Sustainability Review

Investing in customer service sustainability

review 2013

sustainability review

1 Introduction

1 Approach to sustainability

1 Accountability, reporting and assurance

2 Review of stakeholder engagements and initiatives

4 Value creation – various beneficiaries

5 Group Value-added statement

stakeholder reviews

6 Shareholders

8 Employees and organised labour

12 Customers

14 Suppliers and business partners

15 Government and regulators

16 Community and society at large, including transformation and environment

Contents

1 >> JD Group sustaInabIlIty revIew 2013

Sustainability review – 30 June 2013

this sustainability review forms an integral part of the Group’s integrated reporting. the integrated report has already illustrated how the Group integrates sustainability into the strategy of the business by ensuring that it firstly generates sustainable profits, enabling it to remain a responsible corporate citizen, and as such “earning” its social licence to operate.

introduction

This review endeavours to provide a transparent account of the Group’s performance for the year ended 30 June 2013 against additional reporting frameworks, being the Global Reporting Initiative (GRI) and the JSE’s Socially Responsible Investment (SRI) index. The review further aims to illustrate how sustainability matters are addressed and managed through execution of the Group’s strategic business goals.

Management believes that being a company listed on the Johannesburg Stock Exchange (JSE) inherently demands that the business practices of operations must be conducted in a corporate responsible manner. The Group has therefore pragmatically adopted the Global Reporting Initiative’s (GRI) G4 Index for reporting purposes and in particular welcomes the GRI’s approach of reporting only those matters material to the company and its operations. As a result, the Group’s 2013 reporting contains Standard Disclosures from the GRI G4 Guidelines, but has not fulfilled all the requirements of either ‘in accordance’ reporting option.

Management is of the opinion that this will encourage companies to provide more depth to reporting on sustainability matters as it moves away from the normal “tick box” approach. As a result, reporting has been based on a substance-over-form principle, in that sustainability issues that are not considered material to the Group’s business have been disclosed in less detail than those that are considered of strategic importance to JD’s continued existence.

approach to sustainability

JD Group is committed to creating long-term sustainable stakeholder value through ethical business practices, ensuring competitive returns to its suppliers of capital, providing employment, minimising harmful environmental impacts and promoting social and economic development across the broader South African society. The Board regards JD Group as integral to the South African society and therefore the Group acts as a responsible citizen in its social, environmental and economic interactions with stakeholders. Board decisions take cognisance of the impact they may have on the Group’s sustainability and current needs are evaluated to ensure that the ability of future generations to meet their needs is not compromised.

While the Group acknowledges that social transformation is important to redress the unfair practices of the past, the Group’s business perspective remains aligned first and foremost with the expectations of its shareholders and the Group’s future wellbeing. This is because informed investors assess the quality and sustainability of the Company’s economic performance as most essential in this triple-bottom line accord, hence the Group’s zero tolerance in respect of anti-competitiveness.

The philosophy of leadership, sustainability, corporate responsibility and citizenship is core to the Group’s own strategy and evidenced by a statement of the Chief Executive Officer, David Sussman: “As one of the leading retailers in South Africa, JD Group embraces any lawful initiative aimed at ensuring the future prosperity of our country, as well as that of the Group. The importance of transformation, upliftment of the communities and the impact on the environment in which we conduct our business cannot be underestimated. Our existence and future profitability can only be achieved with the support of our customers and the communities in which we operate”.

accountability, reporting and assurance

The ultimate responsibility for retaining full and effective control over sustainability matters rests with the Board; however, the Board has mandated the Group Audit committee, in co-operation with the Social and Ethics committee, to oversee sustainability management and reporting within the Group. The JD Group Risk Director is the accountable Board member in respect of sustainability reporting. The Audit committee, assisted by the Social and Ethics committee and a special Board subcommittee, reviewed the disclosure of sustainability matters in the Integrated report and found them to be accurate and not in conflict with the financial disclosures or misleading in any way.

The reporting of sustainability issues and data has been incorporated within the existing reporting structures of divisions, ensuring that sustainability impacts are communicated, evaluated and responded to in a timely and effective manner and reported to the Board via the Executive committee (on a monthly basis) and the Audit committee (on a quarterly basis). The Group is continuing the enhancement of formal reporting and monitoring structures for measuring and verifying its future sustainability efforts.

The Group has not formulated an overarching Sustainability Policy; however, over the years it has adopted a number of sustainability-related policies such as a Transformation Policy, an HIV/Aids Policy, an Ethics Policy, a Gifts Policy, an Anti-fraud Policy, a Risk Policy, a Health and Safety Policy and an Environmental Policy, to name but a few. The policies not only address key triple-bottom line aspects, but are also supporting the Group’s business strategy. They have been communicated and made available to all employees within the Group, with training provided to relevant employees where necessary. The responsibility for the implementation and compliance of these policies resides with the Chief Executive of each division and ultimately with the Group CEO. This reporting and governance process ensures that the approach followed throughout the Group is consistent and reliable.


The Group has determined that, together with its industry peers, it has a medium to low environmental impact. Readers are referred to the 2013 Integrated report pages 4 and 5 for further explanation of the Group’s business model.

In terms of the GRI G4 framework, the Group has identified the material aspects below which drive the content of this review. The process involved in determining these aspects includes identification, prioritisation, validation and review of sustainability matters on an ongoing basis by management.

Material aspects:• Economic – Economic performance

• Environmental – Energy – Emissions – Effluent and waste

• Social – Employment – Occupational health and safety – Training and education – Diversity and equal opportunity

These impacts are managed with data reported throughout the Group. Once maturity of data collection techniques is achieved, the Group will be able to further develop and implement relevant strategies to respond to these material aspects, together with the development of realistic and achievable targets. The Audit committee recommended that there is no need for management to involve internal audit or external third-party assurance providers at this stage in the Group’s sustainability reporting journey; however, this aspect will be reconsidered as the integrated reporting process matures in future years.

review of stakeholder engagements and initiatives

This section provides a detailed viewpoint of the link between the Group’s stakeholders and the Group’s material issues through a sustainability lens, explaining the reciprocal impact and how they relate to the Group’s strategic business goals.

While the Group fulfils its obligations as a corporate citizen by being a key contributor to the greater wellbeing of society in the form of direct and indirect employment opportunities, meeting customer demand, etc, it is of paramount importance that the Group maintains a robust stakeholder engagement process. This process aims to develop and nurture the symbiotic relationship that exists between the Group and its stakeholders or custodians of the resources on which its business operations rely, or the resources on which its operations may have an impact. For this reason, and based on the imperatives that link them to the Group’s material issues, the following have been identified as the Group’s key stakeholders:• Shareholders,potentialinvestorsandfunders• Employeesandorganisedlabour• Customersandpotentialcustomers• Suppliersandbusinesspartners• Governmentandregulators• Communitiesandsocietyatlarge(incorporatingCorporateSocialInvestment,TransformationandEnvironment).

The following table provides a synopsis of the Group’s key stakeholders, the engagements, their imperatives, the material issues and how the Group’s strategy responds to each:

stakeholder Methods of engagementstakeholderimperatives Material issue

strategic businessgoals read more

Shareholders, potential investors and funders

• Integratedreport

• Annualfinancialstatements

• Corporatewebsite

• Investorrelationsinteractions/communiqués

• Resultsannouncementsandtradingupdates

• Investorroadshows

• One-on-oneformalinvestormeetings

• Formalshareholdermeetings(AGMsandSpecial GMs)

• Informalshareholderengagements

• Engagementswithretailindustryanalysts

• Proactivecommuniquésandmediareleases

• Reactivemediareportsandresponses

• JSESENSannouncements

• Variouslegislativenotices

• Corporatecirculars

• Ongoingresolutionofshareholders’administrativequeries

• Deliversustainableearningsgrowthand enhanceshareholdervalue

• Ongoingengagementwithshareholders

• Remainalong-termsustainablebusinessprovidingbenefitsto allstakeholders

• Riskmanagement

• Governanceandleadership

• Shareholderspage6




Employeesand organisedlabour

• One-on-oneemployeeinteractions

• Bi-annualemployeeperformanceassessments

• JDanddepartmentalcommitteemeetings

• Employeesocialgatherings

• JDbusiness-relatedwrittencommuniqués(memoranda/bulletins/directives/policies/proceduresetc)

• Telecasts

• Chainroadshowsandstorevisits

• Inductionprogramme

• Trainingsessions

• Employeesurveys

• JDIntranet(Wiki)

