WHAT WE HEARD: Sustainable Mining for Development
Mining investments and economic activity on an annual basis dwarfs the amount of official development assistance that developing countries receive from Canada by at least a factor 10x. Yet, it seems that Canada’s global development strategy and policies pay little attention to the role of mining in promoting positive development outcomes.
Instead, as of now, Canadian mining companies are mostly asked to be compliant – to respond to requirements and minimum standards. These standards are improving, and financiers are increasing pressure but given increased global competition, and simply from a moral perspective in the face of increasing global inequalities – it is imperative to define Canada’s success in mining beyond compliance.
We asked a panel of experts what might be done to make Canadian mining more effective as a vehicle for creating sustainable development.
Here is what we heard:
Canadian mining companies are increasingly pressured to comply with strict ESG standards. One key driver is access to capital. Investors around the world are sharing their concerns on the effects of climate change and the material impacts it has on businesses. This has driven more businesses adopting Environmental, Social, and Corporate Governance (ESG) frameworks to help environmentally and socially align their companies to the changing world. The SEC Task Force was created as an enforcement mechanism to ensure that businesses are disclosing material changes to their core business functions and that businesses filing their annual and quarterly reports are disclosing the impacts that the environment, social movements, and corporate governance issues are having on their businesses.
Clearly defining and informing standards on the other hand is still a challenge. The mining sector has made great progress in codifying Environmental and Governance risks and impacts. This is thanks to the works of the Task Force on Climate-Related Financial Disclosures (TCFD) and the Sustainability Accounting Standards Board (SASB).
- The Task Force on Climate-Related Financial Disclosures (TCFD) which develop recommendations for more effective climate-related disclosures that could promote more informed investment, credit, and insurance underwriting decisions and, in turn, enable stakeholders to understand better the concentrations of carbon-related assets in the financial sector and the financial system’s exposures to climate-related risks.
- The Sustainability Accounting Standards Board (SASB) has developed a set of industry based standards across 77 industry specific areas to help account and reflect the governance and management of a companies environmental and social impacts arising from production of goods and services. The use of these kinds of standards help improve transparency, risk management, and performance of a business while providing investors more sustainability based information that is materially relevant to their decision making process and voting decisions.
It is recognized that both TCFD and SASB standards do a really good job of guiding mining companies in their disclosure practices and their environmental materiality assessments. But what stakeholders in the sector have noticed is that the Social aspect in ESG are not well defined yet, are the hardest to define and tend to be the piece that gets neglected.
Understanding the social implications and impact of mining activities on communities is not a simple exercise. Mining companies have to figure out what social issues are relevant. Relevant to the communities, which they can understand through consultations, and relevant to their investors – i.e. which issues may have materiality on their business and their investors decisions. It is difficult to fully understand and potentially impossible to predict fully what will matter over the entire course of a mining operation. Circumstances, priorities and needs change over time. When mining companies own the goal of making their host communities better off, they not only mitigate the risks of breakdown in their social license to operate, but they in fact deliver positive value. Yet the chasm between doing the minimum for risk mitigation vs. truly embracing shared value and community benefit principles isn’t consistently crossed by mining companies, and no standard allows one to evaluate where on the spectrum a mining company resides.
The stakes in raising operating standards are high. From a principle and moral standpoint, the growing social inequalities we see in the world are unacceptable. From a risk of doing business perspective, left unaddressed these inequalities will end up affecting the social license to operate for mining companies. And in a self interested commercial way, Canada is facing steep competition from other mining giants in the world like China. So if we don’t differentiate ourselves, we will lose.
When mining companies operate in low resource countries and regions, it is imperative that they address the impact of their work in a holistic way. No mining operation today can ever hope to operate in isolation from local communities. The connections need to be economic and social – i.e. clearly define how communities benefit from the wealth and activity created by the mine. They must be environmental – in protecting and upholding the health and sustainability of the region and communities affected by the mine, and from a governance standpoint they should strengthen the local and national governance and accountability structures.
Despite the urgency, there is a lack of momentum in defining ambitious, forward looking ways Canadian mining can make a greater positive impact. A few things could be done immediately for Canada to lead more boldly in creating sustainable mining:
- Promote the adoption of sustainability and reporting frameworks that emphasize mining company efforts to maximize economic benefits that go beyond simply mitigating harm. Standards such as the Initiative for Responsible Mining Assurance (IRMA) require mining companies to explain their efforts at creating host community benefits, and act to meaningfully change mining company behavior to be more developmental. For the specific issue of local procurement, supporting the adoption of the Mining Local Procurement Reporting Mechanism (LPRM) by Canadian mining companies would help them obtain a stronger social licence to operate, and support Canada’s brand of foreign direct investment.
- Promote increased cooperation among bilateral and multilateral donors working to support small businesses, skills building, and other initiatives focused on increased domestic participation in mining sector value chains in countries where Canada provides ODA. Canada can support its own mining companies, while supporting economic development, by acting as a convener to bring together actors working on economic development where there is significant mining activity. In many mining host countries it is not an expensive new program that is needed, but rather someone to coordinate and better harness the multitude of initiatives already in place.
- Provide funding for think tanks, industry organisations and advocacy organizations pushing and helping the mining sector create better development impacts where it operates. There are many actors seeking to improve the development impacts of Canadian mining companies, and the sector more broadly, but funding for such organizations is a constant challenge.
PANELISTS
“Sustainable Mining: What Role Can Canada Play to Better this Industry Both Environmentally & Socially?”
- Michael Proulx; Founder, Managing Director of Anagnorisis Risk Discovery Lab
- Jeff Geipel; Mining Shared Value Founder and Managing Director, Engineers Without Borders Canada
- Ian Pearce; Non-Executive Director, Metso Outotec
- Bethany Borody; Director, Sustainability – New Gold
