Environmental

Our extremely diversified structure, both with respect to sectors of operation and a geographical spread across Australia and New Zealand, gives rise to a potentially very wide range of environmental issues. This is the reason our Group environment policy requires business units to develop policies and procedures relevant to their particular circumstances. All such policies have to take account of our overarching guideline which commits the company to “placing strong emphasis on protection of the environment”.

A significant environmental initiative was announced in May 2007 by our Bunnings Home Improvement division. Bunnings will invest $8 million in new environmental projects and commitments involving re-fitting every existing warehouse store in subtropical mainland Australia with rainwater harvesting systems and in achieving carbon neutrality by the year 2015 or earlier. The new water-focused measures extend Bunnings’ active interest in reducing consumption of this precious resource. Its carbon neutrality goal will be progressed through a partnership with Murdoch University in Western Australia aimed at reducing reliance on grid-sourced energy and it will also make grants for carbon offsetting projects over the next two years.

Bunnings extended its successful plastic bag reduction programme to New Zealand in April 2007 following the very positive impact of the 10 cents per bag levy, introduced in Australia in September 2003, in cutting back on the number of plastic bags in the litter and waste streams.

The encouragement of use of fuels other than petrol and diesel is becoming increasingly important in the context both of lower overall pollution levels and the climate change debate. In the absence of special purpose requirements, all ‘tool of trade’ Group-supplied passenger cars must be suitable for liquefied petroleum gas (LPG) use because of its environmental benefits over petrol and diesel. We welcome government initiatives designed to increase consumption of LPG for passenger vehicles and signs that this is increasing demand for vehicle conversions.

We continue our efforts, through Kleenheat Gas, to expand the market for liquefied natural gas (LNG) as a substitute for diesel in the heavy duty vehicle and remote power generation sectors. Our $138 million investment in the construction of a 175 tonne-per-day LNG plant at the Wesfarmers LPG site in Kwinana and on distribution infrastructure and two remote area power stations will greatly expand the availability of LNG as an alternative fuel in Western Australia. The project is on schedule for completion in March 2008.

Group environmental indicators

Gaps remain in our data collection systems across the Group and this affects to some extent our ability to report on indicators of environmental impacts. Each business unit section contains all available and verifiable details from which the summary that follows is drawn.

Greenhouse gas emissions

As mentioned earlier, we base our measure of greenhouse gas emissions on Australian Greenhouse Office methodology.

Total direct and indirect greenhouse emissions for the Group in 2006/2007, converted to carbon dioxide equivalent, were estimated at 2.65 million tonnes (see Figure 2). This was 104,792 tonnes below emissions reported last year and compares with 2.6 million tonnes in 2004/2005. The Group number contribution from the Energy Generation remote power supply business relates to emissions from power stations built, owned and operated by that business.

The emissions figure reported last year of 792,357 tonnes for Curragh was incorrect and was adjusted to 732,534 tonnes.

As noted in the Managing Director’s welcome to this report, we were again in 2007 a respondent to the Carbon Disclosure Project (CDP). Our submission, which will be made public on the CDP website, provides full disclosure of our greenhouse emissions and, more generally, our approach to climate change issues. We made a submission to the Prime Minister’s Task Group on Emissions Trading in which we supported the establishment of a truly global emission trading scheme encompassing as many countries and as many gases as possible. We believe the best prospect for progress in this area is if such a scheme were to link up national and regional systems.

Towards the end of the year we commissioned external consultants to prepare a greenhouse risks and opportunities assessment for the Group as a follow-up to one conducted in 2003. The report was due to be received in October 2007 and will form the basis for future action.

As the Managing Director also noted, our contribution to the industry initiative known as the Coal21 Fund, which levies coal producers to fund research into clean coal technologies, is likely to reach $30 million over the next 10 years.

Energy use

Total estimated energy use for our Group in 2006/2007 was almost 19 million gigajoules, a decrease of about five per cent on last year. Consumption from Energy Generation is included on the same basis as for greenhouse gas emissions. Business–by–business usage is summarised in Figure 3.

Energy Efficiency Opportunities

All our wholly-owned operating businesses have been registered under the Commonwealth Government’s Energy Efficiency Opportunities programme. External consultants have been engaged to assist in the preparation and lodgment of Assessment and Reporting Schedules required to be submitted by 31 December 2007.

