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ENVIRONMENTAL STEWARDSHIP

BUSINESS APPROACH

Tongaat Hulett’s environmental approach is premised on the concept of building value for all stakeholders while working in harmony with nature. The company works towards achieving integration between the environment and its agri-processing and property development operations. Research is regularly undertaken to measure and monitor the impact of operations on the environment and implement systems to ensure that resources are used in a sustainable manner.

Policies and practices are in place to ensure that operations are managed within the relevant statutory and legal parameters as a minimum and Tongaat Hulett’s self-defined best practice requirements.

Key environmental risks continue to be identified and appropriate action is taken to either eliminate or minimise these risks. Environmental incidents and complaints received are monitored and appropriate corrective action is taken. Significant progress has been made during the reporting period with the recording of environmental data on emissions, energy consumption, waste quantification and resource conservation. Specific targets have been set at each operation and are being aligned to the ISO 14001, OHSAS 18001 and NOSA requirements. Objectives and targets will facilitate meaningful and measureable progress with regard to best practice in sustainable development. Accredited auditors monitor the achievement of objectives and operational targets have been set in respect of primary use of land, water, energy, air quality (sulphur dioxide emissions) and bio-diversity.

Tongaat Hulett’s approach to property development is conceptualised and implemented around a sustainable development philosophy, which at its core, is aimed at achieving an appropriate combination between economic development, environmental enhancement and social upliftment. Actions continue to be taken to identify ways to address social development objectives such as affordable and quality housing with appropriate density, public transport, environmental sustainability measures such as green buildings, reducing energy and water usage and developing ecological corridors and indigenous carbon sinks. Environmental Impact Assessments (EIA’s) and the implementation of the respective Environmental Management Plans (EMP’s) are entrenched and all operations strive to conduct themselves in an environmentally responsible manner.

The business continues to evaluate its carbon and water footprint and is identifying new approaches to understand and deal with potential opportunities and consequences of both climate change and constrained water supplies in the future.

INDICATOR	2009/10(15 months)	2010/11(12 months)	2011/12(12 months)	Performance
Revenue	R11,136 bn	R9,681 bn	R12,081 bn
Annual Dividend per share (cents)	275	250	290
Number of employees at year end	40 824	39 314	41 777
Fatalities	11	4	2
LTI’s	65	50	61
Water used in manufacturing*	-	-	10 258 167 m3
Carbon footprints (total tons of CO2)	1 307 091	1 120 634	1 027 569

*Prior year data has been deemed non-comparable due to improved water consumption systems and controls.

Sugarcane fields on the North Coast of KwaZulu-Natal

Climate change

Consideration of global population growth and a middle-class that is increasing in wealth highlight the long-term impacts on the demand for water, food and energy leading to subsequent increase in carbon emissions. Tongaat Hulett acknowledges the reality of climate change and the negative impacts that it may bring to people, the environment and businesses. The company has a climate change policy that seeks to define its strategy and response plan to this evolving dynamic. The business believes that sustainable process and product innovation play an important role in decreasing the greenhouse gas intensity of its products and value chain. To further improve Tongaat Hulett’s climate resiliency, it is considering other leading indicators of climate change such as potential impacts to water resources and is integrating these into its overall sustainability approach.

The company has identified potential risks and opportunities due to climate change and is taking action to mitigate these risks whilst taking advantage of the emerging opportunities. The business is committed to reducing greenhouse gas emissions and developing strategies that will enable it to adapt to and/or mitigate the impacts of climate change.

Its approach in tackling carbon emissions focusses on four main areas:

• Producing renewable electricity from bagasse
• Promoting the blending of biofuel with petrol and diesel
• Switching to cleaner fuels
• Working to improve energy efficiency in operations

Tongaat Hulett is committed to reducing its greenhouse gas emissions by 5 percent per annum for the next 5 years and is targeting at least a 20 percent reduction by 2020 from a 2011 baseline.

Carbon management

In 2011, the Department of Science and Technology released South Africa’s second Risk and Vulnerability Atlas, a publication that provides a condensed overview of the map of areas sensitive and vulnerable to various kinds of risks, disasters and climate-related impacts. Knowledge about weather, climate and water is fundamental to food security, disaster risk reduction, water management, energy supplies and health. Tongaat Hulett interacts with the Department and uses this information to support improved strategic development in the areas of risk and vulnerability decision-making.

