Towards a sustainable development licence to operate for the extractive sector

The extractive sector now holds an even more predominant position for national economies following the adoption of the Sustainable Development Goals in 2015. The sector can make significant contributions to the achievement of a large number of these Goals. Managing extractive resources has always presented a major challenge for many countries worldwide, but especially in the developing world. This paper documents the shortcomings of the existing governance architecture. It builds on the ‘social licence to operate’ and draws from its limitations to propose a new framework called the ‘sustainable development licence to operate’. The latter is a holistic multilevel and multi-stakeholder governance framework aimed at enhancing the contribution of the mining sector to sustainable development. It is not intended to function as a licence in the regulatory sense. The underlying principles, policy options and best practices that form the basis of the proposed framework are outlined in the paper. This analysis should be viewed as a starting point, in recognition that the development of a robust sustainable development licence to operate depends on an open and inclusive approach to populating its normative content.

The global extractive sector-current status and future trends As Figure 1 illustrates, extraction of mineral resources has increased markedly in recent decades, and over the last decade at a faster rate than economic growth. 1 There is currently an oversupply of mineral resources in world markets. 2 However this masks a significant longterm challenge-of how to meet the mineral resource needs of a growing global population that is expected to reach 8.5 billion by 2030. 2 Though their demand will track economic cycles, the overall demand outlook for mineral resources remains positive as economies grow, technological innovation continues, and as developing economies catch up. 3 In recent years the global mining industry has downsized in response to a cycle of declining commodity prices, 4 which will delay responses to future increases in demand. Recent studies suggest that, over the coming 2-3 decades when availability of metals for recycling is expected to remain low, 5 the extractive sector will struggle to meet demand for several minerals for which substitutes are not readily available. 2,6, 7 There is a significant risk in this context of price volatility, which could hamper the efforts of resource-rich countries to manage their endowments in a manner that delivers enduring benefits for societies, economies and governance. Disasters such as the Benito Rodrigues tailings dam collapse in Brazil 8 also highlight the need to carefully balance mining, with stewardship of other valuable natural resources and the rights of local people and communities. Given these challenges there is a clear need for effective governance of the extractive sector across local, national, regional and global scales, to ensure that needs for minerals are met, without undermining other development outcomes. 1,2,9 Towards a Sustainable Development Licence to Operate for the extractive sector Governance challenges for the extractive sector at local, national, and global scales Decision-making in the extractive sector is shaped by a complex array of governance frameworks and initiatives operating at multiple scales (see Figure 2). 1,10 This complexity is compounded by highly globalised minerals value chains, characterised by the involvement of diverse actors (see Figure 3). The need to coordinate and reform this governance landscape is driven by the adoption in 2015 of the 2030 Agenda for Sustainable Development. 11 Recent analyses-including the 2016 Atlas Mapping Mining to the SDGs 12 published by the World Economic Forum and partners-highlight how a well managed extractive sector can promote delivery of the SDGs and Targets, both in relevant countries and globally. The notion of sustainable development-integrating the pillars of people, planet, prosperity, peace and partnership-has become the organising framework for global development cooperation and is key to framing discussions about the extractive sector's future. A growing range of frameworks and initiatives focus on delivering overlapping subsets of this global development vision, but do not currently operate in a sufficiently coordinated or integrated manner. 1, 13 Despite the extractive sectors' potential to act as a catalyst for development in mineral-rich countries, many challenges prevent this potential from being fully realised. 13,14 These include the volatility of commodity prices which have exposed developing countries to external shocks triggering macro-economic instability; 15 difficulties of managing large and volatile inflows of foreign capital; 16 technical complexities of large-scale projects with limited national capacities; enclave nature of mining with weak linkages to other economic sectors; and redefinitions of resource nationalism, absent consensus on what would constitute shared value from mining. 17 Technological advances in the extractive sector could have disruptive impacts on job creation and local procurement of goods and services, as well as transform production and consumption dynamics with profound global implications. These challenges are compounded by the uneven geographical distribution and finite nature of mineral deposits, which ensure that discussions about the future of the extractive sector are influenced by geo-political factors and tensions.
Another important issue for several countries is the discrepancy between formally recognised rights to mineral resources, and the expectations and dependencies of local communities. Policies in developing countries have in some cases facilitated large-scale acquisition of formal property rights by commercial sector actors (including transnational corporations which can prove difficult to regulate) to enable mining. 18 Negative outcomes of property acquisition by the extractive sector include expropriation without adequate compensation of rights held by individuals and communities; extinguishment of long-standing informal rights held by individuals and communities; dislocation of local communities from acquired areas; destruction of local livelihoods; and development that maximises marketable private benefits (e.g. mining) to the detriment of public benefits (e.g. clean water). 19 Finally, the extractive sector's development benefits are impeded by incomplete accounting of sector impacts on wealth, which in comprehensive terms includes both infrastructure and financial capital, institutions and communities, and natural capital including biotic and abiotic components of the environment. 13,20-23 A range of impacts on institutions and communities and biotic natural capital assets (including ecosystems) are not currently valued in markets, and represent well-documented externalities of the extractive sector. 24 As all countries strive to achieve sustainable development, there is a need for a framework that enables, at each level of globalised value chains, all actors to assess the compatibility of their decision-making with the SDGs and Targets, including efforts to address the abovementioned challenges.

