Board oversight of ethics management and the environmental and social consequences of our activities

Overview

It is the responsibility of the board to ensure that good governance practices and principles are applied to maintain high standards of accountability, transparency and integrity.

In response to the heightened scrutiny on ESG, and feedback from various investors, we have agreed the following key focus areas:

• Regular ESG communication with key stakeholders.
• Ensuring full transparency on our ESG disclosure to support the Group's credibility.
• Demonstrating the stakeholder and business value associated with ESG and sustainability.
• Communicating with empathy and understanding the ESG issues that are important to our investors and other stakeholders.
• Reporting robust metrics to aid the measurement of Motus' ESG performance.

Our approach to ESG is to adopt practical best practice frameworks and their minimum compliance standards. This approach allows for nuances within differing operations and for differences in application and levels of maturity.

We have the right governance structures in place to oversee ethics, environmental and social matters; ensuring that our impacts are identified and understood, and that negative impacts are responsibly mitigated and positive impacts are leveraged to drive value for our stakeholders.

Our commitment to transformation in South Africa, has given us a foundation from which to drive a more expanded focus on creating a diverse and inclusive workplace, where safety is a priority with more focus placed on employee wellbeing during the year. Our business would not be sustainable if we did not put in place the stringent controls needed to provide customers with safe, reliable and quality products and services. Our relationships with our community upliftment partners are longstanding, providing support and empowering our beneficiaries. Our social impact and performance is well understood, scoring 3,8 out of 5 on the FTSE4Good Index Series.

Our direct environmental footprint is measured and reported regularly at management and board meetings, which means we can quickly identify any issues. However, any form of transportation is a key polluter and major contributor to climate change. Emissions from the transport sector in South Africa account for 10,8% of the country's total greenhouse gas (GHG) emissions, with road transport being responsible for 91,2% of these GHG emissions. Should these trends continue in the absence of policies and measures, the transport sector is projected to emit a total of 136 gigagrams of carbon dioxide by 20501. While we do not manufacture vehicles, we do play a role in facilitating their use as a key value chain player between OEMs and the consumer.

1	Source: Green Transport Strategy for South Africa: (2018-2050).

Key questions for the Group are:

• What opportunities can be considered regarding OEM products and services that use alternative energy sources?
• How can we influence factors which need to change to make greener automotive products affordable in South Africa?
• How does the objective of mainstream markets to eliminate internal combustion engines impact our business model?

Automotive products and services that assist environmental improvement.

In this year's board evaluation, conducted by an experienced external consultant, ESG was identified as an important area of future focus, and will feature prominently in future social, ethics and sustainability (SES) committee meetings. To improve our reporting, our focus will be to benchmark our ESG disclosure against selected frameworks and stakeholder expectations and experience.

During engagement with our shareholders on the remuneration policy, they raised concern that ESG performance was not holistically considered in our reward structures. For F2022, the short-term incentive (STI) criteria for the Group CEO, Group Chief Financial Officer (CFO), executives and prescribed officers will cover ESG aspects, tailored to their roles. For the CEO, CFO and prescribed officers, ESG will account for 25% of their STI, and 20% of STI for executives. The specific aspects are covered in the governance disclosure that follows.

Remuneration report.

Governance structures

Social, ethics and sustainability committee

In addition to its statutory duties, the SES committee assists the Group in discharging its ethics, environmental and social responsibilities and implementing practices consistent with good corporate citizenship. The committee oversees Motus' management of ethics, people, transformation, health, safety and wellness, environmental impact, stakeholder relationships and contribution to socio-economic development. During the year, the committee's oversight was extended to include IT strategy, innovation and brand management, as an underpin to our sustainability journey and enabler of some of our ESG strategies.

At September 2021, the SES committee was reconstituted and now comprises four members; three are independent non-executive directors, including the Chairman. The Group CFO, CEO of Financial Services, the Executive of Corporate Affairs, Risk and Sustainability and the Chief People Officer attend the SES committee meetings as invitees. The SES committee met four times during the year.

