By Tom Mills, Founder & Managing Director of TOS 1. Antitrust Legislation is Increasing Recognised as a Blocker to Collaboration and Partnership Between Firms
COP27 has been a time where good intentions and initiatives have met the reality of incumbent institutions and systems. For mining companies, who are interested in improving their environmental and social impact at a large scale, partnerships and collaboration between other mining companies are key.
However, this COP has illuminated the legislative barriers to coordination. For over 100 years, the antitrust laws have endeavoured to protect competition for the benefit of consumers, making sure there are strong incentives for businesses to operate efficiently, keep prices down, and keep quality up. Although society is comfortable encouraging collaboration between business
es on climate change current antitrust rules, substantial institutional hurdles still exist today.
COP27 has brought this issue to the surface and we are seeing widespread reviews of antitrust legislation to remove barriers to coordination betwee
n firms on climate. For example, between Shell and Total in the North Sea. Companies who have used antitrust as a reason to move slowly on sectoral climate initiatives will find themselves challenged. As a result of these reforms the systemic frictions to collaboration on climate and social issues should be reduced.
2. Offsets to Channel Funds to Developing and Emerging Economies
The latest COP has seen the US provide a substantial boost to the global carbon market. The Energy Transition Accelerator (ETA) could offer a new means to funnel capital from developed to developing countries for power sector emissions reductions. It is intended that the mechanism will facilitate carbon credits to be paid to developing and emerging country governments from the private sector for carbon offsets from corporates in developed countries.
Considering its expansive global reach, this initiative could have several implications for the mining industry. As a major power user in these countries, the mechanism presents an opportunity for mining companies to e
nter public or private partnerships for projects that reduce power sector emissions and decarbonise mining projects. There may be the opportunity to fund this decarbonisation through corporate offsets.
With an increasing focus on scope 3 emissions, carbon border adjustment mechanisms, and consumer interest in end products, emissions reductions will lower carbon intensity and make products more attractive. As details of the initiative are developed over the coming years it will become clearer whether companies can fund the decarbonisation of their operations through the sale of future offsets to other companies.
4. Shifting from Managing Risks to Real World Impacts
“Real World Additionality.” This is a term that has risen to the surface at this latest COP. It refers to impacts of companies on the people and planet that would not have happened had a company not taken an action. This signals the gradual evolution from ESG’s narrow focus on single materiality: how a company manages the effect of a changing world on its value towards double materiality; how a company’s activities change the world.
This shift will see mining companies being increasingly required to measure and present their impact and footprint on people and the planet. Sustainability metrics, backed up by credible evidence will be required beyond policies to mitigate risk and intent in the future. Focusing only on the mitigation of environmental and social risks and future commitments will be increasingly insignificant, meaning companies will have to develop sustainability accounting competencies and systems.
5. Green-hushing: A New Addition to the Sustainability Lexicon
As the global spotlight falls on ESG claims and we witness the rise of green litigation, a new term has emerged: green-hushing. This is where sustainability and ESG related information is no longer published by companies, for fear of metrics put into the public domain being used against them.
At the heart of the challenge of presenting rigorous evidence on a company’s impact, is the paucity of agreed methods and conversion factors to quantify non-financial impact.
This is not surprising when sustainability accounting is compared to financial accounting, which required decades of development and iteration. It was not only the generally accepted accountancy principals that needed to be developed, but years of training for people to become chartered financial accountants. Over the coming years, green-hushing is likely to be called out as green washing is today.
Mining companies will need the right technology to help quantify, compare, forecast and report sustainability data in an integrated and rigorous way; something we are currently working on, with the development of our new platform, Compass.