This week, The World Resources Forum (WRF) and the Responsible Mining Foundation released a report collectively assessing the ESG practices of companies in the extraction sector. The Extractive Commodity Trading Report (ECT) concluded that public disclosure of such data does not harm competitiveness. As businesses continue to face disruption due to Covid-19, Ukraine war, and high-profile accusations of bribery & corruption, this report provides an important insight into current industry practices.
The Extractive Commodity Trading Report (ECT) uses publicly available data to assess 25 companies across their policies and practices concerning ESG performance – which they define as ‘Governance’ including corporate governance structures and human rights protection; ‘Environment’ including environmental protection and reporting on potential environmental damage in supply chains; and ‘Social’ including community engagement and relations.
The study found that while some companies have well-established frameworks for managing their ESG performance, there is still much room for improvement across all three categories. In particular, there was a need for increased reporting on how companies are managing human rights risks throughout their supply chains as well as improved transparency on corporate governance structures. It also found that as most of these framework changes need to come from within the company itself, there needs to be greater awareness of ESG performance management among senior executive teams.
The report also noted that despite its findings, public disclosure of such data does not necessarily lead to a loss in competitiveness or market capitalisation when compared with competitors who do not disclose such information. This is likely due to the fact that investors are increasingly taking into account ESG performance when making investment decisions and encouraging companies to improve their sustainability measures accordingly.
The Extractive Commodity Trading Report provides valuable insight into current ESG practices among companies in the extraction sector. While it has revealed ample room for improvement in terms of transparency around corporate governance structures, human rights risks management within supply chains, and environmental protection standards – it also offers some hope in finding that public disclosure of such data does not necessarily lead to decreased competitiveness or market capitalisation. With more comprehensive knowledge of industry standards now available through this report, Chief Risk Officers, Model Risk Managers & Directors can better assess where improvements could be made within their own company’s operations in order to ensure long-term success.