ESG issues overtake commodities risk in most recent KPMG report
Another indication of how influential environmental, social and governance (ESG) issues have become for the global mining industry was presented in the “Global Mining Outlook 2022; Extracting key insights for mining leaders” recently released by KPMG.
For the first time in the report’s 12-year history commodities risk was not the top concern for the 301 mining executives from 23 sectors, instead it was ESG issues that executives view as the biggest risk to their business, outranking the price of the products they sell and access to talent.
Environmental risks and including new regulations ranked as the new number one concern, and another ESG-related risk – social license to operate – is in third position.
KPMG reported that 72 percent of respondents expected a disruption in the mining sector due to ESG in the next three years and 84 percent agree that success in the long run will become increasingly dependent on defining success in broader than just financial terms.
“As the world’s supply chains look to meet rising demands, the mining industry finds itself increasingly in the spotlight, being challenged to quickly deliver the materials the world needs in a way that is acceptable to more and more stakeholders. In my view, transparency and high-quality engagement will be critical. For those who get it right, I believe the rewards will be significant,” said Trevor Hart, Global Head of Mining, KPMG International.
“Political instability/nationalization” and “global trade conflict” shot up the list, ranking fourth and fifth respectively, as Russia’s invasion of Ukraine, and growing opposition to projects, particularly in South America, weighs on executives’ minds.
“For an industry that inherently operates over the long-term, these shifts in a short space of time are striking. They underline the extent to which climate change related issues and ESG more broadly are reframing corporate priorities in mining, as in almost every business sector,” KPMG said in a release. “Our research underlines how much has happened in just one year. The pandemic has disappeared from the top ten. Issues relating to geopolitics – political instability, nationalization, global trade wars – loom large. And with events in Eastern Europe unfolding, they will be even more top of mind now.”
There were divergent views on top risks by geography, with Australian executives still ranking commodity prices number one, followed by “decarbonizing the value chain, including scope 3” and talent crisis. Australian leaders were the most bullish globally – three-quarters being confident or very confident, considerably higher than their counterparts in Canada at 62 percent and the United States at 58 percent.
Climate change is a challenge and opportunity for the mining sector, generating strong demand for the minerals required to transition to cleaner energy sources, but requiring significant investment to reduce carbon emissions and meet net zero targets, including scope 3 emissions generated through the use of their commodities.
Supply chain risk was a new entrant to the top 10 list this year and there and concerns about attracting and retaining talent.
For more about the report, visit https://home.kpmg/xx/en/home/insights/2022/04/global-mining-outlook-2022.html