Introduction
The demands of modern life require the mining industry. The materials extracted from the ground and subsoil are necessary for the building of roads, electronics, and vehicles, as well as for the generation of electricity. Without a doubt, the economic development of a society is linked to the development of this extractive industry.
Year after year, society’s concern and interest in the impacts generated by this industry grow by leaps and bounds, mainly in environmental matters. An example of this is the rhetoric of personalities such as Greta Thunberg and Alexandra Ocasio-Cortez3 , condemning the negative impacts that the industry can have. This concern and interest are based on the fact that when this industry is poorly managed, it can cause devastating impacts on the environment; however, if the mining industry is conducted responsibly, it generates significant socioeconomic benefits and supports the achievement of all the Sustainable Development Goals (SDGs) of the United Nations (UN) by catalyzing economic development in many low and middle-income but resource-rich countries, as is the case of Mexico.
In this second part of the document “ESG in the Mexican Mining Industry” we will address those criteria and aspects that affect the mining industry in environmental matters, and we will identify the main risks and opportunities faced by the organizations that are part of it and, based on our experience, we will outline some ideas and general tools to mitigate or take advantage of them, as the case may be.
ESG and the Responsible Mining Index
Arising from social interest and concern and the intention to provide the mining industry with the general tools to navigate in light of “ESG” (Environmental, social and governance) criteria, there are a number of associations and organizations working globally to share better practices in the industry. One of these is the Responsible Mining Foundation (RMF), an independent, non-profit organization founded in the Netherlands in 2012 focused on producing and disseminating the Responsible Mining Index (RMI) every two years.
The RMI is a report whose main purpose is to promote continuous improvement in the responsible mining industry by transparently assessing the performance of the world’s major mining companies in economic and ESG matters, highlighting the best practices of market participants. Although the RMI only evaluates the performance of companies on a variety of indicators and is not a certification or standard, by highlighting leading practices it paves the way for continuous improvement of corporations in the industry. In addition, by encouraging the disclosure of information on practices and incidents on site, reports such as the RMI are especially useful for companies seeking to improve on economic and ESG issues, as they can adapt recognized practices in their daily operations. This is because responsible mining operations require companies to understand, among other things, environmental values and take measures to avoid and mitigate lasting or permanent negative impacts on ecosystems and resources.
The “E” (environmental) of the Mexican Mining Industry
The environmental criteria evaluated and reported by the RMI are highly relevant, especially in the absence of standardized impact metrics that allow for comparison. Therefore, we believe that the environmental criteria evaluated by the RMI will undoubtedly help to fill this gap, helping the organizations that are part of the mining industry to identify those environmental criteria that affect the industry and generate the main risks in this area. This is in order to act accordingly and better navigate the “E” of the ESG criteria.
Along these lines, the RMI specifically refers to the best environmental practices for the mining industry in 2022, dividing them into seven main categories, the first three of which we will address here. The third and fourth part will address the rest.
- Environmental management
Environmental management is the comprehensive understanding and effective handling of environmental risks and opportunities related to climate change, emissions, waste management, resource consumption, water conservation, and the protection of biodiversity and ecosystems. According to the information developed by the United Nations, traditional corporate approaches to environmental management will not be enough to successfully address the major environmental challenges of the 21st century.
RMI reports that, in order to counter this, companies are choosing to implement a cyclical “Plan, Do, Check, Act” management approach to environmental protection. The basic elements in this type of management system include setting goals, assessing potential environmental risks and impacts, preventing and mitigating adverse impacts, conducting environmental monitoring and evaluation, and reporting on their actions, as well as their effectiveness.
Fortunately, this is a common practice in Mexico due to the obligations, conditions and terms imposed on the holders of an environmental impact authorization. Currently, the applicable legislation in Mexico obliges the holders of such authorizations to guarantee the impact through a collateral instrument, report periodically on the progress of mitigation strategies, enter an environmental monitoring program, and have an environmental supervisor, among other requirements. These types of obligations help to guarantee that the strategies authorized in the environmental impact assessment are oriented towards an effective implementation of environmental policy based on regulatory principles and do not consist of exchanging one problem for another.
- Tailings management
Often the crushing process to extract minerals and metals from rock involves the use of chemicals and generates huge volumes of waste. The waste, known as tailings, consists mainly of pulverized rock, water and processing chemicals. Tailings are generally channeled into large surface impoundments, where they are retained by earthen dams.
There are a variety of risks and impacts associated with tailings storage facilities, as (i) they contain chemical residues and high levels of metals; (ii) storage facilities are prone to leakage, which can lead to groundwater and surface water contamination; and in the worst case (iii) tailings dams can fail catastrophically releasing large amounts of waste that can severely affect the environment and local communities, as in the case of the 2019 Fejia mine dam breach (owned by Brazilian mining company Vale) that left dozens dead and missing.
Best practices in tailings management, as reported by RMI, include assigning responsibility for tailings management at the highest levels of the company; implementing the best technology; ensuring that corrective actions are implemented in a timely manner; and allowing independent review of site investigation and selection, design, building, operation, and closure of facilities with public disclosure of findings.
In our experience assisting mining corporations on environmental matters, we have seen little to no implementation of tailings management best practices in the Mexican industry, especially regarding public disclosure of findings. While the lack of public information could be understandable (due to confidentiality issues or in order not to damage the public image or reputation of the companies), the truth is that transparency in the processes ensures greater confidence on the part of investors and society.
- Water
One of the main social concerns about mining is the high risk of water pollution. This is especially due to the historical background of disasters or accidents in the Mexican industry that have had serious impacts on the environment and local communities, such as spills of toxic wastes and metals from the Buenavista del Cobre mine, a subsidiary of Grupo Mexico, in the Sonora and Bacanuchi rivers on August 6, 2014.
However, the mining industry has the potential to implement efficient water management and wastewater treatment strategies that ensure proper management without having negative impacts on its operation. According to the International Council on Mining and Metals (ICMM), these strategies include financing wastewater treatment plants for surrounding communities and monitoring the quality of water discharged by the mine and surrounding communities beyond what is required by law.
In addition, while not specifically an efficient management practice, transparency around water use and water quality impacts has become standard practice for companies globally. Some companies are even demonstrating leadership in water use transparency by making water monitoring data accessible to affected communities and the public. One example is Barrick, the copper and gold mining company with operations in America and Africa that since 2017 has published a water management report.8 Transparency provides more likelihood of establishing trust with local communities and society at large, necessary to avoid conflicts and ensure social consent to operate without controversy.
In general, the practices implemented globally that are considered best practices in environmental management, tailings and water management go hand in hand with transparency and accountability, ensuring public trust in the mining project and a better reputation for the company, which translates into greater economic growth for the company.
To read part one of this document, please click here.
For additional information, please contact our experts:
Edmond Grieger, Partner: +52 (55) 5258-1048 | egrieger@vwys.com.mx
Ariel Garfio, Partner: +52 (55) 5258-1048 | agarfio@vwys.com.mx