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Exxaro Resources Limited
Integrated report 2022

Creating value through stakeholder engagement

We protect and maintain our licence to operate by building long-term, stable, mutually beneficial relationships, enabling us to create shared value with stakeholders. Our engagements also serve as a key treatment in the response to and management of organisational risks.

Our approach to meaningful stakeholder engagement

The value we create for our stakeholders is as important as the value we create for ourselves. We understand our social impact, as well as stakeholder needs and interests, which we identify through regular and ad hoc in-person engagement as well as through social impact assessments and a variety of surveys. This understanding enables us to respond appropriately during the course of business. We live our purpose to strengthen and maintain our stakeholder relationships, facilitating shared, sustainable value creation and impact.

Refer to the ESG report for more information about our approach to Stakeholder management and engagement planning.

We have differentiated the layout of the stakeholder report between the ESG report and the Integrated Report. For this report, we describe our stakeholder management through the lens of our enterprise risk framework – that is, where stakeholder management was instrumental in responding to a key risk in 2022. However, in the ESG report, we have maintained a stakeholder lens to describe key stakeholder relationships and the issues we addressed during our engagements.

Stakeholder universe

We use our ERM process and regular BU and project workshops to identify our stakeholders and assess our impact on them, and their impact on our business. We categorise our stakeholders into four main clusters of government, communities, business and value chain participants and identify relevant engagement strategies and engagement objectives as required.

Stakeholder management in the ESG report explains the nature and quality of our relationships with strategic stakeholder groups discussed on the pages that follow.

Government

  • Governmental departments
  • Local governments
  • Political parties
  • Provincial government
  • District municipalities
  • Regulators

Communities

  • Local media
  • Faith-based organisations
  • Taxi associations
  • Farmers and landowners
  • Other mining companies
  • Local small, medium and micro-enterprises (SMMEs)
  • Communities
  • Local leadership
  • Local schools

Business

  • Non-governmental organisations (NGOs)
  • Media
  • Professional industry bodies
  • Other mining organisations
  • Universities
  • Financial community
  • Non-profit organisations

Value chain participation

  • Unions
  • Investors
  • Strategic suppliers
  • Partner in delivery
  • Sponsors
  • Customers
  • Employees
  • Service providers

Assessing engagement effectiveness

Engagement effectiveness is assessed through assurance and audits on our procedures and changes in risk ratings. We also measure perceptions of our engagement performance as part of a stakeholder survey. We conducted our first reputation tracking survey in 2022 following a baseline study in 2018.

Material engagements in 2022

Exxaro has many stakeholders but for the purpose of this report, we have focused on engagements most material to value creation and preservation. The related stakeholders and the detail of specific engagement are unpacked accordingly.

    Quality of relationship
  No existing relationship or the relationship has challenges
  Established relationship but can be improved
  Good relationship with opportunity for improvement
  Very strong relationship based on mutual trust and respect

2022 risk: Unavailability of rail capacity

Engagement purpose: Collaborate in finding solutions to improve logistics

Stakeholder: Transnet

Quality of relationship:

Further reading

Our business risks and opportunities

Key engagements and outcomes

  • Continued engagement through the Minerals Council South Africa (Minerals Council) with TFR and the Department of Public Enterprises to set up a collaborative forum between the mining industry and TFR. This is envisaged to take off in 2023

Strategic objectives

  • Make our minerals and energy businesses thrive

Stakeholder expectations and issues

  • TFR performance: Cable theft and security, train and driver availability, locomotive spares and derailments, force majeure

Material themes

2022 risk: Key dependency on Eskom as a key customer

Engagement purpose: Eskom continues to be a key customer for Exxaro. In 2022, 75% of Exxaro's sales was attributed to Eskom. The long-term agreements with Eskom at Matimba and Medupi place the coal business in a defensive position. We engage regularly in light of the challenges facing Eskom.

Stakeholder: Eskom

Quality of relationship:

Further reading

Our business risks and opportunities

Key engagements and outcomes

  • Matla: Engagements to renegotiate the Matla cost plus agreement, due to expire mid-2023, are underway
  • Grootegeluk:
    • Medupi power station: Engagement on Exxaro's support regarding Eskom's emissions abatement obligation
    • Matimba and Medupi coal supply agreement contracts: Regular planning and operational alignment engagements

Strategic objectives

  • Transition at speed and scale
  • Make our minerals and energy businesses thrive

Stakeholder expectations and issues

  • Coal supply agreements

Material themes

2022 risk: Community unrest

Engagement purpose: We aim to build relationships and our understanding of community needs to enable collaboration and the successful delivery of socio-economic development projects. Engagements enable us to proactively resolve any issues or concerns raised before protest action occurs. We further aim to communicate how we create shared value through local employment and procurement, community development initiatives, skills development and ESD.

