Ing. Bernhard Geißler, BSc BSc MSc
Sustainable Phosphorus Mining
Actors, Sustainability Standards and Performance Evaluation of a Business Case
Master’s Thesis
to be awarded the degree of Master of Science in Environmental Systems Sciences: Sustainability Management at the University of Graz, Austria
Supervisor: Gerald Steiner, Assoc. Univ. Prof. Mag. Dr.
Institute for Systems Science, Innovation & Sustainability Research (ISIS)
Graz, September 2014 Authors’ Declaration
Unless otherwise indicated in the text or in the references, or acknowledged above, this thesis is entirely the product of my own scholarly work. Any inaccuracies of facts or faults in reasoning are my own and accordingly I take full responsibility for them. This thesis has not been submitted either in whole or in part, for a degree at this or any other university or institution. This is to certify that the printed version is equivalent to the submitted electronic one.
Graz, September 2014
i List of Contents
Introduction ...... 1 Essentials on Phosphorus, Fertilizer and Food Security ...... 5 Phosphorus ...... 5 Chemical Attributes ...... 7 Global Phosphorus Cycle ...... 8 Reserves, Resources, Market and Peak Phosphorus ...... 10 Extraction, Mining and Processing ...... 14 Fields of Application ...... 15 Alternatives and Recycling ...... 16 Fertilizers based on Phosphorus ...... 17 Alternatives to phosphate-based Fertilizers ...... 19 Global Food Security ...... 20 Status Quo ...... 20 Outlook ...... 21 Sustainability Aspects and Performance in Mining...... 23 Sustainability and Mining ...... 24 Controversy: Sustainability / Extraction ...... 24 Need for Sustainable Mining...... 25 Considerable Dimensions ...... 26 Potential Role Model: Gold Mining ...... 28 History of Developments ...... 30 Sustainability Frameworks and Mining ...... 30 Sustainability Reporting ...... 32 Existing Standards, Frameworks, Initiatives and Indicator Sets ... 32 Applied Criteria ...... 38 Scientific Limitations ...... 39 Results ...... 39 Selected Standards, Frameworks, Initiatives and Indicator Sets ... 44
ii Global Reporting Initiative ...... 44 International Council on Mining and Metals ...... 48 United Nations Global Compact ...... 50 Corporate Performance Measurement ...... 52 Morgan Stanley Capital International (MSCI) ...... 55 Bloomberg – ESG Performance Measurement ...... 57 Further Institutions ...... 58 Global Phosphorus Market ...... 59 Phosphate and Chemical Fertilizer Markets...... 59 Phosphate Rock Market ...... 59 Phosphate-based chemical Fertilizer Market ...... 63 Main Actors in the Phosphorus Business ...... 68 OCP S.A...... 70 The Mosaic Company ...... 71 Yuntianhua Group Co. Ltd ...... 72 Vale S.A...... 72 PhosAgro ...... 73 PotashCorp ...... 73 Jordan Phosphate Mines Company...... 74 Wengfu Group Co. Ltd ...... 74 Guizhou Kalin Group Co., Ltd...... 75 Ma’aden ...... 75 Sustainability Standards and Indicator Sets in Practice ...... 76 Business Case: PotashCorp ...... 78 Corporate Performance ...... 79 Economic Performance ...... 79 Environmental Performance ...... 79 Social Performance ...... 80 Methodology ...... 81 Correlation Analysis ...... 81 Kolmogorov-Smirnov Goodness of Fit Test ...... 82
iii Student’s t-Test ...... 83 Data and Results ...... 84 Input ...... 85 K-S Goodness of Fit Test ...... 86 Correlation Matrix ...... 86 Discussion of Results ...... 88 Correlations between Economic and Environmental respectively Social Indicators ...... 88 Further Correlations (Significance 0.01) ...... 89 Further Correlations (Significance 0.05) ...... 90 Conclusion ...... 92
iv List of Tables
Table 2-1: Estimated Reserves for World's Top Ten ...... 11
Table 3-1: Standards Map Search Combined Search Results ...... 37
Table 3-2: Evaluation Results ...... 43
Table 3-3: MMSS GRI 3.0 ...... 47
Table 3-4: The 10 Principles of the ICMM ...... 49
Table 3-4: 10 Principles of the UNGC ...... 51
Table 4-1: Produced PR by Country ...... 61
Table 4-2: Production, Trade and Consumption of PR by Region ...... 62
Table 4-3: Nutrients as % of the Product ...... 64
Table 4-4: Production, Exports, Imports and Consumption by Region ...... 66
Table 4-5: Applied Standards and Frameworks ...... 76
Table 5-1: Table of Input Data ...... 86
Table 5-2: Results of K-S Test ...... 86
Table 5-3: Correlations Matrix ...... 87
v List of Figures
Figure 2-1: The Phosphorus Cycle ...... 9
Figure 2-2: World PR Reserves (IFDC) ...... 10
Figure 2-3: Commodity Price in US Dollar per ton of PR ...... 13
Figure 2-4: Flowsheet of Wet Manufacturing Process P Acid ...... 18
Figure 3-1: G4 Categories and Aspects within the Guidelines ...... 45
Figure 4-1: Map of PR Producing Countries...... 60
Figure 4-2: Production, Exports, Imports and Consumption by Region ..... 62
Figure 4-3: World Bank Real Commodity ...... 65
Figure 4-4: Production, Trade and Consumption by Region and Type ...... 67
Figure 4-5: Volume of Produced PR by Corporation ...... 70
vi List of Abbreviations
ARM Alliance of Responsible Mining
ASM Artisanal and Small-scale Miners
CEO Chief Executive Officer
CERES Coalition for Environmentally Responsible Economics
DAP Diammonium Phosphate
FAO Food and Agriculture Organization
FLO Fairtrade Labelling Organization
GHG Greenhouse Gas
GJ Gigajoule
Global TraPs Global Transdisciplinary Processes for Sustainable Phosphorus Management
GMI Global Mining Initiative
GPRI Global Phosphorus Research Initiative
GRI Global Reporting Initiative
ICMM International Council of Mining and Metals
IFDC International Fertilizer Development Center
IFIA International Fertilizer Industry Association
ITC International Trade Center
IVA Intangible Value Assessment
JPMC Jordan Phosphate Mines Company
K Potash
KPI Key Performance Indicator
vii K-S Kolmogorov – Smirnov
MAP mono-ammonium phosphate
MMSD Mining and Minerals and Sustainable Development
MSCI Morgan Stanley Capital International
N Nitrogen
NGO non-governmental organization
OCP Office Chérifien des Phosphates
P Phosphorus
PR Phosphate Rock
SPSS Statistical Package for the Social Science
TJ Terajoule
TSM Towards Sustainable Mining
TSP Triple Superphosphate
UNEP United Nations Environment Program
UK United Kingdom
UNGC United Nations Global Compact
US United States of America
USGS United States Geological Survey
WHO World Health Organization
WMI Whitehouse Mining Initiative
viii Introduction
“We may be able to substitute nuclear power for coal, and plastics for wood, and yeast for meat, and friendliness for isolation—but for phosphorus there is neither substitute nor replacement.” (Asimov, 1974, p. 164)
This quote underlines the essential prominence of phosphorus for the origin and further evolution of all life on earth.
To address the issue of effective and efficient use of phosphorus in regard to the global food security the Global TraPs (“Transdisciplinary Processes for Sustainable Phosphorus Management”) Project was initiated in 2010 and is under the co-leadership by Swiss Professor Roland W. Scholz and the CEO of International Fertilizer Development Center Dr. Amit H. Roy. This high-level multi-stakeholder approach involves more than 125 experts all over the globe from science as well as practice and targets the overall global phosphorus supply and demand chain, from exploration to mining to processing and further on to use, recycling and financial aspects (Eilittä, Scholz, Roy, Ulrich, & Hellums, 2014). This master’s thesis is part of the project and contributes to the phase of phosphorus mining, by evaluating sustainability standards and the correlations of sustainability performances.
As already stated, phosphorus is essential for life and health of human beings, animals and plants (Newton, 2010). More than 80% of today’s produced phosphate rock (PR) is used for agriculture purposes in form of chemical fertilizers (Scholz, Roy, & Hellums, 2014). The latter account directly for approximately 25% of world’s total crop yield. Over the last
1 decades the use of fertilizers has increased vastly and is estimated to continue enhanced in the future (Enger & Smith, 2010). As a result of an increasing demand in fertilizers the demand for phosphate rock will rise as well. The majority of approximately 85% of today’s phosphate rock is minded from sedimentary depots with the United States, China and Morocco, including the Western Sahara, as major producers (de Ridder, de Jong, Polchar, & Lingemann, 2012). Contemplations to a possible shortage or even fully depletion in the foreseeable future depend on various factors like market prices, reprocessing, technical advances in extraction, recycling, mining and processing. Considering the recent facts from a systemic perspective, a possible shortage in phosphate rock may cause a scarcity in fertilizers which in turn results in a threat to the global food security. While the peak resource theory which is a static approach based on estimated reserves, calculates peak phosphorus between the years of 2051 and 2092 (de Ridder, de Jong, Polchar, & Lingemann, 2012) dynamic approaches like the one by Scholz & Wellmer (2013) argue that due to dynamic boundaries between reserves, resources and unknown geopotential today’s available resources may become tomorrow’s reserves and vice versa and therefore a depletion can’t be exactly determined at this point.
One of the main issues of this master’s thesis is to determine sustainability activities and resulting performances along the phosphorus value chain with a focus on the mining process. Although sustainability in context of resource extraction is seen as a paradox for some scientific communities in regard to the Brundtland Report, many mining companies acknowledged the challenges and stated their commitment to the values of sustainability (Botin & Palacios, 2010). Therefore, in order to support companies, a vast amount of standards, frameworks, initiatives and indicator sets from various organizations were developed over the past years.
2 As a result the commitment to sustainability requires serious amounts of capital in many cases to perform related investments. Beside the intrinsic motivation the rising external market forces towards sustainable developments are increasingly important in relation to economic returns and an increased stakeholder value (Botin & Palacios, 2010).
The central research questions which are addressed by this master’s thesis are:
“Which existing standards, frameworks, initiatives and indicator sets are the most suitable and universally applicable for the mining industries?”
“Who are the main actors within the phosphate mining business and which standards, frameworks, initiatives and indicator sets do they follow respectively apply?”
“Is there correlation between sustainability performance and economic performance in the context of a specific business case of a phosphate rock mining firm?”
Although there is already literature available regarding the research questions of correlations and standards, almost none addresses the specific field of phosphorus mining.
The motivation to address the issues of sustainable phosphorus mining derives from the significance of the topic in the real world in combination with the increasing importance of phosphorus for the future regarding agricultural developments and global food security. Beside the personal interests, it is above all the chance to contribute to the work of a project like Global TraPs which motivates the author personally and results in this master’s thesis.
3 The following paragraphs describe briefly the content within the single chapters and thereby present a short overview on the thesis.
The second chapter Essentials on Phosphorus, Fertilizer and Food Security provides a theoretical basis on the complex interrelations in the field of phosphorus and phosphates.
The central issues of sustainable mining and sustainability performance are introduced extensively in the third chapter. Following the introduction standards, initiatives, frameworks and indicator sets are identified and discussed. The results of the evaluation are presented afterwards in brief. The chapter is continued and concluded with insights on sustainability performance measurement.
Chapter four explores the overall global phosphate rock and phosphate fertilizer market. In extend to the introduction of the market in chapter 2 volumes, actors, imports and exports are analyzed in greater details. The chapter concludes with an overview on the application of the identified standards by the main actors.
The final chapter analysis a business case on one of the leading producers of phosphate rock and phosphate-based fertilizers, namely the Canada-based PotashCorp. The economic and sustainability performance measurement is followed by quantitative analysis regarding the correlation of sustainability performance and economic performance.1
______1 This introduction in this thesis is widely based on the corresponding exposé submitted in May 2014 at the University of Graz for the master’s seminar.
4 Essentials on Phosphorus, Fertilizer and Food Security
This chapter begins with a brief introduction to the field of phosphorus. A compact outline of the history of phosphorus is followed by a description of its chemical attributes as well as an introduction to the phosphorus cycle. The sub-chapters Reserves, Resources, Market and Peak Phosphorus and Extraction, Mining and Processing provide more technical and economic insights into the topic. The introduction of phosphorus is concluded with its fields of application.
The main field of application is addressed in the following sub- chapter, namely Fertilizer and Alternatives. It provides an understanding of the need for fertilizers, especially phosphate-based fertilizers and answers the question if phosphorus may be substituted.
The previous topics lead to the concluding sub-chapter, which provides insights on the status quo as well as an outlook on further developments.
Phosphorus
“Life can multiply until all the phosphorus has gone and then there is an inexorable halt which nothing can prevent” (Asimov, 1974, p. 165)
The term phosphorus derives from its earliest usage as a lighting element. While the first part ‘phos’ can be translated with “to show or to bring to light” the second part ‘phoros’ implies “bearer”. The element was
5 rediscovered in the later 17th century by the alchemist Henning Brand (Scholz, Roy, & Hellums, 2014).
At the time of rediscovery the only known source of phosphorus was urine, approximately 100 years later it was discovered in animal bones and other animal parts. The first phosphate rock mines originated in the 1860s and 1870s in Florida and South Carolina. Commercial interest in phosphorus came up in the 19th century due questionable medical usage for phosphate acid and large-scale match production. The latter resulted in many diseases, mainly in the producing countries, since excessive exposure to white phosphorus can lead among other ailments to “phossy jaw”, a variant of bone cancer. While, although unknowingly, the use of phosphorus in agriculture started at the Roman Empire in the first century, it was not before 1804 when Théodore de Sassure stated that “we had no means to believe that plants can exist without phosphorus”. Around this time the first observation was followed and proven by several experiments mainly in the UK which led to the first fertilizers that were supported by scientifically research (Scholz, Roy, & Hellums, 2014).
Beside of the main usage in agriculture, phosphorus was and is still used in military applications such as artillery shells, tracers, grenades or fire bombings. The life-destroying attribute of phosphorus led to the epithet “the devils element” (Ashley, Cordell, & Mavinic, 2011).
The next section is briefly addressing important definitions, the chemical attributes and the compounds of the most important forms of phosphorus such as white and black phosphorus.
6 Chemical Attributes
First of all it is important to distinguish between phosphorus, phosphates and phosphate rock. The difference between phosphorus and phosphates lays in their chemical composition. While the former is a single element the latter are compounds were phosphorus atoms are bonded with oxygen. Phosphate rock consists of phosphate, which deposits can differ in grade and quality. The grade refers to P2O5 (phosphorus pentoxide) concentration of the rock. Whereby only grades at and above 28% can be processed to fertilizers without further processing to increase the concentration (de Ridder, de Jong, Polchar, & Lingemann, 2012).
Phosphorus exists in at least three allotropic forms that imply different physical and chemical properties. Those three forms are named regarding their colors: white phosphorus also known as yellow phosphorus, red phosphorus and black as well called violet phosphorus. White phosphorus is a waxy, transparent solid that is highly reactive and combines easily with oxygen resulting in spontaneous fire. The melting respectively boiling point lays at 44.1°C respectively 280°C. While heated at a temperature of 240°C and combined with a catalyst, white phosphorus results in red phosphorus. Whereas extreme pressure applied to white phosphorus, leads to black phosphorus. The latter conducts electric current despite of being a non-metal. Only one stable isotope, phosphorus-31, exists in nature. Beside of phosphorus-31 currently seventeen radioactive isotopes are known. Radioactive isotopes break apart once very small particles are fired at atoms resulting in the release of radiation. For example phosphorus-32 is a radioactive isotope which can be useful especially in medical studies like the determination of the blood amount in a human body or the presence of tumors in various body parts (Newton, 2010).
7 As mentioned in this sub-chapter’s introduction, despite of being essential for the health and life of human beings, animals and plants the elemental phosphorus itself is extremely dangerous. While red and black phosphorus might be considered as being relatively safe, white phosphorus can lead to damages to liver, stomach, intestines and the blood flow system and even death at amounts of 50 to 100 milligrams (Newton, 2010).
The next section provides a compact view on the global phosphorus circle in the past and present.
Global Phosphorus Cycle
In the context of the pre-human era the main sources of phosphorus for living organism were sedimentary rocks. Phosphorus has no stable atmospheric gas phases unlike nitrogen or carbon. Therefore, the transport is limited to aqueous transfer. Weathering releases phosphorus due to soil water which transports the phosphorus to the absorbing plants. The transport from land to sea via rivers that carry riverine phosphorus in the two main forms particulate and dissolved into the oceans is called runoff. Similar to the mainland situation phosphorus is also a limiting nutrient for biological productivity in the ocean. The net result of so-called mineral trapping of reactive phosphorus leads to permanent storage in marine sediments (Filippelli, 2008).
