INDUSTRY OUTLOOK
TRACKING THE VALUE IN ESG IN THE FIRST OF A THREE-PART SERIES INSPIRED BY DELOITTE’S TRACKING THE TRENDS 2022 REPORT, AUSTRALIAN MINING EXAMINES THE USE OF ESG AS A MEANS TO CREATE VALUE IN THE RESOURCES SECTOR.
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ow in its 14th year, Deloitte’s latest Tracking the Trends report delved into the top 10 issues that could shape the mining over the next 12–18 months. Unsurprisingly, the idea of environment, social and governance (ESG) credentials featured heavily in the report, as mining companies are increasingly reacting to stakeholder influence in the direction and strategy of their businesses. And while outspoken stakeholders may have posed a headache for executives in the past – conceived as meddling or “woke” – the growing sentiment is that their voices represent an important pillar in the development of modern mining. With more than 15 years’ experience in the field, Deloitte partner – sustainability Michael Wood is a leader in advising on decarbonisation, climate-related risk, and climate resilience. He said the rewards of taking ESG seriously could transform a business. “One of the lessons learned that we always start off with our clients is that your first good starting point is to understand your risk profile,” he told Australian Mining. “But the rewarding thing for mining companies is that once you go into that, there’s a whole plethora
of opportunities that are often untapped.”
SETTING UP SUSTAINABLY
In Trend 1 of the Tracking the Trends report, ‘Aligning capital allocation to ESG’, authors Andrew Swart and Andrew Lane outlined the many ways to create a sustainably advantaged business portfolio. Swart and Lane stated that a sustainable portfolio would make a company’s intentions clear to the ESG-minded investor. “As companies move beyond pure reporting of metrics to making ESG an integral part of their strategies, a key differentiator will be the narrative they build for investors around their portfolio and how they are positioning their assets for the long term,” the report stated. Now that companies are beginning to gain confidence that investors will rally behind strong ESG credentials, these opportunities can arise in all kinds of ways, according to Wood. “Capital markets are willing to invest into these opportunities, while there’s also an appetite from investors to commit to targets,” he said. “This allows leaders to gain confidence and start to make their own commitments, but also start to take action, whether that’s through allocating capital or signalling other types of involvement such as AUSTRALIANMINING
partnerships with OEMs or even alliances with competitors.” This kind of action has been seen in a big way in the mining industry over the past few years. Major diversified mining groups – some of which consult with Deloitte – have taken the initiative to bring together companies of all sizes to collaborate on clean energy technologies. For example, the Charge on Innovation Challenge was founded by BHP, Rio Tinto and Vale, who challenged the industry to find solutions for decarbonisation issues in mining and present them for commercialisation. The Electric Mine Consortium presents another example of several major miners combining with recognised mining, equipment, technology and services (METS) companies to decarbonise their respective operations. These kinds of initiatives are what the industry needs, according to Wood, who said miners must focus on two main issues to prove they’re serious about their ESG credentials. “The first is you need to decarbonise your electrical systems, and then you need to decarbonise the way that you move materials,” he said. “The first challenge is typically the easier path to solve, given the
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technology is ready and the cost of renewables is already attractive. “The biggest challenge for this sector is, how do we move material most efficiently and in a less carbonintensive manner?” To meet this challenge, Wood suggested first understanding the life of a miner’s asset and its equipment and when certain decarbonisation solutions will become commercially and technologically available, if that is not the case already. ESG CREDENTIALS ARE BECOMING INCREASINGLY IMPORTANT FOR STRONG BUSINESSES.
