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Abstract

The IRTC-Business workshop and Round Table on “Building resilient economies - the role of policy” took place via Zoom on November 17, 2020, from 2 am to 6 pm CET. Around 80 registered participants attended the workshop which comprised in a first part presentations from policy-making, industry and research on how more resilient economies can be built and supported. In a second part, the participants split in two groups, one with an industry and one with a policy focus on the topic. In both groups, an expert panel discussed questions surrounding the main topic from their respective views. Participants were able to contribute via a virtual whiteboard. In a follow-up event on December 11, the panelists and participants got the chance to discuss the preliminary results of the November workshop further. This report is a summary of the overall results of both events.
Workshop summary
November 17 & December 11, 2020
1
IRTC-Business workshop summary
Building resilient economies - the
role of policy
November 17 & December 11, 2020
The IRTC-Business workshop and Round Table on “Building resilient economies - the role of policy
took place via Zoom on November 17, 2020, from 2 am to 6 pm CET. Around 80 registered participants
attended the workshop which comprised in a first part presentations from policy-making, industry and
research on how more resilient economies can be built and supported. In a second part, the
participants split in two groups, one with an industry and one with a policy focus on the topic. In both
groups, an expert panel discussed questions surrounding the main topic from their respective views.
Participants were able to contribute via a virtual whiteboard. In a follow-up event on December 11,
the panelists and participants got the chance to discuss the preliminary results of the November
workshop further. This report is a summary of the overall results of both events.
1. CRITICAL RAW MATERIALS AND THE COVID-19 PANDEMIC 2
1.1. PETER HANDLEY: COVID-19 AND EUROPES RAW MATERIALS MANAGEMENT 2
1.2. SVEN RENNER: EFFECTS OF THE COVID-19 PANDEMIC ON EXTRACTIVE INDUSTRIES 3
1.3. PETER BUCHHOLZ: SUPPLY RESILIENCE OF KEY METALS I N THE COVID-19 CONTEXT AND OUTLOOK 4
1.4. SCOTT FOSTER: COVID-19 AND SUSTAINABLE RESOURCE MANAGEMENT 5
1.5. AKANKSHA TYAGI: IMPACT OF THE CRISIS ON RAW MATERIAL S MANAGEMENT OF TRANSITIONAL COUNTRI ES 7
2. HOW POLICY CAN SUPPORT SUSTAINABLE SUPPLY FOR INDUSTRIES 9
2.1. YASUSHI HARADA: HITACHIS EXPERIENCE WITH INCREASING CIRCULARITY OF REES 9
2.2. DIEUWERTJE SCHRIJVERS: INDUSTRY CAPACITY AND POLICY NEEDS IN A RAW MATERIALS RISK FRAMEWORK 10
3. SUMMARY OF THE ROUND TABLE DISCUSSION 13
3.1. THE INFLUENCE OF POLICIES 13
3.2. COVID-19 IMPACT 15
3.3. SUSTAINABILITY 16
3.4. COOPERATION 18
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1. Critical raw materials and the COVID-19 pandemic
1.1. Peter Handley: COVID-19 and Europe’s raw materials management
Peter Handley is the Head of the Resource Efficiency and Raw Materials Unit at DG GROW at the
European Commission.
The European Commission formulated the New Industrial Strategy early March 2020 (before the
COVID-19 pandemic) to face the major challenges for the European economy to become climate
neutral and digital by 2050, as formulated in the Green Deal. This transition requires the development
of breakthrough technologies, which should be managed in a socially fair way, by at the same time
ensuring global economic competitiveness. The EC strategy is called “open strategic autonomy”, which
is an approach towards a resilient EU economy.