The modern terrestrial global phosphorus cycle is dominated by human activity and agriculture. Since World War II the use of commercially available fertilizers mainly based on phosphorus, nitrogen and potassium has been increasing dramatically. Fertilizer-based food production was one key to exponential world population growth. The usage of phosphate-based fertilizers, deforestation, sewage and waste sources contribute substantially
8 to the phosphorus cycle which results in high loads, about twice of the natural value, of dissolved phosphorus in rivers. The net input of dissolved phosphorus into the oceans lays between 4 to 6 Tg/y which represents a doubling in comparison to the pre-human era and results in eutrophication in coastal areas (Filippelli, 2008).
Figure 2-1 illustrates the phosphoric cycle in a simplified schematic way.
Figure 2-1: The Phosphorus Cycle; Source: (University of Waikato, 2013)
The next section provides a more detailed view of available reserves and resources as well as the market behind them and the issue of the so-called peak phosphorus.
Reserves, Resources, Market and Peak Phosphorus
Practically all of today’s inorganic phosphorus fertilizers are produced from phosphate rock which is a naturally occurring geologic material
9 containing a relatively high concentration of phosphorus. Between 80 and 90% of the used phosphate rock have their origin in sedimentary deposits located at ancient marine continental shelf environments (Van Kauwenbergh, Steward, & Mikelsen, 2013). Figure 2-2 provides an overview on the global locations of phosphate rock depots although no assertion regarding volumes is made.
Figure 2-2: World PR Reserves (IFDC); Source: (TheCropsite, n.d.)
In order to understand the upcoming figures regarding reserves and resources it is necessary to define both terms. While reserves of phosphate rock can be economically extracted at the time, by using existing technology under environmentally and socio-economically acceptable conditions, resources of any grade are known to various levels of certainty might be produced over time in the future, as their economic viability has not been specified, yet (Scholz & Wellmer, 2013).
The data on reserves and resources vary in sources and time. Two of the leading institutions regarding data on phosphorus, namely the International Fertilizer Development Center (IFDC) and the United States
10 Geologic Survey (USGS), estimate reserves in the range of 60 to 70 billion tons and resources around 300 billion tons worldwide (Van Kauwenbergh, Steward, & Mikelsen, 2013). The volumes are reported in concentrate of phosphate rock which means upgraded ore to a marketable product with a content of typically 30% P2O5 (Edixhoven, Gupta, & Savenije, 2013), (Scholz & Wellmer, 2013). Although depots are widely spread around the globe, reserves are not. Morocco and the Western Sahara hold about 75% of the world’s reserves on phosphate rock, China follows by far with approximately 6%. The United States are estimated to hold a total of 1.4 billion tons, representing around 2% of the global reserves (Van Kauwenbergh, Steward, & Mikelsen, 2013). Table 2-1 represents the reserves of the world’s top ten holding countries and is based on the USGS Mineral Commodity Summary from 2013.
Country Reserves, 2012 World total [billion tons] [%]
Morocco and Western Sahara 50 75 China 3.7 6 Algeria 2.2 3 Syria 1.8 3 Jordan 1.5 2 South Africa 1.5 2 United States 1.4 2 Russia 1.3 2 Peru 0.82 1 Saudi Arabia 0.75 1 Other 2.268 3 World total (rounded) 67 100
Table 2-1: Estimated Reserves for World's Top Ten Source: own creation based on: (Jasinski, 2013)
Reserves in Iraq with a quantity of 5.8 billion tons have been first recorded in 2012 and might occur in different statistics. These values had been
11 adjusted due to the fact that they were initially based on a Russian classification of reserves and therefore most parts had to be classified as resources (Scholz, Roy, & Hellums, 2014). The USGS lists the reserves of Iraq currently at 0.46 billion tons (Jasinski, 2013).
In contemplation to a possible shortage in the near future the current mine production and the global market have to be taken into account. Similar to the data of resources and reserves the present data on production slightly differs, the USGS stated the global phosphate rock production at 0.198 billion tons for 2011 and estimated 0.21 billion tons for 2012 (Jasinski, 2013). In 2011 the major producers were the United States, China and Morocco, including the Western Sahara. Combined they were accounted for more than two-thirds of the global production. Due to the globally imbalanced occurrence of deposits, major amounts are transported and result in an on- going import and export of phosphate rock. The major regions in terms of phosphate rock exports are Africa and West Asia with shares of 53.65% and 27.7%. While during 1999 and 2010 Eastern Europe and Central Asia halved their exports and East Asia reduced them by 30%, the share of African phosphate exports remained constant at 50%. The EU reduced their imports by 30% between 1999 and 2010 whereas South Asia doubled their amount of imported phosphate rock. However, Western Europe still remains beside South and East Asia among the leading phosphate rock importers. (de Ridder, de Jong, Polchar, & Lingemann, 2012).
The high import rates especially for countries and regions without reserves result in vast dependencies. Particularly the quite volatile price for phosphate rock over the last years represents a risk for whole states as well as for small-scale farmers. After the spike during the word financial crisis in 2008 prices for phosphate rock began to rise again. Although experts like the government of Morocco predicted prices to remain at their higher levels of
12 2011 and 2012 (de Ridder, de Jong, Polchar, & Lingemann, 2012) the price for “Phosphate rock (Morocco), 70% BPL, contract, f.a.s. Casablanca” has dropped more than 50% since then, which is also illustrated by Figure 2-3.
Figure 2-3: Commodity Price in US Dollar per ton of PR; Source: (Index Mundi, 2014)
The already mentioned price-spike in 2008 triggered increased concerns of the depletion timeline of phosphate rock reserves. The peak resource theory claims that a critical period, the peak in the production of the commodity will occur long before the reserve is theoretically fully depleted (Cordell & White, 2011). Peak phosphorus is a static approach to estimate the certain point in time were the world production of phosphorus will reach its peak and slowly decrease regardless of the growing demand. The Global Phosphorus Research Initiative (GPRI) calculated in 2009 that peak phosphorus will occur around the year 2033, with a fully depletion following in further 50 to 100 years. Calculations of peak phosphorus are always based on estimated reserves. Therefore, after the re-estimation of reserves by the USGS in 2011 the peak had to be adjusted to the years 2051 and 2092 with a mean of 2070 (de Ridder, de Jong, Polchar, & Lingemann, 2012). This static approach faces a lot of criticism. Among others Scholz and Wellmer identified a dynamic perspective on reserves as far more suitable. Dynamic boundaries between reserves, resources and currently unknown geopotential (potential resources) constantly change over time. Today’s available
13 resources may become tomorrow’s reserves and today’s reserves may become resources in tomorrow (Scholz & Wellmer, 2013).
The point in time were phosphorus may be fully depleted will also depend on factors like reprocessing, technical advances in extraction, mining and processing which are addressed by the next section.
Extraction, Mining and Processing
As introduced in the previous section the distinction between reserves and resources follows from the economic feasibility. Beside of other aspects like location or ore characteristics grade affects the economic value of phosphate rock. While beneficiated phosphate rock with a grade above 34%
P2O5, is considered as high-grade, a grade below 30% is regarded as low- grade. Under the circumstance that the phosphate content can easily be separated, a medium-grade concentration can be produced from low-grade ore at acceptable costs. Beside of the grade the purity of the phosphate rock is of greater concern for processing options. If impurities exist, problems like improperly drying of wet sized beneficiated ore may occur. Especially the widely used wet process for the production of phosphoric acid requires low impurities. Phosphate rock used for other fertilizer processes may permit higher impurities. During processing common potentially hazardous elements including, arsenic, cadmium, chromium, lead, selenium, mercury, uranium and vanadium are associated with phosphate rock (Scholz, Roy, & Hellums, 2014).
The majority of approximately 85% of the phosphate ore is mined from sedimentary depots. The whole process of concentration, also known as beneficiation, includes several steps which will be covered later in this sub-
14 chapter. The resulting phosphate rock concentrate is either used directly, further processed or exported and sold (Scholz, Roy, & Hellums, 2014).
The next section provides insights into the fields of application for the extracted and processed phosphate rock concentrate.
Fields of Application
More than 80% of the mined phosphate rock is processed further to soluble fertilizers for plant nutrition. Therefore, the insoluble phosphate rock is treated with strong acid for two main reasons. The former is to dissolve the raw material and the latter is to form a water-soluble compound which can be absorbed by plants from the soil. The chemistry of phosphate-based fertilizers is one of the most studied topics in soil and plant nutrition. While insufficient amounts of phosphorus fertilizer may lead to limitations in plant growth, overuse may result in economic inefficiencies and other implications (Scholz, Roy, & Hellums, 2014).
Forecasts indicate that the amount of phosphorus used outside the fertilizer sector is decreasing. One reason might be found in the fact that for many of these applications alternative chemo-technical solutions have been introduced. The high flammable and self-ignite properties of phosphorus in its elementary form are the base for the use as additives in napalm and as a component of incendiary ammunition and fireworks. Phosphorus can also be used to produce smoke screens and tracer bullets (Butusov & Jernelöv, 2013).
Organic phosphorus compounds can be used in nerve gases such as sarin or tabun, as well as, in insecticides to treat worms and lice. Industrial use is found in fire-resistant hydraulic fluids, coolants and lubricants. Calcium salts of phosphoric acids are also used as baking powder, in toothpaste and as food and feed additive (Butusov & Jernelöv, 2013).
15 While the use of phosphorus in the metallurgy process still takes place, the use as detergents for the purpose of water softening is permanently reduced and substituted to meet regulations on wastewater pollution. Since, phosphate is also a strong complexing agent for uranium it is used industrially to extract uranium from used nuclear fuel. Different types of phosphates are widely used in the food industry for dough softening, meat processing and for the stabilization of milk products (Butusov & Jernelöv, 2013).
Although there are a lot of different fields of application, the main purpose remains as fertilizer in agriculture. Therefore the next sub-chapter addresses the latter and responds to the question of alternatives.
Fertilizer and Alternatives
Approximately 25% of the world’s crop yield can directly be attributed to the use of chemical fertilizers. Over the last few decades the use of fertilizers has increased vastly and is estimated to continue enhanced in the future. The major purpose of fertilizers is to replace soil nutrients which were removed by plants. While some building blocks of plants, such as carbon, hydrogen and oxygen are mostly replaced naturally, others require human intervention (Enger & Smith, 2010).
The three primary soil nutrients which are often short of supply are phosphorus, nitrogen and potassium compounds. It is of greater importance to replace those three compounds, often referred to as macronutrients, by chemical fertilizers, which are mainly based on the same elements. When the crop is harvested, these chemical elements are part of the plant and therefore, although they originated from the soil, removed from the field. Beside of the macronutrients, other additional elements in extremely small amounts are necessary. Examples for the so-called micronutrients are zinc, boron and
16 manganese. Following example shall illustrate the difference between macro- and micronutrients. The harvest of one ton of potatoes removes 10 kilograms of the macronutrient nitrogen, but only 13 grams of the micronutrient boron (Enger & Smith, 2010).
It is important to add that chemical fertilizers replace inorganic nutrients, but they are not able to replace soil organic matter. The latter is significant for the reason of modifying soil structure, prevention of compaction and maintenance of the pore space. As a further consequence soil organic matter influences the water movements through the soil and the dissolution of nutrients (Enger & Smith, 2010).
The next section provides a detailed insight on phosphate-based fertilizers.
Fertilizers based on Phosphorus
Phosphatic, also known as phosphate-based, fertilizers contain phosphorus. Most of them are compounds of phosphoric acid and calcium. Several terms are used to describe the phosphorus content in fertilizers, water- soluble, citric acid-soluble and citric acid-insoluble. The application of the different forms mainly depends on the soil condition. While water-soluble phosphoric acid gets absorbed quickly by plants in alkaline or neutral soils it reacts with soil iron and aluminum in acidic soils and becomes unavailable to plants. Basic slag, dicalcium phosphate, rhenania phosphate and raw and steamed bone meal are a citric acid-soluble form of phosphoric acid and they are suitable to acidic soils. For strongly acidic soil, especially the insoluble form of phosphoric acid, which is found in phosphate rock, raw meal and steamed bone is very effective. Phosphatic based fertilizers can basically be divided into two groups, namely straight phosphate-based fertilizer and
17 compound phosphatic fertilizer. While the former supplies mainly phosphorus, the latter supplies nitrogen, and or potassium along with phosphorus (Gowariker, Krishnamurthy, Gowariker, Dhanorkar, & Paranjape, 2009).
Phosphoric acid, also known as orthophosphoric acid, is the most significant source of phosphate fertilizers and can chemically be represented by H3PO4. The most common process to produce phosphoric acid is the wet process. Figure 2-4 illustrates a simplified flowsheet of the process (Gowariker, Krishnamurthy, Gowariker, Dhanorkar, & Paranjape, 2009).
wet process benefication and phosphate rock reactor acid grinding 28-30% P2O5
sulphur concentrator
air sulphuric acid wet process acid 40, 54 or 72% P O water 2 5
Figure 2-4: Flowsheet of Wet Manufacturing Process of P Acid; Source: own creation based on: (Gowariker, Krishnamurthy, Gowariker, Dhanorkar, & Paranjape, 2009)
The process requires the phosphate rock to be ground. Therefore, wet- and dry grinding can take place. While the wet form uses about 30 to 40% less energy and avoids atmospheric pollution by dust, it requires serious amounts of water including the following necessity for waste water recycling. The sulphuric acid is required to form, in combination with the calcium present in the rock, calcium sulphate. The reaction between phosphate rock and the latter not only leads to maximum extraction of phosphates from the rock, it also ensures that growth of gypsum crystals is slow for an easy
18 filtration. Gypsum itself is a by-product of the process, and by itself a very valuable material in agriculture since it contains the two important nutrients sulphur and calcium. Although the resulting phosphoric acid concentration between 26 and 32% is sufficient for the production of some fertilizers, especially in the liquid fertilizer production, others require higher concentrations from 68 up to 70%. The concentration process takes place with steam in heat exchangers under vacuum (Gowariker, Krishnamurthy, Gowariker, Dhanorkar, & Paranjape, 2009).
The next section will discuss the issue of potential alternatives to phosphorus in agriculture.
Alternatives and Recycling
Currently there are no alternatives to phosphate rock present on the market which could replace it on any significant scale. However, small-scale trials of recovery from excreta and other waste streams exist but it will take decades to develop systems to do so on a global scale (Cordell, Drangert, & White, 2009).
The element itself has no substitute in sustaining life and production on the planet. This unavailability of substitutes leads to a threat to the global food security, (Ashley, Cordell, & Mavinic, 2011) which will be introduced in the next sub-chapter.
19 Global Food Security
At the 1996 World Food Summit global food security was defined as follows:
“When all people at all times have access to sufficient, safe, nutritious food to maintain a healthy and active life” (FAO, 1996, para. 1)
Informal, the concept of food security, includes physical and economic access to food, which allows people to meet their dietary needs as well as their food preferences. Beside of undernutrition, nowadays dietary excess becomes an increasing threat to society. Ascending numbers of diseases following malnutrition or super nutrition like food related diabetes emphasize this fact. The World Health Organization (WHO) builds food security on three columns. The first addresses food availability, which is given once sufficient quantities of food are available on a regular basis. The second column accounts for food access, which means sufficient resources are available to obtain appropriate food for a nutritious diet. The final addresses an appropriate usage, based on the knowledge of basic nutrition and care as well as on adequate water supplies and sanitation (World Health Organization, n.d.).
The following section provides brief insights into the current situation of the food market on food security, production and consumption.
Status Quo
Before the global financial crisis hit the market in 2008 the crisis in food and agriculture already found its way into society. Between 2006 and 2008 global food prices had increased by 83%. This fact in combination with
20 increasing numbers of low-income families, led to nearly one billion, of the world’s seven billion population chronically hungry in 2009. Despite this fact the Food and Agriculture Organization (FAO) calculated in 2008 that there is currently enough food to feed the world’s population (Lawrence, Lyons, & Wallington, 2010).
Using the FAO method on recent data, results in 868 million undernourished people for the years 2010 to 2012, which represents about 12% of the total population. Although the numbers are still high it is a significant improvement to 1990 when 16% of the total population was undernourished. The fact that only 2% of the 868 million people were living in the developed world underlines once more the problem of distribution and access (Paarlberg, 2013).
