When we published our first report on environmental, social and governance (ESG) commitment in the mining and metals industry in January of 2020, From Risk to Reward – How a focus on ESG is transforming the mining industry, we suggested that mining companies were “under the spotlight and public scrutiny [with regards to their ESG performance] like never before.” At the time, we also argued that companies needed to pivot away from focusing on ESG risk mitigation and compliance toward truly embedding ESG practices into their organization to meet expectations of investors, communities, regulators, the public and current and future employees.
Today, almost two years after the publication of our first report, expectations and scrutiny have only intensified due to a variety of factors, including high-profile environmental and indigenous community incidents within the industry, the urgent need to address climate change, and the opportunity for the industry to play a critical role in the energy transition. In our discussions with thought partners for this paper, all acknowledged that the “pressure is coming from everywhere” and that mining companies need to evolve and adapt accordingly to deliver strong ESG performance. Put differently, mining companies have tremendous opportunities for real impact, and it will take wise and creative leadership to realize them fully.
Following the publication of our initial paper, we discussed our findings and insights with numerous mining executives, boards, and other industry players. While some did not fully agree with all our arguments, we were encouraged by their thoughtfulness and the positive headways and contributions numerous companies have made since then. Many mining companies have been leading other sectors when it comes to some areas of ESG performance due to the nature of the industry, which inevitably has an impact on land, water, biodiversity, communities, and the climate. All too often, however, there has been a disconnect between strong ESG performance and how it is portrayed externally – not least due to the absence of universally agreed performance measures. Yet, despite showcasing some impressive examples of leading ESG performance, a central argument of this paper is that “what got you here won’t get you there” – mining companies will need to become ever more innovative and sophisticated in how they view and structure themselves, adjust their cultures, collaborate externally, and interact with stakeholders. Only by adopting such guiding principles will mining companies be equipped to successfully respond to the challenges and opportunities they face regarding ESG.
A key question raised in many of our conversations, and the subject of this report, is how companies should go about firmly embedding ESG practices into the fabric of their organizations. While our first paper, From Risk to Reward, touched on some of these aspects – especially regarding the board and some C-suite positions (CEO, CFO and CSO) – the purpose of the present paper is to particularly shine the spotlight on “how” companies can make ESG an integral part of who they are and how they act.
To provide some answers to this question, this report examines the following topics:
In the chapter “The Evolving ESG Landscape,” we look more closely at significant ESG developments since our last publication, with the pandemic, popular movements, and climate change playing a dominant role. Given the enormity of these challenges, we argue that companies need to move beyond a largely internal focus and connect more intimately with the end consumer and broader public. Additionally, we suggest that companies build an even deeper awareness of externalities and discuss how these will ultimately have a profound impact on the context and constraints within which they operate.
In “Market System,” we argue that the world’s sustainability challenges cannot be solved by any one company (sector or country) alone – nor will “going it alone” provide a company with competitive advantage. More importantly, we assert that many mining companies would benefit from adopting a broader view with a deeper appreciation of the interdependencies that exist beyond the industry. Given both the complexities as well as the challenges to achieve positive ESG outcomes (most aptly expressed in the UN’s Sustainable Development Goals), we argue that companies need to influence, engage, and collaborate externally with diverse actors across the broader market system within which they operate. This will be critical for companies to truly create shared value for all stakeholders.
In the chapter “Board of Directors,” we shift our focus internally and explore how board compositions have changed over the past years, and very positively so with regard to ESG expertise, as well as how the full board can and should continue to provide leadership and oversight of the ESG agenda going forward.
We proceed with the overarching topic of company leadership in the subsequent chapter, where we discuss in depth the role of the CEO. Here, we make reference to a recent survey that Egon Zehnder conducted amongst nearly 1,000 CEOs globally across numerous industries, where ESG was also covered. The CEO “archetype” is also explored in this chapter. More than many other industries, the mining industry has had its fair share of swashbuckling “superhero” CEOs, whose larger-than-life personalities and intellectual horsepower have allowed them to build and lead highly successful companies. However, we argue that given the complexities and challenges of the years to come, this type of personalized leadership is no longer a recipe for or even conducive to success – it will become increasingly critical for CEOs to grow even more self-aware, and become more relational in their leadership style, as well as adaptive in their approach.
In the chapter “Culture: Aligning Purpose, Strategy and Organizational Behavior,” we conclude the paper by shedding light on how purpose and culture must align to create a powerful setting for truly embedding best-in-class sustainability practices into a company’s DNA. The “right” culture is critical, yet it remains an elusive and highly complex concept. Our report focuses on what ultimately matters to achieve it: behaviors at scale, bolstered by proper congruence within the company’s operating system. The right culture will arguably have the most profound impact on a company’s ESG performance, and mining executives will be well advised to focus particular attention on this important topic.
Egon Zehnder’s Mining & Metals Practice partners with all players in the industry — from leading public companies to global investors, industry associations and privately backed miners — to help them think through and successfully address their talent requirements and organizational makeup as the world around them continuously changes and poses new challenges and opportunities. What all our clients have in common are business challenges that require human answers. Because we are as global as the industry we serve, we naturally reach across borders and industries to find, assess and develop executives who have the elusive mix of experience, competencies, and potential to excel and lead in this complex environment. The professional background and tenure of our cross-functional consulting and research team means that we know what it takes to be successful in this industry — and provides us with long-term relationships and invaluable access to candidates and industry intelligence.
Editorial team: Cheryl Martel, Global Head of Content and Luisa Zottis, Global Content Manager
Design team: Kamaljit Marwaha, Richard Khuptong, and Siddhant S. Goral