTeng


The Group comprises a managed portfolio of four divisions, each focused on high-volume, low-margin, low-cost distribution of mainly branded consumer goods for cash, through 256 stores in 14 countries in sub-Saharan Africa.

diviSional profile

MDD Massdiscounters MB MassbuildMw Masswarehouse MC Masscash

Our sales figures

R43,128.7m

Operating profit before income taxCorporate (R66.9m)

R1,950.6m

Value addedOther (R75.6m)

R10,052.5m

Customer satisfaction

75.1%

MDD 77.0%

Mw 71.7%

MB 79.9%

MC 73.8%

MDD R11,206.0m

Mw R11,102.4m

MB R5,604.6m

MC R15,215.7m

MDD R584.4m

Mw R718.6m

MB R228.8m

MC R485.7m

MDD R3,249.4m

Mw R2,131.4m

MB R1,797.8m

MC R2,949.5m

6

MDD Massdiscounters MB MassbuildMw Masswarehouse MC Masscash

MDD 4.4%

Mw 4.0%

MB 3.7%

MC 9.9%

MDD 56.81%

Mw 50.80%

MB 40.17%

MC 50.33%

MDD R7.6m

Mw R6.6m

MB R3.6m

MC R4.6m

MDD 366 C02(kg)/m2

Mw 575 C02(kg)/m2

MB 102 C02(kg)/m2

MC 108 C02(kg)/m2

HIV/Aids prevalence

6.44%

Our BBBEE score

55.67%

Corporate social investment (Includes R1.1m Massmart spend)

R23.5m

Our purchased electricity emissions intensity

247 C02(kg)/m2

8,937.9

05

8,819.7

06

17,694.4

07

12,371.5

08

16,104.2

09

Market capitalisation

Market capitalisation (Rm)

25,381.5

05

29,963.6

06

34,807.6

07

38,958.3

08

43,128.7

09

965.5

1,294.8

1,714.7

1,930.6

2,029.0

Sales and operating profit before foreign exchange movements

Sales (Rm)

Operating profit (Rm)


Our sustainability proposition is to achieve commercial success by adopting a mass distribution business model that offers benefits on both ends of the retail value chain without compromising our commitment to socially accountable business practice.

SuStainaBility propoSition

8

Massmart's core sustainability commitments

We sensibly integrate sustainability practices with business objectives.

We offer suppliers an efficient and socially relevant channel to their markets.

We optimise value for customers by providing affordable access to quality safe merchandise that has been procured responsibly.

We act in a socially accountable manner leveraging opportunities and managing risks arising from economic, environmental and social developments.

We advocate the principles of responsible consumerism to customers and responsible business practice to suppliers.

as in previous years we have reviewed and amended the Massmart sustainability proposition to include references to “offering suppliers an efficient and socially relevant channel to their markets” and providing customers with “affordable access to quality safe merchandise that has been procured responsibly”. these amendments reflect the principles of ethical supply chain management that we are currently developing.

at the core of our sustainability proposition is our commitment to apply the highest standard of ethical conduct in our dealings with all stakeholders.


Responsibility for monitoring the scope and quality of sustainability practice rests with the Massmart Sustainability Committee which is a committee of the Massmart board. The committee meets at least twice per year with the objective of reviewing Massmart’s Socially Responsible Investment (SRI) Index, broad-based black economic empowerment and Global Reporting Initiative III performance.

manaGement approach

makro, Thandanani programme beneficiary.

10

the Group’s sustainability priorities are agreed by the Massmart executive Committee on the recommendation of the Group Corporate affairs executive. in this respect sustainability priorities are identified with primary reference to the detailed criteria that constitute the JSe limited Socially Responsible investment (SRi) index.

Implementation is coordinated by the Group Corporate affairs executive who works in close collaboration with divisional line managers. Divisional sustainability practice is regarded as a line management function whilst overall accountability for sustainability performance rests with divisional executive committees. each division reports their sustainability performance to massmart holdings on an annual basis.


When it comes to sustainability, we believe that we are ultimately measured by our ability to add economic value in a way that is responsive to social, environmental and governance imperatives.

Our Group value added statement is an indicator of the economic value that we add...

R47,923.7mSales, royalties, franchise fees, rentals and management and adminisitration fees (inclusive of Vat)

– R35,351.0mCost of sales

+ R101.4mInterest and investment income

– R2,621.6mnet costs of services and other operating expenses

= R10,052.5mMoney spent and shared as detailed in the pie on the right

Group value added Statement

12

R867.4mto shareholders as dividends

9%

R5,349.1mto government as taxation

53%

R112.8mto lenders as interest

1%

R343.1mDepreciation and amortisation

3% R2,965.8mto employees as salaries, wages and other benefits

30%

R32.7mMinorities

0%R381.6mnet earnings retained

4%


… while our SRI Index performance is an important indicator of our responsiveness to social, stakeholder environmental and governance imperatives.

JSe Sri index performance

makro education Trust beneficiary.

14

Environmental

no SCoRe pRoVIDeD By jSe

Social

41/4153/60 desirable performance indicators

Ownership

42/4234/36 desirable performance indicators

Massmart was recognised as a Best performer in the Medium environmental Impact Category of the jSe’s 2008 SRI Index for the second year running. Criteria were met Criteria were met Criteria were met

2008 jSe SRI Index performance


Some issues we're debating: – Screen and identify supplier human

rights performance against internal standard.

– require third party verification of environmental performance against external standard.

– require third party verification of human rights performance against external standard.

– Specify minimum environmental product attributes.

– Specify compliance with best practice product safety standards.

– Specify minimum environmental packaging and recyclability standards.

– Initiate harmful raw materials replacement programme.

Issues we're aware of:– advocate supplier adoption of external

human rights and environmental standards.

– require raw materials chain of custody documentation.

– Conduct product lifecycle assessments.

Source and procure

we've put these into practice:– contract suppliers to comply with

minimum human rights, safety and environmental legislation.

– specify compliance with minimum product safety standards.

we're doing a hands-on trial: – Screen and identify supplier

environmental performance against internal standard.

– Specify third party product endorsement standards.

– Conduct independent product safety testing.

retail opportunitieS to manaGe Supply chain impactS

Retailers are influential. There are many opportunities we have, by virtue of our position in the supply chain, to make a positive impact on manufacturer and consumer attitudes to sustainable development. here’s how…

16

Manage after- sales impacts

we've put these into practice:– implement reliable after-sales

service process.

– implement after-sales health, safety and environmental advisory service or training.

– implement reliable product recall process.

we're doing a hands-on trial: – Provide end-of-life merchandise take

back and safe/responsible disposal facilities.

– Incentivise end-of-life merchandise return and safe/responsible disposal.

Issues we're aware of:– Provide safe/responsible disposal

consumer advisory service.

– Provide support to non-governmental organisations/initiatives that deal with post-consumer impacts.

promote and sell

we've put these into practice:– implement cause-based

merchandise promotions.

– improve environmental attributes of stores.

we're doing a hands-on trial: – Build consumer awareness of socially

responsible merchandise choices.

– reduce plastic carrier bag usage.

– expand merchandise range to include bespoke socially responsible merchandise options.

– Incentivise consumer purchasing of socially responsible product choices.

An issue we're debating: – Specify best practice environmental

and, health and safety merchandise labelling standards.

Issues we're aware of:– Build consumer awareness of healthy

food choices.

– Support nGo-based responsible consumerism initiatives at point of sale.

– Implement additional voluntary promotional and sales controls for socially controversial merchandise (e.g. tobacco).

– Incentivise consumer purchasing of healthy food product choices.

– Delist environmentally unfriendly merchandise options.

– Delist socially controversial merchandise (e.g. tobacco).

Distribute

we've put these into practice:– optimise local procurement

opportunities.

– minimise air freight.

we're doing a hands-on trial: – Improve environmental attributes of

distribution centre facilities.

– Minimise store deliveries by consolidating supplier loads.

– Implement environmentally efficient logistics route planning.

– adopt/promote reusable logistics containers and palettes.

Some issues we're debating: – Implement delivery schedules that

minimise peak hour traffic congestion.

An issue we're aware of:– Convert logistics fleet to low emission

vehicles.

note: this is not intended to be an exhaustive list of opportunities.


Stakeholder engagement (p30)

We recognise that it is important to engage with and promote dialogue and understanding between Massmart and anyone who is impacted by our activities. to this end we work hard to understand stakeholder priorities and respond constructively to achieve mutual commitment to positive and beneficial action.

human capital (p32)

our employees are provided with the opportunity to earn competitive rewards and develop their talents in a very commercially orientated work environment where emphasis is placed on respect for individual rights. We have a demanding work ethic and our employees are cognisant of the level of performance required for their own and the Group’s continued success.

Broad-based black economic empowerment (p34)

today’s South africans are citizens of a young democracy and every one deserves a dignified and prosperous life. We know that meeting this expectation is not only morally right, but also commercially prudent. We have therefore aligned our efforts to the Department of trade and Industry’s BBBee Code of Good Practice to ensure that we contribute to a sustainable and equitable society.

Climate change and environment (p36)

Massmart acknowledges that the climate is changing and that part of this change can be attributed to human activities. We recognise that our operations and the products we sell have the potential to contribute to climate change and that we have a responsibility to minimise our own impacts, to adapt to the risks of climate change upon our business and to provide consumers with responsible merchandise choices that limit their impacts.

Sustainable development can become an empty promise if it is not underpinned by a framework of shared beliefs. These are some of the beliefs that drive sustainable development in our business:

SuStainaBle development BeliefS

18

ethical supply chain

This area will be discussed in detail in the

2010 report. Watch this space!

Massmart recognises that unethical practice in our supply chain by either ourselves or our suppliers has the potential to damage our brands, undermine stakeholder trust and tarnish the Group’s reputation. We will endevour through advocacy activities and by implementing additional sourcing controls to promote sustainable production and distribution by suppliers and responsible consumerism by our customers.

