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Navigating the ESG Narrative

Published by
Global Mining Review,


In the second part of a two-part article, Assheton Stewart Carter, TDi Sustainability, UK, explores the complex ESG reporting landscape for mining companies.

Telling a compelling ESG story

The choice of ESG frameworks for the mining industry is vast, ranging from materials specific (for example, the programmes of The Copper Mark or Aluminium Stewardship Initiative) to general or mineral-agnostic frameworks (Initiative for Responsible Mining Assurance, International Council on Mining and Minerals, the Mining Association of Canada, Towards Sustainable Mining, etc.), so the first challenge is selecting the right framework for the business. Working with a specialist consultancy can help with making the best selection, but initial aspects that should be examined when comparing options include:

Meeting market expectations

The key to identifying the right framework type for each individual is in first knowing the priority stakeholder audience and understanding their expectations around ESG reporting. Investors are most likely to be interest-ed in disclosure frameworks such as those from the Taskforce on Climate Related Financial Disclosures (TCFD) or the Sustainability Accounting Standards Board (SASB); markets and regulators. They will look for responsible sourcing or due diligence frameworks, such as those led by the Responsible Minerals Initiative (RMI) or the Organisation for Economic Co-operation and Development (OECD), while customers and non-governmental organisations (NGOs)/international non-governmental organisations (INGOs) will expect reporting against operating standards frameworks, such as: the World Gold Council, Better Coal, or Responsible Jewellery Council.

It is worth noting that many of the more comprehensive ESG operating standards frameworks may also have certain due diligence or disclosure standards built in as an ‘ESG standard inside’. For example, The Copper Mark or Better Coal frameworks invoke standards such as the ISO 14001, ISO 45001, OHSAS, OECD due diligence guidance, GRI, and ISTM.

Three other aspects stand out as important: influence, cost, and market readiness:

Influence

Often, producers are absent in the process to develop frameworks used to measure and rank their industry’s performance. Does the framework include consultation with producers, and how much influence or credibility does it have in the sector?

Cost

What is the cost to the business of putting in place the required practices and systems for the framework? Will there be additional cost implications, such as membership dues and audit fees?

Market readiness

Is the framework established and ready to go in time to meet stakeholders’ expectations? Some of the newer frameworks may still be under consultation so timings need to be factored into the thinking here.

Whichever framework is chosen, companies must learn to prioritise and target the most critical metrics within them and identify where they are able to make the most significant progress in both the short and longer term.

Stakeholder involvement.

The second aspect to consider is ensuring the involvement of all necessary internal stakeholders, and the roles each group or individual can play in helping to bring the business’ ESG story to life. Too often, the ESG role within businesses is double-hatted, with responsibility being assigned to the marketing or investor relations teams. But failure to allocate the correct time and resources, or to ensure a joined up, company-wide approach to ESG reporting, can compromise the objectives of an ESG strategy and dilute its effectiveness.

Ideally, responsibility should be designated to a senior executive or board member who can reach across the business, including to local community stakeholders, for information and solutions, to build a strategy, and to push through challenging recommendations. This strategy needs clear timelines, objectives, and metrics. Involving all levels and parts of the business will also enable companies to form a more comprehensive and richer story of the impact they are having in all areas of ESG, adding another layer to their reporting.

Keeping up with changes

Finally, businesses need to be mindful of the rapidly changing landscape of ESG reporting and take a proactive approach to keeping up to date with and anticipating developments. As well as being aware of all major legislation and debate at a national, sector and international level that may impact ESG reporting for the mining industry, companies may also benefit from being a part of helping to inform the change itself by collaborating and engaging with industry standards bodies.

Being ahead of the curve with anticipated changes to ESG reporting will have the added benefit of helping businesses to pre-empt their data needs/reporting metrics for the future, and thus put systems in place for collecting this data from an early stage. Consideration should also be given to any legislation that will impact future ESG guidance/requirements of downstream customers and investors, as these are likely to have a knock-on effect on the reporting demands for mining companies.

What next for ESG reporting in the mining sector?

The increasing reliance on extracted minerals across modern society to help support the low carbon economy transition is already starting to turn a spotlight on the mining industry, and this is set to continue with factors such as the Biden Administration’s focus on climate goals, supply chain resilience and critical minerals for the clean energy revolution, as well as the upcoming EU due diligence legislation due in 2022, which will set a precedent for other countries.

The reputational impact and costs resulting from ESG risks pose a threat to business continuity, especially given growing calls for transparency and more effective scrutiny from investors, stakeholders, governments, pressure groups, and consumers.

However, with increased risk, there are also new opportunities being presented by the growing focus on ESG in the mining sector. As well as helping to build greater trust and confidence in businesses and maintaining a critical social license to operate, a comprehensive and well communicated ESG strategy can also help to build long term supply contracts, attract the brightest new talent into companies from the next generation, and secure greater investment and improved access to capital.

For mining companies looking to capitalise on this opportunity, the first step should always be a comprehensive landscape review and prioritisation of reporting metrics based on stakeholder requirements, future predicted needs, and a realistic assessment of what is possible within company resource and infrastructure limitations. From here, businesses can start to use the information available to communicate their ESG story with confidence.

Part one of this article is available to read here.

Read the article online at: https://www.globalminingreview.com/special-reports/24112021/navigating-the-esg-narrative/

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