For thousands of years, mining has had an uneasy relationship with human rights. Those who control the immense riches extracted from the Earth have often been ruthless in pursuit of profit. There are countless examples of mining companies seizing land, sending children into mines and causing havoc for surrounding communities.
The mining industry has come under growing pressure from regulators, investors and consumers to improve its social performance over the past two decades. There is no doubt that progress has been made. Large-scale mining companies have gotten better, for example, at protecting the safety of their workforce – the fatal injury rate in US mines has declined by almost two-thirds in the past 15 years, according to the National Mining Association.
Meanwhile an architecture of transparency mechanisms, certification schemes and due diligence methodologies has emerged around the mining industry, building on long-established tools such as the Equator Principles and the IFC Performance Standards.
“There’s more and more scrutiny from investors,” says Andrew Mason, head of active ownership at abrdn. He adds that the world’s largest listed mining companies are willing to engage with investors on human rights concerns. “They’re very open to discussion and talking about how they can progress and how they can get better. It is an open door with these companies.”
But the human rights impacts of mining are still conspicuous. Recent weeks have seen major safety failings leading to loss of life at mines in Turkey and South Africa. In June, meanwhile, a parliamentary inquiry in Western Australia published evidence of widespread sexual abuse in the mining industry. The inquiry’s findings further tarnished the reputation of Australian mining, just two years after mining group Rio Tinto destroyed the Juukan Gorge cultural heritage site.
These incidents, and many others, underline the need for change in the industry. For investors, finding ways to engage effectively on human rights with the mining industry – and with companies that rely on mineral supply chains – has never been more important.
Beyond ‘conflict minerals’
The focus on human rights in mining partly stems from outrage over “blood diamonds” and “conflict minerals” in West and Central Africa in the early 2000s. Reports that mining was being used to finance warlords in the Democratic Republic of the Congo persuaded US senators to insert a clause on conflict minerals into the Dodd-Frank Act in 2010. The clause imposed reporting and disclosure requirements for listed companies importing tin, tantalum, tungsten and gold into the United States.
The OECD produced influential guidelines on due diligence around sourcing minerals from conflict zones shortly afterwards. The guidance, which has undergone several subsequent revisions, concentrates on a relatively narrow set of severe human rights abuses, including forced labour and child labour in mining, the use of mineral wealth to fund armed conflict and abuses committed by security forces at mine sites. Partly as a result, there is still a tendency for scrutiny of human rights in mining to focus mainly on issues linked to conflict.
“If you spoke to a lot of people about human rights in mining, they would straight away mention security and human rights,” says Kevin D’Souza, chief sustainability officer at Resource Capital Funds, a mining-focused investment firm. “But there are so many other aspects we really must consider that have nothing to do with conflict per se.”
Regulators are increasingly in agreement. Several recent and forthcoming developments will significantly broaden the scope of regulatory scrutiny of human rights in mining. For example, a proposed EU regulation will extend due diligence requirements put in place in 2017 for importers of tin, tantalum, tungsten and gold, to materials used in electric vehicle batteries.
But the biggest impact may come from the EU’s proposed directive on supply chain due diligence. This would require a much wider range of companies operating in the EU to carry out due diligence on human rights risks in their supply chains. Given that mined materials are used in so many manufactured products, the directive will significantly increase scrutiny of mineral supply chains.
Setting the standard
Supply chain regulations in the EU, the US and other jurisdictions generally give companies latitude in determining the right way to carry out due diligence. Rather than assessing every supply chain company directly, offtakers increasingly rely on the plethora of standards and certification schemes that have emerged to help companies prove they are adhering to best practice.
Danielle Martin, director of social performance at the International Council for Mining and Metals, believes these standards are having a positive effect on the industry, pointing to improvements in human rights performance in mining over the past decade. “In large part,” she says, “that has been driven by companies adopting international standards.”
The ICMM, an industry body that was established to improve sustainability in mining, requires members to adhere to its Mining Principles. “Not only do the Mining Principles set out what is expected in relation to human rights for companies within our membership,” says Martin, “but they also require that companies have their performance against them externally validated and publicly reported.”
