License to Operate Remains Number One Issue for Miners in 2021

In a recent survey by our implementation partner, Ernst & Young, mining leaders across the world ranked, 'license to operate,' 'high-impact risks,' and 'productivity and rising costs,' as the top three risks facing their companies in 2021.

COVID-19 has taken over the world and has impacted all industries into 2021, including mining and metals. The recently released report, Top 10 business risks and opportunities for mining and metals in 2021, focuses on the effects of the COVID-19 pandemic on the industry, highlighting how the pandemic has amplified many industry risks but also created new opportunities.

While the pandemic has been disruptive, the survey shows that the mining and metals industry has dealt with the effects of the pandemic exceedingly well. This outcome can be attributed to the mining industry being more prepared to deal with pandemics in comparison to other industries. Having dealt with other pandemics such as Ebola in Africa, Zika in South America and SARS in Asia, global mining companies employed learnings from these past pandemics to manage COVID-19. Organizations prioritized people’s health and safety, collaborated with stakeholders to ensure best practices were followed and employed excellent governance that enabled agile change management.

Top 10 business risks and opportunities for mining and metals

EY Top 10 Risks Image
Source: EY Top 10 Business Risks And Opportunities For Mining And Metals

1. License to operate

Although the pandemic disruption has reshuffled rankings from previous years, license to operate remains the number one issue for miners for three years in a row. Social risks are one of the largest risks faced by the mining industry, and experts anticipate that this will remain unchanged for the foreseeable future. In confirmation with these results, Thibaut Millet, EY Canada Climate Change and Sustainability Leader says, "Stakeholder expectations are changing, what was acceptable ten years ago, no longer flies. The way we are doing things today from a social license to operate, will be different ten years from now."

2. High-impact risks

        Industry experience of the pandemic has elevated stakeholder expectations around how companies prepare for and manage high-impact risks exposures – consequently ranking it second from the fifth position in 2020.

        3. Productivity and rising costs

          Productivity and rising costs are up to third place from tenth position in the prior year. Experts say this is a result of the increase in the complexity of mining and a rise in commodity prices.

          4. De-carbonization and green agenda

            Greenhouse gas emission reduction is still a big environmental issue for the mining and metals industry. The pandemic placed a bigger social responsibility on companies and increased stakeholder demands. The broader public is also becoming increasingly aware of how a continued rise in global temperatures is a potential threat to their health and livelihoods.

            Investors now seek to understand how organizations they wish to invest in are managing their greenhouse gas emissions and associated climate change risks. Thibaut says, "Investors now place greater emphasis on ESG factors when evaluating companies in which to invest. 97% of investors say they conduct an evaluation of ESG disclosures, and that these play a pivotal role in investor decision making."

            This development has made organizations even more aware of the environmental and social impacts of their operations and are committed to implementing solutions that will help mitigate these risks.

            5. Geopolitics

              The growing impact of geopolitical uncertainty has brought forth this new risk which ranked fifth in the survey. The results reflect the shifting balance of power among the world’s largest economies, with leaders expecting this shift to have a big impact on their companies in the next year.

              6. Capital agenda

                Miners have been prioritizing the operation of core assets, tightly managing cash spend and reducing non-essential expenditures to manage the economic effects of the pandemic. This risk remains unchanged at number six from 2020.

                7. Workforce

                  A change in corporate culture and an acceleration of workforce transformation has been a highlight of the pandemic in terms of workforce risk status. With miners feeling more confident in handling workforce relations, this risk has moved from its second position in 2020 to seventh in 2021. Mining companies have demonstrated their commitment to workers’ safety during the pandemic, acting swiftly to protect health and reduce risk of exposure and spread on-site.

                  8. Volatility

                    Volatility is a new risk making it to the annual survey’s top ten. Economic uncertainty is challenging miners to be more prudent when making long-term decisions about demand. Experts say miners need to be able to make sustainable, long-term decisions as they deal with the return of severe commodity price volatility, the threat of substitution and changing customer demand.

                    9. Digital and data optimization

                      The supplementary benefits of digital transformation in ensuring business continuity have been fully unveiled in the wake of the pandemic, particularly in the mining and metals industry. This risk ranked third-biggest last year but is now at number 9, suggesting a growing confidence in digital technology in the industry.

                      10. Innovation

                        The pandemic has provided some lessons on the importance of innovation and highlighted that more solutions can be implemented across the value chain when managing a crisis.

                        Conclusion

                        The uncertainty and disruption created by the COVID-19 pandemic resulted in several major negative impacts on the mining and metals industry. However, the pandemic also acted as a motivator to create an opportunity for greater collaboration across companies to develop innovative solutions to arising problems. The report highlights eminent issues such as stakeholder expectations around corporate responsibility that pose as threats to business continuity. This will unite, restructure and shape the industry for the future.

                        About IsoMetrix

                        IsoMetrix is a world-leading integrated risk management software company, providing solutions for EHS and GRC management. For the last 20 years, global mining companies have trusted IsoMetrix to help manage environmental, health, and safety risks. As a disruptive technology, IsoMetrix helps with SLO management, tailings management, environmental sustainability and social sustainability.

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