With pressure rising from investors, customers and regulators to incorporate environmental, social and governance (ESG) targets into corporate strategy, mines are increasingly focused on demonstrating their commitment to these goals.
The way in which these goals manifest differs from company to company. For example, gold miner AngloGold Ashanti corporate affairs and sustainability VP Stewart Bailey says supply chains have become a focal point for the company.
With investors and governments increasingly requiring miners to report on Scope 3 emissions, which are those bound to supply chains, the company has started influencing its supply chains, such as fuel for example, to ensure these are produced in a cleaner manner.
Moreover, Bailey explains that AngloGold provides its host governments with details about procurement, particularly local procurement, and helps build local supply and skills capacity wherever possible.
The company prefers to enter into engineering joint ventures with local companies to effect skills transfer and local procurement – even for sophisticated equipment and services.
Bailey further notes that governments are increasingly checking the legitimacy of local companies benefitting from mining operations, making sure there is no fronting and circumvention of policies.
He adds that, from an investor point of view, mining companies will have to continue pushing for improvement on ESG targets, as well as reporting on them.
“The providers of capital are getting behind standards such as the Task Force on Climate-related Financial Disclosures. And a $6-trillion voice is one you typically listen to.”
Bailey does believe that some sort of rationalisation will take place across the many standards that have been launched.
The gold sector, for example, is bound to guidelines by both the World Gold Council and the International Council on Mining and Metals. Bailey says it is key to understand what these standards aim to achieve in the first place, and that brings about clarity of what is expected to be implemented.
Junior mining company African Gold Group CEO Danny Callow says he has observed a move away from traditional investors.
For example, with the European Union having published new legislation that requires mining companies to show where commodities come from, which hands it passes through and where it ends up, it shows the changing priorities of investors.
He points out that by 2030, more than $10-trillion of investment capital will be in the hands of Millennials, of which the majority will list ESG as their primary concerns.
“As a small company trying to raise money, if you do not have those credentials in place – an understanding of environmental sustainability and social licence to operate – you won’t get that money anymore.”
Callow believes the playing field is not level for junior miners to come on board with ESG expectations. He hopes that institutions, producers and governments can get on the same page regarding their expectations, and realistically so, so as not to prevent new mining companies from emerging.
“From a sustainability point of view, there are additional input costs in getting things done the way the world wants.
“West African mining companies, for example, do not have the benefit of low-cost grid power that other gold-producing regions have, which is one instance of a harder playing field for sustainability.”
Further, gold miner Centamin sustainability committee chairperson Catharine Farrow says ESG is affecting all industries, albeit in slightly different ways, but it remains a low-hanging fruit for the mining industry.
She elaborates that tailings management, carbon footprint and water efficiency are three things miners should wrap their head around, but admits that it can be overwhelming to find the right partner on these matters.
“ESG has to fit in your ability to deliver returns. Mining is already an industry that is considered a destroyer of capital. I do not think that the journey to ESG needs to be value destructive.
“It is common knowledge that the safest mines perform the best, and those with the most respect paid to environmental and social programmes are often the most profitable.”