The EU economy experienced supply disruptions due to COVID-19 in 2020, first due to measures taken
in Wuhan, later also due to disrupted production and trade within Europe. Business confidence and
investments were declining, which affected the raw materials sector and energy-intensive industries
that are dependent on downstream demand. Keeping the businesses alive required a short-term
strategy, whereas a long-term recovery plan was needed to mend the EU economy. The EC reached
out to the industries, monitored the situation and tried to alleviate Europe-wide supply bottlenecks in
March-May 2020. In response to the call of the European Council, a repair and recovery plan was
established. The long-term recovery strategy should encompass the objectives of open strategic
autonomy: hence, the disruption is used as an accelerator to move towards a more green, digital, and
resilient economy. Member states are advised on how to put according the investments in place
In September 2020, a new critical raw materials list was communicated, addressing resilience,
strategic autonomy, and lessons learned from COVID-19. A high concentration of supply from a single
country, also within Europe, can pose a risk, e.g. when a company experiences financial problems or
is targeted for a takeover from abroad. The list is published every three years and helps to inform
trade policy, research and development policy, and industrial strategies. The list is rather stable, but
includes since 2020 bauxite, lithium, titanium, and strontium.
A new concept that is put into the Industrial Strategy and the recovery plan is industrial ecosystems,
which brings together the interplay between products and services, large companies and SMEs, the
contribution of research and innovation and investment communities to implement industry
strategies. 14 industrial ecosystems are identified, including aerospace/defense, electronics, and
renewable energy.
The European Commission now also conducted a forward-looking evaluation of CRMs in order to
identify the raw material dependencies in 2030 and 2050 of climate-neutrality and digital policy
strategies. Material consumption is forecasted to increase by a factor 12-50 for certain materials.
An action plan is formulated to ensure Europe’s access to raw materials, containing 10 actions:
1) Establish and foster the European Raw Materials Alliance
2) Develop sustainable financing criteria for mining
3) Invest in research and innovation on waste processing, advanced materials and substitution
4) Map the potential supply of secondary CRMs from EU stocks and wastes
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5) Invest in mining projects that can be operational in 2025
6) Develop expertise and skills in mining
7) Deploy earth observation programmes for exploration, operation and post-closure
environmental management
8) Develop research and innovation projects on exploitation and processing of CRMs
9) Develop strategic international partnerships to secure CRMs supply
10) Promote responsible mining practices for CRMs (including a legislative proposal on due
diligence for batteries produced in Europe)
1.2. Sven Renner: Effects of the COVID-19 pandemic on extractive industries
Sven Renner is in charge of the Extractives Global Programmatic Support Trust Fund (EGPS) at the
World Bank.
The COVID crisis affected both the supply and the demand of raw materials. Demand was affected by
a tanking economy and a decrease in consumption. On the supply side, health protection measures
were imposed to many large-scale mines worldwide. The World Bank evaluated the impact of COVID-
19 on the mining of copper in Peru, covering industrial mines, but also artisanal and small-scale mines
(ASM).
Copper demand can generally be expected to continuously increase due to its many applications.
However, now, the global demand is estimated to fall back which will have a ripple effect over the
next couple of years. Peru supplies mostly to the Asian market, and here mostly to China. Hence, the
production is highly dependent on Chinese copper demand. Demand is expected to increase again
due to the infrastructure-led economic recovery in China, China’s announced carbon neutrality in
2060, and the US green energy and infrastructure plan presented by president-elect Joe Biden.
Global copper production has declined in 2020, even more strongly than during the Global Financial
Crisis in 2008. This is not only due to a decreased demand, but also due to health protection measures.
Peru’s projected production in the coming years is lower than the pre-COVID forecasts due to delayed
investments in the production sector. However, Peruvian copper production is relatively mildly
affected due to Peru’s strong position in the cost curve, which is further enhanced by a sharp decrease
of fuel price (40% of OPEX).
Artisanal and small-scale mines are expected to be hit harder by the COVID crisis than industrial mines.
Funded by the EGPS Trust Fund, the World Bank has assessed the viability of creating a specific
financial facility to support ASM communities.
With the COVID crisis it is expected that poverty increases, related to migration back to rural areas
1
with an increasing spread of the disease, and pressure on food security and health services. Artisanal
mining is an important source of livelihood in many regions, often poverty-driven, and associated with
negative social impacts, e.g. related to human rights, illicit financial flows, forced migration, and
1
A participant adds that recent migration in Peru and Brazil was also caused by the rising price of gold that is
artisanally in the amazon area.
