exxaro

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Group in brief

Approach to sustainable development

Sustainability is defined as
the capacity for continuance
into the long-term future. By contrast, sustainable development is the process
by which we move towards sustainability

Philosophy

As a resources group, our challenge is to demonstrate that the way we approach our business contributes to sustainable development.
This means finding that perfect balance between the opportunities
for growth and development that responsible citizenship presents and
ensuring that the social, environmental and economic impacts of
mining – positive and negative – are managed in a transparent and
accountable manner.

In Exxaro, sustainable development has been refined to support the group’s and innovation. Underpinned by an analysis of the business case for sustainable development and the triple bottom-line drivers in each area, our approach is determined by formal charters that define our goals and commitment to stakeholders. These charters are, in turn, guided by South African legislation, recommendations on corporate governance, the JSE Socially Responsible Investment index requirements and international benchmarks such as the Global Reporting Initiative (GRI) and its sectoral supplements, the United Nations Global Compact, and the International Council on Mining and Metals. In line with our commitment, sustainability is an integral performance indicator in the economic, social and environmental aspects of our business.

We believe that reporting on sustainable development is integral to our fiduciary duty to shareholders and, by extension, to stakeholders. In providing the assurance that Exxaro is a well-run and credible group, with sound longer-term prospects, our stakeholders need to understand the coherent process that underpins the way we do business: from the strategy that drives our group, to our understanding of the risks and issues that may impede that strategy and the commitment of our management teams to achieving our goals. In consolidating the elements relevant to Exxaro, we gave equal emphasis to strategy and sustainable development, acknowledging that our success rests on their interdependence.

Exxaro’s approach is to incrementally move beyond reporting reporting. This requires an understanding of legislative requirements, international and other protocols and industry-specific targets (some of which are illustrated below) to ensure the necessary systems and processes are in place to facilitate meaningful reporting standards.

GOOD CORPORATE CITIZENSHIP IMPERATIVE INCLUDES:


SOUTH AFRICAN LEGAL COMPLIANCE		PROTOCOLS

• The constitution • Biodiversity management acts • Pollution and waste management acts • Mineral and Petroleum Resources Development Act • Various labour legislation • Employment Equity Act • Broad-based black economic empowerment • Skills Development Act		• International Council on Mining & Metals (ICMM) • United Nations Global Compact • Global Reporting Initiative (GRI) • FTSE 4 Good • JSE – SRI index • King II report on corporate governance

Sustainability – based on strategy and national priorities

Several years ago – before Exxaro’s formation but initiated a process of understanding what sustainability meant for our business.

The exercise entailed one-on-one interviews with key decision makers, leading to a strategic framework of key elements, set out on page 19. This framework remains relevant to Exxaro and formed the basis of the implementation model shown here. This model is reviewed regularly.

Key elements of Exxaro’s sustainability framework

AREA	KEY ISSUES	PROGRESS
Social impact management	Direct and indirect effects on community and society (operations, social stability and inﬂ uence on family life, housing and living conditions).	Seven socio-economic assessments completed. In 2008, the focus will be on completing the outstanding ﬁ ve assessments and implementing management action plans in response to identiﬁ ed stakeholder issues.

Employment equity	Equitable recruitment and employment practices to meet legislative targets for employing and developing individuals from designated groups.	At the end of 2007, designated groups represented 36% of Exxaro’s management and 14% of these positions were held by women. Exxaro is well on track to achieve its 2008 targets of 40% for management overall.

Natural environment	Understanding our impact on the physical environment and conforming to nationally and internationally recognised standards, policies and measures to address detrimental environmental effects, and ensure sustainable development of our operations.	Environmental impact assessments have been completed or are under way for the majority of operations. Results will be incorporated into site environmental management systems. We are consolidating data systems throughout the group, and will continue the process as we integrate Namakwa Sands in 2008. Key issues have been identiﬁ ed for major operations and this process will be rolled out to other operations in 2008. See pages 25 and 101 for elements to be managed.

Ownership and control by historically disadvantaged South Africans	Managing the black economic empowerment imperative in South Africa through ownership control and management participation.	With 56% of the group owned by black shareholders, including our own employees, Exxaro has exceeded this target. Previously disadvantaged Exxaro employees own 3% of the group, and 36% of management comprises HDSAs.

Stakeholder engagement	Implementing effective and transparent engagement, communication and independently veriﬁ ed reporting arrangements with stakeholders.	Stakeholder engagement plans were completed for every operation. Ongoing interaction will ensure the group remains abreast of changing stakeholder needs. Our stakeholder engagement has further been enhanced with the development of a stakeholder management system.

