2015 PERFORMANCE

THE AECI GROUP, AS A MATTER OF POLICY, IS COMMITTED TO A CLEAN, SAFE AND HEALTHY ENVIRONMENT FOR ITS EMPLOYEES, CONTRACTORS, CUSTOMERS AND SURROUNDING COMMUNITIES.

To fulfil this policy commitment, a set of Safety, Health and Environmental (“SHE”) standards has been agreed to and approved by the Chief Executive. These standards, as stated below, are designed for implementation within AECI’s federal structure. The Chief Executive holds the Managing Director of each AECI business accountable for ensuring that implementation is effected in the business he or she manages. Each Group business must:

adopt a safety, health and environmental policy that meets the needs of the business;

hold line management accountable for the implementation of the safety, health and environmental policy;

develop and maintain appropriate procedures to support the safety, health and environmental policy;

manage safety, health and environmental risks in a manner that meets all the legal requirements of the countries in which it operates and accepted international criteria;

be prepared for and deal with any emergency;

ensure that employees and contractors are trained effectively;

maintain a record of safety, health and environmental information and meet statutory record-keeping requirements; and

audit performance against its policy, standards and procedures and report this regularly to the AECI Executive Committee.

On an annual basis each Managing Director submits a Letter of Assurance to the Chief Executive, describing the main SHE-related risks faced by the business and what is being done to manage these, and confirming that the business is in compliance with AECI’s SHE standards. Where such confirmation cannot be given, the level of non-compliance is described and details of the plans in place to achieve compliance are provided.

It is also a requirement for AECI’s businesses and/or operating sites to align their SHE Management Systems with an external standard against which third-party audits may be undertaken. The most commonly adopted such standards are:

OHSAS 18001 (an internationally applied British health and safety management standard, soon to be replaced by ISO 45001);

ISO 14001 (an international environmental management standard);

NOSA 5 star (a South African SHE Management System); and

Responsible Care. This is the global chemical industry’s voluntary initiative for the continual improvement of performance in safety, health and environmental practices.

AEL has utilised its in-house World Class system which comprises seven elements, including health and safety, for a number of years. This system will be retained going forward but it will be supplemented by the implementation of OHSAS 18001, beginning at the company’s Modderfontein operations.

A table providing details of SHE-related accreditations and, for AEL, levels of achievement against the World Class system standards may be found at www.aeci.co.za/pdf/certifications_2015.pdf.

ENVIRONMENTAL PERFORMANCE

Compliance

Certain manufacturing operations at AEL’s Modderfontein site are unable at this time to meet all the minimum emission standards that came into effect on 1 April 2015, in terms of the National Environmental Management: Air Quality Act, No. 39 of 2004, as amended. Accordingly, AEL submitted an application to the regulatory authorities for the postponement of the compliance timeframes so as to allow the company sufficient time to make the necessary commitments of capital required to achieve full compliance.

On 14 December 2015 the Department of Environmental Affairs (“DEA”), accompanied by representatives from the City of Johannesburg, conducted a search and seizure operation at AEL Modderfontein. Subsequent to this AEL was advised by the authorities that consideration of its postponement application will take place after the issues raised as a result of the search and seizure operation have been resolved satisfactorily. Management is cooperating with the DEA and has submitted a response to its allegations, relating to AEL’s compliance with certain conditions of its current emissions licence. Feedback from the DEA’s process is awaited.

The legal environment in which AECI operates is increasingly complex as a result of additional SHE-related legislation in South Africa and the diversity of legislation in countries in the Group’s geographic footprint. AECI’s risk management and compliance approach in this regard will be reviewed in the coming year to ensure that management processes remain appropriate in a changing environment and to prevent the recurrence of environmental compliance shortcomings identified during 2015.

Incidents

The prevention of incidents detrimental to the environment is an important aspect of AECI’s approach to managing its impact in a RESPONSIBLE manner. Such incidents do occur, though, and are classified and reported internally in line with AECI’s reporting standards and guidelines, available in the Sustainability section of its website. Reporting to external stakeholders in line with the Group’s value of being ENGAGED also takes place, as appropriate, through structures such as Community Awareness and Emergency Response Committees, Stakeholder Forums and Licence Advisory Forums.

