2020 ENVIRONMENTAL AND SOCIAL SUPPLEMENTARY REPORT

2020 ENVIRONMENTAL AND SOCIAL SUPPLEMENTARY REPORT

THE SPAR GROUP LTD

My SPAR, Our Tomorrow 1

Our sustainability policy 1

SPAR and the environment 3

Finding solutions for food waste 4

Our packaging commitment and guiding principles 4

Climate scenarios risks and opportunities 7

Reducing our carbon footprint 9

Water stewardship at SPAR 11

A social purpose 13

Our purpose in action 14

Our human capital approach 15

Broad-based black economic empowerment at SPAR

18

Our sustainable procurement approach 19

Corporate social investment projects 24

Value added statement 28

Governance 29

Appendices 30

Our values 30

Alignment of the SDG targets and NDP objectives 31

Our carbon footprint 33

CONTENTS

The index recognises companies with strong

ESG practices measured against global standards. SPAR received an ESG rating of 3.1 in 2020.

SPAR is included in the

FTSE4Good Index


MY SPAR,

We believe that the future of our business and the society within which we exist are intertwined. Our sustainability tagline, “My SPAR, Our Tomorrow” is a public commitment to the future of our brand and our planet. We base this on SPAR’s values of entrepreneurship, family values and passion. Please refer to the appendix for an understanding of our values. We align our commitment with the United Nations Sustainable Development Goals (SDGs) as well as the South African government’s National Development Plan (NDP). For an understanding of how the SDG targets and NDP objectives align, please refer to page 31.

Even as we grow, we want to reduce our business’s overall impact and contribute to our social and natural ecosystems’ wellbeing.

We intend to become a more climate resilient group by reducing our carbon and water footprints, ensuring that our natural resources are responsibly procured and protected. In partnership with other global organisations, we are actively working to become a carbon neutral organisation by 2050.

OVERALL WINNER OF THE ABSA BUSINESS DAY SUPPLIER DEVELOPMENT AWARD

SPAR’s commitment to the development of small-scale rural farmers was recognised this year: SPAR was the 2020 winner of the ABSA Business Day Supplier Development award. The award acknowledges businesses that stand out as overall leaders in developing suppliers. Read more in the case study on page 21.

SPAR SELECTED FOR THE FTSE4GOOD INDEX SERIES

SPAR satisfied the requirements to become a constituent of the FTSE4Good Index Series. The FTSE4Good Index Series is designed to measure the performance of companies demonstrating strong environmental, social and governance (ESG) practices.

SPAR CERTIFIED AS A TOP EMPLOYER IN SOUTH AFRICA

The Top Employers Institute is the global authority on recognising excellence in people practices.

MY SPAR, OUR TOMORROW

OUR SUSTAINABILITY POLICYWe believe that the future of our business and the society within which we exist are intertwined. Our sustainability tagline, “My SPAR, Our Tomorrow” is a public commitment to the future of our brand and our planet. We base this on SPAR’s values of entrepreneurship, family values and passion, and align our commitment with the United Nations Sustainable Development Goals as well as the South African government’s National Development Plan.

Our sustainability policy supports the SPAR strategy by focusing on six key areas fundamental to the role we play as a food retailer:

Health Community Supply chain

Sourcing Environment Our people

2 THE SPAR GROUP LTD

My SPAR, Our Tomorrow (continued)

OUR SUSTAINABILITY PLEDGE

Our sustainability pledge is to create authentic shared value for stakeholders by working towards these outcomes:

• Contribution to societal change

• Contribution to responsible living

• Opportunity creation

• Resource stewardship

WE USE SCIENCE-BASED TARGETS

SPAR developed science-based targets (SBTs), which set out Scope 1 and 2 emissions reduction targets by 2050:

• 59% for buildings

• 41% for transport

Our carbon reduction framework serves as a roadmap for meeting emissions reduction targets, therefore reducing current and future carbon tax liability. The current SBTs align SPAR’s climate change targets with the global target of a 2°C temperature increase above pre-industrial levels limit. However, since the Intergovernmental Panel on Climate Change’s publication of the refined 1.5°C temperature increase above pre-industrial levels limit target in 2019, SPAR is in the process of updating our SBTs to be in line with the updated global target of 1.5°C.

SPAR recognises that monitoring of progress against targets requires comprehensive and accurate data. Data collection and monitoring systems are key aspects in accurately measuring, mapping and tracking sustainability practices and outcomes. Over the next two years, we will set sustainability targets and monitor suppliers’ progress against those targets.


SPAR AND THE

SPAR AND THE ENVIRONMENT

We want to create sustainable stakeholder value. To achieve this outcome, we have to contribute to responsible living and honour our resource stewardship role. We are committed to preserving natural capital and mitigating any negative environmental impact from SPAR’s business activities.

OUR ENVIRONMENTAL GOALS

• No food that is safe for human consumption will be wasted in our operations by 2022

• Halve food waste in our own operations by 2030

• Work in partnership with our suppliers to halve food waste in our supply chains by 2030

• Help halve global household food waste in the markets where we have retail operations by 2030

• 100% of plastic packaging to be reusable, recyclable or compostable by 2025

• 70% of plastic packaging effectively recycled

• 30% average recycled content across all plastic packaging

• All paper and board used will be 100% sustainable by 2025

Our environmental goals contribute towards the following Sustainable Development Goals:

OUR CLIMATE GOALS

• Reduce absolute carbon emissions from our transport operations from 2016/2017 levels by 36% by 2025, by 82% by 2033 and by 100% by 2050

• Reduce absolute carbon emissions from our warehousing operations from 2016/2017 levels by 59% by 2033 and by 100% by 2050

• Source all our electricity from renewable sources

• Energy-efficient technology

• Installation of water-efficient technology

• Engage with stakeholders around water usage within basin

• Water management practices in place/water stewardship/leadership

Our climate goals contribute towards the following Sustainable Development Goals:


SPAR and the environment (continued)

FINDING SOLUTIONS FOR FOOD WASTE

REDUCING FOOD WASTE In November 2019, SPAR Switzerland entered into a partnership with Too Good To Go, a movement against food waste. Too Good To Go food packages are now available in 55 SPAR stores in Switzerland and contain fresh SPAR products that can be purchased daily at a special price.

Consumers can use the Too Good To Go app to find participating stores where they can buy food packages that are close to their use-by-date at a special price. They can also see how many food packages are available in which SPAR stores. The packages can then be picked up at the local SPAR store of choice.

In addition to driving food waste reduction, SPAR Switzerland encourages customers to save on packaging by using their own bags for transport when picking up their Too Good To Go groceries.

A FOOD WASTE SOLUTION IN IRELANDBWG Group has supported FoodCloud for nearly 10 years. FoodCloud is a social enterprise that reduces the environmental, social and economic impact of food waste by redistributing surplus food to a network of charity and community groups.

FoodCloud reported a 70% increase in demand for the supply of food due to the pandemic. In support of the increasing demand, all EUROSPAR supermarkets in Ireland contributed to a new food initiative by FoodCloud called Food For Ireland. Shoppers can directly support FoodCloud when shopping in-store by donating food products at dedicated collection points. BWG Group then supports a reverse logistics system to transport the donated food to the central depot of FoodCloud for consolidation and redistribution.

OUR PACKAGING COMMITMENT AND GUIDING PRINCIPLESSPAR demonstrates our commitment to sourcing sustainable, environmentally responsible packaging by implementing national packaging management strategies, including:

• Identifying unnecessary packaging and committing to reducing the use of unnecessary packaging

• Using materials that are renewable, safe, effective and sustainable

• Creating consistent branding nationally both in-store and across our house brands

• Utilising materials that have been sourced responsibly and can be recycled locally

• Consolidating and managing waste streams through responsible and sustainable sourcing

• Exceeding our customers’ expectations

• Reducing costs while optimising performance

• Reducing costs for our retailers

• Aligning with circular economy practices and their social, environmental and commercial implications:

– Eliminating all problematic and unnecessary packaging

– Innovating to ensure that the plastics/packaging created are reusable, recyclable or compostable

– Circulating all plastics/packaging we create to keep them in the economy and out of the environment

SPAR has identified its core objective as finding the balance between protecting the environment and providing effective packaging at an acceptable price. We strive to ensure that the best options with the lowest environmental impact are explored and utilised. When designing our packaging with a Circular Economy in mind (reduce, reuse, recycle) we adhere to this set of standards:

• Clear communication on the labels regarding recycling and the materials used

• Choosing mono-materials over composite if applicable

• The contents must be easily extracted

• Separation must be simple to allow for recycling

• Minimising the number of materials used in any given pack

• Using pre and post-consumer recycled content as much as possible (cardboard and plastic)

TAKING ACTION ON FOOD WASTE IN SOUTH AFRICAAccording to WWF, South Africa produces about 10 million tonnes of food waste per year. This equals about 30% of food produced. Of this, fruits, vegetables and cereals account for 70% of the wastage.

SPAR is currently in the process of mapping food waste across the business, including in our stores. We are mapping how much food is wasted (kgs), which items of food are commonly wasted and the seasonality of waste.

Our plan for the next two years is to find alternative methods of dumping food waste, in other words to divert food waste from landfill. We currently have one operational site and some stores that divert their food waste to a composting facility.

Our longer-term plan is to address food waste systemically:

• Address internal policies around food buying and sales incentives to reduce over-purchasing of items to meet sales targets

• Collaborate with various stakeholders including government and industry to:

– Improve communication to consumers around best before/sell by and use by dates with standardised labels across the industry

– Improve the protection of the donor when donating food that is safe for consumption with short shelf lives

Our distribution centres donate excess food to various local charities. Many SPAR stores across South Africa also donate excess food products to their local charity, as the SPAR model encourages independent retailers to support their local community. This also allows stores to support charities that are nearby, reducing distance travelled and time, resulting in more product to be donated as opposed to using national or regional food donor organisations.


OUR APPROACH TO PACKAGINGWe have six core principles that guide SPAR’s packaging decisions:

1. Circular economy thinking2. Strong focus on communication and

education3. Traceability and responsible sourcing 4. Invest in research and development

to enable changes5. Ensure consistency and authenticity

at all times 6. Seek systemic solutions

We take a collaborative approach to achieve our packaging, plastic and recycling goals. This means that we partner with supply chain providers who want to make a difference and work with us across the value chain. We recognise that we have to understand the full system before making changes, including the stores’ value chain. We are also committed to transparent and fair pricing across the value chain.

To align all stakeholders with our packaging goals, we believe in ongoing communication and education as key drivers and keep to clear, simple and authentic messaging.

Our short-term focus is on the 10 categories that deliver 80% of SPAR’s house brand volumes. We are also addressing in-store packaging which includes carrier bags, PET thermoform, polystyrene trays, clamshells and films.