Management committees

Finance and risk review management committees (FRRCs) within each business segment in South Africa, as well as the FRRCs in the United Kingdom (UK), Australia and African operation, support the SES committee and the Group audit and risk committee. They oversee operational risks, ethics, environmental performance, transformation in South Africa, health, safety and wellbeing, regulatory compliance and stakeholder management. All FRRCs are chaired by a senior manager from Group head office other than the Financial Services FRRC's Chairman, who is an external independent industry expert. A standardised agenda applies across all FRRCs guided by Group reporting requirements. Material concerns are elevated to the relevant board committee.

The COVID-19 crisis committee continues to meet on an ad hoc basis, and monitors guidance from health authorities and ensures that our decisions continue to protect our people and stakeholders.

How we integrate people, process and systems influences the internal control environment. Our management acknowledges its responsibility as the custodian for our operational and financial controls within the combined assurance approach. Our controls are implemented according to the hierarchy depicted below.

Our internal control hierarchy

Governance approaches

Elevation to board

Board oversight

Ethics is a standing agenda item for the SES committee, and compliance reporting is a standing agenda item at the audit and risk committee.

Management oversight and accountability

Ethics

The ethics and fraud prevention framework applies Group-wide with variations based on regional requirements. CEOs and Managing Directors are responsible for ensuring that employees are aware of the Group's values and commitment to acting with integrity.

Compliance

In South Africa, legal compliance is a standing agenda item at business segment FRRCs. Non-compliance is escalated to senior management and reported to the relevant board and management committees. A centralised legal and compliance function as well as business segment and divisional legal and compliance departments in South Africa, oversee and monitor our FSPs, where compliance risk is high. In Financial Services, compliance meetings occur monthly with all managers and key individuals.

Our subsidiary, F&I Management Solutions (FAIMS), is a licenced FSP which provides finance and insurance business managers to the importer and retailer businesses. As part of its licencing conditions, FAIMS is required to conduct at least one audit per business manager every year. Going beyond this regulatory requirement, FAIMS audits each business manager at least once every quarter. The Financial Advisory & Intermediary Services Act holds 'key individuals' responsible for the activities of business managers. The audit and risk and SES committees receive quarterly reports of key individuals' scores (roughly 20 business manager scores per key individual). Random audits without warning also take place. Pleasingly, over the past year the average annual scores have improved.

Average scores
	2021	2020			2021	2020
OEM passenger	97%	96%		Importers	96%	96%
OEM commercial	96%	96%		Dealer network	92%	80%

In the UK, financial and insurance product governance is fulfilled by a specialist compliance sub-committee of the FRRC. Certain certified senior managers attend the sub-committee, which meets quarterly. The sub-committee's agenda includes compliance reporting and regulatory horizon scanning.

Each business in the Group is held accountable for ensuring that it complies with all regulation applicable to its operation. Employees who fail to adhere to compliance processes and controls face appropriate disciplinary processes.

Policies and standards

FSPs must adhere to the criteria of their operational licences in their country of operation. In South Africa, these businesses must comply with all the rules and regulations of the FSCA, and in the UK, the Financial Conduct Authority.

Policies

Code of Ethics:

https://www.motus.co.za/wp-content/uploads/2020/01/Motus-Code-of-Ethics-LR-Booklet.pdf.

Group anti-bribery and corruption policy:

https://www.motus.co.za/wp-content/uploads/2020/01/Anti-Bribery-and-Corruption-Policy_27032019.pdf.

Conflict of interest policy:

https://www.motus.co.za/wp-content/uploads/2020/01/Conflict-of-Interest-PolicyFinal_27032019.pdf.

Supply chain code of conduct:

https://www.motus.co.za/wp-content/uploads/2020/01/Motus-supply-chain-code-of-conduct-1.pdf

Additional policies linked to Modern Day Slavery Acts are in place for our UK and Australian operations.

Link to remuneration

In F2022, the preparation of businesses to address changes in legislation will be linked to executive remuneration.

Ethical and compliant business conduct report.

High-quality and responsible products and services report.

Elevation to board

Board oversight

A consolidated Group IT report, including governance and cyber risks and incidents as well as IT audit issues, is distributed quarterly to the audit and risk committee. In the UK and Australia, reporting to the FRRCs occurs every six months.

