The Political, Economic, and Social Drivers of Responsible Sourcing Standards

Abstract

This chapter explores the societal drivers pushing for more responsible sourcing practices and behaviours and the pathways that were adopted to advocate for these changes. Underlying concepts promoting better governance, fair share of value, and securing and protecting the rights of vulnerable stakeholders resulted in several standards and tools to improve and monitor corporate performance. From sustainability guidelines to certification schemes and eventually legislation, this chapter drills down to the common denominator within these approaches and how they drive more responsible sourcing practices. These approaches included building awareness and increasing transparency around the environmental, social, governance, and economic impacts of operations. Civil society organisations and leading private and public sector actors, through advocacy and collaboration, influenced powerful actors within supply chains to enact change. Advocates provided recommendations for what responsible behaviours and objectives should be undertaken. Others constructed assurance mechanisms to evidence that change has taken place.

The publication of the Brundtland Report in 1987, defining sustainability as “meeting the needs of the present without compromising the ability of the future generations to meet their own needs” (Brundtland 1987), was the culmination of decades of efforts to better articulate the impact of humanity on the planet. The report was meant to be cautionary; mankind needed to change their production and consumption behaviour for the sustainability of the planet. Tost et al. (2021) highlight how the definition of sustainable development has expanded since the Brundtland Report. It now includes paradigms focusing on the integration of human society and environmental dimensions; planetary and ecological boundaries to maintain the global bio-physical systems; and participatory and deliberative engagements.

By 2023, the call to change behaviours that supported sustainable development was reflected in multiple responsible sourcing (RS) approaches, largely addressing corporate entities within mineral supply chains. The clamour for more responsible corporate behaviour was being driven by a combination of political, social, and economic drivers, calling for these entities to meet the societal expectations of local communities, workers, consumers, governments, and investors.

In this chapter, we examine how three sets of drivers—political, economic, and social—pushed for changing what was thus far considered as acceptable corporate behaviour in mineral supply chains. The need for better governance, fair share of value, and the security and protection of human rights were set out as major objectives for the main actors in mineral supply chains. RS required improvements in the codes of behaviour that oversaw: (1) corporate governance; (2) supply chains and procurement procedures; (3) the valuation of assets by financial markets; and (4) the engineering and production methods used (see Fig. 2.1). RS approaches consulted, drafted, and advocated for these changes through numerous pathways that are discussed in the second half of this chapter.

Fig. 2.1

Drivers of change and their impact on codes of behaviour

1 Political Drivers Addressing Better Governance

Historically, resource-rich developing countries suffered from several negative consequences for their growth and development that could be attributed to their natural resource sector. The recognition of the ‘resource curse’ by Auty (1993) and Sachs and Andrew (2001) discussed these negative aspects that included: lagging economic growth rates compared to their peers; large debt-surplus cycles within government budgets; and appreciation of exchange rates negatively impacting other domestic industries (Dutch-Disease). Over time, new ‘curses’ have been added to this list. The Natural Resource Governance Institute (NRGI 2015) notes resource dependent countries can suffer from negative impacts on democratic processes; rise in internal (armed) conflicts; limited resource revenue flows (rent capture) to the government; elite capture leading to restrained development of governance institutions; extreme stresses on environmental and social dynamics; and patriarchal cultures that give rise to gender-based challenges. Szablowski and Campbell (2019) note that when extractive interests dominate governance regimes, they can compromise development and protection of human rights.

Reflecting these challenges, the focus of political drivers¹ was on addressing the ‘governance-gap’ linked to the extractive sector. This was largely approached through establishing multi-stakeholder-based initiatives to set up voluntary standards to address challenges at the local, national, and international levels. Fransen (2012) suggests that these initiatives, through consensus-building, are attempting to create a pathway for incremental and stable governance. Governments, international development, and financial institutions have been working to improve governance structures; address the capture of governance reform by the extractive industry (Frederiksen 2019); address the repression and criminalisation of human rights defenders against extractive interests (Huizenga 2019); and protection and respect for Indigenous Peoples Groups (UN Human Rights Council 2018).

