Strategy: 102-14 to 102-15

  • 102-14: Statement from senior decision-maker

    The reporting organization shall report the following information:
    a. A statement from the most senior decision-maker of the organization (such as CEO, chair, or equivalent senior position) about the relevance of sustainability to the organization and its strategy for addressing sustainability.
    Integrated Report:
    Annual General Meeting:

    Chief executive overview

    This year marks 116 years of contribution to the communities and societies we belong to. It is a proud history that we are committed to upholding and reflects the sustainability of the group and its approach to stakeholder value creation.

    As Barloworld, our Purpose is: Inspiring a world of difference, enabling growth and progress in society.

    In order to fulfil this, we strive to carefully balance the six capitals we are responsible to manage: Intellectual; Financial; Manufactured; Social/Relationship; Human; and Natural.

    We understand that we need to make trade-offs between these capitals during our strategic journey, and that different phases will require different trade-offs to ensure sustainable value creation for our stakeholders.

    We have defined ambitions for each of the capitals, and where relevant, we have set aspirational targets to focus attention and underscore our commitment to them.

    Our strategy seeks to balance our long-term growth ambitions with medium-term returns for our stakeholders, underpinned by our responsible citizenship programme.

    In the short-to medium-term we are focusing on our Financial capital, addressing three critical levers:

    1. Fix and optimise our existing portfolio
    2. Implement a more active shareholder operating model
    3. Add high growth businesses to our portfolio.

    While focusing on our Financial capital, we will be balancing the interests of our stakeholders as well as considering and managing the impacts on our other capitals.

    Our Code of Ethics and Worldwide Code of Conduct are central to our responsible citizenship programme and inform the manner in which we pursue our strategic ambitions and address these critical levers. Protect the environment is in our Code of Ethics, and Sustainability is one of our five core Values in our Worldwide Code of Conduct.

    By actively engaging our stakeholders we will optimally manage our capitals, make the wisest trade-offs we can, and balance their interests to ensure sustainable value creation.

    The health and safety of others and ourselves is our foremost consideration. We put safety first in our work environment and promote safe practices throughout our value chain. Sadly we had two work-related fatalities during our FY2018 which have heightened our awareness on safety at work.

    Our responsible citizenship programme includes climate change, environmental considerations and managing our Natural capital. We are mindful of the environmental consequences of our activities, and committed to conducting our operations in an environmentally responsible manner. We also offer innovative customer solutions that enable our customers to achieve their own objectives including minimising environmental impacts.

    We consider our responsibilities in our value chain and have implemented a number of initiatives to assess and limit any potential risks emanating through our supply chain.

    As a large, multi-national organisation, our purchasing power has the potential to create meaningful change in the communities in which we operate. By being mindful of where we spend our money, we can deliver on our localisation and supplier diversity objectives.

    Our supplier diversity and localisation initiatives create legitimacy and credibility in the eyes of our stakeholders. This enhances our reputation while creating commercial opportunities for both our suppliers and ourselves.

    I believe through our strategic approach, the purposeful stewardship of our six capitals and balancing our stakeholders’ interests we will achieve ongoing creation of shared value for our stakeholders.

    I am determined that by following our approach and fulfilling our ambitions, we will make a world of difference to the communities where we operate, and they will be better-off having Barloworld operations than they would be without us.

    Dominic Sewela
    Chief Executive

  • 102-15: Key impacts, risks, and opportunities

    The reporting organization shall report the following information:
    a. A description of key impacts, risks, and opportunities.
    Integrated Report:
    Consolidated Annual Financial Statements:

    Section 1

    Key impacts

    Barloworld's ongoing creation of shared value for stakeholders encompasses delivering top quartile shareholder returns; driving profitable growth; instilling a high-performance culture underpinned by our responsible citizenship programme. Through this approach, economic, environmental, and social issues are managed in an integrated manner, supported by a strong governance environment and underpinned by the group's Worldwide Code of Conduct and Code of Ethics. The group considers these issues in the context of its strategic plan, the six capitals; Intellectual; Financial; Manufactured; Social/Relationship; Human; and Natural as well as the associated risks and resulting opportunities. It considers and manages them and any trade-offs are made in a balanced and integrated manner.

