2010 performance

SHE management

AECI’s management of SHE-related issues is guided by a formal SHE Policy, with performance being measured in the context of supporting SHE Standards. The Policy and Standards, which are agreed to and approved by the Group Chief Executive, are reviewed periodically, and most recently in 2008, by the Corporate Citizenship Committee on behalf of the Board to ensure that they remain appropriate to AECI’s diverse businesses and the changing operating environment.

At the beginning of each year, the Managing Directors of AECI’s businesses are required to submit a Letter of Assurance with respect to SHE-related issues to the Group Chief Executive. This, inter alia, provides confirmation that the particular business complies in all material respects with AECI’s SHE Standards. In the event that such confirmation cannot be given, the Letter details the nature of the non-compliance, as well as the intended corrective action.

AECI comprises a broad spectrum of businesses, ranging from large manufacturing plants producing chemicals and explosives, to small operations on customer sites which provide application services, as well as property leasing and development activities. In addition, many of the Group’s operational sites are situated outside of South Africa, sometimes in relatively undeveloped countries. Consequently, SHE-related issues faced by the 21 businesses in the portfolio are very diverse. It is inevitable, therefore, that a certain degree of generalisation occurs when commenting on such varied activities within a single report.

Responsible Care™

Responsible Care™ is the global chemical industry’s voluntary initiative for continuous improvement of performance in safety, health and environmental practices. It is a public commitment to responsible management and stewardship of products and services through their lifecycle.

It is also the vehicle used by the industry in its pursuit of improved SHE performance and product stewardship.

Responsible Care™ was launched by the Canadian Chemical Producers’ Association in 1984 and has since been adopted in 60 countries. The Chemical and Allied Industries’ Association is the custodian of Responsible Care™ in South Africa, and 142 South African businesses are signatories. The Responsible Care™ Standing Committee, currently chaired by a Senior AECI Manager, is responsible for guiding the programme. In line with the guidelines of the International Council of Chemical Associations, the South African programme is based on eight fundamentals:

1. a formal commitment by each member company to a set of guiding principles;
2. a series of codes, guidance notes and checklists to help companies fulfill their commitment;
3. the development of indicators against which improvements in performance can be measured;
4. open communication on SHE matters with interested parties, both inside and outside the industry;
5. opportunities for companies to share views and exchange experiences on implementing Responsible Care™;
6. consideration of how best to encourage all member companies to commit themselves to, and participate in, Responsible Care™;
7. a title and logo which clearly identify national programmes as being consistent with, and part of, the Responsible Care™ concept; and
8. procedures for verifying that member companies have implemented the measurable or practical elements of Responsible Care™.

AECI and its chemicals and explosives businesses are signatories to Responsible Care™. In South Africa, signatories have their compliance with the Management Practice Standards verified by third-party auditors. The majority of signatory companies in the AECI Group have been audited successfully against these Standards.

In the broader area of corporate responsibility, AECI was again included in the JSE Limited’s Socially Responsible Investment Index in 2010. This index was introduced by the JSE Limited a number of years ago to measure the triple-bottom line performance (environment, society and economy) and the governance performance of listed companies. Companies are assessed in terms of policy, performance and reporting. The criteria are updated each year and now include the consideration of factors such as climate change.

LAND REMEDIATION

The guiding principles underlying AECI’s remediation activities are to protect human health and the environment; to use good science, proven concepts, and best available technologies not entailing excessive cost; and to work with regulatory authorities and share information with interested and affected parties.

A risk-based approach guides the remediation process. In addition, human health and environmental risk assessments are undertaken at appropriate stages of individual projects. These assessments influence subsequent activities.

Spending on remediation and related environmental management activities in 2010 amounted to R9 million, compared to R13 million in 2009. As noted in the previous reporting period, this expenditure is relatively low compared to that incurred a number of years ago. Most of AECI’s environmental legacy remediation investment is now complete. Furthermore, market conditions in 2010 were such that little land was required to be released for sale.

Therefore, remediation requirements were restricted since the timing of such activities is closely aligned to that of the sale of parcels of land. It is unlikely that remediation expenditure will increase significantly in 2011.

At 31 December 2010, the environmental liability for the Group was estimated at R164 million for remediation and was fully provided for.

Environmental performance

This section deals with current operations and excludes waste arisings from land remediation activities. Data from AEL Mining Services (AEL) operations outside of Modderfontein are included for the first time.

WATER USAGE

Total water usage for the year was 4,87 million litres.¹

The vast majority of the 43% increase in the Group’s reported water consumption is due to the inclusion of AEL’s operations outside of Modderfontein. With the significant expansions in Indonesia, these international operations now account for 39% of the water consumed by the mining services business. AEL’s Modderfontein operations also increased their water consumption as a direct result of increased production.

