Climate change is one of the most pressing issues of our time, and its effects are already being felt around the world. The mining sector is not immune to these effects – indeed, it is heavily impacted by the consequences of climate change. For example, extreme weather conditions can affect the stability of tailings storage facilities and exacerbate tailings dam failures. Change in climate conditions can also affect water supply and increase the risk of operating in water stresses areas.
At the same time, the sector is facing two overriding challenges: altering production patterns to accommodate dramatic shifts in demand, especially to support low-carbon technologies (renewable energy technologies, including solar panels, wind turbines, and energy storage systems), while making big improvements to the environmental impact of their production footprint.
Mining has always been a major contributor to the global economy, with metals and minerals playing crucial roles in the production of a wide range of goods and products.
The mining industry plays a significant role in Africa, as the continent is rich in minerals. It is believed that the mining sector makes up 4.5% of Africa's GDP and accounts for over a third of exports from over half of African nations.
Mining is an essential industry that plays a vital role in the transition to a low-carbon, sustainable energy system. For example, copper is an essential component of many renewable energy technologies, as it is used in the production of electric vehicle chargers, solar panels, and wind turbines. Similarly, lithium, a metal commonly extracted through mining, is a key component of many types of energy storage systems, including lithium-ion batteries, which are widely used in electric vehicles and other clean energy applications. In addition, the mining sector is also a major producer of critical raw materials, such as rare earth elements, which are used in a variety of renewable energy technologies.
The need to increase production in order to meet the growing demand for metals and minerals needed for the green transition presents a challenge to decarbonisation efforts in the mining sector, as increasing production will require the use of more energy and other resources, which can lead to increased emissions.
How is COP affecting Mining?
The sector is a significant contributor to greenhouse gas emissions, contributing 4%-7% of global GHG emissions, and as global efforts to combat climate change ramp up, there is increasing pressure on mining companies to reduce their carbon footprint and adopt more sustainable practices. As with many sectors, COP27 will also indirectly impact the mining sector through four levers.
1. Increasing carbon regulation
National regulations are getting tighter, which will have an impact on listed companies. The UK has established the Transition Plan Taskforce (TPT), which will outline requirements for listed companies and financial firms to disclose their transition plans.
The Federal Supplier Climate Risks and Resilience Proposed Rule in the US will require federal government suppliers to disclose their GHG emissions and climate-related financial risks and set science-based targets to reduce their emissions.
The US Securities and Exchange Commission proposed rules that would require listed companies to include certain climate-related disclosures in their registration statements and periodic reports, including information about climate-related risks.
The EU’s Corporate Sustainability Reporting Directive (CSRD) is intended to ensure that companies report reliable and comparable sustainability information that investors and other stakeholders need.
Task Force on Climate-Related Financial Disclosures (TCFD) requirements and Sustainable Finance Disclosure Regulation (SFDR) will further put pressure on companies to disclose how they will address climate risks. Hence, it will be important for the mining industry to work closely with governments, civil society organisations, and other stakeholders to develop and implement policies and regulations that support the transition to a low-carbon, sustainable mining sector.
2. More pressure to disclose emissions and set targets
There is growing pressure from investors and the public for companies to disclose their emissions and set net-zero targets. Over 75% of metals and mining companies have set net-zero objectives, with 29% aiming to achieve it by 2025 and 40% by 2030.
Companies in the International Council on Mining and Metals (ICMM) have collectively pledged to achieve net-zero across their Scope 1 and Scope 2 greenhouse gas emissions by 2050 or sooner. However, few have set net-zero targets for their value chain or Scope 3 emissions, which can make up as much as 95% of a company's total footprint.
ICMM is collaborating with the Science-Based Targets initiative (SBTi) to develop a Scope 3 emissions accounting framework for the sector, to enable its members to set detailed, transparent Scope 3 targets by 2023.
This framework may help standardise reporting requirements, which would benefit the sector as the current proliferation of reporting guidelines and requests for information is creating a burden for companies and leading to inconsistencies in reporting.
3. Companies should avoid jeopardising their reputation
However, there are challenges that companies face. A 2020 report from the Transition Pathway Initiative investor group found that none of the ten largest mining companies were aligned with a 1.5C pathway, with only two firms – Freeport and Grupo Mexico – aligned with limiting climate change to a 2C scenario. Additionally, industry bodies will not be pushing members to achieve specific emission reduction targets for their Scope 3 emissions once the framework is established.
To avoid negative publicity, companies should avoid any appearance of greenwashing. Similarly, greenwashing and green hushing can damage the company's image in the eyes of the public. To increase public confidence, companies should align their actions and communications with recent guidance, such as the UN High-Level Expert Group on the Net Zero Emissions Commitments of Non-State Entities and the ISO Net Zero Guidelines.
4. Measure climate risks and adapt to a changing world
As extreme weather events become more frequent and severe, they can have a significant impact on corporate operations and supply chains. Companies are increasingly trying to understand how their assets may be affected by physical climate risks and how climate change may impact transition risks. To mitigate these risks, companies should actively invest in climate adaptation, such as implementing water conservation measures, investing in infrastructure and equipment that is more resilient to extreme weather events. This will help them futureproof their operations. This can include measures such as making assets more secure and collaborating with supply chains to make their businesses more resilient and future-proof.
Overall, it is evident that the mining sector plays a crucial role in addressing the challenges of climate change and promoting sustainable development. By implementing carbon management strategies, mining companies can continue to contribute to the global economy while also supporting the transition to a more sustainable future.
Africa is a resource-rich continent with great potential to attract international investment in the green and blue economies, as well as infrastructure. However, increasing supply of renewables requires significant investment and collaboration between the private and public sectors as well as strengthening institutional capacity. The number of international projects in renewables has been increasing but is still very low. In 2021, there were 71 international project in renewables, including a project that will supply solar and wind energy from Morocco to the UK via 3,800m of subsea cables.
The need for mining in the transition to clean energy is expected to continue to grow in the coming years, as demand for renewable energy technologies increases and the world reduces its dependence on fossil fuels. Therefore, it is crucial for the mining industry to adopt sustainable and responsible practices, including incorporating Environmental, Social, and Governance (ESG) principles into their business strategies, to support the transition to a low-carbon energy system.
The transition to a truly green economy relies on the mining sector engineering a net-zero commodities boom and doing so in a sustainable manner.