Our ESG risks and opportunities

The ESG operating environment

Globally, the recovery path from the damage brought about by COVID-19 is likely to be varied across industries and countries; with resource-restricted nations falling behind in vaccination roll out, mainly as a result of inequity in global vaccine availability.

In South Africa, the COVID-19 crisis deepened the inequities and injustices in our society, and the civil unrest that erupted in July 2021 dampened tentative economic recovery. We hope that structural economic and political reforms through the introduction of enhanced capacity of law enforcement agencies, the restructuring of state-owned enterprises, the launch of an infrastructure investment programme together with the private sector, and freeing up the electricity supply network, brings positive economic impact which lowers the high unemployment rate. The impact of these initiatives is only expected in the medium to longer term.

The focus on ESG performance has increased, particularly as COVID-19 has highlighted health, safety and job protection across industries. There is also increased investor pressure to disclose more robust board and workforce demographic data, and proposed action on climate change, with requests to report against the Task Force on Climate-related Financial Disclosures. It is expected that ESG issues such as environmental supply chain risk, cybersecurity and mandated ESG disclosure will garner increased attention as well. Globally, collective assets under management represented by the United Nations Principles for Responsible Investments (UN PRI) signatories increased by 17%, from US$103,4 trillion to US$121,3 trillion at March 2021. In June 2021, the UN PRI announced a new milestone – its 4 000th signatory1. In addition, the appetite for sustainable debt instruments has never been stronger.

As the COP26 summit in Glasgow approaches in November 2021, it will bring parties together to accelerate action towards securing global net zero by 2050. In line with this goal, vehicle manufacturers are working on electric and hybrid vehicle concepts in their product portfolios to meet stringent emissions targets, particularly in the UK, Europe, and China (see automotive products and services that assist environmental improvement).

1 UN PRI Update Q3: https://www.unpri.org/download?ac=14223

Environment

Risks

Operational risk: extreme weather events can disrupt business and weaken an economy, impacting our ability to operate. These events can also cause vehicle and property damage, and there is higher risk of road accidents and injury to people due to bad weather conditions, leading to increased costs and lost time. Higher temperatures and lower rainfall brought about by climate change will impact the length and severity of droughts and, in turn, the communities we operate in.

Regulatory risk: increased regulations to achieve carbon neutrality, including carbon taxes and aggressive electric vehicle (EV) and hybrid vehicle adoption targets, will require a change in our portfolio of products (the timing dependent on each country's regulations).

Reputational risk: consumers are becoming increasingly aware of, and invested in, the impact that they and the organisations they support have on the natural environment. It is becoming increasingly important for organisations to take action to curb greenhouse gas emissions and minimise environmental impacts, and in so doing, preserve their brand reputations.

What we can control

  • Operating in an environmentally conscious and responsible manner.
  • Providing appropriate and transparent disclosure of our environmental impacts and the steps we are taking to minimise this.

Not fully within our control but we can play an influencing role

  • Availability of automotive products and services that contribute to environmental improvement.
Opportunities
  • Identify and implement environmental improvement solutions to position Motus as an organisation that operates in a way that mitigates pollution, aligns with country-specific priorities and meets its environmental compliance obligations.
  • Procure lower emissions vehicles for the car rental fleet to protect the environment and achieve cost savings.
Social

People risks

People risk: the scarcity of qualified and skilled managers and technical and customer-facing skills, as well as an ageing skilled working population, challenge the Group's ability to access the talent it needs to remain competitive and successfully deliver on its strategy.

COVID-19 risk: higher levels of COVID-19 fatigue and increasing workloads may result in employees feeling under-supported or overwhelmed, which can adversely impact their productivity.

Reputation risk: failure to engage effectively with employees, transform the workforce timeously or properly plan senior management succession, and failure to inculcate a culture that drives good corporate citizenship, may undermine the Group's reputation.

What we can control

  • Providing business informed people practices and frameworks and an attractive employee value proposition that motivates and engages employees.
  • Providing additional health and wellbeing support to employees and embracing hybrid work practices.
  • Driving a co-ordinated transformation programme to develop and promote employees to achieve our internal employment equity targets.
  • Increasing our investment in formal training programmes to build a diverse talent pool of young leaders and specialists.

Not fully within our control but we can play an influencing role

  • Scarcity of qualified skills.

OHS risks

COVID-19 risk: the spread of COVID-19 leading to illness, and potentially death, impacting productivity and resulting in high rates of absenteeism or business site closures.

