ESG: The foremost risk for global mining companies

The mining industry stands at a crossroads, with environmental, social, and governance (ESG) factors dominating the risk landscape for the third consecutive year. EY Canada’s latest report on the “Top 10 Risks and Opportunities in Mining” underscores the intricate challenges miners face in 2024. Many of the ESG risks raised in our survey this past year are not new, but what is changing is a growing degree of both complexity and investor attention. We believe this will spur more innovation, more ambitious targets, and greater transparency in reporting.

Much of the challenge of ESG is the diversity of risks and opportunities at play. Companies are grappling with issues ranging from water stewardship to ethical supply chains and mine closure — all while trying to navigate what respondents describe as an “alphabet soup” of regulations and with ongoing data integrity challenges. Forty-one percent of executives surveyed said their digital priority was a platform to track and report ESG metrics. To avoid disclosure missteps and make the best use of resources, the industry will need a better view of high-quality ESG data, with strong governance and controls in place to ensure appropriate signoffs and processes. This article delves into the ESG considerations that continue to reshape the sector.

Environmental: Innovations in waste management and water stewardship

The environmental aspect of ESG, particularly waste management and water stewardship, has garnered intense scrutiny. Innovations in tailings and waste management have become paramount as the industry manages over 200 billion tonnes of tailings, with billions more anticipated in the coming years. The International Council on Mining and Metals (ICMM) has made strides in transparency with the Global Industry Standard on Tailings Management (GITSM). Projects like the “Mining Microbiome Analytics Platform” demonstrate the sector’s commitment to non-chemical extraction and remediation strategies, showcasing the potential for microbes to bind to minerals and prevent toxic leaching.

Water stewardship is another critical area, with over half of the survey respondents acknowledging it as a top risk. With governments like Chile imposing stringent water usage policies, the industry must adopt comprehensive hydrology and hydrogeology management. Some companies are leading the way with transparent water usage disclosures, setting a precedent for others to follow.

Social: The drive for inclusivity and wellbeing

The top social components of ESG raised in the last year emphasize diversity, equity, and inclusion (DE&I), health and wellbeing, and human rights. Despite setting DE&I targets, the mining industry struggles to make a significant impact. Female participation in C-suite roles has seen some improvement, but overall diversity remains low. Industry associations are advocating for more robust protocols to accelerate progress, though concerns about automation’s impact on diversity persist.

Health and wellbeing initiatives are expanding in scope, addressing the mental health challenges of Fly-in fly-out (FIFO) workers and integrating psychological wellbeing into safety protocols. The rise in bullying and harassment claims indicates a need for a cultural shift towards a safer, more inclusive workplace.

Human rights scrutiny is increasing, with 25% of respondents noting investor attention in this area. The Responsible Mining Index (RMI) 2022 report reveals a lackluster average score of 22% in human rights performance across the sector. Mining companies are gradually integrating human rights into their operations, but embedding these principles into daily activities remains a challenge.

Governance: The ESG data dilemma

Governance is the linchpin of ESG, with the emphasis on measurement and monitoring. The plethora of regulations and frameworks creates a complex environment for the industry to navigate. Establishing credible baselines and integrating considerations throughout the mine lifecycle are essential for maintaining integrity and achieving global ESG sustainability standards.

Natural capital accounting, as piloted at BHP’s Beenup mineral sands mine site, offers a glimpse into future assessment methods. However, data integrity remains a significant concern, with companies stressing the need for robust platforms, personnel, and processes to track and measure ESG goals effectively.

Conclusion

As ESG continues to be the predominant risk for metals and mining companies globally, the industry’s resilience and inventiveness are more crucial than ever. Upcoming years will continue to be pivotal, with expectations of increased innovation, collaboration, and agility. Mining companies must embrace change to navigate the complex ESG landscape, ensuring sustainable operations that align with global standards and stakeholder expectations. 

Theo Yameogo is the Americas mining & metals leader at EY,
based in Toronto. (www.ey.com/en_ca/mining-metals).

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