To achieve these objectives, RS approaches have focused on improving the capacity of governments to advance the governance of their extractive sectors. For example, the Inter-Governmental Forum (IGF) on Mining, Minerals, Metals and Sustainable Development, with more than 80 member countries, supports governments in developing and implementing better environmental and social impact assessments, environmental management practices, improving mine closure and post-mining transitions, extracting financial benefits through better taxation and fiscal regimes, designing and implementing local content policies, improving and addressing gender equality, and incorporating new technologies in governing their extractive sectors. The Extractive Industries Transparency Initiative (EITI), set up in 2003, works with more than 50 member countries, the extractive industries, and civil society organisations to promote and implement an agreed standard for governance of the extractive sector. The EITI Standard 2023 (EITI 2023) sets out requirements on fiscal transparency and accountability of natural resource revenue flows, as well as addressing environmental and social impact measurements.

There are several similar initiatives, aiming at improved resource governance (for a selection, see Box 2.1). They tend to operate through multi-stakeholder platforms, often funded by the governments from the Global North, with governments from the Global South as members. A common thread noted in these initiatives is to address the power imbalance within mineral supply chains, which have their origins in colonial extractive strategies (Ross 2015). To address this historical legacy, political drivers focus on restoring power and governance capabilities to governments and decreasing their opaque influence on extractive industries (Campbell and Hatcher 2019).

RS approaches addressing governance also consider issues such as land rights and the protection of the livelihoods of communities and Indigenous Peoples Groups, to ensure they do not carry the burden/cost of extractive activities. For engagement with Indigenous Peoples, the Free, Prior, and Informed Consent (FPIC) principles, recognised under the UN Declaration on the Rights of Indigenous Peoples (UNDRIP), are considered crucial by RS approaches. Transparency in how mining licences are awarded and retained; reporting on communities that are displaced due to extractive activities; and the requirement to have community development agreements are noted within many RS approaches and legislation (IIED n.d.).

Box 2.1 Example of Responsible Sourcing Approaches Focusing on Governance Issues

Natural Resource Charter (2014): Developed by the Natural Resource Governance Institute (NRGI) it provides a set of principles for governments with tools and options to avoid the mismanagement of natural resources and provide for sustained returns to its citizens.

European Bank for Reconstruction and Development: The Bank’s mining strategy (2018–2022) provides guidance for governments on policy development and issues, such as local sourcing, new technologies and operational efficiency, following EITI principles, energy efficiency and EHS regulations, financial instruments to support development and mitigate market shocks, addressing access to new markets, and mining structure use by local communities and businesses.

ILO Standards: The International Labour Organization (ILO), an agency under the United Nations, broadly seeks to provide a system of international labour standards that support social justice. The standards, policies, and programmes that it develops promote safe and decent work. Labour standards are defined under legally binding ‘conventions’, eight of which are seen as fundamental, as well as certain associated protocols and non-binding recommendations.

Basel Convention: This international agreement addresses the control of transboundary movements of hazardous wastes and their disposal. Lithium-ion batteries at their end of life, for example, fall under the Basel Convention, if they are to be shipped to a different recycling/disposal site.

International Conference on the Great Lakes Region (ICGLR): An inter-governmental organisation of 12 member states, it governs the extraction of conflict minerals. The ICGLR uses a Regional Certification Mechanism to guard against illegal exploitation of natural resources in the Great Lakes Region.

UNEP Minamata Convention on Mercury (2013): The convention seeks a ban on new mercury mines, phasing out existing mines, and reducing and eliminating the use of mercury in products and processes. It also seeks to regulate the use of mercury in the informal/Artisanal and Small-Scale Mining (ASM) gold sector.

EU-Latin American Partnership on Raw Materials: An EU-funded project that aims to move one step further towards integrating strategic industrial value chains for both regions, exploring new business models, and delivering value for society while keeping high environmental and social standards at the core of this partnership.

2 Economic Drivers to Address Fair Share of Value

Mineral supply chains create value through extracting and then transforming mineral raw materials. As with any value chain, the greater the degree of transformation, the greater the value. However, specific to the mineral sector, part of the value comes from the raw material resource. The resource is, under most national legislation, considered the responsibility of the government, which manages it on behalf of its citizens. In limited cases, the resource is considered to belong to the landowner. In either case, the actors who own, manage, and transform mineral resources create value. RS approaches note that the disenfranchised groups in this supply chain are often not granted a fair share of the value that they create. This requires equitable sharing of costs and benefits across supply chain and involved actors (including workers, affected communities, etc.).

As noted under the resource curse literature, resource-rich developing countries often suffered from low economic growth compared to their peers and unstable government budgets. The NRGI (2015) notes revenue management and distribution challenges to include finite and volatile resource revenue flows to governments and imbalances in allocating revenues between current and future generations. Combatting corruption and bribery remains a significant impediment for governments to realise their natural resource wealth.

