Environment

Leadership & Governance

  • Business Ethics
  • Competitive Behavior
  • Management of the Legal & Regulatory Environment
  • Critical Incident Risk Management
  • Systemic Risk Management
General Issue Category
(industry agnostic)

Disclosure Topics (industry specific) for:
Coal Operations

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GHG Emissions

Greenhouse Gas Emissions

Coal operations are energy intensive and generate significant direct greenhouse gas (GHG) emissions, including carbon dioxide from fuel use and methane released from coal beds during mining and post-mining activities. Regulatory efforts to reduce GHG emissions in response to the risks posed by climate change may result in higher operating and capital expenditures based on the magnitude of their direct emissions. Operational efficiencies can be achieved through the cost-effective reduction of GHG emissions. Such efficiencies can mitigate the potential financial impact of increased fuel costs from regulations that seek to limit—or put a price on—GHG emissions.

Water & Wastewater Management

Water Management

Coal operations have an impact on both the quality and quantity of local water resources. Coal operations are water intensive. The use of water in coal washing to remove sulfur, in cooling drilling equipment, and in transporting coal in slurry pipelines can impact resources. The severity of these risks can vary depending on the region’s water availability and the regulatory environment. Reducing water use and contamination could also create operational efficiencies for companies and lower their operating costs. Wastewater treatment and discharge is often regulated by national or local agencies. Violating limits on selenium, sulfate, and dissolved solids could affect coal operations companies through significant penalties, compliance costs, delays in production, or higher costs related to mine closure.

Waste & Hazardous Materials Management

Waste Management

Handling of solid rock and clay waste, process refuse, and liquid coal waste containing hazardous substances like mercury, arsenic, and cadmium poses operational and regulatory challenges for coal operations companies. Coal slurry or tailings ponds can present a significant threat if the impoundments burst, collapse, or leak, leading to destruction of lives, property, and ecosystems, with associated financial impacts that may include regulatory penalties, compensation payments, and remediation or compliance obligations. Permitting of mining operations may be affected, lowering a company’s revenue or requiring additional expenditures prior to approval. Companies’ ability to lower the number and size of tailings ponds and ensure the structural integrity of impoundments can help minimize such impacts.

Ecological Impacts

Biodiversity Impacts

Coal operations can have a range of impacts on biodiversity. Surface mining and mountaintop removal can alter the landscape, removing vegetation and wildlife habitats. Acid mine drainage is particularly significant: it is highly acidic water, rich in heavy metals, formed when surface and shallow subsurface water comes into contact with coal mining overburden, and can have harmful effects on humans, animals, and plants. Biodiversity impacts of coal operations can affect the valuation of reserves and create operational risks. The environmental characteristics of the land where reserves are located could increase extraction costs as a result of increasing awareness and protection of ecosystems. Companies could also face regulatory or reputational barriers to accessing reserves in ecologically sensitive areas, such as the designation of areas where reserves are located as protected areas. Coal operations companies face regulatory risks related to reclamation after a mine is decommissioned, per applicable regulatory requirements to restore mined property according to a prior, approved reclamation plan. Material costs may arise from removing or covering refuse piles, fulfilling water treatment obligations, and dismantling infrastructure at the end of life. Furthermore, ongoing coal operations are subject to laws protecting endangered species. Companies that have an effective environmental management plan for different stages of the project lifecycle may minimize their compliance costs and legal liabilities, face less resistance in developing new mines, avert delays in project completion, and avoid difficulties in obtaining permits and accessing reserves.

Human Rights & Community Relations

Rights of Indigenous Peoples

Companies in the Coal Operations industry can operate and hold assets in areas occupied by indigenous peoples. Companies perceived as contributing to human rights violations or failing to account for indigenous peoples’ rights may be affected due to protests, riots, or suspension of permits. They could face substantial costs related to compensation or settlement payments, and write-downs in the value of their reserves in such areas. In the absence of country laws to address such cases, several international instruments have emerged to provide guidelines for companies. These instruments include obtaining the free, prior, and informed consent of indigenous peoples for decisions that affect them. With greater awareness, several countries are also beginning to implement specific laws protecting indigenous peoples’ rights, creating increasing regulatory risk for companies. Furthermore, indigenous peoples are often vulnerable sections of the population, with limited capacity to defend their unique rights and interests.

