Mining industry moving ahead with ESG amid challenges

15 May 2024 Consultancy-me.com 5 min. read

The mining industry is behind on ESG, but that is likely to change. The industry is on its way to making big changes due to serious pressure from governments, investors, partners, the public – and from within. That is according to a report from global strategy consulting firm Corporate Value Associates.

It has been said many times before, but it bears repeating: ESG initiatives should no longer be seen as merely a hit to profits and a drag on business models. There are loads of opportunities in the green transition and ESG initiatives should be seen for their potential to create value, rather than as a hindrance.

This principle also holds true for the mining industry, though the industry and the way it works might seem to be totally at odds with ESG principles at first glance.

Mining industry moving ahead with ESG amid challenges

Source: World Bank, IEA, Corporate Value Associates

Indeed, mining has lagged behind other industries in ESG stewardship – but despite that, there is great hope that the sector can become a leader, not least because it is the source of the very minerals that the green transition will be built on, like those needed for batteries.

“Alongside environmental concerns, significant governance and social challenges are yet to be overcome, since critical elements like lithium, nickel, and cobalt are mainly produced today in regions with low governance and high emissions,” said Ramzi Ben Hamadou, Partner at Corporate Value Associates.

“That has historically impacted public support for mining projects leading sometimes to local and international resistance to mining investments and criticisms related to ESG topics.”

Some of those top producers of these critical minerals include notoriously troubled regions or countries with adversarial relationships with the United States and Europe. The Democratic Republic of the Congo and China are among the top producers of copper, for example.

An increasing number of mining companies are committing to reduce emissions

Source: World Business Council for Sustainable Development, Corporate Value Associates

As for lithium – some top producing countries like Chile and Brazil have seen somewhat populist leaders elected to office in recent years, which might lead to more protectionist policies. If industries were nationalized in those countries, for example, it would have a big impact on prices and availability of a wide range of products with batteries.

Decarbonization of mining

Due to the shifting external and internal environment, Ben Hamadou said that a growing number of mining companies are committed to reducing emissions, which is resulting in a recent surge in decarbonization announcements.

Much of the cuts in emissions that have been announced by mining companies fall within scope 1 and 2. Those announcements exclude scope 3, the notoriously difficult-to-reach emissions that are found further down the supply chain that result from entities not directly controlled by a company. Full decarbonization commitments will necessarily include scope 3 emissions.

End-of-life recycling rates (%) for selected metals

Source: Henckens, UNEP, OECD, Corporate Value Associates

The report by Corporate Value Associates highlights the disparity in how different areas of ESG are measured and tracked. “The level of maturity in terms of communication and monitoring on basic indicators such as greenhouse gas emissions, water and waste management, air emissions, and social initiatives still varies widely among industry players,” Ben Hamadou explained.

Recycling minerals

One area of industry for critical minerals that has big potential for more ambitious ESG activity is recycling. As of where the technology and capacity is now for processing harder-to-recycle metals, gold is the most recycled, with nickel, silver, and copper not far behind. The EU relies more heavily on secondary production using recycled metals when compared to other global regions.

Innovation in the recycling sector that could allow lithium to be recycled more efficiently could prove to be a game-changer for the electrical driving industry. Because the batteries needed for fueling cars are quite large, a huge amount of lithium is required by the industry.

There is a serious shortage of lithium that is projected to only get worse in the coming years. The battery industry will need to look to recycling to meet the growing demand. A previous report found that greater sustainability in the battery industry will indeed help with shortages of the raw material.