SUSTAINABILITY REPORT 2023
Supplement to the integrated annual report for the year ended 30 September 2023
Supplement to the integrated annual report for the year ended 30 September 2023
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Our key policies
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Our goal is to build an ethical and sustainable supply chain that adheres to the highest moral, legal, ethical and environmental standards.
Over the last few years, our local and global supply chains have been affected by a perfect storm of converging factors including the pandemic, geopolitical conflicts, China's downturn, and extreme weather events like floods, drought and fires affecting our key commodities.
Locally, our agricultural suppliers face an underperforming economy and have been hit hard by erratic rainfall, floods, drought, pests, water supply disruptions, power cuts, and rising costs for labour, security, electricity, fuel, and fertilisers. Beyond South Africa, the situation is no less challenging. The shift from La Nina to El Nino is affecting commodities like wheat, palm oil, and cocoa. Major floods in West Africa caused a cocoa shortage, limiting chocolate production. Droughts across the EU, South America, and the US have adversely impacted orange concentrate supply, with South African citrus primarily for export. Deforestation in Indonesia, Malaysia and Brazil place caveats on the sourcing of palm oil and other major commodities.
These events have increased cost pressures and created shortages that have impacted our business. Commodity prices continue to fluctuate, and balancing security of supply against cost represents a significant challenge, necessitating a focus on securing supply regardless of cost. This approach, however, raises questions about future sustainability, particularly in light of escalating climate-change headwinds. Needless to say, it has been very difficult making planned and strategic progress in ethical sourcing and preferential procurement ( see – preferential procurement) in this context, where security of supply is our number-one priority.
Challenges internal to procurement have also been a concern, including fraud risk and recruitment difficulties. We have fortunately closed key vacancies in our procurement team, and are addressing fraud risk through our ethical behaviour initiatives ( see – ethical behaviour) that support the necessary cultural shift across the organisation.
Ethical sourcing is a key tenet of our commercial processes and is subject to continuous improvement as we refine our supply chains. We strive for integrity and responsibility in all our sourcing, procurement and supplier-related dealings, and are continuously learning to drive improvements in our approach by participating in industry dialogues and through building relationships with potential partners.
Our ethical sourcing policy, approved by the board in 2018, is an uncompromising commitment to working with our suppliers to build a sustainable future anchored in sound governance. The policy encompasses the responsibilities of our staff and our suppliers to mitigate supply chain risk and build consumer and stakeholder trust. The policy directly aligns with our code and all other ethics policies, and explicitly integrates and articulates the key ethical principles to be adhered to, including but not limited to human rights and labour practices, preferential procurement, and environmental protection. Our ethical sourcing policy is available at www.tigerbrands.com.
We consider ethical and sustainable sourcing very important, but we do not yet implement it in such a way that produces clear performance data. While we are very selective about who we work with, and scrutinise them carefully, our current system lacks robust checks and follow-ups. Our current procurement processes, including ethical sourcing and supplier engagement and assurance processes, are very manual in nature. Since July 2023, however, we started the transition to a centralised digital procurement process that supports more robust supplier assurance and auditing processes.
Our current supplier assurance process includes a supplier self-assessment questionnaire that addresses labour practices, conflicts of interest, and basic health and safety. In recent years, we have strengthened the integration of due-diligence processes for food safety and quality ( see – food safety and quality), and fraud risk ( see – ethical behaviour) into our risk management and internal auditing processes for both our own operations and suppliers. Currently, formal supplier audits are only performed in regard to food safety and quality. Going forward, we plan to strengthen these processes in relation to human rights and environment-related aspects.
As part of the transition of our procurement processes, we are now developing a more comprehensive supplier assurance process that will see us integrate the requirements of our ethical sourcing policy more comprehensively. Our new process will include a robust self-assessment checklist, yet to be designed, that will be sent to all our suppliers. Subsequently, we aim to hire a third-party auditor to inspect a randomly selected group of suppliers, as required for compliance with the Financial Intelligence Centre Act (FICA).
Most of our agricultural commodities are procured through cleaners, buyers or aggregators who act as intermediaries between Tiger Brands and farmers. We currently limit our engagement on biodiversity and sustainable agriculture in our supply chain to engage with these intermediaries, not extending to on-farm or primary production activities.
Palm oil and cocoa (liquor and butter) are key ingredients for our chocolate business, and we are concerned about deforestation, loss of biodiversity, and the use of peatlands in the production of these forest commodities. To address this, we set caveats on our sourcing of these raw materials that foreground traceability and sustainable certification. This safeguard provides some assurance that our supply chains for palm oil and cocoa are anchored by the principles and standards of sustainable production. Our preferred cocoa and palm oil suppliers have programmes in place to lift farmers out of poverty, eradicate child labour, become carbon and forest-positive, and source sustainable ingredients. All these suppliers are members of the International Cocoa Organization (ICCO), Fairtrade and the Supplier Ethical Data Exchange (Sedex), and are audited on a regular basis by these bodies to ensure compliance.
Performance
Our ethical sourcing declaration process is on hold due to the ongoing digital transition of our procurement operations. We plan to resume this process after 2024, using supplier questionnaires on our digital portal.