    Key impacts and areas of value creation are economic, environmental and social as set out below.

    Economic

    Stakeholder value added

    The group understands the direct and indirect economic value it generates for its stakeholders through its commercial activities and is committed to long term value creation. Medium term goals in this regard are to:

    1. Fix and optimise our existing portfolio
    2. Implement a more active shareholder operating model
    3. Add high growth businesses to our portfolio

    The group's Value added statement reflects direct economic value created for stakeholders. Indirect value creation includes employee spending, providing products and services, enhancing the image and reputation of areas in which we operate, and job creation that reduces demand on the fiscus and enables resources to be redirected into other areas. In addition, the group's enterprise development initiatives, channeled through Barloworld Siyakhula, support the creation of small and medium enterprises and includes our supplier development initiatives which continued during the period.

    Add high growth businesses to our portfolio.

    The group also has corporate social investment programmes at group and divisional levels through which public benefit and socio-economic development investments are made.

    Also see 2018 Integrated Report: Value added statement

    Environmental

    Customer Solutions

    We understand the environmental impact of our activities. These arise from our internal operations as well as from our products, services and customer solutions.

    Material areas of impact are the consumption of non-renewable fossil-fuels and associated greenhouse gas emissions. Other material issues are waste and water consumption which is also an area of focus although the group's activities are not water intensive, and water is used, filtered and discharged in the areas of operation and not transported to other destinations. Supported by our principals, we are committed to providing globally competitive products and services that enable customers to achieve their sustainability objectives, which seek to minimise non-renewable energy consumption and greenhouse gas emissions, and to gain competitive advantage.

    We offer skills development programmes to our customers that assist them in the safe and sustainable operation of vehicles, plant and equipment which we provide to them. Barloworld Power’s solar photovoltaic (PV) offering is an example of products and services that support the group’s internal energy imperatives and assists customers to achieve their own sustainability ambitions and of our adaptation and mitigation strategies aimed at transitioning to lower carbon economies.

    Energy efficiency and Greenhouse Gas (GHG) emissions
    Measurements have been put in place and an aspirational group target set to underscore our commitment to improving efficiencies in fuel and grid electricity consumption and resulting GHG emissions.
    We have set an aspirational group target of a 10% efficiency improvement in our non-renewable energy and GHG emissions (scope 1 and 2) by the end of our 2020 financial year, off a 2015 baseline against a business as usual scenario that again tracks revenue as a proxy for business activity.

    We have also set an aspirational group target for renewable energy consumption of 2 000 MWh or more per annum by the end of our 2020 financial year.

    Such targets support our adaptation and mitigation strategies aimed at transitioning to lower carbon economies.

    These targets play a major role in focusing our efforts on energy efficiency with anticipated benefits for the organisation over the five year target period. Innovative products and services are being developed to assist the group and its customers in their quest for environmental sustainability. Divisions utilise the skills and resources within their respective operations to assist in identifying and maximising efficiency opportunities internally within the group. Our stance with regard to responsible energy consumption is incorporated in our Climate ChangeEnvironmental and Energy Efficiency group policy documents as well as in our Worldwide Code of Conduct.

    Water
    We recognise that water is a scarce resource and have implemented conservation measures that include rain water harvesting, recycling and economy of use initiatives. Our approach to responsible water stewardship is reflected in our group Water Use and Management policy document.

    Recognising water stewardship as material aspect within natural capital, we have set an aspirational group target of a 10% efficiency improvement in water withdrawn from municipal supplies by the end of our 2020 financial year, off a 2015 baseline against a business as usual scenario that again tracks revenue as a proxy for business activity.

