GCS sustainable esg

It is generally accepted that sustainable environmental, social and governance (ESG) factors play an important role in the allocation of capital and investment decisions of socially responsible companies. 

It is also accepted that these factors cover a very wide range of issues from the pure environmental side such as climate change, environmental impact and water use, to social issues such as diversity, human rights and consumer protection and governance issues such as employee relations, executive and employee compensation.

This article first appeared in Mining Review Africa Issue 6, 2020
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In the mining project cycle, ESG factors must be considered at an early stage of development. Mining projects must obtain authorisation from government authorities (the project’s licence to mine or mining right) and in so doing undertaking the ubiquitous Environmental Impact Assessment (EIA) is required.

This compels a company to consider all relevant environmental impacts and often certain social aspects must be considered too. The EIA process will consider impacts, quantify such impacts and recommend mitigatory measures that must be undertaken in order to minimise such impacts. This is commonly known as the mine’s environmental management programme or plan (EMP).

The EMP will contain binding commitments that must be made over the life of mine so that the mine’s impact is minimised and mining operations are conducted in a sustainable manner.

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In some mining jurisdictions, the mining right is composed of a bundle of obligations which the mining company must adhere to. The mine plan, the EMP, the Social and Labour plan and closure plan. 

The aim of this multi-faceted mining right is to ensure that in planning the mining operation, adequate resources are allocated to meeting the mining company’s responsibilities. 

By adhering to these commitments the mining company ensures that the benefits of a project are more evenly distributed and in this way goes some way to ensure its social right to mine.

This is no mean feat. Anyone who has been involved in a grassroots mining projects in Africa will know some of the massive challenges faced by mining companies and this is exacerbated in countries with under-developed infrastructure.

The project start-up costs can be huge as the mining company must build infrastructure as it develops the project. But it is here that a mining company can make a massive difference. Building of roads, bridges, water infrastructure and even new towns and communities can have a huge regional impact.

In early 2020 and before the Coronavirus became a global pandemic, mining companies were predicting that global trade tensions (and possible slowdown in demand) and ESG would be the two biggest challenges facing the mining industry in 2020.

However, since then, as the pandemic has massively interrupted global demand and supply chains, the playing field now looks significantly different to what it did a few months ago and survival will be the name of the game for many mining companies, especially the small cap or mid-tier miners.

ESG will play an important role and research shows that companies that had factored ESG into their decision making are better poised to survive.  Those that have a higher level of sustainable ESG compliance are able to attract funds from large funding institutions that incorporate ESG into their funding criteria. 

Sustainability and other environmental factors will already be part of these institutions’ business models. Governance of these ESG entities should be strong as this will provide the leadership and structures to ensure a sustainable and balanced business that stands to face the future.

About the author

Adam Gunn’s role is specifically in charge of the environmental section at GCS, which deals with a wide range of environmental issues ranging from permitting and compliance issues to sustainability and mine closure.