Risks and opportunities due to climate change

Three billion new middle-class consumers will need vital resources such as metals and water in the coming decades. This makes it essential to optimize resource usage. Greater production capacity and more resource-efficient, sustainable technologies will be needed to fulfill the needs and on the other hand to tackle climate change related challenges. We feel that technology can change everything.

Our management annually evaluates the global megatrends that impact Outotec’s business, examining related risks and opportunities to create the basis for strategic planning. Sustainability-related risks and opportunities are addressed in Outotec’s routine risk management processes. The megatrends identified in our 2017 strategy review as impacting Outotec’s business most are: Urbanization, Resource efficiency, Sustainability, Digitalization, and Volatility. Overall, these global megatrends appear to bring Outotec more opportunities than threats.

The key in our climate change strategy, made in 2016, is harnessing our technology for the transition to a low-carbon industry. We have complemented the estimated impacts of megatrends with the opportunities and risks defined in connection with our climate change strategy work. In 2017, we also studied the adoption of Science Based Targets to reduce our carbon footprint and enlargen our positive impact, our handprint, to enable our customers reduce their footprint. Policies relating especially to greenhouse gas emissions in different parts of the world are still evolving and we are following these changes, interacting with policy-makers as well as acting upon them in business development. 

Urbanization

Growing demand for minerals and metals to satisfy the needs of the new middle class requires greater processing capacity and more resource efficient methods.

  Impact on Outotec Risks - / Opportunities +
Our cost structure may be too high for some emerging countries. If we fail to keep our portfolio competitive, we may lose market share.
Consumers’ changing behavior to replace metals with bio-based materials and plastics
Our technologies enable efficient ore processing and higher yields, thanks to advanced process control.
As the concept of circular economy gains ground, we can sell more solutions for the production of metals from end-of-life secondary materials, such as electronic waste, metallic scrap, battery paste or scrap and mining and metallurgy related wastes still containing valuable materials.
Requirements for the efficient use of biomass and waste provide opportunities for our waste-to-energy solutions. 

Resource efficiency

Valuable metals and minerals must be more effectively recovered, and tailings and waste must be better recycled and processed to enhance the efficient use of resources.

  Impact on Outotec Risks - / Opportunities +
Ore grades are declining and ores are becoming more complex and more difficult to process. If we fail to develop new technologies or keep our portfolio competitive, we may lose market share.
Energy shortages and Climate Change mitigation related increased energy costs can reduce our customers’ competitiveness and risk their ability to operate
Availability of water varies, often there is scarcity and sometimes floods.
Our customers will need to replace inefficient processes with new energy- and water-efficient solutions. Our technologies are energy efficient, recycle process water, decrease water loss, and lead to significant reductions in fresh water consumption.
Carbon taxes favor our energy efficient technologies.
Demand for closed water cycles provides business opportunities for our water know-how.
Our technologies are benchmarks for many production efficiency standards and fulfill even stricter future standards

Sustainability

To maintain their social license to operate, our customers are paying more attention to environmental, health, safety and social responsibility with regard to their employees and local communities.

  Impact on Outotec Risks - / Opportunities +
Possible failure of Paris agreement, and lack of global regulation. Tighter regulation can cause customers to lose their competitiveness and cease to operate, carbon leakage.
The metals industry emits SO2, which has significant environmental impacts. Fine particulate matter emissions to air, and heavy metals in hazardous dusts and fumes cause health problems. Eco-toxic substances from metallurgical operations can impact air quality, water, and soils. If customers do not gain social acceptance, they may be forced to close down their operations.
Customers’ sites are often in remote locations with vulnerable habitats, flora and fauna infrastructures and biodiversity.
Outotec’s inclusion in the Global 100 Index of most sustainable companies confirm our image as a leader in sustainable solutions, which helps customers to gain social acceptance and financing for their projects.
International climate agreements and future air pollution limits direct towards the use of clean technologies: compared to peers, our solutions emit less and go below the most stringent environmental regulations.
In emission trading, reductions can generate positive cash flow for our customers which they can use for new investments or services.
Our tailings and water management solutions enable mining companies to solve their environmental challenges. We also offer waste-to-energy solutions that significantly reduce landfill while producing clean energy.

Digitalization

The world is increasingly driven by connectivity, data, and software. Cloud computing, combining big data sets, advanced analytics methods, new ways of interactions with machines, user experience requirements drawn from consumer applications and autonomous systems will become more commonplace in our business.

  Impact on Outotec Risks - / Opportunities +
Digitalization is seen to play a major role in mitigating climate change. If more agile players are entering the market, especially in high-value digital solutions, we may lose market share in our traditional areas.
Digitalization and the integration of customers’ processes offer new possibilities to create value using our unique process technologies. New cost-efficient and interactive partnership models with customers will become possible, supporting performance-based earnings.
Closer engagement with our customers, and the provision of timely data over entire product life-cycles can open up opportunities for innovating new products, systems and services.
Advanced ICT systems offer business benefits and cost efficiency for Outotec. Through our worldwide network of experts, advanced master data management and ICT infrastructure, we ensure data quality and consistency across all business applications.

Volatility

Volatile investment activity rates, the speed of global GDP growth, metal consumption rates, and the balance or imbalance between supply and demand, capacity utilization rates and metal prices all greatly influence our business.

  Impact on Outotec Risks - / Opportunities +
Customers’ operations require sufficient amounts of water, fossil fuels, power and mineral resources. Any changes related to the availability or the price of these commodities can increase customers’ operating costs, which may lead to the closure of some operations, or postpone or cancel investments.
During downtrends, customers tend to minimize their investments in new processing capacity. The lack of large customer projects can significantly reduce our sales and thereby our yearly or quarterly financial results.
A volatile macroeconomy also hampers resource planning due to unpredictability.
82% of our business comes from the cyclical mining and metals industry. Business opportunities will increase substantially in an uptrend.
Changes in the global economy may boost our businesses in some parts of the world, and increase the demand for certain technologies or services including upgrades and modernization.
We operate globally, and offer solutions for virtually all types of minerals and metals, which reduces our dependence on any single commodity or geographical market. Our long-term service contracts, as well as modernizations prolonging the lifetime of older equipment, counteract the highly cyclical mining and metals industry.

Financial implications and other risks and opportunities due to climate change (GRI 201-2)

To mitigate the risks posed by climate change, Outotec spent EUR 56 million in R&D and product development to improve the resource efficiency and competitiveness of its products. Our vast knowledge of mineralogy and our comprehensive R&D facilities enable Outotec to develop process solutions for low-grade and complex ores. In 2017, some 79% (2016: 66%) of our R&D projects was related to initiatives targeting improved metals recovery, energy saving, waste minimization, emission reduction and/or safety improvement.   We have calculated the financial impact of the annual emissions avoided by Outotec’s customers, in total 6.2 million tonnes CO2e, using seven Outotec technologies. The CO2 European Emission Allowances Commodity Price (Dec 31, 2017) was EUR 5.76/tonne CO2. By using this price, the value of the emissions avoided was approximately EUR 36 million.

In line with our strategy, we develop new business concepts, modular products, and are increasing the use of target country suppliers and best-cost-country sourcing to increase our cost-competitiveness. We are also continuously investing in ICT systems and applications to utilize the opportunities of digitalization. In 2017, our investments amounted to EUR 21 million, consisting mainly of IT programs and intellectual property rights. Our plan is also to strongly develop our service business and expanding our waste-to-energy and water management businesses to balance the cyclicality of the mining industry. Our service sales in 2017 were EUR 475 million and our target is to grow it annually by over 10%.

R&D data

 

 

Emissions & climate data