Strategy & analysis 1.1 - 1.2

  • 1.1 Statement from the most senior decision-maker of the organisation.

    Integrated Report 2014:

    CE overview

    Barloworld is 112 years old which underscores our belief that a sustainable organisation is created through integrated and coordinated activities addressing economic, environmental and social aspects.

    The group's Value Based Management approach entrenches long-term value creation, highlights the interdependent nature of stakeholder interests and requires inclusive management and reporting. Engaging with stakeholders enables us to identify their needs, interests and what constitutes value for them. This distils, in part, the material issues for the group and directs group focus. Barloworld actively engages its stakeholders across the group and has assigned responsibility for coordinating and reporting stakeholder activities to a senior executive. A group stakeholder policy codifies the group's approach.

    Barloworld continues to support the UN Global Compact and its 10 Principles which align with our perspective of responsible corporate citizenship.

    Robust strategic planning and risk-identification processes highlight areas for attention which are incorporated into management activities. These also identify strategic opportunities which are pursued. The group has six strategic focus areas. These include Sustainable Development, Financial Returns and Profitable Growth. We have focussed on all these aspects in the year.

    Climate change and environmental considerations remain central components of the group's ethos of responsible corporate citizenship. Mindful of the environmental consequences of our activities, the group is committed to conducting its operations in an environmentally responsible manner and offering integrated customer solutions that enable our customers to achieve their own objectives including minimising environmental impacts.

    The group continues to focus on reducing its consumption of natural resources, particularly energy generated from fossil fuels, water, and reducing greenhouse gas emissions. This includes a focus on improving non-renewable energy and GHG emissions (scope 1 and 2) efficiency and setting an aspirational group target in this regard.

    The majority of our operations have performed ahead of our aspirational group target of a 12% efficiency improvement in non-renewable energy consumption and greenhouse gas emissions (scope 1 and 2) set for the end of this financial year off a 2009 baseline. However, our overall aspirational group target was not achieved due mainly to a number of investments made in logistics road transportation business which have higher energy and emissions intensities compared to our other businesses. Nonetheless these targets played a major role in focussing our efforts on energy efficiency with significant benefits for the organisation.

    In order to maintain this momentum, we have set another aspirational group target of a 2% efficiency improvement for our non-renewable energy consumption and related greenhouse gas emissions (scope 1 and 2) for end of our 2015 financial year off a 2014 baseline year against a business as usual scenario that again tracks revenue as a proxy for business activity.

    We will continue to monitor progress and report against our targets which will be reviewed at the end of the target period balancing our strategic imperatives, environmental objectives and commercial realities. During the period we continued with our water recycling and harvesting initiatives which are designed to minimise consumption, save costs and enhance operational resilience.

    We are in the process of developing our 2020 strategic framework which will be communicated to our top leadership at our Global Leaders Conference in March next year and will inform our approach for the 2016 to 2020 period. While not finalised, the draft framework builds on central aspects of our current approach, intends to refine our approach to sustainable value creation for our stakeholders and seeks to establish credible key performance indicators for progress assessment and reporting. Our Value Based Management approach and organisational sustainability remain central tenents of our strategy which during the period was underscored by our commitment to:

    Supporting our customers' success by providing the integrated and environmentally sound solutions they require to remain competitive and meet their own sustainability objectives
    Mutually beneficial relationships with our principals, and representing them in a way that enhances their success and reflects their sustainable development objectives
    Providing a safe and healthy workplace for employees where all have equal opportunity, are inspired to fulfil their ambitions and be proud ambassadors of Barloworld
    Conducting our operations in an environmentally responsible manner
    Delivering top-quartile returns to our shareholders through responsible business practices
    Identifying profitable growth opportunities and executing our strategic plans efficiently
    Engaging our stakeholders and being a responsible corporate citizen for all of them, including the communities in which we operate, and contributing to their social and economic development.

    I believe the enduring competitiveness of Barloworld and its ability to create sustained value for all stakeholders is founded in these commitments. We will continue to manage the group accordingly.

    Clive Thomson
    Chief Executive


  • 1.2 Description of key impacts, risks and opportunities.

    Integrated Report 2014:
    Consolidated Annual Financial Statements 2014:
    Corporate governance report 2014:

    Key impacts

    Barloworld's Value Based Management approach encompasses responsible citizenship and long-term value creation for all stakeholders. 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. The group considers these issues in the context of its strategic plan, strategic focus areas, associated risks and resulting opportunities, and manages them 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.

