“Sustainability principles are aligned with the five themes of the corporate strategy. This means that Pioneer Foods considers the social and environmental impact of its daily business activities and is continuously seeking opportunities to share and create stakeholder value.”
Pioneer Foods’ long-term success requires sustainable business practices in three fundamental ways:
- The Group is reliant on agriculture, therefore environmental issues such as climate change, energy consumption and water management have a direct impact on operations and profitability
- The Group depends on the current and future availability of human capital and skills
- The Group produces food for general consumption and therefore has a responsibility to ensure its product offerings are beneficial and nutritious
Parallel to these three fundamental business drivers, the Group maintains its commitment to the broader community through several corporate social investment (“CSI”) initiatives. It is in the Group’s interest to develop the consumers of tomorrow.
Pioneer Foods benefits from a thriving economy. The Group’s future success is therefore directly connected with its contribution to socio-economic development. Driving transformation across all levels of the business is a key consideration for the Group.
The governance of sustainability
The social and ethics committee is responsible for the monitoring of sustainability on behalf of the Board. Its mandate is to oversee the implementation and management of sustainability items by the executive team. Formal reporting to the committee follows quarterly reports to the executive committee. Data is collected on a monthly basis according to defined procedures. The implementation of a formal management reporting mechanism has been put on hold in the medium term. Currently, sustainability champions in each division are accountable for data collection and accuracy according to the sustainability strategies that are in place at a divisional, business unit or site level where accountability lies.
This is the first year that the Group has opted to report the core sustainability indicators in accordance with the new Global Reporting Initiative (“GRI”) G4 Guidelines. The full GRI table is available here.
EY has been contracted to provide limited assurance on the following key performance indicators (“KPIs”) and these have been denoted with an LA in the report:
- Lost time injury frequency rate (“LTIFR”)
- Number of permanent employees
- Permanent employee turnover
- Scope 1 carbon emissions
- Scope 2 carbon emission
- Water consumption
The assurance statement from EY, along with a breakdown of the basis for measurement of each indicator, is available online here.
Pioneer Foods’ licence to operate depends on its ability to produce products for consumption by humans and animals that adhere to the necessary quality, consistency, safety and traceability standards. External audits of Group facilities are conducted regularly to maintain certification and align with best practice. The divisions subscribe to the following health and safety standards:
- HACCP (Hazard analysis and critical control points)
- ISO 14001 (Environmental management)
- ISO 18001 (Occupational health and safety)
- ISO 9001 (Quality management) – selected elements
- OSP 22000 (Food safety management) – Essential Foods
- NOSA (National Occupational Safety Association) – certain sites
A formal compliance framework ensures that the impact and applicability of compliance standards requirements are understood and managed within the Group. The Group’s formal approach to regulatory compliance is described in the statement of compliance in the corporate governance report.
Sustainability principles are aligned with the five themes of the corporate strategy. This means that Pioneer Foods considers the social and environmental impact of its daily business activities and is continuously seeking opportunities to share and create stakeholder value.
Material issues are regularly reviewed at executive level to identify threats as well as new value creation and innovation opportunities. Material issues constitute those items that have a direct impact on short-term performance or have the potential to develop into directly impactful issues in the medium to long term if left unmitigated. Stakeholder concerns – including the perceptions of internal role players – inform the process of identifying material issues.
Employee engagement plays a pivotal role in the success of the business. The rightsizing exercise of the past 18 months has affected workforce dynamics as the Group sought to achieve optimal human capital investment.
Total employee numbers, including permanent employees and contracted employees, reduced by 12.06% to 9 859 at 30 September 2014, of whom 9 724LA are permanent and 135 contracted employees. Employee turnover of permanent staff increased to 2 130, a rate of 21.08%LA.
The significant decrease in employee numbers and consequent increase in turnover rate are the direct result of the rightsizing exercise in 2013. Many of the job losses occurred in the poultry business that underwent considerable downturn. This process was undertaken in an ethical and responsible manner to protect the rights of all Pioneer Foods employees, and the organisation has emerged a leaner, more agile business, better positioned to compete in a volatile and competitive market. Efforts were made to place as many affected employees elsewhere within the Group.
