Social and Ethics Committee Report

A social and ethics committee was established by the board with effect from 1 September 2011, in compliance with the requirements of the Companies Act.

The committee has an independent role and is governed by a formal charter. The committee assists the board in monitoring the group’s activities in terms of legislation, regulation and codes of best practices relating to:

  • Ethics
  • Stakeholder engagement, including employees, customers, communities and the environment
  • Strategic empowerment and compliance with transformation codes.

The transformation committee of the board has been incorporated into the social and ethics committee.

Responsibilities of the committee

The responsibilities of the committee are as follows:

  • Monitor the company’s activities relating to social and economic development, good corporate citizenship, the environment, and health and public safety
  • Ensure appropriate short and long-term targets are set by management
  • Monitor progress on strategic empowerment and performance against targets
  • Monitor changes in the application and interpretation of empowerment charters and codes
  • Monitor functions required in terms of the Companies Act and its regulations

Composition and functioning

The committee comprises three independent non-executive directors, namely David Nurek (chairman), Professor Fatima Abrahams and Dr Nkaki Matlala, and two executive directors, David Kneale and Bertina Engelbrecht. Biographical details of the committee members appear here.

The fees paid to the committee members for 2012 and the proposed fees for 2013 are disclosed in the Remuneration Report.

The committee’s report will be presented to shareholders at the annual general meeting in January 2013.

The members of the committee believe that the group is substantively addressing the issues required to be monitored by the committee in terms of the Companies Act. Shareholders are referred to the Corporate Governance Report and the Stakeholder Engagement Report. The group’s progress on transformation and environmental management, two of the other areas of responsibility of the social and ethics committee, are covered below. The committee plans to expand its reporting in the Integrated Annual Report in subsequent years.

Transformation

Clicks Group was rated as the most empowered company in the retail sector in the Financial Mail Top Empowerment Companies 2012 survey, underlying the group’s commitment to sustainable transformation.

As a proudly South African retailer, the group is committed to the spirit of and intent behind the Broad-Based Black Economic Empowerment (BBBEE) Act. The group’s transformation agenda is aligned to the Department of Trade and Industry (DTI) codes of good practice.

Transformation is managed within a governance framework that includes the board’s social and ethics committee, the internal transformation committee, which is chaired by the chief executive and co-ordinated by the group human resources director, and the business unit transformation forums, which are responsible for implementation.

This multi-level focus on transformation has enabled the group to maintain its level 3 BBBEE rating in 2012 despite more onerous targets for employment equity and preferential procurement on the DTI scorecard. Improved scores were recorded in the ownership, management control and preferential procurement categories.

Ownership

The group’s 13.89 points achieved under the ownership element of the scorecard is attributable to the employee share ownership programme (ESOP) launched in 2011, and an independent analysis conducted on the group’s shareholding to determine the level of beneficial black ownership.

The ESOP is aimed at attracting and retaining scarce and critical skills while allowing permanent full-time employees to share in the long-term growth and success of the group. Shares have been allocated to 7 855 permanent employees, with black staff accounting for 86% and women 63% of the recipients. Pharmacists comprise 5% of the ESOP beneficiaries. The first dividend of R2.8 million was paid to scheme participants this year.

Management control

The management control element of the group’s scorecard includes the group executive committee and top management who are members of business unit operating boards, totalling 16 employees. The group increased its management control score to 8.63 from 7.97 in 2011.

Employment equity

The group is committed to creating a diverse workforce through the advancement of previously disadvantaged people, women and employees with disabilities.

BBBEE element Maximum
points
2012 2012
target
2011
Ownership 20 13.89 12 11.71
Management control 10 8.63 7.97 7.97
Employment equity 15 9.50 10 11.01
Skills development 15 10.15 15 12.11
Preferential procurement 20 15.09 14 14.19
Enterprise development 15 15 15 15
Socio-economic development 5 5 5 5
Total 100 77.26 78.97 76.99
BBBEE level   3 3 3

Employee profile

Occupational level Female Male  
African Coloured Indian White African Coloured Indian White Total
Top management 0 1 0 2 0 0 2 11 16
Senior management 3 5 4 21 2 3 2 44 84
Middle management 15 40 28 109 21 43 21 108 385
Junior management 300 401 113 437 274 169 54 171 1 919
Semi-skilled 2 018 1 129 108 198 1 409 371 43 81 5 357
Unskilled 43 20 0 0 37 10 1 1 112
Total 2 379 1 596 253 767 1 743 596 123 416 7 873
Non-SA based employees 95 3 5 1 73 6 6 1 190
Employees with disabilities 23 3 7 10 32 6 57 12 150

Employment equity continues to improve with black staff representing 85.0% (2011: 84.8%) of total employees. Attracting and retaining senior black talent remains a challenge and black staff represent 20.0% (2011: 20.4%) of senior and top management.

Female employees comprise 63.0% (2011: 63.0%) of the total permanent workforce, with 36.0% (2011: 36.6%) at the combined top and senior management levels and 49.5% (2011: 51.2%) at middle management.

While the group’s black employee profile mirrors that of the national demographic, the challenge remains to achieve a more representative workforce overall and at each occupational level.

