Over the last few years, over 140 mining companies across the world have established strategies to achieve net-zero emission reduction targets and decarbonisation, according to a report on the mining sector from Global Data. However, stakeholders and advocates of sustainable mining are concerned that the actual emissions reductions from some of the 140 companies are mixed.
In recent years, the mining industry faced a backlash after the destruction of ancient aboriginal rock shelters in Australia, inhumane conditions at cobalt mines in the Democratic Republic of the Congo, and the Brumadinho dam disaster in Brazil that resulted in the death of 270 people. Reports indicate that the mining industry is currently responsible for 4%–7% of global greenhouse gas emissions, according to consultancy McKinsey.
The key challenge for the industry lies in having to reduce its emissions while ramping up production of critical minerals to fuel the energy transition. As I stated in previous articles, environmental, social and governance (ESG) strategies are increasingly important, and the mining industry is gradually responding to stakeholder demands to comply with both environmental and community standards that seek to protect indigenous people and their heritage.
Technology
Several sustainability reports, including Newmont Corporation’s, indicate that technology remains pivotal to achieving a carbon-neutral future. “The specific opportunity over the next five years is to transform the carbon footprint of mining corporations’ operations through technology investments, which involves embracing innovation,” said KPMG global mining leader Trevor Hart. Hart pointed out there is a need for companies to make funds available to balance expansion and ESG goals.
According to a report from the World Bank, clean energy technologies need more materials and minerals than fossil fuel-based technologies. Greater ambition on climate change goals, as outlined by the Paris Agreement, requires installing more climate and environmentally friendly technologies and will therefore lead to a larger material footprint,” according to the World Bank. One example is the commodities needed for electric cars versus traditional combustion engine vehicles; a battery-electric vehicle needs six times more critical minerals.
Biggest risk
ESG is also seen as the biggest risk for disruption by mining executives in 2022, according to a survey in KPMG’s global mining report. In KPMG’s 2023 Global Mining Outlook, for the first time focus was not on the soaring or declining prices of commodity prices; rather, KPMG highlighted the emerging threat of high greenhouse gas emissions and carbonisation to the environment and community livelihoods. The KPMG report underscored the need move to carbon-neutral operations by mining companies by 2050.
A recent survey of more than 430 mining and metals executives indicated that global mining corporations are optimistic they can meet the demand for clean energy minerals by 2050. Therefore, KPMG forecasts that global miners must face the challenge or risk a bleak future with the decline of their profitability, or risk communal resistance. However, KPMG’s 2023 Global Mining Outlook indicates the vast majority of executives surveyed – 79% – are confident the sector can cater to future demand.
The notion is that the agenda of global miners on decarbonisation is not merely a cost of doing business, but a vital growth opportunity for the industry. This indicates that minerals are at the heart of clean energy technologies that will stimulate future demands for commodities over the next two decades. KPMG International’s International Council on Mining & Metals (ICNN) president and CEO, Rohitesh Dhawan, said the sector is entering a new phase and they have no option other than to embrace ESG and CSP.
Renewable energy
In terms of reducing emissions in recent years, results have varied across regions. Some mining companies have reduced their emissions, while others saw a steep rise due to COVID-19, according to GlobalData. With future demand for gold and other minerals expected to rise, the challenge will be reducing emissions without reducing production or output. Therefore, future discussions on carbon emissions and sustainability plans will revolve around the use of renewable energy, either directly via on-site power plants or through purchasing power assisted by diesel displacement efforts. “In some parts of the world, diesel-fuelled mining vehicles are gradually being replaced by those powered by electric batteries or fuel cells,” explains GlobalData.
This was confirmed in a survey by GlobalData, in which senior managers of 139 mining sites were asked what they thought were the most viable options to minimise emissions in future. Over half of the respondents saw greatest potential in electric vehicles, while 41% saw on-site power as a viable option. Hydrogen-powered vehicles were the least-selected option, with 16%.
This indicates a new mindset on the use of renewable energy for mining, but it is unclear whether the situation is reflecting in Africa – which is host to the largest global mining companies. According to the GlobalData survey, Brazilian mining company Vale’s use of renewable energy resulted in the company having an 87% share of its power consumption from renewables. Others are investing in on-site renewable power, such as solar power plants, to be less dependent on fossil fuels.
