Scope 3 emissions are gaining attention as the focus on sustainability and climate change grows.
Having a significant impact on the environment and society, mining firms managing their Scope 3 emissions is crucial to a sustainable future of Africa and the sustainability of their business operations. By taking action now and effectively managing their Scope 3 emissions, mining companies can not only mitigate risks associated with environmental impact but also gain a host of benefits.
This article explains the challenges mining firms face in managing their Scope 3 emissions, the benefits of doing so, and outlines key actions required to capture the potential value.
What are Scope 3 Emissions?
Scope 3 emissions refer to indirect emissions that occur in a company’s value chain, including suppliers, customers, and the use of its products downstream. These emissions are often more challenging to quantify and manage than direct emissions from a company’s operations, known as Scope 1 and 2 emissions. The GHG Protocol, developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), provides a framework for measuring and reporting Scope 3 emissions.
What are the Challenges of Managing Scope 3 Emissions for Mining Firms?
Complex Supply Chain
The mining industry has a complex and diverse supply chain that includes various suppliers, contractors, and service providers. It can be challenging to trace the origin of materials, products, and services, and quantify their carbon footprint accurately. It is also challenging for mining firms to track emissions from suppliers located in different countries with different reporting standards.
Dependence on Fossil Fuels
Mining operations require a significant amount of energy for operating machinery, managing logistics and generating electricity. Most of it comes from fossil fuels. Reducing the carbon footprint of mining firms requires transitioning to renewable energy sources, which can be challenging due to the availability and affordability of renewable energy in some regions. Africa has a high level of energy poverty, and many people still lack access to modern energy sources. This means that the demand for fossil fuels is likely to remain high in the region for the foreseeable future. Equally important is the limited availability of domestic battery-operated vehicle manufacturers, raising the costs of electrifying fleets.
Lack of reliable data
Many suppliers do not have the resources to accurately measure and report their emissions. This can make it difficult for mining firms to identify and address Scope 3 emissions in their supply chain. This is made more challenging by the challenges faced in building trusting relationships with stakeholders – often hampered by environmental, social and governance issues associated with mining. When in place, these relationships enable mining companies to better identify Scope 3 emissions by partnering with suppliers to build monitoring and reporting capacity in the supply chain.
High cost
Mining firms often need to invest in new technologies or processes to reduce emissions in their supply chain. This can be costly, and there is no guarantee that the investment will pay off in the long term. Many African countries are still developing, and there is a need to balance economic growth with environmental sustainability. This means that there is often a trade-off between reducing emissions and promoting economic development. This can make it challenging for firms to implement sustainability measures without negatively impacting their operations or the local economy.
What Value can Mining Firms Gain from Scope 3 Emissions Management?
Competitive advantage
Gemfields, a responsible coloured gemstone supplier, is cutting Scope 3 emissions by investing in sustainable transportation for its products in Mozambique and Zambia. By partnering with logistics companies that use low-emission vehicles and rail transportation, Gemfields has been able to reduce its carbon footprint associated with product transport. This has not only helped Gemfields to meet its sustainability targets but also provided a competitive advantage. By offering sustainably sourced coloured gemstones with a reduced carbon footprint, Gemfields has been able to differentiate its products and appeal to environmentally conscious consumers. This commitment to sustainability has helped to build trust with customers and increase the resilience of the company to potential disruptions and reduced long-term costs associated with purchasing fossil fuels.
Stronger Stakeholder relationships
In South Africa, Anglo American, a leading global mining company, has partnered with the Siyaphambili Youth Development Association to promote sustainable agriculture and reduce the carbon footprint of its operations. By partnering with local communities and promoting sustainable agriculture, Anglo American can demonstrate their commitment to environmental and social responsibility, which can decrease the risk of negative regulatory or political action. This type of proactive approach to environmental and social sustainability can enhance reputation, build relationships with stakeholders, and reduce political and regulatory risk, ultimately increasing social license to operate. This commitment to sustainability improves the company’s chances of winning future contracts in the region and ultimately contributing to its long-term economic success.
Improved Resilience
In Zambia, First Quantum Minerals (FQM) has invested in a renewable energy project to power its mining operations. The company has built a 130 MW solar plant, which has helped FQM to reduce its reliance on fossil fuels. This has not only improved FQM’s environmental sustainability but also increased the company’s resilience to potential disruptions from rising energy costs and supply chain risks.
What are the Key Actions Needed to Capture the Value of Scope 3 Emissions Management?
Identify and engage with key stakeholders
To manage sustainability effectively, mining firms must engage with stakeholders, including suppliers, communities, NGOs, and government agencies, to understand their priorities and align strategies accordingly. Besides addressing supply chain complexities and dependence on fossil fuels, firms can collaborate with suppliers to enhance transparency, traceability, and shift to renewable energy to reduce carbon emissions.
Set ambitious targets
Setting ambitious sustainability targets is essential for driving progress and demonstrating a commitment to sustainability. To effectively set and achieve ambitious sustainability targets, mining firms must overcome the challenges of sourcing reliable data and improving relationships with their supply chain. This may involve implementing standardized reporting requirements, leveraging technology to track emissions, and working closely with suppliers to improve data quality and transparency. Building strong relationships with suppliers and other stakeholders is also critical to ensure their support and cooperation in achieving sustainability goals.
In conclusion, reducing Scope 3 emissions is a complex challenge for mining companies in Africa, but it is a critical step towards reducing their environmental impact and driving competition in domestic supply chains. Fundamentally, it is a key opportunity for firms to gain the host of benefits of Scope 3 management; a competitive advantage, improve stakeholder relationships, reduce reputational risk and increase resilience within the sector. Mining firms can support sustainable practices and reduce climate impact by engaging with suppliers, using renewable energy, adopting circular economy strategies, creating sustainable products, and implementing sustainability programs.
Next week Henderson Risk will post a blog article on the importance of improving ESG in mining in Sub-Saharan Africa to support electric car manufacturers’ net-zero goals. As demand for minerals and metals grows exponentially with the shift to sustainable energy sources, mining firms in Sub-Saharan Africa face significant challenges. Henderson’s blog will explore the mining industry’s role in mitigating climate change and advancing sustainable practices.
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