Will we ever learn?
ESG Performance | 6 March 2024
Not so long ago I had the opportunity to try and answer this question:
Outline in 1000 words or less what would you like to see change for ESG to be valued more highly in the extractives sector?
This is what I had to say...
"Before looking ahead, I think it is worthwhile to look back and reflect.
Widespread mistrust of the mining industry by stakeholders is not a new issue, with the Mining, Minerals and Sustainable Development Project Report ‘Breaking New Ground’ providing a snapshot that is as relevant today as when it was published in 2002:
“Mineral products are essential to contemporary societies and economies. Many basic needs cannot be met without them. But simply meeting market demand for mineral commodities falls far short of meeting society’s expectations of industry. The process of producing, using, and recycling minerals could help society reach many other goals – providing jobs directly and indirectly, aiding in the development of national economies, and helping to reach energy and resource efficiency targets, among many others. Where industry is falling far short of meeting these objectives, it is seen as failing in its obligations and is increasingly unwelcome.
The mining and minerals industry faces some of the most difficult challenges of any industrial sector – and is currently distrusted by many of the people it deals with day to day. It has been failing to convince some of its constituents and stakeholders that it has the ‘social licence to operate’ in many parts of the world, based on the many expectations of its potential contributions:
- Countries expect that minerals development will be an engine of sustained economic growth.
- Local communities expect that the industry will provide employment, infrastructure, and other benefits that counter the risks and impacts they experience and will leave them better off than when the project started.
- The industry’s employees expect safer and healthier working conditions, a better community life, and consideration when their employment ends.
- Local citizens and human rights campaigners expect companies to respect and support basic rights, even when they are operating where government does not.
- Environmental organizations expect a much higher standard of performance, and that the industry will avoid ecologically and culturally sensitive areas.
- Investors expect higher returns and have shown considerable concern about the industry’s financial results.
- Consumers expect safe products produced in a manner that meets acceptable environmental and social standards.”
Ten years on, ‘MMSD+10: Reflecting on a decade of mining and sustainable development’ questioned how far the industry had travelled towards a sustainable and responsible mineral industry.
“In short, the past 10 years have seen a valuable increase in the number of standards and best practice guidance, helping stakeholders to understand what sustainable development means. But despite good intentions at the strategy level and examples of good practice, the complexity of situations at the mine site means implementation across the sector is highly variable. Questions remain as to whether current verification and reporting regimes are sufficient to meet the needs of key stakeholders – from investors to communities. In a large number of cases, there is little idea of how exactly these should be translated into progress on the ground. Meanwhile, new pressures on the sector, such as competition from emerging economies, climate change and a re-emergence of the ‘resource nationalism’ debate, are putting the challenges and solutions for sustainable development in mining in a new light.”
Another ten years, and the Responsible Mining Foundation publication ‘Closing the gaps…and accelerating progress on responsible mining’ notes ‘the shortfall between industry norms and society expectations remains very wide’ and that ‘…While corporate commitments on ESG issues are becoming the norm, progress on responsible practices has been slow and highly variable even among the companies assessed in the RMI Reports which represent some of the largest, best resourced, and most-media exposed companies in the world’
The report presented four potential indicators / actions that could be used to help track shifts towards responsible mining (and hopefully reduce the tensions between the industry and broader society), viz:
1. ESG-led business models with accountability and agency for ESG issues embedded across all functions and high in company hierarchies.
2. Meaningful information-sharing of public interest data as a minimal tool to reduce the power disparities and information asymmetries in company-community interactions.
3. Rights-based approach to harm prevention, notable in company actions that go beyond compliance and company reporting that includes disclosures of how any harmful impacts are being managed and remedied; and
4. International action on responsible mining among home country and producing country governments, including more widespread application of legislative and regulatory tools and collaboration towards an international policy instrument on responsible extractives.’
The first three of these are actionable by companies so what do we need to see or do to enable change? I'd suggest four simple ideas:
Companies being honest: Taking accountability for the impacts of operations on communities plays an essential role in building the relationships that underpin trust which in turn underpins social licence. As a company and as an industry we need to be honest about our intentions, we need to be truthful about who we are, what we do and why we are here, we need to avoid hiding our intention because we think it is easier and to be upfront with people about the good, the bad and the ugly:
- That the presence of a company leads to change – from early exploration to closure and beyond.
- That competition for land is always an issue for companies and communities. Accessing land is a source of high impact and high risk for the company and for local communities and that this is equally true for temporary, short-term use to undertake work associated with exploration and site investigation and for permanent, long-term use for project development and operation.
- That change is disruptive, that local people and communities are most disrupted, that it is difficult not to cause harm and difficult to remedy harm.
Rewarding Impact Avoidance: We have a plethora of local, national, and international awards that showcase the benefits of mining but when was the last time a company was awarded a gong for avoiding creating an impact? For an industry that is so risk focussed, why does the action at the top of risk hierarchy have so little visibility?
Companies thinking and acting long-term: We know that money can’t buy love and that benefits / sweeteners in the form of jobs and community projects don’t / shouldn’t be used to offset impacts, damage, and poor behaviour. On the other hand, we are told that when done the right way – collaboratively and with individuals and community at the centre – it is possible to make a real and lasting positive change. Examples of success are hard to find, so how do we encourage peer-to-peer learning and the sharing of stories and shift the mindset?
Investors who walk the talk: Companies are increasingly being encouraged (told) to present a balanced view, to be candid and authentic, to avoid selective reporting and to tell the good with the bad which is all well and good. To be honest, to talk about the process, not just the results. We are told it is good for business, it is the smart and responsible thing to do. That transparency and openness are rewarded. But when we do open up and talk about the challenges, the bits that aren’t working, the failures, those same investors mark companies down. Where is the consistency? How can companies have trust in the market?"
What do you think?
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