KPMG: ESG Chief Worry for Australian Mining Companies

Australia’s largest mining companies are most worried about their environmental obligations, a new report from KPMG reveals.

KPMG’s 2024 Mining Risk Forecast probes the top-ranking risks for the country’s mining and metals industry, based on the self-reported material risks of mining companies in the ASX 300 – the stock market index of Australian stocks listed on the Australian Securities Exchange .

The forecast says climate change is the top risk currently faced by mining and mining services companies in Australia. 

Other areas of concern are community relations and social licence, which is when a mining project is deemed to have broad acceptance from society to conduct its activities. 

The 10 areas of concern listed by the Forecast, in order of priority, are:

• Climate change
• Community relations and social licence to operate
• Commodity price risk
• Health, safety and security risks
• Environmental risks (including new regulations)
• Financial risks
• Operational risk
• Access to resources
• Regulatory and compliance change/burden
• Talent attraction and retention

Climate change takes top spot despite not even featuring in the 2023 Forecast. 

KPMG says that this is because Australia’s ESG agenda is “becoming increasingly prominent across all sectors, prompting executives to turn their focus to climate change risks”. 

Mining regulatory landscape 'creating sense of urgency'

It adds that a quickly evolving regulatory landscape is “creating a sense of urgency for the mining and minerals industry”.

The Forecast says Australasian mining companies are “already ahead of the curve because their social licence to operate is connected to impact not only on the environment but also on communities”. 

This, the report states, “presents a significant opportunity for the mining industry to set climate-related goals and develop strategies to reach decarbonisation targets”.

The analysis also reveals other notable shifts in perceived risks. Political instability has dropped off the list.

Commodity price risk, however, remains front of mind for miners, although it has dropped two places from top spot in 2023.

This year’s forecast is based on an examination of the self-reported material risks of designated mining companies in the ASX 300, rather than being survey-based, which has been the approach for past risk forecasts. 

KPMG says the switch in approach has enabled “a comparative analysis of different commodities as well as of the differing risk perceptions”, and that this “provides insight into the focus of the mining industry now and in the future”.

KPMG Governance, Risk & Controls Advisory Partner Caron Sugars says the report shows “a lot of uncertainty for companies about what stakeholders expect on climate reporting, emissions reduction targets and how to meet them”. She said organisations “also wanted to avoid being seen to be greenwashing”.

Sugars added: “It’s surprising we aren’t seeing a stronger focus on cyber but potentially it’s wrapped into some other risks. Political instability has also dropped off the list, but this could be because the conflict in the Middle East occurred too recently to be included in the analysis.”