1 06 Sustainability Report Sonae SGPS, S.A.
3 05.Index 1. Chairman s Statement Sonae Group business approach and portfolio 2.1 Governance Model Share Ownership Holding Company Structure Group Ombudsman 3. Our approach towards sustainable management Shareholder Value Environment in the Governance Model Knowledge Community and Education 3.1 Sonae Holding s role in relation to the management practices of sub-holdings Global Compact and Sustainable Development 3.2. Values and Principles 3.3. Managing New Risks: Strategic and Operational Sonae Risk Management Process Business Risk Model 4. Commitments and Guidance to the sub-holdings 5. Main Group Sustainability Milestones 6. Examples of Sustainability Strategy in action in the sub-holdings 6.1 Risk Management 6.2 Eco-Efficiency 6.3 Business Chain 6.4 Human Capital 6.5 Stakeholder Dialogue 6.6 Community Involvement 7. New Risks transformed into New Markets and New Businesses Glossary
4 The publication of our first Sonae Group Sustainability Report reflects our intention to communicate in a transparent way with our key stakeholders, in particular investors, employees and the general public.
5 1.Chairman s Statement This Report describes how sustainability is incorporated into the Sonae Group s management structure and practices, with special emphasis on corporate governance and risk management; the commitments that Sonae SGPS, as the Sonae Group holding company, makes in relation to our sub-holdings, in its role as the manager of a portfolio of diversified businesses; and a range of sustainability practices that have been or are being implemented across the Sonae Group. The Report demonstrates how Sonae, in addition to creating economic value, acts responsibly both environmentally and socially. Although this is the Group s first sustainability report, it is a continuation and extension of the work begun in 2001, when we published our first Group Environmental Report. Each of our sub-holdings have been making progress in terms of walking the talk of sustainability, as the following pages will show. All sub-holdings, with the exception of Sonae Capital, will issue Sustainability Reports during In the case of Sonae Sierra, 2006 will be the third consecutive year for which an outstanding sustainability report has been published, an achievement of which we can feel justifiably proud. The specific characteristics, history and market sectors of each of the Group s businesses have been determining factors in the manner in which sustainability continues to be integrated into the governance model of each, and explain the differing speeds of implementation. As a portfolio manager, we encourage our businesses to seek constantly to improve the manner in which we integrate social and environmental issues into our management practices, to develop appropriate reporting and measurement, and to anticipate new trends in order to identify new business opportunities arising from sustainability. Due to our specific circumstances and challenges however, each sub-holding is directly responsible for identifying the specific opportunities that may arise from this integrated approach, and to define the best strategy to maximise value creation. In addition to the key role of Sonae SGPS to identify overall Group guidelines in this area, one of other main tasks is to play an active role in international organisations in which the sustainability agenda is being developed and defined. In this respect, Sonae SGPS continues to play an active role in the World Business Council for Sustainable Development and in activities undertaken by the Portuguese branch of this organisation, the BCSD Portugal. In 2004, Sonae SGPS signed the United Nations Global Compact, a voluntary commitment which involves the disclosure of information each year on how its 10 principles, covering labour, environmental and anti-corruption practices, are applied and complied with. It is an area that the Group is actively working on to improve. In 2005, Sonae SGPS also signed the World Safety Declaration, a document that was approved at the XVII World Health and Safety at Work Congress. This declaration aims to establish goals and define criteria for the evaluation of safety improvements introduced at the workplace, and seeks to encourage signatory companies to cooperate in the search for better solutions and to report results achieved at the next Congress meeting that will take place in Sonae will be present and participate actively in this event. In this document therefore, we report on our practices and explain our ambitions and commitments, but we also accept our limitations. At the same time, we commit to constantly strive to improve in these areas which are so crucial for business and society at large. Belmiro de Azevedo Chairman Sustainability Report 06 Sonae SGPS, S.A. 05
