Sustainable andResponsible Critical
Mineral Supply Chains
Guidance for policy makers

INTERNATIONAL ENERGYAGENCYThe IEA examines thefull spectrumof energy issues
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participates in thework of the IEASustainable and Responsible Critical Mineral Supply Chains

Abstract

Abstract
As demand grows for critical minerals to support clean energy technology
deployment, potential new mines and processing facilities will put growingpressure on people, the environment, communities and Indigenous Peoples. This
report explores how the environmental, social and governance impacts of mining
and processing operations can limit the critical mineral supplies needed for clean
energy transitions and outlines five key recommendations for policy makers toensure that critical mineral supply chains are sustainable and responsible. It also
includes deep dives on six priority areas that have important implications for
supply security: water, greenhouse gas emissions, biodiversity, human rights,
communities and corruption.

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This report is released alongside an update to the Critical Minerals Policy Tracker.
The 2023 update includes over 200 new policies, laws and regulations andincludes a special focus on policies aimed at environmental, social andgovernance issues.

Sustainable and Responsible Critical Mineral Supply Chains

Acknowledgements

Acknowledgements
This report was prepared by the International Energy Agency (IEA) Office of LegalCounsel (OLC). This report was prepared in close consultation with and with thesupport of the Environmental, Social and Governance Task Force of the Critical
Minerals Working Party (CMWP). The report’s principal authors were K.C.
Michaels, Alexandra Hegarty and Joyce Raboca, with a major contribution by
Tomás de Oliveira Bredariol. Other IEA colleagues who contributed to this work
include Eric Buisson, Juliette Denis-Senez, Noah Gipson, Lisa Shakhnazaryan
and Sofie Ulrix. Tim Gould, Tae-Yoon Kim and Pascal Laffont provided invaluablecomments and feedback. Colleagues from the Organisation for Economic Cooperation and Development (OECD) Centre for Responsible Business Conduct
also provided indispensable input and review, including Benjamin Katz, Cäcilie Le
Gallic, Louis Maréchal, Ken Menz and Emily Norton.
Valuable comments and feedback were received from external experts, including:
Caroline Avan

Business Human Rights Resource Centre

Cassie Boggs

Mining law expert

Grant Bromhal

United States Department of Energy

Oliver Brown

United Nations Environment Programme

Elisabeth Caesens

Resource Matters

Ellen Carey

Circulor

Assheton Carter

Fair Cobalt Alliance

Ben Chalmers

The Mining Association of Canada

Vincenzo Conforti

Glencore

Aidan DavyInternational Council on Mining and Metals

Pierre De Pascal

The Initiative for Responsible Mining Assurance

Stefan Debruyne

SQM

Kristi Disney Bruckner

The Initiative for Responsible Mining Assurance

Sebastian Dunnett

United Nations Environment Programme

Jason Farr

Oxfam

Katie Fedosenko

Teck Resources

Susannah Fitzgerald

Natural Resource Governance InstituteAnne-Marie Fleury

Glencore

Diego Francesco Marin
Gudrun Franken

European Environmental Bureau

Renault

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Catherine Girard

Institute for Geosciences and Natural Resources,
Germany

Sustainable and Responsible Critical Mineral Supply Chains

Acknowledgements

Emily GreenspanOxfam

Solange Harpham

Paris Peace Forum

Daniel Hill

Natural Resources Canada

Abigail Hunter

SAFE

Fred Kabanda

African Development Bank

Sophie Lu

HSBC

Cecilia Mattea

Transport and Environment

Ferdinand Maubry

Tesla

Susannah Mclaren

Cobalt Institute

Tom Moerenhout

Center on Global Energy Policy at Columbia University

Marcella Munro

Teck Resources

Zubeyde Oysul

SAFE

Laura Platchkov
Isabelle Ramdoo

Federal Office for the Environment, Switzerland

Robin Roels

EU Raw Materials Coalition

Yblin Roman Escobar

SIRGE Coalition

Sebastian Sahla

Extractive Industries Transparency Initiative

Matthieu Salomon

Natural Resource Governance InstitutePayal Sampat

Earthworks

Katherine Shapiro

Natural Resources Canada

Veronika Shime

National Mining Association

Matthew Teh

Australian Critical Minerals Office

Jim Wormington

Human Rights Watch

The Intergovernmental Forum on Mining, Minerals,
Metals and Sustainable Development

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Finally, thanks also to the IEA Communications and Digital Office (CDO) for their
help in producing the publication, particularly to Jethro Mullen (Acting Head), Aya
Abu Shaqra, Poeli Bojorquez, Curtis Brainard, Astrid Dumond, Clara Vallois andTherese Walsh. Erin Crum edited the manuscript.

Sustainable and Responsible Critical Mineral Supply Chains

Table of contents

Table of contents
Executive summary .................................................................................................................. 7
Introduction ............................................................................................................................. 11Part I: Levers for policy action.............................................................................................. 17
1. Ensuring robust regulatory regimes .................................................................................. 17
2. Directed public spending................................................................................................... 20
3. Tracking and monitoring performance .............................................................................. 24
4. Making supply chains more transparent ........................................................................... 29
5. Support for voluntary sustainability standards .................................................................. 36
Part II: Focus areas ................................................................................................................ 44
1. Water ................................................................................................................................. 45
2. Greenhouse gas emissions .............................................................................................. 52
3. Biodiversity ........................................................................................................................ 61
4. Human rights ..................................................................................................................... 71
5. Communities ..................................................................................................................... 80
6. Corruption ......................................................................................................................... 88
Annex ....................................................................................................................................... 98

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Abbreviations and acronyms................................................................................................. 98

Sustainable and Responsible Critical Mineral Supply Chains

Executive summary

Executive summary
Critical mineral supply chains cannot be truly secure, reliable and resilientunless they are also sustainable and responsible. Growing demand for criticalminerals arising from the clean energy transition will mean new mines, processing
facilities and refineries, which can bring attendant risks of harm to the environment,
workers, communities and societies. These harms, if not adequately prevented,
reduced or mitigated, can disrupt supply and hinder the rapid scale-up of clean
energy technologies.
The first and foremost reason to address the environmental, social andgovernance risks in the mineral supply chain is to protect people,
communities and the environment. Addressing these risks allows for thedevelopment of sustainable and responsible supply chains, which can help
communities more fully capture the benefits of mineral development and ensure thatclean energy transitions are people-centred. Growth in the critical minerals sector
can lead to investment, tax revenue, and jobs.
At the same time, adopting sustainable and responsible practices bolsters
security of supply. For example, comprehensively addressing community
concerns about water use and biodiversity impacts makes projects less likely to
encounter local opposition that can halt project development or disrupt operations.
Similarly, eliminating or reducing the incidence of corruption can help avoid delays
and increased project costs associated with instances of bribery. On the other endof the supply chain, if companies are unable to demonstrate that they have taken arisk-based approach to prevent human rights violations such as child and forced
labour, they may face regulatory barriers or reputational risks.
Governments and companies alike have a role in driving improvements
against environmental, social and governance standards. Companies are likely
in the best position to expand sustainable and responsible practices and totransparently report on progress. In parallel, governments can ensure thatcompanies have the right incentives to act and create an enabling environment thatfacilitates improved performance.
Considering the available levers for action, we have identified five key
recommendations for policy makers to ensure that critical minerals value chainsare sustainable and responsible:
First, ensure robust legal and regulatory protections for the environment,
workers and communities. Most countries have existing regulatory frameworks
targeting mining and processing. As the critical minerals landscape changes, there

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

Sustainable and Responsible Critical Mineral Supply Chains

Executive summarySecond, channel public spending to encourage the development of better
practices and to reward good actors. Initiatives to bolster security of supply arebeing backed with public money, and governments can tie these expenditures tosustainability and social responsibility requirements. For example, public
procurement and investment decisions can be conditioned on high sustainability
performance. Innovation funding can be directed towards technologies that improve
operational efficiency, reduce emissions, or facilitate mapping and tracing ofminerals through the supply chain.



Third, strengthen the collection and reporting of granular and standardised
data to enable benchmarking and progress tracking across the industry andthroughout the supply chain. Governments have the capacity to influenceindustry-wide performance by issuing methodological guidelines andrecommendations for sustainability and social responsibility metrics drawing on
industry best practice. Further, publicly disseminating such data is a critical leverthat can equip stakeholders with the requisite information to make sustainabilityfocused sourcing and investment decisions. For smaller enterprises, technicalassistance may be needed to guarantee robustness, accuracy andrepresentativeness of data monitoring.



Fourth, encourage or require companies to improve transparency throughout
the supply chain, including by undertaking due diligence and reporting
publicly on risks and mitigation actions. Greater transparency, alongside efforts
to mitigate identified risks, can alleviate environmental, social and governance risks
while ensuring that purchasers, customers and policy makers have better
information on potential bottlenecks. Governments can do more to encouragetransparency in critical mineral supply chains, including by incorporating due
diligence into legal requirements based on responsible business conduct standards
such as those published by the Organisation for Economic Co-operation andDevelopment (OECD). Particular attention should be paid to the smelting andrefining sector, where greater transparency is needed.

Fifth, support the development of credible voluntary sustainability
standards and encourage harmonised approaches consistent withinternational standards. Sustainability standards and other sustainability
initiatives can play a complementary role to legal and regulatory requirements.
These systems provide avenues to improve the performance of companies
beyond regulatory requirements, provided that they align with internationalframeworks and credibility criteria. By supporting the adoption and improvement

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may be a need to revisit these frameworks to reduce permitting lead times and toensure adequate regulatory protections are in place. Water and greenhouse gas
emissions targets, where they exist, can be made to improve over time. Enhanced
requirements for meaningful and continuous engagement with local communities
and using free, prior, and informed consent as best practice for Indigenous Peoples
can facilitate a social license to operate. Adequate investment in enforcement andimplementation is also needed.

Sustainable and Responsible Critical Mineral Supply Chains

Executive summaryof standards, governments can help drive up environmental and social
performance without displacing the role for legal and regulatory protections.



Improving water stewardship can reduce supply risks, especially for criticalminerals with high water requirements. Lithium and copper mines are often
situated in regions characterised by elevated water stress, necessitating aheightened commitment to water stewardship. Developing infrastructure that
ensures secure water access for local communities can help companies prevent
conflicts where water access is limited. Policy responses that can encourage better
water stewardship include conditioning public investment on achieving specifictargets for water use efficiency and quality and supporting research anddevelopment on water-efficient technologies.



Reducing greenhouse gas emissions from mineral development activities canincrease social acceptability of mining projects and prepare the industry forthe proliferation of carbon pricing. Mining emissions are likely to be increasingly
scrutinised and companies that do not reduce and publicly report on supply-chain
emissions are likely to face market access and reputational risks. Governments can
incentivise emissions reductions by improving or expanding greenhouse gas
reporting requirements to ensure that data on emissions is publicly available, while
supporting industry initiatives that seek to harmonise reporting methodologies.

Addressing impacts to biodiversity can help mining operations meetincreasingly stringent regulatory requirements. Operations that fail to addressthese impacts may face regulatory barriers and reputational and investment risks
as more attention is paid to the increasing loss of biodiversity due from new mining
projects in undisturbed areas – especially for mineral deposits located in key
biodiversity areas. To encourage improved biodiversity practices along the supply
chain, governments can strengthen biodiversity protections in mining regulations
and permits and improve monitoring and disclosure of biodiversity data.

Enhancing the implementation of human rights standards in mining operations
can mitigate operational disruptions and reduce divestment that can result
from human rights violations, including child labour and forced labour. Criticalmineral suppliers with inadequate human rights records may face reputational
damage and legal consequences as well as community opposition in the form oflabour strikes, protests and blockades. To foster responsible critical mineral
operations governments can develop legal and other regulatory frameworks thatenable supply chain transparency by embedding human rights risks in due diligencesystems, while supporting the continued implementation and enforcement of

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These five recommendations are cross-cutting and apply to all types ofenvironmental, social and governance risks. Some of these risks are especiallylikely to hinder supply, with implications for the viability of realising clean energy
transitions. In this report, we have identified six priority areas that have important
implications for supply security: water, greenhouse gas emissions, biodiversity
human rights, communities, and corruption.

Sustainable and Responsible Critical Mineral Supply Chains

Executive summary

regulatory protections. Governments can also develop metrics to assess human rights
risks and integrate transparency requirements into trade and investment agreements.

Meaningful engagement with local communities and Indigenous Peoples canhelp projects obtain and maintain a social license to operate. Local
communities and Indigenous Peoples are directly impacted by mining, with much of
the world’s production, reserves and resources located on or near Indigenous land.
Opposition from these communities can lead to protests, litigation, and permit
denials, which can hinder new developments and disrupt operations at existing
facilities. Governments can facilitate meaningful consultation by supporting themonitoring and reporting of site-level data on engagement and using consultation
processes based on free, prior and informed consent of Indigenous Peoples as abest practice.

Reducing corruption and governance risks can facilitate investment andimprove public confidence in mining operations. The growing demand for
critical minerals could exacerbate incentives for corrupt practices, which can lead tolegal liability for companies, introduce permitting or operational delays, andcontribute to instability and lead to long-term disruptions. Governments can improvegovernance and reduce corruption risks by, for example, ensuring that transparency
provisions in mining codes in line with the Extractive Industries Transparency
Initiative Standard that require disclosure of public permits, licenses, and contracts,
company beneficial ownership, and payments to governments are effectively
enforced.

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It is imperative for governments and industry alike to do more to avoid themistakes of this past. There are myriad examples where development of
resources has not led to sustainable economic growth or has caused corresponding
environmental and social harm. Mitigating these pitfalls of the past will be necessary
to ensure that clean energy transitions are equitable and people-centred and to
avoid supply disruptions that can slow clean energy deployment. As consumers andinvestors are increasingly demanding that companies take these issues seriously,
industry has a clear business case to pursue better environmental and social
performance to maintain a social licence to operate. Governments can play animportant role in promoting improvements by incorporating the recommendations of
this guidance into their policy and investment decisions.

Sustainable and Responsible Critical Mineral Supply Chains

Introduction

Introduction
Growing demand for critical minerals will put increasingpressure on the environment, workers and communities
As the world transitions towards net zero emissions, the rapid scale-up of clean
energy technologies is expected to boost demand for many minerals and metals,
including lithium, nickel, cobalt, graphite, copper, aluminium and rare earth
elements. Under the IEA’s Stated Policies Scenario, demand for critical minerals
for clean energy technologies is set to grow by just over two times. In the IEA’s
Net Zero Emissions by 2050 Scenario (NZE Scenario), which limits global
warming to 1.5°C, faster deployment of clean energy technologies implies a nearly
fourfold increase in demand for critical minerals in 2030 from today’s level. As themarket responds to growing demand, this will mean new mines, processing
facilities and refineries. In the NZE Scenario, development of 164 new mines
producing lithium, nickel and cobalt is needed.
This expansion can create jobs and generate revenue for governments andcommunities in producer economies. However, these economic benefits can berealised only if sustainable and responsible practices are integrated throughout
the supply chain. Despite the progress made in the mining industry, significant
concerns remain. Mining is associated with a host of negative consequences tothe environment from high levels of water use, greenhouse gas emissions, lossof biodiversity, and increased water, land and air pollution; to workers throughsafety incidents and human rights abuses; to local communities and Indigenous
Peoples due to displacement, failure to engage and failure to respect rights,
damages caused by tailings dam failures and local air, human rights abuses, waterand noise pollution; and to societies from instances of corruption, diversion of
public resources, corrosion of governance and the rule of law, contributions toarmed conflict, and adverse impacts on women.

Environmental, social and governance impacts of mining
may limit progress on climate
It is imperative to improve the environmental, social and governance performanceof mining and processing operations to protect people, communities and theenvironment. But in addition, failure to address these consequences can hinder the
supply of minerals needed for the clean energy transition. Poor performance can:limit market access or create legal barriers for materials or operations that cannot
meet regulatory requirements

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

Sustainable and Responsible Critical Mineral Supply Chains

Introduction

discourage investment by increasing the cost of capital, diminishing returns andintroducing risks such as potential legal liability for individual incidentsdamage reputation, deterring investors and buyersincrease the likelihood of opposition from local communities and otherstakeholders where companies fail to obtain and maintain a social licence to operatephysically prevent mines and processing facilities from operating following
incidents of environmental degradation, safety failures, human rights abuses or
corruption.

Without serious efforts to mitigate the environmental, social and governance risks
associated with mineral supply chains, there may not be sufficient supplies tosupport the rapid scale-up of clean energy technologies that are needed to reachnet zero goals and avert the worst effects of climate change. Inadequate supplies
may also hinder efforts to broaden energy access and the facilitation of sustainableeconomic development.
This also has important implications for energy security. As we move towards a world
where minerals are increasingly important for energy uses, disruptions of mineral
supplies will have a larger material impact on energy supply chains than they currently
do. This risk is exacerbated where supply is concentrated in high-risk areas andwhere environmental, social and governance impacts are unmitigated, particularly inareas where local regulations are insufficiently robust or lacking sufficient means ofenforcement. Further, these impacts can complicate efforts to improve supply chain
security to the extent that barriers to developing new facilities hinder efforts to diversify
supply, which is an important condition for supply chain security.
As a result, mineral supply chains cannot be truly secure, reliable and resilientunless they are also sustainable and responsible. Without stronger action to ensure
all mining and processing activity is undertaken in a responsible manner thatmitigates, minimises or prevents the negative consequences of mining together withactions to reduce demand and enhance circularity, it will not be possible to transition
to clean energy technologies quickly enough to meet global climate goals.

Sustainable and responsible supply chains are essential
to realising socio-economic benefits and ensuring thatclean energy transitions are people-centred

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The role of minerals in the clean energy transition presents a major opportunity
to capture socio-economic benefits for people, communities and countries.
These benefits include investment, tax revenue and jobs directly associatedwith mineral supply chain projects as well as indirect benefits arising from thedevelopment of supporting industries and infrastructure in areas that mightotherwise lack these resources.

Sustainable and Responsible Critical Mineral Supply Chains

Introduction

On a macroeconomic scale, the mining sector requires large amounts ofinvestment, and this can increase the money flowing into the economy. In the IEA’s
NZE Scenario, from 2022 to 2030 mining production requires USD 360 billion to
USD 450 billion (in real 2021 dollars) in investment to reach the projected required
level of production. Most of the current anticipated mining investments required toreach the production requirements in the NZE Scenario are in Africa, Central andSouth America, and Asia Pacific. For the processing segment of the value chain,
between USD 90 billion and USD 210 billion is needed over the 2022-to-2030
period to reach projected demand under the NZE Scenario. With proper tax
regulatory frameworks, robust natural resource revenue sharing and benefitssharing agreements, these investments into projects can lead to an increase inrevenue flows from royalties, tax contributions and other fees that can be used forgovernment spending in areas that improve socio-economic well-being. A focus on
investment in mid- and upstream can also ensure that communities retain thelargest value-added segment of the supply chain for critical minerals.
The shift to a minerals-based energy economy also has the potential to boost
employment in the mining sector. In 2022, 800 000 people worked in the mining ofcopper, cobalt, nickel and lithium, up 25% year-over-year due to a record jump indemand from battery manufacturers. In the NZE Scenario, the global criticalminerals extraction workforce nearly doubles between 2022 and 2030. The mining
industry can also provide indirect employment opportunities with service providers
and other types of businesses necessary to run a mine site. Mining can also
increase skills and educational attainment for local workers, particularly where there
is preferential hiring and companies directly provide training, educational and skill
development opportunities. An extensive literature has shown the link between
increased skills and an improvement of the socio-economic well-being of workers,
their families and future generations, including Mitra 2022, Zabel 2018,
and Kaushal 2014.
Mining projects often require large amounts of capital to flow into a community as
mines often require new infrastructure, especially when located in remote areas.
This may include power supply for operational needs; transportation networks suchas roads, trains, or ports for construction and to access markets; and housing,businesses and services for workers. Infrastructure development not only creates
jobs but also has the potential to independently benefit communities beyond the
direct value to a mine and beyond its lifetime. Mining companies often also spendmoney on community investments such as renewable electricity, internet
connectivity, education and training, healthcare, sports and recreation – all of which
can benefit communities.

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Ensuring that supply chains are sustainable and responsible is essential to realise
the socio-economic opportunities of mining so that clean energy transitions can betruly people-centred. For example, mitigating corruption ensures that the full inflow

Sustainable and Responsible Critical Mineral Supply Chains

Introductionof capital into communities and countries is realised; strong human rights
protections can ensure decent jobs that keep workers safe; and consultation with
communities can build trust and allow companies to equitably share socio-economic
benefits, which can reduce the risk of ensuing conflicts and ensure that
infrastructure investments are directed towards the greatest needs. Enabling the fairand even distribution of economic benefits will in itself also be vital to avoid supply
disruptions. Without any realised benefit to local communities, mining projects may
face backlash and delays from local opposition, which can potentially hinder energy
transitions.

This guidance explores how policy can encourage asustainable and responsible mineral value chain while
ensuring supplies are secure and resilient
A growing number of jurisdictions have announced national or regional strategies toensure a stable, secure and resilient supply of critical minerals. Through thesestrategies, governments have announced policy actions at the national level todiversify minerals supplies, attract new investment, and expand research,development and demonstration. At the international level, the IEA’s member
countries have announced the launch of a voluntary critical minerals security
programme.
In announcing measures to ensure security of mineral supplies, many countries
have simultaneously committed to ensuring that these policies encouragesustainable and responsible practices such as through the Mineral Securities
Partnership and the Sustainable Critical Mineral Alliance. Some strategies, such as
the Australian Critical Minerals Strategy, 2023-2030, the Canadian Critical Minerals
Strategy and the European Union’s Critical Raw Materials Act, identify improving
performance on environmental, social and governance issues as an explicit goal. In
line with these commitments and building on the experience thus far, this guidance
explores how policy makers can incorporate sustainable and responsible supply
considerations into policies aimed at addressing security of supply.

Ensure legal and regulatory protections for the environment, workers, Indigenous
Peoples and communities, supported by sufficient means of implementation andenforcement regimes.



Channel public spending to encourage the development of better practices and to
incentivise good performance.

Strengthen the collection and reporting of granular and standardised data toenable benchmarking and progress tracking across the industry and throughout the
supply chain.

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Taking account of the available policy levers, we have identified five key
recommendations for policy makers.

Sustainable and Responsible Critical Mineral Supply Chains

IntroductionEnsure that companies improve transparency throughout the supply chain,including by enhancing traceability, undertaking due diligence and reporting publicly
on risks and mitigation actions.

Support the development of initiatives that help companies demonstrate that
their operations are sustainable and responsible while ensuring crosscompatibility and interoperability.