Tongaat Hulett participates in the Carbon Disclosure Project (CDP), an independent initiative encouraging transparency on all climate change related issues and providing details of emissions performance. As part of the CDP process the company conducted its third carbon footprint analysis. The analysis was conducted according to the Greenhouse Gas Protocol, a widely used international accounting tool. Details of the company’s actions underway are provided in the public response to the Carbon Disclosure Project (www.cdproject.net). The company tracks and monitors its greenhouse gas emissions and will continue to improve the accuracy and reporting of its greenhouse gas footprint.

Direct or Scope 1 emissions are those arising directly from owned or company controlled sources. These include, for example emissions from combustion in owned or controlled boilers, furnaces, vehicles and emissions from chemical production in owned or controlled process equipment. During the year, business operations emitted 593 732 metric tons CO2 (Scope 1 emissions). Indirect or Scope 2 emissions are those emissions from the generation of purchased electricity consumed by Tongaat Hulett. The company purchased electricity that emitted 433 837 metric tons of CO2. Scope 3 covers all other indirect emissions that arise as a consequence of the business’s activities. In the reporting period employees booked nearly 1 865 business trips, flying more than 3 364 420 kilometers resulting in 413 metric tons CO2 being emitted from business travel.

The total Scope 1 and Scope 2 CO2 for the period under review was 1 027 569 metric tons equivalent and the turnover was R12,081 billion, which equates to 85 grams of CO2 emitted per rand generated.

Energy

Sugarcane is a highly effective convertor of sunlight into biomass, and globally is the key raw material for a rapidly growing industry in bio-fuel and renewable electricity generation. Tongaat Hulett’s mills have produced renewable electricity for the supply of power to run the mills for many years and have routinely supplied electricity into selected national grids, albeit on a small scale. In line with global trends, the focus is now on upgrading the generation of renewable electricity using highly efficient technology to produce substantially more electrical power from the same amount of fibre, thereby increasing the quantity of renewable electricity available to the national grid.

The central sugar refinery uses coal while the starch operation uses coal and gas to generate steam used in the production processes. Electricity is either purchased or generated for use in initiating production purposes and to supply power to offices and other support services.

Tongaat Hulett continues to assess the opportunities to reduce the energy and water footprints in each of its operations, starting with factory operations. Provided that an enabling regulatory framework is in place, Tongaat Hulett will expand the operations’ ability to generate electricity from bagasse, a renewable resource produced as a co-product with sugar. As an integral part of these projects, the energy efficiency of the sugar mill which supplies the fuel to the electricity generating plant is targeted to be improved by 30 percent. This energy efficiency improvement will be critical to enable full utilisation of the bagasse for electricity generation.

Energy efficiency projects include lighting, heating, variable speed drives, process efficiency improvements, ventilation and air conditioning. Motion sensors are installed in some administrative offices such as the Meadowdale office resulting in some twenty per cent saving on electricity costs.

For the period to 31 March 2012, Tongaat Hulett used 530 249 MWh of electricity in all its operations and offices. It generated 392 202 MWh from its sugar mills predominantly from bagasse. In the previous reporting period ended 31 March 2011, Tongaat Hulett used 418 210 MWh of electricity and generated 322 245 MWh. Other sources of fuel that are used include coal, diesel, petrol, gas and wood.

Air quality

Since sugar mills primarily burn bagasse as a fuel, the flue gases from the boilers do not contain harmful levels of contaminants. Wet scrubbing technology is used to remove fly-ash from the flue gas to ensure that emissions meet the required standard. The recent South African legislative changes to air quality standards are far more stringent and present a challenge for the sugar industry as a whole and an appropriate action plan to ensure compliance with new standards has been formulated.

Some sugar mills and in particular the central sugar refinery in the Durban South Industrial Basin burn coal as a boiler fuel and therefore have a greater challenge in terms of emission reduction, as required by the recent legislative amendments. Currently emissions levels remain well within the permitted requirements and alternative steam and power technology options are being evaluated to ensure the refinery is compliant with new air quality standards. Development of innovative process technology with energy efficiency benefits is also in progress.

At present, air quality is monitored on a daily basis at the refinery due to the significance of the emissions generated (sulphur dioxide (SO2) and particulates), with all relevant stakeholders receiving access to regular performance reports, as well as an annual emissions report. Installation of on-line monitoring equipment to further enhance emission monitoring accuracy is planned for 2012.

Biodiversity and Land Management

Tongaat Hulett controls over 20 000 gross hectares of land in South Africa and has the responsibility to successfully manage the transition of just over 13 000 of these gross hectares which have real potential for conversion from agriculture to alternative usages on a managed, phased basis at the appropriate time and in line with broader government goals and spatial policies. This conversion will see over 5 000 hectares of land being rehabilitated into natural habitat and placed into sustainable management models to ensure the long term management of such assets for the benefit of the broader region. The business continues to rehabilitate currently unproductive land to agriculture in support of government’s agricultural and rural development goals and objectives, while at the same time securing additional sugarcane supply to its mills.

