2000 Survey of Environmental and Social Reporting in South Africa

E nv i r o n m e n t a l , Hea lth & Safety Unit

CONTENTS CONTENTS CONTENTS CONTENTS CONTENTS CONTENTS CONTENTS CONTENTS CONTENTS CONTENTS CONTENTS CONTENTS CONTENTS CONTENTS CONTENTS CONTENTS CONTENTS CONTENTS CONTENTS CON

Executive Summary

Introduction

Background and purpose

Why report on environmental and social issues?

International Trends

Sustainability reporting

Greenhouse gas reporting

Environmental financial accounting

Internet reporting

Disclosure in Annual Reports

Methodology

Findings

Disclosure in Separate Reports

Methodology

Findings

Environmental Reporting Awards

Conclusion

Annexure A: Social and Environmental Disclosure Corporate Rankings

Annexure B: KPMG Sustainability Reporting Scorecard
Annexure C: The Social Accounting Unit of the Department of Accounting of the University of Pretoria

Annexure D: The Association of Chartered Certified Accountants (ACCA) Annexure E: Sustainability Services of KPMG

Seventh Edition – Based on 1999 Annual and Environmental Reports

Executive Summary

EXECUTIVE SUMMARY EXECUTIVE SUMMARY EXECUTIVE SUMMARY EXECUTIVE SUMMARY EXECUTIVE SUMMARY EXECUTIVE SUMMARY EXECUTIVE SUMMARY EXECUTIVE SUMMARY EXECUTIVE SUMMARY EXECUTIVE SUMMAR The 2000 Survey of Environmental and Social Reporting in South Africa is the seventh in a series of annual surveys. Since 1993, this research has tracked developments in environmental disclosure in annual financial reports. In 1998, the top 50 performing companies were ranked for the first time and, in 1999, an analysis of separate environmental reports was also i n c l u d e d .

In 2000, the survey has once again been extended to keep up with the times. This year, in addition to environmental reporting, health, safety, social and ethical disclosure has been evaluated. This is in line with the current trend towards so-called “triple bottom line” r e p o r t i n g .

In particular, three emerging areas in non-financial reporting are discussed: sustainability reporting, greenhouse gas reporting and internet reporting.

The survey is based on annual reports of the Financial Mail Top 100 Industrial companies, public companies, and the Top 48 JSE-listed Mining companies in South Africa. Key findings were that information on different issues is disclosed in the following order of decreasing frequency: environment (most), health & safety, employees, social / community, business ethics, sustainable development and AIDS (least). Also, that mining companies consistently outperform industrial companies on disclosure of non-financial information in their annual r e p o r t s .

The survey also analysed eleven separate corporate environmental or health, safety and environmental reports using the KPMG Sustainability Reporting Scorecard. Key findings were that the weakest areas of reporting are External verification, Product performance and Innovations. In general, the lack of quantitative data is still a problem, especially relating to financial management. The strongest aspects of reporting are the CEO statement, Report design, layout and appearance and Sustainability management.

Congratulations are due to all those top performing companies who received Environmental and Social Reporting Awards, namely: ISCOR, ESKOM, SASOL, Amplats, Palabora Mining, Durban Roodepoort Deep, Huntsman Tioxide and SmithKline Beecham.

The survey concludes that only a portion of South Africa’s largest companies have begun to demonstrate their accountability through credible environmental and social reporting. On the whole, disclosure in annual reports still tends to be superficial, and detailed separate reports remain few in number and lagging against international standards.

Before mandatory reporting defines the agenda, these companies and their peers will need to do more to convince the country’s stakeholders that they are capable of self-regulation and true sustainability performance. Meanwhile, stakeholders have an equal responsibility to make their information needs known and to help companies define what “sustainability” means in a developing country context.

SASurvey of Environmental and Social Reporting – 2000

Introduction

INTRODUCTION INTRODUCTION INTRODUCTION INTRODUCTION INTRODUCTION INTRODUCTION INTRODUCTION INTRODUCTION INTRODUCTION INTRODUCTION INTRODUCTION INTRODUCTION INTRODUCTION INTRODUCTION INTRODUCTION I N T R O D U C

Background and purpose

The 2000 Survey of Environmental and Social Reporting in South Africa is the s eventh in a series of annual surveys. Since 1993, this research has tracke d d evelopments in environmental disclosure in annual financial reports. In 1998, the top 50 performing companies were ranked for the first time and, in 1999, an analy s i s of separate environmental reports was also included.

In 2000, the survey was once again updated to keep up with the times. In addition to e nvironmental reporting, health, safety, social and ethical disclosure has been included in the evaluation. This is in line with the current trend towards so-called “sustainability” or “triple bottom line” report i n g .

Why report on environmental and social issues?

There are gr owing pressures for companies to provide information on their env i r o nmental, health, safety, social and ethical performance. T h ey come from reg u l a t o r s , the financial community, shareholders, customers, environmental groups and the p u blic. For instance, studies by Q. Vo r s t e r, C.J. De Villiers and M.C. van Niekerk of the University of Pretoria indicate that users of financial statements, directors of companies, auditors and portfolio managers of unit trusts are all demanding increased corporate environmental disclosure. Academics argue that this is linked to companies maintaining their leg i t i m a cy in society. In lay business terms, this is r e f e rred to as protecting their “license to operate”.

