Navigating the Complex Landscape of Mineral Supply Chains

Article drafted by Valerie de Vries.

Today, mining is a significant driver of deforestation.

The mineral supply chain forms the backbone of numerous sectors and industries, ranging from electronics to construction, and from aerospace to automotive industries. With the current focus on the energy transition, setting societies to move from fossil fuel-intensive systems to ‘’clean’’ energy systems, a higher demand for transition minerals has become increasingly evident, and so have its repercussions.

“Key minerals such as bauxite, iron ore, copper, manganese, and nickel have been linked to large-scale deforestation across the world.”

Indonesia, Brazil, and Russia carry the largest responsibility for mining-related deforestation. The impact of mining operations on the environment, including forest loss and degradation, water and soil contamination, and habitat destruction for many (sometimes endangered) animal and plant species, have been increasing over the past 20 years. Research has shown that mining is currently the fourth largest driver of deforestation, which often takes place near key biodiversity areas and leads to negative impacts spilling over into these areas. WWF has highlighted the crucial importance of preserving the world’s existing forests since they  provide a series of important ecosystem services, which include the regulation of climate, rainfall and water supply, the provision of food and livelihood for indigenous peoples and local communities, as well as habitat for most of the world’s plant and animal species, carbon storage, and buffer zones that help prevent and control the spread of potential diseases into human settlements.

Alongside forest loss and degradation, many human rights abuses have been associated to mineral mining as well. For instance, minerals like nickel, bauxite, and manganese have been linked to concerns such as child labor and unsafe working conditions. Moreover, allegations of abuse and harm caused to local communities and their surrounding environment are prevalent. For indigenous peoples and local communities (IPLCs), mining often represents a threat to their livelihood, as they are driven away from their homes due to illegal and dangerous mining practices. Many IPLCs depend on the forest for food and other resources while losing access to their lands also detaches them from their cultural practices and heritage.

Actors in the Mineral Supply Chain

Mineral supply chains tend to be complex and span multiple regions and countries. While this constitutes a challenge in terms of coordination and transparency, those are vital to prevent and facilitate action against human rights and/or environmental issues.

“With substantial environmental and social concerns surrounding mineral mining, it is crucial to examine the various stakeholders that integrate and shape mineral supply chains.”

The mineral supply chain encompasses a wide array of actors, each playing a distinct role in the process.

These include:

• Extraction Companies: Responsible for the initial mining and extraction of minerals from the earth’s crust. The mining of minerals can take place deep under the Earth’s surface, including deep-sea mining. They set the foundation for the entire supply chain. Socioenvironmental problems often occur here, at the point of extraction
• Traders and Brokers: These intermediaries facilitate the movement of minerals between extraction companies, processors, and manufacturers. They play a crucial role in connecting the dots between various stages of the supply chain.
• Smelters and Refiners: Minerals often require processing and refining to be transformed into usable materials. These actors enhance the quality and purity of minerals to meet industry standards.
• Manufacturers: Industries such as electronics, automotive, and construction rely heavily on minerals as raw materials. Manufacturers, such as battery producers or car manufacturers, integrate these minerals into their products, which ultimately reach consumers.
• Distributors and Retailers: These entities are responsible for distributing finished products to the end-users, bridging the gap between manufacturers and consumers.
• Government: Regulatory bodies and government agencies establish policies, regulations, and frameworks that guide the extraction, processing, and trade of minerals. They play a crucial role in ensuring compliance with environmental and ethical standards.
• Civil society: Non-governmental organizations (NGOs), community groups, and advocacy organizations actively engage in monitoring and raising awareness about ethical and environmental concerns related to mineral extraction and its supply chains. Their efforts aim to influence industry practices and promote sustainability along the supply chains.
• Consumers: The ultimate recipients of products derived from mineral supply chains.

The participation of government and civil society adds a layer of oversight, accountability, and social responsibility into the mineral supply chain, exerting a significant influence on its ethical and sustainable development. However, while industries such as palm oil have witnessed considerable efforts to enhance due diligence and responsible sourcing, the mineral sector currently lacks equivalent robust systems. This important gap has, nonetheless, been receiving more attention from different governments in recent years, which are taking legislative steps to increase transparency and accountability in mineral supply chains and stimulate secondary raw material use to reduce the use of primary materials. The Dodd-Frank Act (US), the Critical Raw Materials Act (EU), and the Battery Regulation (EU) are examples of this. These changes indicate that businesses need to take greater responsibility for the sustainability of their supply chains, for which stricter policies and increased traceability and transparency are crucial.

To address these issues, the concept of due diligence has gained prominence. Companies are encouraged to adopt responsible sourcing practices, which, generally, should involve establishing company-wide management systems (including policies, controls, stakeholder engagement, and a grievance mechanism), mapping supply chains and assessing potential risks, implementing a risk prevention and mitigation strategy, and reporting on the supply chain due diligence. Through this type of responsible sourcing practices, transparent reporting, and collaboration, companies can play a pivotal role in shaping a sustainable and ethical mineral supply chain that benefits both industry and society at large.

AidEnvironment has recently assessed the mineral supply chain approaches of downstream companies of the automotive sector. Although ongoing efforts towards improving responsible sourcing and the prevention of risks that permeate these raw materials supply chains are commendable, it became clear that a lot remains to be done. It is essential to increase transparency along mineral supply chains and that due diligence approaches cover environmental risks more consistently, namely those that have oftentimes received less attention than they deserve, such as deforestation.

For more information, please contact Valerie de Vries, Consultant.