SUSTAINABILITY REPORT

R57 million invested in learning and development

Bertina Engelbrecht
Group Human Resources Director

Sustainability is part of how we do business and as the global economy shifts to become more sustainable, we seek to ensure the long-term competitiveness of our operations.

Message from the Chief Executive Officer, David Kneale

Our sustainability strategy recognises that the group cannot achieve business success without caring for the social and environmental systems upon which our operations depend. We apply this philosophy throughout our value chain, from suppliers to customers, from products to processes and from our buildings to our brands.

The initial focus of our sustainability strategy is on driving efficiency, transformation, product-related opportunities and challenges, and supply chain initiatives into an integrated sustainability programme. We will embed our approach through performance-based management and broad communication with all our stakeholders.

The key commitments which form the foundation of our sustainability strategy are:

  • Building a trusted, accessible healthcare network;
  • Sourcing products valued by our customers;
  • Empowering motivated, passionate people; and
  • Lightening our footprint.

An external consultancy has been engaged to assist in developing targets that will be based on local and international benchmarks. These targets will be incorporated into the group and business unit annual and three-year operating plans and disclosed in the annual report from 2011.

  1 Clinic sister treating a patient at one of the 93 Clicks clinics across the country.
     
  2. Clicks partnered with the Department of Health in a national HIV counselling and testing campaign to encourage South Africans to know their HIV status.
     
  3. Clicks Group employees took part in a charity drive with local radio station, Good Hope FM, to donate toys to underprivileged children from local schools.

In the 2009 annual report sustainability priorities were outlined for 2010 and pleasing progress has been made against most of these priorities.

indicator Sustainability priorities for 2010 Performance against priorities in 2010
  • Launch employee value proposition
  • Benchmark employee commitment
  • Entrench the talent and succession management process
  • Embedded the group’s total rewards framework
  • Developed and launched the employee value proposition in pharmacist recruitment
  • 86% of employees participated in the survey
  • Benchmarked as a top company to work for
  • Continued to strengthen the talent management process resulting in an improvement in the depth and quality of the talent pipeline and ratio of internal promotions
 
  • Continue to enhance shareholder value
  • Achieve the targeted level 4 BBBEE status through focus on employment equity and enterprise development
  • Grow market share and leverage the benefits of the Clicks ClubCard
 
  • Growth in market capitalisation of R4.4 billion
  • Total distributions to shareholders up 26.4%
  • Return on shareholders’ interest up from 42.3% to 50.8%
  • Maintained a level 5 externally verified BBBEE rating
  • Announced the implementation of an employee share ownership plan
  • Market share growth across key categories in all businesses
  • 3.1 million ClubCard members at year-end – net growth of 405 000 members in past year
 
  • Set targets to mitigate the impact of climate change
  • Entrench environmental management in operational and business planning processes
  • Implement an environmental management scorecard
 
  • Targets being developed
  • Continued participation in the Carbon Disclosure Project
  • Established an environmental management committee
  • Piloted first “green” concept store in Clicks
  • Commenced with measurement of key environmental impacts
 

  Successes Challenges Priorities for 2011  
  • Implemented the group’s total rewards strategy and framework
  • Developed the group’s employee value proposition
  • 86% of the employees participated in the employee commitment index
  • Invested R57 million in learning and development
  • Registered 761 learners on learnership and skills programmes
  • 4 527 employees participated in learning and development programmes
  • Invested R9.8 million in CSI
 
  • Absorbing the costs of implementing the total rewards framework
  • Finding ways to develop employees without taking them out of the workplace
  • Achieving a balance between functional competence and individual learning and development

 

  • Ensuring that the group is correctly positioned in terms of pay and benefits
  • Improving the employee commitment index rating
  • Maintaining employee turnover rate of 20%
  • Percentage of employees on learning and development programmes
 
  • Increased the pharmacy footprint to 251
  • Improved the group’s overall BBBEE score from 55.41 to 58.37
  • Invested R29 million in the UPD owner-driver scheme
  • Weighted BEE procurement spend of R6.8 billion
  • 3.1 million ClubCard members at year-end
 
