Merpak Envelopes (Pty) Ltd Sustainability Report

2013

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Contents1. Message from the Chief Executive Officer 4

2. Merpak Sustainability 7 2.1 Environmental Impact 7 2.2 Merpak Sustainability Story 8

3. Organisational Profile 11 3.1 Products 12

4. Sustainability Reporting 15 4.1 Stakeholder Engagement 15 4.2 Risk Management Policy 16 4.3ReportingandAssurance 16 4.4 Materiality 17 4.5 Data Management 17

5. Governance 19 5.1 Values, Principles and Codes 20 5.2MembershipsandAssociations 20

6. Economic Sustainability 21

7. Environmental Sustainability 23 7.1 Products and Services 24 7.1.1 Environmental Performance 24 7.1.2 Product Lifecycle 24 7.2 Materials 25 7.3EnergyEfficiency 25 7.4 Water 26 7.5 Waste 26 7.6 Supply Chain 27 7.7 Biodiversity 27

8. Social Sustainability 29 8.1LabourPracticesandHumanRights 29 8.2 Economic Empowerment 29 8.3EmploymentandRemuneration 30 8.4OccupationalHealthandSafety 31 8.5TrainingandEducation 31 8.6 Community Development 31

9. GRI Index 32

Merpak Contact Details 36

AsummaryofthesustainabilityactivitiesrelatingtoMerpakEnvelopes(Pty)Ltdfrom1stJanuary2013through31stDecember2013.Thereportingperiodisinlinewithourfinancialreportingperiodandweaimtoreportannuallyonsustainabilityprogress.ThereportincludesinformationrelatingtoMerpakEnvelopes(Pty)LtdoperationsinSouthAfricaonlyandisalsoavailableonourwebsiteatwww.merpak.co.zaWewelcomeyourfeedbackonoursustainabilityreportingprocess.Pleasesendcommentsorsuggestionsto:

Reportcontact:PeterAdelfangMerpakEnvelopes(Pty)LtdReg.2008/012224/07Tel:0217995741

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Message from the Chief Executive Officer

Merpakoperatesinaninterestinganddemandingenvironment. Our core product, paper envelopes, formsthebackboneofpaperbasedcommunication,a medium under threat from the many digital alter-nativesavailableinthemodernworld.

Paper itself, faces declining demand around the world with less newspapers and books being read in the physical form, magazine volumes, not necessarily titles,declining,financialnoticesandgovernmentcommunicationsmigratingtodigitalmediaandeveneducatorsexperimentingwithelectroniclearningmaterials.

SustainabilityatalllevelsisthereforeacriticalconceptthattheMerpakLeadershiptakesveryseriously.

Environmental SustainabilityWorkingwithpaper,amuchmalignedcommodity,whereconventionalwisdomsuggeststhatpaperisbadfortheenvironment,ourchallengeistosettherecordstraight.Weworkwithaninternationalgroup,TwoSides www.twosides.info who have taken up this challenge worldwide on behalf of the pulp and paper industry, printers, publishers, posts and suppliers to these industries.

Initiallysetuptochallenge“greenwashing”claimssuchas“thinkbeforeyouprint”,“clickhereandsaveatree”andmanyothersimilarmessagesthataboundincorporateandevengovernmentmarketingmessages,TwoSideshasgrownintoapro-activeorganisationwhichnow,withthesupportoftheprintandpaperindustry,runsmainstreammarketingcampaignsdispellingthemythsandsettingoutthefactsabout the environmental sustainability of paper and print.

Asmoreresearchisconductedtoestablishconsumerpreference,itisnowknownthatmostconsumersprefer to read and learn on paper. Is this choice being removed by corporates and governments who championdigitaloverpaperbyusingflawedenvironmentalclaimswhenreallytheydosoforcommercialreasons?

Research conducted by the pulp and paper industry and Two Sides suggests they do. Many surprising factsarenowbeingpresentedaroundtheinherentsustainabilityofpaperpromptingstatementssuchas“forestry,paperandfibrebasedpackagingareamongthemostsustainableindustriesinexistence”(CEOPerspectivePriceWaterhouseCoopers2008)Equallymanyfactsarealsobeingpresentedaroundthegrowing and unsustainable environmental impact of the digital world which is largely powered by the use of fossil fuels.

Merpak takes great care in the responsible procurement of all of its raw materials. Paper, by far the largest purchaseisonlysourcedfrompapermakerswhoareabletocertifytheoriginoftheirpulpfrommanaged

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andfarmedplantationswhocomplywithFSCstandards.NotonescrapofwastepaperisthrownawayatMerpakbutisrecycledtofinditswaybackintothepapercycle.

Paper and print have a good environmental story to tell and Merpak will be part of the story telling.

Electricity, water and other consumable usages are carefully monitored at Merpak andcontinualimprovementsaremademinimisetheenvironmentalimpactsoftheseconsumptions.

Economic SustainabilityWe are mindful of the declining demand for our products worldwide.TheMerpakExecutiveTeamhasworkedhardtoensureoureconomicsustainabilityby employing various strategies to enable us to grow in a mature market. We have discoveredthatquality,deliveryduedateperformanceandservicearethreecriticalaspects our customers need.

Throughtheupgradingofourmanufacturingequipmenttoworldstandard,thetrainingofourstaff,maintainingexcellentrelationshipswithoursuppliersandtheimplementationofERP,ShopFloorDataCollectionandProductionPlanningSystems,Merpakhas,beenabletogrowitslocalandSub-Saharanmarketsharesignificantly.Merpakhasdiversifiedintothermalrollproductionandintroducedaninternationalrangeofpolythenepostalandpackagingsolutionstoourgroupofproducts.Wecontinuetolookforopportunitiestoinvestintothemanufacturingofalliedprod-uctsthatwillallowustoleverageourproduction,sales,administrationknowledgeand systems.