• Divisionalnewsletters

• Corporatenewsletter/publication(Thumb’s Up)

• EmploymentEquityandTrainingcommittee(EE&TC)meetings

• Bursarycommitteemeetings

• Wagenegotiations

• Organisedlabourforummeetings

• Operationalrequirementsnegotiations

• Createapositive,supportiveanddiversity-friendlyworkingenvironmentinwhichemployeescanachievetheirfullpotentialthroughchallengingworkanddevelopmentopportunities,withtheassuranceofbeingrecognisedandrewardedforexcellenceinperformance

• Maintainapositiverelationshipwithorganisedlabour

• Attractandretaincriticalskillsandtalent

• Employeesandorganisedlabourpage8

Customers and potential customers

• Productadvertisementsinvariousmedia

• Monthlyproductcatalogues

• Event-drivenpamphletsandcampaigns

• In-storedisplaymaterial

• Clubmagazines–variouschains

• Customerservicesurveys

• Face-to-facein-branchinteractions

• Written/fax/email/telephonecommuniques

• Customercomplaints–monitoringandresolution viaindependentwebsites,media andJDGroupandChainwebsites

• Socialmediacommuniqués

• Monthlyaccountstatements/notices

• New-customerwelcomecalls(contact centre)

• BespokecampaignsviaGroupContact Centres

• Mobilechannelmessages

• Personalvisits(arrearcollections)

• Createrelevantandlastingrelationshipswithpresentandfuturecustomersbyprovidingthemwithappropriatevalue-addedqualityproductsandserviceofferingsandsolutionstofacilitatetheirhouseholdeconomicupliftment

• Mutualethicalconduct

• Productandservicecomplaints(SCIs)resolution

• Customerexperience

• Businessproductsandservices,responsibleprocurement

• Minimisetheimpactofouroperationsontheenvironmentandcommunitiesinwhichweoperate

• Customerspage12




Suppliers and business partners

• One-on-oneinteractions

• Tenderandprocurementpractices

• Supplieraudits

• Createoptimisedrelationshipsandensurethatthetotalsupplychaindeliversqualityexperiencesandvaluetotheend-customer,meetingtheirneeds

• Ethicalconductinrespectoflabourpracticesandfulfilmentofproductguarantees

• Businessproductsandservices,responsibleprocurement


• Suppliersandbusinesspartnerspage 14

Government and regulators

• Establishmentofconstructiverelationships

• Forumparticipation

• Participationinindustryworkinggroups

• Filingofprescribedregulatoryreports/documents

• RespondingtoRegulatory/ComplianceNotices

• Formalregulatoryenquiries/on-sitegovernanceassessments/visits

• Obtainingregulatoryapprovals

• PracticeNotesandLegislativeDirectives

• Publiccommentsonnewlegislation

• Promulgationoflegislationandregulations

• Queryresolutionmeetings/engagements/interactions

• Obeyalllaws,regulationsandcorporategovernanceandotherapplicableprescribedcodesincountrieswheretheGroupoperatesandseektoengenderconstructiveandhealthyrelationswithalllevelsofgovernmentsandregulators

• Beanactiverole-playerinthetransformationofSouthAfrica

• Governance,leadershipsustainability

• DrivetransformationandCSIinSouthAfrica


• Governmentandregulatorspage 15

• Transformationpage 17

Communities and society at large

• Forumparticipation

• Chain/GroupparticipationinCSIcommunity-upliftprojects

• Chain/Groupsponsorshipofsport,art,charityandotherevents

• Universitydays

• Beaconcernedcorporatecitizenandgrowpartnershipsasanengagedmemberoflocalcommunitieswhereourstores,warehousesandofficesarelocatedthroughthesupportoflocalandselectednationalsustainabledevelopmentinitiatives

• DrivetransformationandCSIinSouthAfrica


• Transformationpage 17

• Corporatesocialinvestmentpage 16

• Environmentpage 19

value creation – various beneficiaries

The Group’s primary purpose is to create and generate sustainable value for the benefit of all stakeholders. This can only be achieved by maintaining profitable business operations and ongoing engagement with stakeholders. It requires a continuing commitment to satisfy customer needs, while pursuing persistent and satisfactory profit growth, through both organic and non-organic strategies.

In layman’s terms, “value added” is the amount of wealth the Group has created by purchasing and selling its merchandise. The calculation takes into account the amounts retained and invested in the Group for the replacement of assets and the future development of operations and its people.

For the year ended 30 June 2013, the Group generated satisfactory profit and made further progress towards achievement of its strategic business goals. Attributable earnings for the period, before profit attributable to minorities, amounted to R632 million (2012: R836 million).


Shareholders benefited with a total gross dividend for the year maintained at 232 cents per share compared to the previous period. The Group’s corporate social investment (CSI) contribution amounted to R10 million (2012: R12 million) during the period, benefiting communities and the society at large.

As a result of the profits generated and the resulting payment of taxes to SARS, the government benefited through payment of taxation, assessment rates and other levies. During the year, employees received almost R4 billion (2012: R3 billion) in remuneration, including market-related salary increases, commissions and performance-based incentive payments. The procurement of products and services resulted in payment of more than R26 billion (2012: R20 billion) to businesses outside the Group, aiding and sustaining those businesses and their dependants.

The Value-added statement presented below is testimony to the value created by the Group. It clearly shows the significant role which the Group plays in fuelling the South African economy and indicates how the wealth has been distributed among stakeholders.

Group value-added statement

2013 2012

rm % Rm %

Revenue 32 210 25 284Investment income 8 4Finance income 48 42Equity-accounted losses – 2

32 266 25 332Cost of merchandise, services and expenses (26 327) (20 450)

value added 5 939 100,0 4 882 100,0

Distributed as follows:

EmployeesSalaries, commissions and other benefits 3 979 67,0 3 035 67,5

GovernmentTaxation, assessment rates and other levies 574 9,7 421 16,9

Providers of capital 1 022 17,2 762 11,0

Distribution to shareholders 484 8,2 510 2,2Finance costs 538 9,1 252 8,8

Reinvestment in the Group 364 6,1 664 4.6

To provide for depreciation 361 6,1 280 5,0To provide for deferred taxation (212) (3,6) 72 (0,5)Reinvestment for expansion 215 3,6 312 0,1

5 939 100,0 4 882 100,0

statement of money exchanges with government

Assessment rates and taxes 52 41Company taxes 452 333Employees’ tax deducted from remuneration paid 471 391Net value added tax and general sales tax collected 459 363RSC and other levies 70 47

1 504 1 175

Note: The 2012 numbers represent a ten-month period


2013 VALUE DISTRIBUTED

Employees 67%

Government 10%

Shareholders and financiers 17%

Reinvested 6%

VALUE ADDED

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

2011 2013

3 918

4 882

5 939

2012

Rm

shareholders

strategic business goals

delivering required return to shareholders

Shareholders invest in JD Group based on its reputation, business model and proven track record of execution of strategic business goals which result in the creation of value. Steinhoff remains the majority shareholder in the Group. As at 30 June 2013, Steinhoff holds a 56,4% controlling stake in the Group, net of treasury shares.

It is further noteworthy that 89,5% (2012: 82,1%) of the Group’s shares are held locally, while 69,6% (2012: 71,2%) of the number of shareholders are the so-called “ordinary man in the street” investor holding less than 1 000 shares each. The Group’s directors hold 0,5% (2012: 0,4%) of the issued share capital. However, in congruence with international trends, the Group Remuneration committee has resolved that, in order for executive directors to in future participate in the long-term incentive scheme, they will have to hold a certain number of JD Group ordinary shares in their own name to demonstrate alignment with shareholders’ interests.

A detailed analysis of the Group’s 3 345 (2012: 3 317) shareholders as at 30 June 2013 in various prescribed categories is set out in the table on following page.