As mentioned in the introduction, hunger is not the only crisis the world is facing while talking about food security. Worldwide obesity rates have almost doubled in the last three decades from 5 to 10%, and from 8 to 14% at men, respectively women. The WHO projects that in the year 2015 a total of 2.3 billion adults will be overweight, with 700 million of them being technically obese. In general obesity leads to diseases like type 2 diabetes, high blood pressure and high blood cholesterol. This forms the conclusion that if the trend continues, there are soon as many obese people as undernourished ones (Paarlberg, 2013).
The next section will provide a short outlook on the following years, regarding the current situation and requirements.
Outlook
Very optimistic statements like the one in Nature from 2010 which suggests: “Producing enough food for the world’s population in 2050 will be
21 easy” still face a lot of criticism. This optimism is related to what may be called a second Green Revolution or to the “sustainable intensification of global agriculture”. Statements like the former may be categorized as far too simplified or even naive, since they focus only on single technologies rather than the holistic system (Scholz, Roy, & Hellums, 2014).
The effective world food demand will be determined by two factors, population growth and rate of economic development. If current levels of per capita consumption are assumed with an increase of 50% in population, it will lead to an increase of 50% in food demand. Given the circumstance that economic developments will occur, per capita food consumption will expand more rapidly than the population growth. Since the world population is expected to grow by 2.5 billion within the next four decades the issue results in the question of how such a fast increase in food production can be achieved (Roy, 2010).
Although the amount of potentially productive land, which could feasibly be brought into agriculture usage has frequently been revised upwards, it is still limited. Furthermore, beside of technological advantages the realization of the potential will require large amounts of capital (Roy, 2010).
Given the limited available space and a growing population, the solution of increasing productivity per area requires extensive use of fertilizers especially phosphate-based products. At this point the circle back to the early beginning of the chapter is closed.
The next chapter will provide more detailed insights into the concepts of sustainable mining.
22 Sustainability Aspects and Performance in Mining
Chapter 3 begins with the, for some, oxymoron of sustainability and mining. Within it covers the given need for sustainability in the field of mining, the dimensions to be considered as well as a brief excursion into the field of gold mining.
The following section provides insights on existing sustainability standards, frameworks, initiatives and indicator sets. An online platform is used to identify possible standards. Afterwards a set of criteria is applied to identify the most relevant ones. The section is concluded with the results of the evaluation.
The identified most relevant standards based on the evaluation, Global Reporting Initiative (GRI), International Council on Mining and Metals (ICMM) and United Nations Global Compact (UNGC) are introduced in detail within the following section.
The chapter is concluded with the issue of corporate performance management. It includes the triple bottom line of the categories, economic, environmental and social performance. It continues and concludes with the introduction of environmental social and governance (ESG) assessment by the financial service providers MSCI and Bloomberg.
23 Sustainability and Mining
The concept of sustainable management represents a management approach which includes the triple bottom line of sustainability dimension into daily business (Botin & Palacios, 2010). Within the mining industry the subject of a social license emerged, to address the growing divergence of expectations of minerals-led development (Owen & Kemp, 2013).
The following section provides insights into the concepts of sustainability and mining.
Controversy: Sustainability / Extraction
It is often stated that mining as an activity could never be considered as sustainable because it involves the extraction and processing of non- renewable resources (Costa & Scoble, 2006). Especially in consideration of the most cited reference to sustainable development (Botin & Palacios, 2010), the 1987 published Brundtland report, defined it as “to meet the needs of the present generation without undermining the capacity of future generations to meet their needs”.
Although the extraction process can’t meet the Brundtland definition it is often suggested that there is an opportunity for the industry to act in a more sustainable way especially since the mining process involves a large and varied range of stakeholders and potentially endangers the environment. It is assumed that the sustainable goals in the mining industry are neither long- term mineral wealth nor mineral economics. It is rather a manner of introducing continuously strategies to improve the protection of the environment and provide socioeconomic growth (Costa & Scoble, 2006).
24 A notable statement on sustainable mining was provided by the United Nations Environment Program (UNEP) in the publication “Berlin II Guidelines for Mining and Sustainable Development”:
“If sustainable development is defined as the integration of social, economic and environmental considerations, then a mining project that is developed, operated and closed in an environmentally and socially acceptable manner could be seen as contributing to sustainable development. Critical to this goal is ensuring that benefits of the project are employed to develop the region in a way that will survive long after the mine is closed” (UNEP, 2002, p. 6)
The need for a concept or framework to guide companies towards more sustainability was initially addressed by the Global Mining Initiative (GMI) and is discussed in greater details in the following sections.
Need for Sustainable Mining
While some damage due to mining operations is unavoidable most of it is. Mining effects environmental social change independently from where it takes place. Mining-related disruption can affect the physical environment in ways like the loss of habitats or contaminations of soil and ground water, as well as local communities. Within the last few decades’ civil society groups campaigned successful for growing responsibility in corporation’s behavior, such as sustainable forestry, conflict diamonds and labor rights. From a company’s perspective the association with irresponsible resourced products bares a growing risk regarding business partners and customers. Especially customers in industrialized countries try to act environmental and socially responsible while buying products or consuming services (Miranda, Chambers, & Coumans, 2005).
25 Beside of the economic factors arising from customer’s behavior environmental and social concerns regarding undeniable facts like the threat of climate change and loss of ecosystem integrity and biological diversity have to be taken into account. But not only ecosystems were changed irreversibly, indigenous cultures too, some of them already have or are in the progress of disappearing (Mining, Minerals and Sustainable Development, 2002).
Besides the legislative regulations granted by governments the local communities take a huge part in the context of the so-called social license to mine. The latter can be seen as a covenant drawn up between stakeholders, affected communities and the mining company itself. It involves commitments by the company towards local communities regarding benefits and quality of life for residents during the mining and after closure. Employees take a pivotal role in facilitating the social license. Issues such as recruitment, skills development or safety, affect a company’s reputation and perception by local communities directly as well as indirectly. Furthermore company’s ethics are determined through its employee’s behavior. The former is commonly defined by the behavior within “grey areas”, therefore in situations with absence of policies or standards (Botin & Palacios, 2010).
The following section provides more detailed insights into the various dimensions which have to be considered while heading towards sustainability.
Considerable Dimensions
According to the Brundtland report the integration of sustainable development requires activities in the three key areas. Activities in these fields are not temporary, they must be seen as an ongoing process and equally
26 important, thus a focus on one area usually conducts a crisis across the whole area of mining activities (Dubinski, 2013). Subsequent the classical areas of sustainable development are introduced briefly in detail.
Economic growth, includes technological advance as well activities in economics to achieve long-term sustainability. The latter includes the field of planned production volumes as well as meeting the needs of customers and further on, economic efficiency obtained from the sale of the minerals (Dubinski, 2013).
The ecological field is mostly addressed through rational acquisitions, which are characterized by savings in depletion. In general the goal is to minimize the negative impacts on the geological and natural environment involved, all across the extraction process (Dubinski, 2013).
The third dimension, social responsibility, targets the mining environment with the main focus on safe working conditions as well as the social aspects of mining, such as the families of miners and the mining environment (Dubinski, 2013).
While the above suggest to focus on the classical three dimensions on sustainable development, Laurence (2011) extended the dimensions based on personal experiences in an Australian leading company’s silver, lead and zinc mines, which are still exploiting after 110 years of operations. Laurence argues that mining managers are price takers and can only influence the cost side from the economic perspective. Beside of the economic dimensions he claims the importance of community support and engagement. Since one mine is based 1200km west of Sydney in an isolated part of Australia the company takes care of its employees in ways like private loans, a local kindergarten, employed teachers or support for a local university. A further dimension addresses a safe working environment. The company is a global
27 leader and innovator by introducing high standards for safety such as private safety equipment like safety glasses or hearing protection. Their standards also included penalties to the employees for non-compliance with the rules. The dimension on resource efficiency includes various underground mining methods to extract as close to 100% as possible of the ore body. The final dimension implies high environmental standards to protect the surrounding community and its environment. The program includes various activities such as a “green belt”, surrounding the mine to repair caused damage (Laurence, 2011).
Laurence argues that in this context especially the safety and extraction practices are of greater concern than in other industries. While a lack in the former often led to mine closures in the past such as the Lassing mine in Austria or Sago Mine in West Virgina the latter is too often assessed from a macroeconomic perspective instead on the site specific micro level (Laurence, 2011).
Within the last 15 years standards forced by leading jewelry manufacturers and non-governmental organizations especially in the field of gold mining arose. The following section will provides brief insights into the possible role mode.
Potential Role Model: Gold Mining
Back in 2003 the jewelry manufacturer Tiffany & Co hosted in cooperation with the NGOs Earthworks and Word Wildlife Fund a “responsible-source minerals dialogue” to address further NGOs, retailers, investors, insurers and experts from the mineral sector. The aim of creating a basis for responsible sourcing and investing involved dialogues in the issues
28 of environmental, human rights and social areas (Miranda, Chambers, & Coumans, 2005).
Inspired by the Fairtrade Labelling Organizations International (FLO) standards for small agricultural producers the “Standard Zero for Fair Trade Artisanal Gold and Associated Silver and Platinum” was developed in 2006. The purpose was to adapt the FLO standard to the requirements and the situation of artisanal and small-scale gold miners (ASM). This pioneering global initiative is under coordination of the Alliance for Responsible Mining (ARM) and targets to combine expertise in various aspects for ASM and fair trade such as certification, a chain of custody, strengthening producer organizations, health and safety issues, child labor, the formalization of ASM and further more. The pilot testing for the first draft of the standard were conducted with nine producers organizations from South America involving the countries Columbia, Bolivia, Peru and Ecuador. Following to due- diligence assessments and reviews on the first results, the first certified ASM gold was launched followed by expansion to Africa and Asia (Echavarria, 2009).
The most actual version of the standard is represented via version 2.0 release candidate from January 2014. It includes a broad framework considering of five dimensions, general requirements including responsibilities or traceability, environmental protection involving the management of toxic substances and the protection of the ecosystem, labor conditions including among others the freedom of labor, health and safety conditions and child protection, a governance and development plan as well as a section addressing trading relationships involving contracts, pricing and down payments (ARM, 2014).
According to an interview conducted with CEO Alexander Skrein from the Vienna-based jewelry workshop Skrein, the demand for jewelry
29 produced from fair trade gold is rising. The awareness from customers regarding issues like working conditions, safety concerns and child labor along the gold production chain is influencing more and more the basis of decision-making. Skrein purchases fair trade gold from a certified supply chain via London from the Sotramin Mine in Peru. In terms of additional costs resulting from fair trade, Skrein states that 2000€ additional costs apply to each kilogram of purchased gold, the overall additional costs per gram gold account for approximately one Euro. In regard of an average piece of jewelry the price for the boxing exceeds the addition costs due fair mined gold and therefore hardly affects the price of the trinket at all (David-Freihsl, 2013).
Although mainly artisanal and small-scale miners are addressed through this standard it is a step towards sustainable development and above all an improvement in life quality for workers. The next sub-chapter provides further insights into the history of developments regarding sustainability in mining and metals industry.
History of Developments
The following two section address the history of developments on sustainability standards in regards of mining and developments on sustainability reporting.
Sustainability Frameworks and Mining
The most common definition for sustainable development was made by the Brundtland Commission in 1987. Within the mining and metal industries the term was probably first used in the early 1990s at congresses like the Rio Summit in 1992. Authors picked up on the issue and addressed the importance of on-going mineral exploration and technological
30 innovations in the context of depleting resources and environmental degradation (Laurence, 2011).
Besides national attempts like the Whitehorse Mining Initiative (WMI) by the Mining Association of Canada the global mineral industry addressed the sustainability issues first in 2000. Ten of the world’s largest mining companies formed the Global Mining Initiative (GMI) under the aegis of the World Business Council for Sustainable Development. The Mining, Minerals and Sustainable Development (MMSD) project resulted as an independent research program and was followed by a framework based on a set of guiding principles including several dimensions in 2002 (Costa & Scoble, 2006).
The International Council of Mining and Metals emerged from a global conference following the MMSD project in order to better represent the industry against its critics. The ICMM is based in London and features most of the initial GMI members. The council mostly faced and faces critics from Indigenous Peoples organizations, NGOs and mine-affected communities most of the time for the fact that the framework included objectives and structures are one-sided dominated by the corporate sector (Whitmore, 2006).
Beside of the ICMM standard various other organizations arose on national and international level such as the US-based Sustainable Minerals Roundtable, the Canadian Minerals and Metals Initiative, the European Industrial Minerals Association (Azapagic, 2004) or the already discussed fair trade standard for gold. One main part of the ICMM standard involves reporting which is addressed via the next section.
31 Sustainability Reporting
Within the last fifteen to twenty years the field of sustainability reporting emerged as an increasingly relevant topic for businesses and academia. A company’s success is driven by a broad set of stakeholders such as employees, customers, creditors or public authorities, which are all pursuing different interests in the directions of economic, environmental and social issues. Sustainability reporting represents an important channel for a company to communicate with its stakeholders and it may result in competitive advantages like enhanced brand value, motivation for employees or reputation and legitimacy. Additionally, sustainable reporting is increasingly recognized as a cornerstone of corporate sustainability. Developments in the field led, beside of financial reporting, from social and economic complements in the 1970s respectively 1980s to the voluntary standard-setting Global Reporting Initiative (Hahn & Kühnen, 2013).
The latter was started in the late 1990s and is today recognized as “the de facto global standard” of sustainability reporting (KPMG, 2011).
The next sub-chapter evaluates a broad set of standards, frameworks, initiatives and indicator sets.
Existing Standards, Frameworks, Initiatives and Indicator Sets
As already stated and emphasized with several examples, a broad variety of standards, frameworks, initiatives and indicator sets were developed to address the issue of sustainable development in the context of the extractive and mining sector as well as the chemical fertilizer industries. The online platform Standards Map was used to identify a set of basically
32 possible standards. Standards Maps is provided by the International Trade Center (ITC) and provides comprehensive, verified and transparent information on more than 130 voluntary sustainability standards and other comparable activities. The main goals are to identify standards or codes of conduct which can be applied to businesses as well as review and comparison of the former. Further features like self-assessments and sustainability diagnostic reports are provided but not covered within this thesis (ITC, 2014y). The ITC itself is a joint agency of the World Trade Organization (WTO) and the United Nations (UN), with the purposes of supporting sustainable economic development and contributing to the Millennium Development goals in developing countries as well as the transition of economies through trade and international business development (ITC, 2014x).
Standards Maps is free for use without registration, although a free registration leads to further functionalities. Up to the current date of 2014-05- 21, 137 standards were listed in the database. The filter functionality allows to narrow the search regarding several attributes like product /service, producing country or destination market. In order to identify all possible standards for the mining sector as well as on phosphorus itself only the product/ service filter was used. The search for the category “Mineral or chemical fertilizer” resulted in 13 standards, the category “Mining and quarrying” led to 21 hits. Since some standards were included in both result sets the combined amount of potential standards was 23.
Table 3-1 provides an overview on the resulting standards with a brief description, the geographic focus as well as information on audits, participating companies and covered products. The data origins from the information provided by Standards Map separately for each standard, the associated references are listed in the bibliography.
33 While the first column contains the name of the standard the second provides relevant information in terms of the organization behind the standard and the location of the head office. The third column presents a brief overview of the standard. The next column lists the aspects of sustainability which are concerned by the standard, regarding the focus or the weighting no statement is made. The column Geographic Scope lists the countries or regions where the standard is currently implemented and/or where products or services are currently covered. The information regarding audits is provided in the next column, furthermore it shall be noticed that for some standards additionally to the regular audits surprise audits may be possible. The columns Participants and Products briefly states who and with which products can participate in the standard. The final column provides the sources of the information, which is in all cases provided by Standards Map.
For example, the GRI Sustainability Framework’s head office is located in Amsterdam. The standard aims to measure and report economic, environmental, social and governance performance. It additionally addresses the fields of quality, ethics and business integrity. The use of the standard is neither restricted regarding location, product type nor business segment. In terms of audits, self-assessment has to be performed be the organization itself.