In addition to these national economic challenges, disenfranchised stakeholders within mineral supply chains are not seeing a fair share of economic benefits whilst shouldering the burden of mineral extraction. The Organisation for Economic Co-operation and Development (OECD) research on the challenges facing the well-being of populations in mining regions notes that income inequalities, mismatch of skills for the local workforce, pressures on public services and infrastructure, and the depletion of natural capital (degradation of air, water, and land quality) are often associated with communities around mining regions (OECD 2020). The lack of payment of a living wage and/or fair wages for workers has been documented in several mineral supply chains (Mancini and Sala 2018). Issues such as child and forced labour, hazardous working conditions, and lack of freedom of association are some of the practices noted in the mineral supply chains for the renewable energy (Kügerl and Tost 2021), e-mobility (Betz et al. 2021), and electronics sector (González and Schipper 2021). The underlying narrative common to these challenges is the power imbalance that allows for an unfair allocation of the costs and benefits resulting from mineral supply chains.

Several RS approaches focus on addressing this inequality and promoting better allocation of resource revenue flows (through fiscal and tax policies) and the payment of fair wages and compensation. Apart from the governmental initiatives discussed in the previous sections, RS approaches focused on increased transparency of financial flows, with the aim of improving the share of value for the disenfranchised and weaker stakeholder groups. The objective was to increase the accountability of governments to deliver on development for their citizens and combat corrupt practices. The EITI has been the leading initiative on reporting and transparency of payments to governments. In 2013, the European Commission introduced disclosure requirements for the extractive sector on payments to governments (European Commission 2013). Similar steps were taken under the Dodd-Frank Act in the United States in 2016 (US SEC 2016).

Requirements for companies to report on the payment of wages, the presence of child or forced labour, and the right of association are commonly present in voluntary RS approaches. The International Council on Minerals and Metals (ICMM) requires its members to report on their contracts with governments (ICMM 2021). The Global Reporting Initiative (GRI 2023) for the mining sector (draft version 2023) requires companies to report on wage rates and gender pay gaps. Similar reporting requirements are noted for other leading RS reporting approaches, such as The Copper Mark (The Copper Mark 2020) and the Initiative for Responsible Mining Assurance (IRMA) Standard (IRMA 2018).

Several developing countries have drafted legislation that now includes local content provisions that set expenditure thresholds for companies to procure goods and services from local firms for their extractive sectors (Korinek and Ramdoo 2017). RS approaches, such as Mining Shared Value, work with companies to develop and operationalise local procurement policies and strategies.

The economic drivers focus on establishing and promoting practices where a fair share of the value generated by the mineral supply chains is allocated to vulnerable stakeholders. This is not to be misinterpreted as charity but to reflect a representative remuneration of their efforts (wages); relinquishing access to land (fees); and compensation for changes to their livelihoods and cultures as a direct result of the mineral supply chain operations (compensation).

3 Social Drivers to Secure and Protect Rights

Social and human rights violations have been a critical challenge for the extractive value chain (Kügerl and Tost 2021; Betz et al. 2021; González and Schipper 2021). The litany of these violations ranges from violent suppression of communities and land defenders; pollution and degradation of communities’ water, land, and air assets; gender inequality; and lack of meeting labour rights and occupational health and safety rights. Over the past decade, there has been an increasing use of the term Environmental, Social, and Governance (ESG) performance and reporting within voluntary and mandatory approaches to capture this range (Bruce 2014).

The pressure for improved performance on social and human rights is being driven by communities, consumers, and investors. In a 2021 survey, PwC found an overwhelming majority of consumers’ and employees’ preference for buying and working for companies that share their values on ESG, particularly for companies that go beyond compliance requirements (PwC 2022). The concept of obtaining a Social Licence to Operate, reflecting awareness of the social and economic rights of communities, has become mainstream in extractive operations (Hitch and Barakos 2021). In some cases, the ESG requirements are considered under risk management by companies, as the failure to undertake these considerations can halt or delay projects (Smith and Mccormick 2019; Holly and Mitcham 2016). Investors have also joined the push for companies to consider and evidence ESG performance in their operations and supply chain management (Maybee et al. 2023).