Reflecting this trend, non-financial reporting is now underpinned by a gr ow i n g number of international vo l u n t a ry standards and guidelines, such as ISO 14040 on E nvironmental Pe r f o rmance Evaluation, UNEP-Sustainability’s 50 Env i r o n m e n t a l R e p o rting Criteria, Accountability 1000 on Social and Ethical Accounting, A u d i t i n g and Reporting, The Copenhagen Charter on Stakeholder Reporting, and the Global R e p o rting Initiative ’s Sustainability Reporting Guidelines.

In South Africa, the trend is further supported by the emphasis on transparency enshrined in our legislation, including the Constitution (1996), the Promotion of Access to Information Act (2000) and the National Environmental Management A c t (1998). Furt h e rmore, mainstream organisations in South Africa, such as the Institute of Directors and the South African Institute of Chartered Accountants, acknow l e d g e the right of a wide arr ay of corporate stakeholders to information. Stakeholders are also increasingly realising their right to information which may be relevant to the protection of their environment, health, safety and sense of values and ethics.

SASurvey of Environmental and Social Reporting – 2000

International Trends

INTERNATIONAL TRENDS INTERNATIONAL TRENDS INTERNATIONAL TRENDS INTERNATIONAL TRENDS INTERNATIONAL TRENDS INTERNATIONAL TRENDS INTERNATIONAL TRENDS INTERNATIONAL TRENDS INTERNATIONAL TRENDS I N T E R N ATIONAL T R E N D

Sustainability reporting

One of the most significant developments in the past year was the launch of two sustainability reporting standards: the Copenhagen Charter on Stakeholder Report i n g ( N ovember 1999) and the Global Reporting Initiative ’s Sustainability Report i n g Guidelines (June 2000), the latter being the more comprehensive of the two .

The Global Reporting Initiative (GRI) describe themselves as “a long term, multis t a ke h o l d e r, international undertaking whose mission is to develop and disseminate g l o b a l ly applicable Sustainability Reporting Guidelines for vo l u n t a ry use by orga n isations reporting on economic, environmental and social dimensions of their a c t ivities, products and serv i c e s .” The following table outlines some of the sustainability reporting parameters envisaged by GRI.

Sustainability re p o rting para m e t e r s

E c o n o m i c: Incl u d i n g, for example, payroll expenses, labour pro d u c t i v i t y, job c reation, expenditures on outsourc i n g, expenditures on re s e a rch and dev e l o p m e n t , and investments in training and other forms of human capital. The economic element i n cludes, but is not limited to, financial statements and related discl o s u re s .

E nv i ro n m e n t a l: Incl u d i n g, for example, impacts of processes, products and services on air, wa t e r, land, biodivers i t y, and human health.

S o c i a l: Incl u d i n g, for example, wo rkplace health and safe t y, employee re t e n t i o n , l abour rights, human rights, and wages and wo rking conditions at outsourc e d o p e ra t i o n s .

The Guideline contains the following sections: Introduction and general guidance; R e p o rting principles and practices; Report content; and A n n exes which include, among others Guidance on ve r i fication. The recommended report content includes: n CEO statement; n P r o file of reporting orga n i s a t i o n ; n E xe c u t ive summary and key indicators; n Vision and strateg y ; n

Policies, organisation and management systems; and n Pe r f o rm a n c e .

GRI states its long term the development of “generally accepted sustainability accounting” principles. Their website is w w w.global re p o r t i n g. c o m.

SASurvey of Environmental and Social Reporting – 2000

Greenhouse gas reporting

The global response to the threat of climate change has gathered signifi c a n t momentum in the past few years. The political foundation for action has been the United Nations Fr a m ework Convention on Climate Change (UNFCCC) and its related Kyoto Protocol which is still in the process of being negotiated. At the ve ry h e a rt of these political agreements is a commitment to reducing anthropog e n i c greenhouse gases (GHGs).

Under the Kyoto Protocol, specified developed countries have GHG reduction t a rgets, but will be able to use three so-called flex i ble mechanisms – emissions trading, joint implementation and the clean development mechanism – to help them a c h i eve these targets. This also implies that companies will begin trading on a global GHG emissions market. For these reasons, accurate measurement and reporting of GHGs has become of paramount import a n c e .

I n i t i a l ly, countries and companies relied solely on guidance by International Pa n e l on Climate Change (a scientific advisory body to the UNFCCC) to determine how to measure and calculate GHGs. More recently, howeve r, several countries have issued more comprehensive guidelines on GHG measurement, reporting and ve r i fication. These include, for ex a m p l e :

UK Department of the Environment, Tr a n s p o rt and the Regions: Env i r o n m e n t a l R e p o rting Guidelines for Company Reporting on Greenhouse Gas Emissions, June 1999; n

Australian Greenhouse Office: Ve r i fication and Reporting Guidelines, M a r c h 2 0 0 0 ; n

M i n i s t ry of Economic A ffairs of the Netherlands: Baseline Studies, Monitoring and Reporting (Volume 2a of the Operational Guidelines for Baseline Studies, Validation, Monitoring and Ve r i fication of Joint Implementation Projects), M ay 2000; and n

World Resources Institute: Is working, together with a number of part n e r o rganisations, on an international standardised protocol for measuring and r e p o rting greenhouse gas (GHG) emissions.

