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ISSUE 9: MAY 2012

REVIEW The quarterly review of SUSTAINABILITY in South African business

Are mines doing enough for communities?

Rio+20: What it means for sustainability over the coming decade

The power of CEOs speaking out beyond business

Sizwe Nxasana talks stakeholder capitalism and activist leadership

Results from our new Sustainability Leadership Monitor

Should CEOs be speaking out more on sustainability issues?

Mining’s role and responsibilities in socio-economic development

Sizwe Nxasana, CEO FirstRand Group

Strikes, bribes, allegations, resignations: Q1 2012 in brief

Rio+20: How will it shape the sustainability debate?

Introducing the Sustainability Leadership Coverage Monitor

CONTENTSEditorialEDITOR: Rob Worthington-SmithEDITORIAL MANAGEMENT: Michelle MatthewsCONTRIBUTORS: Cathy Duff, Gordon Laing, Michelle Matthews, Fadzai Munyaradzi, Nick Rockey, Wadim Schreiner, Chris van CoppenhagenPROOFREADING: Margy Beves-GibsonPRODUCTION: Gillian MitriDESIGN AND TYPESETTING: GroundPepperPRINTING: CTP Web Printers

AdvertisingSALES: Karen PetersenADMINISTRATION: Vanessa Sampson

Contact DetailsCAPE TOWN JOHANNESBURGTel: 021 671 1640 Tel: 011 026 1308Fax: 021 671 0119

POSTAL ADDRESSPO Box 36104 Glosderry, 7702

www.trialogue.co.za

©Trialogue

All rights reserved. The material in this publication may not be reproduced, stored or transmitted in any form or by any means without the prior written permission of the copyright holder. If such permission is granted, any information used in other sources must accurately reference Trialogue and the title of this publication.

DisclaimerAlthough great care has been taken to ensure that all information contained in this publication is as accurate and complete as possible, Trialogue cannot accept any legal responsibility for the information given and the opinions expressed in it.

4LEAD FEATURE

6FEATURE

12ICON

2QUARTERLY REVIEW

14ISSUE

17IN THE MEDIA

Journalists love exposing controversy. For years government has provided plenty of material for stories on ineffective leadership and corruption. Increasingly, however, journalists are honing in on corporate leadership.

Media coverage is increasingly focusing its commentary and criticism on corporate leaders, calling them to account for the performance of their organisations, not simply with respect to returns on investment, but across a range of issues of concern to wider society. Executive pay is the topical point of interest right now – but how leaders communicate innovation, build relationships and handle labour issues are also noted (see our new Sustainability Leadership Coverage Monitor on page 19).

We are hearing more from business leaders themselves, weighing in on a variety of societal issues, ranging from the environmental, such as water scarcity, to concerns around the efficacy of government. We consider the role of

CEOs in challenging the status quo in our feature on page 4.

This quarter we are focusing on the role of business leadership in society.

So what is significant about this focus on leadership? I would like to think it has something to do with the sustainability industry. Society has always had a voice on matters of public interest – and our own government has certainly received its share of criticism. Media coverage of the world of corporations was however restricted to financial coverage; that is until one governance scandal after the next piqued journalistic interest. Add to that events that collectively have lead to the Occupy Wall Street campaign, and we have a story. This voice is increasingly being affirmed in the form of ever-tightening legislation (e.g. the Consumer Protection Act) and standards for corporate governance.

In the reporting field, the King III process has been particularly effective. Integrated reports for the first time now

replace the traditional annual report, providing the link back to the business leader’s role. The integrated report requires companies to set out their most important issues, bearing in mind the concerns of all stakeholders. It then requires companies to report on their performance against these issues, as well as describe their strategy for future success. Finally – the clincher – the report needs to show the link between executive remuneration and the company’s performance against the very issues it has raised as being crucial to its long-term success.

Now at last, we are seeing real accountability beginning to emerge through corporate reporting. The annual general meeting is no longer a rubber stamp affair and the media is starting to pay attention with probing commentary. Now at last, leadership truly matters to all of us. Society cares, society comments, and society is calling its leaders to account.

Rob Worthington-Smith

From the editor

TRIALOGUE SUSTAINABILITY REVIEW MAY 2012 1

OUARTERLY REVIEW

Cosatu’s call for mass action in March drew tens of thousands of protestors in major cities around South Africa. One of the key issues was the proposed introduction of e-tolling. The e-toll – a compulsory road tax – was to be implemented in Gauteng in order to pay a R20 billion debt incurred building new road infrastructure in that province. A Pretoria High Court ruling in April put a temporary halt to government’s plans. Two new labour bills

In March Cabinet approved the Basic Conditions of Employment Amendment Bill and the Labour Relations Amendment Bill for passage to Parliament. The bills are more job friendly, and are being vigorously protested by Cosatu, which wants to see labour broking banned.

In March the National Consumer Commission (NCC) imposed the maximum administrative fine on Auction Alliance for faking bids in the auction of a wine farm – just one of a series of damning accusations of fraud, kickbacks and laundering against the company that erupted in February. The attention of the authorities is now expected to turn to CE Rael Levitt to answer for the role he played in his organisation’s unethical market behaviour.

A South African banker caused a media storm in early March when he resigned from Goldman Sachs accompanied by a scathing letter in the New York Times. Shares dropped 3.35% in the wake of Greg Smith’s resignation, wiping out $2.5 billion of the Wall Street giant’s value.

Clients = ‘muppets’

Walmart lost $10 billion of its share value on 23 April, erasing the year’s gains, after evidence of corruption in its Mexico operations emerged in a New York Times exposé.

In April Citigroup shareholders rejected the bank’s $15 million pay package for its chief executive, Vikram S. Pandit – “the first time that stock owners have united in opposition to outsized compensation at a financial giant” according to the New York Times. Citigroup shares are still down more than 80% since the financial crisis.

reject remuneration

In February President Jacob Zuma announced a R1-billion rebate on port charges for manufactured exports. Transnet National Ports Authority (TNPA) chief executive Tau Morwe said in April that this could be extended if the current rebate was shown to increase jobs.

r1 billionrebate

The Broad-Based Black Economic Empowerment (BBBEE) Amendment Bill, released for a 60-day process of public comment in December 2011, will be particularly strict on companies claiming to be compliant with the Act while appointing black individuals without actual ownership or decision-making power. Minister of Trade and Industry Rob Davies said in April that fronting was tantamount to fraud and that a BBBEE commissioner would be introduced to investigate, correct and, if necessary, prosecute those found perpetuating the practice.

The Small Enterprise Finance Agency (Sefa) – which consolidates Khula Finance, the South African Microfinance Apex Fund and the Industrial Development Corporation (IDC) small business lending book – was launched in April. Sefa will make R2 billion available for small business financing over the next three years.

for small business

fronting = fraud

In April Public Enterprises Minister Malusi Gigaba challenged companies to invest their corporate deposits in job-creating projects, another in a long string of calls from the State for SA businesses to “get on board” with government’s plans.

on strikex 45 000

Global audit firm Mazars ran a survey in association with the Institute of Directors in Southern Africa to measure how many companies had complied with a 1 May deadline to establish a social and ethics board committee in terms of the year-old Companies Act. Thousands have missed it. On each end of the scale were private companies (80% had set up an S&E committee) and State-owned companies (5.3% had a committee).

Half of companies compliant

10% of turnover

Companies“hoard R520bn”

$10 billionDOWN

R2 billion

TRIALOGUE SUSTAINABILITY REVIEW MAY 20122

OUARTERLY REVIEW

For a long time, the concepts of

environmental consciousness and

investment returns have been considered

mutually exclusive. However, the launch

of the Nedbank BGreen Exchange Traded

Fund (ETF) means this need no longer be

the case. In fact, the launch of this

revolutionary investment product means

that, for environmentally aware investors,

environmental sustainability and

economic prosperity can, in fact, form

two sides of the same investment coin.