The specialty chemicals cluster’s use of water increased by 8% year-on-year, largely as a result of increased production. A similar situation prevailed at Heartland’s Umbogintwini operations, where water consumption was 15% higher. Increased production at STF’s upgraded manufacturing facilities also resulted in marginal increases in water consumption.

HAZARDOUS WASTE

Total hazardous waste arisings for the year were 4 971 tonnes.¹

Businesses in the specialty chemicals cluster reduced their generation of hazardous waste by 24%. This was more than offset by the increase in waste generation reported by AEL. Part of this increase was due to the need to dispose of 592 tonnes of waste sulphuric acid during the year. This acid had previously been supplied to battery manufacturers. In 2010, however, there was insufficient market demand to absorb the full volume. The larger portion of the increase (1 496 tonnes) was attributable to arisings from AEL’s operations outside of Modderfontein – sites not reported on in previous years. Hazardous waste arisings from Heartland were minimal.

Targets

Environmental improvement targets for all AECI businesses are being developed and it is anticipated that these will become applicable by mid-2011.

Environmental incidents

There were 10 environmental incidents in the year as follows: ¹

• Clean-up of a sulphuric acid spillage from a road tanker dispatched from Chemical Initiatives in KwaZulu-Natal required the temporary closure of the N2 freeway;
• 500 litres of tall oil leaked from a tank at Resitec’s site in Lages, Brazil;
• About 5 tonnes of emulsion from AEL were spilled on the side of a road near East London when a Mobile Manufacturing Unit overturned;
• About 10 tonnes of emulsion were spilled near Bogoso, Ghana, when a vehicle overturned;
• A vehicle transporting products for Plaaskem was involved in an accident on the Hexrivierpoort Pass, Western Cape, resulting in a chemical spill;
• About 5 tonnes of assorted chemicals were spilled on and next to the N3 highway when a contractor’s vehicle transporting products for ImproChem was hit by another vehicle;
• 34 tonnes of bagged ammonium nitrate fell from a contractor’s truck near Kapirimposhi, Zambia, following a head-on collision with another truck carrying lime;
• 24 tonnes of emulsion were spilled near Chililabombwe, Zambia, when a contractor’s truck overturned;
• About 5 tonnes of ammonium nitrate were spilled near Chingola, Zambia, when a contractor’s truck was hit by another vehicle;
• 16 tonnes of emulsion were spilled near Solwezi, Zambia, when a contractor’s tanker overturned.

In all cases, clean-up was carried out successfully, with no significant permanent environmental impact.

Climate change issues

There is an overwhelming preponderance of scientific evidence showing the effect that increased concentrations of greenhouse gases are having on the earth’s climate. As a result, it has become increasingly important for companies to measure and report on their emissions of these gases. The Carbon Disclosure Project is an international organisation that works with stakeholders and organisations to encourage the measurement and disclosure of greenhouse gas emissions. The Project is being promoted in South Africa by the National Business Initiative, and AECI again took part in this initiative in 2010.

The term “carbon footprint” is commonly used to describe the total quantity of carbon dioxide (CO₂) and other greenhouse gas emissions for which an organisation is responsible. AECI’s carbon footprint has been calculated with the assistance of external consultants, ERM South Africa, using the 2006 Intergovernmental Panel on Climate Change Guidelines for National Greenhouse Gas Inventories and the Greenhouse Gas Protocol’s Corporate Accounting and Reporting Standards, as developed by the World Resources Institute and the World Business Council for Sustainable Development.

In terms of the organisational boundaries of the study, the financial control approach was followed. In terms of this approach, all operations under the financial control of AECI were included within the carbon footprint boundary, and 100% of emissions from these operations were included.

In terms of the operating boundaries of the carbon footprint, the following were included:

• Scope 1 direct emissions – emissions from the consumption of fuel in mobile equipment; emissions from the consumption of fuel in stationary equipment; emissions released from processes occurring at operations; refrigerant usage in air-conditioners and refrigeration equipment.
• Scope 2 indirect emissions – indirect emissions which arise from the generation of purchased electricity and purchased steam consumed by the Group.

The organisational boundaries for which the footprint was determined were as follows:

• all significant AEL operations, including those outside of South Africa, together with the footprint associated with rock-on-floor contracts;
• all specialty chemical cluster operations, including those outside of South Africa;
• all Heartland operations;
• the operations of SANS Technical Fibers, USA.

The carbon footprint calculated for 2009 is presented for comparative purposes. There is an increase in the quantities reported in 2010, for the following reasons:

• in 2009, only AEL’s operations at Modderfontein were included, whereas in 2010 operations elsewhere in Africa and in Indonesia were added;
• the changes in the figures reported by the other businesses are largely as a result of an improvement in the quality of reporting, and the inclusion of information related to individually small sources of carbon emissions.

