Renewable Energy and Responsible Sourcing

Renewable Energy and Responsible Sourcing

For some industries, supply chain management has been a feature of corporate social responsibility (CSR) and sustainability programmes for decades. Early in the CSR movement, labour issues were brought to light in the apparel and textile sectors leading to a proliferation of standards and extensive auditing programmes initiated by consumer-facing firms. Other products’ supply chains soon followed including toys, jewelry, furniture, and food. Then, in 2010, the U.S. adopted legislation requiring companies to conduct due diligence on their sourcing minerals to demonstrate they were not contributing to armed conflict in the Democratic Republic of the Congo or adjoining countries. The so called ‘Dodd Frank Act’ stimulated a responsible sourcing public policy agenda that extended the requirement for businesses’ due diligence to the production of raw materials far upstream in their supply chains. The U.K., EU and Canada soon followed and have or are in the process of enacting similar ‘conflict minerals’ regulations. While initially focusing on tin, tantalum, tungsten and gold, these boundaries too are growing. Witness the mandate of the OECD’s ‘Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD DDG)’, which was written to provide a practical framework for the implementation of ‘conflict minerals’ due diligence. The OECD DDG is expanding its ambit to include at least an additional 34 industrial minerals, precious metals and stones. Additionally, multi-stakeholder and industry-driven responsible sourcing initiatives and standards are emerging in, amongst others, the aluminium, mica, copper, cobalt, and steel supply chains. Inseparable from these is the generation and transmission of energy.

Earlier this year, ActionAid and SOMO released a report about the provenance of materials in wind turbines and their potential human rights impacts. The report cited a World Bank estimate that the increased reliance on wind energy around the world will lead to a 250 percent increase in demand for minerals by the wind industry by 2050. The report emphasized that wind turbine manufacturers have a clear responsibility to address risks of adverse human rights and environmental impacts in the supply chain, invoking the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises.

The report provides data on the amounts of minerals and metals used in wind turbines and their estimated impact on mineral demand. According to the report, minerals used in the production of wind turbines include aluminium, boron, chromium, lead, limestone (for concrete), manganese, iron, nickel, cobalt, copper, molybdenum, rare earths and zinc. A large proportion of these minerals are mined in low and middle-income countries, where, the report points out, human rights policies, legal frameworks and institutional arrangements may be weak and enforcement may be absent or ineffective. The report concludes by recommending that wind turbine manufacturers conduct risk-based human rights due diligence to identify, prevent and mitigate any adverse impacts caused by their operations. But where should companies begin? How can companies identify the provenance of these materials and how can they evaluate the risk of the materials to prioritise where to focus their due diligence efforts? On these points, the wind industry may gain valuable insights from two other industries facing similar questions: the electronics and automotive sectors.

Last month, the Responsible Minerals Initiative in collaboration with Drive Sustainability and CSR Europe published a report authored by The Dragonfly Initiative that examines responsible sourcing of materials in the automotive and electronics supply chains. The report, Material Change, evaluates the environmental, social and governance risks for 37 materials to automotive and electronic industries.

Not surprisingly, there is significant overlap of these materials with those mentioned in the ActionAid report. Of the 13 materials identified by the ActionAid report, 11 are included in the Material Change analysis. Taking iron and steel as an example, which the ActionAid report states constitutes by far the largest amount of minerals used in wind turbines, the Material Change analysis offers the following insights:

The report notes examples of impacts related to hazardous materials and chemicals and emissions related to the iron ore mining and steel making industry in Brazil, where communities in the vicinity of five pig-iron plants have reported pollution; in China, where a city that accounts for 10 percent of global steel output had a major toxic chemical leak; in India, where the iron and steel industry has been linked with water pollution with effluents from refining; and in Russia where benzoapyrene, a carcinogen linked to lung cancer, has been recorded as an air pollutant in a city home to a major iron and steel works. In Australia, the report cites a recent decision to award an iron ore mining concession that overlaps with a national park and may lead to compensation claims from Indigenous Peoples.

This information can help companies, including wind turbine manufacturers, assess risk by identifying potential hot spot issues associated with materials and top producing countries, which can inform the design of appropriately targeted due diligence programmes. It can also provide a basis for stimulating discussion with industry peers and stakeholders to prioritise actions in responsible sourcing strategies and identify where collective efforts may best catalyse positive change.

As renewable energy scales, societal expectations of responsible operations, supply chain accountability and contributions to sustainable development (beyond just the virtue of being a ‘clean’ energy source) are increasing. NGOs are beginning to focus on the human rights impacts of the renewable energy transition. Last year, the Business and Human Rights Resource Centre launched a platform Towards Responsible Renewable Energy that has released a number of research papers, case studies and briefings; and earlier this year, the Danish Institute on Human Rights launched a project on Responsible Renewables.

Fortunately, the experiences of and programmes developed by other sectors can shed light on potential risks and impacts, as well as tools and approaches for mitigating risks and increasing positive impacts. We are developing a series of energy risk profiles and invite interested individuals to get in touch if they would like to provide input into the types of data that would be helpful for companies to develop a responsible energy supply chain.