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What does ESG mean for the Mining Industry?

by Patricia A. O. Bunye - November 23, 2021

In recent years, ESG - environmental, social and governance – has become a major concern in corporate boardrooms: criteria by which strategy is developed and risks are assessed.  While the term may be relatively new [having been coined as late as 2005 in a study of the International Finance Corporation (IFC) entitled “Who Cares Wins”],  it has always been top of mind in the mining industry even if it has not always used the same terminology.  Responsible mining companies have always been concerned about sustainability, care of the environment and working with their host communities towards achieving these goals.  ESG now brings together these in a comprehensive framework that can help a mining company navigate and balance the benefits to the planet, people and profit successfully.

ESG is now front and center in the discussion of many boards, even those whose businesses do not generally deal with the environment, as investors are increasingly paying attention to environmental, social and governance-related matters and data.  As Forbes Magazine notes, “many investors recognize that ESG information about corporations is vital to understand corporate purpose, strategy and management quality of companies.”  Increasingly, transactions are done with an eye on ESG issues.  A company’s track record on ESG would certainly influence how it is able to raise funds and attract investments.  In this regard, in their quest to improve diversity and broaden their representation, many boards are electing directors whose expertise and experience encompass ESG.

Of course, not all boards have embraced the importance of the ESG framework in their decision-making. In a study conducted by the Harvard Business Review, they classified board attitudes towards ESG into four: “The Deniers”, “The Hardheaded”, “The Superficial”, “The Complacent” and “The True Believers”.

“The Deniers” are those who see sustainability as nothing more than a buzzword or a fad, i.e., sustainability is (at most) a page in the annual report. For “The Hardheaded”, sustainability is a factor affecting their business, but reduce it to strategic reasoning (e.g.  how can costs be minimized? are there market opportunities?). “The Superficial” have a shallow understanding of the need for sustainability, including those who implicitly promote greenwashing. “The Complacent” may be early adopters of initiatives like CSR reports, green product lines, or responsible supply chains, but have not kept up-to-date with the latest developments in sustainability, or use past sustainability triumphs to shut down the conversation about sustainability.

Hopefully, responsible mining companies fall into the category of “The True Believers”,  for whom  the long-term economic viability of their organization is closely linked to, and dependent on, social and environmental responsibility. True believers undertake careful analysis of business benefits and disadvantages with a long-term approach to governance.

With this backdrop, a mining company’s  ESG agenda would now include, among many others:

  • Environment: biodiversity, ecosystem services, water management, mine waste/tailings, air, noise, energy, climate change (carbon footprint, greenhouse gas), hazardous substances, mine closure
  • Social: human rights, land use, resettlement, indigenous people, gender/diversity, labor practices, worker/community health & safety, security, small-scale miners
  • Governance: legal & regulatory compliance, ethics, anti-bribery and corruption, transparency.

[Incidentally, at his presentation at the Philippine Mining Club on November 12, Mines & Geosciences Bureau Director Wilfredo G. Moncano announced a forthcoming Department Administrative Order on enhancing biodiversity.]

Many mining companies are already taking steps to assess and improve their ESG performance.  Certainly,  for companies in the Philippines, there is a long list of laws and regulations to be complied with that would tick all the ESG boxes.   However, experts says that the real benefits come when companies move beyond mere compliance and into maximizing the opportunities arising from ESG.

Mining companies also are being encouraged to improve their ESG records by aligning with internationally recognized frameworks (and seeking certification from the relevant body, if applicable):

  • UN Guiding Principles on Business and Human Rights
  • UN Guiding Principles Reporting Framework
  • International Council on Mining and Metals’ 10 Sustainable Development Principles
  • Towards Sustainable Mining (championed by the Chamber of Mines of the Philippines)
  • Responsible Gold Mining Principles

It is worth noting that in EY’s list of Top 10 Business Risks and Opportunities for mining and metals in 2022, ESG emerged as number one.  More than 200 global mining executives were surveyed and named ESG, decarbonization and license to operate as the top three risks/opportunities facing their businesses over the next 12 months.

