Environmental Report
OVERVIEW
The operational impacts on the environment associated with the group’s retail and financial service activities are relatively low. In terms of direct impacts, the group’s activities consume resources, energy and water, and contribute to the generation of product and packaging waste. While the environmental impacts do not have significant financial implications for the business, the group recognises that environmental responsibility is part of good business practice and to this end TFG is committed to developing ways to reduce its impacts more systematically.
Over 80% of the total carbon emissions we generate relates to the use of purchased electricity and is therefore our key focus area for reducing our impact. However, approximately 65% thereof relates to shopping centre air-conditioning over which we have no control. Our key initiative relates to the conversion of our lighting systems to lower consumption units, which we have undertaken widely across the business.
The group is a relatively small purchaser and hence its ability to promote and influence greater environmental awareness and responsible environmental practices amongst its suppliers, is limited.
ENVIRONMENTAL MANAGEMENT
The group’s environmental performance is managed by an environmental committee comprising senior managers from all areas of the business. The committee meets monthly and reports quarterly to the chief executive officer and three members of the operating board. A member of the operating board has responsibility for setting environmental policy, objectives, targets and reporting processes. The group has an environmental policy and will be developing an environmental strategy, in line with the group’s threeyear sustainability roadmap which has been developed and will be implemented and integrated across the group during 2012.
As we do not envisage a significant movement (over the short to medium term) to products differentiated on ethical or environmental criteria within our sector, our group business strategy has deliberately focused on prioritising governance, optimisation and efficiency initiatives, broad-based empowerment, and employee awareness and supply chain issues, over productrelated or “green branding” initiatives, which currently receive a lesser emphasis.
An environmental risk assessment of the group’s operations is undertaken annually and performance objectives are set on an annual basis. An important development in the past year was the introduction of a revised auditing process for suppliers, which includes ensuring that all environmental contractual obligations are being met.
The group’s internal environmental portal is an effective tool for providing staff with information covering environmental awareness, facts and tips, policy documents and guidelines, updates on the group’s environmental sustainability journey, an interactive facility for feedback and suggestions, links to sources of environmental and sustainability news and organisations, and retail industry sustainability news.
We have made progress in implementing more systematic approaches for measuring key environmental performance data, with a longer-term view to setting quantitative performance targets.
Recognising the increasing interest shown by analysts and SRI investors around environmental performance issues, the group commissioned a third annual carbon inventory (or “carbon footprint”) assessing the greenhouse gas (GHG) emissions generated through its business activities. Our carbon footprint is calculated after the production of the annual report. The group is in the process of calculating its carbon footprint for the financial year ending March 2011. A summary comparison of the group’s carbon footprints for the financial years ending 31 March 2010, 2009 and 2008, is provided later in this review. The 2008 report is used as the baseline "carbon footprint" calculation to compare the 2009 and 2010 report, and future carbon inventories, as the group seeks to reduce the GHG emissions associated with its activities.
The key efforts to reduce the group’s GHG emissions focus on reducing our energy demands and reducing waste production through carton reuse.
This year the group again submitted a private response to the Carbon Disclosure Project (CDP), the global initiative in partnership with Bank of America – Merrill Lynch, PricewaterhouseCoopers and Bloomberg, aimed at accelerating carbon reporting and emission reductions.
ENVIRONMENTAL PERFORMANCE
TFG CARBON FOOTPRINT
TFG's carbon footprint calculations for the period 1 April 2009 to 31 March 2010 covered the TFG head offices, regional offices, distribution centres, and retail stores, 100% of TFG’s employees, including all permanent, contract, casual and flexitime employees.
Operational activities covered include:
- direct emissions resulting from fuel used by equipment owned or controlled by TFG (e.g. fuel for generators), gas refills from air-conditioning and refrigeration and the vehicle fleet (referred to as Scope 1 emissions);
- indirect emissions from purchased electricity (referred to as Scope 2 emissions); and
- selected indirect emissions resulting from TFG’s business travel activities (flights, rental cars and hotel accommodation), consumption of office paper, external communications paper (including magazines, envelopes and flyers), cardboard packaging, plastic bags, employee commuting, and outsourced transport/distribution of merchandise (referred to as Scope 3 emissions).
Total emissions for TFG for 2010 were 208 320,45 tonnes of CO2e (compared to 183 992,26 tonnes of CO2e) last year. The inventories relied on the latest scientific data from organisations such as the Intergovernmental Panel on Climate Change (IPCC) and the GHG Protocol. These have been supported by using up-to-date emission factors as supplied by the United Kingdom's Department for Environment, Food and Rural Affairs (Defra), whose information is as closely aligned to the real-life scenarios as found in South Africa.
Table 1: Comparison TFG’s 2008, 2009 and 2010 GHG emissions in tonnes of CO2e*
The results of the TFG 2008, 2009 and 2010 Carbon Footprint Inventories are represented in Tables 1 and 2. Please observe the key changes in reporting between years outlined beneath the table, when comparing years.