RS approaches have taken numerous pathways for pushing for the protection of these rights and usually build on foundational frameworks such as the UNGPs, OECD Responsible Business Conduct Guidelines (2018a), and core ILO conventions. They range from advocacy and awareness-raising (Farooki 2021a) to improving the monitoring and reporting of company performances. In more recent years, as international legislation has changed, companies are being taken to court for the human rights violations resulting from their operations (Kirkpatric 2021).

One of the more commonly used pathways has been the development of due diligence requirements for companies to ascertain the risk of human rights violations in their supply chains. The OECD’s Due Diligence Guidance for Responsible Business Conduct (RBC) including its sector-specific guidelines, in the context of mineral supply chains, most notably the OECD Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD 2016), is one such example. The OECD guidance is referenced in several regulations and declarations, including the EU Conflict Minerals Regulation, the final rule implementing Section 1502 of the US Dodd-Frank Act, the EU proposal for Mandatory Human Rights Due Diligence, and the EU Batteries Regulation. Many industry actors indicate that their standards and programmes are based on the OECD guidance (OECD 2018b).

The social drivers are the most clearly linked to societal expectations, where campaigns from civil society organisations have brought increased awareness to consumers and investors of the negative impacts of extractive activity. Terms such as ‘blood diamond’ and the hazardous conditions faced by artisanal miners in the DRC collecting cobalt for smartphones have become more prominent in our daily lives. The response from consumers and investors has been a push to stop such practices from occurring.

4 Driving a Holistic View

One additional note on RS approaches is the adaption of a holistic view, not only in terms of the interdependence of political, social, and environmental factors. RS approaches need to consider the length of the mineral supply chain and not just each segment separately to enact change.

Consider the case of wind turbines: As final products, they are an essential for renewable energy and make beneficial contributions towards the energy transition and addressing climate change. However, according to Kiezebrink et al. (2018) on manufacturers supplying wind turbines to the Dutch market, the largest impact of production of wind turbines stems from the mineral extraction stage: turbines require aluminium, copper, iron, and rare earth elements for production. The manufacturing of wind turbines, where it is undertaken under unsafe working conditions, has been reported to involve violations of worker rights (including access to fair wages). The recycling of wind turbine blades is fairly limited at this time and discarded blades are more likely to end up in landfills rather than recycling centres. This creates more waste and reduces the circularity of minerals in the production cycle. Therefore, when considering responsible practices for one technology, the impacts created along the mining, manufacturing, and end-of-life management stages can each hold negative repercussions. While the impact of the technology of creating renewable energy is positive, the overall footprint of the supply chain may have a net negative impact. Successful RS approaches, therefore, address actors along the entire supply chain.

By 2023, political, economic, and social drivers were pushing for more responsible practices across mineral supply chains. To enact these changes, RS approaches developed several pathways to influence stakeholders. Under the research and consultations of the RE-SOURCING Project, four major pathways were identified:

• 1. Building awareness, creating knowledge, and increasing transparency around the environmental, social, governance, and economic impacts of operations.

• 2. Through advocacy and collaboration, influencing powerful actors within supply chains to enact change.

• 3. Provide recommendations for what responsible behaviours and objectives should be undertaken.

• 4. Require assurance mechanisms as evidence that change has taken place.

5 Awareness Building and Advocacy and Knowledge Creation

A first step for RS approaches has been to build awareness amongst stakeholders by identifying and articulating the environmental, social, governance, and economic impacts of supply chain operations.

Given the complexity and length of mineral supply chains, lead firms such as Original Equipment Manufacturers (OEM) did not recognise or take into consideration the impacts in their upstream segments, particularly on the most vulnerable stakeholders. This RS pathway relied on developing awareness amongst lead actors that the most vulnerable groups in their supply chains were likely to be subjected to the highest negative impacts. These groups included artisanal miners, local communities, workers in industrial minerals mining, and workers in mining and smelting operations, as well as those in the recycling sector.

To create awareness, RS approaches have used track and trace approaches to map complex supply chains so that lead firms view the multiple nodes and jurisdictions that mineral products travel through. For example, cobalt extracted through artisanal mining in the DRC, through traders, will make its way into China for semi-fabrication and battery manufacturing before being shipped to Europe for installation in an automobile. The complexity of the supply chain makes it difficult for the end manufacturer to be aware of the concerns that are being raised at the upstream nodes. This has led to the use of ‘chain-of-custody’ approaches, to track where minerals have originated from and trace their journey from the extraction point to the end-use/manufacturing.

