Build strong ESG performance in the critical minerals supply chain

Sustainable commodity markets need transparent supply chains because of incoming due diligence laws across Europe and a growing demand for traceable materials. As critical minerals become more imbedded in the economy and their demand increases, proving they are sourced responsibly through transparent supply chains will become a priority.

Companies need data to demonstrate this. They also need a strong ESG data strategy that shapes their key performance indicators and net zero targets. The strategy will determine the data needed to measure success, where and how it is collected and how it will drive business decisions.

Use blockchain technology to make your supply chain traceable

Blockchain technology allows critical minerals to be tracked from extraction through processing, production and recycling, and provides real-time data on emissions and other touchpoints for ESG data. Several solutions exist – one of them, Circulor, supports organisations to make supply chain data collection simpler and more accurate.

Companies can use traceability programmes to help develop two capabilities that are crucial to demonstrate supply chain transparency:

• chain of custody is clear documentation of a material’s origin, handlers and transfers across the supply chain. Blockchain technologies can provide data-driven proof of origin and a verifiable digital model to track the journey of critical minerals through supply chains
• chain of accountability is ownership of datapoints by supply chain stakeholders to make a mineral’s traceability more credible. This helps a company understand ESG data that has been gathered across the supply chain, the data management process and whether a quality assurance review took place.

Once the data is collected, it can be analysed to identify specific opportunities and challenges along the supply chain, informing business decisions.

Build your data into connected LCA tools

Life cycle assessments (LCAs) developed for raw materials provide extensive environmental footprint data. These complement traceability solutions as they offer an in-depth analysis of specific materials and provide data that highlights environmental issues. LCAs measure the environmental impact across the critical minerals supply chain (see figure 1). An example is Earthster.

Figure 1: Example of a critical minerals supply chain

Use traceability data and LCA insight to improve your ESG compliance framework

Traceability data and LCA insight can inform business decisions, policies and procedures that identify and address ESG risks throughout the supply chain. They also enable companies to meet existing and forthcoming regulations and provide a strategic advantage in building a resilient business.

Organisations should:

• use traceability and LCAs to increase supply chain transparency and material traceability across the supply chain to identify risks and support the development of stronger reporting frameworks
• ensure that employees across the business – from finance to operations – understand these risks and how to manage them based on their specific business unit.

Technology is vital to mitigate a range of ESG risks throughout the critical minerals supply chain.

Use of renewable technologies to decarbonise energy consumption of mining operations is on the rise: over 1GW of renewable – wind and solar power – energy capacity has been installed at mining sites globally and another 1GW is in the pipeline.

However, we need new approaches to accelerate progress. Net zero and other ESG-related challenges are too urgent and too large for individual companies to solve alone. Stakeholders in the critical minerals supply chain must collaborate to adopt technologies and solutions that are used in other sectors and develop and scale new ones.

Several examples of cross-sector collaboration to reduce emissions for mining companies already exist. For example:

• Anglo American formed a partnership with ENGIE for the supply of hydrogen-powered mine haul trucks at its remote Mogalakwena platinum mine in South Africa
• Vale and Silverstream collaborate to reduce shipping emissions by 4.4 per cent on Vale’s new ore carrier by the use of ‘air lubrication’ technology which reduces the friction between the hull and the water.

Collaboration across the critical minerals supply chain is needed to establish new business ecosystems, which are communities that can co-create new supply – such as products and business models. They can bring large companies together with small and medium-size enterprises, government, industry associations as well as academic and research organisations. For example:

• Rio Tinto and Schneider Electric partner to develop a sustainable market ecosystem. This will see Rio Tinto provide low-carbon aluminium and copper in return for Schneider Electric’s provision of energy and industrial services. The goal is to combine low-carbon materials with leading digital solutions to transform and decarbonise the supply chain.

Organisations also exist that can help bring members of the mining supply chain together:

• the International Council on Mining and Metals helps coordinate industry stakeholders to create best practices across the complex supply chains, while
• the Critical Minerals Advisory Group of the Global Battery Alliance focuses on the cobalt, nickel, lithium and graphite supply chains to help create sustainable practices and drive collaboration in the battery supply chain. Their work is pivotal: they promote coherence in international and regional regulation and policy as well as support the development of global mining compliance frameworks.

A circular economy involves keeping materials in use for as long as possible at the highest possible value, be it through sharing, leasing, reusing, repairing, refurbishing or recycling existing materials. It focuses on extending product life cycles, reducing waste and regenerating nature.

The mining industry has been working to decrease its environmental impact for many years. Progress has been made in reducing waste, optimising water usage, regenerating mine sites and recycling biproducts. However, advanced technology can further reduce waste, water use and carbon footprints while maximising metal ore output.

There is now effort to ensure that critical minerals stay in circulation longer. This requires new business models and behaviours across the supply chain and will be driven by existing and forthcoming regulation, for example digital product passports and extended producer responsibility.

Recycling and promoting use of recycled material in manufacturing processes are important steps towards circularity. Companies such as Regenx recover precious metals such as palladium and platinum from retired catalytic converters, while also providing a sustainable alternative to smelting that is currently hazardous to the environment. And the world’s first RecyclableBlades – made by Siemens Gamesa – are already generating power in Germany.

Designing products for circularity, using digital technologies to optimise product lifecycles and offering products as a service will be vital to meet rising demand for critical minerals to reach net zero.

Learn more about these topics in our next article that focuses on critical minerals and the circular economy.