Predictions and protection: can software and data improve ESG in mining?
Giles Crosse investigates how a delicate combination of data and regulation could be vital for the future of the mining sector.
he mining industry remains one of the world’s biggest polluters, yet it remains a cornerstone of the world’s industries, and production is unlikely to stop soon.
Improving operational efficiency has become the industry’s preferred method of cutting emissions, as they look to balance the need to minimise environmental damage with the desire to maintain productivity and profitability. Data analytics firms are seeking to make money from environmental governance and digital best practice in this space.
The number crunchers want to help miners make more informed production and supply chain decisions, while cutting emissions and emboldening environmental, social and governance (ESG) integration. But will their efforts ever be enough to offset mining’s inherent environmental damage and footprint?
A numbers game
CRU, a business intelligence and consulting service for the metals, mining and fertiliser industries, is one example of many companies using analytics to alter how the sector manages carbon.
The company relies on blending data from thousands of different sources, analysing it, and creating insights clients use to make short- and long-term investment decisions. Essentially then, an analytics approach which aligns almost exactly with the ESG criteria also driving change in the extractives sector.
It has already released a carbon emissions data tool, helping clients calculate and visualise carbon emissions for more than 4,000 commodity-producing assets globally, and its leaders are aware of the importance of data to a range of companies across the mining industry. Will Blake, chief technology officer at CRU, said customers want data-driven insights, helping them to understand key trends in the market and make informed decisions.
“Decision intelligence and prescriptive analytics help us to achieve that goal, supporting clients to better understand the commodities landscape and model key variables, from costs of production to carbon emissions, that drive investment decisions every day,” says Blake.
“Our customers, more than most, rely on decisions being made five, 10, and even 20 years in advance. Prescriptive analytics lets us provide them with both forecasts looking this far ahead, and given this information, insights on the optimal course of action.”
Oxford University research found 80% of businesses experienced positive stock price performance with good sustainability practices.
There's more than just environment at stake; data and ESG are of course a major factor in company performance, and companies with strong ESG credentials are more likely to be positively viewed by investors and industry leaders. Oxford University research found 80% of businesses experienced positive stock price performance with good sustainability practices.
There's a reason why data firms like CRU are seeing cash in ESG-aligned data metrics. S&P Global Commodities reports that the Natural Resources Forum, held in London in October, heard miners are bracing for new ESG and reporting standards, as demand for minerals grows.
The standardisation of guidelines issued by a cluster of ESG-focused organisations, such as the Responsible Minerals Initiative and the International Council on Mining and Metals, may also be needed to boost the sector's environmental and social acceptability, according to miners, traders, analysts and financiers at the event. Plus, the EU has just adopted a new corporate sustainability reporting directive. Gillian Davidson, chair of the sustainability committee of copper, zinc and lead producer Central Asia Metals, told the forum the mining sector is in “anticipation of regulation.”
As a result, there's an intriguing interplay at stake. On the one hand, global mining firms and investors see regulation coming, heightening their fears and requirements for ESG alignment on extractives. Yet data analysts see an opportunity to cash in from this trend, while the green lobby hopes a more sustainable extractives sector is coming, offering sources of optimism for the future of the sector.
The wider picture
The role of the data providers can only grow. The International Energy Agency (IEA) says there are significant risks associated with the ESG impacts of mining projects.
These include geopolitical tensions, armed conflict, human rights violations, bribery and corruption, emissions, water stress and loss of biodiversity. These types of impacts can erode public support for mining projects, and will face increasing scrutiny from downstream industries, investors and civil society.
The catch: such scrutiny could, says the IEA, limit the supply of crucial minerals and metals, potentially derailing clean energy transitions. Mineral wealth can, if properly managed, contribute to public revenue and provide decent economic livelihoods.
But failure to properly manage these risks may also expose governments and companies to ESG-related regulatory, ethical and reputational criticisms. The theory runs that the right data can at best prevent, or at least alleviate these risks, when data implications are implemented in the real word.
Ernst and Young's 2023 mining and metals risk report contains some telling truths on data. It says complying with new standards and expectations will require miners to improve the availability, rigour, trust and reliability of data. One might argue this will be done through the right analytics providers.
EY also reveals mining and metals executives are focusing digital investment on developing data-driven innovation to inform evidence-based decision making.
EY also reveals mining and metals executives are focusing digital investment on developing data-driven innovation to inform evidence-based decision making. The top priorities in EY's paper are process intelligence and automation, and these are closely followed by the need for new ESG platforms to track metrics and reporting.
In more detail, EY argues digital and data will play a key role in supporting miners to execute sustainability roadmaps, including through providing greater visibility across asset performance and operations, and better monitoring of energy and water consumption.
EY cites how the Garrick Gold Corporation embedded environmental compliancy rules within its real-time operational data platform, helping the miner reduce environmental deviations by 45%.
Additionally, EY argues the right digital tools can support miners in tackling the challenge of reducing scope three emissions; data analytics, smart sensors and blockchain can help better track, monitor and manage scope three.
// 3D System Model and Completed Installation. Credit: Deimos
How data could help the real world
“Our reliance on the mining industry has risen significantly in recent years, following the rapid growth in demand for transition minerals to support our net-zero journey, as these are crucial in the production of renewable energy technology,” comments Elena Espinoza, senior lead, social issues and acting head of governance, UN PRI.
It's worth noting the PRI is the world’s leading proponent of responsible investment. The PRI acts in the interests of its signatories, financial markets and the economies in which they operate. Launched in 2006, the PRI has more than 5,000 signatories managing over US$121tn. Plenty of these control cash that flows to and through global extractives.
“For a long time, environmental and social impacts of mining have been treated as externalities, and the consequences of that have been evidenced in the collapse of tailings dams across the world,” continues Espinoza.
“These tragedies have caused the loss of life, long term disruption of surrounding communities and environmental damage, the scope of which is yet to be fully grasped.”
Espinoza argues that it has become ever so important that environmental and social risks are addressed and mitigated.
// Main image: 3D System Model and Completed Installation. Credit: Deimos
Espinoza argues that as such, it has become ever so important that environmental and social risks are addressed and mitigated, as well as remedied when harm has occurred in the production processes across the global supply chain to ensure the transition is “just”.
“To support this journey, the investor mining and tailings safety initiative have been working to establish a global repository, an independent monitoring system and the creation of a global tailings legacy rehabilitation fund to increase accountability in the mining sector around waste management.
“In addition, the PRI’s advance initiative that seeks to drive progress on human rights through more ambitious investor stewardship will be focusing the first phase of activities on human rights risks within the metals and mining sector.”
// Main image: Mine worker. Credit: Parilov via Shutterstock