IEA (2022), Critical Minerals Policy Tracker, IEA, Paris https://www.iea.org/reports/critical-minerals-policy-tracker, License: CC BY 4.0
Encouraging sustainable and responsible practices
Governments also have a key role in minimising and mitigating the environmental and social impacts of mining projects, including risks associated with geopolitical tensions, armed conflict, human rights violations, bribery and corruption, emissions, water stress and loss of biodiversity.
Ensuring that these risks are well managed is essential to keep clean energy transitions on track, people-centred and inclusive. The mining sector has a unique opportunity to contribute to sustainable development in some producer countries, but the potential for adverse impacts linked to mining activities and supply chains must be addressed.
These risks can significantly affect clean energy transitions in several ways:
- Potential liabilities associated with environmental and social impacts can discourage investment in new production.
- Harm to local communities can make it difficult to obtain – and maintain – social licence to operate.
- Specific incidents may lead to short-term supply interruptions, which can disrupt clean energy technology production supply chains.
- As mining is energy-intensive, additional emissions resulting from increased mineral production may partially offset gains from clean energy technology deployment.
- Mining activities may be affected by climate change, particularly in areas experiencing considerable water stress, where water resources are being claimed for other uses.
- Mineral flows from conflict-affected and high-risk areas are vulnerable to disruption by incidents on the ground as well as by operational shutdowns resulting from regulatory action. Plus, greater mining activity may even contribute to or exacerbate existing conflicts.
While industry has an important role in establishing high standards for its own operations, it will ultimately be up to policy makers and regulators to ensure these issues are addressed and that the mining industry has a net positive impact on economic development. Implementing environmental standards, project appraisal systems and environmental impact assessments can help mitigate environmental pollution and related hazards, while introducing transparency and due diligence requirements can establish a basis for accountability and encourages public participation.
Underlying many policy-making processes are licensing and permitting procedures, which often set conditions on exploitation related to water use and reclamation. However, sound policies such as mechanisms that encourage diversity and facilitate the engagement of underrepresented communities can also promote greater inclusivity and a more equitable gender balance in the industry.
Policy snapshot: Encouraging sustainable and responsible practices
Governments generally require companies to take specific steps at certain stages of a mining project to minimise or mitigate environmental degradation and facilitate ecological rehabilitation. During the initial stage, companies are usually required to conduct an environmental impact assessment (EIA) to identify the ecological impacts of their activities and plan accordingly. While countries often rely on general EIA regulations that apply to many sectors, some have introduced supplemental technical guidelines and standards particular to mining activities.
In Ecuador, medium‑ and large-scale mining projects need to be entered into an environmental registry during the exploration phase. After applying for a mining licence, applicants must submit an EIA with an environmental management plan before the project commences, as a precondition to receiving a licence.
In another example, the Philippines requires submission of a biodiversity assessment along with an EIA before exploration begins. In the context of impact assessments, attention is increasingly being paid to social, health, cultural and economic impacts in addition to environmental consequences.
Some jurisdictions have also introduced rehabilitation requirements, and certain ones have even defined standards. For instance, to implement the EU directives on waste management from the extractive industry, Spain requires companies to submit a restoration plan to return the affected area to a satisfactory state prior to granting them a mining licence. In the Philippines, development and utilisation cannot begin until the regulator has approved a rehabilitation plan that ensures survival of at least 85% of the established vegetation by the time of closure. Companies also need to progressively rehabilitate areas where mining operations have occurred.
To reduce waste discharge and pollution from mining sites, many governments have issued mining-specific water and air pollution standards. In Mexico, an official standard establishes the elements and procedures for formulating and applying a mining waste management plan. Meanwhile, in the United States EPA standards are incorporated into permits for wastewater discharge. These standards specify precise limits for water pollutants and for the pH of water released from facilities.
In most cases, these requirements are enforced through permitting regimes. Obtaining a permit can thus be a long process, extending lead times for new projects. While governments may therefore want to consider strategies to streamline these processes, it will be important to ensure that any regulatory reforms do not reduce a government’s ability to maintain and enforce high environmental and social standards for mining.
Every company engaged in the critical mineral supply chain – from miners to processors to end users – can conduct robust due diligence assessments to identify and mitigate environmental and social impacts. Helpfully, the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas provides clear, actionable recommendations for applying supply chain due diligence.
Coupled with the Alignment Assessment, the Due Diligence Guidance supplies a five-step framework to help companies respect human rights and avoid contributing to conflict or mass corruption. It details due diligence expectations for both upstream and downstream sourcing practices that companies may use to assess their operations and identify possible adverse impacts that could be mitigated. Assessments are to be included in public disclosures to provide evidence that supply chains are both transparent and sustainable.
Some jurisdictions – including the European Union and the United States – have incorporated due diligence directly into their regulatory frameworks, requiring companies to integrate the guidance into their corporate disclosures. However, while the OECD Due Diligence Guidance is applicable to all minerals and all types of supply chain risks, current legal regimes tend to make due diligence mandatory in limited circumstances only.
For example, EU legislation specifies due diligence obligations just for importers of tin, tantalum, tungsten and gold (known as the 3TG minerals). Under this regulation, European companies importing any of these commodities from conflict zones or areas deemed to be at high risk of conflict must comply with several due diligence requirements.
Similarly, the US Dodd Frank Act requires US-listed companies to apply due diligence in disclosing their use of 3TG minerals. If the minerals were sourced from the Democratic Republic of the Congo or an adjoining country, companies must additionally submit a Conflict Minerals Report detailing all due diligence measures taken, as well as other information.
In the European Union, the Batteries Regulation currently under consideration could expand due diligence requirements considerably. Company due diligence policies would need to address the most prevalent social and environmental risk categories (e.g. human rights and the environment) for critical raw materials used in batteries (i.e. cobalt, natural graphite, lithium, nickel and their chemical compounds).
Even though the policies currently in place apply to US and EU companies only and are limited to 3TG minerals sourced from certain regions, they can still have a broad impact. For instance, these requirements indirectly affect upstream companies outside the United States and the European Union because all regulated companies must collect information from any enterprises within their supply chain. Furthermore, a growing number of companies are applying the due diligence framework to all supply chain risks associated with raw materials, including environmental damage and harm in regions that are not generally categorised as conflict-affected or high-risk.
To safeguard their social licence to operate, companies need to maintain the local community’s acceptance and approval, beyond what is required by legal or regulatory processes. In many instances, failure to secure this acceptance has led to protests and other civil unrest on the part of workers and the public.
It is therefore crucial for mining developments to adopt inclusive approaches that respect the rights of all local community members – especially indigenous peoples – and reduce unequal impacts on women. For example, recognising that indigenous communities are often affected by mineral development projects, the Canadian government has established a Critical Minerals Indigenous Engagement Strategy to safeguard the unique rights, interests and circumstances of these communities with regards to critical mineral mining and extraction.
Concerning gender, women have historically been excluded from large-scale mining and still make up just a small percentage of the mining workforce (10‑20%). Some countries have thus begun to adopt policies to address this disparity. Chile, for example, has created what it calls a mining industry decalogue to promote women's inclusion in the sector and provide appropriate working conditions for both men and women. It provides a guideline for companies to voluntarily commit to promoting women’s participation in the mining industry and to regularly measure gender equality progress.