Environment and sustainability

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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 we live in. 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.

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

ACHIEVEMENTS 2018/19

Water management

The roll out of rainwater harvesting tanks in the Western Cape was completed. Tanks with a total capacity of 190 kilolitres were installed in a further nine stores in the region with the aim of improving the stores' resistance to future droughts. The harvested water can be used for basic sanitation requirements and watering gardens.

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 11 CTM stores being converted in the past year.
The Group has launched its new lighting company, U-Light, offering energy efficient LED lights as a core product range. This innovation aligns to the Group's strategy of enabling customers to live more sustainably while remaining fashionable.
The business is in the final stages of preparing a renewable energy roll out plan that will focus on storing solar energy in batteries, with the long-term vision of decreasing reliance on diesel generators.
CTM and Italtile Clearwater stores are powered 100% by solar energy.

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. Over 900 kilograms of waste was recycled in the past year.
A number of business units across the Group have set up pallet-reuse projects, whereby pallets delivered to stores are collected and reused, reducing the number of pallets purchased and contributing to saving indigenous forests.

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 million has been donated.

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 which do not activate the geyser every time the tap is opened;
water-saving cartridges which offer a half-open setting, letting out only three litres per minute;
water-saving aerators which 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.

2019/20 PRIORITIES AND PROSPECTS

Educating employees on the correct use and maintenance of the rainwater harvesting tanks of all stores with recently installed tanks.
The conversion of stores with the highest energy consumption to renewable energy.
Continued conversion of stores to LED lighting with the aim of converting all CTM stores to LED by 2022.
Update the Group's environmental management plan to incorporate the business's response to the Carbon Tax Act (No 15 of 2019).

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.

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 and we are in the process of registering new boreholes. 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 which 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 which 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

We have started rolling out solar panels at the factories, aimed at reducing our reliance on electricity, which will ultimately reduce the 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.

2018/19 major achievements

Water management

The Betta process water treatment plant was upgraded to improve solid removal and enable the water to be recycled.
Registration of a new reverse osmosis plant at Samca to double capacity is in the final stage, awaiting sign-off by the Department of Water and Sanitation.
Continued monitoring of neighbouring boreholes confirmed that no impact from our operations has been detected.

Air management

Heat recovery from kiln waste heat was completed in National Ceramic Industries Australia. The recovery of this energy reduces consumption of gas and hence emissions.
Our air emissions continue to remain within acceptable limits, showing minimal impact on the environment.

Waste management

Due to ongoing waste issues in the Vaal area, Ceramic Industries has donated waste recycling bins to a local high school with the aim of introducing the culture of recycling, reducing and reusing waste.
The factories continued to practice recycling, reducing and reusing within the process and outside.

2019/20 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.

Air management

Continue to maintain air emission levels within legal limit.

Waste management

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.

Energy management

Roll out energy efficient lights at factories that have not yet converted to this new technology.
Install 1 MW solar plant in National Ceramic Industries Australia.

Other

CARBON FOOTPRINT REPORT

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 will enable 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 was undertaken, 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.

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

The results of the study are presented below.

Figure 1 illustrates each entity’s contribution to the overall footprint which consists of scope 1, scope 2 and selected scope 3 emissions.

Figure 1: Breakdown of total Group emissions per entity

Ceramic Industries

Ezee Tile

Italtile

Figure 2 illustrates that 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.

Figure 2: Breakdown of Group emissions per scope

Scope 1

Figure 3 provides a breakdown of the Group’s emissions based on the various source categories. In this example ‘Mobile’ represents sources such as forklifts and fleet vehicles. The specified fuels (ie burner, diesel, paraffin, petrol and Sasol gas) all fall under stationary combustion emissions.

Figure 3: Breakdown of main emission categories

Other (travel, paper, water)

Mobile

Gas

Paraffin

Upstream

Downstream logistics

The selected scope 3 emissions sources are: 'Upstream logistics' representing emissions from service providers transporting goods from source to factory/facility and 'Downstream logistics', which represent the transport of goods from factory/facility to end-user. Finally, the 'Other' category represents indirect emissions resulting from paper and water use, as well as business travel (local and international).

One emission category that is not represented above is 'Process emissions' (scope 1 emission). The only potential source of process emissions within the Group is the calcination of carbonates in the ceramics-making process. Presently these emissions are not reportable to the Department of Environment, Forestry and Fisheries ("DEFF") nor taxable under the Carbon Tax Act (N/A reporting threshold). The Group has previously followed a conservative approach and effectively over-reported its process emissions by assuming that its raw feedstock consists mainly of limestone and dolomite. However, the Group has opted to investigate its process emission in more detail considering that these emissions may become taxable in the future.

Overall, the carbon footprint report reveals that the Group's emissions have increased by 2,63% (inclusive of the smaller emissions). This increase can be attributed to a slight increase in electricity consumption and the inclusion of previously excluded water and upstream logistics data, which was done in an effort to strengthen the quality of this report. A basic review of Ceramic Industries' production figures shows an annual increase of 3,7% in the weight of products produced, but a decrease of 4,1% in the overall square metres (m2) of products produced. Factoring in the impact of Ceramic Industries' production activities (which are the main emissions contributor), the changes indicate that overall efficiency has been maintained in managing the Group's carbon footprint.

Priorities for 2019/20

Accelerate the roll out of renewable energy in stores.
Continue the roll out of LED conversions in stores.
Closely monitor and evaluate newly acquired generators.
Implement staff awareness campaigns to encourage environmentally responsible behaviour.

CARBON TAX IMPLICATIONS

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. Over the coming year, the business will strive to ensure that there are measures in place to improve our energy security while avoiding the risk of incurring carbon tax. The business is currently investigating the feasibility of replacing generators with UPSs, as well as the use of batteries in the Solar Photovoltaic systems to store energy.

Ezee Tile

An analysis of Ezee Tile's operations found that the thermal input capacities of the equipment installed in the South African operations exceeds the 10 MW threshold and, accordingly, the business will have to report on GHG emissions. Assessments show that Ezee Tile has a high likelihood of incurring carbon tax liability due mostly to emissions emanating from stationary fuel combustion. Section 12L, which is an additional allowance for energy efficiency savings, will be extended to the first phase of the carbon tax (2022), to further assist carbon taxpayers and recycle carbon tax revenues. Ezee Tile will actively pursue energy efficiency projects and claim the 12L benefit where possible to decrease this liability.

The development of regulations regarding allowances will be monitored to ensure that Ezee Tile is in a position to benefit from all the allowances as intended. Key aspects to the details above may change once these awaited South African Revenue Service's regulations are finalised.

Ceramic Industries

Ceramic Industries' operations utilise gas for purposes of drying and firing ceramic products, 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 exceeds the 10 MW threshold and the business will report on GHG emissions. Ceramic is a significant consumer of natural gas and the impact of carbon taxation is expected to be approximately R9 million.

Ceramic 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. A new project intends recycling waste heat from the exhaust chimney, through an air-to-air heat exchanger, to preheat combustion air for the roller mill at its Vitro factory. With 1 MW of solar power generation already installed, a project is under consideration to install another 1 MW at the Gryphon factory in Vereeniging. Ceramic also continues to invest in new technology with lower energy consumptions. The Gryphon factory is a typical example with extra expense going into ensuring the EKO-kiln option was specified from the equipment supplier. This kiln uses recuperative gas heating in the eco-burners as well as preheating of combustion gas with waste heat.