In the year under review, this committee focused on business resilience as it reflects the ability of an organisation to absorb and adapt in a changing environment to enable delivery of its objectives, its survival and prosperity.

The committee’s understanding of business resilience is:

Financial resilience	Operational resilience	Reputational resilience
The ability of an organisation to withstand events that impact its liquidity, income or assets.	The way an organisation uses its non-financial resources to withstand and absorb the impacts caused by shocks and stresses affecting demand or supply, its people, technology or facilities.	The ability of an organisation to respond to external perceptions, scrutinising self-limiting behaviours, building brand capital and reserves, and maintaining a foundation of trust and dependability.

Flowing from the Exxaro emergency response plan adopted in 2019, capability interfaces and business continuity capabilities were implemented early to ensure an integrated response and recovery capability throughout the organisation. The plan documented procedures in guiding the organisation to respond, recover, resume and restore to a predefined level of operation following disruption. We are pleased with the supporting role this committee played in ensuring a resilient Exxaro.

ROLE AND PURPOSE

The role of the committee is to oversee the company’s consideration of, and performance in terms of, material non-financial issues, including social, risk, compliance, safety, health and environmental issues. The committee ensures these matters are integrated into strategy and economic performance.

This committee also coordinates risk and compliance activities for the group and leads (on behalf of the board) a coordinated approach to the company’s long-term sustainable development philosophy, policies and performance management.

The committee is responsible for:

Sustainability	Risk management	Compliance
The committee tracks the company’s sustainability performance by reviewing significant sustainability incidents and KPIs, relevant data trends, considering actions to address areas of concern, and consequences of management decisions on the environment, community, health and safety of employees. It reviews the six capitals model to support Exxaro’s strategy and ensures performance indicators are determined for every capital. It also oversees technical and operational matters pertaining to sustainability performance and reporting to the company.	The committee exercises oversight of enterprise risk management on behalf of the board and, in particular, key risks facing the group as well as responses to address these risks.	The committee reviews policies and activities designed to promote compliance culture in the company while ensuring that compliance is understood in terms of the obligations it creates as well as the rights and protections it affords. In this regard, the committee reviews legal and regulatory processes, and monitors compliance with laws and regulations, and codes of good practice. It also ensures compliance is monitored and reported by management, external or internal audit, and reviews and monitors reports indicating material compliance, breaches and corrective measures to prevent breaches.

COMPOSITION

The committee comprised four members to May 2020 and then three independent non-executive directors with the board chairperson as a standing invitee to all meetings. Standing invitees include the CEO, FD, executive committee members, the chief risk officer, chief audit officer and internal auditors. Individuals with the necessary technical experience to assist members in technical deliberations are invited as required.

Management supports the committee with risk meetings at the BUs, sustainability forums, safety and health forums as well as an internal crisis management team.

MEETINGS

The committee held six meetings in 2020, two of which were special meetings. The table below is an overview of meeting attendance in 2020.

Name	Designation	Attendance
Peet Snyders	Independent non-executive director and chairperson	100%
Mark Moffett	Independent non-executive director	100%
Ras Myburgh	Independent non-executive director	100%
Anuradha Sing*	Independent non-executive director	100%

* Anuradha retired by rotation on 28 May 2020.

 SUPPORTING VALUE CREATION

Strategic focus areas

Safety

The Khetha Ukuphepha campaign made good progress. The committee supported safety and health targets for 2020, which again included a fatality target of zero as well as an HPI target of zero. The group achieved 46 months without a fatality in 2020. Employee health and safety contributes significantly to sustainability in the mining industry. Therefore, the company hosts the annual Sustainability Summit to discuss health and safety issues with employees. A safety culture, among contractors and employees, is entrenched with management supervision and performance-related scoring, including safety as a key component. COVID-19 required adjusted implementation of the Khetha Ukuphepha campaign.

Health

When South Africa detected COVID-19 in March 2020, as an essential services provider, the coal mining industry (including Exxaro) was at the forefront of managing the pandemic. Members of the Minerals Council South Africa were proactive, in line with Department of Health as well as DMRE guidelines, in mitigating the risks.