Regulatory and compliance risk: non-compliance with OHS legislation, including COVID-19 related OHS requirements, and failure to protect employees, customers and other stakeholders from injury, could undermine the Group's reputation, result in penalties and fines, and negatively impact productivity.

What we can control

  • Providing a healthy and safe operating environment.
  • Providing our employees with programmes and initiatives that support their wellbeing.

Not fully within our control but we can play an influencing role

  • OHS within the supply chain.
  • The exposure of our employees to COVID-19 beyond the workplace.
  • The slow uptake of vaccines in South Africa, and COVID-19 variants which impact the efficacy of vaccines, increasing the possibility of further lockdowns.

Quality and product risks

Regulatory and compliance risk: non-compliance and failure to meet product safety standards and legislation designed to protect consumers, could undermine the Group's reputation, result in fines and loss of commercial licences. This risk was heightened during the year with three high-impact legislations coming into effect on 1 July 2021.

Information security risk: cybercrime and unauthorised access to information systems and customer data, which is increasing globally, has the potential to cause financial loss, disrupt services and erode customer trust. COVID-19 has also resulted in heightened cyber risks due to employees working from home. Legislation relating to personal data requires that this information is afforded adequate levels of protection and instances of negligence carry large fines.

What we can control

  • Providing excellent customer service.
  • Providing responsible financial services offerings.
  • Protecting our information.
  • Implementing tighter controls and policies for employees working from home.

Not fully within our control but we can play an influencing role

  • Safety features of vehicles.
  • Regulatory developments.
  • Consumer awareness in relation to regulatory changes.

Broader country and community related risks

Economic and socio-political risk: weak growth in South Africa, coupled with increasing unemployment following COVID-19 as well as growing inequality, can lead to political instability and social unrest. The social unrest in South Africa in July 2021 indicates that this risk is increasing, particularly due to high levels of youth unemployment.

Transformation risk: the B-BBEE status of our South African-based operations and failure to achieve transformation targets may impact our competitiveness and sustainability.

Reputation risk: lack of effective stakeholder management and failure to inculcate a culture that drives good corporate citizenship, may undermine the Group's reputation.

What we can control

  • Implementing a robust transformation strategy.
  • Driving employment equity.
  • Supporting inclusive procurement and enterprise development.
  • Contributing to community upliftment.

Not fully within our control but we can play an influencing role

  • Achieving full points on the B-BBEE scorecard for preferential procurement.

Our response

Transformation and community reports.

Opportunities
  • Become an employer of choice in the automotive industry.
  • A diverse workforce is a competitive advantage, for example, attracting and retaining millennials and Generation Z provides cognitive diversity, which promotes collaboration and innovation.
  • Ensure a working environment that is safe for employees and customers and supports employee wellbeing to improve productivity and competitive advantage.
  • Build strong customer relationships and brand loyalty based on high-quality and responsible products and services.
  • Develop compliant and effective methods enabling customers to complete an end-to-end buying process across multiple interconnected channels.
  • Enhance our competitiveness and access to private sector and government business by achieving a B-BBEE scorecard rating that gives us preferred supplier and employer status.
Governance

Risks

Unethical conduct risk: a difficult economic climate, where people are suffering economic hardship, can lead to increased incidents of fraud, corruption and misconduct, including by employees and stakeholders in our supply chain.

Compliance risk: the Group is exposed to a wide range of legislation, which impacts all our operations and relationships with various stakeholders, including banks, OEMs, suppliers, regulators and the public. Non-compliance with environmental legislation, labour-related legislation (including skills development and employment equity legislation), OHS and product legislation could undermine the Group's reputation and result in penalties and fines.

Supply chain risk: we rely on ongoing commercial relationships with key suppliers to deliver superior service to our customers. The loss of any significant supplier could impact operations and financial performance. Shortages of vehicles and parts due to supply chain issues and disruptions could result in loss of sales and missed OEM targets, which would place additional pressure on margins and profitability.

What we can control

  • Maintaining strong relationships with OEMs and suppliers, proactively managing inventory levels and monitoring the effectiveness of our supply chains to understand inherent risks.
  • Implementing the appropriate internal controls and employee training to maintain a high level of ethical and compliant business conduct.

Not fully within our control but we can play an influencing role

  • Regulatory developments.
Opportunities
  • Maintain our reputation as an organisation that effectively implements new controls quickly and ensures compliance in an increasingly complex regulatory environment.
  • The Competition Commission's Automotive Aftermarket Guidelines (Right to Repair) provides various opportunities to expand and effectively execute on our business strategies.
  • The ability to swiftly adapt to changes in regulations can provide first mover advantage.

Managing our risks and opportunities:.

ESG