In the broadest sense, sustainable development is aimed at improving the quality of life for everyone, now and for generations to come. Sustainable development as a means for a green economy and poverty eradication will be the theme for the United Nations Rio+20 Summit – this high-level gathering will certainly put greater onus on major companies around the world to raise the bar.
KPMG in South Africa’s approach to energy in the mining sector is grounded in an understanding of how the energy challenge relates to the government ́s strategic themes of growth, performance, and compliance.
Global demand in mining
Despite tough economic conditions, the global demand for mining products is generally increasing and presents significant opportunities for mining companies. However, meeting demand is a critical issue for the mining sector due to significant risk pressures, such as:
- dwindling global reserves
- increasing project complexity
- increasing government intervention
- changing requirements from key stakeholders around environmental and social issues.
The main bottlenecks in the supply side are related to the fact that increasingly more and more mining explorations are located in remote, politically unstable developing regions of the world, often with high rates of unemployment. These unstable environments, where access to input resources such as water and energy can be unreliable, require mining companies to show greater sensitivity around local concerns.
This creates the opportunity to become partners with national and local governments in the development process of developing nations. We believe it is possible to transform resource and social challenges into key strengths that will help enable mining companies compete and succeed in the new market of today.
Mining sector as an enabler for sustainable development
Licenses to operate will be awarded and maintained only if mining companies are seen as partners of local governments and stakeholders, as well as national levers for economic growth. Many governments, especially those in the emerging markets, see the mining sector as a powerful enabler for sustainable development.
Local projects have the potential to improve the performance of the local economy and, depending on its size, the economic performance at the national level. By adopting sustainable practices, mining companies can reduce business risks and boost shareholder value.
A ‘social license’ is transforming the way mining companies must operate. To minimize financial, operational, and political risks, mining companies must:
- boost stakeholder engagement programmes with key local communities
- discuss issues and conflicts concerning safety, resource availability, economic development and environmental impacts.
It’s critical for mining companies to understand how local resource constraints and socio-economic dynamics can impact business operations and ultimately long-term competitiveness. These issues can have a major impact on the efficiency of mining operations by affecting the price and volatility of key input resources such as energy and water, whereas a disregard for social issues can impact reputation, lead to potential government intervention or, in extreme cases, result in the loss of a ‘social license to operate’.
These linkages will, to some extent, vary between mining regions, as they are dependent on the strength of government and local stakeholder expectations.