6 Sonae was founded in 1959 in the wood products business and today is a diversified, integrated group made up of different management teams. In 2006, the Sonae Group generated turnover of 4,383 million euros and directly employed 33,181 people spread across several continents, cultures and races. In Portugal, the gross value added (GVA) generated to society was 0.8% of Portuguese GVA and our employees represented 0.6% of the Portuguese employed population. 6 Sonae SGPS, S.A. Sustainability Report 06
7 2. Sonae Group business approach and portfolio If we have the right financial resources, shareholder stability, professional management, good educational and training levels as part of our culture and principles, than we have the key ingredients to work together as a team and succeed in the long term Belmiro de Azevedo, speech given to Sonae Industria Managers, 26th September 2000, Troia, Portugal Sonae started business in Maia, in the wood products business and more specifically the production of highpressure decorative laminates. During its first twenty years of existence, Sonae developed as a small to medium size business, focused on the area of wood based panels. During the 1980s, the company began a period of rapid growth, which coincided with Portugal s entry into the European Union. During this period, Sonae also began a process of diversification through the acquisition of a supermarket chain, followed by the launch of the first Continente hyper-market in Portugal. Today, Sonae SGPS, SA is the group holding company, managing a diversified portfolio of businesses: Modelo Continente (food and non-food retail), Sonae Sierra (development, management and investment in shopping centres), Sonaecom (mobile and fixed telecommunications, media, Internet and IT services) and Sonae Capital (tourism, engineering services and real estate development, facility management, insurance brokerage and risk management, and seed and risk capital). During these years of growth, the various group companies developed their businesses in an independent manner, identifying specific strategies in relation to their markets. Sonae Indústria, the Group s first business area in wood based panels, was spun off from the Group in The spin off was considered necessary to give Sonae Indústria improved access to international financial markets to help fund its future growth. Modelo Continente is currently operating entirely in Portugal but is considering possible options for future growth outside the country. Sonae Sierra has focused on an international strategy. It currently has a portfolio of major shopping centre projects under construction and centres already in operation, in Brazil, Germany, Greece, Spain and Italy, in addition to Portugal. Sonaecom has been operating in Portugal since 1994 (but only known as Sonaecom since 1999), and is focused on Telecommunications, Media, and Software and Systems Information (SSI). Over the years, Modelo Continente was listed on the Portuguese securities market (Euronext, Lisbon) between 1987 and 2006, and Sonae Sierra between 1997 and Currently, Sonae SGPS and Sonaecom are those companies listed on the Euronext. In view of the economic, social and environmental impacts of the Sonae Group, we have publicly committed to develop our business activities based on the principles of sustainable development, which imply a continuous challenge to maximise positive and minimise potentially negative impacts on the environment and society. Share Price Performance (Base 100) Dec.01 Jun.02 Dec.02 Jun.03 Dec.03 Jun.04 Dec.04 Jun.05 Dec.05 Jun.06 Dec.06 Sonae SGPS Sonaecom Sustainability Report 06 Sonae SGPS, S.A. 07
8 The Group portfolio is currently structured as follows: Sonae SGPS 100% 50% 51,92% 100% Modelo Continente Sonae Sierra Sonaecom Sonae Capital Food and Non Food Retail Shopping Centers Telecommunications Services Hypermarkets Supermarkets Consumer Electronics Apparel Sports Goods Computers DIY Kidswear Travel Agencies Pharmacies Mobile Communications Portugal Sierra Investments Sierra Management Sierra Development Sonae Sierra Brazil Portugal Spain Greece Germany Italy Brazil Mobile Fixed Media S&SI 1 Portugal Tourism Engineering Services and Real Estate Development Facility Management Insurance Brokerage and Risk Management Seed and Risk Capital Portugal France Brazil = Size of Free Float 1 Software & Systems Integration Each of the four sub-holdings has specific environmental and social impacts as a direct result of their activities, as the chart below shows. Major Impacts by sub-holding Modelo Continente Sonae Sierra Sonaecom Sonae Capital Environmental. Energy. Transport. Waste. Climate Change. Land Use. Supply Chain. Energy. Transport. Waste. Climate Change. Water Consumption. Land Use. Supply Chain. Energy. Waste. Electromagnetic Fields. Energy. Waste. Transport. Water. Land Use Social. Direct and Indirect job creation. Community involvement. Health and Safety (employees, customers and visitors). Employee satisfaction. Food safety. Supply Chain. Direct and Indirect job creation. Community involvement. Health and Safety (employees, tenants, suppliers and visitors). Responsible Procurement. Employee satisfaction. Supply Chain. Digital Inclusion. Community involvement. Health and Safety (employees, customers and visitors). Employee satisfaction. Information Society. Direct and Indirect job creation. Community involvement. Health and Safety (employees, customers and visitors). Food safety. Employee satisfaction In today s complex world, the Group s impacts, risks and opportunities are interlinked, and involve economic, environmental, social and governance factors. This report aims to inform our stakeholders about the way we have been managing these impacts and risks. 08 Sonae SGPS, S.A. Sustainability Report 06