An investment industry first in

South Africa, the Nedbank BGreen

ETF followed the launch, in July 2011,

of the Nedbank Green Index (the

Index), which was created to serve

as a measureable benchmark of the

performance of South African

companies that apply environmentally

sustainable business practices.

The Index is rules based and uses the

scores from the Carbon Disclosure

Project (CDP) and the United Nations'

register of Clean Development

Mechanism (CDM) projects in South

Africa in determining the suitability

of listed companies for inclusion.

The Index currently comprises 43

environmentally sustainable companies

from within the top 100 companies

listed on the JSE, and these make up the

underlying constituents of the Nedbank

BGreen ETF – which can be traded in

the same way as any other ETF.

According to Jacoleen Simpson, Senior

Transactor at Nedbank Capital, the

essential premise of both the Nedbank

Green Index and the Nedbank BGreen

ETF is that being environmentally

responsible in one's investment choices

does not have to result in a loss of

financial performance. This is borne out

by the fact that the Green Index can be

seen to have outperformed the general

market by more than 40% between

June 2008 and November 2011. And

Simpson emphasises that Nedbank is

The Nedbank BGreen exchange traded fund allows all South Africans to invest in line with their convictions.

determined that it is not just large

corporate investors who stand to

benefit from the performance potential

of this sustainability-based investment

vehicle. 'With its low minimum initial

investment of just R1 000, the Nedbank

BGreen ETF has been designed to appeal

to a broad spectrum of the South

African population,' she explains, 'and

is accessible to everyone, from parents

saving towards a child's education to

pension fund trustees and institutional

investors that want to add higher levels

of financially viable sustainability and

responsibility to their portfolios.'

With its diversified spread across

financials, resources and industrials,

the ETF also affords investment sector

exposure that closely mirrors the

overall South African economy, while

allowing investors to benefit from the

foresight and commitment of

companies that have positioned

themselves best to operate in today's

fast-changing environment.

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the future of investment is

NEDBANK. LEADING THE WAY

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LEAD FEATURE

The recent support and criticism of Reuel Khoza for his comments on the calibre of high ranking politicians in South Africa raises important questions. Should corporate leadership take on issues that fall outside the jurisdiction of regular business and what are the consequences of doing so?

Companies can add enormous value to society by just doing good business. The economic power of business invested in the right products and services, in innovation, skills or supply chains, is a force for good (the power of business can also be a force for bad, but that’s another topic). So from a leadership perspective, driving sustainability as a means of ensuring good business is perhaps the most immediate and pressing role of a CEO.

the success of business is not just about business Running a business in a dysfunctional environment is like entering the boxing ring with one hand tied behind your back. Business is deeply affected by the socio-economic and political environment in which it operates, and South African business has its share of challenges. The challenges, as recently

highlighted in the National Development Plan (NDP), include dismal education standards, poorly located and maintained infrastructure, widespread corruption, and sub-standard public services. The NDP calls for collaboration between the private and public sectors and for leadership from all sectors of society in tackling these challenges.

This is relatively easy when business and government agendas are directly aligned. But in a society with so many complex challenges, leadership needs to consider going a step further if it is to achieve a broader impact. The questions are how much further, what can be realistically achieved and at what cost?

the voice of leadership – moving from the collective safe groundUntil now, business lobbying and engagement with government on macro issues has largely been the preserve of

Are CEOs speaking out

enough?

SUSTAINABILITY LEADERSHIP

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collective business organisations such as Business Unity SA (BUSA) or the Big Business Working Group (BBWG). The COP17 CEO Business Forum, assembled to address the issue of climate change mitigation and adaptation, is an example of gathering around a specific issue. These groupings surely play an important role, even if the public outcomes are somewhat sanitised by political correctness.

However, we’ve recently experienced budding examples of lone voices braving public platforms, expressing opinion on issues that are simply too pressing to ignore. The Khoza affair is one such example and, without debating whether

Why speak out on sustainability?In a 2010 Accenture survey of 766 CEOs from around the world, respondents were asked, “What factors have driven you, as a CEO, to take action on sustainability issues?” Seventy-two percent of respondents answered ‘brand, trust and reputation’. The next-biggest factors were ‘potential for revenue growth/cost reduction’ and ‘personal motivation’ at 44% and 42% respectively.

In PwC’s 2011 Global CEO Survey, released in January 2012, CEOs were asked how concerned they were about bribery and corruption. South African CEOs were significantly more concerned than counterparts from across the world – 66% compared to a global average of 34%. South African CEOs believe that government’s top priority should be enabling a skilled workforce (89%), while the top priority for CEOs globally was ensuring the stability of the financial sector. It is clear that in our unique context, broader social issues are high on the agenda of South Africa’s CEOs.

What did reuel say?Under the sub-heading ‘Upholding our constitution’ in his address in Nedbank’s annual report, Reuel Khoza wrote:

“SA is widely recognised for its liberal and enlightened constitution, yet we observe the emergence of a strange breed of leaders who are determined to undermine the rule of law and override the constitution. Our political leadership’s moral quotient is degenerating and we are fast losing the checks and balances that are necessary to prevent a recurrence of the past. This is not the accountable democracy for which generations suffered and fought. The integrity, health, socio-economic soundness and prosperity of South Africa is the collective responsibility of all citizens, corporate or individual. We have a duty to build and develop the nation and to call to book the putative leaders who, due to sheer incapacity to deal with the complexity of 21st century governments and leadership, cannot lead.”

Several high-profile business leaders supported Reuel Khosa’s right to express his opinion, including Banking Association of SA managing director Cas Coovadia, Pick n Pay chairman Gareth Ackerman, and Massmart CEO Grant Pattison, who said Khoza struck a nerve when he “came too close to the truth”.

For more of Mr Khosa’s widely published thoughts on leadership, visit his blog: reuelkhoza.co.za.

his approach and opinion is right or wrong, it is clear that his comments hit the nerve of our senior politicians. In June last year, chairman of Pick n Pay Gareth Ackerman spoke out against the Protection of Information Bill, stepping up to the plate alone even though the view he expressed was pervasive among his business peers.

How much influence can leaders exert without being confrontational? A number of corporate executives have led the debate or participated in forums on corporate sustainability. Mark Moody Stuart (former non-executive chairman of Anglo American and former chairman of Shell) has been instrumental in driving sustainability on the world stage. Locally, the likes of Bobby Godsell and Mervin King have extended their influence beyond the confines of the businesses they are paid to serve. Leaders have also found voice to champion less controversial causes. For example, Santam CEO Ian Kirk has spoken on a number of occasions of the effects of climate change on the insurance industry.

Occasionally, leaders make smart statements backed by action. Last year, CEO of Standard Bank Jacko Maree responded to sentiment relating to high executive pay and inequality by making public a decision to commit 10% of his taxable income to education of black scholars. His gesture will no doubt be remembered as this year’s crop of annual reports for the banking sector reveal remuneration for top executives in the tens of millions of rands.

the choice south african ceos faceIt is not surprising that business leaders find it relatively easy to make meek and mild-mannered statements on a range of topical issues. Apart from raising the ire of powerful politicians, they can be rightfully concerned that their words may be incorrectly quoted or taken out of context by a media corps always on the look-out for controversy. And shareholders would rightfully question whether their interests are being served.

Thus, high-profile examples of corporate leadership on weightier issues of common interest are, sadly, few and far between. Clearly there are risks, and the backlash against Khoza’s comments will perhaps serve to discourage other active voices.

HIGH-PROFILE ExAMPLES OF CORPORATE LEADERSHIP

ON WEIGHTIER ISSUES OF COMMON INTEREST

ARE, SADLY, FEW AND FAR BETWEEN.

But leaders are in privileged positions and their opinions attract interest. If they are considered in their approach and highlight the need for collective and constructive action, the risk of fallout will be reduced. At the very least they are likely to carry the reputation of their businesses on an upward journey with them. The real benefit, though, will come from their ability to influence the behaviour of others for the good, and thereby leave a legacy of a business world that is just that bit more accommodating for the next generation of CEOs.