KPMG advises companies to move steadily up the following GHG data assurance l a d d e r, as illustrated by the following diagr a m :

SASurvey of Environmental and Social Reporting – 2000

GHG assurance framework

Tr a d i n g ?

E x t e r n a l r e p o r t i n g

Data collection & reporting systems

GHG reporting g u i d e l i n e s

GHG strategy and targets

Time stages

Environmental financial accounting

C o rporate environmental responsibility can be a costly business if taken seriously. For example, money needs to be spent on environmental controls, conserva t i o n , rehabilitation and management systems. On the other hand, poor env i r o n m e n t a l p e r f o rmance by business may lead to increased environmental fines, fi n a n c i a l liabilities resulting from lawsuits related to environmental incidents, or damage to p u blic image as a result of pressure group campaigns.

Despite this fact, ve ry few companies have financial accounting and report i n g systems which are capable of accurately quantifying their environmental costs and liabilities. The discipline which is emerging to address this shortcoming is c o m m o n ly referred to as environmental accounting.

With the trend towards integration of financial and non-financial reporting, the need to accurately account for environmental finance is becoming critical. While there is still no “generally accepted accounting standard” for environmental issues, the f o l l owing authoritative guidelines and standards have emerged in recent ye a r s : n

United Nations: Guidance Manual on Accounting and Financial Reporting for E nvironmental Costs and Liabilities, 1999; n

I n t e rnational Federation of Accountants: International Auditing Practice Standard 1010 on the Consideration of Environmental Matters in the Audit of Financial Statements (equivalent to SAAS 2501 in South A f r i c a ) ; n

Federation of European Accountants: Rev i ew of International A c c o u n t i n g Standards for Environmental Issues, 1999; n

Japanese Environment A g e n cy: A Draft Guideline for Evaluating Env i r o n m e n t a l Costs and Publ i c ly Disclosing Environmental Accounting Information, 1999; a n d n

Commission of the European Communities: White Paper on Env i r o n m e n t a l L i a b i l i t y, 2000.

SASurvey of Environmental and Social Reporting – 2000

As a general guide, companies should look to measure and disclose the follow i n g types of environmental financial inform a t i o n :

n Operating ex p e n d i t u r e ; n Capital expenditure; n L i a b i l i t i e s ; n Contingent liabilities; n

R e s e rves; and n Accounting policy notes.

Internet reporting

As companies’ s t a keholders increasingly rely on electronic media, intern e t - b a s e d social and environmental reporting will become the norm rather than the ex c e p t i o n . There a several advantages to this on-line approach, including:

n Reduced or avoided costs in publication and distribu t i o n ; n Po t e n t i a l ly wider accessibility of the report to some stake h o l d e r s ; n

Increased ease of interacting with the readers, especially getting feedback from s t a keholders on the report; and n

The opportunity to update information more frequently, eve n t u a l ly mov i n g t owards real time report i n g .

M a ny companies have already gone the Internet reporting route. The follow i n g websites are examples of sources for these e-Report s :

n w w w. c o r p o ra t e reg i s t e r. c o m is a site with a database of approx i m a t e ly 1 5 0 0 p u blished corporate environmental and social report s ; n w w w. e nv i ro re p o r t i n g. c o m has an ove rv i ew of sites with directories of online ava i l a ble environmental reports; and n w w w. t o m o r row - we b. c o m has a Corporate Environmental Reporting “hotlink” c a t egorised by industry sector.

Seeking to ride on the wave of this trend, a new Swedish-based organisation called Global Responsibility is planning to launch a web site and related services for standardising corporate sustainability reporting and hosting dialog with stake h o l d e r s . Pioneer companies which have signed up to participate in developing the prototype include, among others, Novo Nordisk, Sony International Europe and Vo l vo Car C o rporation. KPMG will verify the data.

SASurvey of Environmental and Social Reporting – 2000

Disclosure in Annual Reports

DISCLOSURE IN ANNUAL REPORTS DISCLOSURE IN ANNUAL REPORTS DISCLOSURE IN ANNUAL REPORTS DISCLOSURE IN ANNUAL REPORTS DISCLOSURE IN ANNUAL REPORTS DISCLOSURE IN ANNUAL REPORTS DISCLOSURE IN A N N UAL REPORTS DISCLOS

Methodology

An analysis was made of corporate annual reports with their ye a r-end within the 1999 calendar year to determine the extent and type of social and env i r o n m e n t a l i n f o rmation these reports contain. The companies selected for the survey were the Financial Mail Top 100 Industrial companies, the top 48 JSE-listed mining companies, and the top public companies, all based on total assets.

Findings

From the table on the next page, the following observations can be made about r e p o rting trends: n

I n f o rmation on different issues is disclosed in the following order of decreasing f r e q u e n cy: environment (most), health & safety, employees, social / community, business ethics, sustainable development and AIDS (least).

Disclosure on environmental, health, safety and sustainable development issues tends to be better among the mines than the industrial companies.

O verall disclosure on environmental issues decreased slightly from the prev i o u s ye a r, although improvements were evident in the detail of report i n g .

n Q u a n t i fied information on environment, health and safety is still less common. n

I n f o rmation on corporate policies is more ava i l a ble for employment practices and employees than for social / community and environmental issues.