While each recommendation has implications for all countries, the implementation
may differ between countries depending on their relative position within the supply
chain. For example, producing countries may focus more heavily on improving legal
and regulatory regimes that govern mining. Consuming countries, on the other
hand, may direct their attention towards strategic investment conditions,procurement sourcing criteria or supply chain due diligence. Some countries serve
as both consumers and producers, necessitating a review of regulations to alignwith current and future needs for appropriate action.

Some risks are more likely to hinder supply than others
While it is important to address all the potential negative impacts of mineralproduction, certain risks are especially likely to create issues for security of supply
by disrupting short-term supply or acting as a barrier to new developments. In thisreport, we have identified six focus areas that have important implications for supply
security:

Water scarcity can lead to disputes with local communities or shortages of water,which is needed in large quantities for mining activities.

Greenhouse gas emissions from mining and processing can undermine the casefor new developments and contribute to regulatory and financial risks.

Impacts on biodiversity may pose growing regulatory and financial risk as criteria
concerning biodiversity impacts are introduced.



Human rights violations can pose major reputational and legal risks for companies
that do not do enough to ensure their supply chains do not contribute or are linked
to abuses.

Failure to meaningfully engage with communities – including respect for the rights
of Indigenous Peoples – can engender local opposition and lead to protests or
blockades that stop production or make it difficult to obtain permits or begin
operations even with the required permits.

Instances of corruption can lead to protracted delays in new projects, andperceived risks may deter new investment in certain regions.

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To be sure, there are other risks associated with minerals production that can poseissues for security of supply, including tailings disposal, contribution to armed
conflict, air and water pollution, unequal treatment of women and injuries to workers.

Sustainable and Responsible Critical Mineral Supply Chains

Introduction

In order to maximise the resilience of supply chains, governments will need to adopt
a holistic approach that addresses all of these risks.

In parallel with effort to improve mining practices, greater
investment in alternatives is needed
While new mines, processing facilities and refineries are needed in the near to
medium term, over time recycling and other secondary supplies may play a larger
role. In the long term, the critical minerals industry can be truly “sustainable” only if
the supply chain is fully circular, with all or close to all material re-entering the supply
chain at its end of life. While this report focuses on ways to mitigate the negative
consequences of existing and new sources of primary supply for the clean energy
transition, there is a parallel need for policy makers and industry to focus on
reducing the demand for primary supplies as well. This can come through demandside reductions such as efficiency improvements and behavioural changes, or
through a focus on circularity and recycling. These efforts can also work to reduce
the negative impacts of mining, create benefits through job creation andinfrastructure investments, and foster sustainable and responsible supply chainsand practices.

About this guidanceThis guidance has been prepared under the guidance of a dedicated Task Force of
the IEA Working Party on Critical Minerals (CMWP). This guidance has also
benefited from consultations and input from other delegates to the CMWP, as wellas conversations with civil society, including organisations representing Indigenous
Peoples, industry associations and industry representatives. While directedprimarily at governments, the guidance is intended to benefit other stakeholders thatare curious to understand how the different risks are defined by current standards
and regulatory landscape.

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The guidance is structured as follows. Part I addresses the key levers for policy
action and is organised around the five key recommendations outlined above. Part
II consists of an analysis of six focus areas that have particular implications forsecurity of supply.

Sustainable and Responsible Critical Mineral Supply Chains

Part I: Levers for policy action

Part I: Levers for policy action
There are many potential actions available that can drive improvements insustainable and responsible practices across the critical minerals industry. In
practice, effectively mitigating environmental, social and governance risks will
require action from many different actors, including governments, regulators,
industry and other stakeholders. This part focuses on what governments can doto set expectations, enact requirements and create incentives to ensure thatindustry effectively mitigates, minimises or prevents the environmental, social andgovernance impacts of minerals production. To this end, it identifies five key
recommendations for policy makers that can help to bring positive changes acrossthe industry.

1. Ensuring robust regulatory regimes
Most countries have existing regulatory frameworks that target mining andprocessing activities. These include fiscal regimes that establish royalties andother charges for concessions, social regimes requiring engagement with affected
communities and infrastructure development, occupational safety and healthrequirements to protect workers, and environmental measures requiring impact
assessments and placing limits on air pollution, water pollution and other impacts.
The first lever for action should be to ensure that existing legal regimes arefit for purpose, incorporating robust and effective protections for theenvironment, workers, Indigenous Peoples and communities, coupled withstringent enforcement; these regimes must be evaluated for theireffectiveness and regularly revised where necessary.

Regulatory frameworks may need to be revisited toensure they incorporate robust protections
The growing demand for critical minerals is likely to bring a change in thelandscape of producers, with some countries developing mining and processing
operations that previously had none. Countries with existing mining sectors may
also see a shift of production into new geographical areas and into minerals thatwere previously produced only in low volumes. Those with mature regulatory
systems may need to revisit existing frameworks and tools at all levels to ensurethat environmental, social and governance issues associated with critical minerals
are well covered.

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Regulatory regimes can include performance- or outcome-based requirements forwater use efficiency, water pollution, greenhouse gas emissions and other air

Sustainable and Responsible Critical Mineral Supply Chains

Part I: Levers for policy action

pollution. In many cases, these regulations are based on “best available
technologies”, and may need to be revised depending on the mineral to takeaccount of technological developments that can enable better performance. Many
countries also have requirements for community consultation and consent from
Indigenous Peoples. It is necessary to ensure that companies undertake
meaningful and continuous consultation and respect Indigenous Peoples’ rights tofacilitate obtaining and maintaining a social licence to operate. Regulatory regimes
can also require or set transparency expectations for both industry andgovernment activities. Mandated disclosures by mineral rights holders – including
companies, governments and state-owned enterprises – regarding contracts andlicences, beneficial ownership, and payments to governments, alongsidetransparency measures aimed at how governments manage and allocate revenue
associated with minerals production, can help reduce incidents of corruption andbuild mutual trust among stakeholders.
Given the amount of time needed to revise legislative and regulatory frameworks,
countries should consider undertaking a full review of environmental, social andgovernance protections to identify gaps and ensure that existing frameworks arefit for purpose. Where gaps are identified, countries can explore revisions to laws
and regulations as appropriate.

Legal protections cannot be effective without sufficient
enforcement and accountability
While there may be a need to revise and update the written laws, there is a parallelneed to prioritise effective implementation and enforcement of existing
protections. As changing laws can be a lengthy process, it is essential to explore
enforcement needs before considering revision, which can help identify whether a
gap needs to be filled in the laws in the first place. Some producers have highstandards but low capacity and resources to enforce the standards, posing a risk
to the supply chain. Consequently, the revision process can include anassessment of resource needs to ensure that enforcement authorities have thenecessary staff and other resources.

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Policy makers should also explore whether the legal regime provides sufficientaccountability for private actors. Insufficient accountability or grievancemechanisms can lead to low compliance and also limit access to justice andcompensation of affected stakeholders. Adopting corporate accountability rules
can address these issues, guaranteeing that energy transitions are peoplecentred while mitigating supply risks. Grievance mechanisms, whether judicial or
non-judicial, are also important to ensure that stakeholders have an accessible
way to express concerns and seek redress for rights violations or other issues
occurring at mine sites.

Sustainable and Responsible Critical Mineral Supply Chains

Part I: Levers for policy action

Policy makers should ensure that expediting permit leadtimes does not compromise regulatory protections
Considering the amount of time needed to move mining from exploration to
production – an average of 16 years when analysing mines that came online
between 2010 and 2019 – governments are facing significant pressure to expedite
permitting processes. The length of time to obtain a permit depends on thejurisdiction and mine; for example, it takes an average of seven to ten years in the
United States and around two years in Australia and Canada. With the pace ofdevelopment required to meet global climate goals, there is no question that thetime to obtain a permit needs to come down. However, if reduced processing time
is caused by lax regulatory protections, this may jeopardise long-term supply
security and put any socio-economic benefits of the project at risk.
As past delays have often been associated with compliance with regulatory
requirements, there may be a temptation to reduce processing times by relaxing
environmental, social and governance protections. However, weaker protections
increase the likelihood of supply disruptions from water disputes, community
protests, tailings disasters, incidents of bribery and other adverse impacts. And infact, in some cases, strengthening aspects of these protections may bolster
project timelines, such as in the case of governance, where stronger governancehas been found to decrease lead times.
Some strategies have been proposed to reduce permitting times. The
United States Inflation Reduction Act provides funding to various government
agencies to hire new personnel and develop tools and guidance to strengthen andaccelerate environmental reviews. Separately, the United States released a
Permitting Action Plan outlining key actions, including better internal co-ordination,
tracking of review progress, enhancing outreach and providing technicalassistance to affected stakeholders. The European Union’s proposed Critical Raw
Materials Act would allow certain projects to be designated as “strategic” thatwould have a streamlined permitting process.

Advanced economies can help developing economies
improve regulatory protection through targeted technicalassistance and capacity building

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Developing economies may be less likely to have effective legal regimes, due tocapacity constraints and rule-of-law challenges. Advanced economies can assist
in revising and updating the legal regimes of these countries and strengthening
enforcement. This can take the form of bilateral assistance programmes, such as
the United States’ Commercial Law Development Program or assistance provided
by the German development agency, GIZ, or through multilateral initiatives suchas the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable

Sustainable and Responsible Critical Mineral Supply Chains

Part I: Levers for policy action

Development (IGF), the Extractive Industries Transparency Initiative (EITI), theEnergy Resource Governance Initiative (ERGI) and the World Bank’s Extractives
Global Programmatic Support (EGPS). However, there remains significant needfor support among emerging and developing economies to further develop
regulatory protections and enforcement capacity across a number ofenvironmental, social and governance issues.

Recommendations
Producer countries can undertake a multi-stakeholder review of existing
regulatory frameworks and their implementation to identify gaps anddetermine whether they take account of the latest practices and technologies
to reduce consequences of mining and processing.



Where gaps are identified, producer countries can explore updates to laws
and regulations to ensure adequate protections, implementation andenforcement regimes, including corporate accountability mechanisms.

Producer countries can maintain commitments to environmental, socialand governance protections in any efforts to speed up permitting of newmines and processing facilities.



Advanced economies, particularly those with well-established mining
industries, should consider offering technical assistance, technology
transfer and capacity building to help improve mining codes and regulatory
frameworks, including enforcement support, and update them where
necessary.

All countries can support international co-operation on legal andregulatory protections through initiatives such as IGF, EITI, ERGI and EGPS.

2. Directed public spending

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Governments are already spending money on energy development, with anincreasing proportion of this being directed at critical minerals. Meanwhile,countries are developing new security of supply programmes aimed at diversifying
supplies, supporting strategic projects and reducing the risks of supply disruption.
This creates an opportunity for producer and consumer governments aliketo use public spending to encourage the development and deployment ofbetter environmental, social and governance practices and incentivise good
performance.

Sustainable and Responsible Critical Mineral Supply Chains

Part I: Levers for policy action

Public financing can help companies improve practices
even if they do not receive a premium in the market
While companies are increasingly facing reputational risks related toenvironmental, social and governance performance, many companies report thatthey still would not expect to receive a premium for adopting good environmental,social and governance practices. As these practices can be costly, this means
there are limited immediate price incentives for companies to invest in actions
designed to reduce the negative consequences of their activities beyond what isrequired by law. However, as investors, companies and governments increasingly
focus on environmental, social and governance issues, companies stand tofinancially benefit from strong performance by attracting a wider pool of investment
and buyers and creating a larger pool of accessible markets. However, studies
have also indicated that high performance can positively impact share prices andreturns while low performance can negatively impact share prices, meaning abroader financial incentive can exist.
Public financing or financial levers can play a role by directly supporting efforts to
reduce consequences for the environment, workers, communities and society. As
investor and consumer scrutiny on these projects increases, these efforts can help
companies ensure that they remain competitive against projects that cannot
demonstrate good environmental, social and governance performance. Further,
reducing these harms can deliver supply security benefits as individual projects
will be less likely to face supply disruptions.

There are opportunities to tailor security of supply
policies to reinforce responsible supply objectives
Countries are already using public finance in support of security of supply
programmes. Some advanced producer economies have announced financial
support in the form of grants, loans or loan guarantees for strategic projects
domestically, such as the Australian Critical Minerals Development Program, theUnited States Infrastructure and Jobs Act and Inflation Reduction Act, and theCanadian Strategic Innovation Fund, and multilateral support under the umbrellaof the Minerals Security Partnership. There are also export finance mechanisms
such as the Australian Critical Minerals Facility and similar funding opportunities
available from the United Kingdom. Some countries without domestic production
also make financing support available for overseas projects, for example Japan,
or through direct equity investments through sovereign wealth funds or stateowned enterprises, as in Saudi Arabia and the People's Republic of China(hereafter, "China").

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Some governments, including Japan, Korea and the United States, hold stockpilesof certain minerals to guard against supply disruptions of materials needed forSustainable and Responsible Critical Mineral Supply Chains

Part I: Levers for policy action

clean energy technologies or other purposes. To build and maintain thesestockpiles, it is necessary to periodically purchase materials for the stockpile.
These financing and stockpiling programmes are generally designed to support
one or more security of supply objectives, such as preparing for acute disruptions,developing domestic capabilities, or de-risking investments in new technologies
or higher-risk jurisdictions. However, producer and consumer governments alikecan encourage responsible mining practices through these arrangements byincorporating sustainable and responsible sourcing conditions. For example,
procurement contracts to support national stockpiles can include reporting
requirements on a broad range of performance metrics covering environmental,social and governance impacts, such as greenhouse gas and water use intensity.
Similarly, financing arrangements for investments in projects to bolster security ofsupply could include conditions on supply chain transparency and set
expectations on sustainable and responsible sourcing practices. Other conditions
could require companies to perform supply chain due diligence or require that they
demonstrate performance through a credible industry standard.
On the financing side, support for projects can include favourable terms forgovernments loans or financial benefits such as tax incentives or subsidies linked
to meeting specified environmental, social and governance targets. Governments
could also provide specific guidelines for what practices or performance is
expected of grant, loan or tax incentive recipients along the lines of theInternational Finance Corporation’s (IFC's) Performance Standards on
Environmental and Social Sustainability. These could also be extended toincentivising co-production of critical minerals, investment into recycling, andremediation of and production from waste, all of which could help to reduce
primary demand extraction and improve sustainability performance. Tying
financing instruments to performance standards or targets can provide a strong
incentive for companies to not only improve their practices, but also todemonstrate their performance publicly.

Investing in innovation and new infrastructure can createa supportive environment

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There remains significant scope for innovation in mining and processing
technologies that could reduce the negative impacts of minerals production. For
example, more energy-efficient techniques could reduce the energy intensity, andin turn the greenhouse gas intensity, of mining and processing activities. Similarly,
newer technologies for water management can reduce the amount needed forprocessing and maximise waste water reuse. Traceability technologies, such as
blockchain-based chain of custody systems and geo-based fingerprinting
methods, could facilitate transparency and co-ordination across supply chains byfollowing the flow of materials from upstream to downstream. These innovations

Sustainable and Responsible Critical Mineral Supply Chains

Part I: Levers for policy action

may also provide additional benefits through cost savings or operational
efficiencies along the supply chain, further reinforcing responsible and sustainable
practices.
Governments, particularly in advanced economies, have long played an importantrole in financing and supporting research and development for clean energy
technologies, particularly where there exists a public benefit to innovation. New
programmes aimed directly at supporting technologies that can reduce theimpacts of mining could improve the state of the art and ensure these technologies
reach market. In parallel, existing funding programmes could incorporate criteria
indicating that projects designed to improve environmental, social and governanceoutcomes are eligible and encouraged. Governments can also support
commercialisation of technologies that can reduce impacts by working withinternational partners to identify potential business partners and to facilitate
development of new markets abroad.
Targeted infrastructure investments can also facilitate environmental, social andgovernance performance. Many mining projects require new infrastructuredevelopment, such as roads, rail lines, and community services like schools andmedical facilities to support workers. Innovative technologies may require further
digitalisation, necessitating information and communication technologies
infrastructure. Regardless of whether governments undertake these investmentsor rely on industry to finance this, concentrating on ensuring that investments
improve conditions for workers and surrounding and affected communities, andsupporting projects that utilise technologies that reduce negative impacts, canalleviate environmental and social pressures.

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Investment in a cleaner electric grid in regions with mining, refining or smelting
facilities can help to bring down greenhouse gas emissions and facilitate local
economic development. Australia is funding efforts at certain mines to boost
renewable electricity generation to support the critical minerals sector through thePowering Australia Plan and the Powering the Regions Fund. Bringing down
emissions at mines can help those mines become more competitive, particularly
as countries increasingly apply carbon pricing to supply chain emissions, consider
carbon border adjustment mechanisms for traded commodities and introduce
traceability policies, such as battery passport requirements. Moreover, power canbe shared from such grids to local mining communities at low cost, allowing
household access to clean energy.

Sustainable and Responsible Critical Mineral Supply Chains

Part I: Levers for policy action

Recommendations
Producing countries can offer targeted financial support for measuresdesigned to prevent, minimise or mitigate negative impacts at existing or
proposed critical minerals projects on the environment, workers, communities
and society.

Countries with national stockpiles can incorporate environmental, socialand governance performance requirements into public procurement
contracts that support stockpiles.

Countries that offer public financial support for critical mineral mining andprocessing projects can include incentives or favourable terms linked tomeeting specified environmental, social and governance criteria in
relevant agreements.

Advanced
economiescansupportresearch,development,commercialisation and adoption on improved environmental practices,
resource efficiency, traceability technologies and other enabling
technologies with public innovation funding.

All countries can invest in infrastructure or develop strategic financing
mechanisms that can facilitate improvements in environmental, social andgovernance practices.

3. Tracking and monitoring performance
Thorough, accurate and transparent data on environmental, social andgovernance metrics are needed to track industry progress towards sustainable
and responsible mineral supply. Information allows companies, policy makers andother stakeholders to identify trends and tailor policies and priorities for theindustry. Governments can strengthen the collection and reporting of
granular and standardised data to enable benchmarking and progress
tracking.

Current mining company reporting does not allow for anindustry-wide assessment of progress towards
sustainable and responsible supply chains

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The IEA conducted an initial assessment of company progress across various
environmental, social and governance dimensions based on the publicsustainability reports published by 20 major mining companies that have a strong

Sustainable and Responsible Critical Mineral Supply Chains

Part I: Levers for policy action

presence in energy transition minerals. 1 The analysis reveals that reporting onthese metrics varies substantially in both consistency and breadth. Somecompanies provide very granular reporting, across several years, with data for
hundreds of categories and detailed regional information. Others provide only
highlights on an aggregate level, covering only a handful of areas.
Altogether, over all dimensions reviewed during this assessment, less than half
were disclosed by more than 15 companies (see table below). Total energy
consumption, scope 1 and 2 greenhouse gas (GHG) emissions, injuries, female
share of the total workforce, and community investment were the most-reported
categories. In other areas, such as due diligence checks, recycled waste, gender
diversity in management and environmental protection investment, only a small
percentage of the 20 major companies disclosed information.
Even where data are available, it is difficult to compare performance of companies
producing the same minerals or within the same region. Most companies
aggregate their reported data in some form or another, often at the company level.
This means it is often not possible to differentiate performance for specificminerals or groups of minerals, particularly for companies whose production isdominated by high-volume commodities such as iron ore and coal. It is also notoften possible to access site-level information, making it challenging to assess
performance of assets in distinct regions or countries. The challenge ofunderstanding and comparing industry-wide performance is further complicatedby the limited public reporting obligations of state-owned enterprises and unlistedcompanies.

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1
The 20 companies considered are Albemarle, Anglo American, BHP, CMOC, Codelco, First Quantum Minerals, FreeportMcMoRan, Ganfeng Lithium, Glencore, KGHM, Mineral Resources, Norilisk Nickel, Pilbara Minerals, Rio Tinto, Southern
Copper, SQM, Teck Resources, Tianqui Lithium, Vale and Zhejiang Huayou.

Sustainable and Responsible Critical Mineral Supply Chains

Part I: Levers for policy action

Reporting on selected environmental, social and governance metrics by 20 major
mining companies
Environmental

Emissions and energy consumption

Water

Land
Waste

SocialHealth and safety

GenderCommunity
GovernanceTotal energy consumption
Total scope 1+2 GHG emissions
SOx emissions

19
19
16

PM emissions
NOx emissions
Renewable energy consumption
Scope 3 emissions
GHG intensity
Water consumption
Water withdrawal
Water reuse and recycling
Land area rehabilitatedLand area disturbed
Hazardous waste
Waste generation
Recycled waste
Injuries
Occupational diseases
Fatalities
Female share of total workforce
Female management
Community investment
Environmental protection investment
Payables to governments
Due diligence

13
12
12
10
6
13
13
11
10
9
17
16
2
19
11
5
18
3
18
2
10
5
IEA. CC BY 4.0.

Notes: SOx = sulphur oxides; PM = particulate matter; NOx = nitrogen oxides. Metrics were selected based on an IEA
assessment of relevant metrics and what was available across company sustainability reports. A broader analysis would be
required to comment on indicators not covered in reports. The 20 major mining companies included are: Albemarle, Anglo
American, BHP, CMOC, Codelco, First Quantum Minerals, Freeport-McMoRan, Ganfeng Lithium, Glencore, KGHM,
Mineral Resources, Norilsk Nickel, Pilbara Minerals, Rio Tinto, Southern Copper, SQM, Teck Resources, Tianqi Lithium,
Vale and Zhejiang Huayou. Reported data are for all operations and are not limited to critical minerals.
Source: IEA analysis based on publicly available company sustainability reports.

While there is growing recognition that reporting on environmental, social andgovernance metrics is important not only for investors but for market access andsocial acceptability, some companies do not report on sustainability at all. For
example, six of the top ten cobalt companies, together accounting for almost 40%
of global cobalt production, did not publish a sustainability report or data for 2022.
Additionally, the practice of voluntary and selective reporting with inconsistent
metrics can skew industry performance assessments, as companies may be likely
to report on areas where they excel.

