ESG Matters Part 2: The Environment

(In this four-part series, Melissa Sanderson takes a deep dive into the important elements that make up a successful ESG program. The focus of Part 2 is the environment. Read Part 1 here.)

The mining industry has spent decades and untold billions of dollars on environmental measures, both required and voluntary, and overall, can rightly lay claim to world-class practices. The industry also has become much more responsive to environmental failures. The tragic tailings dam collapse in Brazil in 2015 is a good example. The International Council on Mining and Metals, the leading mining industry association, quickly launched a revision of tailings standards with the announced objective of developing new safety measures. Importantly, the ICMM reached out to a broad group of stakeholders including, inter alia, the Catholic Church and the United Nations to transparently develop voluntary new standards and procedures governing safety changes to existing facilities as well as development requirements for new tailings deposits. Although this level of broad cooperation and consultation remains a one-off for the industry, I would argue that it should serve as a model for addressing the central environmental issue confronting not only miners but the world: climate change.

Climate change. An increasingly urgent and costly reality, regarded by many as the existential issue of our time. Its effects are many, varied, and increasingly inescapable. Water is a good example. Water deficits in major urban centers in traditionally mining-friendly countries, such as South Africa and, more recently, Chile, have provoked water rationing and risk pitting urban populations against mostly rural businesses (especially mining and agriculture) in a zero-sum water game. Ironically, excessive rainfall in areas that are not used to inundation or have been devastated by fires is leading at the same that other areas are in shortfall to flash floods and mudslides that could complicate mining operations and pose safety concerns.

The extractive industry has literally centuries of experience dealing with water issues and that experience could be brought to bear on mitigating some of these problems, were it possible to overcome stereotypes and mutual distrust that historically have kept mining companies from cooperating with governments and NGOs, and vice versa. I would argue that the current crisis is an urgent call to lay aside artificial barriers and mobilize the broadest array of talent, experience and innovation to respond holistically to a situation affecting us all. I would also argue that with companies facing potential new reporting and regulatory requirements in many countries, including the US, the time for proactive and positive action is now.

What would such a scenario look like?

It would begin by acknowledging that mining companies have valuable contributions to make in helping confront this crisis, ranging from an innovative, problem-solving culture to an array of engineering and scientific expertise to decades of practical experience in key areas such as water and air quality. It would also, frankly, begin by the industry overcoming its traditional wariness of public/political engagement.

On a practical level, the ICMM is well positioned to spearhead the following sorts of activities to develop an action baseline:

1. Survey member companies to compile best practices and innovative technologies demonstrating results.
2. Sponsor a global competition open to universities and research facilities to identify the most promising five ideas focused on concrete changes to benefit the climate, and provide financial or in-kind contributions to advance the work.
3. Voluntarily develop and implement practical, obtainable and sustainable goals for the industry in the areas of water conservation/recycling and air quality (dust control, etc).
4. Publicize these initiatives.
5. Consider public-private partnerships in areas such as building desalination plants and associated pipeline projects, potentially in exchange for tax benefits.
6. By the next Davos Conference, have a presentation on what the industry can and shall do, alone or in public-private partnerships, to combat climate change.

Ideally, the ICMM would utilize the connections it developed during the tailings regime work – with religious organizations and the UN, for instance – to present the above measures or others as a basis for developing a broadly inclusive global model for combating climate change.

One positive benefit of these or similar actions, especially if well publicized, could be to head off imposition of additional politically mandated measures, giving industry more control over the nature and timing of necessary adaptive changes going forward in an increasingly unstable world.

Regardless of whether collective action can/should take place, individual companies of necessity will find themselves spending more time, effort and money on operational changes provoked by the effects of a changing climate. Carefully tracking, quantifying and publicizing all efforts undertaken could pay dividends with government regulators, politicians, investors and shareholders, and help combat the ongoing stereotype of an uncaring industry intent only on pursuing business as usual.  

Conversely, failing to be seen to be taking proactive and effective measures could leave the industry exposed to increasing hostility as societies search for someone to blame for increasingly unpalatable climatic conditions.