Five Critical Considerations for Sustainable Mining Operations

By: Josh Hendry, senior consultant, PE INTERNATIONAL

This article is the second instalment of a five-part series exploring critical environmental, social and governance performance issues for the metals and mining industry.  Each article poses a question for organizations in the industry and explores the importance and value of responding ‘Yes’.

2)      Are you able to quantify your firm’s environmental and social benefits and impact?

Mining and metals companies are increasingly seeking to sell themselves and their products based on environmental, social and governance (ESG) performance in addition to their traditional financial performance metrics. Often these ESG efforts focus on quantifying the social or environmental benefits of product applications, for example more durable or light-weight products that can save energy, or the ability to capture and recycle the metal at its end of life. However, the industry also employs thousands of people and stimulates local economies around the world and so quantifying the benefits of extraction and production is equally worthwhile.

However, the sector’s sheer size and complexity can make quantifying benefits difficult. A report from the International Council on Mining and Metals (ICMM), for example, says: “The mining and metals industry spans a complex web that includes about 6,000 companies employing some 2.5 million people across the world and an informal component – known as artisanal and small-scale mining – which likely includes some 15–20 million people or more.”

Nonetheless, many organizations in the sector have significant ESG or sustainability programs and they are increasingly confident in their ability to quantify their benefits despite this complexity. BHP Billiton, for example, says on its website; “We generate economic value for nations, regions and communities through employment, taxes and royalties, as well as purchasing local goods and services and infrastructure development. Of our total revenue, the communities in which we work retained more than US$17 billion in economic value.”

ICMM’s annual review for 2013, Strengthening Relations with Communities, echoes this approach, highlighting the sector’s growing acceptance that the industry’s future health and growth depends in part on creating benefits for people who live in the areas where they operate.

But if you want to take credit for the benefits, you also need to be clear about your impacts and how you are addressing them. If you do not tell people what is going on in your business, for better or for worse, someone else will. One example of this in another resource extraction sector is palm oil, whose production is deemed to be responsible for deforestation that can cause climate change. In an attempt to improve palm oil sourcing practices, the environmental group Greenpeace carried out a year-long study of the supply chain of one of the world’s largest companies, P&G.

Yet identifying and quantifying these impacts can be as complex as quantifying benefits. Companies already disclose impacts ranging from community level safety issues through to the greenhouse gas emissions for materials from extraction through to end-of-life. The specific benefits and impacts vary greatly depending on what you produce and where, so it is important to focus on what is most relevant, for example through a materiality assessment.

From an environmental perspective, many major industry players have used Life Cycle Assessments (to quantify performance in key environmental categories) for over a decade and have also recently worked together to harmonize these approaches. The industry has also adopted responsible sourcing schemes, which address a range of socio-economic and governance related topics.

Companies may also have to address concerns based on general perceptions of the industry, even if they don’t apply to their particular business. For example, your mine may be located in a region that is not exposed to political or social conflicts. But if particular customers or stakeholders are concerned with ensuring materials are ‘conflict-free’ you may have to provide proof of the source of the minerals and assurance that they were sourced without supporting conflict related activities even if there is no conflict or other social injustices in your region.

Quantifying impacts as well as benefits allows companies to tell a credible story about their operations and the materials they produce. It also allows them to:

  • Set targets e.g., Rio Tinto provides both detailed targets as well as transparent reporting of their progress against these to demonstrate where they have been successful and where they still aim to improve
  • Make comparisons against other materials or industries – there is growing competition between the aluminum and steel sectors over the environmental impacts of their products in vehicles, for example
  • Be proactive in demonstrating that they and their industry are acting responsibly, e.g., Communicating on the role and benefits from a responsible sourcing program, such as this example from the World Gold Council

The mining and metals industry’s diversity and reach into downstream markets is fairly unique among material producing industries and it is therefore well suited to position itself in terms of its broad environmental, social and governance performance. Being able to outline – and quantify – its benefits, as well as to identify and tackle the most serious impacts, will be increasingly important to companies’ license to operate in the future, making it crucial that they have a good insight into their operations and the resources they use.

For more information about how to position your organization related to its key benefits and impacts, please contact Josh Hendry at [email protected]