Integrated Annual Report 2021
Integrated Annual Report 2021
Responsible
business
KEY FOCUS AREAS

Responsible water use

  • Water use efficiency

Climate change mitigation and adaptation

  • Renewable energy and operational energy efficiency
  • Net zero emissions by 2040 roadmap
  • Energy-saving and alternative energy products

Reducing waste and pollution

  • 100% recyclable Private Brand packaging by 2025
  • Net zero waste by 2030
  • Consumer electronic recycling

 

Environmental advocacy and product screening

  • Seafood screening and poultry welfare programmes
  • Sustainable Private Brand pulp and paper sourcing

Economic inclusivity and opportunity

  • Supplier Development
  • Focus on using local businesses as suppliers
  • Identification of localisation opportunities
  • Broad-Based Black Economic Empowerment

CSI

  • Combatting hunger
  • Reducing the Covid-19 health risk
  • Contributing to better education (Early childhood development and support of promising female academics)

As part of our approach to being a responsible business, we focus on identifying opportunities to minimise our footprint and make a meaningful contribution to the achievement of significant global and local sustainability objectives.

 

In recognition of the increasing pressure that our planet is under to sustain us, we understand that we need to increase our aspiration and accelerate our efforts. To do this, we have, together with Walmart, embarked on a journey to become a regenerative Company. One that contributes to leaving the environment and communities in which we operate, in a better position than we found them.

Aligned with this we have identified 12 SDGs where we believe we can make a meaningful contribution and against which we assess and report our progress. Our contribution to these SDGs is addressed in our responsible business (SDGs 2, 3, 4, 6, 7, 8, 12, 14, 15 and 17) and our people (SDGs 5 and 8) sections of this report.

 

 

Read more detail on our people

The content included in responsible business is based on Total Group.

 

Responsible water use

 

Water use efficiency

Although we are modest water users, given the water security challenges faced in many of the areas in which we operate, including large parts of the Eastern and Northern Cape, we continue to implement a suite of water conservation initiatives to minimise our usage.

Having started with Makro stores in 2019, we are expanding our real-time water metering coverage and are in the process of installing independent water meters at all DCs and garden centre stores. This project will be completed in the first quarter of 2022. In addition to helping reduce day-to-day consumption, our experience in Makro has taught us that real time water meters enable us to more rapidly identify water leaks before we incur significant water costs and wastage. One example of this was the detection of a leak caused by an overflowing pressure valve at our Sunninghill head office, which we estimate will save 3.5 million litres of water per annum.

We also continue to offset potable water use by using rainwater and condensate harvesting systems at 91 Makro and Builders stores and DCs. Additionally, all new standalone stores and DCs incorporate rainwater harvesting capabilities, while both new and retrofitted Makro stores feature refrigeration plants with integrated condensate capture and reuse systems. In 2021, we harvested an estimated 30 million litres of water across our South African operations, cumulatively reducing water consumption from potable sources by 121 million litres over the last five years.

Another area of focus is helping our customers reduce their consumption through the cost-effective water-saving devices we sell in our stores. The purchase of these devices has reduced our customers’ water consumption by approximately 2.5 billion litres per annum.

 

 

 

 Climate change mitigation and adaptation

 

Net zero emissions by 2040

We have aligned to Walmart’s goal of achieving net zero emissions by 2040. To achieve this, we have prioritised three focus areas:

  • minimising our carbon emissions
  • increasing the use of commercially viable renewable energy alternatives
  • introducing low emissions equipment and technology into our operations

 

Operational energy efficiency

Grid electricity accounts for 80% of our Group emissions and is a significant contributor to business operating costs, which is why optimising energy efficiency in our operations continues to be an area of focus. During 2021, we increased centrally managed real-time energy monitoring to 99% of all South African operations while retrofitting a further 45 Game stores with building management systems. This centralised utilities monitoring platform enabled us to implement a targeted behavioural energy management programme in Makro, Game and Builders, which together with the installation of energy efficient equipment saved R156 million in electricity costs in 2021.

During the period we also commenced a fridge cabinet door retrofit at 16 Wholesale sites, which we estimate will reduce refrigerator-related energy costs by approximately 40%, and retrofitted 18 stores with energy-efficient LED lighting, achieving an average electricity-use reduction of 37%. Overall, we saw a 20% improvement in South African energy efficiency per square metre and an 18% reduction in overall global scope 1 and 2 emissions.