With ESG at the top of the global business agenda and the intense scrutiny faced by the mining industry in particular, the challenges never cease for mining companies.


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Patricia A. O. Bunye - August 31, 2021

Lifting the open-pit ban and using 'AI' in mining

In my previous column, I had mentioned that, in the Stakeholders’ Forum on Recent Policy Issuances Relating to Mining conducted by the Mines and Geosciences Bureau (MGB) last June, hopes were raised that the ban on open pit mining would finally be lifted.  In response to a question in the open forum, MGB Director Wilfredo Moncano stated that the repealing clause of the draft Implementing Rules and Regulations (IRR) of Executive Order No. 130 (EO 130) would refer to Department Administrative Order 2017-10 (DAO 2017-10) on the ban on open pit mining.  Thus, while EO 130 itself does not explicitly refer to the lifting of the ban on open pit mining, the intent was to lift it since, in the proposed IRR, Section 11 referred to the repeal of the said DAO. Administrative Order No. 2021-25, or the IRR of EO 130, which was published on 08 August 2021, and which will take effect 15 days therefrom and registration with the Office of the National Administrative Register, did not repeal DAO 2017-10 or mention open pit mining at all, dashing any expectation that the ban will be lifted during this administration, notwithstanding the professed objectives of, among others: promoting direct investment for significant economic benefits of the country; ensuring adequate raw materials to support the various government projects, such as the Build, Build, Build Program and the mineral and allied industries; and promoting the development and increasing of employment opportunities in remote rural areas where there are mining activities in support to the Balik Probinsya, Bagong Pag-asa Program the government.  All of these laudable objectives would be met if only the long-stalled priority open pit mining projects were allowed to proceed to operate. On the positive side, with respect to the grant of new mineral agreements, upon effectivity of the IRR, all qualified applicants for a Mineral Agreement may now file their applications pursuant to Department Administrative Order No. 2010-21 and Republic Act No. 11032 (the Anti-Red Tape Act). Further, the permittee of an existing Exploration Permit with an approved Declaration of Mining Project Feasibility (DMPF) may apply for a Mineral Agreement and submit to the MGB Regional Office concerned within 90 days the mandatory requirements outlined in the IRR.  If complete, the MGB Central Office, 15 days from receipt of the Mineral Agreement application, shall review and shall endorse the same, to the DENR Secretary, for approval and issuance of the Mineral Agreement. It must be noted that new Mineral Agreements shall include a stipulation that they shall adhere to the existing revenue sharing scheme and to any future legislation pertaining to revenue sharing, taxes, fees, royalties, and charges. Previously, I also touched on how artifical intelligence (AI), which is defined as the ability of a digital computer or computer-controlled robot to perform tasks commonly associated with intelligent beings, such as learning from past experience, is creeping into many aspects of how we do our work.  Repetitive tasks, or those which may be done more efficiently are seen as better done by AI.  The mining industry,  where efficiency and productivity are paramount, has made profitable use of AI throughout the world. In Bagdad, Arizona, for example, data scientists, metallurgists, and engineers from Freeport-McMoRan created a custom AI model at a copper-ore concentrating mill in 2018 which was loaded with three years’ worth of operating data. It was programmed to look for operational tweaks to boost output. Thirteen monitors were placed in the control room to show readings from hundreds of performance sensors located around the mill.  Over time, the collected data were used to maximize copper production at a reasonable cost, with little new capital investment.  The team created, tested, and refined algorithms that would look into the data and recommend settings to maximize the copper output.  