What is ESG, and What Does it Mean for the future of the Mining Sector?

The concept of ESG

The concept of ESG (environmental, social, and governance) is not new. In the 2010s, the pressure for companies to disclose their Sustainability performance was seen as a branding exercise, and the pressure to report came primarily from boutique impact investors, niche ESG experts and NGOs.

However, the recent surge in social injustice cases, climate-related risks, economic and public health crises have intensified the focus on ESG in boardrooms and across all sectors, including mining. ESG is now linked to longer-term performance, and some also state that it provides opportunities for cost savings, revenue generation, and risk mitigation. Stock exchanges, financial regulators, lenders, asset managers are making it part of how they invest.

Impact of ESG on Mining Industry

Mining by nature has the potential to release hazardous elements and other toxic fluids into the air, water, or soil, and these emissions can be devastating to human lives, the environment, and credit rating of a company, according to mining market intelligence firm S&P Global.

Investors have heightened their awareness of “tailings,” or waste from mining operations, and improved ESG performance is a real thing for mining companies from investors preceptive.

ESG investing is becoming the norm, so if you’re not aggressive about getting a strong framework in place and tracking ESG risks and performance, you’re already losing traction with investors. If mining companies decide not to take ESG and sustainability seriously, they will find it impossible to get funding, insurance, or a license to operate.

Moreover, obtaining a ‘license to operate from local communities has been challenging for the mining industry. Thus, creating real benefits for communities near mine sites will be critical for successful new projects. This concern recently surfaced in EY’s global mining survey, when a significant number of mining executives ranked ESG, decarbonization and licensing to operate (LTO) as the top three risk factors facing their business in 2022.

Environmental, social and governance (ESG) disclosures may soon stop being a choice. In the EU for example, we’re already seeing an array of disclosure initiatives such as the Sustainable Finance Disclosure Regulation (SFDR), None -Financial Reporting Directive (NFRD) – where companies will need to disclose an array of new ESG data. The trend is not just signalling that regulatory floodgates around ESG are about to open wide but also, it’s driving companies to innovate beyond traditional compliance solutions by integrating EGS considerations into their disclosure process.

Now that ESG disclosures are on the road to becoming mandatory, the question now is, how should EHS professionals prepare to track and demonstrate their genuine commitment to ESG while avoiding any accusations of greenwashing?

In our recent global survey of 350 business leaders about the state of ESG Reporting, 80% said ESG and sustainability are part of their organisation’s wider EHS department responsibilities. EHS teams, especially those in mining industries where EHS processes are more mature, have experience managing ESG-related issues around the environment, worker health & safety, GHG emissions.

They’re experienced in dealing with questions such as:

  • How can businesses reduce water and energy waste?
  • How harmful are air emissions?
  • What’s the carbon footprint?
  • Are waste management programs working efficiently and properly disposing of hazardous waste?
  • Is the supply chain optimised for sustainability?

The EHS team monitors these considerations, ensuring the business complies with all applicable regulations and developing plans to keep the organisation ahead of future regulations.
But more importantly, EHS teams will most likely have the data that stakeholders and investors want to see for ESG reporting and compliance.

Let’s also not forget that ESG is accelerating the demands for better ESG disclosures, increasing the need for better quality data. In our ESG reporting survey, we asked business leaders what’s preventing their companies from initiating ESG reporting, and 45% cited a lack of data. With a really good ESG information framework, companies can better demonstrate their genuine commitment to ESG. But any attempt to greenwash will be a huge obstacle and a missed opportunity for companies trying to make big changes.

The focus on ESG will continue to put pressure on companies to have better information systems to support transparency of social and environmental impact disclosures. Therefore, there’s an urgent need for companies to consider Integrated-digital technologies to support the real-time visibility of ESG data with dashboards to enable decision-making. But unfortunately, disparate systems and labor-intensive Excel files will not cut it. Any time you’re working with paper checklists or Excel files, there’s an extra step to get that information where it needs to go, delaying analysis and bogging down your capability for agile EHS management.

A centralized Enterprise software system provides a more transparent overview of the business’s EHS& Sustainability goals. This ultimately provides the data in one holistic view to track performance against goals and how EHS supports ESG efforts.

We’ve started to see companies pushing to increase their investment in digital transformation to respond to an accelerated focus on compliance, ESG, sustainability, and health and safety and the challenge to transition to net-zero goals.

The future is hard to predict, but if the current trends hold, the demand for the good governance of environmental, transparency and social performance will continue to intensify not just for miners but also across all sectors. And companies that integrate EHS and sustainability into their business as a whole will be far more successful in the ESG efforts and will most likely attract more potential investment. Greater digitalisation will thus be critical to achieving ESG demand and long-term sustainability targets for any organisation.