ESG and building resilience in the mining industry

Janine Espin, MD, Economic Development Solutions

As overwhelming as these obligations may seem, given our current pandemic situation, the industry should attempt to understand the benefits of ESG adoption. When integrated into strategic decision-making processes, ESG can present many opportunities such as building resilience and creating certainty within the organisation and the surrounding communities. Ultimately, as a business approach, ESG generates long-term value for mining companies by controlling risks and capitalising on opportunities created by environmental and socio-economic factors.

A guiding framework with real benefits

ESG brings together all the environmental, social and governance compliance themes into a comprehensive framework that can help mining companies to successfully find the balance between people, planet and profit.

By incorporating ESG into long-term strategic planning and communicating this to all investors and stakeholders, mining businesses can gain a more holistic understanding of their performance and the impact of their operations on the world around them. In a report that analysed the results of more than 200 studies into the impact of sustainable corporate practices on investment returns, it was clear that operational and stock price performance can be positively influenced by solid sustainability initiatives and commitment to ESG practices.

According to one report, consistent compliance with ESG commitments resulted in enhanced operational performance in 88% of companies, with the stock price performance of 80% of companies being positively influenced by dedication to sustainability. The cost of capital was lowered for 90% of companies, because strong sustainability scores evidenced reliable operational performance, which in turn lessened investor risk.

Holistic approach required

Companies need to move away from seeing ESG as a tickbox reporting or data gathering initiative, and instead work toward achieving value under its frameworks. Leaders in the mining sector need to push heavily to bring ESG awareness and integration into corporate strategy, which will have an impact on every facet of the business.

This includes organisational culture, risk management, stakeholder engagement and portfolio planning. Commitment to ESG compliance is no longer optional. It is critical to address the breakdown of trust between mining companies, workers and the surrounding communities, as well as to guarantee the responsible sourcing of metals and minerals from the earth. Furthermore, it will only be possible to drive policy reform and ultimately decarbonise the economy if approached through the lens of ESG compliance.

Considering the impact

How mining companies achieve these goals will depend on how well equipped they are to navigate, appreciate, report on and identify opportunities within these frameworks to affect positive change. In respect of mining operations, compliance is multi-faceted and the associated obligations under environmental, social, and business governance pillars are inextricably intertwined.

As a result, issues of sustainability, labour and environmental impact can no longer be considered in isolation.

Operationally speaking, compliance efforts in a mine are dictated by a variety of environmental and social development obligations and duties towards the wellbeing of their employees while they are at work. This requires clear social and labour plans that ensure fair labour practices and safe working conditions. There are also duties toward the labour-sending and surrounding communities, particularly when it comes to a mine’s end of life.

Compliance requires collaboration

ESG compliance is not something that mining companies need to tackle on their own. With the help of a compliance services partner, it is possible for mining houses to unlock the true value of ESG through detailed, holistic mapping of the ESG compliance obligations affecting the mine and its complete value chain.

With a clear understanding of the obligations informing the operations' daily requirements, it becomes possible to identify opportunities to create value. For example, a project that establishes a renewable energy facility will not only ensure a reliable supply for operations, but also an opportunity to offset the mine’s carbon tax liability.

From a social perspective, ESG compliance is the only way mining companies are going to win back the trust of the people. A solid commitment to ESG is irrefutable if the company considers the well-being of workers, while contributing to the development of the local economies.

This must be demonstrated in the way the mining company operates and obtains its supplies, sources its employees and equipment. Healthy workers, productive communities and cleaner operations all add up to increased competitiveness, in a manner that minimises harmful impact on people, planet and profit.