Mining’s top 10 ESG trends for 2022 – MINING.COM MINING.comMining’s top 10 ESG trends for 2022 – MINING.COM MINING.comMining’s top 10 ESG trends for 2022 – MINING.COM MINING.com
Impact Investing Forum 2022
London. April 28-29, 2022.
Climate action has been the focus of attention, but social sustainability issues have also been gaining more attention. The 2021 Global Investor Study by Schroders found that social issues are becoming more important for half of global investors. The 2021 Global Investor Study by Schroders found that social issues are becoming more important for over half of global investors. Here are our top ten.#1 Examining mining’s role during the net-zero transitionIt is undeniable that mining is vital in the transition to a zero-carbon future. Many ESG-savvy businesses boast their support for a low-carbon economy. As more people become aware of the impact mining has on local ecosystems, communities, and human rights, they should expect increased scrutiny. Concerns about socio-economic impacts on workers and communities from the net-zero transition raises concern due to the loss of jobs and other opportunities in mining, such as coal mining. Mining companies will be expected not only to enable the net-zero transition, but to actively contribute to a “just” transition.#2 Rejection of ‘greenwashing’Mining’s role in our net-zero future does not make individual companies inherently sustainable. Businesses that continue to operate as usual and rely on critical minerals’ sustainability credentials for their survival are doing so at their own risk. Probing will find that lofty claims about sustainability and community development goals, as well as hollow ones, are not supported by evidence. Greenwashing becomes more obvious as an ESG vocabulary evolves, standards are established, and impact quantification practices grow. Companies that are thoughtful about their goals, have well-resourced plans to achieve them, demonstrate commitment through action and not just words will be rewarded. As ESG legislation and obligations grow, so will the importance of supporting sustainability claims. The European Union’s Directive on Mandatory Human Rights and Environmental and Good Governance Due Diligence and the U.S. SEC compulsory ESG disclosure framework for public corporations will be the new requirements. #3 Increase demand for social data and disclosures. This will help counter dubious claims, assess company risks, and support ESG accounting. Although social data has been less robust than environmental disclosures, the maturing of ESG investment and social risk minimization efforts as well as legislated accounting for the social impact of investment portfolios is driving this trend. These annual disclosures not only support sustainability claims but also allow companies to demonstrate continuous improvement and progress towards their goals. #4 Focus on value chainsMany companies’ key ESG risk exposure is in their value chain, where oversight and influence can be limited. The global standard will be raised by regulatory developments such as the EU Directive. Companies can no longer focus only on their operations. They must manage ESG risk and performance across their value chain. This means that not only are procurement and product stewardship due diligence requirements increasing, but that downstream customers will also seek confirmation of the practices of mining companies. Modern slavery and Free Prior And Informed Consent (FPIC), are two of the key “S” topics being addressed in due diligence. The importance of worker, diversity, inclusion, community impacts and environmental impacts with socio repercussions is increasing. #5 Social risk integration into Enterprise Risk. As the scrutiny of mining’s impact on society and the potential negative repercussions for companies grows, so does the pressure on mining companies to integrate social risk into their enterprise risk management systems. Although ESG is often recognized as a top industry threat, a recent Responsible Mining Foundation report revealed that it is still a significant weakness for most companies. Nonetheless there is growing recognition of social performance as a technical discipline with specific skill sets; overnight ESG experts, public relations/communications practitioners, or co-workers with ‘great people skills’ are no longer a good stand-in for trained and experienced social management practitioners.#6 Diversity, Equity & Inclusion (DEI) ExpandsMining DEI has grown through 2021, from site to the board room and across supply chains. Global headlines about the Western Australian parliamentary inquiry into sexual harassment in flyin-flyout mining were resonant. McKinsey’s article about why women are leaving mining industry also reverberated. From California to Germany, controversies surrounding board gender parity legislation have been popping up. The requirements for DEI are not limited to gender. The U.S. Securities and Exchange Commission approved NASDAQ’s proposal that required all listed companies to have at least one woman and at most one person identifying themselves as LGBTQ or underrepresented minorities on their boards. Asset managers are increasingly looking for information on racial, ethnic and inclusion. Institutional Shareholder Services and Glass Lewis both issued updates to their proxy voting policies. Companies are paying attention to the recent World Business Research study that found 79% of companies across a range of industries plan to increase their DEI budgets and resource this year. #7 Reconciliation of the employer-employee relationIn the context of the current talent crisis in mining, the industry must confront the changing employer/employee dynamic as well as how mining is perceived by potential talent pools, both local and international. It is no longer enough to have a positive work environment and pay well. Prospective employees expect companies address a variety of social concerns, take actions on inclusion and equity and provide for work-life balance and navigate the changing relationship between work and life. This includes responding to the “Great Resignation” issues and preparing for Gen Z. It also means that prospective employees expect companies to address divisive social or political issues that may (re-)surface in future. Public statements can help companies be seen as true ESG leaders if they are done well. Without meaningful commitments and actions, corporate social activism is at risk of being poorly received, scrutinized, and even stigmatized. #8 Rise in mental health in OHSA. Although psychological ill-health (OH&S) is the most expensive area, few companies have in-house expertise in this field. According to the HR Research Institute, 64% of HR professionals believe that mental health should be a top priority. The most common causes of stress in employees are work/life balance issues and heavy workloads. This issue has been a problem in many industries over recent years. The Covid-19 pandemic brought about a greater awareness of mental health. In June 2021, ISO 45003 was released. This guidance provides guidance on how to manage psychosocial risk in the workplace. #9 Standardization of ESGA. Although MSCI noted that only 34 regulatory bodies and standard-setting agencies were conducting official consultations on ESG in 2021, there is a clear trend towards convergence in many core areas. Standardized reporting is imminent. Companies that have had difficulty navigating the lack of consistent reporting measures in recent years can look forward the International Sustainability Standards Board. It will be created by combining the IFRS Foundation and the Climate Disclosure Standards Board. It will remain crucial to keep an eye out for regionally specific differences however, where there are signs of further fragmentation.#10 Social sustainability-linked financingGrowing awareness of the interconnections between environmental and social factors is likely to prompt more sustainability linked financing with both social and environmental goals. Newmont’s $1B sustainability linked bond and Teck Resources C$4B sustainability linked revolving loan facility will be headline announcements. As sustainable finance taxonomies are better defined, it will be easier to see how companies should contribute to and disclose social objectives. This is especially true as this law becomes law in areas like labour rights, human rights and diversity. The EU Sustainable Finance Taxonomy will include a social framework. This will help guide private sector contributions to social outcomes, and encourage more corporate bonds with social targets. Future-ready executives are aware that people, risk, capital, and people are all interconnected. It is clear that expectations for mining’s social performance will continue to rise in 2022. The increasing awareness of the potential adverse effects on Indigenous and human rights in mining, as well as the companies’ ability to create systems that promote strong social performance, is what most of the mining social risk. Miners must improve their risk management using quantitative and qualitative social data and incorporate robust social considerations into acquisitions, expansions and other business development. The time and money required to take the right actions will be needed, as well as the upskilling of your leadership teams. ESG is becoming increasingly important for both business and social resilience. It is integrated into executive compensation and board oversight. Even if the company’s regulatory environment or largest investors don’t require it, there is a global ESG community that watches over them and a wide range of stakeholders and rights holder who expect it. Inaction is the most dangerous. Rachel Dekker and Elizabeth Freele are the co-founders of Sympact, an industry-focused sustainability consultancy and think tank. They work with companies to ensure that their social performance meets increasing expectations. (This article originally appeared in The Northern Miner.
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