African operations (p38)

Massmart is a South african-based african group that aspires to integrate seamlessly into the societies of all the countries in which we operate by contributing meaningfully to economic and retail development, complying fully with local legislation, responding empathetically to cultural mores, and participating actively in social institutions.

Corporate social investment (p40)

there are commentators who believe that it is enough for business to pay taxes, and that social upliftment is a distraction from business that should be the responsibility of the state. We disagree! It is clear to us that it requires the combined resources and expertise of both the private and public sector to overcome the social impoverishment caused by South africa’s apartheid legacy.


Improving our sustainability reporting

Each year Massmart embarks upon an engagement process to identify opportunities for improving the quality and accessibility of our sustainability reporting. This process, which combines both formal and informal interventions, generally yields good insight which has led to the steady evolution of the format, style and content of successive reports.

We have responded to the feedback received this year by: introducing new performance indicators; providing comparative retail data; incorporating a retail advocacy model; adding a separate spread covering African operations; defining measurable BBBEE, human capital, energy efficiency and African operations commitments, and moving to a more graphic style with less copy.

20


Book two: 2009 performance review

22

Book Two: Sustainability performance

Book Two of this year’s Sustainability Report, the 2009 Performance Review, focuses on the six key areas at the core of Massmart’s commitment to sustainable development.

We kick off with a letter from CEO Grant Pattison (p24), which is followed by a review of our risk landscape (p28).

The six areas we review are: Stakeholder engagement (p30), Human capital (p32), Broad-based black economic empowerment (p34), Climate change and environment (p36), African operations (p38) and Corporate social investment (p40).


letter from the ceo

A meaningful approach to sustainability reporting requires the confidence to not only draw attention to our successes but also to our failings.

This perspective has informed the approach that I have taken in drafting my letter about Massmart’s sustainability performance.

24


preamble

In this report we have described many things that we’re doing well, but we’ve also identified numerous areas in which our performance leaves something to be desired. We’ve done this so that we can present a sensible balance of data covering both our successes and our failures. For example, while our most recent broad-based black economic empowerment performance is commendable, our environmental track record is not where it should be, particularly in terms of our progress on improving operational energy efficiency and promoting environmentally responsible merchandise.

Our achievements are well documented throughout this report, so I’d like to use this letter to spell out our plans for addressing some of our shortcomings.

human capital

We have made significant efforts to detect hIV/aids infection in our permanent staff and offer treatment to our employees, their husbands and wives. I am deeply disappointed that although we have achieved success in our efforts to increase voluntary counselling and testing, we still have a high percentage (31%) of employees who choose not to register for treatment on our programme. I’m sensitive to the fact that there is still stigmatisation associated with being hIV-positive, but it is our failure as a company that we have not been more successful in allaying these fears within our own people. there is a clear need for our human capital community to significantly step up their efforts to find and implement innovative responses to this problem. Pearl Maphoshe, our Group human Capital executive, has undertaken the responsibility to lead us forward to achieve this.

Climate change and environment

the requirements of a low-carbon society and the increasing cost of electricity require that we become more aggressive and innovative in our search for energy savings. We are committed to continuing to look for intelligent opportunities to reduce costs, including reducing energy consumption in stores, but success in this requires clear targets, carefully coordinated action and determined executive leadership. to date, these critical factors have not received sufficient attention. If not addressed immediately, we’re endangering our ability to achieve the goals we set for ourselves. I have asked our Group Commercial executive, llewellyn Steeneveldt, to coordinate a group-wide project for achieving a minimum saving of 12% in our energy intensity within the next two years.

We’ve also recognised the need to develop environmental awareness amongst consumers in our stores by improving their knowledge about the environmental choices they make. In 2008, we developed a mechanism for promoting

Achievements

letter from the ceo

Extended access to medical benefits to an additional 9.75% of employees.

26

Increased BBBEE score by 6.23% achieving level 5 contributor status.

Ranked third by Carbon Disclosure Project (CDP) for quality of carbon reporting.

Increased local procurement in foreign African operations by 8% to 19% of total procurement.

Exceeded CSI policy guideline by investing an additional 0.6% profit after tax.

environmentally responsible merchandise, the eco-wise initiative. It was designed to include options for creating awareness about energy efficiency, water efficiency and recyclability. Sadly, the adoption of this programme has been slow across our Group and we have only introduced four eco-wise products in the space of 12 months. our experience was that price is an impediment for some products, but with greater focus and commitment I am confident we can achieve much more. now, I am personally tracking our progress on environmental issues during my regular one-on-one meetings with divisional chief executives. I will be responsible for placing more emphasis on selecting opportunities to drive our eco-wise initiative.

African operations

I am deeply embarrassed that we have not met our corporate social investment policy guideline to invest a minimum of 1% profit after tax in our foreign african operations. this is particularly disturbing given the prevailing perspectives some people have that South african businesses practise double standards in africa. My awareness of this perspective was reinforced when I met with diplomats from 12 african countries on 17 July this year. the goal of this meeting was to gain a better understanding of their expectations of our conduct in their countries and after hearing their concerns, I appreciate how important it is that we show them that Massmart is different. our executives operating in africa have therefore been tasked to ensure that the CSI target is achieved in the 2009/10 financial year. In addition we have also agreed targets for local procurement and the indigenisation of executive store management in these countries.

Conclusion and next steps

I believe, that more thought needs to be given to evolving an afro-centric response to sustainability issues in our supply chain in general. our approach

has always been largely influenced by the practices of our peers in europe, north america and the united Kingdom. now, my colleagues and I find ourselves questioning the wisdom of committing too much of our efforts towards monitoring the sustainability practices of importers and suppliers of global brands that are already receiving considerable attention from the world’s biggest retailers. We’re looking into this issue and I have asked our Corporate affairs executive, Brian leroni, to research the merits of focusing more of our sustainability dialogue on uniquely african challenges. for example, perhaps we should specifically encourage hardwood-based product suppliers to support the establishment of fSC certified producers in the Congo basin.

finally, I have used this opportunity to express my concerns but I would be remiss if I didn’t also say how proud I am of the reputation that we’re earning as a socially accountable organisation. Most importantly, we need to remember that failure is an inevitable consequence of progress and through it, we learn. on the back of previous failed efforts we find exciting new opportunities, new directions in which to go. I’m eager to get started on one of our newest initiatives, for instance, to tackle ethical supply chain management. I’m also looking forward to overcoming the challenges we’re finding in formalising our sustainability efforts. We’re moving on with greater wisdom and I am deeply grateful to every one at Massmart who is involved in our endeavour to build a more sustainable business.

grant pattison Massmart Ceo


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

1 human capital

Failure to respond effectively to the retail skills shortage

RIS

k 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.

Re

Sp

on

Se 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.

2 Broad-based black economic empowerment

Failure to sustain BBBee performance in line with stakeholder expectations

RIS

k 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.

Re

Sp

on

Se 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.

pRoBABIlITylO

W HIGH

HIG

HB

uS

Ine

SS

IM

pA

CT

12 3

54

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3 Climate change and environment

Failure to adapt merchandise proposition to needs of a low-carbon society

RIS

k 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.

Re

Sp

on

Se 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.

5 ethical supply chain

Failure to identify irresponsible social and environmental supplier behaviour

RIS

k 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.

Re

Sp

on

Se 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.

4 African operations

Failure to accurately predict and adapt climate change impact on foreign African economies

RIS

k 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.

Re

Sp

on

Se 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.


what do our customers say about our retail proposition?

To gauge a better appreciation of our customers’ shopping experience in our retail brands, we interviewed 3 183 shoppers over a period of six weeks. Almost all (97.6%) said they would return to shop in our chains, but when asked if environmental issues affect their purchasing decisions in our stores, only 52% indicated that they did.

what do our institutional investors say about our sustainability performance?

Major investors in our company were surveyed on their perceptions of our sustainability performance, based on the information provided in last year’s sustainability report. Half said that our performance was excellent – none considered it below average – but most also admitted that sustainability was not necessarily a deciding factor in their investment decisions.

50%

33%

17%

none of our institutional investors considered our sustainability performance to be below average

Average

Good

excellent

We take every opportunity to engage with our stakeholders through one-on-one conversations, group discussions, public meetings and civic forums.

This year, a key addition to our programme of engagement involved greater use of surveys to gather formal feedback on stakeholder perceptions of Massmart.

Stakeholder enGaGement

78% 4% 18%Product availability

78% 4% 18%Pleasant experience

50% 20% 30%Environ. awareness

50% 20% 30%Competitive pricing

78% 4% 18%Customer loyalty

Positive Neutral Negative

30

what do retail journalists say about our media friendliness?

We asked retail journalists who cover news about our company for insight into their perceptions. The areas we focused on most were trustworthiness, honesty and responsiveness. The vast majority of respondents (88%) said we are very or extremely trustworthy, while 17% felt we are moderately trustworthy. Most respondents felt that our divisional management teams require media training.

50%

none of our institutional investors considered our sustainability performance to be below average

100%

90%

80%

80%

78%

74%

Honesty

Responsiveness

Accessibility

Openness

Credibility

Trustworthiness

note: fairly low response rate has resulted in a sample, rather than a comprehensive finding, of current stakeholders’ perceptions of our business.

We asked independent sustainability experts to rate Massmart’s performance on seven key pillars of sustainable development. Their ratings reveal that they believe Massmart has made the greatest in-roads in the area of broad-based black economic empowerment, but our performance in other areas has been above average relative to our competitors’ performance over the past three years.

what do sustainability subject matter experts have to say about our sustainability performance?

Standard deviation

Ethical supply chain 74%

70%HR development

71%Environmental

72%CSI

76%BBBEE

73%Corporate governance

74%Stakeholder engagement


Scorecard commentary

Massmart’s level of black management representation (77%) is among the highest in the industry. Our ongoing objective is to achieve 80% representation by June 2011, but we must address the fact that we have insufficient representation (26.5%) where it matters most, at top management level. This is an area of continued focus for us.