    Materials and waste
    Materials and waste recycling, responsible waste management, including disposal, extending the useful life of plant and equipment as well as remanufacture and rebuilding components are the key focus of our initiatives in limiting our impact on constrained resources and the environments in which we operate. We are continually evolving our management of waste and benchmarking our reporting processes.

    Waste disposal methods and destinations are reported and monitored. The group is committed to responsible waste disposal and the use of formal waste disposal service providers. We have set an aspirational group target to dispose of 100% solid and liquid waste through formal waste management service providers by the end of our 2020 financial year. Key aspects of responsible waste management is recycling, and our most significant contribution in this regard is the rebuild and remanufacture facilities and activities in Barloworld Equipment’s operations which is focused on extending the life cycle of Caterpillar components.

    Our approach to responsible waste management is reflected in our group Waste Management policy document.

    Biodiversity
    The group recognises its role and responsibilities in this regard although the predominantly urban locations of our operations do not impact directly on protected areas or on fauna, flora or ecosystems considered to be endangered, rare or threatened.

    Social
    Approach
    We appreciate the role, responsibilities and impacts of being a responsible corporate citizen. Our employees are central to our value creation capabilities and we strive to become an employer of choice to attract and retain the talent required to execute our strategies and achieve our goals. We are committed to diversity, empowerment and transformation and believe that our employee profiles should reflect those of the societies in which we operate. Our activities are guided by our Code of Ethics and Worldwide Code of Conduct which underpin how we conduct ourselves both inside the company and with our external stakeholders and ensures respect for human rights in the work environment. We operate in an environment of good corporate governance and commit time and resources to ensure compliance.

    Elements of our approach to our social role include:

    Employees
    One of our three strategic objectives is ‘Instil a high-performance culture’. Our employee value creation approach focuses on safety, health, and skills development, active talent management and fair reward for all employees. We drive transformation to ensure we have a diverse and inclusive workforce that reflects the demographics of the societies in which we operate and harness the collective wisdom of all employees to ensure optimal performance. We can only realise our growth, strategic objectives and future opportunities through our people.

    Human rights
    Our Worldwide Code of Conduct, Code of Ethics and related policies reflect our commitment to upholding human rights, focusing on workplace human rights. Our intention is to do business with significant suppliers, third party service providers and other business partners who share the same level of commitment. Internally our human rights focus centers around respect for the individual, prohibiting unfair discrimination, fair and equitable employment practices, health and safety, individual development, freedom of association and no forced or child labour. These are addressed through our Human Capital approach, elements of our Integrated Employee Value Model (IEVM) and our Code of Ethics and Worldwide Code of Conduct. Assessments throughout the group in terms of our IEVM are ongoing, and our Individual Perception Monitor (IPM) which is scheduled bi-annually directly assesses individual employee’s perspectives across a range of aspects, including work place human rights. External initiatives are in place that review these aspects of relevant Original Equipment Manufacturers (OEMs) and our principals, which is complemented by a Third Party Service Provider and Supplier assessment process. Our Supplier and Service Provider Code of Conduct covers human rights.

    Diversity and inclusion

    Barloworld believes in promoting equal access to employment opportunities – not only as a moral and human rights imperative – but also a pre-condition for achieving sustainable development, economic growth and prosperity in all communities in which we operate. We are fully committed to ensuring effective, extensive transformation within the workplace, and to developing exemplary employment conditions by encouraging a diverse organisational culture.

    Barloworld continues to strive and develop an inclusive and diverse workforce that reflects the demographics of our operational environments.

    Concomitant to our pursuit of diversity, we remain steadfast in creating real value for Barloworld in the various countries in which we operate.

    Our approach to gender and racial diversity is based on the premise that an inclusive and creative culture improves the quality of our business decisions.

    Our values of equality are informed by our Code of Ethics, Worldwide Code of Conduct and other related policies.

    Central tenets of the group’s approach to equality include:

    • Prohibition of unfair discrimination on the grounds of gender, race, religion, disability, age or sexual orientation
    • Proactive pursuit of programmes and initiatives to achieve our equality objectives
    • Complying with legislation in all countries in which it operates
    • Identification and elimination of employment barriers which unfairly discriminate

    The target for all South African operations is to achieve a minimum B-BBEE Level 4 or better in terms of the South African Department of Trade and Industry's (dti’s) revised B-BBEE Codes of Good Practice.