34 Focus on Geographic Name Head Office Overview Sustainability Audits Participants Products Source Scope Issues
Environment, Social, Bolivia, gold, silver and Alliance for ARM Antioquia "fair mined" certified Economic, Quality, Colombia, 2nd party artisanal and small-scale platinum if (ITC, Responsible Mining (Colombia) metals and minerals Ethics & Business Ecuador and audit miners alongside with 2014a) (ARM) Integrity Peru certified gold small-scale producers and commitment to improved groups, small to large-scale Business Social Environment, Social, worldwide BSCI Brussels working conditions in annual 3rd enterprises, vulnerable and (ITC, Compliance Initiative Economic, Ethics & except Australia any (Belgium) global supply chains, code party audit minority groups, 2014b) (BSCI) Business Integrity and Oceania of conduct international suppliers / facilities electronic, Electronic Industry code to improve social, Environment, Social, 3rd party small to large-scale information and EICC, Washington (ITC, Citizenship Coalition ethical and environmental Economic, Ethics & worldwide audit every enterprises, internal - communications DC (USA) 2014c) (EICC) performance Business Integrity two years suppliers/facilities technology industry alliance of companies, small-scale producers and Social, Economic, Ethical Trading trade unions and voluntary self- producer groups, small to (ITC, ETI, London (UK) Ethics & Business worldwide consumer goods Initiative (ETI) organizations to improve assessment large-scale enterprises, 2014d) Integrity working lives internal suppliers/ facilities
certification for social IMO Group, accountability and fair Environment, Social, contract growers, annual 3rd (ITC, Fair for Life Weinfelden trade in agricultural, Economic, Ethics & worldwide plantations, manufacturing any party audit 2014e) (Switzerland) manufacturing and trading Business Integrity and trading operations operations
Fair Labor based on ILO standards, small-scale producers and Association (FLA) - FLA, Washington DC independent monitoring, worldwide annual 2nd groups, any enterprises, (ITC, Social any Workplace Code of (USA) remediation and except Africa party audit universities and civil 2014f) Conduct verification process society organizations
international social and environmental standard for Environment, Social, WiN WiN Fair Stone, 3rd party natural stone imports with Economic, Quality, China, Turkey any stakeholder within the (ITC, Fair Stone Kirchheim/Teck audit every natural stones a focus on working Ethics & Business and Vietnam industry 2014g) (Germany) three years conditions and health Integrity situations
35 all companies working with Environment, Social, Central agriculture, Fairtrade Fairtrade sustainable development 3rd party hired labor (farms, Economic, Quality, America, South composite and (ITC, International - Hired International, Bonn and poverty alleviation audit every plantations, factories, Ethics & Business America, Africa manufactured 2014h) Labour (Germany) within Fairtrade standards four years manufacturing industries Integrity and Asia goods etc.) agriculture, Fairtrade Environment, Social, Central Fairtrade sustainable development 3rd party small-scale producer composite and International - Small Economic, Quality, America, South (ITC, International, Bonn and poverty alleviation audit every organizations which supply manufactured Producers Ethics & Business America, Africa 2014i) (Germany) within Fairtrade standards four years Fairtrade products goods including Organizations Integrity and Asia gold measurement and Environment, Social, Global Reporting GRI, Amsterdam reporting of economic, Economic, Quality, self- (ITC, worldwide any any Initiative (GRI) (Netherlands) environmental, social and Ethics & Business assessment 2014j) governance performance Integrity establishing benchmarks small to large-scale Chinese Guide on Social China International Environment, Social, of social responsibility for enterprises, suppliers/ international Responsibility for Contractors Economic, Quality, annual 3rd (ITC, the industry, 95% of worldwide facilities, community based project Chinese International Association, Beijing Ethics & Business party audit 2014k) China's overseas business organizations and contracting Contracting Industry (China) Integrity is covered investment clients industry implementation of Environment, Social, International Council sustainable development Economic, Quality, annual 3rd small to large-scale minerals, mining (ITC, on Mining and Metals ICMM, London (UK) framework and public worldwide Ethics & Business party audit enterprises and metal 2014l) (ICMM) reporting against the Integrity framework
maintenance and primarily tools for development of Environment, Social, governments to draft and International Labour international labor United Nations, Economic, Quality, self- implement labor laws and (ITC, Organization (ILO) standards regarding worldwide any Genève, (Switzerland) Ethics & Business assessment social policies, also 2014m) Labour Standards decent, productive work Integrity adoptable by individual conditions of freedom, enterprises equity security and dignity
software based community Intertek - Workplace Environment, Social, Intertek Group, platform which allows annual 2nd (ITC, Condition Assessment Economic, Ethics & worldwide any any London (UK) automated data collection party audit 2014n) (WCA) Business Integrity and benchmarking Organisation for Economic Co- government-backed code Environment, Social, operation and of conduct, applicable by Economic, Quality, self- governments and individual (ITC, Development (OECD) OECD, Paris (France) worldwide any enterprises in countries Ethics & Business assessment enterprises 2014o) Guidelines for where they operate Integrity Multinational Enterprises
36 mining to retail non profit organization Environment, Social, 3rd party any company within the in diamond, gold Responsible Jeweler with focus of bringing Economic, Quality, (ITC, RJC, London (UK) worldwide audit every diamond, gold or platinum and platinum Council (RJC) together participants along Ethics & Business 2014p) two years supply chain jewelry supply the supply chains Integrity chain best practice guidance develop by the Sedex 1st, 2nd or Sedex Members Environment, Social, Associate Auditor Group, 3rd party (ITC, Ethical Trade Audit SMETA London (UK) Economic, Ethics & worldwide any any targets supply chain audit 2014q) (SMETA) Business Integrity transparency including possible suppliers management tool to Environment, Social, construction, chemical, integrate social and Economic, Quality & transport, facility services, Foretica, Madrid Spain and annual 3rd (ITC, SGE 21 environmental concerns Safety Management insurance, pharmaceutical, any (Spain) Colombia party audit 2014r) into business and the System, Ethics & public sector and third stakeholder interrelation Business Integrity sector standard for decent work, Social Accountability and a tool for Social, Economic, worldwide any with restrictions to SAI, New York half-year 3rd any except (ITC, (SA) International implementing international Ethics & Business except Australia certain countries and (USA) party audit maritime 2014s) 8000 labor standards, partner in Integrity and Oceania sectors elimination of sweatshops
certification system for World Fair Trade Sustainable Fair marginalized farmers, Environment, Social, Organization, self- marginalized farmers, (ITC, Trade Management producers and artisans to Economic, Ethics & worldwide any Culemborg assessment producers and artisans 2014t) (SFTM) improve market access and Business Integrity (Netherlands) local trade European Commission Environment, Social, Directorate General products and services worldwide 3rd party The European Economic, Quality, various (ITC, for the Environment which are "kinder" to the except South audit every any Ecolabel Ethics & Business consumer goods 2014u) Brussels for EU environment America five years Integrity Ecolabel alignment of universally Environment, Social, accepted principles in the United Nations Global GC Office New York Economic, Quality, self- (ITC, areas of human rights, worldwide any any Compact (UNGC) (USA) Ethics & Business assessment 2014v) labor, environment and Integrity anti-corruption
elimination of child and small-scale producers and Xertifix, Freiburg boned labor in natural Environment, Social, 2nd party natural stone (ITC, XertifiX India small to medium-size (Germany) stone quarries, also based Economic audit industry 2014w) enterprises on ILO
Table 3-1: Standards Map Search Combined Search Results Source: own creation based on Standards Map’s data
37 Applied Criteria
In order of narrowing the results to those which qualify the most for the mining industries, the found standards were evaluated on a criteria set, based on the knowledge of Global TraPs. Each criterion is subsequently introduced separately.
Criterion 1: Participation
The first criterion required the possibility of participation for all mining companies without limitations regarding attributes like product/ sector, corporation size or location of mining sites.
Criterion 2: Practice
Criterion two addressed only these standards which are currently in use within the mining industry. At least one out of the ten biggest mining corporations, based on market value, participates in the program.
Criterion 3: Relevance
The third criterion covers the relevance for the mining industry, it is required that at least all triple bottom line aspects in terms of sustainability are covered.
Criterion 4: Free Standard
The final criterion requires the standard itself to be clearly defined and the relevant information publicly accessible free of charge.
The following section addresses the scientific limitations within these types of evaluation.
38 Scientific Limitations
Despite the in advance clearly defined criteria, which were used for the analysis, the choice for a particular criterion remained at the evaluator. Therefore, the analysis has to be understood as intersubjective rather than objective. Whereas the analysis was performed alone by the evaluator it cannot be ensured that another evaluator by using the same criteria set would conclude the same results.
A further limitation was the application of the search engine Standards Map. The identified standards were limited to the overall standards present within the database. By the time, the search was performed, 137 standards were present, which does not imply that prospective queries will provide identical results.
Not all criteria could be applied to all standards. In cases of no clear evidence or no information available, the information required to be public available and free of charge in English or German, the criterion was not applied. The related query for information included the Standards Map information portal, the website of the standard as well as reports and websites of the by criterion two identified corporations.
The results of the analysis are presented in the next section.
Results
The subsequent Table 3-2 provides the results of the performed evaluation and analysis based on the criteria set from section 3.3.1 Applied Criteria.
39 While the first and second column contain the identical information as Table 3-1 the further columns provide the results and further information. The columns 3 – 6 contain the results of each criterion if a criterion was not met the cell’s background is colored in red and contains a minus. In the case the criterion was fulfilled the cell is colored in green and contains a X. As already stated for some standards not all information was available. In the case that no assertion could be made the cell‘s background is colored in yellow and contains a question mark. The following four columns contain further information on the assessment of the criteria.
The analysis identified three standards, Global Reporting Initiative, International Council on Mining and Metals and United Nations Global Compact which met all four predefined criteria. The latter are described in greater details within the next sections.
40 criteria criteria criteria criteria Name Overview info ad 1 info ad 2 info ad 3 info ad 4 Source 1 2 3 4
Alliance for "fair mined" certified metals small scale and (ITC, Responsible Mining and minerals - - X X artisanal 2014a) (ARM)
commitment to improved Business Social working condition in global (ITC, Compliance Initiative supply chains, code of X - X X 2014b) (BSCI) conduct
solely products in the Electronic Industry code to improve social, electronic, (ITC, Citizenship Coalition ethical and environmental information and - - X X 2014c) (EICC) performance communication industry
alliance of companies, trade environmental Ethical Trading unions and voluntary solely consumer (ITC, perspective Initiative (ETI) organizations to improve - - - X goods 2014d) missing working lives
certification for social accountability and fair trade only smallholder (ITC, Fair for Life in agricultural, - - X X producers or groups 2014e) manufacturing and trading operations
based on ILO standards, Fair Labor Association just social independent monitoring, (ITC, (FLA) - Workplace dimension remediation and verification X - - X 2014f) Code of Conduct covered process
international social and environmental standard for defined as facade (ITC, Fair Stone natural stone imports with a - - X X materials 2014g) focus on working conditions and health situations
sustainable development and Fairtrade International mining products not (ITC, poverty alleviation within - Hired Labour - - X X covered 2014h) Fairtrade standards
41 Fairtrade International sustainable development and (ITC, - Small Producers poverty alleviation within solely gold covered - - X X 2014i) Organizations Fairtrade standards
measurement and reporting Global Reporting of economic, environmental, (ITC,
Initiative (GRI) social and governance X X X X 2014j) performance
Guide on Social establishing benchmarks of hardly Responsibility for social responsibility for the overseas contracting information in hardly information in (ITC,
Chinese International industry, 95% of China's - ? X ? of Chines enterprises English English available 2014k) Contracting Industry overseas business is covered available implementation of International Council sustainable development (ITC, on Mining and Metals framework and public X X X X 2014l) (ICMM) reporting against the framework maintenance and no clear framework, 185 member development of international split into conventions International Labour countries, therefore it labor standards regarding eg: Rio Tinto, which have to be ratified (ITC, Organization (ILO) can be seen as de decent, productive work X X X - BHP Billiton by countries, great 2014m) Labour Standards facto possible for all conditions of freedom, difference between firms equity security and dignity participating countries software based community no member’s Intertek - Workplace platform which allows list, nothing consultant on (ITC, Condition Assessment automated data collection X ? X - stated on the sustainability aspects 2014n) (WCA) and benchmarking homepages Organisation for Economic Co-operation government-backed code of only applicable form and Development conduct, applicable by firms within (ITC, eg: Rio Tinto (OECD) Guidelines for enterprises in countries - X X X participating 2014o) Multinational where they operate countries Enterprises non-profit organization with Responsible Jeweler focus of bringing together solely diamond, gold (ITC, eg: Rio Tinto Council (RJC) participants along the supply - X X X and platinum jewelry 2014p) chains best practice guidance develop by the Sedex Sedex Members Ethical Associate Auditor Group, (ITC,
Trade Audit (SMETA) targets supply chain X - X X 2014q) transparency including suppliers
42 management tool to integrate social and information only in (ITC, SGE 21 environmental concerns into X - X ? Spanish 2014r) business and the stakeholder interrelation standard for decent work, and a tool for implementing environmental Social Accountability (ITC, international labor perspective (SA) International 8000 X - - X 2014s) standards, partner in missing elimination of sweatshops
certification system for marginalized farmers, Sustainable Fair Trade Information no longer (ITC, producers and artisans to Management (SFTM) - - X ? available in website 2014t) improve market access and local trade products and services which solely consumer (ITC, The European Ecolabel are "kinder" to the - - X X goods 2014u) environment alignment of universally accepted principles in the United Nations Global (ITC, areas of human rights, labor, Compact (UNGC) X X X X 2014v) environment and anti- corruption elimination of child and defined as facade (ITC, XertifiX boned labor in natural stone - - X X materials 2014w) quarries, also based on ILO
Table 3-2: Evaluation Results Source: own creation partly based on Standards Map data
43 Selected Standards, Frameworks, Initiatives and Indicator Sets
The following sections provide further information on the standard which resulted from the evaluation.
Global Reporting Initiative
The GRI, now placed in Amsterdam, Netherlands was founded in 1997 in Boston, from the non-profit organization Coalition for Environmentally Responsible Economics (CERES). The first version of the guidelines including the framework was launched in 2000 and based on an initial multi-stakeholder approach. The idea was to extend the environmental scope to include social, economic and governance issues. The second generation, also known as G2, was presented at the World Summit on Sustainable Development in Johannesburg in 2002, one year after GRI split from CERES. The development of the G3 framework involved more than 3000 experts from business, civil society and labor movements and was completed in 2006. In the following years the framework was extended in form of Sector Supplements, now called Sector Guidelines, until 2013 when the fourth generation was released (GRI, 2014c).
The GRI Sustainability Framework is a reporting system which allows all participants to measure, understand and communicate relating information with an overall vision of: “A sustainable global economy where organizations manage their economic, environmental, social and governance performance and impacts responsibly, and report transparently.“ (GRI, 2014a).
44 As mentioned above, the framework focuses on the three main categories, economic, environment and social. The issue of governance is spread over the economic and social category. An overview of the addressed categories, sub-categories and aspects within the G4 is provided by Figure 3-1.
Figure 3-1: G4 Categories and Aspects within the Guidelines; Source: (GRI, 2014b)
Preparing the final outcome, the sustainability report, can be seen as an iterative process involving and repeating several steps such as the extraction of general and specific internal data as well as the data preparation regarding the GRI Guidelines. To prepare the report in accordance to the guidelines it has to contain at least the core elements, the Comprehensive
45 options requires additional disclosure regarding the organization’s strategy and analysis, governance, ethics and integrity. The content is defined by the four principles, stakeholder inclusiveness, sustainability context, materiality as well as completeness. The quality within the report is assured via seven fundamental principles to achieve transparency: (GRI, 2014b)
Balance: implication of positive and negative aspects regarding the company’s performance Comparability: possibility to compare a company’s performance over time Accuracy: accurate and detailed performance Timeliness: regularity of reporting Clarity: intelligible and accessible to stakeholders Reliability: generation of confidence and trust towards stakeholders (GRI, 2014b)
The Sector Supplement for the Mining and Metals Sector includes all activities from exploration, mining, primary metal processing as well as the complete project life cycle from development to post-closure. Since the sector itself is diverse and includes exclusively specialized companies along with large multi-national enterprises and small scale or artisanal miners. In comparison to other sectors the mining and metal industry is encountered more frequently and in greater measure. Therefore the main contents of the supplements are issues around the control, use and management of land, contributions to national developments regarding economic and social activities, labor relations and stakeholder engagement as well as environmental management, affiliation with artisanal and small-scale mining and an integrated approach to mineral use. Beside of the already stated issues the reporting on incidents and grievances is of greater concern as well (GRI, 2011).