SEE OUR LEADERSHIP MEDIA MONITOR ON PAGE 19.

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FEATURE

By their very nature, mining companies are geared towards the profitable extraction of mineral resources, inevitably moving on when there is no longer a sound business case to justify their continued presence in an area. Where does this leave the communities who have sacrificed their land, water, physical health and social structures in the hopes of a more prosperous life?

ExTRACT AND ExIT: BUT WHAT ABOUT THE COMMUNITY?

Whether they operate in African countries, Spain, Canada, Mongolia or the Philippines, mining companies the world over do not have a good track record when it comes to generating sustainable socio-economic development at a local, rather than national, level. South Africa is no exception to this, which raises the question ‘why isn’t more being done?’

defining socio-economic development Socio-economic development (SED) in the context of the mining industry can be understood as creating economic value for communities and society at large that will endure after mining operations have ceased.

The revised Mining Charter issued by the South African Department of Mineral Resources (as amended in September 2010) identifies the following elements as contributing towards broad-based socio-economic empowerment: ownership; procurement and enterprise development; beneficiation; employment equity; human resource development; mine community development; housing and

living conditions; sustainable development and growth of the mining industry; and reporting (monitoring and evaluation). SED interventions can therefore be multifaceted and span a range of themes.

Why socio-economic development is important SED is about more than mere regulatory compliance with the Mining Charter and its underpinning legislation. It is important for mining companies to acknowledge that the mineral resources on which their businesses are based are considered national assets, hence the benefits of extracting and processing these minerals should be passed on to surrounding communities and labour-sending areas.

The arguments in favour of nationalising the mining industry partly rest on perceptions that mining companies pursue their own pecuniary interests and do the bare minimum for communities – just enough to allow them to retain their mining licenses. Being more proactive and visible in the SED space gives mining companies a credible position from which to counter these perceptions.

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track record of south african mining companies’ socio-economic development efforts In October 2009, the Department of Mineral Resources (DMR) issued the Mining Charter Impact Assessment Report. The report found that with the exception of the good progress made in the participation of historically disadvantaged South Africans in management, the mining industry had performed poorly on all other elements of the Mining Charter. A summary of the report’s findings is presented in the accompanying table.

mining charter element assessed summary of dmr’s key findings

Human resource development • There is a lack of management support for staff participating in adult basic education and training (ABET) programmes.

• Career plans typically focus on developing senior managers to the exclusion of lower level staff.

Employment equity • 37% of companies have developed employment equity plans.

HDSA participation in management • HDSA participation at management level is 33% across the industry (mostly in middle management).

Migrant labour • Element appears to have been significantly complied with.

Mine community development • 63% of companies engaged in consultation processes with communities, but there was no evidence of a direct link between community development projects and the needs of the affected communities.

• 49% of companies have participated in the formulation of integrated development plans (IDP) in mine communities; 14% extended their IDP participation to labour sending areas.

Housing and living conditions • 34% of companies have facilitated employees’ access to home ownership schemes.

• 29% of companies have offered their employees nutrition or have established plans to effect improved nutrition.

Procurement • 89% of companies have not given HDSAs preferred supplier status

• The value of HDSA procurement expenditure as a percentage of total procurement is less than 3%.

Beneficiation • Beneficiation has taken place in pockets in the industry, and is unco-ordinated.

Reporting (monitoring and evaluation) • 37% of companies have audited annual reports, while 11% of companies submit annual progress reports to the DMR.

Ownership and joint ventures • The industry’s stated commitment of R100 billion to facilitate HDSA ownership represents 5% of the value of the net asset value of the mining industry, below the agreed 15% empowerment target.

• Aggregated BEE ownership of the mining industry has reached an estimated 9%.

Source: Department of Mineral Resources, Mining Charter Impact Assessment Report (October 2009).

THE ARGUMENTS IN FAvOUR OF NATIONALISING THE MINING INDUSTRY PARTLY REST ON

PERCEPTIONS THAT MINING COMPANIES PURSUE THEIR OWN PECUNIARY INTERESTS AND DO THE

BARE MINIMUM FOR COMMUNITIES.


FEATUREWhat is complicating sed?With a few exceptions, enterprise development projects tend to be unsuccessful and unsustainable, failing to create viable small businesses despite millions spent by mining companies. Local communities are not empowered (e.g. through a transfer of knowledge and skills) by SED initiatives and are excluded from the management, control and decision-making structures of projects. Consequently, communities exhibit a limited sense of ownership of the projects, which then falter without the active involvement of the mining company. In their approach to SED, mining companies are inclined to focus excessively on economic development while other thematic areas (e.g. education, health, welfare) which also contribute to the cohesion and functionality of a community, are overlooked and neglected.

There are mitigating factors that explain poor results. For instance, rural communities are often short on entrepreneurial know-how and lack the capacity to produce goods and services locally. Further, South African mining companies face the reality of having to conform to the requirements of the DMR in terms of project selection and approval. Linked to this, mining companies need to be seen to spend their budgeted funds quickly in order for the DMR to issue a license to operate. Mining companies are therefore incentivised to focus on spend rather than outcomes and impact.

Another challenge is that many rural municipalities have limited human and financial resources to contribute to the

successful design and implementation of IDP- and LED-designated community development projects. This leaves mining companies bearing development responsibilities that more aptly belong in government’s sphere. In addition, it is difficult to create and sustain activities that are not dependent on the mine – for example, the procurement and employment equity elements of SED are inextricably linked to the purchasing and hiring practices of an active mine.

While acknowledging that mining companies are not omnipotent and have to contend with factors outside their control, the overall conclusion is that mining companies are not doing enough to promote effective and sustainable SED in the areas they operate in and source labour from.

the future of sed in south african mining communities Effective and successful SED results in mutually beneficial outcomes for local communities and mining companies. Individual companies should place more emphasis on actively learning from their own past experiences and having the courage to abandon what does not work. The most senior office bearers in a mining company should play a visible leadership role by making deliberate efforts to integrate strategic SED into key internal reporting and performance indicators and processes. Effective socio-economic development is a sustainability issue; it facilitates the smooth running and decommissioning of mines, and must be high on the business agenda.

How mining companies can do better• Concentrate on playing a lead

role in SED initiatives that are aligned to their strengths (e.g. infrastructure projects), and partner with specialists in areas such as health and education that fall outside the mining company’s core competencies. These partners should be proven experts in their field, chosen on the basis of their credibility rather than the opportunity to score points on the BBBEE Scorecard.

• Increase their collaboration with other mining companies to pool resources, avoid duplication and enhance synergies. This should include agreements on how to track each party’s contribution and report on SED initiatives to affected communities, the DMR and other key stakeholders.

• Conduct regular impact assessments of their SED programmes, scrapping those projects or initiatives that are under-performing. The ability to demonstrate positive quantitative and qualitative impacts is important as failed SED initiatives pose the risk of alienating and angering local communities, potentially resulting in social and political unrest.

• Lobby the DMR for a more flexible approach to generating and evaluating social and labour plans (SLP), so that SED initiatives that most directly speak to the community needs – and have the greatest chance of success – are prioritised.

MINING COMPANIES NEED TO SPEND THEIR BUDGETED FUNDS qUICkLY IN ORDER FOR THE DMR TO ISSUE

A LICENCE TO OPERATE. THIS RUNS COUNTER TO DEvELOPMENT BEST

PRACTICE, WHICH REqUIRES A SLOW BUT SURE PROCESS.

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6482 Tourism Ad.indd 1 2012/05/09 11:34 AM

“In economics, as in anatomy, the whole is much more than the sum of its parts,” says economist John Kenneth Galbraith in his book Economics and Public Purpose. The economic success of a country is inextricably linked to the wellbeing of its people. Mercedes-Benz South Africa (MBSA) conducts its business in service to both.

