Mining Industry: Pursue ESG Goals, Drop the Acronym

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)

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Summary

More than seven in 10 executives globally who work in and around mining believe ESG is an overused term, but that same percentage--72%--believe the acronym's constituent elements of environment, social and governance are essential to the industry's future.

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New Survey of Mining Industry Showed Dislike for the Term ESG

The term ESG (environment, social and governance) has become highly politicized and weaponized in some areas, but in others it is seen as vital for the Metals & Minerals Industry, according to a new survey from Mining IQ (London, England), published by Aspermont Limited (Perth, Australia).

That survey was released December 9 during a webcast. The findings also were contained in the firm's annual ESG report, "Unearthing the Future," released in September. In a survey of 235 professionals working in and around the mining industry, representing 65 companies around the world, 72% agreed that "ESG is an overused or misused term. The same percentage agreed that 'ESG should be a high priority for the industry,'" Sam Williams, editor of Mining IQ, said on the webcast.

Click on the image at right to see responses to Mining IQ's survey.

Only 10% of those surveyed said ESG should be considered a "distraction" for the mining industry, double the percentage that said that in last year's survey, he added.

Responses Grouped into Three Categories

Williams sorted responses into three categories: "hard-core ESG skeptics," "ESG realists" and those suffering from "ESG fatigue."

About 10% of the responses rejected the concept of ESG altogether, he said, adding that this hard-core skepticism was most pronounced in Australia.

He shared a few verbatim comments from ESG Skeptics:

• "ESG is a buzz acronym fueling a bunch of loony woke lefties who make absolutely no contribution to the economy by being obstructive," said a consultancy manager in Australia.
• "CO2 is a scam and bears little effect on the world's climate, and employing anyone based on gender and not competence has a major effect on the outcomes of those businesses, and pays no regard to shareholders," commented an executive and board member from a service provider in Australia.

Those who have grown fatigued by ESG, the largest segment of responses, "don't reject the term (ESG) but have some reservations about it," Williams said on the webcast. This group represented the largest share of respondents. He shared a few verbatims from this group:

• "It's become a catch-all label, which diminishes an appreciation of the inherent value, complexity, span and challenges that the individual letters represent," said a manager at a U.S.-based mining company.
• "The term is ambiguous to the point of meaninglessness," decried one Australian consultant.

The third group, dubbed "ESG Realists" by Williams, accepted ESG "as a basis for good operations, though this group recognized the term is out of fashion." Representatives from this group made the following comments:

• "ESG is crucial for mining companies to maintain a social license to operate. Unfortunately, it is a maligned industry that activist groups often attack," said a manager at an Australian service provider.
• Badly implemented ESG initiatives "can undermine an excellent project and hence must remain at the fore, alongside profitability," said a U.S.-based investor.

Pursuing ESG Goals without the Labels

Despite the responses of those who are skeptical about ESG or have grown weary of how the term has been weaponized, Williams said the survey showed broad support for critical elements of ESG, including safety, water management, carbon emissions, diversity, local hiring and land management.

As evidence, he said the survey showed a falling rate of injuries, a rising proportion of companies with water recycling policies, a rising percentage of women in the mining workforce and a reduction of carbon dioxide (CO2) emissions from mines.

"Safety, water management, community relations, land rehabilitation and tailings stewardship consistently rank among the industry's highest priorities, even among those who argue the ESG label has been misused or over extended," Mining IQ said.

Investors Weigh In

Jamie Strauss, founder and chief executive of researchers Digbee (London, England), said the term ESG "has become a weaponized buzzword that is heavily perceived as a proxy for climate change." But what's really valued among investors, he said, is a mining company's operational quality and local stakeholder engagement, including relations with governmental bodies and local communities.

About 83% of mining projects go over-budget because companies don't invest enough in securing a social license to operate, both at the governmental and affected community levels, he said. "Often, companies that skimp on ESG are not prepared for the rigor of financial and regulatory review they will undergo. Companies are getting to the development stage without adequate preparation, which leads to a totally inefficient review process, extra call and time, and added burdens on lenders and investors."

"Social license to operate and ESG performance are absolutely essential" before companies can make a final investment decision (FID), he asserted" "If you're unprepared, the (FID) process will be more problematic."

Strauss, Williams and a third webcast speaker, Robert Crayfound, portfolio manager at CQS/Golden Prospect Precious Metals (Guernsey, Channel Islands), agreed that safety, environmental stewardship, and community engagement continue to drive value creation and risk mitigation in the mining sector.

Key Takeaways

• More than seven in 10 mining industry participants agreed that that ESG has become an overused term, but that same percentage--72%--believe the acronym's constituent elements--environment, social and governance--are essential to the industry's future.
• ESG is an evolution of earlier terms, such as social license to operate and sustainability.
• Though there is widespread dislike for the term ESG, industry participants continue to say that the concepts embedded in the acronym, such as safety, water management, community relations, land remediation and tailings stewardship, consistently rank among the industry's highest priorities, even among those who argue the ESG label has been misused or over extended.

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