C o rporate gove rnance related disclosure, in terms management responsibility for environmental issues, shows clear evidence of improvement, especially at the exe c u t ive leve l .

Fo rmal Environmental, Health and Safety (EHS) management systems are not yet prevalent, and EHS audits are still relative ly uncommon, if disclosure is an indicator of these.

Where EHS management systems are being implemented, recognised standards are being used. Consensus on environmental standards (i.e. ISO 14001) appears to be greater than for health and safety standards. International social and ethical standards do not seem to have been recognised by South A f r i c a n companies as ye t .

R e p o rting of environmental financial information shows few signs of i m p r ovement from an ex t r e m e ly low base, with the possible exception of capital expenditure. The mines remain much stronger on environmental accounting than the industrials, larg e ly due to statutory rehabilitation requirements and tax i n c e n t ives to make provisions for the associated liabilities.

n Separate reporting of non-financial information appears to be ex t r e m e ly low.

SASurvey of Environmental and Social Reporting – 2000

Table of findings: Environmental and social disclosures in 1999 annual reports

Checklist question (Percentages indicate the number of affirm a t i ve responses)

Top100 Industrials 1 9 9 8 1 9 9 9

1 9 9 8

Top Mines 1 9 9 9

1 Does the annual report disclose anything regarding: E n v i r o n m e n t 5 2 % Health and safety n / a E m p l oyee medical aid benefits n / a Business principles and ethics n / a U p l i f t m e n t / i m p r ovement of society/the community n / a Sustainable deve l o p m e n t / s u s t a i n a b i l i t y n / a A I D S n / a

4 8 % 3 6 % 3 1 % 9 3 % 4 0 % 1 6 % 1 5 %

8 1 % n / a n / a n / a n / a n / a n / a

7 5 % 6 0 % 6 % 6 5 % 2 7 % 4 8 % 3 1 %

2 Is there any quantitative (non-financial) disclosure on: E n v i r o n m e n t 9 % Health & safety n / a

2 0 % 1 5 %

2 2 % n / a

5 8 % 4 4 %

3 Does the report mention disclose a policy/mission regarding:
E m p l oyment practices
n / a
9 5 %
E m p l oye e s
n / a
8 5 %
Social/community issues
n / a
6 0 %
E n v i r o n m e n t
2 2 %
3 1 % n / a n / a n / a 3 2 %

8 3 % 5 6 % 4 3 % 5 2 %

4 Does the annual report disclose whether there is an Executive Director entrusted with:
E n v i r o n m e n t a l , health & safety (EHS) responsibility
1 8 %
2 5 %
1 0 %
2 3 %
Business principles/ethics responsibility
n / a
7 %
n / a
2 %
5 Does the annual report disclose whether there is a member of senior management
entrusted with:
EHS responsibility
4 8 %
5 2 %
3 9 %
Business principles/ethics responsibility
n / a
1 5 %
n / a

SASurvey of Environmental and Social Reporting – 2000

Is mention made of a formal EHS management system? n / a

1 8 % n / a

4 2 % 4 %

4 2 %

Top100 Industrials 1 9 9 8 1 9 9 9

1 9 9 8

Top Mines 1 9 9 9

7 Does the annual report mention EHS audits: I n t e r n a l E x t e r n a l n / a n / a

5 % 8 % n / a n / a

1 4 % 2 3 %

Does the company disclose any information regarding standards: ISO 14000 (environment) 9 % 1 1 % A ny health and safety performance standard n / a 1 6 % AccountAbility 1000 (social & ethical) n / a 0 % Social Accountability 8000 (social & ethical / labour) n / a 0 %

1 7 % n / a n / a n / a

1 5 % 5 0 % 0 % 0 %

9

Does the annual report contain any financial / related disclosure on environment: Operating ex p e n d i t u r e 6 % 4 % 4 6 % Capital ex p e n d i t u r e 3 % 1 0 % 3 9 % L i a b i l i t i e s 3 % 4 % 4 2 % R e s e r ve s n / a 3 % n / a Contingent liabilities 2 % 2 % 1 4 % Accounting policy notes 5 % 5 % 5 7 % 1 0 Is mention made of a separate report / information on: E n v i r o n m e n t a l , health & safety (EHS) n / a Social / Community / Ethics n / a

4 % 9 % n / a n / a

4 4 % 4 2 % 4 4 % 3 3 % 2 1 % 6 0 %

6 % 6 %

The ranking of South African companies on environmental and social disclosure in annual reports is continued in A n n exure A .

SASurvey of Environmental and Social Reporting – 2000

Disclosure in Separate Reports

DISCLOSURE IN SEPARATE REPORTS DISCLOSURE IN SEPARATE REPORTS DISCLOSURE IN SEPARATE REPORTS DISCLOSURE IN SEPARATE REPORTS DISCLOSURE IN SEPARATE REPORTS DISCLOSURE IN SEPARATE REPORTS DISCLOSURE IN SEPA R ATE REPOR

Methodology

E l even corporate environmental and social reports for 1999 were analysed as part of the survey. None of these reports were found to have sufficient information on social, environmental and economic aspects to be judged as Sustainability Report s .