    Employment equity plans and progress reports are submitted to the Department of Labour in South Africa, as well as relevant authorities in some other southern African countries. These plans set out employment targets that address ethnicity, gender and disability and are aligned within South Africa, dti's B-BBEE scorecard, which sets out thresholds to be reached for specified levels of accreditation.

    Our diversity focus is maintained across the group, including non-South African operations. Within our global operations, our emphasis centers on gender equality, localisation and minority representation.

    We would like to reach a point where we no longer view diversity and inclusion as a separate imperative but as a natural extension of the way we conduct ourselves in business.

    Corporate social investment
    Barloworld strives to be responsive to the interests and concerns of the communities in which we do business and the expectations of broader society, in line with our shared value based management philosophy. Through the Barloworld Trust, on behalf of the group, development partnerships are established and investments made in interventions which address the foremost problems in society. Further interventions are made by each division directly into the communities in which they operate. Our programmes focus mainly on education, health and welfare initiatives, and in South Africa aim to empower previously disadvantaged individuals and uplift communities.

    These programmes are complemented by a fund to empower suppliers and develop small and medium enterprises in South Africa.

    Section 2

    Group risks

    Identifying risks and opportunities through a robust and systematic process is central to our strategic planning process. A comprehensive risk management policy, complemented by the Barloworld Limited Risk Management Philosophy is in effect throughout the.

    Enhancing and entrenching a risk awareness culture in the group includes dedicated divisional risk assessment interventions at which internal audit and group risk management services are present. Risk management is incorporated into the group's strategic planning process which ensures risks are identified and appropriately addressed, as well as pursuing the related opportunities. This is underscored by the strategic planning process, which requires that action plans are in place to appropriately address such risks. At a group level, these are reflected in the disclosed risk matrix.

    In line with international best practice, risks are assessed on their probability, severity and the quality of the existing control environment. These measures result in residual risk scores that indicate the relative importance of the risk and facilitate the assessment of progress made in addressing identified risks. Through the Risk and Sustainability committee, the Board determines the levels of risk tolerance for the group and also ensures that risk assessments are performed on a continual basis, by formally reviewing the divisional and group risk registers twice a year. Group risks are disclosed to stakeholders by including a table of the group top risks in its integrated report to stakeholders.

    Risks are detailed, comprehensively assessed and managed through acceptance, transfer, avoidance or reduction response measures. Details are recorded in divisional and group risk registers.

    Initiatives to address identified risks include the development and implementation of business continuity and disaster recovery plans for unscheduled events or occurrences. These plans include information technology and communication solutions as appropriate.

    While this planning is regularly reviewed at executive and board levels, Internal Audit also plays a significant role in reviewing processes, procedures and controls.

    The Risk table reflects the group's top risks as well as management's responses to them.

    Tax and Tax Risk Management 
    The group has a Group Tax Policy and a Group Tax Risk Management policy. In line with UK legislation, the group also has a UK Tax Strategy that is available on the website (https://www.barloworld.com/sustainability/policies-and-disclosures/). Our tax policy provides certainty and support to all the companies in the Group by providing parameters within which tax decisions are to be made, tax compliance to be undertaken and tax positions to be arrived at to ensure an appropriate effective tax rate, the contribution of equitable tax amounts to local governments, full compliance and properly managed tax risks in a timely and cost efficient way whilst complying with tax legislation and regulations in the jurisdictions in which the Group operates. Our tax risk management policy sets a framework for the identification and management of the tax risks associated with all Barloworld’s activities. (See also: Consolidated financial statements – Note 8)

    Climate change risks and opportunities

    Barloworld has identified risks and opportunities associated with climate change and financial implications thereof. These, together with the group's responses to the identified risks and opportunities, are disclosed in its responses to the CDP’s Climate Change and Water responses.  Through its responsible citizenship programme and strategic objectives, including Drive profitable growth, the group considers the significance of such risks and opportunities in its strategic planning process and operational plans.