    The group's Statement of Total Value Added 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, channelled through BarloworldSiyakhula, support the creation of small and medium enterprises and includes our supplier development initiatives which commenced during the period. The group also has corporate social investment programmes at group and divisional levels through which public benefit and socio-economic development investments are made.

    For more detail see also Statement of Total Value Added

    Environmental

    Integrated 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. Water consumption is also an area of focus although the group's activities are not water intensive, and water is used 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 energy consumption and emissions, and gain competitive advantage. We offer skills development programmes to our customers that assist them in the safe and sustainable operation of plant, equipment and vehicles which we provide to them.

    Energy efficiency and GHG emissions

    Measurements have been put in place and an aspirational group target set to underscore our commitment to improving efficiencies in fuel and electricity consumption and resulting GHG emissions.

    Our current aspirational group target for efficiency improvement in our non-renewable energy and GHG emissions (scope 1 and 2) was set in 2009 to the end of our 2014 financial year, off a 2009 baseline year.

    The majority of our operations have performed ahead of our group aspirational 12% efficiency improvement target for non-renewable energy consumption and greenhouse gas emissions (scope 1 and 2) set for the end of this financial year off a 2009 baseline. However, our overall group target was not achieved due mainly to a number of investments made in logistics road transport business which has higher energy and emissions intensities compared to our other businesses. For further details refer to
    EN 3 & 4 and EN 16

    Nonetheless this target played a major role in focusing our efforts on energy efficiency with significant benefits for the organisation over the past five years and will continue to do so into the future. In order to maintain this momentum, we have set another aspirational group target of a 2% efficiency improvement against a business as usual perspective for our non- renewable energy consumption and related greenhouse gas emissions (scope 1 and 2) for end of our 2015 financial year off a 2014 baseline year

    This will allow the group to align its subsequent target period to its strategic period being 2016 to 2020.

    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 Change, Environmental and Energy Efficiency group policy documents.

    Water use

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

    Materials and waste

    Our initiatives around materials and waste focus on recycling, certified waste disposal, extending the useful life of plant and equipment as well as remanufacture and rebuilding components. 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 also investigating waste to power conversion opportunities, which if pursued, will advance both our responsible waste management and energy efficiency objectives.

    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

    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. 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

    Our employee value creation approach focuses on safety, health, and skills development and fair reward for all employees. Our Integrated Employee Value Model informs our approach and includes an Employee Value Proposition and well as a methodology for achieving a high performing organisation. We can only realise our growth, 20153 objectives and future opportunities through our people.

    Human rights

    Our Code of Ethics, Worldwide Code of Conduct, and related policies indicate our commitment to upholding human rights and preventing the abuse of human rights by employees, significant suppliers, third party service providers and other business partners.

    Equality, empowerment and transformation

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

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

    We are committed to creating real value for our diverse employees across the group 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 further entrenched in our Code of Ethics, Worldwide Code of Conduct and other related policies and these include:

    Identifying and eliminating employment barriers
    Pursuing programmes and initiatives to achieve our equality objectives
    Eliminating unfair discrimination on the grounds of gender, race, religion, disability or sexual preference
    Complying with regulations and legislation of our operational environment:

    Empowerment and transformation remains one of our six strategic focus areas. The target for all South African operations is to achieve or maintain a B-BBEE Level 2 or 3. Barloworld's action plan continues to address the challenges and elements of the B-BBEE scorecard with specific reference to management control, employment equity, skills development and enterprise and supplier development.

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

    Our diversity focus is across the group and includes non-South African operations. Emphasis in these regions is on gender equality, localisation and minority representation.

    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 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.

    Group risks

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

    This 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 appropriately addressed and related opportunities pursued. This is underscored by the strategic planning process which requires that action plans are in place to appropriately address such risks. At 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 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 communications 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.

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

    Barloworld group top risks 2014 (in alphabetical order) –

      KEY RISKS   CATEGORY OF RISK AND MANAGEMENT RESPONSE  
      Acquisition underperformance

    The risk of future net cash flows from acquisitions failing to realise the projections upon which the initial purchase consideration was based may lead to value destruction for shareholders and a need to impair the related goodwill or assets.
      Acquisition risk

    A business acquisition policy and procedure is in place that sets out a structured approach and framework to be used when acquisitions are being made.  This includes a pre-acquisition phase that includes the requirement to conduct a comprehensive strategic analysis of intended targets, development of acquisition criteria, both strategic and financial, and quantification of risk-adjusted value creation potential for the respective business unit and the group.
    Following acquisitions, planning and task teams are established to focus on the realisation and management of possible synergies.
     
