ESG should be a concern for all businesses – not just big businesses

Sarah-Joy Pierce, Director, Strategic Mining Communications

It comes as absolutely no surprise to anyone in the mining industry that ESG (environmental, social and governance issues) has only continued to multiply its reach and impact in 2022.

Ernst and Young’s annual report on the Top 10 business risks and opportunities for mining and metals in 2023 identified ESG as the number one risk – for the second year in a row.

The closely-related concept of social license held the top spot for the two years prior, so the social and environmental impacts of mining on the environment and the fabric of society are more topical now than ever.

I’m aware that some small businesses look at the common manifestations of ESG (think sustainability reporting, net zero targets or biodiversity and environmental management programs) and put it in the ‘too-hard’ basket, as something that’s unimportant to them at their level of business.

Being a small business doesn’t mean you can totally discount governance as a ‘big business’ problem – voluntary ‘good practice’ governance that has environmental and social impacts in mind can actually make your business more attractive to potential investors and even employees.

And if you are well and truly tired of hearing about ESG but not understanding how it relates to your business’s profitability – I’m talking non-ASX listed, in the 50-500 employee, under $50 million turnover space, servicing the mining industry but more than likely diversified into other industries also – then this article is for you.

It’s hard to miss ESG innovations in the mining industry, where coal producers commit millions of dollars to community causes, sports teams or environmental research causes. For a small business, this may be out of reach – but you need to focus on what’s possible for your circumstances.

Nobody’s expecting you to save an endangered species or take on an NRL team’s main sponsorship, but you can proactively make your mark in the ESG space in a number of valuable ways.

Even from a compliance point of view, your business may not need to produce a sustainability report or an environmental management plan, but this article points out two key things you need to know about ESG, and two key actions you can take in 2023 that will have real, positive impact on your business and your clients.

Two key things you need to know about ESG

1. Every business has an impact, and quantifying that impact is important.

Corporate research firm Gartner defines ESG as “a collection of corporate performance evaluation criteria that assess the robustness of a company’s governance mechanisms and its ability to effectively manage its environmental and social impacts”.

Working from the bottom of that definition upwards, first let’s examine impacts. Consider:

• The energy sources that your business uses to keep the lights on

• Your scope 1, 2 and 3 emissions (see Ngaire Tranter’s article on page 54 for a fantastic explanation of these)

• How your business uses land and water resources – whether it’s for an office, a workshop or both

• The travel your employees undertake to get to and from site or workshop

• The noise levels your business produces

• Your safety performance statistics (something we’re all familiar with in the mining industry)

• The number of people you employ that live locally

• Your employee diversity – women and First Nations participation in your business

• Traineeships and apprenticeships that your business supports

• Your links to the local community –sponsoring and participating in education, charities, sports or the arts

• Business partnerships, such as industry networking or the local Chamber of Commerce

• The economic contribution your business makes – and how this fits into the picture of mining’s economic contribution (see the annual QRC data for a big-picture view of this metric)

There are more examples, of course – this is by no means an exhaustive list. But the ability to measure these metrics is the starting point to being able to manage them. You may already measure these elements in isolation –for example, your workforce’s gender balance may be part of your WGEA reporting, or your safety statistics may be regularly updated for use in tenders and pitches. Unifying them into an ESG dashboard shows a level of awareness that would set you apart from your peers – a competitive advantage.

Moving further into the definition of ESG, it’s also important not to forget the ‘G’, being governance. Standards for governance are set at two levels: the laws and regulations that define how we do business in Australia, and voluntary ‘good practice’ governance.

The governance structure that your business uses will affect how you scale, grow and expand – whether or not you report to a Board, external investors or even a larger corporate head office or overseas owner.

Being a small business doesn’t mean you can totally discount governance as a ‘big business’ problem – voluntary ‘good practice’ governance that has environmental and social impacts in mind can actually make your business more attractive to potential investors and even employees. In a tight talent market, this could make all the difference!

Finally, the definition of ESG is about the ‘collection’ of these impact metrics. This isn’t just a one-off consideration for a blog post or fluffy end-of-year report – rather, it’s something that you regularly gather, consider and evaluate.

2. Your ESG efforts can be an asset to your biggest clients.

ESG culture is set at the top of an organisation. The biggest mining organisations all have strong links between their company’s purpose statements and their ESG efforts. Phrases like ‘building a better world’, ‘re-imagining mining’, and ‘responsibly sourcing’ all have strong ESG connotations. These companies can’t achieve their purpose without considering their environmental and social impacts.

What does this mean for you as a small business and a supplier to these companies? You’re unlikely to reduce a global mining company’s carbon footprint overnight – but you could supply a technology that helps them measure their carbon outputs, process minerals more effectively, use an alternative fuel source or even boost their diversity efforts. If none of those apply to your business’s area of your expertise, think of this: just by being in business with a big mining organisation, you are providing valuable links to the community that’s local to their operations.

Talking about your value in ESG terms to your clients and how you can help them achieve their goals and purpose is a basic public relations approach – building a mutually beneficial relationship.

This approach comes with a caveat: don’t be seduced by the fact that ‘everyone else is doing it’. Your ESG efforts should have specific relevance and value to your company – not just a generic approach to ‘keep up with the Joneses’.

Two key actions to take in 2023

1. Educate yourself on what ESG means to your business

Modern-day ESG has its foundations in sustainability and the responsible investing movement. But it’s a concept that’s evolved significantly since most small business leaders graduated from their business degree or started their apprenticeship.

That’s why updating your knowledge of the concept of ESG is so important, so you can engage in a way that’s meaningful for you and apply it to your business sensibly.

However, when you’re evaluating whether to take the time to engage with a course or upskilling effort, examine who’s backing it and teaching it – and ensure that they have a level of resources sector experience. At a minimum, they should be able to clearly explain what major industry players are doing in the area, and give practical advice on what that means for your business.

2. Commit to communicating at least one thing that you’re doing related to ESG

Look back at the list of ESG metrics at the start of this article – odds are, you measure at least two or three of these metrics already. Consider how you can measure these metrics on a more regular basis and take steps towards improving your performance.

The ‘hack’ that most businesses miss here? If you’re making the effort, tell people about it! Talk about your big picture goals – but also the concrete steps you’re taking to get there (not just ‘net zero for the sake of it’). This is a huge source of competitive advantage, and one that’s missed by many industrial businesses.

Communicating your ESG efforts doesn’t literally mean shouting it from the rooftops. But look for suitable opportunities – like your website, LinkedIn, capability statement, or even your tenders and pitches for work in the sector. Remember that your ESG efforts can help your clients to shine in their ESG reporting too. It’s an easy win-win, so why not make a good news story that benefits both you and your clients?

ESG is here to stay – and small business needs to get on board. Make 2023 the year that you do just that.