Reduce • Remove unnecessary packaging across the value chain

• Design new products with minimum packaging without losing packaging integrity

Reuse • Design packaging with reuse in mind

• Consider existing packaging from a reuse perspective

• Drive communication around reuse

Recycle • Design packaging to enable efficient collection and recycling

• Actively integrate highly recycled materials into packaging

• Ensure up to date and accurate on-pack recycling labels on all products

SPAR supports proven best practice across all the packaging we control in the following ways:

• Where appropriate, SPAR is willing to get involved in supporting the development of the full value chain (cradle to cradle)

• SPAR will play a leading role in elevating sustainability standards for packaging across our supplier base and value chain

• SPAR will lead in driving voluntary stakeholder participation to deliver more sustainable packaging in South Africa and:

– Enable a shift in the full packaging system where required

– Apply our voluntary trading model to support stakeholder participation

– Achieve SPAR’s core outcome to drive “reduce, reuse, recycle” within packaging



SPAR’S 100% RECYCLED PLASTIC BAGS

SPAR introduced a 100% recycled plastic carrier bag in 2018, made from 100% recycled plastic containing no less than 70% post-consumer waste. To date, SPAR’s 100% recycled plastic bag has resulted in 4 000 tonnes of used plastic being diverted from landfills annually. In producing the bag, a 40% reduction in associated emissions has been achieved.

SPAR also promotes the uptake of paper bags that are made from 100% renewable resources and are 100% recyclable. Although the price of a paper bag is double that of a plastic bag, we are trialling various ways to encourage consumers to reduce the use of single-use plastics.

A FOUNDING MEMBER OF THE SOUTH AFRICAN PLASTICS PACT

SPAR is one of the founding members of the South African Plastics Pact. The Pact aims to create a circular economy that drives investment in infrastructure, supports livelihoods and keeps our environment free of plastic pollution. The Pact was developed by the World Wide Fund for Nature (WWF-SA), in partnership with the South African Plastics Recycling Organisation (SAPRO) and the UK’s WRAP. In this way we are joining other countries such as France, the UK, the Netherlands and Chile in the exchange of knowledge and to collaborate on accelerating the transition to a circular economy for plastic.

WASTE RECYCLING

SPAR takes action to increase the amount of waste that is recycled, thereby reducing the amount of raw virgin materials required for our products. Recycled plastic and cardboard from participating retail stores are brought to distribution centres, and stores are paid for their waste. Plastics are then sold to a waste service provider. The recycled cardboard is sold to our cardboard box supplier and is made into tertiary packaging for SPAR house brand products. Furthermore, SPAR milk cartons have been replaced with unbleached board to ensure that the cardboard is recyclable, and reducing the ink and bleach required to make the cardboard. Milk carton closures are made from bioplastic, which is made from sugar cane, and is 100% recyclable.

ENGAGING WITH SUPPLIERS ON PACKAGING

We prioritise packaging as a topic when engaging with suppliers due to the large role packaging materials play in SPAR house brand products. We do continuous research to improve packaging materials. This involves engagement with packaging material suppliers to reduce the environmental impact and consider the lifecycle impact of final products. SPAR measures the success of this engagement by the percentage of packaging products that are recyclable, the percentage of SPAR house brand products with packaging that is 100% recyclable and the percentage of packaging made from a renewable resource.

PACKAGING COMMITMENT IN SWITZERLAND In Switzerland we committed to reduce SPAR plastic packaging by 20% in our fresh categories by 2025. This initiative commenced in our meat category and will flow into the balance of the fresh category going forward. Recycled paper bags, recyclable plastic and multiuse shopping bags were introduced to further reduce the use of traditional plastic shopping bags.



CLIMATE SCENARIOS, RISKS AND OPPORTUNITIESSCENARIO ANALYSIS AND SCIENCE-BASED TARGETSSPAR did a quantitative climate-related scenario analysis – using IEA’s Energy Technology Perspectives (ETP 2017) 2°C Scenario (2DS) – to develop science-based targets (SBTs). The 2DS is based on a projected global temperature limit of 2°C above pre-industrial levels. We adopted emissions reduction targets that are in line with the level of decarbonisation required to keep the global temperature increase below 2°C above pre-industrial levels.

SPAR committed to SBTs for two sectors, buildings and transport, and developed a number of scenarios for setting targets, i.e. at 1% growth versus 2.5% growth and at intervals from 2016 (base year) to 2025, 2035 and 2050 on both absolute and intensity emissions. The SBTs and our carbon reduction framework (a roadmap to meet SPAR’s climate targets) guide SPAR’s strategic decisions around the implementation of low-carbon technologies, prioritisation of financial planning elements and resources.

SPAR’s climate-related scenario analysis and SBTs for the buildings and transport sectors were developed using the sectoral decarbonisation approach methodology. This methodology makes use of the Intergovernmental Panel on Climate Change’s assessment reports to identify the global temperature increase thresholds, representative concentration pathways as well as the global carbon budget. This information was then translated using the IEA’s Energy Technology Perspectives reports which assist with developing sectoral carbon budgets, sectoral activity projections and sectoral intensities.

The scenario analysis process incorporated SPAR’s base year (2016) and target year (2050) activity data (at base year and projection in the target year), emissions data (Scope 1 and 2 at base year) and sectorial classification. SPAR’s fleet has been categorised under the transport sector and SPAR’s distribution centres under the buildings sector.

SPAR’s carbon reduction framework supports our journey in meeting the SBTs. The framework incorporates quantitative targets and evaluates the financial feasibility of each opportunity. The framework outlines emissions reduction opportunities up to 2050 which could save us over 158 000 000 kWhs of energy and save costs of around R132 million.

SPAR’s carbon footprint was calculated following the Greenhouse Gas Protocol, using emission factors from the Intergovernmental Panel on Climate Change (IPCC) and the Defra 2019 Voluntary Reporting Guidelines, which are publicly available and are updated annually.

SPAR’s current SBTs were developed to align our climate change targets with the global target of a 2°C temperature increase limit. In 2019, the IPCC published a refined target of a 1.5°C temperature increase above pre-industrial levels limit. We are currently updating SPAR’s SBTs to align with the updated 1.5°C target.

SPAR developed an internal carbon pricing methodology in 2019. The aim of the methodology is to:

• Facilitate reaching our proposed greenhouse gas (GHG) emission reduction targets

• Protect SPAR against risks relating to compliance with future carbon pricing systems proposed by government, such as a carbon tax

• Encourage SPAR to make investments in low-carbon technologies

• Encourage SPAR to make sound investment decisions in terms of energy efficiency projects and future operational changes

We plan to start using the internal carbon pricing methodology at distribution centres to make climate-related decisions and evaluate the feasibility of climate actions in the near future. Currently the cost of carbon is not material to SPAR’s business, however, we anticipate this to change significantly in the next five to 10 years.



CLIMATE-RELATED RISKS AND OPPORTUNITIES RELEVANT TO SPARSPAR’s climate-related risks are linked to our strategic risks and are the outcome of an enterprise risk management process. The board of directors’ Risk Committee oversees risk management based on quarterly reports and the risk register. The risk management process includes executive and functional-level input, with monthly divisional risk meetings considering performance against risk and mitigation plans.

SPAR’s climate-related risks and opportunities were identified on a systemic basis and we often address more than one identified climate risk through our mitigating responses, illustrated below.

WEATHER-RELATED EVENTS CAN IMPACT SUPPLIERS

SPAR trains small commercial suppliers on sustainable farming methods. This includes ways to reduce water requirements, and financial assistance to install water-efficient technologies such as hydroponic systems or tunnels. We engage with suppliers to understand their environmental performance and to drive resource efficiency in their operations.

CHANGING CONSUMER PERCEPTIONS AND EXPECTATIONS OF SPAR INCLUDE DRIVING RESOURCE EFFICIENCY AND OFFERING MORE SUSTAINABLE PRODUCTS

We are adopting a circular economy approach to new product development, including embedding resource stewardship across all business operations and driving sustainability practices in the supply chain. This enables us to mitigate identified climate risks while capitalising on new opportunities.

CARBON TAX MIGHT HAVE A SUBSTANTIVE IMPACT ON SPAR’S CORPORATE-OWNED STORES AND SUPPLIERS

Carbon tax came into effect in South Africa in June 2019. SPAR is liable for carbon tax for diesel and liquified petroleum gas use in SPAR’s distribution centres and corporate-owned stores. The increase in fuel and electricity prices introduced by the promulgation of carbon tax impacts SPAR’s direct operations and suppliers across the supply chain, increasing cost of operations. Those costs will have to be either absorbed, reducing our margins, or passed onto consumers, potentially making SPAR products less competitively priced.

INCREASED COSTS RELATED TO THE USE OF REFRIGERATION EQUIPMENT AND FUEL CONSUMPTION

As a warehousing and distribution business, SPAR ensures that fresh and frozen produce is transported and delivered to stores. Increasing temperatures will lead to increased use of refrigeration equipment and increased associated electricity and fuel consumption costs. To reduce our exposure, SPAR has rolled out solar photovoltaic (PV) installations across its distribution centres. SPAR’s logistics team continues to research and trial various energy-efficient refrigeration systems in our trucks. We successfully piloted the world’s first commercially available battery-electric truck refrigeration system, which over time will be implemented in over 30% of our South African fleet.

THERE IS AN INCREASING DEMAND FOR PRODUCT LABELLING IN TERMS OF ENVIRONMENTAL IMPACT

Globally, there is an increasing trend for product labels to display the product’s environmental impact, including emissions associated with a product’s lifecycle. This might eventually lead to labels with compulsory information on energy efficiency standards and ratings. At SPAR, in the short term, this would be most applicable to paper (from FSC-certified forests) and seafood (compliance with WWF-SASSI) labelling.



REDUCING OUR CARBON FOOTPRINTSPAR has participated in the CDP since 2009. Our South African carbon footprint is calculated according to the International Greenhouse Gas Protocol Corporate Accounting and Reporting Standard, and the data provided pertains to 1 October 2019 to 30 September 2020. Scope 1 and 2 emissions were independently verified. Refer to page 33 for more information.

We are working on a detailed Scope 3 accounting process that will allow us to identify the major risks and opportunities in our supply chain. To support this work, we engaged with our top Freshline and SPAR house brand suppliers on their carbon footprint, and water and energy use. This provided us with a deeper understanding of key suppliers’ resilience to climate change.

To reduce absolute carbon emissions from our transport operations, the KwaZulu-Natal distribution centre piloted various prototypes of a new commercially available, battery-electric truck refrigeration system. SPAR’s KwaZulu-Natal distribution centre was the first in Africa to build and trial a hybrid fuel and battery-powered rigid truck in collaboration with the engineering department of the University of KwaZulu-Natal. The battery-electric truck refrigeration system will replace the standard diesel truck fridge and could save up to 90% of monthly fuel and servicing costs. The system results in a significant emissions reduction while recharging batteries at an average of 30 minutes and running for up to 18 hours between charges. About 30% of the SPAR fleet consists of refrigerated trucks to be converted to the new system over time.

