Consumerism & the mining industry: part 1

I’ve been itching to write about this topic for some time but, as with so many articles, I needed the right person to explore it with.

In the end, that person found me.

“Three years ago, I had a eureka moment. So many of these challenges that the mining industry is facing, they all come down to trust,” Elizabeth Freele told me, when we jumped on a call in late March. “It’s very pronounced at the community level, but also more broadly with stakeholders.

“That’s part of a megatrend… If you follow the Edelman Trust Barometer, you can see, we have been in a crisis of trust since 2017. The data is very clear, people don’t trust the major institutions of society. Business is one of those. Trust defines a company’s license to operate, and by extension, its ability to lead and succeed.

“Mining is an industry that has struggled with that, and we’re particularly opaque, which is understandably perceived by the public as the industry having something to hide.

“We don’t talk about it enough. And if we don’t talk about it, then how do we move towards building that very trust that defines our success?”

It’s an excellent question. My hunch is that actually, we’re talking about it internally, but very little action is taken unless the industry is forced to by investors, consumers… whoever.

“That’s what I mean,” said Freele. “We’re not talking all that much about solutions or the actions that need to be taken to tangibly make a change. And in the meantime, it just keeps getting worse.

“License to operate has again been ranked the #1 industry risk for the third year in a row by EY.

“There are severe consequences for us as an industry. Permitting gets harder. Young people don’t want to work in mining. We don’t compete well with other industries for talent and, as we move into Industry 4.0, it’s just going to get harder.”

Talk to any community relations practitioner in the mining industry, and they’ll tell you that their role is mostly about putting out fires, not preventing them from happening. Therein lies the issue: if we don’t talk about how to build a foundation of trust, then we’re just going to keep putting out fires.

Is that really how mining companies want to operate?

“And every fire that needs to be put out sets us back, not just as a company, but as an industry,” Freele added with conviction.

The need to win hearts and minds

Freele has talked openly about the challenge mining has with trust for some time. She studied international development and political science in her home country of Canada before moving to Burkina Faso to work in corporate social responsibility for a mining company.

“I fell absolutely in love with it,” she told me. “But I had a hard time leading up to the decision. With my academic background, I thought to myself, mining, really? Aren’t I selling my soul?

“To be honest, I lost friends over that decision. I’ve been inside the industry for years now and I’m so glad that my path has taken me where it has, because I can have so much rewarding impact.

“But I think about those passionate peers sometimes. Many of the folks who really care about human and planetary wellbeing are still on the other side of the fence. They’re still thinking the negative way I did 10-15 years ago because they haven’t seen the inside.

“I took that first job and quickly realised that my idea that we could leverage a business like mining to do real social good was accurate. That really empowered me.”

After realising that she could have more impact in the boardroom than in the field, Freele moved to Spain and completed an MBA in innovation and entrepreneurship.

Following a stint with Teck Resources, she started her own environmental social governance (ESG) consulting firm in 2019 which was rebranded earlier this year as Sympact Advisory.

“I feel really excited about the positive work that we can do because of this ESG awakening in mining over the past few years,” she said. “Miners are paying a lot more attention than they did a decade ago.

“COVID-19 has also induced a moral awakening. From senior managers to frontline employees, more people are thinking about the moral aspect of business’ role in society, and that’s really cool.”

The rise of conscious consumerism

We talked a bit about other industries that have been touched by conscious consumerism and how demand for greater transparency and ethical production methods has added value to certain products.

Fashion and food are two good examples, albeit a little different to mining because, in mining, there are multiple middlemen; no one buys metals or minerals direct from a mining company to make their own car or phone.

But people are starting to take an interest in where these products come from. Although we’re still a way off from end users demanding sustainably produced metals and minerals (currently that comes from investors and consumer companies, although we are seeing the emergence of brands like Fairphone to cater to more conscientious technology users), with the rise of technologies like blockchain comes knowledge and power.

And, as we start to measure and improve the footprint of mined products, if we package that information in the right way and communicate it effectively, then it could be a really positive tool with which to build societal trust.

It could also create premium products that people want to spend more money on. And that, in turn, will allow us to do other things, like invest more in shared value initiatives.

There are endless possibilities… and we don’t even need to worry about getting it right at this stage – just talk about it.

“For me, it’s a no-brainer,” Freele agreed. “If you care about the tea picker who produced your cup of tea, the coffee bean harvester who produced your morning brew, why on earth would you not care about the miners who dug up the metals in your iPhone?”

We are seeing the rise of conscious consumerism in a very pronounced way with Gen Z and even with millennials.

They may not be holding the purse strings just yet, but there’s $68 trillion of wealth that will soon be exchanging hands in the intergenerational wealth transfer. And that means that end users will be investors before we know it.

It’s already apparent in purchasing behaviours. Young people are making values-based purchasing decisions that look very different to those made by other generations at that same age. They have grown up in a highly connected world with so much information at their fingertips and that influences who they become.

