Kmart Australia is one of Australia and New Zealand’s largest retailers, with a network of discount department stores offering customers a wide range of apparel and general merchandise products. Kmart Tyre and Auto Service is one of Australia’s largest providers of car repairs, servicing, brake repairs and suspension, and tyre replacement.
Kmart sources its products through a diverse range of suppliers who manufacture in countries including China, Bangladesh, India, Indonesia and Cambodia. As at 30 June 2016, Kmart had 209 stores across Australia and New Zealand and Kmart Tyre and Auto Service had 248 centres across Australia. Kmart has 30,173 team members and revenue this year was $5,190 million.
Our business focuses on the following key areas to improve our sustainability:
- Energy efficiency
- Product quality and safety
- Ethical sourcing
- Diversity and inclusion
- Employee safety
- Community contributions
- Reducing waste
Maximising our energy efficiency
In October 2015, a business case was approved for the implementation of LED lighting in 114 Kmart stores.
Implementation started in March 2016 and 48 stores have now been completed, which represents all planned stores in New South Wales and Victoria. An average reduction in energy consumption of 31 per cent* has been recorded for stores where LED has been implemented so far.
In 2017, the LED program will complete its rollout in remaining Australian states, with a rollout planned for Tasmanian and New Zealand stores in 2018.
*The energy reduction was calculated by comparing each stores’ daily energy consumption (pre- and post-conversion) on days where temperature and trading hours were like for like.
Enhancing the health and safety of our team
Kmart’s total recordable injury frequency rate was 27.1, representing a 13.6 per cent reduction on the previous financial year. Our lost time injury frequency rate was 6.8, representing a 3.3 per cent decrease on last year.
The primary reason for the fall in injury rates was a reduction in sprains and strains from manual handling, which reduced by eight per cent for the year. Injuries arising from slips, trips and falls decreased by 41 per cent on the previous year due to the extra focus on housekeeping and cleaning up spills.
Key projects planned for 2017 include the implementation of a new incident reporting and investigation system; a safety leadership training program for line managers; a high-risk store intervention program; a new visitor/contractor induction program; an updated online injury management training program; and the provision of health management plans for store and distribution centre team members.
27.1total recordable injury frequency rate
Ensuring the safety and quality of our products
This year, Kmart made a commitment to improve the quality and safety of its products. As part of this commitment, 'quality' was made the key focus of Kmart’s annual supplier conference in Hong Kong, and a framework was developed to provide a foundation for our quality improvement programs. Linked to the quality framework, a number of new initiatives were also rolled out in the past year, including:
- the format and content of factory technical audits was enhanced to improve the consistency of quality standards across our supplier base;
- the frequency of compliance and safety re-testing of electrical appliances was changed from five years to two years to improve product performance and durability; and
- the standard procedures for factory-based inspection and testing of nominated (recommended) fabric mills were established to enhance fabric quality.
To further support the strategy, a new team structure focused on quality will be implemented in 2017, including the appointment of five new quality managers, including a Head of Quality for apparel and a Head of Quality for general merchandise.
Creating an inclusive culture
We aim to make Kmart right for everyone and ensure our team reflects the communities where we operate. In support of this commitment, in the past year we established long-term targets and a roadmap for diversity and inclusion, with a focus on women in leadership roles, employment of people with disabilities and Aboriginal and Torres Strait Islander team members. We also appointed a dedicated team member to develop and implement the plan.
The percentage of women in leadership roles at Kmart increased from 36.8 per cent in 2015 to 38.7 per cent this year. The increase was a result of enhanced leadership team focus, explicit goals, enhanced team member responsibilities and quarterly reporting of progress.
Over the year, employment of Indigenous people increased from 0.9 per cent of our workforce to 1.1 per cent. The increase was driven by improved cultural awareness amongst zone and store leadership teams and greater engagement with local communities. Although we had an overall net increase in the number of Indigenous people employed, 133 team members left the business in 2016. Identifying and addressing the underlying reasons for this turnover, and further developing our attraction and retention strategies, is a priority for the business.
Contributing to the community
As they have done in previous years, the Kmart team volunteered their time to help celebrate Christmas at the Royal Children’s Hospital in Melbourne, Victoria, by installing Christmas trees throughout the hospital. Children and their families unable to leave the hospital on Christmas Day also enjoyed gifts donated by Kmart.
Mission Australia was added as a beneficiary of the Kmart Wishing Tree Appeal, joining long-standing partner the Salvation Army to distribute the 386,000 donated gifts to disadvantaged people across Australia and New Zealand. More than $300,000 was also donated to our partners to continue their work in supporting families.
