Mining Firms’ INTERNATIONAL DE VELOPMENT IN FOCUS Climate-Sensitive Initiatives Background Paper for Building Resilience: A Green Growth Framework for Mobilizing Mining Investment Sri Sekar, Kyle Lundin, Christopher Tucker, Joe Figueiredo, Silvana Tordo, and Javier Aguilar INTERNATIONAL DEVELOPMENT IN FOCUS Mining Firms’ Climate-Sensitive Initiatives Background Paper for Building Resilience: A Green Growth Framework for Mobilizing Mining Investment Sri Sekar, Kyle Lundin, Christopher Tucker, Joe Figueiredo, Silvana Tordo, and Javier Aguilar © 2019 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 22 21 20 19 Books in this series are published to communicate the results of Bank research, analysis, and operational experience with the least possible delay. The extent of language editing varies from book to book. 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Contents Acknowledgments  v Abbreviations  vii CHAPTER 1: Introduction  1 The mining industry’s climate imperative   1 The climate-local value creation dynamic   2 The purpose and organization of this report   3 CHAPTER 2: Mining Firm’s Climate-Sensitive Current State Assessment   5 Mining firms’ selection   5 Mining firms’ climate-approach categorization   8 Climate strategists  9 Climate conscious  12 Emerging performers: Grupo Argos and Codelco   13 Climate strategists group: Detailed analysis   14 Notes  28 CHAPTER 3: Industry Outlook: How the World’s Largest Miners View their Role in a Green Economy   31 Motivations for climate-sensitive activities   31 Is there a climate-local green growth nexus that industry views as an opportunity?   33 Note  34 CHAPTER 4: Conclusion: A Proposed Future-State Climate-Local Value Creation Framework  35 Note  38 APPENDIX A: Mining Firms Selection Methodology   39 BIBLIOGRAPHY  45  iii iv | Mining Firms’ Climate-Sensitive Initiatives Boxes 2.1 Rolling out carbon pricing: 3Ps assessment   16 2.2 Treating water discharge: 3Ps assessment   16 2.3 Optimization of haul truck routes: 3Ps assessment   17 2.4 Self-production of energy: 3Ps assessment   20 2.5 Diesel switching: 3Ps assessment   20 2.6 Backfilling during mine closure: 3Ps assessment   24 2.7 Waterless mining: 3Ps assessment   24 2.8 Emission reduction incentive plan: 3Ps assessment   25 2.9 Mine of the future: 3Ps assessment   27 2.10 Mine closure standard: 3Ps assessment   27 3.1 Energy and emissions reductions: Reactions from interviewees   32 3.2 Water management: Reactions from interviewees 33 Figures 4.1 A framework for a new green social license strategy   37 A.1 Climate strategy framework   41 A.2 Reference framework for mining companies’ priorities   42 Tables 2.1 Sample mining companies overview 6 2.2 Proxy variables and maximum scores 9 2.3 Mining firms’ categorization 10 4.1 Mining firms’ initiatives categorization 36 4.2 A green approach to local value creation: implications and benefits 38 Acknowledgments This report was commissioned by the World Bank’s Extractives-led Local Economic Diversification (ELLED) Program: a knowledge program that sup- ports inclusive growth in mineral and hydrocarbons rich countries through innovation, long term competitiveness, and regional synergies. This report is part of a series of background reports underpinning the report on Building Resilience: A Green Growth Framework for Mobilizing Mining Investment, which investigates potential for leveraging the mining industry to drive the uptake of climate-sensitive technologies and practices in emerging and developing mar- kets. The series includes four reports: Methodology and Value Chain Analysis, Mining Firms’ Climate-Sensitive Initiatives, Climate Sensitive Mining: Case Studies, and Policy Approaches to Climate Change in Mineral Rich Countries. The research was undertaken by a team comprising Sri Sekar (Mining & Energy Lead), Kyle Lundin (Mining & Energy Research Analyst), Christopher Tucker (Mining Specialist), and Joe Figueiredo (Extractives Policy Associate), all with Deloitte Consulting LLP, with the contribution and under the guidance and direc- tion of Silvana Tordo (Lead Energy Economist, World Bank), and Javier Aguilar (Senior Mining Specialist, World Bank) who co-lead the ELLED Program. The team would like to thank the Extractives Global Programmatic Support, a multi-donor trust fund administered by the Energy and Extractives Global Practice of the World Bank, for their financial support. The comments of peer reviewers Jonathan Coony (Senior Private Sector Specialist, World Bank), Sven Renner (EGPS Program Manager, World Bank), Alberto Criscuolo (Senior Private Sector Specialist, World Bank), and Michael Stanley (Global Lead, Extractives, World Bank) are gratefully acknowledged. Comments were also provided by Kirsten Lori Hund and Daniele La Porta (Senior Mining Specialists, World Bank) and Thao P. Nguyen (Consultant). Editorial support was provided by Isabella Lacsamana. Special thanks go to Barrick Gold,1 Goldcorp, Newmont Mining, Anglo American, and IAMGOLD for their cooperation.  v vi | Mining Firms’ Climate-Sensitive Initiatives NOTE 1. A merger between Barrick Gold Corporation and Rangold Resources Limited was com- pleted on January 1, ­ 2019. The new company continues to be known as ­ “Barrick.” All ­references to “Barrick” or “Barrick Gold” or “Barrick Gold Corporation” in this report, refer to the activities and actions of Barrick Gold Corporation prior to the January 2019 merger and do not necessarily reflect the actions or activities of the newly formed com- pany, ­Barrick. Abbreviations CAD Canadian dollar CAPEX capital expenditure CDP Carbon Disclosure Project CEO chief executive officer CO2 carbon dioxide CSR corporate social responsibility DJSI Dow Jones Sustainability Index EIA Energy Information Agency EITI Extractive Industries Transparency Initiative EPA Environmental Protection Agency GEPA Ghana Environmental Protection Agency GHG greenhouse gas GRI Global Reporting Initiative ICMM International Council on Mining and Metals IMS Integrated Management System INSEAD Institut Européen d’Administration des Affaires IRR internal rate of return KPI key performance indicator LTIP long term incentive plan NGO non-governmental organization OPEX operating expenditure UNESCO United Nations Educational, Scientific and Cultural Organization US United States  vii 1 Introduction THE MINING INDUSTRY’S CLIMATE IMPERATIVE The global mining industry is particularly susceptible to climate risks and is a significant cause of climate-related impacts stemming from its propensity to emit carbon dioxide across its value chain and to consume vast quantities of water during metal and mineral production and p ­ rocessing. As a highly capital-intensive sector requiring robust and resilient infrastructure, the spec- ­ trum of climate-related risks to which the industry is exposed is vast: fuel and electricity supply shocks, damages and supply shortages resulting from coastal storms, dependency on and failure of critical infrastructure, and the overall scar- ­ esources. Factors such as these across the global economy led 750 city of water r experts surveyed by the World Economic Forum in 2016 to state that failure to respond to climate change is the business risk with the greatest potential impact, a risk whose value is estimated to be ­US$2.5 trillion globally (Myers ­2016). To put it in perspective, that risk is valued at nearly three times the aggregate market capitalization of the top 40 mining companies (PWC 2 ­ 018). To meet these cli- mate challenges—which are expected to increase for the foreseeable future— mining firms will need to adapt not just their production processes, but their procurement and purchasing behavior in such a manner as to drive adaptive transformation throughout their value ­ chain. The irony of this vulnerability is that the mining sector substantially contrib- utes to the very same climate risks it needs to ­mitigate. Companies in this indus- try generate US$16 billion in emissions costs, and when their entire value chains are accounted for, those emissions can ratchet up by a multiple of 30—a figure that is the equivalent to India’s entire annual CO2 e ­ missions (Soliman, Fletcher, and Crocker 2017). Overall energy costs for a mining operation can exceed 30 percent of operating ­ costs (Cormack et al. 2017). Furthermore, mining opera- tions can consume a copious amount w ­ ater. While there is a lack of visibility into comprehensive water consumption figures for the industry—mostly owing to an absence of standardized self-reporting—there is at least some evidence of the ­ se (IFC and ICMM 2017). For example, 70 ­percent of scale of the sector’s water u  1 2 | Mining Firms’ Climate-Sensitive Initiatives mining operations from six of the largest global mining companies are located in water-stressed countries such as Chile, South Africa, and Australia; and water-related infrastructure accounts for 10 percent of the industry’s capital expenses (IFC and ICMM 2017). The Carbon Disclosure Project (CDP) esti- ­ mates that 27 percent of mining production from the 12 largest, diversified, and publicly listed mining companies will be exposed to high water stress risk by 2030 (Soliman, Fletcher, and Crocker ­ 2017). Given the foregoing, it is at least in part incumbent on the sector to look closely at its activities, and to rethink and redesign them in a way that limits energy consumption, Greenhouse Gas (GHG) emissions, water use, and their corresponding impacts on the e ­ nvironment. THE CLIMATE-LOCAL VALUE CREATION DYNAMIC It is hard to ignore the extent to which mining operations are dependent on a long term, sustainable, and mutually beneficial relationship with local stake- holders proximate to the mine site and within the host nation’s central government—that is, a “social license” to ­ ­ operate. The development stage for a copper mine even in the United States, for instance, can take up to 12 years—and that is simply to open an ore deposit for ­production. Productive extraction of the ­ mineral itself can take up to 30 years (University of Arizona ­ 2018). Even in ­economically developed nations, a 42-year timeline is a conservative estimate for a copper mine to achieve a threshold IRR (15 percent as a rule of thumb in the mining sector) and in the iron ore subsector mines have had an average life of over 30 years (PWC 2015; PWC 2016; University of Arizona 2 ­ 018). As such, oper- ational continuity and optimized mine uptime are priorities for any mine site— and the buy-in of local and national-level stakeholders are crucial cornerstones to achieving operational ­stability. This focus on operational continuity—and the corresponding maximization of output—is a primary reason for mine site operations to invest in activities intended to share the value created by mine operations with local and national stakeholders in a manner that exceeds a pure focus on employment opportuni- ties and tax ­ contributions. Indeed an effective approach to local value creation rests in part on the strengthening of local supply chains; where mining firms focus on systematically helping local partners to gain the skills they need to par- ticipate in the procurement process through business development training, mentoring, and supplier development p ­ rograms. Such efforts help the industry reduce reliance on global suppliers—and their incident higher logistics costs—as much as they deliver substantial economic value to host countries, creating direct and indirect jobs, enabling skills and technology transfer, strengthening business networks, and increasing tax ­ revenues. The notion of turning local value creation in the mining sector more stra- tegically to such efforts—that is, those that generate scalable and sustainable economic results for host nations and communities—becomes all the more powerful when a climate lens is applied to i ­ t. The industry’s climate impera- tives and the corresponding context in which it operates are becoming issues on which host nation stakeholders are increasingly f ­ ocused. Concerns over GHG emissions, for instance, have sparked protests and blockades leading to the halting of production from fossil fuel companies in Brazil, Indonesia, Nigeria, the Philippines, and South Africa among other countries (Deloitte  ­2 017). Although this isn’t tied directly to the mineral mining Introduction | 3 industry, it is indicative of potential risks for mining firms going f ­ orward. More importantly, besides the risk of protests and production disruptions, the increasingly complex regulatory, compliance, and policy-related climate eco- system poses challenges for mining f ­ irms. This ecosystem includes standard setting and climate reporting guidance from non-governmental organizations (NGOs) and international bodies like the CDP, the Council of Mining and Metals (ICMM), the Global Reporting Initiative (GRI), the Extractive Industries Transparency Initiative (EITI), ­etc. It also includes a patchwork of policy incentives and penalties passed at the national level to not only comply with international climate commitments like the Paris Accords, but to encour- age investment into new areas of the climate economy in order to secure sus- tainable economic growth—a green industrial ­ policy. The need for mining firms to rethink and retool their local value creation efforts along with the growing reality of complex mining policies that firms must learn to navigate presents an opportunity for forward-thinking mining firms to seize a competitive ­advantage. As this report argues, firms that are best able to systematically tackle their climate responsibilities and adapt to climate realities through technical solutions that offer scalable economic value to host nations, are best placed to be rewarded by host nation partners that mitigate the risk of production disruptions, repeat business due to the establishment of a climate-smart reputation, and an implicit incumbency status that might ease the project development ­ process. THE PURPOSE AND ORGANIZATION OF THIS REPORT This report is part of a series of background reports underpinning the report on Building Resilience: A Green Growth Framework for Mobilizing Mining Investment, which investigates potential for leveraging the mining industry to drive the uptake of climate-sensitive technologies and practices in emerging and developing m ­ arkets. The series includes four reports: Methodology and Value Chain Analysis, Mining Firms’ Climate-Sensitive Initiatives, Climate Sensitive Mining: Case Studies, and Policy Approaches to Climate Change in Mineral Rich ­ Countries. This report identifies existing climate-sensitive practices of mining firms creation. It also that generate or have the potential to contribute to local value ­ suggests a future-state model in which companies and host countries would ideally leverage climate-sensitive mining practices for scalable and sustainable ­ in-country value creation, which in turn could lead to the establishment of new green economic value chains, facilitating a diversification away from a potential over reliance on the natural resource ­sector. The first part of this report—the Current-State Assessment—looks into what mining companies are doing to adapt to climate risk and mitigate their climate impacts, and showcases five publicly traded mining firms, and the extent to which their climate strategy may generate in-country v ­ alue. The rea- son for approaching these sustainability efforts at the firm-level, as opposed to providing a catalogue of initiatives by various mining firms, is to capture at a strategic level how publicly traded mining firms with