9 The Economic and Social Impact of the Sonae Group Our Human Capital Employees* Direct employment by Sub holding Modelo Continente Sonae Sierra Sonaecom Sonae Capital * Staff numbers as at % 1% 2% Type of job contract at Sonae Group 15% 94% Our Wealth Generation Direct Economic Value Generated and its distribution in 2006 (Million euros) Economic Value Retained Total Economic Value Distributed Total of Direct Economic Value Generated ,000 2,000 3,000 4,000 4,536 4,937 The importance of the Sonae group for the Portuguese Economy in : Gross Value Added (GVA) in Portugal represents 0.8% of Portuguese GVA Employees in Portugal represent 0.6% of total Portuguese population employed 5,000 6,000 1 Based on data from the National Statistical Institute (INE): Portuguese population figures and preliminary GVA Permanent Contract Temporary 85% Total Nº Employees = 33,181; 67% Female; 33 % Male Total Nº Employees in Portugal = 98% Total Nº Employees abroad = 2% Our Wealth Economic Value Distributed to our stakeholders Structure of the Economic Value Distributed 13% 4% 1% Operating Costs Staff Costs Providers of Capital Government 82% Operating Costs = External Suppliers and Services + Cost of Goods Sold and Materials Consumed + Other Costs Staff Costs = Employee Wages ands Benefits Payments to Providers of Capital = Financial Costs + Dividends Payments to Government = Taxes (excluding deferred taxes) Wealth Generated by the Sonae Group 2006 Turnover (Sales + services rendered) 4,384 Turnover in Portugal 4,060 Gross Value Added (GVA) 1,112 Operational Profit EBIT 357 Operational Cash Flow EBITDA 599 Amounts in million Euro GVA = Turnover + Changes in stocks + Own work capitalised + Supplementary income - cost of goods sold and materials consumed - External supplies and services For more detailed financial information about the Sonae Group, please go to the Investors Relations section on the company website at Sustainability Report 06 Sonae SGPS, S.A. 09
10 2.1. Governance Model The issues of governance and the transparency of a company in relation to markets is one of the corner stones of a credible and sustainable market economy. It is up to all of us to contribute towards preserving the credibility and sustainability of the economic model in which the organisation of our society is placed......[we are] increasingly responsible for the transparency and the way in which we prepare, control and communicate relevant information to the markets. We know that this information is vital for investors and financiers to take decisions. Belmiro de Azevedo, XX Economic Round Table Meeting, November 2002, Barcelona... we have consistently taken, over the years, clear decisions in favour of free and fair trade, transparent reporting to the authorities and society, internal social cohesion within the group, and have actively supported international organizations dedicated to spreading principles of good governance. We were the first Portuguese company to join the World Business Council for Sustainable Development, and we were also one of the founding fathers of the Portuguese Chapter of the Council. We have also joined the European Corporate Governance Institute Belmiro de Azevedo, IV Top Managers Meeting Sonae Sierra, December 2004 Hand in hand with the growth of the Sonae Group has been a constant concern to adopt best worldwide management practices in relation to governance and sustainable development, as well as the need to understand the signals coming from international organisations in order to anticipate management trends and potential business opportunities. Our values and principles which were finalised and published in 1999 reflect this reality, and are, currently, wholly compatible with the demands of international society. Sonae seeks to associate itself with leading international organisations, requiring management to strive to continually update and improve itself, in order to meet the expectations of our various stakeholders and of society in general. Sonae Group Share Capital Ownership Efanor Investimentos, a family holding company, of which Belmiro de Azevedo is chairman, holds a majority stake in Sonae SGPS. It held approximately 53% of the shares and 56% of the voting rights at 31 December Sonae SGPS is listed in Lisbon on the Euronext stock exchange. The remaining free float is widely held. Although the Sonae Group is controlled by Belmiro de