Against a backdrop of uncertainty and unprecedented change in 2020, the mining industry is now under increasing pressure to be more cognizant of their Environment, Social and Governance (ESG) compliance requirements.
As overwhelming as these obligations may seem, given our current pandemic situation, the industry should attempt to understand the benefits of ESG adoption. When integrated into strategic decision-making processes, ESG can present many opportunities such as building resilience and creating certainty within the organisation and the surrounding communities. Ultimately, as a business approach, ESG generates long-term value for mining companies by controlling risks and capitalizing on opportunities created by environmental and socio-economic factors.
A guiding framework with real benefits
ESG brings together all the environmental, social and governance compliance themes into a comprehensive framework that can help mining companies to successfully find the balance between people, planet and profit.
By incorporating ESG into long-term strategic planning and communicating this to all investors and stakeholders, mining businesses can gain a more holistic understanding of their performance and the impact of their operations on the world around them. In a report that analysed the results of more than 200 studies into the impact of sustainable corporate practices on investment returns, it was clear that operational and stock price performance can be positively influenced by solid sustainability initiatives and commitment to ESG practices.
According to one report, consistent compliance with ESG commitments resulted in enhanced operational performance in 88% of companies, with the stock price performance of 80% of companies being positively influenced by dedication to sustainability. The cost of capital was lowered for 90% of companies, because strong sustainability scores evidenced reliable operational performance, which in turn lessened investor risk.
Holistic approach required
At the Mining Indaba Virtual 2021, it was highlighted that companies must now move away from seeing ESG as a tick-box reporting or data gathering initiative, and instead work toward achieving value under its frameworks. Leaders in the mining sector need to push heavily to bring ESG awareness and integration into corporate strategy, which will have an impact on every facet of the business. This includes organisational culture, risk management, stakeholder engagement and portfolio planning.
Commitment to ESG compliance is no longer optional. It is critical to address the breakdown of trust between mining companies, workers and the surrounding communities, as well as to guarantee the responsible sourcing of metals and minerals from the earth. Furthermore, it will only be possible to drive policy reform and ultimately decarbonise the economy if approached through the lens of ESG compliance.
Considering the impact
How mining companies achieve these goals will depend on how well equipped they are to navigate, appreciate, report on and identify opportunities within these frameworks to affect positive change.