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SUSTAINABILITY REPORT
LEWIS GROUP IS COMMITTED TO ADOPTING SUSTAINABLE BUSINESS PRACTICES TO ENSURE THE LONG-TERM PROSPERITY OF THE BUSINESS AND THE COMMUNITIES IT SERVES.
INTRODUCTION
Sustainability management is a key element of a company’s corporate governance framework. The group supports the integrated sustainability reporting philosophy contained in the King lll Report in the interests of enhancing disclosure beyond purely financial performance. The recommendations of the King III Report have been evaluated and the principles will be implemented as part of the ongoing development of the groups’ sustainability strategy and reporting.
SOCIAL SUSTAINABILITY
Stakeholder engagement
Management believes the group is better positioned to achieve sustainable profit growth by considering the long-term social, economic and environmental impact of its operations. This requires the group to act in a socially responsible manner in its business activities and in all its relationships with stakeholders.
The primary stakeholders of the Lewis Group are:
- Shareholders and the broader investment community
- Customers across the three trading brands
- Employees at head office and stores throughout the group
- Suppliers of merchandise and services
- Communities in which the group operates
- Industry regulators who monitor compliance
The table details the rationale for the group’s interaction with each of these stakeholder groups and outlines the means of engagement over the past year:
| Stakeholder | Rationale for engagement | Means of engagement |
| Shareholders |
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Interim and annual results presentations; annual report; investor website; shareholder meetings; SENS announcements; press announcements; broker conferences; regular management meetings with local and international investors and analysts |
| Customers |
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Customer contact in stores; local promotions; birthday contacts; advertising – press, radio, TV; point of sale; account statements; call centre; website; brochure distribution and Club magazine. |
| Employees |
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Intranet; quarterly newsletter; Lewis Live in-store broadcast network; Service Excellence Club; e-mail; management meetings; monthly in-store marketing meetings; regular review meetings; induction and training courses |
| Suppliers |
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Regular meetings at head offices locally; factory visits of local suppliers; overseas visits to supplier head offices and factories; attend new product launches and product development sessions |
| Communities |
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Community investment and upliftment through CSI programme and local support through stores. Involve staff in community engagement |
| Regulatory bodies |
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Statutory reporting; regulatory submissions; liaison with regulatory bodies |
EMPLOYEES
Lewis recognises that employees are the drivers of business performance. The group’s human resources policies are aimed at enhancing performance through staff recognition schemes, equality of opportunity, training and development, a safe and healthy workplace, sound employee relations and an employee well-being programme.
A performance-driven culture aligns reward to the achievement of the group’s strategic, financial and operational objectives.
Employment equity
The group is committed to ensuring that its employee profile is representative of the customer base it serves and the communities in which Lewis trades. Black staff now account for 88% (2009: 85%) of the staff complement, with females comprising 55% (2009: 55%).
The employment equity plan for the three years from 2009 to 2012 focuses on increasing the representation of designated groups, mainly in the senior management, professionally qualified and skilled technical areas. Strategies have been developed to achieve internal employment equity targets, including the implementation of a comprehensive learning and development plan, in-service training of retail management students, granting bursaries, job profiling and performance assessments. Management monitors the group’s performance against these targets to ensure employment equity is promoted across the business.
The employment equity details of the workforce in South Africa at 31 March 2010 was as follows:
| Employment equity | |||||||||
| Occupational levels | Male | Female | Male | ||||||
| African | Coloured | Indian | African | Coloured | Indian | White | White | Total | |
| Top management | 0 | 1 | 0 | 0 | 0 | 0 | 0 | 5 | 6 |
| Senior management | 2 | 3 | 0 | 0 | 2 | 0 | 2 | 20 | 29 |
| Professionally qualified | 14 | 11 | 3 | 4 | 9 | 1 | 21 | 58 | 121 |
| Skilled technical | 121 | 59 | 10 | 127 | 98 | 16 | 216 | 102 | 749 |
| Semi-skilled | 1 664 | 532 | 18 | 1 729 | 734 | 52 | 340 | 61 | 5 130 |
| Unskilled | 21 | 12 | 0 | 5 | 5 | 0 | 0 | 0 | 43 |
| Non-permanent | 4 | 16 | 1 | 3 | 3 | 0 | 3 | 3 | 33 |
| Total | 1 826 | 634 | 32 | 1 868 | 851 | 69 | 582 | 249 | 6 111 |
Skills development
An extensive range of training courses is offered to all employees to enhance their performance and skills. During the 2010 financial year, 2 627 staff attended training and development courses, an increase of 22% over the previous year.
Black staff accounted for 81% of the total employees trained.
Several of the courses are aimed at developing scarce skills relevant to the retail sector, focusing on sales, stock management, credit control and collections, management of stores and credit.
The group’s training department is accredited as a training provider with the Wholesale and Retail Sector Education and Training Authority (W&R SETA) and offers a range of e-learning programmes in areas such as management development, sales training, induction training and other job-specific skills training. A further 3 544 staff, an increase of 38% over the previous period and of which 3 005 were black, were trained through these e-learning programmes.
