Environmental, social and governance (ESG) considerations rose to prominence over the past decade, but ESG is now widely agreed to be past its peak. In fact, the concept has taken a battering of late.
With blurred understanding of what it actually means, shifting goal posts and backlash in some quarters against so-called “woke” initiatives, are the acronym’s days numbered?
The “S” or social considerations were dented 12 months ago when the US started winding back diversity, equity and inclusion (DEI) initiatives, after Donald Trump signed executive orders designed to cut DEI programs during his first week back in office.
As for the “E”, change is in the air with reforms to federal environmental laws introduced to parliament last week. The Coalition and teal independents are not prepared to support the reforms – which include a national interest exemption – as they stand. This means a bumpy path ahead before any changes are enshrined in law and continuing uncertainty for project proponents.
The net zero vibe is changing, and in the political arena, the Nationals announced just days ago they’re scrapping their commitment to reach net zero emissions by 2050. The move forces their Coalition partner, the Liberals, to debate their position in the party room.
On the “G” governance front, miners would note the letters “ESG” have been pulled from the latest version of proposed changes to the JORC Code, a professional code of practice that sets minimum standards for public reporting of mineral exploration results, resources and ore reserves.
The Joint Ore Reserves Committee has completely removed the ESG acronym from its latest draft, after receiving a “significant and emotive response which dominated most aspects” of the draft JORC Code feedback.
JORC acknowledged the ESG acronym had a very wide range of understanding – to some ESG was entirely focussed on social and governance, with environmental factors lost in the acronym, whereas to others governance was overlooked.
Changes following the comprehensive redraft included removing clauses which specifically highlighted ESG and modifying a clause to now refer to “environmental, social and regulatory factors”. The draft is under legal review and is not expected to be open to further consultation once it’s finalised and becomes publicly available.
However, despite the omission from the draft JORC code, companies can’t afford to ignore the factors of sustainability, risk and reputation.
Miners say ESG remains front of mind for many investors, perhaps secure in the knowledge that multimillion-dollar penalties have been dished out in Australia to companies caught greenwashing – misrepresenting that investments were screened for meeting ESG criteria.
And mandatory sustainability reporting has come into effect in Australia this year for larger organisations and financial institutions. The reporting requirement will filter down to other companies over time. The sustainability report must contain climate-related financial information and disclosures.
The ESG acronym may be fading but sustainability, governance and climate considerations remain, and companies continue to seek a social licence to operate.
Perhaps akin to a kaleidoscope, the pieces remain the same and it’s just the perspective that’s changing.