a profit motive are able to achieve positive climate outcomes while maintaining—or even increasing— their net ­ income. Firms that have yet to take steps in this direction, might find these examples useful for setting a roadmap toward climate-smart operations 4 | Mining Firms’ Climate-Sensitive Initiatives that benefit not only the global climate and their host jurisdictions, but their shareholders as ­well. The second part of the report—Mining Firms’ Insights and Proposed Future State—summarizes the feedback provided by sustainability officers at some of the world’s largest mining firms who were consulted during the preparation of this ­report. Their feedback provides insights into how the industry really views local value creation, and to what extent it has used climate-sensitive efforts as a lever to generate such ­value. The report con- cludes with a proposed future state model that might help focus mining firms’ investment toward climate-sensitive production and procurement creation. processes that also drive in-country value ­ 2 Mining Firm’s Climate-Sensitive Current State Assessment This section outlines the climate strategy and related implementation initiatives of 10 companies identified by applying the methodology presented in the Methodology and Value Chain Analysis ­ report. The sample is further reduced ­ . by applying an “organizational sophistication” filter as described in appendix A MINING FIRMS’ SELECTION The Methodology and Value Chain Analysis report identified priority areas and initiatives in which mining firms are currently ­ engaged. Using this frame- work, 10 mining firms that address no fewer than two of the priority areas were identified for further ­ analysis. The selection was also informed by the desire to arrive at a sample of firms that in the aggregate address all priority ­areas. With the understanding that the initiatives previously identified are not comprehensive, this report also relies on externally published rankings and indices of leading climate-sensitive mining firms, such as the Carbon Disclosure Project’s (CDP) Digging Deep Report and Dow Jones Sustainability Index (DJSI), to augment the l ­ist. Lastly, the sample was selected with the specific objective to ensure geographic diversity and emerging market representation. The result of the firm selection exercise were shared with a ­ group of industry experts for ­ validation. It is important to note that the universe of mining firms from which to select a fairly narrow list of 10, is quite ­large. As such, there exists an unavoid- able risk of ­subjectivity. To minimize this risk, this report relies on indepen- dent research, published indices, and a network of experts and industry professionals, as well as the authors’ professional judgment to arrive at a representative ­ ­ sample. An overview of each mining firm in the sample is summarized in table ­ ­ 2.1.  5 6 | Mining Firms’ Climate-Sensitive Initiatives TABLE 2.1  Sample mining companies overview DEVELOPED COUNTRY-BASED FIRMSa CDP SAMPLE CLIMATE-SENSITIVE INITIATIVES DIGGING COMPANY DEEP DJSI PRIORITY AREAS NAME DESCRIPTION LOCATION COMPANY COMPANY ADDRESSED ADAPTATION MITIGATION Goldcorp Goldcorp is a gold Canada No No ( ­ 1). Mine Design - Tailings - Strategic GHG mining and and Closure Management Framework production ­Planning - Zero Water - Electrifying company based in (2). Energy Initiative Mining ­Equip. ­Vancouver. They Intensity in have an integrated ­Extraction value chain from exploration and (3). Materials extraction to ­ andling H processing and (4). Water and ­reclamation. It Waste operates four mines Management in Canada, two in Mexico, and three more in Guatemala, Honduras, and the Dominican ­Republic. Teck Teck is a metals and Canada Yes Yes ( ­ 1). Energy - Strategic Water - Applies a high Resources mining company Intensity in Management internal carbon based in Vancouver, ­Extraction price and and is Canada’s supported carbon (2). Materials largest diversified pricing policy ­Handling resources ­company. - Replacement of It’s primary (3). Water and Diesel in Hauling products are Waste Equipment metallurgical coal, Management copper, and ­zinc. Barrick Gold Barrick is the largest Canada No Yes ( ­ 1). Mine Design - Strategic Water - GHG Targets Corporation gold mining and Closure Management company in the ­Planning - Tailings world, and is (2). Energy Management headquartered in Intensity in ­Toronto. Its ­Extraction operations are primarily based in (3). Materials the Americas and is H ­ andling supplemented by (4). Water and mines in Zambia, Waste Saudi Arabia, and Management Papua New ­ Guinea. Newmont Newmont is an USA Yes Yes ( ­ 1). Mine Design - Mine - Renewable Mining American mining and Closure Conversion to Energy PPAs Corporation company based in ­Planning Pump Storage - Ecoefficiencies ­Colorado. Its Facility (2). Energy in Comminution primary products Intensity in - Tailings - Fuel Switching are gold, copper, ­Extraction Management from Diesel and silver; and it is the world’s second (3). Materials - Site-Specific - GHG Targets largest producer of H ­ andling Water Management -Strategic GHG gold behind ­ Barrick. (4). Water and Charters Framework It is active in the Waste US, Indonesia, ­Management Australia, New Zealand, Ghana, (5). Downstream Processing and ­Peru. continued Mining Firm’s Climate-Sensitive Current State Assessment  | 7 TABLE 2.1, Continued DEVELOPED COUNTRY-BASED FIRMSa CDP SAMPLE CLIMATE-SENSITIVE INITIATIVES DIGGING COMPANY DEEP DJSI PRIORITY AREAS NAME DESCRIPTION LOCATION COMPANY COMPANY ADDRESSED ADAPTATION MITIGATION Rio Tinto Rio Tinto is one of UK/ Yes No ( ­ 1). Mine Design - Mine Closure - Strategic GHG Group the world’s largest Australia and Closure Standard Framework metals and mining ­Planning - Strategic Water - Renewable ­corporations. The (2). Energy Management Energy PPAs company produces Intensity in many commodities - Haul Truck Idle ­Extraction but is weighted Management heavily toward iron (3). Materials ore and ­steel. It has H ­ andling operations on six (4). Water and continents but is Waste primarily concen- ­Management trated in Australia (5). Downstream and ­Canada. Processing Anglo Anglo American is a UK/South Yes Yes ( ­ 1). Energy - “Waterless” - Hydrogen Fuel American large diversified Africa Intensity in Mining Cell Tech PLC miner with ­Extraction - Advanced significant mining (2). Materials Drilling and operations in ­Handling Cutting Systems diamonds, copper, platinum and other (3). Water and - Selling Thermal precious metals, Waste Coal Assets iron ore, coal, and ­Management - CEO Emissions ­nickel. (4). Downstream Reduction KPI in Processing Comp Plan Boliden AB Boliden is a Sweden Yes No ­ 1). Energy ( - Electronics Scrap Swedish mining Intensity in Recycling and smelting ­Extraction - Highest Share of company that (2). Materials Renewable Energy focuses on ­Handling producing precious - Automated metals, copper, and (3). Downstream Processes other base ­metals. Processing Emerging Market-Based Firms Codelco Codelco (the Chile No Yes ( ­ 1). Energy - Strategic Water - Bioleaching National Copper Intensity in Management Corporation of ­Extraction Chile) is a Chilean (2). Water and state-owned Waste copper mining ­Management company, formed through the (3). Downstream nationalization of Processing foreign-owned copper mines in ­1976. Headquartered in Chile, it is the largest copper producing company in the ­world. continued 8 | Mining Firms’ Climate-Sensitive Initiatives TABLE 2.1, Continued DEVELOPED COUNTRY-BASED FIRMSa CDP SAMPLE CLIMATE-SENSITIVE INITIATIVES DIGGING COMPANY DEEP DJSI PRIORITY AREAS NAME DESCRIPTION LOCATION COMPANY COMPANY ADDRESSED ADAPTATION MITIGATION Grupo Argos Grupo Argos is a Colombia No Yes ­ 1). Energy ( - Strategic Water - Alternative Fuels Colombian Intensity in Management Replacement conglomerate with ­Extraction - Downstream large investments in (2). Materials End-User the construction ­Handling Management materials and energy ­industries. (3). Water and - GHG Targets Its cement/ Waste - Cement construction ­Management Production ­materials industry, (4). Downstream Process which this report Processing Optimization focuses on, has operations in Columbia, Central America, the Caribbean, US. and the ­ Vale ­S.A. Vale is a Brazilian Brazil Yes No ( ­ 1). Mine Design - Strategic Water - Variable multinational metals and Closure Management/ Compensation and mining ­Planning Water Recycling Targets corporation, is the (2). Energy - GHG Targets largest producer of Intensity in iron ore and nickel - Integrated ­Extraction in the world, and is Maritime one of the largest (3). Materials Operation logistics operators ­Handling - Self Production Brazil. Vale’s in ­ (4). Water and of Energy (Hydro) primary operations Waste - Diesel Switching are in Brazil, with ­Management operations in 30 (5). Downstream other ­countries. Processing Note: CDP = Carbon Disclosure Project; CEO = Chief Executive Officer; CSR = Corporate Social Responsibility; DJSI = Dow Jones Sustainability Index; GHG = Greenhouse Gas; KPI = Key Performance Indicator. office. a. Determination based on location of the firm’s primary ­ MINING FIRMS’ CLIMATE-APPROACH CATEGORIZATION1 This section assesses the sample companies identified in “Mining Firms Selection” section against a Climate Strategy Framework—presented in appen- dix A—to assess the relative climate-sophistication of their operations, and dis- till a smaller sample of mining firms for in-depth a ­ nalysis. To this end, five categories of analysis are considered: (1) vision, governance, goals, and objec- tives; (2) processes and standards; (3) programs and initiatives; (4) disclosure and communications; and (5) the presence of a company’s headquarters in an emerging market to ensure maximum geographic representation of the ­ sample. 2.2 contains the proxy variables and maximum ­ For each category, table ­ scores.2 ­ .3 summarizes the scoring, and criteria a Table 2 ­ pplied. A narrative summary of each company’s results from this assessment is presented “Climate Strategists Group: Detailed Analysis” section, organized in three groups: climate strategists, climate conscious, and emerging ­ leaders. Mining Firm’s Climate-Sensitive Current State Assessment  | 9 TABLE 2.2  Proxy variables and maximum scores CATEGORY MAXIMUM SCORE PROXY VARIABLE Vision, Governance, Goals and Objectives 6 • Presence of GHG emissions targets (A firm’s governance of climate-smart mining • Presence of water governance and policy efforts) • Presence of executive variable compensation tied in part to climate-based results Processes and Standards (Max A firm’s 4 • Presence of a Water Recycling Policy/Freshwater Use ­ climate-smart mining strategy) Guidelines • Presence of Renewable Energy PPAs Programs & Initiatives (The effectiveness of a 4 • Energy Intensity/Trend of Processes firm’s climate-smart activities) • Water Intensity/Trend of Processes Disclosure & Communications (The effectiveness 6 • Presence of Third-Party Assurance of a firm’s reporting of progress) • Disclosures Made to CDP • Alignment with Global Reporting Initiative (GRI) Headquarters location (the firm’s headquarters 1 • Presence of firm’s headquarters in emerging markets are located in emerging markets) Note: CDP = Carbon Disclosure Project; GHG = Greenhouse Gas; GRI = Global Reporting Initiative. CLIMATE STRATEGISTS The firms identified in this report as “climate strategists” bear similarities among them that set them apart from other mining f ­irms. These distinguishing characteristics include: the high-quality, detailed, and leading practice-­ ­ compliant sustainability metric reporting, the strength and explicit nature of sustainability targets, and strong water and energy management ­ policies. The main strengths and weaknesses of the selected firms are analyzed b ­ elow. Newmont Mining Corporation Newmont’s comprehensive water and energy efficiency practices lead to a steep drop in withdrawn water and energy consumption over the last five ­ espectively (Newmont Mining years—by a factor of 62 percent and 44 percent r 2018). Newmont also shows a heightened level of commitment to climate action by tying executive compensation (bonuses) to implementing numeric GHG emissions reduction ­targets. Furthermore, Newmont goes the extra mile in its sustainability reporting functions by establishing a reasonable—as opposed to a limited—third party assurance ­process. Vale S.A. Among the mining firms from emerging markets, Vale sets itself apart when it comes to climate-sensitive ­operations. It regularly discloses climate results and targets to CDP, it plans its mines to avoid risk of water stress and boasted the highest water recycling rate among the firms assessed in CDP’s Digging Deep ­Report (Soliman, Fletcher, and Crocker 2017). Most interestingly, Vale has integrated within its firm ocean-­going vessels as part of its logistics oper- ations—one of the largest in all of ­Brazil. It has used those operations to drive energy efficiencies through the downstream portions of the value chain, which in turn have the impact of reducing ­ emissions (Vale 2018). 10 | Mining Firms’ Climate-Sensitive Initiatives TABLE 2.3  Mining firms’ categorization FRAMEWORK EVALUATION CRITERIA VISION, EMERGING GOVERNANCE, PROCESSES AND PROGRAMS AND DISCLOSURE AND MARKET CUMULATIVE AND GOAL STANDARDS INITIATIVES COMMUNICATION COMPANY SCORE (MAX: 6 PTS) (MAX: 4 PTS) (MAX: 4 PTS) (MAX: 6 PTS) (MAX: 1 PTS) (MAX: 21 PTS) Shortlisted firms Climate Newmont Mining Corporation 6 3 4 6 0 19 strategists Vale ­S.A. 4 4 4 5 1 18 Barrick Gold Corporation 5 3 3 6 0 17 Anglo American PLC 6 3 2 6 0 17 Rio Tinto Group 4 3 4 5 0 16 Climate Teck Resources 5 3 3 5 0 16 conscious Boliden ­A.B. 2 4 3 5 0 14 Goldcorp 3 2 3 5 0 13 Emerging Grupo Argos 2 1 2 1 1 7 leaders Codelco 0 0 0 0 1 1 Detailed scoring: GOVERNANCE PROCESSES AND STANDARDS PROGRAMS AND INITIATIVE DISCLOSURE AND COMMUNICATIONS ENERGY WATER PRESENCE OF EMISSIONS WATER EXECUTIVE WATER RENEWABLES INTENSITY INTENSITY THIRD PARTY DISCLOSURES ALIGNMENT TARGETS GOVERNANCE COMPENSATION RECYCLING INCORPORATION REDUCTION REDUCTION ASSURANCE TO CDP WITH GRI Newmont Mining 2 2 2 2 1 2 2 2 2 2 Corporation Barrick Gold 2 1 2 2 1 1 2 2 2 2 Corporation Vale ­S.A. 1 1 2 2 2 2 2 1 2 2 Rio Tinto Group 2 2 0 1 2 2 2 1 2 2 Anglo​American 2 2 2 1 2 1 1 2 2 2 PLC Boliden ­A.B. 1 1 0 2 2 2 1 1 2 2 Goldcorp 1 2 0 1 1 1 2 1 2 2 Teck Resources 2 1 2 1 2 2 1 1 2 2 Grupo Argos 1 0 1 0 1 1 1 1 0 0 Codelco 0 0 0 0 0 0 0 0 0 0 ­nitiative. Note: CDP = Carbon Disclosure Project; GRI = Global Reporting I continued TABLE ­2.3, Continued Scoring methodology 0–2 0–2 0–2 0–2 0–2 0–2 0–2 0–2 0–2 0–2 0 = NO REPORTED 0 = DE MINIMIS 0 = NO MENTION FORMAL OVERARCHING LEVELS OF OF RENEWABLE 0 = LACK OF 0 = LACK OF 0 = NO 0 = NO OR SITE-LEVEL 0 = NO POLICY WATER INCORPORATION FIGURES REPORTED ASSURANCE DISCLOSURE 0 = DOES NOT 0 = NO TARGET FRAMEWORK IN PLACE IN PLACE RECYCLING IN REPORTING REPORTED DATA PERFORMED MADE ALIGN 1= Some target 1 = Presence of some 1 = Policy in 1 = 1–70% 1 = Some level 1 = Figures 1 = Intensity 1 = Limited 1= Disclosure 1 = Loosely specified, but level of formal place/To be in Recycling of renewables reported but increase or assurance made but aligns lacks industry-​ framework place but rates incorporation increased overall lacking leading ambition lacking into operations intensity intensity > 100 ton/ton of ore 2= Target and 2 = Reported overarch- 2 = Policy in 2 = > 70% 2 = > 11% 2 = Trend of 2 = Intensity 2= 2 = Robust 2 = Aligns well year specified and ing framework and place and