Risk, SHE, Social and Ethics Committee
RISK, SHE, SOCIAL AND ETHICS COMMITTEE
The committee is constituted as a statutory committee in respect of the obligations prescribed by the Companies Act, and as a committee of the Board in respect of all additional duties assigned to it by the Board.
The committee, comprising non-executive and executivedirectors, is chaired by an independent non-executive director, and meets at least twice a year. Its current members are N Mjoli-Mncube (Chairman), PH Staude (CEO), F Jakoet, TN Mgoduso, SM Beesley and MH Munro (in his capacity as Chief Risk Officer). Several members of the company executive and senior managers (responsible for SHE, broader sustainability aspects, socio-economic development, stakeholder engagement and ethics, amongst others) attend this meeting by invitation. MAC Mahlari is the secretary. The chairman of the committee reports to the Board on all matters discussed by the committee within its mandate, and provides minutes of all of its activities and decisions taken.
In summary, the primary responsibilities of the committee include:
- Assisting the Board to discharge the statutory requirements of the Companies Act articulated under regulation 43(5), including amongst others, monitoring the social and economic development activities of the company.
- Ensuring that the company is an active and socially committed corporate citizen.
- Ensuring that there are processes in place to monitor consumer relationships and general compliance with consumer protection laws.
- Ensuring that the company has implemented effective policies and plans for safety, health and environment that enhance the company’s ability to achieve its strategic objectives, including employee and public safety.
- Overseeing on behalf of the board the total process of risk management and governance, including amongst others, reviewing the implementation of the risk management strategy and policies by means of risk management systems and processes.
- Ensuring that there is meaningful engagement with the company’s identified stakeholders.
During the period under review, the committee carried out a self-evaluation of its performance. The results of the self-evaluation process reflected that the committee was satisfied with how it executed its responsibilities and fulfilled its mandate.
The Risk, SHE, Social and Ethics Committee is pleased to submit its report to the shareholders as required by the Companies Act and recommended by King III, illustrating how it discharged its statutory responsibilities and acted in accordance with the requirements of its terms of reference for the year ended to 31 March 2015:
| 1. | Statutory duties
Social and economic development Tongaat Hulett is a signatory to and participant of the United Nations Global Compact, a corporate citizen initiative espousing principles in the areas of human rights, labour, environment and anti-corruption. The company continued to adhere to the 10 principles articulated in the Global Compact to promote sustainable development and good corporate citizenship, through a set of values based on universally accepted principles. The initiative provides a good networking opportunity for the company, and a forum for exchanging key learning and experiences. The committee recorded its satisfaction that the ten principles were receiving due and appropriate attention by the company on an ongoing basis. During the period under review, the committee monitored the socioeconomic development initiatives undertaken by the company, within the business objective of contributing to the creation of successful rural communities. A full report of Tongaat Hulett’s focus on social and economic development, particularly within the context of its relationship with private farmers, surrounding communities across all areas of operation and the link to the business’ various stakeholder relationships, can be found in the sustainability report. The company is committed to economic sustainability and to this end, continues to assess its business approach to empowerment and preferential procurement, taking into account employment equity, skills development and broad-based black economic empowerment (B-BBEE) within the South African context. The company’s B-BBEE rating audit was conducted for the period under review and Tongaat Hulett was categorised as a Level 3 contributor. More information in this regard is contained in the sustainability report. Good corporate citizenship During the period under review, the committee monitored the company’s standing and commitment in terms of being a responsible and ethical corporate citizen. This included the committee reviewing the company’s stakeholder value creation framework in great detail, which is linked to the strategic objectives of the company. The framework covers inter alia, the company’s objective to assist with the development of small-scale private farmers, partnering with key stakeholders to progress renewable energy initiatives and creating successful rural communities within Tongaat Hulett’s cane catchment. The committee also assessed the company’s proactive stakeholder engagement interface and other processes in place, which ensuring that the appropriate communication strategy for each stakeholder group is identified and successfully implemented, thereby contributing to the maintenance and development of strong and effective stakeholder relationships. Tongaat Hulett is regarded as a responsible and ethical corporate citizen and the committee is satisfied that this element continues to receive the appropriate attention. A full report of the various initiatives led by the company and the positive impact on surrounding communities can be found in the sustainability report. Safety, health and environment (SHE) During the period under review, the committee discharged this responsibility and considered the company’s performance in terms of safety, health and the environment, as can be seen in paragraph 3 below. Consumer relationships, product labelling and communication Tongaat Hulett continues to adhere to consumer protection laws across all countries of operation. Appropriate systems and processes are in place to ensure successful consumer relationships, such as suitable terms of sale agreements, responsible marketing practices and material that comply with applicable requirements, packaging and labelling practices that reflect pertinent product information in compliance with labelling regulations, and the commercial conduct of the company to ensure compliance with these laws. Monitoring of these key issues continues at the various operations, and instances of potential noncompliance will be addressed by the Audit and Compliance committee. Through the establishment of customer care lines, operations are able to monitor customer relationships and any potential complaints that may arise. |
