Social and environmental features in domestic and international minerals resources classification systems

This paper is aimed at a comparison of Ukrainian and international resource classification systems’ fundamental features. As a result, the most common and different features were outlined. The importance of accounting for the social and environmental viability of projects is determined. This study highlights the significance of the harmonization of domestic classification with international standards.


Introduction
All known international standards for the assessment of reserves and resources, as well as domestic regulatory documents, contain object classifications according to important geological and industrial features.These systematizations don't appear by chance, and as a rule, reflect the traditions and stages of exploration and evaluation of mineral deposits in a particular region.
The classification of mineral reserves and resources of the State Subsoil Fund establishes the principles for calculating, geological and economic assessment and state accounting of mineral reserves that are common for the State Subsoil Fund of Ukraine according to the level of their industrial significance and the degree of geological and feasibility study, the conditions that determine the readiness of explored mineral deposits for industrial development, as well as the basic principles for quantifying mineral resources [1].The practice of using this classification systematizes mineral reserves and resources according to certain levels of industrial significance and the degree of technical, economic, and geological study.This classification contains distributable classes that are identified using an international three-order numeric code.Today our classification is harmonized with the United Nations Framework Classification for Resources (UNFC) 2009 version despite the fact that there is already an updated version of 2019 [2].
The relevance of this study is related to the integration of domestic subsoil use into European industries, as well as into the global systems for investing in mining facilities.Thus, the domestic mineral resource base takes into account many minerals from the list of critical and strategic ones for such countries as the United States of America, Canada, Japan, Australia, and the European Union.Understanding the availability and maturity of our deposits will accelerate their investment and development.Understanding the requirements of international standards 1254 (2023) 012098 IOP Publishing doi:10.1088/1755-1315/1254/1/012098 2 for the exploration of deposits will allow us to study quickly and efficiently own objects and select interesting foreign objects.
The analysis of classification systems allows us to determine directions for further changes and harmonization of the national evaluation system.Until recently, social and environmental factors were rarely taken into account when classifying mineral reserves and resources.Their importance has grown significantly over the past few years.Many projects have been delayed or canceled because they did not meet social or environmental expectations, even if they met all other requirements of quantity, quality, and profitability.The various factors involved in the classification of resources do not exist in isolation but operate in a complex manner.In particular, specific issues of property rights and use of the resource, licensing conditions, and other legal issues, which as a result also create economic conditions, can be affected by social and environmental risks.The delay caused by the resolution of these issues in connection with socio-environmental problems can have a significant impact on the economics of projects and even make them economically unprofitable [3].