Exxaro’s implemented initiatives included:

• Two testing laboratories
• Partnership with community health centres to curb the spread of the virus
• Collaboration with municipalities in providing water and PPE to communities as well as healthcare workers
• A mental wellness programme to address emotional and financial stress experienced by employees due to COVID-19
• A 24-hour call centre to monitor individuals in isolation
• Deployment of oximeters for individuals in isolation
• Preventive awareness campaigns and education using peer health educators in host communities
• Defining Exxaro’s new ways of conducting business and COVID-19 control measures in the “new normal” and beyond
• Temporary closure of the conneXXion building
• Mass mandatory COVID-19 screening and testing of employees
• Preparations through the Minerals Council for COVID-19 vaccine deployment

Regrettably, the group recorded nine deaths due to COVID-19 and a total of 2 626 confirmed cases at the end of March 2021. Uncertainties about new ways of working are constantly reviewed by management to ensure the correct measures and practices are in place.

Sustainability

At Exxaro, everything we do today is geared towards ensuring a safer and more productive tomorrow.

Exxaro encourages collaboration, commitment and creativity in an environment that promotes safety, health, and wellbeing with respect and equality as prerequisites. These core values underpin our approach to sustainability

Exxaro welcomes the 17 UN SDGs in recognising the need to address issues facing the global community in a targeted and measurable manner. To this end, Exxaro participates in the NBI to ensure that the 17 SDGs align with the country’s NDP. Within our context, Exxaro is committed to supporting the country in the implementation of the NBI.

For more information, refer to Our material matters of this report.

Exxaro employs leading practice in upholding the following most material SDGs to leave a lasting net positive impact:

Risk management

The group’s risk management processes and framework are mature. The layers are vertically, integrated and provide input into the specific risk profiles. The board considers risk from a strategic level, the executive from a tactical level, and subsidiary and BUs consider risk operationally.

Compliance

An analysis and evaluation of the current compliance environment and practices in the Exxaro group included studying existing data (policies and memoranda) and interviewing relevant stakeholders. Considered and planned activities were identified for the further development, and establishment of approved compliance standards and protocols within Exxaro.

A summary of activities to establish Exxaro’s fully functional risk compliance management function appears below.

Other key issues in 2020

Regulatory compliance policy and report

The committee was informed of the compliance policy update in line with the business processes of the company. The policy intends to ensure that the board, executive heads and management discharge their oversight duties, and management of compliance risks and exposures. In addition, this provides a framework for management and the risk and compliance department to reinforce compliance culture throughout Exxaro. The purpose of the regulatory compliance report is to detail the company’s activities with a view to establishing the risk compliance management function. The aim of establishing the risk compliance management function is to enhance risk identification and monitoring efforts.

Climate change

A task force in collaboration with Trucost (S&P Global), was created to focus on climate-related financial disclosures as well as formulating the company’s climate change position statement. A report on the company’s position on global climate change was released in 2020, expressing its support for sustainable development and decarbonisation of energy generation. The implementation of the TCFD recommendations will include the following tasks and outcomes:

• TCFD benchmarking and gap assessment to identify current practice and compare Exxaro’s practices against TCFD guidance to determine gaps and improvement opportunities (including board and management governance, strategy, and risk management as well as a review of climate-related metrics and targets)
• Physical risk assessment — Trucost will use its analysis tool and model to assess the physical climate change risks in Exxaro’s operations and enable a climate change risk review for future investments
• Trucost analysis for qualitative and quantitative analysis of policy, legal, technology, market and reputation risks and opportunities, as well as socio-economic impacts and risks
• A summary of key findings and recommendations for Exxaro’s internal use as well as one-day climate scenario workshops with internal stakeholders (informed by the results of the TCFD assessments)

Exxaro’s ESG performance

Over the past five years, Exxaro’s FTSE Russell ESG index score for JSE-listed entities has steadily improved and moved into the top quartile of global performers within the basic resources supersector. This ESG momentum is currently in the top 22% of performers. The steady improvement in the final ESG rating since 2015 is notable. Relative to our peers, the score is that of a “best in class” coal mining company.

SLP performance and host community development

The committee monitored SLP implementation progress through regular reporting from executive management. Our community benefit scheme is operating as an officially registered public benefit organisation called Exxaro Matla Setshabeng NPC. It aligns with the DMRE definition of community, positioned to enable regional development and partnerships with industry peers and government through the district development model. Among the five black directors, comprising three Exxaro representatives and two independent non-executive directors, are three women (one elected as chairperson) and two men. The community benefit scheme has capital of approximately R50 million from a donation and dividend received in 2020. The first wave of COVID-19 infections disrupted SLP delivery but significant expenditure in response to the pandemic amounted to R55.1 million, including a R20 million donation to the Solidarity Fund. Not all project schedules will be recovered but implementation is on track as rescheduled.