Tracking refers to following a mineral downstream in its journey along the supply chain. This is usually approached through documentation certifying ‘chain-of-custody’, through various technological platforms (from joint supplier platforms by lead firms, joint database of certifications and audits, and blockchain-based approaches). Ensuring chain-of-custody during the smelting process can be difficult to maintain, as minerals from various origins are blended.

Tracing refers to a lead firm moving upstream, tracing the minerals’ journey backwards within the supply chain. This can also employ a ‘chain-of-custody’ approach.

Track and trace approaches are not without complications and dependent on the ability to correctly tag/identify materials at their point of origin. Traceability is a means to an end for lead firms, civil society actors, and governments to be able to identify vulnerable communities at the point of origin of minerals. Once the vulnerable groups have been identified, RS approaches provide guidelines for lead firms on engaging, consulting, and assisting these communities.

Apart from vulnerable groups, the task of identifying lead firms is not always easy. For example, a single mining site may be the origin for multiple supply chains, feeding into multiple OEMs. Creating awareness of the upstream issues requires identifying the multiple suppliers/lead firms that benefit from the minerals produced. The track and trace approaches can assist in this. Once the correct beneficiaries have been identified, they are approached to change/improve their responsible practices.

6 Influencing Actors to Enact Change

Awareness building is then followed by advocacy campaigns. Now that actors are aware of impacts along supply chains, they must address them. RS approaches engage with the responsible entities, which can include multiple actors (such as an industry cluster) or focus on individual companies, consumers, or investors. Identifying and assigning ‘responsibility’ for abuses or improvements at the mine site to a single OEM is not sufficient to improve corporate behaviour. Effectively addressing the concerns of the vulnerable would require measures to be undertaken by all manufacturers sourcing from that area—which is a coordination and motivation challenge. For example, if one automobile manufacturer engages with a vulnerable community and the second one does not, effectively addressing human rights abuses will be a challenge. The RS approaches therefore require a unified effort by multiple actors; a single entity does not have the resources or scope of influence to enact effective change on a large scale. Given the growing complexity of mineral supply chains, multi-stakeholder approaches are used by RS advocates.

A number of RS approaches have focused on industrial clusters, such as the automotive sector or the mica supply chains, to influence change in behaviour. There are several advantages in working through industrial clusters and alliances. First, given the complexity of supply chains and the fact that several manufacturers share smelters or suppliers, a wider group can be driven to change behaviour. Second, entities that join alliances find they benefit from a shared platform to discuss RS challenges with peers and external stakeholders, are able to express dissatisfaction with the current RS statutes as well as the inaction of peers and push for improved performance, and they gain a seal of approval from peers, clients, and governments. See Box 2.2 for examples of RS alliances.

Successful RS approaches have shown that an alliance allows for streamlining the RS requirements for members and lead firms (informed by civil society, academia, and technical experts) to a manageable and implementable level by all companies. Alliances take a unified approach on RS standards and collectively focus on the impacts of their RS activities rather than trying to, ineffectively, meet multiple standards. Given the cross-jurisdictional and global impact of most RS issues (climate change, biodiversity threat, gender rights, poverty) full risk mitigation cannot be accomplished by a single entity. Given the multiple mineral products that feed into downstream entities, a global/collective approach for tackling RS issues is imperative. This also creates a level playing field for all actors within the sector (Farooki 2021c).

While the necessity for alliances to deliver on the implementation of RS practices is uncontested, it is also clear that there are several internal and external balancing acts that successful alliances must undertake. An alliance serves to formalise the collaborative effort of concerned stakeholders to understand and implement RS practices. A transparent governance mechanism is essential to be made publicly available and be transparent on the processes for independent decision-making.

An alliance also seeks a seal of approval from policymakers. This is different from having policy and government agencies as part of the stakeholder group and focuses more on engagement with policymakers to support the RS actions proposed by the alliance. Such support strengthens the confidence and trust that is placed in the alliance by other RS actors.

Box 2.2 Examples of Responsible Sourcing Alliances

Responsible Business Alliance was formed in 2004 by leading electronics companies and works towards supporting the rights of workers and communities affected by the supply chains of their members in electronics, automobile and toy sectors, and retail.

The Fair Cobalt Alliance joined key stakeholders Huayou Cobalt, Glencore, Tesla, The Impact Facility, the Responsible Cobalt Initiative, and Sono Motors in an agreement to improve working conditions at ASM sites in the Democratic Republic of the Congo. The group seeks to implement responsible mining practices by eliminating child labour and increasing household incomes.

