EU’s due diligence law could boost competitiveness of mining sector
The EU’s plan to oblige companies to police their value chains for human rights and environmental standards has been met with fierce opposition from most industry sectors. However, for the mining industry, the new due diligence directive could prove to be a competitive advantage.
The European Commission’s proposal on corporate due diligence intends to make European companies with more than 500 employees and €150 million annual turnover responsible for monitoring, preventing and mitigating human rights and environmental standards along their value chain.
As mining is considered to be a risk sector, the threshold is even lower with 250 employees and €40 million in turnover.
Despite concerns from most of the industry players, most of Europe’s mining sector has silently embraced the upcoming legislation. Norge Mining for instance was quick to announce that it has positioned itself as a “pioneer” when it comes to corporate sustainability.
A similar stance can also be observed with the European Carbon and Graphite Association (ECGA).
“ECGA believes that responsible and ethical sourcing of carbon and graphite is rightly an essential part of EU policy, and it would be desirable that this is adequately implemented, but not only for the primary materials but also for the products thereafter,” Corina Hebestreit, Secretary General of the European Carbon and Graphite Association told EURACTIV.
While the ECGA also emphasises that “excessive burdens on companies should be avoided” it is more favourable towards the directive compared to other associations that represent industries further up the value chain.
The Mechanical Engineering Association (VDMA) for instance has recently called the directive in its current form a “threat to European competitiveness.”
On Monday (20. February) the VDMA even called on the German government to “prevent the EU Parliament’s plans from being implemented in the Council in the way they are currently being discussed.”
A competitive advantage
While the due diligence directive is portrayed by most industries as an additional burden, it could actually prove to even boost the international competitiveness of the mining sector.
“For the mining industry, the Due Diligence Directive could prove to be a competitive advantage in the future,” André Wolf, head of Department Technology, Infrastructure and Industrial Development at the Centre for European Policy told EURACTIV.
As mining stands at the beginning of the supply chain, European mining companies are far less burdened by the monitoring obligations in the due diligence directive.
While European companies are already obliged to live up to high environmental and human rights standards, the due diligence law would pressure their competitors in third states to do the same, thereby giving European mining companies a relative competitive advantage.
The favourable view towards the new due diligence rules is also present in other producers of primary commodities which do not involve mining.
One case in point is the production of synthetic graphite, an essential part of car batteries, that is produced through a high-temperature process.
“Our target is to have supply chains as local as possible in Europe. So I would say we do not have an issue regarding the due diligence directive, quite the opposite”, general manager of the graphite producer Vianode, Stian Madshus, told EURACTIV.
“We see the European business standards as a competitive advantage. And we believe that electrification is important, but you have to do it responsibly,” he added.
A price for sustainability
Sustainable mining in Europe is currently more expensive than many of their international competitors, who often rely on workers’ exploitation and have often little regard for environmental standards.
“The mining sector is hoping that the industry would be happy to pay a premium for sustainable raw materials since sustainable mining adds more costs to the production in the form of higher capex associated with tailings and water treatment compared to waste treatment in many other places in the world,” Rasmus Blomqvist, managing director at Grafintec, the Finnish subsidiary of Beowulf Mining, told EURACTIV.
According to the expert Wolf, the due diligence directive could help here. In the long term, there could even be positive effects regarding the expansion of the EU’s mining capacity – which is one of the main goals of the upcoming Critical Raw Materials Act of the European Commission.
“The expansion of domestic raw material production could be intensified indirectly through such an increase in the cost of international supply chains,” Wolf said.
“That might also have been one of the Commission’s ulterior motives to push for the due diligence directive,” he added.
“The expansion of domestic raw material production could be intensified indirectly through such an increase in the cost of international supply chains,” he added.
However, it remains to be seen if the due diligence directive, which will enter the final negotiation stage after the European Parliament agrees on its position in May, will really lead to higher international standards.
“The ideal case would basically be that compliance with standards also becomes a real competitive advantage on the global level at some point,” Wolf remarked.