Top Social Trends In ESG For Mining Companies
Even as climate change takes most of our attention, the ESG movement is about focusing on bigger issues across multiple sectors. So far, we’re seeing progress in the mining industry in terms of sustainability, with more companies going all-electric while trying their best to reduce carbon footprints and be as energy efficient as possible.
The industry has a long way to go in terms of sustainability, but it’s important to not forget the other aspects too. The mining industry inherently holds many dangers, for workers underground operating heavy machinery in challenging conditions. This is on top of the outcomes of mining itself, which could cause harm to neighbouring communities and the surrounding environment.
Already, standards and regulations are being enforced around ESG, and while the social elements will take longer to embed than the more ‘obvious’ environmental (resource and energy use) changes, we need to look towards the social developments in the sector.
Geopolitics Drives Local Risk
In 2022, several global crises were unfolding that affected the average person’s way of life. The UN stated in August 2022 that the increased cost of living pushed roughly 71 million people into poverty last year.
And if you’re not pushed into poverty, the IMF forecasts 2023 will feel like a recession. This leads to a lot of social unrest. Where mining companies can help is by giving back to the communities that they serve. Programmes to provide local poverty relief, liveability, and economic development can build the company’s ability to build stronger relationships and manage its social risk.
Wider Adoption Of UNGPs
A good example of corporate human rights is the UN Guiding Principles on Business and Human Rights (UNGPs). UNGPs position themselves as the leading standard for corporate human rights. Furthermore, they have mechanisms in place for asset-level community feedback or grievances.
The framework is formed by a coalition of 88 investors and supported by US $5.3 trillion in assets under management. There are several other frameworks that explicitly reference alignment with UNGPs as well, including the GRI Reporting Standards, which took effect on January 1, 2023.
As human rights legislation spreads around the world, investors and mining companies need to pay attention to these and incorporate them into ESG audits and due diligence.
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Increasing Diversity, Equity, And Inclusion (DEI)
DEI expectations from mining companies have surged over the past year. Even though some have made progress, there are still a lot lagging behind, as there are multiple reports of discrimination, harassment, racism, and sexual violence. This in turn deters possible workers from going into the industry, let alone retaining their jobs in a company.
A range of stakeholders are noticing these problems and are taking action. Proxy voting policies are being adjusted with DEI in mind, and CEOs know that DEI will help attract a variety of talent for various positions. Combine this with worker shortages and current miners leaving the job, and this trend is especially important for the mining industry to pay attention to. Just as important as other key performance indicators.
Embracing Transparent Practices
Building credibility within this industry is another core endeavour for many companies. Steadily, they are showing their sustainability and consideration for the environment. However, there are still several obstacles to overcome. One solution is to be as transparent as possible with ESG performance.
Not just covering the mandatory disclosures, but going above and beyond to voluntarily disclose other details and publish ratings. That much is being covered through various initiatives like the Corporate Sustainability Reporting Directive (CSRD), which sets the tone for 2023 disclosures. These new disclosures cover a broader range of stakeholders, so disclosure will be much larger than in the past.
Even though the early numbers will paint companies in a less than ideal light, the higher level of transparency can build credibility. Even if a mining company has imperfect practices, this can guide operational decision-making and risk management to ensure damages are kept to a minimum.
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Active Involvement In Social Issues
With more people seeing corporations as people or as having personalities, the general population expects companies to react to various social issues. In the wake of Russia’s invasion of Ukraine, several brands issued position statements and made changes to how they do business with Russia.
Without doubt, that expectation will be passed on to every industry in the world, and especially to mining companies given their widespread geographical locations and deeply embedded geopolitical importance.
Outright war or military aggression aside, there are several other social challenges which are highly entwined with the political contexts of given countries in which international mining concerns operate. For example, LGBTQ rights and racial justice are becoming ever more visible for the regimes that persecute specific segments of their populations. People increasingly expect corporations to lean in on these issues, and as we had “conflict-free” gemstones, we will see the same concerns permeate other sectors of the industry. This, especially as greater attention is paid to specific geopolitical flashpoints, such as the acquisition of rare earth minerals for everyday ‘essential’ consumer technologies, which makes them a social issue.
What’s been made clear is that ESG and business are being woven together. The underlying principles of managing business risk, being sustainable, having good governance, and being socially just are all connected. With more people caring about these issues and influencing their investing decisions, mining companies need to change quickly.
Despite the long road ahead, the mining industry is beginning to adopt the frameworks that can address these risks, although it remains to be seen how well public pressure will play a part in furthering the social obligations within the sector.
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