The Group supports its employees’ rights to collective bargaining, and employees are free to associate with the labour union of their choice to negotiate their terms of employment. Total union membership for 2014 was approximately 85.9% (2013: 86.4%) of the bargaining unit and approximately 57.5% (2013: 61.9%) of permanent employees.
There were 2 cases of industrial action during the year and these were within the Essential Foods business.
Leadership alignment was prioritised as a key enabler of building high-performance teams and sustaining the organisation’s transformation. The executive team embarked on a journey to build leadership coherence and inculcate shared responsibility through a series of facilitated workshops which culminated in the development of a revitalised leadership brand. This blueprint outlines the differentiating capabilities that the organisation seeks to nurture and embed to create a high performance culture.
As part of its strategic focus on talent management, the Group took steps to stimulate a renewed sense of pride among employees and launched an integrated reward and recognition scheme in the form of STIs and LTIs (short and long-term incentives). Pioneer Foods employees were invited to nominate colleagues for achievements in areas directly connected with the five strategic themes. A total of 819 nominations were received, indicating a positive response.
The Group mourns two employeesLA who lost their lives in road accidents while on duty. Lindokuhle Eliot Malevu was shot while driving and passed away on 13 November 2013. Ralton Alphonso Manuel was involved in a fatal accident on 17 March 2014. Pioneer Foods is committed to the safety of all employees and strives towards a zero fatality target.
Pioneer Foods is focused on building a high-performance team that is diverse and representative of South African demographics.
Broad-based black economic empowerment (“B-BBEE”)
Improvements in the Group’s B-BBEE score in certain categories can be attributed to Pioneer Foods’ continuous aim to provide previously disadvantaged candidates with opportunities. The Group was rated according to the Agricultural B-BBEE Sector Scorecard (“AgriBEE”) and retained its level 4 B-BBEE accreditation.
Of the economic interest of the Group 17% (2013: 17%) is held by black people, largely the result of the Phase II B-BBEE transaction in March 2012.
Management control and employment equity
Management control is 36% black (2013: 36%) at the Board level and black females represent 29% (2013: 25%) at top management level.
The Group improved its employment equity score at senior and top management levels. This is the outcome of the shift away from multifarious equity planning and delivery processes at the operating level, in favour of fewer, more coherent equity plans at each business unit. This has improved leadership line of sight and accountability for the broad transformation objectives.
Designated employees per level*
Skills development is integral to the Group’s focus on enhancing its human capital for the future sustainability of Pioneer Foods.
This is entrenched by the various capability building initiatives directly related to the five strategic themes.
To transform the organisation into a customer-centric business, skills development initiatives in marketing, innovation and customer management are emphasised. A highlight was the development of the Pioneer Brand Academy curriculum. In addition, a customised Key Account Management course was launched and 14 customer and key account managers were enrolled on the pilot programme.
Pioneer Foods Academy of Learning
Leadership development forms a key part of the Group’s talent retention plan and is offered through two formal programmes – the Advanced Leadership Development Programme (“ALDP”) and the Foundational Leadership Development Programme (“FLDP”). A total of 26 employees were enrolled on the two leadership programmes in the Academy in 2014. A high percentage of students on the courses are from designated groups and in the FLDP more than 50% are female.
The Group invests in future skills through apprenticeships, graduate programmes (internships and in-service), learnerships and employee bursaries. In 2014, there were 40 apprenticeships (2013: 48), 13 graduate programmes (2013: 22) and 161 employee bursaries (2013: 81) in place. There were also 201 (2013: 341) learnerships provided through the different divisions of the Group.
The significant increase in bursaries is the result of lowering the amounts provided, thereby increasing the number of bursaries available. The Group has seen a decline in apprenticeship and graduate programme numbers over the past few years as a result of stricter forecasting being applied to the recruitment of students to ensure there is sufficient capacity to place every individual. Additionally, the reorganisation of the business has focused primarily on building and developing employees internally.
The Group will focus on apprenticeships, learnerships and graduate programmes in the coming year, with specific emphasis on engineering fields.
Total skills development spend for the year to September 2014 was R12.3 million (2013: R17.5 million). Of the total spend, R10.3 million (84%) was spent on designated employees.