Social SustainabilityStaffdevelopment,transferofskillsandemployeewelfareareacornerstoneofouroperationsandourCorporateSocialInvestmentSchemessupportmalnourishedchildreninourregionthroughtheStopHungerNowCampaign,supporttheAlexandraUnemployedAssociationwiththefreeuseofspaceandinvestmentsinBlackSeed,anorganisationthatsupportsmanyruralprojects.

We subscribe to our Employment and Procedures Manual which contains our Mission andVisionStatementsaswellasdetailsourValuesofIntegrity,Achievement,Respect,LeadershipandEnjoyment.

Governance and RiskThe Merpak Board is responsible for Corporate Governance and Risk.RegularmeetingsandmeetingofvariousSub-CommitteessubscribeandadheretoallSouthAfricanlegislation.

FinallyAtMerpak,wetakesustainabilityatalllevelsveryseriously.WearemindfulthatwehaveanenvironmentalimpactinouroperationsbuttakegreatcareinworkingtominimisethisimpactbycontinuallymakingallMerpakpeopleawareofhow,justbydoinglittlethingslikeswitchingthelightsoffandfixingdrippingtapswecanallmakeadifference.

We look forward to building on this inaugural report into the future. We know we can makeadifference.

DeonJoubert

Product rationalisation/ order volume reduction

Digital Print advancements

Customer relationship management

Raw Material supply

Key Priorities

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Merpak Sustainability

2

Sustainability is of great importance to Merpak and we strive to include our whole organisationinourstrategicresponse.OurstrategyiscommunicatedviaMerpak’sfive-yearEmploymentEquity(EE)plananditssupportingstructures.Inthisway,allemployeesremaininformedaboutMerpak’spositionandcancontributetostrategy.

TheMerpakboardisultimatelyresponsibleforstrategicdirectionandworkstoafive-yearplanningcycle.Ourcurrentenvisagedplanspans2013through2018andincludes components such as resources planning, people development, skills transfer andcompanytransformationaddressingtheexpectationsofstakeholdersandoptimisingourassociationwithRotunda.

Merpak has an interest in Rotunda, a Cape Town based provider of Thermal Paper Solutions.Asaresult,theMerpakStrategywillincreasinglyconsideropportunitiesforsynergybetweenthetwofirms.

Merpakishighlyawarethatitisoperatinginaresource-scarceworld.Ourbusiness’relianceontreesforrawmaterialrequiresthatweputsustainabilityattheforefrontofourstrategicplanningprocess.Itiscrucialthatweidentifyandunderstandthematerial sustainability issues within the global context of environmental and social challenges currently being faced. Therefore, our stakeholder engagement and risk management processes inform the commitments we make to monitoring and improving our sustainability performance.

Approximately95%ofMerpak’sproductrangeismadeupofpaperwhichmeansthat, without a sustainable system, a large carbon footprint could result. In order tominimisetheimpactofourproductsoncetheyreachourcustomers,weactivelyraiseawarenessoftheimplicationsandeducatethepublicabouttheneedtorecycle.

Centraltoourawarenesscampaignaretacticssuchastheprintingofeducationalmessagesonenvelopesanda12-monthradioadvertisementwhichaimedtoeducateconsumersaroundthebenefitsofrecycledcontentenvelopes.

2.1 Environmental Impact

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2.2 Merpak Sustainability Story

Merpak’sproductsstartasseedlingsinnurseries followed by the growing of trees in

Forest Stewardship Council managed forests.

Installationoftwoimproved,energyefficient

vacuum pump motors = reductionof200amps

Paper can be recycled up to 7 times

Sustainable CommunicationElectronic waste is now the fastest growing component of the municipal waste stream. The amount of electronic products discarded globally has sky rocketed recently with 20-50 million tonnes generated every year. Toxicity is the main concern with e-waste; containing lead, mercury, cadmium and a number of other substances.

Afterabout12 years the trees are felled, the logs processed by sawmills andreams/reelsoffineorKraftpaperare supplied to us.

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Of the 12000 litres water stored on premises, we use 3000 litres per day through a

recycling pump system.

We save 33%

ofinkperprintthroughinnovativedesign,reducing material cost and bringing us in line withSouthAfrica’spendingVolatileOrganicCompounds(VOC)legislation.

Installationoftwoimproved,energyefficient

vacuum pump motors = reductionof200amps

Printandpaperwasteisnowavaluableandsoughtafterresourcewithmarketdemand

being high. Paper has a 59% recovery rateinSouthAfrica,fargreaterthanglass(25%)andplastic(17%)

We have switched from hot air blowing Leister systems to

infra-red energy drying on machines where possible.

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Organisational Profile

3

MerpakEnvelopes(Pty)LtdisaSouthAfrican-based,privatelyownedfirmthatwasfoundedin1969byBernhardAdelfangandPatrickDanielFrancisHinton.RegisteredshareholdersconsistofTheAdelfangFamilyTrust,DeonJoubert,WisemanMadinaneandPeterAdelfang. WearealeadingEnvelopeManufacturerandenjoyaprominentpositionintheSub–SaharanAfricaregion.Thecompanycurrentlyemploys163staff,deployedinJohannesburgandCapeTown.

MerpakEnvelopeswasfoundedattheendofthe1960’sera,whereformalcommunicationbynewspapersandmagazines,notepadmessages,officecommunicationanddistributionofmailwasadailyprioritisedchore.Thedemandfor these products led to the increased investment of Envelope technology available tomanufacturersworldwide.TheSouthAfricaEnvelopeIndustrywasdominatedbyNasionalePers,TransvaalEnvelopeCorporation,TensionEnvelope,PirieAppletonandJohnDickinsonduringthatperiod.