Computations in respect of 2011 are not yet available.
| Business travel in rental cars | 42,75 | 47,62 | 42,31 |
| Business travel in commercial airlines | 2 235,53 | 1 847,19 | 2 188,74 |
| Business travel in hotel accommodation | Not reported | 70,98 | 54,91 |
| Consumption of office paper | 380,60 | 741,98 | 1 130,94 |
| Consumption of paper for magazines | 334,16 | Not reported | 7 697,01 |
| Consumption of envelopes | Not reported | Not reported | 157,98 |
| Consumption of paper for flyers | Not reported | 124,59 | 97,12 |
| Consumption of cardboard packaging | 3 367,64 | 4 336,52 | 4 682,15 |
| Consumption of plastic bags | 2 375,33 | 2 549,65 | 2 286,04 |
| Employee commuting | Not reported | 10 277,76 | 9 923,20 |
| Outsourced transport/distribution | 27 400,22 | 7 933,29 (restated) | 7 879,81 |
| TOTAL SOPE 3 | 36 136,23 | 27 929,58 | 36 140,21 |
| TOTAL SCOPE 1, 2 and 3 | 128 530,64 | 183 992,26 | 208 320,45 |
| Non-kyoto emissions | 1 047,00 | 548,43 | 1 047,99 |
| TOTAL GHG EMISSIONS | 129 577,64 | 184 540,69 | 209 368,44 |
| Intensity: Emissions per FTE | 12,26 | 18,32 | 19,95 |
| Intensity: Emissions per employee | 8,70 | 11,93 | 14,16 |
| Intensity: Emissions per m2 (excluding stores) | 1,23 | 1,65 | 1,87 |
| Intensity: Emissions per m2 | 0,32 | 0,34 | |
| Intensity: Emissions per m Rand EBITDA | 61,41 | 81,78 | 93,60 |
* Key changes in reporting between years
Due to the new nature of the industry and the rapid changes in science relating to carbon, updates occur throughout the year. The following are key changes that should be considered before comparing data year on year.
| 1. | Updated emission factors: The 2010 Carbon Footprint report was completed using emission factors published by Defra in October 2010. The 2009 report used factors published in September 2009. The major changes occurred in the transport and fuel sector. | |
| 2. | Restating data: Improved techniques and errors in collecting data may be found, resulting in emissions from previous years being restated. The following are restated from 2009: | |
| a. | Electricity in stores has been restated from 104 510 316 (at 0,5752 cents per kWh) to 134 807 339 (at 0,446 cents per kWh) resulting in a change in carbon of 31 206 tonnes of CO2e. | |
| b. | Outsourced transport by service provider "RAM" has restated kilometres travelled from 913 801 km in an 8-tonne truck and 1 370 702 km in a 2,8-litre van to 276 000 km in an 8-tonne truck and 414 000 km in a 2,8-litre van. This has a resulting change from 1 025 to 310 tonnes CO2e for RAM. | |
| c. | Intensity figure EBITDA: The initial figure given for EBITDA was "profit before tax" at R1,78 billion compared to R1,71 billion in 2010. Earnings before interest, taxes, depreciation and amortisation (EBITDA) in 2009 should be R2 256,6 million and R2 236,8 million in 2010. | |
| 3. | Inclusion/exclusion of categories: Every year as the science evolves and data collection methods improve, the boundary of available reliable data may increase as seen when comparing the boundary in 2010 to previous years of reporting. The increase in categories of data results in a higher baseline footprint, which should be considered when comparing reporting years. It may be necessary to restate the base year from 2008 to 2010. | |
The following are activities found in TFG’s 2010 Carbon Inventory that were not found in the relevant reporting years.
2008: Total employees including stores; Square metreage including stores; EBITDA; Electricity in stores; Business travel in hotel accommodation; Consumption of envelopes; Consumption of flyers; Employee commuting
2009: Consumption of paper for magazines; Consumption of envelopes
Table 2: Comparison of units used in 2008, 2009 and 2010 data
| Activity | Units | 2008 | 2009 | 2010 |
| Fuel from equipment owned | Litres | 9 712 | 5 513 | 2 210 |
| A/C and refrigeration gas refills | Kilograms | 13 | – | – |
| Fleet vehicles | Litres | 1 541 045 | 1 536 553 petrol | 1 416 943 petrol |
| 34 293 diesel | 40 171 diesel | |||
| Purchased electricity | Kilowatt hours |
88 774 030 | 13 129 673 (HOs and DCs) 134 807 399 (stores restated) |
13 500 140 (HOs and DCs) 150 360 879 (stores) |
| Business travel in rental cars | Kilometres | 198 132 | 219 684 | 193 700 |
| Business travel in airlines | Kilometres | 19 161 585 | 15 630 224 | 18 335 595 |
| Business travel in hotels | Nights | – | 3 726 | 2 890 |
| Consumption of office paper | Tonnes | 194 | 207 | 233 |
| Consumption of envelopes | Tonnes | – | – | 33 |
| Paper consumed for flyers | Tonnes | 35 | 32 | |
| Paper for magazines | Tonnes | 170 | – | 2 507 |
| Consumption of cardboard packaging | Tonnes | 1 368 | 1 543 | 1 666 |
| Consumption of plastic bags | Tonnes | 396 | 425 | 381 |
| Employee commuting | Kilometres | – | 133 840 924 | 125 298 517 |
| Outsourced transport/distribution | Kilometres | – | 10 009 092 |
9 913 459 |
| (restated) | ||||
| Non-kyoto emissions | Kilometres | 698 | 303 | 579 |
ENERGY EFFICIENCY
The use of purchased electricity accounts for the majority (over 80%) of our carbon emissions generated and is therefore our key focus area for reducing our impact. However, as mentioned earlier, approximately 65% thereof relates to shopping centre air-conditioning over which the group has no control.
