FORENSIC

SUSTAINABILITY SERVICES

From Being Apart to Being PartnersA South African Case Study - BarloworldDaniel Malan, Associate DirectorNovember 2006

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Outline

Being apart

Conceptual framework

Integrated Social Contracts Theory

Corporate Citizens, Colonialists, Activists, Tourists

Being partners: the Barloworld case study

Concluding remarks

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Being apart – one example from history

Cecil John Rhodes – arrived on the South African diamond fields in 1871 – acquired a few claims and started buying up those of others who failed

“Africa awaits us … it is our duty to seize every opportunity of acquiring more territory … means more of the Anglo-Saxon race … the most human, most honourable race the world possesses”

British South Africa Company formed with the blessing of Her Majesty’s Government, its own army, police force and flag

Motto: Justice, Commerce, Freedom

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Top 10 economies in Africa

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The Size of the South African Economy

Source: World Bank, 2003 figures

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Compacts, contracts, partnerships

Compactcompactus (to put together closely)compacisci (to make a bargain, to

covenant together)

ContractContractus (agreement)Contrahere (draw together)

PartnershipPars (part)

parcener (joint inheritor)

TogethernessConsentMutual benefit

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Integrated Social Contracts Theory(Donaldson & Dunfee)

Pluralist approach that tries to avoid the pitfalls of both the relativist (when in Rome…) and absolutist (one size fits all) approaches to business ethics

Attempts to integrate and capture strengths of macro social contracts and micro social contracts, while avoiding the weakness of both

Vagueness of macro contracts

Danger of micro contracts to be morally out of bounds, e.g. a local community that decides to reserve the neighbourhood for members of a specific race

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Categories of Authentic Global Norms

Hypernorms

Consistent norms

Moral free space

Illegitimate normsIncompatible withhypernorms

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Social and political roles

So

cial

Res

po

nsi

bil

ity

Political InvolvementLOW

HIGH

HIGH

Corporate ActivistCorporate Citizen

Corporate TouristCorporate Colonialist

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Barloworld

Diversified industrial company founded in 1902Manufacture, market and distribute products and services and market and distribute leading international brands on behalf of principals (incl. Caterpillar and DaimlerChrysler, licensee for Avis in Southern Africa, Sweden, Denmark and Norway)Operations in thirty-one countries around the world - approximately 50% of 25 000 employees are in South AfricaManagement philosophy: Value Based Management

“The implementation of VBM is a key driver of increased cash flow, profit and value creation. VBM makes every management team within Barloworld focus on creating value for all our stakeholders and is a long-term strategic programme. The benefits of the many VBM-driven initiatives within the organisation will continue to grow value as we expand our asset base”

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The Middelburg Forum (1980’s)

Launched by subsidiary (Middelburg Steel & Alloys), based on Group Code of Employment Practice

Forum: a partnership between the company, schools, churches and ANC community based organisations

Transformed the nature of the company and the conservative town of Middelburg

Integrated facilities (against the law) and improved opportunities for black staff

“If harmony, success and incredible growth is possible within an equal opportunity company such as Middelburg Steel & Alloys, why can’t it be extended to the town, region and country as a whole?” (John Gommersal, MD)

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“It was during a full meeting of councillors, church leaders, business leaders and comrades from the township that we

heard a knock on the door, and in walked Anglican Archbishop Desmond Tutu. We were obviously surprised, but he asked us to carry on while he sat at the back and listened. Later, he asked if he could say a few words. He

started with a prayer and then said that if what was happening in Middelburg could be repeated throughout the country, then South Africa would have a great future ahead

of it.”Mark Drewell, Group Executive, Barloworld

(at the time communications manager of MS&A)

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Learning from the Barloworld case

Microcontract

Compact between stakeholders

Stakeholders adhered to hypernorms

Against “normal practice” at the time – government of the day did not adhere to hypernorms

Corporate activism

Did not shy away from political involvement

Enlightened self-interest

Involvement of stakeholders

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Implications for Global Compact

UN Global Compact can only provide the hypernorms

The real challenge is in the “micro compacts”

Second tier – the challenge of measuring and reporting (GRI)

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Presenter’s contact details

Daniel Malan

KPMG Sustainability Services

+27 83 5611292

daniel.malan@kpmg.co.za

www.kpmg.com

The information contained in “From Being Apart to Being Partners” is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

© 2006 KPMG Services (Proprietary) Limited, the South African member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in South Africa.