Their prediction model, called “TROI”, became so agile, that it was capable of issuing recommendations every 12 hours. Though not initially reliable, “TROI” was continuously improved by the team such that its recommendations became more plausible, to the point that 80% of its recommendations were accepted by the company’s metallurgists. The mill’s production substantially increased in just four quarters with its throughput exceeding 85,000 tons of ore per day, while its copper-recovery rate rose by 10% and its operations became more stable. In Canada, the government utilizes AI to promote clean, sustainable growth of its mining sector competitiveness by reducing costs and increasing productivity through automation. It recognizes that innovation may lead to increased efficiency and productivity, reduced costs, and improved environmental performance.  The Canadian government is now using machine learning to develop better models for the prediction of rock type and economical mineral deposit locations for extraction purposes without engaging in time and resource-intensive approaches.  It also uses AI to map Canada’s water and infrastructure, and to improve its ability to create geospatial data layers which can be used for emergency management, flood mapping, and change detection. In the Philippines, despite rapid technological developments, there are currently no government issuances governing the use of AI-related technologies in the mining industry.  Nevertheless, the DENR appears to recognize the impact that AI can make in preserving and protecting natural resources as it recently partnered with SMART and PLDT to protect peatlands in the Philippines using AI solutions. Outside the mining industry, other government agencies, notably the Department of Trade and Industry considers AI as a “nation defining capability” as it created an AI Roadmap to provide an actionable guide on how to “harness AI’s potential to uplift Filipinos, our local industries, and our economy.” It is geared towards preparing the nation to maximize the benefits of employing AI technologies.   The Philippines is supposedly among the first 50 countries in the world to have a national strategy and policy on AI. Such a policy is touted to increase the Philippines’ gross domestic product by 12% by 2030 as the roadmap can establish the Philippines as an “AI Center for Excellence in the region” and be a “hub for data processing” which can provide high-value data analytics and AI services to the world. The trouble with such projections and roadmaps is that, unless they are acted upon, and until we stop shooting ourselves in the foot, they remain aspirational.  We have roadmaps for practically every industry, yet we have spent decades going around in circles instead.  Back in 2004, a Mineral Action Plan for the revitalization of the mining industry had already been put in place to implement Executive Order 270 (The National Policy Agenda on Revitalizing Mining in the Philippines). The DENR was to be the lead agency in crafting and implementing a strategic plan, in consultation with the other concerned agencies, such as, but not limited to, the Department of Trade and Industry, the Department of the Interior and Local Government, the Department of Finance, the National Economic Development Authority, the National Anti-Poverty Commission, the National Commission on Indigenous Peoples, the mining industry and civil society. Despite the fantastic roadmap laid out, and three administrations later, we all sadly know what followed next: the saga of Executive Order 49 and all the other monkey wrenches thrown in, which prevented the approval of new mining agreements and projects from proceeding for many years.  While this may be oversimplifying all the myriad challenges the mining industry has faced, instead of trying to find new solutions to age-old problems, it may be worth taking a second look at prescriptions that may have been there all along.  Unfortunately, rare is the administration that considers and implements the plans and strategies of the previous ones, no matter how well thought out, for the simple reason that it is ‘contra-partido’ or someone else’s idea, which is why our country has not fared as well as others in the execution of long-term strategic plans.  The issuance of Administrative Order No. 2021-25 is undoubtedly a welcome development, but the road (though paved with good intentions) is still littered with obstacles, many of our own making.  As we soldier on, I cannot help but wonder whether it is AI that can help humans truly learn from past experiences by warning us against committing the same mistakes and allowing us to make better decisions, or humans should finally just face up to the consequences of our folly.  

