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Environmental reporting approach

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Operational Control Approach

In setting its organisation boundaries for reporting greenhouse gas (GHG) or C emissions, and by implication all other environmental key performance indicators (KPI), Grindrod has adopted the operational control approach, as defined by the international GHG Protocol, including referenced and appendix documents .

The company adopted this approach following the board ratification in 2010 of a new corporate environmental and climate change policy which includes clear objectives and targets for improvement in terms of climate change and other environmental KPI, and the follow-on logic that meeting these objectives and targets will require the full authority to introduce and implement changes to policies and management practices within companies or joint ventures (“JVs”) where Grindrod has financial interests.

In addition, Grindrod completed a global best practice benchmarking exercise of transport and shipping companies in 2010 which indicated a move by leading companies towards either financial control or an operational control approach within these industries. Grindrod has also followed the debate and thought leadership within the global petroleum industry , which in some respects (from an environmental reporting point of view) shares the complexity of ownership and management of Grindrod’s shipping businesses, and case studies within this industry also supported this shift. The GHG Protocol makes reference to the petroleum industry (“IPIECA”) guidelines, as a source of detailed guidance for all sectors regarding defining boundaries in the operational control approach .

The Deloitte limited sustainability assurance audit conducted in 2010/early 2011 found this approach “acceptable” whilst pointing out that many large organisations prefer the financial control approach “as the process of identifying financial control is mature and usually well debated internally”. However, one of the reasons that Grindrod has adopted an operational control approach over a financial control approach is that there are instances where Grindrod has limited financial control or minority equity share-holding but does have sufficient operational control to influence emissions reductions strategies – through management and/or contractual arrangements.

In line with the GHG Protocol’s definition of operational control, Grindrod has disclosed 100% of emissions from entities it does have operational control over, and 0% of emissions for entities where, regardless of shareholding, Grindrod does not have “full authority to introduce and implement its operating policies”.

Grindrod’s Guidelines for Determining Operational Control

Grindrod has used the GHG Protocol definition for operational control which states that “A company has operational control over an operation if the company or one of its subsidiaries has the full authority to introduce and implement its operating policies at the operation.”

Determining authority is based on the objective and auditable existence of at least one of the following:

  1. Ownership. As financial control (either through majority shareholding or through contractual arrangements) and operational control are closely aligned, this forms the starting point for determining operational control;
  2. Employee Authority. Regardless of ownership, do Grindrod employees have the authority to make changes to how the business is being run? If they do, this would indicate an ability to control operations;
  3. ISO 14001 EMS. Does Grindrod have the reasonable ability to directly implement (by implication with own employees) or to influence the development (by non-employees) of an ISO 14001 environmental management system (EMS) or equivalent. If so, this would indicate an ability to control operations; and
  4. Contractual arrangements. Does Grindrod have the reasonable ability to impose environmental management directives in contractual obligations? If so, this would indicate an ability to control operations.
     

The inclusion of “reasonable ability” is an important consideration. Within shipping, for example, it could be argued that Grindrod has the ability to influence how all of its assets (ships) that are chartered out are managed and run. In reality and in the context of how the global shipping community operates, however, this is not feasible/practical.

Given Grindrod’s sometimes complex ownership and operational structure, particularly within the Freight Services and Shipping divisions, these screening rules have been applied firstly at the company ownership level as well as at the level of asset ownership and operations (i.e. specific ships and land-based facilities) within these companies.

Finally, Grindrod has adopted a conservative approach, including emissions from sources where interpretation of the screening rules are still not 100% decisive.

Exclusions and Inclusions - Marine Operations

(With reference made to the pdf document entitled “Grindrod Shipping - Fleet Profile 19 January 2012”)

Marine operations where Grindrod or Grindrod-owned subsidiaries have joint financial control over operations, but not operational control as defined above, include ship’s owned and operated by Ocean Africa Container Lines (Pty) Limited (“OACL”) (Grindrod has a 49% stake in this company), Unicorn’s participation in the Dorado Tanker pool (operated by managed by Heidenreich Marine Inc.) Ance and the Stolt Tankers Joint Service Pool (operated by Stolt-Nielsen Ltd.). Stolt Zulu, Basuto, Stolt Swazi, PondoEmissions from these ships have been excluded.

Also excluded are vessels owned by Grindrod but chartered out to other third parties, where similarly Grindrod has no operational control over where these vessels go or how much fuel they use. These include vessels owned by IVS and Unicorn (including Hippo and Nyathi).