    Given Barloworld's reliance on motor vehicles, plant and equipment (currently predominantly fossil-fuel based technologies) as a core part of our business, these risks could be significant, potentially contributing to an increased cost base and decreased revenue. There are also opportunities for competitive products and solutions with reduced carbon footprints.

    Barloworld has formalised group risk assessment processes that assess risks and opportunities specifically associated with climate change and water together with the associated financial implications. This process is aligned to the group risk assessment policy, framework and processes. These, together with the group's responses to the identified risks and opportunities, are disclosed in its response to both the 2018 CDP Climate Change Disclosure, and 2018 CDP Water Disclosure. In identifying the environment as a material aspect under natural capital, the group acknowledges the significance of these risks and opportunities and includes them in its strategic planning process.

    Environmental risks are identified and assessed through:

    • A high level risk assessment (HLRA) which takes place twice a year and considers all risk exposures facing the group. HLRAs are held at both divisional and group levels. Material risks and management responses are disclosed in the group’s reported risk matrix.
    • Focused risk assessments are conducted annually to identify and assess both risks and opportunities around climate change and water. Material aspects are disclosed in Barloworld’s 2018 CDP Climate Change Disclosure and 2018 CDP Water Disclosure. These risk assessments are aligned to the HLRA approach and the group’s risk management framework.

    Sensitivity analysis and stress testing
    Our Intrinsic Value Model (IV Model) addresses:

    • Long term shareholder value
    • Short term value creation
    • Value drivers
    • Financial drivers
    • Operational drivers.

    The impact of changes to the various drivers on both the long and short term value of the group is assessed using the model. Such drivers can be influenced by inflation, exchange rates and interest rates. The model enables sensitivity analysis and stress testing on these and other relevant aspects that affect its value drivers. It is central to our strategic planning process, evaluating potential opportunities and assessing related risks in the group. Using our IV Model is part of all potential acquisitions and other corporate restructuring evaluations.

    Risk culture
    Barloworld promotes and enhances an effective risk culture through a number of initiatives which institutionalise risk management throughout the group. These include:

    • A corporate risk management philosophy which includes the role of all employees in mitigating the group’s risks. The risk management philosophy is signed by the Chief Executive, communicated and displayed widely in the group
    • The Risk and Sustainability committee which is a subcommittee of the board which meets quarterly
    • Quarterly divisional risk committee meetings
    • An entrenched risk review process and procedure which requires that risk assessments are performed on a continual basis by formally reviewing the divisional and group risk registers twice a year
    • A detailed and standard risk evaluation matrix which is completed as part of the regular risk assessments
    • A group executive responsible for risk who is a member of the group executive committee
    • Extensive internal communication programmes, which include health and safety
    • Risk, including health and safety being regular agenda items on executive and management meetings
    • Completion of the CDP Water and Climate change responses that include related risks
    • External reporting of risks in the group’s annual integrated reporting
    • Progress on the group’s risk management process is reviewed annually by internal audit and their report tabled at the Risk and Sustainability committee

    Strategy, opportunities and key performance indicators (KPIs) – These aspects are covered in the Barloworld 2018 Integrated Report and related disclosures.

    Other aspects include: Sustainable development
    We enhance our competitiveness and legitimacy by focusing on  sustainable development and ensuring long term value creation for all stakeholders by responsible business conduct, respected corporate citizenship, developing products and services to capitalise on emerging sustainable business opportunities aligned to core businesses and realising cost savings through efficiency initiatives and other sustainable business practices. We strive to enhance Barloworld's reputation through sustainable development. It is also an important component of our Integrated Employee Value Model, developed to ensure we attract and retain required skills to deliver our strategic objectives.

    For progress see section: Environmental stewardship in the Barloworld 2018 Integrated report.