Stakeholder reviews – 30 June 2013


analysis of shareholders as at 30 June 2013

number ofshareholders

% oftotal

number ofshares

% oftotal

Geographical location of shareholdersSouth Africa 205 229 568 89,5United States of America 20 294 693 8,9United Kingdom 2 297 468 1,0Rest of Europe 760 786 0,3Rest of world 755 807 0,3

229 338 322 100,0

size of holding1 – 1 000 shares 2 327 69,57 697 144 0,31 001 – 10 000 shares 632 18,89 1 943 481 0,910 001 – 100 000 shares 257 7,68 9 622 833 4,2100 001 – 1 000 000 shares 106 3,17 32 356 139 14,11 000 001 shares and above 23 0,69 184 718 725 80,5

3 345 100 229 338 322 100,0

Category of shareholdersListed company 127 164 655 55,45Pension funds 44 030 714 19,20Unit trusts/mutual funds 38 685 276 16,87Other managed funds 6 860 193 2,99Private investors 3 814 548 1,66Employees 3 656 663 1,59Insurance companies 3 176 802 1,39Custodians 1 283 725 0,56Exchange traded funds 791 248 0,35Universities 350 432 0,15Sovereign wealth 295 191 0,13Corporate holdings 155 102 0,07Foreign governments 112 700 0,05Investment trusts 82 519 0,04Charities 61 300 0,03American depositary receipts 46 796 0,02Local authorities 20 684 0,01

230 588 548 100,56*

* Please note the total of shareholder categories exceeded the issued share capital at the time of the analysis and is believed to be as a result of stock-lending transactions.

non-public shareholders(included above)Directors 4 0,12 1 205 000 0,5Share incentive scheme 1 0,03 3 656 663 1,6

5 0,15 4 861 663 2,1

To the best of the Company’s knowledge: % heldbeneficial shareholders with a holding of 3% or moreSteinhoff Africa Holdings Proprietary Limited (net of treasury shares)

127 164 655 56,4

Government Employees Pension Fund (PIC) 19 640 103 6,2

146 804 758 62,6

Fund managers with a holding of 3% or moreRegarding Capital Management Proprietary Limited 16 209 616 7,1Public Investment Corporation (PIC) 12 927 788 5,6Investec Asset Management 12 544 846 5,5Boston Company Asset Management LLC 9 744 191 4,3Sanlam Investment Management 8 950 081 3,9

60 376 522 26,4


The Group responds to shareholder imperatives where relevant, practical and possible to implement. For instance, in response to a lower-than-normal vote in support of the Group’s Remuneration Policy (albeit a non-binding vote) at its most recent annual general meeting (AGM) in 2012, the Policy was augmented and discussed with major shareholders.

Similarly, the Group annually informs shareholders of the performance conditions and hurdles set by the Group Remuneration committee for employees to earn share-based benefits. During the year under review, shareholders have also been informed of the Group’s tailored approach being followed for the giving of notice in respect of the provision of financial assistance to related and inter-related companies. Similar open communication lines and constructive working relationships exist between the Group’s executive management and the major shareholders such as Steinhoff, RE:CM, the PIC and Investec, and both formal and informal engagements take place from time-to-time.

Dividends are declared by the Group at appropriate cover ratios each year, taking cognisance of reinvestment requirements and shareholder expectations.

employees and organised labour


skills and talent management

Since the Group is fully committed to being a responsible South African citizen, it employs South African citizens at all levels in its South African operations and provides security and stability to 27 754 (2012: 26 751) permanent employees in southern Africa, including more than 4 600 non-permanent employees. All labour resources in South Africa are sourced locally in terms of the Broad-Based Black Employment Equity (B-BBEE) regulations. The context of the Group’s workforce is described below.

Patterson grade employee statisticsThe table below summarises the Group’s permanent employment statistics per Patterson grade level as at 30 June 2013:

occupational levelPatterson

gradetotal 2013

Total 2012

Top management F 2 2Senior management E 60 99Professionally qualified and experienced specialists and mid-management D 1 271 1 294Skilled technical and academically qualified workers, junior management, supervisors, foremen and superintendents C 6 410 6 470Semi-skilled and discretionary decision-making B 13 039 13 905Unskilled and defined decision-making A 6 972 4 981

total 27 754 26 751

disabled employeesThe number of disabled staff employed by the Group amounts to 157 at year end compared to 201 in 2012.

2013 EMPLOYEE AGE GROUPS

Younger than 30 32%

30 – 49 years (inclusive) 52%

50 and older 16%

2013 EMPLOYEE GENDER SPLIT

Male 52%

Female 48%

2013 PATTERSON GRADE SPLIT OF EMPLOYEES

A 25,12%

B 46,98%

C 23,10%

D 4,58%

E 0,21%

F 0,01%

2013 EMPLOYEE ETHNICITY SPLIT

African 64%

White 17%

Coloured 12%

Indian 7%


employee turnoverDuring the year 7 735 employees left the employment of JD Group and 8 061 new employees were hired:

employees leaving employees hired

Male (total) 54% 52%

Younger than 30 years of age 26% 29%30 – 49 years of age 22% 19%50 years of age and older 6% 3%

Female (total) 46% 48%

Younger than 30 years of age 24% 30%30 – 49 years of age 18% 16%50 years of age and older 4% 2%

employee sick daysThe average number of sick days taken by employees during 2013 was 2,79 days (2012: 3,32 days) which is in-line with norms. A formalised system is in place to manage the administration of sick days taken by employees.

top employer certification 2013/14JD Group has again been certified as a Top Employer in South Africa by the CRF Institute for providing employees with exceptional employee conditions, nurturing and developing talent across all levels in the organisation and demonstrating its leadership status in the HR environment, always striving to optimise its employment practices and to develop its employees.

Certification is only awarded to the best employers around the world: companies that demonstrate the highest standards of employee offerings. The Top Employers Institute’s research assesses all critical areas of the Human Resources environment, certifying organisations that can demonstrate they are continuously optimising employee conditions and leading the way in the development of their people. The research is conducted by the CRF institute into the HR policies, practices and benefits of the companies which participate.

The Group’s vision to be world class in its fields of expertise inspires it to consistently strive for people practices that compare and even compete with best-in-class organisations. The “war” for top talent requires a competitive advantage and value proposition that differentiates the Group and engages the hearts and minds of current, potential and future talent. The affiliation and brand loyalty in the minds of our customers afford the unique opportunity to entrench aligned employee value propositions, founded on an already sound reputation, that attract and retain talent.

The underpinning philosophy around transforming the HR service centre was partnering with business to create an environment where employees are engaged, energised and empowered to deliver. The employee-centric approach adopted has seen an stringent focus on strategy, policy and process that equip our employees to deliver world-class service to our customers.

employee benefitsRefer to the Remuneration report included in the Integrated report for details.

training and developmentThe training and development of the Group’s employees is a high priority. The Group offers a host of programmes for skills development and lifelong learning that support the continued employability of employees and assist them in progressing their careers. Learning and leadership programmes are specifically developed to meet business needs.

During the review period, employees were exposed to 260 962 hours of training (2012: 1 057 483 hours). The significant decrease in training hours when compared to 2012 is as a result of the special focus that had been placed in 2012 on Product Sales and Service Standards (PS²) training, among others. This training honed the sales persons and branch manager skills in the areas of product knowledge, visual merchandise principles, selling, closing the sale and prospecting. All sales persons, credit consultants, financial services managers and branch managers attended and were assessed on this programme. This was not repeated in 2013 and resulted in the decrease in number of hours trained.

The Group’s key training and development statistics are set out in the table below:

2013 2012

Top management (F) 84 75Senior management (E) 3 190 2 855Professionally qualified and experienced specialists and mid-management (D) 40 297 131 965Skilled technical and academically qualified workers, junior management, supervisors, foremen and superintendents (C) 118 614 309 185Semi-skilled and discretionary decision-making (B) 38 533 494 938Unskilled and defined decision-making (A) 60 245 118 465

total 260 962 1 057 483

The Group has a formal Bursary committee, comprising both management and organised labour representatives. The committee assisted 119 (2012: 175) needy students during the past financial period. An Employment Equity and Training committee (EE&TC) operates in addition to the Bursary committee. The governance body of the EE&TC comprises employees from all occupational levels, occupational categories and staff unions across the Group, represented by:• Blackmales6(agedbetween33and55)• Blackfemales2(agedbetween42and54).

The EE&TC complies with the statutory requirements in South Africa and serves as a representative and consultative body that enhances employment equity (EE).


Over and above the aforementioned, the Group is a member of and maintains a sound relationship with the Wholesale and Retail Sector Education and Training Authority (W&R Seta), the Bank Sector Education and Training Authority and the Services Sector and Training Authority (BankSeta), Manufacturing, Engineering and Related Services Sector Education and Training Authority (MerSeta) and makes proactive contributions towards the development of tailored development programmes for the furniture and appliance industry.

