The most pressing ESG concerns for the mining industry
Environmental, social and governance (ESG) compliance needs to be at the core of any mining company that wants to continue to provide quality services.
Companies from across the mining industry widely promote their corporate social activities, and improving their environmental rating is at the top of many corporate agendas.
However, as more firms are called upon to confront social inequity, corruption, tax avoidance and a lack of security, the mining industry will need to find ways to improve their governance across all aspects of ESG.
Environmental sustainability is more important than ever
Sustainability in mining covers a wide range of activities, from community engagement and development prior to a mine’s construction, through to rehabilitation, with mining required to be both environmentally sound as well as socially responsible. With declining ore grades, miners are required to extract ever-increasing volumes of material for the same quantity of metals and minerals, thus creating a greater challenge to do so while also minimising their impact on the environment.
Over the last two to three years, considerable progress has been made by mining companies in terms of setting emission reduction targets and net-zero goals and, more recently, outlining their decarbonisation pathways. The target year for net-zero for most is 2050, which includes all members of the International Council on Mining and Metals (ICMM).
These companies in October 2021 collectively committed to achieving net-zero Scope 1 and 2 GHG emissions by 2050 or sooner. Exceptions to this include Fortescue and De Beers, who have set their targets at 2030 for net-zero Scope 1 and 2 emissions; and Anglo-American, Sibanye-Stillwater and The Mosaic Company, who have each set their targets at 2040.
While many short-term targets are based on a shift to renewable power, critical to achieving longer-term emissions targets and carbon neutrality is the electrification of diesel-powered fleets. While progress is already occurring at underground mines, major technological advancements are still required to electrify surface trucks, particularly in terms of charging solutions, and their adoption may also impact mine design.
David Kurtz, head of mining, GlobalData
In addition, mining companies are becoming increasingly ambitious with their targets for short-term Scope 1 and 2 emissions reductions targets. These short-term plans principally revolve around the use of renewable energy, either directly via on-site power plants or through purchased power, with this assisted by diesel displacement efforts as diesel-fuelled mining vehicles are gradually replaced by those powered by electric batteries or fuel cells.
Those investing in on-site renewable power include Gold Fields, for example, which is planning to increase its share of energy from renewables from 11% in 2020, including hydropower, to 22% by 2025. Meanwhile, Anglo American is gradually switching to renewables, first in Chile, and then Brazil and Peru. By 2023 all of its South American operations will be powered by 100% renewable electricity.
Social factors are vital to the mining sector
As well as being environmentally sound, mining activities must also be socially responsible with miners needing to engage with communities before and during mining operations. Mining activities can have both a positive and negative effect on local communities. Whilst there are positive impacts, such as job creation and economic benefits, negative impacts can include pressure on infrastructure and housing, income inequality and poorer environment and water quality.
Social development is a key element of many mining companies’ ESG strategies, and they look to make positive contributions to local communities through local employment, supply and procurement from local and regional businesses, community development and education. In recent years investments have increased, programs have been expanded and mining companies are increasingly setting targets for their social performance and investment.
Meanwhile, safety levels have improved, supported by the implementation of various programs and technologies. While fatalities did increase in 2021, the average total recordable injury frequency rate and lost-time injury frequency rate have both been on a downward trend and 19 of the 57 mining companies tracked by GlobalData had a fatality-free year in 2021.
Improving safety standards and processes and rising use of safety-related technology, such as automation, have helped miners to improve their safety metrics over the last few years, despite the operational challenges faced due to the Covid-19 pandemic.
David Kurtz, head of mining, GlobalData
A recent survey by GlobalData also showed that expectations for investment in safety-related technology, such as collision avoidance and fatigue detection, are higher than many other technologies, including drones and predictive maintenance. While a typically male-dominated profession, many mining companies are making efforts to increase diversity. That said, the share of women as a proportion of the total workforce increased only marginally between 2016 and 2020. Comparing 34 leading miners for whom data was available, the average share increased from 15.9% in 2016 to 17.8% in 2020. In early 2022 a survey of over 10,000 Rio Tinto staff members also found a high share experiencing bullying and sexism.
Amongst the leaders in the social theme are Fortescue Metals Group, Newcrest, Boliden and Mosaic, which have suffered zero fatalities over the last five years. At the other end, the Brumadinho disaster at Vale’s operations in Brazil cost almost 250 lives in 2019, while Coal India averages almost 35 fatalities a year, Arcelor Mittal, 20; and Sibanye-Stillwater, 14.
Good corporate governance is critical
Much mining activity globally takes place in less wealthy countries, where the level of corruption can be higher than in wealthier regions. This can lead to revenues which should be fed into investments that benefit citizens being misdirected, with no benefits accruing to the communities impacted by the mining activity or the population at large. As the search for much-needed minerals expands, it may also lead miners into more risky and corrupt countries.
In recent years, rising pressure has come from investors and customers, with the latter increasingly seeking greater transparency with regards to the products they purchase, with organisations such as the ICMM working with members to improve transparency.
Particularly in developing countries, mining operations need to ensure that they operate transparently, and it is clear to the citizens of the country they are paying the taxes they should, while revenues earned by the government are being invested appropriately.
David Kurtz, head of mining, GlobalData
Good governance is key in mining and that also extends to risk management, board-level diversity and cybersecurity. As mining operations become increasingly interconnected, so there will need to be an increased focus on cybersecurity. The internet of things sensors, augmented reality devices, autonomous vehicles and drones that improve mining operations are equally capable of halting activity if they fall prey to cyberattacks.
Mining has historically been male dominated across all levels. Female representation at the board level has also been low, though this is now starting to change with more female CEOs and higher shares of female board members. A survey by Women in Mining (UK) and PWC in 2013 found just 8% of seats at the top 100 mining companies were occupied by women. Now it’s more common to see miners where women account for 10-20% of seats, with some at 30% or more, which helps to demonstrate a commitment to diversity that would cascade throughout an organisation, provide more diverse perspectives, and help to attract and retain talent.
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.