It is the first time in three years that licence to operate has been displaced as the top risk on the latest Ernst & Young (EY) Top 10 Business Risks and Opportunities for mining and metals.
Global mining executives ranked environment, social and governance (ESG) as the top risk facing their businesses over the next 12 months followed by decarbonisation and licence to operate.
The study surveyed more than 200 global mining executives and shortlisted the most significant risks shaping the industry.
It highlights how various external and societal factors are continuing to lead to risks and opportunities, driving mining companies to reshape the future of the industry.
EY Global Mining and Metals Leader Paul Mitchell said the emergence of environmental and social issues as a top risk came as a surprise.
“Miners need to think more broadly about which factors they consider; social impact, water management and biodiversity came through as strong areas of focus for 2022,” he said.
“As stakeholders continue to hold miners accountable for environmental and social practices, purpose, long-term value and sustainability are no longer add-ons to business as usual – they are themselves business as usual.
“In such an uncertain and shifting environment, we are likely to see greater use of data science, scenario planning and data modelling to guide more intelligent decisions and create differentiation.”
Managing impact on the environment and communities can build a positive legacy
The study explored how the COVID-19 pandemic has focused attention on social inequalities, placing pressure on companies to go beyond their regulatory obligations and take responsibility for driving social equality in the regions in which they operate.
“Miners that do more to help ensure the long-term, sustainable economic and social growth of the regions in which they operate can leave a positive legacy beyond the life of the mine.”
With the future mines set to be carbon neutral and sustainable, the majority of the sector’s environmental risk and liability will lie in closed legacy assets. Progressive closure planning can assist with these challenges.
Building a flexible, practical decarbonisation strategy
Decarbonisation took second place in the ranking, up from fourth position last year. While focus to date has been on abating scope 1 and 2 emissions, controlling scope 3 emissions is really where value and long-term sustainability can be created, according to the study.
“Decarbonisation is a major industry disruptor and as such needs to be treated like any other strategic risk; dealt with at a board and executive level, and managed as part of the overarching business strategy, not addressed as a separate climate strategy delegated to a discrete team,” Mr Mitchell continued.
“Sharing a road map to net zero and successes along the way will be key to gaining investor confidence and, potentially, competitive advantage.”
Creating long-term value for all stakeholders can secure mining’s future
The study indicates that shareholder expectations are changing fast, impacted by numerous challenges including the mining industry’s contribution to communities, economies, protection of heritage sites and engagement with indigenous and First Nations peoples, as well as the industry’s role in prioritising ethical supply chains, with diversity and inclusion also in the spotlight.
“Focus on long-term value will be critical if miners are to develop a sustainable licence to operate strategy and reshape themselves for the future.
“The days of working solely to deliver quarterly results are over. The impetus instead needs to be on stakeholder value in its broadest sense; the value that they bring customers, people and society, in addition to their own bottom line.”
