Thursday, 7 July 2011

Buyer Sustainability Management in the Mining Industry 2010–12

It is expected that an increase in sustainability budgets will also lead to increased profitability for the mining industry over the next two years. Controlling overspending and balancing the cost of operations are contributing factors for increased profitability.

London – July 7, 2011 – In the next year, mining industry sustainability management budgets will increase, as buyers are increasingly aware of the importance of sustainability to investors and shareholders and the advantages it can bring, such as increased profitability. As a result, buyers expect suppliers to have ISO 14001 certification and strong health and safety initiatives.

Demand for sustainable products is highest in developed economies and the Chinese and Indian developing economies. Most mining companies see their board of directors as the driving force behind sustainable initiatives, and believe that sustainability measures are adopted for their long term benefits to mining countries.

Mining industry sustainability management budgets to increase
A large percentage of mining industry buyer respondents expect to see sustainability management budgets increase by nearly 8% in the next 12 months. Reasons for this increase include legislation compliance and managing corporate reputation. This is evidence that buyers are aware of the importance of sustainability to mitigate the risks of social, economic and environmental trends. It is predicted that sustainability budgets will increase by over 6% in the coming year.

Most industry buyers require ISO 14001 certification from suppliers
The majority of mining industry buyers think that ISO 14001 certification and environmental and health and safety management are important factors in deciding between suppliers. Several mining companies see environmental accreditations as a direct message regarding environmental performance to shareholders, and these also improve efficiency and develop organizational performance.

Buyers to invest over a quarter of budgets on green initiatives
In 2010–11, the average mining company procurement budget for green initiatives is approximately US$115 million, compared to just over US$100 million for metal manufacturers. On average, buyer companies plan to spend a quarter of their procurement budgets on green initiatives, including water and waste management and health and safety services and equipment.

Over 30% of mining company respondents think that sustainability is more important post-recession, due to government legislations and the increased significance of sustainability
among shareholders and investors. Due to the recovery of commodity prices post-recession, mining companies are more able to invest in sustainability measures.

Demand for sustainable products higher in developed economies
In the next two years, the US, China and Canada are expected to show the highest demand for sustainable initiatives, and Russia, South Africa, Japan and the Middle East are expected to generate the least demand. Of developing economies, China and India will create the most demand as a result of growing populations and energy requirements.

Customers are not willing to pay more for sustainable products
Although there is increased demand for sustainable products, customers are generally unwilling to pay more for these. Of mining companies, around a third think that the majority of customers would pay more for sustainable products, whilst more than 70% of metal manufacturers though a minority of customers would be willing to pay more. However, customers are not generally willing to pay more for sustainable products, as they tend to be satisfied with current products on offer at a lower price.

Sustainability measures adopted for long-term benefits
Approximately 44% of respondents think that ‘balancing financial, human and natural resources for long-term benefits’ was the most important reason for adopting sustainability measures. This is essential for the conservation of natural resources and the protection of the environment, and for an appropriate employee work life balance, aided by adequate training.

Mining companies should engage in strategic planning which ensures the sustainable development of a country without harming its environment, and ensure natural resources are conserved for future generations. A large percentage of metal manufacturers also agree that this is the most important reason for adopting sustainability measures.

Board of directors considered most important factor behind sustainability
Of all mining company respondents, nearly half believe that a company’s board of directors is the driving force behind corporate sustainability, the creation of corporate social responsibility (CSR) and the development of sustainable community development programs and natural resource responsibility. This is followed by the CEO and operational managers. A large percentage of respondents from metal manufacturing believe that the CEO is the most important force for corporate sustainability, followed by operational managers.

To purchase the full version of the report, ‘Sustainability Management in the Mining Industry 2010–12: Market Opportunities, Mining Industry Buyer Demand, Post-Recession Dynamics and Business Trends Forecast,’ please click here.

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