Water consumption

Estimated use of scheme and bore water totalled 7,111 megalitres (see Figure 4). This does not represent the Group’s entire water consumption as it excludes water used by our Kleenheat Gas business because many of its operating sites are leased and no data is available. The Insurance division, which is a low water user, does not measure consumption. Also, this total does not include recycled water used at the Curragh operations because of unreliability of measurement. Last year’s estimated total group consumption was 7,961 megalitres.

Waste

The waste numbers also require some qualification. Kleenheat Gas and Insurance do not measure solid or liquid waste, with the exception this year that Kleenheat recorded paint waste from its Kwinana and Camellia sites. Liquid waste for these businesses and for our Industrial and Safety division is confined mainly to vehicle oils which are collected during servicing. Bunnings does not measure liquid waste volumes. The total liquid waste figure includes discharges at CSBP’s Kwinana and Albany sites (these are both a mixture of process effluents and rainfall) and the Bibra Lake site. No other CSBP site generates liquid waste for disposal to the environment.

With these caveats, we estimate total solid waste at 361,457 cubic metres (compared with 543,326 last year) with liquid wastes of 581,861 kilolitres (727,381 kilolitres in 2005/2006).

Non-compliance/prosecutions

We are not aware of any significant non-compliance with environmental regulations or any prosecutions relating to environmental issues during the year.

CSBP notified the Western Australian Department of Environment and Conservation (DEC) of 48 reportable events, 16 of which were potential non-compliances.

Details of these matters are contained in the CSBP report. Environmental compliance records of our other businesses are covered in their reports.

Reference is made in the Kleenheat Gas report to an ongoing investigation by the Australian Competition & Consumer Commission.

National Pollutant Inventory (NPI)

All our Australian businesses that are required to report under the NPI mention this in their sections. Full details are available on the NPI website www.npi.gov.au.

Environmental expenditures

This year we have expanded the number of businesses reporting on direct environment-related expenditure by including Bunnings. In 2006/2007 this amounted to just over $20.3 million (see Figure 5). The total includes the cost of remediating contamination at sites previously owned by our forest products business, Sotico Pty Ltd. Only the Insurance and Industrial and Safety divisions are not included as they have no ready way of identifying such spending. Our expectation is that their outlays in this area would not be material in a financial sense. The criteria for reporting expenditure addressed salaries and overheads, specific environmental projects and any other costs (such as fees paid to consultants) for an environment-related purpose.

Contamination

Remediation of site contamination is an issue for some of our business units and details are provided in the relevant individual reports. The most significant of these involve our CSBP chemicals and fertilisers business and the former forest products operations of Sotico. Financial provision has been made to cover the estimated cost of these activities. We continue also to address contamination issues associated with sites once occupied by the transport business we sold in 2001.

CSBP is engaged in remediation of a former fertiliser site at Bayswater in Western Australia and of an ammonia/arsenic groundwater plume at its Kwinana site. In the case of Sotico, impacts of timber treatment plants at Pemberton and Manjimup are the focus of our efforts. Kleenheat Gas provides information in its report on remediation arising from former retail fuel sites. The major Sotico project, involving removal of contaminated waste materials from an area adjacent to the Pemberton timber mill, is covered in detail in the Case Study.

Extensive remediation was carried out on creosote contamination of soil and groundwater resulting from timber treatment at the Manjimup Processing Centre (MPC), formerly owned by Sotico, in the mid 1980s.  A site management plan, incorporating ongoing groundwater monitoring, was submitted to the Department for the Environment and Conservation (DEC) in late 2005 and is being implemented. To date, three full groundwater monitoring rounds have been undertaken. Results indicate no impact in the groundwater north west and north of the railway reserve to the west of the MPC. These results show that the remedial works carried out in the former creosote area were successful in removing the main source of contamination in this area. Our consultants, URS Australia, are in discussions with the DEC to identify the correct classification of off-site areas under the Contaminated Sites Act 2003 as well as looking at ways to better focus further groundwater monitoring events.

Work continues, with advice from external consultants, related to fuel spillages at our former transport business sites in Karratha, Carnarvon and Port Hedland. The Karratha land was sold in January 2006 but we continue to monitor groundwater contamination. At Carnarvon, residual contamination is being monitored following removal of soil from the site and at Port Hedland we are awaiting a response from the occupier of the site in order to determine a remediation strategy.