| 2. | Terms of reference
The committee has adopted, and operates within, formal terms of reference that have been approved by the Board. The committee confirms that for the period under review, it discharged its duties and responsibilities in accordance with these terms of reference. The summary of the role of the committee is as articulated here. |
| 3. | Duties assigned by the Board
During the period under review, the committee fulfilled its responsibilities assigned to it by the Board in accordance with its terms of reference. The committee assisted the Board in fulfilling its risk governance and SHE objectives by ensuring, amongst others, that the company has implemented effective policies and plans for risk management, safety, health and environment that enhance the company’s ability to achieve its strategic objectives. The committee also ensured that disclosures and communication between the Board and the Audit and Compliance Committee regarding risk management processes and activities pertaining to safety, health and environment were comprehensive and adequately facilitated. Whilst the committee had specific duties relating to risk governance, the role of the Audit and Compliance Committee was retained in terms of some aspects of risk management, including financial reporting risks, internal financial controls, and fraud and IT risks relating to financial reporting. The committee performed its responsibility of overseeing the performance of the company against its set safety, health and environment targets and objectives, and considering reports relating to substantive SHE risks and liabilities that could potentially face the company. |
| 4. | Relationship with other Board committees
The committee acknowledges the inextricable link between certain of its responsibilities and those of other committees of the Board. Some of these include the relationship with the Audit and Compliance Committee, which retains the responsibility for risk management as it relates to financial reporting risks, internal financial controls and fraud and IT risks relating to financial reporting. Further, the company’s standing on the recommendations espoused in the Organisation for Economic Co-operation and Development (OECD) regarding the prevention of corruption, is reviewed and covered by the Audit and Compliance Committee, which ensures that the company has adopted effective systems of internal control, has an independent external auditor, operates within an approved code of ethics, and has implemented whistle-blowing processes that support the non-victimisation of whistleblowers, amongst others. The company has implemented employment equity policies that are based on the principle of creating equal opportunity for all within a diverse workforce with a substantial number of members of designated groups at all levels; supported by appropriate performance and talent management processes and activities, set recruitment targets, clear development and training programme, and coaching and mentoring programmes among others. The Human Resources Executive drives these processes under the leadership of the CEO and reports to the Remuneration Committee and the Board. |
| 5. | Sustainability reporting
The committee reviewed and accepted the framework for the sustainability section contained in this integrated annual report, noting the various themes of the report including Social Performance (social and relationship capital), Environmental Stewardship (natural capital), Human Capital, Manufactured Capital and Intellectual Capital, as articulated in the International Integrated Reporting framework. The committee reviewed the sustainability report as part of its role of assisting the Board to achieve better performance on sustainability matters, including the company’s contribution to the development of communities in which its activities are predominantly conducted, sponsorships and socio-economic development (SED) programme, relationships with key stakeholders, and the impact of the company’s activities on the environment, employee health and public safety. As detailed above, the Audit and Compliance Committee has considered the sustainability and governance information as disclosed in the company’s integrated annual report to ensure its reliability and consistency with the annual financial statements. The Audit and Compliance Committee also considered the various reports of the external assurance service providers to ensure that the information is reliable and consistent with the financial results and other operational information at the disposal of the committee. Furthermore, the Audit and Compliance Committee assessed and satisfied itself of the independence of the external assurance service provider for the sustainability report. |
| 6. | Attendance
The committee had two meetings during the period under review. The record of attendance is contained here. |
RISK MANAGEMENT PROCESS
While the Board is ultimately responsible for risk management, management has designed and implemented a risk management framework and has committed the company to a process of risk management that is aligned with King III and the company’s corporate governance responsibilities. This commitment is reflected in management’s continued attention to the importance of effective risk management in ensuring that business objectives and strategies are met and that continued, sustained growth and profitability is achieved. The framework, which incorporates the risk management policy, strategy and plan, aims to ensure that risk management processes are embedded in critical business activities and functions, and that risks are undertaken in an informed manner and pro-actively managed in accordance with the business risk appetite. This includes identifying and taking advantage of opportunities as well as protecting intellectual capital and assets by mitigating adverse impacts of risk.