The European Raw Materials Alliance seeks to promote economic resilience in the EU by addressing EU difficulties in securing access to sustainable raw and advanced materials as well as the necessary processing expertise. The initiative is organised under EIT Raw Materials and has two main workstreams: value-chain-specific consultation processes and investment channels for raw materials projects. Its objective is to diversify supply chains and attract investment by supporting innovation and training.

European Battery Alliance was initiated by the European Commission in 2017 with a focus on making the region a global leader in sustainable battery production and use. The alliance brings together stakeholders from governmental authorities and industry research institutes to promote a thriving, but also sustainable, battery value chain in Europe.

The Global Battery Alliance is a global collaboration platform, hosted by the World Economic Forum, to catalyse and accelerate action towards a socially responsible, environmentally sustainable, and innovative battery value chain to power the Fourth Industrial Revolution.

The Alliance for Responsible Mining seeks to promote ‘inclusive and sustainable development’ to legitimise the ASM sector. The alliance has set up voluntary standards and certification schemes and promotes the legitimacy of responsible ASM in commodity markets. ARM supports gender equality, diversification, and socially and environmentally responsible production through implementing good practice techniques and certain technological advances.

7 Recommendations for Acceptable Behaviours

Awareness and advocacy focus on impacts that result from operations that need to be curtailed and mitigated. Taking that reasoning to the next step, RS approaches provide guidance to companies for behaviours and approaches that should be part of their operations. These recommended behaviours are presented as standards and guidelines. Standards will take a more rigorous approach than guidelines, outlining specific actions, processes, or impacts that need to be undertaken.

For example, awareness-raising would focus on curtailing forced labour within artisanal mining; guidelines will then recommend companies undertaking a human rights risk due diligence exercise to ensure minerals resulting from forced labour are not part of the mineral supply chain. Standards will require specific actions and reporting to be undertaken to ascertain that the ASM minerals in the supply chain were produced without the use of forced labour.

Several guidelines have been issued by international development institutions and the UN and address both companies and governments. Guidelines can be wide-ranging in the issues they cover. For example, the OECD Guidelines for Multinational Enterprises (2023) address: disclosure requirements, human rights, employment and industrial relations, environmental impacts, bribery and corruption, consumer interest, science and technology, competition, and taxation. Guidelines also offer a foundation for more rigorous standards. For example, the UN Guiding Principles for Business and Human Rights (UN 2011) are aligned with and incorporated in the ISO 26000 standard on social responsibility (ISO n.d.).

Standards are an important cornerstone in an integrated and complementary mix of mutually reinforcing RS measures, including supporting legal requirements. Standards provide support to companies in the implementation of RS practices by specifying sustainability and RS objectives for producers, traders, and manufacturers. Standards are also used as a diagnostic tool for a business to understand where its risks and weaknesses in implementing RS lie. Businesses that have suffered RS-related reputational damage will often seek compliance with a standard to improve their operations.

The drafting of RS standards is based on multi-stakeholder consultations, each group with their own objectives and needs. These groups can include middle and downstream purchasers, local communities, investors, governments, and consumers; they have different (often overlapping) objectives when it comes to RS implementation. The diversity of the group objectives can lead to many ‘sticking points’ in multiple stakeholder consultations—explaining the long time required for consultations for standard settings. Achieving consensus on best practices across all stakeholders is near impossible and therefore trade-offs need to be managed within a standard (Farooki 2021b).

8 Assurance Mechanisms for Change

The implementation of standards mostly remains under voluntary mechanisms, although with increased purchaser and industry peer pressures, they are taking on a more mandatory aspect. Table 2.1 provides a summary of the compliance mechanisms under some of the more commonly used RS schemes. These compliance mechanisms include the implementation of the standards as set out by an RS scheme; publicly committing and reporting on the company’s sustainable operations; providing provenance of minerals used in manufacturing through a track and trace scheme; and supply chain due diligence approaches.