      Climate change and environmental stewardship

    Barloworld considers a number of environmental related risks to its operations and value-chain. These include climate change and related physical risks due to changing weather patterns; regulatory risks associated with Greenhouse gas emissions; financial risks resulting from carbon taxes; operational risks due to constraints in energy supply and the availability of natural resources, such as water. The group identifies the predominant use of fossil-fuel based energy in its supply-chain, operations, products and solutions as a risk to itself and its value-chain.
      Environmental/operational/strategic/financial/regulatory risk

    Minimise exposure through in-depth risk assessments and strategic responses. Ensure organisational resilience through aligned and integrated management activities and policies. These include:

    Implementation of aspirational efficiency improvement targets in non-renewable energy consumption and greenhouse gas emissions (scope 1 and 2) and focus on water stewardship.
    Association with leading principals, provision of products and solutions with reduced environmental footprint and which assist customers achieve their sustainable development objectives.
    Geographic, industry and product diversification.
     
      Competitor actions

    Competitor actions will erode our competitive position and have a significant impact on the value we create for shareholders.

      Competitor risk

    Continually reduce costs by focusing on operational efficiencies and staff training.
    Continually improve service and the provision of innovative solutions to customers.
    Develop key customer plans which contain all the information and strategies to satisfy the customer.
     
      Currency volatility

    Movement of currencies against one another, mainly the movement of other currencies against the rand which creates risks relative to the translation of non-rand profits, the marking-to-market of financial instruments taken out to hedge currency exposures and the cost of imports into South Africa.

      Financial risk

    The responsibility for monitoring and managing these risks is that of line management. A group treasury policy is in place which clearly sets out the philosophy of hedging and guideline parameters within which to operate and permissible financial instruments to be utilised.
    Preventive measures are implemented around determination of pricing mechanisms and structuring of commercial contracts to reduce the impact of any adverse currency fluctuations.
     
      Defined benefit scheme exposure

    One of the key risks for the U.K.’s defined benefit scheme over the past few years has been the reduced real yield on AA-rated corporate bonds which is used to value the liabilities.  In addition, increased life expectancy of members will have an adverse impact on the schemes’ funding position.  Market volatility remains a risk, with 50% of the schemes assets invested in growth assets (largely equities), which includes 25% diversification into absolute return funds.

    The year-end valuation resulted in the deficit increasing to £104 million, largely due to lower discount rates which was partially offset by decreased inflation above expected investment returns and recovery plan payments by the company.

    As the active members have reduced substantially, the trustee board will adopt more prudent assumptions in future in line with the maturity profile of the liabilities which will result in the Scheme’s liabilities increasing in the actuarial valuation as compared to the accounting valuation.

     

    Market risk

    A suitably qualified representative board of trustees which includes a professional independent Trustee, exists which is responsible for regularly evaluating the effectiveness of investment decisions.  Professional investment advisors are used to assist in the management of the investment portfolios with a view to conservatively preserving and enhancing fund valuations. Complex investment risk models are run by the investment advisors and actuaries to assess optimum risk balance.  The actuary also conducts a formal triennial valuation with six monthly updates.
    Funding shortfalls are planned to be made up within sensible time frames via market-anticipated increased interest rates, positive returns on investments and additional contributions from the company agreed as part of a ten-year recovery plan to bring the fund back to full funding on an accounting basis.
    The defined benefit scheme in the U.K. was closed to new members in 2002 and the scheme is now mature with only minimal active membership following the disposal of Handling UK.  All new employees in the U.K. are automatically enrolled in the U.K.’s defined contribution scheme.
    The Company and Trustees have agreed a long term strategy for reducing investment risk as and when appropriate. This includes an asset-liability matching policy which aims to reduce volatility of the funding level of the pension plan by investing in matching annuities (buy-ins) for pensioners which perform in line with the liabilities of the plan. In 2013, the fund purchased a buy-in representing approximately 12% of the liabilities.
     
     

    Dependence on principals and suppliers

    Some of the businesses in the group are dependent on a small number of principals and/or suppliers. 

    Our success is therefore linked to their on-going financial stability, the competitiveness and quality of their products and services and the availability of equipment to meet customers’ needs.

    In order to ensure sustainable value creation, we depend on suppliers of infrastructure in the countries in which we operate.  Most of our businesses are dependent, inter alia, on reliable power and water supply and appropriate transport networks.

