Morningstar Sustainalytics analysis reveals a concerning trend: of companies that have set targets to keep global warming below 1.5-degree Celsius with the Science Based Targets initiative (SBTi), just 15%-20% have the governance structures in place to be likely to reach those goals. If business-as-usual continues, the world is headed for a temperature rise well above the Paris Agreement’s target to keep warming below 1.5-degrees Celsius. The urgency to transition towards a low-carbon economy has never been more pronounced. At the heart of this transition lies a crucial yet often overlooked element: the cleantech supply chain.
As the world increasingly embraces renewable energy and electric vehicles, there is an increasing demand for the metals and other raw materials used in their production. But the path to a truly sustainable cleantech supply chain is not straightforward.
For the transition to serve its intended purpose, these metals need to be mined responsibly and then become part of a circular economy. Additionally, a successful transition must also be socially just, generating and retaining high-quality jobs and respecting human rights throughout the value chain. Achieving these objectives demands a high level of cooperation between companies, their suppliers, and their investors. Multi-stakeholder initiatives are increasingly playing a critical role in facilitating such collaboration.
In this article, we look at the leaders in the implementation of multi-stakeholder initiatives for the mining industry, the strengths of high-performing initiatives, and how to mobilize investors to raise the bar for industry collaboration in the cleantech supply chain.
Multi-Stakeholder Initiatives: Identifying Leaders in Collaborative Action
Companies rely on collaborative mining industry programs and sustainability standards systems (i.e., voluntary guidelines used to demonstrate commitment to responsible environmental practices) to help drive progress in supply chain traceability, risk management and responsible sourcing accountability. Investors play a critical role in driving the implementation of such initiatives by encouraging more companies to join.
The Copper Mark and ResponsibleSteel, for example, have each a developed an environmental and social assurance program for responsible copper and steel production respectively. The Fair Cobalt Alliance is another noteworthy collaborative initiative, aiming to professionalize the artisanal cobalt mining sector in the Democratic Republic of the Congo. The Global Battery Alliance takes yet another approach, tracking cobalt and lithium in the battery value chain, seeking to mitigate human rights risks and greenhouse gas emissions.
In light of recent legislation in Germany and the EU,1 there has been increased focus on sustainability standard systems for mineral resources. Comparative studies conducted by Germany’s Federal Institute for Geoscience and Natural Resources (BGR)2 and Germanwatch3 evaluated three key aspects of multi-stakeholder initiatives:
1. The extent to which the governance of a standard is truly multi-stakeholder.
2. The quality of audit requirements.
3. The inclusion of a grievance mechanism.
Through these studies, two initiatives have emerged as leaders in the supply chains of cleantech equipment: Aluminium Stewardship Initiative (ASI) and the Initiative for Responsible Mining Assurance (IRMA).
Table 1. Summary of ASI and IRMA Multi-Stakeholder Initiatives
| Multi-stakeholder Initiative | Purpose | Scope | Standard | Implementation |
|---|---|---|---|---|
Aluminium Stewardship Alliance (ASI) | Drive responsible production, sourcing and stewardship in the global aluminium value chain. | The entire aluminium value chain, including bauxite mining, alumina refining, aluminium smelting, processing, application in final products and recycling. | ASI Performance Standard and ASI Chain of Custody Standard | 290 members with 177 certificates issued against Performance Standard plus 71 against Chain of Custody Standard. |
Initiative for Responsible Minerals Assurance (IRMA) | Offer independent third-party certification against a standard for all mined materials that provides ‘one-stop coverage’ of the full range of issues related to the impacts of industrial-scale mines. | Any mined material, but focused on the sustainability performance of industrial mining companies and their individual sites (as opposed to the entire value chain). | IRMA Standard for Responsible Mining | 69 mining companies are engaged in IRMA, with 2 audited sites, 9 sites with audit under way and 72 sites preparing for audit. |
Source: ASI and IRMA websites.4
Based on our own conversations with representatives of ASI and IRMA, as well as member companies committed to and implementing these standards, we have identified the strengths of these initiatives.
Evaluating the Strengths of Mineral Resources Sustainability Standard Systems
ASI specializes in the bauxite-aluminium supply chain, a crucial material in the production of cleantech equipment such as solar panel frames, electric vehicle components, and wind turbines. In anticipation of increased regulation, ASI has been proactive in becoming a Code Compliance member of the International Social Environmental Accreditation and Labelling Alliance (ISEAL), a global membership organization promoting credible sustainability standards. Additionally, ASI has been recognized as one of the most advanced initiatives with respect to implementation.
Considering the ambitious ESG criteria, the number of certified sites is impressive. The initiative has also started to reach less advanced companies and sites in more challenging locations. This is, in part, thanks to the fact that the supply chain for the aluminium industry is not as complicated as with some other metals and bauxite mining does not have co-products. As a result, industry collaboration is easier because there are fewer interdependencies. Furthermore, ASI has been one of few initiatives that certifies companies in the entire value chain by applying a so-called mass balance approach.5
IRMA, by contrast, developed a mineral-agnostic sustainability standard focused on certifying industrial mining sites. This has attracted various large car manufacturing companies who rely on the supply of multiple minerals. IRMA stands out from other standards in how it has been empowering mining worker representatives, local communities and NGOs in its board, standard development and assurance process. That said, IRMA is less advanced with implementation, with just the first few sites receiving certification. While more mining companies are announcing audits, there is still work to be done for broader industry uptake.
Although both ASI and IRMA contribute towards implementing due diligence obligations throughout the supply chain, they each have their limitations and can never be applied as a sole solution. In the words of Germanwatch: “Purchasing companies cannot outsource their responsibility for human rights and environmental due diligence to standards […] and there must be clear and transparent communication about where the limits of their applicability lie in terms of fulfilling the legally stipulated due diligence obligations.”6
Mobilizing Investors to Support Multi-Stakeholder Initiatives
Ambitious initiatives like ASI and IRMA welcome investors to support their purpose. Investors have significant influence through their ownership stakes and financial leverage. They are in a unique position to engage with companies in cleantech supply chains as active shareholders, using their voting rights and speaking with management to promote sustainable practices in supply chains.
By promoting the uptake of the most meaningful initiatives and holding companies to account for their progress, investors can contribute additional assurance that the transition towards a low-carbon economy is delivered in a sustainable manner.
As part of our Responsible Cleantech thematic engagement program, we have been speaking with companies to learn about the opportunities and obstacles they face in leveraging their influence to establish a more collaborative environment with investors and business partners. Get in touch to learn more about our engagement programs.
References
- Germany’s Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz) came into effect on January 1, 2023. The E.U.’s Corporate Sustainability Due Diligence Directive was proposed in 2022 and is currently being worked out.
- Bundesanstalt für Geowissenschaften und Rohstoffe. 2022. Sustainability Standard Systems for Mineral Resources. https://www.bgr.bund.de/DE/Themen/Min_rohstoffe/Downloads/studie_sustainability_standard_systems_2022.pdf?__blob=publicationFile&v=7
- Germanwatch. 2022. An Examination of Industry Standards in the Raw Materials Sector. https://www.germanwatch.org/sites/default/files/gw_bericht_en_final_221004.pdf
- Please refer to https://aluminium-stewardship.org/.org/ and https://responsiblemining.net for the most up to date information.
- A mass balance approach allows one to track the net amount of sustainable materials as they move through a supply chain and ensures an appropriate allocation of these materials in the finished goods.
- Germanwatch. 2022. An Examination of Industry Standards in the Raw Materials Sector. https://www.germanwatch.org/sites/default/files/gw_bericht_en_final_221004.pdf
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