Staff communications
Internal communication is key to staff motivation and to reinforcing the group’s positioning as an employer of choice. As the majority of staff are located in stores across the country, a range of cost-efficient and effective communications media are used for information and training purposes:
- Lewis Communication System is an intranet-based information system for all announcements to staff and management.
- A quarterly newsletter focuses on staff performances (work and sport related); staff benefits; competitions; divisional performances and also provides a forum for feedback from staff.
- Lewis Live is a weekly broadcast on the in-house television system for training programmes and general communication to staff. This allows the group to expose all branches to standardised training and the latest product information.
Industrial relations
Lewis Group has a formal recognition agreement with the South African Commercial and Allied Workers’ Union (SACCAWU).
Recognition agreements have also been concluded with unions in Botswana, Lesotho and Swaziland.
During the year settlements were reached in all countries, with no man days lost to industrial action.
Occupational health and safety
Lewis is committed to providing a healthy and safe environment for employees and customers. Safety management is incorporated into business practices to ensure accidents and incidents are minimised.
A health and safety policy aims to improve adherence to health and safety standards and ensure legislative and regulatory compliance. The health and safety committee will review risks and report to the executive committee on a regular basis. The internal audit department monitors compliance with the policy.
A risk assessment was conducted during the year to identify the major health and safety risks and programmes and procedures have been implemented to mitigate these risks.
HIV/AIDS management
Lewis has an HIV/AIDS awareness programme which is integrated into the regular company training programmes available to staff. The aim of the programme is to advise staff members of the effects of HIV/AIDS and available preventative methods. Brochures are regularly distributed to staff.
An incidental HIV/AIDS management programme has been made available to permanent staff and their immediate families. The programme is run by an external service provider which offers access to post-HIV exposure counseling through a care centre and covers initial medication, free consultations and assistance in locating a clinic for treatment. This service is linked to areas of incidental exposure only.
Participation by employees and their families is voluntary and counseling is confidential. The group meets the cost of this cover for employees.
CUSTOMERS
Lewis is committed to providing customers with quality products and excellent service. High levels of repeat sales are an indication of service satisfaction and customer loyalty, with the group achieving consistently high scores in client service performance evaluations.
A Service Excellence Club motivates and rewards staff for their outstanding customer service. Staff are nominated based on feedback from customers, reports from mystery shopping research or by senior management. Club members qualify for attractive incentives.
Customer profile
The group’s customers are mainly middle class consumers in the LSM 4 to 7 categories. Customers are generally family oriented and from black communities, with 55% of customers being female. The group ensures that customers are serviced by staff from their own communities, with stores located close to where Lewis customers work, shop, live and commute.
Responsible credit granting
Credit is granted centrally to ensure responsible credit granting. Credit applications are processed through application and behavioral scorecards and an affordability assessment to ensure an affordable credit limit is allocated to the customer. Every customer is interviewed by the store manager where the cost of credit, terms and conditions of the credit sale and details of the insurance products selected are explained. This ensures that customers are well positioned to meet their monthly financial commitments.
Product responsibility
The group’s suppliers undertake to repair or replace any defective merchandise within twelve months of the sale. If the merchandise is still defective within six months of the repairs, the supplier will be liable for replacement of the merchandise or refunding the customer in full. In addition, customers may purchase an extended two year maintenance contract from the group. This ensures an enhanced buying experience.
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Customer support
Stores manage customer queries. If customers are not satisfied they may contact the head office call centre via a toll free number. The call centre provides feedback and support to the customer and liases with senior operators, the merchandise division and suppliers on behalf of the customer to ensure resolution.
SOCIO-ECONOMIC DEVELOPMENT
Lewis Group acknowledges its responsibility to contribute to the communities in which it operates. Based on the belief that thriving business depends upon thriving communities, the corporate social investment (CSI) programme aims to assist communities where many people are affected by a lack of education, poverty and poor healthcare. Lewis seeks to be recognised by these communities as a dependable, caring and ethical corporate citizen.
Management is targeting to invest 1% of after-tax profits in community initiatives through both direct project investment and indirectly through charitable organisations operating in the fields of welfare, education and health. In the past year R6.1 million (2009: R2.6 million) was committed to social investment projects. This included additional funding allocated to building classrooms in rural KwaZulu-Natal and the funding of external bursaries and scholarships.
Lewis staff across the country is encouraged to identify projects in their own communities which are deserving of support and these are evaluated by the CSI committee.
The main projects supported by Lewis over the past year focused primarily on the support of children in their education, nutritional and general welfare requirements:
- Project Build provides educational and community facilities for disadvantaged communities in rural KwaZulu-Natal. The project brings together communities, funders, sponsors and local builders to develop these facilities while creating employment and providing classrooms for children. In partnership with Project Build, classrooms and facilities were built at four schools at a cost of R2.6 million. Over the last four years 21 classrooms, seven toilet blocks and ancillary buildings have been built.
