A range of sustainability and ESG forces will shape the business of mining in 2024, building on the trends of 2023, a year characterized by a surge in investor scrutiny, regulatory action, and a significant uptick in mining sustainability performance expectations.
Against the backdrop of continued geopolitical and inflationary pressures, 2023 saw some ESG backlash influence investor narratives in certain jurisdictions, though less so their practices. ESG took the top spot again in key mining industry risk reports, while community protests and governance issues made news in regions worldwide, many based on ESG issues. Globally, we saw a growing entrenchment of ESG and corporate sustainability principles in expectations of how the industry conducts its business.
For 2024, the World Economic Forum’s managing director has forecasted “an unstable global order characterized by polarizing narratives and insecurity, the worsening impacts of extreme weather, and economic uncertainty.” This sets the stage for what promises to be an unpredictable year, with environmental and social issues remaining a core focus. We know that spotting trends to inform strategic action can be challenging, so here are our top 10 mining ESG trends that mining companies should take note of and take action on in 2024.
Net-Zero Acceleration. Climate change risk and decarbonization are likely to remain a key focus in 2024. Net-zero commitments are becoming a standard expectation, and industry leaders are moving from covering only scope 1 and 2, to also include scope 3. According to Net Zero Tracker, half of the world’s largest companies have now adopted net zero targets, though doubts remain about how attainable they are. Investors will increasingly pressure companies to demonstrate adequate and credible climate plans.
Beyond Carbon: Biodiversity Rising. With incontrovertible evidence of the vicious circle that interlocks climate change and nature loss, biodiversity is now a rapidly rising topic. This shift is driven by a growing awareness of the scope of crisis before us and the associated material risks to business and society. The year will see leading companies begin to align with the Taskforce on Nature-related Financial Disclosures (TNFD) recommendations, which aim to integrate nature into financial decision-making and disclosure.
Tailings Management A Critical Focus. Tailings management, having entrenched its position in the investor spotlight in 2023, will remain a key focus. After ICMM members’ first disclosure on alignment with the Global Industry Standard on Tailings Management (GISTM) last year, there will be escalating pressure on the rest of the industry to follow suit, with the new Global Tailings Management Institute (GTMI) spearheading enforcement, assurance, and oversight. Rapid commercialization of a range of technological advancements will help companies move towards more responsible management, too.
Practical EDI Gaining Ground. Mirroring a global shift towards workplace inclusivity, the mining sector will make further progress on Equity, Diversity, and Inclusion (EDI, or DEI) initiatives in 2024. The new TSM Equitable, Diverse, and Inclusive Workplaces Protocol and ICMM member DEI position statement and commitment have spurred renewed focus and action, as the industry acknowledges the need for greater efforts to tackle its ongoing workforce and talent management challenges.
Standardization of ESG Reporting for Capital Markets. The widespread adoption of the IFRS Foundation’s new disclosure standards will transform voluntary sustainability reporting in 2024. The IFRS has now taken over responsibility for the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-related Financial Disclosures (TCFD), both well-known by investors. The new, single, global baseline of sustainability disclosures designed for capital markets will rapidly become the global reference for ESG disclosure, expected to bring much-needed consistency and comparability.
Global Regulations Require Adaptation. A wave of new and updated sustainability regulations is sweeping across the globe, and mining will face the challenge of adapting to new regulatory requirements across various jurisdictions, especially those linked to the EU. High-profile emerging mandatory regulations include disclosure on climate change and modern slavery in multiple jurisdictions and broad standardized non-financial reporting in the EU. Meanwhile, at least 64 jurisdictions are analyzing how to integrate the IFRS Foundation disclosure standards in their regulations.
Surging Investor Demands and Shareholder Activism. Echoing global public sentiment, investors will continue to ramp up pressure for robust ESG performance and transparency. A 2023 KPMG survey found that over half of M&A dealmakers have cancelled deals due to material findings of an ESG due diligence process. And headlines such as Glencore’s climate plan being rejected by investors, attempts to sue Shell directors personally for climate risk mismanagement, and the Global Investor Mining Commission on Mining 2030 announcing strong support from investors with US$11 trillion in assets under management signal a clear trend. Meanwhile, a recent proxy firm policy survey shows the “double materiality” debate continues, but climate-related risk disclosure will be central to investor demands and shareholder activism. TCFD alignment is becoming a standard expectation in the face of increasingly frequent and severe extreme weather events worldwide.
Growing Executive and Board Competency Risk. Surveys from PwC, BCG, and the INSEAD Corporate Governance Centre during 2023 found that only 27-47% of board directors understand ESG risks and have sufficient ESG competence, on topics ranging from climate change to human rights and EDI. Such findings expose a growing disconnect between evolving investor expectations of fiduciary duty and oversight, and the ESG capabilities of directors and company leaders. ESG upskilling to ensure effective management and governance is expected to be a priority for many companies in the year ahead.
Technological Innovation Enabling Performance and Assessment. Technological innovations are likely to play a key role in advancing sustainability priorities. Current commercialization of relevant technologies ranges from the use of AI and data analytics to assess and oversee ESG performance, manage cybersecurity risks, and support health and safety outcomes, to innovative solutions for resource optimization and tailings management (e.g. biomining, bioremediation, waste-to-value, satellite and other real-time monitoring). Along with innovations in materials movement and renewable energy solutions including hydrogen and solar, we are likely to see more rapid innovation foster improved sustainability outcomes and assessment.
Focus on Sustainable and Responsible Supply Chains. Many companies mapping their supply chains in response to pressure to do so, are struggling immensely. Yet further progress in responsible sourcing and supply chain transparency is likely, given regulatory trends and amplified investor expectations to focus on sustainability across the entire value chain. This year will see many companies venture into understanding their Scope 3 emissions and human rights risks especially.
As the work and disclosure of sustainability continue to mature, rumblings of ESG fatigue and discontent continue too, with some starting to favour the language of “responsible business” instead. Either way, the core principles of prioritizing risk management, responsible governance, and resilience stand firm; embedding sustainability in how we mine and invest is a trend set to persist despite rising polarization and politicization, war and contentious elections, and unpredictable market behaviour in 2024.
Many mining companies will continue to grapple with increasing ESG performance and reporting expectations, but this will also offer strategic opportunities. The ESG commitments of both investors and miners will be tested in the year ahead. Those who deploy the principles underpinning ESG in risk management and business strategies will better position themselves to strengthen both social licence and financial performance.
To help readers navigate the complexities of the mining ESG landscape in the year ahead, Sympact has compiled a complimentary report: Mining ESG: 2023 in Review and What to Expect in 2024.
Rachel Dekker and Elizabeth Freele are the co-founders and managing partners of mining sustainability think tank and ESG consultancy Sympact. Sympact supports companies in ensuring their social performance meets growing expectations through advisory services, ESG training, and thought leadership.
Source: MINING.COM – Read More