Management oversight and accountability

IT strategy and governance is formulated by Group IT and executed by the individual business segments. Group IT oversees the adherence of business segments to Group IT and data-related policies and standards. The Chief Information Security Officer manages a central register of IT incidents, including security incidents and system down time.

In South Africa, each business segment compiles an IT risk report, which is discussed at quarterly Chief Information Officer (CIO) forums and submitted to business segment FRRCs. The CIO forums include representatives from all business segments as well as representatives from internal and external audit.

In South Africa, the protection of personal information working group (representing all business segments) and the Group Information Officer are responsible for the implementation and management of the Group's data protection framework and are supported by an Information Officer in each business segment.

In the UK, the Head of IT manages the central register of IT incidents. IT governance and cyber risks and incidents are reported monthly to the CEO and CFO.

Accountability for protecting information rests with every information owner and user.

Link to remuneration

For specific executives, the achievement of specific projects identified as critical to the success of the business at Group, business segment or divisional level is linked to remuneration, this includes innovation and IT projects.

Policies and standards

The Group's data protection framework comprises board-approved IT governance, information management and cyber-related policies, standards and procedures. These requirements are clearly communicated to our staff, partners and customers. In South Africa, the Promotion of Access to Information Manual is published on our website (http://paia.motus.co.za).

High-quality and responsible products and services report (data management).

Elevation to board

Board oversight

The SES committee oversees health, safety and wellbeing at a Group level as well as compliance to relevant OHS legislation across all jurisdictions of operation. All fatalities are thoroughly investigated and reported to the committee.

In the UK and Australia, the operational management teams and FRRCs monitor compliance to OHS policy, legal requirements and best practice. In addition, our business in the UK is required to state annually on its website that it is in compliance with OHS legislation.

Management oversight and accountability

OHS

The Group risk and sustainability function develops and monitors the implementation of OHS procedures in our pursuit of inculcating a health and safety culture and safe working environment for our employees. Employees are encouraged to report unsafe behaviour or incidents where our standards are not being met.

The FRRCs monitor the implementation of our health, safety and wellbeing policies and practices, as well as compliance with Motus' OHS standards and country-specific OHS-related regulatory requirements. A network of OHS committees and safety representatives across individual businesses implement the business segment- and region-specific OHS plans and manage day-to-day OHS matters.

Within the business segments themselves there are additional OHS governance structures, where required. As an example, Aftermarket Parts is working towards a new OHS framework, for implementation in F2022, to keep abreast of health and safety risks and quickly implement action plans to ensure business continuity, where needed. In Car Rental, where the recent restructure impacted some OHS governance structures, the OHS committee structure was updated and operational general managers are now held to greater account; now empowered to make strategic OHS decisions.

The CEO of the UK business holds ultimate responsibility for health and safety and is supported by the Head of Health and Safety, the health and safety auditor and a network of regional health and safety officers. The executive team regularly reviews OHS performance.

Similarly in Australia, the CEO holds ultimate responsibility for health and safety and is supported by all company officers. Dealer Principals are responsible for ensuring effective implementation of OHS measures on-site.

Group-wide, each employee is held accountable for working and operating in ways that adhere to our OHS policies and processes. This includes identifying and reporting potential risks or unsafe acts and conditions. Deviations from safety policies and procedures are dealt with sternly and timeously, with managers and employees held to account where transgressions may result in unnecessary injury.

Quality controls

Stringent quality and safety controls, policies and systems ensure we deliver high-quality workmanship. Each vehicle brand has its own governance structures to ensure these controls, policies and systems are adhered to. For example, at Hyundai all recalls are reported to and overseen by the Hyundai South Africa board. Pre-delivery inspections are the responsibility of dealership management, and complaints following the sale of a vehicle are the responsibility of the Hyundai Aftersales Director who also manages recalls. At Car Rental, management review meetings oversee the division's adoption of ISO 9001 quality management standards, and ensure there is accountability for the implementation and adherence to the ISO requirements.

Franchise standards are clearly defined in OEM dealer and dealer franchise agreements and supporting policies. Deviations are reported at quarterly business segment executive meetings. Significant deviances can result in the termination of an agreement.