SOLAR PANELS AND SMART METERINGWe are committed to sourcing all our electricity from renewable sources. Over the past few years, SPAR invested in energy efficiency and solar photovoltaic (PV) initiatives to reduce energy consumption and energy costs while mitigating the risk of load shedding. In many areas, local municipality infrastructure is constantly under pressure with solar power assisting in relieving the burden.

LED lighting is another key area to reduce electricity use. SPAR aims to convert 100% of lighting to LED alternatives.

All distribution centres use solar energy. Total installed capacity across the distribution centres is 6.89 MWp (excluding Build it) and the solar PV installations generated 8042 MWh of energy during the 2020 financial year.

SouthRand

NorthRand

KwaZulu-Natal

WesternCape

EasternCape Lowveld

Installed capacity (kWp) 1 400.75 923.45462.21 (Dry)

1 313 (Perish) 1 124.5 1 272 396.9CO2 reduction to date (tonnes) 5 353 2 679

465 (Dry) 1 338 (Perish) 3 059 457 465

Energy yield performance to date (%) 96 98

99 (Dry) 99 (Perish) 100 112 93

Financial return to date (rand) R 6 912 794 R 3 770 391

R555 940 (Dry) R1 475 252

(Perish) R4 138 453 R973 967 R722 727

We continue to invest in energy-efficient technology. Distribution centres run a heating, ventilation, air conditioning, refrigeration and machine replacement programme that prioritises newer and more energy-efficient technologies to reduce consumption. SPAR trains its warehouse and administrative employees to be aware of energy losses when operating refrigeration equipment through annual awareness campaigns across all regions.

SPAR and Build it also support retailers to install solar energy at their stores. We now include 55 corporate stores in energy consumption monitoring and performance tracking. Smart energy meters were installed in seven corporate stores, providing comprehensive and accurate energy consumption information in real time.



TRANSPORT EFFICIENCY AND IMPROVEMENTSTo improve outbound transport efficiencies (between distribution centres and stores), we launched projects to improve routing and the electronic flow of delivery documentation to retailers. This entails, for example, changes to picking and loading processes: based on the demand of the stores on a particular route, we can dynamically combine deliveries and reduce the number of trucks on a route.

We created a fully electronic flow throughout the delivery process: eliminating paperwork, automating claims processes, confirming receipts and filing documentation. This helps us use our drivers more effectively and saves time.

We increased our delivery windows to stores, with some distribution centres delivering 24/7. Sundays are now open as a nominated delivery day to retailers and an increasing number of retailers are accepting deliveries during day and night shifts.

To ensure the safety of our drivers, we installed facial recognition cameras with artificial intelligence (AI) in new truck tractors. This is a trial to determine if the technology can be an effective deterrent to prevent hijacking or theft of vehicles. The facial recognition is linked to the vehicle’s ignition and will not allow the vehicle to start should the driver’s face not be recognised.

We are also piloting live fuel probe technology to monitor fuel theft and efficiency in consumption.

THE CLEANEST FLEET IN THE IRISH INDUSTRYThe national distribution centre now has seven new compressed natural gas (CNG) vehicles in its fleet. This includes a mix of articulated and rigid vehicles which are now yielding an estimated 20% fuel saving when benchmarked against standard diesel vehicles. In 2020 we also launched the first two biogas trucks in the Irish market. This will lead to a reduction of 200 tonnes of carbon emissions.

We obtain fuel for the biogas trucks through our transport solution partner, Vision Green, which uses waste products created by the group and not fit for human consumption to create biogas. BWG Group boasts the cleanest fleet in the industry. BWG Group is in the process of receiving Envirogreen certification as acknowledgement of its adoption of biogas in its transport fleet.

REDUCING EMISSIONSSPAR Switzerland is committed to reducing our CO2 emissions in transport and logistics by at least 20% within five years. The commitment was recognised in 2019 when SPAR Switzerland received the 2019 Lean & Green Award from GS1, a not-for-profit organisation developing and maintaining global standards for business communication.

To support this commitment, SPAR Switzerland added a fully electric vehicle to our fleet this year. The new e-truck enables emission-free and almost silent transport from the central warehouse to SPAR stores.

SPAR Switzerland started using hybrid trucks in 2011, which were replaced by the more modern and economical Euro 6 engine in 2017. The new e-truck heralds even more significant reductions in CO2 emissions. It can cover around 180 km per charge, tracks energy capacity through a display in the cockpit and can save 19 000 litres of diesel per year, leading to a reduction of 50 tonnes in CO2 emissions.

We also co-operate with RhB, a Swiss transport company that owns the largest network of the nation’s private railway operators. As part of this initiative, launched in 2018, a growing number of SPAR containers are transported via rail, instead of road, leading to a yearly reduction of 85 000 km of road use.


SPAR purchases fuel directly from fuel suppliers to ensure a better price and supply for the fleet. The SPAR fleet’s continuous improvement is a core, long-term focus. SPAR’s logistics team continues to analyse alternative ways to get products to market to ensure load optimisation and effective routing solutions. We continue to prioritise delivery from source where possible, reducing the distance, cost and administration requirements to transport goods to regional distribution centres.


WATER STEWARDSHIP AT SPARWe are committed to responsible water use by using technology, improving our water management practices and engaging with stakeholders.

WATER IS A CRITICAL RESOURCE

Water is a critical resource for SPAR’s operations in distribution centres and stores to maintain a hygienic environment for storing and selling food products and to ensure clean water use in refrigeration systems. SPAR is a food retailer, managing large volumes of fresh produce and prepared food, and therefore has to comply with food safety and hygiene requirements and standards.

Water is also important for the agricultural activities in our supply chain. Insufficient amounts of good quality water could negatively impact the amount and quality of produce supplied to SPAR stores and potentially lead to increased costs.

Our distribution centres in the Western Cape and Eastern Cape are located in water scarce areas that experienced severe drought and where rainfall is likely to decrease in the future. Gauteng was also identified as a high-risk area, as there are no local water sources. For this reason, these distribution centres were prioritised for water efficiency and alternative water source solutions.

SPAR’S WATER RISK SOLUTIONS

At the Western Cape distribution centre we installed adiabatic cooling systems and water collection measures, and drilled boreholes to mitigate water risk. The Eastern Cape distribution centre drilled boreholes and installed water storage tanks.

SPAR implemented waterless solutions for cleaning trucks and warehouses. We are working with suppliers to promote more sustainable farming methods, which encourage reduced water consumption.

SPAR has recycling systems implemented at five of its facilities: the Western Cape, Eastern Cape, South Rand, KwaZulu-Natal and Lowveld distribution centres.

MEASURING WATER USE

Water withdrawals from municipal water sources are measured and monitored monthly, with information captured from municipal bills. Rainwater, borehole and recycled water use is measured using a water meter which is placed on the outlet of the rainwater tank, providing combined water withdrawal volumes for rainwater, borehole and recycled water.

Water discharge volumes are measured for all distribution centres and the head office. SPAR captures discharged water volumes monthly using estimates included in municipal water bills (estimated as a percentage of municipal withdrawals), as all water discharges are destined for municipal sewage networks. Only discharges for the Western Cape distribution centre are captured as a percentage of both municipal and borehole water withdrawals volumes.

For all distribution centres and the head office, discharges are estimated at 90% of municipal withdrawals, according to the average municipal disposal charges calculations, except for the Western Cape distribution centre, where discharges are estimated at 90% of municipal and borehole water withdrawals.

Water discharges by destination are measured and monitored for all of SPAR’s distribution centres and the head office. All wastewater is discharged directly to municipal sewerage systems.

As part of our ongoing efforts to improve water data accuracy and completeness, SPAR is in the process of installing meters that will allow recycled water to be measured separately in distribution centres where water recycling systems are installed.

We are developing specific targets for suppliers around water reduction and efficiency.

WATER SCARCE AREAS

River basins located in the Eastern Cape and Western Cape were identified as water scarce areas, using the WWF Water Risk Filter tool. Water scarce areas and water basins within those areas were identified, and the following risk indicators were evaluated:

• Rainfall amount

• Access to renewable groundwater resource

• Proximity to the river

• Physical access and proximity to the water source

• Basin-level control over the quantity and quality of water flow levels

The Western Cape remains at risk, however SPAR’s Western Cape distribution centre has access to renewable groundwater.



WATER RECYCLING IN THE WESTERN CAPEThe drought brought on by three consecutive years of anaemic rainfall up to 2018, prompted us to invest more than R5 million into water efficiency technologies and increased water harvesting infrastructure at our Western Cape distribution centre.

The distribution centre implemented water harvesting from the defrost cycle, specifically diverting water from defrost drain to rainwater collection tanks as part of a centralised water collection system. The water is then put through a water filtration system and used to clean trucks and in ablution facilities. We also installed an adiabatic cooling system, which uses cooling pads made from organic material to cool surrounding air which in turn cools the ammonia (NH3), providing cool air for refrigeration.

The system recycles water until the water quality is too poor to be used and then is discharged. This allowed the Western Cape distribution centre to achieve a 98% reduction in water usage per condenser. SPAR’s Western Cape distribution centre also installed a borehole to withdraw water from groundwater sources to reduce municipal water withdrawals.

FLOODING DAMAGES, LOSS AND DELAYSFlooding is a major risk as it damages infrastructure on which SPAR relies for distribution. An example is severe flooding, caused by torrential rain, experienced in parts of KwaZulu-Natal. While SPAR’s KwaZulu-Natal distribution centre was not affected, some of SPAR’s stores, particularly those located in Pinetown, experienced disruption to sales. A major roadway bridge in Pinetown was washed away and the road was closed for seven weeks, making it difficult for consumers to access the store. This resulted in one store losing significant sales.

The impact on roads caused traffic congestions at another SPAR store, making it too difficult for customers to get to the store, resulting in further losses. Furthermore, those stores were unable to claim insurance as they were technically still open and were able to operate but experienced a reduced number of customers.

SPAR’s operations rely on transportation of perishable goods to and from distribution centres. Flooding, which could affect transportation networks, causes delays and perishable items not reaching SPAR’s retailers in time. SPAR operates nationally and therefore floods in any region could affect logistical operations.

A RESPONSIBLE CORPORATE WATER USERSPAR stores play a key role in local communities and are committed to making a difference in communities across South Africa. SPAR recognises that ecosystems within catchment areas affect the quantity and quality of water available to communities living within those catchment areas and can have an impact on SPAR’s operations. Therefore, we engage with local community partners to contribute towards maintenance and rehabilitation of ecosystems.

SPAR’s Eastern Cape distribution centre is a major stakeholder in the Bluewater Bay catchment, and a member of the community that uses water in the catchment. This distribution centre continues to invest in the rehabilitation of the Zwartkops River and assists with the removal of plastics and other rubbish from the river through awareness campaigns and donations.

