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A new ESG mining standard will help drive responsible production

22 February 2020

Mining and metals are critically important, from supporting the promotion of sustainable economic and social progress in resource rich countries to enabling the innovations and technologies needed to address climate change.

This story by Aidan Davy first appeared in the Financial Times on 22 February 2019.

But no matter how essential metals and minerals may be, customers and other stakeholders, increasingly including investors, are justifiably demanding that they be produced responsibly. At its most basic, stakeholder concerns centre on two interconnected factors: provenance and means of production.

The primary concern with provenance is whether the locus of production has associations with specific stakeholder concerns. Initially, these included child labour in the supply of cobalt from the Democratic Republic of Congo, or armed conflict associated with the production of diamonds from Angola or Sierra Leone.

The industry has responded by developing a range of initiatives that establish performance requirements for the responsible production of metals and minerals, supported by a mix of self-assessment and independent third party reviews of implementation progress.

To date, consumer pressure has been a modest driver for this change, notably in the jewellery sector, but supply chain integrity concerns have been more significant, especially from consumer-facing companies in the automotive and electronic sectors.

While some of these initiatives aim to improve practices across the supply chain where mined materials are an important part of the production process, and others offer a “seal of approval” in the form of certification, most involve mining companies making a commercial decision on whether to join industry ESG initiatives.

The International Council on Mining and Metals recently launched Mining Principles help to fill this gap, while remaining aligned to other responsible sourcing initiatives. Our members, which include some of the world’s biggest miners don’t get to choose to which assets they apply. Covering 38 areas, including biodiversity, gender, human rights due diligence, labour rights, local content, mine closure, pollution, resettlement and waste they apply to more than 650 of our members’ assets in over 50 countries.

Their implementation by member companies — which account for about 30 per cent of global production of major commodities such as iron ore, copper and gold — will drive performance improvements at scale.

The Mining Principles also include new requirements on the transparent disclosure of the site-level validation of progress on these environmental, social and governance issues, and members will be required to provide an explanation for those expectations that have not been fully met.

We do not expect that all members will fully meet all expectations at all sites immediately. If they do, we have probably set the bar too low. However, transparent disclosure — and the accompanying narrative — offers a tool for interested stakeholders to observe and evaluate meaningful progress.

Do ICMM’s principles and other industry initiatives establish common ESG requirements for participating companies? There are points of difference between almost all standards and initiatives, even if the focus on improved ESG practices at the operational level is universal. ICMM is actively engaging with many of the owners of other initiatives and standards to assess equivalency and agree on points of divergence.

Ultimately, we hope to make this information publicly available with the support of the owners of the other standards and initiatives. The aim is to avoid additional administrative burden for member companies participating in other recognised third party validated systems, by providing cross-recognition for those ESG requirements deemed to be equivalent.

There are numerous points of connection between our principles and the UN’s Sustainable Development Goals. In many cases the link is clear and direct. In others, it may be a function of how companies channel their community investment or contribute to government revenues that support social and economic infrastructure.

This recent multiplication in ESG standards and the engagement by investors, customers and other stakeholders represents a step change, but if the responsible production of metals and minerals is to become the new norm, we need to see an acceleration of their uptake and implementation. This is the only way to both level the ESG playing field and enhance the industry’s contribution to achieving the SDGs.