  • Continued scarcity of pharmacists, pharmacists’ assistants and nursing practitioners
  • Developing appropriate enterprise development initiatives
  • Focusing on preferential procurement from qualifying small enterprises and exempt micro enterprises

 

  • Continue to expand the pharmacy footprint and increase market share
  • Achieve level 4 BBBEE rating
  • Grow ClubCard membership to 3.5 million
  • Continue to enhance shareholder value
 
  • Implemented an environmental management committee and governance framework
  • Commenced with the measurement of key environmental impacts
  • Included in the Carbon Disclosure Leadership Index
  • Recycled 1 367 tons of plastic, paper and cardboard
 
  • Finding an appropriate mechanism to embed the environmental management system within operations management
  • Setting targets to mitigate against climate change
  • Increasing energy costs which has a negative impact on operating expenses

 

  • Setting medium-term environmental management targets
  • Embed environmental sustainability initiatives within business unit operating plans
  • Continue participation in the Carbon Disclosure Programme
  • Evaluate participation in United Nations Global Compact
 

JSE Socially Responsible Investment (SRI) Index

The group qualified for inclusion in the index for the first time in 2010. Qualification for the index is based on an assessment of the environmental, social, governance and sustainability practices of listed companies.


Sustainability indicators

A range of sustainability indicators have been identified across the group’s financial and trading performance, employees, transformation and environmental management to benchmark progress on sustainability practices within the group. These indicators are regularly reviewed to take account of changes and progress within the businesses and are reported under economic, social and environmental.

Sustainability indicators   2010 2009 2008 2007
Economic          
Headline earnings R’m 576 478 400 357
Diluted headline earnings per share cents 211.4 165.9 131.5 103.0
Return on shareholders’ interest (ROE) % 50.8 42.3 32.8 24.7
Return on total assets % 13.9 12.3 10.5 9.3
Distributions per share cents 106.2 84.0 61.1 48.2
Change in market capitalisation (net of treasury shares) R'm 4 377 1 109 (321) 1 223
Wealth created through cash value added R'm 2 820 2 400 2 113 2 112
Total leased trading area m2 278 621 267 776 259 884 252 239
Number of stores   561 540 519 500
In-store dispensaries   251 207 157 125
In-store clinics   93 105 97 92
Market share          
– Clicks: front shop health % 38.7 37.2 35.5 **
– Clicks: retail pharmacy % 13.6 11.1 9.0 **
– Clicks: beauty personal care % 24.9 24.4 25 25
– Musica: CD % 45 44 41 38
– Musica: DVD % 23 23 22 20
– Musica: Gaming software % 9 9 9 9
– UPD: private wholesale distribution % 23.7 23.6 26.4 25.6
Social***          
Permanent staff   8 064 7 585 7 122 9 076
Staff turnover % 19.8 26.1 21.2 23.4
Skills development as a % of basic payroll % 4.4 4.3 3.6 2.8
Employee wellness utilisation % 27 21 19 18
Employment equity          
– Black staff as a % of total staff % 84.7 84.3 84.2 86.9
– Black senior and top management % 17.8 11.5 18 24
– Black middle management % 42.9 41 35 37
– Black junior management % 67.2 65 80 86
– Black directors % 40 33 36 22
– Women as a % of total staff % 62.7 62 62 60
– Women senior/top management % 34.7 32 36 43
– Women middle management % 50 45 53 58
– Women junior management % 64.2 63 62 63
– Women directors % 33 33 27 9
Transformation rating Level 5 5 6 7
Corporate social investment spend R'm 9.8 14.4 9.8 0.4
Environmental          
Carbon emissions (CO²e) Tons 151 404 134 341 127 014 *
Electricity consumption kWh 108 153 90 499 86 811 *

Economic sustainability

Wealth creation

Value added statement for the year ended 31 August

    2009
  2010 (restated)*
  R ’m R’m
Turnover 13 276 12 175
Paid to suppliers for goods and services (11 092) (10 354)
Value added 2 184 1 821
Other income and finance income 636 579
Wealth created 2 820 2 400
 
 

Transformation

The group’s transformation strategy is aligned to the Department of Trade and Industry’s codes of good practice. The commitment to sustainable transformation is entrenched through the board transformation committee, the group internal transformation committee in which both the chief executive and the group human resources director participate, and business unit transformation forums which are responsible for implementation.

