The Minerals Value Chain Faces Rising Stakeholder Expectations of Environmental, Social, and Governance (ESG) Transparency 

In an era where supplies of critical minerals need to be rapidly scaled, stakeholders across the mining and metals value chain are demanding accountability and transparency on ESG issues. These stakeholders, ranging across customers, investors, host communities, NGOs, and governments, are pressuring companies to define and mitigate their material ESG risks. With rising pressure, corporations in the technology, electric vehicle, renewable energy, and electrical transmission sectors aim to demonstrate that the metals in their supply chains are mined, processed, and delivered responsibly.   

Outgrown and Overlapping Ecosystem of Responsible Mining Initiatives 

The mining industry’s response to customer requests for ESG-related information began in the late 1990s with an effort launched by the Global Mining Initiative, which was the predecessor of the International Council on Mining and Metals (ICMM). Since then, such initiatives have rapidly grown in size and scope. Responsible mining initiatives, frameworks, programs, and certification processes now represent all major mineral categories, sector-based organizations, and major industry interest groups. These initiatives can be classified by the nature of their objectives: some are aspirational; some seek to raise awareness and promote dialogue; others focus on process-driven improvements; and some are issue-focused.  

As companies respond to pressures to endorse various responsible mining initiatives, several issues and opportunities have emerged concerning which to endorse and implement and what this backing means to the companies involved. By focusing on several key attributes of responsible mining initiatives here, we highlight potential implementation and assurance challenges and provide perspective on how responsible mining frameworks can help the mining industry meet stakeholder expectations and ensure responsible operations. 

Lack of Stakeholder Buy-in and Trust on Responsible Mining Frameworks 

ESG risks for mining have been significant and public as demonstrated by major catastrophic events such as tailings facility failures, significant cultural heritage impacts, or neighboring community health effects. These events have caused some stakeholders to lose trust, requiring the mining and metals industry to develop response frameworks to address the risks and issues that have arisen.  

Organizations representing different industry segments develop frameworks by creating sets of principles and standards of practice that address host community impacts and represent stakeholders’ interests and concerns. Many meaningfully engage affected communities on social impacts; however, there can still be a perception of a lack of transparency or imbalance in the process. There are also concerns that early impacted community involvement and participation in decision-making and the management of expectations were not incorporated in creating these frameworks. Further, mining companies prefer working with credible, well-established institutions and industry associations, engagements which can leave host communities feeling disconnected from the process and skeptical of the validations these groups provide. This leads to longer-term erosion of trust. Lastly, this skepticism is amplified by major catastrophic events like tailings dam failures and mining fatalities that continue to occur even in the operations of members expected to implement these principles and standards.  

Transparency and Traceability of Minerals 

There are growing expectations for companies to understand the origins of components for electronics, vehicles, and energy transition materials. These expectations are driven by regulatory and financial factors, particularly in reference to conflict minerals, which have forced the mining industry to establish better traceability systems across their complicated supply chains.  

The de facto standard for supply chain due diligence is the Organisation for Economic Co-operation and Development (OECD) Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. While a voluntary framework in most geographies, under the EU Conflict Minerals Regulation it is mandatory for importers of gold, tin, tungsten, and tantalum (3TG) to meet OECD Due Diligence requirements and forms a critical part of the 2023 EU Battery Regulation. In-scope companies must create a system to identify and assess conflict mineral risk in their supply chains, carry out independent third-party audits, and report on their supply chain due diligence processes.  

Solutions are emerging to help companies ensure transparency and traceability. For example, blockchain technology is viewed by many as a viable solution for tracing mineral chain of custody. Initiatives such as the Responsible Sourcing Blockchain Network (RSBN), which is an industry collaboration among members across the minerals supply chain, use blockchain technology to support responsible sourcing and production practices from mine-to-market. Most blockchain platforms are proprietary, and the protocols that allow data to be transferred may require producers to manage multiple platforms at once. Blockchain technology does face challenges in delivering traceability. These include control over data entered, mixed material sources including recycled content, the potential difficulty of affected communities being able to access them, the involvement of informal supply chain actors, and the interoperability of many blockchain systems. However, if these challenges are overcome, blockchain can provide numerous benefits, including near real time analysis, traceability from the source and throughout the value chain, and greater trust among the diverse stakeholders participating in complex supply chains.  

Poor Correlation between Responsible Mining Programs and ESG Ratings Performance 

Responsible mining as defined through various standards, programs, and statements of principle is focused on ‘license to operate’ factors and associated operational performance expectations. In contrast, sustainability ratings processes focus on ESG criteria and associated business risk. While there is a degree of alignment, implementing a particular responsible mining initiative does not automatically improve an organization’s standing with ratings agencies. This disconnect is the proverbial ‘elephant in the room’ regarding responsible mining, and most mining organizations face data reconciliation challenges.  

Overlapping and Conflicting Responsible Mining Standards 

There are many responsible mining initiatives available to organizations. Company leaders choose to endorse them based on perceived relevance and benefits to their companies and their broader industry. However, the teams accountable for implementation face an overwhelming set of requirements that are both redundant and conflicting. Some are principles-based frameworks, while others are technical standards with rigorous due diligence processes. Some organizations are making considerable efforts to establish equivalency across various initiatives. These organizations include ICMM, World Gold Council, The Copper Mark, and the Mining Association of Canada (TSM), all of which are collaborating to produce the Consolidated Mining Standard Initiative and its associated implementation and auditing guides. 

