Environmental
report

OVERVIEW

Italtile is committed to fighting for the rights of our customers to have a beautiful home, which means not only our places of residence but also the communities and natural environments in which we live. A beautiful home is therefore one where social and environmental challenges are addressed in a way that still generates economic value.

The Group strives for sustainability by addressing the impact it has on the environment, increasing the eco-efficiency of the business, and creating or sourcing products that enable its customers to live sustainably.

RETAIL OPERATION AND SUPPLY CHAIN

Our brands and supply chain businesses constantly consider opportunities to operate more efficiently using the latest green technology. By exercising environmental awareness, they also strive to enhance the sustainability benefits of the products we sell. We ensure that imported products are also only sourced from companies that adhere to the environmental laws of their countries and we seek confirmation of compliance with the UN Global Compact from significant external suppliers.

During the year, a number of initiatives were implemented in an effort to reduce the Group's environmental impact.

Achievements 2019/20
Energy management
  • The Group continues to focus on improving its energy efficiency levels and decreasing its dependency on the national grid. A key energy focus in the past year was the conversion of lighting in stores to LED, with 17 CTM stores converted in the past year.
  • The Group's new lighting company, U-Light, continues to source and offer energy efficient LED lights as a core product range. This aligns to the Group's strategy of enabling customers to live more sustainably while remaining fashionable.
  • The business finalised a renewable energy roll-out plan for its South African retail stores focused primarily on outsourced grid-tied solar systems, with the long-term vision of decreasing reliance on diesel generators.
Waste management
  • The Group's head office continues to implement a recycling programme. All waste generated from the building is separated and recycled or reused where possible.
  • A pallet-reuse project in a number of business units across the Group continues, whereby pallets delivered to stores are collected and reused, reducing the number of pallets purchased and contributing to saving indigenous forests.
  • Stores partake in various recycling initiatives.
Conservation
  • Our brands continue to increase their use of digital marketing, thereby decreasing the dependence on print and paper.
  • CTM and Ceramic Industries continue to support rhino conservation by contributing R5 per box of certain Kilimanjaro tiles sold; once the accumulated funds reach R1 million, the money is donated to the selected charity. To date, R3,5 million has been donated.
  • Retail stores continue to participate in various other conservation activities such as the planting of trees in communities during Arbour Week.
Product innovation

International Tap Distributors, the Group's importer and distributor of brassware and accessories, continued to play a leading role in innovation in the industry, with the introduction of a range of water and energy efficient products including:

  • new Tivoli shower heads with water-saving restrictors included as standard with the products, which significantly reduce the flow rate per minute without impacting performance;
  • additional cold start basin mixers that do not activate the geyser every time the tap is opened;
  • water-saving cartridges that offer a half-open setting, letting out only three litres per minute;
  • water-saving aerators that reduce the water flow per minute by more than half; and
  • water-saving concealed cisterns that save half a litre of water with every flush.
2020/21 priorities and prospects
  • Implementing the renewable energy roll-out plan (grid-tied solar systems) to stores.
  • Continued conversion of stores to LED lighting with the aim of converting all CTM stores to LED by 2022. Product to be sourced and supplied by U-Light.
  • Automation of various processes in stores and improved functionality on mobile scanners (particularly in the warehouse/ dispatch areas of stores), resulting in reduced paper usage.
  • Ongoing product sourcing and innovation (water and energy efficient products), including the ranging of EcoTec tiles from Ceramic Industries.
  • Grow awareness of our wide range of environmentally sensitive products.
  • New store builds will include optimal use of natural light, solar technology, new-generation lighting, water-saving taps, rain water harvesting and environmentally sensitive building materials. In addition, gardens in all new stores will have indigenous vegetation with succulent vegetation to reduce water required for irrigation.

CERAMIC INDUSTRIES

Manufacturing plants

Ceramic Industries' factories use the latest technology to ensure efficient production. Gas consumption is reduced through the use of state-of-the-art burner technology and heat recovery systems that heat combustion air. Process water is recovered and reused, ensuring that no effluent leaves the factories. Natural lighting techniques and new-generation LED lighting have replaced less efficient lighting in many places in the factories. Large solar generation systems have been installed in our Australian factory and at the Betta sanitaryware site in South Africa. Concurrent rehabilitation of raw material quarries is conducted and quarries are rehabilitated once end-of-productive-life is reached (becoming wetlands or park areas).