Azevedo through a majority stake in the share capital and voting rights, the Group is not run as a typical family business, where bloodlines can take precedence over individual merit and family issues can confuse business affairs. In our opinion, the existence of an active and involved reference shareholder also brings greater stability to management, allows a consistent and longer term view to be taken, facilitates the process of motivating employees and brings greater willingness to seek and adopt innovation, while at the same time promoting a balanced and equitable approach to all of our shareholders and other stakeholders. It also means that there are no conflicts resulting from the sharing of power between controlling shareholders or from the separation of the interest of shareholders and management. Responsibilities are focused and very clear and a management system based on trust and transparency becomes an imperative. Sonae Holding Structure A management team supported by one key shareholder needs to include the very best managers available. They should possess a high level of drive, curiosity and a desire to learn about new ideas and concepts, and they should be brave enough to question the status quo and to propose new approaches to business. It is fundamental that there should be open and transparent discussions among management about business strategy and its operational implementation. Therefore, Sonae has developed procedures to ensure that:. strategies are evaluated. day to day management is analysed critically. risks are monitored. there is a continuously developing internal control system 10 Sonae SGPS, S.A. Sustainability Report 06
11 It is crucial that the company is able to implement internal procedures that allow strategies to be evaluated, management to be followed up on and critically appraised, risks to be monitored and internal control systems implemented. And at the same time, ensure sustainability in the medium/long term, by adopting environmental, social and labour policies which preserve natural resources and place value on human capital. Belmiro de Azevedo, XX Economic Round Table Meeting, November 2002, Barcelona Sustainability Report 06 Sonae SGPS, S.A. 11
12 . business is sustainable in the medium and long term. environmental policies are adopted to improve ecoefficiency and to minimise our environmental footprint. policies and processes are adopted to maximise our human capital As shown below, the two key governing bodies of Sonae SGPS are the Board of Directors made up of 5 executive and 4 non-executive members (of which 3 are independent), and the Executive Committee. An important feature of the Executive Committee is that it includes the CEOs of each of the sub-holdings. This provides a direct link between each of the businesses areas and the Holding company, which facilitates the sharing of business strategies across the Group. In this way autonomy is given to each subholding to decide the best means of managing its own businesses, while ideas are shared and activity is coordinated at the top Group management level. Management of Strategic Decisions Executive Álvaro Portela Ângelo Paupério Nuno Jordão Paulo de Azevedo Board Audit and Finance Committee Chairman: Michel Bon Álvaro Cuervo Luiz Lampreia Nuno de Azevedo Sonae SGPS Board of Directors Chairman: Belmiro de Azevedo Non-Executive Álvaro Cuervo Luiz Lampreia Michel Bon Nuno de Azevedo Board Nomination and Remuneration Committee Chairman: Belmiro de Azevedo Luiz Lampreia Michel Bon Approves:. Annual Report and Accounts. Annual Business Portfolio Strategy. Annual Business Plan and Significant Changes thereto Decisions about Strategy Implementation Vice Presidents Álvaro Portela Ângelo Paupério Investors Relations José Luis Amorim Executive Committee CEO: Belmiro de Azevedo Vice Presidents Nuno Jordão Paulo de Azevedo Human Resources José Côrte-Real Responsible for:. Operational Management. Business Portfolio Management. Financial Coordination. Career Development Among Top Managers Corporate Communications Cristina Carneiro Management Control and Administration José Luis Amorim Finance André Sousa Legal Luzia Gomes Ferreira Audit and Risk Management Domingos Sequeira Tax Management David Ferreira Group knowledge sharing and coordination bodies also exist, such as:. Finance Committee. Audit Committee. Human Resources Consultative Group. Innovation Forum. Sustainability Forum The Executive Committee of Sonae SGPS is made up of the CEOs of each of the Group sub-holdings 12 Sonae SGPS, S.A. Sustainability Report 06