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financing of armed groups. Via questionnaires, data were collected among organisations that operate
in areas with active ASM operations. In many African countries, South America, and Central Asia, the
local population has suffered from negative impacts concerning health, food security, and access to
markets. The following conclusions are drawn:
1. Human capital development will undergo shocks if ASM communities become infected. A
substantial part of the population does not feel well informed about COVID-19 and the
measures that have to be taken for health protection.
2. There is a sizeable gender gap when it comes to food security. 36% of male and 56% of female
respondents state that food security has decreased since COVID-19 began, due to price
increases and reductions in household income.
3. Surprisingly, personal security has not decreased due to COVID-19. On the contrary,
improvements in security were observed in Indonesia, Mozambique, Nigeria, Sierra Leone,
and Uganda. Increases in criminal activities were expected, e.g. due to the contained mobility,
but this was so far not the case.
4. Miners intend to continue mining in spite of disrupted trade chains. Two major problems are
a lack of formal access to financing and formal access to markets. The need for formalization
has been an issue for a longer time, independent of the COVID crisis.
6 million USD have been mobilized by World Bank donors, especially from Switzerland, Belgium, the
EU, and Germany, to develop activities that support the ASM communities in the affected areas that
have been identified via the data collection. 22 grants are awarded to organizations working on the
ground in 20 countries, and a next round of grants is coming up.
1.3. Peter Buchholz: Supply resilience of key metals in the COVID-19 context and
outlook
Peter Buchholz is the Head of the German Mineral Resource Agency (DERA) which is part of the
German Geological Survey (BGR). The institute is engaged in a variety of work on criticality, technology
forecasting and monitoring of raw material markets.
According to the International Monetary Fund (IMF), the global GDP declined by 4,4% in 2020.
Countries were hit differently by the COVID crisis, resulting in different growth rates. The only country
with positive growth was China with +1,9%. In 2021, an overall growth of 5,2% is forecasted, with
China and India leading. The World Economic Forum presented different “shapes” in which the
economy could recover. It is unclear yet which shape will appear, and it could be different for each
country. Based on a survey, most CEOs expect a gradual decline of the economy followed by a healthy
rise (U-shape), whereas some predict a second drop in 2022 (W-shape) due to the end of
governmental supporting systems.
Following the steel Purchasing ManagersIndex (PMI), steel demand in the manufacturing sector first
declined in Asia, and subsequently in Europe and the US. Demand in Asia recovered quite quickly, and
demand is currently restored in all regions. Similar trends are observable for aluminum and other
commodities. Prices of base metals declined at the beginning of the COVID crisis, but increased again
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due to the economic growth in China.
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Demand for precious metals, especially rhodium, dropped due
to the crisis in the automotive industry, but this industry has also undergone a restorage. Prices of
materials for batteries remained quite stable under COVID, because they were already relatively low
due to an expected overcapacity.
Throughout the world, mines were shut down during the beginning of the pandemic. As they were
recognized as “essential services”, they resumed quickly in most countries, after necessary health
measures were put in place. In this regard, the supply can be considered quite resilient. However,
exploration budgets went down, also for copper for which demand is expected to increase in the long
term. Therefore, it is expected that more investments in exploration can be observed after the
pandemic.
The supply disruptions due to the lockdowns did not lead to major supply gaps, because demand was
also low. Exceptions are manganese metal flakes, silicon metal, ferro-tungsten, and molybdenum, for
which prices increased by 13-40% in February 2020 due to fears of supply disruption, as China is the
main supplier. Prices came down when China resumed the production in April.
