As the demand for critical minerals grows, greater scrutiny is being applied to the environmental and ethical aspects of supply chains.
Critical minerals such as cobalt, copper, graphite, lithium, nickel, and rare earth elements are essential for clean energy and advanced tech. However, investors and stakeholders are increasingly aware of the environmental, social, and governance (ESG) impacts of mining operations, including potential human rights issues and the broader environmental consequences.
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According to GlobalData, the extraction and primary processing of metals and minerals accounted for 26% of global carbon emissions in 2022. Ethical sourcing and traceability in the critical minerals chain are becoming essential.
In Australia, Queensland is taking a leading role by implementing a strong regulatory framework that aligns with global ESG standards and supports the state’s mining sector. With an emphasis on the traceability of materials in Europe, Queensland represents a promising and logical destination for European investment.
While critical minerals from Queensland are likely more expensive than other regions, the premium pricing is justified due to reduced risks of higher costs further down the line. The world-class environmental regulations, renewable energy infrastructure, and carbon neutrality commitments mitigate regulatory risks to avoid potential EU fines in the millions. Premium market access is secured, with 10%-20% price uplifts for ESG-compliant minerals.
For clean tech and institutional investors, the state aligns with sustainability mandates and has a secure supply chain to deliver higher asset valuations and long-term returns.
Addressing ethical and environmental issues with mining
Put simply, the mining industry needs to change to achieve a sustainable future. The sector is currently facing ethical challenges, particularly around human rights and labour exploitation in specific locations globally. There are reports of certain mining operations associated with unsafe conditions, leaving workers exposed to risks.
Such instances are most prevalent in regions with weak regulatory frameworks. This lack of oversight in mining extends to environmental damage caused by operations. Without sufficient measures in place, extraction processes can result in habitat destruction, pollution of water sources, and loss of biodiversity.
Adding to this is the demand for critical minerals essential for renewable energy technologies – such as lithium and cobalt – intensifying environmental impacts in many locations worldwide.
There has also been growing concern about greenwashing in the mining industry, where companies publicly promote sustainability initiatives that may not reflect actual practices.
However, significant changes are on the horizon. For instance, in the European Union (EU), Battery Regulation (Regulation (EU) 2023/1542) is set to be phased in this year before becoming a legal requirement in 2027. The legislation requires companies to provide evidence of the sourcing of battery components. Better known as the ‘battery passport’, the aim is to enhance transparency and ensure that materials used in batteries are sourced responsibly to address the ethical and environmental issues with mining.
To adapt to the changing landscape, Queensland is implementing a series of measures to optimise the opportunity in critical minerals while meeting ESG considerations.
A prime example of what an ESG-focused mining industry of the future could look like is at the Heritage Minerals project in Queensland. The project is a commercial reprocessing facility for tailings on the site of a historic gold mine that closed in 1900, gaining financial close in late-September this year.
Supported by the Queensland Government, works will reduce acid mine drainage from tailings dams. Under the strategy, water levels will be safely lowered, tailings will be extracted, and ground will be rehabilitated. All of this will protect local waterways, which flow into the Great Barrier Reef. The site will also provide opportunities for Indigenous worker skills development and local procurement.
Increasing transparency in critical mineral supply chains
A key project for ESG transparency in Australia’s critical minerals supply chain is a report titled A Vision and Roadmap for Critical Minerals Provenance and Traceability. The report was produced by FrontierSI in collaboration with Queensland’s Department of Natural Resources. FrontierSI is a social enterprise that addresses industrial and environmental challenges through its expertise in location analytics.
“There was a gap to address provenance and traceability, because developing a national critical minerals extraction and export industry requires a sustainable approach,” says Gavin Kennedy, interim spatial sector lead at FrontierSI. “There are increasing expectations and regulations on critical minerals coming from the international markets.”
The report provides information to ensure that critical minerals produced in Australia are ethically sourced, fully traceable, and comply with international standards in sustainability.
The roadmap focuses on:
- Digital credentials. Implementing a Guarantee of Origin – a system proving where and how minerals were sourced
- Data infrastructure. Improving digital systems to track minerals throughout the supply chain
- First Nations participation. Ensuring equitable involvement of Indigenous communities
- Sustainability alignment. Supporting Queensland’s transition to a circular economy
Companies and investors can use the report as a blueprint to gain insights into the Queensland Government’s strategic thinking. Such knowledge can help anticipate future government directions and enable investors to align their supply chain ESG strategies and operations to meet evolving requirements.
