Handbook on Environmental Due Diligence in Mineral Supply Chains

2. Understanding environmental risks and impacts

Abstract

This chapter clarifies what is meant by environmental risks and impacts and provides examples of common environmental issues found in upstream mineral supply chains. The Chapter also helps business understand factors that may affect the severity and likelihood of risks, both of which are critical considerations when conducting risk-based due diligence.

What does the Handbook cover?

This Handbook considers a range of environmental risks and impacts that may arise in minerals supply chains from the point of extraction through key points of transformation, primarily mining, smelting, refining, and recycling, for all minerals and metals (whether for domestic or export markets), including construction materials, industrial minerals, base metals, precious metals, gemstones and technology critical elements, amongst others (OECD, 2021[13])). They also recognise that environmental impacts can be collective and interlinked or isolated, as well as localised or transboundary in nature.

The Handbook focuses on the following adverse environmental impacts in mineral supply chains:1

• climate change

• biodiversity loss and degradation,2 covering species and terrestrial, marine and other aquatic ecosystems (for example, deforestation, damage to protected areas and soil erosion)

• air, water and soil pollution

• mismanagement of waste, including hazardous substances

• noise and vibration

• damage to aesthetics and cultural heritage sites

• water depletion.

Given the broad range of environmental risks and adverse impacts that can arise from upstream activities in mineral supply chains, and the various ways that these may manifest in different contexts, this Handbook does not aim to be exhaustive and does not provide extensive detail for each environmental risk area. Instead, it considers examples and points readers to additional resources that may provide further technical information on best practice for assessing, preventing, mitigating and remediating environmental risks and adverse impacts along mineral supply chains.

Box 2. Different ways that environmental impacts may arise and manifest

Potential environmental impacts in minerals supply chains can be understood in a number of ways:

Impacts that result directly by an entity’s operational practices. For instance, when a business clears an area resulting in loss of biodiversity (for example forests, wetlands, coral reefs), or when a mine discharges toxic waste resulting in air, water or soil contamination, Impacts can happen:

• Locally (for example mining-related discharge of acid and metalliferous drainage affecting local areas, or a gold processor burning mercury from an amalgam and contaminating downwind areas).

• Remotely (for example continuous discharge of high volumes of air pollutants by a smelter causing remote acid rain, or riverine tailings disposal – when mine tailings are transported over long distances in rivers and sediment deposition causes impacts far downstream).

Impacts that are enabled by, but not a direct result of, an entity’s operational practices,3 for instance:

• When investing in a steel plant, members of the board vote against installing costly equipment which treats run-off from the plant which pollutes local water sources.

• When opening up roads in previously inaccessible areas that attract other economic actors who go on to cause environmental impacts (for example clearing primary or secondary forest).

Impacts that are cumulative and collective in nature. Combined impacts on the environment of more than one activity, that can take place over a period of time (cumulative) or concurrently by several actors (collective), where the aggregate impact can be greater than the individual activities.

• For example, miners and farmers in the same area having a collective impact on a forest, or different mining operators in the same watershed intensifying disturbance of aquatic ecosystems, or the air emissions of multiple refiners reducing air quality within an airshed, or when a smelter or refiner produces GHGs through consumption of fossil fuels in a manner not consistent with internationally agreed global temperature goals (IFC, 2013[14]).

Impacts that have chronic, persistent or constantly recuring adverse consequences for human or ecological systems over a long period of time:

• For example, large‑scale consumption of water resulting in water scarcity and localised aquatic ecosystem impacts.

Impacts that are permanent or irreversible, and continue or endure without fundamental or marked change, an impact that cannot be remediated:

• For example, the deforestation of primary rainforest or activities that cause the extinction of a particular species.

Impacts that are acute and occur over a short period of time. They are used to describe brief exposures and effects which appear promptly after exposure:

• For example, tailings dam failure that results in significant and immediate harm to the local environment and communities.

