As the world grows increasingly concerned by the ongoing effects of climate change, greater scrutiny is being placed on the industries regarded as key contributors, the mining sector included. In particular, industrial greenhouse gas emissions have drawn considerable ire over the past few years, which has led to mining operators taking concrete steps to address their Scope 1 and 2 greenhouse gas (GHG) emissions, which cover direct emissions from operations and indirect emissions from power generation. Major mining companies, including some of the biggest names in the sector, have committed to net zero by 2050 or sooner. However, challenges still abound over how to tackle Scope 3, which encompasses all other indirect emissions across the value chain.
For large iron ore producers such as Rio Tinto and BHP, the majority of their Scope 3 emissions come from steel mills in China and East Asia that use metallurgical coal. At the other end of the spectrum, mining businesses also generate Scope 3 emissions indirectly when they send their employees on commercial flights. The use of sold products is category 11 of Scope 3 and typically accounts for over 95% of total GHG emissions associated with coal mining companies. Within mining, Scope 1 and 2 emissions account for 4–7% of global greenhouse gas emissions. However, according to estimates from McKinsey & Company, this figure rises to 28% of global emissions when accounting for Scope 3.
Unfortunately, as it is difficult to influence the actions of players across the value chain, many companies in the mining industry are yet to reach the point of setting targets for Scope 3 emissions, let alone getting close to reaching them. It’s a good thing, then, that the International Council on Mining and Metals (ICMM) is on the case. Member companies of the industry body, which is dedicated to the sustainable development of the mining sector, have committed to creating credible Scope 3 targets – if not by the end of 2023, then as soon as possible.
“When we say credible, it means credible from a technical point of view – so we’re measuring and reporting the things we should measure and report – but also credible in that it’s using a methodology that critical stakeholders, such as regulators, financial backers and all the stakeholders in the value chain buying the minerals and metals, can use and recognise as valid,” explains Christian Spano, director of innovation at the ICMM.
“The idea is that our guidance for members in developing these targets is robust and not simply aspirational. It needs to inform net-zero targets and align to the Paris Agreement, and be founded on credible measurement and technical work agreed by our 27 members and the specialist stakeholders we have engaged on this topic.”
A deep process of questioning
While Spano is keen to stress that this guidance is still very much ‘in the kitchen’, the organisation is taking concrete steps to build on best practice where it exists, reviewing existing methodologies in hard-to-abate sectors to see how companies have been measuring their Scope 3 emissions and what the rest of the industry can learn from them.
“We’re looking at how they define criticality, how they define the boundaries across the value chain, how they source and manage the data, what level of granularity they apply to the 15 categories of Scope 3 emissions, including purchased goods and services, transportation and use of sold products,” Spano explains.
In addition, the ICMM is not only trying to understand where there are differences between methodologies, but why. For example, why do some companies choose an emission factor that is updated yearly and others think it’s fine to do it less frequently? “We’re asking several times ‘why?’,” Spano says. “We’re not just thinking, if these five companies do it this way, let’s do it this way – we’re going into a deep process of questioning.”
This process is being made slightly easier by the fact that the leading companies in the industry are being transparent in their reporting. “They not only say what they are doing in detail but also where the challenges are, where double counting may happen across the value chain, how they are addressing that double counting, and where they may still be double counting,” Spano says.
The ICMM is also going beyond its mining industry members to look at best practices in other industries such as oil and gas, and cement and chemicals, which have already developed Scope 3 emissions recommendations. “We are trying to learn why they have chosen that route, what is informing their decisions and how, and whether those recommendations are working from a technical point of view,” Spano notes.
Driving new standards
Collaboration across the entire value chain of any industry is the only way to drive it towards a new standard – whatever, in the mining industry’s case, that standard turns out to be. As Spano explains, examples from industries such as automotives and lighting demonstrate why this is such a vital consideration.
“It was a lightbulb moment when Philips came up with the revolutionary idea of not selling a lightbulb but selling light,” he recalls. “When the industry realised they could sell outcomes rather than products, that quickly led to another realisation – that you need to engage with the whole value chain, from regulators to financers to consumers, to make such a shift.”
By this, Spano is referring to Philips Lighting’s (since rebranded as Signify) decision to offer ‘lighting- as-a-service’ (LaaS) to its commercial and public sector customers. Under such a contract, the company installs, operates and maintains the lighting systems while the customers pay a monthly service fee.
Previously, everything had been designed with a linear business model in mind. “If people in those industries and across industries hadn’t got together to understand the minimum conditions that they all needed to agree on for the new business model to reach scale, it would always have remained niche,” Spano says.
Similarly, when Tesla started talking about electric vehicles 20 years ago, there were questions about range and charging infrastructure. Even earlier, thousands of kilometres of roads were required to make fuel cars a more useful alternative to good old-fashioned equine horsepower. “All of these concepts required engagement with various companies and governments to drive to a new standard,” Spano stresses.
ICMM’s collaborative initiative on ‘Cleaner, Safer Vehicles’ provides an example from within the mining industry itself. A unique supply chain collaboration between the 27 ICMM member companies and 19 original equipment manufacturers (OEMs), it aims to eliminate collision-related fatalities, which account for 30% of mining-related fatalities, and reduce emissions in line with Scope 1 and 2 targets. According to ICMM, the project represents a critical mass in terms of market pull.
One of the initiative’s priorities is improving the safety levels of the gigantic haul trucks used to transport ore. “At present, the way the roads have been designed, the way the employees are trained to drive, the way the trucks have been designed – all of this has been designed for the existing system,” Spano says. “We’re moving towards a more automated system that requires processes, technologies and individuals to behave in a way that doesn’t fit the current model. Collaboration is required to understand what the new solutions look like, to open the space for a new market and to define how companies compete.”
Similarly, to reduce the emissions from haul trucks, many different stakeholders will be involved. “If we don’t agree on a minimum base of external conditions, such as regulation and financing, these changes will take longer,” Spano says.
Scope 3 emissions and corporate strategy
One of the biggest challenges of setting credible targets for Scope 3 emissions is that action depends on the combined efforts of producers, suppliers and customers, with some commodities facing greater technological and collaborative barriers than others. While this means that setting targets that work across the board is difficult, Spano says it’s crucial not to get distracted from the ICMM’s overall goal.
“‘Should we compare [the actions of stakeholders to tackle Scope 3 emissions]?’ we’re asking ourselves,” he says. “And if we compare, how far should we compare? This is all about reducing emissions on a level that is well below 2°C and ideally within the 1.5°C the Paris Agreement is aiming for. It’s important to be able to compare, but what we should really focus on is helping companies and industries to understand their footprint, for that footprint to be measured with methodologies that are credible and robust, and for that to drive action in an increasingly accelerated and committed way.”
The encouraging news is that commitment is being seen across the board, right up to the highest echelons of leadership. “Compared to the kind of response you would have received from many industries five years ago, things have changed a lot,” Spano smiles.
“We’re convening CEOs around the technical elements of Scope 3 – it’s very, very exciting.” This is all encouraging to hear, as it will take the combined efforts of all stakeholders across the mining industry if the effects of Scope 3 emissions are to be addressed in a way that matters.
This article first appeared in World Mining Frontiers magazine.
