Sustainability review (Group-wide issues)

 
"For us, sustainability is not something we are 'adding on' to our business: it is becoming an integral part of who we are."
 
In this section, we provide a brief overview of our progress on sustainability in 2010. Some aspects of the on-line 2010 Sustainability Report were subject to external assurance by Ernst & Young Inc. These included elements of five specified key performance indicators and whether this review has been prepared in accordance with the Global Reporting Initiative (GRI) G3 principles and to a B+ application level. Further details on our sustainability performance and the external assurance report by Ernst & Young Inc. can be found in the comprehensive 2010 Sustainability Report on www.sanlam.co.za
 

Sustainability management

Management structures, approach and links to core strategy 

The Sanlam Group places considerable importance on sustainability as demonstrated by our sustainability management strategy and structure. The Sanlam Board has overall responsibility for sustainability and delegates this responsibility to the Sustainability Board committee and all other Board committees dealing with sustainability matters within the business.

The Sustainability Management unit provides strategic direction, co-ordination and monitoring of environmental, social and governance matters within the Group, while business units are responsible for ensuring sustainable investments and financial solutions.

In reporting on our sustainability activities, the complete on-line Sustainability Report details activities of the operations of Sanlam's South African businesses (referred to as 'Sanlam RSA'). Some areas of the report, however, relate to the entire Group and are clearly identified as 'Sanlam', 'the Group', or the 'Sanlam Group'. References in this Review match those distinctions. 
 

Stakeholder engagement

As part of Sanlam's commitment to being a responsible corporate citizen, we aim to ensure accountability, transparency and engagement with our stakeholders.

Our key stakeholder groups are: 
 
> Sanlam Personal finance: The Board, shareholders, industry regulators and government bodies.
> Influencers: Civil society groups such as Industry associations, NGOs, public benefit organisations (PBOs) and communities.
> Business partners: Employees and suppliers.
> Clients: Policyholders and investment clients.
 
Different levels of the Sanlam Group engage with different stakeholder groups to improve our positive impact on society as well as provide opportunities for business and market development. 
 

Compliance with appropriate codes, standards and JSE SRI 

As our implementation of sustainability has evolved, so too has the diversity of voluntary codes and standards to which we subscribe. We have committed our support to several leading initiatives, including our continued participation in the JSE Socially Responsible Investment Index, our application of the King III Code of Corporate Governance and the Global Reporting Initiative's G3 reporting guidelines, our participation in the Carbon Disclosure Project and the Energy Efficiency Accord, and becoming a signatory to both the United Nations Global Compact and the UN Principles of Responsible Investment and Cancun declaration. 
 

Transformation overview

In South Africa, redressing racial and economic inequalities is both an ethical and a business imperative. In addition to addressing past inequalities, diversity within Sanlam and in our business partnerships enhances our ability to provide our multicultural society with relevant products and services.

During 2010, we focused on increasing our Broad-based Black Economic Empowerment (BBBEE) scores for skills development, especially by increasing the accuracy of our measurements. We are accelerating our recruitment and retention of employee equity senior managers. Our total unverified BBBEE score increased to 77,74 in 2010, compared to our 72,54 verified score in 2009 and our Employment Equity (EE) score to 6,74 against the 4,04 of 2009.

We also focused on improving our preferential procurement scores, which decreased in 2009 (largely due to poor measurement of our smaller subsidiaries). Accordingly, we have been streamlining systems for capturing our suppliers' BBBEE credentials, which will in turn allow for more informed choices when selecting suppliers. 
 

Employees

Our successful business relies on an engaged, motivated and capable workforce. We strive for a working environment that is conducive to attracting diverse and skilled people and encouraging them to reach their potential. We provide a compelling employee value proposition guided by our Human Capital Transformation Strategy and EE plans, through which we: 
 
> recognise employees as our most important asset;
> focus on transforming our workplace and promoting equity and diversity; 
> offer skills training and ensure a sustainable 'talent pipeline' through career progression, leadership development and succession planning; 
> foster a cordial and conducive working environment; and 
> take care of employees' wellness and promote a healthy work-life balance. 
 

Workplace transformation

Sanlam RSA's black employee complement has now reached 60% of total staff (increasing from 56% in 2009, 53% in 2008 and 46% in 2007), showing significant progress in meeting our targets. Sanlam RSA's employment rate was 19,5% higher than in 2009 (3 008 new employees). Of new appointments made during 2010, 86% were black.