46 Table 3-3 lists the 11 sector specific performance indicators to provide a greater overview on the supplement.
Aspect Indicator Commentary Amount of land (owned or leased, and managed for Biodiversity MM1 production activities or extractive use) disturbed or rehabilitated. The number and percentage of total sites identified as requiring biodiversity management plans according to Biodiversity MM2 stated criteria, and the number (percentage) of those sites with plans in place. Emissions, Total amounts of overburden, rock, tailings, and Effluents, and MM3 sludges and their associated risks Waste Labor/ Number of strikes and lock-outs exceeding one week’s Management MM4 duration, by country. Relations
Total number of operations taking place in or adjacent Indigenous to Indigenous Peoples’ territories, and number and MM5 Rights percentage of operations or sites where there are formal agreements with Indigenous Peoples’ communities.
Number and description of significant disputes relating Community MM6 to land use, customary rights of local communities and Indigenous Peoples. The extent to which grievance mechanisms were used to resolve disputes relating to land use, customary Community MM7 rights of local communities and Indigenous Peoples, and the outcomes. Number (and percentage) of company operating sites Artisanal and where artisanal and small-scale mining (ASM) takes Small-scale MM8 place on, or adjacent to, the site; the associated risks Mining and the actions taken to manage and mitigate these risks. Sites where resettlements took place, the number of Resettlement MM9 households resettled in each, and how their livelihoods were affected in the process. Closure Number and percentage of operations with closure MM10 Planning plans. Materials Programs and progress relating to materials MM11 Stewardship stewardship.
Table 3-3: MMSS GRI 3.0 Source: (GRI, 2011)
47 The GRI can be seen as “the de-facto global standard” in terms of sustainability reporting (KPMG, 2011). The following section provides insights of the International Council on Mining and Metals standard.
International Council on Mining and Metals
As already stated the International Council on Mining and Metals was founded following to the MMSD multi stakeholder initiative (ICMM, 2014d) Today’s 21 members out of the mining and metals sector contribute to 46 percent of global copper production respectively 41 percent platinum group metals, 41 percent iron ore, 41 percent nickel, 32 percent gold and 19 percent SNL Metals & Mining. Within the 21 members also the biggest global corporations are present except for China Shenhua Energy (ICMM, 2014a).
The sustainable development framework by the ICMM requires its members to implement a set of ten principles, as shown in Table 3-4, and six supporting positions into their corporate policy as well as the adaption of transparent accountable reporting practices. The framework requires three main steps such as the commitment to the ten principles of sustainable development, the public reporting of the corporation’s performance regarding the GRI Guidelines and the independent assurance involving a third-party verification (ICMM, 2014e).
Aspect Principle
Corporate Implement and maintain ethical business practices and sound Governance systems of corporate governance.
Corporate Integrate sustainable development considerations within the Decision-making corporate decision-making process.
Uphold fundamental human rights and respect cultures, customs Human Rights and values in dealings with employees and others who are affected by our activities.
48 Implement risk management strategies based on valid data and Risk Management sound science.
Seek continual improvement of our health and safety Health and Safety performance.
Environment Seek continual improvement of our environmental performance.
Contribute to conservation of biodiversity and integrated Biodiversity approaches to land use planning.
Material Facilitate and encourage responsible product design, use, re-use, Stewardship recycling and disposal of our products.
Community Contribute to the social, economic and institutional development Investment of the communities in which we operate.
Implement effective and transparent engagement, Independent communication and independently verified reporting Verification arrangements with our stakeholders.
Table 3-4: The 10 Principles of the ICMM Source: (ICMM, 2014f)
The supporting statements represent complements to provide further clarification to some of the ten principles. The commitment towards GRI guidelines was agreed by the member companies in 2008 (ICMM, 2014c). The framework and the specific sector guidance, Mining and Metals Sector Supplement, are addressed by the former sub-chapter 3.4.1 Global Reporting Initiative.
The necessity of third-party assurance was also established back in 2008. It requires an external independent auditor to accesses and review the quality of the reports, systems and processes in terms of the ICMM’s Assurance Procedure. The latter addresses five aspects of commitment, alignment towards the ICMM’s ten principles, company’s material risks and opportunities, resulting activities as well as the companies’ performance to
49 address the latter and the application of the GRI Sustainability Reporting Guidelines (ICMM, 2014b).
The subsequent section addresses the final identified sustainability standard, the United Nations Global Compact.
United Nations Global Compact
From the top ten mining companies worldwide based on their market value in 2013 (Top 10 mining companies, 2013) seven are currently actively engage in the United Nations Global Compact, namely BHP Billiton, Rio Tinto, Vale, Anglo American, Barrick Gold, Goldcorp and Newmont Mining. Regarding the remaining three, China Shenhua Energy, Xstrata and Gloncore the UNGC database does not list them as active respectively at all.
The UNGC was launched in 2000 as a leadership platform for the development, implementation and disclosure of responsible and sustainable corporate policies and practices. So far with close to 8000 corporate participants in more than 140 countries it is the world’s largest voluntary corporate sustainability initiative. The UNCG focuses on the advancement in two complementary objectives (United Nations, 2014):
“Mainstream the ten principles in business activities around the world” (United Nations, 2014, p. 2) “Catalyze actions in support of broader UN goals, including the Millennium Development Goals (MDGs)” (United Nations, 2014, p. 2)
The mentioned principles are based on the four main pillars, Human Rights, Labor, Environment and Anti-Corruption. Table 3-5 provides a brief overview on the ten principles.
50
HUMAN RIGHTS Businesses should support and respect the protection of Principle 1 internationally proclaimed human rights; and Principle 2 make sure that they are not complicit in human rights abuses. LABOR Businesses should uphold the freedom of association and the effective Principle 3 recognition of the right to collective bargaining; Principle 4 the elimination of all forms of forced and compulsory labor; Principle 5 the effective abolition of child labor; and the elimination of discrimination in respect of employment and Principle 6 occupation. ENVIRONMENT Businesses should support a precautionary approach to environmental Principle 7 challenges; undertake initiatives to promote greater environmental responsibility; Principle 8 and encourage the development and diffusion of environmentally friendly Principle 9 technologies. ANTI - CORRUPTION Businesses should work against corruption in all its forms, including Principle 10 extortion and bribery.
Table 3-5: 10 Principles of the UNGC Source: own creation based on (United Nations, 2014)
The UNGC lists a broad variety on advantages for participating companies such as the integration in the overall United Nations network including agencies and local networks, access to UN’s knowledge and experience regarding sustainability, utilization of provided management tools and resources and last but not least a globally proven and recognized policy framework towards sustainable development (United Nations, 2014).
The UNGC represents a framework which is adoptable for several types of corporations in various fields of business. The overall issue of corporate performance measurement will be introduced in the following section.
51 Corporate Performance Measurement
The reporting of environmental, economic, social and cooperate governance aspects has grown into a mainstream business activity over the last years. The lack of transparency within the corporations towards their stakeholder has brought new impulses to reporting and measurement of environmental, social and governance performance. The latter includes the processes of data transformation into consistent units and the presentation in the form of ESG indicators (Chvatalova, Kocmanova, & Docekalova, 2011).
The single aspects of sustainability reporting as identified by Chvatalova et. al. (2011), are subsequently listed below:
Economic performance is based on financial reporting which consists of information based on sources like final accounts, annual reports, financial analysts, stock market information etc. The resulting indicators can be distinguished by their surveyed area, such as indicators of liquidity like quick ratio or cash ratio, indicators of profitability like return on equity or return on investment, indicators of indebtedness like debt ratio or indicators of financial and asset structure (Chvatalova, Kocmanova, & Docekalova, 2011). Environmental performance can be defined as the result of an organization’s management of its environmental aspects. The results can be benchmarked against several aspects like the organization’s environmental policy, the environmental objectives or other performance requirements (Chvatalova, Kocmanova, & Docekalova, 2011). Currently a great number of tools and techniques exist in order to perform environmental performance assessment. To stay in-line with the previously
52 introduced GRI approach and the final business case of this thesis solely the concept of environmental key performance indicators (KPIs), based on the GRI, is introduced. The latter represent quantifiable metrics which reflect the environmental performance of an organization. They link various levels of the organization by clearly defined targets and benchmark selected activities (Chvatalova, Kocmanova, & Docekalova, 2011). The measurement of social and governance performance requires the application of a modifiable and broad-spectrum methodology. Again, the GRI indicators offer a broad set which are based on several criteria. These allow to set the individual pillars of sustainability in relation to the progress of economic dynamics and developments within a corporation (Chvatalova, Kocmanova, & Docekalova, 2011).
While the work of Chvatalova, Kocmanova, & Docekalova (2011) regarding environmental, social and governance performance measurement is based on existing GRI indicators, authors like Labuschagne, Brent, & van Erck (2005) choose a different approach. They reviewed at the that time existing frameworks, including the GRI, UN Commission on Sustainable Development Framework, Sustainability Metrics of the Institutional Chemical Engineers and the Wuppertal Sustainability Indicators, before they proposed their own framework to assess the sustainability of operational initiatives. The framework was pro-surveyed by 23 participants which led to the conclusion that the performance measurement depends mainly on three points. The first issue is the availability of data in terms of sustainability assessment, the second point addresses the lack of consensus regarding the assessment procedures especially within the social performance and the third
53 refers to the subjective preferences of the specific assessors and decision- makers (Labuschagne, Brent, & van Erck, 2005).
Whereas the so far discussed literature focused on the performance measurement in general, Fonseca, McAllister, & Fitzpatrick (2013) compared sustainability performance measurement within five mining sustainability frameworks. From the latter, GRI, Towards Sustainable Mining (TSM), seven questions to sustainability (7QS), innovation and technology driven sustainability performance management framework (ITS-PM) and the framework by Adisa Azapagic. While the former two are actually used and implemented within large mining companies, particularly in Canada, the latter were proposed by analysts and academics but found little or no implementation at all (Fonseca, McAllister, & Fitzpatrick, 2013). Since the TSM was not part of the Standards Map results as well as the fact that it requires mining presence in Canada for its full members (The Mining Association of Canada, 2014) in the following only the results on the GRI framework evaluation are introduced. Although Fonseca et. al. (2013) value the GRI Generation 3.1 including the Mining and Metal Sector Supplement as comprehensive in details they identify a lack of geographical or spatial focus especially in practice as well as issues with the process of considering the indicators in isolation. Despite the negative attributes the GRI remains as the most widely used sustainability framework within the mining sector, proven by the fact that from the 102 publicized reports in 2011 95% were based on the GRI framework (Fonseca, McAllister, & Fitzpatrick, 2013).
As already stated there is a growing concern for reporting and measurement of sustainability and/ or ESG performance. More and more corporations are rated by investors not just in terms of economic performance and credit status. Responsible investment, also known as socially responsible investment or sustainable investment in the academic literature, takes non-
54 financial criteria into account. While early on responsible investment was based on negative screening of investment objects, current practices are mainly based on pro-active screening and shareholder involvement. In 2012 approximately $3.1 trillion of assets, which represent about 12% of the universe of professionally managed assets from investors in the United States can be quantified as responsible investments, the European Union even accounts for $6.5 trillion (Bert, 2014).
Considering the need for non-financial performance measurement an extensive amount of indices, based on ESG assessment, were introduced by several of the largest financial service providers. The following two sections introduce the MSCI – ESG assessment as well as the Bloomberg ESG performance measurement in greater details. The selection of MSCI and Bloomberg is based on granted access to the regarding data.
Morgan Stanley Capital International (MSCI)
MSCI is a worldwide leading financial service provider for decision support tools to over 6000 clients (MSCI Inc., 2014b). With headquarters based in New York, NY, the first Capital International Indices were published in 1968. MSCI Inc. was formed in 1998 and operated by Morgan Stanley as well as Capital, the fully separation from Morgan Stanley followed eleven years later. The risk management was expended in 2010 by the acquisition of RiskMetrics which allowed them to move into the ESG space (MSCI Inc., 2014c).
The ESG research is based on MSCI’s Intangible Value Assessment (IVA) which aims to provide further information to investors regarding company’s potential risk on terms of environmental, social and governance issues. MSCI’s IVA covers more than 5000 companies worldwide, rates them
55 on a seven point scale from ‘AAA’ to ‘CCC’, classifies them into 154 sub industries and benchmarks every company against industry peers. The evaluation process applies a 3-stage approach. The first step identifies the key drivers of risks and opportunities for each industry, this process involves the identification of four to seven drivers with the largest externalities in terms of environment and social issues. Step two evaluates each company’s risk, based on a breakdown of its business, including its core product segment, business activities, the location of assets or revenues and other relevant issues. An evaluation, including a weighting process, of the company’s strategy towards the identified risks and opportunities is also included in the step. The final step benchmarks the company against industry peers (MSIC Inc., 2013).
The rating involves two major groups of data sources, it combines company specific data with macro-level data in terms of the key issues. The former sources include corporate reporting such as annual reports, investor presentations or financial and regulatory filings. The macro-level data origins from a broad set of sources such as the US Department of Energy, International Council on Clean Technologies or the OECD Ranking Port Cities with High Exposure and Vulnerability to Climate Extremes. The risk management capabilities and strategies are assessed based on corporate documents, government data, journals, news media and other relevant organizations and professionals. In case of necessary further information direct company contact is sought. The final reports, which are updated on an annual basis, include a final extensive reality check by several committees (MSIC Inc., 2013).
A further major financial service provider, namely Bloomberg, is introduced briefly in the next section.
56 Bloomberg – ESG Performance Measurement
Bloomberg L.P. was founded 1982. By offering its professional private network in terms of data, analytics and other financial information they managed to acquire over 10,000 customers within the first decade. At the same time the TV station Bloomberg News was launched additionally further branches offices were opened all around the world (Bloomberg L.P., 2014a). Within the following years further tools were introduced to the market. Today Bloomberg employs more than 15,000 people in 192 different locations in order to quickly connect influential decision makers with a dynamic information network and other people (Bloomberg L.P., 2014b).
Regarding ESG data Bloomberg provides 190 performance indicators, unlike MSCI the values are not aggregated or weighted. The provided data is disclosed either in a metric system in the way of absolute figures, for example in thousands of tons for SO2 emissions, dimensionless for relative figures like the percentage of energy generated from solar power, or those without units, for example the number of ISO 14001 certified sites, as well as indicators which simple state yes if something exists or no otherwise. The data is provided either by CanPan, company’s sustainability reports or by the Bloomberg Environmental, Social and Governance Survey which has to be done by the companies themselves (Bloomberg L.P., n.d.).
More recently on May 27, 2014 the integration of the third-party ESG research provider Sustainalytics into the existing Bloomberg services has been announced (Sustainalytics, 2014), since the data collection was finished at that time, the data is not included in this thesis.
57 Further Institutions
For the sake of completeness it has to be noted that a vast amount of further ESG information provider exists such as RobecoSAM, KLD or FTSE. In the course of this thesis attempts have been made to the respective companies in order to obtain further data. Unfortunately no data has been provided and also no access has been granted to public undisclosed data. Therefore, no further information regarding those companies or standards is provided within this thesis.
58 Global Phosphorus Market
This chapter begins with an overview of the global phosphate and chemical fertilizer market. In the course both are addressed separately to provide greater insights on produced, traded and consumed volumes based on regional levels.
The ensuring section introduces the main global players within the phosphate rock market. The selection is based on their annual production volumes of phosphate rock. Subsequent the then largest actors are profiled including attributes like form of company, operating sites or financial terms.
The chapter is concluded with an overview of the application of the, within chapter 3 identified, sustainability standards within the identified corporations.
Phosphate and Chemical Fertilizer Markets
Although the phosphate rock market was already introduced in brief in the chapter 2.1.3 Reserves, Resources, Market and Peak Phosphorus the following section is providing further insights into the phosphate rock market as well as the market for phosphate-based fertilizers.
Phosphate Rock Market
As already stated due to the unequal distribution of depots only a few countries account for the main volumes of produced phosphate rock. The map in Figure 4-1shows the major producing countries in dark respectively minor producing countries in light blue.