Another one of our goals has been to extend access to affordable, private healthcare to more of our staff members. We launched the OCSA scheme in 2008 to drive this and during the past 12 months, 1 939 employees have signed up.That’s a 9.75% increase in the number of permanent staff members who now enjoy access to private primary health benefits compared to last year.

We’ve seen a slight rise (0.4%) in the HIV infection rate, mainly attributable to the fact that more employees are using our voluntary counselling and testing programme. One of our concerns in this regard is the number of HIV-positive employees who

have not registered for treatment. We estimate this is as many as 31%, so we are intensifying engagement with employees to encourage those affected to register.

A further recent health initiative we’ve launched for employees, a voluntary screening programme for early detection of priority illnesses, has delivered good results. To date, 7 601 staff members have been screened for cholesterol, blood pressure, diabetes and obesity resulting in early detection of these ailments for many employees. Our group-wide TB analysis questionnaire engaged as many as 5 676 employees and resulted in 53 referrals.

We also focused on investing more money in the scope, quality and intensity of the occupational training we offer our employees. Whilst this led to improvements, we are disappointed that only 30% of participants who attended executive and

human capital scorecard as at June 2009

note: Percentages, except black management and professional staff are reported as a percentage of 18 302 permanent staff.

Total headcount

28,162 4.72%

The percentage of flexible employees

33% 3.92%

Unionised staff

35% 5.73%

Black professionals as a % of all management and professionals

77% 0.22%

Employees with medical benefits (includes OCSA)

38% 9.75%

HIV prevalence

6.44% 0.40%

Staff turnover

9.34% 9.46%

Average minimum wage

R2,139 4.85%

Training spend expressed per capita of total headcount (R30,828m)

R1,261 36.76%

SA retail peer71.85%

SA medical aid membership 14.3%


Sectoral determination R1,947.24

SA retail peerR1,315

SA national 10.90%

Over three-quarters of our management team are black people, but we need to invest more in occupational training for the benefit of all employees.

human captial

32

leadership training courses were black people. We’re working to correct this. Our graduate trainee programme aimed at recruiting talented young, primarily black graduates, continues to surpass expectations. This year alone, 50 new graduates joined our team through this initiative.

Finally, the Group was impacted by labour unrest in two divisions during the year. In December 2008, the South African Commercial Catering and Allied Workers Union (SACCAWU) declared a dispute with Makro over the introduction of a 40-hour rolling week. Then in July 2009, the union declared another dispute with the chain, this time over wages. During that same month, SACCAWU also declared a dispute with Game in relation to the implementation of a biometric time and attendance system. All three disputes led to protest action, which was resolved to the mutual satisfaction of all parties.

note: Percentages, except black management and professional staff are reported as a percentage of 18 302 permanent staff.

Total headcount

28,162 4.72%

The percentage of flexible employees

33% 3.92%

Unionised staff

35% 5.73%

Black professionals as a % of all management and professionals

77% 0.22%

Employees with medical benefits (includes OCSA)

38% 9.75%

HIV prevalence

6.44% 0.40%

Staff turnover

9.34% 9.46%

Average minimum wage

R2,139 4.85%

Training spend expressed per capita of total headcount (R30,828m)

R1,261 36.76%


SA medical aid membership 14.3%


Sectoral determination R1,947.24

SA retail peerR1,315

SA national 10.90%

note: Sa retail peer represents broadly comparable data published by other South african retailers.

Massmart is committed to:

Increase black management and professional representation as percentage of managers and professionals to 80% by June 2011.

Increase medical cover access to 60% of permanent staff by June 2011.



This year Massmart engaged Empowerdex to verify the Group’s BBBEE score and we were delighted to achieve level 5 BBBEE contributor status. Our year-on-year BBBEE score improved from 49.44% for the previous reporting period to 55.67% for this one. We consider this to be a credible score which has improved our BBBEE ranking from 58th to 55th place in the FM Top Empowerment Companies survey. In the same survey, however, we were disappointed to find that we’ve dropped from first to third place in the retail industry rankings.

One ongoing concern is a perception in the media, amongst civil society and in government that the retail industry as a whole is failing to embrace the spirit and practice of BBBEE. We recognise that this perspective could cause collateral damage to Massmart’s reputation, so we’re engaging regularly with government, BBBEE advocacy groups and media commentators about our own BBBEE progress. Through consultation and transparency, we’re hoping to positively differentiate our BBBEE commitment from that of others within the industry.

Ensuring better BBBEE compliance on the part of our suppliers was a key factor in improving our BBBEE performance. Our preferential procurement score increased from 3.60% during the previous reporting period to 8% in the current period, but in comparison to the retail industry best practice (15.99%) we see there’s still room for improvement. We have therefore redoubled our efforts in this area by extending the list of priority suppliers from whom we require verified BBBEE scorecards.

We were also concerned that whilst we procured goods and services to the value of R9.9 billion from verified BBBEE suppliers only R792.7 million could be attributed to emerging black businesses. Competitive pricing tends to be the main barrier to improving procurement from this category of suppliers, an issue that we are struggling to resolve.

Ownership

5.84% 1.49%

Managementcontrol

5.96% 0.61%

Employmentequity

9.2% 1.78%

Skillsdevelopment

6.67% 1.51%

Enterprise development

15.0%No change

Preferentialprocurement

8.0% 4.4%

Socio-economic development

5.0%No change

BBBEE score

55.67% 6.23%

SA retail peer 12%SA retail peer 10.77%SA retail peer 17.06% SA retail peer 8.71% SA retail peer 15.99% SA retail peer 5%SA retail peer 68.37% SA retail peer 15%

note: BBBEE scorecards are calculated retrospectively, therefore the data reported is based on the scorecard compiled in January 2009 for the period ending June 2008.

We’ve achieved a credible BBBEE score, but the BBBEE track record of our industry as a whole continues to be criticised.

Broad-BaSed Black economic empowerment

Broad-based black economic empowerment scorecard as at June 2009

34

Massmart addresses black ownership within our company through the Thuthukani Staff Empowerment Trust. Overall, the year-on-year increase (1.49%) in our BBBEE ownership score can be attributed to the more accurate Empowerdex scoring process, rather than to any change in the structure of black ownership in the organisation.

It is noteworthy that the Thuthukani trust has distributed R67 577 622 worth of dividends to staff members between October 2008, when it was launched, and June this year. The trust has enjoyed a capital growth of R410 395 698 during the same period, but disappointingly only 10 683 of the original 14 065 employee participants are still involved. In the vast majority of cases, this anticipated decline in participation is the result of normal staff turnover.

Ownership

5.84% 1.49%

Managementcontrol

5.96% 0.61%

Employmentequity

9.2% 1.78%

Skillsdevelopment

6.67% 1.51%

Enterprise development

15.0%No change

Preferentialprocurement

8.0% 4.4%

Socio-economic development

5.0%No change

BBBEE score

55.67% 6.23%

SA retail peer 12%SA retail peer 10.77%SA retail peer 17.06% SA retail peer 8.71% SA retail peer 15.99% SA retail peer 5%SA retail peer 68.37% SA retail peer 15%

note: BBBEE scorecards are calculated retrospectively, therefore the data reported is based on the scorecard compiled in January 2009 for the period ending June 2008.



Achieve a minimum score of 65% or level 4 BBBEE contributor status by June 2011.



We are pleased that our group-wide electricity intensity of 252 kW/h per square meter falls below the retail range of 529 kWh/m² to 681 kWh/m². There is still opportunity to reduce total energy consumption by a minimum of 12% and we’ve set this as a goal for our Group operations forum to achieve by June 2011. Recognising that this initiative requires ready access to accurate electricity consumption data, we are evaluating a system at 19 Builders Warehouse stores that enables centralised real-time consumption monitoring.

Good progress has been made in the area of carbon reporting and we were pleased to be ranked third in the low emissions category of the 2008 Carbon Disclosure Project (CDP). We have adopted a phased reporting approach which involves extending the scope of our carbon data gathering activities on an annual basis. As such our latest data includes emissions from store waste to landfill and direct import transport emissions, adding 131 558 metric tonnes of CO2 to the total emissions reported as at December 2008.

In the past, we’d been concerned that chain-specific climate mitigation and adaptation initiatives were too loosely structured and opportunistic in nature. We’ve since commissioned a carbon white paper from Maplecroft and also asked for additional input from Incite Sustainability and, Imbewu Sustainability and Legal Specialists. With the help of their collective findings, we’ve developed a carbon mitigation and adaptation planning tool to facilitate more structured target-setting and governance in our divisions.

We also launched a survey to assess the climate change strategies of high priority suppliers with the intention of assigning each participant a climate change responsiveness score. The survey was distributed to 66 suppliers and we received 44 completed responses. Fujitsu Siemens, Kimberley Clarke, Dulux, Procter & Gamble, and Unilever emerged as top performers.

note: Emissions are reported for the calendar year 1 January 2008 to 31 December 2008 and trading space is taken as at June 2008. Comparative data was provided by Sustbrands and is based on information from two South African retailers and the CDP database.

Estimated CO2 emissions

392,363 tons 36.0%

Estimated total Group carbon emissions Intensity

387 Co2(kg)/m2

35.0%

Estimated purchased electricity consumption

252 kwh/m2

4.0%

Estimated purchased electricity emissions intensity

247 Co2(kg)/m2

2.0%

Estimated water consumption

1.8 kl/m2

20.0%

CDP retail range 210 – 466 CO

2(kg)/m2

SA retail peer 517 – 666 CO

2(kg)/m2

SA retail peer 1.4 – 1.6 kl/m2

SA retail peer 529 – 681 kWh/m2

Our stores may be using energy efficiently, but we are not doing enough to help our customers to do the same.

climate chanGe and environment

environment scorecard as at June 2009

36

A more ambitious project involved engaging KPMG Consulting to build a database to profile ingredients in high environmental impact merchandise categories, such as pesticides. Although implementation has been slow, our aim is to identify, and encourage suppliers to replace, environmentally problematic product ingredients that appear on activist watch lists.

