The Social and Ethics Committee is a statutory Committee in terms of section 72(4) of the Companies Act, read in tandem with Regulation 43 of the Companies Regulations, 2011. The Committee fulfilled its duties in terms of its approved terms of reference.
As it is the norm, Committee reviewed and updated its terms of reference in FY2023. The amendments were to remove repetition, enhance readability, acknowledge maturity and more accurately reflect the focus areas of the Committee.
The Committee’s Membership is detailed on key governance actions and meeting attendance on Board and Committee. Members of the Group Exco and other senior employees are standing invitees. On occasion, various subject matter experts are invited to engage the Committee on topical matters. Some of the year’s key focus areas are set out on the following pages, with cross-references to where more detailed information is included.
No material issues were identified during the year. In accordance with the Committee’s terms of reference, the Committee effectively discharged its statutory duties and responsibilities in FY2023. As Chairperson of this Committee, I will be available at the AGM to respond to any enquiries regarding the statutory obligations of the Committee.
The Committee monitors the Group’s activities in relation to:
While South Africa’s economy rebounded as the COVID-19 pandemic subsided, it came under pressure as loadshedding escalated and the global growth picture weakened. In FY2023, the Committee guided the Group on trade-offs related to short and long-term ESG imperatives and the immediate cost considerations versus long-term capex investments.
The South African context demands that Telkom consider pathways to energy security and efficiency while pursuing decarbonisation objectives. Providing continuity of service to customers despite energy disruptions is of paramount importance. We also recognise that our energy independence measures, in the medium to long-term, must reduce our emissions and harm to the environment.
As a Committee, we have engaged management in constructive conversations about reducing emissions while weighing the cost of these renewable energy investments on the bottom line. This involves balancing our sustainability ambitions against the Group’s objective to be profitable and boost shareholder returns. Here, the Committee’s role is to challenge and interrogate management to ensure they have considered the various trade-offs in allocating capital and selecting projects.
Our stakeholder engagement framework guides managing all stakeholder engagements. In FY2023, Telkom updated the framework with an external service provider’s assistance to incorporate participants’ views at our different business units. This update aimed to respond to changes in our operating environment while considering best practices in stakeholder management.
The plan is to draft the framework through the governance structures for approval and update the Group’s stakeholder engagement management policy by considering changes made to the framework in FY2024. Once this policy is finalised, the plan is to draft the operating model blueprint for the Group’s stakeholder engagement function.
In FY2023, the Committee oversaw the Group’s stakeholder engagement to address stakeholder concerns adequately. The Committee will enhance its focus on the Group’s efforts to improve relationships with regulators in FY2024. In addition, we will guide management with the section 189 processes and communications with affected and nonaffected employees.
The Board approved our first holistic and formalised ESG Strategy on 31 March 2022. The Committee oversaw its implementation in FY2023. The strategy is executed by a small Group central team supported by ESG champions at each business unit/subsidiary. Operationalising the strategy included setting the goals for the strategy's six focus areas and communicating these internally for acceptance. Responsibility for achieving each goal and its related targets is assigned to different CEOs and business heads, supported by a steering Committee for each goal.
The Committee was impressed by the high level of execution and focus on achieving the ESG targets set for FY2023. The Group made solid progress against all of the six focus areas. A notable achievement was the 17% reduction in our scope 1 and 2 carbon emissions year-on-year. This achievement was accomplished by reducing our carbon emissions per site and terminating those sites with unacceptably high emissions. This supports our stated ambitions to be carbon neutral by 2035.
The Committee is responsible for overseeing climate-change specific matters, including Telkom's adoption of the TCFD framework. This includes overseeing how the Group integrates the TCFD pillars of governance, strategy, risk management, metrics and targets into our operations. TCFD is a global framework, and adopting its recommendation clarifies our climate- related risk exposure to the market.
