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Environmental and social risks rise to the top of EY’s annual survey

October 6, 2021

For the first time in the history of EYs annual review of risks and opportunities for the global mining industry environmental, social and governance (ESG) issues were ranked as the top issue facing the industry.

As the world continues to grapple with the COVID-19 pandemic, the disruption in many forms is also weighing heavy on the minds of those who completed the survey. In addition to disruptions to supply chains and volatility in the market, the climate crisis and rising stakeholder expectations are increasing forces of change.

“ Environment and social took the number one spot in our rankings for the first time, followed by decarbonization and then license to operate (LTO), which had held the top position over the past three years,” EY wrote in its summary. “Two new entrants to the ranking – uncertain demand and new business models – highlight the ongoing volatility in a market still impacted by the COVID-19 pandemic. Still, we see more opportunities than risks for miners willing to make the transformational changes that can drive long-term value for organizations and the communities they serve.”

Stakeholder pressure over ESG issues is expected to continue and those companies that have demonstrated a commitment to a sustainable future will have a competitive advantage.

“Companies are also under increasing pressure to take more responsibility for their impact on communities, and go beyond their regulatory obligations. Miners that help drive the long-term, sustainable economic and social growth of the regions in which they operate can leave a positive legacy beyond life of mine,” EY wrote.

Decarbonization ranked as the second most important trend with governments and companies actively working to move away from fossil fuels to move to net zero emissions. EY suggest companies build a flexible plan for Scope 1 and 2 emissions and begin to focus on Scope 3 emissions to create genuine value and long-term sustainability.

Earning and maintaining a license to operate, geopolitics, capital, digital innovation and productivity costs remain concerns on the list.

Uncertain demand and new business models joined the list for the first time.

“The energy transition is pushing up demand for the minerals integral to renewable energy, electric vehicles and energy storage systems. To meet this demand, miners will need to overcome big supply-side challenges, including accessing capital, securing LTO and the geopolitical risk that comes with minerals concentrated in just a few markets,” EY wrote about uncertain demand.

New business models will also have an impact as the threat of substitution is also real in a sector with long project lead times.
Six models may better help miners capture value amid volatility. They are;

  • Shared value model.
  • Circular business model
  • Vertical integration
  • Horizontal market integration
  • Joint ventures
  • Offtake agreements.

The report can be found here. https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/mining-metals/ey-final-business-risks-and-opportunities-in-2022.pdf

 

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