Merpak found their niche in this industry, adding huge value to consumers looking foralternativesuppliersbytheirTrademark“Leadersinthefield”.Bypurchasingthefirstreel-fedpocketmachinewithgussetmakingtoolinginAfrica,theneedsoftheGovernmentPrinter,BarclaysBank,BuildingSocieties,SouthAfricanRailwayServices,Financialmailmagazines,WholesalerIndustryandsmallretaileroperationswere supplied.

Thisdemandedtheneedforskillsexpertiseinarapidlystriving,high-speedoutputmarket,changingpaperpropertiesinalignmentwithmailhousedemands.Therewasa,hugedemandforbrown(Manila)paperduetothelowercostofferinginthemarketcomparedtotraditionalwhitebondpaper.

Mondi Paper reversed out of making brown paper for this industry at the end of the1980’sandgaveSappianopportunitytoclinchthismarketforthemselves.Thiscausedsevereupheavalintheindustryandnorealcompetitorpaperwaslocallyavailable, except for a few small recycled mills feeding the cardboard Industry. Two yearsago,SappiclosedtheirPEMill(Adamas)andrelocatedthemakingofrecycledbrownpapertoSappiEnstra.AnotherstrategicdecisionwastakenbySappitodiscontinuethemakingofvirginfibrebrownpaper(Manilagrade),allowingthemto increase sales of Chemical Cellulose to the middle East due to the expansion of theNgodwanamill;asthisnecessitatedtherequirementofthatparticularhardwood species.

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3.1 ProductsMerpak manufactures, prints and converts a wide range of envelopes with an extensiveselectionofwindowranges,sealingoptionsandassortedpapersubstrates.

Merpaksuppliesenvelopestomailinghouses,banks,stationers,etc,throughoutSouthAfricaandregionalofferingthroughoutSouthernAfrica.

Inserting Envelopes

Standard Stationery stock envelopes

up to 4/5 colour Direct mail envelopes

X Ray Envelopes

Post safe

Simpli-Stik range

Kwik seal range

Internal office mail

Block Bottom Gussets

Credit card pouches

Special envelope shapes

Greeting Card envelopes

Reusable envelopes

TheMerpakproductofferingisunderpinnedbysupportingservicesthatdirectlyad-dressclientrequirementsandinclude,forexample,rapidandsuper-rapidresponsedeliveryoptions.

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Sustainability Reporting

4

Merpakhasidentifiedkeystakeholdersthatareengagedinastructuredmanner.Theseincludeconventionalstakeholdergroupssuchassuppliers,customers,employees,unions,localcommunitiesandregulatorsbutalsoincludespecificstakeholdersthataremateriallyrelevanttotheMerpakvalueproposition.

Overtheyearswehaveforgedlong-standingrelationshipswithmachinesuppliersinGermany.Thesefirmsdeliverexceptionalserviceandtheserelationshipsaremaintainedviafrequentcommunicationorvisits.

WindowmaterialisprocuredfromsuppliersinGermanyandFrance,astherearenolocalequivalentsthatcandelivertoourqualitystandardsand/orbulkbuyingneeds.TheSouthAfricanPostOffice(SAPO)isakeystakeholderandwearecontinuingtoengagewithSAPOaroundissuesofimportanceinthevaluechain.Merpakhasengagedwithanumberofcouriercompanies(includingPostNet),howeverthesefirmsareultimatelyalsodependentonSAPO.

WeunderstandthatSAPOisagainconsideringahybridmailsystemforsendingcorrespondenceviaacryptedsecurefibre-opticlinebetweenmajorhubs,whichwillallowStatementorInvoiceprintingatthehubnearesttothefinaldestination,packagingsuchdocuments–intoenvelopes–beforepostingitoverthe“lastmile”.Merpak,asaleaderintheinsertingfield,seesanexcitingopportunitytopurposefullyengagemoreadvantageouslywithSAPO.

4.1 Stakeholder Engagement

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4.2 Risk Management PolicyArecentHazardRiskAssessmentdeliveredabaselinefromwhichtwoHIRO(Haz-ardandIncidentReportingOnline)Officerswillnowoverseetheimplementationofanimprovementprogram.Ariskassessmentiscurrentlyunderwayandduringthecourseof2016,anaccreditedHealthandSafetyproviderwillconductanotherandadditionalaudit.

Merpak,whichsourcesitsmainpaperstockfromasingle,SouthAfrican-basedpapersupplier,isworkingactivelytomitigatethisriskbyexploringalternativessuppliersthatarecapableofdeliveringtothestandardsthatwerequire.

ThemajorityofMerpak’sinternalreportsaremadeavailablesecurelyonline.Amongother users, our auditors make extensive use of our reported data. We aim to produce our inaugural GRI Sustainability Report in 2014.

Stakeholder Grouping Engagement Methods Engagement Frequency Key Issues Emerging from Engagement and Responses

Employees

Forummeetings,internalMemo’s,EEdepartmentalrepresentation

Quarterly,generalcommunicationasrequiredbyoperationalactivities

GeneraladherencetoSABSstandards,productinnovationandstockreductionwithshorterleadtimes

Customers

Monitoring weekly stock move-ments and replenishment, on sitemeetings,

Weekly/monthly Factorytoursassistingwithproduct knowledge and key issuesrelatingtoinsertionatMail houses.

Suppliers

Bi-Annualvisitstoensurequali-ty products are supplied.

Weekly/monthly Noinnovationfromsupplierscur-rentproductrange,assistingwithcostreductioninthesustainabil-ity model

Unions AsrequestedbyUnionofficials Onrequest Newsletterdistribution,annualwagenegotiation

Local CommunitiesEngage in community pro-jects-feedingscheme

Annual Broaden the scope and engage with the underprivileged during distributionoffoodparcels

Regulators

H&Scommittee,outsourcedcompanies to assist with traininginterventioninassuringcompliance

Quarterly EnsuringcompliancewithOHSact and adherence to local re-quirementswithcommunityFireDepartment

SAPO

OnsitemeetingsatorwithSAPOatcustomerbase.