The University of Pretoria, using KPMG’s intern a t i o n a l ly developed Sustainability R e p o rting Scorecard, independently rated these reports. The Scorecard synthesizes the requirements of the Balanced Scorecard, the UNEP/SustainAbility 50 Report i n g I n gredients and the GRI Sustainability Reporting Guidelines. The scoring f r a m ework uses a ‘modular structure’, allowing for different requirement combinations and maximum scores for environmental, HSE, social, and sustainability reports for both manufacturing and non-manufacturing reporting entities.

The Scorecard contains a maximum of 127 questions, which varies depending on the report to be assessed. The questions are organised into the following 14 gr o u p s of criteria:

O verall report structure: CEO Statement, Ove rv i ew of the reporting entity, R e p o rting principles, Report design, layout and appearance, Report communication and feedback mechanisms and Ve r i fication; and n

Detailed contents: Financial management, Eco-effi c i e n cy, Sustainability management, Operational performance, Competence management, Innova t i o n s , S t a keholder performance and Product perform a n c e .

Findings

The overall Sustainability Reporting performance of the eleven South A f r i c a n
companies is summarised in the spider diagram on the next page. The results are
reflected as a percentage of the total which could have been scored for a given report
in a given categ o ry.

The low overall score of 37% suggests considerable room for improvement if South African companies wish to benchmark against international standards.

The we a kest areas of reporting are ex t e rnal ve r i fication, product performance and i n n ovations. In general, the lack of quantitative data is still a problem, especially relating to financial management.

The strongest aspects of reporting are the CEO statement, report design, layout and appearance and sustainability management.

SASurvey of Environmental and Social Reporting – 2000

E S KOM (env i r o n m e n t a l )

Huntsman Ti oxide (env i r o n m e n t a l )

SmithKline Beecham (env i r o n m e n t a l )

BMW South Africa (env i r o n m e n t a l )

South African Breweries plc and Pick ‘n Pay (social, tied score)

Old Mutual (social)

SAFCOL (env i r o n m e n t a l )

Ta ble Mountain Aerial Cabl eway Company Ltd (env i r o n m e n t a l )

S o u t h e rn Sun Group (social)

1 0 Nissan South Africa (env i r o n m e n t a l )

KPMG Sustainability Reporting Scorecard : South Africa’s 2000 ratings

Financial management

Product performance

Eco- efficiency

34%

27%

18%

Stakeholder performance

27%

44%

Sustainability management

17%

24%

38%

Operational performance

Innovation

Competence management

A more detailed description of the KPMG Sustainability Reporting Scorecard is contained in A n n exure B.

SASurvey of Environmental and Social Reporting – 2000

Environmental Reporting Awards

Based on the analysis and scoring by the University of Pretoria against their checklist of environmental and social disclosure in annual reports, congr a t u l a t i o n s are due to the following top perform e r s :

n n

For the Best Environmental and Social Disclosure in an Annual Report (Industrial Categ o ry ) :

–

Gold Award – ISCOR Ltd

–

S i l ver Award – ESKO M

–

Bronze Award – SASOL Ltd

For the Best Environmental and Social Disclosure in an Annual Report (Mining Categ o ry ) :

–

Gold Award – Anglo American Platinum Corporation Ltd

–

S i l ver Award – Palabora Mining Company Ltd

–

Bronze Award – Durban Roodepoort Deep Ltd

Based on the analysis and scoring by the University of Pretoria against the KPMG Sustainability Reporting Scorecard, we also congratulate the following top p e r f o rm e r s :

SASurvey of Environmental and Social Reporting – 2000

For the Best Corporate Environmental Report

–

Gold Award – ESKO M

–

S i l ver Award – Huntsman Ti ox i d e

–

Bronze Award – SmithKline Beecham

Conclusion

ENVIRONMENTAL REPORTING AWARDS ENVIRONMENTAL REPORTING AWARDS ENVIRONMENTAL REPORTING AWARDS ENVIRONMENTAL REPORTING AWARDS ENVIRONMENTAL REPORTING AWARDS ENVIRONMENTAL R E P O RTING AWARDS ENVIRONMEN South African companies are increasingly players in the global marketplace, wh e t h e r as ex p o rters or subsidiaries of multinationals. It is an operating environment in wh i c h s t a keholders have moved up the ladder of required corporate assurance, from the old “ t rust me” model to the more recent expectations of “tell me” and “show me”.

Hence, the need for transparency is a fi rm trend fuelled by the mounting campaigns of civil society pressure groups. Their calls are for democratic principles to be extended into the corporate arena, through greater private sector accountability for the impacts of their activities on society and the environment.

These principles are like ly to be increasingly tested by the South African courts and tried in the media, as the country seeks to follow its political miracle by a simultaneous economic and social transformation. Many believe companies are the o n ly institutions with the capacity and flexibility to eff e c t ive ly respond to these c h a l l e n g e s .

The drivers for change will be not so much companies’ sense of social responsibility, but organised demands by international business partners and financiers, tog e t h e r with social and environmental activist groups seeking to enforce their constitutional r i g h t s .

