State of Green Business: Extractives dig deeper into sustainability
The following is an excerpt from the GreenBiz State of Green Business Report 2016.
Environmental impacts are business as usual in mining and other extractives. Yet amid an uptick in the demand for metals, minerals, fuels and rare earths that feed everything from cars to construction to clean energy technologies, the mining industry — squeezed by ever greater forces — is slowly shifting, and even cleaning up its act.
There’s no question that the mining industry finds itself in a hole, reputationally speaking. Activists long have targeted mining titans over working conditions, most recently in electronics and jewelry supply chains. Then there’s outrage over ecological degradation.
Yet more potent than lawsuits or sanctions is the market — the slow unraveling of the fossil fuel-based economy. As the price of commodities skyrocketed during the Great Recession, mining spiked, too. That "supercycle" is dead, but real "structural change" is also underfoot. Coal is no longer king; even its reigning companies are suffering steep drops in stock prices, and dozens of coal companies have filed for bankruptcy.
The industry is also getting shafted by the fossil-fuel divestment movement led by 350.org, which counts $3.4 trillion divested and includes 499 institutions, including major banks and the Rockefeller Brothers Fund. Tools abound, such as the Institutional Investors Group on Climate Change guide, to help investors nudge mining company boards toward resilience and sustainability.
A PwC report on shareholder activism (PDF) and trends in mining didn’t mince words, saying, "The gloves are off." A CDP report asked if miners are "chasing fool’s gold" (PDF), noting, "Some companies have not set targets to reduce their emissions over time, despite the fact that several are using internal carbon prices of up to $50 per ton, which could potentially reduce their profits by $10 billion a year."
CDP recently ranked 11 big mining companies on climate-related factors, such as energy and water resilience and exposure to coal and carbon costs. It found the sector to "fare poorly" against other high-emitting sectors. Vale, BHP Billiton and Sumitomo ranked best, with Glencore, First Quantum Minerals and Vedanta Resources at the bottom of the heap.
Following the Paris Agreement, a cleaner era in energy appears to be digging in. The renewable energy economy is already larger than the coal economy: The U.S. solar installation sector employs 77 percent more people than the domestic coal mining industry, according to the Solar Foundation’s National Solar Jobs Census 2015. In the United States, President Barack Obama’s Clean Power Plan and rejection of the Keystone XL pipeline are signs of the times.
And of all unlikely suitors, Greenpeace piped up to purchase one of Europe’s largest coal mines, along with its associated power plants. Greenpeace didn’t actually bid, but hinted at a lowball offer. Whether it was a stunt or a real attempt to transition the coal operations to renewables, the move spotlighted the burden of stranded assets for fossil-fuel behemoths.
More corporations are making their policy preferences known — such as Volvo, which left the National Mining Association because it was lobbying against the Clean Power Plan. Still, the NMA boasts an 85 percent drop in mercury emissions from metals mining, and a 69 percent drop in coal emissions over the past 20 years. It says the value of materials recycled in the U.S. has risen by 82 percent and mine reclamation by 80 percent. That’s progress.
As the industry’s voice for sustainability, the International Council on Mining and Metals (ICMM) describes its five guiding principles as "care, respect, integrity, accountability and collaboration." The group’s 23 companies include African Rainbow Minerals, AngloAmerican, Sumitomo and Teck. Together, they make up more than half of the world’s extraction of copper and 30 percent of gold.
The ICMM joined the chorus of corporates supporting a strong COP21 outcome with carbon pricing, stating that it ultimately seeks to increase the use of renewables. (European oil and gas companies said something similar, but their U.S. counterparts seemed to keep their heads in the ground.) These mining CEOs aim to account for climate risks in planning, and adapt operations and communities to climate change realities. Of course, they’re not ready to give up on coal just yet.
BHP Billiton recently produced a "Climate Change Portfolio Analysis" (PDF). Royal Dutch Shell canceled Arctic drilling plans (although for lack of profitability, not for sustainability reasons). Shell also launched an Energy Transitions Commission involving BHP Billiton, Statoil and others, seeking to "identify pathways for change in our energy systems to ensure both better growth and a better climate."
More companies, from 3-M Energy to ZTC Petro Investments, are sharing information about what’s in their fracking cocktails. A fracturing roundtable led by the American Chemical Society’s Green Chemistry Institute and Apache includes BASF, Dow and Marathon Oil as founding members.
There are growing efforts to create standards for responsible drilling and mining. For example, Equitable Origin, an upstart company, is creating standards to clean up oil and gas exploration in developing regions, and is seeking to do the same for wind and solar farms.
Mining requires vast amounts of energy, especially to tap harder-to-access ores. Energy makes up 20 to 40 percent of mining operating costs, and is set to grow by 36 percent by 2035 globally. Most mines are powered by diesel or the grid. As a result, renewable energy is an untapped opportunity for remote mines. Investment in renewables by mining companies could grow from $2 billion in 2018 to $3.9 billion by 2022, according to Navigant Research.
The Carbon War Room recommends hybrid solar-diesel systems, which offered a four-year payback for chrome mine operator Cronimet. Ironically, energy powered by the wind, sun or sea relies on a melange of materials that must be mined, from copper to rare earths.
Another way to lessen the impact of mining is to not do it in the first place. Circular economy practices can reduce the need for raw materials, and recycling can retrieve metals and minerals already in circulation. More copper is currently "mined" from recycled products than from earthen ores. Honda and Mitsubishi are recovering rare earths from batteries and air conditioner compressors, respectively.
Ideally, innovations in recycling more easily could extract materials from such used goods, and do so profitably for all involved. Best Buy has enjoyed a cut of the sales of gold, lead and nickel recovered through its electronics takeback program. Group Machiels of Belgium recently opened a "closed circle" landfill mining operation, while "urban mining" reclaims scrap metals from abandoned buildings, such as in Detroit. However, such practices aren’t yet scaling to meaningfully dent the need for mining.
The seafloor is yet another untapped vein of materials, such as copper and rare earths. Yet seabed mining promises new ecological risks to already fragile and exploited environments.
That’s not to mention a nascent market for mining asteroids, likely rich in metals. A new law allows Americans to mine and sell material from space (we’ll see how that law holds up internationally). Startups vying for a piece of the rock include Planetary Resources (tagline: "the Asteroid Mining Company"), backed by billionaires including Larry Page of Google, and Deep Space Industries ("Creating Wealth and Opportunity from Space Resources").
It goes to figure that just as we start to clean up mining on Earth, a much larger frontier comes into view. Watch this space.