Ethical culture

Statement of strategic ethical intent: Exxaro aspires to build an ethical culture based on Exxaro's values. To do this, Exxaro is committed to operating ethically by living the Exxaro values with dignity, transparency, consistency, fairness and respect in all that we do.

Ethical commitment

Recognising that our public reputation is one of our most important assets, the organisation is committed to achieving the highest ethical standards. We recognise our obligations to our stakeholders, particularly shareholders, clients, employees, business partners, competitors, authorities, the environment and the wider community. Maintaining the trust and confidence of our stakeholders is the responsibility of every Exxaro employee. As Exxaro is committed to doing the right thing, even when no one is watching, our employees are expected to be able to distinguish between right and wrong, and commit to what is right. By emphasising our ethical commitment, we continue to grow as a business.

Ethics management strategy

Building organisational ethics is a journey. Our board assumes responsibility for ensuring that organisational ethics is managed effectively and governs the group's ethics to support the establishment of an ethical culture. In line with this responsibility, the board adopted a statement of strategic ethical intent as well as an ethics management strategy. The strategy sets out various strategic focus areas as well as interventions to be implemented and overseen by the group executive committee and management ethics committee. The following strategic focus areas have been identified:

Ethics awareness
Ethics accountability and responsibility
Ethics talk
Senior management, management and employee commitment to ethics
Unfair people practices

Code of ethics

Our code of ethics confirms that the organisation's ethical principles promote values such as trust, acceptable behaviour and fairness.

Exxaro values provide general guidelines for interactions with each other and our stakeholders, and reflect what is important to Exxaro and how we conduct ourselves.

The following fundamental values are expressed in the code of ethics:

	Empowered to grow and contribute
	Teamwork
	Committed to excellence
	Honest responsibility

Our group policies and procedures, relating to specific issues, processes and situations, support the code of ethics. The following policies (with several reviewed in 2022), among others, support an ethical culture:

Code of ethics
Anti-bribery and anti-corruption
Conflicts of interest
Exxaro's supplier code of conduct
Fraud prevention
Fraud investigation process
Fraud response
Gifts and benefits from suppliers
Recruitment and selection
Whistleblowing
Insider dealing
Political donations
Nepotism
Diversity, equity and inclusion framework (including people with disabilities policy and gender equity charter)

Monitoring ethical culture

The board monitors the group's ethical culture through its reporting structures, including two board committees (SERC and audit committee), the ethics management committee, the internal audit function, chief audit officer and newly appointed chief ethics officer.

An independent risk assessment by The Ethics Institute in 2021 to measure the state of ethics at Exxaro, focusing on ethical behaviour and ethical culture, recommended that an ethics strategy and management plan be designed to enable Exxaro to actively manage ethics and address identified concerns.

A detailed ethics strategy and management plan were accordingly designed and approved by the board upon recommendation by the ethics management committee, executive committee and SERC.

The risk assessment also measured employees' ethical behaviour, defined as the frequency with which employees observe unethical behaviour on a day-to-day basis in Exxaro. Exxaro group ranked 91 out of 100, which is unethical conduct never observed or rarely observed, and therefore considered low risk. Behavioural risks encountered frequently by employees included bypassing rules and unfair people practices. These risks are addressed in the ethics strategy and management plan.

Ethics talk

Informed by the Companies Act, King IV and strategic focus areas identified in the ethics management strategy, the group company secretary started 2022 by distributing a governance newsletter to the board, the first of which focusing on ethical culture. The newsletter highlighted:

Ethics is not only compliance with policies, rules and regulations but integrity in doing the right thing because one believes that it is the right thing to do
Ethical conduct is required of individual directors and the board as a collective

OECD recommendations related to ethical behaviour

ENS Africa conducted an ISO 37001 readiness assessment in 2018 and identified a gap in ensuring that new third-party exposures are assessed as part of a due diligence process. Exxaro has since introduced due diligence processes for suppliers, customers, employees and business partners.

A comprehensive evaluation of the fraud hotline in 2020 identified areas needing improvement such as the composition of the management ethics committee, a process for tabling forensic reports, monitoring BU investigations and updating escalation protocols. All the recommendations have been addressed and reaudited to the satisfaction of the internal auditor. As part of this, Exxaro is committed to an independent review of the hotline every three years. The next audit is in 2024.