During the review period, the Group distributed R1,5 million (2012: R1,1 million) in supporting young disadvantaged learners, while a further R645 800 (2012: R768 100) was allocated to employees’ children in the learning environment.

employee relations, ethical conduct and human rightsThe Group acknowledges the fundamental rights of employees to freedom of expression, association and representation. Through its Ethics Policy and other related value-based policies, practices and processes, the Group’s employees uphold fundamental human rights, integrity, freedom of expression, freedom of association, freedom of representation, and other ethical practices, which are regarded as the guiding philosophies defining the way business is conducted across the Group and not as a legislative requirement. The Group’s policies do not discriminate on the grounds of race, age, disability, gender or religion and are monitored, tracked and reported on through the EE&TC. Given the Group’s stance against abuse and violation of human rights, it has not experienced or received any reported or recorded incidents of discrimination, child labour, forced or compulsory labour or any other violation involving discrimination or rights of people. The Group is not aware of, and will not support, any suppliers who conduct any such practices. None of the Group’s operations restrict employees’ right to exercise freedom of association or collective bargaining. No incidents of violation involving rights of indigenous people have been reported or recorded.

organised labour and consultationsMore than 45% of the Group’s employees are part of collective bargaining agreements and are therefore party to the associated benefits negotiated between the Group and organised labour on behalf of the bargaining unit members. The Group continues to reap the rewards of solid, sound and ethical relationships with the trade unions representing employees in South Africa, Botswana, Swaziland and Namibia. The stable relationship, in particular with the South African Commercial Catering Allied Workers Union (SACCAWU), has been conducive to both parties for many years. The Group is committed to open, transparent and proactive communication and engagement with organised labour, and the fact that it has enjoyed more than 18 consecutive years without general wage action is evidence of the good relationship and trust that exists between management, the unionised staff and the unions. This sound relationship has been established and fostered through annual substantive negotiations, quarterly National Negotiation Committee (NNC) meetings, shop-steward meetings, operational requirements consultations, information sharing sessions (with trade union leadership) and EE&TC meetings. The Group has secured two 24-month wage agreements in Swaziland and Namibia which is expected to further enhance labour stability across the Group’s operations.

None of the Group’s operations restrict employees’ right to exercise freedom of association or collective bargaining.

Operational requirements exercises have to be embarked on from time to time and in such instances the Group strictly abides by the collective bargaining agreements’ requirement of a 60-day notice period in respect of layoffs. During the past financial period the Group was forced to affect the job security of 399 employees due to operational requirements stemming from limited store relocations and closures of lossmaking stores, as well as the continued roll-out of the Group’s centralised logistics initiative. George Annandale is the Group’s key negotiator in all operational requirements negotiations.

The Group was targeted by various fraud syndicates during the review period. In order to provide a sensible analysis, the fraud incidents are split into three categories, namely confirmed fraud, suspected fraud and attempted fraud. Suspected fraud refers to a suspected loss to the Group and a percentage of these relates to customers who disappear after taking delivery of a product purchased on credit. Attempted fraud refers to minor losses where the fraud was in fact prevented. The main category of fraud relates to identify fraud perpetrated by deceitful customers and/or syndicates.

summary of fraud incidents

Cases total value (r)

2013 2012 2013 2012

Confirmed fraud 58 156 367 962 1 395 436Attempted fraud 31 37 51 365 NilSuspected fraud 658 667 4 107 406 5 052 256


whistle-blowing statisticsCrime Call is a whistle-blowing mechanism used by the Group since April 2002. There are two methods of reporting crime anonymously, namely through a dedicated Crime Call telephone line and an online web interface. The majority of incidents are reported via the Crime Call telephone line. Of late, the JD Intranet link has been upgraded and now also incorporates an email channel. A decision was taken to outsource the whistle-blowing programme to an independent audit firm. While the existing contact details and reporting methodology have been retained, the following advantages were gained by making use of the outsourced service provider:• A24/7-mannedfunction• Serviceoperatorsinall11officiallanguages• TheservicecatersfortheGroup’scross-borderbusinesses• Trueindependence(andassurance)guaranteed• NoadditionalcoststotheGroup.

Awareness of the whistle-blowing procedures is communicated on an ongoing basis.

During the review period, 146 (2012: 154) incidents were reported and investigated. The investigations gave rise to disciplinary enquiries with the following results:• 17(2012:49)dismissals• 5(2012:13)finalwrittenwarnings• 3(2012:1)writtenwarnings• 4(2012:5)counsellingsessionsandverbalwarnings.

Insufficient evidence was obtained on the remaining 117 (2012: 86) incidents, resulting in no action being taken.

The Group was party to 279 CCMA cases during the year (2012: 187) of which 165 cases were won, ten cases were lost, 30 were settled and 74 cases dismissed.

health and safetyThe Group complies with relevant health and safety legislation and has appointed Health and Safety committees to manage and advise on the Group’s compliance with OHASA and the Compensation for Occupation Injuries and Diseases Act throughout the Group and its operations.

From time to time the Group visits and informally inspects the facilities of its manufacturers and suppliers to ensure that appropriate health and safety practices and no unwarranted labour practices exist.

Suppliers are encouraged to subscribe to the Green Building Council of South Africa and to develop ergonomically designed safe work spaces for their employees.

During the review period, the Group experienced 319 work-related injuries (2012: 226), including one fatality in which an employee was killed in a motor vehicle accident while travelling to a training course. Our heartfelt sympathy goes out to the family, friends and colleagues of this person.

HIV/Aids and employee wellness – The Philakahle Employee Wellness ProgrammeThe Philakahle Employee Wellness Programme has made significant progress since its implementation in 2011.

Since the prevalence of the HIV epidemic has ostensibly stabilised, the Philakahle Wellness Programme was broadened into a more general wellness programme. The programme provides employees with the testing of HIV, cholesterol and glucose levels, body mass index and blood pressure measurement. The Group has adopted an HIV Aids Workplace policy which is available online at: www.jdg.co.za/about-us/sustainability/hivaids-policy.

HIV tests conducted in earlier years reflected an infection rate below 5%, but due to the relatively small sample, this is not regarded as a true reflection of the HIV infection rate for the Group as a whole. The Group’s estimated statistical projection of an infection rate remains at between 13,5% and 14,8%.


Customers


Footprint optimisation capitalising on the emerging customer

Meeting customer demand through product and service differentiation

Product and market development

biophysical environment and being a responsible corporate citizen

The Group has a large base of credit and cash customers. JD Group services the mass-middle market in South Africa via numerous chains. When considering the breadth of the product range, customers across LSM categories 4 to 10 are able to find solutions to their home lifestyle needs, the Group’s product range reaches customers from rural villages to those frequenting sophisticated shopping centres. As the market develops and becomes more advanced, the Group will continue to fulfil the aspirations of its customers by providing more sophisticated and refined products and services via its diverse product range.

Product rangeThe Group offers a wide selection of merchandise and services across the home product spectrum, from household furniture to a broad range of major appliances, audio/visual equipment and computer products. As a result of the Group’s acquisition of Unitrans Auto and Unitrans Insurance, a short-term insurance company, as well as SteinBuild, a building materials group, the customer offering has been extended to provide motor vehicles, service and parts, vehicle rental services through Hertz, short-term insurance, home improvement, DIY and building products and solutions to customers.

Where appropriate, furniture sales across the eight furniture chains are financed through credit offerings to customers in the form of secured term loans. Linked to these credit deals are product insurance cover for loss, theft or damage, as well as credit life insurance, to settle the insured’s debt in the case of death, temporary or permanent disability or retrenchment. The Group also offers personal loans, as well as funeral policies and legal access policies marketed via the Blake outbound contact centre to mainly existing customers. A debt recovery and telephone marketing support structure exists at both state-of-the-art contact centres in Randburg and Durban.

Club membership is an ancillary product offered to all customers purchasing with credit agreements in the furniture chains. This also fulfils a part of the Group’s customer acquisition and retention strategy, whereby customers can join the Club for a nominal fee per month. In return, they receive consistently high value in the benefits package, which more than compensates for the outlay. These benefits include funeral and disability cover, discounts, cash and product prizes, as well as educational grants and lifestyle enhancers. Market monitoring within the furniture and appliance industry is carried out on a consistent basis across the country through competitive shopping exercises.

emerging marketsLeveraging from the Steinhoff International sourcing expertise is likely to result in increased exposure to markets like China, Malaysia and Vietnam and cost savings from a logistics perspective. The rationale behind this will be to increase product differentiation and margin opportunities. It remains part of the import focus to source products that are not readily produced by local South African suppliers, thereby creating a competitive advantage for the Group by fulfilling customer demand in a unique manner when compared to its competitors.

