5 Turnkey Strategies for Improving ESG Performance in Mining
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The mining industry has long been looking to improve its sustainable practices. As energy systems transition away from fossil fuels, and the transport and industrial sectors are electrified, society’s dependency on fossil fuels is reduced. At the same time, its dependency on base metals increases. All future societies with low climate impact will be built using more copper, zinc, nickel, and other base metals than ever. Due to increasing dependency, it is important that the production of these metals takes place as sustainably as possible to spur a high level of acceptance for long-term, responsible mining and metals operations.
Just one example of the teeming demand for metals in the context of advancing towards a more sustainable future is the evolution of electric vehicles. Renewable energy has a huge impact on the demand for metals. For example, cobalt and lithium are specialty metals used in rechargeable batteries. Copper is used in batteries, electric wiring in cars, motors of electric vehicles as well as transmission lines. To ensure a more sustainable future, with widespread adoption of electric vehicles and renewable energy, raw materials will need to be mined sustainably.
Five Focus Areas for Sustainability in Mining
Sustainable mining comes down to multiple pillars that embody the extraction practices of the minerals. As stated in the Australian Center for Sustainable Mining Practices – Guide to Leading Practice Sustainable Development in Mining, mine managers will be on track in establishing a sustainable mining operation if they focus on the following five key areas: safety, environment, economy, efficiency and the community.
Safety
A mining operation should prioritize safety. ‘Safe mines’ include maintenance of a strong health and safety policy, a commitment to risk management, reporting systems for near misses and incidents, and a focus on education and training.
Economy
Unless a mine is profitable, it cannot be sustainable. The end-all goal for mine managers is to generate profit responsibly for as long as possible by keeping costs minimal while increasing revenue. This will maximize benefits to all stakeholders, including shareholders, employees, local communities, and businesses, which depend on the mine.
Resource Efficiency
A mine has to be efficient in the way its resources are managed and extracted. Mining engineers, geologists, and metallurgists work together to optimize resource extraction. Efficiency also encompasses the management dimension at a mine site, as poor management decisions can often lead to production problems. Efficiency may translate into how materials are recycled internally, such as the utilization of used oil for heating and utilization of spilled diesel for employee fire extinguisher training. Waste management at a mine is also becoming increasingly important; i.e. monthly inventories of all waste streams, material recycling, and employee training for onsite waste disposal.
Environment
Adopting leading environmental practices on mine sites is key to the management of a sustainable mine. Unless steps are taken in the planning and operational stages to protect environmental values, long-term liabilities may ensue.
Community
A mine needs a ‘social license to operate.’ Unless the community is engaged and supportive of a mining operation, opposition and confrontation may ensue. This can be improved through a number of initiatives, including preferentially employing local people, and training and providing skills in businesses or enterprises that will endure after the mine closes.
How is the mining sector shifting strategies to meet ESG expectations?
Evermore, the growth of mining firms will be largely determined by how they adapt to the pressures of sustainability. This also opens the door for opportunities whereby the mining industry holds the potential to take a key role in fostering sustainability sector-wide through the supply of materials used in a myriad of products globally.
As an example of the shifting expectations for the mining industry, as of February 2020, new membership conditions have been set by the International Council on Mining and Metals (ICMM), establishing a range of new good-practice principles for companies seeking to be a part of the organization. The ICMM has 27 mining and metals company members and over 35 national, regional, and commodities association members. The mission of ICMM is to strengthen environmental and social performance and serve as a catalyst for change, enhancing mining's contributions to society. ICMM’s focus aligns with the UN’s climate and sustainability goal. The new guidelines introduce a set of performance expectations for members to manage a broad range of sustainability issues, including labor rights, gender, access to grievance mechanisms, mine closure, pollution and waste. They are an attempt to “maximize the industry’s benefits to host communities” while minimizing the negative impacts of the industry in the local areas in which it operates.
The ICMM Mining Principles framework updates a set of existing ethical and sustainability standards, which have been in place since 2003 and include site-level validation and performance disclosure arrangements. As discussed in the Mining Journal, ICMM's ten mining principles define good environmental, social, governance (ESG) practices through a set of Performance Expectations (PE) or standards, last updated and made public at the end of 2018. Validation of implementation of these expectations will, for the first time, take place at the site-level for all members' assets, involving a mix of self-assessments and independent, third-party assessments, coupled with transparent disclosure of the outcomes.