In addition, Grindrod has excluded “data from assets which are partly owned by the company (“entity”) but operated by another company” unless the company has the ability to influence management decisions (such as ships within the Lauritzen pool) (Vessels numbered 1, 2, 27-36, and 50 to 55 in the pdf document entitled “Grindrod Shipping - Fleet Profile 19 January 2012”)

Vessels that are chartered out but where Grindrod has sufficient operational control currently includes nine (9) tankers owned by Unicorn but chartered out to oil majors including Unical, Engen, Marida Pool, Navig8 Pool and the Scorpio Tanker Pool. Although the company does not have full control over fuel consumption or efficiency, Grindrod staffs the vessels and manages the on-board ISO 14001 EMS’s.

Although the three bunker barges (20, 21 and 22) do not have ISO 14001 EMS’s, they have been included as they are directly operated by Unical, a division of Grindrod.

Entities where Grindrod has limited financial control or minority equity share-holding but does have sufficient operational control to influence emissions reductions strategies include Lauritzen pooled vessels (currently 10 vessels) owned by IVS. Whilst these vessels are not operated by IVS personnel, this function is outsourced to a third party who are accountable to IVS and who, in addition, manage onboard ISO 14001 EMS’s. 100% of the emissions from these ships have been included. These include vessels numbered 37-43, 45, 46 and 49 in the pdf document entitled “Grindrod Shipping - Fleet Profile 19 January 2012”.

Exclusions and Inclusions – Buildings and Land Based Operations

Emissions from electricity usage in buildings owned and operated by Grindrod Properties (through Grindrod Property Holdings (Pty) Limited and Grindrod Property Leasing (Pty) Limited) are included as follows:

  1. Where Grindrod companies occupy the buildings these emissions are included as Scope 2 emissions. This includes Grindrod House, Grindrod Park, Grindrod Mews and Quadrant House – all in Durban; and
  2. Where tenants occupy the buildings these emissions are included as Scope 3 emissions. Thus currently includes only Mansion House in Durban (which has no Grindrod operating companies as tenants, is controlled through Colliers and Grindrod cleaning and security staff).
     

In terms of other Freight Services land-based operations and holdings, the adoption of this approach has resulted in 100% of the emissions emanating from the following companies being included (with Grindrod shareholding shown):

  • RRL Grindrod (Pty) Limited (50%);
  • Vanguard Rigging (Pty) Limited (50%) and,
  • Röhlig-Grindrod (Pty) Limited (50%) – although currently 100% of emissions is not being reported as some offices do not have any means of recording and reporting electricity consumption.
     

Land-based emissions from OACL, as with ships’ emissions mentioned above, have been excluded.

Similarly emissions from Maputo Port Development Company (“MPDC”), a non-incorporated JV where Grindrod does not have any operational control as defined, have been excluded.

Within Freight Services’ sites/facilities where Grindrod staff are present (in terms of their companies falling within the organisational boundaries) but have limited or no operational control over operations the boundary scope has been determined as follows:

  • Where GFS operates as a service provider /subcontractor on a site operated by a third party, does not have operational control of the site or portion of the site, and where electricity/water consumed or waste generated by Grindrod employees is considered part of the footprint of the site operator – this data has been excluded from the boundary scope. Typically in such cases, there are no meters or systems in place to determine GFS’ contribution, and if the site operator measures and reports environmental data, GFS’ contribution would be included/ consolidated within the site operator's data set. Examples: Grindrod operating as a service provider on a site operated by one of the fuel majors;
  • If the GFS entity pays an amount based on consumption for electricity/water, or an amount based on waste type and volume for waste removed from site, then utilities and waste from such a locations is to be included within the scope;
  • The significance of Freight Services’ staff at the location is considered and currently the presence of 10 or more staff members at a shared site has been used as a cut-off for inclusions in office-based electricity consumption. Examples: Grindrod staff in shared rental office space, with shared ablutions (ie water consumption) and paying a flat rental, with no charge based on actual amount of electricity/water consumed or waste generated;
  • Double accounting is to avoided where GFS shares a locality with another Grindrod entity (e.g. The Head office buildings are reported as one unit, and all the representatives from the various Grindrod Divisions and companies present in the buildings do not have to supply any utilities data for their presence in these buildings); and
  • Finally, the document entitled “Categorizing GHG Emissions Associated with Leased Assets Appendix F to the GHG Protocol Corporate Standard” has been used as guidance for including smaller/marginal leased assets with Freight Services.

Important Note:

The difference between buildings owned by Grindrod and rented out to tenants (included as scope 3 emissions) and ships owned by Grindrod and chartered out to third parties (not included except for cases where there IS ability to control emissions to some degree) is the fact that the buildings are managed by Grindrod. In the case of these ships, Grindrod has no involvement with their usage whatsoever – it would be like renting out the entire building (including its management/maintenance) to a third party.