Energy transitions and community livelihoods
Other studies have shown that energy transition is impacting community livelihoods, and calls for dialogue between companies and communities. Reports indicate that global efforts at moving to a low-carbon economy are affecting demand for fossil fuels, minerals and renewable energy. Besides, this shift is impacting government revenues, investment decisions, economic development opportunities and environmental impacts. Undoubtedly, demand for fossil fuels has major implications for the livelihoods of communities living near extractive operations and energy projects.
In 2022 the Extractive Industries Transparency Initiative (EITI) launched a project titled ‘Engaging communities in a just transition’ with support from the Ford Foundation. Implemented in four communities in Colombia, Ghana and Indonesia, the two-year project explores how the energy transition is impacting community livelihoods and the obstacles communities face in accessing and using data and dialogue platforms. The initiative seeks to strengthen the EITI’s role in ensuring that community priorities are better considered in public debate and decision-making on the energy transition.
EITI Global highlights
Also, on June 15, 2023 in Dakar, Senegal, the EITI held its ninth Global Conference during which it supported efforts for the energy transition to be addressed more explicitly through the EITI Standard. Themed ‘Transparency in transition’, the event was the first Global Conference of the EITI held in Africa since its formation some 20 years ago.
At the conference, the EITI Standard was launched – basically aimed at increasing understanding of the impact from energy transition; helping address corruption risks; promoting gender equity; and improving revenue collection across 57 implementing countries. Among other topics, conference participants discussed win-win solutions for resource-taxation, and using data and dialogue to fight corruption and deliver sustainable mineral supply chains. Furthermore, the conference was aimed at encouraging stakeholders to use EITI Standards to strengthen reporting on gender participation in the industry and manage its social and environmental impact.
The community
There are growing concerns that the extractive industry is not living up to its social responsibilities in some countries and in mining communities. Anokyi and Sanzule are coastal settlements in the Ellembelle district of Ghana’s Western Region. Community livelihoods have historically depended on farming and fishing. But over the past decade, the area has transformed into a hub for Ghana’s oil and gas industry. Anokyi hosts a processing plant that receives gas from the offshore Jubilee and TEN fields, while Sanzule hosts an onshore facility that receives oil from the Offshore Cape Three Points (OCTP) field.
Ghana’s National Energy Transition Framework acknowledges that shifting global demand for fossil fuels presents risks to the country’s oil and gas industry. It also envisages a major role for natural gas in meeting growing domestic energy needs until at least the mid-2050s. In early 2023, Ghana’s state-owned gas company signed an agreement for the construction of a second gas processing plant near Anokyi, which is due to be completed within the next two years.
Opportunities and challenges
It is expected that the exploration and processing of gas will protect community livelihoods and promote local economies. In some places, farmlands have been replaced by industrial facilities and pipelines, and their construction has disrupted the fishing activities that some community members depend on for their livelihoods. Community livelihoods have further come under pressure due to the rising cost of living, driven by people moving to the area for work in the oil and gas industry.
While the company provided compensation and supported efforts to restore community livelihoods, some community members voiced concern over a perceived lack of consultation. Arguably, the industry has also brought benefits by way of Corporate Social responsibility (CSR) projects. Community health centres, schools, roads and water and sanitation facilities have been upgraded. According to CSR reports, some community members are now employed at the oil and gas facilities while others, including women, run small businesses that provide goods and services to the companies and their workers.
These benefits notwithstanding, community members are insisting on having timely information on how the oil and gas industry is impacting their land and environment. At the top of the priority list is information on jobs and local procurement, social spending by companies and revenues received by their local government, the Ellembelle District Assembly.
Members of the community stressed that such information should be disclosed in local dialects and formats that are easy to access through townhall meetings, on local radio and at community information centres. Thus, the transparent disbursement of proceeds from the extractive industries by local government agencies is critical for ESG and CSR implementation. Community members stressed their desire for meaningful multi-stakeholder dialogue and participation in decision-making related to the extractive industries and the energy transition in future. The best practice in managing stakeholder expectation is through open communications.
