We are responding to climate change by transitioning Exxaro into a resilient, diversified resources company and decarbonising our operations and portfolio – positioning the business to thrive in a low-carbon future and enhance our social impact.
This section provides an overview of what guides, informs and drives the transition of our business, including:
Detailed disclosure
This section provides an overview of what guides, informs and drives the transition of our business, including:
Accountability and responsibility through board oversight
Our board and its committees are ultimately accountable and responsible for overseeing Exxaro's response to climate change, ensuring integrated business processes and responses. The board also oversees the executive committee's execution of Exxaro's strategy, including measures that address climate change, among other material ESG matters.
Detailed disclosure
This section provides an overview of what guides, informs and drives the transition of our business, including:
Integrating climate change into our strategy
Our strategy to diversify through investments in our low-carbon transition minerals and grow our energy solutions business is key to addressing the impacts of climate change and reducing our scope 3 emissions.
Detailed disclosure
This section provides an overview of what guides, informs and drives the transition of our business, including:
Executing our decarbonisation roadmap
The roadmap and strategy will guide our emission reduction targets for scope 1 and 2 emissions. We will employ technology and integrate renewables to reduce our scope 1 and 2 emissions. Additionally, we form strategic partnerships and investigate innovative technologies to address scope 3 emissions to ensure carbon-neutral goods and services within the value chain.
Measuring, managing and reporting on performance
We report on energy and carbon data in terms of the GHG Protocol, and participate in the CDP climate change and water programmes.
Detailed disclosure
This section provides an overview of what guides, informs and drives the transition of our business, including:
Collaborating
We engage and partner with various stakeholders to raise awareness and collectively drive climate action.
Detailed disclosure
This section provides an overview of what guides, informs and drives the transition of our business, including:
Addressing risks
Climate-related risks are incorporated into our ERM processes – a strategic initiative fully supported by the board and executive management.
Detailed disclosure
The board's responsibilities and activities include:
The board has delegated responsibilities for ongoing management of risks and opportunities to the RBR committee and oversight of the manner in which we have an impact on the planet, including climate change, to the SERC. These committees meet quarterly and review progress in mitigation, adaptation, leveraging of opportunities and community engagements. The ESG steering committee aims to enhance our effectiveness as we gear up for our transition, and coordinates our internal and external responses.
To ensure alignment with our carbon emissions reduction goals, the ESG steering committee monitors initiatives based on our ESG strategies. This helps us understand risks and opportunities so that our operations can focus on managing energy consumption, carbon emissions and other climate-related matters. The ESG steering committee is supported by the decarbonisation technical working team and the core coordination team, which track progress, escalate issues and align initiatives with Exxaro's emissions reduction roadmap.
Our board and management monitor our performance against climate change goals as part of the regular internal reporting process. Additional sessions inform our board and management of emerging trends, risks and opportunities. Climate change matters that relate to committees' terms of reference are reported as part of each committee's annual work plan.
Our board and management are committed to understanding and embracing the science behind climate change and the use of climate scenarios to understand impacts on the business.
In line with our purpose of powering better lives in Africa and beyond, our ambition is to provide resources (energy, commodities, capital and people) critical to ensuring a low-carbon world. We are acutely aware of the delicate balance between a rapid energy transition and a fair, equitable shift that benefits all stakeholders. Our Sustainable Growth and Impact strategy was established with this in mind, allowing us to respond to the energy and just transitions.
Energy transition
Just transition
Climate change is one of the forces that shaped our strategy. We conducted a detailed scenario analysis that considered various parameters, assumptions and the resilience of our strategy to climate-related risks and opportunities in line with the TCFD recommendations. These included the transition to a lower-carbon economy consistent with a 2°C or lower scenario, impact of carbon pricing and increased physical climate-related risk management to ensure business resilience under these scenarios.
We published our Climate Change Response strategy and assessment on our alignment with the TCFD recommendations in our 2020 Climate Change Response strategy report. The TCFD provides a strategic framework for guiding our Climate Change Response strategy. This supports our overarching Sustainable Growth and Impact strategy through three of the five objectives (transition at speed and scale, empower people to create impact and be carbon neutral by 2050).