SPAR’s Western Cape distribution centre engaged with the City of Cape Town municipality, local industry and businesses to create a plan which focuses on protecting the Table Mountain Group Aquifer and surrounding wetlands.

LOW WATER PRESSURE IN NORTH RANDLow water pressure can be the result of infrastructure challenges, a measure to address non-paying municipalities or can result from load shedding where electricity is used to pump water from reservoirs into water towers.

The North Rand distribution centre experiences constant low water pressure which affects the operation of the onsite ammonia plant for refrigeration. The maintenance team implemented an innovative solution: the defrost cycle water from the ammonia freezer pods are harvested and fed into holding tanks. This water is then used as input into the ammonia plant evaporative condensers. This ensures that the plant has the necessary supply of water to keep running without shutting down due to low water pressure.



A SOCIAL PURPOSE

Our purpose is to inspire people to do and be more. This is why we exist and why we want to be the first-choice brand in the communities we serve.

To create shared value, we build relationships of trust with stakeholders. Our commitment to shared value is also based on careful consideration of SPAR’s values of entrepreneurship, family values and passion, and how these align with the United Nations Sustainable Development Goals (SDGs) as well the South African government’s National Development Plan (NDP).

OUR PEOPLE GOALS

• Be an organisation that attracts and retains top individual talent that encapsulates our values

• Freedom of association and collective bargaining

• Increase colleague skills and digital confidence so they can access a greater number of roles and develop their long-term careers

• Provide opportunities to help young people develop their employability and start their careers

• Continue to build an inclusive culture where everyone has the opportunity to interact

• Help colleagues look after their physical and mental wellbeing so they can be at their best at work and at home

Our people goals contribute towards the following Sustainable Development Goals:

OUR SOURCING GOALS

• Lead the industry in addressing the sustainability challenges in our supply chains, starting with our most important products and ingredients

• Build trusted partnerships with our suppliers

• Ensure international human rights standards are respected at all our suppliers’ sites as per the UN’s Universal Declaration of Human Rights and the International Labour Organization’s core conventions on labour standards, working hours and health and safety of workers

• Increase employment equity at SPAR house brand suppliers

• Reduce supply chain carbon emissions by 2030

• Sustainably source all seafood through our supply chain, excluding stores, by 2022

• Treat all animals in our supply chain humanely at all life stages

• Improve water quality and biodiversity in key agricultural regions

• Increase local sourcing

Our sourcing goals contribute towards the following Sustainable Development Goals:

OUR HEALTH GOALS

• Help colleagues look after their physical and mental wellbeing so they can be at their best at work and at home

• Improve diets by encouraging healthy food choices

• Help remove cost barriers to healthier eating by ensuring customers always pay the same price or less for healthier food versions

• Make own label food and drink recipes healthier, with no impact on taste or quality

• Raise awareness of healthier food choices

Our health goals contribute towards the following Sustainable Development Goals:

A SOCIAL


A social purpose (continued)

END GENDER BASED VIOLENCEWe made a public commitment this year to stand up and help fight to end gender based violence (GBV) in the South African communities we serve. Distribution centres launched initiatives such as self-defence classes, awareness campaigns and workshops, and supported regional community organisations against GBV. In 2020, R2.5 million was donated to charities from funds raised by sales at till points. SPAR supports the Thuthuzela Care Centres which form a critical part of South Africa’s anti-rape strategy, aiming to reduce secondary victimisation and to build cases that are ready for successful prosecution. Support takes the form of food parcels, toys for comfort and protective equipment for centre employees.

SPAR also signed a Memorandum of Understanding with LifeLine South Africa, which is responsible for maintaining and running the END-GBV helpline. SPAR is working with LifeLine to upgrade and improve the call centre infrastructure and to provide sufficient numbers of trained, professional counsellors to manage the volume of calls from both GBV perpetrators and survivors.

By acting in support of a public issue that is contrary to our values, we demonstrate our commitment to the SPAR values and our purpose – to inspire people to do and be more.

OUR PURPOSE IN ACTION


OUR HUMAN CAPITAL APPROACHOur decentralised operating model gives our distribution centres and the people who work there a high level of independence and autonomy. As such, SPAR’s success depends on our employees understanding and working according to our values, ethos and policies.

OUR HUMAN CAPITAL APPROACH IS VALUES BASED

Our values of entrepreneurship, family values and passion are an integral part of who we are. These values remain top of mind and are integrated into our human resources processes. This includes, for example, employee on-boarding, training interventions and recruitment, as well as employee recognition campaigns.

Our values are also integrated into our leadership capabilities and form part of management development and performance management. This helps foster meaningful workplace interaction.

We have a Values Committee at each distribution centre. The members of the committees act as catalysts to drive values-based behaviour. For example, shop steward training emphasises the understanding of our values, and the importance of maintaining a positive culture.

HUMAN CAPITAL POLICIES AND STRUCTURES

In South Africa, each distribution centre has a human resources department supporting employees in various committees. These include health and safety, shop stewards and values committees. The head office human resources team interacts with teams in other territories in terms of business processes, systems alignment and sharing best practice.

Employees have access to a detailed human resources manual via the intranet, including their conditions of employment and a range of policies. These underpin how we manage our employees and are reviewed annually.

We respect the principles aimed at promoting and protecting human rights. These include the Universal Declaration of Human Rights and the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work. SPAR does not have a separate human rights policy. All human resource policies are written with the South African Constitution in mind. The Constitution contains a Bill of Rights that enshrines the rights of all people in the country, including rights to equality, dignity and freedom.

FREEDOM OF ASSOCIATION AND COLLECTIVE BARGAINING

We uphold our employees’ rights to freedom of association and collective bargaining, particularly as these support an industrial relations climate conducive to providing excellent service to our retailers. We maintain positive relationships with unions at the relevant distribution centres. In South Africa, we have a long record of strong relationships with the South African Commercial Catering and Allied Workers Union (SACCAWU) and the Transport Retail and General Workers’ Union (THORN).

Any disruptions in the supply chain due to industrial action result in out of stock situations directly impacting our businesses, relationships and reputation. Such disruptions also carry potential risks related to the safety of our people and assets.

Three of our South African distribution centres, namely KwaZulu-Natal, North Rand and South Rand, are unionised and have recognition agreements in place. The distribution centres engage in wage negotiations according to a cyclical programme. These negotiations are directly conducted between senior management and union representatives. The other distribution centres, namely Western Cape, Eastern Cape, Lowveld, S Buys and Build it, are not unionised.

Labour relations in IrelandBWG Group maintains positive relationships with two recognised unions, namely the Services, Industrial, Professional and Technical Union (SIPTU) and the Mandate Trade Union. We build good relationships with employees and unions and, if disputes occur, we deal with them timeously. We have green area meetings where departmental objectives are discussed.

We have management and shop stewards meetings, workers councils and various forums in place to ensure workplace communication is effective. We invest in developing our shop stewards and share information with them. We involve union officials as stakeholders to ensure we educate them about our business. We pride ourselves in paying above-average salaries in our industry. We provide a minimum of eight weeks’ notice prior to implementing any significant operational change that could substantively affect employees or their elected representatives. We believe in being transparent in our dealings and involving those affected in finding a solution.

A SOCIAL PURPOSE



LOOKING AFTER EMPLOYEES’ PHYSICAL AND MENTAL WELLBEING

Our people and health goals both include the intent to help colleagues look after their physical and mental wellbeing so they can be at their best at work and at home.

In South Africa we provide a free employee wellness service to on-site employees through clinics at each distribution centre. These clinics are operated by an occupational health practitioner with weekly doctor attendance. Support focuses on health and wellness, and liquor and substance abuse. We also partnered with a biokineticist who developed an employee-focused exercise programme to build strength, aid body conditioning and release stress.

HIV/Aids is an area of focus and includes peer education to avoid discrimination if someone is living with HIV/Aids. SPAR has an HIV/Aids policy and management framework in place. HIV-positive employees have access to voluntary counselling and support. SPAR runs HIV/Aids awareness campaigns, accompanied by regular training facilitated by dedicated peer counsellors, to address workplace challenges relating to HIV/Aids. Employees have access to an annual voluntary medical examination.

Our comprehensive risk management programme protects our employees’ health and safety. It is regularly audited by an external risk management service provider. Components of the programme include emergency planning, health and safety, transport, fire and security. Implementation is monitored and reviewed continuously, underpinned by the understanding that legislative compliance is the minimum standard and excellence should be pursued.

Most health and safety incidents occur at distribution centres where employees handle bulk goods and operate heavy machinery. Therefore, each distribution centre has a Health and Safety Committee overseeing regular training and emergency drills, and resolving or escalating issues that arise.

WE ARE INCREASING SKILLS

We support career and skills development through the SPAR Academy of Learning. Employee development programmes are crucial to attracting, retaining and developing a diverse talent pool and are supplemented by ad hoc training. In line with our transformation imperative, development programmes target previously disadvantaged candidates and female employees.

Courses cover a wide spectrum from picker to cashier training to executive development for executive members and national guild retailers.

SPAR also participates in national efforts to address unemployment including the youth employment service (YES) initiative and jumpstart.

DEVELOPING SKILLS AND SUCCESSION PIPELINESThe SPAR Academy of Learning and partnership initiatives with the Wholesale and Retail Sector Education and Training Authority (W&RSETA) continue to drive improvement in leadership and skills for SPAR and retailers. SPAR’s induction programme is used by distribution centre managers and retailers to set the foundation for understanding the unique aspects of SPAR retail.

We invest in our people through programmes such as the senior leadership development programme, the management growth programme, the fundamental leadership development programme and the fresh skills programme.

We work closely with the W&RSETA to leverage learnerships, bursaries and other SETA projects. A number of our stores are running programmes such as the retail leadership development programme, the retail supervisor development programme, the unemployed graduate programme and the generic management learnership.

We also entered into an agreement with the W&RSETA to pilot e-learning as a mode of delivering learning that is SETA accredited. This provides opportunity for training at store level without increasing retailer costs associated with transporting learners to the major centres. It also means a higher number of employees can be trained at store level. The pilot programme focuses on personal hygiene which is classified under food safety as well as deli and home meal replacement skills programmes.

Investment in compliance training continued at distribution centres and retailers, and included, for example, food safety and driver training.

The quality and range of programmes ensure that we are able to manage our leadership pipeline and have effective succession planning. By incorporating distribution centre and retail employees we are also deepening and strengthening these relationships.

Due to the COVID-19 pandemic, some programmes were unfortunately put on hold.


A SOCIAL PURPOSE

YES PROGRAMME CHALLENGES AND PROGRESSSPAR actioned its commitment to the youth employment services (YES) programme by recruiting 450 learners in September 2019. YES recognises the critical role the youth plays in shaping our economy and our country.

