The mining and refining of metal is an industry with ancient roots, and it remains essential to the global economy. Even supposedly “clean” industries like electronics depend on mining and smelting, as gold, tin and other metals are found in cell phones, computers and other ubiquitous consumer products.

Industrial mining can have a dramatic impact on the environment, and metals profits also help finance violent unrest in poor nations like the Democratic Republic of Congo (DRC). Developing nations such as Indonesia, Colombia, and the DRC bear the brunt of mining’s costs, yet downstream consumers – and investors – share responsibility for industry practices.

To better assess these practices, the Global Reporting Initiative (GRI) recently solicited comments for its Mining and Metals Sector Supplement (MMSS). The MMSS will support better environmental, social and governance (ESG) disclosure by mining companies and metal processors.

GRI recognizes that the global economy’s appetite for metal has overwhelmed many efforts to protect workers and the environment, and that the relationship of metal producers and consumers must change.

Even Responsible Mining Scars Land, and People

In a recent sector report, KLD Analyst Lesley Fleischman notes that even relatively well-run mining operations still have an impact:

“There are mining companies who operate some of the most sophisticated environmental and community programs of any of the companies I’ve researched. Many follow high standards for waste disposal, operate programs to hire indigenous people, and provide education and health service to communities.

“But even relatively well-run mining operations can have severe environmental consequences, and many miners’ communities see only a fraction of the income from their work.”

Congo’s “Blood Minerals”

The Democratic Republic of Congo (DRC) is a tragic example of what “blood mineral” wealth can do to a society. KLD Analyst Benson Hyde, who has studied the DRC, writes:

“’Blood minerals’ include not only gold for jewelry, but also tin for electronics; tantalum, used to store electricity in cameras, phones, and other devices; and tungsten, which helps make cell phones vibrate.

“The same Congolese groups are responsible for both the mineral trade and violence in the DRC. Mining operations generate hundreds of millions of dollars each year. Armed groups profit both from forcibly controlling the mines and by demanding bribes from traders, shippers, and border guards.

“The regions where these minerals are mined have the world’s highest rate of sexual violence, which is often used to control inhabitants. Children are also forced to work in mines and join the militants.”

Mixed Messages from Developed Nations

Sustainable and socially responsible investors (SRI) have sought to hold metals companies accountable for their ESG practices worldwide. This week, Canada’s Ethical Funds Company announced that it has secured nearly 20% shareholder support for an independent ESG audit of Barrick Gold. Ethical Funds says that Norway’s pension fund has already divested from Barrick, “citing concerns with human rights violations and community unrest at operations.”

Developed-world governments are also concerned with mining companies, but they may not share ESG/SRI priorities. Canada’s Embassy magazine reports:

“The Conservative government has rejected joint civil society-private sector calls to tie diplomatic and economic support for Canadian oil, gas and mining companies operating in developing countries to socially responsible conduct abroad.

“As a result, there are charges the government—allegedly influenced by mining giant Barrick Gold and the Canadian Chamber of Commerce—has given the green light for misbehavior abroad, and killed the temporary peace between NGOs and mining companies.”

The article describes how, over the objections of NGOs and activists, the Canadian government reduced the power of a proposed “extractive sector CSR counselor.”

Embassy quotes Karyn Keenan, of activist coalition the Halifax Initiative: “The response basically perpetuates the status quo. There’s no incentive for corporations to change their behavior.”

Rich Nations Buy Gold – and Sell Mercury

Part of the metal supply chain’s status quo is for developed-world corporations to source raw material in poorer nations. Trade is not a one-way street, however. Miners in Indonesia import illicit mercury for gold mining use – and the US and Europe are major sources for this toxic material.

The Jakarta Post reports:

“The use of mercury in gold mining is illegal in Indonesia because it is toxic to both human health and the environment. But the price of gold has tripled since 2001, and mercury is the easiest way to extract it…

“Despite the hazards, buying mercury at gold mining sites is as easy as purchasing toothpaste. The international trade in mercury is largely unregulated. And most of the 55 countries where small-scale gold mining is rife lack the political will or capacity to prevent the toxic metal from falling into the hands of 10 to 15 million poor miners.”

KLD’s Lesley Fleischman explains that while large mining companies don’t use mercury to extract gold, they do play a role in creating demand for the chemical. “Typically, the small-scale miners who buy mercury illegally are former farmers whose land has been ruined by large-scale mining.”

Millions of Miners, Billions of Consumers

To their credit, the GRI does not shy away from the geopolitical complexity of this sector. As defined by their guidelines, three of the sector’s “main contextual issues” are explicitly political:

The control, use, and management of land
The contribution to national economic and social development
Community and stakeholder engagement
Labor relations
Environmental management
Relationships with artisanal and small-scale mining
An integrated approach to minerals use

The last-listed issue may have the broadest implications for investors and consumers in the developed world. Individuals’ demand for useful and attractive products is already “integrated” into the world economy; can their concern for human rights and the environment also shape the metals sector?

The Jakarta Post notes that the US, UN, and EU have all committed to banning mercury exports. Sustainable/SRI investors, in concert with independent observers like the GRI, can also help guide the practices of both buyers and sellers of metal.

Resisting the Rare and the Beautiful

Still, the struggle for sustainable use of metals is a struggle against consumerism itself. The difficulty of tempering human appetites – of persuading people to pay more, or use less – is an issue that goes beyond jewelry or iPods.

For a poignant expression of what we’re up against, here is a consideration of a consumer good seemingly unrelated to metal: fresh, store-bought food.

Jon Garvie, writing in the Times of London, reviews Susanne Freidberg’s Fresh: A Perishable History, a social history of consumers’ demand for “permanent global summertime.” Mr. Garvie emphasizes the part of Ms. Freidberg’s story where a desire for social justice collides with baser appetites:

“…[Companies] envelop their activities within promises of corporate social responsibility and greater self-regulation. But the consequences of this attention are as nothing compared to international consumer demand for ‘permanent global summertime’ in which all fruits and vegetables are made available all of the time. The universal impulse to fetishize the (increasingly) rare and the beautiful leads back unerringly to inequity and despoliation. [Emphasis added]”

Whether it delivers something permanent as metal or as ephemeral as food, the supply chain’s reform must begin with the buyer.