Social, ethics and responsibility committee report

Dear shareholders,

I am pleased to present the SERC report for the year ended 31 December 2022.

 

Composition

The committee is chaired by the lead independent non-executive director of the board which assists in elevating the stature and relevance of the shareholder entrusted, social, ethical and corporate responsibilities. In the year under review, in line with the board's diversity and inclusion policy, the committee welcomed a new member, Karin Ireton.

The committee comprised a majority of independent non-executive directors throughout the period, as per King IV recommendations, which facilitated the application of independent judgement on committee deliberations and decisions.

As per the standard committee terms, the chairperson of the board and all board members are welcome to attend all meetings, as observers. The CEO is a standing invitee at all committee meetings as well as the FD, executive head: human resources, executive head: sustainability and executive head: stakeholder affairs. Other individuals with specific skills and expertise are also invited to report and assist members in their deliberations, including the information officer, head of legal, chief audit executive and chief risk officer.

Meetings

Six meetings were held during 2022, including two special meetings and four quarterly held meetings.

The following table provides an overview of member designations and attendance:

Members	Designation	Attendance at quarterly meetings	Attendance at two special meetings
Dr Geraldine Fraser-Moleketi	Lead independent non-executive director and chairperson	4/4	2/2
Karin Ireton	Independent non-executive director	4/4	2/2
Likhapha Mbatha	Non-executive director	4/4	2/2
Isaac Mophatlane	Independent non-executive director	3/4	1/2
Peet Snyders	Independent non-executive director	4/4	2/2

In addition, two interactive hybrid stakeholder engagement days were hosted in the third quarter of 2022.

Committee calendar highlights linked to key focus areas in 2022

February	May	June	July	November
Oversaw decarbonisation project implementation	Received and considered performance report on social impact matters	Reviewed policy proposals in respect of non-mandatory vaccination	Received and considered UNGC communication on progress	Reviewed terms of reference and annual work plan and recommended terms of reference to board for approval
Monitored performance against UNGC principles	Undertook reputation survey Case study: reputation management top of mind	Diversity, equity and inclusion: reviewed principles and human resources practices driving fair pay policies	Received and considered performance report on social impact matters including energy business economic development programmes	Received and considered quarterly report on safety, health and environmental performance
Approved ethics strategy and management plan	Assured entrenched anti-bribery and anti-corruption practices and reviewed ongoing anti-bribery and anti-corruption programme	Reviewed implementation against ethics management plan	Assessed B-BBEE assessment report against transformation objectives	Monitored company's regulatory compliance to ensure fulfilment of licence to operate conditions
Received and considered quarterly report on non-compliance with company's ethics-related policies	Considered report on significant forensic investigations to manage risks and identify process improvements	Monitored procurement risk mitigation measures against mining-related criminal activity	Evaluated land use against SDGs as part of minerals succession programme	Considered regulatory requirements within mandate (including SLP progress)
Approved inclusive policies for people with disabilities		Assessed effectiveness of ethics policies and processes including whistleblowing hotline	Reviewed FTSE Russell analytics and global benchmarks	Reviewed the Social Impact strategy as the company's response to climate change and just transition for relevance and legitimacy
			Diversity, equity and inclusion: Reviewed and approved five-year employment equity plans	Monitored improvements and effectiveness of changes in the anti-bribery and anti-corruption practices
			14 and 15 July 2022: Hosted on-site stakeholder engagement days	Approved policies: human rights and donations

Terms of reference

The committee's terms of reference were extensively reviewed in 2021 to include responsible corporate citizenship in its role and responsibilities. The terms of reference were reviewed in 2022 and the amendment approved by the board. The terms of reference continue to be aligned with legislation, regulations and King IV.

2022 in review

Under the auspices of the committee, the leadership pledge to diversity, equity and inclusion is to have a gender balanced workforce and achieve demographic parity. The approach adopted in so doing, is to maintain the momentum of transformation, focusing on women, youth and people living with disabilities. Oversight of the successful practices and challenges remediated in pursuit of this ideal, is part of the joint accountability model employed by the committee.

Employee engagement outlines our approach and performance.

To name but a few, there are concerted efforts through programmes like the women in mining workplace forum which elevates the practical needs of our women in mining drive and fosters an internal culture for inclusion.

In addition, accessibility audits for inclusion of more people with disabilities and approval of company policy promoting this undertaking continue under the watchful eye of the committee.

With regard to economic development, the committee promotes support of SMMEs led by women and people with disabilities by monitoring participation of beneficiaries in ESD and local economic development initiatives in accordance with the company's drive to increase economic empowerment of women through access to resources and broader employment opportunities.

There is always more work to be done towards diversity, equity and inclusion. Management therefore formulated a roadmap to address inequities. Exxaro is also a signatory to the UN's Women Empowerment Principles, which offer guidance on further women empowerment in our workplace and communities. We celebrate recognition by the Bloomberg GEI ( delivering measurable results and impact) for the fourth consecutive year of the company's accomplishment in a predominantly male-dominated industry. Leadership is commended for commitment and integrity in fulfilling this agenda.

Execution of the Sustainable Growth and Impact strategy hinges on proper execution of the people strategy or human capital priorities. The committee is therefore responsible for assuring the company's standing in relation to the ILO's protocol on decent work and working conditions as well as the educational development of employees. This is particularly pertinent for the company to become carbon neutral by 2050 as a future-fit organisation.