Transformation rating

The group maintained its externally verified level 5 rating and increased its BBBEE score from 55.41 in 2009 to 58.37 in 2010. The group did not meet its targeted level 4 rating owing mainly to the lack of training for employees with disabilities and identifying a suitable enterprise development programme within the Clicks brand. Encouraging progress has been made in the areas of employment equity and skills development. The launch of an enterprise development initiative by the Clicks Group in the new financial year is expected to have a major impact on the group achieving level 4 BBBEE compliance.

  2011      
BBBEE category targets 2010 2009 2008
Ownership 0.49 2.26 2.53
Management control 8.8 7.85 7.79 7.64
Employment equity 10 10.43 6.07 6.20
Skills development 15 12.20 11.53 9.90
Preferential procurement 14 13.82 13.51 11.71
Enterprise development 15 8.66 9.25 9.37
Socio-economic development 5 4.92 5.00 5.00
Total 67.8 58.37 55.41 52.35
Level 4 5 5 6

Preferential procurement

We are committed to procuring from locally based and empowered suppliers and encourage suppliers to externally verify their BBBEE status. During the financial year, 30% of the total procurement spend was from level 4 and higher rated suppliers.

Enterprise development

The UPD owner-driver scheme demonstrates the commitment to transformation and socio-economic development. The scheme was established in 2003 and currently has 52 owner-drivers contracted to deliver products to pharmacies, including Clicks, hospitals and clinics.

UPD spent R28.6 million for services from the owner-driver scheme and a further R0.7 million to the management company operating the scheme.

Social sustainability

Employment equity

Clicks Group is committed to creating a diverse workforce which reflects the demographics of South Africa through the advancement of previously disadvantaged people and the empowerment of women.

Increasing the representation of black people and women at the middle, senior and top management levels is a high priority for the transformation forums at both the group and business unit level.

Total rewards strategy

In 2009 the group implemented the total rewards strategy which is aimed at driving a high performance culture that consistently delivers above average returns to shareholders through employees who are motivated and fully engaged.

The total rewards strategy has resulted in the implementation of the human resources governance framework which has aligned the principles of pay and performance, improved the leave management process, reduced staff turnover, and created internal equity through grading and structured pay bands.

Salaries and benefits are competitively positioned in relation to the retail industry and general market and 20% above the minimum wage determination for the retail sector. Employees are entitled to statutory benefits, including annual leave, maternity leave, paternity leave and family responsibility leave. Employees can also qualify for an annual performance bonus and receive discounts at group stores.

Freedom of association

Clicks Group has a formal recognition agreement with the South African Commercial Catering and Allied Workers’ Union (SACCAWU) which represents 39% of full-time permanent employees in the bargaining unit and 29% of the employees of the Clicks business unit. 35% of the permanent employees within UPD are represented by the Chemical, Energy, Paper, Printing, Wood and Allied Workers’ Union (CEPPAWU).

Between February and March 2010, 157 Clicks employees were locked out of their stores following a dispute with SACCAWU on company operating principles and procedures. The union referred the matter as an offensive lockout dispute to the Labour Court. The court ruled in favour of the company with costs against the union. The matter was referred to the CCMA, after which 82 employees were reinstated subject to agreeing to abide to operational procedures and principles.

The table below provides detail on the group’s workforce profile by race, gender and occupational level at year-end.

  Female Male  
                   
Occupational level African Coloured Indian White African Coloured Indian White Total
Top management 1 3 1 11 16
Senior management 2 2 4 21 4 3 43 79
Professionally qualified 18 34 16 102 23 37 18 92 340
Skilled 277 330 100 426 271 152 55 153 1 764
Semi-skilled 2 037 1 229 141 271 1 518 417 61 112 5 786
Unskilled 33 10 1 28 6 1 79
Total 2 367 1 606 262 823 1 844 615 135 412 8 064

Responsible pharmacist of the year, Waheed Abdurahman (left), at the Clicks store in Cavendish Connect in Cape Town.

