Our senior associate in the Public Law and Regulated Markets Group, Ramiro Araya, spoke with Diario Financiero, where he referred to sustainability as an established principle and essential requirement for advancing mining projects.
It is no longer an accessory element but has become a business criterion: from agreements with communities to ESG traceability, the focus on sustainability now conditions mergers, financing, and the continuity of operations.
The latest corporate moves in the mining industry, such as the Anglo-Teck deal, or Codelco with SQM, are setting new rules of the game and serving as a barometer of what is happening: the importance of sustainability and social license to operate and move forward is coming to the fore.
The recent merger of Anglo American and Teck, which aims to create a global copper giant, seeks to leverage the technical, sustainable, and environmental protection capabilities of both companies, while Codelco and SQM took a key step in the agreement to extend the exploitation of the Atacama salt flat, after concluding the indigenous consultation and making modifications such as allocating resources for communities and local development in the sector, which shows that these aspects are equally or more relevant than others.
Reinalina Chavarri, director of the Sustainability Observatory at the University of Chile’s Faculty of Economics and Business, says that these are not random movements and that there are three areas where mining is shifting the compass.
“There is more stringent regulation; co-governance between the state and the private sector, where we can see contracts or alliances that include ESG goals, such as SQM-Codelco; the Anglo-Teck merger with assets in Chile; and the scale for financing CAPEX in water, energy, and tailings. Thirdly, there is traceability, where the license is a socio-environmental performance that is different from growth and offers opportunities to access portfolios with a better ESG profile,” says the specialist.
Chavarri adds that sustainability is no longer a soft license: ‘In lithium and copper, for example, Chile already defines contracts, partners, and permits; it influences the cost of capital and the search for permanent social acceptability. Companies that convert water, energy, tailings, and community governance into measurable operational advantages will be the ones that best capture the coming copper/lithium supercycle.’
Pamela Méndez, lead partner for climate change and sustainability services at EY Chile, points out that issues such as environmental management, social license to operate, and climate change have been among the top risks in recent years, “which demonstrates the link and importance between this industry and sustainability.”
Competition
Mergers, alliances, or joint ventures, the EY executive points out, involve significant environmental commitments to mitigate environmental impact by combining efforts, technologies, values, and knowledge of territories and communities: ‘A merger in mining undoubtedly responds to pressure from investors to improve production, but with high conditions and standards as required by national and international regulatory frameworks.’
Chavarri adds that these are regulatory market contractual structures that require results to be demonstrated: ‘This is only possible with sustainable business strategies, avoiding complementary strategies or duplication of business’. She points out that Chile competes with Australia and Canada and ‘if it does not demonstrate high environmental standards, it loses capital and market share, especially in a geopolitical or geoeconomic landscape of blocs’.
Social license is becoming an increasingly relevant factor: ‘It remains a priority on the mining industry’s agenda, as does the relationship with all stakeholders, including indigenous peoples,’ says Méndez, because it gives the business viability ‘but also confidence and transparency to the industry’.
For his part, Ramiro Araya, senior associate in the Public Law and Regulated Markets group at Albagli Zaliasnik (az), warns that it is a well-established and unavoidable principle for all stakeholders: ‘Companies are aware of their social role and have integrated it as an important part of their organizational culture; they have understood that concern for the environment and local development is an essential condition for achieving social license.‘ He says that this ‘avoids delays in the processing of permits and significantly reduces investment costs.’
Challenges
Although these issues are very much in vogue, there is still room for further progress.
Chavarri notes that while some industry players indicate that the bar for sustainability has been raised, ‘the challenge is to standardize standards and metrics because the limits of ecosystems are planetary limits, not just administrative ones, and this requires thinking about a country development strategy that ensures not only the product but also social trust and legitimacy.’
Araya indicates that it will also help if the state offers legal certainty that “allows investors to embark on large-scale projects under clear rules that efficiently reconcile economic growth, environmental preservation, and the protection of fundamental human rights.”