Given that a large component of our electricity usage is through lighting in our stores, our key initiatives relate to the conversion of our lighting systems to lower consumption units. The group estimates that its lighting initiatives across the business have resulted in an estimated saving of 309 000 kilowatt hours (kW/hrs) during the financial year, and that a further annualised saving of 911 617 kW/hrs is anticipated in the new financial year.
The appointment last year of a utilities manager to oversee and ensure an enhanced process of measuring and monitoring electricity usage has resulted in improved measurement and monitoring of electricity consumption at our head offices and distribution centres. Our store electricity consumption has proved more challenging to record and monitor, as in many instances, supplier invoices reflect only the monetary cost and not the kilowatt hours. We are engaging with service providers to issue their invoices in a prescribed standard format to provide us with the information that we require. We do not envisage that this change will be achieved during the 2012 financial year.
At our head office buildings we have energy management systems in place and seek to reduce our energy consumption through energy-efficiency measures associated with lighting, computer and other electronic equipment.
WASTE REDUCTION
TFG Logistics division has further reduced the amount of waste generated by the group, through an initiative to drive standardisation of carton specification among merchandise, in order to promote carton reuse. Building on the success achieved last year through this initiative, a further reduction in the consumption of cardboard packaging has been achieved and a further 17% reduction in cardboard waste. This amounts to a combined improvement of 71% over a two-year period. This achievement was recognised by Supply Chain Today magazine when this initiative won the “Best Greening Project” award in the R1 million to R10 million category.
Some of the waste cardboard generated is still shredded and utilised for protective packaging and the balance is handed to our contracted waste service providers for recycling.
Plastic waste is kept to a minimum as a result of the elimination of shrink-wrapping of cartons. Residual plastic waste is given to our contracted waste service providers for recycling.
Plastic hangers are recycled and merchandise is flatpacked, with hangers remaining in stores, resulting in reduced packaging, transport and plastic production. All plastic bags used by the stores are durable and reusable and certain divisions use recyclable paper packets.
TFG waste statistics*| Mixed recyclables** in tonnage | 120,64 | |
| Common mixed waste paper in tonnage | 111,46 | |
| Total recyclable volumes in tonnage | 232,10 | |
| Asbestos waste in tonnage | 3,58 | |
| Non-compactable and wet waste to landfill | 248,53 | |
| Hazardous waste in 210 ℓ drums -fluorescent tubes | 7 | |
| * | Statistics cover activities at our Cape Town head offices and distribution centres, for the financial year in review (1 April 2010 to 31 March 2011) | |
| ** | Mixed recyclables: tins, plastic, polystyrene, glass | |
VEHICLES
Merchandise transport is one of the group’s larger areas of environmental impact. The outbound transportation of merchandise to the stores isoutsourced. The division collaborates with its transport partners in seeking ways to reduce the environmental impact associated with this transportation task. All new vehicles are equipped with the latest diesel technology to make engines run efficiently.
A strict maintenance schedule is in place to ensure that the fleet is regularly maintained by the manufacturers’ agents, so maximising its operational efficiency. All transport partners utilise the latest routing and fleet management technology in order to minimise the number of kilometres travelled.
PROPERTY DEVELOPMENT
Property development is the activity which indirectly makes the group’s greatest environmental impact. Knowing this, the group concludes lease agreements with developers only when the required environmental impact assessments have been undertaken and have led to a positive result.
TFG Services division is increasingly being involved in issues of the environment and the impact which large buildings make on it. This is providing a challenge not only when buildings are first erected or are renovated, but also in existing buildings in good condition but lacking such environmentally-friendly features such as large overhangs, performance glass for the windows, and flexible air-conditioning systems. Issues of this kind will inevitably become increasingly prominent.
In line with international norms, there is an emerging trend in South Africa towards the design and construction of eco-friendly shopping malls. However, because of the uncertain economic climate prevailing in recent years, progress has been slow and most landlords are yet to embark on any significant "greening" initiatives to new and existing buildings. Model design features would include eco-friendly building materials, natural lighting, solar power and heating, and rain water capture.
Whilst the concept of green leases is still in its infancy there is an increasingly active dialogue between the group and landlords.
The group is pressing to insert green clauses in its standard leases and there is no doubt that this will be a growing trend over the next few years.
Various committees have been appointed to develop TFG’s approach to green issues and particularly the minimisation of electricity consumption. A number of initiatives in this connection are under way.