Recycling rates Renewables decreasing decrease Reasonable disclosure is among the site-level framework/ robust incorporation intensity assurance made most aggressive standardized tools in in the industry place Mining Firm’s Climate-Sensitive Current State Assessment  | 11 12 | Mining Firms’ Climate-Sensitive Initiatives Barrick Gold Corporation Barrick has put into place several best practices as an organization but seems to be somewhat constrained in its efforts by the energy intensity of its o ­ perations. Despite the fact that the company’s use of energy on an absolute and intensity basis has increased since 2013, its reporting of figures remain in line with industry best practice, alignment with GRI and CDP standards, and use of the most stringent assurance process among the sample companies ­ analyzed (CDP 2018; Barrick Gold Corporation 2018). The firm ties executive compensation to climate-based outcomes, and has progressively improved its water conservation efforts, includ- ing by launching its Water Strategy Management Framework in ­ 2016 (CDP 2018). Anglo American, PLC Anglo American has aggressively targeted emissions reductions by tying it to executive compensation, and scores highest in CDP’s Digging Deep report’s water governance and policy metric and is noted by CDP for having group’s most comprehensive company-wide water policy, and is pursuing a steep water reduction target of 19 percent against business as usual ­ forecasts (Soliman, Fletcher, and Crocker 2017; CDP 2018). The firm also uses the more exacting reasonableness assurance standard for its r­ eporting. Nonetheless, Anglo American still could see some progress in its incorporation of renew- ­ eers.3 able energy resources, where it ranks near last among its CDP p Rio Tinto Group While Rio Tinto subscribes to most of the same leading practices surrounding reporting and governance as the rest of the top five, it is actively selling its ther- mal coal assets—a move that leaves the firm less prone to energy intensity and CDP scope 3 emissions, and one that makes business sense—to divest of an asset whose market potential is likely c­ apped. (Soliman, Fletcher, and Crocker 2017). Moreover, Rio Tinto is by far the technological transformation leader—using its “Mine of the Future” program to slash Capital Expenditure (CAPEX)—a move that reduces a mines physical footprint, and as such its energy and water demands and potential for impacting a larger portion of the local e­ nvironment. CLIMATE CONSCIOUS Teck Resources Like many of its peers, Teck’s disclosure procedures, at least in terms of its global reporting standards appear s ­ ound (Soliman, Fletcher, and Crocker 2017). The firm has solid emissions reduction targets, it sources 28 percent of its energy needs from renewable sources, and has been explicitly supportive of carbon ­ regulation (Teck Resources 2018; Soliman, Fletcher, and Crocker 2017). However, Teck does not have a compensation scheme tied to a climate-sensitive KPI, its water recy- cling rate is lower than the firms identified in the Climate Strategists group, and energy intensity figures that were slightly below its ­competitors (Soliman, Fletcher, and Crocker 2017). It is also worth noting that Teck is heavily invested in the fossil fuel sector, with 50 percent of its CAPEX allocated to an oil sands project—a proj- emissions. Teck was quite competitive on ect that inflates its risk for large scope 3 ­ ­ roup. The report the climate strategy front with its peers in the Climate Strategists g Mining Firm’s Climate-Sensitive Current State Assessment  | 13 only distinguishes it from its peers due to its large oil sands investments at a time when companies like Rio Tinto are divesting carbon-intensive a ­ ssets. Boliden A.B. Boliden stands out for its rapid uptake of renewable energy—an impressive 42 percent of the firm’s overall energy consumption (whether electricity or fuel) comes from renewable ­sources. That stands in comparison to, for instance, Anglo American who sources only 12 percent of its energy needs from ­ renewables. In addition, this report scores Boliden favorably because of the innovative nature by which its dramatically increased its renewable consumption—compared to most of its peers analyzed in the CDP Digging Deep r ­ eport. That being said, gaps in the groups governance structure led to its exclusion from the Climate Strategists group. Those gaps included a non-response to the CDP water questionnaire and ­ no climate-based KPI tied to executive c ­ ompensation (Soliman, Fletcher, and Crocker 2017). Goldcorp With its “Towards Zero Water,” approach to tailings management, and transpar- ent and comprehensive disclosures and metric reporting, Goldcorp—from a ­ climate governance and reporting standpoint—is certainly among its peers the five (Goldcorp 2018; CDP 2018). Where Goldcorp report identified as the top ­ appeared to fall short, by contrast, is in implementation—specifically from an energy and water consumption ­ standpoint (Goldcorp 2018).4 Water withdrawal, as an absolute figure, has increased since 2013, and the energy intensity of its operations since 2011 has increased by 46 ­ percent. EMERGING PERFORMERS: GRUPO ARGOS AND CODELCO The two emerging market firms included in the Emerging Performers group should not be viewed as deficient in terms of climate-sensitive ­ activities. They are instead, nascent organizations in this field, and were shortlisted for their c ­ limate innovations and ­ recognitions. Grupo Argos was named industry leader by the DJSI, an index in which both these firms are l ­isted. Codelco has been extremely aggressive in pursuing bioleaching applications in its operations, and Cemento Argos, a subsidiary of Grupo Argos has made significant advances in reducing the tremendous energy requirements in the cement production p ­ rocess. With increased organizational sophistication and transparent reporting these firms could attain the next l ­evel. It is challenging to find, for instance, numerical emissions and water consumption targets for Codelco, metrics are inconsistently reported from one year to the next, and the firm does not employ an auditor to provide assurance over its sustainability e ­ fforts (Soliman, Fletcher, and Crocker 2017). By contrast while Argos is more precise with targets, it does not report to CDP (an omission for which it received an “F” from the C ­ DP). It also underreported certain water figures, and though it hired an auditor to provide some level of assurance regarding the sustainability report, the auditor found significant ­errors. These firms are clearly on the right track, but still have to achieve a certain level of organizational maturity, and accede to international standards like CDP, in order to take the next ­ step. 14 | Mining Firms’ Climate-Sensitive Initiatives CLIMATE STRATEGISTS GROUP: DETAILED ANALYSIS Newmont Mining Corporation Newmont sets itself apart from other companies for its commitment to sustain- ability, enshrined in its mission statement, “to create value and improve lives through sustainable and responsible mining” and in its core v ­ alues. Its sustain- ability and climate-related efforts have also been recognized by the DJSI World, who named the company the mining industry leader in overall sustainability for the last three ­years. The effort that Newmont puts into sustainability—­especially in comparison to its peers—appears to have not damaged the overall value of the company relative to its peers in this ­ report. At more than twice the size (in terms of revenue) of Goldcorp, Newmont’s stock price is nearly three times higher, and is three times higher than competitor Barrick Gold, who is a slightly larger corporation than ­ Newmont. The company’s stock price has actually increased in the past five years, where Barrick and Goldcorp have seen stock declines. In its analysis, Morgan Stanley indicated that it favored Newmont ­ over Barrick in part because of a “…de-risked project p ­ ipeline.”5 This is import- ant to note because climate stewardship is often narrowly viewed as occurring at the price of, or at least as not accretive toward shareholder v ­ alue. Newmont’s experience suggests that it is possible to create value for shareholders through sustainability ­ investment. For Newmont, such investments start with an effec- tive tone at the top, reflected in its mission statement, and supported by its sus- tainability governance ­ structure. The detailed assessment of the scoring variables is provided ­ below. Vision, governance, goals, and objectives Newmont’s climate change-related governance efforts begin with a well-­ articulated approach, and global energy and climate strategy focused not only on mitigating threats, but seizing ­ opportunities. The prongs of that strategy include (1) securing a stable and cost effective supply of energy for operations; (2) achieving sustainable cost and efficiency improvements; (3) reducing its carbon footprint through renewable energy, energy efficiency strategies, and carbon offsetting; (4) adapting to a changing climate; and (5) collaborating internally and engaging externally on energy policy frameworks that support an effective transition to a low-carbon e ­ conomy. It has operationalized its cli- mate efforts by establishing a cross-functional Global Energy and Climate team (GECT) who develops climate plans not just at the company level, but at the regional and site ­ level. Newmont also has an aggressive GHG emissions reduction target of 1 ­ 6.5 percent by the end of 2020, and established in 2018 an internal carbon price to use when making investment decisions—a good prac- tice that all of the final five mining firms included in the Climate Strategists group have adopted to at least some d ­ egree (CDP 2018; Newmont Mining 2018). Lastly Newmont has set itself at the leading edge of ­ climate-related governance practices by adopting an executive compensation scheme tied in part to incremental GHG reduction ­ targets (CDP 2018). Processes and standards Newmont’s climate-related and process standards are best exemplified by its ­ mpacts. At the firm level, the company exe- approach to water consumption and i cutes its Global Water Strategy (whose five pillars are watershed approach, Mining Firm’s Climate-Sensitive Current State Assessment  | 15 impact mitigation, operational performance, external engage- Mining value chain climate priority areas ment, and internal collaboration) through an overarching Mine design vision for managing water as an a ­ sset. This strategy is sup- and closure ported by the Water Management ­Standard (Newmont 2018). planning This Standard sets for the company and its operations manag- ers minimum requirements to proactively plan and manage Energy intensity water throughout the mine lifecycle—from exploration to in extraction post closure—such that human health, stakeholder water needs, and the environment are ­ protected. Newmont also Materials provides standards at the mine-level, deploying Water CC Adaptation handling CC Mitigation Accounting Frameworks (WAFs) and site-wide water bal- ances through which each site defines, measures, and reports Downstream water use by inputs, outputs, and diversion identifying water processing quality ­categories. The standard also requires compliance with regulations and sets minimum requirements for water Water and quality parameters where they are not p ­ rovided. This waste management site-specific approach to water management sets Newmont apart from its competitors by addressing the variability of the risks and impacts of water consumption based on the particu- ­ peration. From an energy policy perspective, as mentioned larities of any given o above, Newmont has recently approved a carbon price at an US$50/t CO2—a decision that will help incorporate climate considerations and low emissions alternatives during investment ­ decision-making (Newmont Mining 2018). Programs and initiatives As a global leader in climate-smart mining practices, Newmont is currently employing a number of discrete programs and initiatives aimed at achieving its climate ­vision. Collectively, these activities have helped the company achieve significant savings in water withdrawal and reductions in energy consumption years. Some of its more forward-thinking activities and their over the last five ­ Planet, Profit, People impacts (3Ps assessment) are noted ­ below and summa- rized in boxes 2.1–2.3. Rolling out carbon pricing. The rising tide of carbon taxation schemes employed by governments across the world is continuing unabated, with large markets such as China set to adopt such a tax nationwide from July 2 ­ 018. As of this report’s publication, 40 national jurisdictions and over 20 cities, states, and regions are putting a price on ­carbon.6 In recognition of this trend, and the corresponding cost implications, the company has adopted an internal carbon price mechanism, sometimes termed a “shadow cost of carbon” to better understand how carbon costs impact its investment o ­ ptions. Newmont describes the effort as improving its visibility into each investment’s embedded carbon risk, allowing it to compare each option’s exposure to future carbon pricing schemes, spurring innovation in energy efficiency and clean energy, and promoting the long-term sustainability of the ­ business. Since piloting the mechanism in 2017, the firm has applied an internal price of carbon to projects in Nevada, Peru, and Australia, and Ghana, using a price of US$25/t CO2 and US$50/t ­CO2. Using a pre-tax cost benefit analysis, a US$50 million investment in Nevada to switch a coal power plant to natural gas implied a potential US$117.3 million cost savings at a US$25 carbon price, and a U ­ ­ S$284.6 mil savings at a US$50 carbon ­ ­ price.7 16 | Mining Firms’ Climate-Sensitive Initiatives BOX 2.1 Rolling out carbon pricing: 3Ps assessment Planet: As modern science has shown, the primary extent ­possible. In Newmont’s rough analysis of its cause for climate change is the earth’s atmospheric investment in Nevada for instance, opting for natu- greenhouse effect of which carbon emissions are an ral gas power instead of coal could result in as high immense ­ contributor. Newmont’s pricing of carbon, to ­ S$284.6 million in cost ­ as U savings. the extent that it incentivizes lower-emitting operations, People: While the establishment of a shadow price of can have a substantial impact over time on the firm’s cli- carbon may seem attenuated from the prospect of gen- mate footprint and its contribution to climate c­ hange. erating real local economic value—it is worth consid- Profit: There is a well noted global trend toward car- ering the measure as a foundational element of bon pricing, with large jurisdictions set to adopt a contributing to the growth of green value chains version of a carbon tax in the near ­ f uture. This within a host ­ nation. By their very nature, internal entails—especially for the carbon-intensive mining carbon pricing captures a hidden cost of an invest- industry—a lurking embedded cost in operations ment into a carbon intensive energ y source— that usually persist for longer than 20 y ­ ears. The Newmont’s internal directive forces its hand to invest extent to which organizations can price this taxation in greener energy infrastructure, and that brings with ahead of time allows them to make design and invest- it the opportunity to develop a local supply chain to ment decisions that can avoid these costs to the support such ­investments. BOX 2.2 Treating water discharge: 3Ps assessment Planet: 22 percent of the Ghanaian population lack ­ndustry. By committing to the expense of water i access to safe water and 70 percent of all diseases are treatment ahead of time Newmont is likely avoiding caused by unsafe ­ water.a The scarcity of the resource a prohibitively large remediation expense in Ghana and the vulnerability of the population to surface water down the ­line. quality means that mine operators relying on a stable People: Water treatment and sanitation is an water source must work with local authorities to pre- ext remely economica lly benef icia l a ­ctiv it y. serve, and to the extent possible, improve water quality According to UNESCO (2016a), every US$1 million during ­operations. Newmont’s work with GEPA in invested in the United States’ water supply and treat- constructing a water treatment plant is an example of a ment infrastructure generates between 10 and space. leading practice in this ­ 20 additional jobs and the US Commerce Department Profit: Environmental remediation post mine clo- estimates that each job created in the local water sure can be a tremendously costly ­ endeavor. As just and  wastewater industry creates 3 ­ .68 indirect one data point, the Environmental Protection ­ conomy (International Labour jobs in the national e Agency (EPA) spent U­ S$1.1 billion between 2010 and Organization 2016). Newmont’s installation of a 2014 on environmental cleanup of water resources water treatment facility—especially in close coordi- contaminated by metal and mineral mining nation with GEPA—offers the opportunity for skills ­operations. b In 2016 the US federal government transfer and job creation in a sector of extreme value passed the burden of this remediation onto the government. to the host ­ a. ­https://water.org/our-impact/ghana/. b. ­https://www.chicagotribune.com/news/nationworld/ct-epa-mining-pollution-20171201-story.html. Mining Firm’s Climate-Sensitive Current State Assessment  | 17 BOX 2.3 Optimization of haul truck routes: 3Ps assessment Planet: While capital-intensive projects and fleet ret- People: It stands to reason that optimized routes rofits may draw the most attention, small operational lead to fewer truck driver hours over time, but that augmentations can often yield important ­results. Such being said, it can lead to the creation of job opportu- is the case with Newmont, where its study of truck nities for logistics engineers that can optimize ­routes. routes led to a reduction in carbon e ­ missions. Moreover, it leads to a local procurement standard where Newmont will look more favorably on truck- Profit: What is good for the planet can often be good for ing firms that prioritize route optimization—­ a company’s bottom l ­ine. In this instance, shorter more meaning, Newmont and companies like it operating efficient haul routes not only reduced Newmont’s carbon in the developing world can leverage the procure- footprint, it also entailed a corresponding reduction ment ­ process to drive skills transfer ­ (e.g., logistics in fuel consumption for material movement on a per- optimization) to local ­ f irms. ton ­basis. Reducing fuel input costs over the life of a mine can have a huge impact on an operation’s ­ profitability. Treating water discharge. Two of the pillars of Newmont’s Mining value chain climate priority areas global water strategy are to mitigate environmental and Mine design social impacts associated with water use and to collabo- and closure rate on water ­stewardship. This is what the company is planning doing in Ghana, where it is working with the Ghana Energy intensity Environmental Protection Agency (GEPA) and con- in extraction structed a reverse osmosis water treatment plant that will ensure that water discharged from its Afaho operation is Materials ­ tandards. It is treated in a manner that meets all of GEPA’s s handling CC Adaptation CC Mitigation the notion of not only making active investments but doing so in synergy with GEPA that serves to not only to mitigate Downstream Newmont’s impact on the Ghanaian watershed, but also processing reduces the risk to Newmont that the government of Ghana or the Ghanaian people may find Newmont’s envi- Water and ronmental stewardship to be less than ­ adequate.8 waste management Optimization of haul truck routes. Not all energy effi- ciency gains and carbon intensity reduction in the mate- Mining value chain rials handling segment of the value chain are a result of climate priority areas large upfront costs associated with fleet overhaul, switch- Mine design and closure ing fuel supply from diesel, and installing a ­ lternatives to planning trucks such as conveyor belts and a rail ­ line. In addition to exploring these more costly approaches, Newmont has Energy intensity in extraction supplemented its efforts with the light-touch tactic of improving the routes its haul trucks take to and from the extraction ­site. This has resulted not only in greater oper- Materials handling ating efficiencies for the mine, but also fuel savings and CC Adaptation CC Mitigation lower emissions per production on a per-ton ­ basis. Downstream processing Disclosure and communications The disclosure and communications function in the Water and c limate-smart mining space serves two functions ­ waste for  a  mining company—(1) transparently tracking the management 18 | Mining Firms’ Climate-Sensitive Initiatives effectiveness of a company’s efforts and (2) achieving the credibility, reputa- tion, and goodwill in the marketplace to be preferred over ­ competitors. Toward that end, Newmont complies with the most stringent of disclosure standards, not only following GRI standards as almost all companies analyzed in this report do, but filing regular sustainability reports with CDP, and con- ducting the most rigorous third party verification of its reporting by using a reasonable assurance ­ standard (CDP 2018). Vale S.A. Headquartered in Rio de Janeiro, Brazil, Vale is one of the few truly global diver- sified mining companies that calls an emerging market h ­ ome. With operations in more than 30 countries and a market capitalization in excess of US$70 billion, Vale is built on a heavy presence in iron ore and steel, a commodity from which the company extracts approximately 70 percent of its ­ revenue. The company is the largest commercial producer of iron ore in the ­ world. As recently as June 2018, Vale has pushed to diversify further, funding expansion plans at their Voisey’s Bay operation in northern Canada by selling rights to future cobalt pro- duction at the site and signaling a willingness to explore and invest in metals and minerals further afield from its strong history in iron ore, including increasingly targeting copper and nickel for exploration and site ­ development. Vision, governance, goals, and objectives Vale’s position on climate change and maintaining climate-focused standards is strong, having consistently produced sustainability reports for over a d ­ ecade. Among the strengths that Vale exhibits is a newly initiated corporate governance program that uses variable compensation as a mechanism for rewarding employees and corporate leaders for contributing to the company’s climate-­ ­ oriented ­ goals. This program ties sustainability targets to three impact catego- ries (1) Environment, (2) Energy, and (3) Social, with Environment and Energy together comprising 70 percent of the total s ­ core. This program, while not unique amongst the companies analyzed in this report, is indicative of the seri- ousness with which Vale approaches its climate ­ goals. Vale couples this governance structure with more specific carbon reduction goals. It targets reducing direct GHG emissions by 5 percent by 2020 and has ­ concrete targets for water management in addition to longer term strategic ­goals (CDP 2018). However, according to the company’s 2017 Sustainability Report and the CDP, the company is still working towards defining tangible goals for water resource ­utilization. This includes a multi-year plan to ­significantly reduce the amount of fresh water consumed in production by ­ 2030 (Vale 2018). Processes and standards Perhaps Vale’s most notable process is its water recycling program, a framework that achieves recycling rates of more than 82 percent for water used in industrial ­ processes (Vale 2018). This process stands as a strong complement to their water reduction goals and water withdrawal intensity figures for their operations that sit astride the industry ­average. Generally, Vale appears to be in a strong position when it comes to water management and ­recycling. Further, the energy intensity commit- ments to which Vale aspires have yielded ­results (CDP 2018). The company’s energy intensity of production and emission metrics are relatively low when compared to notable peers such as Anglo American and Freeport-McMoRan. Mining Firm’s Climate-Sensitive Current State Assessment  | 19 Additionally, Vale touts its Integrated Management System (IMS) which serves as a definable framework to ensure, or at least encourage, the company to effectively implement its overall sustainability p ­ olicy (CDP 2018). The IMS outlines ­processes from 1: Policies, objectives, and goals to 12: Monitoring, per- formance indicators and continuous improvement that the company actively apply to their climate-related targets and ­ ambitions. Furthermore, Vale is exploring carbon pricing mechanism as a basis for company decision making, a tactic that could pair well with its pre-existing internal IMS ­framework (CDP 2018). The company is piloting a “shadow carbon price” that models hypothet- ical surges in market prices for carbon, to project the true cost associated with some of its long term investment ­ decisions. Programs and initiatives While Vale employs a number of climate-smart initiatives aimed at mitigating, or adapting to, the effects of climate change, three prominent initiatives and their 3P assessment are provided below and summarized in boxes 2.4 and 2.5. Self-production of energy (Hydro). Vale has made a Mining value chain concerted effort to utilize renewable energy where climate priority areas Mine design ­possible. An example of this type of effort is the Karebbe and closure Hydroelectric Plant, located at Vale’s nickel operation planning Indonesia. Operating since 2011, the plant is capable in ­ of generating 90 MW of power used in mining ­operations Energy intensity in extraction with surplus power distributed to local ­ communities. Karebbe is Vale’s most recent hydroelectric effort in Indonesia, joining earlier hydroelectric plants at their Materials Larona and Balambano sites, the plans generate emis- CC Adaptation handling CC Mitigation sion reduction impacts and have the ancillary benefit of  improving community relations and standard of Downstream through the delivery of additional power generation processing capacity (Vale 2018). ­ Water and waste Diesel switching. In multiple areas, Vale has made com- management mitments to modifying its transportation mechanisms to sources. more efficient, and less carbon intensive, fuel ­ For example, the company has retrofitted its rail opera- Mining value chain climate priority areas tions that transport ore from mine sites in Brazil to Mine design accommodate alternative fuel sources such as e ­ thanol. and closure planning Further, the company has replaced fuel sources at numer- ous plants in the Tubarão Complex in Brazil, further ­ targeting GHG emission ­reduction. Energy intensity in extraction Disclosure and communications While Vale presents a portfolio of strong climate change Materials CC Adaptation handling CC Mitigation action, one area for improvement is enacting a strong framework for reporting and verifying carbon ­ emissions. CDP noted that Vale relies on “limited” assurance when Downstream processing seeking verification of its emissions curtailment ­ efforts (CDP 2018). This threshold is less exacting than its coun- Water and reasonable” assurance, which entails a more terpart, “­ waste ­ tandards. revealing third-party verification of emissions s management 20 | Mining Firms’ Climate-Sensitive Initiatives BOX 2.4 Self-production of energy: 3Ps assessment Planet: According to the EPA, the biggest driver of utility. Second, by sourcing its own power, the local ­ global emissions is the electricity and heat production company has more visibility into and control over long sector due to the burning of coal, gas, and ­ oil.a Vale’s term power ­ costs. efforts to shift toward renewable sources by adding its People: Developing a power project locally can have own generation sources onto the grid helps provide a massive economic i ­mpact. In one example, the more non-emitting sources of energy, for both itself Overseas Development Institute conducted a job and the broader ­ g rid. Quantitatively, the plant has creation impact study on the construction of a eliminated the need to consume 13 million barrels of 13 MW run-of-river hydro plant in U ­ ganda. They High Sulfur Fuel Oil and about 3 billion liters of diesel found that the plant was responsible for the creation fuel each ­year. of up to 1,278 direct and indirect construction Profit: By generating and sourcing its own energy jobs (translating to 7,318 person years of work), and Vale benefits its bottom line on two ­fronts. First, it will up to 10,256 knock-on jobs (~256,000 person years) not have to pay margin on the energy it produces, resulting from the improved power supply to the unlike the energy it would typically source from the ­g rid.b a.  US Environmental Protection Agency Data, ­ https://www.epa.gov/ghgemissions/global-greenhouse-gas-emissions-data. b. Overseas Development Institute, Job Creation Impact Study: Bugoye Hydropower Plant, Uganda, 2013, h ­ ttps://www.pidg.org​ /­resource-library/other-documents/odi-job-creation-impact-study-bugoye-hydropower.pdf. BOX 2.5 Diesel switching: 3Ps assessment Planet: According to Energy Information Agency People: There are a number of social benefits of a sec- (EIA), diesel is the most carbon intensive fuel source tor of an economy diversifying fuel consumption from next to thermal coal, so any effort by multinational petroleum sources to other ­ resources. For instance a mining majors to switch fuels to a comparatively boost in the consumption of ethanol is a benefit to the cleaner, less emitting source is a positive climate local agricultural sector, and a corresponding reduc- ­outcome.a tion in petroleum consumption frees up more of the commodity for the country to ­export. Brazil, for exam- Profit: An exclusive reliance on any one type of fuel ple, as of 2016 was the world’s 10th largest oil ­producer.c can leave a firm exposed to volatile input ­ costs. In the midst of a recent economic malaise, and on the According to EIA diesel prices, for instance, are set to precipice of what might be historic oil production in increase by an average price of 10 percent in 2019 com- 2018,d the more it can boost the productivity of other pared to 2018 prices. Diversification from this specific sectors of its economy ­ (e.g., agricultural) and export fuel source brings with it the opportunity to mitigate more of its petroleum, the better it may be for the price shocks—gradual or ­ otherwise.b country’s overall economic ­ outlook. a.  U.S. Energy Information Administration, Frequently Asked Questions, 2018, h ­ ttps://www.eia.gov/tools/faqs/faq.php?id=73&t=11 b. U.S. Energy Information Administration, Short-Term Energy Outlook, 2019. March 12. https://www.eia.gov/outlooks/steo/report/prices.php. c.  “Production of Crude Oil including Lease Condensate 2016,” ­ U.S. Energy Information ­Administration. d. https://oilprice.com/Energy/Energy-General/Brazil-Poised-For-Historic-Oil-Boom.html. Mining Firm’s Climate-Sensitive Current State Assessment  | 21 However, it should be noted that the standard Vale employs remains among the norm amongst competitors from emerging ­ economies. Barrick Gold Corporation Barrick is the second of two gold-focused companies in the Climate Strategists group. Newmont and Barrick are very similar with regard to their attention to ­ climate smart processes and strategies, although Newmont appears to have achieved a better integration of processes and strategies from the top to the mine-site. Barrick, is the largest gold mining company in the world in terms of ­ production—it produced 5 ­ 017. With ­ .32 million ounces of the precious metal in 2 US$1.5 billion in 2017, the company is the most profitable among a net income of ­ the three gold mining organizations analyzed in this ­ report (Barrick Gold Corporation 2018). It is clear from its sustainability efforts, moreover, that Barrick has used its earnings to invest in climate impact mitigation and adaptation. Those efforts are described in detail b ­ ­ elow. Vision, governance, goals, and objectives Barrick’s climate-sensitive approach starts with its corporate sustainability vision, which states in part, “we partner with host governments and communities to transform their natural resources into sustainable benefits and mutual ­prosperity.” The vision statement captures the core of a sustainable approach to climate-smart mining—a “triple bottom line” that comprises a people, planet, lens. To understand how the triple bottom line focus can manifest in and profit ­ strategic decisions, it is helpful to consider Barrick’s climate strategy, which was developed in 2 ­ 017. For instance, the company tried to dovetail the business imperative of maximizing free cash flow with the climate imperative of “under- stand[ing] and mitigat[ing] the risks associated with climate change; reduc[ing] [its] impacts on climate change; and improve[ing] [its] disclosure on climate change” (Barrick Gold Corporation 2018). At a governance level, Barrick has ­ charged its board’s Corporate Responsibility Committee with the oversight of the company’s sustainability efforts which are led by a Chief Sustainability Officer, who leads the Community Relations, Corporate Social Responsibility, and Government Affairs ­ teams. Its GHG emissions reduction target is ambitious at 30 percent by ­2030 (CDP 2018). It has also established a company-wide water management framework organized around assessment, assurance, and collabo- ration; but unlike Newmont, Barrick does not appear to require the establish- ment of frameworks at each mine s ­ ite. Barrick has similarly adopted the leading practice of tying executive compensation to sustainability outcomes, but has not tied compensation explicitly to GHG emissions ­ reductions. Processes and standards Barrick’s approach to sustainability is unique in the degree to which it is explic- itly focused on a collaborative approach with the host governments in which it operates. It begins with the vision statement quoted above, where Barrick notes ­ its focus on partnering with host governments and c ­ ommunities. It then contin- ues through to its sustainability strategy which states as one of its principles that “host government[s] and communities expect and deserve to benefit from the resources. We do this through local hiring and contracting, extraction of their ­ investing in community priorities, and paying our fair share of ­ taxes.” This is a key takeaway regarding the benefits of climate smart practices—creating a true 22 | Mining Firms’ Climate-Sensitive Initiatives Mining value chain partnership with the host government can help ensure climate priority areas ­ ompany undertakes are done right, to that the initiatives a c Mine design and closure ­ ime. Barrick has the beneficiary’s specifications, the first t planning also established several other climate-sensitive objectives and processes: a short term energy strategy to reduce Energy intensity energy costs by 10 percent company-wide by 2019; an inter- in extraction nal carbon price reflective of the jurisdictions in which it operates and a shadow carbon cost for those jurisdictions Materials that have yet to pass a carbon tax or renewable portfolio handling CC Adaptation CC Mitigation standard; a development standard that requires all new projects to evaluate potential renewable energy options; Downstream and a Water Management Standard, which is designed to processing facilitate site-based water ­ stewardship (Barrick Gold Corporation 2018). Water and waste management Programs and initiatives Barrick’s portfolio of programs and initiatives helped guide the company to reductions in overall scope 1 and scope 2 GHG emissions and water withdrawals in 2017, while obtaining 77 percent of its water supply for operations from recycled ­ sources (CDP 2018). A representative example of these programs and its 3Ps assessment is described b ­ elow. Planning for backfilling during mine closure. In 1994 Barrick took control of a mine in Nevada named Bullfrog that had been in operation since ­ 1904. The mine also had an issue of being built to such a depth that groundwater would accumulate at the bottom of the pit, forming a “pit l ­ake.” Pit lakes are problem- atic because the standing water deteriorates in quality over time, and is at risk of permeating into the local ­reservoir. In other instances of such an issue, especially at mine closure, mining companies have typically built a water treatment plant and operated it in perpetuity—at an exorbitant cost to the c ­ ompany. Barrick by contrast planned ahead, and in 1999 began to backfill the mine to prevent a lake from forming to begin with, by using rock stockpiled at the mine ­ site. When in 2017 the water—as predicted—began to return, Barrick used a fine layer of soil to seal the area and facilitate evaporation at a rate that offsets water i­ nflow. At this needed. point, no further backfill will be ­ Disclosure and communications Barrick complies with the highest and best standard in the industry as it pertains to disclosure of climate-related data and sustainability r ­ eporting. It routinely files water and climate reports with CDP, it is aligned with GRI, and it engages a third party auditor to provide its disclosures with reasonable assurance—the most stringent ­standard (CDP 2018). Anglo American PLC Anglo American is a United Kingdom-based company with an operating profit US$5.5 and more than US$28 billion in revenue in 2 of ­ ­ 017. Compared to peers, the company’s portfolio is well diversified, with significant revenue-­generating holdings in copper, iron ore, platinum, and a comparatively large presence in diamonds through their 85 percent holding of De Beers, the world’s leading diamond mining ­company. Forty-five percent of the company’s GHG emissions Africa (Anglo American 2018a).9 occur in South ­ Mining Firm’s Climate-Sensitive Current State Assessment  | 23 Vision, governance, goals, and objectives Perhaps Anglo American’s most notable instance of corporate governance is their industry-leading executive remuneration f ­ ramework. The company ties executive compensation to climate-related targets and achievements, a gover- nance technique also employed by peer mining c ­ ompanies. However, Anglo American appears to go one step further, producing a “Directors’ Remuneration Report” that specifically outlines the components of the Long Term Incentive Plan (LTIP) that are tied to CO2 emission ­ levels (CDP 2018). Anglo American’s climate-related goals were first developed in 2018 and are mapped on two primary timelines, 2020 and 2 ­ 030. By 2020 the company aims to reduce GHG emissions by 22 percent, and energy consumption by 8 percent, from a “business as usual” ­benchmark. Similarly, by 2030, the com- pany has targeted to reduce GHG emissions by 30 percent and improve energy ­ ercent (CDP 2018). According to company-produced reports, efficiency by 30 p Anglo American appears to be trending towards meeting both of their 2020 targets. Similarly, the company posts aggressive water preservation goals for ­ water use reduction, aiming to increase water recycling levels to 75 percent by 2020 and reduce the abstraction of freshwater by 50 percent in water-scare regions by 2030—goals that both de-risk projects and benefit local p ­ opulations (Anglo American 2018a). While the company does not appear to place a time- line on this goal, it publicly states an aggressive vision to operate completely waterless mines in water-scarce ­ catchments. Processes and standards Anglo American’s Group Water Policy puts emphasis on five key principles running the gamut from the company’s people and processes to its stakehold- ers and supply c­ hain. This includes acting as a “catalyst for local water manage- ment” and “embed a culture of internal water ­ conservation.” The company recognizes that 70 percent of its operations are in water-scarce actively ­ ­ environments (Anglo American 2018a). The company’s process for tackling climate change as a whole centers on the three tenets of (1) climate agility, (2) diving change, and (3) managing risks and opportunities. This third tentpole includes defining what it means to be water ­ and energy secure and also implements carbon pricing as a strategy to tie an economic incentive to monitoring GHG ­ emissions. Mining value chain climate priority areas Programs and initiatives Mine design Like other companies analyzed in this report, Anglo and closure American deploys a variety of initiatives aimed at address- planning operations. The most notable ing the climate impact of its ­ are summarized below and in boxes 2.7 and 2.8. Energy intensity in extraction Waterless mining. A portion of Anglo American’s FutureSmart Mining initiative is the waterless ­ mine. Materials CC Adaptation handling CC Mitigation This program, while not yet fully operational, is an ambitious plan to eliminate the use of freshwater in ­ rocesses. The company plans to fur- their extraction p Downstream processing ther develop a “closed loop” system that would recycle water with limited need to reintroduce fresh water into Water and system. Anglo American plans to continue this pro- the ­ waste cess by expanding two primary technologies focused on management 24 | Mining Firms’ Climate-Sensitive Initiatives BOX 2.6 Backfilling during mine closure: 3Ps assessment Planet: The lengths to which Barrick went to avoid dropped to its lowest levels since ­ 1937.a Water in this the formation of a pit lake mitigated its long term region is scarce, and Barrick’s proactive steps to impact on the a local Nevada ­aquifer. This is especially ensure the integrity of the local aquifer means more important given the 15 year drought that many parts of the scarce water can be put to productive use by change. of Nevada are facing as a result of climate ­ the local ­community. That said, it is hard to argue that the remediation steps taken by Barrick at the Profit: For Barrick, backfilling the mine site to avoid old mine site somehow delivers more local value to the formation of a pit lake meant avoiding the cost of the community in Nevada than the installment of constructing, operating, and maintaining a water a  water treatment infrastructure—the ordinary treatment facility in perpetuity, which can be prohib- course of action—would ­ have. But such are some of itively ­costly. the tradeoffs with which a mining firm must grap- People: Nevada, one of the primary beneficiaries of ple when approaching climate related issues—some the Colorado River basin, has been confronted with a efforts may more efficiently produce a positive historic drought in recent y ­ ears. In fact, Lake Mead, climate outcome while providing fewer local oppor- ­ which supplies 90 percent of Las Vegas’ water, has tunities to benefit ­ economically. a. ­https://oilprice.com/Energy/Energy-General/Brazil-Poised-For-Historic-Oil-Boom.html. BOX 2.7 Waterless mining: 3Ps assessment Planet: Anglo American’s closed loop system has the People: It is worth considering here the full range potential to reduce the firms operations’ fresh water of inventive new technologies that Anglo American requirements, allowing the firm to adapt to the well- is exploring to achieve its vision of the elimination known climate risk of depleting water ­resources. of its use of freshwater in its extraction ­processes. Among its focus areas include state-of-the-art col- Profit: Reducing the water footprint of a mine’s oper- lection methods for evaporation data for use in ation means reducing the acquisition costs for water, automated systems, low cost dry tailings disposal, the maintenance and logistics cost for transporting dry separation, and non-aqueous ­ p rocessing. the water, and its closed-loop reuse means a fewer Engaging local experts and high-skill labor at costs spent on fresh water treatment due to mine the  maturation phase of any one of these new discharge. All of these costs can be reduced as a result ­ ­ technologies—particularly in a jurisdiction whose of a lower water ­ footprint. Another major benefit is economy is mining dependent—could have a pro- that water availability is often a major production con- impact. found skills transfer ­ straint and relieving this could allow Anglo American to grow ­output. evaporation management and dry tailings disposal, innovations that are par- ticularly promising when considering that evaporation accounts for approx- site (Anglo American 2018b). imately 10–25 percent of water lost at a mine ­ CEO emissions reduction KPI in executive compensation plan. Anglo American’s board approved modifications to the company’s LTIP that Mining Firm’s Climate-Sensitive Current State Assessment  | 25 BOX 2.8 Emission reduction incentive plan: 3Ps assessment Planet: Anglo American’s approach to executive com- People: Depending on the route explored by leader- pensation provides direct executive accountability for ship to achieve company-wide emissions reductions, the achievement of its strong 22 percent emissions the social benefits delivered to the host government target. It means its commitment to mitigat- reduction ­ and citizens could span a wide ­ range. An effort to ing climate impacts are not just ambitious, but they are switch to renewable energy for instance brings with it ­meaningful. the opportunity to add more clean technology to a host government’s grid, and for it to develop large Profit: Incentivizing firm leadership to achieve an parts of a renewable energy supply chain and the cor- emissions target frees them to achieve it in the way responding jobs such economic diversification e ­ ntails. most beneficial to a firm’s shareholders, thereby pro- Similarly, a mining company might be incentivized to moting the likelihood of achieving a win-win ­scenario. build out more of its supply chain locally in an effort to Leadership may, for instance choose to electrify more cut down its direct and spinoff emissions, creating an pit operations, substitute trucks with conveyor belts to opportunity for knock-on economic impacts for the handle materials, or sign long term renewable energy host ­government. ­PPAs. incorporate CO2 emissions ­ performance. Compensation Mining value chain climate priority areas derived from the LTIP is calculated based on a series of Mine design key performance indicators (KPIs), one of which ties and closure directly to the company’s goal to reduce emissions by planning ­ 020. This KPI accounts for 5 percent of the 22 percent by 2 