Social and ethics committee report

The Social and Ethics Committee ("the Committee") is pleased to present its report for the financial year ended 30 June 2019.

The Board, together with the Chief Executive Officer, is responsible for the ethical culture of the Group, and has allocated the oversight of, and reporting on, organisational ethics, responsible corporate citizenship, sustainable development and stakeholder relationships to the Committee.

COMPOSITION

The Committee is a sub-committee of the Board as required by the Companies Act. The Committee has adopted a formal charter that was approved by the Board. The Committee conducts its affairs in compliance with its charter. The Committee meets at least three times per annum and is chaired by an independent non-executive director. The Committee is comprised of three directors.

The Board considers the Committee's composition appropriate in terms of the necessary knowledge, skills and experience of the members.

The Group Company Secretary, Ms E J Willis, attends all meetings of the Committee as secretary. A representative from Human Resources attends all meetings by invitation in order to provide input and guidance to the Committee on employment and ethics-related matters. In addition, the Group's Citizenship Manager attends all meetings by invitation to provide input on environmental and corporate social responsibility matters.

ROLES AND RESPONSIBILITIES

The Committee's role and responsibilities include its statutory duties as per the Companies Act, and the principles of King IV, which includes:

• monitoring the Group's activities with regard to matters relating to:
  • social and economic development;
  • good corporate citizenship, including the Group's promotion of equality, prevention of unfair discrimination, reduction of corruption, contribution to development of the communities in which its activities are predominantly conducted or within which its products or services are predominantly marketed, and record of sponsorship, donations and charitable giving;
  • the environment, health and public safety;
  • consumer relationships, including the Group's advertising, public relations and compliance with consumer protection laws; and
  • labour and employment.
• monitoring the Group's performance and interaction with its stakeholders and ensuring that this interaction is guided by the Constitution, Bill of Rights and the UN Global Compact;
• determining clearly articulated ethical standards and ensuring that the Group takes measures to achieve adherence to these in all aspects of the business, thus achieving a sustainable ethical corporate culture within the Group; and
• providing effective leadership based on an ethical foundation and ensure that the Company is and is seen to be a responsible corporate citizen.

SOCIAL AND ETHICS POLICIES

These policies set out Italtile's commitment to undertake its business activities in a socially and environmentally responsible and ethical manner, and sets out the standards by which all employees, representatives and franchisees will be guided in their actions and dealings with colleagues, customers, suppliers and business partners. The policies are approved by the Board and are communicated to all directors and employees.

Italtile is committed to a policy of fairness and integrity in its business dealings. Italtile recognises that maintaining high ethical standards is essential to the long-term economic success of the Group. The Group believes in integrity and transparency, hands-on involvement, partnerships to promote an entrepreneurial spirit and passion for customer service.

The various elements of these policies form part of matters monitored and discussed by the Committee and include the following.

1. Italtile's relationship with employees

Italtile strives to treat all employees equally and believes in providing a workplace that is free from unfair discrimination. In this pursuit Italtile subscribes to the following principles and supports the following programmes and initiatives:

• all employees have the right to work in an environment that is free from any form of discrimination on the basis of race, age, place of origin, religion, creed, gender, sexual orientation, political persuasion, marital or family status, disability, nationality or HIV/Aids;
• strives for the equitable representation and promotion of women in the workplace as far as possible;
• promotes the health, safety and welfare of all employees;
• provides appropriate and relevant support and training and the opportunity for development and advancement to all employees, management and leadership;
• pays fair remuneration to employees that reflect an individual's worth to the Group and abides by both the terms of contracts of employment and its human resources policies. An important element of the Group's remuneration philosophy is the profit share, shared by all employees. Depending on individual contribution and Group performance, the profit share can have a significant impact on an individual's earnings;
• does not exploit labour and upholds the principle of fair labour practices;
• respects an individual's right to freedom of association; and
• is committed to employment equity. The Employment Equity Committee meets regularly to monitor and implement the requirements of the Employment Equity Act, 1998.

2. Employees, leaders, franchisees and business partners' relationship with Italtile

All employees and leaders will demonstrate high levels of integrity, professionalism and performance in their work.

• Integrity – we are open, honest and fair in all our relationships. We make and keep commitments and accept accountability for our actions.
• Professionalism – we try to achieve our full potential as leaders and employees. We commit to winning by learning as much as we can, improving and working as an effective team every day.
• Performance – we strive for continuous improvement, set clear goals and reward excellence.

3. Italtile's relationship with its franchisees and business partners

Italtile's association with its business partners and franchisees is conducted in a spirit of partnership. We will:

• honour all commitments;
• strive to achieve Italtile's business objectives; and
• preserve the entrepreneurial nature of the business.

4. Dealings with colleagues

In dealing with Italtile colleagues we are open, honest, fair and respectful.

5. Dealings with customers

Italtile exists because of its customers. Customer service is thus our top priority. We will provide:

• friendly, courteous, knowledgeable and professional service and advice at all times; and
• quality, fashionable products that provide good value for money.

6. Dealings with suppliers

Relationships with suppliers are conducted in a professional manner in order to support Italtile's reputation and business objectives. In doing business, we will:

• honour Italtile's commitments;
• not knowingly associate with suppliers who exploit labour or discriminate on any basis;
• not deal with suppliers who conduct unethical or improper business practices; and
• encourage dealings with suppliers committed to the process of transformation.

7. Dealings with competitors

Italtile recognises that competition is essential for continuous improvement. Every action that Italtile takes will comply with both the spirit and the letter of the law. We will compete fairly in the marketplace.

8. Compliance with laws and regulations

Employees and leaders must comply with all applicable laws and regulations relating to their activities for and on behalf of Italtile.

9. Conflict of interest

Employees and leaders must be independent from any organisation providing goods or services to Italtile. In maintaining independence:

• employees and leaders must neither take a direct or indirect financial interest in such organisations, nor accept gifts or favours that create an actual or perceived obligation to such organisations; and
• employees and leaders must not use their position at Italtile for their own personal benefit.

10. Preservation of the environment

Italtile recognises and embraces the importance of measuring, managing and reducing the Group's impact on the environment.

11. Transformation and BBBEE

Italtile is committed to empowerment in its business and is supportive of transformation in South Africa. Continuous improvement of the Group's scoring in accordance with the Amended Codes of Good Practice ("Amended Codes") for Broad-Based Black Economic Empowerment is a strategic imperative for the Group.

12. Corporate citizenship and social economic development

Italtile engages in ongoing community engagement and social economic development activities in communities in which it operates and the Group recognises the importance of upliftment of these communities.

ACCOUNTABILITY OF THE COMMITTEE

The Committee is accountable to the Board and provides feedback to the Board of its meetings. The Committee makes the recommendations to the Board that it deems appropriate on any area within the ambit of its terms of reference where action or improvement is required.

AUTHORITY

The Committee conducts its affairs in compliance with its charter and has reasonable access to the Company's records, facilities and any other resources necessary to discharge its duties and responsibilities. The Committee is authorised to take such independent professional advice as it considers necessary, the costs of which shall be for the account of the Company. Save for its duties provided for in the Companies Act, the Committee shall have no executive powers with regard to its findings and recommendations.

CONCLUSION

The Committee believes the Group has continued to maintain an acceptable balance between its financial performance and its social, economic, governance, employment and environmental responsibilities. Further, the Committee is satisfied that it has, in all material respects, achieved its objectives for the financial year ended 30 June 2019.

N P Khoza

Social and Ethics Committee Chairman

7 October 2019