GOVERNANCE

SDG 16 (peace, justice and strong institutions) seeks to promote peaceful and inclusive societies for sustainable development, to provide access for all, and build effective, accountable and inclusive institutions – from small companies to multinationals and governments. The Exxaro board is committed to contributing positively to achieving this goal, especially through good governance.

The board drives the Exxaro strategy and budget, sets performance and culture expectations as well as the governance framework for its subsidiary and controlled companies, trusts and joint ventures. The board therefore continues to be the focal point and custodian of corporate governance for the group.

At the core of Exxaro's corporate governance are principles that guide the board in meeting its responsibilities to the company and its stakeholders, to enable the company to achieve the King IV governance outcomes and fulfil its purpose to power better lives in Africa and beyond. The board therefore regards good corporate governance as fundamentally important to create value and achieve the following governance outcomes in its own ethical and effective leadership:

Our board assumes ultimate accountability and responsibility for the company's performance and affairs. In so doing, it effectively represents and promotes its legitimate interests. As a responsible corporate citizen, it also considers its material stakeholders' legitimate interests and expectations to make a positive contribution to society at large.

Climate change response

We intentionally focus on positioning Exxaro for growth, anchored on the just transition principle, which seeks to balance our financial performance, South Africa's economic development needs, ecosystem protection and society's adaptive capacity in the face of climate change. Exxaro believes that our greatest opportunity is to help steer South Africa towards a sustainable future through undiluted focus on low-carbon minerals and energy with a goal to be carbon neutral by 2050 through consistently reducing our direct emissions. The board is committed, beyond compliance, to mitigating the impact of climate change.

Specific actions in 2021 to honour this commitment included:

• As announced to the market with the disposal of 21.975 million shares in Tronox on 24 February 2021, the funds from the disposal of Tronox Holdings plc ordinary shares will be used to invest in renewable energy projects as well as repay debt and make distributions to shareholders in accordance with Exxaro's capital allocation framework
• The board and executive leadership were presented with the latest climate change assessment report released by the Intergovernmental Panel on Climate Change and the role of the board in responding to climate change
• Due to the direct impact of climate change on the coal business, in 2020, the board identified the need for an experienced non-executive director with environmental, sustainability and climate change knowledge. Following a rigorous process, this appointment was finalised on 7 February 2022
• The board's governance structure was revisited, giving the RBR committee oversight of the strategic, financial and operational business resilience of Exxaro with specific consideration of its response to the low-carbon transition, building a resilient and future-facing portfolio, and increasing customer diversification and revenue streams
• A group-wide internal employee communication plan has been developed for Exxaro's Climate Change Response strategy, which is being rolled out throughout the organisation into 2022

For details on our Climate Change Response strategy, refer to climate change resilience.

Quarter 1		Approved the group’s annual financial statements and final dividend declaration Considered the going concern assessment and approved that the group would remain liquid and solvent in the context of the distribution to shareholders Approved the share buyback programme Approved the disposal of its shareholding in Tronox
Quarter 2		Considered the group’s Sustainable Growth and Impact strategy with various matters to receive additional ongoing attention Accepted the offer for the divestment of ECC* as part of the group’s growth strategy to dispose of non-core assets Approved the appointment of a new group company secretary Held the group’s second hybrid AGM
Quarter 3		Approved group interim financial results and interim dividend declaration Considered the going concern assessment and approved that the group would remain liquid and solvent in the context of the distribution to shareholders as well as the trading statement Approved the Sustainable Growth and Impact strategy with further work to be done on the impact strategy Noted the implementation of the climate change strategy
Quarter 4		Mandated management with respect to COP26 participation Deliberated and considered the group’s impact strategy Participated in the health and safety campaign within the group Approved the consolidated group annual budget

* Divestment concluded in September 2021.

Governance

Group governance framework

The reporting period was particularly important from a governance perspective with the board focusing on reviewing governance structures in the group, board committees' terms of reference as well as delegations of authority to create and preserve value for agile decision making in the minerals and energy businesses while maintaining decentralised decision making in the more mature coal business. King IV recommended practices for group governance require the board to assume responsibility for governance across the group. The board exercises this responsibility by adopting a group governance framework that provides direction on how the relationship between the holding company and subsidiaries should be structured and managed.

For details, refer to adequate and effective control.

Board composition

The following outcomes were achieved in 2021 flowing from the board's key focus areas:

• The succession of the chairperson of the board was addressed with the appointment of Geoffrey Qhena in April as chairperson designate with the retirement of Jeff van Rooyen at the 2021 AGM
• Identification of new directors to take over as chairpersons of committees in future as part of succession planning
• The board adopted a diversity and inclusion policy with new targets in March 2021
• The succession of the CEO, Mxolisi Mgojo, who will retire on 31 July 2022, was addressed through the appointment of Nombasa Tsengwa as CEO designate and executive board member on 16 March 2021 (her appointment as CEO will become effective 1 August 2022)
• The board filled four non-executive director vacancies, including the role of the chairperson, in terms of the required skills and experience identified by the board as well as its diversity and inclusion policy:

	Chanda Nxumalo		Independent non-executive director	Appointed 1 February 2021
	Mandlesilo Msimang		Non-executive director	Appointed 15 March 2021
	Geoffrey Qhena		Independent non-executive director	Appointed 19 April 2021
	Isaac Malevu		Non-executive director	Appointed 22 June 2021

• The board continued to search in 2022 for independent non-executive directors to address independence, gender diversity as well as specific skills and experience requirements (which included energy, ESG, remuneration and hard rock mining) in line with the Exxaro strategy and succession planning. The following appointments have been made:

	Karin Ireton		Independent non-executive director	Appointed 7 February 2022
	Bennetor Magara		Independent non-executive director	Appointed 7 February 2022
	Billy Mawasha		Independent non-executive director	Appointed 7 April 2022
	Phumla Mnganga		Independent non-executive director	Appointed 7 June 2022

For more information on the board's composition, diversity and experience, refer to board of directors. 

