What is ESG?

ESG stands for Environmental, Social, and Governance, and these principles are used by responsible corporations to guide corporate behavior with respect to sustainable, ethical, and corporate governance issues.

ESG and Mining: How does it relate?

Considering the potential impact of mining and exploration activities, it is no surprise that ESG has long been on the minds of governments, NGOs, industry bodies, and other key stakeholders concerned with the environmental and social impacts of this sector.

Mining companies are required and expected to adhere to ESG regulations, codes, and principles that address these concerns.

ESG goals are at the top of the priority lists of many senior mining executives.

A new report has been published by Mining, which examines the impact that AI and IoT can have on Environmental, Social, and Governance (ESG) goals.

According to the report, ESG is becoming increasingly important for miners. It covers both strategic and operational ESG goals, as well as the quantitative benefits of achieving these goals correctly.The viability of the sector and the success of the people who work in it now has even more direct ties to the environment and the community that surrounds it.

Head here to read the report in full.

This report provides a comprehensive, strategic overview for industry professionals involved in metals and mining to identify all of the ESG issues and potential routes to achieve ESG goals. 

How does ESG Affect Investor Mindsets?

ESG is a lens for assessing a company’s or an investment’s exposure to environmental, social, and governance risks. This includes the physical risks of climate change as well as the reputational risks of inaction and the regulatory risks of government action. A company that aligns with ESG principles understands its risk profile and hopefully optimizes it for commercial benefit.

Resources companies are experiencing rapid change in their expectations of corporate behavior. In Australia, the rate of growth of sustainable investment over a two-year period has reached 25 percent, and global investment capital has shifted to more responsible companies.

As a result, ESG reports have increased in production and they vary widely across sectors, commodities, and jurisdictions.

In recent years, ESG reporting has gone from something that was desirable to something that is critical to attracting and retaining investor capital.

ESG standards are generally adopted and integrated inversely related to size in the mining sector. Big companies already follow robust ESG practices.

We found that ESG performance plays a significant role in creating value for both short- and long-term investors.

If a company generates an ESG report, it also implies that they are serious about creating long-term and short-term value and mitigating risks. A properly developed ESG report provides an investor with a great deal of insight into the most important risks.

What are in ESG Reports?

Risk disclosure: From early explorer to stable producer, risk materiality differs for different operations. A company should know where those risks could affect their business, identify them, and have thought about them.

Policies: The company should provide guidance on its ESG policies and specify the benchmarks that they use to frame and measure individual performance. So Investors can take comfort in knowing that the company is well-managed.

Key reporting areas: ESG focus areas include disclosure, corruption, human rights, indigenous rights, tailings, air-water and rehabilitation, health and safety, economic and community contributions, and diversity.

Overall Disclosure: Disclosure is a big focus as a starting point, with the belief that “what you measure is what you get,” in conjunction with ensuring board and management incentives are tied to ESG metrics. In this way, companies show that they care and are sincere.

ESG reporting has its own suite of challenges. In addition to communicating a company’s sustainability ambitions, assessing sustainability risks, opportunities, and impacts, and explaining how they are addressed, it is the single most important way to create awareness of a company’s ESG strategy. Additionally, ESG reports provide both internal and external stakeholders with evidence of tangible progress that have been put in place.

How are Energy Companies working on ESG?

ESG profiles of energy companies have evolved over time, with these principles now being fundamental to how companies operate (especially in Australia). The concept of ESG has quickly moved from a footnote in public disclosure to the forefront of investor decision-making and corporate strategy, a change driven largely by investors rather than governments.

Investors are increasingly demanding a balanced presentation of financial and non-financial information (including future-focused material) on issues including climate change. In light of this focus, Boards and executives need to determine whether they are providing proper governance over the quality of this reported data.

Putting in place ESG policies that are favorable to peers helps the organisation appear more competitive.

ESG strategies will eventually affect a company’s access to public capital and increasingly private capital as well.

The majority of large integrated energy companies have developed or are developing ESG policies and programs and have begun efforts to reduce and minimize their environmental impact. Several examples are listed below.

In November of 2020, Occidental Petroleum Corp. became the first major oil company in the United States to commit to a net-zero emissions target by 2040 and to reduce their products’ GHG emissions by 2050.

Last year, shareholders voted to approve Shell’s sustainability strategy, which was approved by 89% of them. This strategy posited that carbon intensity would be reduced by 100% by 2050.

As part of its sustainability framework, ExxonMobil is investing $3 billion in carbon capture and storage projects.

As a leading contributor to renewable organisations globally, British Petroleum invests heavily in wind, solar, and hydrogen. In 2020 the company divested operations that reduced its overall emissions by 5.4 metric tons, making an initial step towards its stated goal of reducing emissions by 41 metric tons by 2050.

Recently, Kinder Morgan set up a new unit to investigate green energy options, including ethanol, biodiesel, renewable diesel, and hydrogen liquid transportation fuels.
As you can see from headlines and as anyone working in the industry can observe, energy companies are taking note of the ESG revolution.

Knowing where you are now is crucial for any company to get where you want to be. Every company should understand where it stands within the ESG framework and develop policies that are tailored to it and aligned with business strategies.

Source: https://mck.co/3IKGdOR

As per the McKinsey framework, a company can demonstrate a strong ESG proposition by documenting

How can PX4 help with your ESG Goals?

Our goal at PX4 Software is to become more proactive and identify actionable plans to improve sustainability performance.

We do this by making it easier to perform your regulatory actions through an easy-to-use interface to track approvals such as Environmental Approvals, Health and Safety Checks, Land Permits, and other critical regulatory checks.

The PX4 Resources system also enables mining companies to create their own custom actions and submit complex project reporting with ease. PX4 Resources is also constantly upgraded with new features that allow tenement managers to do even more.

1. Top-line growth
2. Cost Reductions
3. Regulatory and legal interventions
4. Productivity uplift
5. Investment and asset optimization

Top-line growth
Having an optimised approval management system will allow your team to focus on new projects, new clients, and new tenements, instead of constantly having to worry about the backlog of work that needs to be done.

Cost Reductions
There are often hidden costs associated with running multiple systems and the overhead of tracking projects across different programs.

Regulatory and Legal Interventions
The nature of tenement management is the high risk of losing a project due to missing a deadline. The government can impose severe penalties on even minor issues. PX4 Resources keeps tenements across multiple jurisdictions in check.

Productivity Uplift
Using a modern, cloud-ready system like PX4 Resources also can improve employee morale, by investing in an easy-to-use system that is designed for collaboration. Using comments across the system, the ability to assign actions to teammates and see the full history of actions from teammates will inspire the team to work collaboratively and optimise work and hand-offs.

Investment and asset optimisation

PX4 Software strives to become more proactive and develop actionable plans to improve sustainability performance.

“We believe ESG will serve as a key driver of value creation for all mining and exploration companies in the next few years.” – Toby Carrigan

“ESG impacts businesses, and having the right tools and systems in place will help the business meet their ESG targets in a smarter, simpler manner.” – Donna Gaffney

“ESG is becoming the number one priority for energy companies, as the world is turning its attention to the actions and responsibility of companies in mining and exploration. We look forward to supporting organisations by empowering them with the knowledge and tools they need to create a positive impact on the world.” – Bill Haylock