CASE STUDY BARLOWORLD

THREE PILLARS TO ESG STRATEGY: SOLAR, WATER RECYCLING AND SOCIAL ENTREPRENEURSHIP

Case Study

1. Solar PV project: To reduce its energy and emissions footprint, various operations have switched to renewable solar PV energy. For the 2022 financial period, around 1,728MWh of renewable energy was generated and consumed within the group. To date a total of 1.7MW of solar energy capacity has been installed in the equipment business. The intention is to roll out a further 1.4MW capacity over the next four years. Similar projects are being considered within the consumer industries segment (which produces maize products) although these are still in the feasibility stage.

2. Water recycling capacity project: The group recycled approximately 1.63-million litres of water that would have otherwise been drawn from municipal supplies. Operations within the group regularly assess the feasibility for recycling of water to reduce strain on municipal water supplies. A water effluent treatment plant is under consideration to reduce the volume of effluent to the municipal reticulation and allow for reuse of water back into the manufacturing process, thus reducing demand for municipal freshwater and reducing associated costs.

3. Social entrepreneurship programme (Mbewu) and supplier development programme (Siyakhula): Mbewu provides seed funding, access to finance and incubation to social enterprises. Siyakhula is the enterprise and supplier development vehicle for Barloworld. Both initiatives also provide access to market for beneficiaries.

4. Refresh of employee wellness strategy: Cognisant that the wellness of its people is key to organisational wellness, Barloworld has refocused to better understand the various issues affecting employees mental, emotional, financial, physical and social wellness. The outcome is an evolving wellness strategy for its people.

5. Training and development project: Structured ESG training and development programme for senior and executive management is being planned. It includes a collaboration with a recognised South African business school to co-develop a programme with Barloworld, which is in the content material development stage.

SDGs TARGETED BY THE FUND

1. Solar PV:

• SDG 7 (Affordable and clean energy): Solar PV reduces consumption from grid electricity which is predominantly fossil-fuel based.

• SDG 12 (Responsible consumption and production): Efficiency targets and solar PV installations result in reduced energy consumption and further switching to renewable energy sources.

Equipment component rebuild and remanufacture centres extend the useful life of the company’s products and reduce waste to landfill.

• SDG 13 (Climate action): Switching from fossil fuel energy sources to renewables results in a reduction of greenhouse gases, which in turn helps alleviate global warming and climate change.

2. Water recycling capacity project:

• SDG 6 (Clean water and sanitation): Recycling waste water allows for adequate filtration ahead of disposal into the municipal reticulation and for re-use of water into the relevant processes, reducing the amount of freshwater drawn from municipal supplies.

3. Social entrepreneurship programme (Mbewu) and supplier development programme (Siyakhula):

• SDG 1 (No poverty): Mbewu supports entrepreneurs to be sustainable.

• SDG 2 (Zero hunger): Mbewu supports entrepreneurs in the agricultural space while the Barloworld Trust focuses on, among other issues, food security.

• SDG 4 (Quality education): The Barloworld Trust focuses on, among other issues, education.

• SDG 8 (Decent work and economic growth): Mbewu’s incubation includes training and development.

• SDG 10 (Reduced inequalities): These programmes include various initiatives to support entrepreneurs to grow and scale their businesses and to grow the group’s supplier base.

4. Refresh of employee wellness strategy:

• SDG 3 (Health and wellbeing). The strategy promotes healthy lives, as well as the physical, mental and financial wellbeing of employees. Product safety standards are applied to ensure the health and safety of Barloworld’s customers.

5. Training and development project:

• SDGs 4 (quality education) and SDG16 (promoting peaceful and inclusive societies). The training provided aims to improve ESG awareness so that this knowledge can be incorporated into business decision-making. It improves management appreciation of ESG and improves the company’s capacity to contribute to a more just, inclusive society.

Estimated Measurable Outcomes Of The Project

1. Solar PV: For the 2022 financial year, Barloworld avoided emissions estimated at 1,831 tCO2. The company plans to commission an additional 300KW during its 2023 financial year which will result in increased renewable energy consumption compared to 2022.

2. Water recycling capacity project: The business recycled and reused 1.63-million litres of water in its 2022 financial year.

3. Social entrepreneurship programme (Mbewu), supplier development programme (Siyakhula) and Barloworld Trust: Siyakhula disbursed more than R25m in 2022 to 35 beneficiaries, supporting 900 jobs. An additional 28 SMMEs had loans brought forward from previous years. In total, Siyakhula has funded 87 beneficiaries which support nearly 2,500 jobs.

4. Refresh of employee wellness strategy: The success of this strategy is measured in terms of utilisation of the wellness programme and the support centre. Key performance indicators for employee wellness are tracked and monitored internally.

5. Training and development project: Training and development follows formal and ad-hoc training within the group and includes internships, apprenticeships, inductions, functional training programmes.

Risks To Outcomes From The Project

1. Solar PV risks:

• Theft of solar panels: Likelihood – medium | Severity – medium

• Damage to solar panels or infrastructure rendering the installation ineffective or reducing yields: Likelihood – low | Severity – medium

• Unavailability of solar panels and related infrastructure: Likelihood – low | Severity – low

• Economic downturn results in reprioritisation of earmarked funding:

Likelihood – low | Severity – low

2. Water recycling capacity project:

• Facility failure resulting in unfiltered effluent discharge: Likelihood – low | Severity – medium

• Power interruptions resulting in facility disruption: Likelihood – medium | Severity – medium

• Economic downturn results in reprioritisation of earmarked funding for future projects: Likelihood – low | Severity – low

3. Social entrepreneurship programme (Mbewu), supplier development programme (Siyakhula) and Barloworld Trust:

• Consistent and effective processes for beneficiary selection and allocation of funds: Likelihood – medium | Severity – medium

• Continued dependence by beneficiaries on Mbewu, Siyakhula and Barloworld Trust for funding, access to market and sustained growth: Likelihood – medium | Severity – low

4. Refresh of employee wellness strategy:

• Wellness strategy will not meet the set objectives: Likelihood – low | Severity – medium

• Ineffective execution of wellness strategy: Likelihood – medium | Severity – medium

5. Training and development project:

• Lack of buy-in from attendees – in other words, ESG is not a consideration in business decision making: Likelihood – low | Severity – medium

Opportunities For Exposure

1. Solar PV: Solar PV consumption targets are included in sustainability linked funding, including financial instruments.

2. Water recycling capacity project: Barloworld’s water-related initiatives are not currently linked to any financial instruments. Funding instruments will be considered where relevant and appropriate in the future.

3. Social entrepreneurship programme (Mbewu), supplier development programme (Siyakhula) and Barloworld Trust: Barloworld has funding agreements in place with financial institutions. Future agreements and facilities are under consideration.

4. Refresh of employee wellness strategy: Initiatives in support of the strategy are funded through operational budgets. The only way investors can hold exposure to this project is by holding shares in the company.

5. Training and development project: Training and development is included in operational budgets. The only way investors can hold exposure to this initiative is by holding shares in the company.

BY LYNETTE