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 2023.

The Social and Ethics Committee, together with the executive management team, is pleased to report on the positive strides that the Italtile Group has made in its retail and manufacturing businesses. Our combined teams have ensured that knowledge and best practice is applied and shared across all areas of the business. These areas are covered below.

The Committee is a sub-committee of the Board and comprises two non-executive directors and the relevant executive management representatives. The Committee met three times this year and has ensured that our deliverables are in line with our charter as required by the Companies Act. The CEO, CFO, Group Company Secretary and Citizenship Manager continue to ensure that the Group remains compliant with all key legislation and that our reporting is accessible, accurate and systematic.

ROLES AND RESPONSIBILITIES

The Committee's role and responsibilities cover all statutory duties under the Companies Act and King IV, spearheading ongoing oversight, maintenance and monitoring of the Group's:

• ethical standards, 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;
• environmental compliance, ensuring that the Group's carbon footprint is contained within the required legislated levels;
• employee relations, with a specific focus on our employment equity statistics, labour and industrial relations and employee wellness;
• corporate citizenship and socio-economic development, ensuring the Group's promotion of equality, prevention of unfair discrimination, reduction of corruption, contribution to the development of the communities in which our activities are predominantly conducted or within which our products are predominantly marketed, including sponsorship, donations and charitable giving;
• commitment and adherence to statutory health and public safety standards;
• stakeholder relations and interaction, ensuring that our interactions are guided by sound principles as encapsulated in the Constitution, Bill of Rights, UN Global Compact Principles and UN SDGs;
• consumer relationships, including the Group's advertising, public relations and compliance with consumer protection laws; and
• effective leadership, ensuring a solid and ethical corporate foundation and responsible corporate citizenship.

ENVIRONMENTAL REPORTING - SUSTAINABLE DEVELOPMENT STRATEGY AND UN GLOBAL COMPACT COMPLIANCE

The sustainable development principles remain top of mind and the Group endeavours to report on the environmental impact of the retail and manufacturing divisions aligned with relevant UN SDGs to ensure optimal ESG practices. Our carbon footprint for the 2023 financial year showed a slight reduction in total emissions compared to the previous year. The reduction is attributed to a decrease in emissions linked to upstream logistics (scope 3) whereas emissions from the direct combustion of fossil fuels (scope 1) remained relatively flat and overall emissions linked to electricity consumption (scope 2) also remained relatively consistent. In the same year the Group also saw a reduction in our final carbon tax liability down to R6,09 million through the effective utilisation of several carbon tax allowances.

The Group is expanding the implementation of water management solutions and its use of solar power to ensure that we save water and diversify our energy sources in light of the country's ongoing load shedding challenges. Ceramic Industries is currently implementing an IoT project, which includes the installation and maintenance of sensors at water treatment facilities, boreholes and municipal meters. The project will improve the quality of water consumption data and reporting in line with the requirements of water-use licences for the factories.

The Group also embarked on waste management practices that will ensure the reduction, reuse and recycling of waste generated from our retail stores. This has been achieved through collaborating with our existing waste management suppliers to start a recycling programme that tracks the weight of waste generated in stores. To date, six stores have implemented the programme to track the amount of waste generated and recycled.

STAFF DEVELOPMENT, TRAINING AND EMPLOYMENT EQUITY

Our Human Resources team has been fully engaged with our industrial relations matters and is implementing the relevant training to manage employee compliance with required deliverables, procedures and standards. Training in this area is ongoing, especially at factory level.

Our retail business continued to focus on coaching and mentoring in line with our goal to ensure successful retention and succession planning. Our female store operator training is one of the key strategies to move closer to our three-year employment equity ("EE") plan. In order to align recruitment processes to the EEP/sector targets, goals and objectives, other initiatives include:

• holding our managers accountable for delivering on EE targets;
• building our artisan pipeline through the millwright training programme;
• developing and implementing specific learnerships and formal qualifications for ceramic and tile technology;
• increasing our retail pipeline through the graduate learnership intake;
• building our junior management and store operator pipeline through our bursary programme, Future Leaders Programme for CTM, and the TopT Trainee Manager Programme.

STAFF WELLNESS AND SAFETY

Our manufacturing business continues to focus on health and safety training, and our disabling injury frequency rate for Ceramic Industries has improved significantly and remains under our target of less than 1%, with all other areas working towards the target of as close to a zero injury-on-duty record. All safety checks are measured stringently via our online reporting platform and our representatives in each area are trained regularly, including legal liability training. The Group's health and safety audit was completed in 2023 and the results show remarkable improvements across the Group, from a score of 89% to 93%. A handful of recommendations will be implemented to improve this result even further, covering increased practical training on the implementation of the health and safety system requirements for Store Operators, carrying out inspections as a form of continuous risk assessment, training on the practical completion of relevant registers and on legal liability.

Our Employee Wellness Programme is now fully entrenched across the Group and an ongoing awareness campaign is in place through roadshows, multi-lingual posters and wellness days to encourage usage by our employees.

B-BBEE STATUS

The Group has retained its level 2 rating and focus remains on skills development and preferential procurement.

LEGISLATIVE COMPLIANCE

A high-level Group risk compliance review has been completed by our legal advisory team and no material adverse findings were noted.

ENGAGEMENT WITH STAKEHOLDERS

In line with the Listings Requirements of the JSE, all key shareholders were engaged with on the Company's performance, governance, compliance and ethical standards, and conduct during the past financial year. Our CEO has been consistent in maintaining open and transparent engagement with shareholders, investors, media, analysts and the general public. Our CEO has ensured that the Company's performance is communicated effectively and all areas of concern have been addressed coherently together with our financial and legislated reports.

Our customer complaints-handling process is effective and ensured that all complaints received were responded to comprehensively within the requisite turnaround times. Systems to streamline these processes and improve responsiveness to customers are continuously reviewed and improved and the use of various online platform monitoring technologies has enriched this area of the business.

Marketing and public relations are ongoing throughout the year. All content is updated and available via our websites and social media platforms. Our comprehensive marketing communication strategy is proving to be effective based on the increased real-time digital feedback and engagement reporting that is in place and continuously monitored.

ACCOUNTABILITY OF THE COMMITTEE

The Committee is accountable to the Board and provides feedback regarding its meetings to the Board. The Committee makes those 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.

Based on all available detailed reporting and registers, the Committee is satisfied that it has, in all material respects, achieved its objectives for the financial year ended 30 June 2023.

N P Khoza

Social and Ethics Committee Chairman

22 September 2023