59
Figure 4-1: Map of PR Producing Countries; Source: (de Ridder, de Jong, Polchar, & Lingemann, 2012)
The following Table 4-1illustrates the worldwide produced amounts of phosphate rock per country for the year 2011 and the estimated amounts for 2012.
produced PR estimated PR World total World total Country 2011 [million 2012 [million [%] [%] tons] tons] United States 28.100 14,2% 29.200 14,1% Algeria 1.500 0,8% 1.500 0,7% Australia 2.650 1,3% 2.600 1,3% Brazil 6.200 3,1% 6.300 3,0% Canada 0.900 0,5% 0.900 0,4% China 81.000 40,9% 89.000 42,9% Egypt 3.500 1,8% 3.000 1,4% India 1.250 0,6% 1.260 0,6% Iraq 0.030 0,0% 0.150 0,1% Israel 3.100 1,6% 3.000 1,4% Jordan 6.500 3,3% 6.500 3,1% Mexico 1.510 0,8% 1.700 0,8% Morocco and 28.000 14,1% 28.000 13,5% Western Sahara Peru 2.540 1,3% 2.560 1,2% Russia 11.200 5,7% 11.300 5,4% Saudi Arabia 1.000 0,5% 1.700 0,8%
60 Senegal 0.980 0,5% 0.980 0,5% South Africa 2.500 1,3% 2.500 1,2% Syria 3.100 1,6% 2.500 1,2% Togo 0.730 0,4% 0.865 0,4% Tunisia 5.000 2,5% 6.000 2,9% Other Countries 6.790 3,4% 6.000 2,9% World total 198.080 100,0% 207.515 100,0%
Table 4-1: Produced PR by Country Source: own creation based on: (Jasinski, 2013)
The worldwide largest expansion project from currently 28 million tons per year to annually 50 million tons by 2018 takes place in Morocco by the Moroccan-owned company OCP S.A. (Jasinski, 2013). The latter and further major producers such as US based Mosaic, Russian owned PhosAgro and the Chinese Yuntianhua Group (de Ridder, de Jong, Polchar, & Lingemann, 2012) will be introduced later on in this chapter.
The obvious imbalance of world’s reserves harbors political- economic supply disruption risks. It is likely that that oligopolistic or even monopolistic tendencies grow in the future, which would lead to increased market power for a limited number of actors. Further risks occur due to geopolitical turmoil in major producing countries including the Arab Spring as one of the latest examples. Last but not least the increasingly implemented access restrictions, trade barriers and export quotas by producing countries represent further risks in terms of supply security (de Ridder, de Jong, Polchar, & Lingemann, 2012).
Especially, the latter may have a major impact on the high amounts of phosphate rock imports respectively exports. Subsequent the table and graph summarize imports and exports as well as consumption on a regional level. Thus, the data originate from the International Fertilizer Industry Association (IFIA) the produced amounts vary lightly from the previous presented data.
61 The amounts are expressed in million tons of phosphate rock for the year 2012.
Apparent Countries Production Exports Imports Consumption Total West Europe 0.858 0.044 3.764 4.578 Total EU 27 1.171 0.060 8.231 9.342 Total Central Europe 0 0 2.159 2.159 Total E. Europe & C. 12.815 2.107 2.697 13.405 Asia Total North America 30.115 0 3.553 33.668 Total Latin America 11.237 3.218 3.040 11.059 Total Africa 41.715 16.556 0.009 25.167 Total West Asia 14.489 6.467 1.116 9.137 Total South Asia 1.303 0 7.731 9.034 Total East Asia 79.392 0.489 4.167 83.069 Total Oceania 3.373 1.277 1.009 3.105
Total Various 0 0 0.915 0.915
Total World 195.296 30.158 30.158 195.296
Table 4-2: Production, Trade and Consumption of PR by Region Source: own creation based on: (International Fertilizer Industry Association, 2014a)
Production, Exports, Imports and Consumption by Region 100 000 80 000 60 000 40 000 20 000
0 thousand tones PR tones thousand
Production Exports Imports Apparent Consumption
Figure 4-2: Production, Trade and Consumption by Region Source: own creation based on: (International Fertilizer Industry Association, 2014a)
62 The data identifies the European Union as the largest importer of phosphate rock followed by the region of South Asia due to the lack of phosphate rock occurrence. The by far highest export rates feature in Africa ensued by West Asia. Although the most phosphate rock is produced in East Asia nearly no exports take place since the consumption level exceeds the production level by approximately four million tons.
In order to stay within the scope of the thesis, prices and developments for the PR commodity are not covered any further than to the extent of the section 2.1.3. Since phosphate rock represents a raw material in the process of fertilizer production, the next section will introduce the global market of chemical fertilizers based on phosphate rock.
Phosphate-based chemical Fertilizer Market
The production process of phosphate-based fertilizers was already introduced in the Section 2.2.1 Fertilizers based on Phosphorus. Basically, sulphuric acid is added to ground phosphate rock within the manufacturing process. While in the past single superphosphates represented the most used form of fertilizer a shift to higher concentration took place. High phosphate content fertilizers like diammonium and mono-ammonium are in much higher favor nowadays. These fertilizer contain up to two or three times the amount of phosphorus compared to traditional fertilizers. Diammonium phosphate (DAP) represents the most widely used phosphatic fertilizer worldwide followed by mono-ammonium phosphate (MAP) which also represents the world’s fastest growing phosphate product. Number three in the ranking of most commonly used phosphate fertilizers is the granular triple superphosphate (TSP) (IBIS World, 2014).
63 The production process and detailed chemical composition are beyond the scope of this thesis therefore the following Table 4-3 represents a simplified lists of nutrients as percent of the product, for the main fertilizer types: nitrogen (N), phosphate rock (P2O5), potash oxide (K2O), sulfur (S) and magnesium oxide (MgO) based on IFA for the four above mentioned phosphate fertilizer groups.
Type N P2O5 K2O S MgO
Single Superphosphate 0 16-20 0 12 0 TSP 0 46 0 0 0 DAP 18 46 0 0 0 MAP 11 52 0 0 0
Table 4-3: Nutrients as % of the Product Source: own creation based on: (International Fertilizer Industry Association, n.d.)
When looking at fertilizer prices and development over the last decades the question of influencing factors has to be raised. Various reasons may take a part in developments such as the price for raw materials, delays in supply and demand equilibria, production cutbacks as well decreasing supplies from fertilizer imports have been identified by the US Department of Agriculture for the US (Weber, et al., 2014). The following graph shows the real annual prices for selected fertilizer raw materials or products in real 2010 US dollars since 1980. With this graph at least the factor of raw material prices can be confirmed by a look at the phosphate rock price and the related DAP respectively TSP during the turbulent years 2007 to 2009, at least in terms of finances. It also should be noted that the volatility of nitrogen-based fertilizers (urea) and potash-based (potassium chloride) during the crisis was below that the one of phosphate-based fertilizers.
64 World Bank Commodity Prices 1000,00
800,00
600,00
400,00
200,00
0,00 annual real prices in 2010 US $ US 2010 in prices realannual
Phosphate rock ($/mt) KPHOSROCK DAP ($/mt) KDAP TSP ($/mt) KTSP Urea ($/mt) KUREA_EE_BULK Potasium chloride ($/mt) KPOTASH
Figure 4-3: World Bank Real Commodity Prices Source: own creation based on: (World Bank, 2014)
The following table and graph were created by using varying public available data from the IFA. For this purpose produced amounts, exports, imports and consumption in thousand tons have been combined for DAP, MAP and TSP to stay in line with the statistics of phosphate rock from the previous sections. The goal was to create a comprehensive overview of the main phosphate-based fertilizers on a regional level for the year 2012.
Following to the graph and table which illustrate the above mentioned volumes in greater details, the main actors of the phosphate rock market are identified and described in brief.
65 Produced Exports Imports Consumption Region DAP MAP TSP DAP MAP TSP DAP MAP TSP DAP MAP TSP Total West 219 76 11 59 48 3 1464 225 335 1624 253 343 Europe Total 1821 374 489 1340 99 294 2423 758 492 2905 1033 688 EU 27 Total Central 268 169 324 119 18 199 246 364 12 395 516 138 Europe Total E. Europe 2032 2855 196 1953 1786 0 19 256 0 99 1325 196 & C. Asia Total North 6187 5005 0 3068 1605 0 265 934 173 3385 4333 173 America Total Latin 343 1895 1174 236 380 195 2100 3019 1386 2207 4534 2365 America Total 3012 1743 1501 2629 1562 1332 1010 143 105 1393 324 274 Africa Total West 2708 39 791 1971 29 430 488 69 150 1226 79 510 Asia
Total South 4438 0 48 0 0 0 6723 211 659 11161 211 708 Asia
Total East 15094 11795 1964 4005 526 853 1773 193 299 12862 11462 1410 Asia
Total 650 152 0 432 0 0 346 479 52 564 631 52 Oceania Total 0 0 213 0 0 176 36 62 17 36 62 54 Various
Total 34951 23729 6222 14471 5953 3187 14471 5953 3187 34951 23729 6222 World
Table 4-4: Production, Exports, Imports and Consumption by Region Source: own creation based on: (International Fertilizer Industry Association, 2014b)
66 Production, Exports, Imports and Consumption by Type and Region 35000
30000
25000
20000
15000
10000 thousand tons of product of tons thousand
5000
0
Exports Exports Imports Exports Imports Exports Imports Exports Imports Exports Imports Exports Imports Exports Imports Exports Imports Exports Imports Imports Exports Imports Exports Imports
Produced Produced Produced Produced Produced Produced Produced Produced Produced Produced Produced Produced
Consumption Consumption Consumption Consumption Consumption Consumption Consumption Consumption Consumption Consumption Consumption Consumption Total West Total EU 27 Total Total E. Total North Total Latin Total Africa Total West Total South Total East Total Total Europe Central Europe & America America Asia Asia Asia Oceania Various Europe C. Asia
DAP MAP TSP
Figure 4-4: Production, Exports, Imports and Consumption by Region and Type Source: own creation based on: (International Fertilizer Industry Association, 2014b)
67 Main Actors in the Phosphorus Business
The identification of the key participants in the global phosphorus market, including mining to phosphate fertilizer production is rather delicate. Some of the companies are privately held by governments such as the Moroccan Office Chérifien des Phosphates (OCP) S.A. or the Chinese Yuntianhua Group Co. Ltd which do not have to disclose as many information as public listed corporations like the US-based Mosaic Company or Canada- based PotashCorp. In order to identify the biggest producers, information from research specialists like Markets and Markets, IBIS and CRU have been taken into account together with the company’s annual financial and sustainability reports and further information provided by the likes of Bloomberg and MSCI.
Research and Markets identified the following companies as major players within the global phosphorus and its derivatives market (Markets and Markets, 2013):
OCP S.A. (Morocco) The Mosaic Company (US) Innophos Holding Inc. (US) PotashCorp (Canada) Prayon Group (Belgium) EuroChem (Russia) PhosAgro (Russia) Yuntianhua Group Co. Ltd (China) United Phosphorus Limited (India)
In comparison to the results of Markets and Markets, IBIS has identified ten companies which dominate the fertilizer product segment.
68 Three out of this ten companies are equal to the Markets and Markets studies, namely PotashCorp, The Mosaic Company and OCP S.A.. Besides the latter following companies, containing also non phosphate rock mining firms, feature (IBIS World, 2014):
Uralkali (Russia) Belaruskali (Belarus) Yara (Norway) CF Industries (US) Israel Chemicals Agrium (Canada) K&S Group (Germany)
In terms of competition PhosAgro used data from another research specialist, namely CRU, to identify competitors in the phosphate rock market based on their production volumes (PhosAgro, 2013). Although Chinese competitors were not listed in this statistics for an unknown reason the following graph includes them, based on the data disclosed on the related company’s websites for the mining sites listed by CRU (CRU, 2013). Additionally to the already identified corporations following ones are listed by PhosAgro respectively the Chinese ones identified via CRU:
Vale S.A. (Brazil) Jordan Phosphates Mine Company: JPMC Ma’aden (Saudi Arabia) Guizhou Kalin Group Co., Ltd. (China) Wengfu Group Co., Ltd. (China)
For Yuntianhua no exact amounts were specified, the company’s website only states 10+ million tons of phosphate mining and beneficiation (Yuntianhua Group Co., Ltd., n.d.). Regarding The Mosaic Company the
69 reported phosphate rock amounts vary. PhosAgro respectively CRU (2013) reported them, as in the following figure, at 19 million tons, while Mosaic themselves state 15.4 million tons of phosphate rock for the year 2013 (The Mosaic Company, 2014b).
Volume of produced PR 2013 30 26,4 25
19 20
15 10+ 10 8,3 7,7 7,7 Million Tons of PR of Tons Million 5,3 5 4 5 3,1
0
Figure 4-5: Volume of Produced PR by Corporation Source: own creation based on: (PhosAgro, 2013); *phosphate ore mining and beneficiation (Yuntianhua Group Co., Ltd., n.d.); ** (Wengfu Group Co., Ltd., n.d. - a); *** (Guizhou Kailin Group Co., Ltd., n.d.)
The following sections will introduce the ten largest identified companies, based on their production volume of phosphate rock, in brief.
OCP S.A.
OCP S.A., further only referred to as OCP, is the world’s leader in phosphate rock production. It is based in Morocco and privately held by the Moroccan state. Besides leading the phosphate rock production OCP also leads worldwide exports of phosphate rock with a market share of 30% respectively exports of phosphoric acid with a share of more than 40%. OCP
70 operates four mining sites, namely Khouribga, Bourcraa, Youssoufia and Benguerir two chemical platforms for phosphoric acid and fertilizer production and four phosphate ports with a total of more than 1000 ships. It accounts for 6% of the national GDP and employs approximately 23,000 people worldwide. In terms of clients OCP claims to serve 160 customers worldwide with the largest presence in North America followed by Europe and South America. The company’s strategy includes among others the enhancement of production capacities to more than 50 million tons in 2020, improvements of yields through reduction in production costs as well as a more flexible and commercially agile production volumes. The operating income for 2012 is stated at 62.572 billion durams (currently $7.501billion) (OCP S.A., 2012).
The Mosaic Company
The Mosaic Company, further only referred to as Mosaic, is a publicly traded corporation and listed in the top 250 companies in the Fortune 500. It is based in the United States with headquarters located in Plymouth, Minnesota. Mosaic employs approximately 8900 people and serves customers in 40 countries worldwide which leads to the fact, that Mosaic is the world’s largest combined producer of potash and phosphate (The Mosaic Company, 2013).
The company’s activities are divided into two major segments, phosphates and potash. Mosaic operates four wholly owned mines in central Florida: Four Corners, South Fort Meade, Hookers Prairie and Wingate. Additionally, Mosaic holds strategic equity investments in a phosphate rock mine in Peru as well as a joint venture in the Kingdom of Saudi Arabia. In terms of potash Mosaic owns three mines in the Canadian region of Saskatchewan as well as a mine in New Mexico. The overall annual revenue
71 for the financial year amounted to $8,170.1 million with an operating income of $961.2 million (Bloomberg Businessweek, 2014a).
Yuntianhua Group Co. Ltd
The Yuntianhua Group Co., Ltd is like OCP a state-owned limited liability company. It is authorized by the Yunnan provincial government and one of the ten largest industrial groups within the province. Besides phosphate chemicals, rock mining and beneficiation the company takes part in fertilizer manufacturing, organic chemicals, fiber glass plastic and in the salt industry. The production amounts for high-concentration phosphate fertilizers are stated at 4.5 million tons and more than 10 million tons for phosphate ore mining and beneficiation (Yuntianhua Group Co., Ltd., n.d.).
Vale S.A.
The Brazil-based Vale S.A. is one of the largest mining companies in the world. With headquarters in Rio de Janeiro and publicly listed on the Brazilian BOVESPA Index, it is operating all over the globe on each continent. Although the mined 8.3 million tons of phosphate rock account for a leading position within the world phosphate rock market it represents only a minor division within the company compared to exemplary 370 million tons of copper. The worldwide 83,300 employees and 129,100 contractors generated a total revenue of $48.8 billion for the year 2013 from which approximately 6% can be accounted to fertilizers (Vale S.A., 2013). Vale performs phosphate rock mining in the largest depot of South America, the Bayovar region in Peru, as well as in the Brazilian region Goias (Vale S.A., 2014).
72 PhosAgro
The public listed Russia-based fertilizer manufacturer PhosAgro, listed on the Moscow Stock Exchange, is the largest supplier of phosphate- based fertilizers for the domestic market. In terms of foreign trade PhosAgro’s market share for high-grade raw materials in the Europe lays at 80% respectively 15% for DAP and MAP fertilizer. PhosAgro mines apatite- nepheline ore which contains numerous useful elements besides phosphate, like aluminum oxide or titanium oxide by additionally being very low on hazardous and harmful elements. The ore is minded from igneous sources and contains a very high grade of P2O5 between 39% and 40%, where phosphate rock minded from sedimentary depots usually lays between 28% and 32%. PhosAgro employees close to 19,000 people and generated a revenue of 105 billion million rubles in 2013 (currently $2.98 billion) (PhosAgro, 2014).
