A new grievance mechanism for Chinese overseas mining needs to be free to use
As the world transitions to more renewable forms of energy, surging demand for critical minerals such as cobalt, nickel, aluminium and lithium could bring significant risk to communities affected by mining and mineral processing.
Yet many such communities have no channels available to raise concerns or seek redress. This leaves the door open for abuses and greenwashing. These not only harm affected communities but are bad for companies managing environmental and social risks in their investment and supply chains. They are also bad for investors, buyers and end users seeking to avoid the pitfalls caused by unethical operations.
China is a vital node for global supply chains in electric vehicle batteries, solar photovoltaic equipment, and other mineral-intensive technologies necessary for a green transition. Recent developments in China suggest stronger accountability to local communities may be coming.
In November 2022, the Responsible Critical Mineral Initiative (RCI; formerly the Responsible Cobalt Initiative) and the China Chamber of Commerce of Metals, Minerals and Chemicals Importers and Exporters (CCCMC) announced that they are creating a new accountability mechanism for the mining sector.
Covering the value chains of all minerals, it will be the first accountability mechanism established by a Chinese industry association allowing communities to raise concerns about the social and environmental impacts of an overseas mining project. If designed and implemented well, it will be a significant step toward closing the “accountability gap”.
The role of accountability mechanisms
Accessible, fair and effective accountability mechanisms provide an important forum for affected people to express concerns and address grievances.
We have worked with many communities affected by mining who have successfully leveraged such mechanisms. These include a community in Guinea that, after being evicted at gunpoint to make way for a gold mine owned by a South African firm, filed a complaint to the accountability mechanism for projects supported by the International Finance Corporation (IFC).
They ultimately secured agreements with the company to improve access to basic facilities at the resettlement site, including water and schooling, and received increased compensation, among other outcomes.
We also worked with herders in Mongolia who filed complaints to IFC’s mechanism regarding gold and copper mines that had depleted water resources and disrupted pasture lands. They secured commitments from the mining company and local government to resolve key issues.
Accountability mechanisms also create channels for investors and corporate executives to hear about environmental and social risks directly from local communities, who are well-placed to know if a project is not complying with environmental and social safeguards.
This gives companies the opportunity to address issues before they escalate, making accountability mechanisms a crucial component of a company’s risk management framework.
The accountability gap
Many mining and mineral-processing projects that are crucial to the energy transition unfortunately cause social and environmental harms.
These include deforestation, pollution and water scarcity, labour standards violations and displacement of local communities. Companies linked to such damages through their supply chains are under increasing scrutiny.
For example, Tesla, Apple, Google, Dell and Microsoft were all sued over alleged forced child labour in mines in the Democratic Republic of the Congo producing cobalt for use in their products. Zhejiang Huayou Cobalt, a major Chinese firm, was named as one of the suppliers.
CCCMC has established various standards and guidelines since 2014, to help companies address the social and environmental risks in their overseas mining and mineral operations.
It also launched the Responsible Cobalt Initiative in 2016 – the precursor to the Responsible Critical Mineral Initiative – which developed a due diligence standard for the cobalt supply chain in 2018 (revised in 2021).
However, without mechanisms to hold companies accountable, implementation of these voluntary guidelines has been limited. With the new initiative backed by CCCMC and RCI, that could be changing.
Will the new accountability mechanism work?
In December 2022, RCI and the CCCMC sought public input on the proposed accountability mechanism. Its draft policy states that communities impacted by mining-sector activities can file complaints alleging that companies did not adhere to “recognised codes for responsible business conduct”.
These codes include CCCMC’s Guidelines for Social Responsibility in Outbound Mining Investments, the Chinese Due Diligence Guidelines for the Mineral Supply Chain, and the United Nations Guiding Principles on Business and Human Rights, among others.
The mechanism will offer a mediated dialogue process for communities and companies to negotiate redress for environmental and social impacts.
Depending on the nature of the case, the process also includes fact-finding by independent experts to support the resolution of disputes. Aspects of the case process will be documented publicly.
Currently, it is not clear exactly which companies the mechanism will apply to, but it is likely to be particularly relevant to members of RCI and CCCMC.
RCI members include Chinese mining companies, refineries and other companies along the critical minerals value chains. They also include international end users such as automotive manufacturers and tech companies.
(Huayou Cobalt and Jiana Energy – Chinese suppliers of cobalt products and battery materials – as well as BMW and Dell, were on the board of the Responsible Cobalt Initiative when it was first established.)