MBSA has its roots in Germany as part of the global Daimler AG company and has been a committed part of the South African corporate landscape for more than 60 years. The automotive leader is committed to sustainability in everything it does. The end result is an organisation that benefits its employees and the automotive supply industry, but also its communities, the environment and the economic stability of the country.

Superior manufacturing plant provides employment to more than 2000From its manufacturing base of operations in East London, MBSA produces the C-Class in left-hand drive execution for export to the USA and in right-hand execution for the South African market. It also assembles Mercedes-Benz commercial vehicles and buses, Mitsubishi FUSO trucks, as well Freightliner trucks. The company imports, distributes and markets the full range of Daimler passenger cars, trucks and vans, including smart cars.

For more than 60 years, the manufacturing plant has provided stable employment in the Border Kei region of one of South Africa’s poorest provinces – the Eastern Cape.

MBSA takes a comprehensive approach to the production, marketing and after-sales services of its vehicle brands, always working towards innovative ways to provide its clients with added value. From cutting-edge adaptations to decrease the levels of emissions of vehicles, to the latest in driver comfort and safety, purchasing a vehicle from the company’s stable of marques sets customers apart on the roads.

Sharing best practise with small businesses

MBSA recognises that its success is linked to the viability of its upstream and downstream value-chain. For this reason it is involved in supplier development projects, in support of government’s goal of economic development and job creation. MBSA shares its expertise in lean manufacturing with small manufacturers to help them grow to the level where they are able to tender for international supply contracts. One such success story is Yenza Manufacturing which, with the assistance of MBSA, has been awarded a contract to be the sole supplier of brake parts for the E-Class production.

Creating self-sustaining communitiesEmpowering the communities around its base of operations is another passion for MBSA. Corporate social investment (CSI) plays an important part in making this possible. Over the past five years the company has invested in excess of R270 million in project partnerships that open the doors of opportunity for disadvantaged communities in South Africa.

Key focus areas that form part of the corporate social investment strategy are selected on the basis of their alignment to national priorities, and are reviewed annually to ensure relevance. The company places particular emphasis on improving education and health (in particular relating to HIV and Aids) by developing self-sufficient and empowered communities.

Investing in people developmentBecause MBSA draws its workforce largely from the Eastern Cape, the standard of learners exiting the education system in this province is of great interest to the company. MBSA joins hands with other interested parties in delivering a well-educated and skilled labour force which is relevant to the needs of industry.

Education remains the main vehicle through which MBSA aims to build a legacy for the future. This covers the spectrum from early childhood development (e.g. Ekukhanyeni Relief project in Lawley), primary and high school levels (e.g. School Transformation and Empowerment Programme and the Rally to Read), as well as tertiary education and skills development (e.g. St Anthony’s Education Centre in Boksburg).

The age-old adage of teaching a person to fish in order to sustain them for life certainly holds true when it comes to the MBSA philosophy of training and skills development. Support for all educational and skills development projects stretch over several years.

Health and wellbeingApproximately 40% of MBSA’s corporate social investment portfolio focuses on HIV and Aids projects.

One of the first companies in South Africa to implement a comprehensive HIV and Aids Workplace Programme in 2000, MBSA has won a string of accolades for what has now become a proven formula for tackling the disease from a collective and co-operative perspective. The model has been successfully replicated to small businesses and in communities, and is also attracting attention as a method for tackling other lifestyle diseases.

The Trucking Wellness initiative, in collaboration with the road freight industry, government and the health sector is a programme making in-roads in tackling the escalating crisis of HIV and Aids. Advocacy on prevention, treatment and care is currently being done nationally amongst truck drivers and in fleet management companies. This project is poised to go international, with six countries in southern Africa targeted. As makers of premium quality commercial vehicles, MBSA has a vested interest in promoting the health and wellbeing of this sector.

MBSA is a company that does not shy away from its responsibility as a good corporate citizen, and continues to pledge itself to the growth of South Africa. Dedication, passion and a spirit of innovation underpins the success of MBSA, and is reflected in the company’s leadership position within the industry.

www.mercedes-benzsa.co.za

Mercedes-Benz group of companies’ employees brought hope to a family in Orange Farm when they pitched in to build them a home.

The Mercedes-Benz group of companies has been involved in the Rally to Read initiative in rural parts of South Africa for many years.

Confidence in the East London manufacturing plant rides high after successive quality awards.

The new generation C-Class will be built in the plant from 2014.

Mercedes-Benz South Africa (MBSA) is committed to sustainability at every level, expanding its good work beyond the business to positively impact communities, the environment and the broader economic landscape of the Eastern Cape, in particular.

Motor manufacturer with a heart cradles the growth of South Africa

MBSA advert_SR9.indd 1-2 07/05/2012 13:45

ICON

Founding partner of SizweNtsalubaGobodo, the first black-owned national firm of

accountants, and now CEO of the FirstRand Group, Sizwe Nxasana ‘leads from the

front’ on sustainability issues.

TAkING THE LEAD ON STAKEHOLDER CAPITALISM

‘Stakeholder capitalism’ is the term Nxasana uses to describe corporate sustainability. He explains that the interests of investors of capital and other stakeholders are aligned in the long run, which requires business to consider their broader responsibilities towards employees, customers, suppliers and society in general. Building a sustainable business requires providing appropriate returns to all of these groups.

stakeholder capitalism for the banking industryNxasana describes stakeholder capitalism as a shared value approach to enabling sustainable development through business activity. It is clearly a model that he believes the banking industry should follow with integrity. “The fundamental role of banks is to provide platforms for people and companies to transact and thus create ‘velocity of money’. This plays an important direct role in economic development and growth,” claims Nxasana.

As an example, says Nxasana, “we may not run industrial activities, but we do fund such operations and it is absolutely critical that we take sustainability into account when providing capital to these. This allows us to enable transformation towards economic equity and sustainable economic development while protecting the sustainability of our business and economy.”

In 2009, Nxasana led the adoption by the FirstRand Group of the Equator Principles (a financial industry benchmark for determining, assessing and managing social and environmental risk in project financing). He explained that at first it was challenging embedding the Equator

Principles into business as usual. Ongoing communication was key because it allowed people on both sides of the transaction to understand the Equator Principles as a business enabler and risk management tool for a new generation of material issues.

Another role of banks is reflected in the good progress that FNB has made in providing access to financial services for a broader market. FNB has more than four million cellphone banking customers and carries close to 80% of cellphone banking traffic in South Africa. He explains that such benefits are also being exported into other developing economies as the Group expands into Africa. Considering his own roots and career journey, Nxasana is clearly excited to see the potential offered to ordinary people by this innovative approach to banking.

a personal perspective and journey“Growing up in the townships, the lack of sustainability was in your face. From a political standpoint I have always been very aware of the issues. As a young student, although I wouldn’t call myself a political activist, I saw that the differences were stark and I knew I had to play whatever role I could in changing the conditions existing then,” says Nxasana.

However, it was only when he started to work that the reality really hit home. Nxasana realised that despite qualifying as a chartered accountant (CA) himself,

the profession was almost completely unknown among black people. The first black CA qualified in 1976 and the second in 1982 and although, by his own admission, he was not the smartest, when he qualified he was one of around six black CAs out of a total of 15 000 CAs across the country.

Seeking to do something about this, Nxasana was among the collective that created the Association for the Advancement of Black Accountants of Southern Africa (ABASA) in 1985, an advocacy group that exists to this day to promote interests of black men and women engaged in the accounting profession. “This was a crucial turning point because I became not just aware, but active,” says Nxasana.

Such action defines how he leads the FirstRand Group. Describing his leadership style, Nxasana claims to lead from the front. He goes on to say that “what leaders do influences the culture of an organisation and, as such, leaders need to walk the talk and get involved in various areas of sustainability. They need to put these issues on the table, support them and become truly activist about them. And it just so happens that I am passionate about quite a lot of them”. To this end, Nxasana chairs the FirstRand Foundation, makes time to volunteer and oversees the Group’s Broad-Based Black Economic Empowerment (BBBEE) programme via the FirstRand Group Executive committee.

