Geopolitics grows as a top risk for mining and metals companies in EY survey

• Focus on ESG continues with prioritization on water stewardship, climate change 
• Heightened geopolitical tension is creating new risks 
• Supply chain disruption emerges as a new risk, impacting strategy and operations

Global mining and metals executives rank environment, social and governance (ESG), geopolitics and climate change as the top three risks facing their business over the next 12 months, finds the EY Top 10 business risks and opportunities for mining and metals in 2023 report.

“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,” explains Theo Yameogo, Americas Mining & Metals Leader. “These external factors combined with inflation will continue to shift the sector’s risks and opportunities as pressure form 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.”

ESG remains the number one risk and opportunity

While evidence has shown that mining and metals companies are integrating ESG factors into corporate strategies, decision-making and reporting, survey respondents continue to rank ESG issues as the number one risk to their business, with climate change following closely behind in the third position. Respondents list water stewardship (76%), decarbonization (55%) and green production (35%) as the top issues they expect will face the most scrutiny from investors.

“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 decarbonization targets while considering the long-term impact of mine closures on workers and communities.”

Global uncertain ups the pressure

Respondents rank geopolitics as the second business risk — up from fourth last year. Seventy-two percent identify resource nationalism as the top geopolitical factor likely to impact their operations as governments seek to fill revenue gaps after spending throughout the pandemic and capitalize on higher 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 with. This evolving landscape requires mining and metals companies to pay close attention to how tax and regulatory changes across jurisdictions will impact operations.”

Supply chain disruption emerges on the radar

Various external and societal factors such as the impact of COVID-19, the war in Ukraine and rising energy prices have magnified the challenges that have been looming for some time. In response, respondents say they are seeking to improve end-to-end supply chain visibility, leverage technology to improve operations and performance, and be more strategic when analyzing new technologies and supplier portfolios.

“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 maximizing opportunity requires companies to make significant changes to their business through a proactive, diversified approach that’s integrated into strategy and broader planning.”

Read the report for more insight into the top risks and opportunities for mining and metals companies.