Many Chinese mining companies are CCCMC members. Increasing these companies’ accountability to affected communities would be a significant step toward ensuring a just transition, but only if designed and implemented well.
What constitutes an effective accountability mechanism is well established. United Nations guidelines state it must be accessible, legitimate, predictable, transparent, equitable, rights-based and a source of continuous learning for companies and investors. In practice, this means it needs to provide communities with a safe and fair process for achieving redress for environmental and social harm.
The mechanism proposed by the RCI and the CCCMC has important strengths to this end, including provisions regarding the right to representation, the commitment to rights-based agreements, confidentiality and the prohibition of coercion and retaliation.
However, some questions about its effectiveness remain. For one, there should be further clarification as to which corporate actors are governed by it so that communities can better predict whether it is a relevant avenue for justice.
Right now, it is challenging to find a list of current RCI and CCCMC members. Moreover, the mechanism needs to demonstrate how it is independent from the companies who could be parties in a complaint, and should disclose the makeup of the committee that processes complaints.
There are two additional steps the mechanism should take to improve accessibility for all stakeholders, including communities who often face financial limitations, language or technical barriers, logistical issues and reprisals.
First, strengthen the commitment to preventing and responding to reprisals against community complainants by building in concrete protection measures. Second, establish an adequate budget for the functioning of the mechanism so that community applicants do not pay for the case process. Establishing such budgets is common practice in existing accountability mechanisms.
Toward greater accountability for Chinese overseas projects
RCI and CCCMC’s proposed mechanism is an important part of a larger move toward accountability for Chinese overseas investments.
In June 2022, the China Banking and Insurance Regulatory Commission (CBIRC) published Green Finance Guidelines that require Chinese banks and insurers to set up their own accountability mechanisms to hear and address concerns from impacted communities overseas. This means policy banks, such as the China Development Bank and the Export–Import Bank of China, and commercial banks, like the Bank of China and the Industrial and Commercial Bank of China, need to set up accountability channels to hear from the people they impact. It remains unclear, however, when and how this requirement will be implemented by each financial institution.
For over a decade, Chinese state institutions and industry groups have issued guidance to companies and banks on how to improve overseas environmental, social and governance performance, but the lack of strong implementation frameworks and accountability mechanisms has limited their impact.
The move towards establishing such a mechanism in the critical minerals sector represents an important first step. It could inform the development of mechanisms for other sectors, especially as we have yet to see any public action by Chinese banks or insurers to set up their own mechanisms.
The mining sector accountability mechanism is expected to be released in the first half of this year. As an industry-led initiative, it will only be legitimate if communities determine it safe and worthwhile to use.
At a minimum, this will require the process to be free for community complainants, the people managing the cases to be independent from company respondents, and safeguards be put in place to prevent and respond to retaliation.
If designed and implemented with the rights of impacted communities in mind, the new mechanism could be positive for communities, companies and the environment, setting an example for more accountability mechanisms for Chinese overseas investment.
If the mechanism fails to meet these expectations, the accountability gap will persist, and both communities and companies will continue to pay the price, China Dialogue writes.
Zijin triples production at Serbian copper complex
Bor, in north-eastern Serbia, is one of the country’s most polluted cities. While local people protest their toxic air and water, Chinese mining company Serbia Zijin Copper, which runs the city’s large-scale copper mining and smelting complex, is expanding its operations without permits, local consent or transparency. Zijin is one of the many highly polluting Chinese investments undertaken without the necessary environmental and social due diligence.
Since 2018, when the new owner of Bor smelter complex, the Chinese-owned Serbia Zijin Copper started its operations, the lives of the citizens in at least five villages in this area of Serbia have been upended. In an open letter this March the villagers of Ostrelj state that the two companies, Serbia Zijin Copper and Serbia Zijin Mining, are expanding their activities threatening their health, private property, and livelihood.
The villagers are calling on the authorities to stop unauthorized construction and find a solution for all the residents who are trapped between the old and new mines and hills of tailings. When winds blow, the Ostrelj village is coated in toxic dust.
The villagers claim that the authorities have not developed a master spatial plan that would describe the future of their village and delineate the mining complex on their territory and describe the environmental impact and the purpose of facilities that Chinese had been building without permits. An environmental impact assessment for just one facility was put out for public consultations after it had already been built.
According to the villagers and research conducted by the Serbian Renewables and Environmental Regulatory Institute (RERI), the Chinese investors have been getting away with construction conducted without legally required documents and permits.