The first intake was challenging in many respects. We eventually started doing our own recruitment to improve the calibre of candidates and to ensure completed paperwork. The roles and responsibilities of SPAR, learners and retailers were not always clear, especially when enforcing discipline and tracking day-to-day issues such as absenteeism. Learners also found retail working hours and weekend work very demanding. We collaborated with all stakeholders to address these challenges.

COVID-19 brought additional demands, but also delivered unexpected benefits. Some distribution centres and retailers employed learners to help with the additional workloads caused by shifts and social distancing measures.

The distribution centres were key to our first intake of YES learners, as all contact sessions were held there. This limited the participation of outlying retailers due to additional costs. Our focus for the next round will be to achieve some scale in outlying areas to provide satellite training.

DEVELOPING HUMAN CAPITAL IN IRELANDWe aim to provide retailers with a progressive range of human resource initiatives to improve and grow their business through their people. Following the outbreak of COVID-19, we made practical information, checklists and templates available to safeguard people and businesses. This included a helpline and facility to answer retailer queries directly.

The BWG Academy incorporates all our training and development initiatives such as in-house e-learning courses, practical training courses and industry-certified courses. The practical training centre provides a state-of-the-art training facility in north Dublin with a host of food-specific courses.

We partnered with Retail Ireland Skillnet to offer retailers degree and apprenticeship programmes. These programmes professionalise the retail industry and provide development opportunities for key employees. BWG Foods retailers are the largest cohort on both programmes. We also developed a lead worker representative online training course with Retail Ireland Skillnet as required under the National Return to Work Protocol for the retail sector in Ireland.

Our investment in people includes online courses for Harvard and Cornell universities and COVID-19-specific industry-certified courses. The latter are free to retailers and employees.

We assisted retailers with recruitment. We provided access to a professionalised recruitment system to advertise job vacancies and recruit effectively. The system is a fully online applicant tracking system and is general data protection regulation compliant.

LEARNERSHIP FOR DEAF CANDIDATES

At the Western Cape distribution centre, we recruit about 50 to 60 deaf learners every year and train them for placement in our stores. This programme enables the learners to add value in the stores’ service areas. Our next intake was meant to commence in May, but it had to be postponed due to the COVID-19 pandemic. This programme is on hold pending the outcome of the initiatives to curb the pandemic.


TOTAL SCORE

77.562019: 75.39

B-BBEE CONTRIBUTOR

Level six2019: Level five

Management control

10.90

Skills Development

18.31

Ownership

20.19

Enterprise & Supplier Development

23.17

Socio-Economic Development

5.00

BROAD-BASED BLACK ECONOMIC EMPOWERMENT AT SPAR


SPAR has shown an improvement in its BBBEE performance as compared to 2019, which is evident in the total number of points achieved of 77.56 (2019: 75.39). SPAR has dropped from a level five to level six in 2020, because it did not participate in the YES programme in 2020. It entered the YES programme in September 2019, which is relevant for the 2020 financial year.

For a copy of SPAR's BBBEE certificate please refer here: https://investor-relations.spar.co.za


A SOCIAL PURPOSE

OUR SUSTAINABLE PROCUREMENT APPROACHA sustainable food system is a collaborative network integrating every aspect of the value chain to ensure environmental, social and economic value for communities and regions.

As a food provider, we recognise our responsibility to deliver quality products to consumers through a sustainable network of first-choice suppliers. We further want to reduce our use of natural resources by rolling out initiatives that foster environmental welfare, and achieve long-term cost reductions for the business. Supply chain optimisation and resilience are critical factors to ensure sustainability.

A LOCAL AND ETHICAL SOURCING APPROACH

Procurement is one of SPAR’s key business activities and competitive strengths. Most of our procurement happens at distribution centre level. Certain products are sourced from local suppliers at store level. The latter enables sourcing that supports local enterprises.

Due to this mixed approach, we work with retailers and suppliers to encourage sustainable procurement and transparent sourcing. Our small-scale farmer development programme, focuses on rural hubs, and assists with the vertical co-ordination between commercial and community farmers to benefit surrounding rural economies.

With the growing participation of small-scale farmers in the SPAR supply chain, we adopted localg.a.p. as an entry-level food safety standard to achieve full compliance with GLOBALG.A.P. Large-scale commercial farmers are expected to fully comply with GLOBALG.A.P. Suppliers are also expected to comply with the Global Food Safety Initiative.

Other small community suppliers working with individual stores often find the cost associated with food safety certification prohibitive. To assist them, we developed a cost-effective solution in partnership with Entecom. By forming groups of small suppliers in the same area, they can complete a large portion of the certification online and have access to a shared consultant to support them through the process. This enables them to join the bigger SPAR family – evidence of how we live our family values.

We conduct site visits and collect data on our South African house brand suppliers’ environmental management systems. This includes energy use, transport, greenhouse gases, waste and wastewater, water use, emissions, pollution prevention and treatment of hazardous substances.

We continue to make significant progress with our suppliers to source responsibly, reduce waste and implement sustainable farming practices. Our Freshline team, for example, assists local farmers in the Freshline supply chain to adopt more sustainable farming methods. On the other side of the value chain, we engage with consumers in terms of nutrition, water use and reducing plastic use.

The launch of any new food concept requires extensive dealings with suppliers to ensure sustainable, scalable and reliable access to the product. We are aware that suppliers risk losing their share of business when new suppliers are introduced. Therefore, buyers are expected to objectively assess strategic value and benefits in managing their supplier portfolio.

Our strategic focus area to embed diversity and transformation applies to our supply chain and supports our commitment to ethical business practices. Spar has contributed over R83 million towards Enterprise Development, Supplier Development and Socio-Economic Development in 2020.

We engage with non-profit organisations, suppliers and activist groups to erase any unethical practices carried out in our supply chain. We understand that it is difficult to address these issues and are actively driving education and awareness across our supply chain to foster change.

We address any instances where unethical practices are identified directly with a supplier. We also work with suppliers to encourage sustainable product development and transparent sourcing.


100% FSC CERTIFIED WOOD PRODUCTS

We made our first disclosure to the CDP forests programme this year. This marks the beginning of our journey to understand the key forest commodities we distribute through our distribution centres and in our stores. We regard disclosure to CDP Forests as an opportunity to focus our actions towards promoting sustainable consumption and driving sustainability even further across our supply chain by considering global forest commodities and their suppliers.

SPAR sells timber commodity in the form of timber products such as doors, boards as well as wood products (softwood and hardwood logs). Timber is also used in primary packaging (cartons used in packaging of SPAR house brand products), secondary packaging (SPAR paper bags) and tertiary packaging (SPAR cardboard boxes).

SPAR sources 98% of timber products from South Africa and mainly sells these through the Build it distribution centre. The remainder of timber is sourced from Zimbabwe. For board products, 60% is locally manufactured and the remaining 40% is imported from Brazil. Paper for SPAR paper bags is imported from international mills located in Sweden and manufactured into SPAR paper bags locally. The cardboard boxes are made from recycled paper and board.

All procured wood is 100% Forest Stewardship Council (FSC) certified, which includes a traceability system from certified tree plantation or forests to final product. We therefore know that these wood products come from sustainably managed forests which contribute towards climate change mitigation and preservation of ecosystem services. We have started engaging with the local FSC Council to further drive demand for FSC certification in South Africa. In October 2020 SPAR signed a promotional licence agreement with the Forest Stewardship Council, signalling our commitment to responsible sourcing of forest-based products.

The paper used to manufacture SPAR paper carrier bags is FSC certified and we are working with local bag manufactures to also become FSC certified.

Drought and associated reduced water availability is a risk in terms of timber supply. In the past few years, SPAR observed a reduction in the number of trees in South Africa that were grown for timber products in plantations due to widespread droughts and forest fires.

SPAR’s Build it works closely with suppliers to identify potential risks facing the industry and to collaboratively find ways to mitigate risk. This includes having a number of suppliers located in various parts of the country to minimise the impact associated with extreme weather events.

The Forest Stewardship Council (FSC) is a global not-for-profit organisation dedicated to promoting environmentally sound, socially beneficial and economically prosperous management of the world’s forests. It helps consumers and businesses identify products from well-managed forests and sets standards by which forests are certified, offering credible verification to people who are buying wood and wood products.

CERTIFIED COFFEE DRIVES SUSTAINABLE CONSUMPTION

Coffee production globally faces a range of issues including socioeconomic challenges associated with small-scale farmers and environmental degradation caused by common practices in conventional agriculture. Sustainability certification is one of the ways in which we can ensure consumers of a sustainable and ethical coffee value chain.

SPAR procures certified coffee, which offers traceability to a country and on a coffee plantation level. Coffee that is sold in SPAR stores under the SPAR house brand and through SPAR Beantree Café outlets is sourced from a range of forest-risk countries.

SPAR’s Beantree Café procures coffee products that have internationally recognised certifications such as Rainforest Alliance Certification, UTZ Certification and Fairtrade Certification. By using certified coffee, SPAR is driving sustainable consumption and is promoting sustainable coffee farming. Sustainable coffee farming drives resource efficiency around water, energy, fertilisers and pesticides, which is in line with SPAR’s sustainability commitment to responsible living and resource stewardship.

SPAR sources coffee products from countries located in Africa, South America and Asia. SPAR house brand coffee originates from the Cerrado region (Brazil), Sidamo region (Ethiopia), North Tanzania, Supremo Huila (Colombia), Huehuetenango (Guatemala) and Mandeling (Indonesia). Espresso beans and coffee capsules procured for Beantree Café are sourced from various regions across the world, including Central America (Mexico, Guatemala, Honduras, El Salvador, Nicaragua, Costa Rica), South America (Brazil, Colombia, Peru), Africa (Tanzania, Kenya, Uganda, Ethiopia) and Asia (India, Vietnam, Indonesia, Papua New Guinea).

Coffee is a commodity that is at risk from global temperature increases caused by climate change, as the quantity and quality of coffee beans are negatively impacted. Certain regions where SPAR sources coffee from might not be viable for the growth of coffee beans in the long term.



A SOCIAL PURPOSE

LEADING RURAL SUPPLIER DEVELOPMENT IN SOUTH AFRICASPAR’s commitment to the development of small-scale rural farmers was recognised this year. SPAR was the overall 2020 winner of the ABSA Business Day Supplier Development award, which acknowledges businesses that stand out as overall leaders in developing suppliers.

SPAR started the journey with small-scale farmers in 2016 with the establishment of the first rural hub in Mopani, Limpopo. The decision to develop and invest in rural hubs was based on the belief that small-scale rural farmers are the key to new and sustainable supply chains in South Africa.

