For critical minerals, it’s better to talk about SDGs than ESG

Big Nickel and Stack (Photo: DeaShoot/Flickr, CC BY-ND 2.0)

Canada – known the world over for its seemingly endless supply of natural resources – is at a crossroads when it comes to the growing global appetite for critical minerals.

Critical minerals, such as lithium, nickel, and cobalt, are crucial for electric vehicles, wind turbines, solar cells and more, as part of the global green transition. Amidst this landscape, Canada is emerging as a pivotal player, as one of the only Western nations endowed with the mineral resources required for electric vehicles.

Canada’s 2022 Critical Minerals Strategy aims to position Canada as a key supplier in the global minerals market. So does a strategy by British Columbia, which released phase one of it in February. Both strategies aim to drive research and innovation, develop bilateral and multilateral partnerships, and further economic reconciliation with Indigenous Peoples.

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Both emphasize environmental, social, and governance (ESG) metrics. But use of the term ESG could lead to miscommunication. Instead, Canadian entities dealing with international partners should use plain-language terms to build a shared understanding of sustainability goals.

A striking KPMG survey published in March revealed that 98 per cent of decision-makers in 75 Canadian mining companies believe the critical-minerals sector requires more investment.

One way to attract capital is to cooperate with key international partners, such as Japan.

Connecting with Japan

Japan is a major importer of critical minerals and relies heavily on stable suppliers for its industrial needs. Canada is a reliable and geopolitically secure trade partner and needs to keep abreast of the characteristics of the Japanese market and trade preferences if it wants to supply Japan.

Canada and Japan’s long diplomatic history, in addition to a 2023 Memorandum of Cooperation for a reliable battery supply chain, are testament to the strengths and the importance of their collaboration.

Japanese business leaders, government officials and think tanks see Canada as a world leader in its commitment to environmental compliance and social responsibility. These values are clearly visible in the federal and B.C. critical-minerals strategies.

But Canadian governments and companies could communicate more effectively by using common sustainability terminology.

Examples of this include shifting away from “corporate sustainability” and toward more holistic concepts like kyosei (culture of co-existence), muda (activities that are wasteful and unproductive), and kaizen (continuous improvement).

This would better position Canada in trade negotiations, conferences and other engagements.

The risk in using the term “ESG”

Among the most recognizable values credentials companies use to demonstrate their commitment to best practices is ESG. Yet, Canadian companies and governments could face challenges using the term with international trade partners.

First, ESG compliance is difficult to measure. There are several recognized ESG standards used in the public and private sectors, but there is no international standard for how to operationalize ESG, and what counts as good environmental, social, and governance performance.

Second, ESG language is far from ubiquitous in international trade. This is further compounded when working with international partners where a language barrier may make communicating sustainability values more complex.

So, what language should be used instead?

One solution is to shift the communication narrative from ESG to a globally recognized frameworks such as the United Nations Sustainable Development Goals (SDGs). This could significantly enhance Canada’s engagement with international partners, particularly Japan.

The 17 Sustainable Development Goals aim to eradicate poverty, protect the environment, and stimulate economic growth. The goals have a high degree of overlap with ESG, with the added benefit of being more widely recognized internationally.

Canada can leverage its success and initiatives within the realm of ESG and integrate them into the broader framework of the SDGs. This includes aligning its actions with specific SDGs that are relevant to critical minerals, such as clean energy (SDG 7); industry, innovation, and infrastructure (SDG 9); and sustainable cities and communities (SDG 11) to showcase the tangible contributions it is making toward broader global goals.

This approach not only enhances Canada’s credibility and reputation as a responsible supplier of critical minerals but also fosters stronger bilateral cooperation with international partners like Japan.

We live in a world of pressing climate-policy imperatives and increasing geopolitical divides.  Countries that share similar values such as Japan and Canada must work together to reduce emissions within this complex global dynamic.

Sharing a common language would help champion the commitment to climate action in the critical-mineral mining sector.

As the late entrepreneur and author Jim Rohn said, “If you just communicate, you can get by. But if you communicate skillfully, you can work miracles.”

This article first appeared on Policy Options and is republished here under a Creative Commons license.