To assist our customers to save energy and reduce their household expenses, we offer a wide range of energy efficient and alternative energy product options. In 2021, our customers purchased over five million energy-saving products which we estimate helped save customers 30 million kWh and R54 million in electricity costs. One example of this is the sale of rechargeable batteries at Game, which replaced the sale of approximately 52 million single-use batteries, equating to the reduction of 1,000 tonnes of raw material and over 5,500 tonnes of CO₂ emissions.

 

Our renewable energy programme

We are accelerating our adoption of renewable energy to reduce our reliance on fossil fuels and lower our emissions. In 2021, we commissioned two new solar plants, one at our new Builders Warehouse Midrand store and the other at our relocated Makro Gqeberha store, increasing the Group’s annual electricity production by an estimated 800,000 kWh. During optimum conditions, our plants can provide up to 100% of the sites electricity needs. This is the case with our Builders Midrand store which obtains 70% of its total daily power requirements from the solar plant and runs almost entirely on solar power during the middle part of the day.

Additionally, a further seven plants with an estimated annual production capability of 6.6 million kWh were approved for installation during 2022.

Solar energy not only reduces our grid-related emissions and directly reduces our energy costs but, because our plants are generator-integrated, also assists as a supplementary electricity source during power interruptions, which further reduces emissions and saves on diesel and generator maintenance costs. During the course of 2021, 4.2 million kWh of renewable energy was generated at 11 solar-equipped sites across the Massmart Group. This brings our total renewable energy generation to 19 million kWh since 2016, making us one of the largest producers of onsite renewable energy in the South African retail sector.

Notwithstanding our immediate focus on deploying onsite solar plants at our largest sites, we appreciate that to scale our efforts we need to incorporate wheeled renewable energy and energy storage technologies, where viable. We will be investigating opportunities to pilot these in the coming year.

 

Our emissions footprint

Our goal to achieve net zero emissions is supported by a zero emissions roadmap that plots a pathway towards reducing reliance on hydrocarbons and synthetic refrigerants, while lowering costs and boosting efficiencies and reliance on newer, cleaner technologies.

To ensure that we make progress towards achieving our goal we track our emissions annually, with 2021 being the tenth year we have done so. We remain committed to transparency and disclosure of our verified emissions publicly, as well as reporting them as part of Walmart International’s annual CDP submission.

 

  • Scope 1 and 2 emissions are externally verified by GCX Africa
  • Scope 1 emissions relate to direct emissions resulting from Group-owned vehicles, generators and fugitive emissions across the Group (SA and the rest of Africa)
  • Scope 2 emissions are derived from electricity consumption from grid-tied sources. Energy consumption data is annualised and normalised. Expected margin of error is 10-15%. Eskom emissions factor updated to 1.06
  • Some Scope 1 and 2 data are estimates based on historical known values. This is due to a lack of accurate data logging capacity and functionality in some parts of the Business. Massmart is currently restoring lost utilities-logging and refrigerants reporting functionality across the Group with energy monitoring to be completed by end-2021
  • Total Group sales are used to calculate Scope 1 and 2 emissions’ intensity per Rand million (Rm)
  • The square metre (m2) is reported as a function of Total Group gross lettable area

 

 

 

 

 

Reducing waste and pollution

 

Reducing waste

Supporting a shift to a more circular economy and minimising waste generated in our value chain is critical if we wish to reduce pollution and improve resource utilisation.

Our objective for our operations is to achieve net zero waste by 2030. Through initiatives including paper, plastic and board recycling, organics composting and donations of non-saleable food to Gift of the Givers and FoodForward SA, we diverted 54% (approximately 14,600 tonnes) of our waste from landfill in 2021.

In particular, we have made good progress in organics composting, which we have grown from 20 tonnes to 1,000 tonnes per annum and overall, we have seen a 10% decline in our total estimated waste generation since 2017. However, diversion options for building waste remain a challenge and we continue to look for commercially viable alternatives to address this waste stream.

In 2021, in partnership with 54 electronic brands, we completed the re-launch of Makro’s Electronic Waste Recycling Programme at 19 Makro stores around the country. We have seen great support from our customers and collected over 40,000 kilograms of e-waste during the year, making this South Africa’s largest voluntary e-waste take back programme.