Meanwhile, Zijin’s mining operations are extending its reach on their territory while the local community representatives say that they are kept in the dark by the local as well as national authorities.
The villagers therefore demand a moratorium on further mining activities before the authorities have created a master spatial plan for relocation of their and six other affected villages and called on Zijin to undertake all protection measures to prevent their further poisoning by toxic dust.
“The Serbian state should stop all the mining activities in Bor and all the constructions that have been implemented without a permit. We also need adequate resettlement plans for the villagers before the work can continue”, said Zvezdan Kalmar, director of the Serbian environmental organizations the Centre for Ecology and Sustainable Development (CEKOR).
The gradual weakening of legal requirements for Chinese investments in Serbia is alarming.
A legal analysis by RERI and Just Finance International shows that China’s influence had an overall negative impact on the legal system in the country. Its business activities increased the number of loopholes in the law, which made exceptions for highly polluting large-scale infrastructure investments, predominantly from Chinese enterprises or financed by Chinese state loans.
The problems have also been addressed in a resolution from the European Parliament 2021.The European Parliament called on Serbia to strengthen its legal compliance standards for Chinese business activities and sent a warning to Belgrade that its behavior is jeopardizing the country’s European accession process.
For several years now, both the Serbian government and the Chinese company have ignored the legal irregularities of the Zijin copper mining and smelter projects. However, some attempts have been made to address the problems in Bor.
For example, in April 2021, Serbian authorities suspended construction work at the Jama mine, core to Bor’s operations, after the company failed to comply with environmental standards. In April 2022, after thousands gathered to protest the project in Belgrade, Serbian authorities halted the operations of Zijin citing environmental pollution. But the attempts did not satisfy the protesting citizens and are regarded as temporary solutions without dealing with the fundamental problem of the operations.
The affected villagers call the government for transparency. They claim that the monitoring of ongoing mining and production activities that could put their lives in peril remain to be ignored by both the Serbian authority and the Chinese who operate Bor cooper mine.
One major uncertainty is what impact the Zijin operations will have on the Krivelj river. The river is of utmost importance for the livelihood of the farming community and the villagers’ fears that Zijin is actively working to change the course of the river since it is blocking their way for a new tailing dam.
The waste from Serbia Zijin Copper operations is deposited on an old dam under which was built a tunnel that secures the Krivelj river’s flow to Ostrelj village. In the end of 2021, the drainage tunnel showed cracks and local media report that toxic substances have leaked into the river. This weakness in critical structure have been identified more than a decade ago, but the authorities failed to tackle them.
In 2007 Serbia started negotiations with the World Bank to build a new drainage system for wastewater to clean that dam. But the country never took to the loan and the project was shelved by 2015. Now, with Zijin expanding its operations more than two times compared with the past and the problem with the dam is still not solved.
The dam holding the toxic waste represent environmental hazard that could not only endanger villages around Bor such as Ostrelj, but also regional capital Zajecar and the town of Negotin. The spill could roll further downstream into the Timok river and all the way to Danube, causing transboundary pollution in Romania and Bulgaria.
So far, the Serbian government, which owns a stake in one of the two locally owned companies has turned a blind eye to various violations of the procedures and Zijin is not making any serious attempts to mediate with the citizens in Bor. Now the pollution is reaching new records in Bor. The expansion of smelter activities has led to an average annual increase of carcinogenic arsenic in air for 10 times over the threshold, according to Serbian experts.
The open letter from the villagers in the Zijin-affected communities Ostrelj was addressed to all the major stakeholders in Serbia including the president Aleksandar Vucic. The villagers feel they have been kept in the dark from the decisions for the expansion of Zijin’s mining operations, fearing the impacts, as well as how they feel as “foreigners in their own country”.
Zijin´s operations in Serbia are among the biggest copper mining operations in Europe and the copper is the number one export product from Serbia to China. Yet, Serbia is only getting 5 percent royalties from Zijin´s revenues which is one of the lowest royalties for mining operations in Europe.
Zvezdan Kalmar believe that the lack of royalties is a problem for Serbia.
“Without this money we won’t be able to regulate and control the negative impact of the mining activities at all”, he said, Just Finance International writes.
Zijin Mining project is one of the many highly polluting Chinese investments
China’s Zijin Mining is polluting a village in southeastern Europe’s Serbia without permits, local consent or transparency, an environmental activist group claims.
Bor, in northeastern Serbia, is one of the Balkan country’s most polluted cities, according to Just Finance, a Dutch group that advocates for public budgets spent on development and infrastructure finance to contribute to sustainability.