A consumer advocacy highlight was our customers positive response to the Fujitsu-Siemens sponsored e-waste recycling facilities that have been implemented at nine Makro stores. By contrast our Eco-wise environmental consumer awareness programme was less successful with price affordability and divisional buyer apathy emerging as barriers to successful implementation. More determined action has already resulted in an increase in the number of Eco-wise products launched in the first three months of the financial year ending June 2010.

note: Emissions are reported for the calendar year 1 January 2008 to 31 December 2008 and trading space is taken as at June 2008. Comparative data was provided by Sustbrands and is based on information from two South African retailers and the CDP database.

Estimated CO2 emissions

392,363 tons 36.0%

Estimated total Group carbon emissions Intensity

387 Co2(kg)/m2

35.0%

Estimated purchased electricity consumption

252 kwh/m2

4.0%

Estimated purchased electricity emissions intensity

247 Co2(kg)/m2

2.0%

Estimated water consumption

1.8 kl/m2

20.0%

CDP retail range 210 – 466 CO

2(kg)/m2

SA retail peer 517 – 666 CO

2(kg)/m2

SA retail peer 1.4 – 1.6 kl/m2

SA retail peer 529 – 681 kWh/m2


Achieve a minimum reduction of 12% in total electrical energy intensity [kWh/m2] by June 2011 using 2008 calendar year baseline.

Increase the share of Eco-wise sales as a percentage of general merchandise sales by June 2011.




This year is the first that Massmart is formally reporting sustainability performance in our African operations. Our main goal is to fully implement, in other countries, sustainability policies that set minimum social and environmental accountability standards. We’ve been slower at doing this than we would have liked and, for example, our tracking of HIV/Aids prevalence among staff in our African operations is poor. In addition we’ve missed the target we set ourselves for investing 1% of profit after tax in social upliftment initiatives.

We are also concerned that we don’t have a comprehensively researched understanding of the impact that our stores have on the social and economic fabric of the countries in which we operate. This inhibits our ability to find opportunities to minimise negative and optimise positive impacts.

These failures are of great concern to us because they could potentially exacerbate established negative perspectives that some stakeholders in host countries have about the conduct of South African companies operating within their borders. We’re therefore aiming to identify and correct our shortcomings so that we achieve a better understanding of the impact of our stores, as well as full compliance with agreed minimum standards in all foreign operations by 30 June 2010.

While we are dissatisfied with our overall performance, we have enjoyed some modest successes. One of these has been an embryonic initiative to improve local suppliers’ ability to enter into supply contracts with Game stores. As a result of our extension of preferable payment terms to emerging local suppliers, procurement within foreign African operations has increased from 11% in June 2008 to 19% in June this year. Our goal is to achieve 25% by June 2011.

Local employees as % of total headcount

98%

Local management as % of total managers

86%

Local executive store managers as % of total executive store managers

50%

HIV/Aids prevalence as % of total headcount

unknown

Productivity lost to malaria as % of total workdays

1%

Local procurement as % of total procurement

19%

Corporate social investment as % of PAT

0.4%

Customer SatisfactionIndex

82%

Purchased electricity consumption

323 kwh/m2

Penalties for legal non-compliance (No. of incidents)

1 Missing a tax deadline

Local citizens are well represented within our store management structures, but we need to do more to establish minimum social and environmental accountability standards.

african operationS

African operations scorecard as at June 2009

38

We’re also making in-roads in securing local people for management positions in our stores. Of all managers in our foreign African operations, 86% have been recruited from local communities. In addition 50% of all executive store managers have been sourced from local communities, although we feel that we can do better in this area through an improved succession planning process, which is currently being developed.

In terms of carbon reporting although we track energy consumption, we have been unable to make an accurate assessment of our energy intensity in some regions. This is mainly due to difficulty in accessing power consumption data in countries such as Ghana, Tanzania, Botswana and Zambia. Our annual energy intensity in the rest of our foreign African countries is approximately 218 kWh/m2. Encouragingly, our Malawian and Mozambique electrical power requirements, accounting for around 991 kWh/m2, are being provided by ‘green’ hydroelectric sources.

Local employees as % of total headcount

98%

Local management as % of total managers

86%

Local executive store managers as % of total executive store managers

50%

HIV/Aids prevalence as % of total headcount

unknown

Productivity lost to malaria as % of total workdays

1%

Local procurement as % of total procurement

19%

Corporate social investment as % of PAT

0.4%

Customer SatisfactionIndex

82%

Purchased electricity consumption

323 kwh/m2

Penalties for legal non-compliance (No. of incidents)

1 Missing a tax deadline

note: no published retail data was available for comparative purposes.


Increase local procurement to 25% of total procurement by June 2011.

Increase local executive store managers to 75% of total executive store managers by June 2011.



Each year Massmart renews its commitment to spending 1% of profit after tax on corporate social investment (CSI) initiatives. This year, we exceeded that goal by 0.60%, excluding supplier and staff contributions. Because we’ve done this at a time when many organisations are reducing their contribution to CSI programmes, we’re especially proud of our achievement. The increase in the level of our investment can be attributed mainly to the number of partnerships we’ve entered into with government related agencies and the fact that we launched a Massmart bursary scheme for disadvantaged African students.

Our bursary programme sponsors learners studying at the University of Pretoria to whom we’ve committed to providing five bursaries per year on a renewable but indefinite basis. These bursaries are available to African, mainly women students, who are studying towards BCom degrees. Each bursary covers the costs of tuition, textbooks, residence fees and meals. Bursary students also receive a monthly living allowance and they are able to join our OCSA primary healthcare plan.

Besides the bursaries, our focus on partnering with state organsations has resulted in many worthwhile donations, such as a gift of 8 304 emergency fluorescent portable lanterns to the South African Police Services (SAPS). We also distributed 500 stationery packs to the South African Police Services (SAPS) orphans and encouraged our suppliers to join us in filling 4 000 food hampers for South African National Defense Force (SANDF) troops serving under UN mandate in Africa.

While we are proud of our involvement in these important initiatives, we do not want to lose focus on the programmes we consider the most important: those that feed people. We believe feeding projects should receive the greatest share of our corporate social investment spend. Currently this is not the case, so we are exploring responsible disengagement strategies for some of our long-standing “other” legacy projects to reallocate these funds to feeding initiatives.

We’ve exceeded our CSI spending goal but want to increase our spending on something that has gained in importance: feeding our people.

corporate Social inveStment

Corporate social responsibility scorecard as at June 2009

Total Group social investment including supplier and staff contributions

R23.5m R4.5m

Total Group social investment excluding supplier and staff contributions

R20.5m

Total investment in feeding projects (container kitchens, feeding schemes, vegetable tunnels, Foodbank)

R5.9m

40

One important advance we did make in expanding our feeding involvement this year was the donation of 3,000 kg of Max-a-Meal to Foodbank South Africa, with a commitment to make an ongoing donation of 6,000 kg of this highly nutritious meal on an annual basis. We also launched a vegetable tunnel project through Builders Warehouse that delivered 90 vegetable tunnels to 30 schools in areas of need. These projects will now occupy a permanent place alongside our existing programme of feeding initiatives which include providing financial support to established feeding schemes and providing fully equipped container kitchens to disadvantaged schools.

Total investment in feeding projects (container kitchens, feeding schemes, vegetable tunnels, Foodbank)

R5.9m

Total investment in icon projects (tools-to-teach, tools-to-play, excellence in education awards, Men-on-the-Side of the Road, Massmart bursary scheme)

R8.3m

Total investment in ‘other’ projects(e.g. Starfish Foundation, Tomorrow Trust Wheelchair fund)

R9.3m note: Icon projects refer to chain specific educational programmes that address specific needs, such as early childhood development.

To understand what CSI is capable of achieving, don’t look at what we’ve spent. look at what we’ve spent it on.

Turn the page to see our CSI stories in action…



42

caroline Sithole and her sister, daphne, are learners at frikkie Smidt primary School in hartbeespoort. There are 203 children here and all are supported by the national Schools nutrition programme. at only R1.29 per child per day, however, the funding is minimal and there’s nothing left over for the school to establish a proper kitchen. in support of children’s charity centurus colleges Trust, makro has been providing food and donating fixtures and equipment since July 2008. learners now receive two hot meals five days a week, and have benefited from R40 280 of the R1.1 million makro has spent in the area since last year.



Students need more than just passion to get into university. They need high marks to ensure admissions offices take notice of them. with his passion for public relations in mind, kante Bila joined a holiday tuition programme run by Tomorrow Trust, a non-profit organisation assisting children of families affected by hiV/aids. The trust works to improve these learners’ chances of being accepted at tertiary institutions by offering extra lessons and school holiday workshops. makro has been supporting the initiative since 2006 and has made R1.45 million available to students like kante. his extra studying earned him an a in accounting in his final year of school and today he’s working toward a tertiary diploma.

44



46

wilfred adams first met his business partners while doing a course with Builders warehouse’s men-on-the-Side of the Road programme. his dream was to run his own construction company, and today he stands in front of a cluster of townhouses in greenstone, Johannesburg that his company helped build. Builders warehouse and massbuild division have supported the building-related skills development programme since 2005. So far, 500 previously unemployed men and women like wilfred and his partners have been trained in bricklaying, plumbing, painting and electrical work. always hands-on, wilfred did the plumbing himself in all four of these units.


game amalunchbox project beneficiaries.

48

eConoMIC peRFoRMAnCe 54

enVIRonMenTAl peRFoRMAnCe 54

SoCIAl peRFoRMAnCe 56

huMAn RIGhTS 58

SoCIeTy 58

pRoDuCT ReSponSIBIlITy 59

STRATeGy AnD AnAlySIS 50

oRGAnISATIonAl pRoFIle 50

RepoRT pRoFIle 51

RepoRT SCope AnD BounDARy 51

ASSuRAnCe 52

GoVeRnAnCe 52

STAkeholDeR enGAGeMenT 53

Please also refer to Massmart at a Glance (p1), Chairman’s review (p25), Ceo’s review (p29) and Corporate Governance (p95) in the Massmart annual report 2009. b new questions included in the 2009 report are marked with a bold asterisk c Content that has been significantly updated is marked with an asterisk at the start of the new paragraph.

