The Resources 2030 Taskforce report, released in August 2018, considers environmental and social risks and opportunities in making its recommendations to the Australian Government for a more competitive resources sector. But best practice, mega trends, and community, regulator and investor perspectives may present challenges in how these recommendations are implemented.
The Resources 2030 Taskforce, established by the Federal Government in March 2018, released its report titled Australian Resources – providing prosperity for future generations in August 2018. Given my interest on sustainability, including environment, community and climate change, the report was an intriguing read on how these issues were integrated into the recommendations and the way the taskforce had assessed them.
The report dedicated two of seven key sections to ‘building strong communities’ and ‘improving environmental performance’. The communities section focused on best practice community engagement, involvement and economic empowerment of Aboriginal and Torres Strait Islander peoples, sustainable planning to build resilience, and building a coalition of support for the sector.
The chapter on environmental performance covered developing a restoration and environmental management capability, streamlining regulation and reducing red tape to make the sector more competitive, managing and using data more effectively, and improved and collective planning.
Life of mine best practice
The report presents the Canadian Towards Sustainable Mining framework as best practice, but in my view, could build upon this approach. Ideally, the approach would focus on the life of mine, including building scenario analyses based on commodity prices, economic shocks and mega trends (see below). Along with this, it needs to be able to preserve the landscape to the greatest extent possible, build local environmental, social and economic capital and return the land to the community and traditional owners for future beneficial use. These features would allow it to positively respond to current debates around how to maximise our resources potential in the short term without adverse long-term legacies affecting communities and stakeholders.
Mega trends and risks
While the report deals with some mega trends affecting our industry, such as the future of work and our increasingly digital world, it is quieter on others, including environmental concerns. In its 2018 Global Risks Report, the World Economic Forum identified that experts regarded environmental concerns highly among the most pressing issues facing the world. From the 30 global risks identified in the report, experts were asked to prioritise these in terms of likelihood and impact. All five environmental risks identified in the Global Risks Report – extreme weather, biodiversity loss and ecosystem collapse, major natural disasters, human-made environmental disasters, and failure of climate change mitigation and adaptation – were ranked highly. Extreme weather events were seen as the single most prominent risk. Australia sits very much in the firing line where these risks are concerned, and for the resources sector, they are becoming financially impactful (for example, see Merz and Capstick’s 2017 Bulletin article on climate impacts on mining operations).
Community, regulator and investor perspectives
The rise of social media has meant that even those who are geographically distant from a mining operation can impact its social licence to operate. This online stakeholder participation and activism have the potential to stall projects and cost millions. The report suggests that a lot of negative stakeholder participation stems from misinformation, and suggests instead that a greater proportion of wealth being shared with local communities may be the solution. In my view, this approach does not take a broad enough perspective. Community concerns should ideally be proactively managed through good and independent science, respectful engagement and meaningful management of impact. Focusing engagement only through the lens of local economic development may be insufficient to mitigate risk.
In the report, regulator perspectives are mostly considered from the point of view of reducing red tape, and furthermore, some important investor concerns are not tackled. Regulators such as the Australian Securities and Investment Commission and the Australian Prudential Regulatory Authority have commented on the need for publicly-listed companies to disclose material environmental risks to their business, such as risks concerning climate change. Investors, including some of the world’s largest, such as BlackRock, have also made similar requests. Issues such as water scarcity and climate change are becoming mainstream investment criteria. In this evolving landscape, consideration of aspects such as disclosure regimes, risk frameworks and liability management are crucial for investors when considering the viability of new projects.
New economy and the Resources 2030 report
Some aspects of the new economy, such as how Australia is well-positioned to supply the renewables sector, is captured in the report. But there could have been further exploration of how and where there may be opportunities to add value to these commodities in Australia. New economy sectors are, by definition, emerging and therefore there are opportunities for government to fuel the support for these sectors here in Australia. This could allow us to move from an export focus to value adding and growing other sectors of the economy based on the success of the resources sector.
The Resources 2030 Taskforce report highlighted some important issues concerning sustainability and community relations in the resources sector. The challenge now is to ensure that the impacts of mega trends and perspectives from the community, regulators and investors are taken into consideration to ensure practical, sustainable outcomes can be achieved.
The views expressed in this article are the views of the author, not Ernst & Young. This article provides general information, does not constitute advice and should not be relied on as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Liability limited by a scheme approved under Professional Standards Legislation.
Ernst & Young (EY) 2018. ‘Top 10 business risks facing mining and metals 2017–2018’ [online]. Available from: www.ey.com/Publication/vwLUAssets/ey-top-10-business-risks-facing-mining-and-metals-2017-2018/$FILE/ey-top-10-business-risks-facing-mining-and-metals-2017-2018.pdf.
Merz R and Capstick S, 2017. Climate impacts for mining: risk, materiality and actions [online], AusIMM Bulletin. Available from: www.ausimmbulletin.com/feature/climate-impacts-mining-risk-materiality-actions.
World Economic Forum, 2018. ‘The Global Risks Report 2018’. Available from: http://reports.weforum.org/global-risks-2018/