Community Relations

Coal operations take place over a number of years and can have a wide range of community impacts. Community rights and interests may be affected by the environmental and social impacts of operations, air emissions, waste generation, wastewater discharges, and decommissioning activities. Coal operations companies often need support from local communities to be able to obtain permits and leases and conduct their activities without disruptions. The expected value of reserves could be affected if the community interferes or lobbies its government to interfere with the rights of a coal company in relation to those reserves. In addition to community concerns about the direct impacts of projects, the presence of coal mining activities may give rise to associated socioeconomic concerns related to education, health, and livelihoods. Coal companies that are perceived as engaging in rent-seeking and exploiting community resources without providing any socioeconomic benefits in return may be exposed to the risk of resource nationalism actions by host governments and communities that restrict their activities or impose additional costs. Companies in the extractives industries can adopt various community engagement strategies in their global operations to manage risks and opportunities associated with community rights and interests, such as integrating community engagement into each phase of the project cycle. Companies that adopt a “shared value” approach may be able to provide key socioeconomic benefits to communities while maintaining profitable operations.

Labor Practices

Labor Relations

Coal mining companies face inherent tension between the need to lower the cost of labor to remain price- competitive and the need to manage human resources to ensure long-term performance. Working conditions related to coal operations are usually physically demanding and hazardous. Labor unions play a key role in representing workers’ interests and managing collective bargaining for better wages and working conditions. This makes the management of labor relations critical, as conflict with workers can result in labor strikes and other disruptions that can delay or stop production, leading to significant lost revenue and reputational damage. Continued labor stresses can impact the long-term profitability of the entity. At the same time, positive outcomes of effective labor engagement can include enhanced work practices, labor utilization, as well as the reduction in safety incidents, accidents, or fatalities.

Employee Health & Safety

Workforce Health & Safety

Safety is critical to coal mining operations due to the often hazardous working conditions. Fatalities or injuries can result from a number of hazards associated with the industry, including accidents, cave-ins, explosions, and flooding. Due to these hazards, the industry is characterized by higher-than-average fatality and injury rates. Coal miners are also susceptible to long-term health risks such as chronic lung disease, commonly known as “black lung” disease, as well as mental health problems. Specific federal health and safety laws protect coal mining workers and make provisions for compensation for black lung disease. These can impose additional costs on companies or lead to regulatory penalties. Changes in legislation can result in additional liabilities. A company’s ability to protect employee health and safety, and to create a culture of safety and well-being among employees at all levels, can help prevent accidents, mitigate costs and operational downtime, and enhance workforce productivity.

Business Model Resilience

Reserves Valuation & Capital Expenditures

Estimates suggest that coal companies may be unable to extract a significant proportion of their coal reserves if greenhouse gas (GHG) emissions are to be controlled to limit global temperature increases to two degrees Celsius per the Paris Agreement. Stewardship of capital resources while taking into account medium- to long-term trends, particularly related to climate change mitigation actions, is critical in order to prevent asset impairment and maintain profitability and creditworthiness. Globally, regulations and policies are and may continue to be put into place to limit GHG emissions from coal-fired power plants—the customers of coal companies—thus lowering the demand for, and subsequently the prices of, coal. Coal demand is also being affected by regulations governing other harmful air emissions that apply to coal-fired power plants. An expansion of GHG-mitigation regulations may increase the magnitude of potential financial impacts in the medium to long term. Along with improved competitiveness of alternative energy technologies, this poses a long-term risk for the reserves and capital expenditures of coal operations companies.

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