// . //  Insights //  Driving Sustainability In The Resources Sector

Mining and mining services companies are wrestling with increasing environmental, social and governance (“ESG”) expectations. Leading organisations are reframing ESG issues and transitioning ESG leadership away from siloed compliance activities to be at the centre of their strategy and execution. Organisations should move beyond a defensive “sustainability strategy” towards a corporate strategy that embeds sustainability in the organisation’s ambition, its choice of markets, and how it will compete and win in those markets.

ESG considerations for organisations in the resources sector are now front and centre in organisational decision making. Credibility on sustainability is now non-negotiable, as organisations compete for customers, funding, talent and community support.

Real credibility increasingly requires stronger foundations. Whereas “compliance” may once have been sufficient, now organisations without a holistic sustainability report are being left behind, and even this will be insufficient without an ability to tangibly explain to stakeholders what ESG outcomes will be delivered, and the mechanisms and roadmap to deliver those targets. The practical effect is that organisations are balancing pressure (and genuine desire) to commit to increased public targets and disclosure with the risk of reputational damage if announcements are seen as cynical. There is a race to generate robust plans not only to accelerate results, but to support credible public commitments on an increasing range of topics.

With this evolution, ESG considerations are now front-and-centre in an organisation’s biggest corporate strategy decisions

We think of strategy as a series of decisions that need to be made coherently and cascaded into a robust plan. The core questions are:

  • What is our ambition? What specific stretch targets will we define that our organisation will mobilise to deliver?
  • What world are we planning for? What scenarios are plausible and most likely for our operating environment, and for our markets, customers and competitors?
  • Where will we play? Which opportunities will we prioritise to deliver full potential in our current core business, and which new segments and markets will we target?
  • How will we win? How will we differentiate ourselves in our markets? What capabilities and competitive advantage will allow us to sustainably create value and stay ahead of the competition?
  • How will we deliver? Which investment options and initiatives will we prioritise to close the gap to our targets? How will we organise our teams and resource our priorities?
Exhibit 1: Leading organisations are “hard wiring” a nuanced approach to ESG into their strategic ambition, which markets and opportunities to target, and how they will win in the market

It is clear that the scope of these traditional questions must now be broadened to incorporate ESG factors (see Exhibit 1). ESG considerations need to be part of the strategic conversation throughout, as the answer is not “one size fits all” — organisations need to think through their specific context to inform these decisions and solve them in a coherent way. In some markets, there are attractive premiums available for a zero-carbon offering or a locally based workforce. For other organisations the headline considerations may be defensive — for example, access to growth capital will be shaped by the weighting of their portfolio across commodities, ability to progress approvals shaped by relationships with communities across the world, or key customers will demand a more diverse workforce.