Table 2.1 Certification schemes by type of requirements

Self-reporting requires companies to provide information on the sustainability aspects of their business practices and, while encouraging, is considered the least satisfactory of assurance mechanisms discussed here. A commonly used standardised self-reporting template is the Global Reporting Initiative (GRI). GRI is an independent international organisation, in operation since 1997, working with a host of actors from governments, international institutions, and firms and addresses a range of sectors, including the extractive sector. The GRI has been designed to report on the underlying question of “how an organization contributes, or aims to contribute in the future, to the improvement or deterioration of economic, environmental, and social conditions at the local, regional, or global level” (GRI n.d.). The reporting requirements and formats include a range of topics, some are mandatory, whilst others are encouraged. Table 2.2 outlines the major topics that the GRI Reporting Standard for the extractive sector addresses. While GRI reporting itself does not lead to certification, the standardised reporting template can be used for third-party auditing purposes.

Table 2.2 Sustainability within the GRI Sector Standard for Mining

Other rigorous self-reporting assurance mechanisms combine due diligence, management approaches, and reporting, such as the standardised reporting template created by the Responsible Minerals Initiative. The RMI (n.d.) has developed a host of general assessment tools for firms, with individual templates for tin and tantalum, tungsten, and gold. The tools follow a due diligence approach, requiring firms to provide information on corporate policy, mapping of their supply chains, risk mitigation employed, mine site assessments, and public disclosure.

The next level of assurance is where the self-reporting mechanism is combined with third-party verification. For example, the reporting template developed under The Copper Mark combines RS performance with verification. The RMI’s Responsible Minerals Assurance Process (RMAP) provides a set of standards and assessments that can be employed for auditing purposes. The approach focuses on identifying social, environmental, and governance issues and associated management practices of a firm to address these issues. The reporting template allows for auditing of information received from a firm.

The Initiative for Responsible Mining Assurance (IRMA) offers a voluntary certification for large-scale mines of all commodity types according to its Standard for Responsible Mining. This set of criteria certifies individual mines, not mining companies, based on requirements for (1) business integrity, (2) planning for positive legacies, (3) social responsibility, and (4) environmental responsibility. The standard was developed in a multi-stakeholder process of mining companies, raw material purchasers, affected communities, NGOs, and organised labour. Through certification, the performance of the mining operations is verified by an independent third party for demonstrating sustainable and responsible production methods.

While there is progress being made on assurance mechanisms, auditing—particularly independent auditing—remains one of the weakest areas for RS implementation. Of seven major assurance schemes that have auditing aspects and apply to large-scale mining activities, an IGF review found that while six of the seven required third-party assessment, only four required third-party assessment as a key determinant of the assessment (Turley et al. 2018).

It is also important to stress that assurance mechanisms for due diligence have only limited power to drive change on their own, if not complemented by responsible purchasing practices and the willingness to engage in meaningful, collaboration including investment into suppliers. Otherwise, assurance mechanisms—as much as binding regulation—risk to fuel a rather costly compliance and audit machinery that often increases the burden of upstream actors with the main outcome of more requirements without additional means (financial, capacity, and skills, etc.) to meaningfully address them. Secondly, international consensus grows—e.g. enshrined in OECD frameworks and EU and national legislation—that assurance and certification do not reduce or shift the responsibility of companies to conduct their own due diligence in their supply chains, including the resulting liability for non-compliance if this responsibility is being disregarded. The OECD (2022) published a background note on the role of voluntary standard schemes in mandatory due diligence, providing various insights about the meaningful utilisation of voluntary standard schemes to drive actual change.

9 The Use of Legislation

Some standards have become the foundation for the drafting of regulations and legislation. For example, the Dodd-Frank Act and the EU Regulation 2017/821 specify that importers of tin, tantalum, tungsten, and gold from conflict-affected and high-risk areas must use the five-step OECD framework to conduct due diligence on their value chains. Similar references are noted in the French Corporate Duty of Vigilance Law, German Act on Corporate Due Diligence in Value Chains, and the EU Corporate Sustainability Due Diligence requirements.

As the successful RS standards were based on stakeholder consultative process, discussions on objectives and impacts have been considered and measurement metrics outlined. This makes them more conducive as a template for governments to convert into regulatory requirements. See Box 2.3 for a few examples of legislation directly addressing RS practices.

Regulations and legislation can often speed up the process of wider and quicker implementation across players. This process does require a vigorous standard-setting process to have occurred in the first place. If the standards are focused on the upstream (mining stage), the government must balance the impact this can have on downstream (manufacturing) stage actors and vice versa. For example, the EU Regulation on Conflict Minerals (European Commission n.d.) requires importers to adhere to the due diligence recommendations of the OECD Guidance (2021). However, the regulation is only applicable to EU firms importing raw materials and does not focus on sourcing of semi-manufactured products that may include conflict minerals.

