2011 performance

	UIC SHE Report 2011 [PDF - 2MB]
	Stakeholders Forum - Air Focus [PDF - 1MB]

SHE MANAGEMENT

AECI’s management of SHE-related issues is guided by a formal SHE Policy, with performance being measured within a framework of supporting SHE Standards. The Policy and Standards, which are agreed to and approved by the Chief Executive, are reviewed periodically by the Social and Ethics Committee on behalf of the Board to ensure that they remain appropriate for AECI’s diverse businesses and the changing operating environment.

A significant development in AECI’s management approach during 2011 was the introduction of Green Gauge, a framework of Group-wide environmental objectives and targets.

In many cases it is appropriate for businesses and/or individual sites to align their SHE management systems with an external standard against which third-party audits can be undertaken. The most commonly adopted such systems in AECI are:

• OHSAS 18001 (an international health and safety management standard);
• ISO 14001 (an international environmental management standard); and
• NOSA 5 Star (a South African SHE management system).

Most Group companies also participate in Responsible Care™, an international set of management practice standards which are verified externally in certain jurisdictions including South Africa.

AECI comprises a broad spectrum of businesses, ranging from large manufacturing plants producing explosives and chemicals, 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 outside of South Africa, sometimes in relatively underdeveloped countries. Consequently, SHE-related issues faced by the 19 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.

There are external stakeholders with an interest in the AECI Group’s SHE-related matters. To address their respective needs, AECI is involved in a number of initiatives and associations in this important area. The most all-encompassing of these is the Responsible Care™ initiative. Other initiatives include:

• longstanding membership of and involvement in SAFEX International, which aims to protect people and property against dangers and damage by sharing experience in the global explosives industry; a representative of AEL serves on the organisation’s Board of Governors;
• the Chemical and Allied Industries’ Association (“CAIA”), of which AECI is a member, engages with both the South African government and various international agencies on a range of SHE-related matters. Some of the interactions with the authorities are carried out under the auspices of Business Unity South Africa of which CAIA is a member. CAIA’s engagements include the Department of Labour’s working group on occupational health and safety, climate change matters, and the National Waste Act. AECI is represented on the Board of CAIA;
• a Process Safety Forum has been set up for the chemical industry in South Africa. AECI representatives are active members of this Forum;
• the Chemicals Handling and Environmental Forum is tasked with promoting the responsible handling of chemicals throughout their lifecycle by providing a forum for stakeholders to discuss critical issues pertaining to the handling, storage, transport and distribution of hazardous chemicals. The Forum comprises representatives of CAIA member companies, government departments, other allied industry associations and various industry experts. AECI is represented at this Forum;
• AECI’s Wellness Programme has been well received by the unions and there has been significant interaction with the national structures of the South African Chemical Workers’ Union (“SACWU”) and the Chemical, Energy, Paper, Printing, Wood and Allied Workers’ Union (“CEPPWAWU”) in this regard. More detail on the Wellness Programme is given later in this Sustainability Report; and
• Community Liaison Forums, Community Awareness and Emergency Response Committees as well as Stakeholder Forums are in place at major sites in the AECI Group. These structures manage the interaction on SHE-related matters between local communities, interest groups and other Interested and Affected Parties (“IAPs”) and the Group.

Responsible Care™ is the global chemical industry’s voluntary initiative for the continual 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 product stewardship.

Responsible Care™ was launched by the Canadian Chemical Producers’ Association in 1984 and has since been adopted in 53 countries. CAIA is the custodian of Responsible Care™ in South Africa, with 147 South African businesses being signatories. The Responsible Care™ Standing Committee, currently chaired by an AECI Senior Manager, is responsible for guiding the programme.

AECI Limited is a signatory to Responsible Care™, as is AEL in South Africa. All 16 companies in the specialty chemicals cluster are also signatories in their own right. In South Africa signatories have their compliance with the Management Practice Standards verified by independent third party auditors. The majority of signatory companies in the Group have been audited successfully against these standards.

Shareholders are naturally important stakeholders for AECI. Two SHE-related initiatives with which AECI is involved that are of direct relevance to shareholders are the JSE SRI Index, and the CDP, a global initiative administered locally by the National Business Initiative.

The JSE established the SRI index in 2004. Initially only the Top 40 companies were assessed automatically. The automatic assessment of Mid-Caps, including AECI, followed. With the addition of some Small-Caps, a total of 109 potential Index constituents were measured in 2011. The evaluation process includes four areas being Environment, Society, Governance and (from 2010) Climate Change.

Seventy four of the 109 companies, or 68%, were included in the Index. While 90% of the Top 40 qualified, the success rate for Mid-Caps was only 52%. AECI was included for the third successive year.

The CDP is an international voluntary disclosure programme. Data on GHG emissions and climate change response actions by business are collated on behalf of global investors with assets of US$71 trillion.

