SAMESG (South African guideline for the reporting of environmental, social and governance (ESG) Parameters

International reporting standards and codes are becoming increasingly stringent when considering the requirements for accurate and appropriate disclosure of organisational social and environmental liability. The Environmental and, Social aspects, and associated Governance therein (“ESG”) which are associated with projects are often technically complex, and span the entirety of the project value chain (Fig. 3).

Figure 3:                Applicability of SAMESG

There is an extensive selection of technical standards available which provide a detailed framework for the reporting of social and environmental (socio-environmental) liabilities in the extractive industries. Internationally acknowledged ESG standards and frameworks include:

• The Global Reporting Initiative (“GRI”), a widely-used sustainability reporting framework that sets out principles and performance indicators for companies to report on ESG performance.
• The Carbon Disclosure Project, a reporting system through which companies disclose greenhouse gas emissions, water management and climate change strategies.
• The United Nations Global Compact, a sustainability initiative for companies to align their strategies and operations in the areas of human rights, labour, environment and anti-corruption.
• The International Finance Corporation Sustainability Framework.
• The Equator Principles.

These frameworks span various business units in an organisation, addressing the technical, engineering, management and financial accounting requirements for operational socio-environmental management, closure practice and remediation.

The SAMCODES Standards Committee (SSC) has responded to this shift in global recognition of the importance of competent assessment of and reporting on socio-environmental liability through the publication of the South African guideline for the reporting of environmental, social and governance (ESG) parameters within the solid minerals, oil and gas industries (the SAMESG guideline). The SAMESG was first released in 2016 and was compiled through a collaborative effort amongst various technical specialists, all who shared a common understanding that a key driver for organisations to adopt ESG reporting is that more investors are incorporating ESG criteria into their valuations and investment strategies.

The SAMESG was produced to define the relevant ESG aspects which should be reported on in public reports issued for the extractive industries and provides guidance on the reporting of the following aspects:

• organisational structure, systems, policies, procedures and risk control management plans;
• compliance related ESG aspects;
• key environmental parameters;
• external social and political parameters;
• internal social parameters;
• conformance and compliance audits;
• ESG liability; and
• Risk analysis and materiality processes.

Although initially compiled as a technical guideline for Competent Persons Reports, the guideline has evolved to provide direction on ESG reporting requirements for public reporting, as defined in SAMREC. The intention of SAMESG is to define the key ESG aspects which influence the reasonable prospects for eventual economic extraction as well as the Modifying Factors. There are nine items which should be reported on within the existing framework established by Table 1 of the SAMREC and SAMVAL codes. These nine items are clearly defined in Section 2, 3 and 4 of the SAMESG. To the extent that any one of the items, or any component of an item, specified in SAMESG does not apply to a reporting entity and its activities and operations, or is not material, reference must be made to why that Item or component is not applicable or not material (i.e. the “If not, why not” principle applies).

SAMESG principles (including the details referred to in Parts V/VI) can also be applied directly in the compilation of:

• Environmental Management Plans (EMPs), Environmental Management Programs (EMPRs), and Environmental Scoping Studies that are supplied to the Regulator;
• Social Labour Plans or similar documents submitted to the Regulator;
• Applications for operational environmental licences;
• Backup documentation for Public Reports;
• Sustainability reports
• All other ESG-specific documents/reports.

The SAMESG also provides guidance on the technical supporting information required when compiling compliancy documents for frameworks such as the Equator Principles, United Nations Principles for Responsible Investment (“UN PRI”) and Global Reporting Initiative (“GRI”). These standards, principles and frameworks encourage collaborative engagement towards more inclusive and transparent analysis of environmental, social and governance matters, which in turn influence decision - making and project development practices.

How to apply SAMESG to SAMREC and SAMVAL - Compliant CPRs

The intention of SAMESG is to define the key ESG aspects which influence the reasonable prospects for eventual economic extraction as well as the Modifying Factors. There are nine items which should be reported on within the existing framework established by Table 1 of the SAMREC and SAMVAL codes. These nine items are clearly defined in Section 2, 3 and 4 of the SAMESG.

The SAMREC/SAMESG Table 1 illustrates which SAMESG items should be reported under specific SAMREC, SAMVAL, and SAMOG items.

To the extent that any one of the items, or any component of an item, specified in SAMESG does not apply to a reporting entity and its activities and operations, or is not material, reference must be made to why that Item or component is not applicable or not material (i.e. the “If not, why not” principle applies).

Before

After

Frequently Asked Questions

1. What is the SAMESG and why has it been published?
   In December 2013, the SSC officially recognised the need to develop an ESG technical guideline to inform the extractive industries reporting codes, notably, the SAMREC, SAMVAL and SAMOG. The South African guideline for the reporting of environmental, social and governance (ESG) parameters within the mining industry (the SAMESG, or the Guideline) was completed in December 2015.
   
