ESG issues, geopolitics and climate change are the top three risks/opportunities facing the global mining and minerals sector over the next 12 months, global mining leaders have said, according to the latest edition of the EY Top 10 Business Risks and Opportunities for Mining and Metals in 2023.

ESG impact priority for mining business leaders and stakeholders

As per the results of a survey conducted for the 15th edition of the report, ESG’s impact is being felt across every part of the sector as the issue becomes a priority for business leaders and key stakeholders. Water stewardship is the top ESG risk for 76% of respondents, given mounting concerns over climate change and water scarcity.

Paul Mitchell, EY Global Mining & Metals Leader, said: "Managing ESG risk is becoming more complex. Miners who get it right can get an edge on competitors in many ways – from accessing capital, to securing license to operate, attracting talent and mitigating climate risk."

He added that the study has also highlighted rising concerns around workplace culture, with bullying and harassment described as endemic and tied to ongoing issues around the lack of diversity, inclusion and respect in the industry.

"The sector needs to do more to improve health, safety and wellbeing. A balanced approach to managing both critical risks and foundational workplace safety and well-being can help companies build a holistic, robust approach,” he added.

Furthermore, global conflicts and ongoing disruption are creating new urgency for miners to rethink traditional operating and business models, the report said. Geopolitics has risen to number two on the ranking, it pointed out, adding that global volatility is likely to be an ongoing issue for the industry, driven by changing governments in key markets, competition between key economies, and a growing tide of resource nationalism.

Mitchell explained: "We see evidence that governments are trying to fill revenue gaps created through the COVID-19 pandemic with new or increased mining royalties. For example, Chile plans to introduce copper royalties, and in Australia, the Queensland state government has already increased royalties on coal. For mining and metals companies, the ability to quickly assess the impact of these changes, as well as different alliances, trade flows and governments on business decisions will be critical."

Although the study found that mining and metal companies have shown progressive movement in managing climate risks, it said that there are still opportunities to improve. One such example is that not enough miners are taking action to minimise the physical risks of climate change, which can threaten operations.

Mitchell points out that while many mining and metal companies have committed to highly ambitious decarbonisation targets, and that there is a sharper focus on reporting emissions, 2023 will reveal whether the sector is truly on a trajectory towards net-zero.

The fourth-biggest concern for mining companies is License to Operate (LTO), having previously been the biggest concern for the sector. This is despite miners facing increasingly complex expectations, which include issues such as building liveable communities, and forging trusted relationships with indigenous communities.

"It is critical for mining companies to go beyond doing what's merely required by law. It's time to commit to furthering truth and reconciliation. Ultimately, reframing LTO as a way of creating long-term value can have a positive impact on the company's brand,” Mitchell explained.

ESG platforms track metrics to focus of their digital investment

Finally, the EY report pointed out that the mining and metals executives surveyed stated that data mining and automation, as well as the introduction of ESG platforms to track metrics and reporting, will be the focus of their digital investment over the next two to three years.

Digital and data will play an important role in helping miners meet ESG requirements, however, the study highlights that many companies are failing to make the most of the opportunity.

Mitchell said: "We still see some miners taking a siloed approach to implementing technology. An integrated, business-led approach to digital transformation can identify more opportunities to solve some of miners' biggest challenges, including ESG, climate risk, productivity and costs."

New business models can also offer opportunities for miners to reposition for a changing future, with many companies considering the benefits of strategies to rationalise, grow and transform.

"Companies that scrutinise and shift business models now, can get an edge on competitors, as demand and expectations change,” he concluded.