Guidelines for a more cohesive and credible approach to
tracking and measuring progress

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While voluntary reporting provides information about how certain elements of theindustry are doing, overall, improvements are needed to enable accurate gauging
or tracking of industry-wide progress on environmental, social and governanceSustainable and Responsible Critical Mineral Supply Chains

Part I: Levers for policy action

issues. Policy makers can play an influential role in setting norms and expectations
on common indicators for measurement and reporting. Government can also
provide support for companies to deliver.
Policy makers can collaborate to provide guidelines and recommendations for
performance indicators, ideally in a co-ordinated manner that ensuresinternational acceptance and compatibility with data reporting requirements inexisting standards and regulatory requirements. By announcing expectations
regarding the necessary sustainability and social responsibility metrics,
governments can encourage industry to make additional data available.
Specific recommendations on how to include indicators that utilise multiple data
points to provide information above simple measures of performance canencourage more informative and consistent reported data. For example, water use
per mined output can give a deeper understanding of relative water use, allowing
for better comparability across companies, and percentage of women in
leadership roles gives better understanding of diversity and inclusivity inoperations.
These indicators can be made mineral-, project- or segment-specific to accountfor the fact that some metrics are more relevant in certain contexts. For example,
it may be more important to focus on biodiversity metrics for open-cast nickel
mining in forested areas, whereas performance on water use could be more
relevant for brine-based lithium production in water-stressed regions.
Methodological guidelines for data collection and reporting also help to improvecomparability across companies. These can be particularly relevant for harder-toquantify metrics. Inclusion of benchmarking best practices and an emphasis onreporting across multiple years can enable progress tracking overtime.
Not all companies have the capacity to implement data collection and reporting
structures, particularly smaller companies. Sometimes, a company’s lack of
relevant data can even be a barrier to seeking approvals during the permitting
process. Technical assistance can help companies set up such structures andbuild capacity to meet reporting standards. Public reporting platforms may also
facilitate collection of data and dissemination to the public, rather than relying
solely on industry to make information public. Making pertinent information
available publicly can also support efforts to streamline permitting processes.

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In some cases, governments already require environmental, social andgovernance reporting. For example, many countries require companies to report
GHG emissions, including Canada, France, South Africa and the United States,
while others encourage disclosure under a voluntary scheme, including India andBrazil. There are also examples of regional and global co-operation for GHG
tracking and assessment, including the European Union’s battery regulations andincoming mandate for a battery passport and the Global Battery Alliance, which

Sustainable and Responsible Critical Mineral Supply Chains

Part I: Levers for policy action

has released a Greenhouse Gas Rulebook for the battery passport. For disclosure
requirements on social and governance performance, some countries have thesefor covered companies alongside other disclosure requirements, such as inAustralia, Germany, Norway and the United Kingdom.
General disclosure requirements for companies also exist, both mandatory andvoluntary. The European Union’s Corporate Sustainability Reporting Directive(CSRD) will make it mandatory for all large European companies and companies
listed on EU-regulated markets to report on selected environmental, social andgovernance metrics. The CSRD is working to release sector-specificrequirements, including for the mining sector. The Global Reporting Initiative(GRI), one of the most widely used voluntary reporting standards, includes
direction on how environmental, social and governance metrics are reported. The
GRI is working to develop a sector-specific standard for mining that will have abroader range of measures. Notably, for both the CSRD and the GRI, the refining
section of the value chain is not covered.
Countries without disclosure requirements for companies could implement similar
requirements and consider expanding to cover additional elements of sustainable
and responsible critical mineral supply chains. Accessible and comparable sitelevel environmental, social and governance performance indicators would assist
policy makers and purchasers in evaluating their exposure to environmental,social and governance risks. An improved reporting framework could also support
differentiated prices based on environmental, social and governanceperformance.

Both producing and consuming countries can provide guidelines tocompanies throughout the supply chain on which environmental, social andgovernance metrics that both unlisted and listed companies within theirjurisdiction should report. These could include mineral- and segment-specificrecommendations to address relevant risks.

Countries can work together to issue methodological guidelines fordetailed data collection and reporting based on international bestpractice, with a focus on benchmarking and reporting over multiple years to
track progress over time, as well as best practices on verification anddisaggregation.

All countries, but particularly advanced economies, can provide or facilitate
technical assistance to companies that do not have the resources for
implementation of performance monitoring and collection.

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Recommendations

Sustainable and Responsible Critical Mineral Supply Chains

Part I: Levers for policy actionAll countries can explore introducing additional reporting requirements
and public reporting platforms that aggregate and disseminate
sustainability and social responsibility metrics across the value chain andacross different metals and locations.

Countries with existing data collection efforts can explore whether existing
standards and reporting initiatives can make data publicly available in auser-friendly format.

4. Making supply chains more transparent
Improving transparency throughout the supply chain has important benefits bothin terms of mitigating negative impacts and for security of supply. Greatertransparency ensures that efforts to understand supply chains and mitigate risks
can be demonstrated and verified, which enables purchasers and customers toundertake due diligence, allows governments to verify compliance with regulatory
requirements, and facilitates performance and progress tracking. It can also allow
for product and brand differentiation, potentially creating a competitive advantage
for companies with responsible sourcing. At the same time, traceable supplies
supported by transparent reporting on risks and mitigation actions can aid industry
players and governments in gauging supply chain risk. Supply chain transparency
can also improve security of supply as it enables industry players andgovernments to track risks that may cause supply disruptions. To facilitate
greater transparency and more responsible critical minerals supply chains,
governments can encourage or require companies to improve chain ofcustody and traceability information, undertake due diligence, and reporttransparently on risks and mitigation actions.

Companies are exploring different approaches toenhancing transparency

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A critical step in bringing greater transparency throughout the supply chain is forcompanies to build a better understanding of where the materials they source
genuinely come from. A lack of awareness of the links in the supply chain could
hinder regulatory compliance and access to capital and market incentives. For
instance, to receive tax credits under Section 45X of the Inflation Reduction Act(which limits tax credits to vehicle batteries using critical minerals sourced,
processed or recycled from specific regions) would require a company to be able
to demonstrate the origin of its minerals. This can be achieved through different
means, including through traceability, chain of custody systems or identification of
upstream actors.

Sustainable and Responsible Critical Mineral Supply Chains

Part I: Levers for policy action

In many cases, companies that manufacture clean energy technologies purchasethe materials they need through an intermediary – in supply chain parlance, a“tier 1” supplier. That intermediary may source its materials from a different
company who may also source from yet another company – “tier 2” and “tier 3”
suppliers. These sources may come from multiple feed sources, leading to"blended supply". For example, electric vehicle manufacturers may purchasebattery cells that already incorporate lithium, cobalt, nickel and other materials.
Even those that manufacture battery cells themselves may purchase thosematerials from a commodities trader or other materials supplier. An illustration ofthis is the platform built by Resource Matters, which maps out the cobalt supply
chain of some large companies from extraction to production.
However, supply chains are dynamic and change regularly. If the tier 1 supplier isregularly purchasing the lowest-cost available materials, then the source of thematerials it delivers may change many times per year. Because of these changes,
a snapshot of a moment in time may not present an accurate picture of thepotential risks. One way to address this problem is for intermediaries to provide
an up-to-date, verified list of possible suppliers over a given time frame. Even if
this does not show the source of a specific individual shipment, this can enable
companies to assess the risks across all potential suppliers. Alternative
approaches include active, continuous tracing, which can allow purchasers toknow where the materials are coming from for particular shipments.

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Companies are increasingly recognising the need to develop an accurate pictureof their supply chains. Some companies, including particularly large auto
manufacturers, have taken a more active approach to managing their supply
chains for some critical minerals rather than relying solely on commodities brokers
or other intermediaries. These companies have entered into long-term offtakeagreements directly with mining companies, which can provide greater assurance
about the upstream source of materials. Some companies have also begun
making direct investments in mining activities for relevant minerals to ensure they
have full control over their supplies. This can allow those companies with sufficient
market size and leverage to engage more directly with environmental, social andgovernance issues at a local level.

Sustainable and Responsible Critical Mineral Supply Chains

Part I: Levers for policy action

Involvement of top-seven electric vehicle and batter makers in the critical minerals
supply chain

EV makers

Longterm
offtake

BYD

Mining Refining

Batterymakers

●●

●●

CATL

Longterm
offtake

Tesla

●●

●●

●●

LG Energy
Solution

Volkswagen

●●

●●

●●

BYD

GeneralMotors●●●●●●Panasonic●●

Stellantis

●●

●●

SK On

●●

Hyundai●●Samsung
SDI

●●

BMW

●●

●●

●●

Mining Refining

●●

●●

●●

●●

●●

●●

●●

●●

CALB

● Before 2021 ● Since 2021
IEA. CC BY 4.0.
Note: EV = electric vehicle; CATL = Contemporary Amperex Technology Company Limited.
Source: IEA (2023), World Energy Outlook 2023.

Technological developments in traceability tools
A growing number of companies now offer material traceability services, which
essentially involves working with tier 1, 2, 3 suppliers (and beyond) to not only
identify the participants in their supply chains, but also digitally track those sources
up to the point of incorporation into an end product. This type of continuous tracingof information can allow an assessment of risks and of environmental, social andgovernance performance as it attaches information on country of origin and dataon performance to the material along the supply chain.
The most common current application of tracing data on environmental, social andgovernance performance is on greenhouse gas emissions, which enables
companies to track scope 1, 2 and 3 emissions along the value chain. In theory,
this could be expanded to other elements of sustainable supply chains as well,such as water intensity, enabling a full life-cycle assessment.

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Policy makers and companies, however, should be aware of the limitations of endto-end product traceability. Sophisticated technological solutions, while
appropriate in some contexts, may not be fit for purpose in small-scale, high-riskor informal segments of the supply chain – all significant sources of supply forcritical minerals – and making them a baseline expectation may therefore limit
supply chain diversification and undercut responsible sourcing strategies

Sustainable and Responsible Critical Mineral Supply Chains

Part I: Levers for policy action

beneficial to the workers and affected communities. Cost implications ofcontinuous traceability must be fully considered, and, where appropriate, a risk
mitigation approach may be more beneficial. In addition, due to the nature of bothaggregation and blending in mineral supply chains, particularly at the smelting andrefinery stage of the supply chain, traceability is not always possible or practical.
In order for traceability technology tools such as decentralised databases,
blockchains and smart contracts to be useful tools to support sustainable andresponsible supply chains, clear definitions and defined objectives are necessary.
This includes specifying recipients of any aggregated data, establishingaccountability for data producers and traceability technology companies, andassessing whether regulatory requirements and enforcement need to be adjusted
for these purposes.

Existing frameworks can provide guidance forcompanies to undertake supply chain due diligence
The most widely recognised international standards that can support companies
in looking more closely at environmental, social and governance issues in theiroperations and supply chains are the OECD Guidelines for Multinational
Enterprises on Responsible Business Conduct (hereafter “OECD MNEGuidelines”), the UN Guiding Principles on Business and Human Rights, theOECD Due Diligence Guidance for Responsible Business Conduct (hereafter“OECD RBC Guidance”), and the OECD Due Diligence Guidance for Responsible
Supply Chains of Minerals (hereafter “OECD Minerals Guidance”). These
instruments were developed through a multi-stakeholder process with in-depth
engagement from governments, including non-OECD Member countries, industry
and civil society, and they have been adopted and approved by OECD member
countries along with several other countries.
While the OECD MNE Guidelines and the OECD RBC Guidance are the mostcomprehensive standards for minimising adverse impacts that may be associatedwith enterprises’ operations, products or services across all sectors of theeconomy, the Minerals Guidance provides recommendations on supply chain due
diligence on specific risks, including some of the most severe. In 2023, the OECDpublished a Handbook on Environmental Due Diligence in Mineral Supply Chains(hereafter “OECD Environmental Handbook”) in order to provide practical
recommendations to companies on using these instruments to address relatedrisks in the minerals sector.

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The OECD Minerals Guidance is designed specifically for companies involved insourcing minerals in conflicted-affected and high-risk contexts. It is global in scopeSustainable and Responsible Critical Mineral Supply Chains

Part I: Levers for policy action

and applies to all mineral supply chains. It provides detailed recommendations to
help companies respect human rights and avoid contributing to conflict andserious economic crimes through their mineral purchasing decisions andpractices. The guidance lays out a five-step framework for risk-based diligence. 2
Five-step framework for companies to undertake risk-based due diligence

Adopt internal due diligencepolicies and implement themwith employees, suppliers
and business partners.

1
Establish
strongmanagement
systems
Publicly report on supply
chain due diligence policies
and practices. Respond to
stakeholder questions,concerns, and suggestions.

Carry out third-party audits toensure that due diligencepractices are effective at key
supply chain control points,
such as refiners and smelters.

5
Communicate
and report ondue diligence

Riskbased due
diligence

4
Audit control
points2
Identify,
assess andprioritiserisks

3Manage risks

Review supply chains to
identify red flags that warrant
enhanced due diligence.
For any red flags, map thefactual circumstances andset risk-based priorities.

Disengage only from supply
chains associated with themost harmful impacts. In othercases, increase leverage toprevent or mitigate risks.

IEA. CC BY 4.0.
Source: Based on OECD (2016), OECD Due Diligence Guidance for Responsible Supply Chains of Minerals.

It is designed to enable investment to flow in fragile contexts, providing the needed
flexibility for companies to implement tailored risk mitigation strategies and ensure
production and trade of mineral resources is carried out sustainably andresponsibly. It does not prescribe that businesses should disengage from allconflict-affected and high-risk areas. On the contrary, the guidance assists
businesses in recognising and addressing these risks following a risk-based
approach.
It is also broad in scope and applies equally to all stages in the chain — fromextraction to smelting to manufacturing. Considering the role that smelters andrefiners play as choke points in mineral supply chains, the OECD Minerals

Other OECD instruments and handbooks on responsible business conduct that were developed after adoption of the OECD
Minerals Guidance have included an additional step: step 6, provide for or co-operate in remediation when appropriate. The
OECD Environmental Handbook likewise includes this step. Within the current five-step framework of the Minerals Guidance,and based on evolving interpretation, remedy should be implemented as part of step 3 regarding how companies in theminerals supply chain manage and respond to risks.

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2

Sustainable and Responsible Critical Mineral Supply Chains

Part I: Levers for policy action

Guidance also sets out a division of responsibility between upstream anddownstream companies in this regard, with the measures taken beingcommensurate to the severity and likelihood potential adverse impacts. While
implementation of due diligence can and should be tailored to particular company
activities and relationships (such as their positions in the supply chain), theguidance provides a framework for all companies to ensure that they do notcontribute to human rights abuses, serious economic crimes or conflict.
Further, the due diligence approach is not limited to risks associated with conflict
and warfare. Although it was initially developed with a focus on conflict-affectedareas, the same approach can be applied to a wide variety of risks and potential
impacts, including human rights abuses, corruption and governance risks,environmental damage and pollution, labour risks and security management risks.
It can also be a useful compliance tool, helping companies ensure that theyobserve international law and comply with domestic legal and regulatory
requirements.

In many cases, market rules and legal requirements
mean that due diligence is no longer optional
OECD RBC instruments are being increasingly referenced and adopted inlegislation. For example, the OECD Minerals Guidance has now been widely, andto varying extents, integrated into regulatory frameworks, notably in the
United States and the European Union, as well as in producing and trading
countries such as the Democratic Republic of Congo, Rwanda and the United
Arab Emirates. Incorporation into legislation has driven a significant increase in
uptake and disclosure across the industry.

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In the United States, the Dodd-Frank Act has required supply chain due diligencein relation to tin, tantalum, tungsten and gold (3TG) originating in the Democratic
Republic of the Congo or an adjoining country since 2011. In 2021, the European
Union also introduced supply chain due diligence requirements through its Conflict
Minerals Regulation. This regulation applies to tin, tantalum, tungsten and gold
sourced from any country or area that is conflict-affected or high-risk. These
requirements have been further complemented by the EU 2023 Batteries
Regulation, which includes supply chain due diligence requirements for critical raw
materials used in batteries (i.e. cobalt, natural graphite, lithium, nickel and theirchemical compounds). The European Commission proposal for a new EU Critical
Raw Materials Act, likewise, would require alignment with OECD Responsible
Business Conduct instruments for meeting the sustainability criteria for EU
recognition and support to "strategic projects" in third countries aiming to diversify
and secure critical raw material supply chains.

Sustainable and Responsible Critical Mineral Supply Chains

Part I: Levers for policy action

In parallel with these policy developments, supply chain due diligence principles
are increasingly being integrated into industry guidelines and market requirements
around the world. For example, the China Chamber of Commerce of Metals,
Minerals and Chemicals Importers and Exporters, which counts over
6 000 members, has developed a due diligence standard aimed at Chinesecompanies that is based on OECD standards. Further, the London Metal
Exchange has also started enforcing mandatory requirements on supply chain due
diligence for all metals traded on the exchange since 2022 based on the Minerals
Guidance. Additional due diligence standards have been developed in line with
OECD standards for specific supply chains such as cobalt and graphite. The
London Platinum and Palladium Market has similar requirements.
Over time, expectations for environmental and human rights due diligence arelikely to continue to grow due to pressure from governments, investors, purchasersof commodities, and consumers of the final product. Mandatory due diligencelegislation is already in place in France, Germany, Norway and Switzerland and isbeing discussed in other countries. In the European Union, the European
Commission’s Proposal for a Directive on Corporate Sustainability Due Diligencewould require EU-based companies to carry out due diligence in order to identify
and manage adverse impacts on human rights and the environment in theiroperations and value chains, referencing OECD RBC standards as theinternational benchmark. New European corporate sustainability reporting
requirements and disclosure legislation for the financial sector also referenceOECD RBC due diligence standards.
As new legislation emerges, often with broad horizontal scope, companies canalready get “ahead of the curve” by putting in place robust due diligence processes
consistent with international standards that can help them to better manage andrespond to risks and impacts along their supply chains. They will then be wellplaced to build on and tailor existing systems and processes to the specificities of
new regulatory requirements.

Some industry segments pose special challenges

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Artisanal and small-scale mining (ASM) poses particular challenges in terms oftransparency. From a mapping perspective, it can be difficult to properly track theorigin of materials from ASM because it is often informal or outside of theregulatory framework. While sophisticated companies may be able to participate
in due diligence and supply chain tracing programmes, this can be challenging forindividual ASM actors. Further, the reputational risks may encourage companies
to seek to remove ASM from their supplies, when a more effective approach may
be to engage more actively to mitigate risks. Although ASM has been mostprominent in tungsten, tantalum and cobalt, other critical minerals such as copperand lithium are seeing growing amounts of materials coming from ASM.

Sustainable and Responsible Critical Mineral Supply Chains

Part I: Levers for policy action

The midstream sector has been particularly difficult to gather complete information
about in recent years. Audits of smelters and refiners may be difficult to verify, withdownstream consumers often not having access to detailed audit reports or having
few avenues for confirmation. Given the importance of these facilities in the supply
chain, a lack of transparency at smelters and refiners can introduce risks even
where consumers have good information about other links in the chain.

Recommendations


Encourage or require all companies to adopt transparent responsible
business conduct practices in sourcing decisions, including undertaking
risk-based due diligence consistent with international standards, instituting
systems of controls and transparency to obtain information on the sources of
their supplies, and reporting transparently on processes, activities andoutcomes.



Ensure that company approaches to due diligence place first emphasison mitigation and prevention when risks or impacts are identified and withdisengagement as measure of last resort, consistent with OECD Responsible
Business Conduct instruments.

For public procurement or investment decisions, including purchases forpotential public stockpiling programmes, require due diligence for all typesof environmental, social and governance risks.

Ensure appropriate funding, resourcing and capacity building of national
authorities mandated with the enforcement of due diligence requirements.

5. Support for voluntary sustainability
standards

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Well-designed and credible voluntary sustainability standards can, depending on theirscope and activities, support companies in achieving specific environmental, socialand governance criteria and in carrying out due diligence that can provide sourcing
companies valuable information on whether an individual supplier or project meetsthese criteria. Broader sustainability initiatives can support companies in other ways,
for example through enabling due diligence, providing best practice tools andguidance, collaborative approaches, traceability or chain of custody systems, sitelevel risk information, or stakeholder engagement activities. Governments can
support the development of credible voluntary sustainability standards andencourage harmonised approaches consistent with international standards,
provided that these do not result in over-reliance by companies orgovernments on initiatives as indicators of compliance or responsible conduct.

Sustainable and Responsible Critical Mineral Supply Chains

Part I: Levers for policy action

Companies can use voluntary standards systems to
support their own environmental, social and governanceobjectives
The current landscape of sustainability initiatives is complex and fragmented asthey vary significantly in scope, ambition and activities, as well as in the quality of
their audit and assurance methodologies, governance and oversight systems,
levels of transparency, stakeholder engagement, and overall credibility. As aresult, companies lack clarity about what particular schemes do and do not do andthe role that an individual scheme can play in making their operations or supply
chain sustainable and responsible. Some initiatives primarily exist to support
company due diligence, whereas others exist to set requirements for performance.
An introduction to the range of categorisations of initiatives and standards can befound in the box below. This report focuses primarily on voluntary sustainability
standards.
Industry and multi-stakeholder voluntary sustainability standards that set
requirements for companies and assess performance or products against themfor mineral projects have proliferated in recent years, mirroring the growing
attention paid to the need for sustainable and responsible mineral extraction andrefining. There are many types of these standards, including disclosure standards,
lender-driven standards and issue-specific standards, each with different
purposes and with varying degrees of uptake among the industry. Notably,
voluntary sustainability standards that focus on the midstream or whole of the
supply chain are nowhere near as prolific.
In all cases, companies retain ultimate responsibility for their own performanceand for how they utilise voluntary sustainability standards. They should makegood-faith efforts to understand the precise scope and activities that the initiatives
cover, and are responsible for building on, tailoring and acting on the information
they receive from or collect for the purposes of the standard. Companies should
also have systems in place to check the quality of the information and the overall
credibility of the third-party initiative.

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Governments can support companies by encouraging transparency on what
individual standards do and do not cover, their degree of regulatory alignment,
and overall credibility. For example, they can provide companies with centralised,public information on the scope and credibility of individual voluntary sustainability
standards, which some governments have already done, including Germany’s
Institute for Geosciences and Natural Resources (BGR)’s Sustainability Standard
Systems for Minerals Resources. Governments could also utilise availablealignment assessments by organisations such as the OECD, ISEAL or other thirdparty assessors to help provide clarity.

Sustainable and Responsible Critical Mineral Supply Chains

Part I: Levers for policy action

Types of sustainability initiatives
There are multiple categorisations of the broad spectrum of standards, initiatives
and schemes that exist to support sustainable and responsible supply chains:
Sustainability initiatives cover a broad category of initiatives and, as defined by
the OECD, can be multi-stakeholder-, government- or industry-led. They canprovide various resources such as tools, information and capacity building. Theirfunctions can include setting requirements, monitoring, auditing, verifying,assuring, certifying, benchmarking or assessing business practices or products
based on sustainability goals. Examples include government-supported sector
dialogues, global framework agreements, due diligence and responsible sourcing
initiatives, reporting frameworks, and certifications. They can be broadly
categorised into subsets:

Verification initiatives: schemes to certify, assure, benchmark or assessbusiness practices or products against specific requirements, allowing formeasurement of a company’s policies and practices against the adopted
standard.



Facilitation initiatives: schemes that play a more collaborative or facilitativerole in supporting companies’ due diligence, but do not actively monitor,
assess, assure, verify or certify a company's performance. They may establish
environmental or social targets or metrics for companies to follow and provide
participating companies or their business partners with traceability or chain ofcustody systems, country-level risk mapping, site-level monitoring, risk
assessment and prevention tools, reporting frameworks, or complaintshandling mechanisms.