Book Three leaves no question unanswered.

As a result of positive feedback received on last year’s report, we have again positioned our performance and disclosures against the GRI III standards in an easy-to-read Q&A format.

Book three : Gri iii QueStionS & anSwerS


STRATeGy AnD AnAlySIS

1.1 Statement from ceowhat are massmart’s current sustainability priorities?

We believe that, as a retailer, Massmart can play a pivotal role by advocating responsible business practice to our suppliers and responsible consumerism to our customers, recognising that a prerequisite for doing this credibly requires that we embrace the principles of responsible corporate citizenship.

c our sustainability priorities include improving staff access to private healthcare benefits, achieving 12% reduction in electricity consumption, improving sustainability performance in foreign african operations (corporate social investment, local procurement and indigenisation of management), formalising our approach to ethical supply chain management and evolving an afro-centric approach to sustainable development.

these issues are discussed in greater detail in the Ceo’s letter on page 26.

1.2 key impacts, risks and opportunitieswhat are key sustainability risks and impacts that confront massmart?

We conduct a biannual sustainability SWot assessment that involves desktop research, consultation with external sustainability subject matter experts and also internal debate to identify the sustainability issues confronting the organisation.

c this year we also contracted KPMG Consulting to conduct a social materiality risk review, Imbewu Sustainability legal Specialists to conduct an environmental legislation risk review and Maplecroft who conducted a generic climate change risk review.

We maintain a comprehensive sustainability risk register but have chosen to only highlight five priority risks in this report. these are failure to: respond to skills shortage, sustain BBBee performance, identify irresponsible supplier behaviour, adopt merchandise to low-carbon society and failure to adapt to climate change in african operations.

We continue to develop appropriate responses to the provisions of the Consumer Protection act (effective 24 october 2010) and the national Waste Management act (effective 1 July 2009), changing consumer attitudes to responsible consumerism and high crime levels.

oRGAnISATIonAl pRoFIle

2.1 - 2.7 profile and marketshow does massmart’s operational structure support sustainability?

responsibility for monitoring the scope and quality of sustainability practice rests with the Massmart Sustainability Committee, a committee of the Massmart board. the committee meets at least twice per year with the objective of reviewing Massmart’s Socially responsible Investment Index, broad-based black economic empowerment, and Global reporting initiative performance.

c the Group’s sustainability priorities are agreed by the Massmart executive Committee on the recommendation of the Group Corporate affairs executive. Sustainability priorities are identified with primary reference to the detailed criteria that constitute the JSe limited Socially responsible Investment (SrI) Index.

Implementation is coordinated by the Group Corporate affairs executive who works in close collaboration with divisional line managers. Divisional sustainability practice is regarded as a line management function whilst overall accountability for sustainability performance rests with divisional executive committees. each division reports their sustainability performance to Massmart holdings on an annual basis.

2.8 Scalewhat is the scope and scale of massmart’s operations?

Massmart is a managed portfolio of nine wholesale and retail chains, each focused on high volume, low margin, low cost distribution of mainly branded consumer goods for cash. the Group operates in 14 countries in southern africa through four divisions comprising 256 stores and one buying division.

c We employ 28 162 people, 35% of whom are unionised. the Group’s total market capitalisation as at 30 June 2009 was r16 billion.

2.9 Significant changeswhat sustainability reporting changes have been implemented in this report?

c Sustainability reporting has remained the same in terms of geographic and divisional scope. We have however added a separate section that covers performance in our foreign african operations. Carbon and electricity intensity data has been reported using electricity consumption for the 2008 calendar year and trading m² at June 2008. Broad-based black economic empowerment data is reported per our empowerdex verified scorecard for the year ending June 2008.

2.10 awards/Recognition receivedwhat sustainability awards did massmart achieve during the reporting period?

c We were ranked third in the low emissions category of the 2008 Carbon Disclosure Project (CDP), achieved top Performer status for the second year running in the JSe

Gri iii QueStionS & anSwerS

50

limited’s 2008 Socially responsible Investment Index (Medium environmental Impact Category) and we were ranked 15th out of 400 South african companies in a Sustainability assurance review of GrI+10 reporting.

RepoRT pRoFIle

3.1 Reporting periodwhat reporting period does this report cover?

c this is Massmart’s sixth report and it covers sustainability performance for the financial year ending 30 June 2009. the content of our sustainability reports is supplemented by ongoing communication via stakeholder workshops, press releases, results presentations, Massmart website and Massmart’s internal news magazine.

3.2 most recent previous reportwhen did massmart publish its last sustainability report?

our last sustainability report was published for the financial year ending 30 June 2008.

3.3 Reporting cyclehow often does massmart publish sustainability reports?

We publish annual sustainability reports that are timed to coincide with the Group’s annual financial reporting cycle (1 July – 30 June).

3.4 contact pointb who compiled this report?

this report was compiled by the Group Corporate affairs executive who is a member of the Massmart executive Committee. the report was compiled in consultation with divisional management.

b who does the compiler report to?

the Group Corporate affairs executive reports to the Chief executive officer of Massmart holdings.

RepoRT SCope AnD BounDARy

3.5-3.7 process for defining content, and any limitationshow does massmart identify and select information covered in the sustainability report?

We attempt to select information that is perceived to be socially material to our key stakeholder groups placing particular emphasis on government, employees, customers, suppliers, communities within which we operate and civil society. the information reported is based on input provided during stakeholder meetings, outcome of Massmart’s internal risk management process, advice of independent subject matter experts, local and global industry trends, content of public discourse and standards defined by initiatives such as the JSe limited Socially responsible Investment (SrI) Index and Global reporting Initiative (GrI).

c the content of this year’s report has also been shaped by a survey of Massmart’s major shareholders and a group comprising leading South african sustainability subject matter experts.

how does massmart ensure that its reporting is balanced?

c We aim to achieve balance in three ways. firstly we emphasise purely statistical reporting through the compilation of sustainability scorecards covering black economic empowerment, human resources, environmental and climate change, african operations and corporate social investment performance. Secondly, we consciously disclose priority performance concerns within each sustainability performance area, for example failure to meet CSI targets in african operations. finally, we direct executives to cover both successes and failures in their respective progress reviews, for example non-compliance with the Department of labour employment equity (ee) reporting standards.

In addition, this year we asked our Chief executive officer to focus his letter on areas of underperformance. our reporting is sometimes limited by insufficient data accessibility, for example scope 2 and 3 carbon emissions data lacks reliability and accuracy of the comparative retail data that we use is difficult to verify.

3.8 Reporting on group elements and data measurement techniquesare data measurement techniques described sufficiently?

c our scorecards are constructed in a manner that seeks to eliminate opportunities for subjective interpretation. We don’t provide specific formulae and detail underpinning the statistical information presented in the scorecards. We try, wherever possible, to apply key performance indicators that are in general use, such as kWh/m² and Co2(kg)/m².

b how does massmart ensure the accuracy of the data reported?

Data accuracy has, and continues to be a significant sustainability reporting challenge. the key issue is that we do not have access to centralised Group information systems containing the data required for sustainability reporting purposes. as such, data tends to be sourced from various paper-based and automated sub-systems before being consolidated in Group spreadsheets. this process is cumbersome and open to error, and does result in inaccurate data reporting.

Massmart attempts to overcome the problem by ensuring that sustainability scorecard data is checked and verified by Massmart Internal audit Services. We have considered the option of only reporting data that is proven to have absolute accuracy but believe that this will undermine the momentum of our sustainable development efforts. We estimate that the margin fro error in reported data can range from 10% to 15%, this is particularly true in the case of climate change and environmental data.

3.10-3.11 Restatements or significant changeshave significant reporting changes been made/identified since the previous reporting period?

c Yes: – Percentage equity controlled by the thuthukani trust

was overstated by 2%;


– energy consumption was overstated by approximately 4 119 000 kW;

– emissions from company owned transport and air travel was overstated by approximately 10 000 metric tons;

– employee turnover has been adjusted to only include dismissals and resignations;

– Carbon emissions calculation has been extended to include estimates of waste to landfill emissions and direct import logistics emissions; and

– Incidents of ethics raised is now reported as all calls received by the ethics line, versus Massmart identified calls to the line that are strictly defined as involving unethical conduct.

3.12. gRi indexwhy does massmart use the gRi standard and how does it impact on sustainability processes at massmart?

Massmart applies the GrI standard given that it has been widely adopted and has, in our opinion, become the de facto sustainability reporting standard. We apply GrI standards as key performance indicators in our sustainability processes, for example economic value generated and distributed.

ASSuRAnCe

3.13 policy and practice on external assurance

We are of the opinion, giving their independence and intimate knowledge of the Group and our information systems, that Massmart Internal audit Services is well placed to check and verify the statistical scorecard information contained in this report. We also believe that verification is best achieved by focusing on purely statistical data. the Massmart Internal audit Department is currently responsible for verifying all Group sustainability scorecard information that is reported.

c however, following the launch of the Draft report on Corporate Governance in South africa (King III) on 25 february 2009, we have resolved to appoint an independent organisation to assure future sustainability reports.

GoVeRnAnCe

4.1-4.3 governance structure, independence

c what structure exists at board level to cover responsibility for sustainability practice?

