Sustainability report

Environmental management and resource conservation

The responsibility for environmental management within Transnet rests with the respective operating divisions and specialist units. During the year under review the Company intensified the drive to ensure a common understanding of current environmental issues impacting on the Company. This included the introduction of an integrated approach to handling environmental matters as well as a more coordinated effort in rolling out environmental initiatives across the Company. Reporting on various environmental indicators, including operational incidents, has been standardised and will be further streamlined in the year ahead.

The SHEQ forum that exists at Group level focuses predominantly on health and safety issues, given the high priority of these issues for the Company. This decisive focus often results in insufficient time allocated to environmental matters. In view of Transnet's commitment to the principles outlined in the UN Global Compact and given the various environmental challenges the Company faces, a separate Environmental Forum was established to elevate and address environmental concerns.

Transnet upholds the principles of the UN Global Compact and applies, as best as possible, these principles in its daily operations, management practices and infrastructure expansion programmes. Three principles in particular relate to environmental management and pertain to the Company's responsibility to protect, manage and rehabilitate the environment within which it operates. These include:

• Supporting a precautionary approach to environmental challenges;
• Undertaking initiatives to promote greater environmental responsibility; and
• Encouraging the development and diffusion of environmentally friendly technologies.

TVMF
Managing our environment responsibly
Environmental management and resource conservation
Environmental performance

Challenges and progress made

Environmental risk constitutes one of Transnet’s top ten risks and receives priority oversight from the Transnet Board of Directors as well as the Transnet Group Executive Committee.

The management of environmental risks has improved over the past year as action plans and control mechanisms are now monitored on a monthly basis. Environmental risks featuring prominently in the review period include the risk of legislative non-compliance relating to pollution and contamination; the risk of not obtaining authorisation for new projects due to environmental factors; and possible infrastructure failures, such as the pipeline network impacting negatively on surrounding ecological areas.

In 2007, Transnet's operating divisions rated the National Environment Management Act No. 107 of 1998 (NEMA) as the Company's second highest regulatory risk. In response to this rating, Transnet Group Compliance initiated the National Environment Management (NEM) project to include all environmental regulatory requirements applicable to Transnet's operations. In 2008, operating divisions rated NEMA as the highest regulatory risk for Transnet, thereby reaffirming the importance of the NEM project. Transnet Group Compliance has initiated a project to enable Group-wide compliance with the environmental legislation.

The adverse impact of environmental incidents on the Company's reputation remains a challenge. In the year ahead, the Transnet Environmental Forum will enhance cooperation between the operating divisions and the specialist units and ensure that a set of common reporting procedures are developed and maintained to address the aforementioned risks. Transnet Group Risk Management has initiated standardised reporting on environmental incidents, as well as reporting on environmental indicators relating to resource conservation, such as water and energy usage. Incident reporting will be further improved in the year ahead. The CURA risk management system will be optimised and the Transnet Occurrence Management System (TOMS) - a SAP based environment, health and safety (EHS) module - will be further refined to support the standardisation and streamlining of Group-wide risk reporting.

Emission management

As part of Transnet’s quest for “zero harm”, dust and gas emissions monitoring was intensified during the year. Taking into consideration the Air Quality Act No. 39 of 2004, concerted effort is being made to monitor inadvertent dust fall out. Strategic points were identified throughout the operations and monitoring instruments were commissioned. The measurement of gas emissions will form part of the carbon footprint study which is planned for the next year.

Waste management

Transnet’s operations inevitably generate various types of waste, which is separated, recycled or disposed of through carefully selected service providers. The removal of asbestos received priority during the year and, going forward, Transnet will pursue best practices in the handling (including the separation and recording of the amount of waste generated), storage, removal and disposal of the various waste types.

The carbon challenge

The Department of Water and Environmental Affairs initiated a long-term mitigation scenario (LTMS) planning programme in collaboration with other departments and sector roleplayers, to gauge the impact of different greenhouse gas emission scenarios on the environment. The scenario planning model will assist Government to determine appropriate policy directions to address issues relating to energy efficiency; electricity generation; carbon capture and storage; as well as issues specific to the transport industry. The South African Cabinet accepted these policy directions in 2008, and has initiated a policy development process to draft a National Climate Change Response Policy for publication by the end of 2010.