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Patricia A. O. Bunye - March 10, 2022

2022 Presidential Candidates: Who truly walks the talk?

Photo credit: Good News Pilipinas As this column is being written, there are less than 100 days to go before the May 9 elections.  Many voters have made their minds up from the outset, some purely based on their visceral reactions to, and past experiences with, the candidates.  However, we owe it to ourselves and future generations to scrutinize the candidates based on their platforms and advocacies, although time and again we are reminded that most campaign promises are made to be broken. For the mining industry, the obvious primary point of comparison would be the candidates’ position on mining and the development of our natural resources. After all, the Philippine Constitution itself recognizes the role that mining plays in our economic life by providing the framework for the exploration, development and utilization of mineral resources. The candidates’ respective positions on mining have been made public through their recent interviews and statements, including the debates that a certain candidate has been pointedly avoiding. Speaking to Boy Abunda, instead of Jessica Soho who he claims is biased, Ferdinand Marcos Jr. said he is open to allowing “sustainable  mining”, while expressing aversion toward open-pit mining.  Marcos Jr. said he recognizes that mining is a big source of revenue for the Philippine government, and that in these difficult times, we should take advantage of our vast natural resources.   On open-pit mining, he cited the pollution that it allegedly causes and post-mine closure issues.  He also called for improving the working conditions and compensation received by mine workers. Vice President Leni Robredo, for her part, has stated that she supports “responsible mining” and ensuring the protection of the environment.  She believes that the benefits from mining should go back to local communities and contribute to holistic national development.  She has also stated that she will continue to push for respect for the rights of indigenous peoples, which has been her advocacy from her days as an “alternative lawyer” and for “honest to goodness consultation” with the communities affected by mining.   She, however, said she would immediately cancel President Duterte’s Executive Order 130 lifting the moratorium on new mineral agreements, issue an executive order identifying “no-mining areas” and would call for the passage of the National Land Use Act, which she co-authored as a member of Congress.  She also supports the passage of the “Alternative Minerals Bill” which bans mining in critical areas and open-pit mining. Manila Mayor Isko Moreno has said he will support mining as a means of reviving the economy especially after being ravaged by Covid-19, recognizing that mining can attract much-needed foreign direct investments and create jobs.  He said that the government cannot rely on taxation alone and must develop its assets, including minerals, responsibly. Senator Panfilo Lacson said that, if elected President, he will ensure the “responsible” extraction of minerals and eradicate the double standard in the regulation of the mining industry. “Ang mining industry, hindi naman pwede patayin kasi major industry ito ng Pilipinas”, he said.  He has pointed to small scale mining as the source of violations of mining laws and environmental risks, and an area that he will devote attention to, emphasizing that his actions will be “data driven” and “science based”.   He has also called for the creation of a special program and funding for indigenous peoples “who suffer the brunt of irresponsible mining.” Senator Manny Pacquiao believes that the extraction of minerals can be done responsibly and is therefore against banning mining.  He says that the number of mining projects in the country can be controlled and that the government can focus on monitoring open-pit mining. Only “Ka Leody” de Guzman has outrightly called for a ban on mining, saying it endangers the lives of people, specifically citing the effects of Typhoon Yolanda in an area where there is a large-scale mining project.  Instead, he advocates advancing a "just transition to a green economy" as a solution to “destructive extractive industries like mining and logging”.  He said that residents in communities to be rehabilitated should be given the knowledge and skills to conserve the ecology of their environments, which is crucial to the return of their livelihoods in farming and fishing. There is an entire laundry list of other issues on the candidates can be grilled.  