Previously I have written about the importance of the healthcare, resource transformation, food and beverage, and  consumption sectors to the 17 Sustainable Development Goals (SDGs). The underlying data for that blog are based on a paper “The Relationship Between Investor Materiality and the Sustainable Development Goals: A Methodological Framework” that I wrote with Professors Gianni Betti and Costanza Consolandi of the University of Siena. A summary of our methodology is provided in my healthcare post. In brief, we mapped the 26 material environmental, social, and governance (ESG) issues (organized in terms of the categories environment, social capital, human capital, business model and innovation, and leadership and governance) of  in all 77 industries organized into 11 sectors, developed by the Sustainability Accounting Standards Board (SASB), to the 169 targets of the SDGs.  Mapping these issues to the SDGs’ targets enabled us to assess how each industry is creating or destroying value for society while focusing on those ESG issues that create value for shareholders. Based on this mapping we created an index that ranges from 0 to 100.

In this post I will analyze the importance of the extractive & minerals processing sector. It’s overall score is 30.4—compared to 36.0 for food and beverage, 32.6 for healthcare, 28.4 for resource transformation, and 20.1 for consumption—putting it the middle of the sectors I have written about so far. There is variation with this sector of eight industries. On the high end are oil and gas exploration (41.4), coal operations (35.7), and metals & mining (33.5). On the low end are oil and gas midstream (21.4) and iron & steel producers (22.7). In between are oil and gas refining and marketing (31.3), oil and gas services (31.0), and construction materials (27.8).

This sector has its highest impact on four SDGs. The one with the highest impact is #14 (Life Below Water-55. 0) where it touches all seven of the targets in this SDG. The other three, with about the same level of impact, are #6 (Clean Water and Sanitation-43.9 [six of six targets]), #11 (Sustainable Cities and Communities-40.8 [five of seven targets]), and #12 (Responsible Consumption and Production-46.0 [four of eight targets]). The ESG issue water and wastewater management and biodiversity impacts in the category of environment are important for all of these SDGs, as is supply chain management in the category of business ethics and transparency of payments. The SDGs for which this sector has the least impact are #4 (Quality Education-0.0) and #10 (Reduced Inequalities-13.1).

A worker unloads crude oil from a tanker at an Enterprise Crude Pipeline LLC storage facility in Loving County Texas, U.S., on Sunday, Dec. 16, 2018. Once the shining star of the oil business, gasoline has turned into such a drag on profits that U.S. refiners could be forced to slow production in response. Photographer: Angus Mordant/Bloomberg © 2018 BLOOMBERG FINANCE LP

Oil and gas exploration has a high impact on five SDGs: #2 (Zero Hunger-55.0 [five of five targets]), #6 (60.6-six of six targets), #11 (52.6-five of seven targets), #14 (70.0-seven of seven targets), and #16 (Peace, Justice and Strong Institutions-56.5 [eight of 10 targets]). The SDG ranked lowest is #4 (0.0). The impact of this industry on Clean Water and Sanitation (#6), Sustainable Cities and Communities (#11), and Life Below Water (#14) is not surprising given the production process of this industry. More surprising is Zero Hunger and Peace, Justice and Strong Institutions. The former is due to the potentially negative impact this industry can have on Targets 2.3 (agricultural productivity and incomes of small-scale food producers) and 2.4 (ensure sustainable food production systems). The latter is due to its potentially negative impact on Targets 16.1 (significantly reduce all forms of violence and related death rates everywhere), 16.3 (promote the rule of law at the national and international levels and ensure equal access to justice for all), and 16.10 (ensure public access to information and protect fundamental freedoms, in accordance with national legislation and international agreements). The material ESG issues here are human rights and community relations (social capital), environmental social impact on assets and operations (business model and innovation), accident and safety management (leadership and governance), and regulatory capture and political influence and supply chain management (business ethics and transparency of payments).

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