Social License to Operate Remains The Biggest Risk for Mining Companies in 2020

Social license to operate (SLO) will once again remain the biggest risk for mining companies in 2020, according to Ernst & Young’s Top 10 Business Risks and Opportunities report for 2020.

It’s the No. 1 risk for the second year in a row.

Main factors behind mining risks in 2020

To compile the report, EY surveyed more than 150 global mining executives from every major mining region. Among these respondents, 44% put social license to operate at the top of the risk list. The report also revealed that it’s no longer narrowly focused on social and environmental issues. For 2020, missteps of any kind can jeopardize access capital or even lead to a total loss of social license to operate.

Some of the factors behind this risk cited in the report include:

  • Increased political uncertainty and volatility in the commodity markets, due to longer election periods and resulting government changes, which in turn are changing the regulatory environment and intensifying global trade tensions.
  • Increased scrutiny from end-consumers, who now demand a supply chain that’s transparent, ethical and that has a smaller carbon footprint.
  • Increased pressure from investors, who are driving many mining companies (81% of respondents) to reshape their portfolios by reconfiguring their existing operations. This is especially true with respect to coal.

Improving investor relations in mining & metals

The EY report points out that the mining sector will need to aggressively rebrand itself away from its “old fashioned and dirty” reputation if it wants to continue attracting investors in an era of shifting societal expectations.

“Many consumer companies don’t want to be associated with the sector — believing it contributes to pollution, slavery and child labor […]. Building a social bond is make or break for the sector.”

See how one Australian
mining company is using internationally recognized stakeholder engagement tools to secure its social license to operate.

Australia’s mining industry

According to EY Oceania Mining & Metals Leader Scott Grimley, Australia’s mining industry is especially reliant on securing the support of the Australian public and government:

“It used to be the case that pretty well every person in Australia had a family member or someone else they knew working in the mining sector. This is not the case now, so large amounts of people don’t know anything about the industry, this is especially so for those living in urban areas. These people have a negative but very loose perception of the industry, and miners recognize there are many people with a negative perception of their work, hence social license to operate continuing to rank highly.”

Investing in social license to operate now essential

In its report, Ernst & Young offers a stark warning to players in the mining industry who fail to invest in social license to operate:

“Last year our view was that the stakeholder landscape was shifting, and a narrow, legacy focus on social license to operate may be the strategy that puts you out of business.

As mining and metals companies adopt new ways of mining and seek out ever more remote locations to find the next big resource, it’s going to be essential to pay greater attention to social-license-to-operate concerns. Greater communication and discussion with key stakeholders will be vital.”

Best practices in social license to operate

In 2019, Insights Success drove home the strategic importance of securing social license to operate in the mining sector by naming Boréalis one of the Most Recommended Mining Service Providers.

For 20 years, leading mining companies around the world have been using Boréalis stakeholder engagement software.

Boréalis software is an integrated information management system used to plan, manage and report all aspects of stakeholder engagement according to industry best practices and international standards:

  • Community Engagement
  • Social Investment
  • Grievance Management
  • Assets & Land Access Management
  • Regulatory & Compliance Management
  • Environmental Monitoring
  • Social Investment

Get started with
Borealis stakeholder engagement software today!