Environmental, social and governance (ESG) considerations are not a ‘nice to have’ for mining companies. Their importance to the sector was deeply visible through the International Mining and Resources Conference. We explore what actions the mining sector can take to make ESG aspirations a reality.
Mining companies have a lot to gain by addressing ESG considerations as part of their business strategy, because it makes business sense. They also face substantial financial, legal and reputational risks if they don’t address ESG considerations - regulators and the market demand it.
With ESG a hot topic at the International Mining and Resources Conference 2022 (IMARC), Cécile Walton spoke on Let’s be honest, we have a credibility issue – can we fix it, and how? This was part of MinterEllison's role as Legal Partner for IMARC 2022.
The importance of ESG for the mining sector was visible throughout IMARC 2022.
“At IMARC you were hard pressed to find a panel, a presentation or even a stall that didn't mention ESG or climate change in some shape or form. It's exciting because we are on the cusp of a real transformation in the way we do business.”
Cécile Walton, MinterEllison Director
In this article, Cécile reflects on the discussion about how credibility issues can create a platform for change and allow organisations to start from a humble place as they look to rebuild trust. For mining companies, it starts with a willingness to transparently disclose progress, performance and plans improving business practices and achieving higher ESG standards.
View shortcomings on ESG as an opportunity to drive change at pace and at scale
To a greater or lesser extent, every organisation, mining company or otherwise, will have reputational issues to address at the company or industry level over time. Those issues compel organisations to consider the steps they will take to improve their business practices from an ESG perspective.
While no one wishes to receive a report from a regulator identifying serious organisational shortcomings with ESG compliance, such a report can act as a catalyst for an organisation to improve its approach to ESG and oftentimes overhaul fundamental parts of its business.
Whether a peer company or you are at the receiving end of scathing criticism from a regulator regarding the way you go about ESG matters, consider taking advantage of the opportunity such criticism provides to reset the organisation's approach by:
- encouraging every team member in the company to understand the criticism and read regulators' reports from cover to cover, to consider how they might improve organisational standards through their own roles
- encouraging managers and team leaders to facilitate conversations between team members about how the ways they work together can collectively improve company standards
- reporting recommended changes to the executive level of the company for endorsement and to obtain support for their implementation
Be transparent in addressing ESG considerations
Regulators, investors, shareholders, customers and members of the community are increasingly scrutinising the way organisations do business and the role they see themselves playing in society. Shareholder activism is becoming more sophisticated, and activists often resort to litigation to force organisations to take notice of their demands. Organisations have to find a delicate balance when responding to the many and varied expectations of their internal and external stakeholders.
To address these varied expectations, mining companies need to focus on and be transparent about how they are incorporating ESG considerations into their decision making and processes, including by:
- designing fit-for-purpose strategies and a governance model that allows for the effective consideration of ESG matters in the decision-making process
- ensuring they have mechanisms to report on their ESG progress and performance over time to deliver on the needs and expectations of their various stakeholder groups
- being wary of a real or perceived gap between what they commit to doing and what they actually do to deliver on their commitments, the consequences of which have recently been demonstrated in relation to 'greenwashing'.
A critical time for action in mining
The mining sector is at a critical time for action on several ESG fronts as the rising short and long term expectations and obligations in Australia and around the world become clearer.