In South Africa the JSE Top 100 companies were invited to submit data in 2011. AECI participated for the third consecutive year and achieved a disclosure score of 83%, a significant improvement on 2010’s performance when a score of 36% was obtained.

The guiding principles underlying AECI’s remediation activities are to protect human health and the environment; to use good science, proven concepts and the best available technologies without entailing excessive cost; and to work with regulatory authorities as well as sharing information with IAPS.

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 2011 amounted to R14 million, compared to R9 million in 2010. At 31 December 2011 the environmental liability for the Group was estimated at R171 million for remediation and was fully provided for.

The sustainability key performance indicators that follow have been measured and reported using AECI’s internal Standards and guidelines which are available on request.

As stated in last year’s Annual Report, there was a substantial increase in the Group’s water usage in 2010. The main reason for this was the inclusion, for the first time, of environmental performance figures for AEL’s operations outside of Modderfontein. It is pleasing to report that the Group’s water consumption for 2011 was 3% lower at
4 748 000 m^3* (2010: 4 870 000 m^3*). This reduction was due to a range of efficiency improvements in AEL and the specialty chemicals cluster. Heartland and STF recorded small increases in water consumption related to increased production rates.

WATER USAGE (MILLION CUBIC METRES PER YEAR)		WATER USAGE BY BUSINESS SEGMENT (%)

HAZARDOUS WASTE

The reported quantity of hazardous waste generated by the Group’s operations rose by 19% year-on-year, from 4 971 tonnes* to 5 920 tonnes*. The specialty chemicals cluster reduced its hazardous waste arisings by 21% in 2011. However, AEL’s reported hazardous waste rose from 1 910 tonnes in 2010 to 3 475 tonnes. This significant increase is attributable to two main factors: while the environmental performance figures from AEL’s operations outside of Modderfontein were included for the first time in 2010, during 2011 it was determined that not all waste streams at certain remote operations had been included. In addition, increased production at AEL’s Indonesian operations led to an increase in waste arising.

HAZARDOUS WASTE ARISINGS (TONNES)		HAZARDOUS WASTE ARISINGS BY BUSINESS SEGMENT (%)

ENVIRONMENTAL INCIDENTS

There were six* significant environmental incidents in the year (2010: 10* significant incidents). No major incidents (as defined in AECI’s reporting Standards which are available on request) occurred:

• during a heavy downpour, contaminated stormwater from Resinkem’s operations at Umbogintwini was inadvertently released into the Umbogintwini Industrial Complex’s stormwater system;
• a third party contractor was moving Crest’s products from Durban to Cape Town. The driver suffered a heart attack and lost control of the vehicle, which ploughed into the Orange River;
• at AEL, Modderfontein, approximately 10 tonnes of nitric acid overflowed from a tank during pumping operations. Some of this acid ran into the effluent system where it was neutralised;
• also at AEL’s Modderfontein operations, approximately 1,5 tonnes of nitric acid was spilled due to an operator error. This acid flowed into the effluent system where most of it was contained and neutralised;
• a truck belonging to a third party contractor moving product for AEL was involved in a collision near Rustenburg in conditions of poor visibility. Approximately one tonne of product was spilled; and
• a tanker belonging to a third party contractor moving product for AEL in Botswana swerved to miss a cow and overturned, leading to the spillage of six tonnes of product.

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

The Group’s Modderfontein site has operated under the requirements of a draft Water Use Licence issued in 2006. Negotiations had been underway with the DWA to have this draft Licence replaced by a new Licence. The DWA issued a new Licence during 2011. However, it contained stringent conditions, effective immediately, which posed compliance constraints for the Group.

Prior to the Licence being issued, the Group had already commenced a programme of projects aimed at reducing effluent arising from operations at the site. Good progress is being made in this regard. Certain projects have been completed and their impact is already being felt. However, others involve the design and purchase of equipment with long lead times.

The approach being followed to achieve full compliance therefore is as follows:

• proceed with all appropriate effluent reduction projects;
• negotiate with the DWA to agree on a phased application of the tightened emission limits to match the rate at which the projects can be delivered; and
• negotiate with the DWA to ensure that the limits take into account contaminants that are originating upstream of the site and not from the Group’s operations.

The term “carbon footprint” is used to describe the total quantity of carbon dioxide (“CO₂”) and other GHG emissions for which an organisation is responsible.

AECI’s carbon footprint has been calculated 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 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.

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

In prior years the Eskom sold factor was used to calculate the CO₂ emission factor of electricity consumed. In the current year the Eskom generated factor was applied. This change is attributed to more progressive reporting and better understanding of the GHG Protocol.