A new paradigm-the Sustainable Development Licence to Operate
Responding to challenges outlined above, the International Resource Panel is coordinating a global process to (1) systematically analyse current evidence concerning governance challenges in the extractive sector, and (2) identify governance options for the sector that are compatible with delivery of the 17 SDGs and 169 associated Targets. A key focus of these efforts will be build on previous efforts such as the 2016 Mining SDG Atlas 12 , to transparently and consultatively formulate a new multi-level governance framework for the extractive sector-the Sustainable Development Licence to Operate or SDLO.
Since the late 1990s, mining companies have increasingly sought to secure the acceptance of mining activities by local communities and stakeholders, in order to build public trust in their activities and prevent social conflict. 25 Such attempts to earn a Social Licence to Operate (SLO) are premised on engagement between mining companies, governments and civil society to ensure that mineral resource extraction contributes to national and local development, and that damaging impacts on host communities and the environ-ment are mitigated or otherwise managed. 13 The SDLO is similar to the SLO in that it is designed to improve the societal net benefits of mining, and is not designed to function as a licence in the compulsory or regulatory sense. However the SDLO extends the SLO concept in several important ways, so that it can function as a normative reference point oriented towards the achievement of sustainable development (see Figure 3): First, the SDLO addresses broader subject matter, covering all environmental, social and economic concerns that fall within the ambit of the SDGs and Targets. Second, the SDLO is designed to be relevant to all actors in the extractive sector across the public, private and third sectors-articulating a set of internally consistent principles and policy options that are compatible with the SDGs and Targets, plus other priorities, obligations and standards compatible with the 2030 Agenda. Finally, the SDLO is designed to set out not only minimum standards of behaviour, but also evidence-based best practice and opportunities for enhancing the extractive sector's contribution to sustainable development.

Principles, policy options, best practice
Based on the SDGs and Targets, plus compatible priorities, obligations and standards relating to: -National and regional economic development  Developing and implementing the SDLOtowards principles, policy options, and best practice Formulation and design of the SDLO is necessarily an inclusive process-requiring input from diverse stakeholders across the public, private and third sectors, and from multiple and representative developed and developing countries. Subject to feedback from stakeholders, the IRP is planning to support three overlapping analytical processes to clarify and develop the normative content of the SDLO (see Figure 4). All of these involve detailed analysis of all 17 Goals and 169 Targets recognised in the 2030 Agenda for Sustainable Development, building on important previous works such as the 2016 Mining SDG Atlas, 12 and International Council for Science Guide to SDG Interactions. 26 First, identification of principles for sustainable development of mining entails analysis of the content of the SDGs in order to identify all Targets that stipulate changes in the extractive sector. For example, SDG Target 5.1 calls for an "end to discrimination against all women and girls everywhere" including in decision-making about mining. These Targets can then be distilled into a manageable, practical list of detailed and core principles. Second, identifying practical and flexible policy options (and opportunities) for sustainable development of mining will involve a global multi-level review of existing policy frameworks, instruments and initiatives, and assessment of these against the SDGs and Targets in order to identify options, gaps and opportunities. Finally, identifying best practice for the extractive sector will need to be informed by an understanding of how mining activities have synergies and trade-offs with action to achieve all SDGs and Targets, coupled with analysis of what existing practices are most compatible with such efforts, and opportunity areas for innovation.
It will be important to ensure throughout these processes that the SDLO incorporates and complements other relevant frameworks and initiatives. Existing policy frameworks, instruments and initiatives relevant to mining (see e.g. list in Figure 2 above).