Why ESG Is More Critical For Mines Than Ever

Environmental, social and governance (ESG) is essentially a key driver in measuring a company’s progress and maturity. Government incentives and taxations are rapidly moving to incorporate ESG scores, and JSE-listed companies are required to disclose their ESG impact, obliging companies to incorporate ESG into their business models.

According to Minnette le Roux, principal environmental specialist at law firm NSDV, mining companies adopt an integrated and holistic approach to operating in an ESG-targeted manner. Within each of the ESG pillars, there are metrics which overlap legislation that mines are required to comply with.

“From an environmental perspective, mines have started to adopt the circular economy approach and begun moving towards renewable sources of energy to improve their ESG performance and set targets. Responsible energy and water usage, considering climate change and resource optimisation are all key disclosure areas in ESG. 

“Mines have started to power their operations with renewable energy, operate electric or hydrogen-powered truck fleets, and integrate recycling in their value chains. These mines will be best placed to sell low-carbon premium minerals,” she says.

“From a social perspective, mines have identified the lack of adequate education, employment opportunities, poor health facilities, and infrastructure as areas to focus on, when acting on the issues raised by local communities. Mines have started to adopt a holistic approach to managing health and wellness programmes, not only for their employees, but also for the host community members.”

Le Roux says the interrelationship between the ESG pillars has resulted in mine closure planning moving from a regulatory compliance tick box to a tool for sustainable end land use. And where there is an increase in collaboration with regulators, stakeholders, employees, and local communities involved and consulted on during all phases of the planning for closure of the mines. 

The legislation on closure planning in South Africa is also catching up to the trend of involving stakeholders and communities, with a draft Mine Closure Strategy that was published for comment in 2021, she says.

“Investors, regulators and local communities are pressuring mines to disclose their ESG performance and set targets. Therefore mines are being forced to improve their ESG data gathering in order to collect accurate and reliable ESG data to assist with disclosure in their integrated reports. 

“Adequate information will further enable stakeholders to quantify the ESG impact of their investment and evaluate the company accordingly, giving the business a competitive advantage over its rivals.”

A sustainability strategy

Law firm Norton Rose Fulbright notes that ESG scores highlight whether the company is promoting natural resources and sustainable use by minimising environmental impacts, or perhaps transitioning to a low-carbon future. 

By way of example, relevant metrics could include reducing electricity consumption, water consumption and waste to landfill, considering alternative energy sources, reducing greenhouse gases and improving biodiversity management and air and water quality. 

As to the social pillar of ESG, social considerations include communities, stakeholder engagement and safety and health. Furthermore, questions that can be asked include: Is the company supporting local communities through economic empowerment? Has the mine delivered on programmes and improved living conditions? Is there proactive and meaningful engagement with stakeholders based on inclusion and transparency?

In addition, have all work-related injuries and diseases been reduced? And lastly, has the health of employees and the surrounding communities been improved? 

By way of example, relevant metrics could include undertaking social assessments and monitoring deliverables in terms of a mine’s social and labour plan; providing appropriate grievance mechanisms; considering land-use rights; implementing measures to reduce risks in terms of safety; and monitoring and measuring occupational hygiene and health of employees and the community. 

In terms of governance, these questions should be considered: whether effective processes have been identified to evaluate compliance with all applicable legal requirements; whether there are adequate controls in place to minimise any environmental, health, safety and social risks; and whether the mine’s performance is being adequately disclosed.

NSDV’s Le Roux says: “We believe that as sustainability disclosure matures, the measure of a mine’s good standing will be measured, weighted and indexed according to the difference between the inputs it receives and the outputs it gives.

“Sustainable disclosure that could be measured would provide for continuous improvements and alignment with the global sustainability frameworks. It will further disclose a company’s ability to achieve sustainable growth and prosperity by identifying the risks and opportunities, and providing for a consistent, complete, comparable, and verifiable disclosure to regulators, communities, investors and stakeholders.”