Addressing provenance and traceability of critical minerals in Australia
Putting together the report was a considerable undertaking given the sheer scope involved. In many cases, data on resources and operations sites had to be compiled from scratch.
“Queensland Government has taken the first step in Australia on provenance and traceability for critical minerals,” says Jia-Urnn Lee, strategic growth lead at FrontierSI.
One of the biggest challenges with the project was ensuring comprehensive representation in stakeholder engagement, connecting with key groups such as large mining companies and Indigenous communities. This engagement process is ongoing through the promotion of the report.
Engagement with international counterparts was also required over a short timeframe, for example, with the British Columbia Government in Canada. This highlighted the need to establish and maintain early and ongoing relationships with key stakeholders both internationally, nationally, and locally.
It should be noted that report outcomes are not yet official policy nor reflect the Queensland Government’s commitment to any future initiatives. Nevertheless, the findings offer an essential starting point for discussions between government, industry, and communities on objectives for a critical minerals provenance and traceability ecosystem in Australia.
Companies and governments can use the roadmap and maturity model to understand how to achieve key goals. Case studies have already been developed from the report to inform where independent commercial parties can get involved in the value chain.
The report is a vital step towards delivering a robust and fully traceable critical minerals supply chain to enable the industry to fulfil its potential while complying with ESG requirements.
“Our role was to report on the potential critical minerals’ provenance and traceability framework for Australia,” adds Kennedy. “We will continue to promote this framework with government and industry, encourage interested parties to engage with us, and identify partnerships that will turn this vision into action.”
How Queensland is developing ESG policies in line with critical minerals growth
Critical minerals are a pillar of the Queensland Government’s economic growth strategy and central to the energy transition. This strategy has been borne out of the critical minerals demand, which has seen rapid market growth over the past five years. According to the IEA, the critical minerals market is expected to grow as much as fourfold by 2030.
The state is well-positioned to meet this demand, with Queensland looking to diversify its exports and imports to avoid volatile prices or supply chains over reliant on fewer locations. By processing materials locally, companies can reduce transportation costs, improve turnaround times, and minimise the impact of international disruptions.
In another initiative to bolster ESG capability, increase awareness, and further knowledge in critical minerals, the Queensland Government has partnered with the Australasian Institute of Mining and Metallurgy (AusIMM). Building on the Queensland Resources Industry Development Plan, the scheme will be carried out under the Queensland Critical Minerals Strategy – with the Queensland Government investing $1m.
Along with strengthening ESG performance for critical minerals in Queensland, the initiative seeks to ensure that best practices are implemented to meet increasing expectations from stakeholders such as consumers and investors, as well as communities and First Nations Peoples.
Queensland is actively promoting full traceability in its mining sector by linking Australian-mined minerals through verifiable supply-chain certification. This initiative is crucial for ensuring that the minerals extracted in Queensland can be tracked throughout the supply chain, from extraction to the end consumer.
In addition, Australia is a signatory of the Sustainable Critical Minerals Alliance, an international organisation committed to sustainability and the highest ESG standards for the mining and processing of critical minerals. The Queensland Resources Cabinet Committee has also been established to streamline project approval processes in the state.
Alongside this, the regulatory framework established by the Queensland Government emphasises the importance of ethical conduct and sustainability in mining operations.
Companies are required to adhere to stringent environmental regulations in operations, including limits on emissions, management of hazardous substances, and rehabilitation of disturbed areas.
Robust engagement with communities is another cornerstone of the Queensland Government’s standards. Companies are encouraged to work closely with local populations, including Aboriginal peoples, to mitigate any negative impacts their operations may have on the environment and community. This collaborative approach not only helps in avoiding permanent harm to the natural environment but also fosters trust and transparency with stakeholders.
With a globally respected mining industry, a highly skilled workforce, and world-leading ESG practices, businesses are increasingly looking to invest in Queensland to secure a stable supply of responsibly produced critical minerals and strategic materials.
All these factors position Queensland’s higher costs as a strategic investment for risk mitigation and provide a future-proofed competitive advantage in fully traceable critical minerals in global markets.
To learn more about critical minerals in Queensland and the ESG framework, download the latest prospectus below.