This survey shows that only a portion of South A f r i c a ’s largest companies have b egun to demonstrate their accountability through credible environmental and social r e p o rting. While those who have performed well should be recognised and congr a tu l a t e d, on the whole, disclosure in annual reports still tends to be superficial, and detailed separate reports remain few in number and lagging against intern a t i o n a l s t a n d a r d s .

Before mandatory reporting defines the agenda, these companies and their peers will need to do more to convince the country ’s stakeholders that they are capable of s e l f - r egulation and true sustainability performance. Meanwhile, stakeholders have an equal responsibility to make their information needs known and to help companies d e fine what “sustainability” means in a developing country contex t .

SASurvey of Environmental and Social Reporting – 2000

Annexure A

Social and Environmental Disclosure Corporate Rankings (based on 1999 annual reports)

B e l ow, the Top 25 performing Industrial and Mining companies are ranke d, based on the analysis and scoring by the University of Pretoria against their checklist of e nvironmental and social disclosure in annual reports. Last ye a r ’s top 50 rankings, re-computed to be comparable to this ye a r ’s Industrial and Mining categories, are included in brackets. Howeve r, it should be noted that this ye a r ’s scoring checklist has been substantially expanded beyond environmental disclosure only, to include social criteria, including health, safety, ethics, employees community relations.

R a n k i n g Financial Mail top 100 Industrial companies 2 0 0 0 ( Top 25 position in 1999)

R a n k i n g Top Mining companies 2 0 0 0 ( Top 25 position in 1999)

ISCOR Ltd (5)

ESKOM (1)

Anglo American Platinum
C o r p o r a t i o n Ltd (2)
Palabora Mining Company Ltd (7)

3 4

SASOL Ltd (3)
The South African Breweries Ltd (4)

3 4

Durban Roodepoort Deep Ltd (6) Impala Platinum Holdings Ltd (14)

5 6

SAPPI Ltd (10)
Illovo Sugar Limited (NR)

5 6

Billiton plc (24)
Anglo American plc (11)*

7 8

AECI Ltd (2)
Highveld Steel & Vanadium Corporation Ltd (11)

7 8

Anglovaal Mining Ltd (NR) Anglogold Ltd (1)

9 1 0

Pretoria Portland Cement Company Ltd (12) Pick ‘n Pay Stores Ltd (NR)

9 1 0

Gold Fields of South Africa Ltd (34) Duiker Mining Ltd (13)

1 1

The Tongaat-Hullett Group Ltd (NR)

1 1

Lonmin plc (NR)

1 2

Chemical Services Ltd (NR)

1 2

1 3

Development Bank of South Africa (15)

1 3

The Associated Manganese Mines of South Africa Ltd (26) Harmony Gold Mining Company Ltd (25)

1 4 1 5

Umgeni Water (7)
Del Monte Royal Foods Ltd (NR)

1 4 1 5

Assore Ltd (20)
De Beers Consolidated Mines Ltd (9)

1 6 1 7

EnviroServ Holdings Ltd (8)
Distillers Corporation SA Ltd (NR)

1 6 1 7

Kelgran Ltd (NR) Avgold Ltd (NR)

1 8

Amalgamated Beverage Industries Ltd (NR)

1 8

Northam Platinum Ltd (32)

1 9 2 0

Rembrandt Group Ltd (NR) Group Five Ltd (NR)

1 9 2 0

Trans Hex Group Ltd (27) Petra Mining Ltd (NR)

2 1 2 2

JD Group Ltd (NR)
Cadbury Schweppes (SA) Ltd (16)

2 1 2 2

Kroondal Platinum Mines Ltd (NR) Gem Diamond Mining Corporation Ltd (NR)

2 3 2 4

Kersaf Investments Ltd (NR) Stellenbosch Farmers Winery Group Ltd (NR) Dunlop Africa Ltd (NR)

2 3 2 4

Barplats Investments Ltd (NR)
Ocean Diamond Mining
Holdings Ltd (NR)
Marlin Corporation Ltd (NR)

2 5

NR = not ranked in 1999 top 50

* 1999 ranking as Anglo American Corporation of South Africa Ltd

SASurvey of Environmental and Social Reporting – 2000

Annexure B

KPMG Sustainability Reporting Scorecard

K P M G ’s intern a t i o n a l ly developed Sustainability Reporting Scorecard synthesizes the reporting concepts and criteria of the Balanced Scorecard, the UNEP/SustainAbility 50 Reporting Ingredients and the GRI Sustainability R e p o rting Guidelines. The scoring framework uses a ‘modular structure’, allow i n g for different requirement combinations and maximum scores for env i r o n m e n t a l , HSE, social, and sustainability reports for both manufacturing and non-manufa cturing reporting entities.

The Scorecard contains a maximum of 127 questions, which va ry depending on the r e p o rt to be assessed. The questions are organised into 8 groups of criteria. T h e criteria for each group are briefly described below.

Financial Manage m e n t : This dimension aims at assessing the financial implication of sustainability factors. It refers to topics like present and future costs, ad-spend, liabilities, gove rnment financial instruments (e.g. taxes, fines, subsidies) and their impacts on the reporting entity’s financial position, ex t e rnal costs, financial benefi t s related to sustainability improvement, charitable contributions, donations and sponsoring activ i t i e s .