Monthly Engaging with various sub divisions,beitAdministrative,Procurement or regional Mailing divisions

Engagement

4.3 Reporting and Assurance

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4.4 MaterialityAbasicmaterialityprocesshasbeenundertakenbyMerpakandwewillbegoingthroughthisprocessinmoredetailinthecourseof2014–ayearinwhichweplantoproduce our inaugural GRI Sustainability Report.

Given the nature of the Merpak business, primary impacts are based in energy andnaturalresourceconsumption,bothofwhicharestrategicallyimportantinoursustainabilityplanningprocess.Ongoinginitiativestoreducerelativeenergyconsumptionareprovidinguswithmeaningfulsavingsandthisispositioningthecompanyadvantageously.Therequirementfortimber-basedpapermaterialshasdrivenustoexaminethewaysinwhichwecannotonlyreducenegativeimpactonthesepreciousresourcesbutpositivelyimpacttheavailabilityoftheseresourcesonthe planet. We have achieved this through our procurement of recycled materials or materialsthatarecertifiedasbeingsourcedfromsustainablymanagedforests(FSC).

Wealsorefertothewebsitewww.twosides.infofordecisiveandfactualinformation.

Importance

Risk

High

Low High

1. Post Office 2. Customer Relationships3. Waste and Emissions4. Employee Labour Unions5. Technology Dependence6. Maintenance 7. Competitor Behaviour8. Raw Materials

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2

1

4

8

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Materiality Map

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4.5 Data ManagementOurproductionstatisticsarecaptureddailyandproductionincentivesarelinkedtothisdata.Theclosemonitoringoforder-flowthroughSymphony(Merpak’sreal-timeproductionplanningsystem)providesthemanagementdataneededforseniordecision-making.

OurERPsystem,(calledForward)alocallydevelopedsoftwareprogrammeiscosteffective,handsonanddynamic.WehaveinstantaccesstoFinancials,enablingusto react and manage the business, implement sound business decisions without the ‘redtape‘reportinglines.

Weareabletotrackeachenvelopebacktoabatch,thatbatchtoaproductionrunandfromtherebacktoaspecificreelofpaperfromthemill.Thisgivesusfullaccountability right back to the source in the case of an issue. We have recently upgradedthesystemandthenewadditiongivesusagraphicviewoftheentirefactoryandeachproductionstage,includingmachineloadings.

WeutilizeanAccsysHRsystemwhichtakescareofpayrollandallHR-relateddatacapturingandreporting.

Merpak’sITdepartmenthasvariousbackupsystemsinplaceandweuseanexternaldatamanagementfirmtoensurefullrecoveryatanytime,whoofferprofessionaladviceandkeepsusintouchwithcurrentITpractices.

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Governance5

TheBoardatMerpakconsistsofthreeExecutiveDirectors,someofwhomalsofacilitatemeetingsontheHealthandSafetyForum,EEandMerpakForum.MerpakisalsoinvolvedonthePrintingSAForum’s.

TheHealthandSafetyForumoperatesasacommitteeandincludesrepresentationfromalldepartmentsinthefirmtoensurelegalcompliance.

TheMerpakForumensuresongoingcommunicationfromManagementtostaffwithregardtothebusinessinterests,includingtheeconomicenvironment,competitorbehaviour,sales,etc.Forumrepresentativesfromalllevelswithinthefirmprovidefellowemployeeswithfeedback.Minutesofmeetingsarepostedonnoticeboardsasamatterofcourse.

We subscribe to our Employment and Procedures Manual. It outlays our Mission StatementandisdescriptiveofourMerpakValuesofIntegrity,Achievement,Respect,LeadershipandEnjoyment.

Deon Joubert Peter Adelfang Wiseman Madinane

Executive Directors

Health and Safety Forum

Employment Equity Forum

Merpak Forum

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5.1 Values, Principles and Codes

Our core values are:

5.2 Memberships and AssociationsOurinvoicingandcreditapplicationsareinlinewithPrintSAstandards.(FormallyPrintingIndustriesofSouthAfrica)

Inordertobenchmarkourselvesagainstaqualitystandard,weadhereandcomplytoSABS882–2011Specificationforenvelopes.WeproducetothestandardssetbyMerpak’sInternalQualitySystem.Inspiredbyourmotto,namelytobethe‘Lead-erinthefieldofqualityPrintedandPaperenvelopes’,thispolicyensures“beyondcompliance”-levelsofproductionandquality.Otherslogansaresometimesusedtopromoteourcauseandadvertising,dependingontheinstancerequired.

OtherqualityassurancecompaniesincludeSGSforexportorders.

AllMerpakpaperissourcedfromsustainableforestsandcarriestheForestStewardshipCouncil(FSC)mark.MoreabouttheFSCatwww.fsc.org.

Wearealsopartneredwith:

PrintingSA

ShopSA

FlexoprintingAssociation

German chamber of commerce

JCCI

PrintingCraftsman’sAssociation

AtMerpak,westriveforexcellenceinallthatwedo,encouragingindividualstoworkwithpassion;tounleashtheirpotentialinordertoachieveself-fulfillment.Wearealsoaleader,facingthefuturewithcourageandoptimismwithrespectforourcountry, our environment and for the people in our community.

Achievement | Enjoyment | Respect | Integrity | Leadership

Our mission is to be a preferred supplier to those who have a need for envelopes or relatedproducts,bystrivingforexcellenceinquality,serviceandvalue.Wewillbeaprofitablecompanythroughtheresponsibleuseofourassetsandbyseekingfairvalue for our goods and services.

Wearealsobuildingahighperformanceworkforcethatreflectsthediversityofoursociety through the development of our people , their skills and dreams.

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Economic Sustainability

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Merpak operates in a mature and even declining market.

Alternativeformsofcommunicationarereadilyavailableandtheartofletterwritinghasallbutbeensurpassedbysocialmediaplatforms.

