METHODOLOGY
The methodology used to development the RMO can be grouped in five categories:
Data collection methods
The value chain information, the market intelligence data and the ESG risk identification were done by reviewing secondary data. Primary data collection through stakeholder engagement was also done to address research gaps or triangulate information where relevant. In addition, part of the market intelligence data was provided by Argus Media*. Secondary data reviewed included:
- Publicly available information (reports, media articles, academic papers, industry briefings, etc.)
- Reported incidents and materialised risks linked to each commodity and at different stages of the value chain.
- Standards and initiatives applicable or relevant for the minerals in scope.
Stakeholder interviews have included industry associations and independent experts.
*Disclaimer: The data provided by Argus in the form of tailored report for the Raw Material Outlook has not been fully triangulated or verified. Data and information contained in the tailored report for the Raw Material Outlook come from a variety of sources, some of which are third parties outside Argus’ control and some of which may not have been verified. All analysis and opinions, data, projections and forecasts provided may be based on assumptions that are not correct or which change, being dependent upon fundamentals and other factors and events subject to change and uncertainty; future results or values could be materially different from any forecast or estimates described.
Reference framework of risk identification and analysis
The United Nations Guiding Principles (UNGPs) on Business and Human Rights have been used as the main reference framework for risk identification, analysis and prioritisation (as explained later). The UNGPs outline (principle 18 specifically) that business enterprises should identify and asses any actual or potential adverse human rights impacts with which they may be involved either through their own activities or because of business relationships. The analysis done for the development of the RMO has expanded this concept to broader environmental, social and governance risks. Given the extended scope the outcomes should be considered as indicative at this stage and in the context of the automotive sector, rather than from the perspective of doing due diligence for a specific company’s value chain and direct business relationships. Moreover, the risk identification has been based on:
- Reported materialised risks, which have been used as evidence to support the identification of impacts at each stage of the value chain.
- Materials specific processing methods and technology, which guided the identification of potential risks even when evidence would not be found. This method has been particularly useful to identify risks to the environment and health and safety, both for workers and communities
Risk classification
Identified risks have been categorised following the Consolidated Framework of Sustainability Issues for Mining which resulted from the comparison and synthesis of sustainability issues and requirements in the mining sector done by the Bundesanstalt für Geowissenschaften und Rohstoffe (BGR). The classification has slightly been adapted to include sub-issues which were not included in the framework.
Risk prioritisation
The data collected through the RMO will be used to guide a preliminary risk prioritisation across the value chain stages for each material. Following the UNGPs methodology, this initial prioritisation, should be then complemented by engaging affected parties and other relevant stakeholders. The preliminary assessment prioritises risks based on saliency, which is defined by the risks’ severity and likelihood.
- Severity: calculated as a compound score of scale (i.e., gravity of impact), scope (number of individuals affected) and irremediability (the ease with which those impacted could be restored). The assessment of these three parameters is done against each risk summary and according to the data collected. It is then combined into an overall severity score.
- Likelihood: evaluated on a geographical basis, using human rights databases and available benchmarks to determine how likely a particular risk is to occur in a particular country or region. These benchmarks are the same for all countries / regions to ensure comparability and consistency. The market intelligence data is used to determine the likelihood based on production countries. For value chain stages where market intelligence data is not available currently, the locations of materialised risks is used instead.
Leverages
The value chain approach has led to the identification of potential leverages for the automotive industry to consider. Recommendations include sector-wide collaborative actions, considerations for individual companies for their own responsible sourcing practices, and multi-stakeholder collaboration opportunities. The leverages are defined based on the methodology outlined by the Shift in the guidance: Using Leverage in Business Relationships to Reduce Human Rights Risks.
Research notes and limitations
This section includes some important notes and limitations which should be noted while reviewing the information presented in the RMO. These are separated between general limitations and the ones which apply to specific materials.
General limitations
Commodity specific limitations
General limitations
- Dealing with broad scope of data – value chain mapping really means looking at the ecosystem of a given material, globally and at different stages of the value chain.