E c o - e ffi c i e n c y : This dimension aims at assessing the eco-effi c i e n cy measures put in place by the reporting entity from a qualitative perspective. The questions refer to e n e rg y, material and water effi c i e n cy programmes, property management, activ i t i e s aimed at reducing any sort of discharge, dematerialising products or extending their d u r a b i l i t y, as well as the use of eco-effi c i e n cy indicators.

Sustainability Manage m e n t : This section mainly aims at evaluating the description of the key components of the reporting entity’s management system. Of the questions included in it, some specifi c a l ly refer to management systems in place, their conformity to national or international standards and ex t e rnal cert i fi c a t i o n , while others check the legal compliance of the reporting entity and its adherence to i n t e rnal policies.

O p e rational Pe r fo r m a n c e : This section aims at illustrating how thoroughly the r e p o rting entity describes its operational environmental, health, safety, social and/or sustainability performance. The questions assess the scope, quality and degree of s p e c i ficity of the information concerning inputs, emissions, waste, transport a t i o n , packaging, as well as health and safety data and disclosure activities concern i n g business ethics, employment practices, community relations and ethical sourcing.

Competence Manage m e n t : The questions included in this dimension are used to assess the learning and gr owth dimension within the reporting entity. This section evaluates disclosure practices related to training programmes, internal recog n i t i o n systems for outstanding performance and key personnel specifi c a l ly appointed for e nvironmental, health and safety, and social issues.

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I n n ova t i o n s : This section aims at evaluating the reporting entity’s disclosure practices concerning innovations of products, processes or services, implementation of env i r o n m e n t a l ly - d r iven technologies and R&D activ i t i e s .

S t a keholder Manage m e n t : This section is designed to assess the extent to which the r e p o rting entity describes its relationship with both internal and ex t e rn a l s t a keholders, and how the relationship is managed. Sustainable Development issues are also included.

P roduct Pe r fo r m a n c e : This section is designed to evaluate the quality and the
d egree of specificity of the information concerning the reporting entity’s Life Cycle
management. The questions refer to Eco-Design activities, use of Life Cycle
Assessments, product stewardship and Eco-labelled products.

Besides the already cited 8 groups of criteria, another 6 extra criteria are included in the questionnaire. T h ey aim at assessing the structure of the report and relate to the: CEO Statement; Ove rv i ew of the reporting entity; Reporting principles; Report design, layout and appearance; Report communication and feedback mechanisms, and Ve r i fi c a t i o n .

Each of the questions in the questionnaire is wo rth from 0 to 5 points. The scale refers to the presence or absence and the degree of specificity of each of the i n f o rmation items. A score of 0 indicates that the item is not report e d, while a score of 5 is awarded if the required qualitative and quantitative information is prov i d e d, comparisons are made, future targets are set and, in addition to this, if the specifi c i n f o rmation has been benchmarked and independently ve r i fi e d .

Detailed evaluations of corporate environmental, HSE, social, and sustainability reports using the KPMG Sustainability Reporting Scorecard are for sale on request, including those ranked in this survey.

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Annexure C

The Social Accounting Unit of the Department of Accounting of the University of Pretoria Professor Quintus Vo r s t e r, who is curr e n t ly the head of the Department of Accounting at the University of Pretoria, created the Social Accounting Unit in 1993. Social Accounting was regarded as an important gr owth area in A c c o u n t i n g , which needed tracking to highlight its emergence as a vital part of the leg i t i m i s a t i o n of organisations in a changing social env i r o n m e n t .

The goals of the unit are to: n track changes in social reporting over time; n track changes in stakeholder perceptions of social report i n g ; n d evelop and highlight new methods of social accounting; n raise general awareness of social issues in business; and n create, develop and maintain a research database that facilitates continued research outputs and confi rms the position of the Department as the leader in this important research area.

The exceptional research output from the Department in this field has assisted in it becoming the leader in terms of total research output by South African unive r s i t y accounting depart m e n t s .

Members of the business community often consult the Unit and papers are presented a n n u a l ly at various local and international conferences.

Should you require further information, please contact:

Charl de Vi l l i e r s Department of Accounting University of Pretoria Pretoria, 0002 Tel: (012) 420 3818 Fax: (012) 362 5142

Email: cdeville@hakuna.up.ac.za

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Annexure D

The Association of Chartered Certified Accountants (ACCA)

ACCA is the largest examining and qualifying professional accountancy body to operate on a global basis. As of mid-2000 ACCA had some 250 000 members and students working in over 160 countries.

ACCA has branches and staffed offices in 25 locations including Australia, China, Hong Kong, Malaysia, Pakistan, Singapore, South Africa and Trinidad. ACCA’s European interests are managed by a full-time Head of European Affairs based in Paris.

ACCA is the first accountancy body in the world to offer its students the o p p o rtunity to take their examinations based on international standards of accounting and auditing.

ACCA has been active in environmental and social issues since 1990. It has held an annual UK environmental reporting award scheme eve ry year since 1991. In 1996 it initiated a European version of the scheme that now invo l ves 11 member states. In 1999 ACCA and the Institute for Social and Ethical AccountAbility launched a new social reporting awa r d .

ACCA is a member of the Steering Committee of the Global Sustainability R e p o rting Initiative (GRI) and is an active contributor to the work of the E nvironmental Task Force of the European Federation of Accountants (FEE).

