The CEO of Exxaro, one of South Africa’s largest Black-empowered resource companies, discusses a journey to net zero that doesn’t leave communities behind.
Asked to name a villain in today’s fight against climate change, many would likely say coal. Brunswick research of opinion leaders in the US and UK found coal to be the energy source they were least likely to invest in and most likely to think the world should use less of. An unofficial goal of COP26 was to “consign coal to history.”
Yet at that same COP, two issues added nuance to how that consignment should take place. The first was a global energy crisis that demonstrated not only the world’s reliance on coal, but also how a mismanaged transition away from it could be much more costly and damaging than previously imagined.
The second was a growing focus on a “just transition.” In the words of Mxolisi Mgojo, CEO of Exxaro, one of South Africa’s largest Black-empowered resource companies, a just transition requires responding both to the “cries of the poor, and the cries of the Earth.”
In one sense, responding to those two cries should be straightforward. The harshest effects of climate change are most likely to be felt by those with low incomes and low skills.
Yet the steps required to tackle climate change can disproportionately hurt those same disadvantaged groups. Billions still depend upon coal-generated power in their homes and businesses, while many local communities, as Mgojo knows firsthand, depend upon those mines for their livelihoods.
The company Mgojo leads, Exxaro, offers a model of how a company that on paper might sound like the enemy of the energy transition—it makes 90% of its revenue through coal—can help foster that transition in a way that helps bring communities along with it.
Exxaro’s work is doubly notable given that it’s taking place in South Africa, where the challenges of a just transition are particularly intense. The country remains riven by racial and economic inequality and faces steep unemployment—all of which the pandemic worsened. In the summer of 2021, civil unrest paralyzed the country’s economy and saw more than 300 people killed—violence ostensibly sparked by politics, but whose deeper roots were socioeconomic.
Between 2015 and 2021, South Africa saw real GDP per capita decline, and today the carbon-intensive country sees rolling blackouts. So the very same step for which the world is calling—a swift move away from fossil fuels—might bring real hardship to South Africa’s most disadvantaged.
On the energy front, Exxaro entered renewables more than a decade ago, making it among the first fossil fuel companies to do so. Today it owns and operates a company with wind farms that feed into South Africa’s national grid. It recently informed shareholders that it intends for renewable energy to grow earnings before interest, tax, depreciation and amortization (EBIDTA) from 8% to 30% by 2030. Exxaro has also expanded into minerals and materials—like copper—crucial for the electric vehicles and energy grids upon which the energy transition will be built. The company’s ambition is for coal to dilute from 92% of its EBITDA to 45% by 2030. The company has set a carbon-neutral target for 2050, and aligned its governance, risk management and strategic processes with TCFD recommendations.