The Initiative for Responsible Mining Assurance’s Standard for Responsible Mining is often viewed as among the most credible certification schemes, partly because it was developed through a multi-stakeholder process.
Aimee Boulanger, IRMA’s executive director, argues that improving transparency through publishing audits is essential to “pull the issues into the daylight” so that investors are aware of the realities at mine sites.
Like most certification schemes in the mining sector, IRMA certifies individual mine sites, rather than entire companies.
This site-level focus is vital for downstream companies seeking assurances that the material they procure has been ethically produced. However, for investors in mining companies, the certification of specific sites does not necessarily guarantee that the company is effective at managing human rights risks across its operations. While in theory a company could seek certification at all its sites – Boulanger points out that Anglo American has committed to doing so with IRMA – investors also need other options for assessing how mining companies are performing.
ESG ratings offer the possibility of a simple way to gauge mining companies’ performance on human rights. But it is not hard to find experts who are sceptical that a simple quantification is sufficient.
“We need to try to avoid ‘ESG-by-numbers’,” says D’Souza. “Human rights often reflect complex intangibles and are therefore not always measurable through checklists or reduced to convenient quantitative metrics.”
He adds: “I worry if we try and put everything on a scorecard, we’re going to miss things. Community involvement, on-the-ground expertise and engagement, and truly listening matter more than what numbers may claim to represent.”
The Local Authority Pension Fund Forum published a report for investors on human rights in mining in April.
Lara Blecher, one of the authors of the report, also argues that investors need to put more effort into understanding realities on the ground. She notes that LAPFF began to engage directly with community members in Brazil affected by the collapse of tailings dams, used to store toxic waste, in 2015 and 2019. “The engagement with affected communities has really made the LAPFF membership realise that they need to look to other sources, to other stakeholders, for complete information.”
She warns, however, that collecting information from workers and communities “is not so straightforward”. “A lot of investors that we come across don’t know how to take that information on board, process it, and use it in their investment decision-making.”
Blecher points to several areas where she believes investors need to pay closer attention to alternative voices. One example is the process by which companies obtain ‘free, prior and informed consent” – known as FPIC – from indigenous communities prior to mining developments taking place. Blecher says mining companies are “often quite disingenuous” in their approach to FPIC, attempting to “wheel around” how FPIC is defined in international law.
Martin acknowledges that mining companies have had concerns in the past that the concept of FPIC would allow representatives of indigenous communities to simply veto mining projects. However, she says that the industry is making process in understanding the importance of FPIC. “Companies in the main absolutely agree that their operations are more resilient … if they have agreement with their landowners or host communities.”
The destruction of Juukan Gorge in 2020 stemmed from the company’s failure to obtain FPIC. Rio Tinto destroyed the 46,000-year-old site in Western Australia, despite being aware of its importance to the local indigenous community.
For abrdn’s Andrew Mason, the disaster highlights the need to look beyond a company’s policies. “Rio had excellent policies in place,” he says. “But it just wasn’t working.”
As he points out: “Anyone can write a policy and it can sit on a shelf and gather dust. What you need to see is what’s the actual output. The proof is in the pudding. If somebody says to you they’ve got a great policy, then the question is: what have been the outputs and the outcomes of that policy?”
Mason says abrdn engages with mining companies about specific details of their operations. “That works well for us as an investor because it gives us more insight,” he says. “But it also works well for the relationship, because the more you know about a company, the more likely they are to take on board suggestions that you’re making. That’s when we start getting outputs and that’s when we start getting progress with the companies.”
The mining industry is not going away. In fact, the industry is more important than ever, given that the energy transition depends on a significant ramping-up in the production of many kinds of minerals.
Despite the scale of ongoing challenges, increased scrutiny and engagement from investors and other stakeholders should ultimately have a positive effect on human rights in mining. “I’ve never seen this much daylight on the mining sector before,” says Boulanger. “I feel more hopeful when I look 10 years forward than I do when I look 10 years back.”