Integrated Annual Report 2011
 
 
     
 
Sustainability and stakeholder review    
 

Introduction

This Sustainability Report forms an integral part of the Group’s integrated report. In this report, the Group endeavours to provide a transparent, accurate and integrated perspective of its sustainability philosophy by covering not only its economic performance, but also portraying the scope of the Group’s associated social, environmental and governance initiatives. The emphasis is on the link between the Group’s financial and non-financial performance, in an effort to demonstrate how these factors interacted and influenced the business during the past year. The Group views the integrated reporting process as an evolutionary journey that will evolve as global developments in this field mature. The Group has adopted the Global Reporting Initiative’s (GRI) G3 Index for reporting purposes however, reporting has been based on a substance over form principle, in that sustainability issues that are not considered material to JD Group’s business have not been disclosed.

Role of the board and the overarching philosophy

JD Group is committed to creating long-term sustainable stakeholder value through ethical business practices, providing employment, minimising environmental impacts and promoting social and economic development. The board regards JD Group as integral to the South African society and therefore acts as a responsible citizen in its social, environmental and economic interactions with stakeholders. Decisions take cognisance of the impact on sustainability. Current needs are evaluated to ensure that the ability of future generations to meet their needs is not compromised. However, as much as the Group acknowledges that social transformation is important to redress the unfair practices of the past and that sustainability ensures its future wellbeing, JD Group’s business perspective remains aligned first and foremost with the expectations of its shareholders whose capital it manages, because informed investors assess the quality and sustainability of the Company’s economic performance as most essential in this triple-bottom line accord – and as such, anti-competitiveness is not tolerated in any shape or form.

The philosophy of leadership, sustainability and corporate citizenship is core to JD Group’s own strategy and evidenced by the statement of its Chairman, David Sussman: “As one of the leading furniture retailers in South Africa, JD Group embraces any initiative aimed at ensuring the future prosperity of our country, as well as that of the Group. The importance of transformation and upliftment of the communities in which we conduct our business cannot be underestimated. Our existence and future profitability can only be achieved with the continued support of our customers and the communities in which we operate.”

Accountability and assurance

The board has mandated the Audit committee to oversee sustainability reporting within JD Group and the Finance and Corporate Affairs Director (Ian Thompson) is the accountable executive board member. The Audit committee has reviewed the disclosure of sustainability matters in the integrated report and found them to be accurately reported and not in conflict with the financial disclosures. It furthermore recommended that management is not required to involve external third-party assurance providers in this early stage of the Group’s sustainability journey. Management expects that the status of this report is at least at the G3 C-level.

The Group has not formulated an overarching Sustainability Policy, however, over the years it has adopted a number of sustainability-related policies such as a Transformation Policy, an HIV/Aids Policy, an Ethics Policy, a Gifts Policy, an Anti-fraud Policy, a Risk Policy and a Health and Safety Policy. These policies are aligned to the triple-bottom line aspects and support the Group’s business strategy. In addition, it has commenced building formal reporting and monitoring structures for measuring and verifying its future sustainability efforts. The Company also obtained advice from our independent advisors, KPMG on the most suitable sustainability framework to be implemented and the most appropriate reporting format, which is the product of this report.

Review of stakeholder engagements and initiatives

Stakeholders

The Group has identified the following as its key stakeholders:

  • shareholders (and potential investors)
  • the board of directors
  • employees (other than executive directors)
  • customers (and potential clients)
  • suppliers
  • organised labour
  • government and regulators
  • communities
  • other individuals and entities that engage with the Group on a regular basis.

Wealth creation – various beneficiaries

The Group’s primary purpose is to create and generate sustainable wealth for the benefit of all stakeholders. This can only be achieved by maintaining profitable business operations and ongoing engagement with stakeholders. It requires a continuing commitment to satisfy consumers’ needs, while pursuing persistent and satisfactory profit growth, through both organic and non-organic strategies.

For the year ended 31 August 2011, the Group generated satisfactory profit and made further progress towards achievement of its strategic goals, as stated here. Attributable earnings for the year amounted to R699 million. Shareholders benefited with a total dividend for the year of 200 cents per share. In addition, 2,8% of the profit was allocated to the Group’s corporate social investment (CSI) budget, amounting to R20 million, which will be applied in the 2012 financial year to benefit communities. As a result of the profits generated and the resulting payment of taxes to SARS, the government benefited handsomely. During the year, staff members received market-related salary increases, commissions and performance-based incentive payments. The value added statement presented below is testimony to the value created by the Group during the year under review.

Group value added statement

    2011  
Rm  
2011  
%  
2010*  
Rm  
2010  
%  
Revenue     15 741     12 590    
Investment income     5     4    
Finance income     65     73    
Equity accounted profits     2     —    
    15 813     12 667    
Cost of merchandise, services and expenses     (11 895)    (9 477)   
Value added     3 918   100,0   3 190   100,0  
Distributed at follows:            
Employees            
Salaries, commissions and other benefits     2 550   65,1   2 158   67,6  
Government            
Taxation, assessment rates and other levies     (34)  (0,9)  395   12,4  
Providers of capital     551   14,1   436   13,7  
Distribution to shareholders     391   10,0   255   8,0  
Finance costs     160   4,1   181   5,7  
Reinvestment in the Group     851   21,7   201   6,3  
To provide for depreciation     199   5,1   149   4,7  
To provide for deferred taxation     344   8,8   (194)  (6,1) 
Reinvestment for expansion     308   7,8   246   7,7  
    3 918   100,0   3 190   100,0  
Statement of money exchanges with government            
Assessment rates and taxes     27     21    
Company taxes     (80)    357    
Employees’ tax deducted from remuneration paid     249     211    
Net value added tax and general sales tax collected     179     106    
RSC and other levies     19     17    
    394     712    
Value added is the amount of wealth the Group has created by purchasing and selling its merchandise. The statement above shows how this wealth has been distributed. The calculation takes into account the amounts retained and invested in the Group for the replacement of assets and the development of operations.  

*Restated to reflect the discontinued operation (Abra).