As companies are subjected to increasingly rigorous compliance with environmental codes and regulations, committing to sustainable development principles has become a core strategic objective and is particularly crucial for companies listed on international exchanges, as global investors seek to reduce risk through environmentally friendly companies.

In order to have their sustainability programs verified many large companies have sought a listing on the Dow Jones Sustainability Index (DJSI) – a rigorously compiled list of companies which demonstrate adherence to a set of criteria. In 2004 DJSI-based assets increased by nearly 30% to nearly $EUR3 billion – indicative of increasing investor interest in these companies.

Against this backdrop, the past two years has seen a flurry of activity as local coal mines – both underground and opencut – have sought formal certification to ISO 14001, the international standard for environmental management systems (EMS).

According to the International Organization for Standardization, certification to ISO14001 increased a massive 34% worldwide in 2003. This trend is likely to continue as companies seek third party endorsement that they are doing the right thing.

The reasons to seek formal certification vary.

Business development manager and environmental auditor Phil Crosby, of auditing company NCS International (NCS International is a wholly owned subsidiary of the National Association of Testing Authorities, Australia) said tightened legislation was not the only factor propelling companies to seek certification.

“It’s also about risk management,” he said. “Boards of directors don’t want risk exposure and one thing they can do to increase their protection is get certification. However, in terms of true sustainability, compliance does not certify you’re a sustainable industry.”

For a company to operate according to sustainability principles it needs to have all three pillars of sustainability – economic, social and environmental - in place, said environmental program manager with SAI Global, Karen Duncan.

Accredited auditing company SAI Global is 40% owned by Australian Standards and was last year commissioned to audit Rio Tinto Coal Australia’s Queensland operations.

Globally, Rio Tinto has a self-imposed target to have all its sites certified by 2005. To date, about 80% of its sites worldwide have already complied. The company’s Tarong and Hail Creek opencut mines and the Kestrel longwall mine in Queensland received ISO 14001 certification in 2004. The Blair Athol opencut mine was due to be audited in March 2005.

In New South Wales, Coal & Allied’s operations (Hunter Valley, Mt Thorley/Warkworth, and Bengalla), managed by Rio Tinto Coal Australia, all have ISO14001 certification.

According to Rio Tinto corporate relations general manager Ian Head, one impetus is the need to have a benchmark across the company’s many diverse operations. ISO 14001 provided this.

Along with Rio Tinto and BHP Billiton, Anglo Coal recently rolled out major compliance programs at all sites. (All three of these companies made the latest DJSI list).

Anglo Coal, following a directive from Anglo American, has had all its underground coal mines certified to ISO 14001 over the past two years. The most recent mine to obtain certification was the Moranbah North longwall in central Queensland in December 2004.

According to an Anglo Coal environmental manager, the drive to gain certification was about credibility with the community. Like most companies prior to going down the certification path, Anglo Coal mines already had stringent safety, health and environmental standards in place.

“External certification demonstrating that our self-governance strategies are working are important to external shareholders,” the spokesperson said.

Among the major mining houses, BHPB has led the way in seeking certification.

BHP Billiton Mitsubishi Alliance operations in Queensland and BHPB

Illawarra operations in NSW were all certified within the past year as part of a corporate requirement for all BHPB-controlled operations around the world to have ISO14001 certification in place by June 2003, to ensure all sites were at a suitable environmental standard, independently certified and recognised internationally.

Leading global provider of environmental certification, Norwegian company Det Norske Veritas (DNV) has audited a number of Australian coal companies over the past two years including BHP Billiton Mitsubishi Alliance mines in Queensland, Rio Tinto’s NSW operations, and an opencut Xstrata coal mine.

DNV certification manager for Australia and New Zealand Yngve Amundsen said because the standard is seen as a risk management tool it had been adopted as a business tool in that regard.

“EMS certification is growing at a faster rate than quality assurance certification, and will become an integral part of a business when companies have key environmental impacts. Compliance to these standards gives confidence to insurance companies, financiers, institutions, and investors,” he said.

Amundsen added that one of the benefits of a good EMS program was the more efficient use of resources and reduction in waste.

“In many instances the system paid for itself within two years,” he said.

Major coal producer Xstrata Coal opted not to seek formal certification, though individual operations have the option should they want to.

“We require all of our operations to abide by strict health, safety, environment and community standards based on the International Council for Mining and Metals’ principles for sustainable development, and we are happy to report there are ISO 14001 based EMS in place that demonstrate a process of continual improvement,” said Xstrata Coal general manager for sustainable development Colin Whyte. A number of sites are ISO 14001 certified.

Centennial Coal has taken a similar route, opting not to seek compliance, though the company stresses its systems are based on the standards.

Critics of formal certification argue that it adds yet another layer of bureaucracy and paperwork to the plethora of systems already bogging down mine managers. There is no denying, though, if a company wants to use its environmental record to attract investment, third party verification is imperative.

Auditing company NCSI has certified a range of mining operations (though no underground mines) including Yallourn Energy and International Power Hazelwood.

NCSI’s Crosby said it had around a quarter of the Australian certification market and was the clear leader in relation to ISO 14001.

“Recently we have had strong enquiries from major coal companies for certification, not just for environment but safety and quality as well,” Crosby said.

In fact, as Crosby pointed out, companies that have Safety Standard AS /NZS 4801 in place will probably have done at least half the work towards meeting certification requirements for the environmental standard.

One future trend will be companies seeking integrated certification across the three key standards: ISO 9000 (Quality), ISO 14001 (Environment) and AS /NZS 4801 (Safety).