The reduced allocation for skills development is the direct result of the organisational restructuring, cost management and rightsizing exercise. As the organisation settles into the new operating model, more focus will be placed on this aspect of the business.
Learnerships (Total 187)
Skills development spend (R’m)
The Group considers preferential procurement a core aspect of its strategic objective to shape a winning corporate portfolio.
In the agricultural sector there is a particular need to support farmers from historically disadvantaged backgrounds by creating markets that will result in economic empowerment in rural areas.
Pioneer Foods improved its approach to supplier engagements by shifting to a total value of ownership (“TVO”) approach. This resulted in more emphasis on transformation, leading to a number of high-value contracts being allocated to a vendor base with level 4 or higher B-BBEE credentials. The Group is currently sourcing a partner to assist in enhancing supplier development efforts.
Food security remains a major concern in South Africa. The Group channels its corporate social investment towards addressing the key causes of societal underdevelopment that lead to hunger and poverty.
Through its partnerships, the Group is involved in a variety of community projects in education, environment and food security. These projects – which focus on vulnerable groups such as women and children primarily in rural contexts – receive 90% of funds distributed by the Group, while the remaining 10% is allocated to feeding schemes. Pioneer Foods distributed almost R11 million to beneficiaries.
Pioneer Foods commissioned an impact assessment in partnership with an external service provider during 2014. The aim was to identify areas where the Group’s contribution is making a significant impact and where to provide more meaningful development opportunities. The results showed a 72% project impact achievement.
The Pioneer Foods Education and Community Trust (“PFECT”)
In FY2014 the trust activities were mainly in three areas:
- Provision of bursaries
- Support to deserving projects
- Development of Mbekweni Youth Centre
Mbekweni Youth Centre
The trust decided in the previous financial year to develop a youth centre in Mbekweni township. The trust will refurbish and extend an existing building with a provisional budget of approximately R12 million, comprising capital and operations expenditure, allocated for 2015. Building has already commenced.
The PFECT bursary programme continues to support students in the fields of accounting, engineering and marketing. In 2014 R1.4 million was allocated to 17 students. In 2015, the number of students will increase to approximately 30. For the new cohort, beneficiaries of Pioneer Foods employees were also invited to apply.
World Wildlife Fund South Africa (“WWF SA”)
An enterprise development and conservation model (“People Working for their Environment”) has been established in the Nelson Mandela Bay Metropole (“NMBM”) in the Eastern Cape, following the success of a three-year pilot programme with the Table Mountain Fund funded in collaboration with the Western Cape government. The project was launched in February 2014. This model aims to develop a sustainable small land management business in the peri-urban context of the NMBM, and to provide natural resource management services to key conservation sites.
Paardeberg Sustainability Initiative (“PSI”)
The Paardeberg Sustainability Initiative (PSI) recognises the threats to the biodiversity and natural resources in the Western Cape Boland area of South Africa. The primary threat is economic pressure facing some farmers and land users of the mountaintops and surrounding areas. The PSI has continued to grow in capacity and now supports land users to protect natural resources through the PSI National Resources Management (“PSI NatReM”) Land Users Incentive Scheme. In this project, the PSI has created 90 sustainable jobs to fulfil its mandate and address economic aspects of sustainability.
The sale of woodchips to the Group’s relevant bakeries as a coal replacement remains the most promising option to pursue to ensure the jobs created become sustainable.
Foodpods Kayamandi is a Women’s Development Programme in Kayamandi township, in Stellenbosch in the Western Cape, focusing on agriculture, food security and entrepreneurship. Over the past year, the project has transformed an unused, inaccessible and arid piece of land at the Kayamandi High School into a large-scale agricultural hub, with the capacity to produce 76 800 vegetable bunches every year, making it the largest township-based, container-grown, agricultural hub in South Africa.
Foodpods Kayamandi provides full-time employment to a group of horticulturalists and site keepers, as well as a number of female growers from the community. Local and international interns and volunteers also contribute to the project, providing business and management support. By investing in the Foodpods project, Pioneer Foods is helping local women to develop the skills and resources to provide for their own food in a model that can be replicated in underresourced communities across South Africa.