The MNE Guidelines provide specific recommendations for understanding and assessing environmental impacts associated with an enterprise’s operations, products and services (see Box 3 below).

What is meant by environmental risks and adverse impacts and how should enterprises assess severity?

For many enterprises, the term risk implies financial, market, operational or reputational risk to the enterprise itself. In contrast, the MNE Guidelines refer to risks to people, the environment and society that enterprises cause, contribute to, or to which they are directly linked – an outward-facing approach to risk.

To assess the severity of an environmental impact, businesses should consider the scale, scope and irremediable character of the impact (see Table 1 below for examples of scale, scope and irremediable nature of the impact in the context of environmental impacts).4

Table 1. Examples of indicators of scale, scope and irremediable character for adverse environmental impacts

Adverse impact	Examples of scale	Examples of scope	Examples of the irremediable character
Biodiversity loss (e.g. deforestation, coral reef degradation, species loss) and damage to protected areas Climate change / GHG emissions Improper use and disposal of hazardous materials Noise and vibration Physical instability, soil erosion and land degradation Pollution (air, water etc) Damage to aesthetics and cultural heritage sites Waste mismanagement Water depletion	Extent of impact on human health Extent of changes in species composition Water use intensity (% use of total available resources) Degree of waste and chemical generation (tons; % of generation)	Geographic reach of the impact Number of species impacted	Degree to which rehabilitation of the natural site is possible or practicable The length of time remediation would take

Source: Adapted from the OECD (2018[15]), OECD Due Diligence Guidance for Responsible Business Conduct, https://mneguidelines.oecd.org/OECD-Due‑Diligence‑Guidance‑for-Responsible‑Business-Conduct.pd.f

For example, factors that may influence the severity and likelihood of adverse impacts to the environment in upstream mineral supply chains may include the:

• local environment (e.g. areas of high biodiversity, its proximity to protected areas or world heritage sites)

• vulnerability of the ecosystem and surrounding communities (e.g. water scarce regions)

• material characteristics (e.g. hazard classification, persistence within the environment)

• prevalence of extreme events (e.g. drought, earthquakes)

• political interference, corruption, instability or conflict

• financial viability of the mining operation (e.g. level and type of capitalisation)

• size and scale of operation

• level of organisation/formalisation of the operation

• ownership of the operation (e.g. publicly listed, private, state owned)

• appropriate nature of the technology being used (fit-for-purpose)

• stage of the mining lifecycle (e.g. exploration, post closure)

• level of mechanisation.

  Many environmental impacts can lead to impacts on human rights, particularly impacts on human health and safety. This includes, for example, unprotected contact with toxic substances throughout the mining, processing and recycling process and contamination of sources of food and water.

While some environmental impacts will manifest immediately, others will take time – future environmental impacts of certain activities may not be immediately apparent and therefore may be harder to assess and manage, and it may be harder to determine causation. Environmental impacts may also range from short-term (reducing once the cause is removed) to permanent (continuing after the cause is removed).