- Peninsula School Feeding Association provides daily meals to children in the Western Cape. Lewis has adopted 10 schools and provides meals for some 1 200 children each school day. Lewis has funded equipment to Monte Christo, a feeding kitchen in Paarl, to enable the facility to provide daily meals for over 3 600 children.
- Children of the Dawn supports rural community initiatives which focus on caring for HIV/AIDS orphans and other vulnerable children. Lewis has increased its sponsorship from 83 to 150 children and the funding covers schooling, food, clothing and health care, including HIV/AIDS treatment.
- iThemba Place of Hope has established the iThemba Academy in Hillcrest, KwaZulu-Natal, to develop future leaders. Lewis has funded 10 bursaries for the children from the impoverished community of Embro to attend the iThemba Academy.
Some of the main organisations that were supported through the CSI programme were:
- TSiBA Education provides scholarships to students for tertiary education. Lewis funded scholarships for the top 10 students who completed the foundation phase in 2009.
- Community Chest received funding for its capacity enhancement programme which enables community-based NGOs to acquire business skills and management practices. This training has enabled many of the organisations to access corporate and state funding.
- Red Cross Children’s Hospital Trust received a substantial donation from Lewis for skills development for specialists and surgeons in endoscopic surgery.
During the year a dedicated CSI website www.lewisgroupcsi.co.za was launched to showcase the group’s community involvement.
ECONOMIC SUSTAINABILITY
Economic value added
The value-added statement shows the wealth created by
the activities of the group and how it was distributed among
stakeholders, taking into account the amounts retained and
reinvested in the group for the replacement of assets and
development of operations.
STATEMENT OF VALUE ADDED
| Group | |||||
| 2010 | 2009 | ||||
| Rm | % | Rm | % | ||
| Revenue | 4 110.6 | 3 807.1 | |||
| Paid to suppliers for goods and services | 2 333.6 | 2 136.1 | |||
| VALUE ADDED BY OPERATING ACTIVITIES | 1 777.0 | 1 671.0 | |||
| DISTRIBUTED AS FOLLOWS: | |||||
| REMUNERATION TO EMPLOYEES | 607.4 | 34.2 | 542.0 | 32.4 | |
| RETURNS TO PROVIDERS OF CAPITAL: | 540.1 | 30.4 | 539.6 | 32.3 | |
| To provide lenders with a return on their capital utilised | 94.7 | 108.5 | |||
| To provide lessors with a return for the use of their premises | 161.0 | 146.8 | |||
| To provide shareholders with a return on their equity | 284.4 | 284.3 | |||
| TAXES PAID TO GOVERNMENTS | 252.3 | 14.2 | 221.4 | 13.3 | |
| Income taxation | 248.2 | 217.7 | |||
| Municipal rates | 4.1 | 3.7 | |||
| REINVESTED IN THE GROUP | 377.2 | 21.2 | 368.0 | 22.0 | |
| Depreciation and amortisation | 46.3 | 47.3 | |||
| Deferred taxation | 23.9 | 43.8 | |||
| Net earnings retained | 307.0 | 276.9 | |||
| TOTAL WEALTH DISTRIBUTED | 1 777.0 | 100.0 | 1 671.0 | 100.0 | |
Procurement and enterprise development
The group strives to provide customers with differentiated, exclusive and value-for-money merchandise. To meet the needs of customers, merchandise is sourced from local suppliers and through imports, mainly from the Far East. While imports account for 24% of merchandise, the group continues to work in partnership with local suppliers to design merchandise which is appealing to the customer base.
A substantial volume of merchandise is procured from small businesses which are mainly black owned. Financial assistance is provided to some of these businesses while payment terms of 30 days support the cash flows of these suppliers.
During the year approximately 58% of furniture was bought from BEE suppliers, 82% of vehicles were bought from a BEE dealership and some 30% of rental premises are owned or controlled by previously disadvantaged individuals.
ENVIRONMENTAL SUSTAINABILITY
Lewis Group is mindful of the environmental impact of its business activities and the consequences for climate change.
The group is currently developing an environmental policy that will cover compliance with environmental legislation, setting objectives, measuring and addressing direct and indirect environmental impacts and reporting on impacts to all stakeholders. The Board has responsibility for the environmental policy.
A preliminary review has confirmed that the group’s direct environmental impact is low. The following priorities were identified:
- minimising electricity and water usage, with the immediate focus on reducing electricity consumption at stores;
- reducing waste by minimising paper usage;
- considering the impact of transport fleets and minimising emission rates; and
- reducing the consumption of materials, mainly packaging.
Suppliers are encouraged to manage the indirect environmental impact of their businesses.
An external service provider will be appointed early in the new financial year to undertake a baseline assessment of the group’s carbon footprint. Following an evaluation of the results of this baseline assessment the environmental policy will be finalised and an environmental programme developed.