ESG and mining debate: cultish activism vs. modern business sense 

Are environmental, social and governance (ESG) guidelines the bible of a shadowy priesthood of consultants, or are they just good for business?

Those two sides took shape during an online video debate organized on Wednesday by the Toronto-based Critical Minerals Institute and were argued by a pair of its directors.  

Christopher Ecclestone, a principal and mining strategist in London for New York-based investment bank Hallgarten & Co., said good companies have been practicing ESG for decades if not centuries.  

“I’m not seeing anything new except the aspect that it’s been mythologized and turned into an object of worship, a priesthood of ESG around it who are hard core black-robed people,” Ecclestone said. “They profess liturgy of ESG.”  

Melissa Sanderson, founder of consultancy Ethically Sustainable Growth and a professor at the Thunderbird School of Global Management in Phoenix, said mining industry companies want the clarity of widely adopted ESG regulations because society is increasingly demanding good stewardship from businesses, although China has been less progressive.   

“The largest companies are looking for the environmentally sensitive producers to be in their supply chain because they as end users, the Apples and Teslas, are subject to such intense scrutiny in terms of where, how and with whom they’re sourcing that they’re desperate to see more of these mines permitted and operating,” Sanderson said.  

“That will either drive China to change or, wow, here’s a thought, drive China out of its market dominance.”  

Concern over climate change is magnifying ESG spending in the mining industry into trillions of dollars over the next decades for items such as electric vehicles and carbon capture systems. Companies are grappling with how to attract investors to projects needed to meet critical minerals and battery metals demand while navigating in jurisdictions such as Africa and Asia where ESG standards can be low and shareholder demands for profit are high.  

The debate proved to be one-sided at times. Ecclestone agreed with Sanderson on the need for ESG to help poor communities in developing nations where mining tax dollars seem to produce few amenities for locals, and to rehabilitate projects leaving “holes that can be seen from the moon.”  

ESG costs

However, moderator Peter Clausi, a Toronto lawyer who’s been an advocate for shareholder rights and board governance, took up the fight with pointed questions on ESG’s impact on profits and the market’s ability to impose all the ESG that’s needed.  

“People are still living a good life in Sudbury,” Clausi said, referring to the Ontario mining city where astronauts once trained for the moon.   

“People aren’t living such a good life in Wales, however, or parts of West Virginia,” Sanderson said.  

“There’s a cost to complying with ESG, whether you’re Bob’s Mining Co. or Rio Tinto,” Clausi said.  

“It’s built into the cost of the commodity,” Sanderson said. “When producing companies sit down to decide what they’re going to price their commodity at, they have factored in their so-called soft-side costs. The market is absorbing a lot of those costs which is why companies aren’t dropping by the wayside because of conforming to regulation.”  

The looming recession will force companies to cut ESG because the “soft spending” will be the first to go, Clausi said.  

Sanderson countered that companies operating abroad need ESG spending locally to ease operations. Otherwise, they could lose millions of dollars a day if local governments pass laws to enforce ESG or make the mine illegal, or protesters shut down roads to the port, blocking exports. 

“It’s the soft stuff that cuts straight to the underbelly when things go wrong,” she said. “The soft stuff kills you in the end and companies that cut it just for the sake of expediency are not only short-sighted but stupid.”  

She cited how Serbia revoked lithium exploration licences for Rio Tinto’s US$2.4 billion Jadar project last week over environmental concerns and Greenland last year banned uranium mining, halting the Kuannersuit rare earth project owned by Greenland Minerals (ASX: ETM).

Attracting women

Both sides agreed on the need for diversity, especially including more women and Indigenous people in the industry and working to keep them in positions of advancement. But they said they are against quotas.  

“We need to do a better job of attracting women,” Sanderson said. “We need to combat this image of the old-style miner with his pick and shovel heading out to the mine and no women are allowed.”  

Jack Lifton, chairman and co-founder of the institute and a long-time critical minerals expert, also jumped into the debate on the skeptics’ side.  

“I’m just amazed at how much all of you think that this little bit of organic slime on this gigantic ball of magma and metal somehow dictates how the ball operates,” Lifton said. “I’ve never seen such arrogance by people thinking they can control the environment and that the climate doesn’t change every five minutes. It always has.” 

Brent Willis, chief executive officer of Calgary-based Voyageur Pharmaceuticals (TSXV: VM), which wants to start producing barium sulphate next year for radiology drugs used in scanning and X-rays, told the debate he plans to use carbon capture technology to trap 90% of emissions from a 2-megawatt diesel generator. It amounts to about 30 tonnes of carbon dioxide a year.  

“It’s a drop in the ocean, absolutely,” Willis said. “But it’s a drop that will grow into a bucket, then hopefully a bathtub, a swimming pool, a lake and keep going.”