Correlation analysis of country governance indicators and the magnitude of environmental and social incidents in mining

Abstract

Environmental and social issues are increasingly recognized as a main business risk in the mining sector and therefore as a threat for raw material supply security. Criticality assessment methods seek to determine raw material supply risk based on certain indicators. These indicators, measuring different governance aspects in the producing countries, are often used to indicate the general framework under which raw material production takes place. While typically employed to reflect a country's political and economic stability, recent criticality assessments have also adapted them for assessing environmental and social issues.This study's goal is to validate the capability of six frequently used country governance indicators to anticipate potentially supply-disruptive events induced by environmental and social incidents in the mining sector. To test these indicators, a global dataset of 256 mining incidents with environmental and social causes was compiled for the period from 2013 to 2018. These incidents were semi-quantitatively classified into three classes of magnitude, based on their reported impacts. The available data quantity did not allow for a direct evaluation of the relationship between indicator values and incident likelihood. The relationship between social and environmental incident magnitude and governance indicator values was statistically analyzed using Spearman rank correlation and Mood's median test. With few exceptions, the results suggest a lack of correlation between incident magnitude and country indicator values. Therefore, the occasionally implied suitability of country governance indicators to reflect environmental and social risks in mining should not be taken for granted. Our results point to a need for further research on how to meaningfully address these issues in criticality assessments, potentially at the sub-national level.