LTIP calculation and the KPI is fully fulfilled if the 22 per- Energy intensity in extraction cent GHG reduction mark is achieved by the end of 2019, whereas it is only 25 percent fulfilled for a 20 percent frame (CDP 2018). reduction for the same time ­ Materials CC Adaptation handling CC Mitigation Disclosure and communications Anglo American ranks well amongst its peers in terms of Downstream processing emission disclosure and verification practices, even if the company’s targets remain average in a ­ mbition. While the Water and company utilizes the less stringent “limited” assurance for waste their Scope 1 emissions, they employ “reasonable” assur- management ance for their Scope 2 emission verification and disclosure process, according to CDP. Along this line, the company’s Directors’ Remuneration Report is quite the ­ detailed and represents a bold step towards tying more executive and leadership compensation to climate ­ performance. Rio Tinto Group Rio Tinto Group is a global mining multinational headquartered in the United Kingdom with more than 140 years of h ­ istory. Operating in more than countries and across six continents, the company derives its US$40 billion 30 ­ in annual revenue from a diversified portfolio, with significant holdings in iron ore and aluminum, with nearly 50 percent of its revenue arising from the alone (Rio Tinto 2018). Rio Tinto is the world’s second largest miner iron ore ­ of iron ore having shipped 3­ 30.1 million tons during 2017, slightly less than 26 | Mining Firms’ Climate-Sensitive Initiatives Vale (Rio Tinto 2018; Vale 2018). As a sign of the company’s Brazil-based rival ­ faith in the current uptick in global commodity prices, Rio Tinto plans increas- ing levels of CAPEX in 2018 and 2019, with approximately ­ US$5.5 billion and US$6.0 billion allocated respectively, and has focused exploratory efforts on ­ ­ copper (Rio Tinto 2018). Vision, governance, goals, and objectives Rio Tinto has made a concerted effort to set GHG reduction targets since 1998, with the company’s initial objective of achieving a 24 percent reduction in GHG emissions from a 2008 baseline by ­ 2020 (CDP 2018). Company reports suggest that Rio Tinto has already exceeded its goal since it reported having achieved a 27 percent reduction in ­2017 (Rio Tinto 2018). Further, Rio Tinto actively sup- ports the intent of the Paris Agreement to limit global warming to less than 2 degrees centigrade above pre-industrial levels and the company has a longer term vision to “substantially” decarbonize their operations by 2­ 050. One way the company is moving towards this goal is by divesting of energy-intensive ­holdings. Notably, Rio Tinto has divested of the last of its coal mining operations, a highly carbon intensive commodity to ­ extract. From a governance perspective, Rio Tinto’s Sustainability Committee reviews and approves positional changes on climate change and evaluates the company’s climate positions for consistency and long-term ­ viability. When it comes to linking executive compensation to climate-based targets, however, the company is less adept, having no set structure in place ­ 2018. as of ­ Processes and standards In addition to linking their climate-oriented goals to a sustainable planet, Rio Tinto emphasizes the role climate sensitivity and active GHG reduction strategies play in de-risking their ­business. Since 1998 the company has fac- tored carbon price into their investment decision making p ­ rocess. More recently, in 2017, the company conducted an internal risk assessment of the possible impacts of climate change, identifying areas impacted by variables such as water risk, sea level rise, and t­ emperature. The company’s long-term process for managing this risk is still in its infancy, but company reports indi- cate there is a concerted effort underway to design and implement a strategy area. in this ­ The company’s water management policy offers a potential for improve- ment. The company has endorsed ICMM’s position statement on water stewardship, which includes tenets such as setting “context-relevant water ­ targets or objectives for sites with material water-related risks,” and indi- cates that it will begin measuring itself against these standards going ­forward. However, under its current state of operation and compared to some other companies in its peer group (some of whom recycle more than 75 percent of water used in production), Rio Tinto recycles a little over 25 ­percent (Soliman, Fletcher, and Crocker 2017). Additionally, the company indicates that it has set specific water targets for 30 operational sites from 2013 to 2018 and that 77 percent of those sites are on track to meet their targets by the end of the 2018 ­timeframe (Rio Tinto 2018). However, the company does not readily disclose what the specific targets are and only indicates that it plans to develop further targets extending beyond the 2018 ­ timeframe. Mining Firm’s Climate-Sensitive Current State Assessment  | 27 Programs and initiatives Rio Tinto has demonstrated active steps to modernize its operations to mitigate initiatives. Two of the most prominent climate impacts, including the following ­ initiatives and their 3P assessments are provided below and summarized in boxes 2.9 and 2.10. Mine of the future. The company is a recognized leader in autonomous and dig- itally managed haul equipment, having launched its first automated haul truck Australia. This effort also in 2008 at their Pilbara iron ore operation in western ­ marked the kickoff of the company’s “Mine of the Future” initiative, an effort that turns the Pilbara in to the company’s proving ground for many of its most BOX 2.9 Mine of the future: 3Ps assessment Planet: Rio Tinto’s technological breakthroughs at Those efficiencies mean lower costs, and greater the mine—from autonomous and efficient material ore. amounts of commercially exploitable ­ movement—has led to the reduction of idle time and a People: Rio has acknowledged that such automation corresponding boost in haul ­ productivity. These efforts have traditionally entailed some level of job improvements show promising new methods of reduc- reduction in traditional mining roles, but offers new emissions. ing overall GHG ­ roles for skilled employees to program and maintain Profit: The profit motive to deploy such an ambitious the new ­ technology. While it may be true that the program is rooted in the notions of efficiency and short term impact may reduce low skill job opportuni- productivity. Automation allows haul trucks to oper- ­ ties—and that this impact may be felt disproportion- ate more continuously and more consistently, and ately in developing ­ countries. On the other hand always take the route of least resistance—allowing for automation presents these same countries with a greater hauls over the course of a shorter ­ period. opportunity. potential technological leapfrog ­ BOX 2.10 Mine closure standard: 3Ps assessment Planet: The climate risks entailed in a firm’s closure of reclamation or rehabilitation costs associated with a mine span a wide range from potential pollution of closing a mine in accordance with obsolete local scarcer local water resources, the inability to reclaim policies. A leading practice approach that goes above ­ the site for agricultural uses due to water scarcity and and beyond forecloses a potential continuing hotter temperatures, or in some regions heavier rain- ­expense. fall might lead to tailings dam ­ failure. Rio Tinto’s People: A mine site can often take up large swaths of approach—dealing with mine closure planning at the land for very long periods of time, removing it from outset of mine design and operations—allows it to productive use by the local community, and a site that anticipate these challenges and “bake-in” mitigation is improperly closed may contaminate local ­ aquifers. and adaptation strategies at the b­ eginning. Proactively operating a mine site with an eye toward Profit: Among the many ways a firm can benefit its the eventual reclamation and productive use of the profitability from proactive mine closure practices land and local water resources is social benefit that includes avoiding the risk of paying for additional citizens. can accrue to a host government’s ­ 28 | Mining Firms’ Climate-Sensitive Initiatives Mining value chain promising environmental and safety-focused ­ innovations. climate priority areas The autonomous vehicles deployed there, in combination Mine design and closure with modifying some vehicles to electric drive, are more planning efficient, reducing GHG emissions with improved fuel efficiency of approximately 5–7 p ­ ercent (Rio Tinto 2018). Energy intensity The vehicles can run longer and with greater consistency in extraction than a traditional truck, increasing the amount of ore the company can transport to processing and reducing ineffi- Materials cient, fuel-consuming idle ­ time. As a recent milestone, the handling CC Adaptation CC Mitigation company’s automated trucks have transported more than 1 billion tons of material at the company’s Pilbara opera- Downstream tions, positively contributing to the bottom line through processing increased ­ efficiency (Rio Tinto 2018). Water and waste Mine closure standard. Rio Tinto takes a strong stance management when implementing climate-rigorous mine closure standards. This includes the stipulation that all mine ­ sites must plan for closure from the outset of the mine Mining value chain climate priority areas and that that closure plan must include strategies to min- Mine design imize financial, social, and environmental ­ risks. The and closure company intends to execute this strategy by maintaining planning a knowledge base on the climate and social implications and conditions of each mine s ­ ite. A mine closure plan Energy intensity in extraction must address long term impacts on water quality and water resources in the impact zone of the mine ­ site. Materials CC Adaptation handling CC Mitigation Disclosure and communications Relative to peers, Rio Tinto’s emissions disclosure is strong, with an aggressive set of emissions ­ t argets. Downstream processing However, their emissions verification process, accord- ing to the CDP, is middling, utilizing the same “limited” Water and assurance standard as other, less exacting mining waste ­ companies (CDP 2018). Conversely, as measured by the management same CDP report, Rio Tinto is one of the most publicly engaged and active companies when it comes to aware- ­ limate-related issues, although it varies as to which side of the issue ness of c the company takes on an issue-to-issue ­ basis. NOTES 1. For the purposes of scoring and categorization companies were reviewed based on their 2018. activities and actions as of ­ 2. The first four of these categories’ proxy variables are scored qualitatively on a scale from 0 to 2 (with 0 representing an absence of or minimal effort in the subject sub-criteria relative to the other shortlist companies, 1 representing an adequate presence of effort in the subject category; and 2 representing superlative effort in the c ­ ategory). The geo- graphical category is measured on a scale of 0-1 with 1 denoting headquarters presence in an emerging ­ market. 3. In part, this is due to AngloAmerican’s South Africa operations, where the dominant coal-fired. power utility is primarily ­ Mining Firm’s Climate-Sensitive Current State Assessment  | 29 4. While Goldcorp did not hit its intended target, water consumption did decrease notably ­overall 5. Morgan Stanley’s Piyush Sood made this assessment on June 12, 2 ­ ttps://finance​ ­ 018. h .yahoo.com/news/morgan-stanley-prefers-newmont-mining-180542185.html 6. A trend documented in by the World Bank in its 2016 State and Trends of Carbon Pricing Report ­http://documents.worldbank.org/curated/en/598811476464765822/pdf/109157​ -REVISED-PUBLIC-wb-report-2016-complete-161214-cc2015-screen.pdf ­ ompany. 7. These cost savings are forecasts and not yet realized by the c 8. Newmont’s Yanacocha project in Peru also represents a strong example of water management ­ 9. This is largely due to the dominant power producer in South Africa relying heavily on ­coal-fired ­generation. 3 Industry Outlook: How the World’s Largest Miners View their Role in a Green Economy This section aims to gauge the motivations of the largest mining corporations to take climate action ­(e.g., whether to mitigate their impact, or adapt their opera- tions to increasing climate risks) and to assess the extent to which these actions take into explicit consideration local value creation imperatives ( ­ i.e., whether corporate leaders see an opportunity in using climate-related efforts to support ­ conomy). This was done through or drive a host nation’s transition to a green e questionnaires addressed to, or substantive conversations with, sustainability officers from five multinational mining corporations: Barrick Gold, Goldcorp, Newmont Mining, Anglo American, and ­ IAMGOLD. On the basis of input received, and conversations with others, it appears that at best, some mining firms see the potential for a systematic approach of linking their climate-related initiatives with a host government’s concerted effort to build green industrial value ­ chains. By and large, however the inter- viewees view these two efforts as distinct, with case-by-case possibilities for overlap; and even in those instances of overlap, the miners’ climate-related activity is only viewed in a local-community value creation or development context—as opposed to having a central role in supporting a broader green industry within a ­ country. Summarized below are the findings from these interviews and ­ questionnaires.1 MOTIVATIONS FOR CLIMATE-SENSITIVE ACTIVITIES When investing in an activity aimed at helping them mitigate their climate impacts or adapt to climate risks the interviewees are generally motivated by two factors: • Bolstering their reputation with the local community in which their mine operates to secure their “social license” to operate; and • Pure ­economics.  