The organisational boundaries for the footprint were determined as follows:

• all significant AEL operations, together with the footprint associated with rock-on-ground contracts. AEL’s international operations were also included. Although South African emissions factors relating to electricity generation were used throughout, there was no material impact on the resultant figures; the impact of process emissions from nitric acid production at Modderfontein was calculated from measured values using a factor of 310 for global warming potential for nitrous oxide
  (“N₂O”); emissions resulting from the burning of emulsion wastes have not been included due to reporting difficulties;
• all specialty chemical operations; uniform emission factors were used as the impact on the reported emissions from Resitec’s Brazilian operations was not material;
• all Heartland operations, which are all in South Africa; and
• the operations of STF in the USA. In this case the emissions factor for Duke Power Utility was used due to there being a significant impact on the final result.

The total CO₂ emission equivalent for the Group increased to 577 478 tonnes* (2010: 527 197 tonnes*). The increase in direct (Scope 1) CO₂ emissions results from process emissions at Resitec’s manufacturing facilities in Brazil. A small increase in indirect (Scope 2) emissions occurred at STF as a result of higher electricity consumption due to increased production. A larger increase occurred in the specialty chemicals cluster. This related to increased steam consumption as the new manufacturing plants at Senmin’s site ramped up their production.

Emissions other than CO₂ can have a significant impact in terms of their 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. In these plants, nitrogen oxide gases are produced through the oxidation of ammonia on a platinum-rhodium metal catalyst gauze in the plants’ ammonia burners. These gases are oxidised to form nitrogen dioxide, which in the final reaction is absorbed in water to form nitric acid.

Some of the ammonia is converted to N₂O in a side reaction which is usually released into the atmosphere as it has neither economic value nor is it toxic at typical emission levels. However, it is a GHG with a global warming potential approximately 310 times that of CO₂.

To combat global warming, a number of countries have ratified the Kyoto Protocol, thereby committing to reducing their emissions of GHGs, 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 GHGs. CERs can then be sold to those entities that are under an obligation to reduce these 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 were registered in November 2007 and February 2008 respectively. The projects involve the installation of secondary catalysts in the ammonia burners of the plants. This secondary catalyst decomposes the residual N₂O without affecting the production of nitric acid.

During 2011 the emission reduction achieved on the No. 9 plant averaged 92%, with No. 11 achieving 85%. The No. 9 plant catalyst performed well throughout the year in spite of a number of stoppages. The starting and stopping of the plants has a negative effect not only on the plant performance but also on the performance of the secondary catalyst.

Total abatement from the No. 9 plant was 84 467 tonnes CO₂ equivalent (2010: 33 922 tonnes) in the first full year of operation with a new type of secondary catalyst.

A number of operational problems led to reduced performance of the No. 11 nitric acid plant’s secondary catalyst. However, emissions abatement for 2011 still exceeded 2010’s figure of 171 759 tonnes, with 212 421 tonnes CO₂ equivalent being achieved.

SAFETY AND HEALTH PERFORMANCE

Safety and health performance is expressed as the Total Recordable Incident Rate (“TRIR”). The TRIR measures the number of incidents per 200 000 hours worked. In the past, AECI reported statistics separately for employees and contractors. From 2010 however, the two statistics were combined to reflect the incident rate for all who work in whatever capacity at AECI’s facilities. For information, the separate figures are still shown in the table below, per business segment.

In 2010 AECI achieved its lowest ever level of worker injuries and illnesses (0,60 *). It was disappointing that this level of performance was not maintained in 2011 and the TRIR rose to 0,67*.

Tragically, a fatality occurred in August 2011 subsequent to a plant fire while operators were loading a vessel at the Resitec joint venture’s site in Rio de Janeiro, Brazil.

ALL WORKERS TRIR

AEL and Heartland had particularly pleasing reductions in their incident rates with both achieving their best ever performance in this area. The incident rate at STF is still higher than desirable. However, having halved the rate from 2009 to 2010, the business achieved a further reduction of 41% and there is every indication that this downward trend will continue. The main area of concern is the specialty chemicals cluster, where incident rates rose by 67% year-on-year. Significant efforts are being made by the relevant business leaders to reverse this unacceptable trend.

The Occupational Illness Rate in 2011 was 0,05* (2010: 0,03*). Five occupational illnesses were reported in the year under review. Three of these were forms of asthma related to operations in the specialty chemicals businesses. The remaining two occurred in AEL, where two employees had to be temporarily removed from their workplace due to exposure to lead.

OCCUPATIONAL ILLNESS RATE

AECI benchmarks itself against an appropriate grouping of international companies with zero incidents being the ultimate target. The benchmarked TRIR graph presented here has been compiled by an independent consultant 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, the basis for AECI’s own reporting.

BENCHMARKED TRIR

The majority of these companies report their statistics for all workers and not only employees, as AECI has done since 2010. However, unlike AECI, some companies have not included occupational illnesses in their figures. This may result in their TRIR statistics being marginally understated in this benchmark.