Transactionalmailvolumessuchasinvoicesandstatementsarealsobeingreplacedbyelectronicmedia,oftenonthepremisethatdigitalis“greener”thatpaper.Wework,incollaborationwithTwoSideswww.twosides.info,aninternationalgroupinchallengingthesemythsandpresentingthefactsaroundpaperbasedcommunication.

Merpakisfocussedonmitigatingtherisksassociatedwithpaperandpaperbasedcommunicationbymaintainingourhighlevelsofquality,improvingourdeliveryduedate performance and striving to be the market leader in the supply of plain and print-edenvelopesinSub-SaharanAfrica.

Diversificationintothemanufacturingofalliedpaperproductsandaddingpolythenepost and packaging products to our range has enabled Merpak to grow market share in a sustainable way.

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EnvironmentalSustainability

7

Wearemakingsignificantstridesinimprovingourenvironmental performance, increasing our energy efficiencyandreducingtheimpactofouractivitiesonthe environment.

Merpak’ssustainabilityprogrammesincludeaMaintenance Programme which revolves around engagement with a maintenance crew, who is responsiblefortheupkeepofequipmentinoperation.AllourmachinesaregearedtowardstheIndustryrequirements,whereoldermachineryhasbeen replaced by state of the art envelope machines over the last decade.

With these new technology upgrades, our machine park can be benchmarked with that of Global manufacturers.

Merpak has set about measuring key sustainability performancedatainoperations.Thisdataactsasabaselineforimprovementandefficiencyovertime.

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7.1 Products and Services

Merpak’scommitmenttosustainabilityincludesconsiderablefocusonproductresponsibility. Up to four million people handle our products daily, where we introducedabroadawarenessandeducationcampaigntoeducateconsumersabouttherecyclabilityofpaperandtheneedforrecycling.Tacticsincludeda702 radio campaign and factual environmental messages on Merpak envelopes.

WesupportanewinitiativecalledTwosides,wherebytheircommongoalistopromotetheresponsibleproductionanduseofprintandpaper,anddispelcommonenvironmentalmisconceptionsbyprovidinguserswithverifiableinformationonwhyprintandpaperisanattractive,practicalandsustainablecommunicationsmedium.Thisorganisationandinitiativewillbedrivenbyalocalrepresentative,holdingatitleofaCountrymanager,spearheadedbyoneofMerpak’sDirectors.(www.twosides.info)

7.1.1 Environmental Performance

Merpak’sproductsstartasseedlingsinnurseriesfollowedbythegrowingoftreesinforests.Afterabouttwelveyearsthetreesarefelled,thelogsprocessedbysawmillsandreams/reelsoffineorKraftpaperaresuppliedtous. We use this paper in our envelope manufacturing process and supply our products to retailers, mail houses and other clients.

Paper is manufactured from a variety of sustainable and managed sources of pulp. Trees are farmed to be harvested for paper and other uses. Managed plantationsproducefarmoreoxygenandsequestmorecarbondi-oxidethanmature forests. More and more paper mills are relying on biomass as an importantalternativetofossilfuelsinthegenerationofpowerforthepapermaking process.

Envelopemanufacturingandprintingdoeshaveaone-timecarboneffectduringproductionbuttheendproductisfullyrecyclableandattheendofitslife will compost completely leaving no harmful traces in the environment.

MerpakwillonlyusepaperthatcarriestheFSCmarkconfirmingthatthepapercanbetracedthroughitslifecycletothemanagedandsustainableplantationswhere it was grown.

Merpakalsooffersenvelopesmanufacturedfrom100%post-consumerwastepulp as well as envelopes made from paper sourced from sugar cane waste.

ThefinalrecipientsofMerpakproductsaretypicallypeoplewhodisposeofourproductsathome.Unfortunately,SouthAfrica’srecyclingsystemsarenotyetasadvancedaswewouldlike,butschoolshaveprovenexcellentatcollectingwaste paper and returning it to the mainstream via recyclers.

7.1.2 Product Lifecycle

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7.2 Materials

99%oftheMerpakproductrangeismadeofpaper.Theother1%ismadeupofglues and ink which are added during the manufacturing process.

Merpak would like to make exclusive use of water-based inks. Unfortunately, however,insomeinstancestheseinkscausepapertocurl.Wetrustthatasolutionwill present itself in the near future.

Inthemeantimewehavepioneeredaprintingprocessthatsavesupto33%ofinkuseperprint.Apartfromthematerialcostreduction,thishasalreadybroughtusalmostinlinewiththeindicatorsexpectedtofallfromSouthAfrica’spendingVolatileOrganicCompounds(VOC)legislation.

7.3 Energy Efficiency

Merpakhasinitiatedenergyefficiencypoliciesandhasembarkedonaprocessofreplacingand/orupgradingcertainmechanicalprocessesinouroperations.

Wehaveinstalledskylights,powerfactorcorrectorsandenergyefficientmotors.Wehave also switched from hot air blowing Leister systems to Infra-red energy drying on machineswherepossible.Weutilizeafrequencyinvertoronaleadingpump,whichmonitorsourvacuumneedsandsuppliesproductionprocessesalignedforbestenergy usage.

Inaddition,twonewenergyefficientvacuumpumpmotorsresultedinareductionof approximately 200 amps of power and a standby generator supports our UPS systems and servers.

ConsumptionofDirectEnergycurrentdailyDemandchargeof263KWhislargelyassistedbymaintainingapowerfactorof0.98.IndirectEnergyconsumptionofourmachinelinesinmanufacturingtheproductisspreadoverdifferentdepartments;dependingonthequantityandproductionleadtimeavailabilityoftheworkcentres.

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7.4 Water

We are focused on monitoring and reducing water use wherever possible, particularlywherewater-intensiveactivitiesareconcerned.