Strategy and risk

King IV prescribes that the board should appreciate that an organisation's core purpose, risks and opportunities, strategy, business model, performance and sustainable development are inseparable elements of the value creation process. The review of corporate responses, social justice movements and other material economic and business impacts, analyst reports on megatrends with a view to identifying material business environment developments and data points is a continuous process.

An updated strategy process was adopted by the board to provide for a continuous cycle in ensuring an integrated strategy across Exxaro businesses, supporting Exxaro's purpose. As risk management is inherently linked to achievement of strategic objectives, an integrated risk management approach is applied in the strategy review process, including the identification of emerging risks.

Quarter 1		Appointed three new non-executive directors, including the chairperson designate Appointed the CEO designate Approved the amended board charter, annual work plans and board committees' terms of reference as well as the recommended name changes of the social and ethics and sustainability, risk and compliance committees
Quarter 2		Approved POPIA policy amendments and received confirmation of implementation of POPIA measures Approved funding request for R25 million from the Solidarity Fund as a top-up contribution for the COVID-19 vaccine roll-out Policies approved: Non-audited services framework and policy Sexual and racial harassment policy Insider dealing policy Information policy
Quarter 3		Approved content to be shared at the Capital Markets Day on 20 September 2021 Considered the group governance framework and energy delegation of authority as well as key focus areas for board committees Received update on COVID-19 interventions and vaccination programme roll-out
Quarter 4		Approved the group governance framework and energy delegation of authority Considered and approved changes to the strategic performance dashboard and board KPIs Reviewed corporate model and total shareholder return peer group

The top five risks at the end of 2021 were:

	Unavailability of current rail capacity
	Eskom systemic risk
	COVID-19 concerns
	Inability to achieve financial targets
	Community unrest

For more information on the strategy and risk management, refer to the integrated report.

Disposal of non-core assets and investments

In line with our strategy, the derecognition of Exxaro's investment in Tronox SA and Tronox Holdings plc and the strategy to monetise this investment were achieved. In addition, the disposal of ECC was concluded and became effective in September 2021.

Driving innovation

Within our overarching values, we have five cultural themes: responsibility, adaptability, openness and connectivity, diversity and ownership. We aim to foster a culture of adaptability to the ever-changing world around us, encouraging employees to learn and improve in everything they do. As change is inevitable, based on current social, economic and technological realities, the company aims to be agile and create new opportunities to move the group forward as a collective.

For Exxaro, innovation is key to a successful, thriving business. Without actively driving innovation practices, businesses stagnate and ultimately fail. The board recognises that it is imperative for Exxaro to continue innovating and striving for radical and disruptive solutions, not only to address challenges but to drive and support our strategic goals of carbon neutrality. Exxaro has adopted Open Innovation as an innovation strategy through which to identify and access radical and disruptive solutions. In a world of distributed knowledge, Exxaro cannot afford to rely solely on internal idea generation and research and development functionalities. Instead, we have perforated the knowledge boundaries of the organisation to source solutions and collaborate with outside innovators like startups, experts and the wider public. Exxaro has processes in place to access radical innovation by forming strategic partnerships with participants within the open innovation ecosystem. According to the PwC Innovation Benchmark report 2021, 54% of innovating companies struggle to bridge the gap between innovation strategy and business strategy. At Exxaro, innovation and business strategy are integrally linked with innovation practices being driven by key functional areas and innovation initiatives streamlined to support key strategic and operational objectives.

In addition to initiatives within the group and to promote board effectiveness, the following has been put in place to support our board:

• The board, board committees, executive committee and material subsidiaries use a secure platform for collation of board packs for virtual board meetings, which has greatly contributed to effective and secure meetings for several years. The system allows for secure collaboration, information sharing as well as electronic voting on written resolutions
• Exxaro held its second hybrid AGM in 2021 with shareholders or their proxies participating via electronic communication or in person, subject to COVID-19 protocols
• Participants could vote during the AGM through an electronic participation platform. If participants wanted their votes counted, they could submit information captured in the AGM notice to the platform service provider. Each shareholder who provided requested information was given a unique link to participate in the virtual meeting
• The insider dealing environment has greatly improved with an electronic insider register sending automated notices to any person whose name is captured in the register and, when it is removed, providing a clear auditable trail as well as ensuring regulatory and policy adherence
• In addition, compulsory insider dealing awareness training has been made available to the board and prescribed officers, as well as employees generally, on MyNexxt to allow completion at own leisure. MyNexxt is a learning management system that takes digital learning and staying connected to a new level by enabling wider accessibility to the platform

Quarter 1		Monitored interventions as COVID-19 concerns remained a top risk Considered and provided input on the suite of annual reports Adopted the board diversity and inclusion policy with amended targets
Quarter 2		Noted COVID-19 measures, specifically the vaccination programme and registration of Exxaro facilities as vaccination centres Appointed one new non-executive director Approved the annual reporting suite for the year ended 31 December 2021 Attended the first board governance session
Quarter 3		Monitored the implementation of POPIA measures, which was noted as satisfactory Considered the performance achievement and STI scheme implementation Noted the need for additional skills composition of the board, which was driven by the remuneration and nomination committee Engaged with community stakeholders through virtual stakeholder day events where we operate
Quarter 4		Approved the update of board and board committee annual work plans Approved the update of the group delegation of authority Considered the line-of-sight incentive scheme, performance achievement policy and alignment of international outbound policy Attended the second board governance session