This plan includes key initiatives, milestones and partnerships in line with our decarbonisation strategy to address scope 1, 2 and 3 emissions. Implementation of our plan will prioritise initiatives that effectively balance emission reduction, technology adoption, technological feasibility and funding availability, ensuring a comprehensive approach to our overall emissions reduction goals.
To achieve this, we will need to actively reduce our scope 1 and 2 emissions by at least 40% by 2030. This target was previously 2026 and was restated due to production changes. The commissioning of our first self-generation project (the LSP) will contribute to a 25% reduction in our scope 2 emissions and a 17% reduction in our total scope 1 and 2 emissions. The implementation of additional renewable energy projects at our Mpumalanga operations and energy efficiency projects will also contribute to the achievement of our short-term target.
We aim to achieve carbon neutrality by 2050 through a strengthened contribution towards a low-carbon transition.
Action
Employ technology to reduce scope 1 and 2 emissions
Focus area
Diversify towards resilient minerals and renewables
Focus area
Secure South Africa's energy and economic needs
Focus area
Balance emitted carbon with an equivalent amount of offset
Focus area
Support the most impacted and vulnerable in the shift
Focus area
We are reducing our diesel utilisation through a phased fleet optimisation strategy that explores hybrid technology and fleet electrification. Grootegeluk, which contributes 58% of total group diesel emissions, is the primary site for decarbonisation.
| Timeframe | Key initiatives | |
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2025
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2026 to 2030
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2031 to 2040
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2041 to 2050
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The following assumptions underpin our fleet decarbonisation approach:
We aim to reduce our coal-fired electricity emissions by integrating solar and wind renewable energy to replace coal-fired electricity. The roadmap includes solar and wind projects, such as the LSP, and wheeled energy solutions.
As a fossil fuel company, Exxaro's use of sold products is the largest contributor to our emissions. To address emissions in our value chain, Exxaro is exploring strategic value partnerships with end-users to foster a culture of shared responsibility. These collaborations are intended to drive industry-wide changes towards a more sustainable future. To this end, we aim to sign memoranda of understanding (MoUs) with our top five customers to collectively execute carbon-reduction initiatives and contribute to the low-carbon transition.
Indirect GHG emissions occur when a sold product undergoes further processing or transformation by a third party before it reaches the end consumer
MoUs and collectively executing initiatives
Exxaro's decarbonisation roadmap, illustrated below, provides a comprehensive framework summarising the key milestones, initiatives and technologies necessary to achieve carbon neutrality in accordance with the plan and strategy. The roadmap provides a clear pathway to operational resilience in a low-carbon future.
| * | Carbon offsets (nature-based and renewable) will be implemented to reach carbon neutrality by 2050. |
| ** | LSP (wheeled solar at Grootegeluk). |
| # | Wheeled solar in Mpumalanga (Belfast, Mafube and Matla). |
| ## | Wheeled wind in Belfast, Mafube, Matla and Grootegeluk. |
Our ERM processes consider and embed climate-related risks and opportunities into our existing processes and decision making. We conducted a detailed climate change scenario analysis in 2019 and 2020 to identify these risks and determine their relative significance. These risks remain relevant to our context. Our response includes leveraging opportunities such as resource efficiency, growing our energy business, self-generation projects, investments in low-carbon transition minerals and developing adaptive capacity.
Our response to these risks is unpacked in the 2020 Climate Change Response strategy report and 2020 climate change position statement.
| Transition risks | |
| Credit and insurance risk | 1 |
| Carbon pricing risk | 2 |
| Market risk | 3 |
| Reputational risk | 4 |
| Physical risks | |
| Water security risk | 5 |
| Risk of heatwaves at our operations | 6 |
| Risk of drought | 7 |
| Risk of extreme rainfall days | 8 |
Financial institutions are increasingly moving away from funding companies with high climate change risk exposure and intangible carbon reduction targets. Globally, funding of coal operations is being diverted to investment that supports a low-carbon economy. Locally, most commercial and development banks have indicated they will no longer fund new coal projects. The financial institutions are increasingly evaluating the impacts of climate change scenarios on borrowers' revenues, costs and property values, and how this could affect the probability of default and loan-to-value ratios at a borrower and portfolio level. This sentiment is likely to grow in the next five to 10 years as action increases to mitigate climate change impacts.
