shareholders , want to better understand how the companies they are invested in are managing their ESG risks as well as opportunities . Investors believe that by effectively integrating ESG best practices into daily decision-making , companies like Freeport will be better able to identify and manage potential risks , ultimately supporting the company ’ s long-term resiliency and sustainability , she said .
Many investors believe even a profitable company could be a significant future investment risk without strong ESG practices and decision-making in place , Barrows said . For instance , a single environmental incident could draw lawsuits , government scrutiny and community opposition that could jeopardize a company ’ s social license to operate , operating permits and financial stability . Organizations with strong environmental management practices run less of a risk of those kinds of incidents . Investors and other stakeholders look to public ESG disclosures to judge how effectively a company is at identifying and managing those risks through its responsible production policies and practices .
Freeport-McMoRan ’ s Sustainability Pillars
The company ’ s strategy seeks to create greater clarity on the outcomes it is working to achieve across three sustainability pillars .
Robust Governance Good governance relies upon dedicated leadership that integrates ESG into every day operations and business decisions through effective internal structures and processes . We strive to embed a holistic ESG approach into decision-making by leveraging our internal culture and regulatory and technical systems and expertise .
Empowered People and Resilient Communities People are at the core of our business . We are committed to supporting the health , safety and well-being of our people , which includes our workforce , our host communities and Indigenous neighbors . We seek to do this in a manner that increases resiliency and empowers people to thrive sustainably in the long term .
Thriving Environments Mining impacts the natural environment . We work to conduct our operations with minimal adverse impacts on the environment , and we support the protection of ecosystems through responsible environmental stewardship . This commitment is embedded in our management systems and approach to continuous improvement .
“ Investors are looking to understand how these decisions are being integrated across the business from the board level down to the frontline worker ,” Barrows said . “ They are trying to understand what could go wrong , whether the company is aware of that , are they accurately identifying it , and how they are managing potential future risks . Investment considerations no longer are focused solely on the financial or operational performance but are looking at all the other interrelated factors that could negatively impact the company ’ s financial and operational performance across various ESG topics , whether reputational or legal .”
CUSTOMER DEMAND DRIVES COMPLIANCE
Pressure also is coming from customers , who contend with the same financial realities from investors to produce their products in an environmentally and socially responsible manner , said Andrea Vaccari , Director-Responsible Production Frameworks and Sustainability .
Several years ago , automobile manufacturers such as Volkswagen and BMW in Germany , encouraged by advocacy groups , began demanding more socially responsible sourcing from their suppliers . Other auto manufacturers , such as Ford and General Motors in the U . S ., have followed .
The result is that mining companies like Freeport are expected to adopt their own responsible production practices and to help ensure their own suppliers also comply with the expectations of the auto industry . Similar demands are being made by other large users of copper , such as electronics manufacturers Intel , Microsoft and Apple .
The European Union has developed its own rules that will require due diligence in production and supply chains . The London Metal Exchange , which dictates quality and trading rules for copper in global markets , also has adopted rules on sustainability . The London Metal Exchange is important to Freeport as the company sells copper using its price benchmark .
While the U . S . government has not imposed those requirements , Freeport is obligated to abide by them because it supplies copper and other products on the world market .
“ The market demands it ,” Vaccari said . “ Our customers demand it , and our shareholders demand it . There are no borders anymore , and , for us , being able to demonstrate that we are a responsible copper producer is crucial .”
Beyond its own disclosures , Freeport demonstrates its commitment to being a responsible producer by participating in industry groups like the International Council on Mining and Metals and by seeking the Copper Mark , a responsible production assurance framework .
Both have extensive checklists of responsible mining practices that members are required to meet . All 11 of the Americas ’ copper sites have earned the Copper Mark , which includes 32 ESG criteria and requires third-party validation to ensure recipients are mining responsibly . The company plans to achieve Copper Mark validation for all its copper-producing sites . PT Freeport Indonesia , the last remaining site to seek the validation , signed its Letter of Commitment to the Copper Mark and began the validation process in June .
COMMUNITY RELATIONSHIPS CRITICAL
None of this is to say that Freeport only adheres to strong responsible production principles because of outside pressure . Environmental protection , workforce health and safety , and collaboration with our host communities always have been part of the company ’ s culture , said Tracy Bame , Director-Corporate Social Responsibility and Community Development .
Beyond the financial demands from investors and customers , good environmental and social practices are essential to maintaining good relationships in communities where the company operates , Bame said . Failing to meet company commitments on such priorities as protecting air and water quality could fuel public opposition and make it more difficult to operate or expand .
“ Communities grant our social license to operate ,” Bame said . “ We need their support to operate . As a company , it ’ s part of our culture and one of our values to drive excellent social performance , to be the best neighbor that we can be .”