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ESG is key to future resilience, says Mgojo

26th February 2021

By: Marleny Arnoldi

Deputy Editor Online

     

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In the recent past, environmental, social and governance (ESG) criteria were predominantly focused on environmental impact and related governance issues, such as climate change.

However, since the Covid-19 pandemic has affected the everyday lives of people across the world, more companies are realising the importance of the social and governance aspects of ESG, says diversified miner Exxaro Resources CEO Mxolisi Mgojo, who is also president of Minerals Council South Africa.

In an opinion piece on reigniting mining capital through ESG investment, Mgojo says stakeholder-accountable businesses consider community help, particularly through difficult times, as critical to business success, such as reducing greenhouse-gas emissions.

“If host communities do not recover, neither will business, with a knock-on effect on national economic performance. This is the reason companies should prioritise all aspects of the ESG mix to enable a postpandemic recovery.

“Exxaro’s approach to ESG is holistic and aims to achieve ‘value beyond compliance’ and sustainability in all of our operations. This has been our approach before the pandemic and prevailed with strength during 2020 and will continue to drive our operations long after the pandemic is over,” Mgojo states.

Exxaro believes this rings true for all businesses: a holistic ESG strategy is the only way to achieve true business sustainability and stimulate economic recovery.

Sustainable development has become more important for organisational success and the success of the country as a whole, the company notes.

Investors have also given more impetus to the importance of sustainability, with increased attention to issues like employee health and safety, business resilience, diversity and inclusion, as well as biodiversity.

The World Economic Forum’s Global Risk Report has identified the two greatest risks to the global economy in 2021 as water scarcity and failure to adapt to climate change.

Rising global temperatures undeniably lead to severe weather events, including droughts, floods, hurricanes and other natural disasters that will have a severe impact on the health, safety, wellbeing and economic prospects of communities and businesses.

Investors know that damage to key infrastructure and natural resources will cripple economic growth and remove any opportunity for investment and wealth creation, hence the focus on the most sustainable businesses as the best investment opportunities.

In the past, many companies failed to address sustainability because there was a lack of support from shareholders and investors, who saw this as an expense that would not generate financial returns or merely as the responsibility of government.

This perception has shifted significantly in recent years, and after Covid-19 especially, more shareholders are insisting that mining operations demonstrate social and environmental responsibility, Mgojo notes.

He adds that there is increasing evidence that companies that are ranked highly on ESG aspects not only contribute towards measurable societal and environmental goals, but also produce higher returns for investors.

This explains why more investors are looking for strong ESG organisations to invest in; they want to see that sustainability is integral in the construction of their investment portfolios.

This is particularly true in the mining and fossil fuel industries, both of which are subject to great scrutiny and pressure to make a just transition to cleaner energy and contribute to a lower carbon world.

It is interesting to see how companies are responding to this increased demand for responsible investments, states Exxaro.

For example, during the Covid-19 pandemic, many businesses and individuals donated more than R3-billion to the Solidarity Fund and other initiatives, and also took real steps towards keeping their staff, stakeholders and communities safe.

In the mining and energy sectors, companies are conscious of the need to diversify into clean energy and socially responsible mining to ensure future success.

“At Exxaro, we know that renewable energy is a critical part of our future, which is why we have invested in 239 MW of Cennergi wind farms. The investment has had the dual impact of a positive contribution to the national transition to renewable energy and Exxaro’s financial performance.

“Our coal operations have also focused on reducing energy consumption, primarily through developing self-generated electricity from renewables, further reducing carbon emissions.

“We are planning a low-carbon growth for our minerals business – in other words, decarbonised mining operations that will enable a low-carbon economy,” Mgojo explains, adding that the company has a water management policy that focuses on the efficient use of this scarce resource.

In the year ended December 31, 2020, Exxaro achieved a record safety performance, going for more than 45 months without a fatality and achieving a record lost-time-injury frequency rate of 0.05.

“As a largely mechanised mining business, this performance is attributable to investment in proximity detection devices to prevent personnel injury from mining equipment,” Mgojo points out.

“There was also significant investment in safety training, communication and awareness initiatives. These and other ESG performance attributes are enabling us to build a firm foundation for future sustainability and commitment to achieving a carbon-neutral footprint by 2050.”

Regarding the material social indicators of Exxaro’s ESG performance, strengthening its social capital through improved stakeholder relationships remains a critical priority.

Mgojo says it is a base upon which the company collaborates for impact and has been instrumental in its ability to respond to community needs related to the Covid-19 pandemic.

“We engaged with ease and responded with urgency throughout our operations to needs for medical facilities such as testing laboratories and accessories for health workers, food parcels for community members, and continued with infrastructure projects related to water for future hygiene needs.”

Exxaro aims to transfer 90% of its post- mining land to emerging farmers in local communities and create partnerships to support their commercial agriculture activities.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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