With the transport industry being one of the fastest growing sectors world-wide, Transnet's role as a freight logistics provider in the transport logistics chain renders it a major contributor to the cumulative transportation carbon footprint locally, regionally and globally. Port Terminals, for instance, operates 15 terminals in 6 of South Africa's ports. An operation of this magnitude consumes large volumes of electricity, water and fossil fuels. The vast machinery base required for the cargo movement further emphasises the impact that Port Terminals may have on Transnet's overall carbon footprint.

Despite the negative impact of climate change, there are also opportunities for Transnet to transform its operations positively by innovating around areas of cost savings, resource optimisation and good corporate citizenship. Transnet's proactive response to climate change is evident in its divisional initiatives to curb the Company's national carbon footprint and to preserve natural resources, as outlined below.

Environmental performance

Following the commitment made in last year’s Annual Report, and in response to the recommendations made by the Transnet Environmental Forum, a baseline resource utilisation pilot study of water, electricity and fuel was initiated during the year.

The objective of this baseline report is to:

• Assess the value of energy, water and fuel utilised by Rail Engineering and Port Terminals;
• Provide a comparison of the utilisation of fuel for 2008 and 2009;
• Evaluate the usage for 2009 and develop an expectation for usage during the next year; and
• Develop a strategy to closely monitor the utilisation of these critical resources and the need to reduce utilisation where possible.

Fuel consumption

Transnet experienced an overall decrease in fuel utilisation of 9,4% compared to 2008.

Freight Rail consumes the majority of Transnet’s total fuel utilisation, making up 71,3% of the total fuel usage. This utilisation is in line with expectations as Freight Rail is the largest operating division within the Company, responsible for transportation of commodities and containers.

Port Terminals, responsible for cargo services within the Company, consumes 6,4% of Transnet’s total fuel utilisation. The division previously utilised approximately 6,2% of the total fuel utilisation. Therefore, utilisation is in line with the previous year’s utilisation and expectations for the Company.

The specialist units utilised 21,9% of Transnet’s total fuel. There has been a slight decrease in the overall utilisation from the prior year, as freightdynamics, was sold at the end of the 2008 financial year. It is expected that the utilisation of other operating divisions will decrease in the next financial year, following the disposal of the Autopax Passenger Services (Pty) Ltd.

we said	2008, p76
The Company is committed to exploring cleaner technologies and renewable energy resources to sustain business in the current environmental context. Transnet will therefore continue to participate in the Government’s long-term mitigation scenario planning process.
we did
A baseline resource utilisation pilot study of water, electricity and fuel during the year. While the scope of the pilot study covers all operating divisions’ fuel consumption for 2008 and 2009, it only focused on Port Terminals and Rail Engineering for water and electricity consumption for 2009. The objective of this baseline report was to: Assess the value of energy, water and fuel utilised by Rail Engineering and Port Terminals; Provide a comparison of the utilisation of fuel for 2008 and 2009; Evaluate the usage for 2009 and develop an expectation for usage during the next year; and Develop a strategy to closely monitor the utilisation of these critical resources and the need to reduce utilisation where possible.
we will
Introduce measures to enable Transnet to monitor key environmental performance indicators as outlined in the Sustainability Value Measurement Framework. Continue to roll out various costcontainment and resource optimisation initiatives which commenced in 2009, with specific focus on stakeholder engagement and improved communication strategies around environmental issues. Conduct a study that will result in an integrated climate change strategy and implementation plan for Transnet. The study will have the following outcomes: Providing Transnet with recommendations for monitoring and reporting against targets and identifying areas for further research and innovation; Providing recommendations on how to reduce the cost of doing business whilst optimising resource usage; Identifying opportunities to develop and invest in projects that generate energy savings and carbon credits for the Company; Identifying potential trade barriers for Transnet in the context of global trade; Determining efficiency indicators per operating division; Identify areas of vulnerability for climate change for Transnet and develop mitigation plans; and Identify opportunities for adaptation measures and develop plans.

Key stakeholders and possible impacts on stakeholders

Transnet's port, rail and pipeline operations, as well as its infrastructure expansion programme impact on the communities where the Company operates. Key stakeholders include communities living in areas surrounding Transnet's ports; and communities living in close proximity to the rail and pipeline networks. Also included in Transnet's stakeholder base are its customers and the broader public, which is served by the Company's infrastructure.

Within the context of Transnet’s existing operations and taking into account the construction of new infrastructure, the following social and environmental impacts have been identified:

• Noise;
• Dust;
• Pollution and contamination;
• Waste;
• Traffic congestion; and
• Loss of animals or damage to property due to the lack of control along rail lines or as a result of fire.