In light of the increasing focus on and demand for corporate social responsibility and given that the sustainability of mining is at stake, blockchain is an ideal technology to “reveal” the sustainability of the supply chain, a report published by global law firm White & Case shows.
Coauthored by partners Rebecca Campbell and Kirsti Massie, and associates Emily Holland, Dr Saghar Khodabakhsh and Margaret Spicer, the report explains that, in parallel with a rising tide of regulatory requirements, benchmarking pressures and climate- and human rights-related litigation, corporates are beginning to see the profit and brand potential in highlighting the environmental and social attributes of their goods and services.
Mining and metals producers are not alone in demonstrating to customers, investors, lenders, regulators and other stakeholders the sustainability of their products, the authors state.
They explain that many companies across various sectors are increasingly engaging in responsible business activities in response to social, environmental and governance challenges and opportunities.
While pressures may be particularly acute for extractive and associated companies, considering that they are also subject to a raft of regulatory and legislative processes, the report, titled ‘Digitalising the mining and metals global supply chain: Blockchain brings sustainability to the forefront’, highlights that the US’s and the European Union’s conflict minerals rules affect manufacturers and importers of the most commonly mined conflict minerals: gold, columbite-tantalite, cassiterite and wolframite.
“The common denominator underpinning stakeholder pressures is a fundamental request and need for accurate and robust information, which has traditionally been difficult to obtain, given that mining and metals supply chain operations are formed from vast, geographically diverse, multitiered and dynamic webs of disparate stakeholders,” the authors say.
Hence, there is an increasing demand for better solutions to source this information and, armed with it, to introduce more sustainable, legally compliant products.
Because of its ability to improve transparency, accountability, integrity and efficiency through open, incorruptible data sharing, blockchain is being considered as that solution.
“Digital governance systems, in particular those of blockchain, are emerging as viable solutions capable of efficiently enforcing rules and ensuring trust and transparency,” the authors point out.
Blockchain data is recorded on a block and across multiple copies of a ledger that is distributed over many nodes, making the blockchain highly transparent. Every block links to adjacent blocks that are stored in a decentralised fashion. Security mechanisms help to ensure that stored records are accurate, tamper-evident and cryptographically signed.
The report elaborates that transparency is key to a sustainable strategy, but that a credible corporate sustainability strategy may eventually demand some additional affirmative action by companies to take responsibility for the environmental and social impacts they have on their surroundings.
“Blockchain could be catalytic to these efforts, and it also has the potential to provide a market for sustainability information.
“Through the use of blockchain, market entrant miners, or incumbent players, could verify claims at the source – which can be tracked throughout the value chain – with the ultimate goal of extracting premiums for demonstrating competitive, leading-edge sustainability practices,” the authors note.
However, the report warns that none of this can be achieved without greater transparency concerning the sometimes hidden and beneficial ownership arrangements at mines and with respect to mineral products.
“The current lack of clarity on who owns what through the mineral supply chain is a recognised weakness of natural resource governance, which dampens investment by certain investor classes,” the authors state.
Beyond sustainability, information about the quality or specification of products could be reported in real time to enable a more effective and efficient product placement.
For the mining and metals sector, the report advises that initial efforts to embed qualitative traits on digital platforms will likely initially arise in the area of product quality.
“If blockchain captures assays of material at the point of extraction, or even before, there is an immediate and tangible value-add generated, with potential just-in-time and made-to-order possibilities.