Sustainability Doesn’t Stand Still – The Lithium Triangle and Global Supply Chains
Nov 26, 2018
On behalf of RESOLVE and as a member of the Lithium Working Group of the Global Battery Alliance, I attended the conference “Mining in Latin America and the Caribbean: Interdependencies, challenges and opportunities for sustainable development“, sponsored by ECLAC and the German Government that took place on November 19 in Lima, Peru. This is what I heard.
The conference surveyed the sustainability frontier as post-millennial mining approaches in South America. The backdrop is the last super cycle boom in South American mining a decade ago. That boom that took place in the framework of twentieth century governance and business models. Chinese urbanization drove the super cycle; materials for manufacturing in the low carbon economy will drive this one. In South America, lithium has been cast in the leading role. Business, governments, academics and civil society representatives all want the next cycle to be cleaner, greener and more inclusive. Shifts are being felt in standards and expectations, but they are still tentative and incomplete.
What’s Wrong with Mature Mining Models?
Social license for mining in the Andean lithium-bearing region isn’t strong or broad. Nobody thinks the sector enjoys enough public confidence. The trend is based on disappointing experiences and unresolved conflicts from the past. This means that companies have little margin for error or slippage on standards. The social license problem slouches across governance, economics and communications.
The next cycle is approaching countries that need, or are just beginning to put in place, national mining for development strategies (as opposed to development of mining strategies). A big part of the governance issue is that permitting decision-makers don’t hear from enough real risk holders, who often depend on traditional agriculture and natural systems. When adverse local impacts happen, governments don’t really have the tools to manage and remedy social grievances. Some observers have a structural concern that policy and permitting decisions are made by institutions with a strong incentive to say yes in order to boost fiscal revenues. Concerns about corruption also affect public confidence. All this leaves questions about how sector governance can deliver social inclusion and environmental justice.
You have to look pretty hard to see sustainable development benefits from the last cycle. Economists found that growth in these countries goes up when commodity prices go up and it goes down when prices go down. The region hasn’t really been able to design convincing ways to harness mining growth to diversification, innovation and productivity improvement − at least not yet.
Just like in the rest of the world, social media both connects and complicates things. Companies are struggling to find new ways to respond with coherence, accuracy and timeliness to public concerns amplified, atomized and multiplied by Facebook, Twitter and Instagram.
Can Lithium be Different?
The lithium cycle has started and foreign investment plans are stacking up. It may be moving faster than public policy can adapt, learn and adapt again. It is emerging into a new kind of world market that has not been experienced by South American mining before. The supply chain is transmitting consumer sustainability requirements upstream to the point of extraction for the first time. No company wants to sell an electric vehicle with materials produced at the cost of human rights or community access to clean water. Lithium suppliers won’t be selling into a market of undifferentiated commodities, like copper and gold mines did. In this cycle, the social impact and carbon footprint of producers will factor into selective purchasing with traceability from the high Andes to the equipment manufacturer to the dealer showroom.
This responsible supply chain thinking is starting to get a foothold in the Lithium Triangle, just as it did for diamonds with the Kimberley Process and later with measures to make sure sensitive minerals in electronics did not finance conflict in Central Africa (see Public-Private Alliance for Responsible Minerals Trade). At the same time, there are very large gaps in the nascent supply chain dialogue that need to be closed, in particular with respect to the role of Original Equipment Suppliers of batteries for electric vehicles. The World Economic Forum and Global Battery Alliance are positioned to play a leading role here.
The opportunities are in sight, and the stakeholders see them. The Argentine Chamber of Mines (CAEM) is demonstrating leadership in the sector by making Towards Sustainable Mining (TSM) mandatory for all members. TSM is the detailed social and environmental performance system of the Mining Association of Canada that rates over 30 indicators from effective community engagement, to prevention of child labour to control of greenhouse gas emissions. Another positive trend is OECD membership (Chile) or accession applications (Peru and Argentina), which can drive durable and continuous improvements in governance performance.
In the Lithium Triangle of Chile, Argentina and Bolivia, the sector can recognize and avoid the mistakes of the past. It is a region where development has passed by remote communities and indigenous peoples. Careful, patient, continuous and broad dialogue with communities can shape operations that provide substantial long-term benefits, and address risks to people and ecosystems. Science, research and innovation have a natural role to play. The Lithium Triangle produces lithium from brine − a fluid under deserts. This involves dynamic hydrology in geologically complex zones. Good science and research will be needed as the underpinning for new regulatory and environmental management approaches. Participation in this vast supply chain can be a bridge to the knowledge economy of the future and industrial development benefits. Maybe being part of this global supply chain can blaze trails to electric mobility and the circular economy for the region.
There isn’t a pre-existing model or regional template for shaping production in the Lithium Triangle. Sustainability doesn’t stand still and a new model is needed. I think the supply chain will want lithium that benefits communities, respects rights, co-exists with healthy natural systems and uses climate smart energy systems. Today’s challenge is networking the key actors and civil society so their decisions and actions add up to sustainable development plus an adequate supply of lithium to build the global energy shift. The Global Battery Alliance is the first best opportunity for this to happen. Closer to the ground, and in coordination with the Global Battery Alliance, I’m working with RESOLVE and with the mining associations of Argentina and Canada to connect to producer and buyer standards through LiFT (Sustainable Lithium for a Responsible Energy Transition) with Towards Sustainable Mining as a foundation.
There is no excuse not to think about the future now, and how lithium and the global supply chain can add up to long-term sustainable development in the region.
November 26, 2018