13 Sonae Group Ombudsman Via its website (www.sonae.pt), fax and mail, the Sonae Group has always given staff and the general public direct access to the Sonae Group Ombudsman, who reports directly to the Chairman of the Sonae Group. This has proven to be an effective way of facilitating the reporting of complaints, which are followed up internally by a manager of the Sonae Holding Company to make sure that independence and freedom of opinion are guaranteed and that all issues are treated equally and fairly. In all our businesses, employees are encouraged to contribute suggestions and to openly communicate with management on any issues which may impair their responsibilities or may threaten their well being. The Sonae Ombudsman in 2006 During 2006, claims were received by the Sonae Group ombudsman. The average time to resolve a claim in 2006 was 34 days with a falling trend in all quarters to reach 22 days in the last quarter of the year. Considering the number of claims received and the complexity of the problems involved, this is a demonstration of the effort made by the services involved to improve turn around time. Claims still not resolved at year end 2006 (2% or 38 cases) relate to recent cases or those still in analysis. Almost all claims are related to customers (99% in 2006).
14 Klaus Post
15 3.Our approach towards Sustainable Management We are in favour of competition and believe that a key feature of successful organisations should be their concern for the personal development of their employees as well as the strength of their leadership. From the point of view of Corporate Social Responsibility, a company cannot be simply a money making machine. In addition to giving the maximum return on investment to shareholders, businesses have to earn the respect of the societies in which they operate, preserving social cohesion, protecting the environment, and ensuring the long term sustainability of the planet on which we live. Belmiro de Azevedo, Leadership Forum, London Business School, November 2006 The management of sustainability at the Sonae Group has always been part of the strategic development of the company. Sustainable Development and its application to business has become one of the main concerns of the Group, while it has also been perceived as a way of developing new businesses and reducing costs. Human capital has also always had a key place in the growth strategy of the Group. In addition to training which is specific to the improvement needs of each employee, employees are encouraged to develop their creativity and constantly search for excellence. A thirst for excellence, and a habit of constantly challenging the businesses, demands a culture of permanent innovation and entrepreneurship 1 : a situation that can only be achieved with a responsible and professional team. In the same way, environmental issues have always been an important part of the Group s management. For example, various training sessions have taken place on eco efficiency so that an internal Group culture exists which allows the continuous identification of new methods of putting this concept into action, with the goal of minimizing energy and water consumption, and maximizing waste recovery. This approach has been progressively integrated into our management model, and implemented by each of the sub-holdings by actions specific to their businesses. We have made progress in the way that we practise the principles of sustainable development, but recognise that we will have to develop a more structured approach to sustainability in particular in relation to international best practice guidelines and the growing importance of nonfinancial information. Sonae Approach to Sustainable Management Environment Social Governance Maximization of future Economic Value of the Company. Eco Efficiency. Responsible Environmental Management. Implementation of Environmental Management Systems Shareholder Value Shareholder Value Sustainable management means managing our company in order to maximise its profitability, while internalising environmental, social and governance issues into our business strategy, since these will have an influence on our financial performance. Such a complex subject that is of concern to all Group businesses led our Chairman in 1994 to challenge all sub-holdings to develop an environmentally responsible attitude towards business, and to consider the environment as a competitive advantage.. Knowledge. Empowerment. Matching skills with job functions. Creativity. Questioning status-quo. Community involvement (social, educational support). Values. Business Principles. Risk Management. Transparancy. Group Knowledge sharing and coordination In the same way, environmental issues have always been an important part of the Group s management. 1 Belmiro de Azevedo, Leadership Fórum, London Business School, November 2006 Sustainability Report 06 Sonae SGPS, S.A. 15