Merpakmeasureswaterusageandtwocoolingtowersaddconsiderableefficiencytoourwatercycle;howeveraveryoldpipesysteminourareafrequentlyleavesuswithoutwater.Thishasledtotheintroductionofagravity-fedwatersystemtosupportcertainablutionfacilitiesinadditiontothe12000litresofwaterstoredonsite for our Vacuum plant use.

Werecycleandreusewaterandwillcontinuetoimplementmeasuresforimprovedwater usage going forward. Of the 12 000 litres of water stored on-site, 3000 litres per day is used via a recycling pump system.

Currentconsumptionfiguresof318000KLofwaterpermonthcanvary,dependingofworkshiftsdeployed.WaterissuppliedtothetwomanufacturingplantsbytheRand Water Board and Cape Town City Water board.

7.5 Waste

AtMerpak,wasteminimisationbeginswithprocurementpoliciesthatensurethatthebestpossiblevolumesandqualityofmaterialsaresourcedattheoutset.Policiesextendtothepromotionofreuseandrecyclingactivitiesthatcollectivelyimpactonthevolumesoffinalwaste.

Ourgluesarewater-solubleandpapercanberecycleduptoseventimes.Allourwaste paper is recycled and collected daily from a large Waste paper company in JohannesburgandCapeTown.Thebulkinturnisaddedbackintothemainstreamofproducing packaging material.

Weseparateourpaperwasteinto“white”and“brown”wastebeforeitiscollected.“White”wastegoesdirectlyintothewastehandler’s‘pulper’while“brown”wasteissortedonourpremisesbeforecollection.Wealsoseparateplastic,tinandfoodwaste and are considering the measurement of separated waste.

TotalAnnualwastefiguresrangebetween1100-1250tons.Thesefiguresvaryyearon year depending on the envelope sizes manufactured, as they determine the cut out size of the waste.

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7.6 Supply Chain

Merpakintroducespotentialclientstotheworkingsofour supply chain at proposal stage. Constant supplier engagementandfacilitationbetweenoursupplychainandclientshelptoupholdourservicelevels.Atoperationallevel,theavailabilityofpaperstockandthepriceofthatstockarecriticalsupplychainelementsandservicelevelagreementsareinplaceatalltimes.

7.7 Biodiversity

Therequirementfortimber-basedpapermaterialshasdriven us to examine the ways in which we can not only reducenegativeimpactonthesepreciousresourcesbutpositivelyimpacttheavailabilityoftheseresourcesonthe planet. We have achieved this through our procurement of recycled materials or materials that are certifiedasbeingsourcedfromsustainablymanagedforests(FSC).

We also refer to the website www.twosides.info for decisiveandfactualinformationabouttheimpactoftheprintingindustryontheenvironment.

Allofourpaperissourcedfrompulpsourcedfrommanagedplantationswheretreesarespecificallygrowntobeharvested.Nonaturalforestsorindigenoustreesareusedasfibresourcesforourpaper.Moretreesareplantedthanharvestedeachyear,efficientlyproduceOxygen and consume Carbon Di-Oxide during their growing phase are naturally irrigated and are planted in areas not usually suitable for other forms of agriculture.

BothmajorpapermakersinSouthAfricaonlyplanttimberonapproximately70%oftheirlandleavingnaturalforests,watercoursesandsensitivegrasslandsfallowtoallowthenaturalbiodiversityoffaunaandfloraintheseareastoflourish.

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SocialSustainability

8

Merpakisactiveintheupliftmentofpreviouslydisadvantagedcommunities.

WefundedtheestablishmentofAuraCafénearthetownshipofAlexandra,SouthAfrica.ThecaféispopularwithMerpakstaff,particularlyourshiftworkers,whothenhave ready access to meals outside normal trading hours. It also provides for some ofthesocialneedsoftheAURAstaffandtheunemployedintheregion.

Weregularlyparticipateinprojectsthatrequireboth,ourfinancialsupportandstaffinvolvement.Duringthe“StopHungerNow”drive,Merpakpurchasedfooditemsthat our employees packed in assembly lines set up in our factory.

WefrequentlymakedonationstotheBlackEmpowermentTrustbecauseitsupportsanumberofworthyinstitutionsrangingfromchildren’s’homesandeducationaltruststoorganisationsinsupportofthedisabled.

8.1 Labour Practices and Human Rights

Vacanciesareadvertisedinternallybeforeweconsiderexternalcandidatesfromthelocalcommunity.LabourpracticesincorporatetheprinciplesandrequirementsoftheBasicConditionsofEmploymentAct.Weoutsourcelabourrelatedincidents,wagenegotiationtoPrintingSA.

8.2 Economic Empowerment

Jobcreation,localrecruitment,employeeeducation,skillsdevelopmentandanumberofsocialinvestmentinitiativesinsupportofthewellbeingofthepeopleinourregion,makeupoureconomicempowermentcontribution.

WeareaLevel4ValueAddingBlackEconomicEmpowerment(BEE)enterprisewhichallowsourSouthAfricanclients125%BEEprocurementspendrecognition.Weare25,1%blackowned.

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8.3 Employment and RemunerationEmployment and Remuneration Summary % Earnings Employee TotalWorkforce Top Management 12.26% 4

Senior Management 7.14% 5Mid Management 18.11% 12JuniorManagement 34% 48Semi Skilled and discretionarydecisionmaking

27.56% 84

Unskilledanddefineddecision making

0.93% 8

Gender Female 25.08% 47Male 74.92% 114

Region Western Cape 12.3% 26Gauteng 87.7% 135

Age Group 20 - 29 6.24% 2030 - 39 14.46% 2840 - 49 34.02% 5650 - 59 35.34% 4760 - 69 8.5% 870 - 79 1.44% 2

WeareinterestedintheBEEstatusandsustainabilitycredentialsofallfirmsinoursupplychain.AtpresentwerequireBEEcertificatesfromoursuppliers.Infuturewewill encourage a greater focus on sustainability.