In addition, the ethics management training, and anti-bribery and anti-corruption, programmes were reviewed, and the executive committee approved an updated anti-bribery and anti-corruption programme.

Supplier ethics

The supplier code of conduct was developed to assist employees in selecting suppliers who operate in a manner consistent with Exxaro's values and relevant standards
The code aims to communicate Exxaro's mandatory selection standards to prospective suppliers
In addition, it promotes the company's commitment to ethical conduct among suppliers
As part of the supply chain pre-qualification process, suppliers must disclose details of shareholders, directors and other associates who are current or former Exxaro employees in compliance with the conflicts of interest policy
Employees who evaluate requests for proposals or recommend contract awards must declare that they have neither an interest in nor a close relationship with the supplier that may be construed as a conflict of interest

Board charter and code of conduct

Our board charter and code of conduct (board charter) regulates the parameters in which the board operates and ensures the application of good corporate governance principles in all dealings in respect and on behalf of the company and the group. It sets out the roles and responsibilities of the board, individual directors, chairperson, CEO, lead independent non-executive director and group company secretary.

The board charter requires board members to be individuals of calibre, integrity and credibility with the necessary skills and experience.

The nomination committee must ensure continuity of directorships and undertake succession planning on behalf of the board. This includes identification, mentorship and development of future candidates.

The board charter was reviewed in 2022 to include consideration by the board of the need for periodic independent assurance in respect of areas such as:

Infrastructure, IT and systems
Sound governance of the company including corporate governance, risk management, ethics and internal controls

Compliance with applicable laws and adopted, non-binding rules, codes and standards in a way that supports the organisation being ethical and a good corporate citizen

Fraud and ethics hotline

We encourage employees and stakeholders to report suspected fraud or corruption to Exxaro's fraud and ethics hotline.

The hotline is independently managed and reports to the SERC and ethics management committee.

Due to the importance of retaining the integrity of the hotline, it is necessary for Exxaro to, as far as reasonably possible, protect the interests of the disclosing parties. As the hotline plays an important role in combating fraudulent activities, Exxaro has successfully defended a court application for the disclosure of an anonymous complaint, which could have undermined the system's confidentiality.

Focused governance sessions

The group company secretary hosts two annual, fixed, governance-related intervention sessions for the board, to which the executive leadership is also invited. These sessions are an opportunity to provide directors with a deeper understanding of corporate governance matters, including an opportunity to focus on new regulations or amendments to the regulatory environment within which Exxaro operates. These sessions are included in the annual corporate calendar to ensure maximum attendance by directors.

The themes of the two governance sessions in 2022 were:

Regulatory framework I (the regulatory universe applicable to directors and prescribed officers as well as proposed amendments to energy regulation)
Regulatory framework II (competition law and amendments to the debt and equity listing requirements)

Avoiding conflicts of interest

In terms of the Companies Act and King IV, directors and prescribed officers have specific duties regarding disclosure of actual direct and indirect conflicts of personal financial interests as well as the perception of a conflict, including that of their related parties.

The group has a conflicts of interest policy, which was extensively reviewed in 2022. Focus was on line managers and management assessing declarations received from employees. Additional clarifications and guiding principles were included following questions from employees and learnings from previous years.

Conflicts of interest policy and register (reflecting material disclosures in line with the JSE Debt Listings Requirements)

The policy continues to place an obligation on directors, prescribed officers and employees (as well as their related parties) to firstly avoid conflicts of interest. It also lists several unacceptable conflicts that may not be approved when declared.

Annual general declarations of outside interests are required from directors and prescribed officers in accordance with section 75(4) of the Companies Act. In terms of the Exxaro policy, annual declarations are also required from all employees in the group.

In addition to the annual declarations:

An item dealing with the declaration of interests appears at the beginning of each board, board committee, executive and management committee agenda
All meeting attendees are required to formally declare that none of them, nor their related parties, have any personal financial interest in any matter on the agenda
Any director or attendee that declared a conflict of interest or a personal financial interest are excused from the meeting for the duration of the relevant matter being considered
The abovementioned declarations are recorded in meeting minutes
A director or prescribed officer must indicate his/her personal financial interest in a matter to be decided through written resolution by informing the group company secretary

Implementation and review of an electronic platform to facilitate reporting, workflow approvals and an auditable communication trail for disclosures by directors and employees began in 2022 and is effective. This includes the gifts and benefits register, director trade clearances and policy management.