Limani: Towards Food Security for Communities
Limani, a permaculture food gardening project implemented by Food & Trees for Africa (“FTFA”), was launched at Shikhati Primary School near Tzaneen, Limpopo Province, in June 2012. The school has since been developed as a resource centre for other schools in the area. As part of their training, schools are encouraged and equipped to harvest rain water and to use mulch to preserve soil moisture, while garden infrastructure and equipment were also upgraded and donated to the schools.
Commercial earthworm farms have been established to produce high-quality compost soil for vegetable gardens. Schools have been equipped with solar cooking kits. All schools are able to supplement their feeding programmes with fresh vegetables and many learners and other community members have started individual gardens following the success of the school gardens.
The project received a R6.9 million grant from the European Union in 2013. Pioneer Foods has agreed to match the funding needed to implement permaculture food gardens at an additional 57 schools.
The African Children’s Feeding Scheme (“ACFS”)
ACFS receives co-funding from Pioneer Foods to purchase milk to support 13 feeding centres in Soweto and the surrounding informal settlements. About 31 000 children benefited from this support during 2014. As part of the programme, the parents and guardians of the assisted children are empowered with skills that should eventually make them independent and able to exit the programme.
The following skills were provided to 1 200 direct beneficiaries during the year:
- Food gardening for food security (for survival as well as for commercial purposes)
- Sewing, beadwork, woodwork and baking (to start small businesses and provide employment opportunities)
- Health education
The organisation also runs school holiday programmes that focus on life-skills training and educational games and activities to keep children occupied and away from abusive home environments.
Stellenbosch Community Development Programme (“SCDP”)
SCDP’s focus is on nutrition and health by fighting malnutrition, preventing stunted growth and addressing obesity in Kayamandi, at Stellenbosch, by providing more than 1 800 children (including 750 crèche children under the age of five) with a meal every school day and most school holidays.
Pioneer Foods’ co-support extends towards the provision of a cup of milk per day for every child who is part of SCDP’s programme. Pioneer Foods also sponsors the salary of a Sustainable Livelihoods mentor.
Pioneer Foods retained full points for the enterprise development aspect of the B-BBEE scorecard for the third year in a row.
The Group encompasses an extensive value chain, which includes farmers and producers across the country, and therefore focuses its enterprise development activities on the development of primary agriculture in South Africa.
The Group provided R1.7 million (2013: R3.5 million) to enterprise development projects in 2014, 76% (2013: 73.8%) of which was allocated to primary agriculture projects. During the year, Pioneer Foods supported eight commercial farming operations whose beneficiaries are all mentored by external commercial farmers and by internal Pioneer Foods employees.
The majority of the Group’s production footprint remains biased towards the Western Cape, with 75% (2012: 69%) of spend going towards projects in the province.
Pioneer Foods’ social and legal licences to operate require that it provides products and services of a consistently high quality to a broad range of stakeholders.
Product life cycle assessment (“LCA”)
The Group concluded life cycle assessments by an external service provider on three flagship products – apple Liqui-Fruit, Weet-Bix and White Star maize meal. Undertaking a life cycle assessment allows the Group to consider emissions impacts when deciding on supplier selection, materials sourcing, product design and manufacturing processes. It highlights cost-saving opportunities while demonstrating environmental responsibility leadership.
Customer service and complaints
Pioneer Foods has a robust complaints management system. While some business units outsource this function, responsibility and reputational risk ultimately lie with Pioneer Foods, and formal Group procedures are therefore rigorously implemented. A 15-day turnaround target is in place for the resolution of complaints.
No environmental fines were paid in the financial year.
Operational and product responsibility key events
The table below provides a summary of notable events for the year and how Pioneer Foods is responding. A breakdown of Pioneer Foods’ overall approach to stakeholder engagement, including stakeholder groups, concerns and Group response, is available online.
Logistics services were centralised as part of the strategic drive towards cost efficiency and streamlining the business.
Replacing bakeries fleet
The Group is in the process of replacing the entire distribution fleet of the bakeries business unit by the end of 2016. The new vehicles will be smaller and more fuel efficient.
