Social licence to operate: earning our legitimacy

Our social and relationship capital refers to mutually beneficial relationships that provide our social licence to operate. To ensure we have a holistic, positive and lasting impact on our people, communities and society at large, we conduct our business activities in a way that promotes development and success for us and our stakeholders.

Our social and relationship capital impact comprises large-scale, high-quality initiatives that provide for meaningful socio-economic upliftment opportunities: Education and skills development Land use and management Local economic development

We strive to positively impact our social and relationship capital through: Our Social Impact strategy addressing challenges in our host communities Investment in socio-economic development Going beyond compliance to protect our licence to operate

Material theme	Matters	Our strategic response	Our impact on the SDGs
Building sustainable communities	Social licence to operate Social acceptance and community unrest Supporting a just transition to a low-carbon economy Job and business creation Impacts on local communities (positive and negative) Value sharing Human rights	Empower people to create impact Be a catalyst for economic growth and environmental stewardship

"We know that there is a better place to be tomorrow than where we are today."
Dr Nombasa Tsengwa

Communities in our 2022 ESG report details our social and relationship capital approach and performance.

How we achieve this

 Our Social Impact strategy embedded in the objectives of our Sustainable Growth and Impact strategy, is a multidimensional and scaled approach to empowering our host communities. We work to empower them with skills and capabilities to find employment, and entrepreneurial opportunities to create their own economic wellbeing, social progress and dignified livelihoods. However, the potential for negative community sentiment to escalate could negatively impact our ability to succeed with our growth strategies. Our Social Impact strategy is a shift from a market-driven approach to a multidimensional approach to inputs and expected outcomes. We will continue to address compliance requirements with increased focus and on a larger scale, complemented by discretionary expenditure and collaboration.

Six funding structures serve as conduits for community donations and sponsorships, namely the Exxaro Chairman's Fund and Foundation, Matla Setshabeng NPC, Amakhala Emoyeni Community Fund Trust, Tsitsikamma Community Windfarm Trust, Tsitsikamma Development Trust and ESD programme. Our Social Impact strategy enables us to deliver impact at scale through the following key principles:

The board approved the Social Impact strategy in November 2022. The SERC, through its statutory provisions, has oversight of community engagement and development. This committee will oversee the implementation of the Social Impact strategy. The executive head: stakeholder affairs, has been delegated with the role and responsibility for integration and execution.

Snapshot of our performance

SLP projects	• Spend: R13.38 million (2021: R56.44 million) • Our spend was impacted by delays experienced in the implementation of SLP projects • Submitted proposals for Thabametsi (2020 to 2024), Matla (2020 to 2025), Grootegeluk (2023 to 2027) and Tshikondeni (in closure) (2023 to 2027) SLPs • DMRE approved the Matla (2020 to 2025) SLP
CSI (including disaster relief)	• R167.93 million (2021: R57.28 million) (Matla Setshabeng NPC was established in 2021 and was fully operational in 2022, hence the high difference in CSI spend) • 1.17 million beneficiaries (including GBV campaigns and university chair) (2021: 300 000) • R80.9 million invested in community education to benefit 41 000 learners
ESD contribution	• Spend: R291.2 million (2021: R127.7 million) • Beneficiaries: – Qualifying small enterprises (QSEs) and exempt micro-enterprises (EMEs): 30 (2021: 15) – Youth-owned: 16 (2021: four) – Women-owned: nine (2021: seven) • Jobs retained: 1 037 (2021: 243) The ESD programme achieved record disbursements and played a role in the achievement of the procurement targets described below. Driven by a higher group NPAT, the programme had to spend a much higher amount within the year to ensure compliance with the dtic B-BBEE codes. Given the high coal prices, the forecast NPAT was much higher than budgeted at the beginning of the year. All efforts were invested to achieve the higher target, however, there were fundamental constraints that prevented us from achieving our ESD compliance goal. Firstly, resource constraints to spend more money and secondly, increasing the volume of ESD funding applications does not improve the number of qualifying applicants. While we reached an annual increase and record disbursement of R291 million, we expect to achieve 9.75 points (65%) out of 15 compared to the target of 13.5 (90%) once the B-BBEE verification for 2022 has been finalised.
Supply chain sustainability	• Preferential procurement: Fully compliant with B-BBEE codes: overall score of 26.9 (2021: 28.3) against 24.2 target • Green procurement programme: Spent R133 million (0.8% of total procurement budget) • Mining Charter III scorecard: Scored 40 (2021: 40) points against 37.2 (2021: 31.5) target • Local procurement: Spent R1 097 million (2021: R1.05 billion) with 246 (local black-owned SMMEs (2021: 241) • Ethical procurement: E-procurement software, supplier onboarding process and checks to reduce fraud risk, maintain cost efficiency and avoid conflicts of interest Our affirmative procurement initiatives at operating mines remain above target. We spent R1.1 billion, (circa 11.4%) of discretionary procurement compared to a target of 10%, on local SMMEs, thus injecting significant value into the local communities. However, the challenge remains large and we will continue to pursue higher levels of this investment through targeted expenditure and skills development to increase both the volume of expenditure and value per expenditure.

While the Social Impact strategy will fit into the "S" element of ESG, the implementation approach will incorporate elements from "E" and "G" to ensure sustainability, especially in relation to just transition considerations. We were deliberate in selecting to focus on education (ECD and adopting local schools), land use and management (mineral succession planning, ie finding alternative economic uses of the land beyond mining) and continuation of local economic development through local procurement and ESD initiatives. When viewed through the lens of the SDGs, this approach will have a sustaining positive impact on communities and reduce poverty by combining multidimensional approaches (education, economic wellbeing, school health and education infrastructure) and influence other areas of wellbeing without additional investment (the multiplier effect). We are planning to have approval of (partial, while researching other) execution plans by mid-year 2023.