Beyond Extraction – Exploring the impact of mining operations

Imagine a world where every business decision considers not only profits but also the impact on the environment, society, and the economy.

In an era of growing environmental and social awareness, businesses are challenged to look beyond just their bottom line. The mining industry, often criticised for its environmental footprint, has a story that extends beyond extraction; by understanding the full impact of mining, we can create a future where value is shared.

Mining plays a key role in economic development, especially in resource-rich regions. However, a key challenge lies in balancing the need for profit and efficiency with environmental responsibility, the well-being of host communities and economic growth. While immediate outcomes are easily observed, the true impact of mining goes deeper. It's about the long-term changes and ripple effects that occur over time, often influenced by many factors.

So, let's move beyond just measuring outcomes of activities – and look at impact.

Impact measurement is a business management tool that assesses the environmental, social, and economic impacts of a company's activities. It translates this data into quantifiable values to gauge the true cost and benefit of these impacts. Ultimately, it's about gaining a clear understanding of the full scope of a mining operation's influence and consequences.

By measuring impact, mining companies can assess direct, indirect, and induced impacts within their operations and value chains, as well as their economic consequences on the countries and communities they serve. This allows a backward looking view on the effectiveness of initiatives undertaken, but also a forward-looking view to guide the strategic direction of the company in terms of value creation. It is intrinsically linked to data-driven decision-making aligned with business strategy and enables comparisons of performance over time and across different business areas.

This assessment informs decisions on allocating capital and wider resources effectively for organic growth and acquisitions, as well as analysing and communicating impact on an organisational level, including the impact of social and labour plans (SLP’s), just energy transition plans, value chains, and the energy trilemma, among others.

Let's look at an example: Impact measurement in the context of the energy trilemma.

The global demand for natural resources is rising, and mining companies face pressure to perform well while addressing the energy trilemma: energy security, energy affordability, and environmental sustainability. Energy security means reliable energy access, often achieved through investments in renewable energy systems and power infrastructure in the absence of reliable supply. Energy affordability aims for fair and affordable energy access, particularly in communities. Environmental sustainability involves minimising environmental harm through energy efficiency measures and transitioning to cleaner energy sources.

This interconnectedness highlights the need for assessing and measuring impacts across energy, environment, and social domains, acknowledging the challenges and opportunities experienced through regulations, responsible resource management, and social equity requirements. Applying a common quantifiable monetary framework that looks at various dimensions will allow companies to make informed decisions, identify long-term strategic projects, and navigate growth barriers more effectively.

Consider this example: a mining company operating in a remote area with limited access to reliable electricity. To ensure uninterrupted operations (energy security), the company needs to decide on renewable energy options often coupled with local fossil fuel generation backup. At the same time, due to disparity in energy access with surrounding communities (energy affordability), the company needs to consider how to provide affordable and reliable electricity to local residents to support its host community and supply chain. Additionally, to mitigate its environmental impact the company implements energy efficiency measures throughout its operations to reduce costs and GHG emissions and preserve local ecosystems.

This impact can be quantified using our environmental, social and economic profit and loss or P&L model. These frameworks exist to quantify a company's impact across the three spheres and analyse the initiatives to determine overall contribution – positive, negative or neutral – for the company and its stakeholders. When evaluating environmental impact we use a model which looks at various factors and incorporates a comprehensive financial analysis alongside environmental considerations. Similarly, social impact assessments go beyond face value to capture the tangible and intangible benefits. This comprehensive assessment allows for a nuanced understanding of the social effects, covering the direct, indirect and induced impacts. 

The results demonstrate the effectiveness of the initiative, whether the costs outweigh the benefits, or the ROI is positive or negative – i.e value is generated. It will help to identify trade-offs and whether there are conflicts or synergies between addressing the trilemma and the social impact goals. This will also provide transparency to ensure that activities align with the objectives and commitments that the company has made. 

One hurdle that we encounter is companies reporting on the projects they’ve implemented without understanding their outcomes or considering the negative and positive ripple effects of their activities. A lack of understanding of impacts can lead to a disconnect between the company and the stakeholders. Understanding and quantifying the wider impact provides the data and a structured approach to communicating the impact, thereby strengthening relationships with stakeholders. 

Furthermore, the insight gained into the effectiveness of its energy solutions, environmental stewardship, and community engagement strategies allows the company to align its strategic choices and refine its approach. Ultimately, allocating capital towards activities that create value and continue to navigate the trilemma with a balanced and sustainable mindset.

By embracing total impact measurement, mining companies can make decisions with purpose and precision. Quantifying the true costs enhances transparency and accountability. Let us work collaboratively towards a future where mining operations not only drive economic prosperity but also contribute positively to the environment and society.