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(The opinions expressed here are those of the author, a
columnist for Reuters)
By Clyde Russell
LONDON, Oct 29 (Reuters) - The boss of one of the world's
biggest mining companies wants the industry to do more than talk
about winning a social licence in an increasingly carbon
constrained world. The problem is that his company and others
probably won't like the solutions.
Rio Tinto Chief Executive Jean-Sebastien Jacques
told the London Metal Exchange (LME) annual forum on Monday that
mining needed to do more on the environmental, social and
corporate governance (ESG) front in order to remain relevant and
profitable as the world deals with climate change.
"Lots of people are talking about it, but I'm not sure there
is action," Jacques said.
Notwithstanding that Jacques himself was talking about it,
he is probably correct that the mining industry, and more
broadly the natural resources sector, has yet to fully get to
grips with how the industry will look in the next 20-30 years.
But if Jacques and other major miners, such as BHP Group
, Glencore and Anglo American, are
looking for concrete action, there is one word they should
consider. Disclosure.
But not just any kind of disclosure, rather an unrelenting,
complete and determined disclosure that encapsulates the entire
spectrum of ESG concerns.
Mining companies should be prepared to fully disclose the
exact amount of carbon released for each tonne of material
produced, and then go even further by disclosing the amount of
carbon generated in turning a raw material such as iron ore into
steel.
Jacques talked of a future in which there is an app that
would allow consumers to see how carbon was emitted in the
production of each product they buy.
It's not beyond the realms of possibility that eventually
all products will have to disclose their carbon footprint,
similar to the way food is currently labelled to show the
breakdown of energy content, as well as fats, proteins and
carbohydrates.
On the social front, mining companies should be prepared to
disclose how much each worker is paid in every location in which
they operate, and not just direct employees, but also
contractors.
This could be compared to the average wage in countries, so
that miners could accurately show whether they were paying
attractive wages.
Mining companies are generally quite good at promoting
social projects undertaken in the communities in which they
operate, but full disclosure could show how much the mining
companies' support was compared to the total income of these
communities, again allowing a better gauge of the total impact
of their operations.
TIME TO LOBBY
On the governance front, mining companies could push for a
global system of full disclosure, so they could see where they
fit in against other industries.
They could also push for global carbon pricing and lobby for
policies that encourage their industry, and others, to switch to
renewable sources of power.
One of the issues raised by various speakers at the LME
forum was whether there should be a premium for commodities
produced with clean power, as opposed to those that rely on
coal-fired energy.
Aluminium is a case in point, with suggestions that the
market should be prepared to pay a premium for smelters that use
hydropower, or whether there should be a tax on those that rely
on coal-fired electricity.
These are tricky issues for companies to navigate, Rio
Tinto's Australian aluminium operations being a case in point.
The company's Bell Bay smelter in Tasmania uses
predominantly hydropower, but its Boyne plant in Queensland
relies on a coal-fired power plant partly owned by Rio Tinto.
Should companies be encouraged, or forced by legislation, to
split their operations into so-called "clean," or low carbon
products, and "dirty," or high carbon products?
If so, what penalties or incentives should be applied?
Should Chinese aluminium or copper exports attract a carbon tax
if they compete against "clean" aluminium produced by companies
such as Rio Tinto or En+?
The overall point is that there is likely to be considerable
disagreement and debate over what is the best path forward for
the mining industry and its aim to stay relevant, investable and
supported by the wider community in the future.
The risk is that the industry remains mainly talking about
the issues and not actually doing that much, or what they are
doing is done in a scatter-gun approach that fails to convince
the public, investors and the bankers that finance new projects.
Rio Tinto's Jacques said the industry needs to talk about
the costs of doing more on ESG, the trade-offs that may need to
be made.
Moving to full and continuous disclosure may be a trade-off
worth making in the long run.
(editing by David Evans)
