​Going Green – A Major Consideration For Mining CEO's

Companies go 'green' for various reasons, many of which overlap. At one end of the scale we have owners, boards, and executive managers who are so dedicated to sustainability they're doing it regardless, even if it means having to create a niche market for their products. At the other end, we have those who couldn't care less because they're all about the money, but find themselves literally being forced to lift their game because consumers and investors are pushing the issue with their wallets. Between these extremes are the ones genuinely looking to find a balance between profitability and the increasing need to consider sustainability for environmental and humanitarian reasons.

CEO's of mining companies should be looking to clearly place their companies somewhere along this scale, and preferably towards the 'greener' end if they want to remain viable in these disruptive times. Increasingly, funding from sources like Breakthrough Energy Ventures will go to companies that are committed to finding and producing ethical minerals and products. These funds are backed by big money (think Bill Gates, Richard Branson, Jeff Bezos etc) and are on a mission to make the world a cleaner, greener place.

Investors too will be looking to put their money into investments that are 'doing the right thing by the environment', and by their workforce as well. Cobalt from the Democratic Republic of Congo is a classic case in point, tainted with child labour, pollution, and exploitation issues as it is. Socio environmentally conscious companies (like Apple and BMW) have already moved away from sourcing their cobalt from mines associated with these practices. More will, and are, following.

Indeed, the who's who list of 'green' companies has some big global names on it. Names like Panasonic, IKEA, Nike, Unilever, IBM, Adobe, Starbucks, Nespresso, Nestle, Heineken, BMW, Dr Pepper and many others. These companies have committed to use ethical supply chains and made significant operational changes to reduce their carbon footprint. You'll immediately notice that there aren't too many mining companies on these lists!

Does this mean mining companies aren't taking 'going green' seriously?

Far from it. Some companies already have 'sustainability committees', demonstrating a commitment to change. Big guns BHP, Rio Tinto, and Anglo American are likewise all committed to toning down their carbon production in their own way, at their own pace. Admittedly, that pace is accelerating and will likely accelerate even faster over the next decade. It will be spurred on by the glimpse we've now had of what life would be like if we cut our emissions drastically and rapidly. 

Anglo and BHP for instance have reinvested / invested in potash, an environmentally stable fertiliser. At the same time they're reducing their interest in that most polluting of all commodities – COAL. BHP is considering retaining only its metallurgical coal assets and getting rid of its thermal ones. Rio Tinto is one step ahead – it has already divested itself of all its coal interests. Conversely Glencore, another global major, is ramping up its coal interests.

However, the key word here is 'divested'. By and large, they haven't shut down these coal operations. They've merely on sold the problem to someone else. Meanwhile they're ramping up their investment in 'greener' commodities like potash to offset their balance sheets, and improve their carbon footprint in the short term. Potash though is not particularly lucrative. There are already plenty of suppliers and it's a tight market. New players, particularly big ones, could force prices down and make it unviable for those with high overheads to continue. Further, it will likely cost these big guys more to get the projects up and running than what they'll make from them. But – potash is 'green'….

BHP was going to sell one of its nickel assets but decided to hang onto it because of the growing demand for the mineral from electric car battery manufacturers. Lithium likewise is on the mineral target list for the same reason. However, to be truly sustainable the focus needs to be not just on finding and mining the commodity but on developing better, more sustainable ways to do it.

The industry is getting there, slowly.

Overall, it has to be said that whilst the industry is certainly moving in the right direction, it does need to do a lot more than it currently is. The fact is that when compared to many other industries, mining's global emissions reduction targets are conservative at best. They're either short term and/or relatively low, or they're more about 'reducing emissions intensity' rather than specific goal setting quantified by meaningful numbers ie 50% reduction by 2050.

IPCC (Intergovernmental Panel on Climate Change) data indicates it will require a 50% reduction in CO2 emissions by 2050 across all sectors of industry, including mining, to keep global warming below the 2C limit set by the Paris Agreement. If the target is lowered further to 1.5C, it will require an 85% reduction in CO2 emissions AND probably also carbon offsetting of the remaining 15% via initiatives like reforestation, and carbon capture / storage.

Coal Mining – A Sector In Trouble

How mining companies achieve decarbonisation goals will depend on what they mine, where those mines are, what sort of power they use and so on. Coal mines face an uphill battle on several fronts. By far the biggest source of operational emissions comes from fugitive coal-bed methane that escapes during the mining process. There are technologies that address this by removing the methane before it gets into the environment. However, whilst these technologies are gaining traction within the industry, they aren't yet in widespread use. But, if coal mining is to continue in an ethical and eco-friendly way, they need to become widespread.

Reducing emissions at the coal front however is just one part of the solution. Coal powered electricity generation is responsible for over 20% of global CO2 emissions but for mining it's classed as a ' scope 3 emission'. In other words, coal miners can dig it up 'ethically' if they adopt the aforementioned technologies, but because they're not directly responsible for the subsequent emissions created by those who buy and burn it, coal mining will remain an environmental issue. On the other hand, it's probably fair to say that investors and the public will increasingly expect miners to become more accountable by factoring in the end use environmental impacts of products like coal. Incidentally, this scenario isn't limited to coal – there are plenty of other 'scope 3 emission' commodities.

Greening The Non-Coal Mining Sector

For miners not involved in coal, there are numerous ways already available to green up their act. The most obvious is changing over to renewable energy sources. Sun, wind, water, geothermals, biodiesel, and hydrogen are already powering an increasing number of mining operations around the globe. The advantages in doing so include:
  • Operational cost savings
  • Less greenhouse gas emissions
  • Ongoing sustainability
  • More efficient energy use
  • Additional employment opportunities

Electrifying mining equipment is another. Although Newmont's Borden mine in Canada is 100% electric, this aspect of the industry is currently in its infancy. However, as the technology advances and becomes more economical we can expect to see a big push towards the use of electric pit vehicles and other equipment. Incidentally, this will help fuel the demand for battery minerals.

Ultimately how, when or why miners go green will depend on priorities and circumstances. Some will do it because it benefits their bottom line. Others will do it as a matter of social responsibility. A few will even do it because their CEO is committed to the cause. There will also be those who don't 'bother' but as investors and consumers increasingly vote with their wallets, will they become the exception rather than the rule?
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