Where it all startedThe rural hub concept was based on a central fresh assembly point (FAP), which acts as a collection and consolidation point for a range of fresh produce. Five small-scale farmers joined the first rural hub business and the first permanent FAP opened in Ofcolaco, Mopani, in August 2017. By 2021, 15 rural farmers will be supplying the hub (three of them women). Many of the farmers can now finance a portion of their business themselves – a sign that they can stand on their own feet. The farmland supplying the FAP increased from 22 hectares (ha) to 122 ha of vegetable production. More than 100 full time jobs will be created by the Mopani hub by 2021.

What makes SPAR’s supplier development differentThe SPAR rural hub concept supports small-scale farmers and creates markets for their products. This contributes to job creation, income generation, infrastructure development, skills transfer and empowerment, while creating a food system that provides affordable and nutritious fresh produce. All participating small-scale farmers receive training covering all aspects of farm management and food safety, provided by an in-house team of qualified agronomists.

The concept of rural farmers supplying fresh produce to SPAR stores started as an aspirational idea. In theory, we knew this would provide employment, grow rural economies, ensure food security and improve nutrition, reduce transport costs for SPAR, shorten lead times, and increase freshness and shelf life. There were evident challenges, such as financing, infrastructure and skills. But we believe we have created a sustainable model that can be rolled out nationally.

Kevin O’Brien, Risk and Sustainability Executive

This means that our model is intentionally focused on rural community development and is different to other programmes in that we address systemic issues such as food security. This was one of the reasons why SPAR was not only selected as the overall winner of the ABSA Business Day Supplier Development award, but also won the category for rural and township supplier development.

Other differentiators include:

• The demonstrated impact of the approach in transforming the programme’s target market – an impoverished sector of society

• The focus on shortening the supply chain and developing suppliers of products in rural areas through a localised distribution platform

• The implementation of local compliance standards for small primary farming businesses

• The collaboration with Food Lover’s Market (a competitor) for market access for emerging farmers

• A model that can be scaled and duplicated, and can impact all areas of economic transformation in the long run, improving food security and contributing positively to health and wellbeing in rural communities across South Africa

The SPAR rural hub initiative is evidence of a purpose-led strategy being implemented on the ground. We inspire people to do and be more by addressing real South African challenges, including food security, nutrition, job creation and transformation.

Graham O’Connor, Group CEO

The SPAR Group Ltd is actively pursuing higher levels of innovation, efficiency opportunities and value partnerships, and thus are deserved winners of the title of overall winner. We look forward to seeing this initiative grow and scale nationally, and toward bolder investment in this initiative in the future!

ABSA Business Day award summary


Rural hub progress in 2020The rural hub in Mopani is going from strength to strength. It now operates according to a mixed model: it supplies the SPAR North Rand and South Rand distribution centres and some stores in the area.

This year we produced a summer crop for the first time since starting out in 2016. Ofcolaco is traditionally a winter producing area, which meant operations previously came to a standstill in summer. By expanding our footprint to farmland in Polokwane and Nelspruit, we were able to generate income for the rural hub over a 12-month period.

We also transitioned from low-value crops such as spinach and cabbage to much higher-value crops like baby vegetable ranges, speciality tomatoes, speciality peppers and cucumbers. Low-value crops are typically unable to carry the costs of packaging, transport and refrigeration, thus becoming unprofitable. High-value crops also have a higher uptake through the SPAR Freshline brand, ultimately being more profitable for the farmer.

For produce that does not meet Freshline standards, there continues to be demand in the local trade. Many farmers also continue to grow private crops for local communities.

We were able to improve farm infrastructure such as tunnels and net houses through loan financing to the farmers.

Despite COVID-19 impacts such as the need for additional shifts and longer working hours, and the redesign of pack lines for social distancing, the hub did not retrench employees or reduce wages.

The second rural hub business in Ikhwezi, Mpumalanga was unfortunately closed down towards the end of 2019. Our biggest challenge was farmer commitment. We started out with 30 farmers and ended up with only two, who were not able to produce the minimum volume for the hub to be sustainable. Water quality was also a major issue in the area, resulting in crops not being produced according to SPAR’s minimum food safety standards.

We continue exploring sites for new rural hubs. We identified a potential site in the iLembe district in KwaZulu-Natal, where there is also a large number of small-scale farmers with infrastructure and local technical support. Unfortunately, COVID-19 delayed progress towards establishing a new hub, prevented us from visiting and evaluating new farms and affected the sustainability of many farmers who supplied school feeding schemes in that area.

All participating small-scale farmers are trained in the following modules:

• Financial management

• Land preparation

• Planting

• Integrated pest and disease management

• Fertilisation

• Irrigation

• Harvesting

All the participating small-scale farmers receive the following support interventions:

• Grants and loans

• Mentorship

• Market readiness

• Market access

Our measures of successSPAR measures the success of rural hubs and its supplier engagement model by the number of farmers that are able to successfully deliver produce to the FAP and farmer productivity, specifically, the amount of produce as well as area (ha) farmed.

The success of the small-scale farming development model requires support from a range of stakeholders, including farmers, communities, government, food manufacturers and wholesalers, retailers, financial institutions and funders.

Our most significant achievement with the rural hubs has been to develop small-scale rural farmers to the same level as large-scale commercial farmers, especially with regard to food safety. No one believed this would be possible when we started out.

James Lonsdale, Group Sustainability Manager



A SOCIAL PURPOSE

POSITIVE CHANGE IN SEAFOOD RETAILINGSeafood is part of our offering to retailers and consumers. However, we are conscious of responsible sourcing as it affects the sustainability of fish species as well as the livelihoods of local fishing communities.

SPAR acknowledges that there is a global concern over the over-exploitation of seafood resources and environmental impacts from fishing and aquaculture activities on marine ecosystems. Retailers and wholesalers are major role players in the South African seafood industry and can help drive positive change in fisheries by supporting sustainable seafood choices from responsibly managed sources and creating market-driven incentives. SPAR aims to ensure all its seafood is responsibly procured and supports sustainable fisheries and aquaculture operations.

SPAR is a co-signatory to industry and government bodies on issues relating to fishery improvements. Our seafood procurement is conducted within the parameters of the World Wide Fund for Nature (WWF) Southern African Sustainable Seafood Initiative (SASSI) guidelines on how seafood should be caught and sold.

SPAR joined the WWF-SASSI retailer/supplier participation scheme in December 2010. Since then, we completed an assessment of the SPAR house brand seafood range demonstrating that SPAR house brand seafood procurement occurs according to our formal sustainable sourcing policy.

We create internal awareness of the WWF-SASSI and SPAR commitments and generate external awareness through the SPAR guilds. We provide real-time access to seafood data by linking WWF-SASSI and suppliers to SPAR’s online portals. Through working closely with suppliers, we established full traceability of SPAR house brand seafood products. This includes random DNA testing on SPAR house brand seafood products to ensure correct identification and labelling.

We took this initiative beyond SPAR house brand products to seafood and fish procured through our distribution centres. We engage with and assess suppliers who deal directly with distribution centres according to standards stated in the SPAR house brand procurement policy. We also focus on training buyers at distribution centres and gather information from seafood suppliers to assess whether any species were red listed. We also assisted retailers who sourced their own seafood, including the outsourced fresh fish counters in SPAR stores in the Western Cape.

SPAR together with other retailers, food wholesalers, fisheries suppliers and government wrote a letter of support to the Namibian government, requesting that better management practices be adopted by the Namibian hake industry. As a result of the letter and pressure from all retailers and suppliers, the Namibian hake industry is currently undergoing an audit by the Marine Stewardship Council (MSC) to ensure good fishing practices have been adopted and fisheries are managed responsibly. This is part of SPAR’s commitment to improve business practices by incorporating sustainability. Once the Namibian hake industry has been MSC certified, SPAR’s house brands will have all its species either listed as green or under improvement, in compliance with WWF-SASSI.

SPAR also engages with small-scale fishers in South Africa and provides them with an opportunity to trade independently in SPAR’s stores. SPAR also trained small-scale fishers on sustainable fishing.


FOOD SAFETY IS A PRIORITY

SPAR retailers rely on us to ensure products provided by our distribution centres comply with food safety standards. Where retailers elect to source their products from smaller suppliers, they take responsibility for food safety. Since this poses a risk to SPAR and retailers alike, we work with retailers and hold them accountable to ensure appropriate controls are in place and are documented. We also assist small suppliers to comply with programmes such as the Global Food Safety Initiative (GFSI). Ireland and Switzerland largely rely on government inspectors who enforce food safety regulations.

We comply with all food safety regulations in the territories where we operate. In South Africa, this includes the recently introduced R638 that governs general hygiene requirements for food premises, the transport of food and related matters.

In South Africa, the Department of Agriculture, Land Reform and Rural Development changed its approach to inspections. Private and independent companies are now appointed as assignees to do inspections, and retailers stores have to carry the costs. The cost of inspection is based on gazetted tariffs. We received our first processed meat report from the Food Safety Agency and improvement recommendations are being implemented.

Our focus in 2020 was to start building a food safety culture and move away from a checklist approach. This followed the appointment of a new food safety auditor, NSF Africa, from 1 July 2020. Following a new risk-based approach, we will be focusing more on self-assessments and online tools.

By the end of 2020 we plan to have binding food safety agreements signed between SPAR and all national, house brand and distribution dropshipment suppliers.

Distribution centres are subject to bi-annual audits and store audits are conducted quarterly. SPAR ensures that microbiological sampling and testing takes place at the time of the audit. This typically includes one food sample, two hand swabs and two surface swabs. We test for bacteria such as listeria monocytogenes, staphylococcus aureus, escherichia coli, bacillus cereus, salmonella and coliform. In future, we plan to use local labs to process tests which will facilitate a rapid turnaround time. This will enable our distribution centres to take remedial action sooner.

Water used for food preparation is tested on an ad hoc basis by an accredited laboratory to ensure it is safe to use and meets food safety requirements. SPAR’s suppliers are also required to test the quality of water to ensure produce received by SPAR is safe to consume and meets stringent food safety requirements.

SPAR partnered with several service providers that support our business in offering basic food safety training for food handlers as well as the person in charge of accredited training. We also offer suppliers the preferred listing of Consumer Goods Council of South Africa (CGCSA) selected certification bodies to assist them with the GFSI programme and acquiring certification.

The person in charge of each distribution centre or store is suitably qualified or has received accredited training on the principles and practices of food safety and hygiene. We also comply with specific requirements for food safety training for employees handling food products.

SPAR is represented at the CGCSA and involved in the Food Safety Initiative Pillar as a member of the Nutritional Technical Working Group and Food Safety Technical Working Group.

CORPORATE SOCIAL INVESTMENT PROJECTSSPAR stores play a key role in the community as the local supplier of household goods. Other brand offerings, such as TOPS at SPAR and Pharmacy at SPAR, further ensure a local neighbourhood SPAR can become a convenient, one-stop shopping destination. Build it stores provide rural and urban communities with a one-stop home building solution.

