NEW YORK, NY, USA, 1 February 2022—Released today, the 14th annual edition of Deloitte Global’s mining and metals report, Tracking the Trends 2022, explores key trends facing mining and metals companies which could redefine how these companies prepare for the energy transition and meet decarbonisation and environmental, societal, and governance (ESG) goals. The report takes a look at what the mining sector is doing right and what needs to improve in addition to offering best-practice examples.
“Right now there is a convergence of factors that the mining sector has to face head on if they want to build competitive advantage,” says Andrew Swart, Deloitte Global Mining & Metals sector leader. “The ongoing impact of the COVID-19 pandemic on work and the drive to digitise, as well as the need to develop and meet ESG commitments are all challenges the sector must address. But within these challenges also lie opportunities to redefine the industry.”
Positioning for a more sustainable future
The COP26 event held in Glasgow, UK, in November 2021, highlighted the mining industry’s integral role in supplying the metals and materials critical for a low-carbon future. The way in which mining companies position themselves today in preparation for this future could make or break their competitive advantage over the next decade.
While the core objective of the mining industry will remain unchanged—providing metals and minerals to downstream sectors—the energy transition presents a rare opportunity for leaders to reorganise, generate new value, and forge partnerships to create a more responsible and attractive future for the industry. To capitalise on opportunities and create organisations fit for the 21st century, companies should evolve traditional mining and metals businesses through new business models and capital allocation, agile work practices, and data-driven technologies.
The next decade will be some of the most exciting and transformative in the mining industry’s history. Successful mining and metals companies will be the ones that not only adapt and innovate, but also position themselves to profit from the energy transition and leave a positive social impact in their wake.
Top industry trends
Deloitte Global has identified ten trends that could impact the industry over the next 12 to 18 months. Each of these trends has a role to play in guiding companies to success beyond the pandemic and towards a more sustainable future.
- Aligning capital allocation to ESG: While much of the focus today is on climate change and decarbonisation, companies should think holistically and ensure their capital-allocation decisions reflect their ESG commitments. Building a portfolio of businesses, initiatives, and projects that are collectively strategically sound, value-creating, resilient, and sustainable will minimise risk in the face of future uncertainty and boost the aggregate value of a company’s holdings over time.
“As companies move toward making ESG an integral part of their strategies, a key differentiator will be the narrative they build for investors around their capital investments,” says Swart. “Companies may want to look at their portfolios through the lens of a potential ESG investor, as well as consider looking beyond traditional ROI metrics to those that help the company achieve its wider net-zero commitments.”
- Reshaping traditional value chains: The energy transition is reshaping the traditional mining value chain creating new challenges and opportunities for miners. There is likely to be a realignment of portfolios to position for the energy transition, new alliances across the value chain as scope 3 emissions come into focus, new entrants or competitors for some commodities and companies exploring more circular business models in addition to their core business.
- Operating in the post-COVID regulatory and tax environment: With commodity prices soaring in 2021, many countries are looking to regulations and resource nationalism to recoup lost revenue during COVID-19. This can range from the expropriation and nationalisation of assets to states implementing new forms of taxation. Companies should learn how to operate in this new environment by demonstrating their value beyond tax—including their ESG efforts—to governments.
- Embedding ESG into organisations: Mining and metals companies should be functionally set up to respond to and address ESG-related opportunities, challenges, and risks. Companies should create operating models to support their ESG commitments, providing a structure for achieving their goals and a way to demonstrate how they are honoring their commitments. At a practical level, these operating models should facilitate visibility, accountability, and collaboration between departments along with a clear governance structure.
- Evolving mining’s world of work: For several decades, miners have found themselves starved of talent, but COVID-19, among other issues, has intensified this challenge. Facing this increasingly competitive labour market requires mining and metals companies to position themselves as an attractive sector and employer, capable of meeting evolving priorities. Social purpose, reimagining work, and building an inclusive leadership culture provide an opportunity for miners to secure a strategic and sustainable advantage through human capital.
- Establishing a new paradigm for Indigenous relations: Indigenous communities around the world are often keen to establish a new type of understanding and connection with mining and metals companies that participate in their environment. Issues such as decarbonisation and natural-resource management, securing diverse talent and leadership, are all potential subsets of how Indigenous peoples may help mining and metals companies better relate to and fulfill responsibilities as actors within a landscape. When planning new projects, mining companies should look for opportunities that align with local communities’ own goals and priorities.
- Continuing the journey toward innovation-led organisations: While the need for innovation has long been a key trend in mining, a number of recent factors should motivate organisations to intensify their efforts. This includes new remote work practices spurred by COVID-19, the need to find new ways to decarbonise, and the latitude that high commodity prices can bring. Mining companies should restructure and rethink processes so that they may embrace and benefit from these changes—moving past the traditional focus on stability.
- Unlocking value through integrated operations: Mining and metals companies should make better use of digital transformation to drive effective integrated decision-making. This is more important than ever as the current heightened focus on ESG measures has placed pressure on companies to manage not only their operational environment, but also social and regulatory challenges. The insights and visibility digitalisation provides can help companies empower employees across levels to make decisions as well as enable them to respond to ambiguous and complicated situations thereby unlocking significant value.
- Closing the Information Technology (IT)- Operating Technology (OT) vulnerability gap: Mining companies’ cybersecurity has traditionally focused on functions like finance or human resources rather than on the ground at mine sites. However, with more devices being connected, some of the industry’s biggest cyber vulnerabilities are around operational technology, industrial control systems, and sensors. As many mining companies are at the beginning of their digital journeys, it is important to put in the time, attention, and investment now to ensure operations are not left exposed in the future.
- Preparing operations for a changing climate: Mitigation is only one piece of the puzzle when it comes to climate change. Mining companies should prepare for the physical impacts a changing climate can produce across their businesses and operations as well as beyond their own sites—such as meteorological events that disrupt key transport corridors. Digital tools can offer insights that can help address these risks as well as provide transparency of complex procurement networks.