Natural resource management	Responsible use of non-renewable mineral and other natural resources.	Dedicated specialist unit established to intensify focus on addressing risks and impacts.

AREA	KEY ISSUES	PROGRESS
Business sustainability	Ensuring our long-term ﬁ nancial viability; contributing value to all stakeholders; and accounting for the distribution of value created through business activities.	The integration of former Kumba Resources and Eyesizwe Coal operations has been successful to date. The integration of systems, processes and policies will take a little longer, as anticipated in the business planning that preceded Exxaro’s listing.

Mine closure	Our aim is to leave self-sufﬁ cient communities after mine closure with appropriate infrastructure, skilled people and rehabilitated land.	Results from the most recent closure plan to date – Durnacol mine in rural KwaZulu-Natal – have been excellent. The success in rehabilitating Hlobane mine has received worldwide recognition. Extensive consultation between all stakeholders has resulted in a sustainable community with the infrastructure, skills and determination to succeed. Closure plans for current operations are developed and reviewed against prevailing life-of-mine plans and current best practice.

Social development/ national social priorities	In balancing our interests with those of our stakeholders, speciﬁ c areas are guided by the social needs of the community, and by the national priorities of society at large, including: Education, training and skills development Healthcare promotion, particularly HIV/ Aids programmes Job creation SMME (small, medium and micro enterprises) and other business opportunity development Conservation of the environment, including awareness programmes Infrastructure development, including schools, clinics, potable water, sanitation, etc.	Social and labour plans have been submitted to the authorities for most operations. Similar plans are being developed for the remaining operations, which will be submitted by April 2008. In 2007, 58 projects were completed at various operations at a cost of R22 million.

HIV/Aids	Approaching the pandemic on two levels: as a workplace issue (speciﬁ cally preventative, educational and clinical support practices including antiretrovirals) and as a community issue.	By the end of 2007, some 30% of the total workforce had participated in voluntary counselling and testing (VCT). In 2007, 1 889 people attended awareness sessions, 1 784 participated in VCT and 145 tested positive. Over 240 people are on anti-retroviral treatment (ART).


AREA	KEY ISSUES	PROGRESS
Health and safety in the work environment	Exceeding legislative compliance on workplace conditions for employees to facilitate greater satisfaction, efﬁ ciency and productivity.	Nine of the group’s 12 operations have achieved OSHAS 18001 certiﬁ cation. In 2008, the focus will be on certifying our remaining operations.

Labour relations	Managing the relationship with our employees and their representatives, to foster appropriate engagement, a climate of trust and widespread participation on issues of mutual interest.	Some 60% of the Exxaro group’s employees are members of ﬁ ve recognised unions.

Corporate governance	The extent and sophistication of Exxaro’s board, executive management and governance structures supporting our practice of triple bottom-line risk management.	Exxaro subscribes to the spirit and principles of the King Report on Corporate Governance (King II) (read more).

Human resource development	The range and extent of training and skills development practices, moving beyond current job training requirements to include future and potential work orientation, personal skills development, and training in corporate citizenship and sustainable development.	Exxaro spent 6,5% of total payroll on human resources development in 2007, above its own target of 6% and well above the mining industry average of 3,4%. This translated into 66% of our workforce receiving an average of 27 hours of training during the review period (page 121). In line with our commitment to encourage our people to become literate and numerate (NQF level 1 and higher qualiﬁ cation), 66% of Exxaro employees have at least an NQF level 1 qualiﬁ cation.

Shareholders’ rights	Equal treatment of all shareholders and protecting their rights specifically minority shareholders through equal, accurate and timely disclosure.	The group has programmes and guidelines for providing detailed information to shareholders through formal and informal communication channels and media.

Supplier relations/ developmental procurementt	Managing procurement processes and nurturing small enterprises and disadvantaged individuals, developing suppliers through preferential procurement.	Small enterprises are exposed to a variety of opportunities in Exxaro to accelerate their diversiﬁ cation process along the commodity value chain.

AREA	KEY ISSUES	PROGRESS
Human rights	Ensuring basic human rights are respected by all direct operations.	Exxaro complies with all applicable labour legislation in South Africa and with International Labour Organisation guidelines. Accordingly the group encourages freedom of association and collective bargaining, and ensures that child labour and forced or compulsory labour are not tolerated. Induction programmes ensure employees are educated about their rights. Policies on discrimination, harassment and racism are in place, as are structures to protect employees’ rights in the workplace.

Product stewardship	Ensuring business partners in our supply chain are themselves responsible corporate citizens.	Exxaro is developing policies to manage this element in line with accepted practice.

