• Scope of report
• Group profile
• Group structure and locations
• Vision and Values
• Strategic intent
• Goals and objectives
• Investment case
• Key production and market statistics
• Financial and non-financial indicators
• Illovo's integrated business sustainability model
• Materiality assessment
• Stakeholder engagement
• Strategic overview
• Strategic and operational accountability
• Value-added statement
• Five-year review

Illovo’s integrated business sustainability model

“NOT only do sustainable practices make good business sense, they also reflect our responsibility for and COMMITMENT to the environment and our surrounding communities”

Gavin Dalgleish Managing Director

integrated sugar cane processing

• In normal to good conditions, sugar cane contains between 13% and 15% sucrose, which is used in sugar mills to produce granulated brown and refined sugar.
• Cane fibre or bagasse, the fibrous residue following the sugar extraction process, is used as a bio-renewable fuel source in the factory boilers to produce steam for processing requirements and to generate electricity. Illovo aims to be power self-sufficient for factory and estate irrigation before exporting to national grids. In 2014/15, 89% of the group’s power requirements were produced by the group’s own installed electricity-generating capacity.
• At Illovo’s operations in Swaziland and Malawi, cane trash is blended with bagasse to increase the volume of fuel feedstock for the boilers, thereby providing for increased electricity generation.
• Water contained in sugar cane amounts to between 68% and 72% of total content. During the extraction process, this water is released and recycled for use within the factory, reducing reliance on external water resources.
• At the Sezela downstream plant in South Africa, plant material in the bagasse is extracted to produce furfural and its derivatives. The resulting furfural reactor residue is returned to the sugar mill boilers as fuel:
  • Electricity from the sugar mill is then used to produce hydrogen by electrolysing water, after which the hydrogen is used to catalytically convert furfural to furfuryl alcohol;
  • A furfural process side stream of natural solvents is further refined, through a process of freeze crystallisation, to produce food flavour chemicals;
  • Furfural is also used as the active ingredient in our Agriguard, nematicide products; and
  • This core activity of the group produces low-volume, high-value products which contribute significantly to our total revenue stream.
• Organic and non-organic impurities captured in the form of “filtercake” during the manufacturing process are returned to the cane fields for use as a fertiliser.
• Molasses is a by-product of the sugar manufacturing process which Illovo ferments and then distils to produce potable alcohol for use as a neutral spirit for beverages and denatured spirits for the pharmaceutical, cosmetic and printing industries:
  • The vinasse by-product from ethanol fermentation is then evaporated to make a CMS liquid fertiliser that is applied on sugar cane and a variety of other crops including bananas, pastures and maize. Significantly, the application of CMS recycles important and increasingly expensive minerals back into the soils from which they were extracted.

Sugar cane

• Sugar cane is a large grass variety which grows well in tropical and sub-tropical climates across the globe, absorbing around 18 tCO² per hectare per annum.
• Harvesting in the southern hemisphere takes place between April and December when the cane is 12 to 24 months old.
• Once harvested, the cane commences a new growing cycle from its existing roots; this re-growth is called a “ratoon”. Replanting takes place only every seven to 10 years, minimising soil disturbance and exposure to wind and water erosion.
• Rainfed cane in South Africa, with industry yields of around 65 tons of cane per hectare, minimises the impact on subterranean water supplies.
• In the rest of Africa, where irrigated cane yields are significantly higher, water for irrigation is sourced from secure and sustainable water resources such as large rivers, lakes and dams within permitted rights of use.

Our existing business model and continuing growth strategy on the African continent are focused firmly on the need to deliver continuing value to shareholders and TO maintain the financial sustainability of the group.

SuStainability practices

Through our business strategies, we aim to ensure that sound, sustainable practices are developed and maintained, following the guidance provided by internationally recognised frameworks. Further information in this regard is provided in the Social and Ethics Committee Report and the 2015 Socio-economic Impact Report (which can be viewed on our website at www.illovosugar.com).

In line with our integrated business approach, our reporting process is guided by the GRI guidelines on sustainability reporting, the requirements of the JSE’s SRI Index, local socio-economic and environmental issues, and key stakeholders’ requirements.

In 2014, we qualified for inclusion in the JSE’s SRI Index for the eighth consecutive year, being named amongst the nine companies which met its “best performer” threshold. Illovo was one of the “best performers” in the High Environmental Impact category.

IRAS has provided independent third party assurance over the sustainability information contained within this report, confirming that it meets the GRI’s Application Level B requirements (B+ with its assurance). A summary of this assurance statement is provided here, with the full statement appearing on our website.

Our management is assisted in the sustainable development of the group business by the Risk Management Committee, which, in conjunction with the Audit Committee and the Social and Ethics Committee, ensures effective governance of risks that may have a potential impact on the achievement of sustainable development, such as safety and health, environment, regulatory, market and financial performance, as well as reputational issues and community relationships.

Economic and social

Illovo strives to support the advancement of all communities where its operations are located and our Corporate Social Responsibility strategy entrenches this philosophy. Sustainable community development is achieved, inter alia, through employment, procurement and supply-chain development.