However, also next year, supply chains in the mineral market might be affected by regional outbreaks
of COVID. Diversification could be the best way for industries to prepare for this: by looking for new
or alternative suppliers in the market to fill possible supply gaps. A lesson can be learnt from the
decreased supply of fluorspar from China to Germany and the Netherlands, which was due to
increased environmental restrictions on mining in China. Germany successfully diversified their supply
via imports from South Africa and Spain. However, diversification is becoming more and more difficult
when political and economic power is becoming more concentrated, especially in some raw material
markets. DERA established a graph showing how trade dominance of metallic resources shifted from
Europe (around 2002) to China, especially in Asia, Africa, South America, and Australia. Europe and
the US need to build better trade relations with resource-rich countries to make supply chains more
resilient.
1.4. Scott Foster: COVID-19 and Sustainable Resource Management: Policies and
actions to support resilience in the supply of critical raw materials
Scott Foster is the Director of the Sustainable Energy Division at UNECE.
The surge of the stock markets after the announcements about a vaccine against COVID-19 is a signal
that society is heading back to where we were before the pandemic, which might not be the best path.
If we want to build back better, there are 3 dimensions to consider that have not been included in
2019 forecasts:
§ There is anecdotal evidence that the environment, especially the quality of air and water,
benefited from the lockdown and the economic slowdown. However, 2020 was also the year
2
A graph correlating the zinc price with the US dollar shows that the zinc price is higher when the dollar is
weak.
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of forest fires and floods causing over 1 billion of animal deaths. The market did not respond
to this.
§ There is a strong focus on unemployment and quality of life. For example in the energy sector,
there has been a strong decrease in demand and this might continue; the same is true for
other sectors.
§ Urbanization: pre-COVID forecasts predicted a global population of 9 billion people in 2050,
with 70% living in cities. This would require building 255 additional cities with the size of Paris.
During the pandemic, resilience was expected from the individual to cope with stress, social isolation,
job losses, and health issues, as well as from individual companies. A vision for the whole system,
including the environment and other species, is needed. Sourcing basic raw materials in an
environmentally, socially, and economically coherent way is key.
Governments are trying to improve the security of supply of raw materials. This does not necessarily
imply supply independence, but rather redundancies in supply chains, and the ability to prepare for
what can happen, to respond instantaneously, and to learning and retaining lessons from events. In
order to build back better, there should be a common vision of shared outcomes, shared knowledge,
integrated resource management, and a comprehensive toolbox.
Securing supply of CRMs can partially be achieved by diversification, partially by increased exploration
and mining, and partially by increased sustainability of consumption and production. With current
consumption patterns, we would need 7 earths to deliver the demanded resources, especially
considering the increased development of low-income countries towards the standard of high-income
countries, which is connected to a much larger material footprint. For sustainable production,
engagement of local communities is needed to establish the social license to operate, which is
currently impeded by the image of social and environmental problems associated with resource
extraction.
To build back better, the resource management narrative should be rewritten:
§ Align resource management to the 2030 Agenda: investments should flow into resource
development for the technologies that deliver country commitments to sustainable
development
§ Improve financial resilience through business process innovation
§ Derive good social, environmental, and economic outcomes
§ Obtain social license to operate
§ Integrated approach: mutually beneficial economic interdependence should be created
§ Harmonization and common vocabularies, such that the same standards of sustainability are
applied by all actors.
At the UN, the United Nations Framework Classification (UNFC) and United Nations Resource
Management System (UNRMS) aid in identifying resources and manage them in order to meet a
country’s objectives. Transparent communication of these objectives furthermore increases trust,
which contributes to the creation of mutual interdependencies. Investments made by MSMEs (Micro,
Small and Medium Enterprises) across the whole value chain allow for diversification and resilience.
These frameworks are being deployed throughout the world. UNFC covers renewables, uranium,
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thorium, petroleum, oil and gas, nuclear resources, and all critical raw materials. Implementing this
system at a global scale is part of the creation of a shared vision which is critically important.
1.5. Akanksha Tyagi: Impact of the crisis on raw materials management of transitional
countries
Akanksha Tyagi is representing the Council on Energy, Environment and Water (CEEW), a leading
policy research institution based in New Delhi, India.