While sales remain steady for functional home appliances, there has been an increase in customer demand for larger-capacity items such as water dispenser refrigerators and laundry products. There is also a continued demand for new flat-panel TVs and computer hardware in the emerging markets, with tablet PCs and media hardware products finding favour with more sophisticated customers.

responsible lendingThe demand for credit remains robust in the South African market which continues to bode well for the future of JD Consumer Finance. Furniture loan growth remains aligned to overall furniture sales and the demand for unsecured personal loans continues to grow strongly. The growth in unsecured lending has been a contributor to the strong results achieved by JD Consumer Finance during the past year and is expected to continue into the coming year. While there are differing views in the South African market regarding the growth in unsecured loans and the associated risks it might pose, we are confident that the consistently prudent credit granting approach followed by the Group will enable the Group to timeously react to any change in the regulatory environment or customer payment behaviour. More information regarding the credit granting approach is included in the Chief Financial Officer’s report included in the Integrated report.

Our strategy of limiting the maximum personal loan disbursement size and term to R25 000 and 24 months respectively will remain in place for the foreseeable future to ensure we are able to react quickly to any market changes with the least impact on the overall portfolio performance. We will continue to apply rigorous, conservative and compliant credit acquisition strategies, including prudent affordability assessments to ensure we grant responsible credit to qualifying customers. Further to this, we will continue with our strategy not to provide unsecured loans to high-risk credit customers (based on the results of our scorecards), focusing primarily on existing customers with whom we have a longstanding relationship. We will also refrain from entering the external debt consolidation market as we see this as outside our current risk appetite and will continue to focus on growing our internal product offering to existing customers through the introduction of new and innovative products to supplement our ever-increasing product range.


The successful implementation of our new operating platform allows JD Consumer Finance to develop and deploy new products to both internal and third-party channels. We have entered into agreements with new third-party channels that will contribute positively to our growth ambitions and support our strategy of becoming a serious player in the South African consumer finance market. Further to this, we are in the process of developing and introducing new products to our existing range that will put us in a strong position to attract new partners wishing to make use of our credit offering. These include the introduction of a revolving credit facility and expanded vehicle finance products.

Customer rights and complaintsThe Group serves its customers in a diligent and transparent manner, with due regard and a commitment to treating customers fairly, acknowledging the right of customers to receive quality products and services. Through various communiqués, induction and workshops, employees have been encouraged to ensure that the Group acts as a responsible corporate citizen and through the Art of Service culture, the Group prides itself in exceeding customer expectations. The Group conducts its business in a diligent and transparent manner, maintaining the highest standards of integrity, ethics, accountability, and transparency. It is committed to and complies with both the letter and spirit of the Consumer Protection Act (CPA).

The CPA has a significant impact on the relationship between the Group and its customers on the one hand, and between the Group and its suppliers on the other hand. In particular, the CPA affects the Group’s rights and obligations as a retailer of goods and supplier of services and for this reason, the Group uses the CPA to guide its actions in promoting and protecting customers’ interests and rights. As a consequence, in the negotiation of agreements with the Group’s suppliers, the CPA is one of the foremost considerations receiving attention. The Group has in previous years renegotiated the trading terms with its suppliers (and manufacturers) to ensure full compliance with this legislation. The Group’s standardised agreements ensure that in instances where a supplier provides goods or services that are in any way substandard, such a supplier is held accountable to the Group and in turn to its customers. The Group’s customer-facing employees receive ongoing training to enhance their understanding of the regulatory obligations as codified in the CPA and to ensure compliance and the alignment of business practices, processes, policies and agreements to the CPA regulatory requirements, with a specific focus on customer-complaints handling procedures.

In this regard, and based on the fact that the Group regards customer service as a right (as opposed to a privilege) in line with section 54 of the CPA, the current customer-complaints handling framework is being revamped to improve efficiencies.

The Group appointed a Customer Services Executive who oversees the complaints and post-transaction customer service and support functions on an enterprise-wide basis. The Group’s complaints procedures and databases enable a full analysis of the current processes and procedures being followed in each chain in order to improve visibility, efficiencies and a customer-centric solution that will significantly improve the levels of service provided to our customers, translating into both the reduction of the number of complaints per branch and the turnaround time for resolving customer product queries. The aim is to fulfil the CPA requirement, i.e. to have zero outstanding claims in excess of 30 days. However, as can be expected from a business that has a large customer base, several queries regarding products, health and safety, information disclosure, sales processes, interest rates, charges, fees and Credit Bureau listings procedures have been escalated to the National Credit Regulator, the National Consumer Commission, the Credit Information Ombud, the Ombud for Long-term Insurance, the Ombud for Short-term Insurance, the Ombud for Financial Services Providers, as well as to the Department of Trade and Industry’s Consumer Investigations Directorate. However, each matter has been resolved amicably and in the best joint interest of the Group and the customer in support of JD’s Art of Service culture.

Customer service – Art of ServiceIn 2013, the focus remained on maintaining the commitment that has been created around “making a difference through service”. The 2013 Ask Afrika Orange Index® results are pending and are awaited with great anticipation as the self-imposed Art of Service culture during 2013 was to once again improve the Group’s service levels to compete with players outside of the furniture retail industry.

Service is everyone’s business at JD Group. It is expected of, and there is a commitment from, every employee to be fixated on making the customers’ shopping experience unforgettable so as to entice them to return to their JD store of choice for more similar Art of Service experiences.

other service interventionsThe various chains in the Group conduct individual mystery shopping initiatives on an ad hoc basis to establish service levels in specific branches, to improve service delivery where needed and to compare merchandise ranging and prices with competitors. Overall, these activities are aimed at improving our customers’ shopping experience.

The Group strives to communicate with its customers in such a manner that each customer feels that he or she is the only customer. This approach is core to the Art of Service and the ultimate objective is to differentiate the Group from its competitors through the delivery of excellent service to customers.

The first step towards improved communication with customers was implemented by the Group’s contact centre in Randburg. Each customer who enters into a credit transaction with the Group receives a “Welcome” follow-up call once the customer has received delivery of the purchased goods. The call achieves a variety of purposes, including establishing service satisfaction, understanding of financial responsibilities linked to the credit agreement and to identify early alerts of any dissatisfaction. All feedback is channelled to the relevant service centre for attention. To protect the rights of both the customer and the Group, all calls from the contact centres are recorded and assessed by a specialist team of quality assurers.

In addition, a host of other channels are being utilised across the Group to communicate with customers. General business communication is conducted via telephone and electronic channels from head office and regional or local chain offices, as well as face-to-face engagements between customers and employees at store level, where credit agreements and purchase documentation are concluded.


A special focus has been placed of late on optimising the supply chain service in respect of delivery of goods. Marketing communication channels focus mainly on monthly catalogues, event-driven pamphlets and in-store display material. Existing customers are also engaged via their account statements, Club magazines and with the use of mobile channels.

For purposes of arrear collections, the Group makes use of statement messages, follow-up letters and personal visits by collectors to facilitate rehabilitation. Customers with access to the Internet can also interact with the respective chains’ websites where a multitude of information is hosted, including merchandise ranges, store locators and customer care contact numbers for facilitating the lodgement of customer enquiries. Stakeholders can also gain access to important information about the Group by accessing its website at www.jdg.co.za.

suppliers and business partners


Product and market development

optimising retail efficiency to maximise margins


Suppliers’ B-BBEE compliance is informally monitored on an ongoing basis. The Group’s policy to support locally-based suppliers is evidenced by the fact that 89% (2012: 95%) of its approved furniture suppliers are locally-based, thereby promoting a positive indirect impact on the economy by supporting the growth, development and wealth creation of locally-based businesses. While 89% of furniture-related products are produced locally, only 34% of electronics and appliances are procured locally due to manufacturers predominantly being based in countries other than South Africa. In certain instances these manufacturers have established operations in South Africa, contributing to the Group’s local procurement.

In respect of services such as safety and security, cleaning and common-area infrastructure maintenance, the Group makes use of external contractors that source their labour from South African citizens, with a focus on previously disadvantaged individuals (PDIs). During new-store developments and other construction works, labour is largely sourced and used from the local geographical area. Where possible, national suppliers of store development material, such as carpets, tiles and office furniture, make use of locally based business to make deliveries.