For further information on ACCA’s activities in the environmental and social areas, please contact Rachel Jackson on +44 207 396 5845 or see ACCA’s website at www. a c c a . o r g . u k

For a South African related query, please contact:

Mashudu Ramano

ACCA South Africa Representative PO Box 1060 Johannesburg, 2000

Tel: (011) 646 7435 Fax: (011) 646 6932

Email: accajhb@iafrica.com

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Annexure E

Sustainability Services of KPMG

KPMG is one of the wo r l d ’s largest global professional services organisations, with 103 000 professionals in 159 countries and revenues of US12.2 billion in 1999. Hence, we are well placed to assist organisations to respond pragmatically to the sustainability challenge. The heart of our approach is to relate environmental, social, ethical, economic and financial issues to the core strateg y, management objective s and operational processes of any organisation.

Our service offerings are seen to fall into three broad categ o r i e s : n S t r a t egic advice; n

Implementation; and n A s s u r a n c e .

S p e c i fi c a l ly, KPMG offers the following Sustainability A d v i s o ry and A s s u r a n c e S e rv i c e s :

Business Ethics Consulting

KPMG has ethics and integrity practices comprising more than 30 professionals in 9 countries. In South Africa, the Business Ethics Consulting Unit has offices in Cape Town and Johannesbu rg and provides the following core serv i c e s : n

I n t egrity T h e r m o m e t e r – applying an interactive, web-based tool that measures the level of integrity within an orga n i s a t i o n .

C a rds on the Tabl e – introducing and facilitating a game of ethical dilemmas to sensitise staff to their ethical va l u e s .

Codes of Conduct – developing and implementing social and ethical policies and codes of conduct to guide orga n i s a t i o n s .

A c c o u n t ab i l i t y – advising on, developing and conducting social and ethical accounting, auditing and report i n g .

Ethics Helpline – assisting with the design and implementation of an intern a l helpline, or offering an independent call-centre serv i c e .

Impact A s s e s s m e n t – conducting ethics impact assessments on the effects of policies, procedures or specific actions.

Tra i n i n g – providing a one day Introduction to Business Ethics course, as we l l as Ethics Officer training.

“ Just right” services – supplying tailored services relating to ethics policy, communications and training.

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Environmental Health & Safety (EHS) Services

KPMG has environmental practices comprising more than 160 professionals in 2 6 countries. In South Africa, our EHS Unit has offices in Cape Town, Durban and J o h a n n e s bu rg and provides the following core serv i c e s :

S t ra t egy and gov e r n a n c e – conducting strategic analyses and corp o r a t e g ove rnance assessments to position EHS management for the future.

M a n agement systems and standard s – designing and implementing management systems for compliance with ISO 14001 and OHSAS 18001.

Audits and assessments – auditing compliance of EHS management systems and performance with legal and other standards, including due diligence inve s t igations. Our EHS auditors are among the most qualified and experienced in Africa, with more than 6 000 combined EHS audit hours (as at January 2000).

Finance and accounting – integrating EHS issues into financial and accounting systems to provide essential management inform a t i o n .

Reporting and verifi c a t i o n – benchmarking, advising on and verifying EHS data systems, disclosures and report s .

Ethics Line – providing an independent call-centre facility to manage s t a keholder communications more effi c i e n t ly and eff e c t ive ly.

Climate ch a n ge and the Kyoto Pro t o c o l – providing strategic advice and ve r i fication services related to flex i ble instruments for greenhouse gas emissions r e d u c t i o n .

B r i e fings and tra i n i n g – supplying tailored presentations and courses on all aspects of our EHS serv i c e s .

R e s e a rch and bench m a rking – conducting tailored research and benchmarking on all subjects related to our EHS serv i c e s .

For further information, please contact:

Environmental, Health & Safety Unit Wayne Vi s s e r

Business Ethics Consulting Daniel Malan

Tel: (021) 423 8940
Fax: (011) 423 8937
Email: wayne.visser@kpmg.co.za
(021) 419 4040
(021) 419 7503
d a n i e l . m a l a n @ k p m g . c o . z a

Website: http://www. k p m g . c o . z a

SASurvey of Environmental and Social Reporting – 2000

A c k n o w l e d g m e n t s

The primary sponsorship and authorship of the 2000 Survey of Environmental and Social Reporting in South Africa, as well as the Sustainability Reporting Scorecard were provided by

The analysis of environmental and social disclosure in South African annual and separate environmental and social reports was conducted by

Secondary sponsorship of the 2000 Survey of Environmental and Social Reporting in South Africa were provided by

2000 Survey of Environmental and Social Reporting in South Africa

Contents

Executive Summary

Introduction

Background and purpose

Why report on environmental and social issues?

International Trends

Sustainability reporting

Sustainability re p o rting para m e t e r s

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Greenhouse gas reporting

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Tr a d i n g ?

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Internet reporting

Disclosure in Annual Reports

Methodology

Findings

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Table of findings: Environmental and social disclosures in 1999 annual reports

1 9 9 8

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4 2 %

1 9 9 8

9

Disclosure in Separate Reports

Methodology

Findings

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44%

Innovation

Environmental Reporting Awards

Annexure A

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Annexure C

Mashudu Ramano

Business Ethics Consulting

Environmental Health & Safety (EHS) Services