“GROWING UP IN THE TOWNSHIPS, THE LACk OF SUSTAINABILITY WAS IN

YOUR FACE.”TRIALOGUE SUSTAINABILITY REVIEW MAY 201212

ICON Reporting by Cathy Duff

Nxasana is of the view that BBBEE, in particular, remains fraught with challenges ranging from the availability of skills, the quality of the education system, the legislation and regulation that governs it, and the practices of companies. It is his belief that “we need to accept that we are not where we should be in terms of BBBEE and that it will take years to fully transform South Africa”.

the role of business in societyNxasana feels that the role of business in society is increasingly coming under scrutiny, and most leaders are under-prepared for this. He has attended the World Economic Forum several times

and each time the future of capitalism is discussed. “When I sit with delegates from developed countries, it amazes me how advanced we are as a country in looking at broader sustainability issues,” he says.

Companies are stakeholders in the countries in which they operate and, for this reason, Nxasana believes they have to get involved in policy, regulation and legislation formulation. According to him “this is challenging in South Africa and while we have come a long way in addressing the history of apartheid, not enough has been done to develop strong and effective links between the public and private sectors”. He cites trade policy, the National Development Plan and the

Jobs Fund as just a few of the areas where opportunities exist for the public and private sectors to work together for the benefit of the nation.

“Leaders need to acknowledge challenges and work together to address them, as our potential as a country will never be realised if they are not addressed proactively,” he says. “South Africa can be a great country and we have already achieved significant change. Now we need to ensure the benefits of this change are shared by a broader group of people. Using competitive markets and efficient businesses as a tool to enable these benefits must underpin any journey towards sustainable development.”

“ LEADERS NEED TO ACkNOWLEDGE CHALLENGES AND WORk TOGETHER TO ADDRESS THEM.”


ISSUEThe United Nations Conference

on Sustainable Development,

colloquially known as Rio+20,

takes place over three days in

June. The conference – like

its antecedent 20 years ago –

provides a platform for shifts

in how we will conceptualise

sustainability in the coming

decade. Significantly, there is a

clear move towards the thinking:

“it’s the economy, stupid”.

Yes, we’ve just had COP17, but that was mainly about emissions. Rio+20 is the ultimate sustainability conference – theoretically it subsumes COP17, driven by the United Nations Framework Convention on Climate Change, which was itself adopted at the first Rio Earth Summit in 1992. However, there is nothing as neat as a carbon tax to grab leaders’ attention this time.

Attendance at Rio+20 certainly looks promising with more than 130 heads of state, vice-presidents, heads of government and deputy prime ministers on the speakers list. Paul Polman, chief executive of Unilever, the consumer goods group, says: “World leaders must attend the summit. Our leaders’ presence and commitment is crucial if Rio is to deliver real change.”

Many participants hope to move beyond the semantics to see substantial shifts implemented, particularly in the global economic system. Saleemul Huq, a lead author of the Intergovernmental Panel on Climate Change’s fourth assessment report, told Reuters that the most important aim of Rio+20 should be reaching the “real decision makers who have made the wrong decisions in the past two decades and landed us where we are”, rather than “arguing over the meaning of the terms ‘green economy’ and ‘sustainable development’”.

is business on board?Despite their key role, it seems that “a lot of CEOs are sitting on the fence” over their commitment to attend Rio+20, Malcolm Preston, global head

RIO+20: HOW WILL IT SHAPE THE SUSTAINABILITY DEBATE?

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ISSUEof sustainability services at PwC, told the Financial Times in April. Other than Unilever’s Polman, other high-level executives who will be making the trip to Rio include CEOs and board members of Total, Siemans, PUMA, Novo Nordisk, Bank of America and Philips – many under the auspices of the UN Global Compact, which is facilitating a corporate sustainability forum at the talks. The aim of the forum is to “bring greater scale to responsible business practices, to advance and diffuse sustainable innovation, and to stimulate broader collaboration”.

FOR A BUSINESS INITIATIVE RELATED TO RIO+20, SEE: theregenerationproject.com

Beyond direct participation, some of the broader themes at the conference are likely to impact on business practice in the longer term:

New growth modelsThe EU and UK will be pushing for new ways of measuring growth, moving from GDP to broader measures of wellbeing. The concept of environmental finance – putting a value on natural resources rather than considering environmental assets and services as free – will also be prominent. Caroline Spelman, the UK’s Environment Minister, will be taking the concept of ‘GDP+’ to Rio+20. “We will call for governments to take steps to measure and account for their natural and social capital, as well as their GDP,” Spelman told the Guardian. “It’s becoming more and more apparent that GDP is not a perfect measure of progress.”

The global green economyFacilitating more sustainable economic growth is the core theme of the conference. The UN says the green economy “should protect and enhance the natural resource base, increase resource efficiency, promote sustainable consumption and production patterns, and move the world toward low-carbon development”. The Rio+20 agenda will include discussions on global trade, the effect of subsidies, technology transfer enablement and the like.

Will SDGs replace MDGs?The Millennium Development Goals – eight objectives addressing the needs of the world’s poorest, formalised at the UN in 2000 – have over the years moved beyond CSR departments to influence the way companies conduct business and even how they develop their business models, especially when expanding in

What is rio+20?Convened by the United Nations under the banner ‘The future we want’, the Rio+20 conference is an update of the seminal 1992 Earth Summit, held in the same city (which was itself an extension of the UN Conference on the Human Environment held in Stockholm in 1972). It was here that countries adopted Agenda 21, “a blueprint to rethink economic growth, advance social equity and ensure environmental protection”. It was after Rio 1992 that the term sustainable development, coined in the 1987 Brundtland Report, came into wider use. The World Summit on Sustainable Development in Johannesburg in 2002 enabled world leaders to reconnect with the issues.

A decade later, progress is still slow. Nonetheless, governments, institutions, civil society and business – about 50 000 of them – will be meeting once again in Rio from 20 to 22 June to “agree on a range of smart measures that can reduce poverty while promoting decent jobs, clean energy and a more sustainable and fair use of resources”. A short ‘zero draft’ of the outcome document, released earlier in 2012, has reportedly been expanded to over 200 pages for discussion.

Two key themes:

1. A green economy in the context of sustainable development poverty eradication.

2. The institutional framework for sustainable development.

Seven priority areas:

1. Decent jobs

2. Energy

3. Sustainable cities

4. Food security and sustainable agriculture

5. Water

6. Oceans

7. Disaster readiness

official websiteswww.un.org/en/sustainablefuture/ and www.uncsd2012.org/rio20/index.html

developing countries. The MDGs have a target date of 2015, after which they will need to be reassessed and updated. The new agenda, according to the UN’s MDG website, “will reflect new development challenges and will be linked to the outcome of Rio+20”.

For months, pundits have speculated about these new SDGs – the Sustainable Development Goals. Will they be more rigorous, setting clear targets and assigning accountability? Will they focus more on the environment and on reducing inequality than on poverty and health? How might they influence business practice and reporting in future?

Sustainable development global governanceThe first Rio conference was instrumental in creating several new institutions and conventions, which are still active today. At Rio+20, the UN will be considering how to reform and strengthen international environmental governance (IEG), which is currently unmanageably fragmented. They will also be aiming to develop guidelines for “a more effective Economic and Social Council (ECOSOC) as a principal body for co-ordination, policy review, policy dialogue and recommendations on issues of economic and social development”. Rumour has it that delegates may be asked to appoint a global ombudsman to represent future generations, in line with the intergenerational justice aspect of sustainable development.

Ultimately, these institutions will influence policy and legislation in countries throughout the world. The tone of this year’s conference suggests that some firm stances will be taken on the intersection between economic activity and sustainable development. Over time, these will filter down to affect businesses where they operate.