Sustainability systems refer to a range of organisations that define sustainability
performance levels or improvement pathways, including measuring, monitoring orverifying performance or progress, as defined by ISEAL.

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Voluntary sustainability standards are private standards that set and assess
performance for products or operations to meet specific economic, social andenvironmental sustainability metrics, as defined by the UN Forum on Sustainability
Standards.

Sustainable and Responsible Critical Mineral Supply Chains

Part I: Levers for policy action

Average number ofstandards per reportSite-level standards used by the top 10 companies with a 2022 sustainability report by
type

6

4

2

NickelDisclosureISO

Lithium
Responsible mining and sourcing

CobaltIssue-specific
IEA. CC BY 4.0.

Note: Types of standards are grouped based on a selection of standards analysed by SRK Consulting: issue-specificinclude standards focused on issues such as the Voluntary Principles on Security and Human Rights (VPSHR); responsible
mining and sourcing includes the International Council on Mining & Metals (ICMM), Mining Association of Canada’s
Towards Sustainable Mining (TSM) initiative, and Initiative for Responsible Mining Assurance (IRMA), among others; ISOrefers to the International Organization for Standardization‘s standards on environment, health and safety, risk, and social
responsibility; and disclosure includes non-financial/sustainability reporting initiatives, climate-specific disclosures and otherdisclosure initiatives.
Source: IEA analysis using company sustainability reports.

This analysis focuses primarily on voluntary sustainability standards that cover themost relevant environmental, social and governance risks and that are
implemented with a system requiring independent third-party verification or
certification. These include the ICMM‘s Mining Principles and related performance
expectations, IRMA‘s Standard for Responsible Mining, the TSM initiative, theResponsible Minerals Initiative and the Copper Mark’s Risk Readiness
Assessment Criteria Guide (the Copper Mark). However, the intention is not topromote comprehensive approaches over standards with narrow focus in all
circumstances; standards can be effective precisely because they specialise andfocus their resources and expertise, for example on specific risk issues, segmentsof the supply chain or geographies.

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While in general these standards can all lead to increased transparency regarding
sustainability performance, as noted, there are major differences between
standard systems in the overall stringency of requirements, the scope of theirapplication, the specific approach to compliance and reporting, uptake and inoversight and assurance systems. The most comprehensive review of thesestandards is from BGR, which aims to provide a comparative overview ofsustainability standard systems as well as their uptake and implementation, andwhich was last updated in 2022.

Sustainable and Responsible Critical Mineral Supply Chains

Part I: Levers for policy action

Standards should be assessed based on a range ofcredibility criteria
Voluntary sustainability standards can be a useful source of information forcompanies, but participation or membership in a standard cannot guarantee
responsible or sustainable conduct, nor should it be considered a replacement for
proper due diligence aligned with international due diligence standards.
Number of human rights allegations and share of companies with a human rights
allegation that meet at least one standard

2015

2015

2016

2016

2017

2017

2018

2018

2019

2019

2020

2020

2021

2021

2022

2022

0
25
50
75
100
Number of human rights allegations0%

not certified

25%
50%
75%
Share with certification

100%

IEA. CC BY 4.0.
Note: Includes companies that have met one of the following standards for at least one site: IRMA, ICMM, TSM and
Copper Mark.
Sources: IEA analysis based on data collected by the IEA and Business & Human Rights Resource Centre (2023),
Transition Minerals Tracker.

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As voluntary sustainability standards are primarily designed to enable
companies to demonstrate how they are performing against specific criteria or
requirements, the specific relevance and value of a given standard is a functionof, among other things, its scope and how credible it is to its intended audience– whether investors, purchasers, governments, civil society or the public. Thereis growing demand from governments and other stakeholders for harmonised
approaches to credibility criteria or principles for the broader range of initiatives
as the landscape grows in complexity. ISEAL has developed Credibility
Principles that define the core values of credible and effective sustainability
systems. Meanwhile OECD adherent governments and the European Union

Sustainable and Responsible Critical Mineral Supply Chains

Part I: Levers for policy action

recently called on the OECD to develop harmonised credibility criteria forsustainability initiatives (currently under development). 3
Noting the work of the OECD and ISEAL on this topic, as well as ongoing debates
about what credibility criteria are appropriate for all initiatives, factors that may
affect credibility include:

Degree of alignment with relevant international frameworks. Relevant
requirements and/or activities and management systems of the standard areconsistent with international standards on due diligence, including core risk-based
principles of progressive improvement and proportionality, contain adequate detailand are contextually appropriate.

Clarity on scope. The initiative communicates its scope publicly and clearly,
including in terms of subject areas, geographies, activities and entities covered.

Transparency. Level of transparency of the initiative, including whether thereports and outcomes of activities, audits or other assessments and informationon the initiative’s governance and oversight systems, assurance mechanisms(where relevant) and stakeholder engagement are publicly available.

Multi-stakeholder engagement. The initiative includes approaches tomeaningful consultation, participation and engagement with relevant
stakeholders, such as workers, communities and unions, including in relation to
the design and revision of the initiative’s standards and policies, monitoring andevaluation systems, and impact assessments.

Quality of assurance mechanism, where included. Where an assurance
mechanism exists to assess and assure or certify the quality of company
performance, it should be robust with appropriate safeguards to ensure theindependence of audits or other assessments and meaningful participation in theaudit or assessment from relevant communities and workers. See for example
ISEAL’s Assurance Code of Good Practice.

While these factors, among others, can help stakeholders to makedeterminations about an initiative’s credibility, there is still no common approachto credibility and limited publicly available information about the extent to which
individual initiatives would meet credibility criteria. Existing benchmarks anddatabases, such as the International Trade Centre’s Standards Map, as well as
ISEAL’s own assessments, tend to rely on self-reporting or desktop review of
documents rather than evaluations of how initiatives, including assurance
systems, operate in practice. The OECD Alignment Assessments ofsustainability initiatives do provide a unique implementation component,
including through stakeholder interviews and site-level shadow assessments.

The OECD is in the process of developing credibility criteria for sustainability standards and other types of multi-stakeholder
and industry schemes, following a recent mandate set out in the Ministerial Declaration on Promoting and Enabling
Responsible Business Conduct in the Global Economy, adopted by the European Union and 51 adherent governments on
15 February 2023. The OECD is consulting ISEAL on the content of the criteria.

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3

Sustainable and Responsible Critical Mineral Supply Chains

Part I: Levers for policy action

Voluntary sustainability standards can support
sustainable and responsible supply chain practices, but
greater transparency, harmonised approaches tocredibility and appropriate incentives are needed
While there can be significant reputational and commercial benefits for companies
to voluntarily join and participate in standards, the specific incentives depend on
a range of factors – including the legislative landscape, demands set by buyers,
the specific geography, the commodity and the supply chain segment. Policy
makers can play a role in supporting and promoting the development, coherence,transparency and, in some cases, adoption of credible standards and approaches.
Some industry associations or bodies have adopted standards as a mandatory
requirement for their members. For example, a requirement for membership with
the Mining Association of Canada (MAC) is the adoption of TSM. This has been
adopted by 14 other mining associations worldwide, where a key requirement foraffiliation with TSM is mandating adoption by all members of the associatingorganisation. A key factor of TSM is that each association can adapt the system
to their own local needs outside of the seven core requirements. The Canadiangovernment has played an active role in supporting TSM, particularly in adoption
by organisations overseas. Canada also has lent its support to the TSM standard,with a programme that provides matching funds for companies pursuing thehighest levels of performance under the TSM Climate Change Protocol.
A primary driver for standards uptake is market pressure. Standards wereoriginally devised as investment tools to assess risk based on corporate
sustainability at the operational level, given the negative reputation of mining
among investors. Selective pressure on the market can encourage or discourage
uptake of standards based on consumer and investor preferences. Standards
such as the OECD's Due Diligence Guidance are good examples of those that are
adopted (at least initially) because of market pressures and investment
considerations. Investors, stakeholders and consumers have increasingly been
putting pressure on companies to conform to these standards in their criticalmineral supply chains. Incorporating standards requirements into spending
decisions, including for public procurement, could help ensure there are market
incentives for good performers.
Legislation has also been a key driver for companies to implement and report on
good-practice standards. 4 Some national and regional governments haveinstitutionalised standards, effectively giving them the force of law. For example,

The European Union's adoption of the OECD's Due Diligence Guidance and recent battery regulation decisions areexamples of formerly independent standards being adopted into governance frameworks, where introduction of an
enforcement mechanism caused industry-wide adoption of the standard.

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4Sustainable and Responsible Critical Mineral Supply Chains

Part I: Levers for policy action

the US Securities and Exchange Commission’s proposed Climate Disclosure rulewould require companies to quantify greenhouse gas emissions and builds onother voluntary climate-related frameworks, such as those by the Task Force on
Climate-Related Financial Disclosures and the Greenhouse Gas Protocol.
Governmental oversight in standard setting is still necessary, however, to ensure
public interest representation, accountability, and long-term viability in thestandard-setting process.
Some standard-setting bodies and commentators have pushed back against thisapproach, claiming that standards are not designed for regulatory purposes.
Rather, the purpose of standards is to improve the practices of companies beyond(and not within) government regulation. Nonetheless, standards systems can playa role in establishing industry expectations and demonstrating what is possible,
which can pave the way for more robust regulatory action.

Promote collaborative approaches to align voluntary sustainability
standards with international frameworks and credibility criteria, while
supporting transparency on the scope and credibility of individual initiatives.



Actively encourage the adoption and improvement of credible voluntarysustainability standards and other types of sustainability initiatives thatcomplement legal frameworks and align with relevant international standards,
agreements and legislation.

Set expectations for companies to review and evaluate sustainability
initiatives they participate in for credibility, alignment with international
standards, agreements and legislation, and to take responsibility to ensure
participation in standards is meaningful.

Encourage standards systems to clearly communicate their scope andimprove alignment and compatibility among credible standards to clarify thelandscape and simplify implementation by companies.



Where possible, develop centralised public digital platforms to provide
companies and other stakeholders with information on the scope, degree ofalignment and credibility of sustainability systems.

Consider providing access to financial support to reduce barriers forcompanies participating in credible voluntary sustainability standards,
particularly for small enterprises that may find them cost-prohibitive or not havethe systems in place to implement them, subject to evaluation of credibility andtaking into account market implications.

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Recommendations

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

Part II: Focus areas
It is important to minimise harm from all types of environmental, social andgovernance risks to ensure that critical mineral supplies are sustainable andresponsible. Mitigating these risks can help protect people, communities and theenvironment. In addition, comprehensively addressing these risks can bolster
security of supply. Environmental, social and governance impacts can disrupt
current and future supply in different ways:


physically preventing a mining or refining operation through material constraints
to operationregulatory and legal requirements preventing permits from being issued, leading
to shutdowns, blocking access to markets, etc.



reputational impacts leading to divestment or being a barrier for new investmentsocial pressure leading to protests, litigation and blockage of supply if there is alack of acceptance or consent.

While these impacts are possible for all types of risk, some risks raise moresecurity of supply concerns than others, with implications for the viability ofrealising clean energy transitions. This section explores six focus areas that can
impact supply security through one or more of these disruption pathways: water,
greenhouse gas emissions, biodiversity, human rights, communities andcorruption.

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For each risk, this section characterises the potential impacts associated with therisk and the implications for supply security, supported by illustrative examples of
disruptive events. We offer a snapshot of how the industry is performing right now
based on available data, followed by a review of coverage and gaps in existing
standards, including ICMM, IRMA, TSM and Copper Mark. Each section also
showcases examples of existing policies and regulations that align with the IGF’s
Mining Policy Framework (IGF Framework), which was updated in November
2023. The IGF Framework outlines essential recommendations for mining sector
regulations based on six pillars: laws, policies and institutions; financial benefits;socio-economic benefits; environmental management; post-mining transition; andASM. Finally, we present key recommendations for policy makers designed to
implement the overarching policy levers for proactive and effective risk
management identified in Part I.

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

1. WaterNature of risk
Water is vital to critical mineral development
Water is used all along the mineral production value chain, from exploration toprocessing (e.g. flotation uses water to concentrate mineral ores) and transport. It
is a major input of many standard operations, such as cleaning, cooling, dust
control and pumping. Some mineral supply chains are more susceptible to waterrelated risks. For example, lithium brine extraction and copper processing areparticularly vulnerable given the location of many mines in arid regions, whereas
nickel processing is vulnerable due to its high water requirements. Nonetheless,water remains a crucial element in the production of all critical mineral supply
chains and will be increasingly important as the world transitions to a mineralsbased energy economy and climate change makes water flows more variable.

Supply security
Water stewardship is a key element of supply security,especially in water-scarce regions

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One of the biggest material risks to supply is water scarcity, which can lead toa slowdown or complete halt of production, with 40% of major mining
companies reporting that water risk could close operations, disrupt production
capacity and constrain growth. This a problem exacerbated by the geographicallocation of mines and deposits in arid regions. Over 50% of today’s lithium andcopper production is concentrated in areas with high water stress levels, such as
northern Chile and Australia, and this proportion is set to increase as more mines
are developed for the clean energy transition leading to increased risk of supply
disruptions from water scarcity issues.

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

Location of copper and lithium mines and water stress levels, 2020

Notes: The exact water stress levels vary by location. The assessment of the share of mines located in water-stressed
areas was made based on granular regional representations; these are aggregated at the subnational level on the map forthe sake of simplification. Water stress levels are as defined in the Aqueduct 3.0 dataset according to the ratio of total
water withdrawals over the total available surface and groundwater supplies.
Source: IEA (2022), Reducing the impact of extractive industries on groundwater resources.

Failure to meet regulatory or legal requirements for water stewardship can halt
supply due to delayed or denied permits, government-ordered shutdowns
and limited market access. This will vary based on the jurisdiction of operation,
but could result from excessive withdrawals, mining effluents and otherenvironmental impacts of mining, including acid mine drainage and poor tailings
management that could contaminate downstream water bodies. Water pollution
is particularly worrisome in the processing stage, where grinding, milling andconcentration methods often generate polluting effluents loaded with heavy
metals and chemicals. Difficulties in addressing water pollution or scarcity issues
may also cause permitting delays or may prevent projects from moving forward.
A lack of proper water stewardship that causes damage to water resources forother uses, either real or perceived, can lead to a lack of community acceptanceor reputational damages. Ineffectual water stewardship can halt or disrupt supply
through community responses such as protests and litigation. This isparticularly relevant for minerals that require significant water withdrawals formining and processing or are located in geographical areas at risk of water
scarcity.

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Sustainable Development Goal 6 calls for access to and sustainable
management of water and sanitation for all. Clean energy transitions should aim
to support this goal. Water constraints already impact supplies of some criticalminerals, and implementing proper water stewardship practices will becomeSustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

increasingly important in this context, especially as the demand for criticalminerals grows to support clean energy transitions.

Water use at Los Bronces copper mine: Charting a path from troublemaker
to solution provider
Water stewardship is particularly important in water-scarce regions, such as at the
Antofagasta mine in the arid, mountainous desert region of northern Chile. Manyof the mines in the region have suffered partial shutdowns and reduced production.
Excessive water extraction, attributed in part to mining activities, has depleted
groundwater reserves in the region, leading Chile to restrict access to some of its
aquifers. Many mines in the region are developing measures to reduce theirimpacts on fresh water use, such as investing in desalinisation plants or water
recycling.
To implement its goal of eliminating fresh water consumption by 2030 and to getapproval from local government and stakeholders for the extension of its mining
permit, Anglo American initiated a water supply project in the Los Bronces coppermine through an agreement with a Chilean water desalination provider. The project
involves sourcing desalinated water from a newly established plant in the
Valparaiso region, which will be conveyed via a pipeline and pass through Anglo
American’s Las Tortolas plant before reaching the Los Bronces mine. This project
would serve the dual purpose of meeting the mine’s water requirements andbenefiting nearby communities such as Colina and Til Til, supporting waterprovision for approximately 20 000 individuals.
Beyond this phase, Anglo American is devising a scheme to introduce a waterexchange programme, directing desalinated water toward human consumption.
This mechanism involves exchanging treated waste water to sustain the mine’s
operations. In a broader context, this project signifies the company’s response to
the ongoing drought crisis in central Chile, which has already led to diminishedmining output at the Los Bronces mine. Yet this project's value as a solution
remains unproven, owing to regional co-ordination shortfalls and potential adverse
impacts of the infrastructure.

Industry performance
Many companies still report high levels of water usage,
although there are signs of progress

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There are a variety of ways that companies have started to address water
management at their operations. Water stewardship is the use and management

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areasof water in a socially equitable and sustainable manner, which, in the context ofmining operations, is more than looking at water as an “operational fence line”
issue, which views water management only through improved efficiency, waterreuse and control over effluent discharges. Instead, it aims to support thesustainable management of the local water catchment or watershed.
Implementing water stewardship along the mining supply chain is crucial for thesustainable and responsible supply of critical minerals.
Based on IEA analysis of 20 major mining companies that have a strong presence
in energy transition minerals, many companies still have high levels of water use,with consumption increasing by nearly 20% since 2018. Positively, sustainability
reports showed an increase in the availability of data for the latest years, indicating
the industry is putting more effort into tracking its performance. Companies could
report more metrics on water usage that demonstrate good water stewardshippractices, such as water efficiency and intensity and investment into research anddevelopment for the purposes of reducing water usage, among others.

Water use

4 000

12

3 000

9

2 000

6

1 000

3

cm per t mineral

Mcm

Water consumption and reporting on water use by 20 major mining companies
100%

75%

50%

25%

0%
2018

2019

Water consumption

2020

Companies reporting water use

2021

2018

2019

2020

2021

Per mined output (right axis)
IEA. CC BY 4.0.

Notes: Mcm = million cubic metres; cm per t mineral = cubic metres of water used per tonne of mineral extracted. Shows
aggregated data for those companies among the 20 major companies IEA assessed that reported water use (Albemarle, Anglo
American, BHP, Codelco, First Quantum Minerals, Freeport-McMoRan, Glencore, Mineral Resources, Norilsk Nickel, Rio
Tinto, Teck Resources and Tianqi Lithium). Considers reported data for all operations and is not limited to critical minerals.
Source: IEA (2023), Critical Minerals Market Review 2023.

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IEA. CC BY 4.0.

Some standards require that companies report on water stewardship, such as the
MAC's TSM. Self-reported data from members of MAC give an example of what
can be reported on and give an indication that positive progress is being madetowards sustainable water stewardship, at least among MAC companies. The bulkof data reported indicates increasing compliance in every category, with an

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

exceptionally large number of companies excelling in the planning segment andfewer than five firms having low grades in any criteria. Notably, many companies
excel at watershed-scale planning and water reporting and performance, while
fewer companies excel at water governance and operational water management.
More generally, relatively few countries provide detailed information on how theirmining industry addresses water issues.
Self-assessed performance on water stewardship by Mining Association of Canada
companies by Towards Sustainable Mining grade

Share of facilities

100%

C
B

75%

A
50%

AA
AAA

25%
0%

2019 2022
Water
governance2019 2022
Water
management

2019 2022
Watershedscale planning2019 2022
Reporting andperformance
IEA. CC BY 4.0.

Notes: The above chart is an excerpt of TSM data, covering the self-reported water stewardship reporting from 2019 to2022. Members of MAC must apply and report on TSM at their Canadian operations; therefore most data are from Canadabased mines. Each company is given a rating from C to AAA by criteria, ranging from not compliant to excelling against the
TSM standard.
Source: IEA analysis based on Mining Association of Canada data.

Standards
Many standards systems include measures to improve water
quality and minimise groundwater drawdown, although indifferent ways

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The surveyed standards cover critical areas of water stewardship, especially interms of assessment and due diligence processes. However, not all standards areequally stringent or comprehensive. As an example, most standards have built-in
requirements for consultation with stakeholders regarding water use in theplanning phase of the operation, but few require continuing consultation.
Additionally, while some standards require that mines assess impacts of water use
and set general performance targets, these do not always include specificSustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areascommitments for the watershed such as maintaining baseline-level water quality,
maintaining adequate water quantity and minimising groundwater drawdown.
In all standards, water assessments and due diligence reporting are typicallymandatory – all necessitate evaluating impacts, future uses and public disclosureof water performance. However, the rigour of the standards vary. Both TSM (levelA) and IRMA enforce stringent requirements for the establishment and continuous
monitoring of site-specific and catchment-level water balances, in addition to theimplementation of environmental protection and mitigation strategies. On the other
hand, the Copper Mark primarily targets mitigation measures, whereas the ICMM
encourages their adoption but stops short of making them compulsory.
Coverage is also mixed in terms of planning for extreme natural events. Althoughsome standards have not specifically included emergency measures for droughts,
floods and similar events, TSM requires an emergency plan to address naturalenvironmental water crises at level B. IRMA requires emergency planning in
general, while ICMM and the Copper Mark do not require it at all.

Existing policies
Most countries already have legal structures to address water
quality, although fewer specifically address water scarcity
The IGF Framework recommends that governments adopt water management
standards, including watershed-level planning and environmental management
programmes, to protect water sources and mitigate climate change risks. It
advises requiring mining entities to manage surface and groundwater impact, treat
mine effluent streams, protect groundwater from waste, and establish
mechanisms for monitoring and enforcing water quality and quantity standards.
As a means to avoid adverse impacts to water quality and quantity, the IGF
Framework emphasises the need for participation by mining communities inmonitoring committees, with reference to guidelines by the World HealthOrganization and the IFC.

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Most jurisdictions already require mine operators to monitor water quality andtreatment effluents. In Canada, for example, the regulatory framework consists ofa patchwork of laws and regulations at the federal, provincial and territorial levels
that collectively ensure that companies manage water resources and mitigate theconsequences of mining activities. The Federal Environmental Effects Monitoring
programme establishes water quality standards and monitoring requirement for all
sectors, with specific requirements applicable to mining. These are embodied in
the Metal and Diamond Mining Effluent Regulations that sets water quality targets
and establishes provisions for monitoring of environmental impacts.