Employee turnover

  2010 2009
Permanent staff at start of year 7 585 7 122
Add: Recruitments 1 995 2 230
  Acquisition of Direct Medicines 129
Less: Resignations (1 197) (1 436)
  Deaths (15) (40)
  Dismissals (264) (359)
  Retirements (28) (37)
  Retrenchments (12) (24)
Permanent staff at year-end 8 064 7 585
Permanent staff turnover % 19.8 26.1

The employee turnover rate has declined from 26.1% to 19.8% which can be attributed to a range of factors, including the implementation of the total rewards strategy, an employee retention scheme and the focus on learning and development. The opening of a net 21 stores across the retail businesses and 44 pharmacies during the year contributed to a 6.3% employment growth. Employee retention improved as the number of resignations declined by 16.6% over the year.

Employee wellness

The employee wellness programme is aligned to the group’s total rewards strategy and encourages employees to take responsibility for their physical, mental and emotional well-being. This contributes to a productive organisational culture in which employees are mentally, physically and emotionally present.

The programme is a work-based advisory, counselling and support programme which provides free life and wellness management services to employees in all official languages. Employees and their family members have access to confidential professional counselling; financial and legal advice; trauma and health management services; management and supervisory support; and HIV testing, management and support.

Employee wellness programme 2010 2009 2008
Employee utilisation 2 016 1 427 1 309
Family utilisation 571 167 74
Total utilisation rate 27% 21% 19%
Manager referrals 132 55 23
High-risk cases 9 16 34
Employees on HIV programmes 55 63 55
       

The refocusing of the employee wellness programme through the use of the Clicks in-store radio channel, business unit engagement, site visits and wellness days has resulted in the increase in utilisation.

Through the employee wellness programme over 1 100 employees received voluntary HIV/AIDS counselling and testing during the health screening days at the head office and eight distribution centres across the country. There are currently 55 employees registered on the HIV/AIDS management programme which provides free antiretroviral and support services.

Learning and skills development

The group increased its investment in skills development to R57 million (2009: R39.7 million), which equates to 4.4% (2009: 4.3%) of basic payroll costs.

A total of 4 527 employees attended learning and development programmes, with black employees representing 85% of the total employees trained. Workplace experience opportunities were granted to 54 students and graduates through the internship programme.

Description 2010 2009
Employees trained 4 527 4 523
Training spend as a % of payroll 4.4 4.3
Training spend (R’m) 56.8 39.7
Delegates on management development programmes 47 *
Delegates on retail learnership and skills programmes 331 306
Delegates on pharmacy learnership programmes 430 228
Interns and graduates on workplace experience programmes 54 48
Delegates on health and safety programmes 65 105
* Not reported    

The Pharmacy Healthcare Academy, which is registered with the SA Pharmacy Council, continues to make a difference in the pharmacy skills shortage challenge facing the group and the industry. Over 550 delegates registered for the pharmacists’ assistant basic and post-basic learnership programme over the financial year.

The academy also had over 500 delegates, including pharmacists, nurses and interns, attending courses throughout the year.

Health and safety

The health and safety of employees, suppliers and customers is an important aspect of our business. Health and safety committees have been established across the group and ongoing training is provided to health and safety representatives and employees alike. A health and safety policy covers employees, contractors and customers.

Corporate social investment

The group is committed to investing 1% of profit after tax through the Clicks Foundation to contribute to social and economic development. Over the past year the group invested R9.8 million (2009: R14.4 million) towards community development.

The focus of the corporate social investment is on health and well-being. The business units are required to identify and implement projects which are relevant to their business and which are aligned to these focus areas.

Musica continued to support the Carel du Toit School for the hearing-impaired, Marion Institute and Dance for All. Both Clicks and Musica have donated products to the value of R9 million towards these and other various non-governmental organisations.

