Integrated Report 2021
Exxaro Resources limited
Environmental, social and governance report 2021
Peet SnydersRBR committee chairperson
Dear shareholders,
I am pleased to present the RBR committee report for the year ended
31 December 2021.
The committee is a board committee in terms of section 72 of the Companies Act, the company's MoI and King IV.
The committee's role is as follows:
The committee's role is to oversee that the group has implemented an effective policy and plan for risk management that will enhance the group's ability to achieve its strategic objectives and that the disclosure regarding risk is comprehensive, timely and relevant.
Risk management is the process effected by the board, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the organisation and manage risks to be within its risk appetite, and ultimately to provide reasonable assurance regarding the achievement of the organisation's objectives. Risk governance refers to the governance structures and mechanisms established within the organisation in terms of which decisions regarding risk are taken and implemented.
The committee is responsible for reviewing the ERM process, including key risks facing Exxaro as well as responses in place to address these risks with particular focus on:
Business resilience is the ability of an organisation to absorb and adapt in a changing environment to enable it to deliver its objectives, survive and prosper. Risk, incident, crisis and business continuity management are among the four key elements of business resilience. The role of the committee is to oversee the appropriateness of Exxaro's crisis response plans and frameworks.
During the period under review, the committee comprised a majority independent non-executive directors. Chanda Nxumalo was appointed a member of the committee from 1 February 2021. In addition, following the resignation of Mark Moffett on 11 May 2021, Mandlesilo Msimang was appointed on 23 June 2021 as a member of this committee. The board is satisfied that the committee members have a suitably balanced blend of skills and experience to enable the committee to discharge its functions.
Standing invitees to committee meetings include the CEO, CEO designate, FD and chief risk officer. Other individuals, including members of management, external consultants and service providers, are invited to attend meetings of the committee from time to time in consultation with the committee chairperson.
The committee held four scheduled meetings, as determined by its terms of reference, during the period under review and one special meeting. The committee's attendance of 100% throughout illustrates high levels of engagement by RBR committee members. The table below is an overview of meeting attendance in 2021.
| Members | Designation | Attendance |
| Peet Snyders | Independent non-executive director and chairperson | 100% |
| Mark Moffett* | Independent non-executive director | 100% |
| Ras Myburgh | Independent non-executive director | 100% |
| Chanda Nxumalo** | Independent non-executive director | 100% |
| Mandlesilo Msimang*** | Non-executive director | 100% |
| * | Mark Moffett resigned on 11 May 2021. |
| ** | Chanda Nxumalo appointed as member from 1 February 2021. |
| *** | Mandlesilo Msimang appointed as member from 23 June 2021. |
The committee's terms of reference were extensively reviewed in 2021 to include business resilience in its roles and responsibilities, which amendment was approved by the board. The terms of reference continue to be aligned with legislation, regulations and King IV.
The strategic performance dashboard is an analytics tool that manages board, board committee, executive committees, functional and operational KPIs that are of strategic importance to the organisation. The dashboard tracks execution of the Exxaro strategy to promote management discussion and analysis while aligned with the requirements of King IV. The KPIs for the board and the group executive committee have been reviewed and approved during the year under review. The review of the energy executive committee KPIs are underway and will be finalised in 2022.
According to best practice, the ERM framework is required to be updated every one to three years. During the period under review, the ERM framework was accordingly reviewed and updated to enhance the risk process and align it with the organisation's risk maturity level, and to keep it relevant and up to date with best practice. Emerging risks have been emphasised and included in the ERM identification process. In addition, the ERM framework was revised to reflect changes in reporting structures and role designations, and to ensure alignment with current governance practices and standards.
In respect of risk management, the unavailability of rail capacity remained the most significant risk. This risk also drives several other underlying risks such as inability to achieve financial targets and cost competitiveness of products. Management's interventions to manage this risk are reported to the committee and the board on a regular basis.
The risk associated with COVID-19 was monitored closely during the municipal elections, the festive season and new variants of the virus that resulted in another wave impacting the operations. The labour unrest risk was reduced as a three-year wage negotiation was signed. The board approved the strategic risk profile for the period under review.
The committee oversaw the tactical and operational risks, which were updated on a quarterly basis to ensure it reflects the current risk exposures.
The group's compliance efforts in 2020 focused on examining the current state of compliance processes and practices across all functions of the group to ensure that all the required governance documents were in place. The focus of 2021 was to develop and action an improvement plan to enable Exxaro to advance its compliance maturity levels through the enhancement of its compliance processes and practices.
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Under the oversight of the committee, the following regulatory compliance matters received attention:
The Exxaro POPIA implementation project commenced in 2020 with a number of targets reached by 30 June 2021. The purpose of the project was to develop and expand Exxaro's information governance framework with a privacy framework that seeks to protect the constitutional right of persons to privacy. During the period under review, the project progressed to the next phase of operation: project implementation. The key focus areas of the project implementation included training, conducting risk assessments and compliance gap analysis within the functional areas. Training included awareness training across the group as well as advanced compliance workshops to train employees who deal with the processing of personal information in their day-to-day duties on specific functional POPIA requirements.
Exxaro is committed to respecting and protecting the personal information and privacy of others. As a responsible party, we strive to ensure that our use of the personal information in our possession is lawful, reasonable and relevant to our business activities. A new policy was therefore developed to explain how we process and safeguard personal information. The board approved the privacy policy as per the recommendation by the committee. The privacy policy aims to enable Exxaro to achieve its compliance obligations to the privacy laws applicable to it.
During the period under review, the committee considered information management (IM) top 10 risks, governance review and the group security posture. Progress was monitored by the committee with management providing comprehensive quarterly updates, reflecting on challenges and steps taken to address those challenges.