“It’s an inevitability, and I see business leaders as having a choice,” said Freele. “Do you want to lead the pack? Do you want to be the one who is recognised for being informed and brave enough to be among the first? Or do you want to be at the back of the pack being dragged along, screaming?

“Because if your business is to thrive, you’re coming either way. The alternative is folks may not want to buy your product, or you may struggle to get investors.

“At every step of the value chain, you are influenced from both sides. Increasingly, businesses need to position themselves as trustworthy partners and good corporate citizens to participate.

“As expectations for greater corporate transparency grow, and technology enables that transparency more than ever, it’s becoming harder and harder to operate in an opaque way.”

Transparency and truth

Transparency is coming, and there is a collective, tangible fear in the mining sector surrounding exposure. Whatever skeletons come out of that closet, it’s super important that we stand up and own our mistakes rather than shying away from them.

In the wake of the Brumadinho tailings disaster, not one mining executive spoke openly in the general media and said: “As an industry, we’ve made mistakes, but here’s what we’re doing to try and make things better”.

In my opinion, that was a massive opportunity that we missed to start rebuilding trust.

“I think it speaks to a cultural challenge we have in mining,” said Freele. “We need more corporate vulnerability and authenticity.

“For the next generation of talent, these are the characteristics that will define the new era of business leadership, the characteristics that will make the difference between someone wanting to be a part of your organisation or not. So, I basically want to Brené Brown our whole industry.

“Vulnerability is scary for any individual. I can only imagine how scary it would be as a 65-year-old white man (the profile of the average mining executive today). It’s the complete opposite of everything you’ve been told you must be, both personally and professionally, to succeed, to be enough.”

A lot of this boils back down to how we define success, not just in the mining industry, which is rife with toxic masculinity, but in general.

Corporate success is still very much gauged on a financial level and we need to expand that, to also measure success based on how happy the workforce is, how satisfied and secure our stakeholders feel, how much our business activities contribute to advancing community development and resilience…

I would like to see significant change on that front too.

Freele nodded: “The growth of ESG metrics is the beginning of that. It drags the laggards along, but it doesn’t quite create leaders. It’s a promising start though in helping business response to evolving societal expectations.

“From there, I see opportunity as we become more transparent, as we see harmonisation of ESG metrics, and as we see the maturity of the S in ESG. Sure, social performance is admittedly hard to measure. But there is value in qualitative data, as well as the quantitative.

“It is possible to present qualitative data in valuable, interesting ways. And I have hope that, as that becomes the norm, we will also be motivated to move beyond quantifying do-no-harm, to quantifying tangible contributions to broad-based and sustainable social progress.

“And with that, we’ll see more opportunities for any company to be one who stands out from the pack, to not be determined by the average or the status quo of an industry.”

From consumerism to capitalism

Which led us neatly to investment. Historically, mining has been put in a certain bucket by investors.

But, as we get more specific data that is transparent, easy to search, easy to understand and easy to select, there will be big opportunities for companies who have the courage to lead on ESG metrics, to be considered in portfolios where miners normally wouldn’t be.

“In the future, the industry that you are a part of may not determine your fate in terms of where your investment comes from,” said Freele. “There’s so much new investment available, mining companies just need to figure out how to speak to it.

“If a pool of capital is dying, find new pools. It doesn’t have to be complicated. It may mean change, though.

“Look at the amount of money that’s moving into ESG… that’s just the beginning. The way I always explain it is that ESG is about changing finance, but impact investing is about financing change. And we’re seeing more and more interest in the latter from the next generation. They want to see change.

“If you imagine a spectrum with traditional profit-first business models at one end, at the other end would be impact-first models. We’re seeing more capital move in that direction and mining companies need to figure out how to capture it.

“That capital reflects the general public. That capital reflects the consumer base we’re talking about.”

In 2013-15, Freele was working with Roxgold in Africa and the team secured project financing from the International Finance Corporation (part of the World Bank Group), which has been at the forefront of impact investing for over six decades.

“It was amazing how much that empowered and resourced my role,” she said.

“The additional community impact initiatives and sustainability integration that I had dreamt of became possible virtually overnight, because of the change in drivers and interests of the investor base. Suddenly, there was an influx of values-based investment and covenanted expectations. That was super cool.

“The IFC’s been around for a while and so have their performance standards. But these standards are a single seed compared to the entire forest that is growing of impact-centric investment.

“Imagine a world where expectations for positive socio-environmental impact accompanying financial returns starts to become the norm. How’s mining going to navigate that? If we believe that we serve humanity, which we do – we deliver the materials for everyday life – then we must find a way.

“And that’s as much a responsibility for people outside of the industry as those within it. Part of the onus on us is to figure out how to get those people outside the fence to understand us and to come and help solve our challenges, because we can’t do it alone.”

Again, that links back to culture within the mining industry, of not asking for help and admitting our wrongs.

If we don’t learn how to do that, then we’re not engaging with the outside world; the people that we serve and who are soon going to be our investors.

To be continued…

Check back on April 14, for part two of this article series where we discuss practical steps to bridge the gap and build trust between consumers and companies in the mining space