UPD supported the Topsy Foundation and provided funding towards the purchase of two vehicles, as well as product donations.

The Body Shop launched the Stop Sex Trafficking of Children and Young People in partnership with ECPAT (End Child Prostitution, Pornography and the Trafficking of Children for Sexual Purposes). The campaign is aimed at raising awareness and funds for victims of trafficking. The Body Shop made a further financial donation of R70 000 towards the Homestead.

Employee payroll giving

Employees are encouraged to participate in a payroll giving initiative and to volunteer time, money and goods towards community social investment projects. Employees have identified beneficiaries in their communities and co-ordinated programmes to collect and distribute gifts.

Primary care clinics

Clicks supports government’s vision of making healthcare more affordable and accessible. Through its national network of over 251 pharmacies and 93 primary care clinics, Clicks provides a convenient and affordable alternative for basic primary healthcare. In 2010 Clicks partnered with the Department of Health in the national HIV counselling and testing campaign to encourage South Africans to know their HIV status.

Environmental sustainability

Environmental management

The group aims to embed environmental management into its operations to ensure sustainable business practices. The board audit and risk committee has ultimate accountability for environmental sustainability, while the group human resources director has responsibility for the implementation of the environmental management policy. An internal committee of volunteers from all business units is tasked with internal co-ordination, raising employee awareness and reporting on environmental management.

Energy efficiency

The group continued its participation in the global Carbon Disclosure Project (CDP). The project assesses the potential risks and opportunities relating to climate change and greenhouse gas emissions (GHG). The group partnered with Global Carbon Exchange to conduct an energy efficiency audit to improve the level of understanding of energy usage, areas of inefficient energy usage, the cost of technology to implement savings and related opportunities.

Carbon footprint

An evaluation of the group’s carbon footprint was again commissioned, based on internationally recognised GHG protocols.

Scope 1 emissions      
(CO²e) metric tons 2010 2009 2008
Company-owned cars 1 761 2 322 2 182
Fugitive emissions 2 173 3 588 2 841
Generators 24 33 231
Scope 2 emissions      
(CO²e) metric tons      
Purchased electricity 108 153 90 499 86 811
Scope 3 emissions      
(CO²e) metric tons      
Business travel 1 790 2 089 2 107
Product distribution 16 096 15 675 13 941
Employee commute 21 407 20 135 18 901
Total 151 404 134 341 127 014
 

The group’s electricity utilisation increased to 108 153 CO²e owing to store growth and extended trading hours.

The group has adopted the Green Building Council of South Africa and the SANS regulations for energy efficient lighting specifications for all new stores.

The installation of energy efficient lighting, metal halides, lighting sensors and timers has resulted in a 25% energy saving on new light fittings and a further 15% energy saving on circuits, sensors and timers.

The Clicks brand has piloted the green store model in line with the Green Building Council of South Africa and SANS specifications and regulations.

Waste management and recycling

Over the past year 1 367 tons (2009: 1 150 tons) of plastic, cardboard and paper were recycled. Recycling at head office has been outsourced to the Oasis Association, a non-profit community-based organisation which promotes the reuse of goods and materials.

Product sustainability

While customers are becoming increasingly environmentally conscious, value will always remain key. Clicks is in the process of developing environmentally friendly private label products that are both price competitive and offer innovative product, packaging and sourcing alternatives.

Clicks will launch product ranges that are used in everyday life and can have an immediate impact on the environment.

Packaging solutions include increasing the recycled content of packaging, for example developing shopping bags and water bottles with a high percentage of recycled material, reducing unnecessary packaging and branding products with the universal recycling logo.

Clicks will also create a more sustainable supply chain by identifying enterprise development opportunities in the sourcing of private label merchandise.

As part of the global The Body Shop brand, the local franchise markets naturally-inspired cosmetics and toiletries, including several certified organic products. Sustainability is a core value of The Body Shop and the brand is committed to fair trade, community upliftment and non-exploitation of scarce resources.