      Strategic risk

    Add value by giving constant feedback to our principals on market movements and product competitiveness.
    Continually improve/build our relationships with our principals and major suppliers and attempt to ensure that we are a preferred dealer/customer.
    Provide excellent customer service and lead in our markets.
    Build long-term partnerships with customers.
    Supplier due diligence performed
    Build relationships with local authorities.
    Align strategies and targets with those of our major principals as far as possible.
     
      Exposure to political risks, sanctions, terrorism and crime in the countries in which we operate

    The group's people and assets are spread through numerous countries around the world, while our activities are conducted in many more. The possibility exists that our people and assets, and the viability of the businesses, may be exposed to sanctions, acts of terrorism, political turmoil or crime in some of the regions in which the group operates, as well as in those that may be the subject of expansion. Business growth initiatives require that new markets and territories are the focus of our business expansion. These opportunities come with their own distinct risk exposures.

      Operational Risk

    Minimise exposure in high-risk countries through in-depth risk assessments, coupled with the application of preventive and corrective risk management activities.
    Maintain flexible business models.
    Maintain Business Continuity Plans that incorporate emergency response actions, crisis management and business recovery plans specific to the businesses and the respective territories in which the businesses operate.
     
      Exposure to significant customers and dependence on channels to market

    We are exposed to certain large customers and/or industries and well-established distribution and support channels that may change or consolidate.

      Market risk

    Build long-term partnerships with customers.
    Develop customer solutions which differentiate and expand our offering from product-based businesses.
    Diversify customer base.
    Develop new channels.
     
      Occupational Health and Safety risks

    Barloworld’s key asset is its employees.  The Occupational Health and Safety risk is the likelihood of a person being harmed or suffering adverse health effects if exposed to a hazard in the workplace.

     

      Employee/Operational/Strategic risk

    Minimise exposure through in-depth risk assessments, coupled with the application of preventive and corrective risk management activities and policies.
    Training in accident prevention, accident response, emergency preparedness and the use of protective clothing and equipment, all with the aim of ensuring a safe workplace.
     
      Regulatory environment

    Many of the group’s activities are governed by regulations.  Due to the complexity and changing nature of these regulations across the industries and geographical spectrum of the group’s activities, there are challenges in staying abreast of all developments and maintaining full compliance.

      Regulatory risk

    Management is responsible for the on-going monitoring of all pending and actual changes to the group’s regulatory environment.  Due to the large number of jurisdictions which govern the group’s activities, this monitoring occurs in each relevant country of operation.
    Where feasible, the group will comment on proposed changes to the regulatory environment that may adversely affect the group in a particular jurisdiction.
     
      Slow recovery of global economies

    The effect of the slow recovery on our businesses, customers, suppliers and funders and the continued risk that funding constraints within the supply chains could result in a double-dip recession  and/or impede growth. This, in turn, has lowered commodity prices and impacted mining company investments.

      Financial Risk

    Inflationary pressures to be carefully monitored and managed, as appropriate, in each business.
    Reduce costs and improve operating efficiencies.
    Monitor our customers’ ability to spend and access credit.
    Reduce working capital, limit capital expenditure and improve cash flow.
    Secure adequate committed borrowing facilities.
     
      Strategic employee skills

    Barloworld’s key asset is the intellectual capacity and skills of its employees.  This necessitates on-going management of the challenges regarding recruitment, succession planning, skills retention and development.

      Employee risk

    Barloworld has a defined Employee Value Proposition and methodology to align employees with the strategy of the organisation.
    These identify and align all employee elements of a value-creating organisation to ensure sustainable intellectual capacity and value-creation competence.
    Through performance management systems, employees’ purpose, role, function and accountabilities are defined, and, using competency-based assessments, employees are regularly reviewed to ensure the appropriate skill sets are available to enable performance at optimum levels.
    Investments in training resources and facilities are continuing to assist and encourage employees to enhance their levels of competence and performance.
    An appropriate suite of reward and incentive schemes ensures recognition, value-creation for employees and retention of high-performing employees.
     

    Barloworld has formalised group risk assessment processes that assesses 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 2014 CDP Climate Change Disclosure, and 2014 CDP Water Disclosure. In identifying sustainable development as a strategic focus area, the group acknowledges the significance of these risks and opportunities and includes them in its strategic planning process.

