The 'S' in ESG
As most readers will know, earlier this month LBMA released for public consultation version 9 of the Responsible Gold Guidance.
A key change was to add greater definition to Environmental Social and Governance (ESG) requirements in refiners’ primary supply chain.
Of the three letters in the acronym, environment and governance risk indicators are likely more familiar to LBMA refiners. Human rights abuses or corruption or sourcing from a UNESCO World Heritage Site, for example, are clear red flags that are easily identifiable and remediable.
But what of the 'S' in ESG?
We would argue social factors are the ones most likely to be overlooked in an assessment of suppliers’ operations. What health and safety practices do they have? How well compensated are workers in industrial mines that supply the refiner? How good are relations between a miner and the host government or community in which the mine is located? What are the longer-term consequences of ignoring social issues or local grievances—not just from a reputational point of view, but for the bottom line?
This issue was raised during a presentation on the hidden risks of outsourcing labour in mines in Peru, Colombia and Bolivia at the annual OECD conflict minerals forum.
The report, by Dutch labour organisation CNV, highlighted several factors worthy of consideration, including:
- Legal frameworks vary across countries, and their existence does not guarantee equal labour rights.
- Outsourcing labour in the mining industry is a common practice in Peru and Colombia and is done as a cost-saving measure.
- Working conditions fall short of international labour standards, with outsourced miners being paid less, receiving short-term contracts, fewer benefits, and they see very low unionising rates.
- Outsourced miners do not work on skilled activities, but are usually hired for the lower-skilled, yet higher-risk, activities such as digging, crushing, and blasting.
Proactive ESG monitoring as risk management
CNV also underscored the importance comprehensive site visits play in uncovering such issues during the due diligence process. The union also argued companies need to better understand human rights risks beyond those outlined in the OECD Guidance, including expanding Annex II risks to include outsourcing and threats to freedom of association.
The issue is not a semantic one. Social grievances are often at the heart of growing populist calls for resource nationalisation—like the one that appears to have propelled Socialist Pedro Castillo to power in Peru this month. With campaign rhetoric focussed squarely on the mining sector, and the lack of local beneficiation, what happens next is keeping analysts guessing.
Peru is obviously not the first country to face the nationalisation bogeyman. Many thought the same would happen with post-apartheid South Africa, only to see it implement some of the most advanced ESG legislation in the world. That example might serve as a template of how to diffuse the stronger barbs of Castillo’s anti-mining rhetoric and meet the Social requirements in an ever broadening ESG landscape.
LBMA RGG Consultation Webinar
As previously mentioned, LBMA recently launched the first round of public consultations on version 9 of the Responsible Gold Guidance (RGG). The draft and an accompanying explainer document are available for download. We welcome all feedback. The deadline for responses is Tuesday, 20 July.
Those wanting to learn more about the RGG draft are invited to watch our webinar available now, led by LBMA's Chief Technical Officer, Neil Harby, and consultant Nirali Shah, who walk participants through the salient changes and answer questions.
Responsible Sourcing News
- Brazil: New clearing of forest in protected area in Brazil linked to mining. Mongabay
- Canada: Karora aims to be a carbon neutral junior gold miner. Canadian Mining Journal
- Colombia: In less than a generation, legal mining in Colombia deforested over 120,000 hectares. Mongabay
- Colombia: Colombia drug trafficking money laundered through modified gold. InSight Crime
- Ecuador: Lundin Gold connects students to education in Ecuador. Canadian Mining Journal
- Peru: Government formally ratifies National Plan on Business and Human Rights. Peru Support Group
- Peru: 3 security challenges facing Peru’s incoming President. InSight Crime
- USA: A tiny Alaska town is split over a goldmine. At stake is a way of life. The Guardian
- Finland: Study says rising mercury levels in fish linked to climate change. Open Access Government
- Germany: New Supply Chain Law a step in the right direction: Law’s gaps should be fixed by next Government. Human Rights Watch
- Ireland: The women who keep the gold in Ireland's ground. The Ecologist
- Norway: Norwegian Parliament adopts the Transparency Act. European Coalition for Corporate Justice
- Worldwide: Responsible Minerals Initiative releases ESG standard for mineral supply chains. Responsible Business Alliance
- Worldwide: How lawyers are cleaning up supply chains. FT
- Report: Does formalizing artisanal gold mining mitigate environmental impacts? Deforestation evidence from the Peruvian Amazon. IOP Science
Upcoming Webinars & Events
13 September – 10 October: Gender and Mining Governance E-Learning Course, IGF
20 September: Virtual Precious Metals Conference, LBMA/LPPM
20 September: London Networking Reception, LBMA/LPPM
6-9 October: IPMI 45th Annual Conference, IPMI
4-8 October: ESG Week: Energy and Mining Forum, Natural Resources Forum
12 October: LME Annual Dinner, LME
19 - 20 October: Responsible Business & Responsible Minerals Conferences, RBA/RMI
19-20 October: IGF 2021 Annual General Meeting, IGF
1 December: LBMA/LPPM Annual Dinner, LBMA/LPPM