Emissions other than CO₂ can also have a significant impact in terms of global warming potential. Ammonium nitrate is used extensively in the explosives and fertilizer industries and is manufactured from nitric acid and ammonia. AEL has two nitric acid plants at Modderfontein. Nitrogen oxide gases are produced through the oxidation of ammonia on a platinum-rhodium metal catalyst gauze in the ammonia burners of AEL’s nitric acid plants.

The ammonia is first oxidised to nitric oxide and then to nitrogen dioxide, which in the final reaction is absorbed in water to form nitric acid. Some of the ammonia is converted to nitrous oxide in a side reaction, which is usually released into the atmosphere as it does not have any economic value or toxicity at typical emission levels.

However, it is a greenhouse gas with a global warming potential approximately 310 times per unit mass as that of CO₂.

To combat global warming, a number of countries have ratified the Kyoto Protocol, thereby committing to reducing their emissions of greenhouse gases, or to engage in emissions trading if they are to maintain or increase emissions of these gases.

Provision was made in the Kyoto Protocol for the registration of Clean Development Mechanism (CDM) projects, which allow participants in developing countries to generate Certified Emissions Reductions (CERs) by lowering their emissions of greenhouse gases. CERs can then be sold to those entities that are under an obligation to reduce greenhouse gases but are unable to achieve the required reductions.

AEL has registered two CDM projects with the United Nations Framework Convention on Climate Change. These are for the No. 9 and No. 11 nitric acid plants, and they were registered in November 2007 and February 2008 respectively. The projects involve the installation of secondary catalysts in the ammonia burners of the plants, below the primary gauze catalyst. This secondary catalyst decomposes the residual nitrous oxide without affecting the production of nitric acid.

During 2010, the Heraeus secondary catalyst on No. 9 nitric acid plant achieved an average reduction of 59%. The total reduction for the campaign period was the equivalent of 33 922 tonnes of CO₂. Owing to cost considerations, performance issues and the good performance of the Johnson Matthey secondary catalyst on No. 11 nitric acid plant, a decision was taken to convert No. 9 to the same catalyst from September. The plant experienced a mechanical breakdown at the end of October and this precluded the proper testing of the newly-installed catalyst. However, all initial indications are that this catalyst performs better.

No. 11 completed its second campaign, with the Johnson Matthey secondary catalyst achieving a reduction of 89%. This translates into a reduction of 171 759 tonnes of CO₂ equivalent.

Safety and health performance

ALL WORKERS TRIR

Safety and health performance is expressed as the Total Recordable Incident Rate (TRIR). Prior to 2010, AECI reported statistics separately for employees and contractors. From this year, the two statistics are combined to reflect the incident rate for all who work at AECI’s facilities. For information, the separate figures are still shown in the table on page 114, per business segment.

It is gratifying to report that in 2010 AECI achieved its lowest ever level of worker injuries and illnesses. The rate of 0,60 ¹ represents a 23% reduction from the level recorded in the prior reporting period.

AECI benchmarks itself against an appropriate grouping of international companies, with zero incidents being the ultimate target. Given the need for continual improvement, AECI’s Executive Committee has adjusted the maximum tolerable level for the TRIR for 2011 to 0,90 from 0,95 in 2010.

BENCHMARKED TRIR

The benchmarked TRIR graph presented here has been compiled by an independent consultant, Rob Ferrie, from the latest information publicly available from the various companies’ websites at the time of writing. These companies were selected on the basis of their operations being similar to those of AECI’s businesses. Due to minor variations in reporting formats, the rate was recalculated in certain cases to provide results uniform with the USA’s Occupational Safety and Health Administration system of reporting, which is the basis for AECI’s own reporting.

The majority of these companies report their statistics on the basis of all workers, as AECI has done for 2010. However, unlike AECI, some companies have not included occupational illnesses in their figures.

TRIR performance by business segment

The mining services and specialty chemicals businesses showed exceptionally pleasing reductions in their incident rates. The property business recorded an increase in incidents, largely relating to a substantial demolition project under way in the Western Cape. The injury rate for the fibres business, while still unacceptably high, was half that for 2009 and none of the injuries that occurred were serious.

No fatalities occurred in the Group’s operations in 2010.

OCCUPATIONAL ILLNESS RATE

The occupational illness rate for 2010 was 0,03. ¹

Three occupational illnesses were reported in 2010. An employee at AEL’s Modderfontein site was diagnosed with silicosis and another was removed temporarily from the workplace due to elevated blood lead levels. A third AEL employee, working on a mine, was diagnosed with contact dermatitis. The underlying causes of all three illnesses were rigorously investigated and action plans were put in place to prevent similar illnesses in the future.