Driven by the contribution we can make to the economic development and wellbeing of our stakeholders and the communities in which we operate, Illovo plays a significant economic role as a creator of wealth, contributing to the empowerment of emerging markets in the six African countries in which we operate, as reported in our Socio-economic Impact Report. We create value, not only by transforming raw materials into products for our customers and providing much needed employment, but also through the wealth creation provided by the substantial revenue created for our suppliers, contractors, distributors, service providers, and the returns provided to our shareholders and investors. Significant economic benefits accrue to governments through direct and indirect taxes and also through the provision of infrastructure, education and health care, thereby directly and indirectly benefiting the surrounding communities, and generally providing much needed social benefits and supply opportunities in the developing regions of Africa.

Accordingly, over and above the usual costs of production which would typically be found in the more developed sugar-producing countries, in the year under review, Illovo:

• provided social benefits to our employees, amounting to approximately R289 million;
• provided revenue to the local farmers who supply sugar cane to its factories across the group, aggregating approximately R1.3 billion, benefiting these growers directly and indirectly and leading to significant multiplier effects within the associated communities; and
• procured 81% of its supply requirements from local suppliers in the countries in which it operates, valued at R7.4 billion.

The group’s Socio-economic Impact Report which can be found on our website at www.illovosugar.com, the Value-added Statement here, and our five-year review of financial performance and statistics in this report here provide further information on the considerable positive economic impact our operations have on the socio-economic development of the regions in which we operate and the wealth we have been able to create for our stakeholders through manufacturing, trading and investment and our subsequent distributions to shareholders and reinvestment in the business. The Socio-economic Impact Report also articulates the significant advances made in stakeholder engagement. We have identified two priority areas, ie, in Malawi – a stakeholder process aimed at finding a solution to ongoing competing land claims in the area in which we operate, and in Mozambique – a proactive initiative to include land rights as part of guidelines around smallholder land development. Other successful initiatives include our assistance to Malawi flood victims in the early part of 2015.

Human capital

Illovo strives to be an employer of choice within the agri-business sector in which we operate. We recognise the importance of our own human capital in the delivery of Illovo’s stated goals and objectives, and the broader long-term sustainability of the African sugar industry. Our philosophy for human excellence extends to providing meaningful employment and safe environments within which to work, promoting equal opportunity, an environment which promotes talent development and the continual pursuit of excellence. Staffing and targeted manpower succession planning is a key pillar for the development of our existing employees whose continued growth and good performance is recognised, irrespective of race or gender.

Illovo’s values are an integral part of our business and leadership. We believe that everyone has a leadership role in Illovo and needs to live our values and associated behaviours on a daily basis. In essence, as we align our behaviour to our values, we develop a culture within Illovo that is based on Integrity, is found to be Inclusive, ensures Accountability, lives Commitment and encourages Empowerment.

Our 2015 Human Capital Report may be viewed on our website at www.illovosugar.com.

Human rights and ethics

Our Code of Conduct and Business Ethics embodies our key principles and values, and prescribes the conduct required of all employees to achieve these values. The Socio-economic Impact Report (which may be viewed at www.illovosugar.com) provides further information in this regard and demonstrates our application of:

• the United Nations Global Compact Principles and other internationally accepted human rights principles;
• the Organisation for Economic Co-operation and Development (OECD) recommendations regarding corruption; and
• the International Labour Organisation (ILO) standards.

During the year under review, we introduced our Group Child Labour and Forced Labour Guidelines as well as our Group Guidelines on Land and Land Rights, both of which may be viewed on our website at www.illovosugar.com. These guidelines were formulated in consultation with local and international experts and complement our Strategic Intent, which encapsulates our aim to be welcomed in the communities in which we operate and without whose support our businesses would not be sustainable. The guidelines also supplement our Group Code of Conduct and Business Ethics which embodies our commitment to respecting internationally recognised human rights and to adopt policies and practices to protect against human rights abuses and requires our suppliers to do likewise.

Environment

Illovo’s direct environmental sustainability impacts are primarily associated with our agricultural and manufacturing operations and therefore focus on the need to identify climate change-related risks across the value chain. Our environmental sustainability reporting, guided by the GRI, is structured to reflect the inputs, outputs and modes of impact the organisation has on the environment, including our mitigation and adaptation strategies related to climate change. Materials, energy and water represent three standard types of inputs used by all of our operations. These inputs result in outputs of environmental and climate change significance, which are captured under the parameters of emissions, effluent and waste. Land and biodiversity are also regarded as inputs to the extent that they can be viewed as a natural resource.

As the largest sugar producer in Africa, with a substantial geographic footprint, Illovo has developed structures to:

• embed climate change considerations into the group’s policies, strategy, culture and management plans in order to build internal support for climate change management and reporting;
• integrate climate change-related stakeholder engagement into governance and decision-making processes; and
• undertake internal climate change reporting and communication.

Business continuity plans for all sites are developed following the evaluation of site-specific risks and opportunities.

The key risks and opportunity categories which received focus during the year under review were energy and greenhouse gas management, water management; weather-related responses, adoption of new regulatory systems, including the pending carbon tax in South Africa; and embedding systems such as the SUSFARMS initiative to enhance the group’s future sustainability profile. We continuously strive to comply with all applicable in-country environmental regulations.

Our 2014/15 Climate Change Report may be found on our website at www.illovosugar.com.