Merpakhasassistedtoestablishfour100%blackownedenterprisesthatprovidefulltimeemploymentandoffervariousgoodsandservicestoMerpakandother customers.

Diversity and Equal Opportunity

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8.4 Occupational Health and SafetyMerpak,throughtheeffortsofourHealthandSafetyCommittee,isfullycompliantwithSouthAfrica’sOccupationalHealthandSafetyAct.AnongoinghazardaudithashelpedtoestablishourOccupationalHealthandSafetybaseline.

8.5 Training and EducationTraininganddevelopmentiscentraltoMerpak’scompetitiveadvantageandtherefore,ourstrategy.WeofferanOfficeLearnershiptounemployedschoolleavers,whichisrecognizedinternationally.TheauditingandqualityInstitutionisregulatedbytheFassetSeta.ItrequiresstudentstoattendFormalcollegetrainingattheGermanChamberofCommercetrainingInstitutioneachweek(calledCats),foraperiodoftwoyears,tostudythefollowingsubjectsin: •Communication •Finance • Literacy • Business Studies

MerpakisalsoanaccreditedproviderwiththecurrentFP&MSeta.WerunaCompleterecognizedApprenticeProgrammeinwhichalltraininghoursarerecordedinlinewiththeSetacontractualobligationandregulations.SuccessfulcompletionensuresaRecognisedArtisanCertificate.

WeareassistingemployeestoattainaFinancialLearningCertificate(FLC)forcandidatesasrequiredbytheSkillsDevelopmentActcomingintoaffectin2014.ThroughaprocessofdirectAptitudetesting,thosequalifyingindividualswillbeidentified.Thiswillbecomeanecessaryrequirementinattendinganyfurtherbridgingcourses.ThisisdrivenbytheEEcommittee.

WehaverecentlyengagedwithTheUniversityofWitwatersrandthroughPrintingSA,whereourfirst2JuniormanagementemployeesareattendingaBusinessManagementProgramme(BMP).ThiscanbecomplementedbyaseniorManagementDevelopmentProgramme(MDP)atalaterstage.

8.6 Community DevelopmentWe are concerned with building local economic value and we recruit locally whereverpossible.Proceedsfromoursocialandcommunityinitiative,theAura(AlexandraUnemploymentResidents’Association)Caféareusedinsupportofthelocal unemployed.

Merpakparticipatesinthe‘STOPHungerNOW’project,whichdeliversnutritiousmeals to preschool children in our community who are not receiving a balanced diet.

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GRI Index9

INDICATOR RESPONSE COMPLIANT1.1 Page 4, 52.1 Page 32.2 Page 11, 122.3 Page 11, 212.4 Page 3, 382.5 Page 3, 11, 12

2.6 Page 112.7 Page 11, 122.8 Page 11, 7, 322.9 Therehavebeennosignificantchangesduringthereportingperiodregardingsize,

structure,orownershipincluding:-Thelocationof,orchangesinoperations,includingfacilityopenings,closings,andexpansions;-Changesinthesharecapitalstructureandothercapitalinformation,maintenance,andalterationoperations.

2.10 Noawardswerereceivedoverthereportingperiod.3.1 Page 33.2 There was no previous report.3.3 Page 33.4 Page 3, 383.5 Page 15, 16, 173.6 Page 33.7 Page ?3.8 Noreportingonjointventures,subsidiaries,leasedfacilities,outsourcedoperations,

andotherentitiesthatcansignificantlyaffectcomparabilityfromperiodtoperiodand/orbetweenorganisationshasbeenrequiredinthecurrentboundaryandscopeof this report.

3.10 Therehavebeennorestatementsofinformationinthisreport.

3.11 Therehavebeennosignificantchangesfrompreviousreportingperiodsinthescope,boundary, or measurement methods applied in this report.

3.12 Page 34 - 373.13 Page 384.1 Page 11, 214.2 Page ?4.3 Page ?4.4 Page 16, 214.5 Page ?4.7 Page ?

Compliant PartiallyCompliant

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INDICATOR RESPONSE COMPLIANT4.8 Page 22

4.10 Page ?4.12 Page 22, 314.13 Page 224.14 Page 164.15 Page 174.16 Page 15, 16, 174.17 Page 16EN1 Page 27EN2 Page 26EN3 Page 27EN4 Page 27EN5 Page ?EN6 Page 27EN8 Page 28EN9 Nowatersourcesaresignificantlyaffectedbywithdrawalofwater.EN10 Page 28EN11 Nolandowned,leased,managedin,oradjacentto,protectedareasandareasofhigh

biodiversity value outside protected areas.EN12 Therehavebeennosignificantimpactsofactivities,products,andservicesonbiodi-

versity in protected areas and areas of high biodiversity value outside protected areas.EN13 Nohabitatshavebeenprotectedorrestored.EN14 Page 29EN15 NoIUCNRedListspeciesandnationalconservationlistspecieswithhabitatsinareas

affectedbythecompany’soperations.EN18 Page 29EN19 Merpakwasnotabletorecordemissionsdataduringthisreportingperiod,

but is aware of the importance of reducing emissions wherever possible.

Wearepursuingeffortstoreduceourrelianceonfossilfuelsanddecreaseour greenhouse gas emissions to improve the overall carbon footprint of our operations.

EN21 Page ?EN22 Page 28EN23 Therehavebeennosignificantspillsduringthereportingperiod.EN24 NotreatedwastedeemedhazardousunderthetermsoftheBaselConventionAnnex

I, II, III and VIII has been transported, imported, exported and no transported waste hasbeenshippedinternationally.

EN25 Nowaterbodiesandrelatedhabitatshavebeensignificantlyaffectedbydischargesofwaterandrunoff.

EN26 Page 7, 8, 9, 25, 26, 27, 29EN27 Page 28EN28 Nofinesand/ornon-monetarysanctionsfornon-compliancewithenvironmentallaws

andregulationshavebeenincurredinthereportingperiod.