- Manufacturing / intermediary products sections – this section of the value chain has been the most difficult to analyse within the scope.
- This assessment has been subject to an overwhelming English language bias. This may also create a data bias against certain geographical regions such as Latin America. Other source languages for consideration might have included Spanish, German, French and Chinese.
- Whether or not a situation, environmental or human rights abuse had been resolved remained unclear in many cases as there is often little follow up to initial reporting. As such, it was very difficult to obtain the latest position on a given incident or situation.
- It was very difficult to accurately identify contemporary relevant stakeholders, particularly companies involved. This was due to changes in the parties in many cases, as well as sometimes confusion in public reporting.
- It was very often extremely difficult to place company operations within a precise value chain stage as it was not always clear whether a given set of circumstances or impacts related to mining or processing operations, and, if the latter, which processing operations.
- Information conveyed in public reporting on ESG impacts is often contested and not uniformly reported. This creates challenges in verifying accuracy and as such any reports are best treated as indicative.
- Situations therefore require further enquiry and investigation on the ground with relevant stakeholders. However, such investigations can be extremely difficult – especially in remote areas that companies control access to – e.g. Russia and Colombia. In on the ground investigations need to be careful of whitewash, even in local press, due to perceived financial implications of adverse reporting for workers. e.g. https://www.theguardian.com/world/2016/sep/12/russian-metals-firm-admits-spillage-turned-river-blood-red - this article very well highlights the problem that worker and even local community dependence can render local people unwilling to speak out.
- The ESG risk identification and analysis does not intent to assign responsibilities to specific parties. It rather focuses on identifying which impacts are already or potentially taking place, so to direct further analysis and due diligence.
- Risk identification has been more extensive on the upstream stages of the value chains, specifically mining and processing stage. Once the material is further transformed in intermediary or manufacturing products, a broader analysis would be required and tracing down impacts across manufactures has been considered out of scope. Further risk identification would require combining the existing data with specific automotive manufactures supply chain mapping.
Commodity specific limitations
Bauxite / Aluminium
- Reporting on the mining stage was more extensive than for other value chain stages, with evident limitations for casting, intermediary products, semi-fabrication and manufacturing stage which deserve further analysis.
- In some instances, lack of consistency of reports in terms of clearly differentiating between alumina refining and aluminium smelting made attribution of impacts to a certain value chain stage more difficult.
- The recycling stage deserves further analysis as drawing impacts specific to aluminium within the current scope presented limitations.
Chromium
- This assessment has sought to identify reporting that relates specifically to chromium and not to the general mining or processing situation in a given country or region. This has meant that wide variety of impacts may not be explicitly referenced in this report due to the fact that links to chromium extraction or processing have not been made clear or explicit. Nevertheless, even in the absence of chromium-specific examples, chromium mining and processing should still raise serious human rights concerns when they take place in conflict affected countries or countries with poor human rights, rule of law or environmental records.
- This analysis has drawn mainly on sources dated 2015 or later. It has therefore usually excluded data relating to human rights impacts reported on prior to 2015. This does not mean that risks and impacts reported earlier have necessarily been resolved or are no longer relevant. Rather, maintaining follow up to such cases is often extremely difficult in light of competing events and limited resources.
- Particularly in cases of product manufacture, individual environmental and human health impacts of chromium can be difficult to isolate. This study has placed particular emphasis on hexavalent chromium (Cr-VI) exposure as this is a strong indicator of chrome-related impacts.
- Where mining, processing and/or product manufacture take place within the same vicinity it is difficult to attribute impacts to a specific stage of the value chain.
- The individual impacts of a single production facility can be challenging to isolate if it is located in the vicinity of other industrial activities that can co-mingle. This is particularly an issue where steel manufacturers and tanneries are located in industrial complexes. This can occur where, as in northeast India, mineral deposits like iron and chromium are located in strategic proximity to ports and used for a wide variety of industrial applications. Whilst this can create challenges around causation for certain impacts that affect health and livelihoods, the use of chromium is nevertheless generally identifiable as a factor.