16 Environment in the Governance Model In 1995, Sonae become a founder member of the World Business Council for Sustainable Development (WBCSD), thus formally demonstrating our conviction that environmental issues would become key factors in the success of companies and that business strategy based on the principles of sustainable development represented good corporate governance. Between 1995 and 2000, the Sonae Group ran several workshops, conferences and internal eco-efficiency programmes, and in 1999 launched the ECO 2 XXI programme, aimed at encouraging eco-efficiency across the Group. In 2000, Sonae broadened the composition of the Environment Forum to include Environmental Coordinators from all sub-holdings. It was a platform for sharing information, experiences and best practices across Group, and for challenging the sub-holdings to take action on environmental issues. The Forum was responsible for planning, organising and animating training and awareness events as well as for general communication of environmental matters across Sonae s businesses. It also had the responsibility of advising the Board of Directors of Sonae on all issues concerning the environment. The Chairman of the Forum was appointed by the Board. In 2001, the Sonae Group published its first Environmental report. A further report was issued in 2003, which included key environmental indicators from each sub-holding. Between 2000 and 2004, a quarterly environmental newsletter - Eco News - was also published for distribution to all Group employees, available both in print and on the Internet, in order to increase environmental awareness and encourage best practices. In 2005, the Environment Forum evolved into a Sustainability Forum and in 2006, all sub-holdings were invited to strengthen their sustainability strategies and issue sustainability reports. Some sub-holdings have already begun this process, while others are now beginning to develop a more structured approach to sustainable management. Knowledge In Sonae, people must have the desire to learn, and they must embrace change as part of their careers (summary speech by Belmiro Azevedo, Sonae Indústria Managers Meeting, September 2000, Troia.) In order to develop a business management system that is able to understand, anticipate and incorporate the challenges that today s business world presents to our operations, we must be able to question the status-quo and think creatively. Continuously updated knowledge and the constant search for excellence constitute the corner stones of an innovative, modern and bold organisation. The training of all Sonae staff is a factor that differentiates Sonae Group management, since all staff are constantly challenged to learn. In 2004, the Sonae Learning Centre was set up in the Sonae headquarters building in Maia. This Centre is mainly targeted at specific training for top managers and technical employees, and its main purpose is to provide training, conferences, seminars, short and medium term courses, exhibitions and social events of various kinds. We have developed specific training sessions for business units, but also opportunites for longer term study such as Post-Graduation courses, specifically built to meet the skill improvement needs of our employees. These courses are developed in partnership with Portuguese and International universities. Some of our employees also complete MBAs and other post-graduate courses in the main European Business Schools Number of Sonae employees present in Learning Center courses Year Nº , , Sonae SGPS, S.A. Sustainability Report 06
17 Community and Education We believe that business can contribute towards minimising the impact of social problems that are part of the society in which it operates. We also recognise that access to cultural activities through partnerships with other businesses, individuals or organisations, has a significant contribution to make to the development of society. Therefore, the Sonae Group has developed social initiatives among its sub-holdings to support projects that lead to positive long term results within the community. In 2006, around 300 undergraduates and graduates attended. During the day long event, the participants learn about the Sonae Group, and meet senior Sonae managers. The programme s main aims are to allow talented young people to get to know the Sonae Group and to discover quality management potential in Portugal. Despite being independent from the Sonae Group, it is appropriate to mention the Belmiro de Azevedo Foundation, a private charitable institution which supports innovation and change in favour of the community, especially in the arts, science, technology, education and training. Through contributions made by sub-holdings to the Foundation, the Group in turn contributes towards a better educated and demanding civic society. Each subholding engages with the community both directly and via the Foundation. The Foundation also supports the children of employees with scholarships for those children with outstanding academic performance, in order to encourage their academic development. Between 2000 and 2006, sub holdings, through the Foundation donated a total of approximately 24 million euros. Since 1986, Sonae has organised the Contacto Programme, which takes place annually and to which final year undergraduates from Portuguese Universities and young post graduates with MBAs are invited. More than 3,500 undergraduates have taken part in the programme since then, and several hundred have been invited to join the Group. Sustainability Report 06 Sonae SGPS, S.A. 17