    Group opportunities

    Barloworld has identified the following growth industries as central to our strategy. Due to our strategic profile, the Original Equipment Manufacturers (OEMs) and brands we represent, and our regions of activity, we are well positioned to realise opportunities in these growth industries:

    Mining
      Growth driver: Emerging industrialisation driving long-term demand for commodities (Geography : Southern Africa and Russia)
    Infrastructure
      Growth driver: Infrastructure backlogs and rapid urbanisation in developing economies (Geography : Southern Africa, Russia, Iberia)
    Power
      Growth driver: Increasing demand in electricity, marine, petroleum, and industrial power segments. (Geography : Southern Africa, Iberia, Russia)
    Agriculture
      Growth driver: Importance of food security, growing demand for bio-fuels and rich agricultural potential across Southern Africa (Geography : Southern Africa, Russia)
    Automotive
      Growth driver: Increasing need for flexible vehicle usage solutions in private, corporate and government segments and exposure to the growing tourism market (Geography : Southern Africa, West Africa, East Africa)
    Logistics
      Growth driver: growing international trade and trend to outsource supply chain management activities (Geography : Southern Africa, Middle East, Europe )

    Strategic focus areas and key performance indicators (KPI)

    1. Integrated customer solutions

    Our business model, based on our strategic profile, is centred on providing flexible, value-adding integrated solutions including: customised maintenance and repair contracts, cost efficient combinations of rental, used and new equipment and vehicle offerings, long-term fleet management solutions, power including efficiency as well as turnkey solutions in electrical power generation, marine transport, petroleum, industrial and rail segments as well as integrated supply chain management and integrated logistics solutions. Technology plays an ever increasing role in delivering such solutions efficiently, competitively and for mutual benefit.

    KPI: Market leadership in targeted segments through delivering integrated customer solutions.

    2. People

    Create value through and for our employees by attracting and retaining the globally competitive people and skills necessary to deliver our integrated customer solutions strategy and growth targets. This is achieved by an inspiring employee value proposition, engaged and productive employees, attracting and retaining essential talent, comprehensive skills development programmes, performance-related reward and employee participation systems.

    KPI: Overall employee engagement score (Individual Perception Monitor 'IPM) greater than 75% for all businesses.

    3. Empowerment and transformation

    Our attitude and strategy for empowerment and transformation goes beyond merely meeting compliance targets but focuses instead on establishing leadership in this strategic focus area.

    We plan to exceed the minimum requirements of B-BBEE legislation and industry charters and aim to set the benchmark for our industry sector which is reflective of all South Africans in partnership with all stakeholders.

    We believe that empowerment and transformation makes commercial sense and contributes towards the national agenda, as they continually improve the sustainability of South Africans by broadening their economic activity and allowing the majority of South Africans to participate in the mainstream economy. The group aims for an employee profile that represents the demographics of the societies in which we operate. Our diversity focus is across the group and includes non-South African operations. Emphasis in these regions is on gender equality, localisation and minority representation.

    KPI:
    South Africa: Department of Trade and Industry Broad-Based Black Economic Empowerment (B-BBEE) - Level 2 or 3 for each South African business unit with the focus on the priority elements of Ownership, skills development and enterprise and supplier development.
    Group: Targeted gender equality, localisation (local employment), people with disabilities and diversity objectives by business unit.

    4. Sustainable development

    We enhance our competitiveness and legitimacy by leading in sustainable development and ensuring long-term value creation for all stakeholders by responsible business conduct, developing products and services to capitalise on emerging sustainable business opportunities aligned to core businesses and realising cost savings through energy efficiency initiatives and other sustainable business practices and enhance Barloworld's reputation by leading in sustainable development. It is also an important component of our Employee Value Proposition, developed to ensure we attract and retain required skills to deliver our strategic objectives.

    KPI: Aspirational group target of a 12% efficiency improvement in non-renewable energy consumption and greenhouse gas (GHG) emissions (scope 1 and 2) against a business as usual perspective by end financial year 2014 (baseline 2009).

    KPI (2015): Aspirational group target of a 2% efficiency improvement in non-renewable energy consumption and greenhouse gas (GHG) emissions (scope 1 and 2) against a business as usual perspective by end financial year 2015 (baseline 2014).

    5. Financial returns

    Consistently achieve top-quartile returns, at or above our cost of equity, as measured against relevant peer groups in each of our chosen business segments.

    KPI: Achieve top-quartile financial returns on average through the cycle.
    Achieve return on equity target of 15%
    Achieve return on net operating assets target of 20%

    6. Profitable growth

    Achieve targeted growth in total shareholder returns over five years to September 2015. Pursue opportunities in high-growth sectors such as mining, infrastructure, power, agriculture, automotive and logistics with a focus on emerging markets.

    KPI: Achieve top-quartile growth in total shareholder returns over five years to 2015.

    For more detail see also ‘Executing our strategy’ section of the 2014 Integrated Report