The Future of ESG in Mining
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The Future of ESG in Mining

byWill Coetzer, Founder & Director, Stratum International
3 years ago
The Future of ESG in Mining

The mining industry has long struggled with the practice of mining sustainably. With the green movement accelerating globally, more pressure is being placed on mining organizations to prioritize environmental, social, and governance (ESG) matters.

But who is driving ESG at a company level, and what are mining firms doing to attract diverse ESG talent?

A new report from Stratum International, a premier executive search and recruitment firm, details which ESG issues the industry will focus on over the next 24 months and highlights potential barriers to success. 

The report surveyed decision-makers within the mining industry from 29 countries, of which 67% held the position of C-Suite/Board member, Director or Vice-President within their organizations. 

Is mining leadership prioritizing ESG?

In the past, it was common for junior managers and Health & Safety teams to handle ESG matters. But with industry expectations, pressure from stakeholders, and international standards related to sustainable practices driving ESG in mining organizations, decision-makers now recognize that ESG is an essential component of their organization’s policies and strategies and demands ExCo’s input. 

Of the respondents surveyed, 71% consider ESG important in the decision-making process. Only 2% felt their companies were not prioritizing ESG.

So how is the ESG discipline integrated into mining organization structures?

49% of respondents identified ESG as a standalone discipline in their organization, 22% in corporate affairs, and 6% said their ESG function sits within operations, finance, risk and sustainability, and health and safety. 

Furthermore, 83% of respondents said it is either a central Board function or a standalone sustainability committee, confirming that mining leadership and stakeholders are committed to prioritizing and driving ESG initiatives.

But who determines what standards to adhere to? 

Several respondents raised concern over a lack of industry standards. While many follow the 17 interlinked UN Sustainable Development Goals, respondents actively want greater regulation within the mining industry. 

63% said an independent analysis of their firm’s ESG credentials is very important. Most management teams are now turning to their peers to compare their ESG credentials. 

When asked if respondents believe their mining firms will benefit from a corporate ESG strategy that prioritizes a mining asset’s sustainable development or operation, 79% argued in favour. 

Past vs future: How have ESG priorities within mining shifted?

Historically, miners tended to lump ESG matters in with Health, Safety and Environment (HSE), but that is changing. Most organizations have now created silos focused entirely on addressing ESG issues, with only 5.6% retaining ESG as a sub-division of HSE.

The report aims to determine if ESG priorities are changing within the mining industry, especially when considering the energy crisis and its potential longer-term impact due to the Russian invasion of Ukraine, and which areas are being given greater attention.

According to Stratum’s research, in the last 12 months, ESG priorities have largely encompassed environmental issues, focusing on waste management and air and water pollution. But with the substantial increase in oil and gas prices, firms are looking for ways to reduce overheads and create energy-efficient mine sites.

Many are switching to low-energy bulbs on site and using electric cars in favour of petrol or diesel vehicles. It’s the first step towards improving energy efficiency, positively affecting climate change and local biodiversity, and pleasing investors. 

That said, the sector also recognizes the importance of shifting focus to social and governance issues.

Respondents noted that standardized ESG scoring for reporting or fundraising is becoming more integral for Boards and executive committees. Those organizations that fail to address governance-related issues will soon find it impossible to attract funding or retain talented professionals.

While there was little change within social priorities, there continues to be a lack of focus on gender and diversity. If the sector hopes to attract more female engineers and geologists willing to work on-site, it must change the perception that mining is a male-only field. That starts with education and getting young girls interested in STEM from early in their school careers.  

Lastly, future deployment priorities will focus more heavily on addressing the lack of consultancy availability. 

So, to recap, for the next 24 months, it looks like mining will be prioritizing community relations, health and safety, human rights, and cultural heritage. This confirms that the sector has adjusted its ESG strategy to focus on creating long-lasting impact in each standalone area of “E”, “S”, and “G” instead of just environmental. 

But what is needed to achieve these goals?

Finding the right ESG talent

With ESG becoming a critical and binary requirement for mining firms to operate and raise capital, finding the right talent to champion environmental, social, and governance matters should be of the utmost importance. 

50% of respondents said hiring for ESG was a priority, but how have those positions been filled? 

Most companies relied on Communications, Adverts, and Direct Hire to attract ESG talent, a notoriously unreliable and time-intensive process. Others entrusted their hiring process to generalist recruiters. For some, hiring for ESG was not a recruitment priority. Instead, they preferred to leverage personal and professional networks.

At a time when corporate ESG strategies can make or break mining firms, hiring inexperienced professionals to lead ESG transformations is a high-risk strategy with a potentially disastrous outcome. 

Accelerating ESG’s impact within mining organizations will come down to the people tasked with driving this transition. It cannot be left to chance. Mining firms would do well to enlist the help of a specialized recruitment partner with an extensive network and a trusted process when searching for their next ESG leader.

What the industry needs to do to accelerate ESG change

If mining organizations hope to attract future investment and change negative public sentiment, they need to prioritize ESG issues. 

Whether a mining junior, mid-tier or major, they must create a dedicated ESG division and hire professionals with experience strategizing and leading ESG teams. They should also consider hiring experts from non-traditional mining backgrounds, such as communications, human rights, and law, as these individuals will bring new skills and fresh perspectives that could benefit the industry.

Those choosing to promote an internal candidate to ESG Manager must make provisions for upskilling and providing further training and benchmark their internal candidate against the market to ensure they have the best person available. Access to an independent expert ESG accreditor such as Digbee is recommended while the industry works towards identifying a global standard for mining companies to implement and adhere to.

Read Stratum’s full report, “ESG in Mining: Is the Mining Industry prioritising Environmental, Social, and Governance (ESG) matters and what more can be done?” at: https://stratum-international.com/thinking/.

Tags: ESG
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