Objective

As part of Wesfarmers’ commitment to sustainability, we produce an annual Sustainability Report – this is our thirteenth such document. This is a voluntary document developed to communicate our company’s philosophy and commitment to sustainability, with the objective being to provide information to interested stakeholders about the economic, environmental and social impact of Wesfarmers and the businesses we operate.

What do we mean by sustainability?

In 1984, Wesfarmers set the provision of satisfactory returns to its shareholders as its key priority. Over the past 26 years, the role and responsibilities of business – particularly large companies such as Wesfarmers – have changed significantly. They are no longer judged solely on the size of their financial returns, but also on how they manage various factors that contribute to a sustainable community and society, as well as a strong bottom line.

As a result of these changing investor, government and societal expectations, the inputs that now drive a company’s commercial success have become broader and more complex. Every organisation will have different views and definitions as to what constitutes sustainability and the measures to define their sustainability objectives and performance, depending on the nature and scope of their business operations.

Wesfarmers believes that providing satisfactory returns for its shareholders in 2010 and beyond involves a focus on five key principles and actions. They are:

• The importance of our people: As one of the largest private sector employers in Australia, the quality, diversity and skills and application of our employees is a key competitive advantage for our company. We aim to provide a safe, stimulating and ethical working environment that encourages high levels of personal and professional development.
• Carbon emissions reduction and energy management: In an increasingly carbon-constrained world, reducing our carbon footprint is both a commercial priority and an environmental imperative. As this report is being prepared the final nature of Australia’s carbon reduction policies and legislation is still unclear, but Wesfarmers is of the view that some form of carbon constraint (as already exists in New Zealand) will be implemented in Australia and we are contributing to that policy debate, while preparing for a carbon constrained future. Our major focus in this area at present is investing in new energy efficient technologies and methodologies that will contribute to the transition to a low carbon economy, as both a technology user and supplier. At the same time, we continue to set internal benchmarks that ensure the efficient and sustainable use of all our energy inputs.
• Community investment: A first-rate business environment needs to be underpinned by a cohesive and inclusive community environment. Wesfarmers invests in and recognises those areas of community endeavour which it believes are necessary to contribute to building long-term community cohesion, stability, leadership and innovation.
• A reduced overall environmental footprint: In addition to energy and carbon emissions, there are a number of inputs and outputs that are part of Wesfarmers commercial operations which have both direct and indirect environmental impacts. These include water usage, packaging, emissions to air, solid and liquid waste, and land rehabilitation. Each of these will be subject to ongoing planning and management to ensure that Wesfarmers continues to reduce its overall environmental footprint.
• A strong economic contribution: A strong business environment and a strong economy go hand in hand. Wesfarmers seeks to maximise its contribution to the economy through long-term business growth that increases overall economic activity and its capacity to generate additional direct and indirect employment (we currently employ approximately 200,000 people), our tax and royalty contribution that enables governments to invest in growing economic and social capital, as well as providing dividends and other investment returns to our more than 500,000 shareholders, including to the individual superannuation and other investments represented by many of our institutional shareholders.

What this report covers

Timing

Coverage is for the financial year ended 30 June 2010. In a few cases where there have been developments subsequent to the end of the reporting period, but prior to the printing deadline, we have included and identified this information to make the report more time-relevant.

The structure

All wholly owned and/or operationally managed businesses as at 30 June 2010 are included. On 1 July 2010 our Energy, and Chemicals and Fertilisers divisions merged and now operate as a single division, but this report presents their outcomes separately to reflect their status during the reporting period.

In line with our commitment to continual improvement, small changes have been made to the structure of this report. Each of the business unit reports again summarises activities across the five key principles listed above, and highlight their sustainability performance over the reporting period. In many instances, the business units have developed divisional sustainability reports which are available on their own websites as specified in their section of this report.

This year we increased the number of core sustainability indicators on which we collect data from 13 to 24. A list of these indicators is available on our website.

