While the rise of environmental, social, and governance (ESG) is impacting many industries, the mining sector in particular is facing a crucial time of change and opportunity.
“ESG has gone from a ‘nice to have’ element of corporate strategy to a ‘must have’ as investors, customers, and those in the company’s supply chain demand more from mining companies,” says Andrew McLaughlin, VP Legal Affairs, General Counsel, and ESG Lead at Major Drilling.
As the demand for critical metals rises and talent needs continue to shift, there will be an increasing need to implement ESG practices across the mining industry. This guide will provide insight into what you most need to know about the impact of ESG in mining, including its role in finding, training, and retaining talent.
The Impact of ESG in Mining: Risks and Opportunities
Stakeholders, shareholders, and investors are increasingly engaging with environmental, social, and governance concerns, especially when it comes to decision-making. As a result, mining companies are being viewed through an ESG lens with more scrutiny than ever before.
The mining industry has a challenging history when it comes to sustainability and environmental impacts. PWC’s Mine 2023 Report found that over one-third of CEOs in the mining industry see their company as highly or extremely exposed to climate-related risks. In terms of risks to the sector, the 2022 Mining & Metals market sentiment survey by White & Case found that ESG was the biggest threat, with 40% of industry participants citing it, along with climate change regulation and shareholder activism.
The same White & Case study found that respondents believe the area of mining and metals that will face the greatest ESG and sustainability-related scrutiny from regulators and investors is local community impact, including human rights issues (25%), followed by emissions from use of materials by customers (20%), and mine site emissions (18%).
This lines up with a statement made by Brad Cahoon, Environmental Lawyer, Shareholder, and US Environmental Practice Co-Leader at Dentons: “In the past, the focus has always been on the ‘E’ in ESG in the extractive industries. Sustainability is also being considered from the perspective of social elements, such as labor and governance goals that highlight diversity and inclusion.”
Therefore, mining executives should consider and create policies, performance, and disclosures around all factors related to environmental, social, and governance, including waste, land use, Indigenous relations, supply chain risk management, and more. For hiring managers, it’s important to have policies around labor practices, both from an ESG lens and to attract jobseekers who are becoming increasingly cognizant of labor practices of mining companies.
It’s also important to ensure transparency around these policies through ESG reporting for stakeholders, shareholders, and investors to engage with.
Failure to meet the demand for ESG practices, fill in ESG-related gaps, mitigate risks, and/or provide correct reporting (“greenwashing”) can lead to reputational harm and criticism, short-term production disruptions, loss of social license to operate, increased regulatory costs, falling behind competitors, and reduced funding. According to the 2022 Accenture Global Institutional Investor Study of ESG in Mining, 59% of mining and metals investors want miners to aggressively pursue decarbonization and be market leaders in that effort, and 63% said they would be willing to divest or avoid investing in mining companies that fail to meet their decarbonization targets.
When implemented effectively, ESG performance and practices can have a profound positive impact on mining companies, including increasing their chances of giving them a competitive advantage, boosting their bottom line, and encouraging increased investor support and funding.
“Given the number of investors and lenders that have publicly committed to considering ESG issues when making investment decisions, companies can leverage their ESG policies to attract investment,” says Jennifer Wasylyk, a partner and co-chair of the banking and specialty finance and ESG groups at Cassels Brock & Blackwell LLP.
Crucially, ESG can also lead to enhanced talent attraction and retention and assist with obtaining permits.
Changing Hiring and Talent Needs
With the increase in mining activity driven by ESG and critical minerals demands, such as those required for electrification, companies need more talent than ever before. Unfortunately, a lot of mining companies are facing talent shortages, and a 2021 survey by the Mining Industry Human Resources Council of Canada found that 70% of respondents aged 15 to 30 said they probably or definitely would not consider a career in mining.
With those born between 1981-2012 making up 72% of the workforce by 2029, it will be especially important to appeal to this cohort, of which 46% of Gen Z and 55% of millennials say ESG is important to them. To meet hiring demands, attract new talent, and increase employee satisfaction to reduce turnover, especially from this up-and-coming talent pool, mining companies should have ESG policies in place that focus on sustainability and diversity, equity, and inclusion, and include mention of these policies on their website and job boards.
As technology changes, the skills needed within the mining industry are also changing. According to a 2020 study by the World Economic Forum, mining executives feel that technology-use skills are in the highest demand. This means the need for skills such as data analytics, robotics, and automation are on the rise, replacing traditional skills within the field.
According to PwC’s 26th Annual Global CEO Survey, two-thirds of mining CEOs believe that skill shortages will have a large or very large impact on profitability over the next decade, while their 2022 Global Workforce Hopes and Fears Survey found 39% of workers at metals and mining companies said they’re concerned about not getting sufficient training in digital and technology skills from their employer. This indicates both a need for new talent with these skills and retraining for current employees.
Conclusion
Mining plays a special role in the global race for sustainability. In order to rise to the occasion, mining companies will need to determine how they will negotiate with ESG and its profound impacts on the industry.
With such significant and rapid changes reaching into every facet of industry operations, finding the right talent is more important than ever. Combining our dedication to and understanding of ESG with our decades of experience and deep knowledge of the changing mining talent pool, TPD can help you find the right mining talent, guaranteed.