Navigating the ESG Landscape Part 2 – Responsible Mining

by | Nov 9, 2020

In a previous article published in June, 2020 (link), we set out key elements of the Environmental, Social and Governance (ESG) landscape, and how Micon can support mining companies at all phases and all scales to engage with sustainable approaches to addressing ESG issues. In this article, we pick up the parallel theme of the ‘responsible mining’ approach which is inextricably linked to ESG, and discuss what this means for mining companies, their investors, and in practice.

The mining sector is a global industry and we often hear talk of ‘systemic change’ – but this can feel distant especially for smaller companies with more localized geographies. Nonetheless, Micon’s approach is to work with individual participants at the local level, embedded in local economies, their communities, and the local environment because it is at this level where we really feel the pain or the gain in environmental and social terms. What is ‘responsible’ at this level should drive action in the near term, and will set the scene for longer term gains in economic, financial, technical, environmental and social sustainability terms.

 

So, what does ‘responsible mining’ mean?

Being a responsible member of a community, society, country (on a business and on an individual level) can mean taking actions that ‘do no harm’ or that take account of future generations. The Brundtland Commission (1987) definition of Sustainable Development is “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”. In the 1980s the concept of Corporate Social Responsibility (CSR) also arose, embodying an ethic of ‘responsibility’ in approaches to business practice. CSR is defined variously as “a self-regulating business model that helps a company be socially accountable—to itself, its stakeholders, and the public”, and more recently by the EU Commission as “the responsibility of enterprises for their impact on society”. However, CSR as a tool is inherently weak in practice as it lacks definable measures of performance and is not subject to external regulation.

Responsible Business Conduct (RBC) is another term, coined by the Organisation for Economic Co-operation and Development (OECD), described as “making a positive contribution to economic, environmental and social progress with a view to achieving sustainable development and avoiding and addressing adverse impacts related to an enterprise’s direct and indirect operations, products or services”. Sounds familiar?

The Responsible Mining Foundation has described responsible mining as “benefiting the economies and improving the lives of people, and respecting the environments of producing countries, while also benefiting mining companies in a fair and viable way” (www.responsibleminingindex.org).

Interestingly, the EU recognises that Small and Medium-sized Enterprises (SMEs – the most common type of businesses in the EU) may not know or use the terms ‘CSR’ or ‘RBC’, but through their close relations with employees, the local community, and their business partners, they often have a naturally responsible approach to business. Micon sees this observation reflected in the mining industry where for many smaller operations, the process by which they meet their social responsibility goals is still somewhat informal and intuitive.

Figure 1 shows the interlocking realms or components that make up responsible mining.

 

Figure 1: Realms of Responsible Mining

 

Investor interest in responsible mining

 Since the early 2000s, more than 2,300 asset owners representing $86 trillion of assets under management have signed up to UN Principles of Responsible Investment (PRI) that require them to integrate ESG factors – key components of ‘responsible mining’ – into their decisions. The Global Sustainable Investment Review 2018, indicated that at the start of 2018 there were $30.7 trillion of assets under management for sustainable investment, an increase of 34% over two years.

In view of this significant shift in investor behaviour on ESG there is growing consensus that we are seeing the start of a cycle of ‘Responsible Investing’ that generates competition for capital based on good ESG performance. In the meantime, the raising of performance standards by the mining industry and requirements for independent and transparent validation at site-level are steps in the right direction. They provide the basis for driving improvements in performance across the sector, while helping investors differentiate between good and poor performers in determining where to place their capital.

It should be clear that to attract finance over the short and longer term a company must demonstrate commitment to responsible, sustainable mining practice.

So how can this be done?

 

Current initiatives in the responsible mining space:

The overarching agenda is provided by the United Nations Sustainable Development Goals (UN-SDGs) which set out objectives and targets for equitable, socially inclusive and environmentally sustainable economic development. The mining industry is a major potential contributor to the SDGs and the International Council on Mining and Metals (ICMM) – representing around a third of the industry – and has provided sustainable development guidance for the sector to ensure that investments should be technically appropriate, environmentally sound, financially profitable, and socially responsible (see Box 1). This theme has recently been taken up and extended further by new initiatives including the Global Industry Standard on Tailings Management, of which ICMM was one of three co-convenors.

 

Box 1: The scope of the ICMM Mining Principles

Adapted from www.icmm.com/mining-principles

 

There are several other frameworks that allow a company to demonstrate responsibility – such as the UN Global Compact, GRI, Carbon Disclosure Project, IFC standards, ICMM performance expectations, ISO26000 on Social Responsibility, the World Gold Council Responsible Gold Mining Principles (RGMPs), The Copper Mark, ResponsibleSteel, Responsible Minerals Initiative, Responsible Gold Agreement and so on… – as well as those focused on sustainable mining (these were set out in the previous Micon article on ESG in June, 2020 (link). However, this plethora of initiatives can be confusing, and may be increasing the levels of sophistication of performance reporting and accountability tools without supporting the same degree of fundamental improvements in on-the-ground ESG impacts in practice.

 

How to become more Responsible

 Micon supports the application of the key principles outlined above, and this means paying attention to all of the following aspects at all stages of the mine lifecycle:

  • the social dimension: affected communities, human rights and social development
  • past, present, and future management: environmental and social impacts, a life of mine approach, design of closure and reclamation, tackling abandoned sites
  • organizational capacity: identifying and addressing weaknesses, creating and retaining knowledge and expertise
  • governance: role of the state, regional alignments, legislation, performance standards, insurance
  • transparency & accountability
  • financial modelling: inclusion of properly calculated environmental and social management costs throughout the Life of Mine
  • interdisciplinary awareness and effort: encouraging interdisciplinary knowledge-sharing, training and capacity building and a willingness to engage in and promote cross-disciplinary conversations on specialist topics such as biodiversity, climate change, water management
  • promoting where possible a systematic management approach: this involves vertical and horizontal integration of functions (planning, design, construction, operation, management oversight) within the broader life of mine management framework.

  

In conclusion

It is demonstrably possible for a mining project to be at the same time both profitable and responsible. Indeed, who would not want to achieve both these goals? To fail to do so is, by definition, irresponsible, a position which is surely difficult to justify at any level be that economic, technical, environmental, or societal?

Micon is committed to building the capability of mining companies to act responsibly and to effectively engage with meeting the demands of sustainable management of ESG issues.

Micon works with mining companies to understand and embed effective systems for responsible mining from the earliest project stages, to firmly set the scene for ongoing responsible and sustainable financial, environmental and social outcomes. In mining, environmental and social issues are always applicable! An understanding of the principles of responsibility as they apply to mining can facilitate the perspectives and decisions needed to ensure effective performance in the ESG space.

 

 

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