ESG and social responsibility principles and standards: a guide for AusIMM members

  • By Bruce Harvey FAusIMM, Chair, AusIMM 'ESG/Social Responsibility' Committee

A detailed list of well-established global sustainability principles, standards and guidance for AusIMM members

Environmental, social and governance (ESG) performance is increasingly referenced in corporate board rooms and the financial sector. The minerals sector is at the forefront of these emerging ESG expectations, and yet there is usually very little detail provided. To assist with this and to help AusIMM members become more aware and understand what ESG expectations might be expected in the context of their work, this article lists and summarises global principles, standards and guidance that can apply to minerals sector projects, operating assets and closure transition.

Global principles, standards and guidance

When working anywhere in the world AusIMM Members need to be aware of and conform with statutory and regulatory requirements. Increasingly, global best practice performance principles and standards are also setting universal expectations, frequently linked to financing conditions. Relevant global principles, standards and guidance are listed below, with linking websites and some summaries are provided. It is recommended that AusIMM Members need to be aware that these exist, and many members may need to be familiar with or competent in their application when undertaking their work roles.

It may also be appropriate for some AusIMM members to be familiar with the following:

International Finance Corporation (IFC) Performance Standards and Equator Bank Principles

IFC Performance Standards (IFCPS)

The IFC Performance Standards (IFCPS) have been in place for over 20 years, applicable to IFC-funded (World Bank non-government funding) development projects everywhere in the world including many mining projects in developing regions. Regularly reviewed in the early 2000s, the IFCPS have matured and stabilised to the point of being the primary reference point for all other global environmental and social sustainability codes.

IFCPS 1 – Assessment and Management of Environmental and Social Risks and Impacts

IFCPS 2 – Labor and Working Conditions

IFCPS 3 – Resource Efficiency and Pollution Prevention

IFCPS 4 – Community Health, Safety and Security

IFCPS 5 – Land Acquisition and Involuntary Resettlement

IFCPS 6 – Biodiversity Conservation & Sustainable Management of Living Natural Resources.

IFCPS 7 – Indigenous Peoples

IFCPS 8 – Cultural Heritage

Equator Bank Principles

The Equator Bank Principles provide ESG-guidance on financing conditionality for signatory commercial banks. Of similar vintage and with direct reference to the IFC Performance Standards, the Principles have been signed by some one hundred institutions (known as Equator Principles Finance Institutions – EPFIs), including all of Australia’s major commercial banks. The fourth upgrade to the Principles (EP4) goes live in October 2020 – providing greater detail in lending requirements; it will increasingly be referenced in commercial financing of mining projects.

Principal 1 – Review and Categorisation

  • Category A: potentially significant adverse environmental and/or social risks and/or risks that are diverse, irreversible or unprecedented
  • Category B: potentially limited adverse environmental and /or social risks and /or impacts that are few in number, generally site – specific, largely reversible and readily addressed through mitigation measures.
  • Category C: minimal or no adverse environmental and social risks and/or impacts

Principle 2 – Assessment required at client expense for Category A and B to meet ‘Equator Bank’ satisfaction.

Principle 3 – Applicable Environmental and Social Standards – involves compliance with applicable IFC standards on Environmental and Social Sustainability for Non-Designated Countries and compliance with host country laws regulations and permits for environmental and social issues for Designated Countries (those countries with robust environmental and social laws and policies and strong supervisory regulatory systems). 

Principle 4 – Environmental and Social Management System and Equator Principle Action Plan – for Category A and B projects the requirement to develop and maintain an Environmental and Social Management System to comply with the applicable standards.

Principle 5 – Stakeholder Engagement – for Category A and B projects the client will need to demonstrate an effective Stakeholder Engagement process in a structured and culturally sensitive and appropriate manner with Affected Communities.

Principle 6 – Grievance Mechanism – all Category A and as necessary Category B projects to establish and maintain a mechanism to receive and facilitate resolution of concerns and grievances about the project’s environmental and social performance.

Principle 7 – Independent Review – All Category A and as is appropriate Category B projects require an independent review of the assessment documentation and the stake holder engagement documentation to assess Equator Principle compliance.

Principle 8 – Covenants – will apply to all financial documentation that the client will meet the Equator Principle requirements and for Category A and B projects these include specifically compliance at all times during construction and operation and for decommissioning in accordance with the decommissioning plan. Failure in any respect is subject to substantial penalties.

