Two Faces of ESG in the Mining and Minerals Industry

Rezki Syahrir, PhD *

Today, Environmental, Social, and Governance (ESG) in the mining and minerals sector is no longer optional. It has become a prerequisite—part of the industrial lifecycle and global supply chain. Market access, financing and social legitimacy are increasingly determined by the extent to which business practices can be read as environmentally, socially and governance responsible (governance).

However, before the ESG discourse gets stuck solely on compliance issues, there is one conceptual foundation that needs to be dissected more clearly: two faces of ESG that are often lumped together, even though they are born from different logics—ESG Standards and ESG Guidelines. Both talk about sustainability, but work from different directions and serve non-identical functions.

ESG Standards are essentially designed as consumer and market protection instruments. It works downstream, providing signals, labels and ethical boundaries of what is acceptable in the global marketplace. Standards such as IRMA (Initiative for Responsible Mining Assurance), RMI (Responsible Minerals Initiative), or Global Reporting Initiative (GRI) serve as external filter—screening products and practices that are deemed to be ethically, socially or environmentally risky.

In contrast, ESG Guidelines work from the upstream side. It starts from a different question: how producers can produce responsibly in real operational, social and institutional contexts. Guidelines such as ICMM – Mining Principles & Performance Expectations, Australia’s Leading Practice Sustainable Development Program for the Mining Industry, or Canada’s Towards Sustainable Mining (TSM) are not intended to replace global standards, but rather to pave the way for more credible and sustainable compliance.

In other words, ESG standards protect the market, while ESG guidelines prepare the producers. The challenge is not choosing one, but placing both strategically.

When Industry Develops ESG Standards

This discourse is important because it touches the roots of ESG legitimacy and the way the market reads the power relations behind a “standard”. In principle, the problem is not technical capacity. In fact, industry players often understand field practices best. The main challenges lie in legitimacy, conflicts of interest and market perception.

ESG standards function as a selection tool—determining who is “worthy” and who is “not.” When these standards are drawn up by the industrial group itself, a structural conflict of interest arises: industry acts simultaneously as a rule maker and a regulated subject. In the eyes of the market, this raises a fundamental question: is this a genuine safeguard, or a self-protection mechanism?

For institutional investors, OEMs and global consumers, ESG standards are a tool to reduce reputational, legal and ethical risks. Because of this, the market tends to trust standards that are prepared by parties that are relatively independent from producers, involve civil society, and have strict and transparent audit mechanisms. Standards that are too close to industry are often perceived as softer, more oriented towards corporate risk management, and less strong as an instrument of public protection.

In this context, perception becomes as important as substance. When industries develop ESG standards, the market often reads them as a defensive effort—rebranding or resisting regulatory pressure. If the standards are lax or the audit is not truly independent, the risk of being labeled as greenwashing or ESG-washing becomes very high. And once market confidence is lost, restoring it is almost always much more difficult.

The market response to standards of this kind is rarely frontal, but it is also rarely full of acceptance. Investors tend to place it as complementary information, not a basis for decisions. Downstream buyers continue to request additional independent certification. Meanwhile, civil society and the media are critical, especially when violations occur in the field. As a result, industry standards are often in place second-tier in the ESG legitimacy hierarchy.

Ironically, instead of simplifying compliance, industry-made ESG standards can actually add complexity, fuel skepticism, and weaken products’ bargaining position in global supply chains.

The “Silent Failure” Pattern in ESG

When the industry compiles guidelinesthe market reads this as:

“They are trying to improve how they work.”

When the industry compiles standardsthe market often reads:

“They are trying to certify themselves.”

In practice, many industry-developed or industry-dominated ESG standards never actually “fail” openly, but suffer from what could be called a silent failure. They weren’t rejected, but they weren’t worn either. Not used as a reference for investors, not adopted by regulators, and not used as a condition of purchase by OEMs.

The case of the World Coal Association with Coal Stewardship Framework often used as a classic example. Despite its aim of demonstrating “responsible” coal practices, this framework is almost never referenced in global ESG discourse. Not simply because the content is wrong, but because its moral and structural position is not trusted by the market.

Another example is Responsible Care in the chemical sector—a long-standing internal improvement program. It was recognized as an effort to improve internal practices, but never became the basis for public or investor confidence. Again, technically acceptable, but failed as an instrument of market legitimacy.

This experience explains why ICMM—even though it consists of the world’s largest mining companies—does not position itself as an ESG standard or market certification scheme. ICMM chose the path of guidelines and membership commitments, and the market accepted them as such capacity-building instrumentis not a replacement for IRMA or RMI. This is an example of learning from failure before it occurs.

The Aluminum Stewardship Initiative (ASI) offers a more nuanced lesson. ASI is not a failed project, but neither is it a standard with absolute legitimacy. It is relatively accepted because it involves multi-stakeholders and focuses on the supply chain, right right to operate. However, because the industry remains dominant, its legitimacy is conditional and often comes with additional due diligence. ASI indicates that the position of the instrument is as important as its content.

Lessons for Indonesia

From these various examples, the global market reads one consistent message: ESG standards must appear independent of producers, while instruments close to industry are more credible when positioned as guidelines, frameworks or pathways.

For Indonesia—with its social complexity, environmental sensitivity, and critical mineral geopolitical pressures—this lesson is crucial. ESG is not just about having your own instruments, but about understanding the domain in which we play. Strong and credible ESG Guidelines are not an alternative to global standards, but rather a practical foundation that enables national industries to adapt, comply and be competitive in a variety of evolving international ESG regimes.

With the right understanding of the position, ESG can truly become an instrument for leveraging the quality of Indonesian industry—not just a label, but a way forward competitive advantage domestic mining industry as well as sustainable legitimacy in the eyes of the world.

*Director of the Indonesian Initiative for Sustainable Mining, Observer of Geopolitics, Resource Governance and Just Energy Transition