Results
Until recently, social and environmental factors have rarely been considered in the classification of natural resources.Their importance has grown considerably in the last few years.Many projects have been delayed or canceled because they failed to meet social or environmental expectations, even though they met all other requirements.The various factors involved in resource classification do not exist in isolation, and the distinction between them is rarely black and white.The related issues of ownership, contract terms, legal, regulatory issues, and in some cases, financial conditions may be affected by social and environmental issues.A delay due to the resolution of these as a result of socio-environmental issues can have a significant impact on the economics of projects, even making them no longer economically viable.
Socio-environmental issues, typically described as a requirement for "social license" or "social license to operate" (SLO), have attracted a significant amount of interest and attention in recent years.A project cannot proceed unless the important social and environmental contingencies are resolved, typically described as obtaining an SLO.UNFC is a tool for effective management of national resource endowments needed for realizing the Sustainable Development Goals (SDGs).UNFC applies to energy and mineral resources; injection projects for the geological storage of CO 2 ; and anthropogenic resources such as secondary resources recycled from residues and wastes.UNFC aims to provide necessary specifications and guidelines for optimizing the management and development of resources, with positive impacts on society, the environment, local economies, and employment [3].
In 2022, the problems and risks of social licenses have become especially acute, which is especially noted by the forecasts of global audit companies.Table 1 lists the Top 10 business risks and opportunities for mining and metals.The risks of social licenses appeared in the lists of top risks in 2015, but until 2022 they did not rise above 5th place.
With Ernst and Young's (EY) data released at the end of 2022 [4], environmental, social, and corporate governance (ESG) remains a top risk and challenge for mining and metals companies in 2023.This issue is now widely included in corporate strategies due to its impact on almost all aspects of operations -productivity, logistics, economics and finance, sales markets, etc.Some of the biggest areas of ESG improvement are not new -ensuring diversity, equity, and inclusion still remain challenges, and mine closures and rehabilitation require longer-term, more strategic planning [4].
However, every year the demands on mining enterprises are becoming stricter and today, water resources management and biodiversity are fast becoming urgent priorities in the face of climate change.Stakeholders expect from companies a better assessment of risks and opportunities to minimize them with the help of transparent studies and guarantees for their .Stricter reporting will be critical if companies are to meet growing stakeholder expectations and avoid accusations of greenwashing.A bonus for companies that meet these requirements is significant competitive advantages -from access to capital and resources to obtaining a license to conduct activities and attracting highly qualified personnel [4].
Among the most significant for the extractive industry in the list of social and environmental factors were the following (in descending order): water resource management problems, compliance with the processes of decarbonization of production, reduction of the negative impact on climate change, environmental friendliness of production and volumes of emissions that are directly or indirectly related to enterprises, etc.
Classifications of mineral reserves and resources always reflect the most important features of mineral projects that determine their effectiveness.From the beginning, these were basic geological and mining technical characteristics, then economic and environmental factors.Now such a sign is environmental, social, and governance, which directly affect the possibility of project implementation.Next, we analyze existing system classifications to determine the direct and indirect ways in which these systems account for these ESG factors.
The development of international reporting standards for the assessment of mineral resources began at the end of the 20th century as a result of globalization processes in the extractive industry (figure 1).The largest mining companies are developing international projects and diversifying the regional risks of the mining business.This necessitated the development of integrated assessment systems that create unified and understandable tools for assessing mineral reserves and resources, regardless of the location of the assessment object itself.
This study analyzes and compares the classification features of various systems: Ukrainian classification [1], UNFC [2], The Petroleum Resources Management System (PRMS) [5], The Committee for Mineral Reserves International Reporting Standards (CRIRSCO) [6] in order to establish features that allow determining the social and environmental risks of subsoil use projects.
In the mining projects valuation, environmental and social risks, as well as ESG in general, are often used in the context of investment attractiveness, although stakeholders include not only the investment environment, but also customers, suppliers, company personnel, local populations, and governments, who are increasingly interested in safe (in all senses), and stable development of organizations and companies on their territory.The presence of these direct features in the classification systems indicates the orientation of the assessment standards to the comprehensive assessment of projects as such meeting the goals of sustainable development.
Below are comparisons of the basic parameters of classification systems (table 2): CRIRSCO (by International reporting template for the public reporting of exploration targets, exploration results, mineral resources, and mineral reserves [6], PRMS Petroleum resources management system update 2018 [5], The Norwegian Petroleum Directorate's resource classification system (NPD) 2016 [7] Ukrainian Classifications of reserves and resources for minerals of the State Subsoil Fund (SSF) [1].The features of classifications are given in the order in which they are considered in the system.
From the given comparison, it is fixed that the social and ecological viability of subsurface and natural resources projects is used as a direct feature only in the UNFC.In 1997, the UNFC was developed for solid minerals and conventional energy resources with the aim of becoming an ideal tool for comparing different regional and national standards.Currently, this classification has been expanded to include other types of resources.Today, the UNFC covers energy resources, including oil and gas; renewable energy projects; atomic energy resources; solid minerals; CO 2 storage projects; underground water; and anthropogenic resources, such as secondary resources recycled from production residues and wastes.An important feature is the systematization of information not only for geological and mining enterprises but also for all interested parties.Such parties are defined as international and regional organizations in the field of international research of mineral resources and energy (to facilitate the formulation of a consistent and visionary strategy of actions), national and local governments (for the sustainable management of national resources), companies and industrial enterprises (for the development of production and technologies, project management and financing), financial organizations and funds (for project management and financing) [2, 3].Thus, the UNFC itself is a tool for the effective management of national resources necessary for the realization of sustainable development goals, which enables all interested parties to find a common understanding of the development of resources and territories, as well as to compare projects in different types of resources and subsoil use.The development of the basic characteristics of the classification of reserves and resources in the UNFC from 1997 to 2020 is shown in the following table 3.

