Exxaro Resources Limited – Environmental, social and governance report 2021

Ethical culture 1.1 to 1.3


Principle			Applicable actions, policies and processes
The governing body should set the tone and lead ethically and effectively [1.1]			Reviewed the board charter in 2021, annual work plan and key focus areas Reviewed board sub-committees' terms of reference, annual work plans and key focus areas Appointment of new directors after assessment of skills and competence as well as background checks by nomination committee (four new directors appointed in 2021 and an additional four directors on 7 February 2022 as the board considers succession planning and board refreshment as a key element for a sustainable company) The board applies a zero tolerance approach to actions taken without integrity


The governing body should ensure that the organisation's ethics are managed effectively [1.2]			Ongoing monitoring and reporting on the group-wide anti-bribery and anti-corruption programme Following the 2020 group-wide integrity survey conducted by internal audit, a group-wide ethical risk assessment was conducted by The Ethics Institute in 2021 Flowing from the risk assessment, the ethics committee began formulating a statement of strategic ethical intent, and developing an ethics strategy and management plan to address specific identified development areas that will be submitted to the board for approval in 2022


The governing body should ensure that the organisation is and is seen to be a responsible corporate citizen [1.3]			Exxaro initiated a process in 2021 to develop a framework that will further guide the organisation in the management of human rights Exxaro expressed its continued commitment to supporting the UNGC principles on human rights, labour, environment and anti-corruption 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 Board and executive management awareness of 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 The board identified the need for an experienced non-executive director with environmental, sustainability and climate change knowledge, which was finalised on 7 February 2022 Exxaro's growth strategy includes impact investments to ensure creation of an equitable society

Performance and value creation 2.1 and 2.2


Principle			Applicable actions, policies and processes
The governing body should lead the value creation process by appreciating that strategy, risk and opportunity, performance and sustainable development are inseparable elements [2.1]			Adopted an updated strategy process to provide for a continuous cycle in ensuring an integrated strategy across Exxaro businesses, supporting Exxaro's purpose Applied an integrated risk management approach in the strategy review process, including the identification of emerging risks Reviewed and approved Exxaro's strategy annually Reviewed and approved a new strategic performance dashboard and strategic-aligned sustainability KPIs Tracks performance against every KPI quarterly through its strategic performance dashboard Reviewed and approved the ERM framework and risk appetite Monitors the impact of external and internal events for their effects on the strategic risk profile


The governing body should ensure that reports and other disclosures enable stakeholders to make an informed assessment of the performance of the organisation and its ability to create value in a sustainable manner [2.2]			The integrated report is based on integrated reporting throughout the year The integrated report sets out the strategic objectives, the business model, the material matters that impact the business and the risks that prevent the organisation from achieving its objectives The RBR committee oversees Resources and Reserve statement as part of the 2021 integrated report The audit committee assesses material matters and reviews financial materiality annually The audit committee reviews the integrity of the integrated report The board approves the integrated report and the financial statements annually

Adequate and effective control 3.1 to 4.5


Principle			Applicable actions, policies and processes
The governing body should serve as the focal point and custodian of corporate governance in the organisation [3.1]			The board as a whole remains accountable for corporate governance Approved a new group governance framework applicable to the full group of companies, which reaffirms the Exxaro board as the focal point of corporate governance The board entrenches corporate governance throughout the organisation at all levels of decision making The board attends mandatory governance sessions for directors and executive management twice a year New directors received a formal induction on appointment


The governing body should ensure, in its composition, a balance of the skills, experience, diversity, independence and knowledge needed to discharge its role and responsibilities [3.2]			The board adopted a nomination and appointment policy to provide a framework and set standards for the nomination and appointment of relevant, fit and proper, suitably skilled and ethical non-executive directors to the board of the company The nomination committee ensures that the board's composition comprises the appropriate level of skills, experience, diversity, independence and knowledge of which the appointments in 2021 and 2022 are testimony The remuneration and nomination committee reviews its terms of reference annually An approved skills and experience matrix facilitates directors' appointments The board annually reviews and approves its diversity and inclusion targets Directors receive a formal appointment letter Directors declare any outside interests on appointment and before any meetings commence with annual reviews of these declarations by the SERC The board appoints the lead independent director A formal division exists between the CEO and chairperson's duties as per the board charter The board reviewed its charter in 2021


