Mining needs 'accelerated purpose'

The mining and metals industry is facing the prospect of doing business in a world reshaped by COVID-19. While this poses a tremendous challenge, it also provides an opportunity to redesign the industry into one that is fairer, more sustainable, and more resilient for all stakeholders.

David Burns & Jörgen Sandström
 Companies working within the same supply chain can share data to support responsible sourcing

Companies working within the same supply chain can share data to support responsible sourcing

The pandemic highlighted the importance of sustainability and purpose, best defined as a company's commitment to making a positive impact on its stakeholders and on society at large.  Accenture and the World Economic Forum's Mining and Metals Industry Action Group (IAG) identified "accelerated purpose" as a key element in helping companies manage the direct effects of the COVID-19 crisis while building a resilient future. 

Accelerated purpose is more than doing the right thing.  For mining and metals companies, it provides a powerful value proposition and an opportunity to move beyond ESG reporting to a net contribution on the Sustainable Development Goals.  A clear, strong purpose can help build trust among stakeholders, creating stability and support as companies face future challenges.  And a well-defined purpose can keep stakeholders aligned as the industry landscape changes. 

For mining and metals companies, there are two key areas to focus on in building an accelerated purpose:  1) Advancing decarbonization efforts and 2) Pursuing responsible sourcing.  It's also key for companies to establish how they can finance these efforts by taking advantage of the growing availability of capital for sustainability initiatives and the transition to a low-carbon economy. 

Advancing Decarbonization Initiatives

During the pandemic, lockdown measures and the associated reduction in economic activity resulted in a temporary reduction in carbon emissions, making the link between climate change and human activity increasingly clear.  As businesses and countries reopen, however, emissions are returning to pre-pandemic levels. 

Mining and metals companies can take several actions on this front, including:

  1. Set decarbonization ambitions.  The mining and metals industry has begun the process of setting emissions-reduction goals, with many of the top mining and metals companies committed to net zero by 2050 or earlier. But the industry must work together to address emissions with the needed scale and urgency.  Possible initiatives include more action pledges, collaborating on research, developing and demonstrating research into demand signals and creating net-zero industrial clusters.  

Some companies may worry about putting their business at risk, but the World Economic Forum's Mission Possible Partnership platform, which aims to help heavy asset and transport industries reach net-zero emissions by 2050, found that reaching that goal is economically and technically feasible, with a cost of less than 0.5 percent of global GDP. 

  1. Develop a low-carbon product strategy.  Demand for low-carbon products is growing, and the industry has begun to explore the willingness of customers to pay for such products.  Last year the London Metal Exchange set up its first platform for a green material by introducing a low-carbon aluminum trading platform. As manufacturers focus more on carbon-friendly products, there will be increased pressure on upstream commodity producers to provide low-carbon products.  An industry-wide low-carbon brand could shift consumer preference from competitors such as composites or plastics toward mining and metals products. 
  2. Make investments in new technologies.  New technologies such as carbon capture utilization and storage (CCUS), scrap recovery, inert non-carbon anodes and advanced materials will be essential for the industry to decarbonize and meet its emissions goals.  Some leading companies have made major investments to help hit net-zero emissions by 2050.  The mining and metals industry should watch other industries, such as oil and gas, that are making significant R&D investments and pooling funds to accelerate development of technology like CCUS.

Implementing responsible sourcing

As industrial end-users anticipate changes in consumer demands, responsible sourcing is receiving more and more attention.  Right in the midst of the pandemic, customers in our supply chain research survey identified sustainable products and services as the top priority for mining and metals companies in the period from 2020 to 2022, while a majority of consumers surveyed in other research we conducted last year believe COVID-19 has increased the need for greater business involvement in improving social and environmental outcomes. 