Sustainability practice is reviewed by the Sustainability Committee which is a committee of the Massmart board. the committee comprises two non-executive directors, independent sustainability subject matter expert, Massmart Ceo, Massmart Corporate affairs executive and Group human Capital executive. the chairperson of the committee is a non-executive director appointed by the board. the committee meets at least twice annually to review Massmart’s sustainability performance.

c We have finalised the appointment of Professor Derick de Jongh as an independent external representative on the Sustainability Committee with effect from 31 august 2009.

b what other board committees are charged with governance oversight responsibility at massmart?

there are four principle committees of the board that are charged with governance oversight responsibility. they are the: audit, remuneration and nominations, risk, and, Strategy and Investment committees. the mandate and composition of these committees is discussed in the Corporate Governance section of the annual report.

4.4 Shareholder/employee interactionwhat mechanisms are in place to enable shareholders and employees to make recommendations to the board?

employees have a 10.05% shareholding in Massmart through their participation in the thuthukani employee empowerment trust, Black Scarce Skills trust and executive Share trust. employee and external shareholders are entitled to make recommendations to the board at annual general meetings. employees are represented at the annual general meeting by staff elected thuthukani trustees. a toll-free thuthukani hotline has been established to enable employees to enquire about their thuthukani investment and also to provide input to their elected trustees.

4.5-4.7 link between compensation and performanceTo what extent is sustainability performance taken into account when determining executive compensation?

executive bonuses are based on individual performance as well as the overall financial performance of the Group, and the particular division in which executives are employed. In the case of sustainability performance a financial incentive is payable to top executives based on the extent to which they improve the BBBee performance of their division. this reflects the high priority that the Group places on transformation. the Group remains alert to opportunities to introduce incentive structures that assume a similar level of priority in other sustainability areas.

4.8 policies on triple bottom-line performance and implementation statusb what informs massmart’s sustainability proposition?

our sustainability proposition is informed by adopting a balanced perspective of a combination of the Group’s commercial goals, impacts on society and the environment, expectations of civil society, prevailing socio-political conditions, public discourse, activities of retail peers in developed economies and our social accountability aspirations. this proposition is becoming increasingly influenced by our sub-Saharan african focus.

what is massmart’s sustainability proposition?

our sustainability proposition is to achieve commercial success by adopting a mass distribution business model that simultaneously offers benefits on both ends of the retail value chain without compromising our commitment to socially responsible business practice.

this involves sensibly integrating sustainability practices with business objectives, offering suppliers an efficient socially relevant channel to their markets, optimising value for

52

customers, by providing affordable access to quality safe merchandise that has been procured responsibly, acting in a socially responsible manner and advocating principles of responsible consumerism to suppliers and customers.

achievement of this proposition is underpinned by black economic empowerment, human capital, ethics, climate change, corporate social investment and related policies that define minimum standards of sustainability practice.

b 4.9. managing triple bottom-line risks, opportunities and international compliancewhat monitoring and assessment mechanisms are in place to oversee massmart’s sustainability performance at board level?

the Chairperson of the Massmart Sustainability Committee provides the Massmart board with quarterly updates about the Group’s sustainability performance placing emphasis on JSe Socially responsible Investment (SrI) Index performance, independently verified broad-based black economic empowerment (BBBee) performance, Carbon Disclosure Project (CDP) participation and level of sustainability reporting disclosure.

c In addition the Sustainability Committee is empowered to initiate both internal and external reviews of aspects of sustainability performance. In a most recent example the committee requested an Internal audit review of the Group’s icon corporate social investment (CSI) projects. the Sustainability Committee has also requested that future sustainability reports be the subject of independent external assurance.

4.10. Self-assessment of triple bottom-line governancewhat processes are in place to assess triple bottom-line governance at massmart?

the Massmart Sustainability Committee assesses Group sustainability performance in terms of a framework that measures progress against agreed sustainability targets. this is supplemented by comparing internally assessed performance against the progress made in the JSe limited Socially responsible Investment Index. We also engage external specialists to review black economic empowerment, ethics and environmental risk performance. this year also saw the introduction of “comparative” data to the Group’s sustainability scorecards.

4.11. precautionary approachhow does massmart follow the precautionary approach in the procurement of products?

Massmart makes every effort to base procurement decisions on a sound understanding of all relevant facts with reference to the reasonable man test. the Group’s default approach is to adopt a conservative approach to procurement decisions in situations characterised by doubt about the practices of product suppliers and/or the product in question.

what does massmart do to promote adoption of a precautionary approach in its decisions?

We have implemented a variety of interventions that reinforce the principles of the precautionary approach. these include

training staff in the process of ethical decision-making, applying a risk management approach that seeks to avoid exposing the organisation to undue risk, defining comprehensive product specifications that emphasise health and safety issues, conducting supplier environmental surveys, contracting suppliers to specified standards of conduct, implementing third party food product testing and contracting external subject matter experts to conduct pre-emptive risk reviews within the organisation.

4.12 external economic, environmental and social charters or initiatives

which charters/associations/principles or other sustainability initiatives does massmart subscribe to or endorse?

Massmart’s sustainability programme is strongly influenced by the criteria defined in the JSe limited’s Socially responsible Index, Department of trade and Industry’s Codes of Good Practice on Broad-based Black economic empowerment, Carbon Disclosure Project (CDP) questionnaire, the King III report on Governance for South africa and these Global reporting Initiative guidelines.

4.13 industry associations and advocacy organisations

what associations and advocacy organisations does massmart participate in and support?

Massmart are members of, participate in and/or make contributions to organisations that include; Business against Crime (BaC), Business unity South africa (BuSa), Consumer Goods Council of South africa (CGCSa), ethics Institute of South africa, national african federated Chamber of Commerce (nafcoc), national economic Development & labour Council (nedlac), South african Institute of race relations, IDaSa and WWf.

STAkeholDeR enGAGeMenT

4.14 - 4.16 Stakeholder groups engaged, basis for identification and frequency of engagement

what is massmart’s position on stakeholder engagement?

We are committed to proactively understanding and responding to the priorities of our stakeholders who we interpret to include investors, shareholders, employees, customers, suppliers, local communities, government, foreign african diplomats, civil society and the media. our stakeholder engagement practices include participation in stakeholder organised forums, conducting one-on-one meetings, making formal submissions to parliament, conducting stakeholder surveys, and hosting public policy and general interest discussion groups.

what criteria does massmart use in deciding who to engage with?

Massmart engages proactively with identified stakeholder groups that directly impact on, or are directly impacted by activities in our direct sphere of commercial influence. factors that are considered before engaging stakeholders include representivity, credentials and, social and business relevance of issue.


b what form does stakeholder engagement take?

We proactively contact various stakeholders, individually and collectively, to share information and gain an appreciation for their perspectives. notwithstanding numerous one-on-one meetings, our stakeholder engagement generally involves conducting regular discussion groups that include themed discussions with subject matter experts, public policy discussions with government and civil society representatives and consumer discussions with consumer interest groups.

how frequently does massmart engage stakeholders?

Stakeholder engagement activities occur on an ongoing basis throughout the year. engagement with investors and shareholders takes place at least four times per annum through results presentations, meetings and the Massmart annual general meeting. We aim to engage with government and civil society stakeholders at least six times per year through meetings, workshops and surveys. employee, customer and supplier engagement is considerably more intensive and generally occurs as needed.

eConoMIC peRFoRMAnCe

ec1 how much value added has massmart generated over the reporting period?

We derive economic value with reference to employees salaries, wages and benefits, government taxation, shareholders’ dividends, interest paid to lenders, minority holdings in Masscash subsidiaries, and amortisation and depreciation. on this basis our value added for the year ending June 2009 was r10,052 million versus r9,891 million at June 2008.

ec2 financial implications, risks, opportunities relating to climate changehow does massmart measure risks and opportunities relating to climate change?

c Massmart made extensive use of external consultants in 2009 to identify the risks and opportunities associated with climate change. this included entering into consulting engagements with Imbewu Sustainability legal Specialists (legal review), KPMG Consulting (general risk review) and Maplecroft (carbon white paper). these reviews attempted to assess climate change risk with primary reference to the Massmart supply chain and the countries within which the Group operates.

ec3 defined benefit plan obligations

Massmart has no defined benefit plans.

ec4 financial assistance from governmentwhat is the extent of financial assistance received from government?

Massmart receives no financial assistance from government.

ec5 Standard entry level wage compared to local minimum wagehow does massmart determine entry level wages for employees?

entry level wages are determined by each division with reference to minimum wage legislation, internal wage equity and local market expectations. the average minimum wage in the Massmart Group for the year ending 30 June 2009 was r2 139 versus r2 040 at June 2008.

ec 6 proportion of spending on locally based supplierswhat is massmart’s policy with regard to procurement from locally based suppliers?

c We apply every effort to first procure merchandise from local manufacturers insofar as they satisfy our customer expectations of style, quality and price. total direct South african imports for the year ending 30 June 2009 represented approximately 3.6% of total procurement versus 4.5% at June 2008. We estimate that local procurement in our foreign african operations stands at 19%.

ec 7 procedures for local hiringwhat is massmart’s approach to hiring staff from local communities?

Massmart has a strong preference for hiring staff from local communities. We are however sometimes constrained in our efforts by the unavailability of individuals with the requisite skill and experience. a total of 98% of the full staff complement and 86% of management in our foreign african operations are local citizens.

ec 8 Significant direct impactswhat are the most significant indirect economic benefits that derive from massmart’s operations?

our primary indirect economic impact is rooted in Massmart’s high volume low-cost customer value proposition that seeks to provide wholesale and retail customers with an exceptional value for money proposition. further economic opportunities are also created for the property development industry as the result of the Group’s store opening programme. We don’t however have sufficient data to quantify the specific indirect economic benefits attributable to the Group’s activities.

enVIRonMenTAl peRFoRMAnCe

en1-2 materials used and recycleddoes massmart track and manage all the materials used in its operations?

Massmart doesn’t currently have the systems in place to track recycled waste materials as a percentage of all materials used in operations.

what percentage of materials used by massmart are recycled?

our stores are all required to recycle board and paper waste associated with merchandise packing material. to this end we currently have 120 active paper and board recycling facilities. In addition, Makro has established customer e-waste recycling facilities at nine of its stores.

en 3-7 energy used and savedb who has responsibility for the implementation of energy saving measures?