Supply chain compliance	Ensuring business partners in our supply chain are themselves responsible corporate citizens.	Exxaro’s tender criteria include legislative compliance and good corporate citizenship standards by prospective suppliers and an integrated supplier engagement process is in place.

Leadership in sustainability	Demonstrating our leading role in promoting and implementing corporate citizenship and sustainability as a business philosophy in our industry peer group, in our sector of operation, in our country and against international benchmarks and standards.	Exxaro’s manager of corporate sustainable development serves as the Africa business representative on the Global Reporting Initiative, on Unisa’s Centre for Corporate Citizenship and on the African Institute for Corporate Citizenship. Exxaro is also sponsoring a chair in business and climate change at the University of South Africa.

STRUCTURE AND MODEL FOR IMPLEMENTING SUSTAINABLE DEVELOPMENT

Managing sustainability into the future Following the formation of Exxaro, a decision was taken to form a sustainable development steering committee of senior managers. The intention is to give impetus to efforts to manage all key impacts faced by the new group in a proactive and consistent manner.

Five task teams that support the work of the steering committee have been formed. These task teams (graphically represented below) are mandated to manage the major thrusts, namely energy and climate change; safety, health, and environmental stewardship; stakeholder relations; and human resources management and governance.

This structure will be replicated at each operation to ensure that all the aspects listed on page 24 and 25 are properly managed. In future reports, Exxaro intends to detail progress on these aspects.

SUSTAINABLE DEVELOPMENT MODEL – MAJOR THRUSTS

In implementing this model, which was formally approved after year end, workshops were held across the central support departments to identify key issues for triple bottom-line reporting in a process founded on the group strategy and closely aligned with risk identification and management. These workshops will be extended to our operations in 2008.

Practically, and in a top-down/bottom-up process, strategic direction is provided by the sustainable development steering committee, reporting to the executive committee and board. Teams at each operation and support departments implement and monitor initiatives, and report to the steering committee. This creates a virtual circle of development that is both sustainable and meaningful because it responds to identified needs.

Many of these aspects (listed overleaf) are already well developed. Equally, while some are limited to a specific area of the triple bottom-line, others span two or three areas and highlight the interaction between operations and support services. As Exxaro’s sustainable development structures to manage each aspect entrenched, longer-term aspects will be incorporated.

ASPECTS

	Zero harm

	Programme to ensure zero fatalities

	Identify and set targets to reduce the number of significant environmental incidents

	No transgressions of the principles embodied in the UN Universal Declaration of Human Rights

	Legal compliance

	Zero fines and prosecutions

	Management systems

	All operations to undertake annual self-assessments against Exxaro health, safety, environment and community

	management standards and develop plans and target dates to conform to standards

	All operations to obtain and maintain International Standards Organisation 14001 and 18001 certifi cation

	All operations to have an effective stakeholder management system as per Accountability AA1000SES standard

	Risk Management

	Risk registers (finance and sustainable development risks) to be in place and maintained at all operations and at Exxaro corporate centre

	Health

	All operations to implement a baseline survey on occupational exposure hazards and establish occupational monitoring and health surveillance programmes

	All operations to establish annual reduction in exposures above occupational exposure limits, expressed as

	percentage of workforce

	All operations to establish targeted reduction in incidence of occupational disease and target dates

	Safety

	All operations to establish targeted reduction in LTIFR (excluding first aid treatments) by targeted date

	Environment

	Energy and greenhouse gas management

	Identify and set targets for all operations with carbon dioxide (CO2) equivalent emissions above pre-determined

	level to have and maintain energy conservation plans and targets

	equivalent emissions above pre-determined level to have and

	Identify and set targets for all operations with CO2

	maintain greenhouse gas management plans and targets

	All operations to develop programmes and targets for alternative, cleaner energy

	Aggregate group target for reduction in greenhouse gas emissions per unit of production to be developed

	Water

	Identify and set targets for all operations that consume fresh water in line with water management plans

	Aggregate group target to reduce fresh water consumption per unit of production to be developed

	All operations to establish level of water contamination

	Aggregate group target to reduce water contamination to be developed

ASPECTS

	Waste

	All operations to develop and maintain waste minimisation programmes

	Aggregate group target to reduce waste (excluding recycled and mining–related materials, such as waste rock, tailings, coal rejects and slag) per unit of production to be developed

	Land management

	All operations to have and maintain land management plans to protect and enhance agreed beneficial uses

	All operations to identify biodiversity risks and implement biodiversity management and closure plans

	Product stewardship

	Life-cycle assessments prepared for all major Exxaro products (incorporating participation in industry programmes where appropriate)

