In the early days of corporate environmentalism, the focus was mainly on big, heavy industries. Fossil fuels and Mining had the most obvious environmental issues, as well as extensive regulatory regimes to navigate. These days, however, sustainability discussions are more often focused on the actions of consumer product, retail, and tech brands. But it’s important to check in periodically with the big guns of environmental impact and see how they’re thinking about these issues.
Thus, it was with real interest that I recently found myself in Chile visiting the World Copper Congress, where I spoke at a dinner for 1,800 executives held by the Center for Copper and Mining Studies (CESCO). There, it became clear to me that the modern sustainability agenda — beyond regulatory compliance — is becoming critical to this sector, with both risks and opportunities stemming from environmental and social pressures.
For context, consider the scale of copper, with upwards of 25 million tons produced annually. Chile is the biggest source, producing about 25% of the global total. And the biggest buyer is China, which sent a sizable delegation. China uses roughly 40 to 60% of the world’s major commodities, including, as the Chairman of CECSO told me, about 45% of global copper.
An industry this big, with heavy materials circling the globe, creates significant environmental impacts. For years, the traditional corporate responsibility agenda has required these companies to work with greater transparency and with local communities throughout the lifecycle of big projects. This is part of the toolkit of maintaining their “license to operate.” But the sustainability agenda in mining is broadening (as it is for all sectors). Specifically, the industry has a great deal to lose if it doesn’t understand and manage global mega-trends, such as increasing pressure on natural resources, rising demands for transparency, and global action on climate change, which affects all energy-intensive companies. On the flipside, the rise of the clean economy is creating significant upside and growth for the copper business.
Let’s start with the risks. A world growing to 9 or 10 billion people, with many getting richer, needs more of everything. But the richness of ores (the “ore grade”) has been in long-run decline for most elements. Copper ore grade is down from 4% a century ago to well under 1% now (and falling). Copper mining isn’t just affected by natural resource pressures; it embodies natural resource constraints.
This long-term trend requires digging up more of the earth to get the same amount of copper. From 2006 to 2016, the copper ore grade dropped 25%, but total production rose 30%. In addition, total energy use in the sector rose 46%, a more than linear relationship between production expansion and growth of energy use. I believe that this situation is a major risk for the sector, since it exposes them to deep concerns about carbon emissions. Climate change could seem remote from the business of digging holes, but it’s not. Chile’s commitment to the Paris climate accord, for example, is to cut emissions 30% by 2030. No industry can afford to keep increasing emissions.
But there are some bright spots on the horizon. First, luckily for everyone, clean energy is rapidly getting cheaper, with solar costs dropping 80% over the last decade. And as it turns out, through a fluke of atmospheric endowment which keeps the skies clear of clouds, much of Chile receives more solar radiation (per square meter) than anywhere else in the world (an interesting side note: for the same reasons, scientists have placed many of the biggest space observatories in Chile). The industry is starting to embrace renewables, so the clean economy should help keep the sector on the right side of the climate battle.
Second, the rise of the clean economy is creating new, exciting growth markets for copper. A The rapid drop in the cost of battery storage is driving some rosy projections for the use of electric vehicles (EVs). And EVs need a lot of copper. A pure EV requires roughly 4 times as much copper as an internal combustion engine.
All of this is good news for the sector, but when you combine these trends, you get a mixed picture. Ore grades are still declining, and the world will need even more copper than before. It’s time, I think, to use the sustainability lens to think in more heretical ways about metals and how to build a circular economy. What if we rethink where we get metals from — i.e., why do we need to dig up new, or virgin, metals instead of reusing what we’ve already dug up?
Two pathways seem promising. First, one of the biggest environmental liabilities of this sector (or any) are the “tailings ponds,” the large pools of mining remnants with metals at too small a percentage to bother with… until now. Last year I visited Kazakhstan, another major mining economy where I met with execs from ERG, a central Asian mining company. ERG has a fascinating project in the Democratic Republic of Congo (DRC). ERG has figured out an economic way to reprocess the tailings in one of the world’s largest pools to reclaim some copper and cobalt. This is a win-win to reduce an environmental risk (these pools leak into waterways) and to avoid the heavy footprint of virgin production.
The second path is basically recycling, but from one particular rich source of metals: old electronics. A UN study estimated that, pound for pound, e-waste has 40 to 800 times as much gold as gold ore. It’s not easy to separate dozens of metals from plastics and other materials and collect them in economic quantities, but this is an obvious innovation opportunity.
In all, visiting Chile gave me the opportunity to explore how mega-trends weave their way through the past, present, and future of one big sector. It’s increasingly obvious that every company and industry, no matter how heavy or how modern, has a big stake in issues like climate change, clean tech, and rising demands for transparency. The risks and opportunities are real, and the benefits of looking at the business through a sustainability lens are clear.