31 32 | Mining Firms’ Climate-Sensitive Initiatives As such, the spectrum of climate-related activities in which these companies’ mining operations typically engage falls into two categories: (1) activities aimed at increasing an operation’s energy efficiency or shifting the sources of energy; and (2) activities aimed at increasing an operation’s water usage efficiency, or securing a long-term and reliable supply of ­ water. Each category is discussed below, and a sample of answers received is ­provided. Energy and emissions reductions With respect to investments whose effect was to reduce emissions, the primary motivator appears to be ­ economics. Specifically, the interviewees’ companies who had invested in a power plant or shifted away from a diesel production fleet did so because of cost reduction, or to hedge against a future rise in the price of the high-emitting fuels on which they are ­ reliant. It is important to emphasize that even though some of the interviewees sought a shift to lower-carbon tech- nologies or fuels, they were not primarily motivated to do so even by the likely emissions reduction i ­mplications. Rather, they made their investments on the likelihood that it would reduce operating costs over ­time. To the extent that such an investment would earn them a social license to operate—the interviewees viewed this notion on a range from a side benefit, to skepticism—because neither the host communities in which they operate, nor the company, view carbon emissions as a local and near term ­ issue. Some of the reactions from the interviewees that give voice to this perspec- tive are summarized in box 3.1. Water management In contrast to energy-based climate investments, the mining corporations that were interviewed in the context of this report all viewed their water-based climate investments as driven equally—if not primarily—by its propensity to generate local value as they are driven by the miners’ need to secure a stable supply of water for their operations, that is, economic ­considerations. The key distinction between water management and BOX 3.1 emissions reduction is the fact that, since they tend to operate in water-stressed areas, (1) the local community Energy and emissions reductions: can more tangibly perceive the near-term limited nature of Reactions from interviewees and competing demands on water as a resource, which leads to (2) water availability often becoming a major pro- “To be honest in most jurisdictions in which we duction ­ constraint. As such, mining corporations will operate, climate change is not regarded as a local often view the return of saved water to the community or issue…our business decisions will be primarily the construction of a desalination plant—to use one influenced by whether [an energy investment] example—as core to their sustainability and social costs more or less…”With the exception of water license-building ­strategy. After all, even if it is in a mining and air quality “local [emphasis added] communi- operation’s economic best interest to secure a long term ties don’t really care” about climate change or supply of water, doing so at the expense of the local com- emissions ­reduction. munity is a sure way to diminish the long term viability of “Local socio-economic development is a side the ­operation. benefit” of the firm’s investment in a solar power Some of the reactions from the interviewees that give plant at the mine ­site. voice to this perspective are provided below and summa- rized in box 3.2. Industry Outlook: How the World’s Largest Miners View their Role in a Green Economy | 33 BOX 3.2 Water management: Reactions from interviewees With reference to an operation in South America, the Climate change as a general proposition is not company stated that it is widely understood among the regarded as a high priority in the communities in industry operating in the region, that although it is not which the company operates, and as a result is not a mandated prerequisite, it is difficult to obtain viewed at the mine site as a primary concern ( ­ i.e., mine approvals for new mine construction without the site operators/managers will not typically take climate installation of a water desalination ­ plant. This is in part action for climate purposes alone; rather, they will be due to necessity—there is scarce water available for motivated first by an opportunity for cost reduction or mining operations that isn’t already committed to efficiencies, and will view climate benefits as an ancil- community uses—so miners must resort to transporting impact). The few exceptions of “overlap” lary positive ­ seawater 100–200 km inland and 2,000 m above sea as one company put it, was around “site-based water level before treating it and using it in mining ­ operations. ­management.” IS THERE A CLIMATE-LOCAL GREEN GROWTH NEXUS THAT INDUSTRY VIEWS AS AN OPPORTUNITY? To the extent that any of the interviewees determined that there was an opportunity to pursue climate action that drives host country economic development—particularly a transition to a green economy—the opportunity wasn’t viewed as sufficiently tangible to warrant concerted and immediate investment. This suggests that the rationale for this may arise from the fol- ­ lowing three overriding themes: 1. Site level mining operations generally have one overarching mandate— to maximize the value of their mining ­ asset. This means, among other things, taking steps to optimize net operating income through measures directed at reducing costs or increasing o ­ utput. All investments a site manager makes are viewed through this economic lens; therefore if, like Anglo American, a firm were to invest in a “closed loop” water recycling system that reduces its consumption of freshwater from the local aquifer, it would do so ­primarily to increase water availability, thereby reducing production down- time and increasing output and net operating ­ income. Similarly—as exem- plified in Goldcorp’s Borden operation in Ontario, Canada—if a company were to invest in an all-electric mining fleet (including boom trucks, drilling trucks, and scoops) it would do so in large part because of its ability to achieve an acceptable payback period and an expectation of an Operating Expenditure (OPEX) r ­ eduction. In the case of Goldcorp, these figures were 2–3 years and 10 m ­ CAD/Yr., respectively, after a 5 m CAD subsidy from the Ontarian ­Government. 2. Site level mining operations do have a secondary mandate of solidifying the social license to operate with the local community—but the sought after out- comes here are inextricably intertwined with the mandate to maximize ­ value. All of the companies interviewed have dedicated sustainability teams engaged ­ evel. Many of these activities in community development activities at the site l are well articulated, and drive real value in the ­ communities. One such 34 | Mining Firms’ Climate-Sensitive Initiatives example in South Africa’s Limpopo Province, is the provincial government’s joint implementation with Anglo American of the firm’s “Collaborative Regional Development” approach to regional planning, which takes into account climate change issues when considering agricultural ­ options. This is also representative of most of the interventions undertaken by community development operations at the mine-site level: they are deeply local, tailored for the communities, and are rarely if ever specifically driven by climate outcomes. For example, Anglo American acknowledged that “many of our ­ interventions do not have an explicit climate lens at the moment and we could likely do more on that ­front.” Rather, most outcomes will be project specific ­ (e.g., agricultural yield or employment), and the residual outcome that informs all such community investments is the propensity of the activity to mine. extend the operational life of the ­ 3. The scope of a mining firm’s activities directly addressing the climate change imperative is almost entirely confined to its headquarters-level sustainability ­team. All interviewees suggested a headquarters and mine site-level dynamic with respect to the intentionality with which the firm addresses issues. As discussed above, at the mine site, measures to secure the climate ­ long term availability of a dedicated or semi-dedicated source of potable water is primarily informed by the site’s desire to maximize output, and is viewed as a climate-adaptive measure to preserve declining water resources, only ­after-the-fact. Similarly, any effort at the site to shift energy resources or move toward an automated fleet are motivated by a desire by the mine to reduce OPEX, should any Greenhouse Gas (GHG) reductive outcomes follow, that is an ancillary ­ benefit. The headquarters staff, how- ever, does aggregate these ancillary site-level benefits and reports GHG reduction and water conservation data to global standard setting bodies such as C­ DP. The leading climate-sensitive mining firms’ sustainability teams at the headquarters comprise real experts, with real board-level authority, and climate issues are their core ­ mission. That being said, sus- tainability teams very rarely have operational, site-level, investment authority. They are an overhead cost center to the firm, and the scope of ­ their responsibilities are often confined to external metric reporting and internal auditing ­ functions. This headquarters-site level disconnect in terms of the climate imperative for the firm can often result in missed opportunities for meaningful climate interventions and the corresponding chances for catalytic local value ­creation. NOTE 1. Note that all conclusions not directly attributed to a company’s representative in this section is a product of inference and analysis of the totality of firm responses to the ­ questionnaires or phone interview ­ ­ questions. 4 Conclusion: A Proposed Future-State Climate-Local Value Creation Framework This report has highlighted a gap in terms of the climate and local value-­ creation ambitions of a company and the crafting and implementation of a strategy to pursue those ­ambitions. Put simply, too many times socio-­economic value creation efforts on the part of mining firms land in the realm of Corporate Social Responsibility (CSR) initiatives—too bespoke and tailored to the local community to create a truly meaningful, scalable, and catalytic economic impact at a national l­ evel. Furthermore, the mining firms interviewed in con- nection with this report made abundantly clear that they view their site-level initiatives that might be classified as climate-oriented and their local value creation efforts as fundamentally separate e ­ ndeavors. Several of the inter- viewees suggested, however, that there is a real opportunity in connecting the two endeavors—and a few, like Goldcorp, had current examples of climate ini- tiatives that are delivering real and sizable local economic value to their host jurisdictions and ­communities. With that said, none of the efforts reviewed in this report rose to the level of a strategic operation driven from the top down to the site to systematically target climate-sensitive mine operations that are most likely to catalyze economic development and diversification for host jurisdictions and local ­ communities. Instead, the initiatives identified in this report are largely a hodgepodge of investments and operations that generally fall into the following three overarch- ing categories (or somewhere in between categories): • Compliance measures: Auditable reports and internal standard setting aimed at satisfying minimum criteria established by non-governmental orga- nizations (NGOs) and international guidance-establishing bodies like I ­ CMM. • Resource planning efforts that can credibly be characterized as climate-smart: Investments made to shift away from price-volatile fuel and electricity sources, and to lock up long-term sources of water supply, all with an eye toward increasing mine productivity while reducing c ­ osts. • Social license efforts with a climate element: Local value efforts conducted by site-level CSR and community development teams continue apace in an effort to bolster the firm’s social license to operate, but the vast majority of dimension. these small-scale efforts lack a climate ­  35 36 | Mining Firms’ Climate-Sensitive Initiatives Table ­ 4.1 provides a visual categorization of the climate-sensitive mining firms’ initiatives presented in “Mining Firm’s Climate-Sensitive: Current State Assessment” ­section. It is important to note that the initiatives categorized in table ­4.1 are not a representative sample of all of the climate-related efforts mining firms have under ­ way. Rather, they explicitly reflect climate efforts that have the highest tendency to drive local value ­creation. As a result, the Resource Planning cate- gory is somewhat overrepresented—in part because these efforts entail the building of scalable infrastructure that offer the opportunity for large scale employment in a green economic sector, along with significant technological transfer. and skills ­ It is within this Resource Planning band of activities that this report con- cludes mining firms should devote more strategic ­focus. These activities have the capacity to address two of the mining industry’s present pain points: • The likelihood that the existing local value creation/stakeholder engagement framework in which firms are operating may not be optimally yielding the desired results—as is reflected by several high profile protests, bans, and pro- duction interruptions; and • The growing climate dimension of a firm’s social license to o ­ perate. Increasingly, due to international pacts, accelerating climate impacts, and host nations’ desire for diversification into and growth of sustainable sectors of their economy—firms must navigate and take advantage of a complex patchwork of policies aimed at boosting green industrial ­ sectors. Developing a strategy to help host nations achieve their green industrial ambitions is a new approach to delivering local value that might differentiate a firm from its c ­ ompetitors. A graphical representation of such a framework is provided in figure ­ 4.1. The sphere is split into two hemispheres—the lower hemisphere reflects operational activities carried out by firms in the mining industry, whereas the upper hemi- sphere is intended to reflect the policy environment—set by nations, i­ nternational pacts, and standard-setting bodies—in which the firms ­ operate. Each of the tri- angle icons is associated with an initiative described in “Mining Firm’s Climate- Sensitive: Current State Assessment” section, and numbered in table ­ 4.1. The three bands of activities are loosely tied to the three categories identified in table  ­4.1. The outer band is about compliance, where most of firms’ TABLE 4.1  Mining firms’ initiatives categorization INITIATIVE CATEGORY COMPANY COMPLIANCE RESOURCE PLANNING CSR/LOCAL VALUE CREATION Newmont 1 Carbon Pricing 2 Ghana Water Treatment Facility 3 Haul Truck Optimization Vale 4 Indonesia Karebbe Hydroelectric Plant 5 Diesel Switching Barrick 7 Planning for Backfilling during 6 Real Time Water Monitoring Mine Closure Anglo American 9 Emission Reduction KPI in CEO 8 Waterless Mining 12 Collaborative Regional Compensation Plan Development Rio Tinto 11 Mine Closure Standards 10 Mine of the Future (Automation) Note: CEO = Chief Executive Officer; CSR = Corporate Social Responsibility; KPI = Key Performance Indicator. Conclusion: A Proposed Future-State Climate-Local Value Creation Framework | 37 climate-specific work appears to take p ­ lace. They are motivated by the “standard setting zone” of policy, and the reporting and auditing they conduct are aimed at projecting a “good neighbor” ­ status. The inner-most band of activities are social license-related, usually small scale, bespoke, and unlikely to create catalytic local economic ­ value. Firms engage in these activities largely due to local communi- ties’ desire to share in the mine operation’s value, or to not be socially or econom- ically displaced by those ­ operations. The middle band of activities in figure 4 ­ .1, is really the thrust of this report’s findings—climate related activities that have a propensity to create scalable eco- nomic value are those that involve significant investments in long-lasting green infrastructure that has the potential to grow into a new economic sector within the host n ­ ation. To varying degrees, all of the initiatives in the graphic high- lighted in gold reflect this type of potential—the construction of a hydroelectric plant, for instance, creates an infrastructure with 30–40 years of useful life that provides power to the community quite apart from the needs of the mining oper- ation ­itself. By engaging local contractors in, and helping to develop a local sup- ply chain that supports the design, construction, assembly, operations, and maintenance of the plant, a mining firm can help create thousands of direct and knock-on employment opportunities, and develop skills in the local work force that will be relevant for the foreseeable future, as the green economy within the host nation—and ­ globally—matures. FIGURE 4.1 A framework for a new green social license strategy The standard-setting zone International pacts and NGOs seeking climate-specific commitments The green growth zone Resource-rich countries seeking to The public policy agenda diversify into the green economy The local value zone Local community dev. 2 12 The social license zone 3 8 7 HQ & social investment 11 4 5 10 5 The blue ocean New replicable operating model The corporate strategy agenda 1 for sticky markets 9 The good neighbor zone Dedicated climate audit and sustainability staff to sustain brand value Note: CSR = Corporate Social Responsibility; NGO = Non-Governmental Organization. 