Principle 9 – Independent Monitoring and Reporting – is required over the life of all project categories over the project life including that beyond the Financial Close with Category A and B projects being required to retain qualified and experienced external experts to verify the monitoring information and to report to the Equator Principle Financial Institutions.

Principle 10 – Reporting and Transparency – all Category A and as appropriate Category B projects are required to ensure disclosure of any matters revealed under Principle 5 and that a summary of the Environmental and Social Impact Assessment developed under Principle 2 are available online.

Industry Association Principles

International Council on Mining and Metallurgy (ICMM) Principles

ICMM’s Mining Principles define the good practice environmental, social and governance requirements of its company members. Linked to robust site-level validation of performance expectations and credible assurance of corporate sustainability reports, the ICMM’s Mining Principles seek to maximise the minerals sector’s benefits to host communities, while minimising negative impacts and effectively managing issues of concern to society.

Principle 1 – requires statements on ethical business practices; sound systems of corporate governance; transparency to support sustainable development and partnerships with governments, industry and stakeholders to achieve appropriate an effective public policy, laws, regulations and procedures that facilitate mining and minerals sector contributions to sustainable development within national sustainable development strategies.

Principle 2 – requires the integration of sustainable development in corporate strategy.

Principle 3 – requires respect for human rights and interests, cultures, customs and values of employees and affected communities.

Principle 4 – requires effective risk management strategies to be implemented based on sound science that take into account stakeholder perceptions of risk, to inform any parties potentially affected by significant risks including spelling out the measures that will be taken to manage such risks effectively.

Principle 5 – requires health and safety performance with the goal of zero harm to employees, contractors and people in communities affected by operations.

Principal 6 – requires continual improvement in environmental performance and specifically requires rehabilitation of land disturbed or occupied by operations in accordance with appropriate post-mining land uses.

Principle 7 – requires contribution to the conservation of biodiversity and to integrated approaches to land use planning.

Principle 8 – requires the facilitation and support of knowledgebase systems for responsible design, use, re-use and recycling of products containing metals and minerals.

Principle 9 – requires pursuit of continual improvement in social performance and contribution to social, economic and institutional development of host countries and communities. It also requires engagement at the earliest practical stage with all likely affected parties concerning the management of social impact and the maintenance of systems for continual interaction with affected parties.  This includes contributions to community development during exploration through to closure, with encouragement for partnerships with governments and NGOs to ensure they are well designed and effectively delivered to enhance social and economic development.

Principle 10 – requires proactive engagement with key stakeholders on sustainable development challenges and opportunities. It also specifies responsibilities to report on economic, social and environmental performance and contributions including responding to stakeholders through open consultation and providing timely, accurate and relevant information related to economic, social and environmental performance.

Minerals Council of Australia (MCA) Enduring Value Framework

MCA’s Enduring Value Framework aligns to the ICMM 10 Principles and sets out at Australasian regional level how the ICMM principles apply for MCA member companies, with an emphasis on site-level implementation. The Framework seeks to translates each principle into defined actions by:

  • identifying a set of indicators for each principle that should be evident across companies that operate in accordance with Enduring Value;
  • emphasising verifiable outcomes rather than compliance with process to assess whether practices are consistent with the principles;
  • supporting continued excellence in public reporting on performance in the areas of health and safety, environment and community benefit; and
  • encouraging the Australian minerals industry to operate in a manner that is attuned to the expectations of the community.

Principle 1 Implement and maintain ethical business practices and sound systems of corporate governance.

Principle 2 Integrate sustainable development principles into company policies and practices.

Principle 3 Uphold fundamental human rights and respect cultures, customs and values in dealings with employees and others who are affected by our activities.

Principle 4 Implement risk management strategies based on valid data and sound science.

Principle 5 Seek continual improvement of health and safety performance.

Principal 6 Seek continual improvement of environmental performance.

Principle 7 Contribute to conservation of biodiversity and integrated approaches to land use planning.

Principle 8 – Facilitate and encourage responsible product design, use, re-use, recycling and disposal of our products.

Principle 9 Contribute to the social, economic and institutional development of the communities in which companies operate.

Principle 10 – Implement effective and transparent engagement, communications and independently verified reporting arrangements with stakeholders.

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