In India, the energy sector is already quite diversified. However, the notion of critical minerals is
relatively new but increasingly important due to a growing demand for electronics, chemicals, food
and beverages. In 2016, CEEW evaluated the criticality of 49 non-fuel minerals across 16
manufacturing sectors, includingamong othersmetals, food and beverages, textiles and apparels,
refining, and electronics, over the period of 2011-2030.
With the applied methodology, the economic importance of the minerals is based on i) the
consumption pattern (the fraction of the mineral consumption in a sector), and ii) the industrial
structure (the contribution of that sector to the national GDP). The supply risk is evaluated by i)
national resource endowment (via import dependence and domestic reserves), ii) geopolitical risk (via
the Worldwide Governance Indicators), iii) substitution risk (substitutability) and iv) recyclability risk
(recycling potential). Based on this, minerals that will be critical in 2030 are mostly metals due to the
specific consumption of sectors that will contribute to the expected development of India. Critical
minerals are heavy and light rare earth elements (increased demand for clean energy technology and
electronics), Ta, Sr, Be, graphite, Si (difficult to refine in a transitional country due to high energy
requirements for processing), Ge (low recycling rate in India), Cr, Re, Zr, V, PGM, limestone, Bi Nb, and
potash.
India committed to various international and domestic development objectives, such as an emission
reduction of 30-35% by 2030 compared to the emissions of 2005 within the Paris agreement. India is
on track to meet this target due to the energy conservation program that aims for increased energy
efficiency, e.g. via use of LEDs and efficient building codes. Other targets are 175 GW of renewable
energy in 2022 and potentially 450 GW by 2030, EV sales of 30% by 2030, and this year the
implementation of the BS VI/ Euro VI standards for vehicles to decrease air pollution. India strives for
an increased digitalization via 600 million broadband connections by 2022. These objectives all require
the use of metals, making these metals critical.
COVID-19 reinforced the sentiment that India needs to assess its use of CRMs. The government tries
to rebuild the economy in a clean and sustainable manner, but there is a renewed focus on domestic
value creation and self-reliance via i) industrial expansion and integration with global value chains, ii)
adopting a low-carbon approach, and iii) supporting indigenization of low-carbon solutions. There is
increased support for MSMEs, via improved access to finance, as it is not strategic to rely on a few
major companies. 10 critical sectors are supported via a “Production Linked Incentive Scheme”. To
strengthen the domestic PV manufacturing industry, a custom duty is imposed on modules procured
abroad. Most tenders deployed in India require a domestic engagement.
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Emerging policy considerations are resource availability, recycling, and substitution. To create resilient
supply chains for strategic and critical minerals, KABIL was created, which is a conglomerate of three
public enterprises that generate a consistent supply of aluminum and copper, and conduct mineral
exploration. Regional cooperation between India, US, Japan and Australia allows for improved
exchange between business and academia, and continuous exchange of information and technologies,
which could lead to enhanced domestic exploration and improved recycling. India has a large recycling
sector. However, this sector is mostly informal; hence, value creation is marginal and minerals are not
always directed towards the sector in which they are most needed. Unlike for solar modules for which
there was no clear waste management plan, the government set waste management rules for
batteries alongside the scaling up of battery production, as manufacturing and waste management
should go hand in hand. Finally, the government promotes R&D and technology transfer between
industry and academy to increase substitutability. The government applies a technology-agnostic
approach, meaning that any technology that enables achieving India’s objectives is welcome to be
upscaled leading to increased diversity and use of more domestically abundant minerals.
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2. How policy can support sustainable supply for industries
2.1. Yasushi Harada: Hitachi’s experience with increasing circularity of REEs
Yasushi Harada is Senior Chief Researcher at the Center for Technology Innovation at Hitachi, Ltd. He
is presenting Hitachi’s experience with increasing circularity of REEs in collaboration with Takeshi
Nemoto from Hitachi’s Water & Environment Business Unit.
