susTaInaBIlITy rePorT - hayleys.com

1 Hayleys PLC - Annual rePorT 2011/12. 056| 057. susTaInaBIlITy rePorT Message from the Chairman Our commitment to excellence in all aspects In addition, for the first time, our rePorT is Today, susTaInaBIlITy has become an imperative of our operations deliver value to those externally assured, which is an indication of the for all kinds of organisations. Hence, it is that invest in us. At the same time, we importance we attach and the commitment we essential that both the Government and the have held firm to our commitment towards have to susTaInaBIlITy across the Group. Private Sector give due consideration to the health' of our triple bottom line in our conducting their activities sustainably. business operations, ensuring the long-term Last year, we set ourselves an ambitious goal susTaInaBIlITy of the Group. of working towards measuring the carbon It is heartening to note that the Government has footprint of the Hayleys Group.

2 I am pleased to already taken certain initiatives in this regard Whether we create, transport, power or rePorT that this initiative has been successful, at a macro-level over the past several years. build, susTaInaBIlITy is integrated into all we and a preliminary study has been successfully These measures include enacting necessary do. The year under review has been a period conducted. Going forward, we set ourselves legislation, establishing required organisational of tremendous activity and achievement for the challenge of further increasing the depth of structures (such as setting up the Sustainable corporate susTaInaBIlITy at Hayleys. our scope of analysis, and identifying initiatives Energy Authority, National Nanotechnology to reduce our environmental impact, waste and Initiative, Environmentally Sustainable Transport The foundation for a well-structured, aligned ultimately our cost base.)

3 We still have a long Initiative etc.), and granting of fiscal incentives, and inbuilt susTaInaBIlITy system was set in way to go. Due to the diverse nature of our with a view to adapting to climate change, place. The credit for this achievement lies businesses, systems and processes still need prudent use of natural resources, addressing with the vision, professionalism, energy and to be improved. rising cost of energy, safeguarding bio-diversity, ingenuity of the Hayleys Corporate and Group promoting responsible tourism, ensuring food Companies. Being a signatory to the United Nations Global security and minimising air pollution. Compact underlines our respect for, and A susTaInaBIlITy Gap Analysis was conducted commitment to international standards. We Correspondingly, large Private Sector through a process of interviews and fact-finding continue to be guided by these principles, organisations have taken noteworthy steps audits, in order to identify current susTaInaBIlITy which seek to promote responsible corporate and devoted a fair share of their resources practices and opportunities for improvement.

4 Citizenship to surmount challenges posed by to integrate susTaInaBIlITy into their business To take this forward, a proficient susTaInaBIlITy globalisation the same principles that earned activities. Notable initiatives have been taken team representing the entire Group was Hayleys the title of Sri Lanka's Best Corporate by companies in the plantations, tourism and formed and trained through capacity building Citizen on four seperate occasions. apparel sectors. workshops. I am immensely proud of the hard work I am pleased that the Hayleys Group, one of The measure of success of this enterprise and commitment shown in achieving our Sri Lanka's premier diversified conglomerates, was proven through our ability to identify susTaInaBIlITy targets. I thank our customers, has demonstrated over 134 years, that an the material topics and issues derived from suppliers, business partners and most emphasis on corporate susTaInaBIlITy is no the entire diversified conglomerate and its importantly our employees who are integral barrier to progress, but instead an indication of stakeholders, and through inculcating policies stakeholders in this commitment.

5 As our 135th it. Hayleys in fact reported its best ever results and systems to address them. year dawns, we continue to build on the robust in 2011/12, as detailed in the financials. foundation we have put in place, and retain our I note the full impact and success of this emphasis on concerted, structured corporate We are fully aware and proud of the role we initiative through the coherence and accuracy susTaInaBIlITy in our pursuit of growth. play in the private sector. Our export income of this year's susTaInaBIlITy rePorT . The quality benefits the nation's coffers and fosters of information that is currently available to our entrepreneurialism and innovation in outreach stakeholders undoubtedly surpasses previous communities and within our own teams. reporting efforts. Pandithage Chairman and Chief Executive Hayleys - In the Context of Sector Specific Risks susTaInaBIlITy Global Markets and Manufacturing In operating a viable and sustainable business Climate changes affect supply of fibre and also enterprise, Hayleys is challenged to evaluate, impact the quality standards of stocks in hand for understand and mitigate impacts and risks that its the Fibre sector.

