Sustainability is under pressure. Sustainability investments are increasingly scrutinized by management due to an uncertain geopolitical climate, rising costs, increased fears of tariff-invoked global recession, and low share prices. This has been particularly evident in the U.S., where the Administration has scaled back support for sustainability and renewables, emphasizing economic growth and energy independence in its communications.
The trend has been evident in Europe and other parts of the world as well. For example, the EU Omnibus introduced stripped-down versions of the Corporate Sustainability Regulation Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD), and the EU Taxonomy. Meanwhile, at their last summit, BRICS countries declared sustainability was important but secondary to economic growth.
Investors and CFOs are growing impatient as well. In the pursuit of cost savings, there is increasing scrutiny on the value of disclosure beyond compliance, alongside a challenge to identify more tangible connections between sustainability programs and value.
In the mining sector, maintaining environmental and social license to operate, which often takes efforts beyond compliance, has long been recognized as a critical element of risk management and essential to delivering cash flows, access to capital, and asset value. Nonetheless, there is increasing pressure to credibly demonstrate which activities create or protect value, and which do not.
To help clients to better assess the value of their sustainability activities, enabling them to identify strong investment cases across the corporation and its assets, ERM has developed the framework below.
There are plentiful examples of direct and indirect benefits for miners from investing in sustainability. Implementing new technologies can reduce costs, as well as water and energy consumption while achieving better sustainability credentials can improve market access.
There are equally substantial indirect benefits, such as reduced likelihood of catastrophic risks from climate change or time to permit a new mine, that are harder to calculate reliably. The value of sustainability efforts on brand, reputation, and human capital is even more difficult to quantify. Our framework aims to give that process more structure by breaking down the direct and indirect value of sustainability efforts into six categories.
Figure 1: Sustainable Value Creation
Price premia, improved market access, and new revenue streams
The area of greatest focus (and greatest disappointment) in deriving value from sustainability has been the lack of price premiums for metals and minerals produced with strong sustainability or ESG credentials, particularly those with low carbon production. While many clients report some form of price premium in individual offtake agreements, particularly in illiquid markets like lithium or cobalt, the ‘holy grail’ of spot prices on metals has proved illusive.
However, there are still significant market benefits of a strong sustainability performance. Stronger sustainability performance provides sellers with greater choice of customers, making it easier to trade, locking-in long-term relationships, and the potential for partnerships with reputable Original Equipment Manufacturers (OEMs). Consumer-facing sectors, such as automotive, technology, and jewelry, are aiming to capitalize on the sustainability story to drive sales and engagement, creating real value for them in procuring higher credentialled product. For example, diamond buyers indicated a willingness to pay a premium if they had confidence that the diamonds had been ethically produced.
In addition, supply chain-focused regulations, such as the EU's CSDDD, will increasingly create pressure on OEMs to find cleaner, more ethically produced inputs. There are also green shoots outside of consumer industries. Low-carbon steel has seen premiums of over 40% (albeit for very small volumes) as companies seek to explore how new green steel products can start to phase out coal. To this end, mining companies are increasingly looking to develop green metal products and brands, most notably in aluminum and steel.
Beyond the traditional upstream mining model, mining companies are also diversifying into metals recycling, green mining technologies (such as AI, enhanced recovery, and fleet electrification), and low-carbon smelting practices, which drive both mineral and licensing revenues. For example, Rio Tinto aims to become a technology provider through its Nuton bio heap leaching technology, which increases copper yields, and its ELYSIS low-carbon smelting technology.
The lowest-hanging fruit is where sustainability improvements generate direct cost savings, providing a return on investment for the invested capital. The adoption of tailored sustainable practices can yield significant cost reductions through reduced power and water consumption, as well as improved material and waste efficiency.
Energy efficiency programs have been particularly well-explored, with technology improvements and systems optimization yielding immediate reductions in operating costs. Larger-scale initiatives substituting fossil fuels for renewable power sources often have even larger impacts on operating costs, with paybacks of less than two years. For example, at a single site in the US, an ERM team has identified up to $6 million in annual energy savings.