Stakeholder: Communities

Quality of relationship:

Further reading

Our business risks and opportunities and social licence to operate
Communities(ESG report)

Key engagements and outcomes

  • Continue engaging with communities and local municipalities through existing platforms such as stakeholder engagement forums to address local recruitment and procurement expectations. Regrettably we continue to experience interference in our supply chain processes
  • The board held a follow-up community stakeholder engagement day in Limpopo
  • We initiated engagements with key representatives of the Department of Cooperative Government and Traditional Affairs with the objective of strategic alignment on supporting socio-economic development in traditional authority areas
  • Our new Social Impact strategy was approved by the board in November 2022. This will enable us to identify and develop impact projects
  • Continue our efforts to reflect South Africa's diversity in the development and outcomes of all our projects

Strategic objectives

  • Become a catalyst for economic growth and environmental stewardship
  • Empower people to create impact

Stakeholder expectations and issues

Our communities expect Exxaro to employ, uplift and empower locally, enabling South Africa's development. Communities highlighted infrastructure, service delivery, procurement and youth and skills development as key issues during the year.

Material themes

2022 risk: Fatal risk incidents

Engagement purpose: Align employees' focus with our health and safety strategy and culture for competitive advantage and resilient business performance.

Stakeholder: Transnet

Quality of relationship:

Employees

Our business risks and opportunities and our people
Employee engagement (ESG report), health and wellness (ESG report), and safety (ESG report)

Key engagements and outcomes

  • Continued implementation of the COVID-19 awareness and vaccination programme with an average vaccination rate at our BUs of 90% against the industry target of 80%
  • Daily reminders on safety issues at operational level, annual BU safety indabas and regular communication of safety messages across a variety of platforms
  • Annual leadership safety day and sustainability summit
  • Ongoing safety and safety risk management training
  • Our employee wellness programme (EWP) is communicated on multiple internal platforms alongside daily inspirational SMS messages and weekly mental health masterclasses
  • Engaged with employees about Exxaro's code of conduct

Strategic objectives

  • Make our minerals and energy businesses thrive
  • Empower people to create impact

Stakeholder expectations and issues

  • Health and safety standards.

Material themes

2022 risk: Climate change concerns

Engagement purpose: Understand regulatory policy, empower employees, communities and value stream participants to manage climate change impacts, contribute to thought leadership and communicate our decarbonisation plan.

Stakeholder:

  • Government and regulators
  • Employees and unions
  • Communities
  • Investors
  • Customers
  • Suppliers
  • Trade and research associations

Quality of relationship:

Further reading

Our business risks and opportunities
TCFD
Our people
Social licence to operate
Our environment
Climate change resilience(ESG report) and social (ESG report)

Stakeholder expectations and issues

  • A just transition
  • Climate change adaptation and mitigation
  • Carbon pricing
  • TCFD and decarbonisation plan
  • Green procurement
  • Biodiversity, waste and water
  • Policy

Material themes

Key engagements and outcomes

Government and regulators
Engagements with leading national authorities on climate change and carbon budgets included effective application of instruments designed to meet South Africa's international climate change obligations, particularly the NDC. We engage with the Department of Forestry, Fisheries and the Environment (DFFE) (lead department on climate change) and National Treasury (lead department on the Carbon Tax Act). Discussions with the Department of Energy included our renewable energy strategy and potential future investments in renewable energy.

Employees and labour unions
Our energy management efforts and implementation of cleaner energy sources at our operations drive carbon emissions reductions. Reducing and offsetting our footprint in line with the NDCs is a priority.

Communities
We are engaging with communities on climate change mitigation, adaptation and resilience with the aim of increasing the adaptive capacity of host communities. We are also communicating our decarbonisation plan.

Investors
We have shared our strategic approach to climate change mitigation, adaptation and business resilience as well as risks and opportunities, carbon pricing, TCFD recommendations and broader ESG issues.

Customers
We engaged with downstream customers who impact our carbon footprint, business strategy and ambition to be carbon neutral by 2050 about our Sustainable Growth and Impact strategy, decarbonisation plan and divestment from some coal operations. Engagement explored collaboration in emissions reduction, aiming to reduce our scope 3 emissions and customers' scope 1 and 2 emissions.

Suppliers
Our green procurement strategy prioritises sustainable supplier engagement with critical objectives including increasing the adoption of environmentally friendly, natural resource-efficient equipment, products and technology at Exxaro's operations.

Trade and research associations
As a member of the Industry Task Team on Climate Change, we worked with government and other businesses to address South Africa's international climate change obligations, supporting the low-carbon transition, carbon price merits, collaboration and the just transition.

Our NBI membership enables us to contribute to thought leadership on issues such as the just transition and the role of business in ensuring the transition to a low-carbon economy, preparation for COP meetings and alignment with the SDGs.

Through the Minerals Council, we were involved in discussions with government on the implications of environmental policy, carbon tax, and waste and water management in a changing climate.

We engaged with other businesses through Business Unity South Africa on macro-economic and high-level issues that affect the country at national and international levels.

Exxaro was also among the Business Leadership South Africa members focused on securing energy supply.