Rio+20 and your businessYour business may not be attending, but you would do well to keep an eye on key themes and outcomes emerging from this conference. Twenty years ago barely anyone had heard of sustainable development; today companies are not only producing sustainability reports, but are integrating ESG issues into the annual report, using mandatory King III principles and following standards such as the GRI and the International Integrated Reporting Committee (IIRC) guidelines.

Reporting by Michelle Matthews

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Blue isGREEN

the new

A member of Standard Bank Group


We have been ranked South Africa’s greenest company in

Newsweek’s 2011 Green Rankings*. As this country’s largest financial

services group, we are committed to sustainable development

through ethical and responsible financing. www.standardbank.com

Moving ForwardTM

*Ranked 13th financial company worldwide and 45th among the Global 500 companies

Authorised financial services and registered credit provider (NCRCP15)The Standard Bank of South Africa Limited (Reg. No. 1962/000738/06). SBSA 116202-5/12

Moving Forward is a trademark of The Standard Bank of South Africa Limited

To be placed at the bottom of the page

SuStainability iS a two-way StreetSo says Standard Bank director of group sustainability management, Karin Ireton. “Many organisations think that sustainability is something outside of the business and can be undertaken on an ad hoc basis when there’s enough extra money or when public or supply chain pressure forces them to, for instance, change their fleet management policies to reduce their carbon footprint.

“They also see the social capital element of sustainability as a form of charity – in terms, for example, of making donations to feeding schemes.

“In fact, sustainability covers all forms of natural, social, human, manufactured, and economic capital. The sustainability of organisations impacts the sustainability of markets, and vice versa. So, sustainability has to be pro-actively embedded at every level of an organisation and be relevant to every level of its external community and physical environment.

Sustainability – a business imperative“At Standard Bank we believe that our most significant contribution to sustainability is operating an effective bank and, therefore, being able to provide people and organisations with financial products and services that enable them to be sustainable. Their success becomes our future business and, therefore, our sustainability.”

With this mind, Standard Bank’s social compact states that the bank “will contribute to the socioeconomic development of the countries in which we operate in a way which is consistent with the nature and size of our operations. We will provide financial services

and products responsibly, bearing in mind the needs of society, our customers, our staff, our shareholders, the environment and future generations.”

Enabling small business growthBearing in mind the needs of various stakeholders does, however, mean refining the bank’s traditional ways of interacting with its market – and, indeed, looking beyond its traditional markets.

An example is Standard Bank’s solution to the problem of providing finance to SMEs in sub-Saharan Africa, where the lack of financial records, credit bureau data, and collateral would normally prevent SMEs accessing loans. In 2011 in Ghana, Kenya, Nigeria, and Tanzania, the bank used a new credit evaluation approach and a product called SME Quick Loans to provide SMEs with unsecured loans of between USD300 (R2 176) and USD30 000 (R217 584). At December 2011, loans totalling more than R320 million had been disbursed to approximately 5 650 businesses, with lending loss rates proving to be much lower than expected.

“We took a calculated risk in designing SME Quick Loans, based on our strategy of building Africa’s leading financial services organisation,” Ms Ireton says. “Africa’s social and

environmental challenges present risks both to our own sustainability and to the development and growth prospects of economies. However, the very nature of our business positions us to help our customers and stakeholders manage risk and invest for the future, which in turn contributes to the sustainable growth of local markets and national economies.”

Opportunities in the green economyA peculiarity of the African market is that it offers both the challenge and opportunity of low carbon growth, obviating the cost and disruption to commerce and industry of retro-fitting energy efficient technologies and, at the same time, creating entirely new business opportunities for development and deployment of new technologies.

Standard Bank has already used its existing expertise, as the first African bank, in 2003, to create a carbon trading division, to win 13 bids with renewable energy capacity of 605 megawatts in the South African Government’s Renewable Energy Independent Power Producer Procurement (REIPPP) Programme, Ms Ireton says.

This equates to 38% and 58% of the megawatts available from the solar and wind projects accepted in the first phase of the programme.

“However, sustainability cannot be compartmentalised,” Ms Ireton says. “So, we embed environmental custodianship into all our business activities. We apply the Equator Principles to project finance loans and internally developed appraisal systems that include screening all large transactions for environmental and social risk.”

“Sustainability is about making best use of your intellectual capital and other

internal assets to make sustainability work for your business – so that it can

work for everyone else.”Karin Ireton: Director, Sustainability Management

Sustainability is not interchangeable with corporate social investment initiatives.

MBSA advert_SR9.indd 4 09/05/2012 15:27

IN THE MEDIA Reporting by Wadim Schreiner and Chris van Coppenhagen, Media Tenor SA

The Sustainability Monitor recorded an uptick in coverage of human resource

management and external stakeholder issues, as strikes and retrenchments rocked

industries from banking to mining. This quarter also sees us analysing the profiles of

CEOs in the media. Unsurprisingly, it’s primarily those under external pressure who

speak out about sustainability issues.

LOOk WHO’S TALkING HOT TOPICS AND HIGH PROFILES IN Q1 2012

The media has the ability to build up or to destroy reputations. When companies receive coverage on the transgression of laws, price collusion or pollution, the damage to reputation, as well as share price, has taken months to recover. On the other hand, positive media exposure on sustainability issues can provide companies with a competitive edge within a market that is becoming increasingly sensitive to environmental and social issues. Often, media coverage of how previous concerns have been proactively addressed goes a long way to restoring reputation.

The impact of media on a company’s value is not limited to reports on financial performance – but is also affected by issues ranging from transformation to environmental performance. This is why Trialogue and Media Tenor monitor the media for business stories related to sustainability and environmental, social and governance material issues.

2012 Q1 in briefRoughly in line with 2011’s analysis, reporting on marketplace impact and community relations continues to draw positive media coverage (see chart 1). Compliance with legislation and HR

Q1 sustainability focus overview• Sustainability-relatedcoveragehit

highs of 20% of total corporate coverage during the first quarters of 2008, 2009 and 2010, in the midst of the financial crisis.

• Theproportionofsustainability-related coverage in Q1 2012 is in line with last year’s Q1 – around 15%.

• Onaverage,sustainabilitycoveragecomprises 17 – 18% of total corporate coverage over a year. Sustainability coverage is likely to pick up in Q2, as integrated reports are released.

management are areas of greatest reputational risk, with reporting on these issues more negatively biased. The first three months of 2012 were rife with HR and compliance issues, including the Implats strikes, rumoured Absa retrenchments, MTN’s dealings in Iran and labour opposing the Massmart-Walmart merger.

Negative Positive

Rating of coverage on sustainability categories, q1 2012

CHART 1

Marketplace impact

Community relations

Sustainability management

Environment

External stakeholder relations

Sustainability advocacy

BEE/transformation

Human resource management

Compliance with legislation

0-20-40-60 20 40 60

BEE and transformation were also a more negatively perceived sustainability area in Q1 of 2012 (see the box overleaf). This is largely due to activity in the mining sector, where labour issues – including damning revelations of intra-company income inequality – were covered as part of the ongoing nationalisation debate.

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redm

alBlue is

GREENthe new



We have been ranked South Africa’s greenest company in

Newsweek’s 2011 Green Rankings*. As this country’s largest financial

services group, we are committed to sustainable development

through ethical and responsible financing. www.standardbank.com

Moving ForwardTM

*Ranked 13th financial company worldwide and 45th among the Global 500 companies

Authorised financial services and registered credit provider (NCRCP15)The Standard Bank of South Africa Limited (Reg. No. 1962/000738/06). SBSA 116202-5/12

Moving Forward is a trademark of The Standard Bank of South Africa Limited

To be placed at the bottom of the page

SuStainability iS a two-way StreetSo says Standard Bank director of group sustainability management, Karin Ireton. “Many organisations think that sustainability is something outside of the business and can be undertaken on an ad hoc basis when there’s enough extra money or when public or supply chain pressure forces them to, for instance, change their fleet management policies to reduce their carbon footprint.

