Five ESG issues facing growing scrutiny from stakeholders
The mining sector is making progress. The last year has seen many companies prioritize environment, social, and governance (ESG) factors, weaving them into corporate strategies, decision-making and reporting, as the issues become a priority for all stakeholders and shareholders. With ESG now firmly integrated within business models, mining companies must now consider how these issues will evolve and broaden their capabilities to manage them effectively going forward.
This needs to be articulated through transparent, outcome-based measurement and assurance. In fact, more rigorous reporting will become critical if companies are to meet growing expectations and avoid accusations of “greenwashing.” Companies that go beyond policy and have a holistic approach to ESG can get an edge on competitors in many ways from accessing capital to securing licence to operate and attracting talent.
The EY Top 10 business risks and opportunities for mining and metals in 2023 report outlines some of the top ESG issues the sector expects to face the most scrutiny on and how to respond.
Prioritizing water stewardship
Seventy-six per cent of survey respondents cited water stewardship as their top ESG risk, as climate change and water scarcity concerns escalate. As this will continue to be a critical issue for years to come, coordination between organizations and governments needs to be a priority.
The sector’s current trend of setting blanket targets around water usage often fails to acknowledge trade-offs, for example, water-saving technologies can be energy-intensive. Transparency around the water and energy nexus and a lifecycle approach can help companies assess and limit impact.
Improving diversity, equity and inclusion (DE&I)
DE&I remains a critical challenge for the sector. Unless mining companies can address these issues, they face significant risks in attracting the current next generations of talent, and in sustaining their businesses into the future. Key DE&I issues include:
> Increasing participation of women: Companies still struggle to attract, retain and promote women, depriving them of a huge talent pool as well as the proven benefits of a more gender diverse workforce. Rethinking traditional recruitment tactics, creating equitable career paths, and breaking down barriers on-site and in corporate headquarters are examples to help accelerate change.
> Safety and support on-site: Companies need to change how mining sites are built, operated and constructed to improve safety and support for all workers. For example, on-site childcare could attract more people while making a positive contribution to the community.
> Building a purpose-led brand: Companies must do more to build a brand aligned with the purpose and values of the next generation of talent.
Increasing credibility of disclosures through data and communication
Around the world, regulation of carbon emissions, sustainability and social governance is increasing, with companies subject to different regulatory and reporting frameworks across jurisdictions. 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. Complying with new standards and expectations will require mining companies to improve the availability, rigor and reliability of data.
Accessing capital increasingly depends on meeting ESG targets, with investors expecting comprehensive, accurate nonfinancial value included in company disclosures. Policymakers and companies need to work together to ensure the availability of better climate and other ESG data to create transparency and assurance of company actions or plans.
Overlooking the circular economy is a missed opportunity
The circular economy offers opportunities for companies to take ownership of their products throughout their lifecycle, finding ways to unlock new value. For example, a company that mines battery minerals can also play a role in ensuring they are retained and reused at the end of the battery’s life, opening up the opportunity of new commercial models for battery disposal.
Stewardship of minerals throughout their lifecycle can be an excellent differentiator for companies, particularly while recycling continues to develop. While nearly 60% of survey respondents said engaging in circular economy strategies is a differentiator, only half of them plan to do so.
Developing long-term strategic vision for mine closure
Mine closures impact a wide range of stakeholders, and expectations are increasing around how miners mitigate these impacts, including the socioeconomic effects on communities.
A proactive approach to mine closure begins when a mine is first planned. Designing with closure in mind allows for effective ongoing engagement with traditional owners and communities, creates opportunities for progressive closure activities and ensures that decisions throughout the life of the mine consider the impact of closure options. When companies take this strategic approach – while engaging with communities and supporting their socioeconomic longevity – they can leave a positive legacy long after mines have closed.
As we head toward 2023, new business models offer opportunities for mining companies to reposition for a changing future, with many considering the benefits of strategies to rationalize, grow and transform. Companies that scrutinize and shift business models now can get an edge on competitors as demand and expectations change.
THEO YAMENGO is EY Americas and Canada mining and metals leader. For more information visit www.ey.com/en_ca/mining-metals.
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