Stephen Kibsey and his students of the Sustainability and Environmental Accounting course at McGill University gave their 2020 award for the best sustainability report to Canadian mining company Teck Resources Limited (Teck).
Transparency and materiality in the mining Sector
The team had to analyze the sustainability reports of companies in the mining sector, which has undoubtedly been the key target of criticism in the past. Under the scrutiny of NGOs, environmental groups and social organizations, mining companies have significantly increased their efforts to improve their image and practices.
“I think it is unique how, especially in Canada, the mining industry has created protocols through the Towards Sustainable Mining program (Mining Association of Canada) to ensure that everything is moving in the right direction and that there is third party verification,” says Kibsey.
The main challenges for mining companies with respect to material issues are their response to climate change, the management of tailings dams, social acceptance and interaction with communities. “I recommend that students pay attention to not only the physical elements, but also to what is not highlighted by following an established sustainability assessment framework,” says Kibsey. He invites jury members to exercise their own judgment, as well as to look at each of the internal stakeholders in a company, taking into account the specific issues that affect them.
Comparability of data
As is the case almost every year, benchmarking is a dominant technique in accountability. “Over the past 15 years or so, both in my teaching and research, I have come to realize that it is important to observe things in an absolute way, without always resorting to some kind of consensus, since conditions are very different for every company,” says Kibsey. “Think of the community issues for a company operating in Africa, and then think of the community issues for a company operating in Val d’Or… there is very little comparability here,” he says. When it comes to assessing water use, for example, the resources available can make all the difference. Students are therefore very cautious when considering data from ESG ratings and rankings, since they do not always know the exact methodology that was used.
A very relevant exercise for university students
“I believe the competition not only prepares the next generation to better understand sustainability, but also helps demonstrate to executives all the useful information they need for their investment analysis,” says Kibsey. “The students and their mentors are key stakeholders in this evolution, even though their analysis of the reports is primarily based on disclosure and not necessarily on the implementation of the sustainability programs of the companies evaluated,” he says.
As with the Task Force on Climate-Related Financial Disclosures (TCFD), students can take a critical look at the content of reporting and encourage best practices.
“It is a necessity to give students the tools and knowledge to achieve the 2030 sustainable development goals and to mitigate climate change,” says Kibsey.
When it comes to teaching sustainability, whether in accounting, marketing, finance, economics or MBA, the sustainability report is the corporate communication tool available to all stakeholders. “It is good that it is not just for investors,” says Kibsey. “In fact, this document’s mission is to show investors that the company must take into account other stakeholders in order to promote sustainability. We also need to convince companies, governments, NGOs and consumers.”
The competition allows students to develop skills for teamwork, and the use of personal judgment, while learning more about best practices and current corporate actions to present their sustainability programs. “If we did not have this challenge, we would probably do it ourselves, independently,” says Kibsey. “Participating with other universities provides a sense of community for students and faculty. Also, the very serious work that students do in drawing their conclusions, all this in a way takes them from academia into the world of work.”
Disclosure at the heart of Teck’s activities
Headquartered in Vancouver, Teck is Canada’s largest diversified resource company. It also has operations in Chile and the United States.
The company has been producing a sustainability report under the Global Reporting Initiative (GRI) for 19 years now. “We know that mining is an industry that can have an impact, both socially and environmentally. Transparency is therefore essential to maintaining relationships with our stakeholders, such as government, regulators, local communities and the investment community,” says Katie Fedosenko, Manager, Sustainability Reporting at Teck. The company’s GRI report is also a condition of its membership in the International Council on Mining and Metals, which promotes transparency and disclosure throughout the mining industry.
Drawing on more than 20 ESG rankings and scores, Teck identifies any disclosure gaps using the GRI as a baseline framework. Its sustainability report is then a key document for any involvement with investors and other stakeholders. The company also produces a Sustainability Accounting Standards Board (SASB) index and discloses data to the United Nations as a member of the United Nations Global Compact.
Contents of a winning sustainability report
“Sustainability is dynamic and needs to be reviewed on an ongoing basis. Look at what is happening with COVID-19. Rapid changes are taking place that emphasize the growing importance of ESG from human capital management to employee engagement to health and safety,” says Fedosenko. Teck therefore takes sustainability very seriously and has made it one of its core values.
Teck’s sustainability report presents approximately 60 ESG data series. Experts review the company’s activities and PricewaterhouseCoopers ensures data quality based on key performance indicators. “We conduct an annual materiality assessment that involves benchmarking against a range of different sources, working with our external stakeholders, ranging from communities to investors and clients, to understand what’s important to them,” says Fedosenko.
The sustainability report is based on a materiality matrix that considers the most significant themes for the company. The six key themes of the 2019 report were health and safety, water management, relationships with Indigenous Peoples, community relations, tailings management and climate change.
The future of the planet in mind
Every five years, Teck updates its sustainability strategy. It launched this strategy in 2010, setting its objectives to be achieved by 2015, as well as long-term goals to be reached before 2030. They recently launched a new strategy with short-term goals to 2025 and long-term goals to two decades out. “You will see in our 2019 Sustainability Report an update of our strategy with targets to 2040, 2050 and beyond, and in particular our commitment to become a carbon neutral operator by 2050,” says Fedosenko.
Teck’s goals include reducing the amount of electricity it obtains from carbon-emitting sources and switching to renewable electricity and solar or clean energy at its facilities in Chile. “In some cases, our targets are activity-based so you have to look at the quantitative and qualitative elements of our performance,” says Fedosenko.
Reducing its carbon footprint and taking action on climate are among Teck’s priorities. For example, Teck produces copper, which is needed for electrification. “Our products, from copper to steelmaking coal to zinc, support the transition to a low-carbon economy,” says Fedosenko.
Investment as a driver of change
The number of signatories to the UN Principles for Responsible Investment has risen to nearly 2,300, with approximately 86 trillion assets under management, which represents a rapid jump in just 5 years. These numbers can only increase, considering the corporate response to COVID-19. “Environmental priorities will remain, but I anticipate a shift towards the social side of things: human capital management, employee engagement, better wages and all those social issues that have been recognized but are difficult to address,” says Fedosenko.
Mélanie Pilon, journalist for Finance Montreal’s Finance and Sustainability Initiative.