- The impacts of chromium are often a notable contributing factor in the adverse human rights and environmental impacts of aluminium and stainless-steel manufacture. It is not possible to illustrate the full extent of the risks posed by these sectors as each would merit a study in their own right. The work developed within the Drive Sustainability project should provide some additional support in this respect. However, some limited indicative examples of risk manifestations involving chromium have been provided.
- Chromium can often be a by-product of platinum group metals extraction. The human rights risks associated with such extraction will not necessarily be reported as chromium specific. An analysis of platinum group metals human rights impacts is beyond the scope of this study
Copper
- In the Democratic Republic of the Congo (DRC), a significant amount of raw copper is produced by ASM. However, as copper and cobalt - often referred to as 2C - are often mined and traded in the same region and by the same companies, reports of human rights issues generally do not differentiate clearly in their findings between the mining of cobalt and copper. For that reason, risks identified in the upstream cobalt supply chains may also apply to copper mining. This lack of clearly differentiating between copper and cobalt mining made attribution of impacts to a single mineral more difficult.
- Reporting on the mining stage was more extensive than for other value chain stages, with evident limitations for smelting, refining, alloying, manufacturing, and recycling stages which deserve further analysis.
- In some instances, a lack of differentiation between copper smelting and refining, referring to both as ‘processing’, made it difficult to firmly outline specific impacts on the value chain and data pertaining to each value chain stage.
- Determining the likelihood of risks materialising at the manufacturing stage proved complex because market intel on the manufacturing of copper-bearing products was too extensive to draw conclusions about the largest copper-bearing product manufacturing countries. The likelihood scoring is therefore based on the specific countries where human rights and environmental issues associated with the manufacturing of copper-bearing products have been identified.
- With China playing a large role in copper smelting, refining, alloying, product manufacturing and recycling, risks and adverse impacts may be harder to identify or go unreported.
Graphite (Natural)
- Reporting on graphite was considerably low compared to other minerals, presenting graphite as somewhat of a blind spot. As result, a notable segment of public reporting expressing concern over graphite cited situational indicators for concern, rather than specific instances of ESG breaches.
- The opacity of the global graphite supply chains and distortions in trade data that, for example, present traders as major graphite exporters, rendered it more challenging to clarify the issue of scope of risk, despite the fact that there were clear indictors of risk sources that could potentially contaminate the supply chain (e.g., North Korea and Pakistan).
- Distinguishing between natural and synthetic graphite production was often difficult and, in some cases, appears to have likewise caused confusion among certain market intelligence analysis. Reporting on impacts on communities generally referenced graphite production “factories” without specifying whether factory processes related to the processing of natural graphite or synthetic graphite.
- Distinguishing between different graphite processing, and sometimes even between the impacts of mining and processing, was rendered difficult by generic or vague reporting. Reporting often discussed impacts without reference to specific triggers or causes, leaving this down to deduction, where possible. In one case, minerals experts reported confusion as to why certain triggers such as high dust particle emissions should be generated by a processing facility of the nature described in reporting.
Iron ore – Steel
- Limited reporting was available for the beneficiation, fabrication and recycling stages which all deserve further analysis in terms of materialised impacts and risks.
- As the value chain looked at iron as raw material and then steel production as main application, the analysis has been limited to iron, and for steel production impacts identified focused on the actual processing and operations, and it did not look into other components in detail.
Leather
- The leather value chain analysis has sought to identify reporting that relates specifically to leather for auto making and not to general leather making or auto production in a given country or region. This has meant that a wide variety of impacts may not be explicitly referenced in this report due to the fact that links to auto leather making (relevant to Daimler value chain) have not been made clear or explicit. Nevertheless, even in the absence of specific examples, cattle growing/ranching for auto leather, slaughter, tanning, and production should still raise serious human rights concerns when they take place in or countries with poor human rights, rule of law or environmental records.
