This month the SVAI sits down with Mzila Mthenjane, Executive Head: Stakeholder Affairs at Exxaro Resources to learn more about the company’s Just Transition to a low-carbon economy, while minimising the social impact on employees and communities that depend on the coal economy.

Q1: How has the organisation’s purpose, ‘Powering better lives in Africa and beyond’, guided the delivery of Exxaro’s strategy?

Exxaro’s purpose statement evolved from our payoff statement, powering possibilities, in 2016/17. At the time, we were evaluating Exxaro’s inevitable transition from coal to new investment opportunities in energy, food and water, which represent the three substantive natural elements that are required to sustain life.

We have kept this purpose statement – powering better lives in Africa and beyond – as our strategy has evolved. It guides everything we do as it speaks to the responsibility and accountability that one should assume, if you’re going to have a purpose statement that refers to life.

In terms of the execution of Exxaro’s strategy, our purpose statement talks to three important points, the first of which concerns responsible mining. From an employee perspective, considerations like sustainability, in terms of, amongst others safety and health, are top of mind for us. Similarly, when it comes to employment and remuneration practices, we are very cognizant of issues of diversity and inclusion as key considerations that guide alignment to our purpose.

The second point, from an external stakeholder perspective, concerns community development and empowerment. We are very proud of our 30% broad based black empowerment scheme, which includes employees and also benefits communities through a non-profit company established to address the needs of poor and vulnerable communities – not only in our surrounding operations, but countrywide.

We also take community empowerment further. We recognise that small companies, SMEs, have a key role to play in stimulating and growing the economy, and creating employment opportunities. We have witnessed this first hand with our flagship Enterprise Supply Development programme. For the past three years, we’ve been able to support about 66 SMEs through interest-free funding and grants to the tune of R400 million. The direct result of this has been employment creation for more than one thousand people and revenue growth in excess of R1.2 billion for those companies – R1 billion of which was from Exxaro, through the supplier development program.

Lastly, there is the issue of how we, as a coal mining company, are responding to climate change. Whilst this is seen as a very topical issue, we have embraced it as a demonstration of our purpose and responsibility.

Any response to climate change that is well considered and long-term in its perspective, is one that resonates with our purpose. Also, in terms of our sustainable growth and impact strategy, our response to climate change and how we aim to make an impact is all-inclusive, combining both adaptation and mitigation.

Our Climate Change Response Strategy is integral to our Sustainable Growth and Impact strategy and objectives as we understand that these elements of our business and operating environment are deeply connected.

Q2: In your Climate Change Response Strategy report, it was noted that your transition to a low carbon world is very specific, very intentional, and also anchored on the Just Transition principle. What exactly does this mean?

Just transition is an often discussed and debated expression which, depending on one’s perspective, could mean different things to different people. However, in its simplest form and for our purpose, we have interpreted it to be an all-inclusive journey, where no-one is left behind.

As Exxaro transitions, we acknowledge that our current business has many stakeholders who are dependent on business activities and who may not have the capacity to embark on this transition, to the same extent as Exxaro. As such, it is important that mechanisms are put in place to enable vulnerable stakeholders to also be able to transition.

When we talk about Just Transition, we do so firstly from the perspective of being a company that is located in South Africa. In other words, our existing coal business portfolio will continue to remain relevant and central to our transition journey. Coal is a valuable natural resource that must be extracted optimally and responsibly to continue providing energy security, which will support economic growth and social development in South Africa.

Secondly, Just Transition speaks to our objective of being a catalyst for economic development and environmental stewardship, and how we can leverage our existing assets to develop new economic opportunities. As a mining company, one of our biggest assets is land and most of our mines are developed in rural areas, which traditionally would have had agricultural activity. Therefore, having completed mining and rehabilitated that land, it provides an opportunity to go back into that sector – of course, the manner in which we will embark on that will be very different to how it was done before.

Regenerative agriculture is one of the ways in which we can reuse and repurpose rehabilitated mining land. It represents a huge advantage, not only from an economic development and job creation standpoint, but also from a climate change response perspective – creating carbon sinks that will help manage our carbon emissions.

In a nutshell, what Just Transition means to us is that, when our coal mines are no longer operating, there will be an alternative economic activity capable of sustaining those communities that, until now, were dependent on mining for their livelihoods.

Q3: In Just Transition, the biggest challenges is to minimise the cost to the communities, the workers and everyone that are impacted. How will you mitigate this risk?

It is still early days for us. We are currently in the planning phase of what we know is going to be a long journey. While our coal mining operations will continue over the next 10-15 years, we do need to act with haste and ensure these programmes are delivering results within this timeframe.

Skills development and more specifically development of ‘green skills’ within the communities are some of the programmes we are exploring. There are the types of skills which can be applied in the regenerative agriculture programme and also skills pertaining to waste management and recycling. It is not just about subsistence or being self-sustaining, everything we do must also have a commercial end-goal. In terms of long-term sustainability, it is important that the communities also have access to markets for any fresh produce or recycled products generated through these programmes.

In this context, we see ourselves as a catalyst, playing a particular role up to a certain point. Beyond that, we will need to bring in partners who are capable of scaling up pilot initiatives, in such a way that it has a much broader and regional impact in communities well beyond where we operate.

We are currently exploring opportunities to bring funding partners onboard, in particular impact investment partners. To this end, we are designing projects that will meet specific impact investment criteria as identified by GIIN, the Global Impact Investment Network. For example, one of the projects focuses on the harvesting of alien tree species. This is a critical project because of the negative impact it has on underground water resources in an arid region such as South Africa. On the one hand, the removal of these alien species will result in actual production of water. On the other hand, the wood from these trees can be used to develop a secondary economy – one that is not limited to the traditional use of wood for furniture, but also for activated carbon, which in itself has a further economic benefit.

The most important issue is how we embark on these projects. The project needs to have a clear intention in terms of achieving specific sustainability objectives – not only environmental but also economical sustainability, with direct and immediate social benefits for the beneficiaries.

Exxaro is a company with ambitions and goals to grow in South Africa and beyond, into Africa. This growth ambition is also accompanied by a desire to have a positive impact on the continent. We see the Shared Value Africa Initiative as a fantastic platform to enable us to showcase that, despite any negative sentiment towards coal mining, we are a company that conducts itself in a way that benefits not only our shareholders, but all our stakeholders in all the countries in which we will operate.

Q4: Last but not least, how does the concept of Shared Value fit into Exxaro’s overall sustainable growth and impact strategy?

Exxaro’s sustainable growth and impact strategy, as a key response to climate change, is in fact about creating Shared Value.

It is a holistic approach that starts with how we transition from a fossil fuel-based company for electricity generation to low-carbon business opportunities. It is important that we take all our stakeholders along on this journey and that we develop programmes with more than one social impact dimension: our projects must have a positive economic and environmental impact, as well as be able to sustain livelihoods within communities.

This is also captured in our five strategic objectives. One of the key objectives, which speaks to Shared Value creation, is for Exxaro to act as a catalyst for both economic development and environmental stewardship. This objective will be a key guiding principle in terms of how we continue to create Shared Value for all stakeholders – delivering both economic value and value for society and the environment.

Responsible environmental stewardship, after all, is about protecting and preserving natural resources for the greater good of all our stakeholders.