During 2021 we also transitioned to more sustainable shopping bags across all South African stores. Our new bags are made from 100% recycled material and are themselves fully recyclable. Additionally, we have changed the design of the bags to reduce inks and colours, allowing us to increase production efficiencies and reduce resource use during manufacture. We estimate that the transition from virgin to recycled material plastic bags has achieved a 642 tonne decrease in virgin plastic usage.

 

 

Environmental advocacy and product screening

 

Seafood screening

To ensure that we do not source any Southern African Sustainable Seafood Initiative (SASSI) or International Union for Conservation of Nature (IUCN) red-listed species, we conduct sustainability screening of all the fresh, frozen and canned seafood that we sell.

As part of this process, we make use of genetic identity testing to verify the species and origin of the seafood products we are supplied. In partnership with the University of the Witwatersrand, with whom we have been working since 2019, we completed DNA analysis of 14 seafood lines in 2021, which included sampling all Private Brand lines and multiple national brand products. Species identified through this process are reviewed against the World Wide Fund for Nature (WWF) SASSI list. Results are additionally referenced against the inventory maintained by the IUCN-Red List of Threatened Species. Despite no red-listed species being detected across all samples, three previously undisclosed species were identified during testing, which we are investigating in consultation with the relevant suppliers.

Given the continued pressure that fisheries are under, we recognise that we need to work more closely with suppliers to improve fishery and broader ecosystem health. Although this is a highly complex issue, in 2021 we prioritised deeper engagement with leading suppliers, to identify opportunities to drive more sustainable practices in our local supply chain. Following this, we will be working with NGOs and suppliers to address concerns raised regarding the health of the west coast sardine fishery and the marine bird populations that rely on this fishery.

 

 

 

 

Private Brand products

Review of Private Brand pulp and paper-based products

In order to address deforestation and better protect forest ecosystems, we have commitment to using 100% third-party certified sustainable pulp and paper-based products in our Private Brand offering.

Following a detailed assessment of our current Private Brand product range, we used approximately 5,200 tonnes of pulp and paper based fibre in 2021, of which 99.8% comprised recycled or certified sustainably sourced virgin material. Notably, 100% of the timber used in our two largest fibre based Private Brand products, office paper and toilet tissue, is sourced from Forest Stewardship Council (FSC) certified plantations.

Sustainable Private Brand packaging

We require that our Private Brand packaging is 100% recyclable, reusable or industrially compostable by 2025. In 2021, we conducted our second Private Brand packaging assessment. As part of this assessment, we achieved a 16% increase in supplier participation and collected and reviewed packaging information for over 6,900 products, accounting for 71% of total Private Brand sales. The assessment indicated that approximately:

  • 92% of Private Brand packaging is regarded as locally recyclable
  • 22% of packaging is compostable
  • 13% of packaging contained recycled content
  • 9% of packaging is bio-based

Additionally, we conducted an in-depth cost and sustainability review of over 300 products covering among other aspects: rationalisation opportunities, recycling optimisation, cost reduction and product protection. As a result of this, we have identified 65 products where opportunities exist to transition to more sustainable material and lower costs. Among these, one of the most immediate opportunities is the removal of blister packaging from selected Grip hand tool product lines. We will work with our Private Brand team, merchants and suppliers to implement the identified changes during the course of 2022.

Poultry welfare

In 2018 we introduced a poultry welfare programme to assist in improving welfare conditions on the egg production facilities from which we source. Using the services of a specialist poultry vet we have thus far completed welfare assessments covering 21 farms, housing over 4.5 million birds. The purpose of this programme is to drive immediate improvements in bird welfare, prioritising issues such as access to adequate, good quality food and water; overcrowding; ventilation; and lighting.

In 2021, we completed poultry welfare audits at six layer farms, representing 45% of our egg procurement. As part of the audit process, and as referenced in last year’s report, in 2021 we placed additional focus on the treatment of birds in cull depots and on end-of-lay bird handling.

In 2022, we plan to maintain the programme while diversifying the suite of farms in the audit scope, focusing on smaller, more rurally-located production facilities.

 

Economic inclusivity and opportunity

 

Supplier Development

The aim of the Massmart Supplier Development Programme (SDP), which was established in 2012, is to provide opportunities to small and medium manufacturing enterprises. The programme’s current portfolio of 21 businesses manufacture a variety of products including chef wear, toilet seats, detergents, adhesives, cooler boxes, charcoal and paint. We have purchased in excess of R1.5 billion since the inception of the programme.

