Page 44 - Vol 33 Issue 34 2021

Measuring Up - Where is ESG Performance in Extractives?
mining ESG Performance

Measuring Up ­ Where is ESG

Performance in Extractives?

By Busisipho Siyobi

ver the last five years, a growing global movement has made considerable efforts to address key issues
Orelated to environmental, social and governance (ESG) factors in various industries. Historically, ESG
considerations have been ignored because unethical firms preferred to externalise social and environmental
costs, and deterrents against such behaviour were insufficient. This led to widescale environmental degradation
and the abuse of human rights.

Due to growing external pressures, businesses into systematic measures that are universally both governments and companies, respectively,
are being compelled to integrate ESG principles effective and reliable. For instance, Zimbabwe’s to be on board in addressing the issues.
into day-to-day business operations and into their mining sector is plagued by illicit financial flows The RMF study, based on publicly available in for -
long-term investment strategies. Among these (IFFs). IFF’s are estimated to have cost the country ma tion, covered ESG measures relating to com pa-
external pressures are increasing climate change $3 billion a year over the past decade, much of nies’ supply chains. In particular, it exa mined human
concerns, issues of diversity and inclusion in the which is attributable to illegal mining activity and rights, corporate governance, fi nan cial flows, and
workplace, and overall corporate responsibility. the smuggling of gold and diamonds. However, the environment. A sample of 25 companies was
While ESG factors have affected a general there has been limited intervention to effectively selected in the extractive com modity trading space
range of industries, the extractives industry, in address the growing challenge and associated including publicly listed and private companies,
particular, has deep and unique environmental, risks related to illicit financial flows in Zimbabwe. as well as state-owned enterprises (SOEs). The
social and governance risks that can no longer This is largely because IFFs are enabled by evidence shows that most companies assessed
be ignored. A recent study by the Responsible dubious partnerships between local and foreign chose not to disclose information on the payments
Mining Foundation (RMF) assessed that ESG due companies which have poor ethical standards. they have made to governments and SOEs for the
diligence systems within the extractives industry Therefore, the adoption of ESG principles requires purchase of the state’s share of production. This
are typically more concentrated on identifying
ESG risks than on managing these risks.
Pockets of progress Mine Shaft
against the backdrop of
non­compliance

Despite the RMF findings, elements of the glo bal

extractive industries have shown some com mit-
ment to tackle ESG risks and attempt to integrate
ESG principles into their business or investment
stra tegy. For instance, the Eurasian Resource
Group (ERG), a Luxembourg-headquartered mi-
ning company, has established a dedicated ESG
committee to incorporate sustainability prac-
tices into decision-making processes. These
sus tainable practices will include the use of
re newable energy sources and responsible
sourcing of materials for the energy transition.
The committee will be tasked with ESG goal-set-
ting and reporting to ensure accountability. Evi-
dently, corporate commitments to ESG issues are
be co ming increasingly mainstreamed.
While significant efforts are being made to
integrate ESG factors into the extractives industry,
past commitments have not yet translated

44 | AFRICAN POWER Mining & Oil Review Vol33 Issue 34 2021