Race and gender are not Sanlam RSA's only diversification measures; we help disabled people to advance their careers within the business. During 2010 our largest business, Sanlam Personal Finance (SPF), initiated 18 disability learnerships in a bid to increase our disabled staff complement. Detailed statistics can be found in our on-line Sustainability Report. 
 

Skills development

We invest in developing the skills of our employees to retain our staff's interest and loyalty. Staff retention is monitored on a regular basis by the Group Human Resources unit in order to improve our working environment and company culture.

During the period under review we spent R58,5 million on training and skills development in Sanlam RSA with 53% of this spent on black employees. This includes a combination of development programmes, and technical and desktop training. Details of our various initiatives in the Group can be found in our on-line Sustainability Report. 
 

Conducive working environment

Sanlam creates a pleasant working environment to attract and retain excellent employees, an environment that embraces diversity and equity. Our efforts include orientation programmes for new employees, surveys of staff wellness and satisfaction, simplified grievance procedures, organised internal communications such as magazines, and a variety of other day-to-day benefits including an Employee Assistance Programme (EAP) for staff and their families, as well as convenience shops at our head office, access to loyalty programme discounts, and focused wellness interventions. 
 

Employee health

Throughout 2010 Sanlam RSA held training sessions to improve our employees' understanding of the range of medical benefits we offer, addressing common misperceptions. Our Wellness Strategy forms an important component of the Sanlam Employment Value Proposition and aims to help employees achieve a healthy work-life balance.

The EAP forms part of our Wellness Strategy, offering employees and their families a variety of services. Approximately 8,1% of employees made use of these services in 2010. These services include a variety of health tests, wellness presentations and our medical aid benefit.

During 2010 the wellness programme focused on stress management through the Revived and Resilient programme, which offered a series of talks and a self-help e-learning programme.

Sanlam RSA's Lighter Side of Life challenge was completed in March 2010. This voluntary programme focused on healthy weight loss through sustainable changes in lifestyle.

During the wellness campaign 742 staff members were tested for HIV, of whom seven tested positive (1%). Although we held no specific HIV awareness events, there is a very informative 90-minute session on the subject in the Group Orientation programme, which 928 Sanlam RSA staff members attended during 2010. 
 

Dependable products and services

Broadening access to financial services

More than one billion people in the world today do not have access to safe drinking water.
Providing excellent, dependable products and services, Sanlam forges its own business sustainability by cementing a strong reputation and attracting and retaining clients. Our product range also supports social development by concentrating on previously underprivileged markets and offering financial education to empower people with the knowledge to manage their finances effectively.

By extending our financial services to include disadvantaged, lower-income groups, Sanlam RSA will not only contribute to South Africa's economic upliftment but will also create important new market opportunities and effectively position ourselves for further growth. In our Sustainability Report, we detail our approaches to this sector, which include developing various products tailored to the needs of the disadvantaged, and, in particular, funeral cover policies.

One of our businesses, Sanlam Developing Markets (SDM), specifically focuses on improving access to financial services in entry-level markets, both in South Africa and a number of other developing countries. Over the past few years we have increased our rural presence in areas where lack of infrastructure has traditionally prevented access to services, particularly among the elderly. We have found that the lower end of the South African entry-level market is best approached through our Group Benefits model, which utilises various affinity groups such as the Zionist Christian Church and funeral parlours to reach potential clients. We discuss other models in more detail in the Sustainability Report.
 

Appropriateness and competence of sales advisers 

Our SPF, SDM and Sanlam UK businesses rely on intermediaries (advisers and brokers) to distribute products and services. The skill and integrity of these intermediaries is essential for the reputation of our brands and for our long-term sustainability. We have therefore invested significantly in the training and accreditation of our intermediaries in our different businesses. In 2010 we invested over R29 million in training SPF advisers, and R1,3 million on SDM brokers and advisers. Sanlam UK also set up Sanlam Distribution Services in 2010 to ensure responsible and effective intermediary behaviour (see our on-line Sustainability Report for more detail). 
 

Financial education and literacy

Our on-line Sustainability Report details the projects on educating existing and potential clients on finance, financial management and financial services. These initiatives are aimed at creating markets for Sanlam products in different segments and also improving financial literacy in general. Our projects have mostly targeted underprivileged groups and have included radio programmes, articles, newsletters, a financial literacy DVD, free business assessments and reports for small enterprises, presentations for students and educational roadshows in rural areas. 
 