Table 2. Examples of environmental issues in upstream mineral supply chains

Environmental issue	Description
Biodiversity loss (e.g. deforestation, coral reef degradation, species loss) and damage to protected areas	Biodiversity loss or degradation, of a specific area, for example deforestation and land use change related to open pit mining or damage to marine habitats / ecosystems associated with deep sea mining. It is of high concern for all enterprises operating in forested, marine and other key biodiversity or protected areas, in all stages of the supply chain.
Climate change (e.g. GHG emissions, failure to adapt to physical risks of climate change)	Changes in global temperatures and weather patterns resulting from anthropogenic GHG emissions. GHG emissions in mineral supply chains may be particularly prevalent at the smelting and processing stages of the supply chain. GHG emissions should be measured either on an absolute or intensity basis for scopes 1,2 and 3, where appropriate.5 As the world is already experiencing climate change – including changes in average temperature, increased frequency of extreme weather events, and changes in seasons – adaptation refers to adjustments in ecological, social or economic systems in response to actual or expected climatic changes. Failure to adapt increases the likelihood of potential damages to the environment, people and society from climate change.
Improper use or disposal of hazardous materials	Materials that when released to the environment, can pose a risk to workers, communities, water sources and wildlife. Examples of hazardous materials include: elements present in the ore, such as radioisotopes, arsenic, mercury and other heavy metals that are released through minerals processing process chemicals, such as acids, organic compounds, cyanide and mercury recycling residues, which may be non-valuable residues or waste containing non-recoverable valuable materials (such as residual lead in wastes from lead-acid battery recycling).
Noise and vibration	Noise and vibrations can disturb and have severe adverse impacts on local biodiversity as well as people. Noise sources include drilling and blasting, fixed and mobile equipment, excavators, the loading/unloading and movement of trucks, crushers, mills, air fans, diesel generators and large or handheld pneumatic, percussion and grinding tools. Vibrations are principally associated with blasting and passage of heavy vehicles.
Physical instability, soil erosion and land degradation	Movement and collapse of tailings storage facilities, waste rock dumps and slopes can remain a risk to local communities and nature over an extended period, including beyond the life of the producing facility. Compaction, extraction and disruption of soil physical structure.
Pollution (air, water etc.)	Contamination of the environment by any chemical, physical or biological agent that modifies the natural characteristics. Planned or accidental discharge of effluents containing physical, chemical and/or biological contaminants into waterbodies, which causes damage to aquatic ecosystems and terrestrial organisms using that water. The risk of water pollution is influenced by site‑specific factors, such as rainfall, type of ore being exploited, chemicals being used, sensitivity of the receiving environment and the quality of environmental management. Water pollution is an environmental impact which intersects with the human right of access to safe, affordable and reliable drinking water. Air pollutants include dust, particulates, fumes, vapours and other non-GHG emissions arising from activities such as drilling, blasting, excavation, material size reduction, loading and movement and smelting, refining and recycling. They should be considered in terms of their volumes, treatments and emission locations. Some emissions cause adverse impacts on land and soil quality and ecosystem and human health in downwind areas when particulates and gases are washed out by rainfall or settle under gravity.
Damage to aesthetics and cultural heritage sites	Operations result in visible deterioration and negative aesthetic quality of natural and manmade landscapes or damage to cultural heritage sites, which impairs people’s ability to enjoy and benefit from their environment. This typically occurs in circumstances where facilities occupy large land surface areas or where industrial buildings are visible in residential and rural landscapes.
Waste mismanagement	The impact of solid and liquid waste on the environment and human health depends on its hazardous (or non-hazardous) properties, mass and volume and on quality of waste management (collection and treatment). Large volumes of waste can be generated at all stages of the supply chain, but are more prominent where product to waste ratio is low (e.g. low ore grade mining operations) circular regenerative processes are not applied, in upstream operations generally and in recycling operations that do not manage non-valuable materials and hazardous fractions and residues. Waste mismanagement can result in the dispersion of contamination and adversely impact water, soil and air quality.
Water depletion	More water being used than is available by natural replenishment or when water is diverted from ecosystems and users. Risks are often higher in permanent or seasonally arid environments.

Note: Further iterations of this table are provided in Chapter 4: Six step due diligence approach and provide guidance on indicators and sources of information for environmental risks and monitoring of mitigation efforts.

Notes

← 1.  Adverse environmental impacts specifically referenced in the MNE Guidelines are not exhaustive. Other related and more specific impacts were identified by the expert working group for the Handbook.

← 2.  See the Glossary for more information on Biodiversity.

← 3.  Subject to evolving interpretation, indirect impacts can be treated as contribution or direct linkage under RBCs involvement framework, depending on specific circumstances.

← 4.  See the RBC Guidance, Annex, Q3 for meanings of these terms.

← 5.  See the Glossary for more information on Scope 1, 2 and 3 emissions.