As part of the Energy Intensive Users Group of South Africa, we worked with government, power utilities, industry and other stakeholders to ensure a financially viable, technically healthy and well-managed energy supply sector for South Africa. We discussed energy efficiency, energy strategy and policy implementation with government and other businesses through the Energy Efficiency Leadership Network.

We also engage with various stakeholders such as government, NGOs, communities and industry, on air quality management in priority areas through multi-stakeholder reference groups and implementation task teams for the Highveld and Waterberg-Bojanala priority areas.

Strategic objectives

  • Transitioning at speed and scale
  • Make our minerals and energy businesses thrive
  • Empower people to create impact
  • Be carbon neutral by 2050

2022 risk: Loss of social licence to operate and country risk

Engagement purpose: Proactive engagement supports our efforts to drive business resilience and manage risk. Collaborating and partnering with government is how Exxaro plays a role in finding solutions to socio-economic challenges and contributes to shaping government policies.

Stakeholder: Government

Quality of relationship:

Further reading

Our business risks and opportunities
Social (ESG report)

Material themes

Stakeholder expectations and issues

  • The role of big business in solving broader societal issues
  • Responsible water management, minimising environmental impact and overcoming climate change issues
  • Life after mining, job development, community upliftment*
  • TFR performance*
  • COVID-19 response support*
  • B-BBEE level – net profit after tax (NPAT) impact
  • Socio-economic development*
  • Municipal service delivery*
  • Local procurement*

* This is a multi-stakeholder issue.

Key engagements and outcomes

  • Department of Public Enterprises – continued engagement through the Minerals Council regarding TFR
  • Departments of Health in Limpopo and Mpumalanga to support COVID-19 response strategies, and vaccine and booster vaccine roll-out programmes
  • Engaged dtic regarding changes in NPAT and double treatment of dividend income. The challenges and proposed solutions were well received by the dtic. The dtic confirmed that these are areas of concern they are aware of, but that changing the codes is a lengthy process
  • Engagement with the Department of Cooperative Government and Traditional Affairs, the Municipal Infrastructure Support Agency and the South African Local Government Association to find innovative responses to address service delivery challenges at local government level
  • Regular engagement with the provincial leadership of Limpopo and Mpumalanga and their economic growth agencies to discuss development priorities and provide feedback on Exxaro's socio-economic development initiatives
  • Engagement with the Presidential Climate Change Commission regarding our just transition response strategy

Strategic objectives

  • Become a catalyst for economic growth and environmental stewardship

Case study: Reputation management top of mind

Perceptions of Exxaro's reputation and business ambitions have improved significantly since 2018 among the majority of Exxaro's key stakeholders, according to the stakeholder reputation survey conducted in 2022.

The survey reached out to 1 487 participants (government, investors, media, civil society, customers, suppliers, organised labour, communities and employees) online, by phone and in group sessions.

The survey was conducted against a global climate of generally declining trust in business to operate in the best interest of society. However, among Exxaro's stakeholders, trust in mining companies to operate in the best interest of society was up from 2018. The overall results show significantly improved trust and reputation indicators for the company compared to the baseline survey conducted in 2018.

Key findings
While all stakeholders agree that Exxaro delivers on its purpose, they also feel that there is an opportunity for us to increase the intensity of feedback, especially to communities. It is interesting to also note that other than communities, all stakeholders believe that we have a role to play in South Africa's transition away from fossil fuels.

Expectations from Exxaro on the community front remain very high. While our community development efforts are acknowledged, "more and better" is expected from the company given the increasing level of social and economic distress among our local communities.

Reputation resilience
The survey outcome shows that, while our overall relationships with stakeholders (measured through stakeholder engagement efficiency) are good, additional effort is required in relation to civil society and communities. In response, we have developed strategies for each stakeholder group to guide future engagement that will address concerns and reinforce mutually beneficial areas.

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UNDERSTANDING OUR BUSINESS
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Driving transition through leadership
Driving value creation through transition
About our integrated report
Chairperson's statement
About Exxaro
Sustainable growth and impact
Our operating context

DRIVERS OF VALUE CREATION
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Our business model
Our material matters
Our business risks and opportunities
Creating value through stakeholder engagement

TRANSITIONING THE BUSINESS FOR GROWTH
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CEO's report
Our strategy: positioning Exxaro for sustainable growth and impact
Performance against our strategy and future focus
2022 strategic key performance indicators
Key strategic trade-offs

GOVERNANCE FOR VALUE CREATION
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Our leadership
Summarised governance report
Combined assurance for effective governance

OUR PERFORMANCE
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Finance director's overview
Operational performance
Business resilience
Our people
Social licence to operate: enabling our legitimacy
Our environment: stewardship and compliance
Responding to TCFD reporting requirements

OUR MINERAL RESOURCES AND MINERAL RESERVES
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Our mineral resources and mineral reserves

ADDITIONAL INFORMATION
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Glossary
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