Governance and risk management

Our Boards and executive committee provide the leadership necessary to implement principles of good corporate governance across the Group so that all deliberations, decisions and actions of our business are based on integrity, responsibility, accountability, fairness and transparency.

Stakeholder engagement at multiple levels informs our materiality assessment, our strategy and our reporting. Go to Our manufacturing operations: a focus on our people (CEP and SEAT), Our stakeholders and our SEAT report archive for more details.

Materiality assessment ensures that the Group acts and reports on issues that reflect its material economic, environmental, social and governance issues, or those that would affect our stakeholders now and in the future.

Management, employees and our business partners are guided by our Code of Business Ethics, which is supported by our Business Integrity Policy. Our Sustainable Development Policy outlines our overall sustainability strategy and is supported by our seven sector policies on sustainable forestry; environmental performance; climate change; product stewardship; corporate citizenship; global employment; and occupational health and safety.

We comply with the corporate and accounting regulations of South Africa and the UK, in line with our dual listed company (DLC) structure.

Board oversight and functioning

Mondi Limited and Mondi plc are separate corporate entities, though with the same individuals on their boards of directors. This enables the effective management of the DLC structure as a single unified economic enterprise.

The Boards guide strategy and provide oversight on performance. In 2013, the Group was jointly chaired by Cyril Ramaphosa and David Williams until 3 May. Fred Phaswana replaced Cyril Ramaphosa as joint chairman on 1 June. The chief executive officer’s position is held separately by David Hathorn and the division of responsibilities between the joint chairmen and the chief executive officer has been clearly defined and approved by the Boards.

The Boards each have nine members: the two joint chairmen, four independent non-executive directors and three executive directors. Its members are diverse in respect of origin, gender, race and education. Together, they bring a wealth of experience and expertise to the Group and reflect the nature of its business and domicile. Two of the nine Board members are women and two of the four South African-based Board members are from historically-disadvantaged communities.

The DLC committees, to which the Boards delegate specific areas of responsibility, have the authority to make decisions according to their specific terms of reference. The composition of these committees is reviewed at least once a year.

Accountability

Accountability for our sustainable development policies, systems, practices, commitments and actions is guided and was monitored in 2013 on three levels by:

  • The DLC sustainable development committee – a committee of the Boards which ensures that the Group‛s sustainable development strategy, policies and commitments are aligned with global best practice. The governance responsibility for Environmental, Labour, Human Rights, Society; and Product Responsibility aspects in the Group lies with the DLC sustainable development committee, while the management responsibility of these aspects lies with the chief executive officer.
  • The DLC executive committee chaired by our chief executive officer – this committee has executive responsibility for sustainability performance and ensures that business line management holds primary responsibility and accountability for sustainability performance, supported by the sustainable development committee and specialist network groups.
  • Six global specialist network groups – safety, health and occupational hygiene; environment; energy; black liquor recovery boiler; product stewardship; and fire safety networks. Each group is made up of specialists drawn from across the Mondi Group and who provide valuable expertise and knowledge.

A significant proportion of the remuneration of executive directors and of other senior executives is performance-based. Remuneration strikes a balance between the achievement of short- and longer-term objectives, which can be financial or non-financial.

Guiding sustainability

We consider the environmental, safety, health, economic and social implications of our key decisions. Our Sustainable Development Management System (SDMS) guides the effective management of all aspects of sustainability governance and the implementation of our sector policies. All facilities and activities that we own and operate (including those in which we hold a controlling interest), new developments, mergers, acquisitions and businesses in which we plan to invest, and activities undertaken by contractors on Mondi sites or while under our management, are incorporated into our SDMS and are required to comply with our policies, requirements and practices.

Our Sustainable Development Policy defines our overall strategy and is supported by our sector policies. Seven key sustainability aspects have been identified: sustainable forestry; environmental performance; climate change; product stewardship; corporate citizenship; global employment; and occupational health and safety.

The sector policies apply across all operations we own and manage. We invest in training, education, consultation and auditing to ensure that these policies are widely understood and implemented.

A sustainable development governance standard links our management standards to our corporate governance structure. Nine specific management standards define our governance requirements and provide a basis for the development, enhancement and application of our sustainable development principles. A further 10 operating standards define the minimum requirements for good operational management and control across all policy areas and provide guidance on the implementation of the SDMS at Group, divisional and operational levels.

Our sustainable development reporting and information system captures sustainable development data from our global operations.

Internal audit

Our internal audit function is an integral part of our system of corporate governance. The overall purpose is to evaluate whether the Group’s systems of control are effective and adequately mitigate business risks. Ultimately, the assurance provided by the internal audit function serves to assist the Boards in fulfilling their disclosure obligations under the corporate governance codes of South Africa and the UK, and to report annually to shareholders on the effectiveness of Mondi’s systems of control.

