Traceability and labelling of sustainable metals and minerals
– Efforts to increase transparency, credibility and demand
The availability of metals is conditional for the development of innovation-critical technologies needed in the transition to a sustainable society. However, the extraction and processing of such metals need to be sustainable. On challenge with this transition is to ensure that investors, consumers and producers have information and knowledge about the sustainable burden of metals used in production. Today, the information available does not include, for example, details of the environmental impact of certain metals or whether the employment of child labour are used in the mining and refining of metals.
In March 2018, the Swedish Agency for Growth Policy Analysis received an assignment from the Government on the traceability and labelling of sustainable metals and minerals. The main challenge of this assignment was to identify how traceability systems for metals and minerals can develop in order to create a better overview of the sustainability among manufacturers and products. We have identified three sub-questions based on which the main question will be answered. These are:
- What information is required in order for traceability systems for metals and minerals to gain long-term credibility?
- What can be done to boost the credibility of systems for tracing, labelling and reporting sustainable metals and minerals?
- What can be done to boost the demand across the supply chain for products made from sustainable metals?
The first question is about what makes a traceability system more credible. Ultimately, it is about the provision of information. In order to cultivate credibility, accurate information must be entered into the traceability system so as to support subsequent efforts and a sustainable development by, for example, complying with the global sustainability objectives for 2030. The second question is about how – existing traceability systems and potential problems and challenges with these. The third question is about what efforts can be made to increase the demand for sustainability labelled products.
What did we find?
The purpose of traceability systems for metals and minerals is to ensure transparency of relevant information throughout the supply chains. However, the lack of such information poses a real challenge to supply chains incorporating metals and minerals. End product manufacturers can often only provide reliable information about their immediate suppliers. At the same time, a supply chain may include thousands of companies. Thus, there a problem with asymmetric information which indicates that effective traceability systems are difficult to establish without state intervention.
Another difficulty in the design of traceability systems for metals and minerals is the varying sustainability impact. Information that is relevant to one metal is not necessarily relevant to another. Steel, magnesium, aluminium and copper have the greatest impact on our climate. The extraction of metals and minerals also has an impact on the local environment. However, because of varying conditions, it is not possible to directly compare this impact between the different mines. These differences pose major challenges in the design of reliable and, by the operators, acceptable traceability systems. Some traceability systems are used for reporting the overall sustainability impact of a company or industry. This requires the provision of comprehensive information. Other traceability systems are used to identify the sustainability impact of individual products. Information about a certain aspect of sustainability, e.g. greenhouse gas emissions, is then often sufficient.
Another difficulty is that there are significant structural problems that complicates the design and establishment of generally accepted traceability systems. This applies not least to the lack of cooperation within the supply chains as well as between different supply chains and other stakeholders such as the end consumer. There is also a tendency for resource-poor stakeholders not to have the capacity to participate in the development of traceability systems. Major mining companies and smelters dominates many existing initiatives resulting in smaller mining companies and recycling industries being sidelined. This contributes to the problem of asymmetric information.
The question is how to improve the development of traceability systems. According to our analysis, it is all about generating relevant information, establishing credibility and taking the right actions to create a demand for products made from sustainable metals and minerals. As the extraction, processing and final consumption of metals are intertwined in complex global supply chains, there are varying policy challenges to overcome. What can be achieved by way of national initiatives? What must be dealt with on an international level? What are the roles of the market players and the State in the development and establishment of reliable and acceptable traceability systems?
Information challenges – what can build up confidence?
We believe that due diligence for responsible business procedures aimed at identifying sustainability risks and measures in the supply chains are the key to traceability systems processing the relevant information. The State can play an important role in this development by requesting sustainability reports based on due diligence for responsible businesses or not awarding grants or innovation support to medium or large sized companies that do not have a due diligence procedure in place.
How is confidence built up?
Our analyses show significant shortcomings in the existing traceability systems for metals and minerals (except for the well-functioning systems of 3TG Conflict Minerals). Current initiatives are likely to benefit special interests. So as to counteract this risk, the end manufacturers, recycling industries, interest groups and academia must demonstrate an increased interest in and capacity to actively participate in initiatives. At the same time, the State may need to support the ability of these market players to actively participate in the development of traceability systems – on the same or similar terms to those of the mining companies.