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

Environmental impact assessments are a feature of many jurisdictions' mining
laws, and often include specific requirements on water. British Columbia’s
Environmental Assessment Act Reviewable Projects Regulation, for example,
limits the total waste discharge for permitted project. Mining codes also often
include water-related safeguards. The British Columbia Mines Act includes
environmental protection provisions for major mines, expansions and expansive
exploration undertakings. Mining entities must secure pertinent environmental
permits, which often encompass areas such as waste discharge and water
utilisation.
Groundwater drawdown, however, is an area that is less commonly covered inmining laws. California’s Sustainable Groundwater Management Act (SGMA)
regulates groundwater, which is seen as a shared asset of the locality. SGMA
uses the term “sustainable yield”, defined as the maximum amount of water thatcan be withdrawn annually from a groundwater supply without causing an
undesirable result. It also requires Groundwater Sustainability Plans that involve
different stakeholders such as mining operators and local communities and must
contain certain elements, including monitoring protocols and mitigation of
overdraft.
South Africa’s National Water Act is another example of an integrated approach
to water management. In conjunction with the Policy and Strategy for Groundwater
Quality Management, the act recognises the need for integrated management ofwater and participation on the catchment level. The government is also required
to assess and approve mining activities considering the impact on groundwater.
Companies are then required to monitor groundwater at facility level if they posea potential threat to groundwater quality, depending on specified trigger levels forwhich are defined based on site-specific investigations. As in other countries,
enforcement has faced challenges in South Africa, underscoring the need for bothwell-designed legal frameworks and effective implementation.

Recommendations
Ensuring robust regulatory regimes. Consider if existing staff and resources
are adequate to monitor compliance and enforce regulations. Review whether
existing regulations adequately protect water resources, including by
establishing targets for water quality, water use and effluents that improve overtime. These could include requirements on monitoring and reporting as well as
participating in local governance for continuous consultation in water use
decisions. Current mining codes and permitting regulations can also be
updated to include such regulations.

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

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areasDirected public spending. Incentivise good water stewardship practices bymaking strategic public funding or procurement decisions conditional on
adopting water stewardship practices and achieving water performance
metrics. This could include targets to reduce the impact of mining activities onwater resources, reduced water use and improved water quality metrics,
among others. In parallel, governments can invest in research anddevelopment for technologies that reduce water use or support companies
driving innovation in this field.

Tracking and monitoring performance. Support the monitoring andcollection and reporting of data from mine sites with thorough methodological
guidelines on how to measure water performance, including recommendations
for data collection and monitoring of groundwater resources, water use andintensity, and water stewardship practices. Technical assistance could be
provided for relevant companies.



Making supply chains more transparent. Improve transparency across the
supply chain through regulations or guidance that encourage or requirecompanies to embed environmental risks, including water use and water
depletion, into due diligence systems. Additional attention should be paid tothose minerals and processes that are particularly water-intensive, in line witha risk-based approach.

Support for voluntary sustainability standards. Encourage the use ofcredible voluntary sustainability standards that incorporate clear performance
metrics on water use and water stewardship. Companies should also be
incentivised to improve the coverage of water issues in existing standards.

2. Greenhouse gas emissions
Nature of risk
There is a growing imperative to tackle emissions from energy
transitions minerals

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GHG emissions from critical mineral production can occur at multiple places along
the supply chain. The industry relies on heavy equipment and industrial processes
that can be relatively energy-intensive and have historically been powered byfossil fuels. In 2021, the average GHG emissions for the production of criticalminerals produced ranges from 4.6 t of carbon dioxide equivalent (CO2-eq) per
tonne of refined copper to 75.8 t CO2-eq per tonne of neodymium oxide. Theseemissions will vary greatly depending on the type of processes, the energy
efficiency and whether the power is sourced renewably. As of today, emissions

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areasfrom the critical minerals industry are relatively small compared with other sectors,
largely due to low production volumes. However, these emissions could growalongside projected growth in demand, including indirect emissions frompurchased energy.
Clean energy technologies have lower levels of GHG emissions compared withother technologies even when considering the full life-cycle emissions. Total lifecycle greenhouse gas emissions of electric vehicles are around half those ofinternal combustion engine cars on average, with the potential for a further 25%
reduction with low-carbon electricity. However, lowering mining’s GHG emissions
will be crucial in the production of critical minerals to ensure there is a sustainable,
responsible and reliable supply.

Supply security
High GHG emissions from critical minerals activities may create
barriers to expanding supply
With the expected proliferation of domestic, regional and international GHG
emissions regulatory requirements, it will be increasingly important for mining
companies to find ways to reduce emissions. Failure to do so may make it difficult
to obtain permits and licences if operations don’t meet increasingly stringent
national GHG emissions requirements. In the context of regional and international
requirements, failure to mitigate GHG emissions may also limit market accessfor high-GHG-emitting operations.
Increasing regulatory pressure can lead to increased costs for mines as carbon
taxes raise the cost of mining, especially for high-emitting mining sites such as
those that rely on fossil fuels for power. These increased costs could limit supply
if it means some operations are not economical given the carbon price or the costof mitigation actions. Although a carbon tax could be beneficial to the mining
industry in the long-term as it will shift demand to renewable energies, there would
likely be near-term consequences for supply, particularly at those mines with high
GHG intensities, including those in remote areas far from clean energy
infrastructure.

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Given that the development of new critical minerals deposits and increased
demand primarily arises from their essential role in clean energy technologies
necessary for combating climate change, the social acceptability of mining may
decrease if critical mineral mining does not reduce its GHG emissions, which may
make it harder to obtain a social licence to operate. This could arise from lowered
demand from companies aiming to produce net zero or low-emissions end-use
technologies if suppliers are unable to meet emissions targets. Due to impending
regulations, downstream and end-use companies are already increasinglySustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

looking to buy low-carbon minerals to reduce their life-cycle emissions, andproduction with higher emissions may find fewer and fewer customers over time.
Looking ahead, consumers’ purchasing decisions may increasingly takeemissions into account with improved access to information about emissions
through tools such as the battery passport.
High GHG emissions along the critical mineral supply chain may eventually serve
as a prohibitive barrier in developing new operations in areas where costefficient renewable sources of energy or GHG abatement technologies andmethods are unavailable. This is particularly relevant for minerals that requireenergy-intensive processes and for developing resources in regions that are notgrid-connected or grid-powered by sufficient levels of renewables. According toanalysis for a forthcoming Nuclear Energy Agency report, 15.8% of critical mineraldeposits are remote. As new reserves and resources of critical minerals aredeveloped to meet demand from the clean energy transition, mining supply chains
will need to invest in technological improvements to bring down emissions.
Heat map of remoteness of critical mineral deposits

Note: Location of remote mines is approximate. Remoteness is defined as a distance of more than 20 km from anelectricity distribution network.
Sources: Chart and analysis from forthcoming Nuclear Energy Agency analysis. Data on deposits are from two US
Geological Survey datasets and data for electricity grids are from Arderne, C. et al. (2019), Predictive mapping of the global
power system using open data.
asdf asdf

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By contributing to GHG emissions, mining could also be reinforcing supply risks
in other areas and increasing its own risk of being exposed to the impacts ofclimate change, which can stop production or create delays. Climate change isknown to exacerbate extreme weather conditions and fundamentally alter global
precipitation, temperature and hydrological conditions, all of which couldSustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

potentially severely disrupt the entire length of mineral supply chains, both
upstream and downstream. Changing weather patterns, especially altered floodlevels and increased water stress, could disturb individual mine sites’
infrastructure and operations.

Industry is co-ordinating amongst themselves to tackle GHG emissions
across mineral supply chains
Some industry groups and initiatives are coming together to combat GHG
emissions in the sector. For example, ICMM has collaborated with manufacturers
to commit to introducing emission-free surface mining vehicles by 2040. Other
coalitions of companies, such as the First Movers Coalition, which is made up ofcompanies that use large quantities of aluminium, have committed that at least
10% of their primary aluminium procurement volume will be low-emissions by2030. Another example is the Global Mining Guidelines Group, which has an
Electric Mine Working Group that aims to accelerate the adoption of all-electric
technologies mining. These initiatives and targets showcase that companies arecoming together and expressing their desire to work with low-carbon minerals.
Individual companies are also making strides to tackle GHG emissions in their
supply chains through full electrification or through implementing electric
equipment.

Industry performance
Many companies have made commitments to reduce GHG
emissions, but concrete progress is still lacking
There are various ways that companies have started to address GHG emissions
in their operations and along their supply chain. These include using less energyintensive processes, decarbonising their sources of power and electrifying
operations, and sourcing from operations with lower GHG emissions, among
others. Companies have also started increasingly recognising the importance of
reducing GHG emissions in the mining sector, as shown by the number of large
mining sector companies making scope 1 and 2 net zero commitments and shortterm reduction targets, 5 although few have made any scope 3 emissions
reductions targets.

Scope 1 emissions come directly from sources owned or controlled by the company; in the context of mining, one example
could be emissions released by diesel-run mining vehicles. Scope 2 emissions come from the off-site production of energythat is used by the company; in the context of mining, one example could be emissions created from generating electricity
used to smelt minerals.

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5

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

Despite this progress in commitments, emissions reductions have been slow –most of the 20 major mining companies prominent in energy transition minerals
have not made substantial reductions in their GHG emissions in recent years, asseen by company reports in recent IEA analysis. Although GHG emissions are
one of the most widely reported on environmental, social and governance metrics– almost 100% of companies analysed reported scope 1 and 2 emissions –progress needs to be made on reduction implementing reductions.
Based on data from the Responsible Mining Index 2022, which scores companies
across a set of indicators based on company-published data, many of the world’s
top cobalt, copper and nickel companies are showing limited progress on tracking,reviewing and acting to improve their performance on reducing scope 1, 2 and 3
emissions. Similarly, assessed companies are not acting rapidly enough to reduceenergy consumption or to assess and address how climate change canexacerbate the impacts of current and future operations on the environment.
GHG emissions by 20 major mining companies and indicators of company
performance for selected top cobalt, copper and nickel companies

120

0.3

80

0.2

40

0.1

2018 2019 2020 2021

0.0

kg CO2-eq per kg mineral

Mt CO2-eq

GHG emissions
5
4

Company performance in tracking
and acting on selected indicators
Highest score

3
2
1

Average score

Climatechangeresiliency

Total emissions

Reducing
Reducing
GHG
energyemissions consumption

Emissions intensity (right axis)
IEA. CC BY 4.0.
Notes: Mt = million tonnes; kg = kilogramme. Left chart shows aggregated data for those companies among the 20 major
companies IEA assessed that reported greenhouse gas emissions (Albemarle, Anglo American, BHP, CMOC, Codelco,First Quantum Minerals, Freeport-McMoRan, Ganfeng Lithium, Glencore, Mineral Resources, Norilsk Nickel, Rio Tinto,
SQM, Teck Resources and Tianqi Lithium). Considers reported data for all operations and is not limited to critical minerals.
Right chart shows aggregated scores based on Responsible Mining Index 2022 for critical mineral producing companies.
More information on the scoring framework can be found here. Scores are standardised for a maximum possible score of 5
across all categories.
Sources: Left chart: IEA (2023), Critical Minerals Market Review 2023. Right chart: IEA analysis based on Responsible
Mining Index 2022 and S&P Global Market Intelligence data.
asdf asdf

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Many of the critical minerals required for clean energy technologies have highGHG emissions intensity, especially during the processing stage of the supply
chain. For each mineral, potential GHG emissions intensities vary depending on
the stage of supply chain, with the methods of extraction and processing, and with

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

the electricity source of the operation. For instance, if the most energy-intensive
processing route for nickel production – extracting and processing laterite ore tomatte via nickel pig iron – relies on a high-carbon electricity source, it emits ten
times more GHG emissions than the least energy-intensive route for sulphide.

t CO2-eq per tonne of nickel

Current average GHG emissions intensities of nickel production processes

80

Potential range of GHG emissions
based on power source

Average GHG emissions

60
40
20
Sulphide
MiningLaterite(matte via
NPI)
Processing

Laterite(HPAL)

Sulphide

Laterite(HPAL)

Laterite(matte via
NPI)
IEA. CC BY 4.0.

Notes: HPAL = high-pressure acid leaching; NPI = nickel pig iron. The ranges of GHG emissions intensities correspond toa range of assumptions for the emissions intensity of electricity (between 240 grammes [g] of CO2 per kilowatt-hour [kWh]and 600 g CO2/kWh). For reference, the global average emissions intensity for electricity is around 464 g CO2/kWh.
Includes scope 1 and 2 emissions from mining and processing.
Source: IEA analysis based on Trytten Consulting Services and Skarn data.

Standards
Most existing standards require target-setting, quantificationand public reporting, but specific approaches vary considerably
All the prevalent standards require companies to disclose corporate-level climatechange policies and facility-level performance targets, and to report on scope 1
and 2 emissions. They also generally require a GHG emissions management
system with data collection and monitoring. However, the specific approach
among standards varies considerably.

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In terms of emission targets, ICMM members have committed to achieving net
zero scope 1 and 2 emissions by 2050 or sooner. All ICMM members have also
committed to report their emissions annually and to obtain external verification.
Other standards require companies to establish GHG reduction targets, but they
do not specifically require a target of net zero by 2050. Regular reporting ofemissions according to an internationally recognised protocol is required by all
standards, although external validation is not uniformly required.

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

Standards vary in their treatment of scope 3 emissions, in contrast to the moreconsistent approach for scope 1 and 2 emissions. For instance, TSM (at Level
AAA) encourages site-level emissions reduction commitments, reporting andindependent assurance of material scope 3 emissions. In contrast, the CopperMark and ICMM require these measures. Generally, these standards do notpresently compel companies to synchronise their emissions reduction strategies
with upstream or downstream partners, which could improve consistency in scope
3 reporting.
Notably, not all standards offer precise guidance on emissions measurement orreporting procedures. For example, only the Copper Mark requires site-levelbaseline and reporting, whereas IRMA allows either site-level or corporate-level.
The standards also generally allow companies to choose what reporting standard
or methodology they use, provided that it is internationally recognised.
Consequently, companies adhering to the same standard might adopt different
approaches when measuring and reporting their emissions, setting targets, andoutlining mitigation plans, which poses a challenge in terms of assessing
performance across companies. That said, there are some initiatives to facilitatecomparability. For example, the Global Battery Alliance established a battery
passport and Greenhouse Gas Rulebook to set globally harmonised rules thatmake battery carbon footprints transparent and accessible.
In general, all standards provide limited guidance as to how companies mayachieve and make progress against their targets. For example, the Copper Markencourages offsets only after companies have made efforts to reduce emissions,while TSM requires that use of offsets be documented. IRMA, on the other hand,does not provide guidance on this point in its 2018 standard, but the draft IRMA
2.0 specifies that offsets may be used if the site can demonstrate a carbon
mitigation hierarchy is followed, minimising the need for offsets.

Existing policies
There is a growing trend of regulations that mandate GHG
reporting and mitigation targets

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The IGF Framework advises governments to implement several key measures on
GHG emissions. These include adopting standards to control and reduce GHG
emissions in line with national and international climate change commitments
including the Paris Agreement. It also recommends that governments require
mining entities to improve energy efficiency, reduce and report emissions, establish
robust mechanisms for monitoring emissions, regularly inspect and analyseemissions reports, and enforce regulations with appropriate sanctions to ensure
legal and regulatory compliance. It also recommends that targets and emissions
calculations be in line with international guidance such as the Guidance by the Task

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

Force on Climate-Related Financial Disclosures and the Intergovernmental Panelon Climate Change (IPCC).
While many countries have set national net zero targets, there are few instanceswhere companies are legally required to adopt their own targets. That said, wherenet zero targets are incorporated into legally binding regulation, this sends a strong
signal that companies should be prepared to adopt similar targets to ensure they
are prepared for future policy developments.
Some governments have begun exploring how to use their purchasing power toencourage companies to set GHG targets and demonstrate progress. Canada’s
recently introduced Standard on the Disclosure of GHG Emissions and the Settingof Reduction Targets and the United States' proposed Federal Acquisition
Regulation require suppliers for large public procurements to measure and disclose
GHG emissions while adopting reduction targets aligned with the Paris Agreement.
When applied to mining directly, such as in the case of procurements for publicstockpiles, these can create direct incentives for minerals companies. For otherproducts, these rules can indirectly encourage mining companies to align theiremissions targets with those of the country’s direct suppliers.
Some regulations already address GHG monitoring and reporting in the metal
mining sector, and these types of policies are rapidly expanding in scope andpurpose. For example, the US Environmental Protection Agency's (EPA's)
Greenhouse Gas Reporting Program (GHGRP) has been requiring large metal
manufacturing facilities to report their emissions annually under specificmethodologies that incorporate those of the IPCC. A facility’s emissions reportundergoes a thorough verification process, with resulting data made publicly
accessible. Because it is aimed at informing the EPA on compliance with the Clean
Air Act, only scope 1 and 3 emissions must be reported under the GHGRP, andscope 2 emissions are excluded.
Corporate accountability laws also sometimes include reporting on GHG emissions,with a particular focus in recent years on scope 3 emissions. For example, theEuropean Commission’s Corporate Sustainability Reporting Directive (CSRD)
requires both large EU companies and foreign companies with EU subsidiaries todisclose their emissions beginning in 2024, with the potential to expand disclosure
along the whole value chain, including scope 3 emissions. By 2027, the EU Battery
Regulation will mandate battery producers to disclose the complete carbon footprintof electric vehicle batteries over their life cycle. Using the Product Environmental
Footprint methodology, end users must account for the full cycle, from raw material
extraction to waste management. Moreover, the proposed corporate accountability
acts in California and New York require scope 1, 2 and 3 reporting.

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Mechanisms such as carbon pricing and emissions trading schemes also contributeto emissions mitigation in the mining sector. For instance, Canada recently

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

expanded its clean fuel standard to cover mining activities. Additionally, efforts havebeen made to facilitate the operation of carbon taxes across national borders. One
notable example is the European Union's Carbon Border Adjustment Mechanism(CBAM), which imposes a carbon tax on imported energy-intensive goods, such asaluminium. The aim of the mechanism is to prevent EU producers from simply
relocating their operations to regions with less stringent GHG emissions regulations,
thereby maintaining environmental standards. Mechanisms such as these have thepotential to expand to other emissions-intensive and trade-exposed critical minerals
in the future.

Ensuring that regulatory regimes are robust. Review GHG emissions reporting
regimes to ensure they are fit for purpose and consider incorporating emissions
reduction into regulatory regimes consistent with its international commitments,
potentially through GHG mineral intensity targets that decrease over time.
Reduction targets could consider emissions from mine- or processing-site powersources. Site-level monitoring and reporting requirements can complement thesetargets to track performance.

Directed public spending. Support research and development for technologies
that reduce emissions from mining and processing. Tie strategic investment
decisions to reducing emissions or energy use intensity at mining and processing
sites. Public procurement of minerals or technologies intensive on minerals could
include requirements around emissions. Offer financing for projects that reducegreenhouse gas emissions at mining and processing projects, such as renewableelectricity deployment in mining regions.



Tracking and monitoring performance. Support harmonised methodology andpublic reporting so customers and other stakeholders can easily compare
emissions, plans and targets. Small companies might need technical support tomonitor emissions accurately and representatively. Reporting should aim to cover
all relevant areas, including small and medium mines and scope 3 emissions.



Making supply chains more transparent. Improve transparency across the
supply chain through regulations or guidance that encourage or requirecompanies to embed greenhouse gas emissions in due diligence systems.

Support for voluntary sustainability standards. Support credible voluntarysustainability standards that contribute to meaningful emissions reductions
through clear targets and robust monitoring, bolster the traceability of GHG
emissions along the supply chain, support market mechanisms, and provide
guidance on emissions accounting methodologies. Support consistentmeasurement and reporting procedures across standards to establish a cohesiveframework for evaluating GHG emissions performance in the mining industry.

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Recommendations

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

3. Biodiversity
Nature of risk
Mining and processing activities can damage habitats andreduce biodiversity
Mining activity is often destructive to the surrounding ecosystem and requires
land-use changes, although the impact of a particular mine depends on the typeof mine (e.g. open-pit versus underground), geological mineral source (e.g. lithium
hard rock versus brine deposits) and geographical context (e.g. mines located intropical rainforests will have higher biodiversity impacts than mines on degradedland). Geographical or locational context is the key risk factor for adverse
biodiversity impacts, especially when mining enters relatively remote andundisturbed areas. This can have large implications for biodiversity, particularly as
mining activities may be located in Key Biodiversity Areas (KBAs). 6
These impacts can be direct, indirect and cumulative, ranging from the site level,such as habitat loss and fragmentation, to local or regional level, such as watercontamination or particulate matter emissions, to global level, such as climatechange. Biodiversity risks are not limited to activities taking place within mine sites,
as mines often require local or regional infrastructure, including roads and raillines, that can also disrupt natural habitats and ecosystems, including migrationroutes. Mineral transport and processing are also significant users of land anddrivers of changes in land use. Declining ore grades and increasing mineraldemand could lead to mounting impacts from critical mineral supply on land use
and biodiversity.

Supply security
Biodiversity loss is emerging as an important contributor to
supply risk
The importance of biodiversity as a supply risk is growing as countries and regions
are expected to implement more stringent requirements following the signing of
the Kunming-Montreal Global Biodiversity Framework at the United Nations’ 15th
Conference of the Parties (COP15) on biodiversity held in early 2023. Failure to
take effective steps to mitigate impacts on biodiversity can complicate regulatory

According to the International Union for Conservation of Nature's (IUCN’s) Global Standard for the Identification of Key
Biodiversity Areas, KBAs are defined as “sites contributing significantly to the global persistence of biodiversity.” They are
identified by applying the criteria and thresholds included in the IUCN Global Standard, which take into consideration all taxa
and levels of biodiversity, including genetic, species and ecosystems.

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6

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

processes, including by making it difficult to obtain permits and licences orleading to a rejection of environmental assessments or revocation oflicences.
The loss of biodiversity is also closely linked to risks that involve local
communities, Indigenous Peoples and water stewardship. Improper mitigation of
biodiversity risks can lead to a project not obtaining or losing its social licence tooperate, which can lead to protests, blockades, strikes and litigation.
Biodiversity impacts can also lead to reputational and investment risks forcompanies. This will be increasingly true as investors look to include moreenvironmental, social and governance criteria in their investment decisions. For
example, the recently released recommendations from the Taskforce on NatureRelated Financial Disclosures aim to be aligned with the goals in the KunmingMontreal Global Biodiversity Framework. Another example is Nature Action 100,an initiative looking to mobilise institutional investors to establish a common
agenda around nature and biodiversity and drive corporate engagement on
biodiversity by targeting 100 prominent companies, 13 of which are mining
companies. Recent corporate announcements related to deep-sea mining also
illustrate the importance that investors and buyers place on this topic, as
biodiversity impacts are a key concern among opponents.
Globally, nearly a third of the mines and exploration sites located in KBAs are
critical minerals projects, and a large portion of these sites are exploration
projects. Failure of down-, mid- or upstream segments of the supply chain toproperly implement mitigation strategies could mean that any of the above risks
may hinder the development of the needed supply at the scale and pace required.

