Climate change - a burning platform?

9 September 2018

This summer, we experienced a prolonged heatwave in the UK. In Portugal, temperatures recently reached 46 degrees Celcius. In Japan, over 100 deaths have been attributed to heat this year. And Australia’s prime minister recently declared it a “land of drought”. Everywhere, our planet’s changing climate is becoming an uncomfortable reality for its inhabitants. Footage of wildfires in Australia, Europe and the USA dominate many daily news bulletins.

For over a decade, ICMM’s members have recognised and been committed to addressing the challenges of climate change, although our approach has varied over time as the international situation has evolved. Initially, hopes were high that a globally binding agreement could be reached that would incentivise reduced emissions on a level playing field basis, so that competitive tensions could be managed. Over time, it has become apparent that such a binding agreement is a distant prospect, and in the absence of international consensus, state actors have instead taken more of a “patchwork” approach. However, according the Economist, even though around 70 countries or regions currently price carbon, they are responsible for only 20% of total emissions. That is a good start, but it is unlikely to be enough.

The private sector is increasingly being expected by society to get ahead of governments. There are multiple ways in which this pressure is being manifested. One obvious source of pressure is investors. The UN Principles for Responsible Investment (UNPRI), an alliance of investors representing over US$22 trillion of assets under management, has articulated support for the implementation of the Paris agreement and the recommendations on climate reporting of the Task Force on Climate-related Financial Disclosures (TCFD), which focusses on companies’ approaches to governance/targets & metrics (carbon reduction) and strategy/risk management for adaptation. And investors have recently brought climate-change related resolutions to companies’ AGMs, including some of ICMM’s members.

A second source of pressure is of course NGOs. They take a wide variety of approaches, but one example of an NGO which is dedicated solely to advancing corporate practices is the Carbon Disclosure Project (CDP), which benchmarks companies on how well they are managing different climate change risks, and on their overall governance and strategic approach.

A third source of pressure is religious organisations. All of the world’s major faiths have issued statements on climate change. The Church of England has been particularly proactive with its investor hat on. The church supports the Transition Pathway Initiative (TPI), a growing alliance which helps investors assess companies’ “preparedness for the transition to a low-carbon economy, supporting efforts to address climate change”. The church, along with the Vatican and the Methodist Church, is part of the “Mining and Faith Reflections Initiative” a forum for engagement with CEOs from the mining sector that first met at the Vatican in 2013. Interestingly, the oil and gas sector are following suit, with senior executives attending a similar forum on climate change at the Vatican earlier this year.

Finally, employees themselves are exerting pressure. Millennials are especially keen for their employers to have a positive impact in society. In Deloitte’s latest survey of over 10,000 millennials in 36 countries, they cited climate change as one of their top five concerns, with only terrorism being a greater concern for those based in developed countries. Companies cannot do very much about terrorism, but a clear statement of purpose on climate change is one way to drive the attraction and retention of talent, and especially younger talent.

ICMM and its members are responding in several ways. We have collectively articulated support for a price on carbon and other market mechanisms that drive reduction of emissions. We have also explicitly acknowledged the need to reduce emissions from the use of coal, provided this is done in a measured way that recognises the importance of coal in the global economy, particularly in the developing world. And our members have committed to support the greater use of renewable energy and improve energy efficiency. All ICMM members report according to the GRI framework which includes public disclosure on their Scope 1 and 2 emissions, and some also report on their overall levels of renewable energy use and emissions intensity, which is a measure of how much CO2 a company is generating per unit of metal mined.

One way that ICMM seeks to enhance collective performance is through the sharing of best practice and different approaches between members. Some interesting themes emerge from a review of the examples:

Energy switches appear to offer the greatest gains. For example, Newmont is switching from diesel to gas at its Tanami project in Australia, which will result in an immediate 20% reduction in emissions. Teck achieved a similar reduction by switching to gas at its metallurgical coal processing plant in Canada. Glencore and Goldcorp are developing all electric underground mines which will eliminate diesel consumption and also likely cut overall energy use by 10% to 20% due to reduced ventilation needs.
Process improvements to reduce energy use can also offer significant gains. For example, a switch of process at JX Nippon’s copper smelter reduced energy intensity by 15%. In South Africa, Glencore is converting waste gas that is currently flared into a fuel, although the savings there are still to be quantified. To help address energy use, some members have adopted the ISO 50001 energy management standard, such as Gold Fields’ Cerro Corona mine, and Freeport McMoran’s Atlantic Copper smelter, which was recently assessed as being 56% more efficient than the average from a sample of 55 copper smelters. A number of small changes can make a difference when added up - at Teck’s Highland valley operation, 15 small changes, such as a simple process improvement to reduce truck idle times, achieved four times the project’s reduction targets.
Mines can anchor renewable projects and in areas where a grid is present the amount of power that can be anchored is significant. For example, in South Africa Gold Fields is developing a 40 MW photovoltaic solar plant. Antofagasta and Barrick Gold’s Zaldivar project in Chile recently signed a 10-year contract to be supplied with 100% renewable energy (a combination of solar, wind and hydro) thus saving 350,000 tonnes of CO2 a year. And construction recently began in Sweden of a Euro270 million wind farm to supply Norway’s Hydro under a 29-year power purchase contract.

Beyond the improvement of existing operations, members are also experimenting with some interesting innovation. For example, Rio Tinto is partnering with Alcoa, with support from Apple and the governments of Canada and Quebec, to accelerate the commercialisation of an aluminium smelting technology that would completely eliminate carbon emissions. A number of members have invested in experimental carbon sequestration projects. And BHP is collaborating with the World Bank Group and others to held reduce deforestation in developing countries through the REDD+ initiative. Deforestation accounts for up to 20% of global emissions.

Much more remains to be done, especially since many metals, such as copper, nickel, and cobalt, will be needed in even greater quantities to support the world’s decarbonisation. ICMM’s members are committed to producing those metals as efficiently as possible, to supporting the development of renewable energy supply opportunities, and to reporting transparently on the results of their efforts. It’s not just about responding to external pressure; it’s also because reducing carbon emissions and sustainability performance more generally are increasingly regarded as indicators of good business performance.

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Tom Butler is Chief Executive Officer at the International Council on Mining and Metals.