Over the past six years, we have noted a significant increase in our insurance premiums against our assets. This scenario is likely to increase as climate action intensifies. Additionally, the major risk will be associated with an inability to cover our assets through insurance.
To manage this risk, our Sustainable Growth and Impact strategy is strongly focused on renewable generation and transition minerals that can facilitate a cleaner future. Many financiers have indicated their interest in this new business direction, mitigating some of the financial lending risk.
The South African government is implementing policy measures to reduce its GHG emissions to meet its Paris Agreement commitments. The government implemented carbon tax in June 2019 to encourage corporate behaviour to direct investments and expenditure towards low-carbon alternatives and emission reduction.
The nominal tax rate is R190/tCO2e and represents a 16% increase from the 2023 nominal tax rate of R159. However, government still allows specific tax-free allowances to facilitate a smooth transition to a low-carbon economy and mitigate competition among affected industries, reducing the rate to between R9.50 and R76/tCO2e.
The first phase of the carbon tax (up to December 2025) is not designed to affect the electricity price but to address concerns raised by the mining sector. However, in November 2024, National Treasury released phase two of the carbon tax as a discussion paper for public comment. This phase, scheduled for implementation from 2026 to 2035, introduces significant changes to the design of the tax. The proposed changes include:
Our calculations indicate that based on the proposed phase two carbon tax changes, Exxaro's carbon tax liability for the short term (2024 to 2027) will increase, with liability figures of R3.3 million for 2024, R4 million for 2025, R7.9 million for 2026 and R9.7 million for 2027.
We also undertook a scenario analysis assuming that the current tax-free allowances will fall away from 2031 going forward. Our scenario analysis identified increased carbon pricing and operating costs (such as higher compliance costs) as examples of climate-related policy risk. Carbon prices associated with emissions trading schemes, carbon taxes, fuel taxes and other policies are expected to rise as government reduces GHG emissions in line with the Paris Agreement.
The speed and rate of carbon price increases are uncertain and likely to vary across countries and regions. Our scenario analysis of carbon price risk exposure below shows the expected outcome based on the stated policies and sustainable development scenarios. The impacts of carbon pricing on exports to regions such as the EU, which is planning to implement the Carbon Border Adjustment Mechanism, will depend on Exxaro's export strategy, carbon intensity of exported goods and the EU carbon price for 2026 going forward.
One of the major ways in which markets can be affected by climate change is through shifts in supply and demand for certain commodities, products and services as climate related risks and opportunities are increasingly taken into account.
The shift in fossil fuel and energy markets will have implications for our business portfolio resilience and transitioning process. Further, we also appreciate that climate change has created new markets, increased emissions reduction technology demand and supply, presented new financial instruments, and renewed efforts to mitigate fossil fuels and potential financial impacts on the business.
Climate change was identified as a potential source of reputational risk tied to changing stakeholder perceptions – investors, customers, communities, non‑governmental organisations (NGOs) and government – of an organisation’s contribution to or detraction from the transition to a lower-carbon economy.
The mining sector is exposed to the reputational risk of climate change – a threat to the credibility of its efforts to reposition itself as a more sustainable sector, and by extension to its licence to operate.
New policies such as the Climate Change Act could impact the business from many angles, ie compliance, financial, mitigation and adaptation points of view (upon the Act becoming effective). Non-compliance to the Act may also present reputational risks.
Our approach is to genuinely commit to climate action, sustainability, accountability and transparency, and implement adequate mitigation, adaptation, governance, risk and communications strategies to ensure a sustainable future for Exxaro and our stakeholders.
Climate change physical impacts, such as increasing temperatures, rising sea levels, more frequent or intense droughts, and more frequent and more damaging floods and storms, are serious challenges for our facilities, supply chains, employees, current and potential customers, and our host communities.