- This leather value chain analysis has drawn many sources. It has included information relating to human rights violation cases which may be out of date but are encompassed to provide indicative risk. This does not mean that risks and impacts reported earlier have not been resolved or are still relevant, rather they indicate patterns and local nuance. Furthermore, maintaining follow up to such cases is often extremely difficult in light of competing events and limited resources.
- As actors in the leather value chain produce not only for Automotive companies (but also for fashion, furniture, and more), individual environmental and human health impacts of auto leather value chains specifically can be difficult to isolate. This study has attempted to isolate what are more likely risks related to the auto leather value chain.
- The leather value chain is highly complex. Much data is reported using terms interchangeably such as “leather” and “leather goods” without clarity on whether such data regards imports, exports, or other volumes and refers to partially treated hides, finished hides, or finished products (such as leather fashion goods, etc).
- The individual impacts of a single production facility can be challenging to isolate if it is located in the vicinity of other industrial activities that can co-mingle. This is particularly an issue where slaughterhouses and tanneries are located in industrial complexes. Cattle are farmed for their beef meat more than for their leather (hides which can be turned into leather are often considered a by-product), so meat usage as a primary driver of cattle farming activity should be kept in mind. Discussion of slaughterhouses is regarding beef production as it is difficult to separate human rights risks of activity in these facilities between hide removal (for potential leather) and the primary activity of such facilities which is meatpacking (cutting of carcasses).
- The impacts of leather are often a notable contributing factor in the adverse human rights and environmental impacts of rainforest clearing. This is especially an issue where rainforest is cleared for cattle farming, but often also for agriculture such as for soy growing, etc (land may be used for one activity after another over time). The value chain analysis do not illustrate the full extent of the risks posed by these sectors as each would merit a study in their own right, but considerable public material is available regarding efforts to end deforestation related to cattle meat and soy production, and there is considerable overlap in industry initiatives and efforts as many actors recognize the overlapping impacts. Where relevant overlap is mentioned.
Lithium
- Reporting on the mining and refining stages was more extensive than for other value chain stages. There were evident limitations for trading of spodumene concentrate and trading of lithium chemicals and these value chain tiers deserve further analysis.
- In some instances, lack of differentiation between lithium mining and refining and referring to it all as ‘production’ made it difficult to firmly outline specific impacts on the value chain and data pertaining to each value chain stage.
- With China playing a large role in refining, component and product manufacturing and recycling, risks may be harder to identify or go unreported.
- Lithium-ion batteries have recently become the largest end-product of lithium, so risks associated with its manufacturing, and recycling are yet to be understood or have materialised. As a result, further investigation would need to be conducted over the next few years as demand and production of lithium-ion batteries increase.
Magnesium
- Limited public information is available on magnesium impacts. When data was available, in some instances, it has proven difficult to link reported impacts to specific value chain stages or to clearly define the severity and cause of impact because of the limited information available.
- Accessing market information beyond the mining stages has been challenged by the limited publicly available information.
- The OECD data on trade provides values in US dollar instead of volume of traded material, which instead would provide a more accurate analysis.
Manganese
- Limited public information is available on manganese impacts. When data was available, in some instances, it has proven difficult to link reported impacts to specific value chain stages or to clearly define the severity and cause of impact because of the limited information available.
- Accessing market information beyond the mining stages has been challenged by the limited publicly available information.
- The OECD data on trade provides values in US dollar instead of volume of traded material, which instead would provide a more accurate analysis.
Molybdenum
- As molybdenum is often extracted as a by-product of other principal minerals (copper, etc.), there was minimal information available on molybdenum mining, refining, etc. alone, on its own with its own separated impacts. Much of the information was extracted from information gleaned from copper mining, or tungsten mining, etc.
- Minimal public information available on trading, warehousing, transportation.