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responsibility for the implementation of energy saving measures rests mainly with the operations Directors and Store Planning Managers in the various divisions under the guidance of the Group Commercial executive.

how much energy was consumed by massmart during the reporting period?

the Group consumed approximately 246,331,161 kW of electricity during the reporting period ending 30 June 2009 versus 249,830,295 kW at June 2008. this data is susceptible to data reporting inaccuracy.

what percentage of energy was saved during the reporting period?

c energy consumption statistics decreased by 4,497,000 kW or 18%. We are however reluctant to attribute this decrease entirely to energy savings given the margin for error that is endemic to the data collection exercise. our conservative estimate is that roughly 5% of this decrease is attributable to energy savings initiatives.

b what steps have been taken to conserve energy?

our divisions have, to different degrees of implementation, undertaken numerous interventions to reduce electricity consumption such as replacing incandescent light bulbs with compact fluorescent bulbs, decreasing night time store lighting levels, switching off store signage lighting, implementing energy efficient climate control technologies and decommissioning store geysers.

what alternative energy sources does massmart use?

c the Group’s operations in Malawi and Mozambique requiring approximately 991 kW of electricity are supplied from hydroelectric power schemes.

b what steps have been taken to introduce energy saving products to consumers?

Massmart has and continues to proactively promote merchandise that conserves energy. this includes the promotion of compact fluorescent light bulbs, geyser blankets and a selection of energy Star certified electrical appliances. the Group also retails alternative energy products such as solar pool heaters. We consider our endeavours in this area to be modest and capable of significant improvement.

en8-10 water used and recycledhow much water did massmart use during the period?

c We report water usage in rands rather than litres consumed given that we are experiencing significant difficulty in sourcing consumption data from the numerous municipalities in which the Group has a store presence.

the cost of water consumed, including foreign african operations, was r13 648 087 during the reporting period ending 30 June 2009. We have converted this to an indicative water consumption indicator of 1.8 kl /m2

(1,975,121 kl ) which was derived with reference to the rand Water Board's retail tariff (including levy and value added tax) of 691 cents for the period 1 July 2008 to 30 June 2009.

how much water was recycled during the period?

no water recycling statistics are available.

b what measures does massmart have in place to improve water security?

Water saving mechanisms have been implemented in varying degrees across the organisation and include, for example, rainwater harvesting in certain Builders Warehouse stores and installation of waterless urinals. there is however no doubt that a more comprehensive plan is required to conserve water within the business and also to advocate better water conservation practices to customers and suppliers. a rainwater harvesting study has also been initiated at Makro.

en11-15 Biodiversity

how does massmart currently manage its impact on biodiversity?

environmental impact assessments are conducted in respect of all store development activities. furthermore Massmart does not own, lease or manage any land in or adjacent to protected areas or areas of high biodiversity value. We have not implemented initiatives in respect of tracking and managing the impact that suppliers have on biodiversity.

b how does massmart ensure the protection of biodiversity through its supplier networks?

Massmart does not currently have initiatives in place to ensure the protection of biodiversity amongst suppliers.

b how does massmart measure the impact of its products on biodiversity?

We don’t currently measure the impacts of our products on biodiversity.

en16-25 emissions, effluents and waste

what were massmart’s greenhouse gas emissions during the reporting period?

We estimate, based on available data, that the Group emitted 392,363 metric tons of carbon dioxide for the reporting period ending December 2008 versus 249,222 metric tons at December 2007. the increase in emissions is attributable to the inclusion of estimates of Co2 emissions from waste to landfill and direct import transport emissions. altogether 64% of reported emissions are attributable to electricity consumption. this calculation was based on the international WrI/WBCSD GhG Protocol Corporate accounting and reporting Standard.

b what carbon offset mechanisms does massmart have in place?

none

were there any significant waste spills during the reporting period?

no


en26-27 products and services

what constraints will environmental considerations place on future demand for massmart’s products and services?

c We anticipate that consumers will seek alternatives to environmentally sensitive products, for example, detergents, insecticides, solvents and paints. the Group’s eco-wise programme is intended as one response to cater to consumer needs for environmentally responsible merchandise.

how does massmart take into account environmental issues associated with the procurement of products and services?

all merchandise procured must comply with legislated environmental standards and South african Bureau of Standards specifications where these exist. Massmart has developed guidelines that encourage buyers to ask suppliers about the environmental impacts of their products placing emphasis on manufacturing practices, product design, traceability, packaging and environmental labelling standards.

does massmart calculate the carbon footprint of the merchandise that it sells?

no

what is massmart’s approach to environmentally friendly packaging?

We recognise the environmental and commercial benefits associated with reducing product packaging and have set an objective to explore packaging reduction opportunities with key suppliers. Massmart has made little progress in this area.

en28 incidents of non-compliance

were there any instances of non-compliance to environmental legislation and regulations during the reporting period?

no

en29 impact of transport

what were the greenhouse gas emissions that can be attributed to massmart owned transport, and air travel during the reporting period?

We estimate that 6 745 metric tons of carbon dioxide attributable to company owned transport and air travel was emitted during the calendar year ending December 2008 versus 7 999 metric tons for the same period in 2007. there are however inconsistencies in the 2008 data which were unresolved at the time that this report was published.

b what were the greenhouse gas emissions that can be attributed to third party transport during the reporting period?

We estimate that 42 643 metric tons of carbon dioxide attributable to supply-side direct import freight (land, sea and air) was emitted during the calendar year ending December 2008. this is the first time that we have reported direct import emissions. We do not have any data relative to transport emissions associated with other third party transport emissions.

en30 Total environmental protection investments

b is massmart a member of any environmental protection organisation?

Yes, Massmart is a member of WWf and interacts regularly with WWf staff in South africa.

what is the extent of massmart’s investment in initiatives and project aimed at environmental protection?

this data is currently not tracked and is therefore unavailable.

SoCIAl peRFoRMAnCe

labour practices and decent work

la1-3 workforce breakdown turnover and benefits

how many people does massmart employ and what is the racial composition of the workforce?

We employ 28 162 employees 82% of whom are black (african, Coloured or Indian). approximately 77% of all management and professional staff are black. Staff turnover for the financial year ending June 2009 was 9.34%.

b what is the gender composition of the workforce?

a total of 59.65% of all permanent employees are males and 40.35% are females. In addition we employ 3 857 female managers/professionals representing 45.25% of all managers/professionals. altogether 3 084 of all female managers are of african, Coloured or asian (aCI) descent.

b what benefits that are offered to permanent staff are not offered to temporary employees?

temporary employees don’t, in general terms, qualify for medical and pension cover. We attempted to overcome this concern by introducing the concept of a flexible 40-hour rolling week to facilitate conversion from temporary to permanent employee status without losing the scheduling flexibility to staff up over peak trading periods. In terms of this arrangement it was envisaged that certain employees would be scheduled flexibly to work their allotted 40-hour work week at any time during the week. the process was discontinued after objections were raised by the South african Commercial Catering and allied Workers union (SaCCaWu).

la4-5 employees covered by collective bargaining agreements and policies for communicating major change

employees in collective bargaining agreements and policies on communicating significant operational changes

b which union represents employees within the various operating divisions?

unionised employees are represented by the Confederation of South african trade unions (CoSatu) affiliated South african Commercial Catering and allied Workers union (SaCCaWu). union negotiations take place on a de-centralised basis within the various operating divisions.

what is the level of staff unionisation?

c a total of 35% of all staff were unionized as at 30 June 2009 versus 40.74% at June 2008. the decrease in unionisation appears to be attributable to natural attrition.

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have there been any significant changes in collective bargaining agreements and union memberships?

c Yes, union membership has decreased by 5.7%. this appears to be related to staff attrition.

have there being any significant instances of labour unrest during the reporting period?

c Yes, the South african Commercial Catering and allied Workers union (SaCCaWu) engaged in one day of industrial action during December 2008 in protest about the introduction of a 40-hour rolling week at three Makro stores and the introduction of biometric time and attendance system at Game. In addition, at the time of publication of this report SaCCaWu had declared wage disputes which led to industrial action at Makro and Game stores.

la 6-9 occupational health and safety

how does massmart manage the risks associated with occupational health and Safety (ohS)?

Massmart’s risk management process includes applying extensive ohS safety protocols that include appointment of safety officers, establishment of store safety committees, regular health and safety training, incorporation of safety standards into job descriptions and, conduct of line management and independent safety reviews.

how many employee occupational health and safety incidents occurred during the reporting period?

c a total of 708 workplace injuries were sustained by Massmart employees for the period ending 30 June 2009. this is significantly higher than the 516 injuries reported at June 2008 and is attributable to improved reporting protocols. no staff fatalities were reported.

b how many customer occupational health and safety incidents occurred during the reporting period?

a total of 111 health and safety incidents involving customers were reported during the period ending 30 June 2009. this included one customer fatality resulting from merchandise which fell on a customer in a Masscash wholesale store. Subsequent investigation by the South african Police Services cleared the company of any wrongdoing.

b how many health and safety personnel were trained during the reporting period?

a total of 1 923 employees attended health and safety related training during the period ending June 2009. the training covered topics such as first aid, fire fighting and evacuation, hazardous chemicals and dangerous substances, racking and stacking and, gas handling and filling.

what is massmart’s approach to hiV/aids?

c We have an extensive hIV/aids programme which includes ongoing awareness building, peer counselling and support, regular voluntary testing clinics and the provision of free antiretroviral treatment for permanent staff and their spouses. the estimated hIV prevalence rate amongst permanent staff for the year ending 30 June 2009 was 6.44% versus 6.04% at June 2008. this is significantly below the 10.90% national infection rate.

the rate of infection is highest in our Masscash division (9.9%) which has a significant presence in KwaZulu-natal, an area with the highest infection rate in the country.

what is massmart’s approach to other priority diseases and ailments?

the Group runs regular store-based programmes to screen for diabetes, cholesterol, high blood pressure, tuberculosis and obesity. a total of 5 676 employees participated in the Group’s tB analysis questionnaire resulting in 53 referrals. altogether 7 601 employees have, to date, been screened for cholesterol, blood pressure and diabetes.

la10-12 employee training and educationwho takes responsibility for training at massmart?