“They also see the social capital element of sustainability as a form of charity – in terms, for example, of making donations to feeding schemes.

“In fact, sustainability covers all forms of natural, social, human, manufactured, and economic capital. The sustainability of organisations impacts the sustainability of markets, and vice versa. So, sustainability has to be pro-actively embedded at every level of an organisation and be relevant to every level of its external community and physical environment.

Sustainability – a business imperative“At Standard Bank we believe that our most significant contribution to sustainability is operating an effective bank and, therefore, being able to provide people and organisations with financial products and services that enable them to be sustainable. Their success becomes our future business and, therefore, our sustainability.”

With this mind, Standard Bank’s social compact states that the bank “will contribute to the socioeconomic development of the countries in which we operate in a way which is consistent with the nature and size of our operations. We will provide financial services

and products responsibly, bearing in mind the needs of society, our customers, our staff, our shareholders, the environment and future generations.”

Enabling small business growthBearing in mind the needs of various stakeholders does, however, mean refining the bank’s traditional ways of interacting with its market – and, indeed, looking beyond its traditional markets.

An example is Standard Bank’s solution to the problem of providing finance to SMEs in sub-Saharan Africa, where the lack of financial records, credit bureau data, and collateral would normally prevent SMEs accessing loans. In 2011 in Ghana, Kenya, Nigeria, and Tanzania, the bank used a new credit evaluation approach and a product called SME Quick Loans to provide SMEs with unsecured loans of between USD300 (R2 176) and USD30 000 (R217 584). At December 2011, loans totalling more than R320 million had been disbursed to approximately 5 650 businesses, with lending loss rates proving to be much lower than expected.

“We took a calculated risk in designing SME Quick Loans, based on our strategy of building Africa’s leading financial services organisation,” Ms Ireton says. “Africa’s social and

environmental challenges present risks both to our own sustainability and to the development and growth prospects of economies. However, the very nature of our business positions us to help our customers and stakeholders manage risk and invest for the future, which in turn contributes to the sustainable growth of local markets and national economies.”

Opportunities in the green economyA peculiarity of the African market is that it offers both the challenge and opportunity of low carbon growth, obviating the cost and disruption to commerce and industry of retro-fitting energy efficient technologies and, at the same time, creating entirely new business opportunities for development and deployment of new technologies.

Standard Bank has already used its existing expertise, as the first African bank, in 2003, to create a carbon trading division, to win 13 bids with renewable energy capacity of 605 megawatts in the South African Government’s Renewable Energy Independent Power Producer Procurement (REIPPP) Programme, Ms Ireton says.

This equates to 38% and 58% of the megawatts available from the solar and wind projects accepted in the first phase of the programme.

“However, sustainability cannot be compartmentalised,” Ms Ireton says. “So, we embed environmental custodianship into all our business activities. We apply the Equator Principles to project finance loans and internally developed appraisal systems that include screening all large transactions for environmental and social risk.”

“Sustainability is about making best use of your intellectual capital and other

internal assets to make sustainability work for your business – so that it can

work for everyone else.”Karin Ireton: Director, Sustainability Management

Sustainability is not interchangeable with corporate social investment initiatives.

MBSA advert_SR9.indd 4 09/05/2012 15:27


Energy industries gaining positive tractionThe oil/gas industry – largely driven by coverage of Sasol – is much better placed than in previous quarters. So too is the energy industry, with Eskom being the key player (see chart 5 for a comparison). The utility has come a long way in terms of effective communication, with coverage now close to neutral.

Eskom’s electricity tariffs play a significant role in the overall perception of South Africa’s industrial competitiveness, with clear influence over international investment and local expansions. The utility received much more favourable media coverage after the latest tariff discussion (see chart 6), where annual price rises were not as high as initially anticipated (lowered by Nersa from 25.9% to 16% for 1 April 2012 to 31 March 2013).

HR and stakeholder issues in the newsReporting on the relationship between a company and other external organisations (external stakeholder relations) remains the most prominent sustainability issue in the media, with coverage in the first quarter comprising just over 41% of total sustainability coverage. Human relations also had a strong showing, but due largely to negative coverage of strikes and retrenchments.

Environment and transformation off the radarThe results of the first quarter of 2012 show that media attention on COP17, the conference hosted by South Africa in December 2012, was relatively short-lived. Focus on environment in the first quarter 2012 (2.6%) is considerably lower than in Q1 of 2011 (4%). This raises questions about the extent to which 2011’s environmental focus was genuine and part of companies’ overall strategy, or an event-driven marketing campaign.

Even more worrying is the lack of focus on BEE and transformation (see chart 2 for a comparison of coverage of the two issues). Still reeling from a painful nationalisation debate, particularly affecting the mining and banking industry, the corporate share of focus on transformation remains dismally low (1.3% of total sustainability coverage).

Media Tenor’s coverage of the issue of transformation indicates a worrying trend: the tone of reporting has dropped from a positive 20% at the height of corporate BEE deals in 2007, to a negative 20% in the first quarter of 2012 (see chart 3).

Many companies consider the nationalisation debate as something that does not apply to them, as it targets the mining and banking industries. However, nationalisation could be considered a proxy for a range of other issues – one of them being (lack of) transformation. Companies are advised to communicate far more on this issue through 2012.

IN THE MEDIA

Portion of sustainability coverage dedicated to coverage on environment and BEE/transformation issues, q1 2006 – 2012

CHART 2

Environment

% o

f to

tal s

ust

ain

abili

ty c

ove

rag

e

q1 of each year2006 2007 2008 2009 2010 2011

9%

0%

BEE/transformation

2012

Rating of coverage on companies in the energy and oil/gas industries, 2010 – q1 2012

CHART 5

Energy

Rat

ing

1 2 3 4 1 2

50%

-50%

Oil/gas

3

0%

4 1

201220112010

Portion of sustainability coverage dedicated to external stakeholder relations and human resource management

CHART 4

External stakeholder relationsHuman resource management

% o

f to

tal s

ust

ain

abili

ty

cove

rag

e

2006 2007 2008 2009 2010 2011

60%

0%2012

Rating of coverage on the issue of electricity tariffs

CHART 6

Rating of coverage on electricity tariffs

Jan2010

50%

-50%

0%

Jun2010

Dec2010

Jan2011

Jun2011

Dec2011

Jan2012

Mar2012

volume and rating of coverage on transformation q1 of 2006 – 2012

CHART 3

Rating

% o

f to

tal s

ust

ain

abili

ty c

ove

rag

e

Nu

mb

er o

f st

atem

ents

2006 2007 2008 2009 2010 2011

30% 1 000

0

-30%

Volume

2012

0%

q1 of each year


IN THE MEDIASustainability Leadership Coverage MonitorAt the World Economic Forum in Davos in January 2012, global leaders made it clear that business is expected to communicate and engage beyond investor relations. Globally, issues such as human resources, government relations, the environment and inequality should be taken seriously enough to warrant executive involvement and commentary.

SEE OUR FEATURE ON CEO SUSTAINABILITY LEADERSHIP ON PAGE 4.

Media Tenor’s data shows an increased focus in the media on management and leadership, beyond appointments and retirements. From an average figure of 5% of total corporate coverage in South Africa (sustainable and otherwise), the issue of leadership breached the 10% mark for the first time in 2011. The average share of coverage that media dedicated to sustainability issues when reporting on CEOs in Q1 of 2012 has been about 16% of total coverage.

This quarter, for the first time, we have identified those CEOs who receive reportage in the media, either in their own capacity or through their companies (see table 1). The analysis was undertaken on a similar basis to that used for the Trialogue/Media Tenor Media Sustainability Coverage Monitor.