It is pleasing to report that no * major or serious environmental incidents occurred in 2015 (one * serious incident in 2014). Of those moderate and minor environmental incidents that did occur during the year, the two most significant were:

six tonnes of nitric acid were spilt at AEL’s Modderfontein manufacturing facility. The spillage was contained on the site and clean-up was effected successfully;

a third-party contractor’s vehicle tipped over near Mufulira, in Zambia, when the driver attempted to avoid a pothole. The emulsion that spilled from the vehicle was cleaned up successfully and there was no material environmental damage

Resource efficiency

 

Water usage by the Group’s operations increased by 2,9% to 3 432 734 m3 *. The majority of this increase took place at ImproChem’s operations as a result of the acquisition of Clariant’s manufacturing facilities.

Hazardous waste generation and disposal increased markedly by 84% to 7 892 tonnes* (2014: 4 296 tonnes*). The main component of this increase was as a result of AEL needing to dispose of large quantities of low concentration sulphuric acid. This waste stream was previously used as a feedstock by a customer whose business closed during the year. The acquisition of Clariant also contributed to increased hazardous waste generation, as did higher production levels at Chemical Initiatives.

Recycled waste arisings were 7,7% lower at 14 815 tonnes (2014: 16 049 tonnes*) thanks largely to the success of a waste reduction project at Industrial Oleochemicals Products’ manufacturing facility in Jacobs, Durban. This is an example of progress being made in line with AECI’s Green Gauge initiative. See the Green Gauge commentary on the AECI website for details.

HEALTH AND SAFETY PERFORMANCE


AECI’s health and safety performance in 2015 was overshadowed by two* fatalities (2014: no fatalities*). Tragically, in January Mr Zingisile Reginald Mkhosi, a Group employee, died in a traffic accident while travelling to a customer’s site in the Northern Cape. This accident is a sad reminder of the road-related risks that are inherent to many of the Group’s businesses.

Equally tragic was the death, in October, of Mr Vincent Mahema. He was a also a Group employee and he sustained fatal injuries in a forklift accident in AEL’s Nitrates operations at Modderfontein.

A disappointment was an explosion, in July, at AEL’s Central Bulk Emulsion Plant at Modderfontein. No personnel were harmed but a manufacturing unit was severely damaged.

Inadequate operational discipline was a contributing factor in the death of Mr Mahema and the explosion. More stringent auditing and reporting regimes are being developed to assist in re-emphasising the importance of adherence to established standards and practices.

Despite these disappointments, there were some significant successes. There were fewer work-related injuries and illnesses than ever before, with the Group finishing the year with a Total Recordable Injury Rate (“TRIR”) of 0,35* — nearly a third lower than 2014’s 0,50*. Particularly pleasing was the improved performance of businesses in the specialty chemicals segment and the performance of many businesses outside South Africa where the operating environment is sometimes very difficult. The TRIR measures the number of incidents per 200 000 hours worked. The Group also achieved its lowest-ever recordable illness rate.

AECI’s approach to managing its international operations will be reviewed in the coming year to determine what enhanced value can be offered from AECI’s Head Office resource in terms of managing safety, health and environmental issues.

AECI continues to compare its health and safety performance to that of its peers. The graph below, compiled by an independent consultant using the latest publicly available data from the various companies’ websites at the time of writing, positions AECI’s health and safety performance in the context of its industry peers.

INVESTOR-RELATED INITIATIVEs

AECI is involved in three sustainability-related investor initiatives, namely the FTSE/JSE Responsible Investment Index Series, and the Carbon Disclosure Project (“CDP”) Climate Change and Water Programs. The latter two are global programmes administered in South Africa by the National Business Initiative.

In 2015 the JSE’s environmental, social and governance (“ESG”) collaboration with FTSE Russell resulted in the creation of the FTSE/JSE Responsible Investment Index Series. These indices replaced the JSE Socially Responsible Investment (“SRI”) Index which was terminated at year-end. AECI had been a constituent of the SRI Index for six consecutive years.

The first FTSE/JSE Responsible Investment Indices were constituted based on the FTSE ESG Ratings performed by FTSE Russell during 2014. Companies eligible for the Indices are those that form part of the FTSE/JSE Shareholder Weighted All Share Index as well as the FTSE All World Index. It was pleasing that AECI achieved a sufficiently high ESG Rating for inclusion in the FTSE/JSE Responsible Investment Index as well as the FTSE/JSE Responsible Investment Top 30 Index.

In the CDP Climate Change Program the company was placed in the “C” performance band with a carbon disclosure score of 97%, placing it 36th of the participating 87 companies that made their disclosure public.

The CDP scored companies’ Water questionnaires for the first time in 2015, with scores being benchmarked against region and sector peer companies. AECI achieved an above average score in the “B” band.

AECI’s 2015 submissions are available on its website.

* Indicates limited assurance.

 

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