Energy management is considered as a priority issue by the Group, due to uncertainty of supply, rising cost of energy and the impending carbon taxation proposed for 2016.
Scope 1 or direct emissions were 116 715 tCO2eLA (tons of CO2 equivalent) and total scope 2 or indirect emissions were 263 824 tCO2eLA, bringing total combined emissions to 380 539 tCO2e. In 2014, 692 919 MWh of energy was consumed (2013: 668 513 MWh, excluding Quantum Foods). Of this, 62% (426 747 MWh) relates to direct energy and the remainder to indirect or purchased electricity and steam. This is an increase of 3% (direct) and 6% (indirect) of energy consumed over 2013.
Carbon Disclosure Project (“CDP”)
The CDP challenges companies to measure and report their carbon emissions to create transparency between investors and other stakeholders. Pioneer Foods has participated in the CDP for four years and has made it results public for the first time in 2014. The Group improved its score from 74 in 2013 to 82 in 2014.
Emission reduction opportunities (“EMOs”)
Over the past 18 months, the Group partnered with the National Cleaner Production Centre of South Africa (“NCPC-SA”) in conducting energy efficiency assessments at its production facilities. As a result, 10 identified EMOs are in the process of being implemented. Associated savings are expected to amount to R2.2 million. There are a number of EMOs currently undergoing feasibility studies or are in planning phase.
A summary of EMOs identified, planned or in progress per site is available here.
At the end of the financial year, Pioneer Foods partnered with an external service provider to install a woodchip boiler at the Claremont bakery in the Western Cape, following the successful installation of the first boiler at the newly commissioned Shakaskraal bakery in KwaZulu-Natal. The wood comes from waste from sawmills, pallet manufacturers and other industrial enterprises and is used as a sustainable heating fuel to generate steam at the bakery. Investigations are under way to integrate the wood sourcing with other projects, for example from the WWF land management clearing sites and the PSI sustainability initiative.
Electrical consumption to run the required machinery to generate the woodchips is as low as 6.8 kWh and wood is considered a carbon- neutral fuel as the carbon emitted through the chimney stack is reintegrated in the soil by the cultured forests.
Water is one of the key resources used in agriculture and production, and is therefore a vital component of Pioneer Foods’ business.
The Group is on a journey to better understand its water usage to successfully implement management strategies that contribute to the sustainable supply of this resource. In the medium term, this is expected to result in suitable long-term adaptation plans for water usage across the Group’s value chain.
During the year, water usage metres were installed at Bokomo Foods plants to improve the accuracy of consumption data collection and usage management.
Water usage and quality is monitored at all business units, as well as the quality of the water used in the production process. On-site water treatment facilities at certain Ceres Beverages and Quantum Foods sites are used to treat water before and after use at the sites. In 2014, 3.1 million m3#LA of water was withdrawn (2013: 4.7 million3), which is a reduction of 33%. This was a result of the purchase of water meters at one of our largest water-consuming sites. The actual monthly consumption was far less than the amount calculated in the previous year.
Year-to-date progress on five-year target (water m3/ton of production ’000)
Future sustainability goals
B-BBEE 2015 targets
The Revised B-BBEE Codes of Practice were gazetted on 11 October 2013 and with the transition period ending in the first part of 2015, Pioneer Foods switched from the Agri-Codes to the revised codes on 1 October 2014. Compliance levels have been redefined and the new 40% hurdle rates on the elements (ownership, skills development and enterprise and supplier development) will result in many companies, including Pioneer Foods, dropping a few levels. Focus in 2015 will be on enterprise and supplier development. A women’s development flagship programme is already being developed.
Carbon emission targets
- Direct energy: 10% reduction
- Indirect energy: 8% reduction
- Water: 5% reduction?
Recent studies have demonstrated the interconnection between food, energy and water – meaning that one drives the demand of another in this triangular relationship. In the context of climate change, these studies have emphasised the food and water link. Within the Group’s upstream value chain, this pressure is increasing. Partnerships with academic institutions and organisations such as WWF are being explored.
Waste management provides further opportunities towards the creation of value, and an extension of the Group’s engagement with the NCPC through the Western Cape Industrial Symbiosis Programme (WISP) demands closer investigation.