The internal audit team plan and undertake audits of the businesses in a systematic way to ensure that the overall control environment within the business is appropriate, effective and complies with Mondi controls and procedures.

The audit committee has responsibility for monitoring and reviewing the effectiveness of the Group’s internal audit function. Each year the committee considers and approves the internal audit plan, receiving progress reports at each meeting on how the team are meeting the plan and discussing any changes or shortfall in targets. The committee agrees deviations from plan as the need arises during the year, usually as a result of major acquisitions or a change in Group risk profile highlighted through audit reports and through matters highlighted through the confidential reporting hotline, Speakout. The committee regularly challenges the nature and speed of management’s response to issues raised in audits and to Speakout messages in order to satisfy themselves that this has been appropriate to the circumstances.

Internal audit assumes regular evaluation of the adequacy and effectiveness of our systems of internal control, across all business sites and all business processes. Internal audit visits every Mondi operation at least once every five years, with all major plants audited every year. Internal audit continues to increase the role of sustainability performance monitoring in key operations.

The structure and resources of the internal audit function are also regularly reviewed. The last external review of the internal audit function was carried out in 2010 by PricewaterhouseCoopers. That review concluded positively on the effectiveness of the internal audit function while making some recommendations to further improve on this. Since that review the DLC audit committee has monitored progress with the implementation of the recommendations and annually reviews the effectiveness of the function. The DLC audit committee has concluded that the heads of internal audit provide appropriate leadership of the internal audit function, which remains effective in carrying out its remit. The DLC audit committee has determined that external reviews will be carried out every five years with the next scheduled for 2015.

Speakout

Speakout, the Group’s confidential reporting hotline operated by an independent third party, is established and well understood throughout the organisation. This reporting tool enables employees, customers, suppliers, managers or other stakeholders, on a confidential basis, to raise concerns about conduct that is considered to be contrary to Mondi’s values.

The DLC audit committee of the Boards has the oversight responsibilities for ensuring the adequacy of the Speakout procedures while the internal audit, responsible for day-to-day monitoring of the Speakout process, ensures that management on an appropriate level is informed about reported issues and that risks are adequately managed. Summaries of all reported issues, and the status of all unresolved items, are presented to the DLC audit committee.

During 2013, there were 79 Speakout messages received worldwide compared to 65 in 2012. The number of messages and quality of information reflect positive recognition and effectiveness of this confidential reporting hotline. The messages were received from 14 different countries with the majority originating from Turkey, Russia and South Africa. All information pertaining to Speakout messages received was forwarded to the respective Mondi management according to Mondi procedures. Management took appropriate and adequate measures in each case which led to corrective actions when appropriate and necessary.

Political donations, gifts and bribes

Mondi is opposed to corruption and illegal practices in all forms. We do not tolerate the giving and receiving of bribes; nor condone anti-competitive practices in dealings with governments and in the marketplace. Mondi does not permit contributions or donations for political purposes. Our approach to corruption is published in corporate brochures, newsletters and on the Group website. Mondi requires any lobbying undertaken to be in line with the Group’s business ethics and internal policies. Our policies with regard to these matters are set out in our Group Business Integrity Policy.

Fines, non-monetary sanctions and significant legal issues

Mondi was not engaged in legal actions for anti-competitive behaviour, anti-trust, or monopoly practices during the year. No material fines or non-monetary sanctions for non-compliance with laws and regulations were received during 2013.

Risks and opportunities

Identifying and managing risks and opportunities is critical to the success of our business. A Group-wide risk management framework ensures the effective governance of material risks. We exercise due diligence prior to the introduction of new operations, practices, processes and products.

Our Sustainable Development Risk and Change Management Standard guides the ways in which sustainable development risks are identified and managed. The approach we take to risk management, particularly related to environmental issues, incorporates the tenants of the precautionary principle, which implies our responsibility to protect the natural environment from harm where there is a plausible risk.

Our sustainable development risk register is updated annually to ensure mitigation plans are in place for those risks with a high likelihood of occurrence and/or impact potential. These risks include inherent operational risks as well as strategic risks. In addition to the key impacts on our business and our stakeholders, we identify sustainability trends and opportunities and seek to mitigate risks that affect our longer-term prospects and financial performance.

Risk management is one of the internal processes that have informed the identification of our six material sustainability issues, and the commitments we have set to monitor and improve our performance within these. See Our material issues within a global context for a more detailed discussion on our material issues, and Our 2015 sustainable development commitments for a detailed report on our progress against our commitments.