Geological knowledge
Other standards and classification systems have evolved in accordance with the more practical and rational objectives of providing reliable valuations for investors of all levels.The CRIRSCO standard notes that the extractive industry today is a global international business whose financial and operational success depends on the trust and confidence of investors [6].Unlike many other industries, geology and mining deal with mineral resources that are exhaustible and non-renewable.The main emphasis on the risks of mining projects in these standards is made on geological risks, which depend on the reliability of information about objects from the beginning of the geological study to the end of mining.Subsoil users are encouraged to effectively and transparently assess the risks associated with investments to ensure the high level of confidence necessary to sustain their activities [6].ESG criteria are taken into account as part of modifying factors that determine the possibility of converting mineral resources into reserves that are designed and have individual technical, technological, and organizational solutions for implementation, which forms their economic and environmental assessment in the relevant legal and regulatory conditions.In the hydrocarbon resource assessment standards 2018, the social and environmental component is also indirectly taken into account in the project success criteria ("chance" for commercial implementation) and uncertainty parameters.

Conclusions
The paper presents a comparison of classification features in the exploration and evaluation of mineral resources in domestic and international practice.This study analyzes and compares the classification features of various systems: The Ukrainian Classifications of reserves and resources for minerals of the State Subsoil Fund, The United Nations Framework Classification for Resources, The Petroleum Resources Management System, The Norwegian Petroleum Directorate's resource classification system, the Classification of the Committee for Mineral Reserves International Reporting Standards.
As a result, the most common feature of classifications is the level of geological study.This feature makes it possible to distinguish 4 groups of geological knowledge.Features of economic viability and status of the project, as a rule, are used in international practice.Important criteria, which are now reflected only in the UNFC, are the social and environmental viability of projects.This determines the importance of accounting for ESG in our valuation and resource accounting systems.
In recent years, social and environmental risks have become basic for the implementation of mining projects.Their growth can lead to the postponement of projects in time or the complete cancellation of decisions made because they did not meet social or environmental expectations, even if they met the requirements of quantity, quality, and profitability.Such changes must be reflected in classification systems for reserves and resources assessment that are used by all stakeholders to make management and investment decisions.Today, the social and ecological viability of subsurface and environmental projects is used as a direct feature only in the UNFC, and its inclusion took place in 2009 in the part of social factors, and in 2019 -in the part of environmental factors.This shows that the UNFC is a tool for the effective management of national resources, necessary for the realization of the goals of sustainable development, which enables all interested parties to find a common understanding of the development of resources and territories, as well as to compare projects in different types of resources and subsoil use.
In other international standards, as well as in the domestic classification of the State Subsoil Fund, the ESG criterion is taken into account indirectly, which is one of the key areas of development of these mineral resource evaluation systems.Such development can take place in two directions: 1) inclusion of social and ecological criteria of the direction as basic features, while this is possible both in the form of complex parameters and individual classes/subclasses; 2) use and improvement of existing methods of resource valuation, taking into account the environmental and social risks of the implementation of mining projects.

Figure 1 .
Figure 1.Development of international and national standards for mineral assessment in the period 1990-2020.

Table 2 .
Comparison of the basic features of the mineral resources classifications.

Table 3 .
Development of Principal elements of the UNFC.