Investments in water efficiency, such as recycling and the adoption of new water-saving technologies, have been gaining particular momentum as climate change exacerbates water insecurity for miners working in arid climates. ERM data suggest that a water scarcity event in Chile may cost a mining company approximately 5% of its annual revenue. Anglo-American’s Los Bronces copper mine is a notable example. Droughts in 2019 resulted in a 9% loss in annual production for the mine. Anglo American has since invested heavily in its water management, generating $80M in water savings across its portfolio.
A further area that has benefited from recent innovation is the efficiency of the mining process – particularly the ability to minimize material moved per tonne of ore. Performance in material and waste efficiency can reduce the use of water and energy, the land used in production, and the volume of waste to manage during and at the end of the mining cycle, all of which are critical sustainability aspects and drivers of cost and long-term liability. ERM worked with a processing facility on its characterization and comminution process, which generated immediate returns through reduced energy costs, higher yields from crushed materials, and will likely reduce long-term liabilities associated with waste materials.
All signs point to a surge in demand for metals and minerals, driven by the expectation of massive investment in renewable energy generation, electric vehicles, energy grids, construction, and other industrial applications that are key to the transition to a low-carbon economy. Over time, this will inevitably push up prices and increase the rewards on offer for those companies that are able to develop new projects.
However, many of the most technically attractive undeveloped mining projects in the world are currently stalled due to stakeholder challenges, particularly in copper, the commodity at the center of many miners’ long-term strategies. In addition, even major operating mines have been forced into care and maintenance in recent years due to challenging socio-political headwinds.
The ability to successfully build and maintain a social and political license to develop new mines will be a key differentiator in years ahead as commodity prices climb. While mining share prices remain depressed, companies are prioritizing the acquisition of producing mines through M&A activity over developing new projects. However, as that calculus shifts, the ability to build will climb in importance. The key qualities that will generate the greatest value will be
- existing relationships and trust with stakeholders in resource-rich regions,
- a model for capital project development that is adaptable to different local contexts
- sophisticated human resource with capacity to marry technical disciplines with complex diplomatic, anthropological and socio-economic analysis and engagement.
The developing world has traditionally been seen as the epicenter of socio-political challenges; increasingly, projects in developed mining jurisdictions have been equally affected. For example, in 2024 the federal government in Western Australia blocked Regis Resources’ McPhillamys project at the last minute due to a perceived lack of Indigenous consultation. The Jadar project in Serbia was brought to a halt after pervasive and sustained NGO opposition and public protest made it impossible to advance the project. Finally, First Quantum’s operating Cobre Panama mine, which initially appeared to be a successful case for the swift development of a new copper mine, has been in care and maintenance since November 2023 following public protests over a range of ESG issues, again leading to an erosion of political support.
Advantageous access to capital
There are three primary benefits of strong sustainability performance when it comes to accessing capital.
First, a solid sustainability track record helps miners access government grants that involve stringent sustainability due diligence and require a project to meet particular geopolitical or job-creation requirements. It may also create opportunities for prioritized permitting, which South32 appears to have benefited from at its Hermosa project in Arizona, though government promises of streamlined permitting processes do not always materialize in practice.
The second benefit is access to preferred capital providers. While investors may not be willing to offer a discount on their rates, companies and projects with stronger ESG performance are certainly in greater demand, as it lowers uncertainty and derisks projects for investors. Therefore, strong performance in this area likely enables a developer to select and choose partnerships that contribute technical expertise and political leverage or are simply a better fit for the business.
Relatedly, a strong sustainability profile also breeds opportunities for closer relationships with sustainability-conscious OEMs, which may be willing to offer long-term offtake agreements and, in some cases, co-investment. Vale Base Metals and General Motors are co-investing in a battery-grade nickel sulfate facility in Quebec, with a capacity to supply 350,000 electric vehicles annually.
The third benefit is the lower cost of capital for ESG performance. However, the promise of achieving a lower interest rate on debt due to stronger ESG performance has largely proven illusory so far. Green bonds are the primary means for developers to access cheaper financing. That option is growing. According to Bloomberg, the market for green bonds reached a record $575 billion in sales in 2023. Green bonds typically have specific environmental or climate criteria that a project must meet to be eligible, often making them more suitable for energy projects that support decarbonization than for the development of mines. SQM, a Chilean lithium producer, has used green bonds to raise $700 million at 75 basis points less than its lowest-ever previous interest rate.