The risk management review process seeks to achieve the correct balance between the issues that are specific to, and appropriately managed in, an operational area and those issues that are significant enough or cross cutting enough to be considered, and managed in an appropriate way, on a company-wide basis. The approach to risk management includes being able to identify, describe and analyse risks at all levels throughout the organisation, with mitigating actions being implemented at the appropriate point of activity. The very significant, high-impact risk areas and the related mitigating action plans are monitored at an executive level. Risks and mitigating actions are given relevant visibility at various appropriate forums throughout the organisation.
Tongaat Hulett has documented its approach towards information and communication technology (ICT) in various documents such as the ICT governance framework (including the company’s policy and charter), disaster recovery plans, business continuity plans, acceptable use policy and a record of the approach to the protection and control of ICT documentation. The IT systems and application controls in the multiple computer systems of the various operations are, inter alia, subject to internal audit processes on an ongoing basis, integral to the audit of the overall control environment.
The current business environment is recognised as having many changing and challenging elements, particularly in the context of the volatile global economy and specific localised dynamics. Most of Tongaat Hulett’s business platforms and operational areas are not considered to be in a static, steady state. Consequently, rather than relying purely on periodic reviews, there is a continued and increasing adoption of a project management approach and use of project management skills in various management processes, including risk management. The ongoing, routine risk management processes are thus coupled with change management and specific, task-based, project- driven risk management initiatives.
Company-wide systems of internal control exist in all key operations to manage and mitigate risks and a Combined Assurance Strategy and Plan was implemented to further enhance the co-ordination of assurance activities. Tongaat Hulett’s Combined Assurance Plan provides a framework for the various assurance providers to work together to provide assurance to the Board, through the Audit and Compliance and Risk, SHE, Social and Ethics Committees, that all significant risks are adequately managed. The Plan consists of “three layers of defence”, being management, functional oversight and independent assurance providers, wherein the assurance on the risk management and related controls for the company is reported.
Appropriate business continuity plans and resources were identified in order to ensure the implementation of recovery procedures, where potential risks have been identified as having the possibility of constituting a disaster.
The Tongaat Hulett internal audit function, which is supported by its internal audit service provider, KPMG, has performed a review of the effectiveness of the company’s internal control environment, including its internal financial controls, and the effectiveness of its risk management process. The evaluation of the company’s risk management processes included a review undertaken by KPMG. It noted Tongaat Hulett’s positioning for the review period on the KPMG Risk Maturity Continuum as“mature” out of a possible range of “basic – mature – advanced”. Consequently, the company’s internal audit function has provided independent assurance to the Audit and Compliance and Risk, SHE, Social and Ethics Committees and the Board on the effectiveness of its risk management processes.
For the period under review, the Tongaat Hulett Board, assisted by the abovementioned committees, is of the view that the internal control environment and the risk management processes in place for the company are effective.
