Faced with extraordinary events, mining and metals companies have risen to the challenge by moving quickly to respond to the COVID-19 pandemic. In many areas, the industry has been designated an essential business—reflecting its key role in the global and local economies—and companies have had to find innovative ways to continue operations while keeping their people safe. As the pandemic continues, it will undoubtedly have long-term ramifications, and the industry must continue to adjust to this evolving reality. With that in mind, Accenture teamed up with the World Economic Forum to create Industry Action Groups (IAGs) with about thirty metals and mining companies to help answer the daunting question: How might mining and metals companies collaborate with one another and their surrounding ecosystem to build resilience for disruptions to come?
COVID-19’s impact on the industry has been rapid and widespread. By peak lockdown in April, market capitalization of the top 30 mining and metals companies had fallen 28% since January,1 and 275 mining operations2 and more than 56 steel plants3 had been disrupted as can be seen in Figure 1.
Figure 1: Disruption in the mining & metals industries
CLICK TO ENLARGE FIGURE 1
Three months later, market capitalization is still down 27% from January, and more than 40 mines are still shut down across the world.4 Projections indicate a 12% decline in 2020 production5 across key customer industries, including high tech, motor vehicles, industrial production, and construction—and declines of 6%6 and 4%7 in commodity and steel production, respectively.
The situation has stabilized somewhat since the peak of the crisis, but that stability is fragile. COVID-19 case numbers have declined in some areas and surged in others. The long-term economic impact of the crisis is still unclear. And in general, there are still many unknowns about the virus.
One thing seems certain, however: the pandemic is driving and accelerating further disruption. In addition, the urgency of tackling climate change remains very real. In fact, COVID-19 has highlighted the need to fundamentally change the way companies operate. As suggested by the World Economic Forum, the world is entering a unique window of opportunity to shape the recovery through a “Great Reset” to address political, economic and social disruptions caused by the pandemic, and in which industries and societies need to assess, re-think and transform the way they work.
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The world is entering a unique window of opportunity to shape the recovery through a “Great Reset”, according to the World Economic Forum.
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Moving forward as an industry
Each company should build greater resilience through initiatives such as to boost cybersecurity, deploying digital technologies that increase flexibility and efficiency, and creating mechanisms for dynamically adjusting production capacity to meet changing demand, among other initiatives.
Such efforts are critical, but they won’t be enough. As they drive internal improvements, companies also need to look beyond their four walls. The impact of COVID-19 continues to be both deep and widespread. That means that effective responses will need to include industry-wide, collective initiatives that tackle evolving pandemic-related challenges from a broad, holistic perspective.
Over the last few months, Accenture and the World Economic Forum’s Mining and Metals Industry Action Group identified three areas where the industry is likely to find valuable opportunities to collaborate.
- Adopting a new paradigm of work. Companies will need to draw on employees and contractors to build a flexible, skilled workforce, which will be key to resilience. In order to move from recovery to resilience, the industry should first focus on rebounding operations safely. In parallel, organizations should develop their digital operations to continue to move people out of harm’s way. Possible collaborative actions include working together to build a future-ready workforce by understanding the skills needed and preparing the workforce to acquire them. Companies can also collaborate to create an employee value proposition for the industry that will help attract talent. This is especially important with digital skills, where mining and metals companies compete with other industries for often-scarce talent. Companies should look to leverage their network to provide equitable access to education. They can also work together to define how the industry can build operational resilience while bringing employees along as their greatest asset.
- Creating the connected value chain. As an inherently global industry, metals and mining must look towards building resilience in its value chains, from suppliers to downstream customers. With the shutdown of multiple operations and trade routes, COVID-19 has been a catalyst for some major global shifts, such as a rising tide of localization of production and processes, and the need for real time data and delivery to contend with disruption. Companies (across the value chain) can work together to improve their ability to deal with the downstream changes that are likely to be frequent in an uncertain post-COVID-19 world. They can consider two basic strategies on this front: Working with partners to build new demand-sensing capabilities, using technologies such as machine learning and artificial intelligence to provide earlier insight into changing demand; or increasing operational flexibility to become “hyper agile” and quickly respond to shifts in demand. Companies can also build the “touchless supply chain,” where data is shared and tracked across partners. These are just a few examples of collaboration to expand and strengthen connections in the value chain. Moving forward, the industry can explore how to get closer to the consumer to increase resilience and decrease risk exposure.
- Accelerating the shift to “purpose”. In recent years, research and experience have shown the importance of purpose in business, but the COVID-19 pandemic has dramatically highlighted that importance. The industry can work together to define, strengthen and articulate the industry’s purpose and collaborate with financial services to transform commitments into reality. What is its broader responsibility to employees, communities, and society—not only in response to COVID-19, but in areas such as decarbonization, circular business models, and environmental, social, and governance issues in general? How can the industry accelerate efforts in these areas to solidify and reinforce its commitment to purpose? Establishing a clear industry purpose can help build trust among stakeholders—a powerful source of stability as companies pivot to meet future challenges and opportunities, notably with trends in sustainability and finance and their strategic implications for the industry.
As dramatic as the impact of COVID-19 has been, the industry is still in the early stages of gauging its long-term impact and understanding what mining and metals companies will need to do—individually and collectively. In the coming weeks and months, Accenture and the World Economic Forum will continue to explore these issues and share their insights into how the industry can navigate the Great Reset.
Accenture and World Economic Forum leads
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Managing Director, Lead – Natural Resources, Accenture
Head of Mining and Metals Industry – World Economic Forum
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We would also like to thank Sylvain Marpeau-Roussel, Marina Colombo and Renée Van Heusden from the World Economic Forum for all their support and contributions.
1 S&P Global Intelligence
3 Metstrat as of 4/23/20
5 Oxford Economics updated with most recent data 20Jul2020
6 S&PGlobal Market Intelligence updated with most recent data 20Jul2020
7 Metstrat updated with most recent data 20Jul2020