ESG remains the top risk to the mining industry in 2023. But could this be the year the sector turns to data to show it’s taking ESG seriously?
Environmental and social governance (ESG) remains the number one risk to the mining industry in 2023, according to a major report from EY—but could this be the year the sector turns to data to show it’s taking ESG seriously?
Why ESG is being taken so seriously by miners
For the last three years ESG issues have topped EY’s Top Ten Business Risks and Opportunities for Mining and Metals report. In 2023, ESG has yet again beaten out factors like geopolitics, rising costs, and productivity and supply chain disruption to take the top spot, despite huge external pressures on the industry, including Russia’s war in Ukraine and rocketing inflation.
But why? Speaking with Consulting.us, Keith Russell, global leader of energy transition at management consultancy Partners in Performance said: “I think mining companies have all come to the realisation that market expectations of them to be a good citizen is an essential part of the journey.
“There are very clear market stakeholder pressures from big funds, and others, and obvious pressures from a government and regulatory perspective as nations go on the pathway to decarbonisation. There’s also a growing need (or) desire from customers to be able to buy green metals.”
Here’s what the industry told EY’s survey it believed investors wanted them to take action on:
How can data and digitisation help miners with ESG?
There has long been a level of cynicism, both from investors and inside the industry, about certain aspects of ESG. “Greenwashing”, for example, where companies beef up their environmental credentials for good publicity while doing comparatively little in reality, is one key example of this.
In an article on mining’s top 10 trends in ESG for 2023, Mining.com flagged the growth of “green-hushing”.
“A recent South Pole report found that 25% of companies now don’t plan to talk about their science-aligned climate targets at all, usually to avoid scrutiny,” Mining.com reported.
“This is detrimental to companies and the broader industry, hampering crucial industry knowledge-sharing on decarbonisation, while possibly eroding stakeholder trust and social acceptability.
“In 2023, companies are advised to take a thoughtful, credible approach rather than opting for silence, such as by setting public objectives to deepen their understanding of issues like climate change before setting science-based emissions reduction targets.”
This is where data comes in.
ESG data points helping grow the bottom line
It would be a mistake, though, to think the only value of this data is appeasing a fussy and fickle market. In the Consulting.us article, Mr Russell goes on to explain that for companies seeking to integrate more renewable energy into mine projects to lower greenhouse gas emissions, for example, incorporating digitisation could further increase efficiency, improve assets and optimise mining processes.
“(Digitisation) allows us to understand the points at where we’re consuming excess energy, understand the raw materials that are going into the grinding circuit, and adjust the circuit in a manner that produces optimum with minimum energy.”
Mr Russell said these kinds of tools can often achieve a five to 10 per cent reduction in energy use, often without even changing the technology or source of energy.
The EY report gives a cast-iron example of this, citing Garrick Gold’s decision to embed environmental compliancy rules in its real-time operational data platform, which resulted in a 45% reduction in environmental deviations.
Accountability is coming on ESG
Whether companies and individual business leaders like it or not, accountability is coming on ESG. As the EY report points out, the new International Sustainability Standards Board (ISSB) aims to, “help meet the demand for high-quality, transparent, reliable and comparable reporting by companies on ESG, including climate data”.
“Rating agencies expect more quantitative information that is typically difficult to obtain from most miner’s systems,” the report states. “Complying with new standards and expectations will require miners to improve the availability, rigor, trust and reliability of data.”
Investors, the market and the community more broadly now want to see evidence of ESG from mining companies and, what’s more, they’re acting on the data. PwC’s Mine 2021 report found that companies that make the switch to open ESG reporting, “do better commercially”.
“Our report found that mining companies with higher ESG ratings outperformed the broader market during the peak of the COVID-19 crisis, delivering 34% average total shareholder return over the past three years—10 percentage points higher than the general market index,” the report authors stated.
Transparency is replacing greenwashing
Among Mining.com top 10 trends was, “radical transparency”, fuelled by developments like the ISSB, the Global Industry Standard on Tailings Management, new GRI reporting standards, and the EU’s Corporate Sustainability Reporting Directive.
An article in Mine also pointed to the emergence of standardised guidelines from a number of ESG-focused organisations, including the Responsible Minerals Initiative and the International Council on Mining and Metals.
Taken together, it’s hard to ignore the conclusion that not only is change coming, but miners ignore it at their peril.
“There’s an intriguing interplay at stake,” Mine’s reporter Giles Crosse states. “On the one hand, global mining firms and investors see regulation coming, heightening their fears and requirements for ESG alignment on extractives. Yet data analysts see an opportunity to cash in from this trend, while the green lobby hopes a more sustainable extractives sector is coming, offering sources of optimism for the future of the sector.”
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