Review Mining ESG

ESG – environmental, social and governance – and the issues it embraces will not be new to the Mining industry although the term may be unfamiliar. Miners have long grappled with matters related to the ‘green’ or sustainability agenda, but ESG now brings together all these themes in a comprehensive framework that can help a mining company navigate and balance the benefits to the planet, people and profit successfully.

ESG has come to the forefront primarily through investors demanding increased attention on environmental, social and governance-related matters and data. In short, investors are starting to look beyond financial statements and now want to consider the ethics, competitive advantage and culture of a mining organisation. They’ve also proposed new standards and frameworks against which mining investments should be measured.

Against this background, it can be difficult for mining companies to navigate what is important and how it should be reported. The following issues are covered by the ESG agenda for the mining industry:

• Environment: biodiversity, ecosystem services, water management, mine waste / tailings, air, noise, energy, climate change (carbon footprint, greenhouse gas), hazardous substances, mine closure.

• Social: human rights, land use, resettlement, vulnerable people, gender, labour practices, worker/ community health & safety, security, artisanal miners, mine closure / after use.

• Governance: legal compliance, ethics, anti-bribery and corruption (ABC), transparency. Within this, mining companies need to consider whether there are environmental, social or governance risks that may affect their ability to: raise capital; obtain permits; work with communities, regulators and NGOs; and/or protect their assets from impairments. And then there may be opportunities to: reduce energy and water bills or carbon emis- sions; improve operational performance; enhance community and regulatory relationships; and manage closure viability.

Many mining and minerals business are already taking active steps on their ESG agenda; identifying their priorities and measuring their performance. But in our experience, the real benefits come when you move beyond measurement and take action to improve.

This is the first in a series of articles on ESG in Mining. The next article will identify the four reasons why the Mining industry should act on ESG.

ESG (environmental, social and governance) issues are rising up the agenda for companies in the mining and minerals industry. Here are four reasons why we think a proactive response on ESG will benefit any mining business.

1 Investors, lenders and customers care about ESG

In our experience, today very few transactions are done without a review of ESG issues. Responsible investment and buying are a reality and investors, lenders and customers now want to see and be kept informed that ESG issues are in hand. This need to demon- strate a track record of good ESG performance will now only increase; and failure to act positively will ultimately reduce access to customers and funding and/ or increase the cost of funding. Good ESG = more and cheaper funding for your next project.

2: Governments, regulators, NGOs, employees, communities… are watching too Internal and external stakeholders are increasingly demanding transparency and performance on ESG issues. Mining and mineral businesses and their stakeholders face challenges on many fronts including performance related to climate change, energy, water, sanitation, land use, ecosystem services, food, education, health, local infrastructure, vulnerable people, and corruption.

Priorities will be specific to each company and even individual mine sites, but having the interests and agenda aligned for all stakeholders can only help everyone involved.

3: You avoid the inevitable risks that come with poor ESG performance

No one likes taking on unnecessary risks, especially when it can disrupt or even halt a critical project. Here are just some of the ESG risks that can be avoided if you manage this agenda proactively:

• Unhappy communities disrupting expansions or operations at a mine site.

• Failed tailings dams and environmental pollution resulting in the loss of licences, disruption to operations, and civil or criminal liability.

• Poor planning and design exposing infrastructure to physical climate change risks.

• An inefficient use of scarce resources like water and energy threatening business continuity

• Poor workplace health and safety resulting in the loss of licences, disruption to operations, and civil or criminal liability.

4: You benefit from significant opportunities through strong ESG performance

ESG is not just about managing or avoiding the downside. There is also plenty of upside potential to go after, including:

• A track record of performance and strong stakeholder relationships that give you access to resources, funding, clients and faster development schedules.

• Meaningful’ bottom line’ savings from areas such as reduced energy costs, better use of water, and more effective and efficient management of many other resources.

• The ability to attract and retain the best people in the industry. Make the whole team proud and want to work for you.

The next step for any mining business now should be not only to work out where the key ESG risk and opportunities are, but also to put that agenda into action, make improvements and realise the benefits for all.

In tackling ESG risk and opportunities we would recommend the following six-step approach to any Mining business:

• Assess and screen ESG risks and opportunities across your mining portfolio or for a single site.

• Set your ESG strategy and objectives at both a board level and for your corporate executive.

• Agree and define your strategic action plan from board level through to individual sites.

• Pursue specific project interventions at each mine site that focus on your prioritised ESG issues.

• Collect and report ESG data for your investors and other key stakeholders.

• Seek certification and associated independent validation of your ESG performance.

Risk and opportunities –There are several, and arguably too many, ESG frameworks and guidelines that will influence what you want to consider across the environmental, social and governance spectrum. But its important first to understand where you stand, are clear on where you’d like to be, and determine the risk and opportunities relevant to your business in that context. No two mining ventures or operations will be the same: risks and opportunities will vary in both importance and how they can be addressed. First you need to understand what ESG means for you today, whilst being mindful of an evolving playing field.

Strategy and objectives – Having gained the insight into where you are now, you will be in a much stronger position to establish a clear pathway to achieving your strategy with objectives and priorities for the future. You will also be able to do that at an organisational level and make differentiated choices at an individual site scale. This combination, together with clear coordination and inter-dependencies will ensure your overall ESG strategy is robust, achievable and understood across your business.

Action plan – Like any strategy your ESG plan will require investment, management attention and resources. It will also drive related or affected operational activity and opportunities, so it is critical your ESG action plan is prioritised and fully integrated with operational management and delivery. To be successful you want ESG actions fully owned and integrated at a site level.

Project interventions – By integrating ESG into the way you do business, progress on your ESG strategy ultimately comes down to progress on projects. These may be company-wide or site specific, but the given the scale of mining operations, this means you need leadership and focused action to translate ideas and strategy into tangible action and positive, material impact.

Collect and report – Your ability to demonstrate progress will come down to not only project implementation but also the collection and reporting of ESG data. Your key stakeholders, particularly investors, are increasingly asking for robust data sets and benchmarking to evidence ESG performance and demonstrable progress against key performance indicators you have set.

Seek certification – One of the easiest ways to demonstrate ESG progress is to seek certification and assurance from an independent authority, be that the International Council for Mining and Metals (ICMM), Initiative for Responsible Mining Assurance (IRMA) or another third-party that applies IFC performance standards or similar frameworks. These assurance schemes provide a ‘gold standard’ by which your ESG programme can be evaluated and provide further incentive to strive for even better ESG risk and opportunity management.