Our reflection on the King IV™ outcomes

How we create an ethical culture

Ethical behaviour, in its simplest terms, is about knowing and doing what is right. At SPAR, we strongly believe that we have an obligation to ourselves as individuals, our organisation, our community, society and our retailers to develop a coherent ethical system.

The board endeavours to meet the highest ethical standards of business practice and acknowledges that ethics are the foundation of, and reason for, corporate governance. The board is responsible for ensuring that management actively cultivates a culture of ethical conduct and establishes the values we must uphold.

To steer and lead the business in an ethical manner, we have developed a SPAR Code of Ethics. We enjoy a values-based culture that has entrepreneurship, family values and passion as its core values and typically underpins the way we conduct business sustainably on a daily basis. Furthermore, SPAR adheres to all the applicable laws, rules, regulations and principles of good corporate governance in our respective territories. The unique blend of our values-based culture with a defined ethical framework provides a guideline for ethical business choices.

The board and the executive team, which includes those working at the distribution centres, endorsed and has committed ourselves to implementing the SPAR Code of Ethics as the basis for our decision-making and actions. This forms the basis of our ethical culture.

The SPAR Code of Ethics outlines SPAR’s values, including how employees of SPAR are expected to conduct themselves and approach and report situations. SPAR defines ethics as follows: ‘doing the right thing in the best long-term interests of all stakeholders, even when no one is watching’.

The SPAR Code of Ethics has been translated into Afrikaans, isiZulu, isiXhosa and Sesotho to facilitate broader access to and understanding of its content.

We believe that ethical business dealings and total honesty in all spheres of operations are essential to the long-term, sustainable success of SPAR’s business.

The code applies to all employees of SPAR. We have also developed a supplier code of conduct that has been approved by the Social and Ethics Committee and which we plan to roll out in future. Related initiatives include our sustainability survey of SPAR house brand suppliers as well as our commitment to the ethical sourcing of products.

SPAR has a whistle-blowing facility that is actively promoted. Statistics and incidents are reported to the Audit Committee and Social and Ethics Committees.

An Ethics Culture Assessment (ECA) was undertaken this year, the details of which can be found in the Social and Ethics Report.

Employees are required to report any perceived breaches of the code or any unethical behaviour through their management structures or the whistle-blowing facility. The Whistle-blowing Hotline is an anonymous service run by Deloitte & Touche and is wholly independent of SPAR.

The full SPAR Code of Ethics is available here.

Although the membership agreement between the guilds, retailers and SPAR has an ethical element, there is scope to develop a retailer Code of Ethics. TOPS at SPAR belongs to aware.org, a registered non-profit, public benefit organisation, membership of which entails subscribing to a strict and comprehensive Code of Commercial Communication that includes stringent rules on advertising, packaging, promotions and media use, and which has been updated and expanded upon on several occasions since its inception.

How we ensure good performance

We measure SPAR’s overall performance in the context of the external environment, as it is demonstrated through a wide range of activities, interactions and relationships. Financial performance is but one aspect of overall performance, in a similar way that financial capital is only one source of value when considering business activities, outputs and outcomes.

Our key facts encompass the financial and non-financial indicators we use to gauge our annual performance. Our five-year financial review provides a longer-term comparison of key data. Together with our value-added statement, this provides shareholders with historical and comparative performance trends related to financial value creation. This includes, for example, employment, dividends paid and share price movements.

These indicators are closely linked to our strategic imperatives, which drive our progress towards achieving the group’s vision: being the first-choice brands in the communities we serve.

We also recognise that our performance enables our stakeholders – our retailers, employees and suppliers, in particular – to be sustainable. Where we are unable to mitigate our strategic risks, we are potentially affecting a wide range of stakeholders who rely on SPAR to provide a market for their products, services and systems to support their retail operations, who depend on SPAR for employment and who rely on the group to aid empowerment in their communities.

The board considers the group’s performance at the quarterly board meetings, with specific indicators monitored in greater depth by the relevant committees. Where progress is unsatisfactory, action plans are put in place to ensure recovery and mitigation. Read about our performance for the 2017 financial year in the Chief Executive Officer’s report and financial review.

Individual employee performance is structured and rewarded through a performance management system that aligns performance indicators to strategic imperatives, thereby creating a positive correlation between individual, team and company performance and remuneration earned. Read more about our remuneration philosophy and implementation in the remuneration report.

Retailer performance is supported through financial benchmarking, IT, human resources, marketing and retail operations’ services – all geared towards supporting success and sustainability.

How we ensure effective control

SPAR operates according to a voluntary trading model, which creates unique challenges for effective control, as retailers have the freedom to operate independently under the SPAR brand. Our primary area of control extends to operations at the distribution centres, including delivery, with more limited control in the retail environment. Our retail operations team, in co-operation with the guilds, provides the necessary structures to facilitate the most appropriate risk mitigation, and financial and reputational controls for retail.

In terms of our distribution centres, subsidiaries and central office functions, we rely on a range of internal and external assurance mechanisms in combination with formal policies and frameworks. External mechanisms include, for example, our auditors, sponsors and verification agencies, while internal audit and management reviews provide internal control.

Our enterprise risk management (ERM) process approach is set out below and show the steps linking business processes, risks, controls and auditing to strategic imperatives:

In terms of IT systems, we are in the process of rolling out SAP in South Africa, whereas Ireland and Switzerland have their own systems. Up to now, the SAP conversion has included general ledger, assets, non-trade debtors, creditors, etc. Logistics and warehouse operations will follow in the next phase.

Effective control in the IT environment is particularly challenging as the number of cybercrime incidents continues to increase. We completed an external audit on our system controls this year and are satisfied that the group is well protected against data security breaches.

Read more about effective control in terms of food safety in our relationship with suppliers.

Read more about the Audit Committee’s role here.

How we create legitimacy

Legitimacy denotes recognition and acknowledgement that can only be earned through the eyes and experiences of stakeholders. When we are able to create authentic shared value, as per our sustainability pledge, we build our reputation as a good corporate citizen and strengthen the material relationships that enable value creation.

We take our responsibility as a corporate citizen seriously, which means that the board continuously evaluates the group’s impact on stakeholders and the environment. The Social and Ethics Committee is mandated to provide guidance on and oversight of SPAR’s activities regarding the environment, consumers, employees, communities and other stakeholders, and to monitor the company’s sustainability and governance performance in this regard. The committee also ensures that these activities take place in a compliant and ethical manner that contributes to the welfare of the business and our stakeholders.

To further expand on the group’s legitimacy, the SPAR guilds also have Social and Ethics Committees:

  • The SPAR Guild Social and Ethics Committee is a committee of the SPAR Guild board, comprising SPAR Guild distribution centre and retail members who focus on social and ethics matters relating to the guild. These include, for example, marketing activities and community projects.
  • The Build it Guild of Southern Africa’s Social and Ethics Committee is a committee of the Build it Guild board, comprising Build it Guild retail members, a Build it wholesale member and the Build it human resources manager.

These governance structures direct our focus on SPAR’s value creation for stakeholders and serve as a conduit for new and emerging risks as well as stakeholder feedback to other board committees.

Our report on material stakeholder relationships provides information on how we engage with and create authentic shared value for stakeholders which, together, builds the brand’s public legitimacy.

We also linked our values to the sustainable development goals (SDG), thereby articulating how we can support its aims to end poverty, protect the planet and ensure prosperity in the next 15 years. This link ensures that we retain an external and holistic focus and remain aware of our impact on society. More detail about our commitment to the SDGs is available here.