According to its environmental vision and long-term environmental targets, Hitachi strives towards a
low-carbon, resource-efficient society that is harmonized with nature. These targets include an 80%
reduction in CO2 emissions throughout the company’s value chain in 2050 (compared with 2010), a
50% improvement in the efficiency of the use of water and other resources in 2050, and a minimization
of Hitachi’s impact on natural capital. Furthermore, Japanese manufacturers, like Hitachi, are heavily
impacted by the stagnating imports of raw materials such as plastic, base metals like iron and copper.
As Japan does not have a large amount of domestic natural resources, recycling is an important
strategy against price increases related to increased resource consumption.
16 affiliates of Hitachi, forming a nationwide collection and recycling network, contribute to a circular
use of resources from 100 different product types via product recycling service centers that collect
end-of-life products from customers. The standardized method of Hitachi, which includes regulations
regarding the security management and recycling procedures, is certified by the National Permit
System for industrial waste by the Ministry of Environment of Japan. The used products, such as IT
servers, computers, disk drives, and automated teller machines (ATMs), are disassembled into parts;
frequently by manual labor. They are being recycled into materials like waste plastics, steel, copper,
aluminum, glass, and magnets. A total of about 500 metric tons of products have been handled in 5
years from 2014 to 2018, with hard disk drives accounting for about 10 metric tons, an equivalent of
20’000 drives.
Every year, several thousands of ATMs are collected and recycled. Since 2007, the ATM manufacturer
(Hitachi-Omron Terminal Solutions) and the disassembler (Hitachi Industrial Equipment Nakajo
Engineering) have been working closely together and share information. Nakajo Engineering has the
advantage of having been an ATM manufacturer in the past. They retained their in-house engineers
who are knowledgeable in the physical structure of ATMs. ATMs are disassembled manually, to break
the equipment down as much as possible into single materials which can then be recycled efficiently
into resources, or which can be reused after refurbishment. Approximately 20 different types and a
total of 7’000 parts have been effectively reused to date, mostly as parts for maintenance. The service
life of an ATM is limited to 10 years due to upgrades of equipment and change in design. However,
many parts are often still usable for the new product. Such Design for Environment (DfE) needs to be
more widespread to increase refurbishment and reuse.
ATMs are comprising metals, circuit boards, cables, hard disk drives, rechargeable batteries, waste
plastics and glass. Only the glass materials used in the panel is classified as waste. Metals make up
about 90% of the overall material. The metal that is most effectively recycled is steel. Recycling of
steel does not only decrease the need to import iron ore from other countries, but also decreases the
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energy consumption of the steelmaking process. Recovery of heat from plastics, or the use of burnt
ashes in aggregates is strictly speaking also recycling, although it still reflects the linear economy. In
the future, more awareness about the circular economy is needed.
Hard disk drives (HDDs) contain an aluminum casing, a disk, a motor, a magnetic head, a circuit board,
screws, and a voice coil motor (VCM) which contain rare earth elements. HDDs were also disassembled
by hand. However the speed of disassembly was limited by 10-12 drivers per worker per hour. An
automated disassembler was developed that increased this rate to 140 drives per worker per hour.
This disassembler is designed to avoid the VCMs from being damaged, which could lead to
spontaneous combustion or the infiltration of contaminants in the magnet refurbishing process. The
Hitachi disassembler has processed 26 tons of magnets from HDDs over 6 years since 2013. In 2018,
MRI scanners were also targeted for rare earth recycling. In that year alone, the total volume of
magnets collected soared up to 25 tons.
The recycling of rare earths allows to supply 10% of the total RE demand of Hitachi. Furthermore, the
collection and recycling of rare earth magnets by Tokyo Eco Recycle Co., Ltd (one of the three recycling
companies of Hitachi) reduces CO2 emissions to less than 10% of the emissions that would have taken
place if the same weight of magnets would have been manufactured from primary resources. By
making the rare earth magnet value chain more circular, Hitachi reduces the disposal of magnets, and
provides means of added value in the value chain, via reuse of parts and materials and recycling into
raw materials. The circular flow prolongs product lifetimes and saves resources, improving the co-
existence of humans and nature. Initially this was motivated by environmental impact reduction, and
the implementation of regulations from the Japanese government supported by governmental
subsidies. However, in the end, the collection of used parts and automatization of equipment also lead
to cost reductions. In order to help achieving the SDGs “Responsible consumption and production”
and “Partnerships for the goals”, Hitachi will continue practicing efficient resource recycling through
both supply chain coordination within Hitachi and partnerships outside the group.