Industry performance
Progress has been slow on biodiversity impacts, but companies
are increasingly committing to address them
When sourcing or developing supply in or from countries, areas or projects thatare located in areas with high levels of biodiversity risk, a common approach is tofollow the mitigation hierarchy of avoid, minimise, rehabilitate or restore, or offset
as a last resort. In addition, some companies have made either a “no net loss” or“net positive impact” commitment regarding biodiversity:“No net loss”: any loss of biodiversity must be offset with an equivalent
gain which does not necessarily have to occur in the same geographic
area as the impacted site. However, alternative sites should ideally support
the same or similar types of habitats or species to ensure that ecologicalbalance is maintained.

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•

Sustainable and Responsible Critical Mineral Supply Chains•

Part II: Focus areas“Net positive impact”: any activity leads to an improvement in the quality
and quantity of the environment compared with its baseline state. A
company might not only restore habitats it has damaged but also create
new habitats, thus increasing biodiversity beyond baseline levels.

Among the top 10 critical mineral companies, most nickel producers haveannounced a public commitment to follow the mitigation hierarchy approach,compared with about half of the top 10 lithium and cobalt companies – possibly
because more nickel operations are located in areas of high biodiversity where
mitigation hierarchy implementation is more crucial. Overall, only a quarter ofthese companies have a no net loss or net positive impact commitment.

125

Land rehabilitation

0.5

100

0.4

75

0.3

50

0.2

25

0.1

kha per million USD

khaLand rehabilitation by 20 major critical mineral companies and number of companies
with biodiversity commitments

0.0
2018 2019 2020 2021
Total land rehabilitated
Per million USD of revenue (right axis)

10

Biodiversity commitments

8642
NickelLithium
CobaltMitigation hierarchy
No net loss commitment
Net positive impact commitment
IEA. CC BY 4.0.

Notes: kha = thousand hectares. Left chart shows aggregated data for those companies among the 20 major companies
IEA assessed that reported on land rehabilitation (Albemarle, Anglo American, BHP, CMOC, Codelco, First Quantum
Minerals, Freeport-McMoRan, Ganfeng Lithium, Glencore, Mineral Resources, Norilsk Nickel, Rio Tinto, SQM, Teck
Resources and Tianqi Lithium). Considers reported data for all operations and is not limited to critical minerals. Right chartshows data for the top ten producers of nickel, lithium and cobalt. All companies with a “net positive impact” or “no net loss”
commitment have also committed to follow the mitigation hierarchy.
Source: IEA analysis based on company sustainability reports and S&P Global.

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Assessing and measuring biodiversity are vital to implement this mitigation
hierarchy. Biodiversity must be assessed across a wide range of measures thatcover not only impacts on an adequate spatial level, but also the different
characteristics of species and habitats, including species richness andabundance, and ecosystem sustainability and resiliency, as well as the key role ofbiodiversity hotspots and endemic species. Baseline and asset-level biodiversity
data are crucial to manage this risk as biodiversity impacts should consider habitat
conditions before operations and are particular to specific locations. Although theimportance of protecting biodiversity and deploying mitigation hierarchies is
becoming more prominent, companies are still lagging in their monitoring andSustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

reporting of biodiversity impacts, and external evaluations of tangible impacts are
hard to find, making it difficult to assess the industry’s performance.
Based on IEA analysis of 20 major mining companies that have a strong presence
in energy transition minerals, many companies report on only a select few
biodiversity metrics. Consistent with the Global Reporting Initiative’s (GRI's)
current reporting standard on biodiversity, these often cover only land
rehabilitation or land disturbed. GRI is currently updating its biodiversity standard
to include additional metrics, but in the meantime, the currently reported metrics,
while useful, do not allow a robust assessment of biodiversity impacts. And even
within these metrics, there is a lack of demonstrable progress. For example, theamount of land rehabilitated by these companies has remained flat since 2018.
When measured in relative terms, the amount of land rehabilitated over this period
per USD of revenue has actually decreased by almost 15%. Notably, many
companies assessed did not report on any biodiversity metric at all and less thanhalf of the companies assessed reported on land impacts. Further, although mostcompanies report across multiple years, baseline data are generally not available,
making it difficult to assess the overall impacts of operations.
The Responsible Mining Index 2022 provides insight into wider company
performance on biodiversity by scoring companies based on whether they meetcertain criteria across two indicators. Specifically, whether they commit to not
explore or mine World Heritage Sites, respect protected areas, and not use
practices that threaten habitats and whether they track, review and act to improve
performance with respect to biodiversity. The average score for companies onboth indicators is less than half the maximum attainable score.
Indicators of company performance for selected top cobalt, copper and nickel companies

5
4Highest score

3
2

Average score

1

Commitment to not explore or mine
protected areas

Tracks, reviews and improves
performance on biodiversity

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IEA. CC BY 4.0.

IEA. CC BY 4.0.
Notes: Aggregated scores based on Responsible Mining Index 2022 for critical mineral producing companies. Moreinformation on scoring framework can be found here. Scores are standardised for a maximum possible score of 5.
Source: IEA analysis based on Responsible Mining Index 2022.

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

Alcoa's jarrah forest initiative in Western Australia: Biodiversity in minerehabilitation
Australia is one of the world’s top bauxite producers, the key source of aluminium,
which is increasingly being used in power grids. Alcoa has been mining bauxite in
the "jarrah forest" since the 1960s, a forest that is renowned for its diverse flora
and is one of the most plant-species-rich forests in the world outside of tropicalrainforests.
The rehabilitation requirements set by the Australia Environmental Protection
Authority have evolved to take account of the new scientific advances over theyears. The company also works with the Department of Biodiversity, Conservation
and Attractions as it progresses forest management and plans to hand backrehabilitated areas. Monitoring is undertaken every year, with a clear objective: torestore a functional jarrah forest ecosystem that matches the pre-mining land uses.
To meet this objective, the company does not engage in mining activities in oldgrowth forests or national parks and mines only areas that have been previously
logged at least once. It has also invested in research and development since the1970s towards this goal. The company transitioned to using entirely native species
in rehabilitation in 1988, aiming to return the same number of plant species as in
the surrounding reference forest. Rehabilitation strategies include salvaging andreusing fresh topsoil, shaping areas to fit within the surrounding topography of theforest and treating the seeds before use to simulate the processes they experiencein the natural environment.
The company first achieved 100% species richness return in 2001, and hasreported that more than 75% of the areas cleared for bauxite mining have beenrehabilitated. Published peer-review research estimates that the company has had
a success rate of approximately 90%. Ongoing research focuses on improving
habitat recovery for all species.

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Despite this, the company has faced pushback that is threatening its social licenceto operate as stakeholders have felt their expectations around the company’senvironmental obligations were not met. This highlights the tension often present
between "completion criteria", which often include site productivity, return of
biodiversity, and long-term ecosystem trajectories and other ecosystems, andways of measuring and reporting, which can greatly impact the assessment ofcompletion.

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

Standards
Standards play a role in driving regulatory goals andenforcement towards improved biodiversity protection
Until recently, the focus on biodiversity in standards systems was relatively limited,meaning that protections for biodiversity stemmed primarily from national laws.
However, while laws to protect biodiversity exist in many countries, they are notuniformly incorporated into mining requirements. Thus, voluntary standards canplay a role in directing attention towards biodiversity protection in resource
extraction, particularly in countries without effective regulatory protections.
The IFC Performance Standard 6 (IFC PS6), widely used in project financing, isbased on the no net loss principle and the mitigation hierarchy to avoid, minimise,rehabilitate, restore and offset as a last resort. The IFC Performance Standards
are adopted by 140 financial institutions in 39 countries through the Equator
Principles, and many mining standards are patterned after them. The IFC PS6
requires borrowers to consider direct, indirect and residual impacts on biodiversity.
The IFC PS6 also requires borrowers to adopt systems and verification practices
if they purchase commodities produced in regions with risk of significant impacts
on natural or critical habitats, as defined in the standard. While initially designed
for the agricultural sector, it is an example of how supply chain mapping andimpact mitigation can be encouraged by a standard.
While all standards prevent their members from operating in legally protectedareas, the IRMA and Copper Mark standards include particularly detailed
commitments, citing the UN Convention on Biological Diversity (UNCBD), theWorld Heritage Convention and the Ramsar Convention on Wetlands. IRMA andthe Copper Mark also provide protections for some areas that are not necessarily
legally designated protected areas. For example, the Copper Mark provides that
KBAs, High Conservation Value Areas and critical habitats could fall under a site’s
management responsibility and must be incorporated into the site’s biodiversity
assessment. Thus, even if domestic law would theoretically permit a development,
voluntary standards might impose additional limits.
A commitment to no net loss is required by the Copper Mark, IRMA and TSM (forlevel AAA rating), while ICMM treats it as an ambition. The provision on net
positive impact or net gain is seen as a step above and beyond “no net loss” andis explicitly mentioned as an ambition under the Copper Mark.

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As with other focus areas, biodiversity commitments should be measurable andverifiable, preconditioned by a baseline study to identify biodiversity values. Thiscan then be coupled with a defined biodiversity scope, impact scope, measurable
goal, upper limits to impacts, appropriate time frame and transparency

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areascommitments. An example of this is IRMA’s requirement to specify objectives withmeasurable outcomes, indicators and timelines, as well as to frequently monitor
these indicators in detail.
Existing standards do not specify the methodology that companies must use,making it difficult to compare results across standards. Some issue-specificstandards are aiming to support common definitions, such as the Business andBiodiversity Offsets Programme’s Standard on Biodiversity Offsets, the Taskforce
on Nature-related Financial Disclosures recommendations for financial
disclosures of mining and metals companies, and guidance on measuringbusiness nature dependencies issued by the UN Environment Programme
Conservation Monitoring Centre.

Existing policies
Mining codes, policies and financial regulations are aiming toaddress biodiversity risks
The IGF Framework recommends that government adopt policies and build
capacity to manage biodiversity and ecosystem services and require mining
entities to identify and manage related risks and impacts, aiming for no net loss
across the mine life cycle through the mitigation hierarchy. It also recommends
that governments require mining operations to avoid legally protected areas, withreference to the UNCBD, the World Heritage Convention and the Ramsar
Convention on Wetlands. Robust biodiversity management systems are needed,
including regular inspections by government-assigned independent reviewers andreport analyses, with enforcement of standards and appropriate sanctions andaccountability mechanisms to ensure compliance. The IGF provides a case studyof Senegal and Türkiye to illustrate these principles.
Along with prohibiting large-scale development in protected areas, many
jurisdictions require biodiversity to be considered in major projects or set limits tonatural resource use and pollution discharge. Some jurisdictions have progressedby covering biodiversity safeguards by an agency-level regulation that details
targets and methodologies to prevent and mitigate adverse impacts. Policy
makers have also turned to zoning mechanisms, permitting, emissions standards,
and disclosures on corporate financing and due diligence.

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In China, the National Biodiversity Strategy and Action Plan has led to several
policies protecting biodiversity, including the National Plan for Major Function
Zones, which designates zones where mining and other industrial activities areeither prohibited or allowed only with certain conservation restrictions, and a fundto improve restoration and environmental protection in mining operations. Morerecently, China enacted a law to protect the Qinghai-Tibet Plateau's environment,

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

which focuses on climate and biodiversity preservation, including measures likegeographical surveys, risk assessments, and the creation of a biodiversity
monitoring network. The law restricts, but does not completely ban, mineral
extraction, especially in river source nature reserves.
Impact assessments are a common tool that often include biodiversity provisions.
Under the EU Environmental Impact Assessment (EIA) Directive, for example,
mining companies need to conduct a biodiversity assessment when their projects
fall under certain conditions. The EIA must identify, describe and assess the direct
and indirect effects of the mining project on human beings, fauna, flora, soil, water,
air, climate, landscape, material assets and cultural heritage. EIAs must include
measures to prevent or mitigate adverse effects and allow public involvement in
consultation processes. The EU Directive on public access to environmental
information, in accordance with the Aarhus convention, guarantees public accessto such information, including project-specific biodiversity studies, thereby making
EIA analysis on biodiversity impacts and discussion of reduction, mitigation andcompensation measures available to the public.
Australia’s Environment Protection and Biodiversity Conservation Act provides
guidance for activities that may adversely affect biodiversity. Any activity that may
significantly affect protected areas should be avoided unless there is approval
from the minister after a special assessment process is taken deeming the project
necessary. Each state oversees its own impact assessment processes. South
Africa also has its own Biodiversity Act, which is further implemented through otherlaws and regulations. The 2013 Mining and Biodiversity Guidelines outline how
the mining sector should address biodiversity issues in the country.
Measures for biodiversity conservation and protection can be applied asconditions to a mine’s permit at all stages, but baselines should be establishedprior to any activity. This can happen during impact assessments. In 2022, theMinistry of Environment in the Philippines published an administrative order toprovide measures on biodiversity conservation in mining operations,mainstreaming all applicable laws into mining projects. It requires, among otherthings: data gathering on critical ecosystems and species to establish baselines,
progressive rehabilitation at every stage of mining operation, full-time personnel
with biodiversity expertise, 5% of the total area set aside as reference ecosystem,and participatory governance from local stakeholders.

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Often, the approach to project risk mitigation is to focus on direct impacts and sitelevel activities, but indirect impacts also need to be considered. This necessitatesa dual approach that involves both companies and state authorities. Companies
are responsible for actions regarding site-level activities and listed in impact
assessments, which includes addressing risks at the project or operation level andimplementing measures to manage these direct impacts. On the other hand,Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

addressing biodiversity risks, which are typically large-scale and require largescale solutions, is the responsibility of state authorities. States need to implement
regional measures, such as avoiding road expansion and habitat fragmentation,
promoting sustainable resource use, limiting extensive forestry, and dealing withcumulative impacts from multiple coinciding developments in areas affected bymining.
Financial due diligence and disclosure regulations are also developing as a trend
to support common definitions for measurement, reporting and verification ofcompany data. In Europe, the 2019 Sustainable Finance Disclosure Regulation(SFDR) harmonised transparency rules for financial market participants. This
includes impact disclosures based on standardised indicators, including
biodiversity indicators, such as the share of investments in companies with
operations located in or near biodiversity-sensitive areas where their activities
negatively affect those areas. In this context, France amended its pioneering 2015
finance industry environmental, social and governance transparency legislation
with Article 29 of the Energy and Climate Law, which mandates all financial
entities, including banks and insurers, to report not only climate but also
biodiversity-related risks. Disclosures require a “double materiality” approach,necessitating disclosures on how financial activities affect and are affected bythese risks. Additionally, they must outline their strategies for reducing biodiversity
impacts, setting specific targets in line with international biodiversity goals.
To compensate for inevitable biodiversity loss, offsets are available in somejurisdictions (Australian state-level governments such as New South Wales haveoffset schemes based on the federal Biodiversity Conservation Act). However,critics have raised concerns that in general, biodiversity offsets imply thatbiodiversity is interchangeable and substitutable. On a practical level, offsets often
encounter logistical and contractual challenges in implementation, such asdifficulties in acquiring land for habitat-based offsets and offset permanence.
These issues, compounded in some jurisdictions by weak compliance, regulatory
enforcement, governance inconsistencies and lack of local community input haveresulted in implementation failures, such as in Madagascar and internationally.

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International co-operation in this area has ramped up over the last few years,
which explains the amount of focus on it today. This includes the Finance for
Biodiversity Pledge launched in the run-up to COP15 of the UNCBD in 2021, whichcalls for the protection and restoration of biodiversity through finance activities andinvestments. Also, Target 15 of the Kunming-Montreal Global Biodiversity
Framework provides that parties of the Convention on Biological Diversity are to
take legal measures to encourage large companies to progressively reduce
negative impacts on biodiversity by monitoring, assessing and disclosing risks andimpacts.

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areasEnsuring robust regulatory regimes. Assess and review the adequacy of
existing regulations related to biodiversity protection and whether these haveeffective safeguards and targets for conservation, preservation and reductionof impacts on ecosystems. Update mining codes, permitting requirements anddue diligence regulations to integrate elements of biodiversity protection.
These regulations may encompass monitoring, reporting and verification
requirements as well as active participation of local communities andIndigenous Peoples. Adequate resources should be directed at enforcement
and compliance.

Directed public spending. Embed robust and validated assessments of
biodiversity and risk-based mitigation hierarchy as conditions to public
procurement contracts or investment arrangements, ensuring that theseinclude clear targets for biodiversity at all stages of mining operations. Invest
in research and development focused on reducing the ecological footprint frommining.



Tracking and monitoring performance. Integrate and support common
definitions and methodologies for measuring and monitoring site-level data of
biodiversity performance. Technical assistance may be provided to relevant
stakeholders, including local communities that participate in data collection andmonitoring.



Making supply chains more transparent. Introduce regulations or guidelinesthat encourage or mandate companies to incorporate biodiversity risks into due
diligence systems as well as require public disclosure of biodiversity data
related to their mining activities. Particular emphasis should be placed onminerals and processes that have a significant impact on biodiversity.



Support for voluntary sustainability standards. Promote adoption of
credible voluntary sustainability standards that incorporate clear performance
metrics for biodiversity conservation and responsible ecosystem management.
Companies should also be incentivised to go above and beyond minimum
requirements instituted by law and existing standards.

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Recommendations

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

4. Human rights
Nature of risk
Critical minerals extraction and processing pose serious risks
to human rights
The mining industry has historically been associated with adverse human rights
impacts at many stages along the mineral value chain. Human rights violations thatare commonly associated with the mining industry include labour violations, such as
child labour or forced and compulsory labour, which are notably prevalent in artisanaland small-scale mining; failure to respect land rights and Indigenous Peoples’ rights
to land, use of natural resources and self-determination; violations of the right tohealth, with some cases of torture, or cruel, inhuman and degrading treatment orsexual violence perpetrated by security forces of the state or private companies; andthreats or attacks against human rights defenders. The right to a clean, healthy andsustainable environment is also an emerging trend in mining industry litigation. The
mining industry is particularly at risk for human rights violations as often operations
are located in regions marked by political instability, economic disparities, conflict andweak governance. Since the OECD Guidelines for Multinational Enterprises werereleased, more human rights complaints have been filed against companies in themining and manufacturing sectors than any other sectors.
The urgency of the energy transition may lead to pressure to circumvent humanrights standards for critical minerals projects, which may weaken protections thatprevent human rights violations. Although the mining industry gives rise to risks ofviolations of many different human rights, this section focuses specifically on
forced labour and child labour rights as others that are most prominent given
documented cases and regulatory requirements are covered in other sections.

Supply security
Human rights violations can disrupt operations and preventnew projects from coming online

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Mining companies are bound by domestic laws and policies that can help define what
human rights are. In the case of multinational mining companies, they can also bebound by laws in their countries of registration, which may differ in either complexity
or stringency. Not respecting the rule of law in relevant jurisdictions can lead to
shutdowns, the denial of permits or licences, or litigation, all of which can be
costly and reputationally damaging. Companies are also increasingly facing supply
chain due diligence requirements from downstream suppliers, which may limit market
access if the company is unable to demonstrate that they follow human rights norms.

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

There is also a material risk to supply if a lack of respect for human rights leads toharm to workers, accidents or mine failures, which can interrupt supply ofminerals. Failing to provide proper equipment, training on safe procedures, or
adequate working conditions can also lead to stop-work orders or mine closures.
Minerals projects can also risk losing the social licence to operate over humanrights allegations or violations. Strikes, protests, demonstrations and blockades
can result in shutdowns and reputational costs that may impact ability to obtain apermit. Litigation processes or protests against allegations or violations could leadto forced closures of mines. Further downstream, consumers may not buy theend-use products if there are human rights allegations in the supply chain,putting clean energy transitions at risk.
Human rights allegations or violations can also lead to reputational damage that
can impact investment decisions, resulting in exclusion from investment funds
and investor deterrence and withdrawal from projects. The risk is present not only
in upstream mining operations, but also for midstream processes.
As the world increasingly develops critical minerals reserves and resources
needed for the clean energy transition, these ways that human rights risks candisrupt critical minerals supplies will be particularly relevant as much of the world’s
reserves and resources of critical minerals are in countries that lack robust
protections for human rights, or the means to enforce them.
Civil liberties and rule of law index for global critical mineral reserves and resources

Global reserves and resources

100%
75%
50%
25%
0%

Lithium

CobaltCivil liberties andrule of law index:

Low

CopperNickelGraphiteHighNodata dummy

Mn

REE

data
ChartNoelement
IEA. CC BY 4.0.

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Notes: Mn = manganese; REE = rare earth elements. Data are from the V-Dem Dataset, and averages their civil liberties
index, physical violence index, political civil liberties index, private civil liberties index, rule of law index, and access tojustice index.
Sources: IEA analysis based on V-Dem data and Owen, Lebre & Kemp (2022), Energy Transition Minerals (ETMs): A
Global Dataset of Projects.

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

Child labour in the Democratic Republic of Congo’s informal mining sector
Human rights abuses may be present in both artisanal and small-scale mining(ASM) and large-scale mining. Cobalt is currently primarily supplied by the
Democratic Republic of Congo (DRC), with the ASM sector making up a significant
share of supply. While ASM production and its share of supply varies, it fulfils an
important role in promoting smooth market functioning: ASM sites take much lesstime to begin production compared with their industrial counterparts, they help
traders and producers top up during a shortage or sell off when their other sourcesof supply are in overcapacity, and they help balance supply and demand between
cobalt and copper as swing producers, with artisanal miners switching between
the two co-located commodities based on international prices.
However, while the Democratic Republic of Congo has made strides in integrating
due diligence into its legal framework, gaps and ambiguities in the Mining Coderegarding co-operation between ASM and industrial producers have left the sector
largely informal, allowing the use of child labour, hazardous and abusive working
conditions, and forced labour to persist at many sites. In particular, those working
in ASM are highly susceptible to hazardous working conditions due to weak or
unenforced regulatory protections. Workers in underground shafts haul heavyloads and handle toxic chemicals, but protective equipment is not usually available
at mine sites. Although there is no reliable data on the prevalence of child labour,
surveys have found children present at 30% of visited ASM sites in the Democratic
Republic of Congo. While this does not necessarily indicate a human rights
violation, it may signify a cause for concern. The worst forms of child labour
generally persist in ASM activities that occur outside the legal structure and arelinked to poverty as a primary driver.
After one instance of children employed at a mine dying due to a tunnel or wallcollapse in 2019, an international human rights group filed a lawsuit against
technology companies for sourcing cobalt from the mine.* While the court
dismissed the case, the defendants and associated companies incurred
reputational damage from publications that made allegations regarding sourcing
cobalt from child labour. The companies issued public statements to defend
themselves after several news articles reported the suit. While not defendants,
other mining companies mentioned in the complaint also responded to preserve
their reputation, either by issuing public statements describing measures they aretaking to address child labour concerns or suspending the purchase of artisanal
cobalt from DRC mines until industry standards are met.