Companies seeking to enhance their responsible sourcing capabilities should consider environmental and social factors including: 

  • Environmental footprint.  Both investors and end-users are putting more pressure on businesses to report how they use natural resources within their supply chain, and particularly to disclose the climate impact of such resource usage.  Water, land, and energy consumption are vital parts of operational resilience for mining and metals companies and are used heavily throughout the supply chain.  In addition to environmental reporting and initiatives to reduce consumption, mining and metals companies may want to consider implementing circular business models that reduce waste and increase recyclability.  To do this, they will need a better understanding of where waste is going, how to maximize secondary product output, and what product innovations could lead to a more circular flow with their end users. 
  • Social footprint.  Social factors are becoming more important to proponents of responsible sourcing.  COVID-19 has drawn attention to issues such as the living wage, labor standards, and improved health and safety.  A key element of responsible sourcing is ensuring that human rights are not violated anywhere within a company's operations.  While most large global companies have human rights principles in their codes of conduct, these companies are increasingly threatened by risks caused by the conduct of their supply chain partners and on their production sites.  Our operations research indicates that it is often difficult to get the accurate, unbiased information needed to monitor and mitigate risks, not only because these risks can be highly specific to the country, location, or counterparty in question, but because of a lack of transparency into contractors.

Companies working within the same supply chain can share data to support responsible sourcing.  Ledger and cloud-based technologies enable partners to easily share accurate, trusted, and secure information across the supply chain.  In addition, better data sharing can enable greater supply chain efficiency and resilience. 

Access to Sustainable Capital - Financing an Accelerated Purpose

Accelerated purpose depends on investment to make the changes needed to support decarbonization and responsible sourcing. Environmental, social, and corporate governance (ESG) goals have been strengthened and are now considered a top priority as a result of the pandemic. Deutsche Bank has estimated that by 2030, as much as 95% of global assets under management will reflect ESG risk considerations and objectives.

There are now several sources of capital specifically focused on low-carbon operations: 

  • Green and ESG loans provide access to dedicated capital pools that are linked to sustainability criteria.
  • Other decarbonization-related financial mechanisms include climate bonds or green bonds, which are usually issued by multilateral development banks.
  • Changing sentiments are allowing mining and metals companies to access untapped investor capital, with COVID-19 also increasing awareness of risks from factors such as climate change and biodiversity losses. 

At the same time, it seems there is a growing trend for investors to move away from firms that do not prioritize ESG. It is evident that mining and metals companies that fail to address these issues are likely to be impacted. Meanwhile, companies that tap into these various sources of capital to successfully support an accelerated purpose are likely to see significant, tangible benefits, including higher margins.  An analysis of ESG and financial performance by Arabesque S-Ray, a financial services firm, found that companies that focused on the triple bottom line (social, environmental, and financial factors) had operating margins 4.7 times higher than low ESG performers. High ESG performers were already seeing such benefits before COVID-19, and that continued even as the pandemic took hold.

Accelerated purpose offers mining and metals firms a way to keep in step with stakeholder expectations to drive business performance and retain its license to operate.  As COVID-19 has demonstrated, companies need not only flexibility and resilience but a clear purpose that encompasses and benefits all stakeholders.  This can lead to a business environment that is more sustainable, more equitable, and more effectively governed. 

David Burns, a managing director and global lead for Natural Resources, Accenture

David leads Accenture's Mining practice globally. He brings great strategic mining insight from over 25 years of consulting experience within mining companies —as well as with energy, chemicals and other natural resources clients—helping them to achieve transformation amid unprecedented technology and industry disruption. His focus has been supporting many large, global clients with significant all-of-business change programs. David is based in Melbourne. 

Jörgen Sandström, Head of Mining and Metals Industry at the World Economic Forum

Jörgen Sandström is Head of Mining and Metals Industry at the World Economic Forum. This community consists of the world's leading mining and metals companies, representing a broad range of commodities and all regions. In this role, Jorgen leads a high-performing team who address critical issues facing the industry on global, regional and industry levels through cross-industry inter-action and engagement with governments, financial industry, industry associations and civil society. 



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