The company’s land planning and conversion philosophy is based around the goal of sustainable development and contributing towards the growth of sustainable cities with emphasis on facilitating appropriate new investment and job creation opportunities, appropriate densities, promoting mixed use, industrial development and land for affordable housing, integration of public transportation, conservation, increasing biodiversity in natural habitats and open spaces together with facilitating new socio-economic opportunities and benefits for new and surrounding communities. In this way the effects of land management and conversion on climate change are mitigated and tend towards a net environmental gain for society.

The business works closely with communities, authorities and Non-Government Organisations in its land management, planning and conversion activities towards facilitating the most appropriate activities and uses of its land in line with government’s spatial planning policies and objectives.

Water resource management

As an agri-processing business, Tongaat Hulett acknowledges that water is an essential resource for all its operations and production can be impacted by both the quality and quantity of water available. More importantly, local communities within its operations rely on having access to clean, safe drinking and reliable water which is critical to sustaining local health and a balanced eco-system. Ensuring access to a reliable supply of water is an important strategic priority. The company operates facilities in regions where there are various site specific challenges relating to the supply, quality and reliability of water resources.

The company’s participation in the CDP Water Disclosure Project has led to the development of a Water Policy which documents Tongaat Hulett’s view on key elements including; prioritising sustainable management and effective use of water resources, local water resource optimisation and protection. In order to account for its water resources within its operations, Tongaat Hulett is a signatory of the United Nations CEO Water Mandate and is implementing water management plans at all operations, including controls to mitigate the impacts of water use and discharge. It continues to identify opportunities for water recycling, efficient use and responsible waste water disposal.

Tongaat Hulett’s sugar operations are in various locations within the SADC region and different water techniques are applied across operations. As a result of the fact that the sugar cane plant comprises approximately 70 percent water, sugar mills are net producers of water. Most of the sugarcane cultivated in South Africa is dependent on natural rainfall while operations in Mozambique, Swaziland and Zimbabwe, practice large-scale irrigation via purpose-built canal systems with water being extracted from rivers. The management of these canals and irrigation systems is in keeping with the highest agronomy and safety standards.

At the starch operation, water usage is monitored on a daily basis and optimised to run at relevant world standards for wet milling operations. Water quality is monitored on an ongoing basis and the operation continues to identify business risks and opportunities for water access, reuse or recycling, efficient use and responsible waste water disposal.

Tongaat Hulett intends to establish a water efficiency improvement target for water consumption per ton of product produced. This will be done as a means of not only improving the company’s water footprint, but also to reduce the company’s reliance on water sources that might affect local communities.

Tongaat Hulett reported its water usage in the product manufacturing process for the period under review as m3, with a further 66 902 561 m3 being purified at various mills and supplied to local Municipalities as potable water. This metric, reported for the second time, provides a single, aggregated overview of water demand across company operations. The company continued its engagement with the Council for Scientific and Industrial Research (CSIR) to identify future rainfall patterns and water scarcity due to the evolving impact of climate change. In the previous year ended 31 March 2011 Tongaat Hulett used 26 803 489 m3 with a further 75 565 904m3 sold to municipalities as potable water.

Water scarcity is becoming a reality, and by making the six elements of the UN Global Compact CEO Water Mandate central to planning this will continue to assist in reducing the impact of water use and the promotion of good water stewardship regionally.

*Prior year data has been deemed non-comparable due to significant improvements in water measurement systems and controls as from 2012.

Effluent

Subsequent to the “zero effluent” philosophy that has been adopted by several operations to minimise the quantity of liquid effluent leaving each mill or plant, most of Tongaat Hulett’s sugar mills recycle and re-use water within the factories, while the remaining effluent undergoes biological treatment (aerobic and anaerobic) to reduce its chemical oxygen demand to acceptable levels before being discharged in accordance with the relevant environmental requirements. The remaining mills are developing environmental management programmes to adopt best practices and ensure legal compliance as a minimum. Water that is produced as part of the sugar milling process is largely used for the irrigation of sugar cane on adjacent estates and effluent produced at the central sugar refinery is disposed of into the municipal sewer for treatment, and both the quantity and quality thereof is monitored to ensure compliance with the relevant specifications.

The starch operation’s effluent is treated at local authority treatment plants, with effluent quality being constantly monitored.