The committee continues to drive key performance imperatives in respect of people development and learning through innovative means. The workforce of the future is bolstered by a range of flexible workplace accommodations like parental leave for adoptive parents and work-from-home practices (hybrid model). The transformation of static workforce practices is an extended process to which the committee is responsibly committed.

The committee identified that management of social and ethics risk, requires meaningful engagement and dialogue with affected stakeholders. To this end, the committee's stakeholder engagement strategy is executed and includes in-person visits, as is preferred, as well as multi-region, virtual engagement sessions. These town hall sessions were extended to local, district and provincial government, ESD beneficiaries and many other economic development project participants. The advantage of the virtual platform was the integration of simultaneous engagement with community and government stakeholders, which contributed to a richness in discussions and shared learnings.

Relationship building remains a key outcome of the stakeholder engagement strategy in redressing the plight of the poor in communities surrounding operations.

The committee's oversight of stakeholder engagement includes weekly reports in respect of business activity and media review as an indicator of reputation management.

In accordance with the OECD recommendations, the company developed and employed an anti-bribery and anti-corruption policy and adopted adequate internal controls, ethics and compliance programmes as well as measures for preventing and detecting bribery.

Based on an ethics risk assessment, the committee approved an ethics management strategy and related plan. Throughout the year and through the ethics management committee, measures were assessed and adapted for continued effectiveness, and to mitigate the risk of becoming complicit in bribery, bribe solicitation, small facilitation payments and extortion among others.

In addition, internal employee awareness and public communication of the company's stance against corrupt activity was undertaken during the period under review. Strict zero tolerance of unethical conduct and disciplinary processes are aimed at rooting out this kind of conduct. No political donations were made in 2022.

The future of the mining and energy industries is increasingly shaped by ESG imperatives. As such, the committee oversees management plans to leverage opportunities identified for the minerals business, including resource transition, linking ESG outcomes to value creation, unlocking new sources of value such as reskilling employees beyond mining services, mining strategically for the future and decarbonisation of the business.

The board is invested in a just energy transition and supports the path to sustainability in an era of climate change. Demonstrated commitments include the company's investment in wind power and preparation for a response to a range of global climate scenarios. The company is indeed aiming to be carbon neutral by 2050.

Climate change position statement (sustainability tab)

The committee oversees the Social Impact strategy, an integrated socio-economic development strategy in response to the dual challenges of social inequality and the systemic impacts of climate change. It aims to transition Exxaro to a low-carbon future. The committee, along with management, continue to dedicate time to ensuring delivery of SLP commitments and developing the Sustainable Growth and Impact strategy.

With regard to safety, health and integrated wellness, the committee is pleased to announce that, on 2 March 2022, the company achieved a major milestone of five years fatality free, underpinned by the Khetha Ukuphepha safety campaign. However, this celebration was short-lived when Belfast reported a regrettable loss of life. The learnings from proper internal and external investigations were shared and leadership increased visibility through more frequent and focused presence.

Collaborating with the DoH, COVID-19 vaccination campaigns were successful. The group achieved an outstanding vaccination rate, which far exceeded the 80% industry target.

With concern, it was reported that for the period under review, there had been 23 occupational disease cases recorded with six instances related to noise induced hearing loss.

In keeping with a COVID inspired initiative, the integrated wellness approach was designed to support the whole employee. Management made concerted effort to support the emotional, financial and occupational dimensions of each person. The committee was pleased with the outcomes and impact of this continued approach, which has delivered demonstrated results. The wellness offering has been renewed and continues to improve.

Future focus areas for 2023

1. Oversee implementation of diversity, equity and inclusion strategy in support of the overall Exxaro strategy as a key business value driver
2. Scrutinise the people strategy and human capital levers in support of the five strategic objectives
3. Continue to engage the eight key stakeholder groupings in terms of the KAM approach
4. Monitor the demographic of beneficiaries of the ESD programme, also in accordance with the diversity, equity and inclusion strategy, and women empowerment programme
5. Review the ongoing anti-bribery and anti-corruption programme implementation, including the whistleblowing mechanisms for effectiveness and ensuring an ethical culture
6. Oversee ESG governance in the organisation and execution of the decarbonisation programme

Performance evaluation

Although the committee is currently not obligated by legal or regulatory requirement to complete annual performance evaluations, in line with King IV's recommendation of regular performance evaluations for all board committees, it is governance practice at Exxaro to evaluate the committee's performance and effectiveness every two years.

During the period under review, an independent evaluation of the performance and effectiveness of the board, its committees and specific individuals found no significant matters of concern. Areas in need of greater focus include ESG and community project oversight and review of the effectiveness of whistleblowing mechanisms. The overall conclusion is that the committee functions effectively.

Conclusion

The SERC is pleased to confirm that, in carrying out its duties, as prescribed, it has duly regarded King IV principles and recommended practices, and has discharged its responsibilities in accordance with its terms of reference and the Companies Act. Beyond mere compliance, the committee is also satisfied that it has fulfilled its non-statutory mandate and that there are no material instances of non-compliance to disclose. If any material non-compliance existed, it was duly considered during the year in review.

In closing, the committee recognises that the current transformation in sustainability and responsibility is a clearly bigger revolution than digitalisation. It is committed, with leadership to act now and with impact!

On behalf of the committee

Dr Geraldine Fraser-Moleketi
SERC chairperson
14 April 2023