LAUNCESTON, Australia (Reuters) - The top concern among global miners, for a second year running, is how to keep a social license to operate, especially amid rising pressure for the industry to tackle climate change.
But knowing what the main challenge is, and knowing what to do about it appear to be two different things.
A survey of global mining companies by consultants EY showed that 44% of executives ranked maintaining a social license to operate as their leading concern, with preparing for the workforce of the future the next most important challenge.
The social license refers to how much a company’s business practices are accepted by employees, interest groups and the overall public.
“The sector is facing greater scrutiny from end consumers, demanding a transparent ethical supply chain as well as a lower carbon footprint,” the report said.
“Shareholder activists are also driving many miners, particularly those with coal assets, to reshape their portfolios by either reconfiguring existing operations or executing divestments,” EY said in the report, published last month.
There is little doubt that public scrutiny of mining is on the rise, with heightened focus not only on coal miners, but also on metal ore producers, even those needed to drive a global shift toward cleaner renewable energy generation and battery storage.
But while companies have stepped up their public commentary on climate change and their roles in mitigating the warming of the planet, it’s still hard to get a sense that this is indeed the top concern of global mining companies.
If winning over community support for mining and showing the industry can be a leader in combating climate change is the number one priority, it would be logical that mining chief executives spent much of their time focused on the issues.
It’s also likely that companies would appoint a senior executive to drive climate change programs, and ensure that this person was seen as equal to other top level executives, such as the chief financial officer or the heads of mining operations.
For example, BHP Group, the world’s biggest mining company, has a vice president for sustainability and climate change in Fiona Wild, but she doesn’t appear on the 11-strong executive leadership team on the company’s website.
Rio Tinto doesn’t have climate change listed as a responsibility of any of its 12-strong executive team, although Joanne Farrell is listed as the group executive for health, safety and the environment.
Of the 18 people listed as the management team for diversified miner Glencore, not one has either environment or climate change listed as a responsibility.
It’s the same situation at Anglo American, with not one of the 14-strong management team on the website having environment or climate change listed among their responsibilities.
Top iron ore miner Vale has a director of sustainability among the eight executives listed on its website, with Luiz Eduardo Osorio also having responsibility for communication and institutional relations.
Aside from a few well-publicized announcements and commitments, it doesn’t really seem that major mining companies are behaving as if maintaining a social license is their top concern.
MORE ACTION NEEDED
BHP deservedly won plaudits for its pledge in July to invest $400 million over five years to reduce its emissions.
BHP also said it would tackle Scope 3 emissions created by the use of its products, an important consideration given it is the top exporter of coking coal used in the steelmaking and number three in iron ore, the raw material for steel.
Emissions are divided into categories. Scope 1 and 2 cover an organization’s direct emissions and indirect emissions generated by power it buys to run its operations, while Scope 3 emissions occur when a company’s products are used.
But as laudable as BHP’s moves are, the company remains something of an outlier among its global peers, with other miners making more modest commitments.
A further point is that while $400 million may sound like a considerable sum to spend on emissions reduction, it pales in comparison to the $9.47 billion BHP recorded in underlying profit from continuing operations in the year ended June 30.
Again, if maintaining a social license to operate is the most important thing a mining company can do, surely accomplishing this task requires a bigger financial commitment and sufficient executive attention and resources?
While moves such as Rio Tinto signing a preliminary deal with two Chinese partners to develop new ways to cut carbon emissions are valid and worthwhile, the question still remains as to whether this is enough.
It’s likely that hundreds of similar type initiatives will need to be undertaken, requiring a coordinated industry effort, and that doesn’t appear to be the case.
In fact, many of the industry lobby groups are still promoting coal mining and the construction of new coal-fired power plants.
The industry will most likely have to split itself into those miners committed to producing, in a carbon-neutral manner, the products needed to transform the world toward renewable energy, and those who tend to side with the climate skeptics and conservative politicians who largely reject the warnings of scientists.
It’s interesting that the second biggest issue of concern for miners in the EY report was how to create the workforce of the future, which will have to be more tech-savvy and capable of taking mining into the digital era.
But much of the industry’s lagging attitude to climate change means it will struggle to attract the young knowledge workers it needs.
In some ways the top two concerns for miners are interlinked.
They won’t have a future unless they can convince the public that their operations and products are aligned with the world’s needs, and they won’t be able to get a future workforce unless they can succeed in the first challenge.
(The opinions expressed here are those of the author, a columnist for Reuters.)
Editing by Christian Schmollinger
Our Standards: The Thomson Reuters Trust Principles.