management and measuring carbon footprint Scopes 1, 2 and 3 (both direct and indirect emissions). Specifically, what is reasonable from four perspectives – the company, the industry and the employee and society. Certain processes within the mining company may be responsible for more emissions and therefore to assist reporting and impact the trade-off charts using data analytics for measurement and monitoring could differentiate one mining company against another. Robust business engineering processes result in strong, transparent and effective reporting thereby mitigating risk and creating opportunity and competitive positioning. ESG reporting is translated in the integrated reports as well as voluntary and mandatory disclosure of companies. • Engaging credible experts Given the complexity of ESG and its impact on the various stakeholders and the value chain, engaging and employing specialists with a credible track record in the field is key. Hence, it is critical to engage specialists who can train, develop and educate on ESG matters and ensure embedding it into the organisation on all levels,” advises Mr Bogdanov. One of the risks that Risk Insights has noted in South Africa is a repurposed approach when it comes to appointing individuals on ESG related positions which have very little experience or training on ESG. Core business imperative, not an option Indeed, all told, the importance of sound ESG reporting in the current operating environment cannot not be overstressed as the world devises strategies to protect the planet and contribute towards carbon neutrality. Ongoing developments have rendered sustainability into a core business imperative, and not an option. • Stakeholder accountability Increasingly, stakeholders are holding mining companies accountable for environmental and social practices (or malpractices). “Miners need to be able to demonstrate their contribution to a sustainable future, and the most practical way is through sound management of ESG issues,” comments EY Africa energy and natural resources leader, Wickus Botha, referring to the growing prominence of sustainability as revealed in the recent survey amongst global company executives.
Direct bearing on bottom-line What makes ESG rating more relevant is its bearing on the bottom-line of a business. From a brand and reputation perspective, it translates into financial measurement through share price and market capitalisation. For instance, ESG scores can impact an organisation’s valuation. Impact investors apply larger discounts on companies that have lower ESG scores. “Having a good ESG score means that a company embeds the principles of inclusivity and stakeholder management into its strategy, operations and human capital management making a company more sustainable. It translates, via brand and reputation management viewpoint, into a competitive advantage affecting the cost of capital and cost of debt of a company,” Mr Bogdanov points out. • Positive legacy Finally, by doing more to ensure the long-term, sustainable economic and social growth of the region in which they operate, mining companies can leave a positive legacy beyond the life of the mine. Prioritising ESG more By and large, the burden is on mines to turn the risks that ESG factors pose to their operations into competitive opportunities and positioning to demonstrate their commitment to sustainable business practices. Risk Insights would like to see “South African leadership actively translate value as conscious leadership into good for current and future generations. Leadership must pivot to change the world and the ways we operate when it comes to CO2 emissions, water pollution, taking care of communities, inclusivity and much more. Mining is one of the closest to earth industries”. The timing for mining companies to enhance their commitment to sustainable business practices could not have been better, as recent global events indicate. COVID-19 pandemic has caused social inequalities in regions where mining companies operate, in addition to disasters in different regions linked to climate change. These events, amongst others, have reinforced the need for mines to go beyond their ‘traditional’ regulatory obligations and drive social equality initiatives, asserts Botha.
Mr Andrey Bogdanov, Principal and Interim CEO of Risk Insights (Pty) Ltd, a Johannesburg-based boutique professional risk management data analytics firm
Risk Insights has blazed a trail with Africa’s first machine learning and Artificial Intelligence (AI) ESG sustainability rating tool - ESG GPS. So far, ESG GPS has been used to rate all listed companies in South Africa, Nigeria and Kenya.
Mining Business Africa | November - December 2021 5