Job specific retail training is the responsibility of Divisional human resources directors. the Massmart human Capital executive has responsibility for development associated with maintaining the executive and priority skills pipeline. the latter is addressed primarily through the Massmart corporate university.

what investment does massmart make in training and development?

c the Group invested approximately r30.8 million in formal training and development activities during the year ending 30 June 2009 versus r23.7 million at June 2008. this equates to per capita training spend of r1 261 per annum.

b how many employees received formal training during the reporting period?

a total of 13 752 employees were trained of whom 5 421 were female and 11 823 were african, Coloured or Indian (aCI). only 42 disabled employees received training.

b how many days of training were conducted during the reporting period?

altogether 45 537 days of training were recorded of which 19 174 days benefited women and 38 955 days benefited african, Coloured and Indian (aCI) employees. Disabled people received 107 days of training.

b what is massmart’s role in tertiary education (e.g university bursaries)?

We launched, in January 2009, a bursary scheme in partnership with the commerce faculty at the university of Pretoria in terms of which Massmart will fund five new commerce bursaries per year on an indefinite but renewable basis. the bursaries cover tuition, residence, food and book costs and, include a monthly stipend and access to primary medical care.

how many hours training does each employee receive per annum?

unknown

la13-14 diversity and equal opportunitydoes massmart have any programmes in place to promote appreciation of diversity amongst employees?


Massmart conducts diversity training with executives and senior managers, and continues to implement diversity training across the Group. a total of 4 292 employees attended diversity training during the year ending June 2008.

huMAn RIGhTS

hR1-3 investment and procurement practiceswhat proportion of massmart’s investments have been subject to human rights screening?

unknown

what does massmart do to extend the principles of human rights screening to suppliers?

Massmart trading terms contracts include a provision requiring suppliers to comply with all relevant legislation and also with good human rights practice. Massmart approved, in 2008, a pilot project to conduct an independent social audit of selected direct import suppliers. this project had however not been initiated at the time of publication of this report.

hR4 incidents of discriminationwhat mechanisms does massmart have in place to disclose incidents of human rights abuse?

Massmart has implemented an independently managed anonymous ethics line to which suppliers, supplier staff and Massmart employees can report any unethical issues which include incidents of discrimination.

c the ethics line number is 0800 203 246

how many incidents of discrimination have been reported?

c a total of 21 incidents of racial discrimination were reported during the financial year ending 30 June 2009 versus three incidents which were reported at June 2008. there are no clear trends in terms of the incidents reported.

hR5 Risks to freedom of association and collective bargainingare there any areas of operation within massmart in which risks to freedom of association may exist?

c no, our commitment to freedom of association is authentic and we would act firmly against any employee who through their actions/omissions is found to undermine this commitment. the union did however level accusations of “union bashing” against Massmart during the recent wage related industrial action at Makro and Game. our view is that the accusations were without merit.

hR6-7 incidents of child, forced or compulsory labourwhat is massmart’s policy with regard to child labour?

the Group does not employ underage staff and contracts suppliers to make the same commitment in their employment practices.

hR8 Security personnel trained in relevant human rightswhat training do security staff receive to ensure that they do not infringe employee, customer and supplier human rights?

Security staff receive training related to the legal procedures

that they must follow when apprehending an employee, customer or supplier suspected of wrongdoing. this training, whilst dealing with the “rights” of suspects does not focus specifically on human rights per se.

hR9 Violations of the rights of indigenous people?does massmart have a policy covering the rights of indigenous people?

no, although we reinforce, through our ethics and diversity training, the general principle that the dignity and rights of all individuals may never be infringed in the way that the Group conducts its business.

SoCIeTy

So1 programmes to manage impacts on communitieshow does massmart assess the impact of its operations on communities?

c Massmart’s focus is limited to impact assessments that are conducted prior to the development of new store sites. Broader social impacts are identified through our programme of stakeholder engagement which is currently deficient in this specific area of engagement. Massmart is in preliminary discussions with an independent researcher to assess the social impacts of new store openings in our foreign african operations.

So2-4 policies and practices on corruptiondoes massmart have a code of ethics and how is this implemented and enforced?

Massmart has a Code of ethical Conduct which has and continues to be communicated to staff and strategic suppliers. ethical practice in the Group is tracked and managed by accredited divisional ethics officers who are accountable to a Chief ethics officer. an outsourced anonymous ethics line has been established to report unethical practice and the ethics Institute of South africa conducts biannual surveys of the state of ethics in the Group.

how many incidents of unethical conduct were raised during the current reporting period?

the ethics line received 912 calls during the financial year ending 30 June 2009 versus 668 calls at June 2008. a total of 77 calls related to allegations of criminal misconduct, whilst 137 calls received were anonymous. We are delighted that employee usage of the ethics line has increased.

what is the extent of massmart’s involvement in organisations dealing with ethics?

c Massmart is a member of the ethics Institute of South africa. the Group recently contributed funding to the ethics Institute of South africa, to survey the ethics practice of listed South african companies.

So5 policies on public policy development and lobbyingwhere in the organisation does the responsibility for government liaison lie?

Government liaison is conducted primarily at the Group level where responsibility is shared between Ceo, Group Corporate

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affairs executive and Channel executive. the Channel executive deals primarily with legislative and regulators issues covering operational activities and the Group’s merchandise proposition. the Group Corporate affairs executive is responsible for broader public policy issues.

how does massmart engage government on public policy issues?

the Group focuses public policy engagement efforts primarily on the legislature by making written and verbal submissions to the appropriate parliamentary portfolio committees. We also participate in forums such as Business unity South africa that represent the business community’s perspective on public policy issues.

So6 contributions to political parties and related interestswhat is massmart’s policy on making donations to political parties?

Massmart does not make donations to political parties or related institutions.

So7 legal actions for any anti-competitive behaviourswere any actions for anti-competitive behaviour lodged against massmart during the reporting period?

c no – however the Competition Commission has announced an investigation “into the retail trade of food through supermarkets” and Massmart will cooperate with the commission during the investigation. to this end the Massmart Ceo has met with the commission to gain insight into the scope and terms of reference of the investigation.

b what is massmart’s policy regarding anti-competitive behaviour by suppliers?

We will report, anti-competitive behaviour that we encounter in our supply chain.

b what proactive measures has massmart taken to counter anti-competitive behaviour amongst suppliers?

Massmart has initiated a process to provide buyers with additional education and training about the requirements of the Competition act 89 of 1998.

So8 fines or sanctions for non-compliancewhat fines were imposed on massmart for incidents of legislative or regulatory non-compliance during the reporting period?

none

pRoDuCT ReSponSIBIlITy

pR1-2 customer health and safetywhat standards and voluntary codes with regard to merchandise health and safety does massmart subscribe to?

the merchandise that Massmart sells conforms with relevant legislated requirements, product specific South african Bureau of Standards criteria and haCCP standards. We also retain food Consulting Services to conduct Good Manufacturing Practice (GMP) audits and random food quality and safety checks on private label food products.

pR3-4 products and service labelingwhat product labelling standards and voluntary codes does massmart subscribe to?

c our suppliers are required to comply with all relevant labelling legislation, such as the foodstuffs, Cosmetics and Disinfectants act, (food and toiletries), liquor Products act (including health warnings on liquor products), Medicines act, tobacco Products Control act, agricultural Standards act and the Merchandise Marks act no 17, 1941 (various). We are investigating options to extend additional voluntary labelling disclosure standards to suppliers.

pR5 practices on customer satisfactionhow does massmart identify customer expectations with regard to sustainability issues?

Market research including focus groups and customer surveys are conducted at divisional and Group level within Massmart. the primary emphasis of this research tends to be on traditional commercial elements of the value proposition to customers, however recently introduced (april 2009) Group level research has started focusing on customer attitudes to responsible consumerism.

pR6 -7 compliance with marketing and communications standardswhat marketing codes and voluntary standards does massmart subscribe to?

Massmart follows the Direct Marketing association (DMa) and advertising Standards authority (aSa) codes of practice and complies with relevant marketing and advertising legislation. We have also started reviewing current group-wide advertising and marketing practice in terms of the principles proposed in the Consumer Protection Bill.

how does massmart take sustainability issues into account in its marketing campaigns?

Game, Makro and Builders Warehouse have begun experimenting with mechanisms in their print advertising and in-store promotional material that draws consumer attention to socially responsible merchandise options.

did massmart incur any fines/legal sanction for breach of advertising and marketing standards?

no

pR8-9 Substantiated complaints and fines for breaches of customer privacywhat is massmart’s policy on customer privacy?

Massmart maintains strict confidentiality with regard to all personal information relating to our customers. We are closely monitoring progress of the Protection of Personal Information Bill which had not been enacted at the time of publication of this report.

did massmart incur any fines/legal sanctions for breach of customer privacy during the reporting period?

no


Massmart house16 Peltier Drive

Sunninghill ext. 6Sandton 2157

South africa

Private Bag X4Sunninghill 2157

South africa

t +27 (0)11 517 0000f +27 (0)11 517 0020

[email protected]

www.massmart.co.za

the Massmart Internal audit Services conducted a review of the data reported in the preliminary and final sustainability scorecards. the review was conducted in terms of assurance standards and entailed the verification of the authenticity of data presented against internal and external sources. all significant reported internal audit findings have been satisfactorily addressed prior to publication. on this basis we are satisfied to report that the data presented in the scorecards fairly represents the position of Massmart’s sustainability performance for the year ending 30 June 2009.

Designed by hKlM. all photography unless otherwise credited © Mykel nicolaou. edited by elizabeth nicolaou.

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