Exxaro's flagship mine, Grootegeluk, is situated in the Waterberg region. It relies on the Mokolo and Crocodile River (West) Augmentation Project phase 1 water supply scheme for reliable water supply. Water from the Mokolo Dam is supplied via a 46km pipeline to the Lephalale area for the town, Eskom and Exxaro. The system can supply 30 million m3 of water per year.
The risk of water security has increased significantly at our Waterberg operation due to a lack of perennial water basins and high temperatures. Our Waterberg operation has a negative water balance as it relies on an external source for its operational water requirements. To address this risk we have signed the supply agreement for MCWAP 2 that will bring in additional water from the Crocodile catchment.
Climate change, coupled with anthropogenic effects (population growth, etc), will impact our daily water management practices, and we need to adapt to a new normal that will require a shift in our overall water management strategy. In 2024, we conducted a water security risk assessment to understand the likelihood of Exxaro's operations, the environment, and communities suffering physical climate change risks to their water management systems, ecosystems and livelihoods respectively.
The risk assessment recommended various operation-specific mitigation measures and changes to our water management strategy to ensure business and community resilience.
Exxaro has one active tailings facility (slimes dam 1 and 2) at Grootegeluk, managed by operators and an engineer of record. To manage the facility and limit the deposition of slimes to the slimes dam, Exxaro has operational cyclic ponds which are used for slimes management.
As part of the risk management and continuous improvement in the operation of the tailings facility, Exxaro adopted the Global Industry Standard on Tailings Management. This is part of ensuring that the operation and governance of the tailings facility aligns with SANS and international standards.
Heatwaves are events where the maximum temperature at a given location exceeds the average maximum temperature of the year's warmest month by 5°C or more for at least three consecutive days. Downscaled climate models show that the Waterberg complex is predicted to experience a relatively higher number of average heatwave days than other Exxaro assets in Mpumalanga. The Waterberg operation will experience between 14 and 19 heatwave days from 2021 to 2040 (relative to 1961 to 1980). Our Mpumalanga operations are predicted to experience between eight and 13 heatwave days for the same period. This risk of heatwaves increases between 2041 and 2060 with Waterberg and Mpumalanga operations predicted to experience heatwave days of between 20 and 26, and 14 and 19 days respectively.
An increase in heatwaves could result in negative health and safety impacts for employees, create occupational health risks such as heat stroke, and restrict employees' physical functions and capabilities.
Our proposed actions will enable employees and the business to cope with heat stress and include improving our health and safety policies and emergency response plans. We plan to improve communication through instantly alerting and updating affected employees and host communities on sudden or rapidly changing weather conditions. We are also investigating the review of personal protective equipment to ensure specialised personal protective equipment for extremely high temperatures and heatwaves is available to employees. We have made recommendations for an industry wide approach to specialised personal protective equipment for extreme weather events to enhance employees' health and safety.
According to the Council of Scientific and Industrial Research Green Book – Detailed Projections of Future Climate Change over South Africa, there is a pronounced west‑east rainfall gradient over the country. Over the eastern escarpment and east coast, for the period 2021 to 2050, relative to the period 1971 to 2000, under low mitigation, rainfall is projected to increase over the central interior and the east coast. The western interior, northeastern parts and the winter rainfall region of the southwestern Cape are projected to become generally drier.
The Grootegeluk complex is in an area predicted to experience a higher level of drought severity than Exxaro's other sites – a trend that will increase over time. The increasing frequency of drought, particularly in the Waterberg, will increase our water security risks.
On 13 March 2014, the Waterberg region received an unprecedented high rainfall in a 24-hour period, which led to operational interruption for five days. Grootegeluk is in an area predicted to experience fewer average extreme rainfall days than Exxaro's other sites. The average number of extreme rainfall days is expected to increase across all sites towards 2060.
The flood event had a severe impact on our operations in terms of infrastructure damage, supply chain interruption, production stoppages, and employee and community safety. The frequency of extreme rainfall events is expected to increase in the Mpumalanga region.
IR