SPAR is founded on entrepreneurship, family values and passion. To position SPAR as a force for good in society, we encourage retailers to support philanthropic and sponsorship initiatives at store level and be at the centre of their communities. Retailers and their employees are often from the local community, which strengthens personal ties with their target market. The voluntary trading model enables retailers to support local enterprise development and, in so doing, adds value by growing the local economy.

Our formal corporate social investment policy guides community engagement on national, distribution centre and community levels to ensure we move beyond donations to support meaningful, sustainable and far-reaching projects.

Our main focus areas are:

• Training unemployed youth and supporting community transformation initiatives that play a role in combating crime, including a focus on skills transfer and personal development.

• Feeding schemes, food production through income-generating projects and educational programmes aimed at minimising the impact of poverty on communities.

• Educating communities on health issues such as nutrition, cancer and the impact of HIV/Aids. In particular, sports and sports-related initiatives enable us to promote SPAR as a brand associated with health and well-being, personal development and community wellness.


SPAR was named 2020 Sponsor of the Year at the Momentum gsport Awards, the country’s longest-running women’s sport recognition platform. At the same time, the SPAR Proteas were named Team of the Year after reaching the semi-finals at the Netball World Cup 2019 in Liverpool, England. The SPAR Proteas is South Africa’s national netball team and represents the country in women’s international netball.


A SOCIAL PURPOSE

COMMUNITY SUPPORT AND INVESTMENT

The SPAR Group in partnership with The National Department of Social Development and the Consumer Goods Council of South Africa delivered 24 000 parcels to the value of R12 477 568 during the height of the COVID-19 pandemic to vulnerable families across South Africa.

Break down of parcels distributed by region over a three month period:

South Rand – 6 000North Rand – 4 500KwaZulu-Natal – 4 500Western Cape – 4 500Eastern Cape – 3 000Lowveld – 1 500

KWAZULU-NATAL: WE FOCUS ON VULNERABLE CHILDREN AND FOOD INSECURITY

The SPAR KwaZulu-Natal distribution centre’s flagship community project is the Gozololo day-care centre for needy children situated in KwaMashu township on the outskirts of Durban.

More than 300 vulnerable children from destitute communities find care and support at the day-care centre. The KwaZulu-Natal distribution centre has supported Gozololo for about 15 years by providing it with dry groceries every month and perishable products every week. Donations like cot bed mattresses, toys, stationery and school bags are made based on needs analyses conducted every year.

The KwaZulu-Natal distribution centre also supports Ingane Yami Village, a non-profit organisation established to help children affected by the growing Aids crisis in KwaZulu-Natal. The village provides a safe and supportive family environment where each child lives in a home with five other children and a foster mother.

Through Izulu Orphan Projects, a non-profit organisation, the distribution centre also contributes to educating, feeding and supporting 1 700 rural South African orphans, as well as the children of HIV-positive widows.

The distribution centre further continues to support the SPAR Operation Hunger feeding scheme in Hammarsdale that was set up to feed destitute people in the area.


LOWVELD: WE FOCUS ON VULNERABLE CHILDREN AND FOOD INSECURITY

The SPAR Lowveld distribution centre has a long-term relationship with St Johns, an orphanage based in Barberton. We provide St Johns with a credit facility to purchase monthly groceries in one of our SUPERSPAR stores. We also supported the Bettie’s Haven orphanage based in Nelsville.

Distribution centre employees spend time with children in the orphanages to commemorate special occasions like Christmas, Easter and Nelson Mandela Day. On these days we serve nutritious meals and this year provided education and awareness programmes regarding COVID-19. Children and staff at the orphanages were provided with masks and sanitisers and were reminded of the importance of hygiene, washing hands and social distancing.

In May 2020 the Lowveld distribution centre donated 10 kg SPAR maize meal packs to the value of R100 000 as part of the COVID-19 Food Distribution Initiative. The maize meal packs were part of the care packages that were distributed to needy communities.

We donated a truckload of maize meal worth approximately R250 000 in support of the non-government organisation Children in Distress, in partnership with Manna Christian Fellowship.

Towards the end of the financial year we also supported an initiative driven by the Consumer Goods Council of South Africa and the Department of Social Development, aimed at providing food parcels to vulnerable communities. We donated 1 500 food parcels valued at R526 each over a three-month period. The parcels, which contained essential items and nutritious food, were packed and distributed by Kago Ya Bana.

SOUTH RAND: WE FOCUS ON WELLNESS AND FOOD INSECURITY

The South Rand distribution centre focuses on crime prevention initiatives and wellness. For example, we provide trauma counselling for retail store employees when there is a crime incident. Employees have access to wellness support through our on-site clinic, which offers voluntary counselling and testing for HIV, as well as free family planning. We offer financial wellness workshops and on-site support by a financial advisor.

During COVID-19, the South Rand distribution centre donated 3 000 food parcels to Operation Hunger’s #FeedaFamily campaign. The donation aims to fight the increase in food insecurity and malnutrition brought on by the pandemic.

Food hampers, which included staple food items like milk, maize meal, samp, tea, sugar, cooking oil, salt and beef stock, were distributed to Katlehong, Rondebult, Tembisa, Vanderbijl, Alexander, Cosmo City and Honeydew. A group of volunteers and SPAR employees packaged the food parcels and upon distribution, provided beneficiaries with community-based educational training on COVID-19. Each hamper also contained a personal note by an employee of SPAR South Rand as a message of encouragement.

NORTH RAND: WE FOCUS ON YOUTH EDUCATION

The North Rand distribution centre continued to support Tlama Primary School in Tembisa in conjunction with the Maths Centre. The purpose of the project is to improve the conceptual understanding of mathematics and science for teachers and learners, and encourage learners to continue with these subjects in high school as well as at a tertiary level.

The project, which commenced in 2013, focuses on the Foundation Phase (grades 1 to 3). In 2015 we incorporated the Intermediate Phase (grades 4 to 7). The project has reached 1 360 pupils and 20 teachers and continued via virtual platforms despite the COVID-19 pandemic.

WESTERN CAPE: WE FOCUS ON SUPPORTING VICTIMS OF CRIME

The Western Cape distribution centre continued to drive our Victim Friendly Support Rooms through Business Against Crime. We are committed to combating domestic violence, sexual offences and other traumatic crime-related events to ensure victims are supported and empowered. We want to create a safe environment for all. Our aim remains to assist victims of crime and related trauma in regaining confidence, restoring their hope and discussing their immediate emotion and reaction to the incident.

This year the distribution centre also supported the Saartjie Baartman Centre, situated in Manenberg, which looks after the interests of women and children who are victims of domestic or sexual violence.



A SOCIAL PURPOSE

BUILD IT: WE FOCUS ON SUPPORTING SOCCER

Build it has supported soccer in the communities where our stores trade, focusing on under 13 players, since 2006. Under 13 players are in their last year of primary school when teams typically experience higher levels of parent support.

The Build it U13 Festival is seen as one of the bigger youth development programmes in Southern Africa. The sponsorship is active in South Africa, Namibia, Eswatini and Mozambique.

Build it benefits from the sponsorship by building relationships with schools and parents who see Build it as their one-stop hardware solution. Build it is seen as a brand that invests in local communities where our stores trade.

This year, Build it also assisted in a major campaign to supply water tanks to rural schools throughout South Africa to assist children with hygiene to deal with the pandemic.

BWG GROUP: WE FOCUS ON FOOD INSECURITY

BWG Group works with FoodCloud Hubs to redistribute excess food to those in need. FoodCloud Hubs connects businesses such as SPAR to local charities such as Meals on Wheels, after school clubs and homeless shelters providing them with quality food that would otherwise have been assigned to waste, despite it being perfect for consumption.

The impact of our FoodCloud support for 2020 is significant:

• 39 359 kg of food redistributed

• 93 711 meals donated

• €118 007 value of surplus food rescued

• 125 948 kg of CO2 equivalent avoided

Since the beginning of the COVID-19 pandemic, SPAR and BWG Group provided extra support to FoodCloud through logistical transport and storage solutions to ensure those most in need continue to be supported.

Any product not fit for human consumption goes directly to our transport solution partners Vision Green and this product is used to create biogas, which in turn fuels the biogas trucks we have in our transport fleet.

SPAR also contributed to the Feed the Heroes campaign, which supported healthcare teams by connecting frontline workers, donors and Ireland’s food industry in response to the COVID-19 pandemic.

Our retail brands support their own retailer-nominated charities and engage in proactive fundraising initiatives on their behalf. We also donate a percentage of all house brand products sold in our symbol stores to the brand’s official charity partner:

• SPAR supports Make-a-Wish, a children’s charity which grants the wishes of children with life-threatening medical conditions to give them hope, strength and joy

• Londis supports Pieta House, which provides free, therapeutic treatment to people who are in suicidal distress and those who engage in self-harm

• MACE supports Down Syndrome Ireland which offers support and services to people with Down syndrome and their families

• XL and the wholesale division of BWG Foods support the Simon Community, which works to prevent and address homelessness

• EUROSPAR supports FoodCloud through donations in store and EUROSPAR retailers fundraise to provide accessible defibrillators for the communities they serve

SWITZERLAND: WE FOCUS ON SUPPORTING HANDBALL

Our flagship sponsorship in Switzerland is women’s handball. We have supported handball, the leading indoor sport in Eastern Switzerland with approximately 22 000 licensed players, for 10 years. Games are televised and receive excellent coverage in regional press.

Since 2016, SPAR and TopCC customers have made a direct contribution based on their purchases via the SPAR handball app. With every purchase, customers can have 2.5% or 1% of their purchase sum credited to their preferred club as a sponsorship.

This year we were able to donate a record amount of CHF42 000 as a result of the handball communities’ increased spend of more than CHF1 million at SPAR and TopCC.

In 2019, we started two SPAR women’s races with 2 000 runners in Basel and 1 600 runners in Winterthur. We will continue with these and anticipate increasing participation.


VALUE ADDED STATEMENT

2020 % 2019 %Rmillion of revenue % Rmillion of revenue %

Revenue 124 277 109 477 Less:Net cost of product and services 114 103 100 967

Value added 10 174 8 510 Add:Income from investments and associates 116 175

Wealth created 10 290 8.30 100.0 8 685 7.90 100.0

Applied to:Employees

Salaries, wages and other benefits 6 279 61.0 61.0 4 888 56.3 56.3 Providers of capital 1 650 16.0 16.0 1 692 19.5 19.5

Interest on borrowings 272 2.6 261 3.0 Dividends to ordinary shareholders 1 378 13.4 1 431 16.5

Taxation 740 7.2 7.2 618 7.1 7.1 Replacement of assets 924 9.0 9.0 754 8.7 8.7 Retained in the group 697 6.8 6.8 733 8.4 8.4

Wealth distributed 10 290 100.0 8 685 100.0


61.0%

2020

2.6%

13.4%

7.2%

9.0%

6.8%

56.3%

2019

3.0%

16.5%

7.1%

8.7%

8.4%

Salaries, wages and other benefits Interest on borrowings Dividends to ordinary shareholders Taxation Replacement of assets Retained in the group


GOVERNANCE

The SPAR board is the custodian of corporate governance and plays a prominent role in the strategic development, risk management and sustainability processes of the group. The board understands that adhering to the highest standards of corporate governance

is fundamental to the sustainability of the SPAR business. Business practices are conducted in good faith and in the best interest of the company and its stakeholders.