Through our preferential procurement approach and enterprise and supplier development spend, Telkom positively impacted more than 150 000 lives and created 46 700 new jobs. We are proud of this achievement against a backdrop of crippling unemployment rates and inequality.
Telkom appreciates the strategic role of remuneration and reward in enabling performance and value creation. Accordingly, Telkom has incorporated ESG Strategy metrics into the performance conditions for the FY2024 STI and LTI schemes to drive accountability and execution across the Group.
Read more about our progress in executing the ESG Strategy on Unpacking our PIVOT Strategy.
For the period under review, the Committee received training in ESG Strategy and implementation. It also received training on diversity, equity and inclusion, which created an opportunity for reflection on how we could mitigate the impact of biases within Telkom through simple but effective mindset and behavioural shifts. This training included, among others, exploring the neuroscience of bias and gender sensitivity. It allowed Committee Members to appreciate their own biases and blind spots better.
Diversity, equity and inclusion is an agenda item at all Committee meetings, as accepting employees of all backgrounds is important to Telkom's enduring success. Several initiatives are underway and will culminate in developing a diversity, equity and inclusion strategy. This strategy will draw on the views and experiences of our employees and is a priority for FY2024. The strategy will positively impact our gender equality goals, drive a culture of belonging and enhance our reputation as an employer of choice. This work will also support achieving our ESG ambitions.
When employees feel respected and valued for their contributions, their engagement improves, which lifts business performance and flows through to the bottom line.
We believe that leadership needs to set the right tone from the top. We are pleased with the progress made with the execution of our ethics strategy, as indicated by improvements in our ethics statistics.
The Board once again approved the annual ethics leadership in FY2023. This document focused on the commitment to gender and age diversity. The Chairperson of the Board and the GCEO signed the statement on behalf of the Board and management to underline leadership's commitment to high ethical standards. This pledge was introduced in FY2019 and is signed each year and published on our website. It is a core element of our ethics strategy, which was established to ensure that ethical values and principles are embedded across the Group.
We launched a Values Hub where employees pledge to live according to their selected values during the period under review. Employee adoption of this platform has been excellent, with a number of employees submitting pledges. The Group is preparing an extensive awareness campaign around this platform in FY2024.
Our ethics champions based at business unit/subsidiary received external training in FY2023 to deepen their understanding of ethics and their role and responsibilities in supporting the Group Ethics Office to entrench ethical principles across the Group.
The Committee noted improvements in ethics statistics, especially with conflict of interest declarations, which have improved from 80% in FY2022 to 94% in FY2023. The overall compliance with the Group Ethics Handbook improved from 98% in FY2022 to 99.36% in FY2023.
Our annual supplier compliance survey was successful as 98.5% of our top 200 suppliers recommitted to our Supplier Code of Conduct.
At Telkom, whistle-blowers are protected and do not face any negative repercussions. When requested, we keep the identity of whistle-blowers anonymous. However, we have been pleased by the number of whistle-blowers prepared to identify themselves. This gives our forensics team a greater opportunity to interview whistle-blowers regarding their allegations. It also indicates that we have created a space where people feel comfortable disclosing, knowing that they will not be victimised.
Read more about Telkom's ethical culture on Managing our business with integrity.
Thank you to management and my fellow Committee Members for their support and contributions this year. I acknowledge the important work and commitment of Kholeka Mzondeki, this Committee's outgoing Chairperson. She was passionate about diversity, equity and inclusion and ensured that these matters received attention. She was especially interested in the work of the Telkom Foundation, including having the Foundation management present on their projects and making time to hear the testimonials of the students and teachers. We appreciate her leadership and wish her well in her future endeavours.
Unfortunately, FY2023 was another difficult year due to the prevailing macro-economic conditions. Yet, despite the financial constraints, we continued to invest in executing our ESG Strategy and decarbonisation journey. We look forward to further progress against our ESG goals and priorities in the year ahead.
Ethel Matenge-Sebesho
Chairperson: Social and Ethics Committee