Digital transformation is key to building a path to sustainable mining, addressing sustainability challenges and capturing meaningful, thorough ESG (Environmental, Social, and Governance) data. The mining industry plays a crucial role in providing minerals for everyday devices like smartphones and electric vehicle batteries, but mining operations also carry environmental and social risks. The mining community has been conscious of these risks for many years, and now there is a growing movement to modernize data capture to drive ESG strategies to mitigate and better report on these risks.
By adopting new technologies, mining companies can enhance transparency, improve data quality and minimize greenwashing. Digital solutions enable closer monitoring of environmental and social impacts, ensuring responsible practices and reducing adverse effects on local communities and ecosystems. Moreover, digital transformation allows for efficient ESG accounting, controls and disclosure, alleviating the reporting burden and facilitating informed decision-making.
ESG factors have become integral to business functions across industries, and mining should adapt to meet the increasing demand for reliable and transparent ESG information. Embracing digital transformation not only drives efficiency gains for miners but also de-risks mining activities, creating investment opportunities. By effectively presenting their sustainability efforts, mining companies can showcase their positive contributions to ESG practices and build trust with diverse stakeholders.
Government regulators, financial auditors, potential investors, and acquirers all require robust and transparent ESG data captured directly from mine sites. By embracing digital tools and processes, mining companies can meet the needs of these external stakeholders and demonstrate their commitment to responsible practices, paving the way for sustainable mining. Digital transformation in the mining industry is essential for overcoming sustainability challenges, capturing reliable ESG data, and fostering a more transparent and accountable approach to mining operations.
In today’s mining industry, the effective management of environmental, social, and governance (ESG) data is of paramount importance. Mining companies are tasked with capturing a wide range of ESG information, from tracking water usage and wildlife conservation to ensuring the health and safety of employees and conducting site inspections. However, the prevailing reliance on manual entry tools such as paper notebooks and spreadsheets often leads to disorganization and data loss. This article highlights the significance of adopting digital data management solutions to improve operational efficiency, ensure regulatory compliance and enhance transparency in reporting.
Enhancing Permitting Efficiency and Social License
As mining operations progress from exploration to production stages, obtaining permits and permissions from regulators and governments becomes increasingly vital. Failing to provide complete and well-organized data records in a consumable format can significantly delay the permitting process and raise the risk of encountering social license challenges. Given the current global emphasis on expediting permitting times to secure critical minerals, mining companies stand to benefit from embracing digital transformation. The Mineral Security Partnership (MSP), recently announced by several nations, underscores the need for sustainable mineral production, processing and recycling to maximize economic development opportunities tied to geological endowments.
Business Efficiency Gains
The advantages of integrating new digital tools into mining operations extend beyond streamlining permitting processes and ensuring transparency and accuracy. Embracing a paperless approach for instance, creates a centralized and easily shareable log of records among colleagues and managers. This eliminates the burden of quarterly and yearly reporting, reducing consulting costs and facilitating more efficient decision-making. By adopting digital data management solutions, miners can unlock significant business efficiency gains that are crucial for optimizing ESG processes.
Digital Transformation in Mining
The mining industry has already witnessed impressive examples of digital transformation, particularly regarding automation in production-stage companies equipped with large fleets of vehicles. Automation has become a cornerstone of mining operations, enhancing productivity, safety and operational performance. Digital twins, for example, enable remote performance and worker safety analysis, further exemplifying the industry’s commitment to innovation. Major mining companies like Newmont and Anglo-American are actively employing these technologies, setting the stage for the possibility of fully automated mines that minimize risks to human life while meeting the demand for critical minerals.
Preparing for Disclosure Requirements
To navigate the evolving landscape of ESG reporting, mining companies must proactively integrate the forthcoming disclosure requirements into their reporting processes. International accounting standards will require sustainability disclosure alongside finance statements. Regulatory bodies such as the Securities and Exchange Commission (SEC), the United Kingdom (UK) and the European Union (EU) are introducing frameworks like the Corporate Sustainability Reporting Directive (CSRD). Furthermore, these reporting standards will require the adoption of internal controls that can support an independent audit.
Below is a summary of some sustainability reporting standards mining companies will be subject to.
International Accounting Standards
Beginning in 2024, International GAAP (IFRS) will require sustainability disclosure reporting as spelled out by the International Sustainable Standards Board (ISSB). The ISSB’s initial requirements require climate reporting similar to the Task Force on Climate-related Financial Disclosures (TCFD) framework. In future years reporting will be expanded to include industry-specific ESG factors that are material to financial stakeholders. Industry-specific ESG factors are expected to follow the SASB standards, which merged with the ISSB in 2022.
Sometime in 2023, the SEC is expected to adopt climate reporting requirements for all US public companies. The SEC proposal requires management to expand climate reporting and develop robust internal controls over climate disclosures. A registrant’s emissions data will be verified by an independent verifier and reported in its annual financial statements. Climate-related disclosures such as risks, opportunities and emissions targets will be reported in the Management, Discussion and Analysis (MD&A) section of the annual Form 10K.
The EU recently enacted the Corporate Sustainability Reporting Directive (CSRD) for reporting years beginning in 2024. The CSRD initially requires larger EU companies to prepare annual corporate sustainability reports (CSR) covering 10 detailed disclosures as outlined by European Sustainability Reporting Standards (“ESRS”). ESRS intends to expand on these disclosures for companies in high-impact and energy-intensive sectors such as coal mining, mining and oil and gas.
The UK’s climate disclosure requirements apply to UK-listed and certain large private UK companies. Companies that fall within the scope must indicate whether they have published disclosures consistent with the TCFD’s recommendations in its annual financial report, or if not, explain why not. In future years, the UK is planning on requiring companies to report ISSB sustainable reporting disclosures.
Internal Controls
The breadth of sustainable factors required to be reported by mining companies goes well beyond most firms’ current “annual and manual” method of sustainability reporting. To meet new reporting requirements, mining companies must adopt ESG reporting controls that are on par with financial controls. Companies will need to incorporate processes that aggregate decentralized ESG Data in an automated fashion to create auditable reports that meet growing regulatory demands.
Mining-Specific Frameworks
Mining companies should consider one of several frameworks that will help assess materiality. Picking the appropriate framework can help companies prove performance to capital markets and prepare for audits in the future. Among these are the Initiative for Responsible Mining Assurance (IRMA), Towards Sustainable Mining (TSM), the Global Reporting Initiative (GRI) and the International Council on Mining and Metals (ICMM).
The consensus is that much like other financial disclosure requirements, ESG data will be a major component of company valuation in capital markets with similar reporting and materiality concerns for companies. Mining executives should familiarize themselves with these requirements, identify the applicable standards and develop a comprehensive digital strategy to capture the relevant data categories within these frameworks.
As the mining industry continues to embrace the importance of ESG considerations, effective data management emerges as a key differentiator for companies seeking investment in capital markets. By adopting digital tools and processes, mining executives can not only expedite permitting times and enhance transparency but also realize significant business efficiency gains. Moreover, staying ahead of forthcoming disclosure requirements is crucial for maintaining compliance and securing long-term sustainable mining practices. As mining companies navigate the path toward improved ESG performance, investing in robust data management systems becomes a strategic imperative that will unlock numerous benefits while meeting the demands of a changing world.
Authors: Joe Holman, Principal and Practice Leader, ESG Services |[email protected] and Trevor Jones, CEO, Lynx Global Intelligence
Contact Us
For more information on this topic, contact our ESG Services Team today.