Committees’ terms of reference

The board charter review led to amendments of the code of conduct, which will be integrated into board committees’ terms of reference. Furthermore, a new minutes approval process was recommended in line with the board charter.

Safety leadership day

The committee was informed of the virtual Safety Leadership Day on 30 October 2020 across BUs to an audience of over 2 000 participants. Executive committee members were deployed to the BUs to acknowledge good safety performance, highlight areas of concern and encourage commitment to maintaining a safe workplace.

Risk report and out-of-appetite KPIs

The following matters of significance were highlighted in the risk report:

• Safety and health concerns — safety and health controls are in place and working effectively. However, the current strained economic and political climate, pandemic health risk and work stress due to retrenchments by contractors are cause for concern, and could negatively impact the safety and health of employees
• Community unrest — the risk remain high in the current economic and political climate, and upcoming municipal elections are also a driving factor
• Eskom systemic risk — the financial viability of Eskom remains a concern
• Labour unrest — this seasonal risk usually increases during wage negotiations. Business continuity management activities at the BUs focused on the spread of COVID-19

2020 KPIs	Evaluation
Review current sustainability, risk and compliance committee KPIs for relevance in line with new approved strategy	Achieved
Once approved, review sustainability, risk and compliance committee KPIs quarterly and understand management plans for out-of-appetite KPIs, and periodically review management plans with enhancements requested in 2019	Achieved
Recommend the revised risk appetite after approval of the Exxaro strategy, including the growth strategy	Achieved
Periodically review the top risks pertaining to the group, key operations and mega operations	Achieved
Review the climate change strategy in light of recent changes to Exxaro’s strategy	Achieved
Review Exxaro’s top compliance risks	Achieved
Recommend the integrated report to the board for approval	Achieved

The out-of-appetite KPIs on the strategic performance dashboard received necessary attention to the satisfaction of the sustainability, risk and compliance committee. Significant risks brought to the board’s attention were community unrest, Eskom systemic risk, health and safety concerns, and labour unrest. Improvement in material litigation was also reported to the board. BUs were fully licensed for operation.

2021 OUTLOOK

Exxaro rolled into 2021 with confidence and strength despite disruptions by lockdowns and protocol. We managed COVID-19 with distinction, made progress with the development of the sustainable growth and impact strategy, and delivered strong financial performance notwithstanding challenging economic conditions. The world of business in 2021 is distributed, dynamic and disrupted.

It will be distributed and interconnected across a web of business relationships with stakeholders, clients and third parties. It will be dynamic in that business changes from day-to-day — processes, employees, relationships, regulations and risks, and objectives change.

The disrupted business environment presents unique opportunities for mining companies to significantly shift their perceptions of doing business — 2020 was the poster child for business rolling into 2021.

Knowing the risks Exxaro already faces, I believe we should become agile in the way we do business. For the business to be agile in uncertainty, we will be influenced by rapid growth and change in risks, regulations, competitiveness, technology and business data.

When addressing sustainability, risks and compliance in 2021, we will have to focus on business integrity, business resilience and integration. Exxaro has the necessary structures in place to ensure sound risk management and ensure sustainable business. Moreover, we have the benefit of a new committee member to encourage us.

PERFORMANCE ASSESSMENT

No legal or regulatory requirement compels the committee to complete annual performance evaluations. While King IV™ recommends regular performance evaluations for all board subcommittees, it is governance practice at Exxaro to biannually evaluate the committee’s performance and effectiveness.

CONCLUSION

The committee, in carrying out its duties, duly regarded the principles and recommended practices of King IV™, and discharged its responsibilities in accordance with its terms of reference amid the pandemic’s challenges. Furthermore, the committee is satisfied that it has fulfilled its mandate in terms of the Regulations to the Companies Act, and that there are no material instances of non-compliance to disclose. If any material non-compliance existed, it was duly considered.

On behalf of the committee

Peet Snyders
Sustainability, risk and compliance committee chairperson
19 April 2021