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ESG Tips for Juniors

ESG Tips for Juniors

Many junior mining companies are a step behind majors in preparing for the future green economy.  While they often do not have in-house resources to keep abreast of every trend, juniors can be nimble in seizing the opportunities created by the high worth now placed on environmental social and governance (ESG).  Here are some top ESG tips for juniors:

  1. Recognise that ESG is here to stay.  It is not a fad, even though sporadic articles suggest that it is.  ESG expectations are already deeply rooted in international sustainable development goals (SDGs), sustainability standards, law and the minds of the next generation of consumers.  Bad practices may result in a change in the term “ESG” but the imperatives driving the need for ESG will not disappear.
  2. Real ESG will increase potential for access to finance.  Financiers are under even more pressure than miners to practise ESG.  Asset owners and asset managers are being rated and ranked by  public-facing agencies.  New ESG disclosure laws apply unequivocally to financial institutions, while small non-financial companies that are not listed can currently get away with little or no disclosure.  Asset managers say mining companies need to improve their ESG performance to access capital.
  3. Honest and concise ESG narratives are required.  Asset managers say that they don’t have time to wade through vast reports providing vague and ambiguous insights on ESG performance.   The narratives need to be succinct and frank about material risks and salient issues.
  4. Continuously engage with business stakeholders. Future equity investors and lenders are likely to be quite clear about their ESG requirements.  Downstream processors and manufacturers are generally still defining their ESG requirements and it is likely these will change as the notion of responsible sourcing is still in its formative stages.  It is realistic to expect that mineral products will have passports that carry their ESG credentials through the supply chain.  The concepts of passports and the provenance of mineral products are being endorsed by the London Metals Exchange (LME).
  5. Prepare for validation of your ESG performance.  Members of ICMM intend to commission third-party validation reviews of their performance against the ICMM Performance Expectations at a granular asset level.  This is likely to become routine within two years.  This will set a precedent for the whole mining industry.  New requirements at the LME will reinforce ESG validation practices.   The LME requires that its brands align with a recognised sustainability standard by 2022 and provide reports on their conformance with the standard by 2023.
  6. Choose the standards that you align with carefully.  There is an explosion of sustainability standards applying to the mining industry at present, this is overwhelming for both mining companies and their stakeholders.  Some institutions, such as the ICMM, are reportedly working to define equivalence between the standards.  While this work is underway, it is wise to choose a couple of widely respected standards.  It is probable you will meet all requirements by observing these, relevant legislation and the United Nations SDGs.
  7. Don’t be tempted to exaggerate good performance. Lawyers warn that misleading information about ESG performance could lead to legal action because so much reliance is being placed on the information.
  8. Include ESG in your company strategy and define sensible key performance indicators  (KPIs).  Your company strategy should include information on ESG trends, risks, management measures and a review of performance.  The review should include KPIs relevant to the business.  Choose KPIs carefully.  One school of thought is that these need to be specific to the company and its unique business model, setting and challenges – performance needs to be measured from one year to the next.  The other is  that these need to be standardised across industry so that performance of different companies can be compared – this works for some issues but not others.  A hybrid of these approaches is currently favoured.