The group said China’s Zijin Mining, which runs the city’s large-scale copper mining and smelting complex, is one of the many highly polluting Chinese investments undertaken “without the necessary environmental and social due diligence”.
“Since 2018, when the new owner of Bor smelter complex, the Chinese-owned Serbia Zijin Copper started its operations, the lives of the citizens in at least five villages in this area of Serbia have been upended,” the group said.
In an open letter this March the villagers of Ostrelj said Serbia Zijin Copper and Serbia Zijin Mining are expanding their activities, which threatens their health, private property, and livelihood.
In 2016, Zijin agreed to pump nearly $1.5 billion into the Serbian copper and gold project and paid $350 million for 63% of state-run Serbian miner RTB Bor Group.
The villagers are calling on the authorities to stop unauthorised construction and find a solution for residents living between old and new mines and hills of tailings. “When winds blow, the Ostrelj village is coated in toxic dust,” Just Finance said.
The villagers claim that the authorities have not developed a master plan that takes into account environmental impact.
Just Finance said an environmental impact assessment for one facility was put out for public consultation after it had already been built, Asia Financial writes.
Greenland Strips Chinese Mining Firm of License for Iron Ore Deposit
The license was withdrawn because of inactivity at the site and a failure to make the agreed guarantee payments, the government said.
According to Reuters, Greenland has stripped a Chinese mining company of its license to an iron ore deposit near the capital Nuuk. General Nice, a Chinese coal and iron ore importer, took control of the Isua mine project in 2015, replacing previous owner London Mining, which went bankrupt. It was the first Chinese firm to have the right to exploit minerals in Greenland.
The license was withdrawn because of inactivity at the site, the government said in a statement. The license be offered to new interested companies once it has formally been handed back. The company also failed to make the agreed guarantee payments, the statement said.
The government requested that all geological data is returned, remaining payments of 1.5 million Danish crowns are deposited, and the mining area is cleaned up. London Mining, which obtained the exploitation license in 2013, had initially planned to hire some 2,000 Chinese workers to construct the project and aimed to supply China with around 15 million metric tonnes of iron ore a year. However, it failed to secure sufficient financing.
Greenland’s government has said it supports environmentally responsible mining. This year it banned uranium mining, effectively halting development of the Kuannersuit mine, one of the world’s biggest rare earth deposits, which is partly-owned by a Chinese company.
General Nice also attempted in 2016 to buy an abandoned naval station in Greenland from Denmark, but Copenhagen vetoed the offer because of security concerns, sources told Reuters at the time. In 2018, Greenland rejected an offer from a Chinese state bank and a state-owned construction company to finance and build two airports in Greenland.
Greenland has stripped a Chinese mining company of its licence to an iron ore deposit
Greenland said on Monday it has stripped a Chinese mining company of its licence to an iron ore deposit near the capital Nuuk, dealing a blow to attempts by Chinese companies to gain a foothold on the resource-rich Arctic island.
General Nice, a Chinese coal and iron ore importer, took control of the Isua mine project in 2015, replacing previous owner London Mining, which went bankrupt.
It was the first Chinese firm to have the right to exploit minerals in Greenland, which has attracted international interest as climate change has opened up waterways and access to the vast Arctic island’s mineral resources.
The licence was withdrawn because of inactivity at the site, the government said in a statement, adding it will be offered to new interested companies once it has formally been handed back.
The company also failed to make the agreed guarantee payments, it said.
“We cannot accept that a licence-holder repeatedly fails to meet agreed deadlines,” Greenland’s Resources Minister Naaja Nathanielsen said.
The government requested that all geological data is returned, remaining payments of 1.5 million Danish crowns are deposited, and the mining area is cleaned up.
London Mining, which obtained the exploitation licence in 2013, had initially planned to hire some 2,000 Chinese workers to construct the project and aimed to supply China with around 15 million metric tonnes of iron ore a year.
However, it failed to secure sufficient financing.
Greenland’s government, elected in April, has said it supports environmentally responsible mining.
This year it banned uranium mining, effectively halting development of the Kuannersuit mine, one of the world’s biggest rare earth deposits, which is partly-owned by a Chinese company.
General Nice also attempted in 2016 to buy an abandoned naval station in Greenland from Denmark, but Copenhagen vetoed the offer because of security concerns, sources told Reuters at the time.
General Nice could not be reached for comment.
In 2018, Greenland rejected an offer from a Chinese state bank and a state-owned construction company to finance and build two airports in Greenland.