The global economy has changed dramatically in the past few years, and the metals and mining sector has transformed along with it. The pandemic and the recent war in Ukraine have placed supply chains under enormous strain. And climate change has altered the economic landscape, turning the spotlight on the minerals sector.
Other drastic changes can be expected in the future, perhaps even bigger than those of the recent past.
Metals and mining companies are vital to reducing the world's reliance on fossil fuels. They must shift focus to the production of minerals that help reduce global carbon footprint, not least through the production of millions of electric vehicles. Transforming their own operations to conform with increasingly important environmental, social and governance considerations can also drive this effort in the journey to net zero.
Still, the volatility of mineral and metal prices makes it difficult to plan ahead. Promisingly, our latest survey of the sector shows that executives around the world are planning to make the investments needed to restructure the way they produce. This can, in turn, help global business to move in a new direction.
Delve into our analysis of the problems facing the industry, and uncover key insights on ways to overcome them, in our full report.
Higher commodity prices are providing a rare opportunity for the sector to transform its operations as it heads towards a zero-carbon future. Companies in the industry are facing two overriding challenges: altering production patterns to accommodate dramatic shifts in demand, while making big improvements to the environmental impact of their production footprint.
Approximately 90% of executives surveyed are confident in the growth prospects of their company and industry over the next two years. It remains to be seen whether optimism on prices will remain in the wake of recent events, such as the increase in interest rates by central banks to slow the rate of inflation.
More than half the companies surveyed regard the transformation of operations through technology investments as the biggest business opportunity over the next two years. Over one-third predict they will significantly change their portfolio of products towards commodities and metals used to accelerate the transition to cleaner energy.
Beneath the apparent optimism, however, there are anxieties about the future, with almost half saying they are not prepared or have a lot more preparations to make for the next economic disruption.
A major focus of executives is to develop ESG criteria that will enable their companies to satisfy the demands of shareholders, governments and employees. However, there are several challenges in achieving ESG objectives, with inconsistent government rules about ESG reporting cited as the most prominent one.
Another challenge cited by metals and mining executives is fast-changing government regulations. The added complexity of new environmental rules is likely to have a significant effect on trading relationships, which are already stretched thin. Supply chain issues are cited as a risk over the next two years, and supply chain problems rank only behind corruption as the top challenge facing the industry.
Metals and mining companies are similarly ambitious about their net-zero targets. Executives say the most effective measures that will help their companies meet net-zero targets are, first, to ensure their company communicates clearly and fully to stakeholders and, second, to see to it that net-zero objectives are incorporated into their overall corporate strategy.
As with ESG objectives, they face a number of obstacles to reaching these goals — the biggest of which are difficulties in measuring progress and a lack of resources to bring them about.
Many of the industry’s leading companies and those that aspire to lead are confident about the future. Buoyed by an upsurge in prices, they aim to invest in technologies that will transform their operations and make it easier to reach sustainability objectives.
Some key guidance for companies:
- Accelerate the implementation of ESG goals to develop a business-as-usual culture of excellence in the organisation.
- Given the wide swings in commodity prices, companies must plan for a range of possibilities with regard to investing in measures to enhance sustainability.
- Companies should communicate their carbon and ESG goals clearly and comprehensively to their stakeholders.
- Companies continue to be highly concerned about corruption and social conflict within the countries, territories and jurisdictions in which they operate.