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What is ESG? And why is it important?

While many health fanatics may mistakenly read this three-letter acronym as “MSG”, it is not in-fact used in any food products and definitely causes more good than harm in the world, especially in the mining industry.

ESG (Environment, Social, and Governance) seems like a new buzzword, however, mining companies are very familiar with regulations and practices in Safety, Health, Environmental, Legal, and Community (SHEC). So why the new focus on ESG?

In the past, the world has seen major failures in the way mining companies have treated the environment and people where they operate.  Therefore, a renewed focus on ESG principles is being driven through corporate governance and financial reporting standards.

ESG (Environment, Social, and Governance)

In the past ±50 years, the purpose of a company has evolved from “making a profit to serve its shareholders” to “making a profit to serve all stakeholders”. This was supported by the evolution of financial reporting standards in South Africa:

  • 1994: King I with the Triple bottom line (3 P’s) – People, Planet, Profit. Advocating an integrated approach that involves all stakeholders.
  • 2002: King II with the sections on sustainability, the role of the corporate board, and risk management.
  • 2009: King III with new Companies Act and integrating sustainability, governance, and strategy into the report, instead of having sustainability as a separate chapter. The recommendation of Integrated Reporting also increased focus on executive remuneration and board director performance was included.
  • 2016: King IV with numerous refinements in the areas of remuneration, tax strategy, governing bodies, delegation, auditing, risk governance, social and ethics, performance, and corporate citizenship.

More recently, there was an increase in the understanding that being a good corporate citizen means a positive business case and ROI for the company, as well as benefits for all stakeholders, i.e. employees, communities, shareholders, and government and political stakeholders, etc. However, the road to corporate citizenship is littered with risks and, if not managed correctly, could mean another major failure as was seen in the past.

VBKOM’s Risk Management Services

VBKOM offers risk management services that will support mining companies through the three maturity levels:

  • Corporate Social Investment (CSI)
  • Corporate Social Responsibility (CSR)
  • Corporate Citizenship

It is no longer just about the bottom line. It is about investing responsibly in the future of our people’s lives and environment.

The VBKOM team of experts can help you identify, understand, and manage your ESG risks into investment analysis that offer long-term advantages in the mining sector. By integrating traditional risk management practices and ESG risks, we offer a tailored solution that is designed to fit each of our individual client’s needs.

Contact us for more information.

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