- Minimal public information available on some of the later stages of the value chain, including component manufacturing, product manufacturing, and recycling and disposal. This could be because molybdenum is often extracted as a by-product of other minerals, and therefore is found in minimal amounts toward the later value chain stages.
Nickel
- The sheer volume of reporting in respect of nickel mining and processing operations created a heavy bias on the upstream processes involved in nickel production. It also meant that several cases could not be included simply due to scope limitations, and the impacts reported.
- Some situations appear to be protracted and evolving, whereas others are simply seldom reported on. Nearly all materialised risk were considered temporally relevant either because events had taken place during the reference period (as well as before it) or because reporting on events had taken place during the reference period in a manner that suggested that the issues remained unresolved.
- Reporting tended to focus on nickel production “projects”, which could involve both mining and processing. This made it difficult to distinguish which part of the value chain a given impact related to. For example, many metallurgical facilities are set up as projects to reduce transportation costs locating smelters and refiners close to mines. Moreover, legal arrangements between entities operating each facility can vary and be complex. As such, nickel has been proven more difficult to disaggregate actions between mining and refining in numerous cases, either because impacts coalesce or because of the way in which cases are reported. It can be likewise difficult to distinguish between smelters and refiners where reference to impacts is particularly focused on human health or environmental outcomes rather than modes or triggers of harm.
- There were certain instances of companies implicated in serious ESG risks in one location but having operations elsewhere that are best in class for lower impact. In some cases, these companies would continue to operate extremely damaging operations elsewhere, claiming that impacts were being addressed without resolving the situation, or else ceasing damaging activities but failing to address historical impacts.
Niobium
- This analysis has drawn mainly on sources dated 2015 or later. It has therefore excluded notable amounts of data relating to human rights impacts reported on prior to 2015 (though a certain amount has been included where there are indications of ongoing issues). This does not mean that risks and impacts reported earlier have necessarily been resolved or are no longer relevant. Rather, maintaining follow up to such cases is often extremely difficult in light of competing events and limited resources.
- As niobium is a rare earth metal that is overwhelmingly found in Brazil, coverage of niobium-specific human rights reporting – especially reporting in English – can be more difficult to come by. This assessment has drawn in large part on open-source Portuguese media translated using online translation.
- Outside Brazil, niobium ores are sometimes extracted from tantalum material without specific reference to niobium content, making specific producers difficult to identify in most human rights reporting.
- Considering that niobium is often extracted as by-product (e.g., from tantalum), risk identification specific to niobium has been more difficult, as many reports do not differentiate or make explicit the implications of niobium specific production.
REE
- In some instances, it has proven difficult to link reported impacts to specific value chain stages or to clearly define the severity and cause of impact because of the limited information available.
Rhodium
- The rhodium value chain analysis draws mainly on sources dated 2015 or later. It has therefore excluded notable amounts of data relating to human rights impacts reported on prior to 2015 (though a certain amount has been included where there are indications of ongoing issues). This does not mean that risks and impacts reported earlier have necessarily been resolved or are no longer relevant. Rather, maintaining follow up to such cases is often extremely difficult in light of competing events and limited resources.
- As rhodium is a platinum group metal that is frequently a co-product or by product from the extraction or processing of other target minerals, its impacts are often impossible to disaggregate from those of other co-products, and are, in any case, subsumed under the wider category of PGMs in human rights reporting.
- Rhodium/PGMs can be a co/by-product of the mining and processing of non-PGMs, particularly nickel and chromium. Some illustrative human rights case studies from the nickel and chromium value chains have been provided in this study, where relevant (e.g., for Russia and Canada). However, for a fuller understanding of the human rights risks and impacts associated with these sectors readers are advised to read both the nickel value chain risk profile produced for Drive Sustainability and the Chromium value chain mapping and human rights risk analysis presented elsewhere in this series for Daimler.
- It is important to note that rhodium may not be specifically targeted for mining as part of some PGM projects, and in others may not be a key mineral targeted, though may still be produced. This can create ambiguity about whether any given PGM (or other) mine even produces rhodium. As such, this study has focused its attention specifically on mines and facilities identified as having capacity for rhodium production in market intelligence data.