Realizing cost reductions, economic opportunities, and social license by taking a lifecycle and regional approach
By embracing lifecycle asset management approaches, companies can build mines faster, reduce operational disruptions, and minimize liabilities at closure. Industry-standard valuation tools tend to discount sustainability risks with low probabilities and significant impacts. Risks such as tailings dam failure, loss of social license disrupting operations, or potential impacts of severe weather events damaging a site are rarely fully considered in decision-making. Each of these risks has a low probability of occurrence but significant financial implications for the business.
In addition to considering a longer timeframe, companies should broaden their focus to encompass not only the economics of the mine site but also the economic and community needs of the wider region. This broader perspective enables companies to identify context-specific opportunities for sharing or reducing costs, enhancing their license to operate through collaboration, and generating new revenue streams for affected communities.
For example, Anglo American’s early investment in economic diversification and community development in South Africa led to the Sishen Mine transitioning into a major agribusiness hub upon closure. By thinking broadly, Anglo American was able to leverage its land base to generate long-term revenues. Beyond the direct returns, these types of investments often have indirect benefits, including enhanced community trust and regulatory acceptance, that reduce risk.
Not waiting until closure but also addressing the shared needs of companies and stakeholders during operations can help build trust and drive more immediate financial benefits. Glencore, for example, in Chile, recycles wastewater for its smelter in a high-water-stress area. The recycled water meets the smelter’s requirements, reduces the risk of water conflict with the community, and offers potential cost and reputational benefits. It demonstrates that situating a mine within its regional context can unlock new partnership opportunities, alleviating cost and operating burdens while enhancing stakeholder relationships.
Attraction and retention of skilled workers
Working in mining can be dangerous: 25 ICMM members report a total of 35-45 fatalities per year for the last five years. Mining companies are also struggling to come to terms with a widespread culture of bullying, harassment, and discrimination that can threaten both the physical and psychological safety of employees, particularly women. Improving performance across a range of sustainability topics could significantly alleviate pressures on existing workers, enhance the industry’s reputation, and attract top young talent.
Cross-sectoral studies from the Centers for Disease Control and Prevention and the Ontario Safety Group calculated that miners can expect between 15% and 35% direct returns on health and safety spending through avoided costs and productivity gains. Additionally, a 2020 study in the International Journal of Environmental Research and Public Health into quarrying found that better health and safety cultures significantly reduce turnover rates and broader job satisfaction.
Sustainability efforts to build a better reputation outside the mining gate are crucial to recruiting young workers and securing a better position in the fight for talent. This is most pronounced among Gen Z (born 1997-2012), where between half and two-thirds have a poor perception of mining or are unwilling to work in the sector. Due to this reluctance, coupled with an aging workforce, the mining industry is facing a substantial talent gap. Without improvement, crucial positions will remain unfilled, while salary costs will continue to rise.
In response, mining companies are modifying their workplace environments and hiring strategies to align with the values of younger workers, including diversity, flexibility, and sustainability. Regarding sustainability, the energy transition presents mining with an opportunity to become part of the solution to climate change as providers of electrification-critical metals and minerals. The mining industry can leverage this in its recruitment efforts.
Offering young talent diversity and flexibility is more challenging, as mining traditionally requires large workforces to spend extended periods in remote areas. However, advances in autonomous machinery and virtual reality are beginning to reduce the time needed in the field. Mining companies should consider the positive recruitment implications when weighing investments in these technologies.
Pivoting from 'values' to 'value'
The first step management should take is to conduct a thorough review of all existing initiatives, assessing the value as well as identifying any gaps in the approach. Linking sustainability to explicit outcomes can drive more tangible conversations around value.
Direct examples can be relatively straightforward, considering additional revenues and reduced costs, increasing volumes sold, or reducing energy or water consumption. More challenging indirect examples may require probabilistic analysis to define the potential value, such as the reduced likelihood of catastrophic risks from climate conditions or time to permit a new mine. Intangible value remains a challenge to quantify but can often be linked to an organization’s strategic objectives beyond the sustainability function.
In an external landscape increasingly skeptical of a ‘values-based’ approach, sustainability professionals must learn to master the language of financial valuation in order to credibly demonstrate why sustainability in mining should not be viewed as a cost center but a core driver of corporate value.