In the UK, site managers are accountable for quality management. Quality control is reported at monthly regional management meetings and quality review meetings are held every six months with the Managing Director and senior site managers. Quality and safety are included in personal development reviews.

In Australia, systems are in place to ensure the operation complies with a statutory obligation not to sell any pre-owned vehicle that is subject to a recall and has not been repaired.

Policies and standards

OHS

As explained in the health, safety and wellbeing report the Group has a minimum standard for OHS, which is gold status or above 85% compliance to the OHS checklist, for all sites in South Africa. A customised questionnaire for each business segment ensures compliance to our minimum standards and also serves as a tool to report compliance against the standards. All businesses are required to have an external service provider audit their sites once a year.

In a similar process, the UK business has adopted a target score of 90% and in Australia, which is implementing a new OHS framework, scores a site as either compliant or non-compliant. In the future, once the framework has matured, this business may adopt the rating system if it makes sense to do so.

Health and safety standards across the Group have been updated to include COVID-19 protocols.

Quality

Quality standards and policies differ based on business segment requirements and products, for example, the standards required for safety critical parts differ to those pertaining to vehicle accessories.

Health, safety and wellbeing report.

High-quality and responsible products and services report.

Elevation to board

Board oversight

Matters relating to human capital management, B-BBEE performance and corporate social investment (CSI) spend are reported quarterly to the SES committee. This includes employment equity, learning and development, talent management and employee relations. The SES committee ensures that large CSI investments align to our chosen pillars – education and skills development, road safety and health. B-BBEE performance is also reported quarterly to the business segment FRRCs.

Management oversight and accountability

The Group human capital function serves as a centre of expertise on people trends in a changing world of work, to develop programmes that support the Group's innovation journey and to support the mobility of talent with the right skills across the organisation.

The development of people practices and frameworks, and the broader people strategy, and oversight of their implementation are the responsibility of the Chief People Officer (CPO). Each business segment has an HR executive who works closely with the CPO and business segment CEO. Various HR teams across business segments and geographies manage day-to-day people practices. Regular engagement and collaboration takes place between HR teams to achieve common people objectives. In South Africa, HR meetings are held monthly.

As B-BBEE is considered a key priority and top risk for the Group, the executive committee and the business segment FRRCs play a management oversight role. Training and diversity and inclusion matters are reported to regional FRRCs.

We adhere to the principles embodied in the Universal Declaration of Human Rights, the South African Constitution and the International Labour Organization's Declaration on Fundamental Principles and Rights at Work.

In the UK, we are required to annually provide an anti-modern day slavery statement on our website and in Australia we are required to report annually against the requirements of Australia's Modern Day Slavery Act.

Link to remuneration

All CEOs and managing directors in South Africa are accountable for the B-BBEE performance of their areas of responsibility. In F2021, 20% of their performance incentives were linked to achieving employment equity targets.

In F2022, a broader set of social considerations will be linked to executive remuneration depending on role, including the achievement of employment equity targets at top and management levels, improving gender representation, implementing skills development and strategic talent management plans, and the development of a three- to five-year succession plan for key employees.

Policies and standards

The standardisation of essential people-related policies to enhance the fair and consistent management of our employees across the business segments is ongoing.

Policies

• Disability policy.
• Learning and development policies.
• Sexual harassment policy.

People report.

Transformation report.

Community report.

Elevation to board

Board oversight

Group environmental performance against targets is reported quarterly to the SES committee.

Management oversight and accountability

The Group risk and sustainability function at head office oversees the Group's environmental management practices. Risk and sustainability managers as well as company CEOs and CFOs within business segments and individual businesses are responsible for environmental management and compliance with environmental legislation.

Link to remuneration

Environmental progress and capital adequacy (which covers the sustainability-linked loan) are linked to the key performance indicators (KPIs) of certain managers.

From F2022, the achievement of fuel, electricity and water targets; and investment in environmental improvement projects, electricity saving equipment and water recycling plants on all new and refurbished buildings will be linked to executive remuneration.

Policies and standards

• Group waste policy.
• Policies for energy and waste recycling in the UK.

Environmental report.