38 | Mining Firms’ Climate-Sensitive Initiatives TABLE 4.2  A green approach to local value creation: implications and benefits OPERATIONAL IMPLICATIONS OF A GREEN APPROACH TO POTENTIAL REWARDS FROM PURSUING A GREEN MODEL FOR LOCAL VALUE CREATION LOCAL VALUE CREATION • Coordination between central office government • Strengthening the partnership with host nations—who will not only affairs units, sustainability units, and site-level be invested in a firm’s success due to the economic activity the mine operations is driving, but will now multiply the touchpoints with the firm given • Shifting climate-related resources away from CSR the investment in new green ­ infrastructure. teams and toward site-level resource planning and • Relying on the strengthened partnership with the central government investment teams and local communities, to mitigate the risk of production disruptions • Continuing and strengthening the commitment to due to bans, protests, and punitive ­ levies. “Good Neighbor Zone” ­ activities. Metrics tracking and • Increasing the likelihood of repeat business or market “stickiness” due reporting should be expanded to include economic to the competitive advantage entailed by the new approach to local outcomes from green infrastructure investments value-generative implementation of climate ­ mandates. • Aiming for ­ scale. Instead of simply navigating policy, helping to shape ­ it. Brokering deals with host governments that might entail multiple green infrastructure projects potentially in exchange for an expanded mining footprint and expedited ­ permitting. Responsibility. Note: CSR = Corporate Social ­ As the framework indicates, this middle band—investment activities that can be supported by green growth or green industrial policies promulgated by host nations—must ultimately crowd out the smaller scale tailored activities that cur- rently are overrepresented in social license-building e ­ fforts. Those CSR-type initiatives will ultimately be no substitute for the jobs, revenue, and development impact of large technological and infrastructure i ­nvestments. This is a “Blue Ocean” strategy for local value creation—by shifting focus from traditional social license activities toward a strategic approach to developing mutually beneficial green infrastructure and “inclusive” automation, a mining firm can deliver such considerable value in the marketplace as to have carved out a competitive ­advantage.1 Table 4 ­ .2 summarizes some of the operational efforts this might entail, and the benefits this might ­accrue. NOTE W. Chan Kim and 1. The term “Blue Ocean Strategy” was coined by INSEAD professors ­ Renee ­Mauborgne. See Blue Ocean Strategy, Expanded Edition: How to Create Uncontested Market Space and Make the Competition Irrelevant, Harvard Business 2015. School Publishing Corporation, ­ Appendix A Mining Firms Selection Methodology For the purpose of identifying a representative sample of mining firms, in addi- tion to the methodology laid out in the Methodology and Value Chain Analysis ­ ramework. The analysis is con- report, this report utilizes a Climate Strategy F ducted in two stages: • First, 10 mining firms are shortlisted based on the priority areas identified in the Methodology and Value Chain Analysis report; • Second, the shortlist if further refined by applying the Climate Strategy ­Framework. SHORTLIST PHASE The Methodology and Value Chain Analysis report identified a set of five priority areas based on a scoring exercise that gauged the relative climate risks to and impacts of mining processes across the value chain within multiple metal and subsectors. Those priority areas were: mineral ­ • Planning for the Risks Associated with Scale and New Geographies • Energy Intensive Extraction • Procurement and Management of Material Handling • Downstream Processing • Water and Waste Management The shortlist of 10 leading mining companies comprise those companies that have actively made investments in or addressed in a tangible manner at least two areas. The sample selection was designed to include companies of these priority ­ whose activities in the aggregate address all priority ­areas. The report also lever- ages external resources such as the CDP (formerly the Carbon Disclosure Project (CDP), and now focused on broader climate indicators), indices such as the Dow Jones Sustainability Index (DJSI), and interviews with mining sector experts to arrive at a list that is fully representative of the climate-smart work being done by mining ­companies. In addition the report seeks to include compa- nies headquartered in developing ­ economies.  39 40 | Mining Firms’ Climate-Sensitive Initiatives MINING FIRMS’ CATEGORIZATION PHASE This report utilizes a “Climate Strategy Framework,” described in further detail below, to identify five representative companies for in-depth ­ analysis. To this end, the shortlisted companies are scored across the four categories of climate strategy operational sophistication, along with a fifth category awarding a pref- erence for companies whose operations are headquartered in emerging m ­ arkets. The four climate strategy categories are: • Vision, Governance, Goals, and Objectives • Processes and Standards • Programs and Initiatives • Disclosure and Communications Companies that rank highest across these four categories and the emerging ­ eport. market preference category are further analyzed in this r THE CLIMATE STRATEGY FRAMEWORK The analysis carried out in this report employs two primary frameworks: the Climate Strategy Framework to select five best practice companies from the shortlist, and as a mechanism to describe a company’s approach to climate impact mitigation and adaptation; and the Climate-Sensitive Mining Reference Framework, to tie company-specific programs and initiatives back to the priority report. A detailed description of each areas identified in the value chain analysis ­ framework is provided ­ below. Climate Strategy Framework Since this report is aimed at capturing the practices of leading businesses in the mining sector it is appropriate to view their climate-sensitive efforts through an organizational strategy and business process ­lens. In doing so, the report utilizes the Climate Strategy Framework depicted in Figure A ­ .1 in an effort to provide the organizational context in which the efforts are taking p ­ lace. Successful busi- nesses do not stumble into their activities—climate-related or otherwise—by accident. Each action is assessed for cost and benefit to the organization and its ­ impact on ­shareholders. This planning process begins with a unifying and direc- tional tone at the top of the organization, which drives action planning, organi- zational activities, and reporting on progress toward g ­ oals. The processes underlying the leading practices of companies, as identified in the Climate Strategy Framework, are described ­ below. Vision, governance, goals, and objectives Senior leadership must establish the vision, direction and level of ambition for the firm’s climate impact adaptation and mitigation strategy, and once that is decided, leadership must also put in place the necessary governance structure to oversee the development and implementation of the strategy ( ­ e.g., Climate Change Committee, Board Oversight, e ­ tc.) Senior leadership must similarly establish goals and objectives that define the strategic priorities and pillars of the climate ­strategy. This will form the basis of the metrics used to measure whether ­ ision. the firm’s activities are helping the firm to achieve its v Mining Firms Selection Methodology | 41 FIGURE A.1 Climate strategy framework Vision and Vision governance governance goals and objectives Goals and objectives Policies, standards, guidelines Processes and standards Climate change risk and opportunity assessment Programs and action plans for climate change strategy Programs and initiatives Mine design and Alternative materials Bioleaching closure movements Internal tracking and reporting: Internal reporting (e.g., energy and GHG intensity, targets, Disclosure and water stress risk, insurance premiums, etc.) communications External disclosure and communications: (e.g., CDP, TCFD, DJSI, GRI, etc.) Messaging and narrative development, communications planning Note: CDP = Carbon Disclosure Project; DJSI = Dow Jones Sustainability Index; GHG = Greenhouse Gas; GRI = Global Reporting Initiative; TCFD = Task Force on Climate-related Financial Disclosures. Processes and standards In this, the activity planning stage, the organization develops policies, standards, and guidelines to inform and direct the firm’s implementation of its climate ­ strategy. This can include, among other directives, a policy regarding water use at mine sites, guidelines regarding hauling fleet procurement, and mine design standards. In developing these policies, the firm should conduct an assessment ­ of the risks and opportunities posed by climate change ( ­ e.g., regulatory risks, supply shock risks, climate scenario analyses, and reputational o ­ pportunities). Programs and initiatives In the implementation stage, the firm should develop programs and action plans to execute on the climate change s ­ trategy. The relevant types of initiatives in which mining firms can engage, and the initiatives on which this report focuses are those that address the climate priority areas identified in the value chain anal- ysis ­report. Representative initiatives include, for instance, procuring for alterna- tive movement of material, and incorporating climate change into mine closure planning at the design phase of a ­ mine. Each of the representative company pro- grams or initiatives this report seeks to highlight not only have a substantial impact from a climate perspective by mitigating the company’s impact on climate change or adapting to those changes, but they also achieve that impact while 42 | Mining Firms’ Climate-Sensitive Initiatives being accretive to the firm’s bottom line, and have the potential to put the firm and mine site in a position to create shared value at the local ­level. To reflect these interrelated impacts the report uses a “triple bottom line” or “3Ps” a ­ nalysis—in which the report endeavors to reflect on the planet, profit, and people implica- tions of the climate i­ nitiative. It is worth noting that the initiatives vary in terms of their potential to drive local value creation—the people prong of the analysis— and yet the initiatives on which the report elaborates represent some of the best efforts by leading climate-conscious mining ­ firms. This is the gap that this report aims at addressing by suggesting a potential framework for a s ­ olution. Disclosure and communications Once the plan is in place and the strategy is being implemented, the firm must track progress toward its goals and v­ ision. As such, it should develop KPIs for monitoring and reporting on programs and key metrics to internal ­ stakeholders. Moreover, it should exploit the opportunity to improve its goodwill and reputa- tion by enhancing external disclosures and communications on climate change stakeholders. to external ­ CLIMATE-SENSITIVE MINING REFERENCE FRAMEWORK This report focuses on both climate impact adaptation and mitigation activities in which companies are engaged, throughout their value c ­ hain.1 To orient the reader as to which type of effort in which segment of the value chain/­identified priority area a company is conducting, the report uses the framework/graphic FIGURE A.2 Reference framework for mining companies’ priorities Mining value chain climate priority areas Mine design and closure planning Infrastructure design • Flooding resistance GHG/energy • Drought resistance • Optimal energy consumption • Extreme weather events Energy in mine design resilience intensity in extraction • Energy efficient mine Operations equipment • Tailings management taking • Renewable energy sourcing climate change into account (GHG emissions per energy • Planning for passive tailings unit) closure Climate change Materials Climate change handling Water/land use adaptation mitigation Closure/postclosure Runoff management • Planning for climate change • Watershed level planning • Modeling of future climate • Digital water management and hydrological regimes • Zero net water use planning Downstream • Slope stability processing • Revegetation changes • Effect on acid rock drainage Water and waste management ­ as. Note: GHG = Greenhouse G Mining Firms Selection Methodology | 43 presented in figure A ­ .2. Specifically, the report uses the core graphic at the center of figure ­A .2, highlighting the areas implicated by the reference compa- activities. At the left and right of the graphic are representative examples ny’s ­ of adaptation and mitigation activities in which a mining company might ­engage. NOTE 1. Adaptation efforts comprise those activities in which companies engage to limit the ­ evenue. Mitigation efforts, con- impacts of climate risks to their operations, costs, and r versely, are those activities intended to reduce the impact of a company’s operations on the climate through, among other initiatives, reducing fuel and water c­ onsumption. Bibliography Anglo American. 2018a. Company Website. http://www.Anglo American.com/. Accessed November 2018. ———. 2018b. 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ECO-AUDIT Environmental Benefits Statement The World Bank Group is committed to reducing its environmental footprint. In support of this commitment, we leverage electronic publishing options and print- on-demand technology, which is located in regional hubs worldwide. Together, these initiatives enable print runs to be lowered and shipping distances decreased, resulting in reduced paper consumption, chemical use, greenhouse gas emissions, and waste. We follow the recommended standards for paper use set by the Green Press Initiative. The majority of our books are printed on Forest Stewardship Council (FSC)–certified paper, with nearly all containing 50–100 percent recycled content. The recycled fiber in our book paper is either unbleached or bleached using totally chlorine-free (TCF), processed chlorine–free (PCF), or enhanced elemental chlorine–free (EECF) processes. ­ More information about the Bank’s environmental philosophy can be found at http://www.worldbank.org/corporateresponsibility. T he need for mining firms to rethink and retool their local value creation efforts, along with the growing complexity of climate policies, presents an opportunity for forward-thinking mining firms to seize a competitive advantage. As this report argues, firms that systematically tackle their climate responsibilities and adapt to climate realities through technical solutions that offer scalable economic value to host nations are best placed to contribute to sustainable growth in their countries of operation. SKU 33306