Read more about our governance structures, board composition, leadership profiles and committees in the governance section of the integrated annual report from page 92.


OUR VALUESWe are a family of entrepreneurs driven by passion. We encourage entrepreneurship, live our family values and demonstrate passion. The following three values shape our relationships with our independent retailers and form the foundation of our decision-making and strategy.

Entrepreneurship Family values Passion

At the very core of the SPAR model are entrepreneurs, our independent SPAR retailers, innovative and agile, with the

ability to embrace change and capitalise on the opportunities that present

themselves.

Encompass that sense of community and belonging, personal connection, caring for one another and working together towards common goals. This includes embracing

changes in the SPAR family and supporting those changes to ensure the health of the SPAR brand and our SPAR family at large.

Represents the authentic, positive energy, attitude and enthusiasm that permeates our

organisation, helping to drive the organisation forwards in line with our purpose –

to inspire people to do and be more. We believe that passion is contagious,

creating a virtuous circle, and in doing so, protecting our SPAR family.

For each of the three values, a definition has been developed, behaviours identified and we have determined ways to measure whether we are effectively living these values. These values are our ethical and moral compass and decision-making foundation.

• Creativity and innovation• Problem-solving• Taking ownership and responsibility

for outcomes• Visionary leadership and the

ability to take calculated risks• Long-term focus versus

short-term gain

• Creating a sense of belonging in the SPAR family, particularly with our people and our retailers

• Supporting and embracing every person’s contribution

• Personalising work and business relationships

• Working together for the greater good of the company, which means putting one’s own agenda aside and demonstrating true teamwork, and removing silos

• Demonstrating unrelenting commitment to our consumers and retailers, suppliers, the SPAR brand, our jobs and teammates

• Displaying authentic, positive energy and attitude

• Being enthusiastic• Wanting to do what you are currently

doing and enjoying it in the process

• Appropriate decentralised decision-making

• Courage• Adaptability and flexibility• Innovation• Rule bending and taking

challenges head on• Resilience• People involvement in idea

generation and problem-solving

• Demonstrating empathy• Understanding and embracing diversity• Listening with purpose and interest;

genuine consultation• Investing time in developing people• Tolerating self-expression• Participating and encouraging teamwork• Communicating• Networking• Speaking up and speaking out respectfully• Acting with integrity• Treating others like you want to be treated

• Going the extra mile• Taking accountability• Walking the talk, i.e. ‘say what you

mean and mean what you say’• Owning your opinion• Being professional• Owning up to mistakes• Giving credit where credit is due

• Group and divisional performance versus objectives

• Introduction of innovation and continuous improvement into own job/department

• Employee retention• Adaptability in a changing

environment

• Productivity, teamwork and empowerment of teams

• Quality of conversations, i.e. free and honest conversations

• Goal achievement• Employee climate/culture surveys• Supplier ratings• Retailer surveys

• Think Retail Survey• Achievements• Individual and team ratings, or other

360 degree-type appraisals• Employee retention• Public opinion of SPAR people• Pride in wearing our uniforms• Support for company activities

Our values are integrated into employee onboarding, training interventions and recruitment, as well as employee recognition campaigns. We respect principles aimed at promoting and protecting human rights. These include the Universal Declaration of Human Rights and the International Labour Organisation’s Declaration on Fundamental Principles and Rights at Work.

DE

FIN

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DE

MO

NS

TR

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ME

AS

UR

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Sustainable development goals

No. of targets

No. of objectives National Development Plan

7 2 2 NDP objectives from Chapter 11:Social Protection

8 4

1 NDP objective from Chapter 5:Environmental Sustainability and Resilience

2 NDP objectives from Chapter 6:Inclusive Rural Economy

1 NDP objective from Chapter 11:Social Protection

13 6 6 NDP objectives from Chapter 10:Health Care for All

10 13 13 NDP objectives from Chapter 9:Improving Education, Training and Innovation

Enhance Relationships between TVET Colleges and Industry

9 3

2 NDP objectives from Chapter 11:Social Protection

1 NDP objective from Chapter 12:Building Safer Communities

8 3

2 NDP objectives from Chapter 4:Economic Infrastructure


Partner with Municipalities to address Wastewater Treatment

5 3

2 NDP objectives from Chapter 4:Economic Infrastructure


Incorporate a Greater Share of Gas in the Energy Mix

12 77 NDP objectives from Chapter 3: Economy and Employment

8 1 1 NDP objective from Chapter 4:Economic Infrastructure

ALIGNMENT OF THE SDG TARGETS AND NDP OBJECTIVES

APPENDICES


Appendices (continued)

Sustainable development goals

No. of targets

No. of objectives National Development Plan

10 3

1 NDP objective from Chapter 3:Economy and Employment

1 NDP objective from Chapter 11:Social Protection

1 NDP objective from Chapter 15:Nation Building and Social Cohesion

Support Nation Building and Social Cohesion

10 8

1 NDP objective from Chapter 4:Economic Infrastructure

3 NDP objectives from Chapter 5:Environmental Sustainability and Resilience

4 NDP objectives from Chapter 8:Transforming Human Settlements

11 2 2 NDP objectives from Chapter 5:Environmental Sustainability and Resilience

5 3 3 NDP objectives from Chapter 5:Environmental Sustainability and Resilience

10 1 1 NDP objective from Chapter 5:Environmental Sustainability and Resilience

12 1 1 NDP objective from Chapter 5:Environmental Sustainability and Resilience

12 6

5 NDP objectives from Chapter 13:Building a Capable and Developmental State

1 NDP objective from Chapter 14:Fighting Corruption

Strengthen Partnerships with Local Government

19 2 2 NDP objectives from Chapter 7:South Africa in the Region and the World

Cross-cutting Role of NBI in Supporting Collaboration

There is a general pattern of intent between the NDP Objectives and Actions and the SDG Goals and Targets. However, these objectives did not map exactly to SDG targets:

1 NDP objective from Chapter 4: Economic Infrastructure

1 NDP objective from Chapter 9: Improving Education, Training and Innovation

2 NDP objectives from Chapter 10: Health Care for All

2 NDP objectives from Chapter 11: Social Protection


APPENDICES

OUR CARBON FOOTPRINTSPAR has participated in the CDP since 2009. Our South African carbon footprint is calculated according to the International Greenhouse Gas Protocol Corporate Accounting and Reporting Standard, and the data provided pertains to 1 October 2019 to 30 September 2020. Scope 1 and 2 emissions were independently verified.

SCOPE AND MEASUREMENT The scope of the submission comprises the central office and seven distribution centres with their associated distribution fleets. It excludes S Buys and SPAR’s operations outside South Africa. SPAR is committed to reducing carbon emissions, specifically around Scope 1 (mobile combustion, stationary combustion and fugitive emissions) and Scope 2 (electricity).

SPAR developed science-based targets (SBTs) which set out Scope 1 and 2 emissions reduction targets by 2050:

• 59% for buildings

• 41% for transport

SPAR recognises that monitoring of progress against targets requires comprehensive and accurate data. The implementation of data collection and monitoring systems is one of the key aspects in accurately measuring, mapping and tracking sustainability practices and outcomes.

INTRODUCING OUR CARBON REDUCTION FRAMEWORK Our carbon reduction framework serves as a roadmap for reducing emissions and meeting emissions reduction targets, and therefore, reducing current and future carbon tax liability. The current SBTs align SPAR’s climate change targets with the global target of 2°C temperature increase above pre-industrial levels. However, since the Intergovernmental Panel on Climate Change’s publication of the refined 1.5°C temperature increase above pre-industrial levels target in 2019, SPAR is in the process of updating our SBTs to be in line with the updated global target of 1.5°C.

A baseline was measured in 2016 and action plans were set for 2017 to 2025, and key actions for 2025 to 2035 followed by 2035 to 2050. We set a new baseline in 2018 with action plans set for 2020 – 2033 and further key actions for 2033 – 2050 with the aim to be carbon neutral by 2050. We mapped projects with potential savings to prioritise key actions. Based on the framework, we designed an internal carbon pricing methodology aimed at the following outcomes:

• Reach our proposed greenhouse gas emission reduction targets

• Protect SPAR against risks relating to compliance with future carbon pricing systems such as a carbon tax

• Encourage investments in low-carbon technologies

• Make sound investment decisions in terms of energy efficiency projects and future operational change

OUR PERFORMANCE IN 2020Our 2020 performance reports on data collected for the period from 1 October 2019 to 30 September 2020. During this period, SPAR’s activities emitted 80 478 tonnes of carbon dioxide equivalent (CO2e) for Scope 1 and Scope 2 emissions (2019: 82 896 tonnes). Due to business development and growth in the business during the year ended 30 September 2020, total cases dispatched from warehouses increased by 1.3% to 250.3 million cases.

In addition, we saw a decrease in total Scope 1 and 2 emissions of 2.9%. On a CO2e per case dispatched basis, emissions per case decreased by 4.2%. The decrease in total Scope 1 and 2 emissions was attributed to a decrease in our Scope 2 emissions. This could be attributed to the transition of all our distribution centres (excluding Build it) to renewable energy.

Electricity consumption contributes towards our Scope 1 and 2 emissions. We consumed 38 288 124 MWh of electricity for the stated period compared to 43 001 294 MWh in the previous period. Electricity consumption (kWh) decreased by 11.0% in 2020. This was due to installation of Solar PV facilities across the distribution centres (excluding Build it) and retrofitting of LED light fittings across the distribution centres.

We run behavioural change campaigns to raise employee awareness around the benefits of reducing electricity consumption. The group neither purchased nor consumed heat, steam or cooling energy during the stated period.

The breakdown of Scope 1 and 2 emissions below are tracked from a 2013 base year:

Scope per greenhouse gas protocol 2016 2017 2018 2019 2020

Total footprint Scope 1 and 2 (CO2e) 78 010 82 984 81 763 82 896 80 478Scope 1 direct greenhouse gas emissions from vehicles, warehousing, cooling and air conditioning facilities (CO2e) 37 210 39 010 39 882 38 175 41 424Scope 2 indirect greenhouse gas emissions from electricity consumed (CO2e) 40 800 43 974 41 881 44 721 39 054

www.spar.co.za

2020 ENVIRONMENTAL AND SOCIAL SUPPLEMENTARY REPORT

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