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However, disengaging entirely from ASM as a strategy does not constituteresponsible sourcing and may exacerbate the causes of child labour. To varying
extents, ASM offers socio-economic advantages; losing these may heighten thelocal community’s vulnerability to other forms of exploitation. Formalisation of thesector could mitigate the worst forms of child labour, but this has its own

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

unintended consequences as well. Addressing poverty at its core is essential for alasting solution. This requires ongoing collaboration across actors and sustained
community engagement.
*Under the US Trafficking Victims Protection Reauthorization Act, plaintiffs claimed that technology companies knowingly
benefited from and participated in the trafficking and dangerous working conditions at the mines, which led to thechildren’s deaths or injuries.

Industry performance
There is an increasing number of human rights allegations in
the mining industry
The mining industry can adopt various practices to mitigate human rights risks.
These include implementing internal human rights policies that follow the United
Nations Guiding Principles on Business and Human Rights and creating internal
processes that enable the implementation of these policies, implementing due
diligence processes, and having robust internal grievance mechanisms.
Although many companies implement these practices, there remain individual
examples of substantiated human rights violations by the mining industry. Evenso, an overall picture of the prevalence of human rights violations is difficult toascertain. This can be exacerbated by the lack of access to full and fair justice by
those groups who are facing the human rights violations and by threats andattacks directed at human rights defenders seeking to draw public attention to theissue.

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Data on human rights allegations in mining operations collected by the Business& Human Rights Resource Centre provides some external information on trends,
although it has some limitations – reports are not independently verified, and thestatus of claims following the initial public report is not tracked. Overall, tracked
companies have seen a steady number of allegations in recent years, mainly foralleged violations of local communities’ rights, attacks on civil society
organisations and environmental impacts. There are also an increasing number ofcompanies that are facing allegations, with many companies having more than
one project with an allegation and facing allegations that fall under multiple
categories.

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

Number of allegiations

Number and type of human rights allegations against mining companies, 2015-2022

240

40

180

30

120

20

Security issues andconflict zones
Governance andtransparency
Environmental
impacts
Impacts on workers

60

10

0

0

2015 2016 2017 2018 2019 2020 2021 2022

Impacts on civilsociety
Number ofcompanies (right)
IEA. CC BY 4.0.

Notes: The data cover only reported allegations against companies operating globally significant producing mines of cobalt,
copper, lithium, manganese, nickel and zinc. All allegations are publicly reported, specific incidents including attacks
against human rights defenders or legal/regulatory action against companies. Allegations are not independently verified.
Each allegation can be related to multiple categories.
Sources: IEA analysis using data from Business & Human Rights Resource Centre (2023), Transition Minerals Tracker.

Looking at critical minerals supply chains specifically, approximately 40% of
current global production of cobalt, lithium and copper comes from a mining projectwith at least one human rights allegation in 2022. Many of these are in the top
20 producing projects worldwide. This is partly due to the concentration of
production among a few projects and companies and in a few countries andregions – particularly for cobalt and lithium – but indicates that the world’s mostdominant sources of production are implicated in this risk.
Assessing company performance from self-reporting is also difficult, as many
companies report very little information on human rights or none at all. Of the 20
major mining companies prominent in critical mineral production that the IEA
assessed, 7 ten mention specific strategies for integrating human rights due
diligence practices into their business practices and operations, which vary fromutilising internationally agreed upon frameworks such as OECD Guidance to aninternal human rights strategy. Of those that mention due diligence practices, only
five report on specific quantifiable metrics to assess due diligence practices, suchas number of due diligence checks or screening by third parties. This is despite
17 out of the 20 companies having a human rights policy for their business.

The initial assessment was carried out for the Critical Minerals Market Review 2023.

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7

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

Standards
Standards offer a practical approach to addressing humanrights risks, complementing more robust legal rights
frameworks
The standards assessed universally incorporate human rights provisions, drawing
from established normative frameworks such as the UN Guiding Principles on
Business and Human Rights (UNGPs) and the OECD Minerals Guidance.
However, these provisions vary greatly in specificity and stringency, underscoring
the unequal emphasis placed on different aspects of human rights within thesestandards. For example, the Copper Mark requires that the company havepolicies, procedures and practices in place in compliance with the UNGP, while
IRMA provides specific details on how policy should be formulated and issued(e.g. approved by senior management and informed by relevant expertise).
Some initiatives have developed guidance notes to encourage more stringent
policies, although these are not always binding. ICMM’s Human Rights Due
Diligence Guidance, for example, describes different levels of maturity for humanrights due diligence programmes and details best practices for companies. The
Copper Mark’s Policy on Human Rights and the Environment, revised in April
2023, outlines a procedure for instances where a company is suspected of being
linked to adverse human rights impacts. Upon receiving relevant information, theCopper Mark conducts a fact-finding process through external sources or thirdparty assessments and will work with the company to respond to the situation.
Failure of the company to meet the criteria can lead to the suspension or removalof the Copper Mark.
The prevailing standards also have different approaches to substantive
prohibitions on specific human rights abuses. IRMA and the Copper Mark include
more comprehensive provisions that prohibit exploitative working conditions andworkplace discrimination, while respecting freedom of association among its
members. For example, the Copper Mark details commitments in separate criteria
on prohibiting child labour and forced labour. It includes a specific section on ASM,
as well as references to relevant International Labour Organization Conventions
and the UNGPs. Other standards rely on high-level principles such as the UNGPs
and otherwise focus primarily on procedural elements such as due diligencepractices or implementation of management systems. Given the unequal depth ofhuman rights provisions across standards systems, policy makers should carefully
assess whether a given standard aligns with domestic policies when considering
how compliance with the standard implicates supply risk.

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Finally, all standards oblige companies to create site-level grievance mechanisms
in line with UNGPs, which call for operational-level grievance mechanisms that

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

can identify human rights impacts and provide solutions to remediate those
impacted. Besides being legitimate, accessible, predictable, equitable,transparent, rights-compatible and a source of continuous learning, these should
also be based on engagement and dialogue. The IFC provides guidelines forestablishing site-level grievance mechanisms, which form the foundation for theguidelines of TSM, ICMM and IRMA. These also include provisions on ensuringthat the mechanism is designed through engagement with stakeholders. In
addition to requirements to establish operational-level grievance mechanisms, theCopper Mark and IRMA have both established mechanisms to hear complaints atthe corporate level as well.

Existing policies
The increasing prevalence of due diligence regulations will put
additional pressure on companies
The IGF Framework addresses human rights in several ways. It recommends thatmining policies, codes, agreements and standards respect international humanrights agreements and normative language on human rights. It advises thatlegislation ensure that mining entities respect workers’ rights, prohibit forced andchild labour, and ensure the rights, health and safety of miners and the community.
On ASM, the framework emphasises improving health and safety standards,
providing education, and enforcing laws prohibiting forced and child labour. To
concretise these rights, the framework advises governments to require mining
entities to set up a free and retribution-free grievance mechanism that offers
prompt and effective resolution, is culturally sensitive, and supports confidential
and protected complaints, including those related to gender-based violence.

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A number of countries have adopted legislation in recent years targeting humanrights in supply chains that apply to the minerals sector along with other sectors.
For example, the European Union’s recently enacted Corporate Sustainability
Reporting Directive includes human rights impacts reporting measures, while theGeneralised Scheme of Preferences framework provides for preferential tradetreatment to be withdrawn in instances of serious or systematic violations ofhuman rights. Germany’s Supply Chain Due Diligence Act of 2021 and France’s
Law No. 2017-399 on the duty of care of parent companies and ordering
companies and Canada’s Fighting Against Forced Labour and Child Labour in
Supply Chains Act are other examples of due diligence reporting that requirecompanies to identify risks of human rights violations and implement preventive
measures. These laws apply to various products and are likely to pressure mining
companies, as end-use companies are increasingly scrutinising their mineral
supply chains in response.

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

Other laws have more specific implications for critical mineral companies. Specificto batteries, human rights due diligence requirements in the EU Batteries
Regulation require operators to establish and publish due diligence policies forcobalt, graphite, lithium, nickel and related compounds that must align with OECD
Due Diligence Guidelines and the UNGPs. The United States Uyghur Forced
Labor Prevention Act establishes a rebuttable presumption that goods partially or
wholly produced in the Xinjiang Uyghur Autonomous Region of China areproduced with forced labour and therefore banned for importation. Recognisingthat forced labour is prevalent in this specific area, companies must undertake
measures to trace the origin of goods that may originate in Xinjiang in order todemonstrate compliance, which may have particular relevance for lithiumproducers.
The National Action Plans (NAPs) under the UNGPs provide guidance on whatcountries are doing to streamline human rights in business regulations. For
example, the Viet Nam NAP published in July 2023 includes specific timelines for
integrating business and human rights principles into its laws. The government
aims to incorporate responsible bidding requirements into its Law on Procurement
by 2024. The government also aims to review and propose amendments topromote and protect labour rights and the rights of vulnerable groups compatible
with international legal standards by 2025. Regarding grievance mechanisms
under the UNGP, Chile’s NAP makes the Ministry of Energy responsible forpromoting the development of mechanisms to resolve disputes between
companies and communities for energy-related projects.

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Furthermore, countries have created specialised rules for ASM to formalise andoversee these operations and have introduced supply chain diligence to enhanceminers’ livelihoods and foster ethical mining supply chains. Peru has madesignificant strides in implementing due diligence standards, aligning with OECD
recommendations. In the context of formal mining, positive advancements fromdue diligence mechanisms have been observed in land transaction negotiations
and environmental impact management and social conflict prevention. Also,
Colombia’s proposal for a new National Mining Policy released in June 2023
introduces six guiding approaches to reorientate the mining industry. On humanrights, the proposal aims to introduce due diligence instruments.

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areasEnsuring robust regulatory regimes. Review and update regulatory
frameworks to ensure human rights protections in the mining sector are
adequately robust, particularly aligning with the UNGPs and OECD Guidelines.
For example, legal provisions can ensure that child labour and forced labourare prohibited at the mine site and ensure that human rights defenders areadequately protected. Sufficient resources should also be directed at
enforcement and compliance.

Directed public spending. Include elements of human rights-related
conditions in public procurement contracts, such as a prohibition on theemployment of child labour, forced labour and modern slavery, exploitative
working conditions, discrimination in the workplace and respecting labour rights(e.g. freedom of association). Provide targeted support for technical assistanceand capacity building to developing and emerging economies.

Tracking and monitoring performance. Support the monitoring andcollection of aggregated data from mine sites with thorough methodological
guidelines on measurement of relevant human rights performance data andindicators.



Making supply chains more transparent. Improve transparency across the
supply chain through regulations or guidance that encourage or requirecompanies to embed human rights risks in due diligence systems for all
minerals supply chains.

Support for voluntary sustainability standards. Support credible voluntarysustainability standards that incorporate best practices human rights protection
and monitoring along the supply chain based on robust due diligence andestablishing of site-level grievance mechanisms for reporting violations.

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Recommendations

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

5. Communities
Nature of risk
Local communities and Indigenous Peoples are directly
impacted by mining projects
Mining projects often bring a host of changes to local land use, the local
environment and the local economy, which can cause both negative and positive
impacts to communities. These impacts affect nearby towns, villages,
communities and Indigenous Peoples, as well as workers. They can include
changes and impacts on the local environment through land changes,
displacement, lack of respect for consent rights, water resource use, water and air
pollution, and deforestation, which can cause adverse health effects. Mining canalso bring with it changes in the population and economic structure of areas.
Critical mineral resources are highly correlated with being on or near Indigenous
land. Although some of the same impacts may affect both Indigenous andnon-Indigenous Peoples, the latter have a particular relationship with the land andits resources and they can hold different rights than other types of community; theyshould be treated as distinct groups when companies or governments are creating
engagement plans. The free, prior and informed consent (FPIC) process as
defined under the United Nations Declaration on the Rights of Indigenous Peoples(UNDRIP) is legally required in some contexts, and even where it is not, it should
be used as best practice for engagement with Indigenous Peoples.
As demand for critical minerals continues to grow, active and meaningful
engagement with groups who have traditionally used the land where theseminerals lie will be crucial to ensure they are able to raise their concerns and havetheir voice be taken into account in the decision-making process.

Supply security
Failing to obtain and maintain a social licence to operate canprevent projects from coming online and lead to shutdowns anddisruptions

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Indigenous Peoples and local communities have legitimate concerns over the
potential impacts of a facility. If their concerns are not properly addressed and if
the benefits of the project are not distributed equitably and fairly, these groups
may oppose operating mines or the development of new mines. The lack of asocial licence to operate can disrupt supply or block the development of newSustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

supply if local opposition evolves into blocking or revocation of licences,referendums, litigation, protests, or blockades from local communities.
A lack of buy-in from local communities or Indigenous Peoples or unclear
regulatory and legal obligations around consultations can also cause reputational
damage that impacts investment decisions for companies and regions. Thiscan adversely impact further investments in the region or lead to withdrawal of
exploration requests over concerns about the risk.
Governments have an important role to play in ensuring communities are respected
and that mining companies follow international standards. In many jurisdictions, local
communities have a right to be consulted on individual projects, while others haveincorporated the FPIC process into domestic legislation for Indigenous Peoples
impacted by development projects. Supply disruptions can arise if companies do notfollow the legal requirements to properly consult with communities, such as throughthe cancelling of mining licences. Failure to obtain FPIC from Indigenous Peoples
where legitimately expected can also lead to denied licences, the revocation of
permits or government-ordered shutdowns. Furthermore, following FPIC
principles as best practice for engagement is an emerging industry expectation, evenin the absence of domestic legal requirements. Disruptions can happen whencompanies fail to understand and address the needs of affected groups, both inmitigating the negative impacts of mining and in providing secondary benefits for local
communities and Indigenous Peoples. This will be particularly significant as the world
develops future supply, as the minerals critical for the clean energy transition are often
located on or near Indigenous land.

Share of reserves and resources

Share of global reserves and resources of selected critical minerals that are on or near
Indigenous land

100%
75%
50%
25%
0%

Lithium

CobaltCopperNickelOn or near Indigenous land

Graphite

Mn

REE

Not on or near Indigenous land

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IEA. CC BY 4.0.

IEA. CC BY 4.0.
Notes: “On or near” is defined as within 10 km of geographical areas where Indigenous, tribal groupings or strong claims tocustomary tenure have been recognised as supported by state instruments using the definition in Garnett et al. (2018),
A spatial overview of the global importance of Indigenous lands for conservation.
Sources: IEA analysis based on public data compiled by Owen, Lebre and Kemp (2022), Energy Transition Minerals(ETMs): A Global Dataset of Projects.

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

Local opposition to rare earths mine in Greenland
One of the world’s largest known deposits of rare earth elements is located on thesouthern tip of Greenland at Kvanefjeld (or Kuannersuit). The Kvanefjeld deposit
is located 7 km from the nearest town, Narsaq, which is home to just above
1 300 inhabitants. Exploitation at the site has been controversial for years, partly
due to the presence of uranium. In 2013, the civil organisation Urani Naamik wasborn out of residents’ concerns about the health and environmental consequencesthat the operation could cause to their community. Risks include the spread ofradioactive dust through wind erosion and leakages of potentially radioactive
tailings into water sources as a result of mining. Concerns were heightened byfears that developing the mine would threaten the traditional Indigenous Inuit
lifestyle that dominates the town, and the precedent it might set for other areas,
given that 89% of the Greenlandic population are recognised as Indigenous Inuits.
As the project sponsors initiated procedures to pursue exploitation, local
opponents expressed that the consultations did not provide adequate time formeaningful consultation, while environmental organisations criticised the project’s
environmental impact assessment as insufficient and inaccurate. The Office of theUnited Nations High Commissioner for Human Rights requested that the sponsor
explain what steps it had taken to seek free, prior and informed consent from the
Indigenous Inuit Peoples.
The controversy over the mine contributed to the collapse of the sitting Greenlandic
government in 2021, which was followed by snap elections where the Kvanefjeld
mine dominated the discussion. The party opposed to the mine won a majority inthe election and the new government passed a law effectively stopping the projectfrom moving forward.

Industry performance
The mining industry is increasingly recognising the importanceof effective engagement with communities and Indigenous
Peoples in order to operate

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There are different ways that companies along the critical minerals value chain
can mitigate the impacts of mining on communities and Indigenous Peoples, whileproviding for potential local value-addition as well. These include meaningfully
engaging with communities from the inception of a project, supporting local job
creation with respect to developing and operating the project, investing in thecommunity in whatever capacity is most beneficial to them, providing support for
local development and opportunities, and setting up co-equity ownership,co-management of operations, and benefit-sharing agreements, among others.

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

By assessing whether and how companies are performing these actions, it ispossible to evaluate how the mining industry is performing with respect tocommunities and Indigenous Peoples. International references such as those thein the United Nations Declaration on the Rights of Indigenous Peoples and theInternational Labour Organization Indigenous and Tribal Peoples Convention,
1989 (ILO 169) provide guidance for practices in this area.
According to IEA analysis of 20 major mining companies prominent in energy
transition minerals, companies have been increasing the monetary benefits
provided to communities. From 2018 to 2021, there was a 62% increase in dollars
invested in communities, and companies invested almost four times more
per million USD in revenue. Few companies report data for many consequent
years, meaning that tracking progress over a longer period of time is more difficult.

Million USD

Community investment reported by 20 major mining companies

Community investment

0.5%

100%

1 600

0.4%

75%

1 200

0.3%

800

0.2%

400

0.1%

2 000

2018 2019 2020 2021

0.0%

Number of companies reporting

50%
25%
0%

2018

2019

2020

2021

Community investment (left axis)
Ratio of community investment to revenue
IEA. CC BY 4.0.
Notes: Left chart shows aggregated data for those companies among the 20 major companies IEA assessed that reported
on community investment (Albemarle, Anglo American, BHP, First Quantum Minerals, Freeport-McMoRan, Glencore,
Mineral Resources, Norilsk Nickel, Rio Tinto, Teck Resources and Tianqi Lithium). Right chart also considers CMOC,
Ganfeng Lithium and SQM. Considers reported data for all operations and is not limited to critical minerals.
Sources: IEA (2023) Critical Minerals Market Review 2023 based on company annual reports and S&P Global.

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The Responsible Mining Index 2022 provides some insight into how the criticalmineral mining industry is performing across a wider set of measures. Taking as
an example the world’s top cobalt, copper and nickel companies, few perform wellon indicators covering Indigenous Peoples’ rights, economic community
development, consultation with communities, evaluation and mitigation of impacts,
and community rights. The average score for assessed companies is less thanhalf of the maximum possible score across all relevant measures.

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

Within these aggregated categories, companies are performing particularly poorly
on disclosing the impacts of operations on women, youth and children, at
implementing systems for examining and addressing how climate change canexacerbate the impact of operations on communities and workers, and working toensure livelihoods are improved or restored following any involuntary
resettlement. However, the best-performing companies have achieved a scorenear or at the maximum, indicating that better performance is possible.
Average and maximum score achieved on community and Indigenous Peoples
performance indicators for selected copper, cobalt and nickel companies

Score out of 5

5
4
3
2
1
0
Indigenous
rightsLocaldevelopment

Average score

Community
consultation

Inform andreduce impacts

Community
rightsMaximum score achieved
IEA. CC BY 4.0.

Notes: Aggregated categories and scores based on Responsible Mining Index 2022 for critical mineral producing
companies. More information on scoring framework can be found here. Scores are standardised for a maximum possible
score of 5 across all categories.
Source: IEA analysis based on Responsible Mining Index 2022.

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There has also been a shifting recognition of the separate and important distinction
between community and Indigenous Peoples engagement and consultation.
Using MAC’s data on member companies’ adherence to TSM as a snapshot ofprogress, Indigenous Peoples engagement was added as a separate category in
2021. As a sample of industry performance, it seems that industry is making
strides towards recognising these issues and that some companies are making
positive progress towards community and Indigenous Peoples engagement,
though it is important to note that this covers only the Canadian context. A recent
report from Oxfam that looked at battery minerals also concluded that
improvements are needed, indicating that few companies adopt strong free, priorand informed consent policies that unequivocally prevent them from proceedingwith a project if Indigenous Peoples withhold consent.

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

Self-assessed performance in engagement with communities and Indigenous Peoples
by Mining Association of Canada companies by Towards Sustainable Mining grade
Share of facilities

100%
75%
50%
25%
0%

2019 2022
Community
identification

2019 2022
Community
responsemechanismAAA2019 2022
Effective
community
engagement
AA

A

B

2021 2022
Effective
Indigenous
engagement

2021 2022
Community
impactmanagement

C
IEA. CC BY 4.0.

Notes: The above chart is an excerpt of TSM data, covering the Indigenous Peoples and community self-reporting from2019 to 2022. The last two indicators were added after 2021, therefore there are no data for 2019. Each company is given
a rating from C to AAA by criteria, ranging from not compliant to excelling against the TSM standard.
Source: IEA analysis based on Mining Association of Canada data.

Standards
Standards requiring ongoing community engagement foster
local ownership and contribute to the legitimacy of a mining
project
Community engagement provisions in standards systems are somewhat mixed interms of comprehensiveness and stringency. Most standard requirements focus
primarily on process and planning. For example, the TSM protocol expects
companies to identify communities of interest, develop engagement processes
with input from these communities and periodically review those processes.
Essentially all standards require companies to develop engagement plans in one
form or another and to establish grievance mechanisms, albeit with differing levelsof detail.

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Several substantive commitments are unique to certain standards. IRMA’s levelof detail regarding community engagement is notable. In addition to requiring thatengagement processes be accessible, IRMA requires companies to demonstrateefforts to ensure inclusivity for women and vulnerable groups. IRMA also requires
companies to assist communities in assessing their capacity to engage in
consultations and to offer assistance where appropriate. The Copper Markuniquely includes public disclosure of risks, planned actions, progress and results

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

related to affected stakeholders and Indigenous Peoples’ rights as corerequirements. TSM requires that communications to the public be published in thelocal language if requested and that materials be clear, understandable andaccessible.
For Indigenous Peoples, many standards set FPIC as an aspiration or an aim. As
the most stringent, IRMA requires obtaining unequivocal consent from Indigenous
Peoples, including both for new mines and for changes at existing mines that may
result in new or increased impacts. The Copper Mark requires its members to
respect Indigenous Peoples’ rights including FPIC and hold a separate
engagement process where relevant. The ICMM and TSM include commitments
on FPIC, stopping short of an express requirement, but set expectations for whatcompanies should do to ensure meaningful ongoing engagement. Particular to
TSM, it requires members to establish a collaborative decision-making process toacknowledge Indigenous Peoples' right to define their own FPIC process.