- The underrepresentation of midstream industrial processes in human rights reporting can particularly arise in relation to minerals processing operations where they take place in the vicinity of mining activities or other industrial processing. This is due to the fact that the impacts of such facilities are not always well understood among the general population, and the fact that their impacts can be difficult to disaggregate from the impacts of other activities. As such, they can become underrepresented. In the context of rhodium, it is notable that in Russia, most human rights related/ESG reporting has related to processing facilities, whereas in South Africa, most reporting relates to the mining activity. This disparity likely represents where the balance of issues is felt to lie in each country but also creates potential bias in the presentation of issues affecting each value chain segment in these countries.
- As specific impacts of rhodium use in manufacturing are very difficult to identify, this analysis has focused on mining and processing with the view that the specific human rights impacts of companies like BASF, Johnson Matthey and Umicore would merit a separate analysis.
Silica
- This analysis has drawn largely on sources dated 2015 or later. It has therefore usually excluded data relating to human rights impacts reported on prior to 2015. This does not mean that risks and impacts reported earlier have necessarily been resolved or are no longer relevant. Rather, maintaining follow up to such cases is often difficult in light of competing events and limited resources.
- Lack of specification in reporting has rendered it difficult in many cases to discern between human rights impacts experienced in the silica sand sector and those experienced in the construction/regular sand sector. An attempt has been made to outline the challenges and give an indicator of likelihood of risk, where possible.
- The many applications of silica sand in car manufacturing, difficulties identifying manifest examples of human rights risks associated with glass manufacturing and the sheer volume of manifest examples of risks associated with sand extraction, means that the predominant focus of this research and analysis lies with the extraction and trade of silica sand, as opposed to its further manufacture and use.
Tantalum
- Considering that tantalum is often extracted as by-product, risk identification specific to tantalum has been more difficult, as many reports do not differentiate or make explicit the implications of tantalum specific production.
- Data available on 3Ts’ mines in eastern DRC is often aggregated across 3Ts minerals (especially when two or more occur in the same area), and not in all cases it was possible to single out tantalum specific impacts.
Tin
- The analysis has drawn mainly on sources dated 2015 or later. It has therefore usually excluded data relating to human rights impacts reported on prior to 2015. This does not mean that risks and impacts reported earlier have necessarily been resolved or are no longer relevant. Rather, maintaining follow up to such cases is often difficult in light of competing events and limited resources.
- Where mining and processing are vertically integrated or take place within the same vicinity (i.e., refining and smelting) it can be difficult to attribute impacts to a specific stage of the value chain due to reports using a single geographical location or company as the main reference point.
- The substantial role of ASM mining in tin ore production and particular attention on this issue among media outlets and NGOs means that the research for this analysis has strong ASM, and by extension, conflict minerals coverage. Indeed, both factors are very significant human rights risks in the tin supply chain. Regardless, it should be noted that the impacts of largescale mining (LSM) can also be particularly significant and widespread for local communities where they are not properly managed. Reporting on such instances is not always as comprehensive as it is on ASM (in part because of more potential liability issues surrounding such coverage). It is important to not therefore that LSM impacts can also therefore tend to be underrepresented in human rights reporting compared to ASM.
- The underrepresentation of more largescale industrial processes in human rights reporting can particularly arise in relation to smelting operations where they take place in the vicinity of mining activities or other industrial processing. This is due to the fact that the impacts of smelters are not always well understood among the general population and the fact that their impacts can be difficult for the lay person to disaggregate from the impacts of other activities. As such, these impacts can likewise be underrepresented.
Zinc
- The value chain stages refining, smelting and roasting were combined, as much of the literature seemed to combine these stages or use the terms interchangeably, and it has proven more difficult to associate impacts to specific value chain stages.
- Minimal public information available on trading, warehousing, transportation.