Mining Sustainability – Four Frontiers
Sep 11, 2017
Introduction: I recently had the opportunity to participate in a meeting with sustainability executives in the Canadian mining industry. The discussion was about identifying emerging social and environmental issues that companies need to factor into their sustainability strategies and policies in the coming three years. The four frontiers are human rights, standards assurance at the level of supply chains, mine closure with energy transition and the social implications of the automated mine of the future.
Human Rights: The scope of human rights scrutiny on companies is expanding. This combines with a shift from soft CSR human rights commitments to hard legal accountability and potential for litigation in multiple jurisdictions. It also appears that disclosure requirements and multi-stakeholder fora are a growing field of action for NGO stakeholders. There is increasing emphasis on social, economic and environmental rights as issues for which companies need to consider impacts well beyond the operational footprint. At the level of public opinion, this perspective can extend as far as the fairness and uses of the taxes mines pay. Failure to provide adequate local benefits might be interpreted as a human rights issue. An active area of debate is how to clearly define the extent of company obligations and where those of the state become preeminent.
Free, Prior and Informed Consent (FPIC) with respect to Indigenous rights is here to stay for the mining industry. However, there continues to be a great deal of variation across jurisdictions regarding how FPIC is implemented. Bringing a degree of clarity and certainty concerning the interpretation and implementation of FPIC remains an important challenge.
A management challenge for companies is how to manage and rationalize additional human rights compliance requirements. These will come from different angles. It will be increasingly important to adopt a strategy that includes a “curated playlist” of instruments and standards. In this mix, it will also be increasingly important for companies to demonstrate objectively their positive contribution to human rights. Many elements of an enabling environment for human rights are beyond the power of any single company to influence. Together with other human rights stakeholders, there is scope for business to advance human rights advocacy action in difficult jurisdictions and ensure consistent performance by corporate peers.
The management challenge for companies is significant. On the one hand, human rights (especially allegations of violations) have a very subjective quality. On the other hand, the complex operational processes of mining companies require objective data for decision-making. New management tools for human rights are coming into focus. Human rights impact statements are one example. Identification of vulnerable groups in the social and environmental assessment process is another. Credible fact-finding processes that have integrity and engage all key stakeholders can help create a shared basis for understanding disputed events when opinions are polarized. We see increasing examples of human rights complaints raised at annual meetings of shareholders and gaining visibility with investors. There is scope for cross sector learning on appropriate responses to concerned shareholders as the obligation for business to respect human rights is not unique to extractive companies but applies to all business.
Grievance mechanisms play an important role when they are effective and credible. There are important and outstanding questions that must be addressed regarding what constitutes effective approaches to remedy when rights have been impacted. Many of these questions revolve around the roles of companies, home countries and host countries in providing an effective approach to remedy.
While lenders are increasingly considering human rights in loan approvals, most investors are not focusing on this yet as a factor in asset selection. Partly this is because mining assets make up a small proportion of most large holdings. It also seems that investors do not fully grasp their potential exposure to risks of human rights liabilities within their assets.
Sustainable Supply Chains and the Circular Economy: Levi Strauss (clothing) and Apple have stated their intent to close a recycling circle for their manufacturing inputs. While this does not eliminate the long-term need for minerals and metals, it is a powerful signal of downstream sustainability expectations. The trend is for downstream manufacturers, some civil society groups and international organizations, like the OECD, to take a supply chain perspective to social and environmental standards assurance. Divergence in standards along the supply chain is clearly undesirable. Recently, upstream, mid-stream and downstream leaders have started working together to identify practical and workable approaches for coherent supply chain assurance. This looks like a consequential trend (see WEF/RESOLVE White Paper on Voluntary Initiatives). The implication is that market preferences will emerge for sources of minerals and metals that enjoy credible assurance starting at the production site.
Mine Closure and Energy Transition: Across sectors, mining is unique in its focus on preparing for closure as no other industry has the same obligation to pre-plan for closure. Up to now, industry practices and regulatory requirements on closure have been focused on environmental closure with uneven integration of socio-economic considerations. Additionally, some jurisdictions have established strong regulatory regimes for closure, while others have policy gaps in this area. Regardless of jurisdiction, there is an increasing need to look at the socio-economic factors in closure to minimize and address any adverse impacts.
In fact, an early closure planning process focused on socio-economic aspects of closure can contribute to maximize the long-term sustainable benefits that can be realized by the presence of a mine. An example is planning for renewable (eg. solar) energy generation at mine sites that can continue and expand at closure providing a legacy of clean power generation into the local grid and help countries meet their Paris targets.
The (Automated) Mine of the Future: Mining is already capital intense. Efforts to get greater productivity, safety and automation at mine sites imply significant reductions in local employment opportunities. So why would any community agree to a mine in their region that does not bring jobs? The industry will be challenged to develop new value propositions with local resonance to justify resource extraction. The long lifecycle of most mines argues strongly for sites to be excellent neighbors to local communities. Perhaps future community agreements will involve new kinds of social offsets and new developmental partnerships financed by site revenues.
An issue to watch is cyber-security and the heavy damage malign hackers could inflict on computerized mining systems.
Conclusion: The radar screen for the mining industry is crowded with incoming risks and leadership opportunities. Today’s four sustainability frontiers are human rights, responsible sourcing, transition to green energy and community benefits that don’t depend on local employment.
- Human rights presents complex challenges because mines effect people and communities in many different ways. This calls for comprehensive integration of human rights considerations in mine planning and operations. At the same time as companies must prevent and respond adequately to local adverse impacts, the industry needs tools to ensure consistent human rights performance across the sector.
- Consumer and manufacturer concern about the social and environmental qualities of mineral and metal inputs is intensifying. This generates demand for comprehensive standards assurance from site to final product. It is inevitable that mining will face responsible sourcing expectations similar to those already in place for conflict sensitive minerals (see Conflict Minerals, Ethical Supply Chains and Peace), forestry and other sectors.
- The challenge of GHG reduction creates a new opportunity for mine lifecycle approaches to green energy within operations and beyond into local and national energy grids. The transition to green energy will require more sources of metals and minerals. However, mines must be able to demonstrate that they are able to provide those materials while respecting human rights and the environment and providing benefits to affected communities.
- The logic of technology and productivity lead away from employment as a local benefit for mining. Companies will need new approaches to community benefits in order to secure local acceptance for the mines of the future.
- Tim Martin, Senior Advisor