ESG Reporting Insights: Mining

Environmental and health and safety regulators—as well as several other important stakeholder groups—play an influential role in the Canadian mining industry. As a result, the sustainability priorities of mining companies cover a wide spectrum of environmental, social and governance (ESG) matters, including water stewardship, inclusion and diversity, carbon emissions and Indigenous relations, to name but a few.

This can make it difficult for mining companies to pinpoint the sustainability-related risks and opportunities that are material to their organization. These complexities are magnified for companies operating in multiple jurisdictions. To overcome this challenge, companies need a clear process for engaging their stakeholders that includes understanding how each stakeholder group will use their ESG reports and the information it contains.

We recently analyzed the sustainability reports and other disclosures of Canada’s top mining companies, as well as businesses from other sectors. Across all industries, we found that many companies’ disclosures fall short of what’s required to meet new regulatory requirements and the climate change reporting expectations of stakeholders. But we also saw sector-specific opportunities for organizations to build trust with stakeholders and increase their long-term enterprise value.

Canadian mining companies face several rising sustainability-related risks. Consumers and other end users of manufactured products are taking a greater interest in the origins of the raw materials contained in their purchases, including the cost of carbon embedded in their supply chains. They expect companies to source materials produced in an environmentally responsible and ethical manner, without the use of child or forced labour. Our analysis shows many mining companies are well-positioned to respond to these evolving expectations. Nearly half (46%) disclose how they address modern slavery in their operations and supply chain. That’s slightly higher than the Canadian average of 43%. More broadly, 82% of mining companies report how they engage their stakeholders to identify material ESG matters—notably higher than the Canadian average of 59%.

We also found many mining companies taking actions that can help maintain their social licence to operate. Stakeholders, including governments, expect the industry to meaningfully engage the Indigenous communities and other residents in the areas in which they operate. Insufficiently mitigating the impact of a mining operation on these communities—or making public sustainability claims that are inconsistent with how your ESG performance is perceived locally—carries significant reputational risks and can threaten a mining company’s ability to operate. Our analysis found many mining companies are taking an important step to managing this risk by disclosing a strategy and/or policies around Indigenous relations.

But we also found areas where mining companies can take additional steps to manage ESG-related risks. For example, many mining companies face workforce risks that stem from operating in a historically male-dominated industry. Discrimination and harassment have serious repercussions on individual workers and can tarnish an employer’s brand, making it difficult to attract and retain employees at a time when skilled workers are in short supply. Setting measurable diversity targets, and reporting progress against those targets, can be a powerful part of a company’s workforce strategy. But currently, only 10% of mining companies in our analysis take this step.

Companies with high-quality ESG data can meet the sustainability reporting demands of their stakeholders by demonstrating how they’re meeting ESG targets and integrating sustainability into their business model. This is often interwoven with a company’s operational performance, as targets to reduce emissions and water consumption are efficiency targets that also reduce operating costs.

Many sustainable mining frameworks already encourage this at the site level. But our analysis found that not all mining companies incorporate upstream and downstream impacts at the enterprise level and include it in their public reporting. We expect the sector’s ESG reporting in this area to improve as upcoming regulations mandate companies to disclose supply chain risks.

Setting sustainability targets and demonstrating progress against those targets can also improve companies’ access to capital. Many mining companies are eligible for tax incentives and government funding to help reduce their emissions. And several banks now offer sustainability-linked loans to companies that can credibly demonstrate their ESG performance—a requirement that’s expected to become more common for companies seeking financing.

But ESG information needs to be trusted to be used effectively for decision making. Obtaining third-party assurance is a powerful way of building trust in your disclosures. We see many mining companies seeking assurance to confirm their compliance with international mining frameworks and other standards. But this is often not linked to a company’s overall ESG reporting. Our analysis found that only 28% of Canadian mining companies obtain assurance over their ESG metrics, including greenhouse gas emission data. More Canadian companies will want to obtain assurance over their ESG data in the near future as regulators make this a mandatory reporting requirement.

Reporting on how you’re managing your material ESG matters, pinpointing value creation opportunities and mitigating the impact of your business on the environment and surrounding communities can build trust with your current and future stakeholders.

Now, mining companies have opportunities to achieve quantifiable returns through their ESG reporting by recognizing and disclosing the sustainability value that’s often already present in their business. For example, maintaining strong relationships with local residents in the communities in which a mining company operates can help it secure approvals to maintain its current operations and extend the life of a mine.

Additionally, ESG initiatives can improve a company’s financial performance. This can be achieved through operational efficiencies, such as reduced energy use, and lowering staff turnover rates by implementing effective safety and training management protocols. And mining companies that provide raw materials needed in a low-carbon economy can articulate their role in the energy transition—helping to secure capital and customers.

Canadian mining companies have an opportunity to go beyond disclosing data by reporting on how they’re integrating their corporate and ESG strategies in ways that support a sustainable mining program.