The governing body should consider creating additional governing structures to assist with balancing power and effective discharge of responsibilities without abdicating accountability [3.3]			The board has reviewed the mandates and delegated powers to its board committees with the most significant changes to the SERC, RBR committee and the investment committee All board committees have formally approved terms of reference, which are reviewed annually The board assesses the composition of board committees annually and has made several changes to board committee composition The composition of board committees complies with the Companies Act, Exxaro's MoI, King IV and each committee's terms of reference


The governing body should ensure that the appointment of and delegation to competent executive management contributes to an effective arrangement through which authority and responsibilities are exercised [3.4]			A clear division of power exists between the CEO and chairperson as per the approved board charter The board monitors the performance of the executives The executive committees have formal terms of reference that were reviewed in 2021 The board approves the group delegation of authority and reviews it at least annually, including a separate focused delegation applicable to the energy business The board appoints the company secretary The board assesses the company secretary's performance annually


The governing body should ensure that the evaluation of its own performance and that of its committees, its chair and its individual members supports continuous improvement in its performance and effectiveness [3.5]			The board conducted a high-level independent assessment through questionnaires and one-on-one interviews early in 2022 The chairperson conducts a formal assessment The chairperson oversees a formal implementation plan to address potential shortcomings flowing from the evaluation, which is reported on to the board Two governance board sessions are arranged throughout the year


The governing body should govern risk and opportunity in a way that supports the organisation in defining core purpose, and to set and achieve strategic objectives [4.1]			The board approves and periodically reviews the ERM framework The board links Exxaro's strategy, risks, risk appetite and performance via the strategic performance dashboard 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 An integrated risk management approach is applied in the strategy review process, including the identification of emerging risks The strategic performance dashboard was reviewed with a revised philosophy based on the Sustainable Growth and Impact strategy with new focused KPIs for the board cascading down to management


The governing body should govern technology and information in a way that supports the organisation in defining core purpose, and to set and achieve strategic objectives [4.2]			The RBR committee monitors IM-specific risks and security posture The audit committee exercises ongoing oversight of technology and information management The audit committee delegates IT governance to the IM steering committee The IM steering committee has formal terms of reference and its scope includes reviewing the IT strategy in support of the overall business as well as IT risks, IT audit findings and IT compliance The IM steering committee reports to the audit committee quarterly


The governing body should govern compliance with laws and ensure consideration of adherence to non-binding rules, codes and standards [4.3]			The board formally approves the compliance policy The board fully integrates the compliance process with the risk process The board conducts compliance awareness of high legal risks annually Exxaro subjects the compliance process to independent assurance annually Exxaro developed CSA questionnaires to enable managers to assess compliance with licence to operate requirements The regulatory compliance universe has been reviewed and updated with the necessary content to assist management with an understanding of the relevant legislation


The governing body should ensure that the organisation remunerates fairly, responsibly and transparently to promote the creation of value in a sustainable manner [4.4]			The remuneration committee determines strategy and policy Shareholders vote on the remuneration policy at the AGM Formal engagement takes place with shareholders The remuneration policy dealing with the STI and LTI principles was amended in 2021 following engagement with shareholders


The governing body should ensure that assurance results in an effective control environment and integrity of reports for better decision making [4.5]			The audit committee approves the internal audit charter and plan annually The audit committee approves the external audit plan annually A formal policy has been adopted to serve as a framework for engagement of auditors to supply non-audit services to the group Exxaro has a risk-based internal and external audit report Combined assurance forum with formally approved terms of reference ensures coordination of assurance activities The audit committee monitors all findings Internal audit performance forms part of every executive member's KPIs The board appointed a chief audit officer, independent of management, who chairs the combined assurance forum

Trust, good reputation and legitimacy 5.1


Principle			Applicable actions, policies and processes
As part of its decision making in the best interests of the organisation, the governing body should ensure that a stakeholder-inclusive approach is adopted, which takes into account and balances legitimate and reasonable needs, interests and expectations.			The board has an approved stakeholder management policy Formal stakeholder day virtual events were held in 2021 and attended by SERC members and executive responsible for stakeholder management A KAM approach to stakeholder engagement is followed addressing stakeholder inclusivity and responsiveness. The SERC monitors stakeholder relations and matters An adequately resourced executive holistically manages stakeholder affairs All operations have an approved stakeholder engagement plan All directors attend the AGM

King IV application register

Ethical culture 1.1 to 1.3

Performance and value creation 2.1 and 2.2

Adequate and effective control 3.1 to 4.5

Trust, good reputation and legitimacy 5.1

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