Digging deeper into ESG
An expert panel discussion unearthed the key ESG issues impacting the mining industry at this year’s Indaba conference.
Even a few years ago and you would have struggled to get more than a few dusty specialists (such as myself) interested in a debate around environmental, social and governance (ESG) issues. But last week, it was standing room only at Emperor and Buchanan’s ESG and the mining industry panel discussion, held during the African Mining Indaba conference in Cape Town. It is clear times have changed.
An expert panel – comprising investors, ESG experts, corporate executives and non-executives, a stock market representative and a broadsheet journalist – tackled some of the big themes affecting the mining industry and offered their experience and insight to the more than 80 delegates in attendance. Here are a few of the key themes from that discussion.
It’s a top priority
Make no mistake, the days of ESG being an add-on to business are well and truly over. Companies, regardless of industry, that fail to demonstrate their impact on society and the environment and evidence a clear plan to address material issues will not be successful in the long term.
Good ESG performance is good for the bottom line of the business, it enhances corporate reputation and gives an insight and learning of what your business does and how it is perceived. In the mining sector, the issues of climate change (consistent with most industries) and safety (particularly tailings dams and worker safety) are top of the ESG action list, but are by no means the only material issues that miners face.
Mining can access growing ESG capital
This year, the value of capital invested through an ESG lens is expected to rise to $40 trillion. Much of this is funnelled into companies through funds that appraise environmental and social performance and strategy, either using the funds’ own metrics and/or ESG ratings agencies. Many of these are not exclusionary funds and any business that can evidence its social or environmental purpose and commitment to improving its performance should be eligible for investment.
As some of the world’s biggest investors add their voice to the growing chorus, it is anticipated that ESG investment will continue to grow rapidly and may at some point soon become ‘the norm’ for investment decisions.
Mining firms must do more to explain the industry’s role in tomorrow’s world
The future low-carbon world that needs to be created will be built, in large part, from minerals and metals in the ground. Smart cities, vehicles and distribution networks will require cobalt, lithium, copper and aluminium to name a few. But mining companies often collectively keep their heads below the parapet, communicating almost apologetically about their performance of slight carbon reductions or fewer injuries or fatalities. There is a stronger message to be made by the mining sector as a whole.
Strong backing by leadership is required
Although the knowledge of board executives and non-executives on ESG issues is improving, there is still not a sufficient level of understanding to make informed decisions and have valuable dialogue with stakeholders. As investors, employees and customers continue to become more savvy about sustainability, the same is required of leaders of corporations. The growing demand for executive remuneration to be further linked to ESG performance will undoubtedly help this happen. Change and progress needs to start at the top, and if stakeholders don’t believe or understand business leaders then they are unlikely to invest in them, work for them or even buy their products.
Telling your story is more important than ever
As the number of stakeholders interested in or requiring ESG information increases, getting the communication right is essential. A key factor in this is understanding not only what type of information is being demanded (from short, punchy excerpts, to in-depth datasheets), but also understanding where, when and how different stakeholders find and consume information is of the utmost importance.
Poor practices and greenwash or purpose-wash are now immediately seen through and show a lack of transparency which creates a sense of suspicion. Insufficient communication also means that analysts, employees and customers are unable to get a feel for how well ESG is managed and considered in future planning. Telling your story clearly, coherently and confidently will not only get the right information to the right people, but open an increasing number of doors as the mindset of the investment community continues to gravitate towards ESG.
Let's talk about your ambitions
Our thanks to all the panellists for generating such a lively, engaging and thought-provoking discussion. Environmental, social and governance will be some of the major factors affecting mining companies’ future success (or lack thereof) and the better informed and up-to-date the industry is, the better it can adapt to this new business environment.
If any of these themes or issues feel relevant to your organisation then Emperor can help. We’d love to talk to you about your challenges, opportunities and great ambitions for the future, and share our vast experience of ESG in both the mining sector and others. Let’s talk – contact me at [email protected] to see how we can help.