The resources sector, long a cornerstone of the global economy, is now at the forefront of a new wave of transformation: sustainability reporting. With growing pressures from regulators, investors, and the public, mining and resources companies are increasingly being held accountable not just for their financial performance, but for their environmental and social impact as well. According to the Global ESG Monitor (GEM) 2024, the quality of sustainability reports across industries, including resources, remains alarmingly low, with many companies failing to meet the standards set by evolving ESG frameworks.
This shift comes at a critical time for the resources sector, which is often viewed as one of the largest contributors to environmental degradation and social disruption. However, it also presents a unique opportunity for companies to demonstrate leadership in responsible mining practices, resource stewardship, and community engagement.
The Impact of the European Sustainability Reporting Standards (ESRS) on Mining
With the introduction of the European Sustainability Reporting Standards (ESRS), mining companies face heightened expectations to deliver detailed, transparent sustainability reports. The ESRS introduces the principle of double materiality, which requires companies to report not only on how environmental and social factors impact their operations but also how their activities affect the broader ecosystem.
For mining operations, this means providing detailed insights into the impact of resource extraction on local ecosystems, water management, carbon emissions, and biodiversity. These factors are critical to managing the reputational risks associated with large-scale projects, especially as mining companies expand into ecologically sensitive regions.
However, according to the GEM report, many resource companies are still struggling with the concept of double materiality. For instance, while resource companies are among the largest users of water and contributors to land degradation, only 28% of companies identify biodiversity as a material issue. This raises questions about how well the industry is aligning its reporting practices with stakeholder expectations and regulatory demands.
Beyond Compliance: Enhancing Report Quality in Mining
Despite the increasing volume of sustainability information being published, GEM’s analysis shows that report quality remains below expectations. The average sustainability report in the resources sector, as in other industries, scores just 45 out of 100 in terms of quality. This gap underscores a fundamental challenge: companies in the resources sector are producing more data than ever but are falling short in presenting it in a way that is accurate, transparent, and useful to stakeholders.
The resources sector, with its complex supply chains and long-term environmental impacts, faces particular challenges in this regard. ESG frameworks like the Task Force on Climate-related Financial Disclosures (TCFD) and the Global Reporting Initiative (GRI) provide essential guidelines, but many companies struggle to incorporate these into their reporting in a way that balances regulatory compliance with genuine transparency.
As Ariane Hofstetter, co-founder of GEM, points out: “High-quality sustainability reports are characterised by features such as accuracy, comparability, and comprehensibility, which many companies still struggle to achieve.” This is particularly relevant for resource companies, which need to communicate the nuances of their environmental management and social governance to a range of stakeholders, from investors to local communities.
Resource Companies and the Path Forward: A Focus on Material Issues
For resource companies, high-quality ESG reporting is more than just a compliance exercise—it is an opportunity to build trust with stakeholders, identify operational risks, and secure long-term investment. Michael Diegelmann, co-founder of GEM, highlights the value of transparent disclosures, noting that companies that excel in ESG reporting are less likely to face capital restrictions.
In mining, where projects often face intense scrutiny, especially in developing regions or areas with vulnerable ecosystems, strong sustainability reporting can differentiate responsible companies from the rest of the pack. Investors are paying close attention to how mining companies manage issues such as land rehabilitation, community relations, and carbon emissions, particularly as these factors increasingly impact financial performance and share prices.
Leveraging GEM’s Tools for Reporting Improvements
Tools like GEM ASSAY™ offer mining companies a way to benchmark their sustainability reports against best practices and identify areas for improvement. GEM’s in-depth analyses and peer comparisons provide valuable feedback that resource companies can use to enhance the accuracy and transparency of their disclosures.
As the first ESRS-compliant reports come into play, mining companies will need to ensure that their reporting goes beyond superficial disclosures. This means adopting a more integrated approach to ESG, where sustainability considerations are embedded into the core business strategy, not just included as an afterthought. Topics such as carbon offsets, energy transition efforts, and mining’s role in the circular economy are gaining traction, and resource companies must be prepared to provide data and narrative around these key issues.
Conclusion: Navigating the Future of ESG in Mining
The resources sector faces unique challenges in the ESG landscape, but it also has a unique opportunity to lead by example. With stricter regulations like the ESRS and heightened scrutiny from investors, mining companies must move beyond basic compliance and focus on improving the quality and depth of their sustainability reporting.
By embracing principles like double materiality, mining companies can not only meet regulatory requirements but also address the growing concerns of their stakeholders, build trust, and enhance their long-term viability. In an era where transparency and accountability are paramount, resource companies that rise to the occasion will be well-positioned to thrive in the new ESG-driven landscape.