How do we develop traceability labelling systems?
Analyses show that today’s private individuals find it difficult to comprehend how their choice of metal made products impacts on sustainable development objectives. There are also difficulties understanding the role of large professional business customers for the development of traceability systems. Consequently, an enhanced knowledge base is required. Government interventions in Sweden and like-minded countries may be of importance to the attainment of evidence for the clarification of the link between the use of metals and sustainability objectives. However, independent organisations and academia are key players when it comes to spreading knowledge and applying pressure on international brand companies and politicians.
The processing of certain metals and minerals results in large greenhouse gas emissions globally. In this context, the labelling of products can be used as a measure to reduce greenhouse gas emissions on an international level. However, there is still no credible system for comparing greenhouse gas emissions in the manufacturing of different products. Independent environmental organisations are obvious contenders for the promotion of such a system as they do not represent any specific industrial interests or policies and hence, are deemed most credible. A possible starting point is the existing International EPD System.
How can the State help generate consumer demand?
The State may, through various efforts, generate demand for products made from sustainable natural resources. However, such efforts may also pose a problematic challenge seeing as any ill-conceived actions taken by the State could potentially hamper the development of technology. In addition, metals and minerals are international markets which a small country like Sweden will find difficult to influence. The following four demand stimulation activities are thought possible: Creating a demand through public procurement, requesting due diligence when financial support is given to companies, requesting EPD certification for the procurement of greenhouse gas emitting products and promoting a better overall view of EU directives.
What can the Government do?
The Government has limited opportunities to contribute to the development of traceability systems for sustainable metals and minerals. For a small country like Sweden, it is primarily about strengthening ongoing international and national initiatives and enabling them to be developed and streamlined so that sustainability information becomes more credible and acceptable by the different market players.
Like France, the Government can help promote the OECD Due Diligence Guidance for Responsible Business Conduct by introducing a national regulatory framework that would require that large Swedish companies draw up a plan of activities for the purpose of limiting the impact on sustainability objectives throughout their supply chains. Such framework would partly be based on the OECD Due Diligence Guidance for Responsible Business Conduct and partly on the Due Diligence Guidance for Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. The Government can commission an investigation of how a corresponding framework may be implemented in Sweden and how other measures may affect the incentives of small-size companies to comply with the OECD Due Diligence Guidance.
Furthermore, the Government can help reduce the risk of traceability systems developing on the basis of special interests of large international mining companies. This is made possible by the State contributing with its own knowledge base, funding research and providing support to interest groups involved in the development of traceability systems for metals. More specifically, the Government could:
- By way of an Owner’s Manual, assign a Swedish research institute the task of establishing a centre for the certification and recycling of metals and minerals. The responsibilities of the Centre should include to (i) disseminate knowledge about how the extraction of metals and minerals impacts on sustainability objectives, (ii) engage in international initiatives aimed at tracking, reporting and labelling metals and (iii) support small and medium businesses when making demands on their own supply chains. A key role would be to collaborate with non-profit organisations, the metal recycling industry, smaller mining companies interested in establishing themselves in Sweden and financial market participants.
- Assign an authority the task of examining the sustainability preferences of private and professional end consumers within EU Member States and their choice of consumer products. The purpose of the above is to be able to influence the development of EU directives. Implementation should be coordinated with the Raw Materials Information System and Product Environmental Footprint initiatives of the EU Commission.
The State could also, by way of public procurement, contribute to the development of a market for consumer products made from more sustainable metals and minerals. The Government could further investigate the possibility of requesting that the public sector must always, subject to availability, acquire TCO certified products. There are also reasons to study the impact of EPD requirements in conjunction with procurements under Italian law as well as local procurements in France so as to assess the conditions for making EPD requirements in Sweden.
A particular challenge is the lack of harmonised methods for calculating product related greenhouse gas emissions. This is a matter of particular interest to companies and countries alike. History shows interest groups to have greater credibility in situations like this. This suggests that the Swedish Government has a limited role in the development of harmonised methods for the calculation of greenhouse gas emissions in addition to which, its extended support to research continues through the Swedish Energy Agency's programme ‘Developing Future Markets for Climate and Resource-efficient Materials and Products’, the purpose of which is, among others, to promote labelling of products based on their contribution to greenhouse gas emissions and metal recycling.