Client service levels 

We strive to improve our clients' access to products so they can better manage their own financial security. This involves simplifying and clarifying the way we present our services, making it easier for clients to manage their policies. Such interventions go a long way towards client retention.

Our excellent service includes sound financial advice and efficient after-sales assistance, in order to retain their custom. Sanlam RSA's success with client service is evident in our client persistence figures, which are among the highest in the industry. In addition, the business has won numerous awards this year, and our 'Voice of the Customer' (VoC) score results show annual improvement. 
 

Dealing with client complaints

Our complaints-handling process is critical in forging lasting relationships with our clients. During 2010 we upgraded this process to make our complaints procedures more visible to clients, an exercise that included an update of our website and complaints brochure.

SPF's Client Relations unit was commended by the Ombudsman for Long-term Insurance at their 25th birthday function for the best organisational responsiveness over the past 10 years. For further details, please see the on-line Sustainability Report. 
 

Responsible investment

Internationally, large institutions are increasingly expected to put pressure on companies to incorporate environmental, social and corporate governance (ESG) considerations into operating practices. As one of the largest institutional investors in South Africa, we recognise that we have a duty to focus on socially responsible investment.

In 2007 Sanlam Investment Management (SIM) signed up to the UN Principles for Responsible Investment (UN-PRI). As a signatory, SIM adopted the six principles (outlined in the Sustainability Report). Overall, we are pleased with our progress towards implementing the UN-PRI, and we completed the UN-PRI survey in May 2010 ahead of the required date. 
 

Socially Responsible Investment funds

Sanlam RSA is committed to developing a range of actively managed funds that bring about social and economic change. In recent years, we have noticed a growing interest in Socially Responsible Investment (SRI) funds, with some consultants now proactively seeking these for their clients. There is now a variety of SRI-type funds in a number of our businesses, including the SIM SRI Equity Fund, the SIM SRI Bond Fund, the Africa Sustainability Fund, the Sanlam Multi Managers SRI Fund, Sanlam Private Investments' Shariah Fund, and SPF's Empowerment Fund. These are explained in more detail in our on-line Sustainability Report. SIM's SRI funds are performing exceptionally well. Although the other SRI funds are too new to report on, according to an Alexander Forbes investment performance survey for the year ending December 2010, SIM was rated fourth out of the nine measured equity funds and second out of the five measured bond funds. 
 

Financing empowerment and investing in infrastructure 

Only 1% of water found on earth is easily accessible for human use.
According to the Financial Services Charter (FSC), 'empowerment financing' includes the provision of finance for, or investment in, the following: transformational infrastructure in underdeveloped areas, agricultural development for emerging black farmers, low-income housing and black SMEs, and BBBEE financing. The Agri-Vie Fund raised USD$109 million for investment in agri-businesses across sub-Saharan Africa. The principal investment thesis of this fund is food security, and the fund targets investments in small and medium enterprises within the food and agriculture sector. Sanlam RSA and the Kellogg Foundation are the anchor investors of the fund. The Agri-Vie Fund made two new investments during 2010, bringing the total so far to four. Sanlam Private Equity (SPE) made three further investments in black-empowered companies in 2010 to strengthen and stabilise the balance sheets of these empowerment companies and to facilitate further growth.

Owing to the low returns on infrastructure investments and their long-term nature, SPE did not identify any appropriate opportunities for such investments during 2010. 
 

Responsible property management

Sanlam RSA has appointed specialist consultants to look at ways of managing our property portfolios based on 'greener' principles. Although the green building concept encompasses more than just energy management, our initial focus on energy consumption constitutes one of the largest considerations.

In 2008 we appointed the PEC Group to assess our property portfolio's energy efficiency and to consider potential savings. Over the past two years, the PEC Group has focused mainly on council electricity bills and recoveries from tenants. In addition, they have tested energy-saving lighting, remote-controlled air-conditioning systems and roof and pipe insulation. 
 

Responsible procurement

As a large organisation, Sanlam is committed to reducing environmental and social impacts. Procurement offers us the opportunity to improve our direct and indirect impacts on natural resources and communities, through consciously selecting supplies and suppliers that minimise adverse environmental and social effects. In the South African context, this includes a focus on BBBEE suppliers.

Since the Sanlam Group's Sourcing unit became fully functional in 2009, procurement has become considerably more proactive and strategic, aiming to reduce costs to our business, the environment and communities. Strategic sourcing means that we look critically at purchasing needs and formulate smarter ways of sourcing, including a greater focus on BBBEE suppliers. 
 