18 3.1. Sonae Holding s role in relation to the management practices of sub-holdings A culture of innovation and entrepreneurship demands [...] a culture of risk taking. It demands that one puts confidence in people, creating organisations in which they individually are encouraged to fight against conformity, to constantly propose new solutions. It also demands that there exist in organisations performance reward and recognition systems, which are not exclusively based on results, in the strictest meaning of the term. Belmiro de Azevedo, Leadership Forum, London Business School, November 2006 When he defined the Ten Guiding Principles, Belmiro de Azevedo also stated that the values... should last a long time, should not be a code in the sense of a creed or mantra, and also could not be too specific at the risk of being too dogmatic and not leaving enough freedom to all our companies to change their behaviour without changing the values. Belmiro de Azevedo, The Value and Limits of Ethical Codes in Business Activity The growth of the Sonae Group has taken place with a lean and agile management structure, designed to allow each company to have the capability of anticipating, adapting and reacting to change, which is one of the basic competitive advantages for the success of any company. This approach to management was already present in 1985 when the Chairman defined the ten guiding principles for Sonae managers (see page 20). Already at that time, there was the concern of making the business grow in a unified and stable manner, but allowing creativity, flexibility and freedom of action by the managers of each Group company in order to encourage a bold attitude to identify business opportunities, and not run the risk of losing them because of excessive bureaucracy or functional issues. For the success of this management approach, professional human resources are needed, who combine boldness, a sense of responsibility for their actions together with a questioning attitude towards the world around them. A management style of this kind is closely associated with the visionary and guiding character of its leader, who constantly challenges the status quo both inside and outside the company, while at the same time setting himself as an example of frugality and rationality in the management of the group s businesses and in personal working habits. The Group is thus united by a set of values and principles, by a governance model and by a common risk management methodology, in which it is expected and desirable that each sub-holding advances and grows in accordance with the opportunities identified in the markets in which it operates. The Group is therefore made up of many companies, consolidated into sub-holdings, each of which are in different phases of development in certain areas. Global Compact and Sustainable Development In 2004, Sonae SGPS signed up to the ten principles of the UN Global Compact, which asks companies to embrace, support and enact within their sphere of influence a set of core values in the areas of Human Rights, Labour Standards, the Environment and Anti-Corruption, Sonae thus committed itself publicly to report on the manner in which these principles are applied in the daily management of the Group. Some of these principles, such as the absence of child or forced labour, and the existence of anti corruption practices, are not only incorporated into Portuguese law but also are part of the Sonae values and principles, which are applied by all employees in all parts of the world where Sonae does business. Nonetheless, we recognise some limitations in our ability to control the practices of all our suppliers, and although we are not aware of any specific case along the value chains of our sub-holdings, we commit to find alternative suppliers if we discover any who are not complying with the Compact principles. Each sub-holding has been working and will continue to work on actions that move in the direction of these principles, and we are conscious 18 Sonae SGPS, S.A. Sustainability Report 06
19 of the need for certain aspects to be addressed with more specific actions in the future. One area will be to look more closely at increasing our influence on the management practices of our suppliers and subcontractors along the value chain, the scope of which will need to be defined with these key stakeholders. By signing the Global Compact, Sonae SGPS aims to drive its sub-holdings forward towards incorporating social, environmental and human issues in a more structured way into their daily management. It is each sub-holding s responsibility to develop the appropriate approaches, methodologies and actions to implement, and they must analyse in a continuous and evolving manner, how sustainability is related to their core businesses. For this to be possible, creativity, a forward looking approach and a sense of opportunity are the key elements in the process. We believe that strengthening sustainability