Let’s start with a deep dive into ESG issues in the mining industry. What is your top focus currently in this space?
At the top of my focus, is the trust deficit. The mining industry has a trust problem. Broad-based trust in our industry seems at an all-time low. The impact is wide-ranging: fracturing of public attitudes, community resentment and opposition, regulatory delays, and cancelled permits, government expropriation, an inability to attract and retain new talent, spreading of misinformation, being shunned by investors, and frustrating undervaluations. The difficult fact is that no amount of public relations spin, reputational management, or distracting “awareness raising” will fix the current degree of suspicion and mistrust. We may need mining, but the reality is that no one wants it.
The International Council on Mining and Metals (ICMM), under the courageous leadership of CEO Rohitesh Dhawan, recently engaged GlobeScan to assess public trust in the industry. It showed that when it comes to fulfilling responsibilities to society, mining ranks at the bottom, scoring the lowest since GlobeScan began collecting data in 2001. While the easiest way to solve a problem is to deny it exists, this does not change the facts: we are unloved, even as many governments recognize that mining is essential to meeting the world’s decarbonization challenges. Right now, our industry needs to demonstrate it is responsible, to gain as much goodwill and trust as it can garner.
As an industry, we have traditionally defaulted to engaging with civil society to be understood, rather than understand. We prefer to direct our messaging through friendly and predictable channels to a largely passive audience. We avoid those who are vocally critical of us. We defensibly feel the need to “correct” misperceptions by talking up mining’s great benefits: local jobs, contracts, government tax revenues, and local socio-economic benefits when today, these are considered the bare minimum. We don’t put enough effort into understanding our real-world impacts fear being transparent about our mistakes and struggle to recover from them.
Meanwhile, the biggest media stories shaping the narrative around mining today are mostly negative: environmental pollution, fatalities, bribery, corruption, and human rights abuses to name a few. In this interconnected and image-dominated era, these controversies stay fresh in the minds of the public and investors who look to our recent past to gain confidence about the future. Some of these controversies have also shown that legal obligations are no longer a reliable proxy for ethical ones. Culture and leadership matter.
This is not dismissive of all the tremendous strides we have made in so many ESG areas over the last few decades, but this does not detract from the undeniable fact that we still have a long way to go.
We must acknowledge that there is a mounting globalized anti-mining sentiment (coupled with increased resource nationalism), and we need to become more dependable, better match our words and actions, and actively address historical legacies rather than exacerbate them.
What are some of the biggest changes or developments in this space you’ve seen over your career?
In the past, it was all about shareholder value and not breaking the law. By the late 90s, we started to co-opt the environmental activist language of responsibility and sustainability. The term “sustainability” started becoming popularized after a UN conference in Stockholm in 1972, but it wasn’t until the 80s that a growing emphasis was placed on the economic needs of people in the global south and less on just environmental impacts. Today we have “ESG” which has been falsely framed as an ideology.
Our industry has been a leader in many areas, but part of the ongoing challenge is that ESG issues will never be static. They change and evolve with time, politics, and societal beliefs and expectations. Some issues may be long-term, others short-term, and not every ESG topic is relevant to every mine site or company. The breadth of what is now considered ESG is staggering, and the list keeps growing.
Today we live in a fast-moving, interconnected, image-dominated era which creates so many new challenges but also opportunities. Polarization and misinformation flourish and there is no reliable way to avoid criticism. Right now, ESG issues are being advanced in so many ways — from new legislation, investor due diligence criteria, increasing stakeholder proposals and activism, to growing geo-political, protectionist and resource nationalism agendas. This manifests in a variety of ways, including societal distrust and reputational damage, to more tangible actions including employee activism, permit revocation, divestments, shareholder proposals, proxy fights and even litigation.
I have witnessed tremendous progress toward ESG performance, but there remains plenty of room for improvement. Many believe we are amid a true industry transformation. In today’s world, merely providing annual ESG reports and paying lip service to ESG ideals is not enough. Stakeholders are becoming increasingly sophisticated and alert to evidence of “greenwashing.”
To have a workable ESG strategy, miners must learn to differentiate between ESG operational risks, ethical imperatives, and impact/innovation opportunities – noting impacts that might become risks if
one does not act.
Another big change has been the long overdue increased focus on the “S” in ESG. Historically, mining companies had a primary focus on inbound risks to their operations from the community, rather than risks to the community from their mining operations—and importantly trying to identify and understand community aspirations and concerns. This one-way approach masked the root causes of company-community distrust and conflict and the inability to fully recognize, respond, and provide remedies.
The final change is the growing movement to make environmental and human rights crimes a serious criminal offence. The risk of legal action – including significant financial losses and reputational damage – is reshaping corporate minds on human rights and environmental impacts like never before.
