Sustainable mining finances: Exploring costs and liabilities
February 08, 2024
February 08, 2024
When done correctly, sustainable mining should save money and reduce emissions
The mining industry is changing. And mining professionals can spur progress on sustainability goals. After all, engineers play a vital role in achieving a sustainable vision. In addition to designing for safety and reliability, they can also include environmental, social, and governance (ESG) considerations. In doing so, engineers can integrate sustainable design elements into their daily work.
Focusing on sustainability gives companies a leg up on their competition. How? Sustainable decisions help a company meet its environmental goals. They comply with regulations. And they boost the bottom line thanks to cost savings from operational efficiencies. All this results in increased production. This is vital to meet the demand for critical minerals in clean energy technology.
Corporate leadership teams must drive goals focused on sustainability. It all starts with a future vision. Then, it builds with interim milestones and projects that will move the needle. But the goals must be supported with the investment and people to make it happen. Let’s explore the finances behind sustainable mining below.
We often refer to green credits as carbon credits or environmental certificates. They represent a reduction or removal of greenhouse gas emissions. Mining companies can earn green credits by reducing carbon emissions. They can also earn them by sequestering carbon. Both actions contribute to sustainability.
Here’s how carbon credits typically work:
For a mining company, embracing green credit programs contributes to environmental sustainability. But it can also generate revenue. So, the company can make money from its decarbonization efforts. Then, it can invest in more sustainable mining practices. This financial incentive aligns with broader trends in corporate responsibility and sustainable development.
Green premiums and brown penalties are financial terms tied to environmental stewardship. Green premiums are incentives for environmentally friendly practices. Brown penalties are costs or fines associated with harmful practices. Green premiums and brown penalties both exist in the mining industry.
Green premiums are a clear financial advantage. They benefit companies that adopt sustainable practices. This can include using cleaner technologies, reducing carbon emissions, or applying eco-friendly processes. For example, mining companies that adopt sustainable practices might receive higher prices for their products. They could gain preferential access to markets. And they could attract environmentally conscious investors. These premiums reflect a market willingness to reward responsible actions.
Brown penalties are the costs that companies face if they engage in environmentally harmful practices. Think pollution, deforestation, or poor tailings management. Mining companies facing brown penalties might experience increased regulatory scrutiny or legal challenges. It could also lead to fines or less access to certain markets. Investors and consumers may shy away from companies with poor environmental records. This leads to a financial disadvantage.
Green premiums and brown penalties are economic outcomes. And they are linked to the practices of mining companies. It is key for miners to put positive practices in place; it’s also important to limit harmful ones. These financial incentives reflect a broader shift. A shift towards responsible resource extraction.
It’s been said before, but it bears repeating. Employees want to work for companies that are responsible. This is especially true when it comes to the environment. According to Gallup, Gen Z and millennials now make up nearly half (46 percent) of the full-time workforce in the US. This new generation cares more about climate change and social equity than the workforce before them. Meaning? Companies that champion environmental and social efforts are more attractive to potential employees. They are more likely to get the top talent.
A culture of sustainability can also increase employee retention. This saves money and maintains a company’s intellectual capital. An employer of choice must prove how they are improving lives today and for generations to come. ESG-focused values are appealing for many employees—especially millennials—who want their work connected to a higher purpose.
This is the ideal time for mining companies to tap into the new generation of workers. It’s also a great time to further the ESG initiatives and achievements. This also means fostering a fresh view of the mining industry within society. Mining is changing its way of working. That is, being responsible and sustainable. It’s an industry that is sourcing the critical minerals we need for green technologies. It’s an industry that embraces workforce diversity. And it’s an industry that engages with community. Mining is an industry that puts people first.
These financial incentives reflect a broader shift. A shift towards responsible resource extraction.
One of the biggest obstacles to sustainability is a classic culprit. Money. Many people recognize the financial benefits of sustainability. But some still view it as an expensive undertaking. Or just a box-ticking exercise. Some may also think that these practices increase risk through downtime or less output.
But it is important to measure the long-term view of the business. And to consider the liabilities from not operating sustainably. One example: increased costs for mine closure. Or it could be something harder to measure, such as reputational damage or increased risks in the business.
Responsible miners have strong relationships with communities, their workforces, customers, suppliers, and governments. This yields a smoother business operation. Thus, it’s a financial benefit as much as it is a social one.
An effective way to start a cultural shift? Helping both leaders and employees recognize the financial and social upsides to sustainability. When done right, sustainable designs drive operational costs down. They also improve recovery rates. For example, a copper mine in Arizona completed a debottlenecking study to review their operation. During this exercise, they realized they could save energy costs by modifying their grinding and crushing circuit. How? The modifications reduced energy use while also increasing their recovery. Sharing success stories like this can teach others that sustainable solutions bring cost benefits to the business.
Engineers can lead the charge by using innovative and sustainable solutions in their projects. The result? Operations that deliver on environmental protection, decarbonization, safety, and the returns to stakeholders. The message is not hollow. The outcomes prove it.
Sustainability is not a target buried within an annual report. It is a moral obligation. It is a business imperative for corporations. It’s the foundation of commitments, strategies, and metrics that are tracked and reported annually. And it’s achievable. But only when supported with the funding and the people to make it happen.