PotashCorp
Canada-based PotashCorp is the world’s largest fertilizer company by production capacity of all three primary crop nutrients, potash (K), nitrogen (N) and phosphorus (P). Besides Canada the company is invested in various forms in Chile, Israel, Jordan and China whereby phosphate operations take place in White Springs, Florida and Aurora, North Carolina. Approximately 31% of the overall 5300 employees can be accounted to the phosphate business segment. The main cornerstone in the business strategy is financial health to grow in the potash segment, which represents the most important business for the company due to superior margins and lesser competitively in the market. Phosphate and nitrogen are seen as stabilization factors due to diversification. PotashCorp, which is publicly listed at the Toronto Stock Exchange and the New York Stock Exchange for composite transaction, reported an annual net income for 2012 of 1,785 billion US dollars.
73 Jordan Phosphate Mines Company
The former public company was privatized in 2006 in line with a government strategy to privatize public shareholding companies to improve their performance as well as the national economy (Jordan Phosphate Mines Company, 2014a). JPMC operates three mines, Al-Hessa, Al-Abiad and Eshidiya with capacities of 0.72, 1.05 and 3.6 million tons of phosphate production for the year 2013. From the overall 5.4 million tons approximately 3.2 are exported, with India as major customer picking up more 62% of all sales. JPMC reported a total revenue of 589 million Jordan dinar (currently: $832 million) for the year 2013 which resulted into a net income of 2.6 million Jordan dinar (currently: $3.67 million), especially the comparison of net incomes to the previous years with 131 and 145 million Jordan dinar for the years 2012 and 2011 is remarkable (Jordan Phosphate Mines Company, 2014b).
Wengfu Group Co. Ltd
The Wengfu Group Co. Ltd, further on only referred to as Wengfu, is a large scale state-owned enterprise in China. It originated from the former Guizhou Hongfu Industry & Commerce Development Co. Ltd., Guizhou is also where the sedimentary phosphate mine is located. The enterprise is specialized in phosphate mining and beneficiation as well as the production of phosphate-based fertilizers and various chemicals. The company’s reserves are estimated at a total 580 million tons of phosphate rock with a current annual mining rate of approximately 5 million tons. The annual turnover in 2011 was generated by more than 5,000 employees and is stated at more than 24.5 billion Yuan (currently $3.95 billion) (Wengfu Group Co., Ltd., n.d. - b).
74 Guizhou Kalin Group Co., Ltd.
The Guizhou Kalin Group Co., Ltd. is located in Kaiyng, Xifeng China. It has expanded in various industries besides phosphate mining and phosphate chemicals such as coal chemicals, trade and real estate. The total annual sales value is stated at above $100 million and the number of employees is above 1000 people (Guizhou Kailin Group Co., Ltd., n.d.).
Ma’aden
The Saudi Arabia-based Ma’aden is divided into four major business segments, gold and base metals, phosphates, aluminum and industrial minerals, with phosphate business being the significant growing factor. Ma’aden currently operates one mining site located in Al Jalamid and invested in a joint venture as major partner with Mosaic and Sabic worth approximately $7 billion in Wa’ad Al Shamai. The new site is expected to go live in late 2016 doubling their production capacities. The overall growth is also represented via new recruitments. In 2013 1,478 new employees were added to the overall staff of currently 5,763 employees. The overall sales revenue for 2013 is stated at 6.047 billion Saudi riyal (currently: $1.612 billion), of which 51% can be accounted directly to the sales of DAP fertilizers, further 18% account for ammonia fertilizer (Ma'aden, 2014).
The following concluding sub-chapter will provide an overview of the relevant applied standards, identified by chapter 3, within the above introduced corporations.
75 Sustainability Standards and Indicator Sets in Practice
The subsequent table contains the ten main actors identified by the former sub-chapter 3.4. It provides an overview on the application of the sustainability standards identified by chapter 3 (GRI, ICMM and UNGC).
If the standard is not used the cell’s background is colored in red and contains a minus. In the case the standard is used the cell is colored in green and contains a X. As already stated in the previous section for some companies not too much information is publicly available, in this case the cell‘s background is colored in yellow and contains a question mark. This is especially relevant for GRI, whether or not a sustainability report was available. For the ICMM and UNGC frameworks the regarding websites list the participants respectively provide a search functionality for members.
Name GRI ICMM UNGC
OCP S.A. - - - The Mosaic Company X - X
Yuntianhua Group Co. Ltd ? - -
Vale S.A. X X X
PhosAgro X - -
PotashCorp X - - JPMC ? - - Wengfu Group Co. Ltd ? - - Guizhou Kalin Group Co., Ltd. ? - - Ma’aden - - -
Table 4-5: Applied Standards and Frameworks Source: own creation
76 The results indicate that most of the companies have a lot of room for improvements. In terms of the Chinese firms and JPMC very little information is publicly available, especially not anything close to a sustainability report.
The next chapter forms a business case on one of the leading phosphorus mining firms and conducts a correlation analysis on economic and sustainability performance.
77 Business Case: PotashCorp
The business case on the Canada-based firm Potash Corporation of Saskatchewan Inc., previously often and later on only referred to as PotashCorp, forms the final chapter of this thesis. The chapter is structured as follows, the first section introduces the used key performance indicators categorized accordingly to the triple bottom line, although the classification isn’t necessarily selective. The following sub-chapter provides insights in brief on the applied methods, namely the Kolmogorov-Smirnov (K-S) test, the correlation analysis and the t-test. The statistical results were computed by using the software Statistical Package for the Social Sciences (SPSS). The chapter is concluded by a discussion of the results.
The selection is based on two main considerations, firstly PotashCorp represents the second largest publicly traded corporation regarding phosphate rock production in North America (PhosAgro, 2013) and secondly PotashCorp leads the ranks in the ESG assessment of MSCI for listed phosphate rock producing companies (MSCI Inc, 2014a).
The North American main competitor in the potash and phosphate rock segment, The Mosaic Company, could not be evaluated since the provided data on economic performance is based on a financial year lasting from the first of June to the last of May while most of the ESG data is based on the calendar year. Additionally, the financial reporting period was changed to a calendar year by the introduction of a seven month transitional period (The Mosaic Company, 2014a).
78 Corporate Performance
Measuring a company’s performance was already discussed in sub- chapter 3.5 Corporate Performance Measurement. All of the data, with exception of the phosphate rock price developments, originates exclusively from the corporation’s website. The selection of meaningful KPIs proved to be challenging, especially to the reason that PotashCorp also operates, beside of the phosphate rock business, in the potash and nitrogen fertilizer segments. Therefore some indicators were only available for the overall corporation instead just for the phosphates sector. Additional to the key drivers, used in MSCI’s assessment, further indicators were chosen based on information provided in the according chapters of this thesis.
In the following the indicators are listed with their related units, classified accordingly to the triple bottom line.
Economic Performance
In terms of economic, also denoted as financial, KPIs the selection was narrowed to the following four indicators.
company-wide revenue in $ gross margin phosphate business in $ average realized price per ton phosphate fertilizer in $ phosphate rock price per ton at year-end in $
Environmental Performance
For the category of environmental indicators information was available based on all three business segments separately, therefore only
79 phosphate related indicators were selected. With this selection all MSCI indicators are covered with the exception of “investments in clean tech”. Neither the balance sheet, sustainability report nor the cashflow-statement provided reliable values according research and development investments in the cleaner technologies. In terms of the toxic emissions the information was provided for each phosphate facility separately, therefore the values of all seven phosphate facilities were aggregated.
environmental operating costs: phosphate in $ phosphate rock mined in million tons phosphates (P2O5) in million tons normalized GHG emissions: phosphate in tons CO2e per ton of product direct energy use - intensity: phosphate in GJ per ton waste heat recaptured: phosphates in TJ nitrogen oxides emissions: phosphate facilities in tons carbon monoxide emissions: phosphate facilities in tons particulates(dust) emissions: phosphate facilities in tons sulfur dioxide emissions: phosphate facilities in tons fresh water used: phosphate in million m³ per million tons of product water recycled: phosphate in million m³
Social Performance
Regarding social indicators unfortunately only company-wide data was available. Nevertheless, the following indicators provide reasonable information on the company’s social performance.
number of employees at year-end
80 employee lost-time injury frequency rate per 200,000 work hours recordable injury frequency rate per 200,000 work hours severity injury frequency rate per 200,000 work hours percentage of employees with union memberships average training time per employee in hours total community investments in $ ratio of community investments to revenue community survey: average score with 5 as maximum percentage of local purchasing ratio of manager positions held by women ratio of female board members
The compiled data on the indicators above is contained in the section 5.3 Data and Results. The following sub-chapter provides basic knowledge on the applied statistics in order to comprehend the following calculations.
Methodology
The use of a correlation analysis originates from the according research question itself and will therefore not be further discussed. The method itself, is introduced in the following section.
Correlation Analysis
The correlation coefficient is the widest used measure of association for the continuous data type. Two variables, X and Y form a dataset, the correlation coefficient, also known as Pearson correlation, of this dataset is computed as (Marques de Sá, 2007):
81 푠푋푌 푟 ≡ 푟푋푌 = 푠푋∗푠푌
Where sX and sY represent the standard deviation of each dataset and the covariance of X and Y is denoted as sXY they can be computed as (Marques de Sá, 2007):
2 ( ) 푠 = √∑푛 (푥푖−푥̅) 푠 = ∑푛 푥푖−푥̅ ∗(푦푖−푦̅) 푖=1 푛−1 푋푌 푖=1 푛−1
The correlation coefficient is a dimensionless measure with values in the interval of [-1, 1] represents the degree of linear association of the two datasets. While a value of 0 denotes no linearity between X and Y, the values 1 and -1 imply total correlation (linear association) in the same direction respectively the opposite direction. If more than two datasets are analyzed pairwise the results can be arranged in a correlation matrix where each value represents the correlation coefficient of the according column and row variable (Marques de Sá, 2007).
To provide evidence of true correlation a Student’s t-test has to be performed which in turn requires a goodness of fit test, to see if the data follows a normal distribution, in advance. Therefore the K-S test is introduced in the next sub-chapter.
Kolmogorov-Smirnov Goodness of Fit Test
The K-S goodness of fit test is a one-sample test to evaluate the goodness of fit of a data set Sn(x) to a hypothesized distribution, FX(x).
Thereby the test uses the largest deviation (Dn) from Sn(x) to F(x) as the goodness of fit measure (Marques de Sá, 2007). The null hypothesis can be formalized as:
82 “H0: The data variable X has a cumulative probability distribution FX(x) ≡ F(x)” (Marques de Sá, 2007).
The former hypothesis is rejected at the level α if Dn > dn,α, where dn,α is: PH0 (Dn > dn, α) = α, with the following obtained critical points (Marques de Sá, 2007):
1.63 1.36 1.22 푑푛,0.01 = 푑푛,0.05 = 푑푛,0.1 = √푛 √푛 √푛
In this case the K-S test is used to assess whether the data follows a normal distribution or not which is required by the t-test which follows in the next section.
Student’s t-Test
As already stated, the results of a correlation analysis often require evidence that the respective variables are correlated. The test, where ρ represents the true value of the Pearson correlation, is formulized as H0: ρ >
0 and H1: ρ ≠ 0 for a two-sided test. If r represents the sample Pearson correlation with the sample size n and the null hypothesis is verified as well as the variables is normally distributed the test has a Student’s t distribution with n – 2 degrees of freedom. It is computes as follows (Marques de Sá, 2007):
푛 − 2 푡∗ = 푟 ∗ √ 1 − 푟2
The next sub-chapter provides the statistical results of the analysis as well as an overview of the input data and the used statistical parameters.
83 Data and Results
Due to formatting reasons the following three paragraphs contain all of the relevant information for the following sections.
The initial section lists all KPIs categorized in economic, environmental and social indicators with the according data in absolute values for the years 2009 to 2013. Additionally relative growth ratios were calculated for each pair of following years. The units regarding the values are stated in- between square brackets.
Subsequently the results of the K-S goodness of fit test, which was used to determine whether the input values were normally distributed or not, with α being 0.05 are provided. From the 28 variables 24 were normally distributed for the remaining four, KPE3, KPE6, KPS6 and KPS12 the hypothesis H0 was rejected, which implies that although correlation was found the t-test for evidence is invalid.
The concluding section displays the results in a correlation matrix. To provide a better overview cells with a strong correlation at a two-sided significance level of 0.05 are colored in gold respectively green for a two- sided significance level of 0.01. The main diagonal is colored in grey since it does not contain any relevant information. For the indicators which failed the K-S test the columns respectively rows contain values colored in a dark red font.
