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August 17, 2004
Handbook Reports on Sustainability Practice in South Africa
    by William Baue

Trialogue and the African Institute of Corporate Citizenship join forces to create a comprehensive text placing South African sustainability practice in a global context.

The strength of the second King Report on Corporate Governance (or King II) is its balance of universalism with localism: on the one hand it draws on international best practice, while on the other hand it remains attenuated to uniquely South African issues. This same praise can be applied to the source of the above opinion, The Good Corporate Citizen: Pursuing Sustainable Business in South Africa.

This handbook published by Cape Town-based strategic knowledge firm Trialogue, opens with a concise but comprehensive overview of the global development of sustainability, corporate social responsibility (CSR), and the triple-bottom-line (TBL). Included in this opening section is an in-depth timeline of sustainability-related events dating back to the 1948 Universal Declaration of Human Rights and running through the 2004 enactment of the Broad-based Black Economic Empowerment Act (BEE). The handbook's subsequent discussions benefit immensely from this detailed grounding in historical context.

Informative sidebars abound. For example, a sidebar documents the "yawning chasm between rich and poor" via the Gini index, a United Nations Development Programme (UNDP) initiative that measures the disparity between upper and lower income levels. South Africa scored 59.3 on a scale from 0 (representing perfect equality of economic distribution) to 100 (representing perfect inequality), ranking 116th of 123 countries in 2003 according to the book (111th of 175 countries on the Gini website).

This statistic sets the stage for specific discussion of how the functions on the ground. A case study on ChevronTexaco (ticker: CVX) subsidiary Caltex in the "Transformation" presents numerous metrics on the empowerment of historically disadvantaged South Africans (HDSAs). For example, 60 percent of the Caltex board is comprised of HDSAs, and HDSA representation in the workforce has increased from 51 percent in 1990 to 62 percent in 2002.

The book also includes commentary from corporate and noncorporate representatives, such as Rob Nunn of Dell (DELL) South Africa and Paul Kapelus, CEO of the African Institute of Corporate Citizenship (AICC, which co-sponsored the book.) Sandi Baker of the Global Reporting Initiative (GRI) discusses the risk of not reporting, pointing out that companies who "remain silent are increasingly distrusted, because ignorance is a wonderful vehicle for suspicion."

She also points out that although King II, GRI, and the Johannesburg Securities Exchange (JSE) Socially Responsible Investment (SRI) Index are all driving reporting on HIV/AIDS, the lack of standardization hampers comparability. To counter this problem, GRI convened a working group that produced a resource document on the HIV/AIDS reporting framework in November 2003 for pilot use in South Africa and eventual use for international standardization.

A case study of Lonmin Platinum (LMI.L) includes a statistic from its latest sustainability report estimating the cost HIV/AIDS will rise from US$6 per ounce of platinum in 2003 to $11 per ounce in 2011, based on workforce prevalence peaking at 26 percent in 2006. The case study also reveals how Lonmin's sustainability report exposes instances where performance is out of line with accepted norms. The report notes that the sulphur dioxide (SO2) emissions continue to exceed the permitted level of 4.8 tons per day, "but that the 'fixation plant' currently being installed will reduce levels by 96 percent and so bring the level well within acceptable norms." Lonmin believes that this level of transparency "will be rewarded by investors and other stakeholders."

A final strength of the book is its inclusion of primary research on corporate citizenship and sustainability practices conducted in 2003 by Trialogue. The research entailed interviews with senior managers at over 100 of South Africa's companies drawn at random from the JSE top-300 by market capitalization, as well as some large unlisted companies and parastatals.

Graphs on applying codes, guidelines and indexes are illuminating. For example, the graph shows just under 50 percent current participation in the JSE SRI Index, with future participation projected well beyond 60 percent. The graph similarly reveals increases in intended future participation in King II, GRI, the Global Compact, the Dow Jones Sustainability Indexes (DJSI), and the FTSE4Good Index, among others. In general, the responses suggested "greater adoption of local than international initiatives."


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