Our procurement policy

An effective procurement policy can bring about behaviour change that has a positive impact on the environment and society while also achieving savings. We have aligned our policy with current best practice in terms of transparency of business dealings and effective governance processes, among other criteria. The policy aims to aid transformation by developing black entrepreneurs and by enhancing the long-term economic sustainability of all stakeholders.

Sanlam RSA's procurement approach is one of proactive cost reduction through the strategic management of all operations. In 2009 a range of policies were introduced with the commissioning of the Group Sourcing unit. During 2010 we focused on entrenching and fine-tuning processes and practices. For example, by raising awareness about business travel issues, we have influenced travel choices. Video-conferencing reduces the need for travel. While Sanlam RSA's procurement policy includes environmental criteria, these have proved challenging and are yet to be fully implemented, providing a goal for the future.

Strategic sourcing has brought about considerable efficiency improvements, bringing over R180 million in benefits to the Group during 2010. Total procurement expenditure for 2010 was R9 billion
 

BBBEE procurement

Stimulation of economic activity among the previously disadvantaged sector is critical for Sanlam RSA's growth and South Africa's advancement. Management of diversity in the supply chain will benefit sustainable procurement in the long term. Our aim is to increase the complement of black-owned small businesses in our supplier group, with specific focus on black female-owned companies.

During 2010, 80,46% of Sanlam RSA's procurement on a weighted basis came from BBBEE-certified suppliers, giving us a score of 17,29 on the dti Scorecard. In the travel category, for example, about 97% of suppliers are currently BBBEE-verified. During 2010 we focused on ensuring that suppliers submitted verified certificates and we therefore anticipate a significant improvement in our 2010 BBBEE procurement score. Our progress against our procurement objectives has been very satisfactory, and we aim to improve on this even further. 
 

Enterprise development

Enterprise development is closely aligned with preferential and BBBEE procurement, since Sanlam RSA is best able to develop small black-owned enterprises in South Africa through our purchasing power.

Sanlam RSA assesses its entire supply chain in order to identify transformational challenges and to determine the viability of enterprise development initiatives as a solution. Whenever development of a new business area commences, our strategy includes facilitating the entry of black business into that area. This includes investing in small black businesses by assisting their cash flow through soft loans and early payment terms. To promote enterprise development more broadly, Sanlam RSA runs entrepreneurial competitions and a business-oriented educational television programme for entrepreneurs.

Sanlam RSA's largest contribution to enterprise development occurs through our Ubuntu-Botho (UB) transaction, since we financed the deal through preferential loans. Shareholders in the broad-based UB empowerment groupings have access to capital, opportunities and business advice. This deal yielded us full points on the enterprise development component of the dti Scorecard. 
 

Society and community

Corporate social investment and socio-economic development 

It is estimated that every person needs between 20 to 50 litres of water free from harmful contaminants each and every day.
For an economy to be sustainable, its people must be healthy, educated and skilled. Society must also secure a supply of natural resources for the future to support businesses and to maintain social stability. Sanlam RSA's corporate social investment (CSI) and socio-economic development (SED) initiatives focus on education, environmental management, health and skills development. By investing in these areas, Sanlam RSA not only encourages future client loyalty and support, but we make a meaningful contribution to the society we serve.

During 2010 we reviewed our CSI programmes to focus on fewer, more strategic projects in order to be more effective, sustainable and impactful. After a process of stakeholder consultation and project selection, we finalised our 2011 to 2015 CSI strategy, which aims to ensure a sustainable future business by supporting the development of a better society. In 2010 our CSI spending exceeded R19 million, which represented 0,52% of Group net profit after tax.

Our CSI strategy is to ensure that our investments lead to the creation of wealth for the poor communities in which we operate. To enhance the management of our CSI programme, we will establish the Sanlam Foundation in 2011. For more information on our programme and projects funded in 2010, see the on-line Sustainability Report. 
 

Sponsorships that focus on society and communities 

Sanlam views our community sponsorships as a win-win, adding real business value while also supporting socially significant causes. For Sanlam RSA, sponsorships present opportunities to engage with various target markets and stakeholders.

During 2010 we introduced a new sponsorship initiative, the Sanlam Kay Motsepe Schools Cup. This tournament is a national annual soccer tournament that aims to revive the culture of school football, involving over 4 000 high schools from all provinces in South Africa. Our other sponsorships include the Takalani Sesame radio and television educational programme, the Sanlam Cancer Challenge golf tournament, and a suite of cultural sponsorships through which we aim to reposition and transform the Sanlam brand in our traditional and non-traditional target markets. In 2010 we contributed R4,8 million to a variety of projects including music and writing initiatives and the Food Wine Design Fair. 
 

