Mining and Metals in a Sustainable World

2050

September 11, 2015 by Roland Haslehner and Benjamin Stelter

Calls for conservation and sustainability are increasingly vehement and urgent. Vital natural
resources are being depleted, even as consumption levels climb. Population increases are one
measure: in 2050, the world’s population will total 9.6 billion people, an increase of 2.6 billion
over the current total that will occur mostly in African and Asian countries.

Expect a transformation. By 2050, the world and the way it uses its resources will be different.
Rules are changing, societal pressure to act more sustainably is growing, and technological
advances are creating new possibilities. The push for sustainability is challenging ways of doing
business across industries. But for the mining and metal sector, the challenges are fundamental:
these companies are extractors and users of finite mineral resources, and they face significant
demands and expectations regarding sustainability from across the value chain and from various
stakeholder groups.

Mining and metal companies can meet these challenges. Doing so requires changes in mind-sets
and business models and a long-term view; sustainability will be an imperative in the years
leading up to 2050, and beyond.

The Boston Consulting Group, in conjunction with the Mining & Metals in a Sustainable World
2050 initiative of the World Economic Forum, has analyzed the outlook for mining and metal
companies and established a framework to navigate these changes.

No End in Sight

Mining and metals are essential to the global economy and societal development. These
companies stand at the beginning of most value chains, supply crucial materials and products,
and generate trade, employment, and economic development globally. This sector will also be
central to meeting the demand for global growth in a more sustainable world.

With that foundation, BCG and the World Economic Forum's initiative find no reason to
anticipate an end to mining. Primary extraction will continue, although volumes are unlikely to
grow in line with GDP growth. Therefore, to prosper as businesses that retain a license to
operate, mining companies will have to combine cost-effectiveness with environmentally and
socially responsible behavior, leading to new partnership and operating models.

Nor will metal companies disappear. Metal companies can survive by acting as liaisons between
commodity producers and end industries. Opportunities will exist for these companies to adapt
business models and reposition themselves as materials providers.
Already, the mining and metal industry is reacting to the new agenda. A survey found that 80
percent of senior executives believe that sustainability-oriented strategies are essential for current
and future competitive advantage.

A Framework and Principles for Sustainability

To make the necessary adjustments and to put sustainability at the heart of corporate culture, the
initiative compiled a framework of key questions that mining and metal companies must answer:

 How will the balance of primary and secondary commodity supplies look at various
points in the future?

 Which supporting resources (such as water and energy) face the largest risks of scarcity
and cost increase?

 What long-term downstream and end-use trends could most affect the sector?

 Which technological developments will affect mining and metals, and how?

 How can the sector attract people with the right skills?

 How is regulation being shaped, and how are different nations’ varying regulatory speeds
being addressed?

 Which parts of the business model and overall strategy need to be adjusted for a more
sustainable world?

Mining and metal companies can turn to this framework to check the progress of their strategies
toward sustainability as the environment evolves. They can evaluate and adjust their approaches
or trigger new action plans.

What are they planning for? A set of overarching principles sets the direction that mining and
metal companies must target. The end state could encompass the following: environment and
climate conservation, fair value and development, transparency and human rights, and health and
well-being.

Changing Resource Use

A key element in the new sustainable world is circularity. Products will have greater longevity as
they are increasingly reused and recycled. Instead of being thrown away at the end of their life,
products (or, at least, many of their components) will be dismantled for recycling and reuse. This
will demand changes at several points in the value chain.

In particular, product designs need to be altered so that products, and their components, can more
easily be repurposed when they are no longer useful in their original states, at the end of their
life. It should be possible for components to be easily and inexpensively extracted. Steel rods and
beams from buildings could be reused after demolition. Components from electrical products
such as smartphone displays should be easy to extract. Achieving more reusability will demand
standardized component designs and specifications along with close collaboration and
cooperation along the value chain.

Reuse can also be ensured through remanufacturing, in which a product is not scrapped but
disassembled, cleaned, repaired, and reassembled. This is an extremely environmentally friendly
and energy-efficient way to make domestic appliances, machine tools, and (in particular) engines
and turbines reusable. Reusing a remanufactured engine rather than producing a new one
consumes up to 83 percent less energy and can save up to 87 percent of emissions.

Governments are likely to push circularity by using life cycle assessments, which measure the
true environmental impact of a product. Governments can also be expected to demand a
reduction in the waste associated with mining and metals—currently estimated at 10 billion tons
per year, or 40 to 55 percent of the global total—and an increase in recycling.

More efficient treatment of waste would also benefit mining companies. It has been estimated
that with the right technology for treating bauxite waste, aluminum production per ton extracted
could be increased by 20 percent, a significant value gain.

Recycling rates will need to rise. Wasteful bottlenecks, such as the 30 percent of aluminum scrap
that is not collected in the U.S., must be eliminated. End-of-life recycling rates vary from 40
percent for zinc to 85 percent for steel. Even in high-recycling steel, an increase of recycling
rates (and scrap used in new steel) is possible. More recycling also means more-efficient energy
use. Recycling aluminum takes only 5 to 10 percent of the energy needed to produce primary
aluminum. When steel is produced using 100 percent scrap inputs, the process uses up to 60
percent less energy than the same process via the integrated route, which cannot run only on
scrap.

In the face of the sustainability imperative, mining and metal companies must address not only
the overarching trend toward sustainability but also other relevant supporting factors, including
the impact of technology, staffing needs, and relationships with host communities, especially in
mining. A clear understanding of the potential challenges and opportunities is key to prospering
in the new sustainable world. By acting now, mining and metal companies have the opportunity
to define the role they can play and embrace the changes to come.