Responsible sourcing and sustainability in metals are big news at the moment. The LME has announced several new initiatives recently, but these are only the latest in a series of developments in the ESG (environmental, social, governance) space that impacts the entire value chain of every metal.
Many organisations already have individuals or teams responsible for monitoring and improving ESG metrics. These teams often create company-level reports for stakeholders. But as demands for supply chain transparency increase, customers increasingly expect assurance that the actual product they are buying meets their sustainability criteria, and want better information regarding its provenance.
Supply chain transparency at this level is possible, but it can no longer be the preserve of distinct teams and relies on the entire organisation being able to access, process and share data better than ever before.
What’s changing in the sustainability landscape?
Consumer demand for sustainable products has been growing over recent years, with human rights, land stewardship and climate change all high on the agenda and reinforced by legislation in many jurisdictions. Most large organisations have already made steps to address these concerns and assigned responsibility for managing sustainability issues.
Miners may have teams focussing on land stewardship and hazard management, whilst buyers may have teams reporting on human rights and other supply chain issues they are working to mitigate. And smelters and manufacturers are increasingly facing demands to monitor their energy use and greenhouse gas emissions alongside the raw materials’ sustainability metrics. As companies take action to embed social responsibility internally, they are also exerting pressure on their partners to maintain sustainability across the value chain.
The LME is now making several changes to embed responsible sourcing in response to these industry changes, particularly after the discovery in 2017 that some of the cobalt traded on the LME could have been mined by children.
The first notable change is the introduction of responsible sourcing requirements that will apply to all brands, with deadlines depending on which certification track the business chooses to follow, and the first reporting period for some tracks beginning in January 2021. These requirements build on the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. By December 2023, brands will also be required to complete ISO 14001 and OHSAS / ISO 45001 certifications (or equivalent) to demonstrate their environmental and health and safety compliance.
Other sustainability programmes are also on the way, including new recycled and scrap contracts and plans for “LMEpassport” which aims to support a “green aluminium” labelling programme by allowing market users to record electronic Certificates of Analysis and other metrics for specific batches of aluminium on a voluntary basis.
And the LME are not the only driving force behind these new initiatives; they are responding to the expectations of the market and consumers. For example, nickel demand is predicted to almost double to 4.0m metric tons by 2030, driven by electric vehicles, which are often held to a higher sustainability standard than traditional vehicles. Tesla recently announced it expected to award a “giant contract for a long period of time if you mine nickel efficiently and in an environmentally sensitive way”.
The impact on metals and mining
Until recently, ESG has often been managed at the corporate level by dedicated teams, but these latest market changes show this will not be sufficient for long. Supply chain partners will increasingly expect traceability and provenance for each shipment rather than the current high-level sustainability overviews. There is therefore a growing need to embed best practice in recording sustainability data and supplying this externally when needed, without divulging sensitive information.
Trading and operations teams already manage a great deal of complexity in their demanding workloads, and the extent of sustainability data that will be needed even in the near future is not yet fully known. Rather than adding a still-unknown level of data management, with the higher risk of copying errors, incorrect attachments and other mistakes that come with adding more manual steps to workflows, consider how your CTRM and other tools can be used to future-proof your processes.
Metals CTRMs and Commodity Management
Some CTRMs may already have the flexibility needed to effectively manage any upcoming traceability challenges and the data these will create. However, if you are already using offline processes or manual work-arounds due to system limitations, these will only cause further errors and difficulties for staff as traceability becomes standard.
One option is to replace your CTRM or other commodity management system with a modern metals CTRM, but this may not be feasible for all companies so there are other options – such as contract management technology. Contract management technology is designed to integrate with your existing systems to improve their performance without the need for a complex replacement project.
You can manage additional data easily within your contract management system and automatically update any other systems that use this data, with the flexibility to add new fields and adapt the automated workflows to how you will be using the data.
Maintain transparency across your supply chain by matching stock from input to output. For example, traders can automatically match purchase and sale contracts when allocating stock, and the system will transfer all stock data seamlessly across. This reduces mistakes, means you have an audit trail of the information you are providing to buyers, and makes document/certificate management simple too. You can also update records as things change whilst maintaining your audit; whether that’s splitting or combining stock or adding greenhouse gas emissions as a result of processing.
The metals and mining supply chain is demanding increased transparency, and businesses need traceability tools to respond. The current model of central teams gathering high-level data will soon be considered insufficient. Data in the near future will need to be specific and granular to meet demand, but the good news is that the tools to manage this data already exist and can make your operations faster and more effective than they are today, even when they are dealing with far more data.
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