The Net Balance assurance statement appears at the end of this report. The external assurance process, to the standards specified in the statement, is an important part of Wesfarmers’ commitment to transparent reporting of our activities.

The data collection and reporting of our community contribution and support has again been conducted primarily using the London Benchmark Group (LBG) methodology. The LBG is an international framework to record and measure an organisation’s community investment beyond its financial contribution. The LBG model recognises community contribution in four main categories: cash; time; in-kind contributions; and facilitated contributions where the organisation assists others to achieve their objectives.

These contributions must be made primarily for the benefit of the community, usually through community groups and charities. The LBG methodology was used for all businesses except Home Improvement and Office Supplies – in these cases the community contributions were verified by Net Balance as part of its broader assurance processes for this report.

Each of our businesses has a specific section in this report. A range of other part-owned businesses such as the Bengalla coal mine in NSW, Wespine softwood sawmill in WA, Queensland Nitrates in Qld and Gresham Partners Group Limited are grouped in the ‘Other businesses’ section of the report. We provide links to websites for readers wishing to find out more about their activities. Within the report we also cover the operations of entities we do not fully own but for which we have day-to-day control in the relevant divisional reports.

Safety data

Readers will notice in the safety performance graphs a reference to statistics being for the year to 30 June 2010, and this year we are reporting our statistics as at that date. It can mean that the numbers reported for a particular year have to be changed in subsequent reports as circumstances such as the duration of time lost from work change over time. Similarly the data on Worker’s Compensation claims is presented as at 30 June 2010. Lost Time Injury Frequency Rate (LTIFR – please refer to the glossary) numbers now include contractors unless otherwise specified in the reports of the individual businesses. Where it is possible to calculate a LTIFR for contractors – that is, where there is regular engagement and hours worked are available – the business is required to include this information.

Greenhouse emissions

Greenhouse emissions information contained in this report is generally based on the National Greenhouse and Energy Reporting (Measurement) Determination 2008 (NGER Measurement Determinations – as applied in 2009/10), although for indirect emissions (such as Scope 3 electricity emissions, waste and air travel not included in the NGER legislation) calculations are done in accordance with the National Greenhouse Accounts (NGA) Factors 2009. Readers should note that some of the NGA (and now NGER) emissions factors have changed from time to time and, accordingly, year-to-year changes in emissions data may in part be due to this rather than a change in the performance of a business unit in relation to greenhouse emissions.

There are also businesses for which we report energy use and greenhouse emissions in this report, but for which we do not have ‘operational control’ as defined in NGER, are based outside Australia or which are not defined by NGER and hence are not reported formally within its provisions. The difference in emissions recorded in this report and our NGER report for 2009/10 (available from the regulator at the end of February 2011) is described in this report.

We have used an emission factor for New Zealand-based electricity generation and consumption from the Ministry for the Environment Guidance for voluntary corporate greenhouse reporting – Data and Methods for the 2008 calendar year. Further information is available at www.med.govt.nz. The UK emission factors were drawn from the 2010 Guidelines to Defra/DECC’s GHG Conversion Factors for Company Reporting.

Report preparation

Data collection and report drafting is the responsibility of business unit environmental, safety, sustainability and community relations representatives who are part of a working group convened by our Wesfarmers Corporate Office. Drafts were reviewed by the Corporate Office prior to detailed discussions with the contributing authors.

This process ensures that ultimate ownership of the report lies with the business units. While this report does not include specific case studies from each of the business units – unlike in previous years – in many instances these have been included in the longer version of the business unit reports which are available online. However we have included short case studies on four important elements of Wesfarmers’ business in the ‘Sustainability scorecard’ section of this report.

Glossary

Within each separate report we aim to eliminate as much jargon and technical terminology as possible and to spell out the names of organisations when they are first mentioned. A general glossary can be found on page 76.

Completeness

We do not claim that this report provides 100 per cent coverage of our sustainability performance. Any gaps in our knowledge will be reduced as our systems improve. This document is a best-endeavours attempt to report openly and honestly based on our current state of knowledge.