The Group prides itself on the integrated nature with which it engages its supplier network, thereby ensuring that quality standards are maintained. Not only has the Group strengthened its relationships with its suppliers of merchandise and services, it also assists them in becoming more concerned corporate citizens. Many of the Group’s suppliers have already adopted sustainability strategies and are limiting their impact on the environment through environment-friendly approaches in their production processes and product provisioning practices. In this regard the Group screens suppliers and contractors, confirming their use of environmentally-friendly raw materials, recycling of raw materials for the manufacture of end-products such as carpets, tiles, office furniture, paint, etc, as well as their waste disposal practices. During its ongoing engagements with suppliers and contractors, the Group’s stance against all forms of discrimination is conveyed, as well as its expectation that human rights should be upheld. While suppliers and contractors have not been subjected to formal human rights screening, the Group informally inspects the facilities of its manufacturers and suppliers from time to time to ensure that appropriate health and safety practices and no unwarranted labour practices, such as child labour, exist. To the best of the Group’s knowledge and belief, its suppliers and contractors do not use forced labour of any kind and employ only workers who meet the minimum legal age requirement. The Group furthermore ensures that the appointment of suppliers and contractors is in accordance with legislation and encourages non-racial, crime-free working environments.

The Group is committed to fair trade with its suppliers via service level agreements that contain fair terms and conditions. As a consequence the Group is able to provide more affordable and quality merchandise to customers by virtue of its strong relationships with its suppliers. In order to fulfil its obligations under the Consumer Protection Act’s product return regime, the Group has negotiated regulatory-compliant product guarantees and return terms with its suppliers and manufacturers. While the Group has in selected instances acquired the right to sole distribution of certain quality branded products within South Africa, it is not involved in any price fixing or other market practices that could be construed as being in breach of the Competition Act or any related legislation.

FURNITURE (%)

Local 89%

Import 11%

ELECTRONICS AND APPLIANCES (%)

Local 34%

Import 66%


Government and regulators


transformation – refer page 17


The JD Group, as a responsible corporate citizen of South Africa and a JSE listed company, recognises its accountability to all its stakeholders under the legal and regulatory requirements applicable to its business and is committed to high standards of integrity, business ethics and regulatory compliance in the conduct and operations of its business.

We are totally committed to serving customers in a diligent and transparent manner, and we take remedial action and address any reported incidents and customer complaints or non-adherence to the letter and spirit of the law. To this end, given our commitment to enhance customer-complaints handling, a business decision was made that the Group Legal and Compliance department should act as a channel of communication to receive regulatory compliance issues from the National Consumer Commission and the Consumer Goods and Services Ombud (CGSO), for investigation and resolution. This will ensure streamlining and prioritisation of customer-complaints handling. Group Legal will then send the complaints to the relevant Chief Executive, who bears the onus to resolve and finalise the customer complaints as the custodian of the brand. This process helps Group Legal monitor progress of the complaints, whilst constantly updating the CGSO and the customers of progress.

Compliance risk forms an integral part of the Group’s combined assurance and risk management process. The Group Compliance committee is responsible for overseeing and reviewing the effectiveness of the compliance and legal framework across the Group and providing assurance to the Board that effective controls exist and are maintained around compliance with laws, rules, codes and standards, and that observance of the aforementioned are managed via the Group’s Employee Code of Conduct and other ethics-related policies and procedures. Furthermore, divisional/subsidiary Compliance and Risk committees have been set up to streamline the ERM process in an endeavour to gain an in-depth understanding of the risk and regulatory compliance matters pertaining to that division/subsidiary and deal with such accordingly prior to the escalation to the Internal Risk Management and Compliance committee, and the Group Compliance committee. The mandate of the divisional Compliance committees will be in line with the Group Compliance committee.

The Group Compliance committee considers the adequacy of the processes and systems that have been implemented to monitor and ensure compliance with applicable legislation and regulations in a proactive manner. At its meetings, it considers compliance, legal and risk issues reported to it under the escalation policy and reviews compliance issues raised by any regulatory body, as well as any reputational issues. It reviews breaches (non-compliance or transgressions) in respect of regulatory obligations and considers key compliance failures and management’s remedial actions thereto. It also monitors and assesses the role and effectiveness of the Group’s compliance at subsidiary, divisional and departmental level.

The committee ensures that there is adequate integration of regulatory requirements into business processes and monitors any litigation actions in which the Group may be involved. It ensures that appropriate education, training, awareness and communication takes place to enhance the concept of compliance in the Group. In this regard, the topic of regulatory compliance features as a regular item on the agendas of both the Group Exco and the Board.

A number of subject-matter experts among staff have each taken accountability for legal compliance in the specific areas of their businesses to ensure that the Group remains fully compliant with all material provisions of applicable laws and regulations.

The Group Compliance committee has enterprise-wide representation and meets on a quarterly basis and through its extensive agenda, analyses the Group’s regulatory universe, the compliance, legal and regulatory obligations and specific risk areas pertaining to regulatory compliance. It also monitors compliance with applicable operational requirements and makes enquiries as to whether the controls provide reasonable assurance that the Group is in compliance with the regulatory universe to which it is subjected.

A formal compliance policy is being maintained and is due for review in the new financial year. Through quarterly reports to this committee and monthly feedback at Group Exco, as well as personal interaction with staff in operations, the Compliance Officer keeps the Internal Risk Management committee, the Board and all executives well-informed of the Group’s compliance status. This process also assists the Company Secretary in carrying out his primary obligation of advising the Board on relevant and applicable legislation impacting the Group. The Group uses customised risk plans in respect of key legislation to assist the organisation in mitigating the risk of legal compliance. A legal dashboard and various related compliance control measures have been implemented through which high-impact legislation is being monitored. During the review period, a number of compliance audits have been carried out at various stores to assurance-test the effectiveness of the Group’s Consumer Protection Act and its National Credit Act compliance.

The Group supports the concept that alternative dispute resolution is an important element of good governance that assists with preserving business relationships through expeditious, efficient and effective mediation. For this reason, the Group has adopted the Institute of Directors’ dispute resolution clauses in its standard agreements for settling internal, and where possible, also external disputes. The Compliance Officer, with such internal or external assistance as may be required, will represent the Group in any alternative dispute resolution process.

The Group participates in various stakeholder forums and in some instances plays a leading role as a catalyst to effect change. Subject-matter experts representing the Group have participated in and driven industry initiatives to the benefit of government, regulators and the retail industry as a whole. In this regard, the CEO of JDG Insurance has, as a member of the Consumer Goods Council of South Africa FAIS Steering Committee, been instrumental in negotiations with the Financial Services Board in order to establish a FAIS compliant situation in the furniture retail industry within the context of the realities of the labour market in South Africa and the various insurance-selling models adopted by participants in the furniture retail industry.


In addition to the Group’s Code of Ethics and various related corporate policies that promote ethical standards, as well as the Board Charter and the terms of reference that have been adopted for each of the Board committees, the Group has adopted the following codes and charters of note:• KingIII• TheNationalDebtMediationAssociation’sCodeofConductforaffiliatedcreditproviders• TheCreditProvidersAssociation’sConstitutionforaffiliatedcreditproviders• TheAdvertisingStandardsCodeofSouthAfrica• TheConsumerGoodsCouncilofSouthAfrica’sCharter• TheSouthernAfricanFraudPreventionService’sCodeofConductforaffiliatedcreditproviders• TheSouthAfricanInsuranceAssociationCodeofConduct• TheAssociationforSavingsandInvestmentSouthAfricaCodeofConduct• BusinessUnitySouthAfricaCharterofEthicalBusinessPracticeforSouthAfrica(CodeofEthics).

industry engagement and membershipThe Group plays a role in shaping industry events through its participation in and membership of industry and professional bodies, of which the following is merely a synopsis: • BusinessUnitySouthAfrica(participatingthroughourCGCSAmembership)• CreditProvidersAssociation• NationalDebtMediationAssociation• ConsumerGroupCouncilofSouthAfrica• MemberoftheBraamfonteinImprovementDistrictForum• TheUnileverInstituteofStrategicMarketing• TheComplianceInstituteofSouthAfrica• TheInstituteofInternalAuditorsofSouthAfrica• TheInstituteofDirectorsinSouthAfrica• WholesaleandRetailSectorEducationandTrainingAuthority• ConsumerGoodsCouncilofSouthAfrica• TheAssociationforSavingsandInvestmentsSouthAfrica• TheSouthAfricanInsuranceAssociation• TheOmbudsforFAIS,forLong-termInsuranceandforShort-termInsurance,forCreditInformationandforFinancial

Services Providers• TheInstituteofFuturesResearchandtheBureauofEconomicResearchatStellenboschUniversity• TheBureauofMarketResearchatUnisa• Econometrix• TheSouthAfricanInstituteofRaceRelations• TheLawSocietyoftheNorthernProvinces• TheJohannesburgBarAssociation• SAICA.