Existing policies
Countries are increasingly requiring companies to consult with
communities and seek consent from Indigenous Peoples
The IGF Framework recognises the need for consultation and engagement in boththe permitting and licensing process and in designing socio-economic benefits,with special attention to Indigenous Peoples. It advises governments to require
mining entities to consult with affected communities in preparing the permit
application and in each stage of the mining cycle, providing an opportunity for themto express concerns about project risks, impacts and mitigation measures as wellas on the socio-economic implications of the project. It also advises mining entities
to establish grievance mechanisms and provide fair compensation for those
displaced by mining. Results of the consultation process should be accessible tocommunities. To respect Indigenous Peoples’ rights and perspectives, their free,prior and informed consent should be obtained when applicable and outcomes of
the FPIC process should be captured in community agreements.

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International law as embodied in the UNDRIP and ILO 169 recognises thatIndigenous Peoples have the right to give or withhold FPIC concerning decisions
that may affect them such as resource extraction. Consequently, many countries
have incorporated FPIC into their national legislation, with some enacting laws
specifically empowering Indigenous Peoples to stop or suspend projects. For
example, the Philippine Mining Act includes the right to stop or suspend a project
because of Indigenous Peoples’ opposition. Similarly, Sierra Leone has recently
integrated FPIC in its national mining legislation, allowing local communities toveto any project affecting them. Canada’s Critical Minerals Strategy lays out the
government’s strategy for supporting Indigenous Peoples’ engagement, which

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

includes a commitment to uphold the duty to consult, with the aim of securing FPIC
from Indigenous Peoples. The country is also developing a National Benefits
Sharing Framework to help ensure Indigenous Peoples directly benefit from major
resource projects in their territories. Several countries in Latin America andsouthern Africa also have policies in place to safeguard community consent.
Proposed updates to Finland’s mining code include a greater focus on the rightsof the Sámi people. The amendments would require that protection and respect
for the Sámi people and culture are taken into consideration more effectively
during permit examination. For example, the mining authority would be obligatedto investigate the consequences of mining activities to the rights of the Sámi as
indigenous people if they have considerable significance on their rights – evenwhen activities are outside the Sámi’s home area. The mining authority would thenbe required to consider measures needed to reduce and prevent adverse impacts.
Moreover, community development is required by mining laws of several
countries. The Philippine Mining Act is one of the more specific laws and requiresthat where an agreement is entered into with a community or with artisanal miners,
royalties must be paid into a trust fund for their socio-economic well-being. The
implementing rules require the creation of a five-year social development andmanagement programme in consultation with the local communities. In Mongolia,
the Mineral Law requires licence holders to establish Local Co-operation
Agreements (LCAs) with heads of local administrative units. The purpose of LCAs
is to outline the contributions made by companies to the well-being of residents inspecific regions, focusing on aspects such as environmental protection, local
content, infrastructure investments and job creation. Similar provisions are foundin Sierra Leone and Peru.



Ensuring robust regulatory regimes. Implement regulatory regimes that
require identifying, engaging with and including local communities andIndigenous Peoples in land-use planning and the development of minerals
activities based on FPIC principles as applicable. Regulations should also
include best practice engagement and consultation provisions for changes toexisting operations that may lead to new or increased impacts.



Directed public spending. Tie public funding or procurement policy tocommunity engagement and consultation, impact mitigation, benefits sharing,
investments in mining communities, and targeted strategies that addresscommunity concerns. Benefits sharing could be either directly from thecompany, e.g. royalty-sharing schemes, through indirect means such as local
sourcing, skills development and training, mine closure plans, or community

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Recommendations

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

infrastructure improvement or through the allocation of centrally collected taxes
or royalties to social and economic infrastructure in producing areas.
Tracking and monitoring performance. Support the monitoring and reportingof site-level data on relevant indicators of company performance regarding
community engagement and, working with Indigenous Peoples, whether andhow FPIC is obtained.



Making supply chains more transparent. Improve transparency across the
supply chain through regulations or guidance that encourage or requirecompanies to embed community engagement and Indigenous Peoples’ rights
in due diligence systems, in line with relevant OECD guidance. Encourage or
require publication of community benefits sharing agreements and consultation
or FPIC processes.



Support for voluntary sustainability standards. In reviewing voluntarysustainability standards, ensure compliance with national and local
requirements on local community consultation and consent from Indigenous
Peoples. Support credible local community and Indigenous Peoples-led
consultation schemes, taking account of special rights and status, and thosethat use FPIC as best practice for engagement.

6. Corruption
Nature of risk
The critical minerals industry is vulnerable to corruption risks atevery stage of the supply chain
Corruption is often defined as the abuse of entrusted power for private gain.
Corruption in the mineral supply chain can come in many forms, including bribery,
misappropriation of funds, embezzlement and fraud. It can also come at many
stages, such as selecting and awarding contacts or extraction licences, whennegotiating contracts (whether between companies and the state or between
companies and suppliers), when obtaining consent or compensation for affected
communities, in the negotiation of commodity trading deals, during the course ofoperations, and paying taxes and fees. Corruption risks are also present forrefining, processing and recycling.

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The mining stage of the supply chain is particularly at risk for corruption as it is astate-involved industry with high levels of investment, wealth generation andeconomic rents. Corruption can occur across multiple pressure points, including
government, firms and in global transactions. The government often owns either
the land from which minerals are extracted or the mineral resources themselves

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areasand can be heavily involved in regulating and overseeing the mining sector
through the granting of licences and approvals for exploration, development,
construction and operation, and collection of royalties. Firms and traders can use
corruption to get access to resources and maximise their profit.
The rapid development of critical minerals required for the clean energy transition
and the potentially large economic gains to be realised in this push makes thesector especially liable for corruption risk. This is especially true given that large
amounts of these minerals are in countries with high levels of corruption, but evenadvanced economies are not immune to corruption allegations. An extensive
literature has found strong links between natural resource wealth and corruption,
including Lashitew and Werker 2020, Ross 2015, Bhattacharyya and Hodler 2010,
and Sachs and Warner 2001, suggesting that as demand for critical minerals
grows in the coming years, the incentives for corruption will increase accordingly.

Supply security
Instances of corruption may cause delays, discourage
investment and erode public support for mining projects
In addition to diverting resources from investments in infrastructure, health,education and other public needs, corruption can have major impacts on supply
availability. High-level allegations of corruption can lead to protracted delays indeveloping new mine projects. National officials may place a hold on existing
licences to investigate allegations, or otherwise seek to revise or revisit licenceterms. Smaller incidents may lead to more time-limited shutdowns or delays inoperations, such as when officials demand “grease payments” to obtain necessary
approvals or permits.

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Perceptions of corruption risk may make certain locations less attractive forinvestment, which can limit opportunities for diversification. If investors decide toexit high-risk jurisdictions altogether, this can reinforce market concentration.

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

Attractiveness for mining investment compared with perceptions of corruption by country

Investment Attractiveness Index

100
80
60
40
20
0

0

20

40
60
Corruption Perception Index

Emerging market and developing economies

80

100

Advanced economies
IEA. CC BY 4.0.

Note: The Corruption Perceptions Index ranks countries around the world based on how corrupt their public sectors areperceived to be. The results are given on a scale of 0 to 100, where 0 is highly corrupt and 100 is highly clean.
Sources: IEA analysis based on Fraser Institute’s Annual Survey of Mining Companies 2022 and the Corruption
Perceptions Index.

As the reserves and resources of critical minerals needed for the clean energy
transition are developed, this risk will be particularly relevant for minerals that areprimarily located in areas with high perceptions of corruption. Minerals such ascobalt, nickel, graphite, manganese and rare earth elements are highly
concentrated in these areas; however, the location of reserves and resources oflithium and copper still present corruption risks as well.

Share of global reserves andresources

Control of corruption index for global critical minerals reserves and resources
100%
75%
50%
25%
0%

Lithium

Control ofcorruption index:

CobaltLow

CopperNickelGraphite

Mn

REE

High
IEA. CC BY 4.0.

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IEA. CC BY 4.0.

Note: Mn = manganese; REE = rare earth elements.
Sources: IEA analysis based on the World Bank Worldwide Governance Indicators and Owen, Lebre and Kemp (2022),
Energy Transition Minerals (ETMs): A Global Dataset of Projects.

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

Allegations of corruption may also erode public support for individual projects,
which can affect a project’s ability to maintain a social licence to operate. This is aparticular problem where public funds designated to support affected communities
are diverted for other purposes – public or private – as well as when economic
opportunities are captured by corrupt actors instead of local communities. This
diverts benefits away from those who are affected by mining and can lead to anerosion of public support. This can lead to higher likelihoods of supply disrupting
events, such as protests, strikes, blockades and litigation, and can also make it more
likely that communities will oppose development of new supply.
Corruption may also exacerbate other supply chain risks if it hinders complianceor enforcement of environmental and social requirements, making it less likely thatpoor practices in other areas are brought to light. This can undermine environmental
and social requirements and aggregate negative impacts, making good governancean essential backbone for sustainable and responsible supply chains.

A decade of delays due to corruption: Simandou
Exploration licences for the Simandou project in Guinea, which centres on one of
the richest greenfield deposits of iron ore in the world, were first granted to
Rio Tinto in 1997. The project has since been mired in corruption-related delays
for the past decade.
In 2008, the Guinean government stripped Rio Tinto of half the Simandou
concession and reissued it to BSG Resources (BSGR), citing lack of development.
Six years later, the government revoked BSGR's mining rights and launched aninvestigation into the licence’s legality. The revocation began a five-year work
stoppage at the site while the company was still building infrastructure to support
eventual exploitation.
In 2014, a series of corruption allegations and lawsuits began between thegovernment and the two companies. BSGR filed an arbitration case against
Guinea accusing the government of expropriation, followed by a lawsuit by Rio
Tinto against BSGR in a US court. In 2016, the Guinean Mining Minister accused
Rio Tinto of having offered a bribe to obtain exploitation rights in 2010, and Rio
Tinto admitted to paying USD 10.5 million to a Guinean official in 2011. A 2022
award in the arbitration proceeding between BSGR and Guinea found“overwhelming evidence” of corrupt practices by BSGR.

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A final stop-work order was lifted in March of 2023 after eight months of disputes
among current partners and the government about ore and control of the rail line.
As of the time of writing, the Simandou project has not yet yielded any ore – or thepromised revenue and resources for affected communities – despite the initialhopes that it would be online in 2015.

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

Industry performance
Progress has been limited on addressing corruption risks andthere remain significant data challenges
Companies along the critical minerals supply chain can adopt and implement
policies that provide safeguards against corruption. The EITI Standard, which was
updated in 2023 to include corruption as a core objective and validation process,provides a set of objective measures of resource governance policy for the EITI
implementing countries. These include requirements to publish contracts andlicences, to report beneficial ownership, and to disclose payments togovernments. Companies can also follow voluntary disclosure requirements sothat their performance in preventing and mitigating corruption risk can beassessed, such as the Global Reporting Initiative’s anti-corruption standard.
Organisations such as the Natural Resources Governance Institute (NRGI) also
provide recommendations and guidance.
While adopting these policies does not guarantee that corruption will not takeplace, measures of transparency should make it less likely. It is equally key toensure that such policies are effectively enforced, as currently many contracts in
EITI implementing countries are still unpublished even where policies exist to
require disclosure, as shown in the recent EITI country validations.

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Under EITI’s governance structure, companies may join as “supporting
companies”, which means they’re expected to uphold the EITI Standard throughreporting in EITI implementing countries where they operate and are encouraged
to participate in multi-stakeholder groups. A handful of the largest critical mineralcompanies are officially supporters of EITI, which together cover a relatively small
proportion of global production. Copper has the most coverage, with 6 of the top
10 companies – covering 26% of global production of copper – supporting EITI.
Notably, very few top lithium and cobalt companies are EITI supporters. Corruption
mitigation could be improved if more critical mineral companies commit to – andimplement – EITI principles.

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

Production share and number of top 10 critical mineral companies that are Extractive
Industries Transparency Initiative supporters

100%

Share of top 10
producers who are:Not EITI
supporters

80%

EITI supporters

60%
40%

Production shareof EITI supporters

20%
0%

NickelLithium

CobaltCopperIEA. CC BY 4.0.

Note: Critical mineral companies are the top producing companies in lithium, nickel, cobalt and copper according to S&P
Global Market Intelligence data.
Source: IEA analysis based on EITI and S&P Global Market Intelligence data.

Measuring on-the-ground levels of corruption is notoriously difficult because
corrupt actors have a strong incentive to avoid detection. Nevertheless, somemeasures do exist based either on direct evidence such as public allegations,investigations or lawsuits, or on indirect evidence from perceptions of experts ormarket actors. Most existing external measurements of corruption show significant
corruption risks associated with mining, particularly in emerging markets anddeveloping economies. The Business & Human Rights Resource Centre’s
Transition Minerals Tracker includes 37 allegations of corruption since 2010, withnearly a fifth coming from 2022 alone. An OECD study of all foreign bribery cases
found that around one-fifth of the cases investigated came from the extractive
sector.

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Publicly reported company data can also give some indication on the corruption
performance in the sector. The Responsible Mining Index 2022, which scorescompanies across a set of indicators that assess company-published data, reveals
that assessed companies are on average performing well in preventing direct andindirect forms of bribery and disclosing data such as payments to governments
and lobbying practices. For other measures, especially holding leadershipaccountable for responsible business conduct, company disclosures on ultimate
beneficial owners, and improving practices, the average score is much lower. At
the same time, it is notable that a small minority of companies have achieved the
maximum possible score for many metrics, showing that it is possible to do better.

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

Average and maximum score achieved on corruption performance indicators forselected copper, cobalt and nickel companies
5

Highest score

4
3
2

Average score

1
0

Prevent direct
Improve
ImproveTax
and indirect performance effectiveness transparency
on anti-bribery
forms ofofin allbribery and and corruption whistleblowing jurisdictions
corruption
mechanism

Discloses
ultimatebeneficial
ownersDiscloses
disaggregate
payment datato allgovernments
IEA. CC BY 4.0.

Notes: Aggregated categories and scores based on Responsible Mining Index 2022 for critical mineral producing
companies. More information on scoring framework can be found here. Scores are standardised for a maximum possible
score of 5 across all categories.
Source: IEA analysis based on Responsible Mining Index 2022.

Standards
The approach to addressing corruption is mixed acrossstandards systems, with few providing in-depth coverage
The surveyed standards systems typically mandate that their members establish
anti-bribery and anti-corruption procedures, although IRMA provides the most
specific requirements. Most standards typically do not delve into corruption issues
in detail, but this approach perhaps reflects the idea that corruption is often seen
as primarily within the purview of governments for regulation and enforcement.
Nevertheless, there are areas where companies can reduce their exposure tocorruption risks and contribute to a transparent environment that disincentivises
corruption. In fact, there is a trend for requirements to be increasingly detailed
among standards. For example, ICMM announced in December 2021 that its
members would be required to disclose all contracts entered into after 1 January
2021 where not prohibited by law. Separately, IRMA’s draft Standard 2.0
expanded the anti-corruption corporate policy requirement and include newreporting requirements.

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Employee training requirements and public disclosures including material
payments to governments, beneficial ownership, mineral development contracts
and political contributions are areas where industry can support government
efforts to reduce corruption in alignment with the EITI Standard. Disclosure
requirements are uneven across the standards. For instance, the requirement toSustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

disclose political contributions is required by IRMA and ICMM, the Copper Markrequires a company to establish procedures for approval of such payments, andTSM does not require commitments on disclosures. Nonetheless, TSM’s
Responsible Sourcing Alignment Supplement covers some measures designed toreduce corruption risks for companies that are implementing TSM alongside otherinternational standards. In contrast, IRMA devotes a chapter to financialtransparency and anti-corruption, and the Copper Mark revised its standard toeffect a zero-tolerance stance on facilitation payments and other corrupt practices.
Although not an industry certification scheme, the EITI Standard is a global
benchmark aimed to foster transparency and accountability in extractive
industries. For example, in collaboration with Open Ownership, the EITI is actively
working to deepen beneficial ownership transparency through an initiative called
Opening Extractives. Furthermore, all EITI implementing countries are required to
publish details of new contracts with private companies, providing an additional
tool to fight corruption in the extractive sector.

Existing policies
Financial transparency regulations can enhance accountability
in extractive industry supply chains
The IGF Framework and the EITI Standard recommend that governments adopt
financial transparency principles that can help to reduce corruption risks. Bothadvise governments to manage and distribute financial benefits transparently andto comprehensively disclose fiscal charges paid by mining entities, distribution ofrevenues and subnational transfers, and rules and processes governing thefinancial relationship with state-owned enterprises. Both the IGF Framework andthe EITI Standard call for transparent and consistently applied mining policies andpermitting processes, specifically promoting disclosure and public access tomineral agreements.

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IEA. CC BY 4.0.

As laid out in the IGF Framework and the EITI Standard, financial transparency
policies covering beneficial ownership transparency, contract publication andgovernment payments disclosure can play a crucial role in curbing corruption risks
across critical mineral supply chains. For example, the United Kingdom’sCompanies Act requires companies to maintain a register of People with
Significant Control. Established in 2016 and continuously refined, the register has
effectively disrupted and deterred criminal and corrupt practices through its
beneficial ownership transparency rules. In October 2023, the United Kingdom
enacted the Economic Crime and Corporate Transparency Act, which is asignificant development aligning the country’s legislative framework withinternational standards in financial regulation and anti-money laundering.

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areas

In order to be effective, these transparency regulations must be broadly appliedand enforced. Indonesia, for example, has established a similar beneficial
ownership information register that at least theoretically could provide a similarlevel of transparency to what is seen in the United Kingdom and Europe. However,in practice, relatively few companies appear to be complying, underscoring theneed for robust enforcement.
The EITI has been a key driver in assisting emerging and developing economies
in increasing transparency. Malawi, which is an EITI implementing country, willsoon introduce a regulatory framework for the extractive sector to ensuredisclosure of natural resource contracts and beneficial owners. It aims to support
meaningful public oversight and identify loose ends and loopholes that can betightened to ensure responsible natural resource governance, expenditure, andsocial and environmental governance. Moreover, Malawi aims to create asovereign fund with clear and transparent rules of deposits and withdrawals toensure that proceeds from mineral wealth are invested in public goods.
The Extractive Sector Transparency Measures Act (ESTMA) in Canada and theDodd-Frank Act’s Section 1504 in the United States exemplify regulations for
public disclosure of payments to governments by extractive companies. ESTMA
requires businesses involved in the commercial development of oil, gas andminerals to publicly report certain types of payments annually. This includes social
payments made in exchange for no opposition to a project as well as non-cash
contributions to domestic and foreign governments. The total payment value ofreported projects on ESTMA as of publication is over CAD 700 billion (Canadiandollars) (around USD 520 billion). The Dodd-Frank Act similarly obliges resource
extraction companies to disclose payments to governments, including those madeby their subsidiaries or controlled entities. Data and reporting for both laws are
published online – the ESTMA Data Portal is published by the government, while
the Dodd-Frank Act requires the reporting company to publish the information
online in an interactive data format and with detailed category tags.

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Another important element in preventing corruption is ensuring adequate
protections for the victims of corruption while bolstering the rights and activities ofcivil society, journalists, whistleblowers, and other anti-corruption actors, who arepivotal in investigating wrongdoing, holding entities accountable and advocating
for reform, yet often face resource constraints and threats. The US Presidential
Initiative for Democratic Renewal commits funding to reinforce democracy andhuman rights on an international scale. It supports global independent media
through a fund and accelerator, and establishes protective measures forjournalists. Concurrently, the initiative targets international corruption through the
Empowering Anti-Corruption Change Agents Program.

Sustainable and Responsible Critical Mineral Supply Chains

Part II: Focus areasEnsuring robust regulatory regimes. Incorporate transparency principles
based on the EITI Standard within regulatory frameworks and ensure that they
are effectively enforced, including provisions requiring companies to disclose
beneficial ownership, publish contracts and licences, and disclose payments
to governments. Consumer countries can also ensure that anti-corruption andanti-bribery laws are strictly enforced.



Directed public spending. Encourage companies to identify and address
corruption risks by tying public funding or procurement decisions to datareporting on corruption metrics and public disclosure requirements. Provide
technical assistance and capacity building to emerging and developing
economies to improve transparency requirements and enforcement.

Tracking and monitoring performance. Support the alignment of datacollected and reported on, including by developing recommendations formeasures to assess corruption risks.



Making supply chains more transparent. Improve transparency across the
supply chain through regulations or guidance that encourage or requirecompanies to embed corruption in due diligence systems for all minerals supply
chains, in line with relevant OECD guidance.

Support for voluntary sustainability standards. Encourage credible
voluntary sustainability standards to incorporate anti-corruption measures andimprovements in governance practices and data reporting, in line with a riskbased approach.

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Recommendations

Sustainable and Responsible Critical Mineral Supply Chains

Annex

Annex
Abbreviations and acronyms
artisanal and small-scale mining
Institute for Geosciences and Natural Resources
BSG Resources
Canadian dollars
Carbon Border Adjustment Mechanism
Working Party on Critical Minerals
carbon dioxide equivalent
Conference of the Parties
Corporate Sustainability Reporting Directive
Democratic Republic of Congo
Extractives Global Programmatic Support
environmental impact assessment
Extractive Industries Transparency Initiative
Environmental Protection Agency
Energy Resource Governance Initiative
Extractive Sector Transparency Measures Act
free, prior and informed consent
greenhouse gas
Greenhouse Gas Reporting Program
Global Reporting Initiative
International Council on Mining & Metals
International Energy Agency
International Finance Corporation
Intergovernmental Forum on Mining, Minerals, Metals and Sustainable
Development
IPCC
Intergovernmental Panel on Climate Change
IRMA
Initiative for Responsible Mining Assurance
IUCN
International Union for Conservation of Nature
KBA
Key Biodiversity Area
LCA
Local Co-operation Agreement
MAC
Mining Association of Canada
NAP
National Action Plan
NRGINatural Resources Governance Institute
NZE Scenario Net Zero Emissions by 2050 Scenario
SDFR
Sustainable Finance Disclosure Regulation
SGMA
Sustainable Groundwater Management Act
TSM
Mining Association of Canada’s Towards Sustainable Mining
UNCBD
United Nations Convention on Biological Diversity
UNDRIP
United Nations Declaration on the Rights of Indigenous Peoples
UNGPs
United Nations Guiding Principles on Business and Human Rights
USD
United States dollar

PAGE | 98

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ASM
BGR
BSGR
CAD
CBAM
CMWP
CO2-eq
COP
CSRD
DRC
EGPS
EIA
EITI
EPA
ERGI
ESTMA
FPIC
GHG
GHGRP
GRI
ICMM
IEA
IFC
IGF

International Energy Agency (IEA)
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Subject to the IEA’s Notice for CC-licenced Content, thisis licenced under a Creative Commons Attribution 4.0
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Unless otherwise indicated, all material presented in figures and tables isderived from IEA data and analysis.
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