The Massmart SDP gives preference to Black-owned and Black women-owned enterprises. The programme provides the participating businesses with a range of support including:

  • Retail and business management training
  • Assistance in meeting product quality standards to help increase overall competitiveness
  • Investing in bespoke manufacturing equipment to build capacity
  • Provision of upfront loans and early payment arrangements to address cash flow challenges
  • Process engineering using specialist industrial engineers to increase efficiencies and competitiveness

A key focus of the SDP is supporting local business and finding localisation opportunities so we can increase the number of local products on our shelves. In 2021, we completed a detailed product localisation market assessment covering more than 2,500 SKUs, from which we have identified 14 immediate product localisation opportunities. These are: office and flat pack furniture, gym and fitness products, pool accessories, trailers and campers, and infant and pet beds. Of these, we have already transitioned to the localised supply of selected flat pack furniture products in Makro.

 

 

 

 

 

Broad-Based Black Economic Empowerment (B-BBEE)

In 2021, we maintained our Level 4 contributor status with a B-BBEE score of 80.15, for the 2020 financial period. This remains the highest score achieved by a JSE-listed retailer. Consistent with our focus on providing opportunities to small and emerging businesses and supporting the communities in which we operate, we again achieved full points for enterprise and supplier development and corporate social investment. Our B-BBEE score makes it possible for customers to claim 100% of their spend with Massmart as going towards B-BBEE.

We have noted a decline in many of our suppliers B-BBEE scorecards following the introduction of the amended Codes of Good Practice. This is in turn impacting our ability to maintain our current scorecard performance. As a consequence, while our internal focus on transformation remains unchanged, we forecast a one level drop in score in our upcoming verification.

 

 

 

 

Corporate social investment

 

Combatting hunger

During 2021 we entered into a partnership with FoodForward SA, to increase food redistribution from stores through their Food Share programme. Through this programme, stores are partnered with local beneficiary organisations who collect good quality non-sellable food for redistribution. During 2022, these initiatives will be expanded to incorporate stores countrywide.

In response to the civil unrest in KZN, Walmart, the Walmart Foundation and Massmart contributed R13 million in cash and in-kind donations to hunger relief organisations supporting those that were impacted. As part of this contribution, Walmart and the Walmart Foundation donated R7.5 million to Gift of the Givers and FoodForward SA for the purchase of relief aid and to replace equipment that was lost and damaged. In addition, Massmart delivered 210 tonnes of food (comprising peanut butter, baby formula, pasta, rice and canned protein) to Gift of the Givers and FoodForward SA, to help alleviate heightened food insecurity following the civil unrest.

 

 

 

 

 

 

 

 

 

Supporting Government’s efforts to reduce the Covid-19 health risk

At the start of 2021, when vaccine registrations opened, Massmart provided vaccine registration services across our facilities to assist customers with the registration process. When vaccines became available, we partnered with the National Department of Health across six provinces to set up temporary vaccination sites at stores to increase vaccine access in underserved communities. Through these sites approximately 36,372 vaccines were provided to Massmart customers. In addition, working with the Clicks Group Ltd, we established temporary vaccination sites at our larger stores to help increase vaccination uptake rates among our associates.

 

 

 

 

Contributing to better education

We have continued our long-standing partnership with HOPE Worldwide to enable better education outcomes for vulnerable children between the ages of 0-6 years. HOPE Worldwide works to support Early Childhood Development (ECD) centres in underserved communities and assist primary caregivers with young children who have limited access to education facilities.

During 2021, we, together with Hope Worldwide, supported a total of 272 ECD centres catering to 12,586 children. This support included: teacher training; infrastructure refurbishment and maintenance; and supplementary nutritional support for vulnerable learners. During the period, 48 ECD centres were fully refurbished and 14 centres were successfully registered to receive Government subsidies. In addition, 2,625 parents were enrolled in 145 parent support groups across seven provinces.

In addition to our focus on ECD, we wish to play a role in supporting promising female academics and assist in supporting greater gender and racial representation in South African academia. With this in mind, we have partnered with the University of the Witwatersrand to assist the Female Academic Leadership Fellowship. During 2021, we provided research funding for social interest research into GBV and alcohol abuse and dependency by emerging female academics.