Community and society at large, including transformation and environment

Community and society at large



Corporate social interaction and initiatives

The Group’s corporate social investment (CSI) strategy is managed within the dimensions of socio-economic development and enterprise development projects, whereby we make direct donations and run “sweat equity” initiatives in the communities within which we conduct business. Subsidiaries and chains across the Group are individually accountable and responsible for engaging, building stakeholder relationships and supporting their local communities. However, for optimisation purposes, these engagements are planned and financed centrally at Group level. An amount of R10 million (2012: R12 million) was allocated for socio-economic development activities in 2013 and a further R3 million for enterprise development initiatives (2012: R3 million).

The Group has inculcated a need among its employees to closely associate themselves with the upliftment of communities and in this regard has experienced an unfaltering increase in community involvement over the years.

The spend across the various categories of the Group’s socio-economic development initiatives are reflected in the following table:

Category 2013 2012

Community development 3 217 524 2 580 951Skills upliftment and education 3 624 967 2 532 333Wildlife conservation 1 594 885 4 468 500Arts and culture 260 000 260 000Health (including disability) and HIV/Aids 1 189 430 1 473 224Sports development 143 887 70 000Other 263 626 589 067

total 10 294 319 11 974 075


enterprise development projects

The Group is involved in a number of enterprise development projects, of which the Techno-Agricultural Innovation for Poverty Alleviation (TIPA) is the most significant. The Group has been involved in the project for six years and has made significant financial contributions during this time. This agricultural initiative aims to alleviate poverty, create employment and empower communities. It revolves around the concept of the African Garden Market, part of the Food Security for Africa initiative presented in 2002 at the World Summit for Sustainable Development. The Group works in conjunction with Isaac Isaac (a farming consultant from Israel) on the projects; he trains farmers on best farming methods, running and managing a farm, how to use equipment and also helps them with the distribution of their produce. Financial and other assistance is provided to communities which enables them to start their farming projects and successfully run their farms. At present, projects are run in Diepsloot, Hazyview, Kokstad, King William’s Town, Durban and at Bethanie near Brits in the North West province.

The Group has also been offering free operating space (which includes free use of water and electricity) to black-owned car wash companies at some of its Unitrans Automotive dealerships, and the initiative has been going on for some years now. During the period the Group also contributed towards the growth and sustainability of Kings Travel and Mina Mina Trading & Projects.

direct donations

The Group’s direct donations policy is focused on providing financial assistance to alleviate poverty, combat crime and to enhance community development, education, health, arts and culture and is strongly inclined towards disadvantaged children and the youth. The Group has fostered strong relationships and bonds with a number of community organisations with which it is proud to be associated. During the review period, the key organisations benefited include Ekhaya lo Musa, the Midtzvah School, St Enda’s School, Future of the African Daughter, Africa Tikkun, The Open Initiative and the Africa Community Trust, as discussed in more detail in the Executive Chairman’s review included in the Integrated report.

transformation


transformation in south africa

transformation from an employee perspective

The Group supports the empowerment of previously disadvantaged individuals (PDIs) and is committed to its own transformation in order to meet the country’s need to transform the economy. Its transformation policy and practices are aligned with relevant legislation, codes of good practice and general best business practices. Richard Chauke, an executive director on the Board, oversees the Group’s programme of transformation, which focuses on addressing the inequalities of the past in respect of race, age, disability and gender in the workplace.

Almost 83% (2012: 82%) of the total positions in the Group are occupied by PDIs. Ongoing monitoring of recruitment and appointments takes place to ensure that the transformation momentum is maintained, with a dedicated focus on senior management levels. Statistics are reported to Richard Chauke, David Sussman and the Exco on a monthly basis and quarterly to the Board.

transformation from a broad-based black economic empowerment (b-bbee) perspective

As is evidenced by the Scorecard in the table provided on the next page, the Group has made consistent progress over the past three reporting periods in improving its B-BBEE contributor level status. Management will continue monitoring developments in the proposed changes in the qualification criteria.

The Group has improved from a level 5 to a level 4 B-BBEE contributor during 2013.

The Group has not entered into a B-BBEE ownership transaction as yet and the current economic situation is not conducive to such a transaction. Consequently, the current “Ownership” score is derived from indirect shareholding, using the flow-through principle as contained in the B-BBEE Codes.

In anticipation of the more onerous transformation requirements that are imminent (including an elevated scoring-activation threshold of 40%), the Group’s existing Transformation Plan was reviewed and enhanced.

The Group has a targeted procurement strategy and supports procurement of material from B-BBEE and SMME suppliers and enterprises and progressively increases its procurement from companies that have made significant progress in the area of B-BBEE. Suppliers’ compliance to B-BBEE principles is informally monitored on an ongoing basis and suppliers are encouraged and, where possible, assisted in becoming B-BBEE compliant or to increase their status. (See also Suppliers and business partners below.) In 2013 the Social and Ethics committee set an appropriate B-BBEE rating as a prerequisite for procurement.

Two PDI females currently serve on the Board, while four PDI males also hold directorships. The Group experienced resignations at Board level during the review period, and as a consequence the total PDI representation as a percentage of the aggregate improved to 40% (2012: 35%). The Scorecard on the next page has been verified by Aqrate for the 30 June 2013 financial year and reflects the Group’s progress in the area of B-BBEE.


GrOu

PGroup b-bbee scorecard

2010/2011 2011/2012 2012/2013 2013/2014

ownership 11,47 17,48 20,26 17,48

Management 4,46 4,00 5,71 4,00

employment equity

3,87 3,49 3,62 5,60

skills development

3,88 2,09 10,16 7,00

Procurement 12,99 13,61 11,85 17,00

enterprise development

15,00 15,00 15,00 15,00

socio-economic development

4,02 5,00 5,00 5,00

55,69 Level 5

60,67 Level 5

71,60 Level 5

71,08 Level 4

Jd group’s B- BBee scorecard performance

Qualification level

Customer recognition

level

100+ = 1 135%

85+ = 2 125%

75+ = 3 110%

65+ = 4 100%

55+ = 5 80%

45+ = 6 60%

40+ = 7 50%

30+ = 8 10%

30- = 0 0%


environment



The Group’s operations, being largely of a retail and financial services nature, have been classified as having an overall medium environmental impact. Nonetheless, the Group not only continuously evaluates the environmental impact of its operations, but also takes proactive steps to minimise this tempered impact on the environment. It remains committed to being a responsible corporate citizen in its interconnected environment with society and nature and supports a long-term view, i.e. current business decisions should not take into consideration only the wishes and needs of the present because this may compromise the available resources of future generations.

Environmental policy

During the 2013 financial year, the Group’s Social and Ethics committee has adopted a formal Environmental Policy that promotes general awareness of environmental issues and the maintenance of proper standards of environmental management across all Group operations. In general, the Policy advocates the development, implementation and improvement of business practices on an enterprise-wide basis in order to minimise the Group’s impact on the environment to the benefit of both current and future stakeholders.

As a priority, the Group is committed to reducing its use of water and energy, its emissions to air and its effluent and other waste production. In espousing the objectives of the Policy, the Group will, among others:• Complywithallenvironmentallegislation,regulations,standardsandcodesofpracticeapplicabletoitsoperations• Identifyallsignificantenvironmentalaspectsrelevanttoitsoperationsanddevelopandimplementappropriatestrategies

to manage them •HeightenenvironmentalawarenessacrosstheGroupthroughcommunication,training,consultationandinteraction•Wherepractical,setobjectivesandtargetsforreducingitsimpactsontheenvironment•Measureandreportitscompliancewithapplicablelegislationandregulationsaswellasitsperformanceagainstobjectives

and targets • Monitornewdevelopmentsinenvironmentalmanagementandtechnologyrelevanttoitsoperations•Adoptenvironmentalmanagementasakeystrategicobjective.

