By James McGuire, APAC ESG lead at ISN
In our increasingly interconnected world, responsible business operation has become a normal, critical part of doing business. Consumers, investors, and other company stakeholders are demanding businesses take responsibility for their current and future impacts on people and the environment. When assessing the role corporations play in a more sustainable future, many will turn their focus to Environmental, Social, and Governance (ESG) factors that help define and measure sustainable business.
Environmental, Social, and Governance factors are the pillars upon which the future of responsible business stands:
Environmental factors
These consider the impact a companyand its value chain have on the natural environment and associated risks to business operations.
Inan era in which climate change is a global concern, understanding the environmental footprint of a business is crucial. This is particularly true in the mining industry, with its resource-intensive operations.
Social factors
Tracking social factors involves the impact a company has on its employees, supply chain and the surrounding community in which it operates. These factors extend beyond profits to the wellbeing of individuals and society at large. In mining, social factors encompass safety, community engagement, First Nations People,
and the livelihoods of those living in surrounding areas.
Governance factors
Governance factors consider how a company is engaging in transparent and ethical operating practices. It is
about ensuring that the organisation conducts itself with integrity, fairness, and accountability. In mining, governance extends to issues such as the ethical sourcing of minerals and responsible corporate behaviour in the extraction process.
Given the wide variety of topics encompassed in ESG, companies often identify which are material, or prioritised by company stakeholders. Materiality is a concept that helps companies decide what information to report on their ESG performance. It means that companies should focus on which issues are most relevant and significant for their business, their stakeholders, and society at large.
Some examples of ESG topics that may be material include human rights, data privacy and security, occupational health and safety, and the environmental and social impact of products and services. A useful tool to help organisations navigate materiality is the SASB Materiality Finder. This tool supports organisations to gain both quantitative and qualitative information for material ESG topics. This type of information is often reported using a standard or framework such as the Global Reporting Initiative (GRI) as guidance. This initiative has emerged as a crucial tool in the journey towards sustainability.
Through customer feedback and research ISN has established three key components to support integrating ESG into the value chain.
First component: education
The first step in the ESG journey is education. With a multitude of sustainability standards and frameworks available, and untold numbers of potential data points to capture, it can be difficult for organisations to discern where to begin and which path to take when it comes to data collection. This is particularly true for smaller companies and suppliers who might find ESG terms unfamiliar.
Particular emphasis should be placed on the importance of helping organisations, especially those in the mining sector, understand how ESG information can benefit their businesses. Providing simple explanations and illustrating how ESG can positively impact operations can go a long way in encouraging cooperation. For example, in the mining industry, education can involve explaining how responsible resource management not only reduces environmental impact but also contributes to long-term business sustainability.
Second component: capturing reliable data
A sustainable business should account for all three ESG pillars: environmental, social, and governance. In the mining industry, a natural starting point might be capturing environmental data related to resource consumption, such as fossil fuels, water, and energy. However, the list of data points to capture can vary based on materiality and shared expectations in the value chain.
Setting goals and capturing reliable data is crucial, and technology can play a pivotal role in this step. It simplifies the process, reduces the burden on industry suppliers, and ensures a consistent framework for data collection.
Setting long-term goals with defined interim benchmarks is important to keep the company on track. For instance, mining companies can set goals related to reducing water usage, which is not only environmentally responsible but also a cost-saving measure.
Third component: measuring progress
Data collection is not the final step in achieving the ESG objectives that the company has established with intermediate milestones. It is also essential to monitor the progress and evaluate the performance against the ESG goals. One main way to do that is by reviewing aggregate data from the vendors that supply goods and services. It’s not just about data collection; it’s about analysing data to track year-over- year progress. This analysis not only shows how far the organisation has come but also identifies trends and provides insights into why the data is what it is.
However, presenting this progress to stakeholders at the C-suite or Board level requires simplicity – they are often juggling numerous priorities, and complex data can be overwhelming. Technology plays a vital role in simplifying complex information into easily digestible and visually approachable formats. Visualisation is particularly important in conveying the journey towards ESG goals.
Integrating ESG into the value chain is an essential step for companies in the mining industry and beyond. Education, capturing reliable data, and measuring progress are the three key components that can guide organisations on this path. The GRI and similar frameworks provide valuable tools to navigate this complex terrain. By following these principles and embracing ESG, companies not only meet stakeholder expectations but also contribute to a more sustainable and responsible future.
ESG road map
By following an ESG roadmap, such as the example below, mining companies can embark on a journey towards sustainability that aligns with global expectations and contributes to a more responsible and environmentally conscious industry.
1. Impact and materiality assessment:
Gain a baseline understanding of a company’s ESG Key Performance Indicators (KPIs). For a mining company, this may include assessing the environmental impact of mining activities, social aspects such as worker safety, and governance measures such as transparency in reporting.
2. Data collection:
Use data to determine actionable goals. In the mining sector, this can involve tracking resource consumption, emissions, and social wellbeing indicators in mining communities.
3. Establish objectives:
Create initiatives to achieve these goals. What actions is a company going to take? What is the timeline? What resources are needed? For example, how might a company report on mandatory requirements such as emissions standards or modern slavery reporting?
4. Obtain stakeholder buy-in:
Gain company support, as even the best objectives and initiatives require this in order to be successful. In mining, this means securing commitment from leadership to invest in sustainable practices. A fundamental way to measure buy-in is by analysing the perception and knowledge of stakeholders through perception and feedback surveys – these should include all relevant stakeholders within an organisation and its supply chain. Then use these results to achieve greater buy-in of stakeholders.
5. Review and report:
Continuously review progress against the internal targets set. Regular reporting is essential, not only to track progress but also to remain compliant with mandatory reporting standards such as emissions and anti- modern slavery reports, and communicate achievements to stakeholders, including investors, regulators, and the local community.
The mining industry, like many others, is navigating the changing landscape of stakeholder expectations, and ESG is at the forefront of this transformation.
The integration of ESG principles into the value chain is not just about compliance; it’s about ensuring the long- term sustainability of the industry while positively impacting the environment and communities where mining operations take place.
Education, data collection, and progress measurement are the cornerstones of this journey, and organisations that embrace these principles are not only meeting current demands but also positioning themselves for a more sustainable future.
