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Responsible Sourcing for the Just Transition: The biggest opportunity we have yet to seize

Responsible Sourcing for the Just Transition: The biggest opportunity we have yet to seize

May 31, 2022, by Julie Schindall

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  • Minerals and metals are at the heart of the raw materials required for the just transition.
  • Yet responsible sourcing is hindered by two challenges: an audit paradigm focused on supplier questionnaires and data collection; and a proliferation of voluntary industry certification or standards schemes.
  • We need to shift the focus towards engaging with suppliers and potentially affected people, greater use of leverage, and collaboration.
  • The greatest single contribution companies will make to the betterment of human lives and our planet will be when the company’s own footprint on people and the environment is a force for good.

Has due diligence evolved over the past decade?

Think back to 10 years ago. “Responsible sourcing”, often referred to at that time as corporate social responsibility or sustainable supply chains, frequently meant a focus on information gathering. Companies tried to find out who their suppliers were beyond Tier 1, got them to fill out questionnaires, developed databases to store the information from the questionnaires, and carried out audits to check the veracity of the questionnaires. As these were fairly early days of formalised supply chain due diligence, with many companies starting out with little knowledge of their supply chain, it made sense. Step one in responsible sourcing is knowing where you’re sourcing from and what kinds of impacts could be occurring to people and planet along the way.

Fast forward to today. Our sector has evolved on many fronts. Minerals and metals, including cobalt, lithium and manganese, are at the heart of the raw materials required for the just transition. Governments and companies are putting the spotlight on “critical minerals” as a matter of national security and energy independence. They are also necessary to transition to a greener, more just future.

And yet due diligence in the minerals and metals sector appears to have evolved rather little, at least not in a way that can put the “just” in “just transition”. The focus still seems to be on supplier questionnaires, audits, and checking if companies have certain policies or processes documented. We’ve seen far too little emphasis placed on whether those policies or processes actually improve outcomes for people or planet.

At Levin Sources, we have yet to meet a mining company that was unaware that its activities have an impact on local communities and workers. The sector is well familiar with assessments of impacts on people, namely through social impact assessments, which have been in use in the sector for decades. And in many jurisdictions, mining is more regulated than other sectors when it comes to community impacts. Yet to this day, as recently reported by the Business & Human Rights Resource Centre, it is the most dangerous sector for community members who stand up for their rights (people we often refer to as human rights and environmental defenders). After decades of efforts, this troubling track record should encourage all of us working in the sector to rethink the implementation of due diligence with an eye toward achieving true “performance”.

What are the other tools in the toolbox?

So what can companies that use minerals and metals in their products – or produce them – do better? As one green energy company recently asked us at Levin Sources:

“If we’re not going to be solely reliant on audits to demonstrate responsible sourcing, what should we do? What are the other tools in the toolbox?”

This is exactly the right question. It’s been over 10 years since the UN Guiding Principles on Business and Human Rights (UNGPs) set the global bar on what it means to do business responsibly, with respect for people’s fundamental dignity and welfare.

The UNGPs set out a clear pathway for companies by referencing something companies already know about: due diligence. We now have leading practices that demonstrate the appropriate role for verification tools like audits, as well as a bigger picture about what companies can do to demonstrate that their products and services are made responsibly.

What does this mean concretely?

It's all about engagement

Of all the practices we’ve seen work, especially deep into the supply chain, engagement is the “make or break” factor. The word “engagement” gets bandied about a lot. When it comes to responsible sourcing, engagement means “dialogue” and “conversation”.

Supplier engagement should mean an invitation to discuss not just the presence of a policy or process, but how it’s implemented, the challenges suppliers face in doing this implementation, and how they think that “stuff on paper” leads to improved outcomes for people and planet.

Many companies will argue that they can’t have a conversation with thousands of suppliers. Of course they can’t -- at least not alone. This is where the power of collaboration comes in. Collaborations, partnerships, industry initiatives, multistakeholder initiatives, dialogue platforms: over and over we have seen their power in engaging, supporting and pushing supply chain partners to rise to the standard that we expect of all companies to do business with respect for people and planet.

Of course, it should be stated explicitly here that suppliers aren’t “the problem” and they shouldn’t be burdened with customer demands that have no connection to improved outcomes for people or the environment. Engagement with suppliers is about exchanging views and solving problems as partners in a mutually respectful relationship.

Engagement with potentially affected people is just as important – indeed, it is central to getting responsible sourcing right. Potentially affected people are the people who could – or have already – experienced abuses of their fundamental rights in connection with your business, whether in your own operations or value chain. Questionnaires aren’t enough for that type of engagement either. It requires a real conversation, usually held in collaboration with civil society organisations or trade unions. Again, collaborative initiatives play a critical role in helping companies create space for these conversations at scale, across complex (and shared) supply chains.

Experienced companies in the minerals, metals and mining sector know that you ignore the perspectives of affected communities at your own peril. We see direct ties between harm to communities because of mining projects and material risks to mining companies, all the way up to the project having to close or end due to conflict with the community. The research on this highlights why hearing the perspectives of potentially affected people is a core part of ongoing due diligence and effective business operations management.

Lately, we’ve heard some criticism that responsible sourcing or human rights and environmental due diligence is a form of neo-colonialism, forcing Western perspectives on businesses and communities whose realities are far removed from those of the richest social democracies. Yes, that could be the case – if a company fails to put the perspectives of affected people in the centre of their due diligence and resulting decisions and actions. The centrality of potentially affected people to a company’s due diligence approach and actions cannot be overstated. Put another way: the perspectives of potentially affected people need to drive and shape a company’s due diligence approach. This can be challenging for companies to deliver – it requires often a cultural shift within the company – but leading companies are increasingly taking steps to effectively integrate the perspectives of affected people into their policies, decision-making processes, mitigation actions and remediation steps as part of their ongoing due diligence.

Turning a company’s footprint into a force for good

Too often, we see human rights due diligence categorised as “just” risk management. That “just” “do no harm” is the boring, must-do part, and somehow the real “wins” or “shift” or “moving the needle” or “impact” is going to happen in other activities that are separate and considered more exciting.

The greatest single contribution companies will make to the betterment of human lives and our planet will be when the company’s own footprint on people and the environment is a force for good. No amount of philanthropy, of bringing a useful product to market, can erase the profound harm companies can do when they fail to respect the rights of workers, communities and environments impacted by their activities. Think of the thousands (or tens or hundreds of thousands) of people and communities impacted by one large business and its value chain. Imagine that all those people and communities experienced positive improvements in their lives because of that company’s actions. Talk about an opportunity! An opportunity for resilience, for being a company and business partner of choice – for being a leader in our time of the just transition.

 

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