6 Business activities may exert on the overarching goals of susTaInaBIlITy . It is similarly challenged to Changing weather patterns in natural rubber comprehend and leverage opportunities arising producing regions make supply forecasting from its drive to attain true susTaInaBIlITy . difficult for the Hand Protection sector. Floods, in rubber producing countries, also affects supply of In this segment we examine this subject in a natural rubber. high-level, concise and objective manner. Increasing shortages of the key raw material Risk and Impact coconut shell charcoal can negatively impact the General manufacture of our Purification products. Hayleys maintains close relationships with public and regulatory bodies, which require effective High cost of energy and escalating prices of other management and consistently fruitful dialogue raw materials causes an increase in the cost of and engagement.

7 Falling short in this area could production of manufacturing industries thereby compromise the Company's ability to fully benefit making our products less competitive in export from potential business opportunities. markets. Parity and consonance of view in values of Agriculture susTaInaBIlITy , do not always exist amongst Adverse weather conditions that prevail at critical the buyer community. This factor, as well as a periods create difficulties in catering to buyers'. prevalent market slowdown could negatively requirements on time. impact business by constraining leeway for major projects to flourish and be availed of in a Increased pest resistance to traditional crop sustainable manner. protection products and disruptions to weather patterns could result in reduction in the overall The withdrawal of the GSP in Europe was extent of cultivation. This in turn reduces demand highlighted as a risk by all export industries.

8 For the Company's agricultural inputs. In addition, weather influenced changes impact the demand for certain products such as flower seeds and can lead to loss in revenue. Further, crop diseases could affect supplies of fruits and vegetables thereby affecting the financial performance of our value added agricultural exports. A further risk encountered is the looming shortage of labour in the Agriculture Sector. Hayleys PLC - Annual rePorT 2011/12. 058| 059. susTaInaBIlITy rePorT Plantations processes that could lead to inadequacies in brands that have inculcated susTaInaBIlITy in their Disruption of normal weather patterns and result reporting, thereby compromising the overall business model, tangibly support a responsible temperature change encourage the growth of susTaInaBIlITy process of Hayleys. and emancipated susTaInaBIlITy initiative. pests and diseases which impact the quality of the final product.

9 Opportunities Do Exist Agriculture General We look to leverage weather patterns and expand Transportation and Logistics Sri Lanka's major drive to effect infrastructural cultivation of fruits and vegetables in the North Fluctuations in oil prices and resulting fluctuations development, and towards tourism including and the East. This also provides the Sector with in freight rates create a risk for our bunkering eco-tourism, is widely publicised both locally and an opportunity to search for crops that can grow business. internationally. all season round. Poor climatic conditions can affect oil exploration This positive publicity generates opportunity by Agriculture companies in the Group have the activities and similarly cause route cancellations way of attracting more foreign direct investment opportunity of marketing drought resistant plant and deviations, forcing alterations on shipping and offering more projects and joint ventures for material and catering to the increasing demand and freight forwarding activities, resulting in business communities.

10 In this regard, Sri Lanka for new generation, low toxic, target specific additional costs. is in search of a diverse mix of reliable, affordable crop protection products. They can also leverage energy resources. Opportunity lies in meeting the potential for drip irrigation, improved water Adverse climate can negatively impact our this rising demand in a safe and environmentally management processes, and look to increase businesses by curtailing operations, responsible manner. levels of mechanisation. Products that cater to delaying vessel calls, inland transportation public health and termite protection systems are of goods, etc. Sector Specific Opportunities also on offer. Global Markets and Manufacturing Introspective Risk Review Plantations There are instances when Hayleys benefits Any inadequacies in terms of awareness and from regulations and legislation.