ESG Among Top Risks for Mining and Metals Companies in EY Survey

Published on: 30 September 2022
by KnowESG
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According to the EY Top 10 business risks and opportunities for mining and metals in the 2023 report, global mining and metals executives identify environment, social and governance (ESG), geopolitics, and climate change as the top three risks facing their business over the next 12 months.

Theo Yameogo, Americas Mining & Metals Leader, said: 

"We've witnessed huge upheaval and change over the last year, namely due to the war in Ukraine, climate events, new governments in mining regions, and shifting relationships in others—all coming together to drive substantial impact on the sector. 

These external factors, combined with inflation, will continue to shift the sector's risks and opportunities as pressure from stakeholders and capital markets hold leaders accountable on multiple fronts. Companies that can demonstrate their ability to future-proof their business models to better deal with disruption and changing commercial relationships will ultimately gain a competitive advantage."

Even though evidence suggests that mining and metals companies are incorporating environmental, social, and governance (ESG) factors into their strategies, decisions, and reports, survey respondents continue to rank ESG issues as the biggest risk to their business, while climate change is in the third position. Respondents think that investors will pay the most attention to water stewardship (76%), reducing carbon emissions (55%), and green production (35%).

"Net zero is still a focus, but mining and metals companies are also mitigating broader transition and physical risks," shares Yameogo. "Companies must play a role in enabling a just transition, achieving decarbonisation targets while considering the long-term impact of mine closures on workers and communities."

Respondents identify geopolitics as the second most important risk, up from fourth place last year. Seventy-two per cent see resource nationalism as the most likely geopolitical issue influencing their operations, as governments seek to cover financial gaps left by the pandemic and capitalise on rising commodity prices through new or increased mining royalties.

"Global uncertainty is putting pressure on companies to quickly assess the impact of different alliances, trade flows, governments, and taxes on business decisions," says Yameogo. "It's also forcing companies to define where intersects exist. As the interplay between ESG and geopolitics increases, so too does the amount of regulation needed to comply. This evolving landscape requires mining and metals companies to pay close attention to how tax and regulatory changes across jurisdictions will impact operations."

The impacts of COVID-19, the conflict in Ukraine, and the rising cost of energy are examples of the external and societal factors that have exacerbated the challenges that have been brewing for some time. In response, many companies say they want to enhance their supply chain visibility, use technology to boost efficiency, and take a more strategic approach to evaluate potential new suppliers and technologies.

"Major disruption and rapidly changing expectations, together, may impact the ability for mining and metals companies to build sustainable value," Yameogo adds. "Risk mitigation and maximising opportunity requires companies to make significant changes to their business through a proactive, diversified approach that's integrated into strategy and broader planning."

Source: Kitco News

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