ICMM chief operating officer Aidan Davy stated to NS Energy, “Societal expectations of the mining industry encompass a broad range of environmental, social and governance challenges. Our aim has been to develop a holistic set of requirements that establish a benchmark for responsible mining practices. ICMM’s Mining Principles will support our members to supply the increasing demand for metals and minerals, while giving confidence to customers and other stakeholders that they have been produced responsibly.”
Investors are driving the need for mines to improve ESG performance.
Sustainability in the mining industry translates to a long-term health and safety culture in employees, contractors and vendors. This culture results in creating a thinking pattern that minimizes injuries and applies to both working and household environments. Safety in the mining industry has over the past 20 or so years come to be equated with good business practice, and now the spotlight has slightly shifted to be on ESG as a whole, and the capabilities of mining companies to exhibit good ESG practice and policy. There are higher societal expectations on ESG performance and increasing pressure on companies from investors to improve performance apparent in company investment ratings.
The shift in investor behavior on ESG could begin the cycle of responsible investing generating competition for capital based on good ESG performance. The Mining Journal points out that the raising of performance standards within the mining industry, apparent by the ICMM’s requirement for independent and transparent validation at site-level, are positive steps towards a more sustainable direction. The standards provide the basis for driving improvements in performance across the sector, while helping investors differentiate between those companies who have strong ESG policies, and those that need to improve.
Mining.com states that a notable indicator of ESG policy strength is how the mining sector handled the impact from the pandemic in the first half of 2020. However, as the world moves into recovery, there could be a flood of capital back into the markets, and companies with good ESG policies will be the first to benefit. This capital will be primarily controlled by larger institutional investors that have a very strong viewpoint on ESG as a means for a well-managed and capable company. Mining companies that already have strong ESG policies have seemed to weather the pandemic better than their peers, including better health and safety measures to address worker safety issues.
5 Turnkey Ways for Mining Companies to Improve Their ESG Profile
There is a big push in the mining industry to find more sustainable solutions, particularly in terms of equipment or methods.
Increasing the conversations around sustainability across senior management – In every company, you must start from the top. If senior management is focused on sustainability, it is easier to pass the message down to operator level and ensure everyone understands what is required and why it is important. To achieve a better CDP score for example, you must show the integration of sustainability in business cases, corporate planning, and risk management systems. From top down, demonstrating ways in which employees and suppliers are engaged with the sustainable operations of the company will improve performance. Offering safety and environmental bonuses to employees when a proposed target is achieved is an example of a great motivational management method.
Local collaboration and partnerships – According to the Normet article on MiningTechnology.com, “In addition to working closely with personnel at all levels, management must also learn to more effectively collaborate with their respective governments. By working in partnership, mine operators are also likely to see a reduction in costly disputes with local municipalities and communities, which are believed to delay or suspend approximately $25B worth of projects worldwide.”
Continuous stakeholder engagement – In order to meet the new ICMM at-mine-site validation requirements, the Mining Journal states that, “mining companies will need to establish expert at-mine-site assurance, with a move away from annual ‘spot-checks' towards continuous engagement that incorporates third-party stakeholders including non-governmental organisations (NGOs), local or indigenous communities, community and political leaders and other opinion formers. By making this information public, mining companies are taking a calculated risk that by exposing themselves to public scrutiny they will engender trust and enhance reputation, improve ESG outcomes and - by extension - business performance; and differentiate themselves as an attractive investment proposition.”
Analysis of mandatory laws and regulations in each jurisdiction of operation – This analysis will help foster understanding of the regulatory framework with which mining companies must comply. As discussed in The Assay, once the scope of compliance requirements is understood, a company should prepare and implement a group-wide strategy designed to ensure compliance with the various requirements, through training, monitoring and reporting. Best practices may include nailing an articulation as to why the company values ESG aspects in relation to their stakeholders, implementing ESG due diligence when onboarding suppliers or contractors, etc.
Accountability – Mining companies should maintain realistic expectations and targets for their ESG goals. Ensure the targets are achievable in order to avoid failure or avoidance of reporting downfalls with respect to a pre-established target.
KERAMIDA’s sustainability experts can guide you through the strategic ESG management and reporting of key industry-specific topics and others deemed material by GRI, CDP, or SASB. We can also support you with your CDP disclosures and GRI reporting. Contact us or call (800) 508-8034 to speak with one of our experts today.
Contact:
Becky Twohey, Ph.D.
Vice President, ESG Strategy, Planning and Reporting
KERAMIDA Inc.
Contact Becky at btwohey@keramida.com