Water management

Our factories rely primarily on water from boreholes and municipalities for production. It is for this reason that our existing boreholes are registered with the Department of Water and Sanitation. We conduct monthly water monitoring on site to detect our potential impact on the environment and also conduct groundwater level monitoring to determine how much we are consuming from our natural resources. Furthermore, our factories are designed to maintain a closed loop system, which means that most of our water is recycled right through the process. In an effort to enable our factories to operate environmentally efficiently, we have active water treatment plants at some of our factories, which make it possible to clean and reuse our process water. Reverse osmosis plants clean water that is then used in the factories. These initiatives all reduce the reliance on municipal water.

Air management

Emission of dust as a result of the type of raw material used in the production process is a key risk. Our factories are equipped with baghouses and wet scrubbers, which ensure particulate emissions are minimised or eliminated. In line with our occupational health and safety standards, we assess and monitor occupational hazards and implement mitigating measures. Air monitoring is performed on kiln and drier emissions to ensure compliance with regulated limits.

Waste management

We aspire to comply with the hierarchy of waste management by preventing, minimising, recycling, and recovering, with disposal being the last option. This approach applies to all waste that could potentially emanate from our production process and domestic waste that is generated on a day-to-day basis. Some of the initiatives that have been implemented include recycling of heat, raw materials and process water which all feed back into the process. We also have a waste management system that separates waste at the source and aims to dispose of as little waste as possible. This is an ongoing project delivering continuous improvement.

Energy consumption

Solar panels fitted at the factories reduce our reliance on electricity and our carbon footprint. The Company has over the years also invested in technology and robots within the process, which not only improve productivity, but have an indirect positive impact on the environment. Other changes in the factory including motion sensors, heat recovery, and light bulb retrofitting, will eventually add up to a notable saving in energy and costs.

2019/20 major achievements
Energy management
  • Continued roll out of energy efficient lights at factories.
  • Installation of a 1 MW solar plant in National Ceramic Industries Australia.
Other
  • Development of a new EcoTec production method which results in lighter and thinner tiles. The EcoTec manufacturing process emits 30% less CO2' while the product requires 25% less packaging and costs 25% less per m2 to transport from source, contributing to a significant carbon reduction.
2020/21 priorities and prospects

Management will continue to raise awareness around issues pertaining to waste, water use and air quality through internal communication and externally through community engagement forums. Specific priorities for the business in the year ahead include:

Water management
  • Continue to minimise water use and improve recycling.
  • Maintenance of water treatment plants to ensure no effluent discharge.
  • Progress plans to construct a waste management area in Vereeniging while maintaining the culture of recycling within and outside the process.
  • Reduce consumption of paper by encouraging the use of digital techniques instead of print.
Air management
  • Continue to maintain air emission levels within legal limit.
Energy management
  • Roll out energy efficient lights at factories that have not yet converted to this new technology.
  • Installation of a 3 MW solar plant in Vereeniging which will reduce reliance on non-renewable energy and generate up to 25% of energy requirements.
Other
  • Expansion of the EcoTec range of tiles.
  • Construction of an upgraded Samca Floor tile factory. The new factory will include state-of-the-art technology with reduced energy requirements, with reduction of up to 25% in gas and electricity consumption, together with the corresponding reduction in CO2 emissions. Product produced will consume 15% fewer natural resources to manufacture.

CARBON FOOTPRINT

In line with recent developments in South Africa's regulatory and tax landscape regarding climate change, the Group has resolved to align its environmental assessment methodologies with local legislation and international best practices. This revised approach has enabled the Group to comply with legislative requirements, adequately prepare for the impact of carbon tax and proactively manage its overall carbon footprint.

In this regard, a detailed assessment of the Group's carbon footprint is undertaken annually, specifically focusing on the following:

  • identifying and quantifying direct (scope 1) emissions that will require reporting to the Department of Environment, Forestry and Fisheries ("DEFF"), and also be liable for the carbon tax; and
  • understanding the main sources of indirect emissions (scope 2 and 3) contributing to the Group's overall carbon footprint.

Scope 1 emissions are determined according to the National GHG Emissions Reporting Regulations (as issued by the DEFF) and the Carbon Tax Act (National Treasury). Scope 2 emissions are based on Eskom's latest grid emission factor. The scope 3 emissions are determined in accordance with the UK's Department for Environment, Food and Rural Affairs ("DEFRA") guidelines. Generally, all calculations align with the Greenhouse Gas Protocol and ISO 14064 standards.

The carbon footprint assessment splits the Group into three components: Ceramic Industries, Ezee Tile and Italtile (inclusive of all remaining Group entities).