   The SAMESG provides a standardised, systematic and orderly framework for reporting and defines material ESG matters which influence the reasonable and realistic prospects for eventual economic extraction.
   The reporting framework requirements have been based on widely used internationally accepted best practices in the ESG field, and as such is relevant to global reporting exchanges.
   
   
2. What commodities does the SAMESG apply to?
   Solid minerals, oil, and gas.
   
   
3. How are the requirements of the SAMESG incorporated into the 2016 SAMREC Code?
   The 2016 SAMREC report has been updated to include the key reporting aspects which are contained in the SAMESG. The SAMESG is not specifically referenced in the SAMREC, and CPs / CVs are directed to the full SAMESG when determining the reporting requirements which should be completed when compiling a SAMREC/ SAMVAL compliant CPR.
   
   
4. How are the requirements of the SAMESG incorporated into the 2016 SAMVAL?
   The SAMESG is specifically referenced in the 2016 SAMVAL Code to the extent that when reporting on ESG modifying factors, reference should be made to the ESG reporting parameters as required by SAMESG or other recognised code (e.g. Equator principals).
   
   
5. What needs to be included?
   There is a reporting table available on the SSC website to assist CPs/CVs with determine what information should be reported (available on the SSC site SAMESG page). The information required by the SAMESG does not need to reported under separate headings, and should be incorporated into existing reporting items (i.e. those required by SAMREC/SAMVAL).
   
   The SAMESG has been designed to allow the CP and/ or CV to report on ESG aspects which are material to the operations included in the report.
   
   
6. Are there requirements for competency when reporting on ESG aspects?
   Yes – the same CP/CV requirements for SAMESG and SAMVAL apply to the SAMESG – i.e. a technical expert should provide input when reporting on ESG aspects for standalone Public Documents.
   
   
7. Is there any technical support for CPs wishing to apply the SAMESG?
   Yes – the SAMESG committee is available to all CPs/ CVs or those seeking more information on the SAMESG and how to report on the required aspects therein. Contact can be made through the SSC website.

Important definitions

Environmental, Social and Governance (ESG)

1. Environmental (E): Issues relating to the quality and functioning of the natural environment and natural systems. These include: biodiversity loss; greenhouse gas (GHG) emissions; climate change; renewable energy; energy efficiency; air, water or resource depletion or pollution; waste management; stratospheric ozone depletion; changes in land use; ocean acidification; and changes to the nitrogen and phosphorus cycles.
2. Social (S): Issues relating to the rights, well-being and interests of people and communities. These include: human rights; labour standards in the supply chain; child, slave and bonded labour; workplace health and safety; freedom of association and freedom of expression; human capital management and employee relations; diversity; relations with local communities; activities in conflict zones; health and access to medicine; HIV/AIDS; consumer protection; and controversial weapons.
3. Governance (G): Issues relating to the governance of companies and other investee entities. In the listed equity context, these include: board structure, size, diversity, skills and independence; executive pay; shareholder rights; stakeholder interaction; disclosure of information; business ethics; bribery and corruption; internal controls and risk management; and, in general, issues dealing with the relationship between a company’s management, its board, its shareholders and its other stakeholders. This category may also include matters of business strategy, encompassing both the implications of business strategy for environmental and social issues, and how the strategy is to be implemented. In the unlisted asset classes governance issues also include matters of fund governance, such as the powers of Advisory Committees, valuation issues, fee structures, etc.

Materiality

Definitions of materiality can centre on valuation-based decisions by shareholders, on broader interests of shareholders, or on the perspectives of a wider set of stakeholders combined with assessments of the company’s positive and negative impacts on society.

For the purposes of ESG reporting, the following constitutes a material issue:

1. On the results of a comprehensive impact assessment, the level of impact within the mine’s pre-defined Zone of Influence (ZoI) has been rated as a significant impact. These impacts are those that are still significant post mitigation action (should a competent EIA process be undertaken, in which a suitable impact assessment has been performed), or those impacts that cannot be mitigated;
2. Any relocation/resettlement of a community (number of households to be resettled is irrelevant);
3. Any permanent loss of ecosystem functionality (irrespective of area of impact), with specific focus towards sensitive ecosystems in critical biodiversity areas;
4. An issue that contravenes a legal requirement that can or will result in the issuance of directives, penalties, suspension of authorisations and/or prosecution; and
5. Any major finding from a conformance audit.

Technical Specialist

A Technical Specialist must have an applicable academic qualification and a minimum of five years’ relevant ESG experience. It is, further, recommended that he/she is also registered with an appropriate professional/statutory body or relevant Recognised Professional Organisation (“RPO”). The Technical Specialist must also comply with the provisions of the relevant promulgated Acts. Persons being called upon to sign as a Technical Specialist must, within the context of this definition, be clearly satisfied in their own minds that they are able to face their peers and demonstrate competence.