Double Materiality for the Mining Industry – Part 1

September 19, 2023

The materiality of environment, social and governance (ESG) issues plays a key role in business strategy development. Recently, the concept of double materiality has emerged, which considers that the there are two distinct types of materiality – impacts “on the business” and “of the business.” The table and graphic below (and above) demonstrate the concept and the most common terminology associated with double materiality.  For industries like mining the notion of double materiality is not new. Mining companies have long understood that issues impacting the environment and society can significantly affect operational (and therefore financial) performance.

Outward
Impact materiality
Impact of the business on the environment/society
Inward
Financial materiality
Impact of environment/society on the business

 

Outward Impacts

Consider the environmental impacts of mining operations. Mining can lead to substantial environmental degradation, such as water contamination, biodiversity loss, and carbon emissions.

Similarly, the social impacts of mining, whether negative or positive, can be considerable, ranging from community displacement, the introduction of issues such a alcoholism and domestic abuse – to local job creation, infrastructure development, and more.

These are clearly “outward” impacts requiring active management. 

From Outward to Inward

In both examples, if these “outward” impacts are not managed effectively, they can manifest in the form of community protests, leading to project approval delays, operational disruptions, reputational damage, loss of investor confidence or increased challenges in accessing capital and other resources – all of which have significant financial impacts, ie “inward” impacts.

While “inward” and “outward” might be new for many industries, mining has been managing the concept for many years. You could say that impact and financial materiality, and therefore “double materiality” has always been at the core of mining sustainability strategies.

The difference is in how the issues are prioritized!   (More on this in Part 2)