The majority of the Group's emissions come from scope 1 emissions, which include process emissions (release of CO2 due to chemical reactions); mobile fuel (fuel from Company-owned vehicles and forklifts); and stationary fuel (fuel used in Company-owned kilns, dryers and generators). Scope 2 emissions are from purchased electricity and scope 3 emissions are from: business travel; upstream and downstream logistics; water; and paper use.

Overall, the Carbon Footprint report reveals that the Group's emissions have decreased (inclusive of the smaller emissions). The impact of the lockdown aside, detailed assessment of the various facilities within the Group highlighted the following changes:

  • Extended closure of Samca Floor reduced stationary combustion emissions.
  • Improved operational efficiency and waste reduction at Samca Wall and Pegasus facilities reduced emissions linked to stationary combustion and electricity. The impact of these improvements is presently being investigated for a Section 12L energy efficiency incentive.
  • The Solar PV plant situated at Betta managed to generate 1 751 226 kWh, thereby effectively reducing emissions linked to grid electricity by 1 767 tCO2e.
  • The addition of new retail stores increased emissions linked to grid electricity.
  • A reduction in imports (shipping and air freight) reduced upstream logistics.

CARBON TAX IMPLICATIONS

The payment for carbon tax was set to be due in July 2020, but has been extended to 31 October 2020 due to the COVID-19 pandemic. The first payment of this tax will be levied on emissions from 1 June to 31 December 2019. The tax applies only to selected scope 1 emissions and also presents various allowance mechanisms that can be utilised to reduce the Group's taxable emissions. Taxpayers liable for carbon tax are required to apply for a licence in terms of the Customs and Excise Act.

Breakdown of Group emissions per entity     Breakdown of Group emissions per scope
   

Presently the tax only directly affects the Group's manufacturing entities with an annual carbon tax exposure exceeding R20 million. The impact of the tax was significantly reduced through the effective utilisation of available allowance mechanisms. The Group specifically participated in DEFF's Carbon Budget programme and collaborated with National Treasury to develop a Ceramics Manufacturing Emission Benchmark. These efforts, combined with the basic and trade exposure linked allowances, reduced the Group's carbon tax for the 2020 financial year.

An independent expert was engaged to assess the Group's carbon tax liability and GHG emissions reporting requirements. All activity classifications, thresholds, emission factors, energy contents and calculations are based on the guidance provided by the National Greenhouse Gas Emissions Reporting Regulations.

Retail

The retail component of the business has the potential to be impacted by the carbon tax as a result of stationary fuel consumption (diesel in generators). An analysis of stationary fuel use across all the stores in the Group found that consumption is currently below the 10 MW threshold, thereby exempting the retail business from the tax under the current conditions. The retail business will continue to strive to ensure that there are measures in place to improve our energy security while avoiding the risk of incurring carbon tax (this will include use of UPS systems and batteries to store energy where economically viable).

Ezee Tile

An analysis of Ezee Tile's operations found that the thermal input capacities of the equipment installed in the South African operations exceed the 10 MW threshold and, accordingly, the business will have to report on GHG emissions. Ezee Tile further incurs a carbon tax liability due mostly to emissions emanating from stationary fuel combustion and an accrual of R0,2 million for carbon tax has been recorded in the financial year under review. Ezee Tile will actively pursue energy efficiency projects and claim allowances where possible to decrease this liability.

Ceramic Industries

Ceramic Industries' operations utilise gas for purposes of drying and firing ceramic product, and diesel for material handling by means of forklifts and front-end loaders. The installed thermal capacities of the equipment installed in the South African operations exceed the 10 MW threshold and the business will report on GHG emissions. Ceramic is a significant consumer of natural gas and an accrual for R7,5 million for carbon tax has been recorded in the financial year under review.

As noted in this report, Ceramic Industries will continue to implement projects that reduce energy consumption. These projects include the installation of new energy efficient motors, gas burners with reduced energy consumption, waste heat recovery projects, improved insulation, installation of generation by means of renewable energy technologies and process improvements to lower consumption. Ceramic was one of the first ceramic companies to implement recovery of heat from its kiln rapid cooling zones to the spray driers. Further, installation of a 3 MW solar plant in Vereeniging is planned, which will reduce reliance on non-renewable energy and generate up to 25% of energy requirements.

Breakdown of main emission categories     Italtile Ceramics Group – annual carbon footprint
   

The Group’s ongoing productivity campaign was accelerated with the onset of the pandemic. Significantly, we have recognised that by driving up the output and returns on all our resources and assets, we can do more with less, while retaining the best of our offering.

By focusing on consistent investment in the shopping experience, entrenching retail excellence principles and winning over customers, we will continue to recover and build on the foundation for sustainable growth.