GRI Index

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INDICATOR RESPONSE COMPLIANTEN29 Nosignificantenvironmentalimpactsoftransportingproductsandothergoodsand

materialsusedfortheorganisation’soperationshaveoccurredinthereportingperiod.

HR1 Therearenosignificantinvestmentagreementsthatincludehumanrightsclausesorthat have undergone human rights screening.

HR2 Therearenosignificantsuppliersandcontractorsthathaveundergonescreeningonhumanrightsandactionstaken.

HR3 Nospecifictrainingrelatingtohumanrightspoliciesandproceduresinoperationstakesplaceatthistime.Employeesdo,however,undergoandinductiontrainingpro-cessthatisinformedbythepoliciesandprinciplesoftheLabourRelationsActandtheBasicConditionsofEmploymentAct,bothofwhichrefertohumanrightsissuesthatare relevant for the company.

HR4 Noincidentsofdiscriminationhavebeenrecorded.HR5 Nooperationshavebeenidentifiedinwhichthatrighttoexercisefreedomofassocia-

tionandcollectivebargainingmaybeatsignificantrisk.HR6 Nooperationshavebeenidentifiedashavingsignificantriskofincidentsofchild

labour.Internal(andexternalBCEA)policyisstrictlyappliedintermsoflegalemploy-mentagerequirements.

HR7 Nooperationshavebeenidentifiedashavingsignificantriskforincidentsofforcedorcompulsory labour.

HR8 Allsecuritypersonnel(100%)receivetrainingthatincludespoliciesandproceduresthat relate to human rights.

HR9 Therehavebeennoincidentsofviolationsinvolvingrightsofindigenouspeople.HR10 Noplacesofoperationhavebeensubjecttohumanrightsreviewsand/orimpact

assessments.HR11 Nogrievancesrelatedtohumanrightshavebeenfiled.LA1 Page 32LA4 Page ?LA5 Minimumnoticeperiodsforemployeesregardingoperationalchangesaregoverned

bytheBasicConditionsofEmploymentActof1996(theAct).Inrespectoftermina-tiontheseare:-Duringthefirst6monthsofemployment,workerswillbeentitledtoatleast1weeks’noticeofterminationoftheirservices.-Betweenthefirst6monthsand12months,workerswillbeentitledto2weeks’notice.-Iftheyhaveworkedformorethanayear,workersareentitledto4weeks’notice.ThisappliestocollectiveagreementsforworkerswhosecontractsaredeemedtobegovernedbytheAct.

LA7 Page ?LA8 Page 33LA10 Page ?LA11 Page 33LA13 Page 32LA14 Page 32SO2 Allbusinessunitsanddepartmentsareregularlyanalysedforrisksrelatedtocorrup-

tion.

GRI IndexCompliant PartiallyCompliant

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INDICATOR RESPONSE COMPLIANTSO3 Thecompanyhasnotyetintroducedanyclear-cutanti-corruptionpoliciesandproce-

dures.SO4 Therehavebeennoincidentsofcorruption.SO6 Nofinancialand/orin-kindcontributionstopoliticalparties,politicians,andrelated

institutionswererecordedinthereportingperiod.SO7 Nolegalactionsforanti-competitivebehaviour,anti-trust,andmonopolypractices

havebeenrecordedinthereportingperiod.SO8 Therehavebeennofinesorsanctionsfornon-compliancewithlawsandregulations.SO9 Nooperationshavesignificantpotentialoractualnegativeimpactsonlocalcommuni-

ties.SO10 ?PR1 Page 25, 26, 29PR2 Therehavebeennoincidentsofnon-compliancewithregulationsandvoluntarycodes

concerning health and safety impacts of products and services during their life cycle.PR3 ?PR4 Therehavebeennoincidentsofnon-compliancewithregulationsandvoluntarycodes

concerningproductandserviceinformationandlabelling.PR6 Thecompany’smarketingandadvertisingcommunicationsaregovernedbytheSouth

AfricanAdvertisingStandardsAuthorityaswellascertaintermscontainedintheConsumerProtectionAct.Thecompanyensuresthatthesetermsandconditionsareupheldbyretainingexpertexternalmarketingandadvertisingconsultantswhoareprofessionallyfamiliarwithalllegalrequirementsinthisregard.

PR7 Therehavebeennoincidentsofnon-compliancewithregulationsandvoluntarycodesconcerningmarketingcommunications,includingadvertising,promotionsandsponsorship.

PR8 There have been no complaints regarding breaches of customer privacy and losses of customer data.

PR9 Therehavebeennofinesfornon-compliancewithlawsandregulationsconcerningthe provisions and use of products and services.

EC2 Page 23EC4 ThecompanyhasnotreceivedanyfinancialassistancefromGovernment.EC6 Page ?EC7 Page 31, 32, 33

GRI Index

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Merpak Contact DetailsHEAD OFFICEMerpakEnvelopes(Pty)Ltd14 third streetWynberg, Gauteng Sandton 2090SouthAfrica

POSTAL ADDRESSMerpakEnvelopes(Pty)LtdP O Box 39344Bramley, Gauteng Sandton 2018SouthAfrica

ThisreporthasbeencompiledbyMerpakwiththeassistanceofGSACampbellSustainabilityConsultingusingtheGlobalReportingInitiative(GRI)G3.1Guidelines.Thecompanyisself-declaringaCApplicationLevel.ThecompanybelievesthatthelevelofindependenceandguidanceachievedbytheappointmentofGSACampbellissufficientforthisinauguralreportanddoesnotbelievethatathirdpartyassuranceprocessisnecessaryatthistime.

Thisreportisavailableonourwebsiteatwww.merpak.co.zaandanyquestionsorcommentscanbeaddressedto:support@merpak.co.za

STRATEGY SUSTAINABILITY MARKETING||

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