Stakeholders, governance foundation and our strategy

Stakeholders

This report is prepared for our broad base of stakeholders who remain critical to the ongoing success of Bidvest. We believe that it is only with robust partnerships formed and developed over years that we can continue delivering growth and acceptable returns for our society at large. This report outlines those key stakeholders – equity and debt investors, employees and trade unions, communities, including community-based organisations, non-profit and non-governmental organisations, government, governing and regulatory bodies, partners and potential partners, customers and suppliers – that play a part in our strategic planning process and that have an impact on our decision making. The value created for stakeholders is discussed in more detail in Sustainable value for all of the Annual Integrated Report.

Functional governance

Operational management is organised in a decentralised manner, conducting activities within a framework of a Group-wide governance structure, which entails significant reliance on the ethical behaviour of all employees, and well-defined expectations around key performance metrics. These structures generally govern oversight, capital allocation and management, strategic integrity, reporting, and consistency of cultural values across the Group as a whole (and includes alignment with the Bidvest Code of Ethics). Management teams within the individual businesses, who often have a specialised focus and concentration in specific sectors and services, are given significant autonomy to run their businesses and achieve the results expected of them. The decentralised structure of the Group allows for agile decision-making and execution.

An authority matrix forms the backbone of day-to-day governance, and formal reporting structures complement independent business-level processes that result in dynamic and iterative risk assessment and mitigation actions. Group management and reporting is organised via an Executive management committee (“Exco”) and board at the Bidvest Company level, which oversees the operations and governance of the Group as a whole, sets the framework of key performance metrics and related goals and receives and evaluates divisional reports and results. This oversight is supported by active, quarterly divisional boards and subcommittees that provide guidance, oversight and track results of business progress within the divisions. Monthly meetings between the Group’s chief executive officer and divisional chief executive officers, which focuses on uniform and simple key performance indicators, as well as monthly timeous and granular financial reporting from the underlying businesses (with flash financial results from the underlying businesses typically available on the fifth business day of every month), allow for active management of the diverse offerings of the Group. The key performance indicators are trading profit growth, cash conversion, Return of Funds Employed (“ROFE”), sustainability and transformation and are linked to short-term and long-term incentives. The Group also places significant emphasis on the quality of existing management teams within businesses when considering potential acquisitions, and typically retains the management teams to continue to operate newly acquired businesses.

Risks

There are certain material matters that might disrupt Bidvest’s ability to continue creating value for its stakeholders. Bidvest has long acknowledged its duty to share the value created, fulfilling a responsibility to contribute to economic and social development among its Group of stakeholders, including investing in the Bidvest team of people, and the environment. Our decentralised, asset-light and everyday essential products and service business model is, in itself, an effective risk management tool.

As external factors emerge and evolve, the key matters that may interrupt the operations of the Group’s business are carefully assessed through a controlled process. The meaning of material is defined and clarified across the Group, and those matters that may have an impact on the effective and successful future operations are assessed on an enterprise-wide level and, where necessary, mitigating action is introduced. The key material matters are shown below, and discussed in more detail in Material focus areas risks and responses:

• Supply chain constraints;
• Challenging economic outlook and constrained consumer spend;
• Increasing regulation and cost of doing business;
• Ongoing COVID-19 impacts, including new ways of working and learning;
• Cyber assaults;
• Loss of agency and distribution rights, port leases and licences; and
• The shortage of skills.

Control Risks was mandated to identify the socio-economic, environmental and ethical factors of greatest relevance to the Group to ensure that we do not have any blind spots when establishing the Bidvest sustainability framework. Their work entailed categorising the trading operations into industries; map environmental, social and governance risks per industry; provided additional geographic considerations; suggested metrics to measure the risks; identified universal risks across the Group; and flagged thematic risks, per geographic region, in the supply chain.

The following key ESG risks were identified as common throughout the Group:

• Energy management – unchecked energy intensity and sourcing can affect any company’s operating efficiency, as well as its production costs and exposure to regulatory shifts.
• Waste management – regulatory and operational challenges in management waste, as some waste is subject to regulation pertaining to their transport, treatment, storage and disposal.
• Water management – lack of water efficiency and water scarcity expose companies to great risks in addition to costs stemming from compliance with water quality regulations and reputational damage in places where water availability is low or restricted.
• Employee diversity and inclusion – a high degree of competition for roles due to high levels of unemployment and low levels of diversity can lead to discrimination related litigation and reputational damage.
• Labour practices – poor treatment and protection of employees and their rights could lead to reputational damage and disruption due to strikes.
• Business ethics and compliance – there is a baseline standard of regulatory compliance that Group companies must adhere to. Corrupt practices at lower levels are hard to monitor and mitigate. Such events can lead to reputational damage and legal costs.

At a divisional level, the following additional risks were identified, mainly relating to the supply chain:

• Branded Products and Commercial Products – environment and social impact of the supply chain, product and packaging lifecycle management, and employee health and safety;
• Automotive – product safety and data security;
• Financial Services – data security, regulatory risk management, professional integrity, and financial inclusion and capacity building;
• Services – employee health and safety, customer safety, and labour practices; and
• Freight – climate change, and ecological impact.

Cognisance was taken of these risks in designing the ESG Framework. Based on historic data we identified the operations that generate the majority of emissions, water and waste as well as those that have extensive supply chains. These are the “focused operations” that will be measured against the set environmental targets. All businesses will be measured against social and governance targets.

Stakeholder capitalism – the capacity of the private sector to harness the innovative, creative power of individuals and teams to generate long-term value for shareholders, for all members of society and for the planet we share.

Sustainable strategy

The notion of stakeholder capitalism and sustainable enterprise value creation resonates with the Group, and ESG considerations have made up a part of the Group’s corporate thinking and reporting for some time. The integration of ESG into the Group’s practices at an operational level has, however, historically been more informal. As the impact of climate change and inequality have become more and more evident, the Group has sharpened its focus in this area, recognising the need for all stakeholders to collaborate and work towards greater sustainability. This culminated in the adoption in the financial year ended 30 June 2021 of a detailed ESG Framework focused on those areas where the Group believes that it can make the largest difference.

We use the United Nation’s 17 SDGs as a guideline. We identified the the SDGs that are most relevant (refer below) to us and assess the impact we are making.

Our resultant ESG Framework, sets our focus areas and targets to achieve our objectives and meet our commitments, all whilst we continue to drive the Bidvest strategy.