Frustrated by perennially poor compliance and missed budget targets, many industrial executives are recognizing they need a new approach to managing sustaining capital investments—one that applies the same kind of disciplined, enterprise-wide strategy as their growth capital projects.

While sometimes overlooked, spending on sustaining capital—the broad set of investments required to maintain current operations and output—can reach billions of dollars annually, on par with investments in expansion projects. In mining, for example, sustaining capital has accounted for 50% or more of annual capital expenditures in recent years (see Figure 1).

Figure 1

Although the case studies explored in this article come from the mining industry, the trends and best practices apply across energy, natural resources, manufacturing, and other industrial sectors. They’re all facing the prospect of rising sustaining capital expenditures in the coming years due to a bow wave of demands: sustainability pressures, equipment replacement cycles, and increasing investments in new sites, necessitating more sustaining capital expenditures.

Where value gets lost

Despite the scale, sustaining capital rarely receives the same discipline, transparency, or strategic attention that industrial companies give their major capital expansion projects. The biggest impediment: Sustaining capital budgets typically encompass hundreds (if not thousands) of expenditures distributed across a company’s sites, from $100 million-plus waste management projects to replacing a single piece of equipment for less than $100,000. This fragmentation makes coordination and efficiency incredibly difficult. Responsibility is spread across sites that have uneven capabilities and resources, and budget cycles often fail to adapt to changing needs.

As a result, industrial companies frequently misjudge what’s required and mishandle allocated resources. For example, over a five-year period, one global mining company’s annual sustaining capital spending swung between 20% below and 20% above the budgeted amount (see Figure 2). It achieved an 80% spending compliance rate for larger projects, but it struggled with the long tail of smaller projects—just 40% compliance. Furthermore, about 60% of its budgeted projects didn’t launch within the designated year, and 75% of the sustaining capital projects it did carry out were unplanned.

Figure 2

Leading companies are discovering a better way. They’re taking a more strategic approach that balances site ownership of sustaining capital projects with enterprise-wide discipline, resulting in better visibility, execution, and investment returns.

Achieving sustaining capital excellence

In our work with industrial companies across sectors and regions, the most effective sustaining capital managers follow a set of seven best practices:

• Balance ownership of execution between sites and the center.
• Link budgets to long-term asset plans.
• Maintain a multiyear pipeline.
• Focus on the highest-value projects and clearly defined value levers.
• Reallocate budget in-year as priorities change.
• Tailor execution to the project type.
• Create spending transparency.

But in practice, four areas consistently stand out as the most critical—and the most commonly mishandled.

1. Balance ownership of execution between sites and the central office. Sustaining capital projects are often delivered by frontline site teams, but without the structure and support afforded to major capital investments. Inconsistent site-level capabilities, especially in geographically diverse portfolios, can lead to poor and inefficient results.

Leading companies are striking a better balance. They define clear guardrails that preserve site ownership while reinforcing consistent enterprise-wide standards. That includes establishing roles by project archetype. Central teams oversee and provide support to the projects that carry the most value, risk, and complexity (e.g., complex plant replacements, green energy projects, and nonroutine projects), while regional and site teams manage routine equipment replacements and projects best suited to their expertise and knowledge of day-to-day operations (e.g., working with local contractors).

The result is faster execution, better accountability, and smarter allocation of resources across the portfolio.

2. Anchor budgets to long-term asset plans. Too often, sustaining capital budgets have limited connection to long-term operating strategies and capital planning. Many companies still rely on reactive, site-driven budget requests in-year, often with limited input from technical functions. That makes it hard to distinguish what’s truly essential from what’s just noise.

In contrast, best-in-class organizations tightly link budgets to life-of-asset plans. In mining, for instance, roughly 50% to 70% of sustaining capital needs—such as mine development, equipment procurement, and waste disposal—follow predictable patterns. By proactively aligning with these cycles, companies can improve both the accuracy and efficiency of their planning processes, with more reliable forecasts and fewer last-minute surprises.

Beyond annual budgets, long-term capital plans also need to be adjusted as life-of-asset plans evolve. The most effective organizations build this flexibility into their capital planning process so that it becomes routine.

3. Focus on value, not volume. Many companies attempt to create detailed budgets for every sustaining capital line item, regardless of value or predictability. But with hundreds or thousands of line items to track, that effort rarely pays off. In our experience, roughly 80% of spending typically comes from just 20% to 30% of sustaining capital projects (see Figure 3). And yet, those high-value items often receive the same level of scrutiny as far smaller initiatives.

Figure 3

In contrast, high-performing organizations focus detailed budgeting and performance tracking on the top tier of projects that matter most. For the long tail of smaller, typically less complex, lower-priority investments, they allocate flexible site-level budgets based on historic needs. These site-owned budgets can adapt to scope changes or unpredictable requirements, such as equipment breakdowns. This approach builds trust between the center and the front line, reduces wasted effort, and increases agility, while ensuring that leadership stays focused on delivering the projects with the highest return.

Key to all of this is tracking spending accurately and efficiently. At leading companies, sites deliver detailed line-item reporting of the highest-value initiatives and a more general, collective summary of smaller projects.

4. Reallocate funds throughout the year as priorities change. Traditionally, sustaining capital budgets have been rigid—often set far in advance and difficult to adjust once locked. But that doesn’t reflect the real world: Priorities shift, project readiness is fluid, and estimates on cost, scope, and timing evolve. Without the ability to reallocate capital throughout the year, companies risk underspending and missing opportunities, delaying critical work, or burning funds on low-value projects just to avoid leaving budget on the table at year’s end.

The most effective capital managers build flexibility into the system. They create a centralized fund for the largest 20% to 30% of projects, releasing capital based on strategic priority. Smaller projects remain under site-level control and draw from their allotted funding pools, enabling teams to move quickly without waiting for approvals. If sites don’t use all their allotted funding, it can be returned to the centralized fund and reallocated based on need, helping cover for large project delays, cancellations, or scope changes. This model avoids year-end fire drills and ensures that capital flows to where it will create the most value.

The global mining company referenced earlier recognized that its sustaining capital projects lacked standardized tools, governance, and enterprise visibility, which resulted in inconsistent capital planning, limited prioritization, and, ultimately, poor project compliance.

To address this, the company launched a transformation initiative focused on three areas. First, it introduced tools for standardization and prioritization, including a common project initiation form to capture information, which was stored in a new, centralized database. Second, cross-functional capital planning workshops were held to consolidate inputs from mine plans and site forecasts, enabling integrated planning across teams and the creation of a multiyear sustaining capital pipeline across all sites. Lastly, it rolled out a new governance and performance management system built on monthly performance tracking dashboards and a centralized contingency fund that reallocates capital based on project needs and execution risks.

As a result, the company gained visibility into around 80% of its sustaining capital spending, significantly improved its financial and performance reporting for high-value projects, and aligned its capital allocation with long-term strategic priorities and business plans. In short, it built the internal muscle to manage sustaining capital with the same rigor and confidence as its growth investments, setting a new standard for capital excellence across the organization.