84 Input
Variable 2009* 2010 2011 2012 2013 ch_0910 ch_1011 ch_1112 ch_1213 Financial (Economic) revenue [million US $] KPF1 3.893,00 6.398,00 8.624,00 7.859,00 7.023,00 64,35% 34,79% -8,87% -10,64% gross margin phosphate business [million US $] KPF2 92,00 346,00 648,00 469,00 304,00 276,09% 87,28% -27,62% -35,18% average realized price per ton phosphate fertilizer [million US $] KPF3 299,00 422,00 575,00 522,00 433,00 41,14% 36,26% -9,22% -17,05% phosphate rock price per ton (70% BPL) at year-end [US $] ** KPF4 90,00 140,00 202,50 185,00 101,00 55,56% 44,64% -8,64% -45,41% Environment environmental operating costs: phosphate [million US $] KPE1 92,60 79,40 68,00 88,00 82,10 -14,25% -14,36% 29,41% -6,70% phosphate rock mined [million tons] KPE2 6,70 5,90 7,30 6,80 7,70 -11,94% 23,73% -6,85% 13,24% phosphates (P2O5) [million tons] KPE3 1.505,00 1.987,00 2.204,00 1.983,00 2.058,00 32,03% 10,92% -10,03% 3,78% normalized GHG emissions: phosphate [tons CO2e/ ton] KPE4 0,53 0,47 0,40 0,44 0,46 -11,32% -14,89% 10,00% 4,55% direct energy use - intensity: phosphate [GJ / ton] KPE5 5,40 4,40 3,90 4,70 4,50 -18,52% -11,36% 20,51% -4,26% waste heat recaptured: phosphates [TJ] KPE6 12,70 22,10 25,00 22,50 24,00 74,02% 13,12% -10,00% 6,67% nitrogen oxides emissions: phosphate facilities [tons] KPE7 958,84 1.004,78 965,98 977,25 1.130,13 4,79% -3,86% 1,17% 15,64% carbon monoxide emissions: phosphate facilities [tons] KPE8 612,71 763,56 490,53 762,37 926,55 24,62% -35,76% 55,42% 21,54% particulates(dust) emissions: phosphate facilities [tons] KPE9 381,90 608,45 521,19 475,37 410,78 59,32% -14,34% -8,79% -13,59% sulfur dioxide emissions: phosphate facilities [tons] KPE10 8.341,70 7.478,00 8.591,00 7.356,00 8.891,00 -10,35% 14,88% -14,38% 20,87% fresh water used: phosphate [million m³/million tons] KPE11 38,60 29,30 33,40 32,80 26,10 -24,09% 13,99% -1,80% -20,43% water recycled: phosphate [million m³] KPE12 717,40 777,20 940,80 819,10 938,90 8,34% 21,05% -12,94% 14,63% Social employee at year-end [#] KPS1 5.136,00 5.486,00 5.703,00 5.779,00 5.787,00 6,81% 3,96% 1,33% 0,14% employee lost-time injury frequency rate [# per 200,000 work hours] KPS2 0,20 0,22 0,18 0,16 0,03 10,00% -18,18% -11,11% -81,25% recordable injury frequency rate [# per 200,000 work hours] KPS3 1,57 1,49 1,48 1,60 1,19 -5,10% -0,67% 8,11% -25,63% severity injury frequency rate [# per 200,000 work hours] KPS4 0,86 0,48 0,58 0,96 0,51 -44,19% 20,83% 65,52% -46,88% employees with union memberships [%] KPS5 36,00% 37,00% 38,00% 39,00% 41,00% 1,00% 1,00% 1,00% 2,00% average training time [hours per employee] KPS6 99,00 130,00 136,00 129,00 126,00 31,31% 4,62% -5,15% -2,33% total community investments [million US $] KPS7 10,00 17,00 21,00 28,00 31,00 70,00% 23,53% 33,33% 10,71% community investments / revenue [%] KPS8 0,26% 0,27% 0,24% 0,36% 0,44% 0,01% -0,02% 0,11% 0,09% community survey: average score (out of 5) KPS9 4,10 4,20 4,40 4,50 4,20 2,44% 4,76% 2,27% -6,67%
85 local purchase [%] KPS10 62,00% 65,00% 69,00% 68,00% 60,00% 3,00% 4,00% -1,00% -8,00% manager positions held by women [%] KPS11 13,00% 14,00% 15,00% 16,00% 16,00% 1,00% 1,00% 1,00% 0,00% board composition: female board members [%] KPS12 25% 25% 23% 23% 23% 0,00% -2,00% 0,00% 0,00%
* CDN GAAP till 2009-12-31, IFRS since 2010-01-01
Table 5-1: Table of Input Data Source: own creation based on (Potash Corp, 2014b), ** (Index Mundi, 2014)
K-S Goodness of Fit Test
Variable Result Variable Result Variable Result Variable Result
KPF1 keep H0 KPE4 keep H0 KPE11 keep H0 KPS6 reject H0
KPF2 keep H0 KPE5 keep H0 KPE12 keep H0 KPS7 keep H0
KPF3 keep H0 KPE6 reject H0 KPS1 keep H0 KPS8 keep H0
KPF4 keep H0 KPE7 keep H0 KPS2 keep H0 KPS9 keep H0
KPE1 keep H0 KPE8 keep H0 KPS3 keep H0 KPS10 keep H0
KPE2 keep H0 KPE9 keep H0 KPS4 keep H0 KPS11 keep H0
KPE3 reject H0 KPE10 keep H0 KPS5 keep H0 KPS12 reject H0
Table 5-2: Results of K-S Test: own creation based on SPSS results
Correlation Matrix
86
KPS1 KPS2 KPS3 KPS4 KPS5 KPS6 KPS7 KPS8 KPS9
KPF1 KPF2 KPF3 KPF4
KPE1 KPE2 KPE3 KPE4 KPE5 KPE6 KPE7 KPE8 KPE9
KPS10 KPS11 KPS12 KPE10 KPE11 KPE12 KPF1 1 .95 .98 .83 -.72 .36 .95 -.99 -.87 .93 .12 -.03 .44 -.03 -.47 .79 .91 -.25 -.18 -.23 .57 .94 .71 .21 .83 .65 .79 -.81 KPF2 .95 1 .99 .94 -.80 .23 .88 -.98 -.88 .82 -.16 -.32 .53 -.07 -.24 .67 .73 .03 .04 -.19 .30 .88 .46 -.10 .83 .82 .57 -.68 KPF3 .98 .99 1 .92 -.72 .30 .89 -.99 -.84 .85 -.07 -.20 .45 -.09 -.30 .71 .82 -.09 .00 -.12 .43 .89 .59 .06 .89 .77 .70 -.77 KPF4 .83 .94 .92 1 -.61 .00 .68 -.86 -.69 .62 -.45 -.45 .56 -.34 .02 .39 .56 .29 .39 .09 .06 .75 .28 -.27 .90 .96 .42 -.53 KPE1 -.72 -.80 -.72 -.61 1 -.22 -.83 .81 .95 -.75 -.04 .36 -.59 -.28 .35 -.72 -.48 -.01 .27 .67 -.17 -.77 -.20 .24 -.34 -.49 -.26 .39 KPE2 .36 .23 .30 .00 -.22 1 .33 -.36 -.22 .33 .50 .10 -.60 .80 -.22 .77 .50 -.81 -.62 -.07 .71 .12 .59 .56 .17 -.20 .59 -.78 KPE3 .95 .88 .89 .68 -.83 .33 1 -.94 -.96 .99 .31 .08 .54 .08 -.67 .84 .88 -.31 -.39 -.53 .60 .97 .68 .23 .61 .47 .72 -.70 KPE4 -.99 -.98 -.99 -.86 .81 -.36 -.94 1 .91 -.90 -.03 .19 -.46 -.03 .38 -.79 -.83 .15 .13 .27 -.47 -.92 -.59 -.07 -.80 -.70 -.69 .77 KPE5 -.87 -.88 -.84 -.69 .95 -.22 -.96 .91 1 -.91 -.16 .13 -.64 -.12 .54 -.78 -.71 .12 .31 .63 -.38 -.93 -.45 .03 -.51 -.53 -.50 .54 KPE6 .93 .82 .85 .62 -.75 .33 .99 -.90 -.91 1 .40 .22 .51 .04 -.74 .83 .92 -.39 -.44 -.51 .68 .97 .76 .35 .61 .41 .79 -.72 KPE7 .12 -.16 -.07 -.45 -.04 .50 .31 -.03 -.16 .40 1 .82 -.22 .46 -.84 .52 .46 -.89 -.95 -.54 .80 .19 .65 .84 -.27 -.67 .52 -.33 KPE8 -.03 -.32 -.20 -.45 .36 .10 .08 .19 .13 .22 .82 1 -.13 -.07 -.75 .10 .36 -.67 -.60 -.20 .66 .09 .60 .86 -.17 -.59 .48 -.13 KPE9 .44 .53 .45 .56 -.59 -.60 .54 -.46 -.64 .51 -.22 -.13 1 -.55 -.31 .04 .21 .50 .20 -.47 -.21 .68 -.05 -.41 .28 .57 -.01 .16 KPE10 -.03 -.07 -.09 -.34 -.28 .80 .08 -.03 -.12 .04 .46 -.07 -.55 1 -.10 .57 .04 -.59 -.68 -.38 .33 -.15 .11 .22 -.36 -.47 .06 -.30 KPE11 -.47 -.24 -.30 .02 .35 -.22 -.67 .38 .54 -.74 -.84 -.75 -.31 -.10 1 -.59 -.69 .64 .78 .69 -.76 -.63 -.73 -.67 -.05 .25 -.64 .37 KPE12 .79 .67 .71 .39 -.72 .77 .84 -.79 -.78 .83 .52 .10 .04 .57 -.59 1 .81 -.66 -.67 -.49 .77 .70 .73 .44 .41 .14 .74 -.84 KPS1 .91 .73 .82 .56 -.48 .50 .88 -.83 -.71 .92 .46 .36 .21 .04 -.69 .81 1 -.58 -.43 -.22 .85 .84 .94 .60 .71 .33 .97 -.89 KPS2 -.25 .03 -.09 .29 -.01 -.81 -.31 .15 .12 -.39 -.89 -.67 .50 -.59 .64 -.66 -.58 1 .86 .23 -.92 -.15 -.78 -.91 .02 .53 -.70 .63 KPS3 -.18 .04 .00 .39 .27 -.62 -.39 .13 .31 -.44 -.95 -.60 .20 -.68 .78 -.67 -.43 .86 1 .68 -.74 -.23 -.56 -.68 .31 .61 -.44 .36 KPS4 -.23 -.19 -.12 .09 .67 -.07 -.53 .27 .63 -.51 -.54 -.20 -.47 -.38 .69 -.49 -.22 .23 .68 1 -.23 -.46 -.12 -.05 .33 .22 -.05 -.03 KPS5 .57 .30 .43 .06 -.17 .71 .60 -.47 -.38 .68 .80 .66 -.21 .33 -.76 .77 .85 -.92 -.74 -.23 1 .50 .96 .91 .33 -.20 .92 -.81 KPS6 .94 .88 .89 .75 -.77 .12 .97 -.92 -.93 .97 .19 .09 .68 -.15 -.63 .70 .84 -.15 -.23 -.46 .50 1 .63 .16 .67 .58 .68 -.60 KPS7 .71 .46 .59 .28 -.20 .59 .68 -.59 -.45 .76 .65 .60 -.05 .11 -.73 .73 .94 -.78 -.56 -.12 .96 .63 1 .84 .55 .03 .99 -.85 KPS8 .21 -.10 .06 -.27 .24 .56 .23 -.07 .03 .35 .84 .86 -.41 .22 -.67 .44 .60 -.91 -.68 -.05 .91 .16 .84 1 .09 -.48 .75 -.56 KPS9 .83 .83 .89 .90 -.34 .17 .61 -.80 -.51 .61 -.27 -.17 .28 -.36 -.05 .41 .71 .02 .31 .33 .33 .67 .55 .09 1 .83 .68 -.72 KPS10 .65 .82 .77 .96 -.49 -.20 .47 -.70 -.53 .41 -.67 -.59 .57 -.47 .25 .14 .33 .53 .61 .22 -.20 .58 .03 -.48 .83 1 .19 -.31 KPS11 .79 .57 .70 .42 -.26 .59 .72 -.69 -.50 .79 .52 .48 -.01 .06 -.64 .74 .97 -.70 -.44 -.05 .92 .68 .99 .75 .68 .19 1 -.91 KPS12 -.81 -.68 -.77 -.53 .39 -.78 -.70 .77 .54 -.72 -.33 -.13 .16 -.30 .37 -.84 -.89 .63 .36 -.03 -.81 -.60 -.85 -.56 -.72 -.31 -.91 1
Table 5-3: Correlations Matrix: own creation based on SPSS results
87 Discussion of Results
The following section aims to explore and discuss the main results from above in greater details.
Correlations between Economic and Environmental respectively Social Indicators
A strong negative correlation at a two-sided significance level of 0.01 exists for the normalized greenhouse gas (GHG) emissions and the economic indicators: overall annual revenue and gross margin for the phosphate segment. Recent studies within the extractive industry, although on the overall environmental level and not on specific indicators, show similar results according environmental performance and economic returns (Weber & Banks, 2012). Furthermore continual improvements in the environmental fields can be associated to higher business performance (Gomes, Kneipp, Kruglianskas, da Rosa, & Bichueti , 2013). The negative correlation, although at a two-sided significance level of 0.05, of the gross margin in the phosphate segment and the direct energy use intensity undeniable falls into the same category as the two mentioned correlations above.
The reduction of GHG itself represents a main target within the environmental target scorecard of the PotashCorp, although a company-wide reduction for the year 2013 in comparison to 2012 was not achieved. Besides, no link or coherence from the sustainability report to the current Canadian GHG policy is made (Potash Corp, 2014a). In terms of provincial actions the region of Saskatchewan, where the company’s headquarters are located, is working towards the adoption of SGER-style regulations for 2015 under the “Management and Reduction of Greenhouse Gases Act”. The later faces
88 ongoing discussions on the equivalency with federal governmental regulations. Especially the local industry is in favor of the lighter touch, emerging under the federal processes. (Sawyer & Gass, 2014).
So far the results imply not many surprises particularly when considering that direct energy represents a cost factor which reduces the margin. Suchlike also applies for GHG emissions if either certificates to emit have to been bought or measures to reduce the output either by law or intrinsically motivated have to be taken. In terms of economic and social performance only the coherences between overall revenue and the number of employees at the end of the year proved a significant correlation.
The next section addresses the correlation results between environmental and social indicators respectively within each of the three categories at a two-sided significance level of 0.01.
Further Correlations (Significance 0.01)
Within the group of financial indicators the positive correlations of overall revenue respectively gross margin on the phosphate segment, with the average realized price for phosphate fertilizers do not contain any new exciting insights. The general (simplified) way to calculate one’s revenue is the amount of goods sold times the price of the products, minus the costs. Therefore a higher realized price leads to a higher revenue. In the case of the gross margin it likewise simple because the gross margin equals the price of the goods sold minus the costs.
Regarding the coherence between the number of employees and the percentage of management position held by women an empirical analysis of FTSE 100 companies found similar evidence to suggest that the total number
89 of staff employed, positively influenced the number of female non-executive directors (McCann & Wheeler, 2011).
Finally two further correlations at a two-sided significance level of 0.01 were statistically confirmed. Both include the indicator of overall annual community investments. Regarding the latter the performed literature review didn’t provide too much rigorous explanation. Community investments are a vital part within PotashCorp’s annual report. The investment target is set at one percent of consolidated income before income taxes on a five-year rolling average, which was met in the year 2013. (Potash Corp, 2014a). Therefore the indicator may be considered as exogenous, as long as the spending is a percentage of the income and the target is met.
Concerning the density of union memberships it has to be stated that at large in Canada (Government of Canda, 2014) as well as in the US (United States Bereau of Labor Statistics, 2014) the density of union memberships is declining. Both countries aggregated, account for more than 93% of PotashCorp’s employees and still, the percentage of people with union memberships rose from 36% in 2009 to 41% in 2013 (Potash Corp, 2014b).
The following section will discuss further results at a lower significance level in brief.
Further Correlations (Significance 0.05)
The identified correlation within the financial indicators will not be discussed at this point since the coherences were already discussed in the previous section.
While the current analysis proved relations in the form of negative correlation between lost-time injury and union memberships, Sinclair, Marin
90 & Sears (2010) used structural equation analysis to show that union safety values influence safety outcomes through higher safety motivations.
The mining and metals industry will much likely face the need to increase efforts in research and development mainly for two reasons carbon tax respectively cap-and-trade schemes for CO2 emissions as well as rising energy costs (Filippou & King, 2011). The identified correlation takes the same line, environmental costs depend on the energy use intensity which again positively correlates with the normalized GHG emissions per ton of product.
With this study several limitations are given, the main issue is that the evaluation of one single firm, PotashCorp, can neither represent the overall phosphate industry and especially not the overall extractive industry. Furthermore the analyzed time period is rather short which is based on the availability of data. Sustainability reporting, like it is performed nowadays, is still in its initial stage compared to financial reporting. It may take years to come, till companies are able to provide long time series of sustainability data in consistent quality and consistent measurement methods. The concluding issue is the selection of suitable indicators for such kind of analysis. While it should be based on a combination of scientific research and best-practice sometimes it has to be based, once again, on the availability of data. Especially for large enterprises which operate in several different industries or business segments detailed analyses may be hard, since often sector or business segment specific data is not available. By taking company-wide data instead a risk of bias is given since different segments may perform opposite.
The conclusion for the analysis as well as the previous work is provided in the following final concluding chapter.
91 Conclusion
On the one hand, it was the challenge and opportunity to contribute to the Global TraPs project and on the other hand it was the complexity and significance of the topic, especially since phosphorus, fertilizers or mining were hardly ever part of master’s program in Graz, which motivated the author the most. As already stated several times, phosphorus is essential for all life on earth including us human beings as well as flora and fauna. Furthermore it is unfortunately neither substitutable nor infinite. Together with nitrogen and potassium, phosphorus is one of the three main types of modern chemical fertilizers which play an important role in the global food security. The vast majority of today’s used phosphorus originates from mining of sedimentary phosphate rock depots which are, for the most parts, located in Morocco including the Western Sahara, US and China.
The extractive industry faces a tough challenge on introducing sustainability into a business which technically cannot be sustainable at least not by the original Brundtland definition. Over the last years a vast amount of standards, initiatives, frameworks and indicator sets was developed by organizations like the United Nations, further NGOs or industrial associations. Based on a criteria set the field was narrowed down to three standards which seemed to be the most universal and promising from an overall mining industry’s perspective.
The market for phosphate rock respectively phosphate-based fertilizers is complex and dominated by major established players from Morocco, North America, China, Brazil and Russia and evolving firms from Jordan and Saudi Arabia. The review on the application of the three identified standards within the ten largest firms, based on their production volume of
92 phosphate rock, led to the conclusion that there is still a lot of room to develop and adapt for most of the firms.
The study of interrelations between economic and sustainability performance on a created business case entailed expected, as well as interesting results. But, as already stated in the conclusion of the previous chapter, the results are based on one single business case on one firm and should not be used for generalization. Studies on a larger scale within the mining industries have already been performed by Weber & Banks (2013) or Gomes et al. (2013). Their results showed similar correlations between indicator groups as well, but did not provide detailed insights on single indicators. Especially from a business perspective it is important to identify the exact leverage points with the highest impacts on economic, environmental and social performance.
From the authors perspective, this is exactly where further research should be heading, phosphorus is essential for us all therefore we should aim to mine as little as necessary at an efficiency level as high as possibly, performed by vital and highly advanced firms which are aware of their social responsibilities regarding their staff and the communities in which they are present, with minimum environment impact. By continuing transparent reporting according to international standards, companies can lay the ground for further empirical research in order to identify the measures with the greatest impact to finally help us all.
Enhanced availability of data at companies’ levels will also provide the foundation research on the overall sector. A bottom up approach could be used to assess all major companies within the PR mining industry, in a way it has been done in this thesis. The aggregation of these results then could be used to form a case study on the overall industry to derive more general insights which then could be used for comparisons to other mining industries.
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