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 2024.

In this report, the Committee, together with the executive management team, provides feedback on behalf of both Italtile and Ceramic Industries with respect to their performance in relation to social and ethics, as well as the Group's ESG imperatives.

The 2024 financial year saw a particular focus on health and safety in our factories, including the new Vulcania Ezee Tile factory. Our commitment to ensure the wellness of our employees continues and is equally balanced by our efforts to cultivate positive customer relations in our factories and retail stores.

The Committee is a sub-committee of the Board and is constituted of 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 revised Charter as required by the Companies Act. The CEO, CFO, Group Company Secretary and Citizenship Manager continue to focus on the Group's overall compliance and reporting.

ROLES AND RESPONSIBILITIES

The Committee's role and responsibilities cover all statutory duties under the Companies Act and King IV, addressing the following:

monitoring enterprise-wide social responsibility and ethics management processes;
monitoring the Company's activities with regard to matters relating to social and economic development and good corporate citizenship, including the Company's promotion of equality, prevention of unfair discrimination, reduction of corruption, and contribution to the development of the communities in which its activities are predominantly conducted or within which its products or services are predominantly marketed;
recording of sponsorship, donations and charitable giving;
monitoring the environment and health and public safety spheres, with specific reference to the impact of the Company's activities and its products or services;
monitoring consumer relationships, including the Company's advertising, public relations and compliance with consumer protection laws;
monitoring labour and employment legislation, including the Company's standing in terms of the International Labour Organisation Protocol on decent work and working conditions, including children's rights issues, employee safety and health, fairness of remuneration and employee and organisational ethics management;
monitoring the Company's guidelines for interaction with its stakeholders and ensuring that interactions are guided by the Constitution and Bill of Rights and the Company's ethics standards;
determining clearly articulated ethical standards and ensuring that the Company takes measures to achieve adherence to these in all aspects of the business, thus achieving a sustainable ethical corporate culture within the Company;
providing effective leadership based on an ethical foundation and ensuring that the Company is, and is seen to be, a responsible corporate citizen;
monitoring the Company's compliance with the 10 Principles of the UN Global Compact, which address Human Rights (Principles 1 and 2), Labour Standards (Principles 3 to 6), Environment (Principles 7 to 9), and Anti-Corruption (Principle 10);
ensuring that employee dignity is protected, that remuneration is appropriate, and providing assurance to stakeholders that the Company is in favour of the International Labour Organization Protocol on decent work and working conditions; and
overseeing that the Company's core purpose, values, strategy and conduct are aligned with it being a responsible corporate citizen.

ENVIRONMENTAL REPORTING – SUSTAINABLE DEVELOPMENT STRATEGY AND UN GLOBAL COMPACT COMPLIANCE

During the 2024 financial year, the sustainable development principles and their impact on the retail and manufacturing divisions remained top of mind for the Group as we continued to adhere to relevant UN SDGs and Global Compact principles within our business.

GHG emissions and Carbon Tax

The Group collected and processed the data required to calculate and submit our National Greenhouse Gas ("GHG") Emissions Reporting and Carbon Tax obligations to the Department of Forestry, Fisheries and the Environment at the end of March 2024. The overall observation was that in 2023, the Group reported lower total GHG emissions than in 2022. While the carbon tax liability increased, this was attributable to the 9,43% increase in the carbon tax rate in 2023.

Ceramic Industries' tile factories make use of natural gas in the manufacturing process. During the 2023 reporting period there was a significant 6% reduction in fuel usage compared to 2022. This equates to a 5% reduction in GHG emissions and a 6% reduction in carbon emissions (tCO₂e).

Ezee Tile also recorded a decrease in fuel usage of 35% and a concomitant reduction of GHG emissions (tCO₂) of 22%. These are pleasing results, and we look forward to further reduced consumption during 2024.

Water and waste management and solar initiatives

Boreholes have been installed on 27% of Company-owned properties, in line with our strategy to expand our overall water management initiatives to reduce water consumption and limit our reliance on municipal water in light of the country's water-shedding challenges.

In terms of waste management, in the 2024 financial year 60% of CTM stores in Gauteng and 86% of Italtile Retail stores recycled cardboard and plastic. In addition, Ceramic Industries provided training for all CTM and TopT stores on pallet recycling and implemented a project to collect all used pallets for reuse. A total of 8 195 pallets were collected between November 2023 and February 2024 and 11 486 kilograms of cardboard were recycled.