in the core business and governance model of our companies is fundamental to the continuous success of our living company Values and Principles Ethics in Business [...] is the relationship between business and society [...] The reality we face today is that businesses need a licence from society to operate. Or putting in another way, businesses need to earn the respect of society in order to operate. Even in countries where we know that our competitors are taking advantage of the local way of doing business through kickbacks, we should refuse that practice and stick to our values of integrity and transparency without any kind of compromise. Even if we have to lose the deal or have to give up doing business in the country, it will pay in the future. We do not have to make deals that do not fit the policy of the Group. The more we refuse, the bigger will be our contribution towards a more transparent relationship with competitors, authorities and clients. Belmiro de Azevedo, IV Top Managers Meeting Sonae Sierra, December 2004 A set of values and principles have always existed as part of the Group s good management practices. Since 1985, the ten guiding principles defined below have been part of day to day management. They were targeted specifically at Group managers and focused on the key attributes that they should aspire to. Even at that time, the emphasis was put on a balance between leadership qualities, personnel development and competition on the one hand, and integrity, personal ethics, and community involvement, on the other. Sustainability Report 06 Sonae SGPS, S.A. 19
20 There is no business that can justify any compromise with these  principles, or with values such as integrity, personal ethics and social responsibility. The fight against corruption, both public and private, has always been and will continue to be at the top of the agenda of a group like Sonae Belmiro de Azevedo, Leadership Forum, London Business School, November 2006 These ten guiding principles are: 01. To be a leader, or have the capability of becoming one 02. To constantly improve their cultural knowledge 03. To be available, and physically resistant during demanding working periods 04. To accept criticism from superiors and subordinates, and consider and be able to respond in a constructive manner 05. To have great respect for the work of subordinates, ensuring that they always have good working conditions, and have appropriate training to continuously improve their level of knowledge 06. To be known inside and outside the company for the rectitude of their character 07. To be highly demanding of themselves, be dedicated to their work and to find the appropriate balance between their personal and working lives 08. To have a rigorous code of conduct and ethical values 09. To accept the challenge of internal and external competition 10. To continuously search for excellence, which will be achieved as a result of the cumulative impact of good decisions taken over time. Their publication gave the markets advanced warning as to how Sonae would focus on the professionalism and ethical behaviour of its staff. a spirit of cohesion, the shoots are open, unrestricted, signifying creativity. This is how Sonae sees its future. In 1999, the Sonae Group Business Values and Principles were defined, which evolved naturally from the ten guiding principles for managers, to a set of values and principles applicable to all employees and sub-holdings. They are flexible enough to allow each sub-holding the freedom to develop their own specific values and principles related to their own business problems and challenges. Working in several countries with different cultures and different ways of conducting business is an opportunity for our employees to broaden their mind set, improve their understanding of different cultures, and expand their professional and personal knowledge. All the above needs to be achieved with a high level of respect for people and the environment. This is why it is so important to maintain a consistent set of values that are visible in our past activities, so that we can be seen as credible players when we decide to implement projects with high levels of change, and which will have inevitable consequences for our companies and our employees. Sonae values and principles provide the foundation for the policies, organisational processes and risk management of the Group. In 1993, Sonae presented its new logo designed to signify the capability for growth and permanent innovation in the group, and the energy, flow and synergies among all its businesses. While the ring of fire is closed, signifying For a group of Sonae s size operating in different countries and cultures [...] there is often no way but to abide by our principles. Our Values and our Principles can be viewed as the glue that keeps us together and guarantees our strength and common future. Belmiro de Azevedo, IV Top Managers Meeting Sonae Sierra, December Sonae SGPS, S.A. Sustainability Report 06