RS-based regulations have many objectives and intentions, one of which is to manage the supply risk and economic disruptions of vital economic sectors, guaranteeing access to critical mineral resources necessary for the green transition. However, in meeting their sustainability agenda, governments also want to ensure that vulnerable groups within these supply chains are protected through legally binding systems upholding their rights.

Box 2.3 Examples of Responsible Sourcing-Related Legislation

2010: Dodd-Frank Act, Section 1502, conflict minerals

2010: California Transparency in Supply Chains Act

2014: EU Non-Financial Reporting Directive

2016: UK Modern Slavery Act, Transparency in Supply Chains Clause

2017: French Corporate Duty of Vigilance Law

2017: EU Conflict Minerals Regulation 2017/821 laying down supply chain due diligence obligations for Union importers of tin, tantalum, and tungsten, their ores, and gold originating from conflict-affected and high-risk areas

2019: EU Supplementing Regulation for the recognition of supply chain due diligence schemes concerning tin, tantalum, tungsten, and gold (supplement to the Conflict Minerals Regulation)

2019: Dutch Child Labour Due Diligence Law

2021: German Supply Chain Due Diligence Act

2021: Norwegian Transparency Act on business transparency, human rights, and decent working conditions.

2022: EU Corporate Sustainability Due Diligence Directive

2023: German Supply Chain Act (Lieferkettensorgfaltspflichtengesetz; LkSG)

2023: EU Battery Regulation 2023/1542 concerning batteries and waste batteries, incl. due diligence obligations for four major battery raw materials: lithium, nickel, cobalt, and natural graphite

2023: EU Critical Raw Materials Act

10 Driving Responsible Sourcing in the Future

In this chapter, we looked at the political, economic, and social drivers of RS and the pathways developed to implement change. While we do not possess a crystal ball, some observations can be made about the future drivers of RS approaches.

During the last decade, recurring global supply chain disruptions (e.g. COVID-19 pandemic and war in Ukraine) highlighted the need to foster more resilient global supply chains. Corporate due diligence processes will need to become stronger in risk identification and mitigation to improve any potential disruptions from social and environmental factors.

The link between economic, environmental, and social drivers will remain, with increased recognition of addressing these impacts together rather than separately. In addition, greater recognition of the ‘trade-offs’ that exist between the three, due to the limitations of financial and human resources, will become more widely recognised amongst RS proponents. A strong sustainability approach will need to be adapted with the recognition that natural capital cannot be traded off for man-made capital.

Efforts to address supply chain nodes—extraction, processing, manufacturing, and end-of-life management—will move towards more holistic management. This will stem from the recognition that the cumulative impact of supply chains requires solutions that go beyond addressing individual nodes. Approaches such as Life Cycle Assessments will become more widespread, allowing corporate entities to consider the (ecological) impact of their products from the beginning of the planning process. This will also lead to more integrated approaches with other areas of sustainability—it is foreseeable that so-called Designing for Sustainability will become more entrenched (Rosenkranz 2022).

RS approaches will move further from mitigation and net-zero impact creation to requiring more active contributions to sustainability. Creating net-positive impacts to limit impacts of existing operations and address impact of past operations and damage will begin to emerge. This will also require changes in current business models and consumption behaviours—the move towards less resource use in general and more managed consumption. Whether through increased recycling material requirements or repair rather than replace policies for decreasing consumption will strengthen.

Fragmented RS approaches will begin to align rather than converge. Equivalence and interoperability will become better established, allowing different standards to orientate themselves towards global benchmarks whilst allowing them to reflect specific issues and stakeholders. Given the diversity of topics and issues covered by each standard, convergence to a single standard is unlikely to happen, nor would it provide an effective way forward.

The requirement for information and data to prove RS practices in a clear and transparent manner will increase. Companies and governments will move towards a standardised reporting template for sustainability reporting. This process will be complicated by the agreement on what factors will be included given commercial sensitivities for companies, how the factors will be measured, and indeed if they can be meaningfully measured.

As we continue to build our scientific (both technical and social) knowledge on the impacts of mineral supply chains, the characterisation of what is responsible behaviour will continue to evolve. The pathways for achieving these changes will also evolve, as will strategies to foster change. However, based on regional priorities and capacities, the balance between awareness, advocacy, standards, and assurance will differ.