On the energy front, 13,32% of the total energy consumed by our retail stores is supplied by solar technology, installed at 45 sites-including three totally off-grid stores. Furthermore, seven stores have hybrid-battery energy storage systems.

For completeness, ESG content has been integrated into the employee induction and training programme across the Group. In addition, Ceramic's factories conduct training on environmental compliance, which comprises part of the Company's Workplace Skills Plans. This training content covers the handling of hazardous chemicals at Betta Baths and the waste management toolbox talk at Vitro.

STAFF DEVELOPMENT, TRAINING AND EMPLOYMENT EQUITY

Our employment equity focus remains on increasing and aligning our recruitment process to the Employment Equity Plans and sector targets, goals and objectives through holding managers accountable for delivering on these targets by:

focusing on building our artisan pipeline through the millwright training programme;
developing and implementing specific learnerships and formal qualifications for Ceramic;
increasing the retail pipeline through the graduate learnership intake;
building the Store Operator pipeline through the annual Future Leaders Programme for CTM;
building the future succession pipeline through the annual TopT Trainee Manager Programme;
building the junior management pipeline through the national bursary programme, CTM's Future Leaders Programme and TopT's Trainee Manager Programme; and
focusing on coaching and mentoring to ensure successful retention and succession planning.

STAFF WELLNESS AND SAFETY

Our Employee Wellness and Assistance Programmes conducted through the Ask Nelson and Stratum Primary Healthcare programmes are well-received by our staff. Given the prevailing challenging economic environment, our employees receive stress management support and guidance on an ongoing basis via site visits as well as online platforms, which afford greater reach and more regular access. Our manufacturing business has experienced a 92% participation uptake during our planned wellness days, and we continue to undertake periodic medical and occupational wellness surveys.

Our 2024 results show a significant improvement in our Disabling Injury Frequency Rates ("DIFR"), largely underpinned by the downward trend at Ezee Tile from 4,29% in the 2023 financial year to 1,71% in the reporting period. Our Group target is to maintain the rate as close to zero as possible; we are pleased that Ceramic's rate is currently at 0,33%, owing to a concerted effort by management to adhere to consistent safety protocols, training and standard operating procedures.

The Group's annual Health and Safety Audits were completed in 2024. The unchanged 93% rating achieved by the retail business verifies that we display a "mature culture" - a clear indication that our workforce and management teams are committed to a culture of continuous improvement, managing and resolving risks, enforcing security protocols, and implementing ongoing safety and compliance training. In the manufacturing businesses, it is imperative that we make further improvements in training and compliance in the year ahead in order to progress these divisions from being classified as having a "proactive culture" to a "mature culture", in line with the retail business. The recent appointment of a dedicated Health and Safety Officer at Ezee Tile will ensure that the requisite health and safety standards and related issues are managed stringently across all its branches; a notable improvement is already evident at our Vulcania factory where the new officer is based.

B-BBEE STATUS

The Group has retained its level 2 rating.

LEGISLATIVE COMPLIANCE

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

ENGAGEMENT WITH STAKEHOLDERS AND CONSUMER RELATIONS

In line with the Listings Requirements of the JSE, our key stakeholders were once again engaged regarding the Company's performance, governance, compliance, ethical standards and conduct during the past financial year. Our CEO has effectively and consistently communicated openly with shareholders, investors, financial media, analysts and the general public. He has ensured that the Company's investment proposition is communicated accurately and honestly and he disclosed transparently around all areas of concern. These engagements are supported by the audited and validated financial and legislated reports.

Our marketing, public relations and customer complaints-handling are consistently being improved and updated and we strive to ensure speedy customer complaint turnaround and feedback. We continue to use and improve on various traditional, digital, social and online platforms to communicate and provide information and feedback to our customers, suppliers and service providers.

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 in 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 is satisfied that the Group has maintained an acceptable balance between its financial performance and its social, environmental, governance and employment responsibilities.

Based on all available detailed reporting and registers, the Committee deems that it has, in all material respects, achieved its objectives for the financial year ended 30 June 2024.

N P Khoza

Social and Ethics Committee Chairperson

20 September 2024