Waste management

Some company operations have re-engineered and refined services in order to reduce waste and increase resource productivity and these initiatives have yielded savings through offering new revenue streams from the sale, exchange and recycling of waste products.

Recycled refinery filter cake, which is predominantly constituted of calcium carbonate, is distributed to vegetable and maize farms as a replacement for lime, which would normally have to be purchased as an input to operations. This material was previously classified as a ‘hazardous material’ and constituted more than 15 000 tons of waste shipped to landfills per annum. By redirecting the waste to farms, Tongaat Hulett is not only reducing the total volume of waste being shipped to landfills, but costs are reduced by having the farmers purchase the filter cake material at a price set to cover the cost of transportation from the refinery to their farms. A technical paper covering this project was recently published and presented at the last South African Sugar Association Congress and based on increasing interest, it is scheduled to be published in the International Sugar Journal.

During the reporting period, 11 853 tons of general waste, 1 815 tons of scrap metal waste, 302 tons of hazardous waste and 36 466 tons of recycled waste was generated and disposed of in accordance with applicable legislation. In the previous reporting period there was 18 139 tons of general waste, 3 048 tons of scrap metal waste, 175 tons of hazardous waste and 131 469 ton of recycled waste.

Promoting sustainable agriculture

Agriculture in its broad sense is often accompanied by complex, interrelated social, environmental and economic dynamics. Farming sugarcane is no exception and companies or farmers cannot deal with these dynamics in isolation. Tongaat Hulett supports a multi-stakeholder approach to sustainable agriculture that will help to protect its supply chain as well as create successful farming communities. It has direct relationships with numerous private farmers in 3 countries to whom it provides agronomy support. This support includes providing quality seed cane as well as guidance on crop management, soil and water protection and environmental best practice. The guidance is not limited to farming and covers all areas of agriculture. Where appropriate the World Wildlife Fund standards are used to facilitate training of private farmers in order to ensure that sustainable principles are employed.

Tongaat Hulett is using sustainable sugarcane agriculture practice which seeks to protect the natural resource base, prevent degradation of soil and water, conserve biodiversity, contribute to the social and economic wellbeing of all, ensure a safe and high-quality supply of its agricultural products, and safeguarding the livelihood and wellbeing of agricultural workers and their families.

The company practices different conservation methods such as minimal tillage, implementing land use plans and every field that is planted is assessed to ensure that soil conservation structures are maintained in the field. In selected areas, depending on soil conditions and other agronomic influences, a range of cover crops are used to improve soil conditions at planting, provide assistance with the control of problem weeds and in certain cases improve nitrogen availability to the subsequent sugarcane crop. This results in improved cane yields and improved soil conditions in a sustainable fashion.

There is ongoing interaction with the South African Sugar Association, and South African Sugarcane Research Institute to ensure that sustainable farming methods are practiced at Tongaat Hulett operations. Fertile soils are important for carbon storage and by employing good farming practices, soil erosion and greenhouse gas emissions are reduced. Through cropland management and modern soil conservation methods the agriculture department is able to ensure increased yields and the sustainable supply of sugarcane to its mills.

Environmental compliance

There were no material incidents, fines or non-monetary sanctions for non-compliance with applicable environmental regulations during the year under review. The established community liaison forums between Tongaat Hulett and interested parties continue to address environmental related complaints. Level 1 environmental complaints are those that are deemed ‘minor” and refers to the number of times operational activities resulted in isolated public complaints. Although a response is triggered, Level 1 complaints do not require remediation plans. Level 2 complaints refer to number of times operational activities resulted in widespread public complaints or attention from media. Both a response and remediation plan is triggered in the event of a Level 2 complaint.

During the reporting period, Tongaat Hulett experienced 13 Level 1 complaints and 3 Level 2 complaints. Two Level 2 complaints were received at the Kliprivier starch plant and 1 was received at the Maidstone sugar mill.

The 2 complaints at Kliprivier were both odour related. The first incident was related to odour emanating from product re-work and the odour was neutralised through chemical addition. The second incident was linked to odour from an effluent tank whilst it was undergoing a maintenance clean-up. The remedial actions implemented included the addition of ash to suppress odours as well as a catalyst to reduce the impact. The mill communicated its action plans to the relevant authorities and stakeholders.

The odour complaint from Maidstone mill was related to a smell emanating from the irrigation holding ponds. There was a leak in the raw water feed line to the irrigation dam which was assumed to be the root cause of the complaint. The leak was attended to by the mill personnel and sampling and analysis of river confirmed that there were no impacts on the river. Municipal authorities and all relevant stakeholders received communication regarding this incident.

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