Assurance

Internal verification

This report’s accuracy and completeness is important and every effort is made to ensure that all statements are properly authenticated. Once the final draft of each business unit report was agreed upon, business unit representatives were required to compile detailed checklists linking report content to documented source material. Representatives from our Corporate Solicitors Office and Group Risk Management department then conducted sample verification checks through site visits and desktop audits and prepared reports for senior management.

External assurance

Assessors from Net Balance carried out an independent assurance engagement on this report using the AA1000 Accountability Principles 2008 and the elements of the Global Reporting Initiative (GRI). The Assurance Statement is published on page 74. This is the fourth year that Net Balance has assessed the Wesfarmers report. It provides a detailed report to management and the Board’s Audit Committee on its assessment of the reporting process, which Wesfarmers will respond to. In addition, information contained in this report about our community contribution, with the exception of Home Improvement and Office Supplies data, was independently verified by the London Benchmarking Group, and the verification statement can be found on page 24. However, as noted earlier, the Home Improvement and Office Supplies data in this area was assured by Net Balance. This year we have also sought from Net Balance an assessment of this report against the disclosures contained in the GRI – we have been assessed at the level of ‘B+’ as indicated in the Assurance Statement.

A comprehensive account of Wesfarmers reporting against the GRI indicators is provided on our website.

Financial and governance information

This report uses only summarised financial and governance information with much more detail, particularly around the Board processes and policies set for the organisation, remuneration policies, and financial accounting practices, available in our 2010 annual report at www.wesfarmers.com.au. The annual report also sets out in detail the structure of the organisation, our operating locations, major shareholdings, markets, countries and sectors we operate within, and any legal changes to subsidiaries and the like during the reporting period.

Wesfarmers endorsement

Senior management at each of the business units are involved in the preparation and sign-off of the internally-verified report. Each managing director of the division signs off on the final, externally assured report. In addition to the internal and external verification process, the Wesfarmers Audit Committee reviews the entire document prior to its publication. Richard Goyder, our Managing Director, endorses the final report.

Stakeholder engagement

Wesfarmers and its businesses have an extensive reach throughout Australia and New Zealand and interact with millions of customers each week, as well as many regulators and policy makers, non-government organisations, suppliers and contractors and community-based organisations. Many of these interactions are described in the various sections of this report (and the separate divisional reports). As part of the external assurance process for this report, we understand the AA1000 Standard 2008 requires certain formalisation of these processes, including the mapping of stakeholders, which we elected not to pursue for the entire Wesfarmers Group this year. Our assurance providers assess the extent to which we are inclusive of our stakeholders.

However, as foreshadowed in the 2009 report, we have developed a formal stakeholder engagement assessment for the corporate entity Wesfarmers Limited. This involved a stakeholder forum with four of Wesfarmers Limited’s long-term community partners, and an on-line survey reviewing many aspects of our sustainability performance with a range of investors, analysts, business organisations and journalists. Net Balance developed the tools for this work and has reported to Wesfarmers on the outcomes – a copy of the Executive Summary of the Net Balance report is available on our website, and in next year’s report we will outline our response to the various recommendations contained within it.

Feedback

Wesfarmers welcomes your feedback on this report. A form has been provided for you on the inside back cover. You can also email info@wesfarmers.com.au; or you can contact any of our business units about their individual reports at the websites listed in their sections of the report.

Other public reports

In addition to this Sustainability Report, information regarding Wesfarmers’ activities can be found in:

• the Carbon Disclosure Project (www.cdproject.net) and the Carbon Disclosure (Water) Project initiated in 2010;
• the Dow Jones Sustainability Index (www.sustainability-index.com);
• the Australian National Packaging Covenant (www.packagingcovenant.org.au) (from mid 2010 this has become the Australian Packaging Covenant which Wesfarmers has registered for);
• the Energy Efficiency Opportunities Act (www.energyefficiencyopportunities.gov.au) in Australia; and
• the National Greenhouse and Energy Reporting Act in Australia (www.climatechange.gov.au/reporting/).