The committee oversaw the process of updating various business continuity governance documents:
Furthermore, this process sought to align all BUs to the boardapproved business continuity plan template that is aligned to ISO 22301 and British Standards Institution 11200:2014.
The Exxaro Climate Change Response strategy and report on the alignment to the TCFD recommendations was published on 18 March 2021. The report articulated Exxaro's strategic response to the transitional and physical climate change risks and opportunities.
The key milestones set for the reporting year were achieved:
For more information, please consider Climate change resilience.
The focus in 2022 will be on identifying senior management knowledge gap analysis and developing appropriate training modules that will enhance understanding of how to manage climate change transitional and physical risks and opportunities.
Global climate change action intensified due to COP26. Exxaro confirmed that it shared the commitment of the South African government to continue contributing its fair share to address climate change and supported the country's efforts of meeting international climate change commitments through the NDC under the Paris Agreement.
This committee has an oversight role over the strategic, financial and operational business resilience arrangements of Exxaro with specific consideration of its response to the impending low-carbon transition, building a resilient, future-facing portfolio as well as increasing its customer diversification and multiple revenue streams.
The committee oversaw the establishment of the decarbonisation project structure and office to coordinate all activities to reduce the climate-related risks and leverage opportunities. Under the guidance of functional executives, activity charters have been developed that outline a process by which decarbonisation opportunities will be identified and integrated into the group-wide decarbonisation plan.
Embedded within this project delivery structure is ensuring employee participation in the development of the decarbonisation plan. The training and employee participation stream have engaged Exxaro-funded climate change universities: Wits, University of Pretoria and Unisa. The engagement plan is to create a master class series to provide employees with climate change information on important climate change concepts, the need to reduce greenhouse gas emissions, and their role in mitigating and adapting to climate change consequences.
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Safety
The focus areas of Exxaro's safety improvement plans monitored by the committee include the following:
| BUs implemented safety indabas in accordance with the safety improvement plan. The main purpose of the safety indabas was to reflect on the group as well as respective BUs’ safety performance, address challenges, raise safety awareness during the critical season and recommitment to the zero harm vision. | Due to the COVID-19 restrictions, a Leadership Safety Day was held virtually and physically on site across all BUs on 12 October 2021. The virtual Leadership Safety Day programme was successfully delivered to an audience of 1 908 physically on site and 730 online. | ||
| Leadership interventions included executive committee members communicating risk awareness messages to the broader workforce on the identified safety risks as part of the Khetha Ukuphepha campaign. Pre-recordings of executive committee members on dedicated focus areas were completed and broadcast at predetermined intervals across the group on various communication platforms such as the Exxaro portal, LetsConnect, Microsoft Teams and LCD screens. This material is used at the BU safety indabas and ongoing awareness campaigns. | The key contributors to the zero harm vision were identified as change management and consequence management. | ||
Rehabilitation liabilities
The committee considered proposed amendments in respect of the environmental liability regulations published on 27 August 2021. Exxaro is taking part in the comment process through the Minerals Council to ensure that concerns are adequately represented.
Reputational resilience matters
Exxaro has established a resilient brand and reputation in the market since its creation in 2006, despite some challenging times, based on its sustainability strategies and consistently delivering stakeholder value. The three key attributes that have enabled this resilience included competence, transparency and guardianship, which will prevail in the future as Exxaro pursues its Sustainable Growth and Impact strategy.
The challenges and opportunities due to climate change, coupled with aggravating effects of COVID-19 and a distressed socio-economic environment in South Africa, drive high expectations for delivery of short and long-term benefits to stakeholders. As a South African brand that has shown resilience and continues to display financial strength, research shows that stakeholder expectations for Exxaro to play a more meaningful role in society have risen.
It is considered that, over the next decade, trust in Exxaro, and hence its reputation, will be a function of Exxaro's actions to resolve societal challenges where most governments have shortcomings. Exxaro's ability to achieve this trust and maintain a resilient reputation continues to be a focus area of this committee.
The table below shows the key focus areas for the committee.
| 2021 AND 2022 | STATUS | ||
| Review relevance of current KPIs and the completeness of current and emerging risks and whether in line with approved strategy | Ongoing | ||
| Review risk governance efforts to ensure monitoring of key risks impacting the organisation's strategic objectives (includes the review of completeness of current and emerging risks and whether in line with strategy) | Ongoing | ||
| Ensure effective plans are in place based on the impact of business disruption (plans are up to date and no significant incidents have occurred that have led to business disruption) | Achieved | ||
| Review the risk appetite for Exxaro | Achieved | ||
| Review the key compliance risks for Exxaro related to Exxaro's licence to operate | Achieved | ||
| Based on the key risks, recommend the appropriate predictive and proactive reporting and engagement with key stakeholders (including the integrated report) | Achieved | ||
| Review the governance of technology and Information to ensure it incorporates technology and information risks to enable strategy and ensure business resilience | Ongoing | ||
| Review business resilience key elements to ensure business strategy compliance | Achieved |
There is currently not a legal or regulatory requirement for the committee to complete annual performance evaluations and, while King IV recommends regular performance evaluations for all board committees, it has become a governance practice at Exxaro to have the committee's performance and effectiveness evaluated every two years.
As Exxaro's board committees embarked on a significant transformation journey in 2020, which culminated in the group governance framework, revised delegation of authority, board committee mandate and work plan review as well as committee name changes following this process. Allowing an opportunity for the changes to settle and make impact, the board did not undertake a review in 2021 following the highlevel assessment in 2020 but will commence formal performance evaluations in November 2022 for disclosure in the integrated report 2022.
The committee is satisfied that it has discharged its responsibilities and fulfilled its mandate in accordance with its terms of reference, the Companies Act and King IV.
Peet Snyders
RBR committee chairperson
4 April 2022
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