Social licence to operate is a major risk for the mining industry. Let’s take a deep dive into how different jurisdictions can manage this. Do you see any standouts globally?
“Social licence to operate” (SLTO) refers to the tacit “licence of legitimacy” sought by mining companies around the world as an objective beyond compliance for project approvals. It is a factual rather than a legal concept now widely used by industry, activists, commentators, and political leaders alike. A company attempts to build and maintain an SLTO over time through meaningful local relationships and by being a steward for the environment, its employees, and the community in which it operates — in short, by being accountable for its actions.
For six consecutive years, SLTO has topped, or near topped, Ernst and Young’s risk listing for mining and metals. Companies that don’t act fairly toward host communities and fail to achieve the SLTO at the beginning of a mine’s lifecycle — or lose it later — will often face a multitude of challenges from costly and unexpected delays or closures, negative social media and reputational damage, limited access to capital, regulatory noncompliance, inability to attract or retain talent, and much more. The mining industry’s collective response to such public social performance challenges is increasingly coming under scrutiny from governments, host communities, investors, and other civil society stakeholders.
However, the SLTO concept has also attracted notoriety from civil society scholarly attention who have attempted to objectively define what it is (legitimacy, credibility, community perceptions, social contract, ongoing approval, broad-based acceptance, ethical promise etc.), how it can be conceptualized and enacted, and how it can be measured. The mining industry has attempted to address SLTO through a variety of means, however, critics claim it is too capricious and ambiguous to hold the industry to account constructively and fairly. We must recognize that an SLTO for a gold mine in Kazakhstan, PNG, or Ghana is not going to face the same set of social risks and issues as a copper mine in Canada, DRC, or Chile and hence measurement or comparison is rather academic. Nevertheless, three core principles are pretty much globally relevant across all cultures and jurisdictions. Host and Indigenous communities need to be listened to; be able to trust mining companies and their employees; and see meaningful and tangible benefits from the mining operations.
Notwithstanding, too many in the industry fail to recognize the difference between a SLTO and actual social performance. As mentioned, the former is about the benefit to the company only and its desire to secure community acceptance, while the latter is about the benefit to communities and creating societal value through equitable benefit sharing and maximizing local procurement and local employment. You will never hear a host community celebrate the presence of a SLTO – they need to see tangible benefits.
How can junior miners best embed ESG into their corporate culture and use it as a growth driver?
All miners including juniors need to have an authentic ESG strategy — but strategy is really the art of choosing what not to do — which is the difficult bit for many. As a miner, especially a junior, you simply cannot act ambitiously on every relevant ESG issue. If you don’t focus on what is core to the identity and mission of your business you will never get traction, especially on the ground. I’ve seen so many companies being ill-advised through cookie-cutter materiality assessments supposedly to help inform their strategy. These repeatedly end up claiming almost everything is material with a focus on reputational pressure and trying to appease every stakeholder, rather than genuine operational substance. This lack of clarity is regrettably very common — as the ever-widening breadth of stakeholder pressures and demands weigh against taking an informed strategic approach.
I encourage miners to prioritize ruthlessly – be mindful of defensive politicking to protect agendas – and identify those strategic ESG issues that are truly important to both internal and key external stakeholders. Benchmarking against peers is important providing one remembers the objective is differentiation, not mimicry. Clear prioritization makes developing a pragmatic and implementable ESG strategy less excruciating.
To have a workable ESG strategy, miners must learn to differentiate between ESG operational risks, ethical imperatives, and impact/innovation opportunities – noting impacts that might become risks if one does not act. If miners can’t distinguish between these, they will have little chance of designing coherent goals or incentives to implement.
The irrefutable fact is that company culture trumps everything. There must be a fit-for-purpose ESG strategy and an appropriate internal governance structure to deliver effectively. Because fundamental concepts behind genuine ESG performance are still new to some, coupled with the increasing compliance nature of ESG disclosure requirements, companies tend to take a laggard approach and do the minimum.
You’ve worked with a lot of the majors in the industry on their ESG development plans. What are some of the key takeaways for juniors?
What is worrying is the growth of undifferentiated virtue signaling – from pledges on net zero to being nature-positive which most often wildly outrace genuine commitment and tangible actions on the ground. This is all impression management and is a big “red flag” where the onus is on managing the ESG messaging, rather than the real issues or impacts with operational substance particularly on increasingly complex issues such as climate change, human rights, or biodiversity management.
Companies that will thrive in this new era of accelerating transformation and stakeholder capitalism will embrace ESG as a business imperative. Their ESG approach will not be about short-term thinking, hoping to do the right thing, maintaining relationships to secure permits, or simply ticking boxes. Rather, it will be about creating value through the systematic application of ESG disciplines throughout the business. It will strengthen company-wide operational preparedness, build resilience, and help attract and retain the best talent, because these companies will be the partner of choice for all stakeholders.