	Community

	All operations to prepare public sustainable development reports (including incidents, community complaints and operation-specific emissions) annually

	All operations to conduct and maintain socio-economic and environmental impact survey with inputs from relevant stakeholders

	All operations to have and maintain a stakeholder management database and plan, including community engagement plan

	Aggregate contribution to community programmes, including in-kind support, of a target of at least 1% of net operating profit after tax

	Aggregate contribution to enterprise development of a target of 3% of net operating profit after tax

	Community health programmes to help local communities fight major diseases such as HIV/Aids and malariam

	Our people

	All operations to have and maintain a talent management plan for all grading levels to increase and retain skilled people in the local community

	All operations to set and achieve race, gender and disability targets as stipulated by the mining charter

	All hostel employees to be accommodated in single or family units

	All operations and corporate centre to have an approved workplace skills plan and submit an annual training report

	All operations to roll-out an HIV/Aids management plan based on corporate strategy and targets

	All operations to implement a wellness plan that includes nutrition, injury management, employee counselling and health promotion

	Procurement

	Developmental procurement – all operations to set annual targets to increase local historically disadvantaged

	South African (HDSA) procurement services according to corporate policy

	Corporate governance

	Company to have policy and procedures to satisfy King II

Process to engage with stakeholders and apply international standards

p>For the review period, Exxaro reports against the revised GRI guidelines, issued in 2006 and referred to as G3 to differentiate them from GRI’s 2002 guidelines. In integrating the former Kumba Resources and Eyesizwe Coal operations, and in future Namakwa Sands. The focus therefore is on standardising data collection and analysis for meaningful reporting that complies with King II and the new GRI guidelines. As such, Exxaro has not declared a GRI application level for 2007, but will do so in the 2008 annual report.

Exxaro qualified for inclusion in the JSE’s reviewed SRI in November 2007. This index assesses the performance of companies in relation to economic, environmental and social sustainability as well as corporate governance.

We initiated several innovative practices in preparing to report to stakeholders for the 2007 financial year – our first full year as Exxaro:

To remain abreast of the changing needs of our stakeholders and the impact of our operations and initiatives, seven Exxaro operations completed comprehensive socio-economic assessments of their sustainable development footprints and management responses to identified impacts. The remaining five assessments are under way.
Issues raised during the internal workshops were presented to a representative stakeholder panel (from government departments to analysts, community members and organised labour) convened by an independent third party, African Institute for Corporate Citizenship (AICC). The aim was to elicit stakeholder feedback on whether we are covering the issues of concern (or materiality of reporting) to individual panel members, and to obtain feedback on the completeness of this reporting. The AICC report appears on page 135. This approach is in line with the standard set by AA1000SES.
Where possible, additional issues raised by the panel have been incorporated in this report.

We believe this process will over time ensure that Exxaro reports provide a measurable indicator of progress and underscores our commitment to stakeholder engagement.

Sustainable development assurance – broad-based verification

Exxaro has internal systems to record and monitor the quality (accuracy, fullness and consistency) of management information and any data gaps in the group. These are continually assessed and improved, aiming for best practice.

In line with our commitment to the triple bottom-line, an integral part of reporting to stakeholders is assurance on the quality of disclosure. Previous integrated annual reports have been externally assured, albeit on a limited range of elements. In this report, we have extended our approach to assurance by commissioning a more in-depth external assurance by KPMG (page 132). We have also initiated a more qualitative approach by including a range of stakeholders in a formal panel in the process of identifying issues for comprehensive coverage (page 135). The recommendations of both third parties have been noted and will form part of the implementation of our sustainable development model.

In addition, our previous integrated annual report (Kumba Resources 2005) was externally assessed by KPMG. Our report was compared to a basket of internationally and locally relevant triple bottom-line reporting guidelines, such as the GRI G3 reporting framework and report assessment methods.

Scope of sustainable development elements of the report

In this report, we have concentrated on former Kumba Resources operations while we integrate reporting systems from former Eyesizwe Coal operations.

This report also excludes the following operations where we do not exercise management control:

Australia Sands – Australia Sands’ principal asset is its 50% ownership in the Tiwest joint venture with Tronox Incorporated.
Chifeng Refinery – As a ﬁrst step for potential investment in China, Exxaro established an equity joint venture with an existing reﬁ nery facility. Exxaro has a 38% shareholding in Phase 2, and a 25% interest in Phase 3 of this venture, resulting in an effective 22% economic interest in the expanded operation.

Exxaro has representatives at Chifeng and Australia operations to inﬂuence and advise on sustainable development matters.


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