Kmart is one of Australia’s largest retailers, with 185 stores throughout Australia and New Zealand, product sourcing offices in Hong Kong, China, Bangladesh and India, and more than 28,000 team members.

The Kmart team is committed to our customers, and offering low prices on all products every day, right across our stores.

Kmart Tyre & Auto Service (KTAS) is one of Australia’s largest retail automotive service, repair and tyre businesses, with a network of more than 260 stores. We are also one of Australia’s largest employers of mechanics and apprentice mechanics, with more than 1,400 team members.

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We have continued to rebuild and reinvigorate our business, with revenue increasing to $4.1 billion and earnings before interest and tax increasing by 32.3 per cent to $266 million. Safety performance has been mixed, with our total recordable injury frequency rate decreasing; however, our lost time injury frequency rate increased.

During the year, we started a trial of energy saving initiatives at one Kmart store and also became a signatory to the FluroCycle program to divert used fluorescent tubes from landfill.

The Kmart Wishing Tree Appeal continues to be Australia’s largest gift collection appeal and this year, we also partnered with Variety, the Children’s Charity to support the ‘Bikes4Kids’ program.

Participation with our ethical sourcing program has also increased, with 42 per cent of factories now engaged with the program.

Increasing the number of Indigenous Australians working for Kmart is a key focus area and this year an additional 10 stores participated in our Indigenous employment initiative, bringing the total number of stores and distribution centres to 17. This work is not possible without the support of the Indigenous community and store teams across Australia.

Through an employee survey, 105 team members identified themselves as Indigenous. Despite more team members participating in the survey this year, the total number of Indigenous team members has reduced.

Almost 70 per cent of the Kmart workforce are female and we have increased the number of women in leadership roles to 33 per cent throughout the year. In addition, we have trialled a mentoring program for selected team members in New South Wales. Initial results have been positive and we are now reviewing this program to potentially extend it to other stores.

Our learning and development team produced consistent and simplified training for areas including online induction and safe work practices, updated process documents and introduced performance-based learning as part of the ‘Kmart Way’ program. This program was launched in August 2012 and eliminates, simplifies or maintains in‑store processes, with the objective of introducing one way of doing things across all of our sites.

We have also introduced a number of new programs at Kmart throughout the year including leadership and commercial skills training for all store managers, a 360-degree leadership assessment program supported with coaching and leadership training for all state operations and zone managers, as well as training for selected store team members to improve the flow of stock from truck to shelf.

In total, more than 170,000 hours of training were delivered, with an average of 2.3 training sessions per team member.

We have continued to focus on reducing the number of injuries sustained across our business. The safety strategy was revised, with goals for the year including consistent execution of the safety plan, creating ownership through the introduction of new reporting and key performance indicators, as well as building a strong safety foundation.

Key achievements in Kmart for the year included introducing a safety score to focus on identifying areas for improvement and developing a strategic safety plan for our supply chain function to target high-risk areas, which resulted in a 52 per cent reduction in injuries compared to the previous year. In addition, our Wiri distribution centre in New Zealand has been able to achieve a TRIFR of zero.

Our KTAS business restructured its safety function to provide greater responsiveness and earlier intervention, which resulted in a 66 per cent reduction in the average lost time rate.

In response to the Christchurch earthquakes and based on feedback from team members, Kmart New Zealand sites have now introduced emergency evacuation folders. The folders include rosters and contact details for team members and are located in key areas within the site for easy access.

For the year, we recorded 222 lost time injuries, up 33 per cent on the previous year. Our LTIFR increased to 9.26 and our TRIFR decreased to 37.05.

We commenced a trial of energy efficient lighting and an initiative to reduce the amount of energy used to heat and cool our Kmart stores. Initial results are showing a reduction of 20 per cent of the total store energy consumption. In 2012/13, we plan to finalise this trial and, if successful, aim to introduce these initiatives to additional stores.

To reduce transport emissions in New Zealand, we have worked with our customs clearing agents to send stock directly to the South Island ports. Traditionally, these goods were sent to Auckland and transported by rail, ferry and truck to get to these stores.

Given the phase-out of R22 refrigerant gas, we are preparing to trial a replacement gas in one store. The majority of Kmart stores utilise R22, and if successful, this trial will allow us to convert existing units to a new gas, rather than having to replace the air conditioning plant.

Our total carbon emissions for the year were 313,702 tonnes of CO2e, up 0.7 per cent on the previous year. Energy use was 1.06 petajoules, down 1.9 per cent on the  previous year. Across our sites, energy is primarily used for lighting and air conditioning.

During the year, Kmart became a signatory to the FluoroCycle program, which commits businesses to recycling used fluorescent tubes, rather than sending them to landfill. We have already recycled more than eight tonnes of these tubes since joining the program.

At Kmart, we also recycle ink cartridges from our photo labs. These cartridges are used to make new cartridges or other plastic products and through this initiative we diverted more than 12,000 cartridges from landfill this year.

Kmart stores have facilities to recycle paper, cardboard, plastic film, shopping bags, damaged goods and used garment hangers. KTAS stores have facilities to recycle used tyres, batteries, steel and other workshop materials. During the year, we recycled more than 34,000 tonnes of material, representing 76 per cent of the total amount of solid waste generated.

The Kmart Wishing Tree Appeal is Kmart’s largest community program and is the largest Christmas gift collection appeal in Australia. Over the past 24 years, the Appeal has collected more than five million gifts for those in need. Last year, we collected more than 461,000 gifts, almost $263,000 in cash donations and 100,000 from the sale of Kmart Wishing Tree Appeal-branded merchandise.

In addition to Kmart’s coin collection program, store teams can support local community groups through the provision of gift cards or merchandise. More than $114,000 was provided throughout the year.

During the year, we contributed a total of $1.15 million in direct support to the community and $10.41 million in indirect support, as verified by LBG.

From an environmental perspective, Kmart was contacted by one council in New South Wales, as our exterior lighting at one store did not comply with the requirements of the development application. We are currently implementing a solution with the council.

Regulators contacted Kmart on 97 occasions during the year, with the majority relating to product safety following the mandatory product safety reporting requirements which started on 1 January 2011.

We classified 10 as reportable, as they posed a significant risk to the business from a reputational or financial perspective. Throughout the year, Kmart conducted seven product recalls, four of which were for Kmart-branded products.

In December 2011, Kmart launched its updated ethical sourcing program. The Ethical Sourcing Code forms part of this program and establishes the legal, social and environmental requirements that Kmart suppliers and factories must meet as a condition of conducting business with us.

To ensure compliance with the Code, Kmart monitors its factories through both announced and unannounced audits which are conducted by independent third-party audit bodies. Under the mutual recognition component of the Code, we may also accept credible certifications from other organisations where the certification is current and conducted by a reputable and independent third-party audit firm.

For the reporting year, 42 per cent of factories were deemed to be engaged, compared to 16 per cent last year. Behind our auditing program is a strong commitment to working with suppliers and factories by providing continuous education and support. However, it is sometimes necessary to deregister suppliers who do not share this view, or for significant breaches of the Code. During the year, eight factories were deregistered for breaches involving attempted bribery and one instance of child labour was also detected.

The material sustainability issues for our business are concentrated around continuing to restore the foundations of our business, so that we are able to meet the needs of our stakeholders. In doing this, our prime responsibility is ensuring that our sites are safe for our team members, customers and visitors. Other significant material issues for Kmart include reducing the amount of energy we use and improving our design and management of packaging, to in turn provide environmental and financial benefits to the business and the communities we operate in.

If we succeed in these objectives, then, together with our community contribution programs, we will be achieving the material objective of benefiting the communities where we operate.