However, for the Makati Business Club (MBC) [whose Governance Committee I currently chair] and other business groups, including the Financial Executives Institute of the Philippines (FINEX), Legal Management Council of the Philippines (LMCP), and Management Association of the Philippines (MAP), as well as various Chambers of Commerce, one paramount point is where the candidates stand on Freedom of Information. Freedom of information is enshrined in the Constitution.  The Bill of Rights (Article III), particularly, Section 7, provides “(T)he right of the people to information on matters of public concern shall be recognized. Access to official records, and to documents and papers pertaining to official acts, transactions, or decisions, as well as to government research data used as basis for policy development, shall be afforded the citizen, subject to such limitations as may be provided by law.”  What we need, therefore, is a law which implements and operationalizes this.  A Freedom of Information (FOI) Law would require government to make public information available to citizens, organizations and businesses.  However, it has been 35 years, and counting, but an FOI Law has still not been passed. From the perspective of FOI advocates, there is no lack of arguments in favor of the passage of an FOI Law.  Good governance reforms are crucial in promoting sustainable and inclusive growth.  This can only happen with clear rules and guidelines, easy access to information, eliminating vagueness in procedures, unchecked discretion among regulators, and inefficiency in the bureaucracy.  An FOI Law would also encourage developing a culture of transparency at all levels. On 23 July 2016, soon after President Duterte assumed office, he issued Executive Order 2, entitled “Operationalizing In The Executive Branch The People’s Constitutional Right To Information And The State Policies To Full Public Disclosure And Transparency In The Public Service And Providing Guidelines Therefor”. While this was a very welcome development, the EO only covers the Executive branch,  including but not limited to, the national government and all its offices, departments, bureaus, offices, and instrumentalities, including government-owned or -controlled corporations, and state universities and colleges.  It  does not, however, cover the legislature, judiciary and or even LGUs, although it encourages them to observe the order.  Interestingly, the EO contains a reminder to all public officials of their obligation to file and make available for scrutiny their Statements of Assets, Liabilities and Net Worth (SALN) in accordance with existing laws, rules and regulations, and “the spirit and letter of the Order”, but the signatory of the EO himself has time and again refused to provide his SALN, which is a basic instrument of transparency. For its part, the Supreme Court issued the Rule on Access to Information About the Supreme Court in 2019. The Supreme Court likewise ordered the creation of FOI Manuals in the entire judiciary.  The Rule on Access to Information About the Supreme Court guarantees one’s “privilege” (but not absolute right) to either obtain a copy, receive the information or gain insight to all information and records or portions of those records in the official custody, possession and control of offices in the Supreme Court. Like all other rights, the “right to know” is not an absolute right.  Excluded are those “non-disclosable information” protected by laws, rules or resolutions of the Supreme Court En Banc. The obvious limitations of these two issuances are that they only cover their respective branches of government.  The goal is to pass an FOI Law which covers all three branches of government, including local governments. The consolidated House Bill (HB 5776) currently pending for approval by the House Committee on Public Information enjoys strong support and has been consistently identified as a legislative priority by the business community.  However, it is highly unlikely that it will pass in this administration, and it is therefore up to the next administration to take up the cudgels. Information is power.  Information will allow us to make better decisions about who we elect to office, how we allow our leaders to allocate and spend our taxes, and also examine the policies they seek to implement.  Information will allow us to be better partners in nation-building.  The right information will empower us to fight and correct misinformation, falsehoods and outright fake news. During the campaign, a number of the presidential candidates have professed support for the concept of “freedom of information”, though some not necessarily for the passage of the law itself.  What is more telling is not what they have said in words, but by their actions through the years, i.e., whether they have led lives of transparency and accountability. The campaign period is therefore a time for us to really sift through the noise and get to know our candidates, both national and local, but most especially the presidential candidates, as to who truly walks the talk.

