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Miners shift to enterprise governance to avoid reputation disasters

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Global Mining Review,

With new standards like the Global Tailings Standards (GTS) requiring better environmental, social and governance (ESG) in mining, organisations are having to review their reporting processes to ensure they have an enterprise-wide view, said K2fly Chief Commercial Officer, Nic Pollock.

With its broad and global client base delivering technical assurance solutions to a majority of global top 50 miners across commodities, Pollock says there is noticeable shift in companies working to create enterprise-wide reporting processes to avoid the fall-out of serious governance issues such as Brumadinho and the Sarmarco dam failing in Brazil.

“We’ve noticed a marked change over the past year to 18 months as how mining companies are looking at their operating models and governance in response to increased ESG, higher societal expectations, risk to corporate reputation and capital value,” added Pollock.

“A lot of this is being driven by the understanding of the risks of getting things wrong at site, and how that affects the global corporation– from Sarmarco and Brumadinho through to the more recent example at Juukan caves.

“While the technical details of each are different, what each of these reputationally damaging occurrences have in common is a failure of good governance, likely driven by the historically siloed nature of mining,” he said.

Pollock explained that the big mining houses traditionally operated in a federate model, with the company spilt by commodity or regional lines, with local decision making and accountability.

“While local decision making had sound historical basis due to remoteness and communications, the federated model creates siloed departments and systems which can obfuscate the right information travelling to the right executives or board in a timely fashion.

“There is often a plethora of systems, often spreadsheets, that hold information of critical value to the corporate entity that are not aggregated or governed and the lack of action at the region or operation can have dramatic negative effects on a company’s corporate reputation and potential future access to capital.”

Pollock said that global mining companies are increasingly embracing the challenge of creating better governance that creates enterprise-wide oversight and accountability, and are understanding the need to connect different types of reporting across the business.

“A large number of our inventory governance and reporting clients have drawn a direct link between resource governance and tailings governance.

“We see it going even further, into less readily defined areas such as cultural heritage, land access, communities and environment, all of which together contribute to ESG and therefore need to be considered collectively.

“Many large global mining companies quite rightly devote significant resources to various ESG initiatives and talk a lot about their values and their positive impacts on the communities in which they operate.

“However despite the good intentions and introduction of new standards like the Global GTS, more needs to be done to encourage stronger ESG reporting internally – the remuneration of most key executives is predominantly linked to financial performance and safety only.

“The risks of getting it wrong are clear. Now is the time for transparent governance structures, codes and systems that support mining ESG initiatives to be put in place in a consistent way to prevent further disasters destroying lives in local communities, cultural heritage and the environment. The world is watching.”

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