Key questions about ESG in mining: Q&A with GlobalData thematic analyst
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David Kurtz is the director of research and analysis for construction, mining and energy at GlobalData, and is responsible for the company's published data and insights on these sectors. He joined the company from Datamonitor in 2013, where he spent 10 years based in London leading the Energy and Utilities business unit, before moving to Sydney in 2004 to head the Asia Pacific operations.
Lara Virrey: What are the most pressing ESG challenges for the mining industry in 2023?
David Kurtz: Safety, as always, remains a key priority for miners. We have seen a steady improvement here from most miners, with a downward trend in fatalities and injuries. Miners also need to be socially responsible, engaging with local communities to maintain their social license to operate, whilst a further major challenge facing most miners at present is how to reduce their impact on the environment.
The management and reduction of energy use and associated emissions is critical and in recent years miners have begun working to reduce Scope 1 and 2 emissions in particular, with a long-term shift to being carbon-neutral. Other environmental challenges relate to water, with miners needing to implement water management practices and reduce water consumption given it can be a scarce resource in many of the regions in which they operate.
Lara Virrey: What are the most promising technologies that could help the mining industry deal with its environmental challenges?
David Kurtz: In the near-term the switch to renewable power, either through the local grid or on-site power generation, presents the best opportunity to reduce carbon emissions. Many miners have moved to increase their share of renewable energy through the Public-Private Alliance for Responsible Minerals Trade in recent years and, through a high share of power from renewables, miners will be able to close in on their near-term emissions targets.
In the medium- to long-term, a shift away from diesel-powered vehicles to battery or electric power will help to dramatically reduce Scope 1 emissions. Given the need for technologies to develop and fleets to be replaced, the transition will take longer – typically mining companies are targeting between 2030 and 2040 for diesel displacement – with various miners having begun to implement electric fleets or initiate trials.
There have already been a number of partnerships established between original equipment manufacturers (OEMs) and miners and cross-company initiatives. To date there has been more progress with underground mining equipment, including underground mining trucks and loaders, compared to surface mining, where the transition to electric power has been more limited.
Alongside those, emissions can be mitigated through increased automation and use of the internet of things to improve efficiency in the case of the former, while monitoring and adapting operations in the case of the latter to minimise the environmental impact.
Lara Virrey: Who are the biggest innovators in environmental technology in the mining sector?
David Kurtz: On the equipment side, the major OEMs are all introducing battery- and electric-powered machines, with Sandvik and Epiroc dominating the underground segment, while Hitachi, Komatsu and Liebherr are the main suppliers of trolley-assist trucks for surface mines. Caterpillar is developing battery- and electric-powered machines for both surface and underground mining.
The miners leading the way in adoption of renewable power and switching away from diesel include Fortescue Metals Group and Anglo American, which are aiming to achieve net-zero emissions by 2030 and 2040 respectively; First Quantum, Boliden, Agnico Eagle, LKAB and Vale, which are early adopters of battery and electric equipment; while Teck, Antofagasta and Polyus all have very high shares of renewable power. Other majors, such as BHP and Rio Tinto, are also at the forefront of innovation, working with OEMs to develop zero-emission haul trucks.
Lara Virrey: What are the key areas the mining sector needs to focus on in addressing social and governance challenges?
David Kurtz: The key for miners is to ensure that their projects deliver positive outcomes for local communities, such as jobs and other economic benefits, whilst avoiding issues such as income inequality and pressure on infrastructure and housing. To generate positive outcomes, miners need to work to maximise local employment and procurement of supplies from local and regional businesses, as well as community development and education. We have seen in recent years increasing investment in programs for local communities, as well as targets for their social performance and investment.
Mining has also traditionally been a male-dominated sector, and change is occurring only slowly, with some way to go to improve diversity at all levels, particularly board level. Corruption can occur in mining, as in any sector, and companies need to protect themselves from exposure to any type of bribery as well as be prepared to walk away from lucrative opportunities when risks of such activities are high.
Lara Virrey: Overall, do you think the mining sector is showing enough commitment to improving its ESG performance?
David Kurtz: The impact mining has on the environment is significant and mining companies have more significant exposure to ESG risks compared to many other sectors. Their shareholders can and will take voting action on various ESG topics, from climate change to health and safety to executive pay, and mining companies are increasingly demonstrating to their shareholders that they are serious about ESG.
There is very widespread setting of near-term emissions targets and net-zero commitments, reporting of social investments and reporting across a wide range of ESG performance targets. Recent emissions performance suggests that emissions in the mining sector have peaked and will continue to fall, with some miners already having made good progress towards their short-term emissions targets. Whether they will succeed in achieving these goals still remains to be seen.
There are many practical challenges regarding certain aspects of mining operations, for example the electrification of surface equipment, which is only at the very early stages. Simply producing a sufficient number of battery- or electric-powered vehicles to eliminate diesel emissions will be a huge task, so it is expected that some miners will lag behind in their emission reduction implementation.
GlobalData, the leading provider of industry intelligence, provided the underlying data, research, and analysis used to produce this article.
GlobalData’s Thematic Intelligence uses proprietary data, research, and analysis to provide a forward-looking perspective on the key themes that will shape the future of the world’s largest industries and the organisations within them.