In furtherance of the Policy tenets, the key touch points of environmental management have already been incorporated into the Group’s strategy as a biophysical environment strategic business goal. The business case for environmental management goes far beyond merely being a responsible corporate citizen. It is a key contributor to any organisation’s reputational “licence to operate” and can present significant financial benefits in the form of cost savings and enhanced efficiencies. The Group is focused on the following environmental areas:

Climate change Climate change is among others the result of high emissions of carbon dioxide and has the potential to, directly or indirectly, impact the environment in which the Group operates. Carbon dioxide is released naturally through the carbon cycle and as a result of burning fossil fuel. This, coupled with the exorbitant current and future increases in energy tariffs, has driven the Group’s efforts to reduce its dependency on fossil fuel by minimising its use of electricity and fuel.

Carbon footprintThe Group conducted another carbon footprint assessment during the year under review which was again done using the services of independent external advisors using limited available data. This year’s assessment proved to be challenging as a result of the restructuring of the business, compounded by the acquisitions of Hardware Warehouse and the Reeds Motor Group. This resulted in the current year’s footprint assessment not being comparable to that of the previous period. Management understands that the recording and reporting of this data is still in its infancy and will take some time to mature. The learnings from the current year’s assessment will benefit the Group with its future carbon footprint assessments in terms of data accuracy and processes surrounding recording and reporting.

The key objectives of the assessment remain: • Tobeabletoreportacarbonfootprint,therebyunderstandingtheGroup’scurrentstatusandimpactbasedonavailabledata,

with a view to identifying areas of greatest impact and potential reduction opportunities• Tounderstandhowoperationalefficienciescanbeimplementedtoreduceoperationalcosts• Toincreaseawarenessofclimatechangeamongourstakeholders• Toidentifyanyshortcomingsinavailabledatawiththeintentionofimprovingthequalitythereofforfuturebenchmarking,

emission-reduction monitoring, reporting and disclosure to initiatives such as the Carbon Disclosure Project• ToreporttheGroup’scarbonfootprinttoSteinhoffforinclusionintheirscope.

Findings of the 2013 assessment, based again on limited and potentially incomplete data, for the period 1 July 2012 to 30 June 2013 include:

The Group’s activities for Scope 1 and 2 accounted for a total of 116 307 tonnes of carbon dioxide equivalent (CO2e):

scope2013

tonnes Co2e

1 Emission sources (fossil fuels) 33 977

2 Emission sources (energy sources) 82 330

– Other direct non-Kyoto emissions 1 298


• Themostsignificantemissionsourceiselectricityandmakesupthevastmajority,i.e.70,01%ofmeasuredemissions• Company-owned/controlledtransportisthesecondlargestcontributortototalmeasuredemissions,i.e.29,80%,representing

Scope 1 emissions• Noindirect,Scope3emissionsweremeasuredinthisassessment• Insomecasesdatawasextrapolatedandassumptionsmade.

electricity consumption interventions

The Group continues to develop and implement the first phase of an Energy Management Programme. In terms of this programme, consumption monitoring and metering systems have been installed in all high-usage areas and new buildings. This initiative provides consumption statistics and trends that will be used to develop and implement further initiatives aimed at reducing the level of consumption. Instances of non-adherence to operational disciplines and incorrect billing by service providers have been identified and addressed. Other energy-efficiency initiatives, forming an integral component of scheduled building refurbishments and renovations, include the following:• Installationoftimersand/oroccupancylight-switchingsensors• Disconnectionofgeyserssupplyinghotwatertohandwashbasinsinstoresandoffices• Re-evaluationandredesignofexistingstandardisedelectricalwiringinstoresandoffices• Retro-fittingofenergy-efficientlightfittingssuchasLEDlightsorfibre-opticlighting.

As reported in the previous period, eco-friendly building and design initiatives have been incorporated into all new exclusively-owned or tenanted buildings and entail the following principles: • Optimisationofinteriorspaceinaccordancewiththetheoryof“smallerisbetter”• Energyefficiencythroughtheuseofnaturallightandheat,naturalventilation,properuseofrenewableenergy,etc• Simplifiedarchitecturaldesignbyapplyingbasicbuildinggeometrysuchasstandardisedceilingheights,aswellassound

ergonomic principles facilitating people movement, etc • Designingfordurability,ensuringcongruenceofaffordability,durabilityandminimalenvironmentalimpact• Incorporatingpotentiallong-termeco-friendlymeasuresintothedesignofbuildings,evenifthesemeasuresmaynotbe

activated in the immediate future such as storm- and rainwater harvesting, among others.

Some of these initiatives have also been incorporated into the construction of the Group’s centralised warehouses under Project Sebenzile, and include energy-saving lights and the use of natural light, recycling of roof run-off water by an improved roof design, natural ventilation, incorporating indigenous plants in the landscaping design, as well as the use of eco-friendly products in the construction of buildings.

Gas emissions, fuel consumption and other logistics-related interventions

The Group has implemented a number of initiatives to reduce the number of kilometres driven by the Group’s fleet, in so doing, reducing the carbon footprint in terms of emissions and maintenance cost on vehicles. The centralisation of distribution resulted in a significant decrease in the size of the Group’s delivery vehicle fleet. The following initiatives are also performing well: • Push-to-talktechnologyi.e.communicationbetweendeliverydriversanddispatchcentres.Thissystemhasbeentriangulated

with the route planning and vehicle-tracking systems to reduce the distances travelled by delivery vehicles and the occurrence of failed deliveries. In addition, the use of geo-coding has been implemented to convert delivery addresses into geographic coordinates. This enables effective map positioning, supporting the delivery process (and customer service) and reducing fuel consumption and carbon emissions

• TheGroupnowmaintainsfuelsupplyintanksatitscentraliseddistributioncentres,providingenhancedcontroloverthequality of fuel used by its fleet vehicles and securing supply in the event of strike action.

waste and recycling

The Group continued its efforts during the period to recycle materials where possible. In terms of a Group policy, all used materials that are not earmarked for recycling are disposed of in an environmental-friendly manner and usage of municipal disposal sites is compulsory. Suppliers are encouraged to use environmental-friendly raw materials in their manufacturing processes.

Incredible Connection, in co-operation with its customers and other members of the general public, recycled 96 (2012: 79) tonnes of electronic waste (e-waste) during the year. The recycling is done in partnership with an external electronic recycling specialist who has a 20-year track record of environmentally responsible e-waste recycling. Well-documented and reliable processes, structured according to International Standards 9001, 14001 and Occupational Health and Safety Act 18001, are used in the recycling process. The recycling processes are benchmarked internationally to ensure that they are aligned with the latest sustainable technological innovation and processes. The recycler is also ISO 14001 compliant and a certified B-BBEE level 1 contributor.


responsible printing

As print production processes impact on natural resources, the Group has contracted with print partners who provide the assurance that marketing brochures are delivered with the least impact on the environment without any compromise on the quality of printing. These companies have been awarded the Forestry Stewardship Council (FSC) Chain of Custody (CoC) certification, which demands that they adhere to strict paper procurement policies. In addition, the following processes are managed responsibly: eliminating emissions, recycling, reduction in carbon footprint, decreasing waste and reducing chemical usage, such as alcohol, to prevent toxicity and fire/safety hazards.

water

Since water is a scarce resource in South Africa, the Group has issued a number of internal directives to its stores regarding water usage. Push-down demand taps have been installed in all shops that have been renovated during the past three years. This not only minimised water wastage, but as a secondary benefit, it has also reduced the incidence of water damage (since taps can no longer be left running inadvertently). Separate water-level consumption metering has also been introduced in all retail operations. Efficient storm-water management, rainwater harvesting and grey-water systems have been incorporated into newly Group-developed and exclusively-owned or tenanted distribution centres and contact centre office buildings. The Group relies totally on municipal water supply and does not withdraw any water from the environment.

indirect economic impacts

The Group engages in activities in the ordinary course of business that have an indirect impact on its stakeholders, which are typically not measured in monetary terms. An example of this would include the sourcing of inventory from suppliers, which in turn creates jobs and opportunities for the staff of such suppliers.

General

Management is not aware of any Group-owned properties or leased properties that are in or adjacent to protected areas. The Group operations did not have any material negative impact on the biodiversity environment and the Group is also not aware of any negative impact on the environment by its material suppliers.

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Sustainability Review