Despite these consolidation efforts, mining companies today need to show success across multiple frameworks and standards to satisfy different stakeholder demands. This need adds complexity, inefficiency, and cost, while taking time away from important stakeholder engagement processes that build trust between companies and their stakeholders.  

Independent Assurance and Certification 

Stakeholders are seeking transparent reporting on ESG performance, backed up with independent verification. Further, civil society organizations are more likely to endorse responsible mining initiatives that emphasize data transparency at the asset level and where governance and accountability are based on multi-stakeholder arrangements. What is lacking in several initiatives that purport to have third-party verification is a supporting accountability framework for auditors to use. Other issues include missing or vague competency requirements and prequalification for independent verification service providers; dispute resolution support; or minimal requirements for public disclosure of verification results. These issues represent inherent vulnerabilities in initiatives and risk them becoming ‘box checking’ exercises rather than real drivers of performance improvement. 

There are varying approaches to third-party assurance and certification of responsible mining initiative conformance. Some, such as ICMM and World Gold Council (WGC), have elected to follow public reporting assurance processes aligned with the Global Reporting Initiative (GRI) combined with site-level data verification. TSM requires independent verification of facility self-assessment reports and has recently added requirements to strengthen their process. Others, such as The Copper Mark and RMI, follow non-accredited independent certification processes that engage qualified auditors to perform audits on behalf of the certificate granting organization. IRMA goes still further, requiring independent stakeholder engagement throughout the assessment process and verification of performance through field assessment and extensive data gathering. Some assurance and certification approaches such as the Responsible Jewellery Council and the Aluminum Stewardship Initiative require ISO 17021 or ISO 17065 accredited certification bodies to perform assessments. Additionally, non-conformity management during verification is managed differently, with varying definitions and processes, and different requirements for corrective action. 

This variability adds to the challenge of establishing equivalency across assurance and certification processes. When a mining facility is required to self-assess for more than one process, they are obligated to address the most stringent and prescriptive process as a basis. In addition, each self-assessment must be supported with verifiable evidence and demonstrated performance across the scope of ESG requirements.  

Assurance and certification face many challenges:  

  • Independent assurance and certification providers are required to qualify with the overseeing organization to perform assessments for each scheme. 
  • Mining companies must carefully consider which combination of external standards require assurance and/or certification when selecting their provider to achieve the efficiencies of a combined assurance and/or certification process.  
  • Facility site visits are required, making the location of the assurance and the certification provider’s teams critical (e.g., to ensure appropriate cultural awareness and language skills). 
  • Qualified assurance and certification providers are few, particularly among those who are qualified to work with multiple schemes. 

Conclusion and Recommendations: 

Civil society and other key stakeholder groups are demanding ESG transparency, minerals traceability, and assurance/certification of data and programs across the minerals and metals value chain. This demand comes from diverse groups including investors, communities, customers, and industries who have a stake in the mining industry's products and processes. In response, there has been exponential growth in the number and variety of responsible mining and mineral initiatives. With this growth, companies see an opportunity to build trust, improve the perception of their operations, and strategically differentiate themselves from competitors. To realize these opportunities, companies are committing to multiple responsible mining frameworks. The burden of implementing these programs and demonstrating progress against them typically falls at the corporate business unit level, and specifically within the operations, environmental, social, and procurement teams.  

We recommend that companies borrow from sustainability disclosures and commence with good risk management processes such as a focused, asset-level materiality assessment. Through this assessment, companies can identify key stakeholders and their associated needs and expectations. From this understanding, they can make strategic and informed choices regarding which responsible mining frameworks they will utilize. Lastly, companies can identify where there is and is not commonality among initiatives and focus their resources on the actions most important to getting the most value from them.  

Mining and metals companies must endorse and implement an ESG-driven strategy to build trust, demonstrate performance, and attract investment. To guide this process, the following steps will be helpful:  

  • Use materiality assessment processes to understand stakeholder rights and expectations and to promote social cohesion. 
  • From the results of the materiality assessment, develop strategic and informed choices regarding which responsible mining frameworks to utilize for your company. 
  • Engage with impacted/host communities early and often to gain their buy-in and maintain trust. 
  • Compare responsible mining initiatives to understand how they align with corporate strategy and ESG disclosure requirements.  
  • Recognize the equivalency challenge across responsible mining initiatives and plan for integrated approaches to their implementation.  
  • Leverage digital technologies that enable integration across responsible mining standards. 
  • Evolve towards blockchain-based technologies to provide traceability of minerals. 
  • Design internal assurance and certification processes to minimize disruption and resource needs while providing tangible evidence on performance through disclosure and engagement.  
  • Conduct supply chain due diligence (upstream and downstream) and recognize it will require more than developing a procurement policy. Focus on more than just the raw material supply. 
  • Choose external assurance and certification providers with relevant experience and the qualifications to assess multiple initiatives during a single engagement.  
  • Disclose performance – good and bad – build trust and be willing to adapt.