Locally, the Spare Change program continued to raise nearly $180,000 through the collection of coins at registers. Fundraising in Kmart stores benefitted 140 different community organisations, including the Mama Lana’s Community Foundation, Monash Special Development school and Reach Foundation.
Internationally, Kmart continued to support the work of the organisations Half the Sky Australia in China, Salaam Baalak Trust in India and Room to Read in Bangladesh.
As part of our Better Together plan, we aim to launch an updated community engagement strategy, with the objective of enhancing support for communities where we operate, both locally and globally.
Ensuring the safety and security of customer data
The safety and security of our customers' private information is a priority for Kmart. Although we have systems and procedures in place to protect customer information, in September 2015 we experienced an external privacy breach of our customer online product order system.
The breach included accessing details of customers' names, email addresses, delivery and billing addresses, telephone numbers and product purchase details. No online customer credit card or other payment details were compromised or accessed.
As soon as we became aware of the breach, we contacted all customers to notify them of the issue and immediate action was taken to stop any further information being accessed. We also engaged leading information technology forensic investigators to conduct a review and contacted the Office of the Australian Information Commissioner and Australian Federal Police to review the matter.
As a result of the incident, we have implemented a number of additional controls to minimise risk in the future, including enhanced monitoring and vulnerability testing of our systems and procedures.
Minimising our waste
Kmart’s waste-to-landfill increased by 38 per cent in 2016*. This increase was driven by unit sales growth in our retail stores, which resulted in an increase in general waste collections, as well as improvements in the accuracy of reported waste by Kmart Tyre and Auto.
As part of the Better Together plan, in 2016 Kmart commissioned an independent review of our store waste and recycling data and systems with the aim of setting a long-term target to reduce waste-to-landfill.
Along with the establishment of a target, the review identified a number of opportunities for improvement, including better separation and recycling of flexible plastic and cardboard, and the reduction or recycling of polystyrene packaging. In 2017 we will develop action plans to address these opportunities.
In addition to improved store waste management, our team are pursuing a number of opportunities to pack products more efficiently and eliminate cardboard packaging through the supply chain.
*Kmart Tyre and Auto inadvertently understated its FY15 waste to landfill figure due to a data handling error. As part of a detailed review in FY16, this error was corrected and this has informed a significant increase in reported waste to landfill.
Ensuring our products are sourced ethically
In 2016, there were five key initiatives aimed at enhancing Kmart’s ethical sourcing program:
As part of our Better Together plan we developed five-year goals and targets for ethical sourcing to enhance the focus of our program.
We reviewed and updated our ethical sourcing risk model to address gaps identified in the scope of our compliance program, including creating additional requirements for suppliers of national/international brand products, local vendors supplying own-brand products, and suppliers of goods-not-for-resale.
We started developing a strategy in relation to living wage, including joining the ACT collaboration and undertaking a wage audit of three of our factories in Bangladesh.
We continued to work with individual suppliers and factories and provided targeted training to improve the performance of factories where issues of concern have occurred, such as excessive working hours, consecutive working days, wage deficiencies, inconsistent records and health and safety issues.
We continued to build on our policy of factory transparency. All apparel and general merchandise factories in high risk countries that directly produce Kmart product are now published on Kmart’s website.
During the year, we conducted 775 ethical sourcing audits of our suppliers' factories. Although the majority of factories were approved or conditionally approved, our audit program and ongoing monitoring efforts identified eight critical breaches of Kmart’s code in the past year. The most common breach related to attempted bribery. All these factories have now been deregistered, meaning no further orders can be placed.
The focus for Kmart next year is the rollout of our Better Together plan, including associated governance, communication and reporting. Across our six key goals, priority projects include:
- Create an inclusive culture: further development of attraction and retention strategies for women in leadership roles, people with disabilities and Indigenous team members.
- Helping our communities thrive: launch of our updated community engagement strategy.
- Respect our partners: launch of a strategy focused on factory worker quality of life.
- Deliver great value products without compromise: implementation of a new team structure to reflect our 'quality' focus, including the appointment of a Head of Quality for apparel and a Head of Quality for general merchandise (previously there was one role covering apparel and general merchandise).
- Use natural resources responsibly: development of strategies focused on sustainable materials and sustainable factories.
- Reduce, reuse, recycle: the development of action plans to reduce waste to landfill, including minimising or recycling polystyrene packaging, and reducing cardboard packaging across the supply chain.
GRI Reference: G4-DMA, G4-PR6, G4-12