More mining companies are making bold commitments to decarbonize their operations to reduce business risk and help fight climate change.

The International Council on Mining and Metals (ICMM), which represents 28 mining companies and 35 commodities associations worldwide, recently committed to a goal of net-zero scope 1 and 2 greenhouse gas emissions by 2050 or sooner, in line with the ambitions of the Paris Agreement. 

As suppliers of metals and minerals critical to decarbonization and sustainable development, the industry has a responsibility to minimize its environmental footprint — and is acting. Although the speed and depth of initiatives being taken to decarbonize vary across the industry, many miners are taking immediate steps by investing in areas such as renewable energy and electrification, while also improving governance to align with global climate risk reporting standards.

Miners are under increasing pressure from various stakeholders to reduce emissions and address climate risk, which can have a negative financial impact on the company. The financial risk comes from the physical effects of climate change, such as extreme weather events, and the risks of transitioning to a low-carbon economy.

It’s important to recognize the opportunities for miners with decarbonization, given the rapidly rising demand for metals such as copper, cobalt, aluminum, nickel and rare earths required to help power the low-carbon future.

Mining companies can successfully decarbonize through a combination of solutions such as renewables, corporate power purchase agreements (PPAs), electrification, carbon offsetting, data management and ensuring data integrity in environmental, social and governance (ESG) reporting.

More miners are investing in renewable energy solutions to help decarbonize their operational emissions and lower current and future carbon-price exposure. Wind, solar and other renewables are also increasingly viable options for miners to increase their energy independence and control their own power supplies.

There’s also potential for miners to use excess land to develop renewables, particularly in remote locations where energy supply is a challenge. Another opportunity for miners is bundling renewables with energy storage solutions to balance supply and demand. Any excess power generated by renewables can also be sold to utility companies to help generate revenues and offset costs.

Many miners are also entering into corporate PPAs, which are long-term power contracts that provide renewable energy certificates, physical electricity, or both from a specific project. The other opportunity with PPAs is off site generation and virtual power purchase agreements.

PPAs deliver long-term certainty, which can be a competitive advantage for miners in the future and drive up their valuation in the eyes of investors. Still, miners must consider accounting, tax, and legal issues around PPAs, which also vary from one jurisdiction to the next.

More miners are also investing in the electrification of their vehicle fleets to reduce emissions, reduce costs and improve the health and safety of workers.

While location and life-of-mine and design considerations will need to be factored into the decision to go electric, there is a cost-reduction potential for moving to battery electric vehicles. Research shows the total cost of ownership of a battery electric vehicle for mining could be around 15% to 20% lower than diesel trucks due to lower maintenance and fuel costs.¹

Many miners are navigating the rapidly changing landscape for carbon offset targets, especially over the past year as the long-disaggregated market becomes more standardized, regulated and transparent.

There are concerns about ‘greenwashing’ with the use of carbon offsets, which miners will need to consider. Still, offsets are expected to become an important part of long-term net-zero and decarbonization targets, particularly with hard-to-abate emissions.

Data management and integrity in ESG reporting are increasingly critical in the mining industry as investors and governments pay closer attention to climate change risk. There will be even greater demand for data as the reporting environment evolves. Miners will need to continuously improve the quality of the data to keep up with the evolving standards, including tracing its origin and making it available in real-time.

We are going to see a lot of change in this industry as global organizations and financial markets see decarbonization as both a requirement and a responsibility for mining organizations.

Leading companies are taking steps to decarbonize through a combination of solutions. Companies will also need to continuously improve their ESG performance to reduce risk and maintain their social licence to operate, particularly as stakeholders — from investors to governments to communities and consumers — keep a close watch on the industry’s activities moving forward.

Watch KPMG’s panel on mining carbon reduction strategies on KPMG’s 17th annual mining executive and director forum webcast