It seems that ethics, good environmental practices and other typical issues that make up the bulk of a company’s sustainability report are simply not high on the corporate PR agenda, or of real interest to journalists, unless, of course, there is a disaster or bad news story. Significant internal effort is required to embed responsible behaviour and report accurately. Achieving this enables a company to operate sustainably, expand into Africa, build trust and achieve other strategic goals. However, these are means to an end and therefore don’t acquire much media exposure. There is an unmet opportunity for executives and companies to build publicity and news around those aspects that are both material to

TABLE 1: Top 10 CEOs speaking on sustainability issues, q1 2012

Index score*

Proportion of coverage to sustainability

key issues and verbatim

Alan knott-Craig (Cell C)

30.84 22% Mr Knott-Craig said he believed Cell C would make a profit, but the task would not be easy. “I would not have taken the job if I didn’t believe it is an achievable target. The main focus will be on network roll-out and data. Cell C has a good customer base, but its distribution channel is poor and we can fix that. Cell C could do better than it has done.” (Business Day, 20 January 2012)

Brian Molefe (Transnet)

29.45 18% An expanded Transnet would generate more money as demand for rail services was “almost unlimited”, Mr Molefe said. The new assets would start making money almost immediately, lightening the debt burden. (Business Day, 21 February 2012)

David Brown (Implats)

27.38 29% “Essentially we have found each other, and that augurs well for the mining industry in Zimbabwe,” Implats CEO David Brown told a news conference after a joint statement confirmed the deal. (Business Day, 13 March 2012)

Julian Roberts (Old Mutual)

26.16 16% Old Mutual will continue with its restructuring and growth plans, which include expanding into Africa and preparing the US asset management unit for an initial public offering. (Business Day, 12 March 2012)

Sipho Nkosi (Exxaro)

24.87 25% “Cennergi aims to be the leading cleaner energy independent power producer in Southern Africa, serving an expanding energy market.” (Business Day, 6 March 2012)

Maria Ramos (Absa)

23.15 18% Absa and Barclays are now working in an “intensely exciting collaborative way” to build up an Africa franchise with a shared client base and products. (Business Day, 13 February 2012)

Warren Buffet (Berkshire)

22.97 17% It is Buffett’s warning about the sustainability of exceptionally high corporate profits that is most pertinent today. (Business Day, 13 February 2012)

Erik venter (Comair)

19.71 14% “We are not going to rely on the economy turning around or the fuel price coming down. We are really looking at redesigning the back end of our business.” (Business Day, 15 February 2012)

Graham Mackay (SAB)

19.19 19% “Our relationship with the Castel Group has gone from strength to strength … these operational changes will benefit our local businesses, our minority partners, and our customers and consumers in both Angola and Nigeria, and demonstrate both groups’ long-term commitment to the alliance.” (Business Day, 10 January 2012)

Michael Jordaan (First National Bank)

19.11 27% “If there is one thing that we have managed to do, it is to nail our flag to the mast of innovation, and this is something that has become a culture over the years.” (Business Day, 29 February 2012)

The leadership podium: q1’s top three

Alan Knott-Craig made a splash before he even took office, being put on the spot on a variety of Cell C sustainability issues.

Transnet CEO Brian Molefe, second behind Knott-Craig, will be spearheading the presidentially-announced infrastructure spend in the months to come.

David Brown, the former CEO of embattled Impala Platinum must have had his quarter horribilis: strikes, battles with the Zimbabwean government and court actions over a fatality have pushed the company into a reputational crisis. Despite this, the CEO did what CEOs should do: faced the media and pushed sustainability as much as possible (in this case, 29% of media coverage on his person).

their business and in the sustainability sweet spot – as we see in the example of Sipho Nkosi from Exxaro.

* The index score measures CEOs who are active (volume) in a wide range of media (spread) on a number of issues (diversity) and with positive attributions (quality).


Cell C vs MTN: A telecoms case studyWith a new CEO in Alan Knott-Craig, Cell C had its fair share of media attention when compared to giants Vodacom and MTN. The results from the Sustainability Leadership Coverage Monitor have the new CEO positioned on top in the first quarter and the company placed 4th overall (behind Massmart, Old Mutual and Facebook).

MTN, much larger and much more global than Cell C, is active in Africa and is one of the few South African companies with international recognition. The company has, for several years, enjoyed one of the highest shares of positive overall coverage in the South African

media. Despite producing outstanding financial results, the latest allegations around bribery, tender irregularities and socio-political collusion involving the Iranian government and Turkcell put a dent in its previously squeaky-clean reputation. While this issue is not particularly South Africa-focused (other than the references to alleged involvement of South African government officials), it has nevertheless impacted on the perception of MTN SA’s leadership.

Sifiso Dabengwa has been much quieter in the media than his predecessor Phuthuma Nhleko – particularly on issues around sustainability (he is ranked 35th in the Q1 of 2012 Sustainability Leadership

Coverage Monitor). Cell C, on the other hand, is benefiting from the profile of its new CEO and has improved the tone of its overall coverage in the media (from a negative 5% in Q2 of 2011 to a positive 26% in Q1 of 2012).

While Cell C’s sustainability coverage in Q1 has been almost exclusively positive or neutral (see chart 8), MTN has experienced a significant proportion of negative coverage (see chart 9), particularly in the area ‘compliance with legislation’. With the Iranian story only really starting to emerge in April 2012 (outside of the analysis of the first quarter) the full impact of the allegations on MTN remain to be seen.

IN THE MEDIA

quarterly media ratings of Cell C and MTN, 2010 – q1 2012

CHART 7

Cell C MTN

Rat

ing

1 2 3 4 1 2

40%

-40%3

0%

4 1

201220112010

TABLE 2: Company performance in q1 2012

Index score

Sustainability coverage lead by:

25.96 Massmart Competition Commission approves merger.

24.07 Old Mutual Old Mutual combines the Wealth Management Continental Europe business and the Skandia Retail Europe business to create Wealth Management Europe.

22.52 Facebook Anticipation of Facebook’s IPO.

22.11 Cell C Appointment of new CEO.

22.03 Discovery Discovery discusses sustainability of the company’s medical aid schemes on the back of cutting unlimited benefits.

21.56 Coronation Focus on commitment to investors and stakeholders as Coronation announces upcoming appointment of new CEO.

21.36 Daimler Daimler and Foton start a joint venture, opening up the Chinese market to the former.

21.28 Exxaro Resources

Exxaro forms joint venture with Tata to produce energy in South Africa. This also provides access to the renewable energy market.

20.61 WalMart Competition Commission approves merger.

20.57 Sasol After abandoning exploration of opportunities in the Karoo in December, Sasol started its Sasol Agricultural Trust in March.

Companies dominating the coverage in Q1 of 2012 addressed issues such as growing new markets, communicating with stakeholders around change and energy self-sufficiency.

Neutral Positive

Sustainability issue coverage for MTN, q1 2012



Marketplace impact



Environment


Community relations

BEE/transformation

150100500 200

Negative

CHART 9

Basis: 355 statements

Neutral Positive

Sustainability issue coverage for Cell C, q1 2012

CHART 8


Marketplace impact





40200 60 80

Negative

Basis: 125 statements


IN THE MEDIA

Mondi_Trialogue_2012_final.pdf 1 2012/04/25 3:53 PM

Real Mining. Real People. Real Difference.

PORTIA MONEBIHomeowner, North West Province

NO MATTER HOW VALUABLE

A RESOURCE, OUR PEOPLE

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SETTLEMENTS TO PROVIDE

20 000 HOUSES FOR OUR

EMPLOYEES IN LIMPOPO

AND NORTH WEST.

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OF MORE THAN R1.4 BILLION,

OUR PLATINUM EMPLOYEES

WILL BE ABLE TO ENJOY

THE COMFORTS OF HOME –

LIKE PORTIA MONEBI,

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WE ARE IMPROVING OUR

PEOPLE’S LIVING CONDITIONS

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FIND OUT MORE AT

GETTHEFULLSTORY.CO.ZA

PRODUCINGSOMETHING MORE

PRECIOUS THANPLATINUM: HOMES

review - trialogue - leaders in corporate sustainability · pdf file · 2015-03-31...

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