Commentary

Patricia A. O. Bunye - July 04, 2022

Diwata plans award for best SDMP programs

As Diwata-Women in Resource Development, Inc. (“Diwata”) marks its tenth-year anniversary on July 18 this year (incidentally, also Nelson Mandela Day), it takes pride announcing the launch of an award to recognize the best Social Development & Management Program that specifically benefits indigenous peoples, specifically women and girls. When Diwata was founded ten years ago, it sought, among others, to serve as a positive platform for dialogue on contentious issues on mining and natural resources and to promote understanding by bringing together and promoting meaningful connections among stakeholders.  It also sought to protect and safeguard the rights of indigenous people, women and communities. Its flagship project, Tanging Tanglaw: Turning Grandmothers into Solar Engineers [more popularly known as the “Solar Lolas” Project in cooperation with our partners, the Land Rover Club of the Philippines and the Philippine Mine Safety and Environment Association (PMSEA)] has enabled the training of Aeta Women from 2 communities in Bamban, Tarlac and Gala, Zambales at the Barefoot College in Tilonia, India to assemble, repair and maintain solar panels.  The Solar Lolas have since returned to their communities where these panels have been installed and are now working.  The second phase of the project was a financial literacy program, which Diwata ran in collaboration with FWD Insurance, to reinforce the idea that the principle behind the project is that the community will put  the money they used to spend on kerosene and other sources of energy into a fund which will now be spent on the solar panels and other community-administered livelihood projects.  FWD Insurance will remain Diwata’s partner for the third phase of the program, a longer-term livelihood program with the locators at the Clark Development Freeport Zone.  Diwata has an MOU with Clark Development Corporation and the Bases Conversion & Development Authority for the use of two classrooms at the Clark Skills and Training Center, Clark Green City, which are charged to these agencies’ respective Gender & Development Funds. The Solar Lolas Project was originally conceived and pitched to mining companies a possible model for community development, which we hoped was something that could be successfully replicated in different areas of the Philippines.  However, despite the generally positive response to the project, some mining companies were lukewarm to the idea.  Among the disappointing responses were: “it does not tick the boxes to comply with the Social Development and Management Program (SDMP) under the Mining Act”; “the current project is beyond our project area – it will require us to go beyond what the law requires”; and “the communities have gotten used to company dole outs”. Under the law and its implementing rules, the SDMP refers to the comprehensive five-year plan of the companies to conduct their actual mining and milling operations towards the sustained improvement in the living standards of the host and neighboring communities.  Specifically, it covers: Promotion of general welfare of those living in host and neighboring barangay communities Advancement of mining technology and geosciences Institutionalizing Information, Education and Communication (IEC) programs for greater public awareness and understanding of responsible mining and geosciences Companies are required to allocate an annual budget of one and half percent (1.5%) of their annual operating costs for their respective SDMPs, allocated as follows: The companies are also required to prepare their SDMPs in consultation and in partnership with the host and neighboring communities to ensure that the programs are responsive to the communities’ needs, demands, and concerns.  The program should also be reviewed every five to accommodate the changing needs of the recipient communities. The Mines and Geosciences Bureau (MGB) periodically allows realignments of the SDMP. In the past, mining companies were allowed to realign the unutilized/unspent SDMP funds to assist typhoon victims within the host and neighboring communities, as well as the non-impact barangays in their respective localities. In 2020, pursuant to MGB Memorandum dated 27 March 2020 mining companies were again allowed to realign unutilized SDMP funds to assist the host and neighboring communities, as well as the non-impact barangays in their respective localities, during the implementation of the enhanced community quarantine due to COVID-19.  In this regard, many mining companies could be considered “frontliners” in responding to the needs of host and neighboring communities, as well as the non-impact barangays in their respective localities during the pandemic as could be shown in the final report issued by the MGB Central Office on the utilization of the total of PhP 407.6M budgeted by the companies, with PhP 380.1M expended. The companies’ community relations offices regularly submit reports to the Mines and Geosciences Bureau detailing their compliance with the SDMP.  Considering, the significant resources that are required to be allocated to the SDMP, and the real opportunity for companies to create self-reliant communities through the programs they implement, it is important for them to choose programs which are truly transformative and which have a lasting impact on the lives of the members of the community. Since the primary objective of SDMP is to help create sustainable communities, Diwata would like to support this effort by launching our award to recognize and encourage companies that not only comply with the requirements of the law, but also go above and beyond by offering fresh and innovative approaches, particularly in promoting the rights and welfare of IP women. As this column is being written, Diwata is finalizing the criteria for the award to be announced on the date on our tenth anniversary on July 18, with the award to be given at the PMSEA’s Annual National Mine Safety & Environment Conference in Baguio in November 2022.  Watch out for the details!

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