Skills development

The group is committed to developing the skills, knowledge and capability of its employees to achieve sustainable business growth and to enable employees to realise their potential. This year R40 million (2011: R47 million) was invested in learning and skills development, which equates to 2.8% of basic payroll (2011: 3.4%). A total of 4 687 employees (2011: 4 356) participated in learning and development programmes. Black employees accounted for 82% (2011: 82%) of the total employees trained, and females 63%.

Learning and skills development interventions focused on enhancing management and leadership competencies, developing scarce and critical skills, and internal transformation.

Learning and development statistics 2012 2011
Learning and development spend as a % of payroll 2.8 3.4
Learning and development spend (R million) 40 47
Employees trained 4 687 4 356
Black employees as a % of all employees trained 82 82
Female employees as % of all employees trained 63 Not reported
Delegates on leadership development programme 20 n/a
Delegates on management development programmes 333 319
Delegates on retail learnership and skills programmes 273 347
Delegates on pharmacy learnership and skills programmes 360 408
Interns or graduates on workplace experience programmes 39 40
Pharmacy bursary spend (R million) 1.8 0.7

The group’s pharmacy development strategy focuses on the continued investment in engagement with pharmacy schools across the country; investing in learning laboratories at university pharmacy schools; managing the pharmacy bursary scheme; providing workplace experience through the pharmacy internship programme; the development of pharmacist’s assistants at basic and post-basic level; and the continuous professional development of pharmacists and nursing practitioners.

In the past year the group awarded R1.8 million in bursaries to 61 pharmacy students, with more than half of the bursaries awarded to black students.

The in-house Pharmacy Healthcare Academy is instrumental in developing pharmacist’s assistants. The academy is registered with the SA Pharmacy Council and 360 learners are currently registered on the learnership programmes.

Preferential procurement

The group’s procurement practices are focused on sourcing merchandise and services from locally based and empowered suppliers. In the past year, 42% of the procurement was from level 4 and higher-rated BBBEE suppliers, 12% from qualifying small and exempt enterprises and 2% from black-owned enterprises.

Enterprise development

The group again achieved the maximum points for enterprise development as a result of the increase in the number of enterprise development initiatives that it supports by investing over R90 million over the last financial year.

The UPD independent owner-driver scheme was established in 2003 and contracts close to 50 small enterprise owner-drivers to deliver products from UPD to Clicks, independent pharmacies, hospitals and clinics. UPD paid R33 million (2011: R30 million) to the owner-drivers this year, with an additional R0.8 million (2011: R0.8 million) to the management company supporting the owner-drivers.

The group spent R60 million with Bakers Transport, a 100% black- owned independent transport and logistics services company, and continued its support for Style Studio, a specialist haircare and beauty chain, through an interest-free loan of R0.8 million and employee time totalling over R76 000.

Socio-economic development

The group continues to demonstrate its commitment to making a sustainable contribution to the communities within which it operates by investing 1% of profit after tax in social development programmes through the Clicks Foundation. A total of R7 million was invested in social development through funding and product donations to non-profit organisations and initiatives aligned to the group’s focus on health and wellbeing.

The Clicks Helping Hands Trust offers free clinic services to mothers whose babies were born in state hospitals and who do not belong to a medical aid. The trust was launched in 2011 in response to the need to reduce infant and maternal mortality in South Africa. The free services offered include baby immunisation, growth measurement and baby weighing, feeding and nutritional advice, as well as family planning advice and medication. In addition, 5% from every Clicks-branded baby product is donated to the trust.

The beneficiaries of the Clicks Foundation’s investment included organisations such as Child Welfare, Safe House, Heal the Hood, Carel du Toit Trust, Topsy Foundation, Villa of Hope, Somerset Hospital and Cotlands. The group donated over R600 000 towards the upgrading of the maternity wing at the Groote Schuur Hospital.

Environmental management

Environmental management is embedded in the group’s operations to ensure sustainable business practices. The group was the leading company in the consumer discretionary sector in the annual Carbon Disclosure Project, and was placed 11th in the Nedbank Green Index, which serves as a benchmark for environmentally conscious investors.

The group’s response to climate change is to continue to monitor and evaluate all aspects of the environment while focusing on energy and water efficiency, distribution network optimisation, and waste management.

The efficient use of energy has become a critical part of the group’s cost management strategy as a result of the high cost and limited availability of electricity. The focus on distribution network optimisation has resulted in a reduction in the kilometres travelled by 17% for Clicks and 5% for UPD. A total of 1 493 tons of waste material has been recycled through the distribution centres and head office.

Carbon footprint

The group again commissioned an independent analysis of its carbon footprint, based on internationally recognised greenhouse gas protocols, reflecting a reduction of 4.3% on last year.

  * 2012 2011 2010
Scope 1 emissions (CO2e) metric tons 2 977 1 945 3 227
Scope 2 emissions (CO2e) metric tons 92 034 91 555 91 099
Scope 3 emissions (CO2e) metric tons 21 009 26 548 27 359
Total 116 020 120 048 121 685

* Current year indicators are in the process of being externally assured.


David Nurek
Chairman: Social and ethics committee

13 November 2012