Biophysical environment

All of us depend on a healthy biophysical environment and functioning ecosytems. As a responsible corporate citizen, contributing positively to ecological health needs to be part of our triple bottom-line.

This commitment to responsible environmental citizenship informs Sanlam RSA's journey to integrating environmental principles into our business approach. It is also this commitment that drives our long-standing partnership with the WWF and its Living Waters unit, and that will again inform the new partnership agreement that we will sign with the WWF in 2011.

We believe that the issue of water is not based on conjecture or varying opinion, but on fact, as our country faces significant economic and development challenges that will require significant water resources to be made available for industry and jobs, food production and improved social standards.

Our investment in WWF is therefore not only based on sound environmental imperatives, but also makes financial, social and economic sense. Our decision to build 'water' as a theme into the design of this Integrated Annual Report, graphically illustrates our commitment in this area.

Our dedication to responsible environmental practices is also evident in Sanlam RSA's participation in the Carbon Disclosure Project; assessing and reporting on our carbon footprint; measuring our consumption of energy, water and materials and working towards reducing our footprint.

Our commitment and work in this area is guided by our Group Environment committee which oversees the management of environmental impact, bringing us into alignment with environmental best practice. 
 

Our carbon footprint

The Ernst & Young 2009 Business Risk Report rated climate change as the fourth highest business risk. South African businesses therefore have both a social responsibility and a business imperative to measure and reduce carbon emissions. This year Sanlam RSA again participated in the Carbon Disclosure Project (CDP), increasing the scope of our measurements.

Sanlam RSA's Carbon Footprint Report will be published separately on our website and more information is available in the 2010 Sustainability Report.

Our highest carbon emissions come from electricity consumption (Scope 2 emissions). There are currently a number of energy-saving initiatives led by the Facilities team, detailed in the Sustainability Report's section on 'Resource consumption and efficiency'.

In 2010 Sanlam RSA was ranked 5th overall on the CDP Leadership Index and featured in the top quartile of the carbon performance index. 
 

Resource consumption and targets

Agriculture claims 70% of all the fresh water used by humans. It takes 3 000 to 5 000 litres of water to grow just one kilo of rice.
As a signatory to the Energy Efficiency Accord, we are committed to reducing our fossil fuel energy consumption. At our head office in 2010, we improved measurement of our energy use by installing a real-time energy management system in which meters measure our energy consumption. Through such monitoring, we can concentrate on areas yielding the largest energy savings. The heating and AC system is our biggest consumer of electricity. We have therefore installed an alarm system to sound at a certain level of energy use so that chillers can be turned off where not needed. We are also replacing a variety of old equipment, including an elevator upgrade project, to reduce energy consumption - and we are currently investigating other efficiency measures including movement sensors for light fittings, and sun-shield glazing for windows. As a Group we are also encouraging energy-efficient housekeeping at all our offices.

We are monitoring our water consumption and taking a variety of measures to reduce this, including the installation of manual flush systems on all toilets. The head office recycles about 61% of all waste (including food waste), or 10 to 15 tonnes per month. We intend to achieve a waste recycling rate of 75% and are investigating ways of improving this. 
 

Performance

During 2010 we spent the following amounts on various resource efficiency initiatives: 
 
> Lift project: R2 935 825 (completed)
> Energy metering project: R41 040 (in progress)
> HVAC speed drive project: R317 099 (in progress)
 
While we have made progress towards our 2010 environmental targets, we have not met them all. The Group Environment committee is evaluating the 2010 environmental targets in order to determine a sound method for setting new targets. The committee will finalise and introduce these during the first half of 2011. This process highlights the challenges we face in determining realistic targets in terms of scope, scale, measurement methods and tracking. 
 

Conclusion

Integrated sustainability forms the very foundation of the Group's business culture. If Sanlam is to be truly sustainable, our business model must be holistic, resting on a balanced triple bottom-line. In order to play a beneficial role in society, we must not only be financially profitable, but also contribute positively to social and environmental well-being. In the past, these three areas of impact, economic, social and environmental, have often been seen as separate. At Sanlam we are learning to integrate all of them into our business strategy. For us, sustainability is not something we are 'adding on' to our business: it is becoming an integral part of who we are.