At a time when ESG reporting is more important - and complex - than ever, new software could reduce the compliance burden on junior mining firms

Over the past decade, accompanying the growing global focus on green growth and sustainable development, mining companies have fundamentally changed the way they address Environmental Social and Governance (ESG) issues in their business models. Today ESG reporting has become a crucial part of all resource companies processes and especially those, such as battery metal companies, that are at the forefront of the green growth agenda.

But as the demand for ESG reporting has increased, so has the complexity of filing, with the number of frameworks proliferating across jurisdictions. Just as ESG reporting has become crucial to accessing capital, the challenges and cost of meeting these frameworks has spiraled for junior firms.

"ESG stemmed from the ‘60s and ‘70s with socially responsible investing and sustainable development - now it's driven by access to alternative sources of capital," says Laurie Clark, CEO of Onyen Corporation.

"The capital markets have established themselves as the driver behind the integration of ESG into mainstream business and ESG has become a fundamental factor in derisking investment decisions."

The embedding of ESG as a central aspect of mining operations has coincided with a rapid increase in the number of different international reporting standards, from eight in the year 2000 to over 30 by 2021.

Companies are increasingly required to meet global, local and sector specific regulatory frameworks and, in the wake of COP-26, two significant regulatory changes are set to have wide ramifications.

Firstly, the International Financial Reporting Standards foundation (IFRS) announced plans to create the International Sustainability Standards Board - and consolidate the Value Reporting Foundation (VRF) and Climate Disclosure Standards Boards (CDSB) standards (a CDP initiative) into accounting standards starting in 2022.

Additionally, the Securities and Exchange Commission (SEC) has created a new Climate and ESG Task Force in the Division of Enforcement that requires that any ESG related statements made in any disclosures, including marketing materials and emails, must be substantiated. This task force will have the powers to audit and enact punitive measures against firms found not to be in compliance.

"This new task force is incredibly impactful to industry. The SEC is making a critical statement on the importance of ESG disclosure and its direct impact to the investor," says Clark.

"In addition to the plethora of new standards, frameworks, legislation and regulation, the ratings agencies review outcomes of ESG reporting - an opaque process in the ESG value chain.

"A large mining company has the resources to sift through the morass, but for juniors or mid-cap firms reporting can become very onerous."

Clark, who comes from a background in capital markets building trading and securities exchange systems, founded Onyen Corporation, an ESG reporting software solution that allows companies to enter their data in a single portal and automatically completes their reporting obligations across a number of international standards, including SASB, GRI, ICMM, ISS, CDP, TCFD, IFC and UN Global Compact. By using Onyen, companies save time, cut-out costly mistakes and raise their ESG profiles with regulators and investors.

In the latest versions of the software, improved AI capacity allows for inputs to be realised in real time, allowing firms to identify variances and trends and manage their outcomes before they have to report. 

Access to day-to-day, week-byweek, or month-by-month data allows companies to be intelligent about the way they conduct business on a daily basis.                                

One such firm is Technology Minerals PLC, a UK-based battery metals firm that listed on the London Stock Exchange in November 2021. It aims to create the UK's first circular economy for battery metals, sourcing and recycling lithium, cobalt, nickel and manganese.

"With the electric vehicle (EV) revolution, demand for battery metals is expanding rapidly and the solutions for end-of-life are limited and, from an ESG perspective, recycling is absolutely critical," says Alex Stanbury, Technology Minerals' Chief Executive Officer.

The firm has its own patented recycling technology that reduces the risk of fire and explosions with the often-volatile lithium-ion battery and has established a strong logistics network connected with EV dealerships and insurance companies to source damaged or end-of life parts.

"Having Onyen helping us along the ESG journey is incredibly helpful as our aim has always been to run the business in the most ESG compliant and socially conscious way we can," says Stanbury.

"We can see our inputs in real time, enabling us to be open and transparent to the investment community whilst reducing the administrative burden on small and medium-size enterprises like us.

"Investors are increasingly getting fully behind the COP 26 agenda on climate change and are very ethical in the way they think and invest.

"Now we're listed on the LSE, it's absolutely essential that we demonstrate to the fund managers the seriousness of our approach regarding our ESG standards - which we hope makes us an easier investment proposition."

The demands of ESG reporting are likely to get tougher in the coming years. Spurred by the introduction of the famously gargantuan DoddFrank Act in the wake of the 2008 financial crisis, increased scrutiny of corporations has led to new standards for anti-money laundering legislation, rules for conflict minerals and community relations.

"We would like to see a blending or a consolidation of frameworks to create a clear set of rules by which all countries must abide," says Clark.

At the moment, the political will for such consolidation appears to be lacking and mining firms will have to persevere under the current, sprawling system of regulations. However, technological solutions such as those provided by Onyen provide a welcome simplification of the process.

"Back in the 1990s, the capital markets really came to understand the power of data and that had a massive impact on the investment community," says Clark. 

"I think the situation is similar today in the ESG space. The availability of real-time data for ESG performance metrics will be a true game-changer for mining and oil companies and, eventually, all companies.

"It is technological innovation along with the investment power of the capital markets that will drive substantive reporting that includes consistency and efficiency, much more than government policy and subsidies; and that will be the true driver of green growth."