2.2. Dieuwertje Schrijvers: Identified gaps between industry capacity and policy needs
in a raw materials risk framework
Dieuwertje Schrijvers is a postdoctoral researcher at the ISM-Cyvi group at University of Bordeaux. In
the IRTC-Business project, she is responsible for research and publication.
One of the goals of IRTC-Business is to prepare a decision-making tool that supports the management
of critical raw materials for companies. A decision-making model was drafted and discussed during
the IRTC workshop that was organized in May 2020.
This model was based on the classic structure of criticality assessments in which materials are critical
when the probability for a supply disruption is high and when the company is vulnerable to this
disruption. The model represented three types of risks: i) the severe problem with the physical
accessibility of a material, ii) material price fluctuations, and iii) the reputational risks due to the use
of a material. Workshop participants could provide feedback via the online platform Miro. Overall,
there was agreement on the relevance of the three risk types. However, they should not be assessed
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separately, as the risks might be related; i.e., accessibility problems could lead to fluctuating prices.
Furthermore, the model did not consider that multiple risk mitigation measures might need to be
applied in parallel, before criticality is successfully mitigated. The potential damage caused by the use
of CRMs was also not reflected by the model. Via parallel discussion sessions, an overview of
mitigation measures, as well as practical limitations regarding their implementation, was generated
for each type of risk. For example, some measures might only be effective in the short or long term,
or the required investments are only feasible for larger companies. Successful mitigation also seems
to be dependent on the company’s commitment to criticality mitigation, because collaboration is
needed between different company departments, such as marketing, purchasing, legal, and
environment, health and safety. The full report of the workshop of May 2020 can be accessed here.
The next step in the improvement of the decision-making model is to classify mitigation measures,
which allows to effectively combine them in the management of criticality. For this purpose, a cause-
and-effect diagram was developed (Figure 1). Such cause-and-effect diagrams are also used in Life
Cycle Assessment (LCA) to evaluate environmental risks. In LCA, the impact of the use of a resource or
an emission on the ecosphere is modeled via an impact pathway that models the fate of the emission,
the exposure, the effect, and finally the damage on the ecosphere. Similarly, in the cause-and-effect
diagram of Figure 1, the damage of the use of a raw material on a company can be modeled. A
company can be exposed to the three types of risks mentioned earlier (physical accessibility problems,
price fluctuations, or reputation damage). The effects of these risks cause a damage: the company will
have unstable operations. The origins of the risk types could be considered the “fate” of the raw
materials, e.g. the supply of the material can be disrupted, or there could be a mismatch between
supply and demand.
Different mitigation measures have a mitigation potential at different points in the cause-and-effect
diagram. For example, the ability to pass on costs to costumers does not avoid costs increases, but it
can avoid that the increased costs cause damage to the company. Having stockpiles does not avoid
that the company is exposed to accessibility problems or fluctuating prices, but it can avoid that the
company will experience the effects of these problems. The position of the mitigation measures can
already give an idea about the timescale. Measures on the right-hand side of Figure 1 can be
implemented relatively quickly, but might only be effective on the short term. Measures on the left-
hand side might need more time to be implemented, but can also have a long-term protection against
risks.
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Figure 1 Classification of mitigation measures according to their mitigation potential in the cause-and-effect chain that links
the use of critical raw materials to potential company damage.
The diagram of Figure 1 can also provide some insights regarding who is responsible for mitigating
criticality. First, it appears that only companies will experience the damage of using critical raw
materials, but this damage can also be felt by society, via the unstable provision of jobs, goods, or
taxes to sustain education and health care. This justifies the help of policymakers in mitigating
company risks, as was also visible during the COVID crisis. Raw material risks also might be caused by
the political landscape in which the company operates, e.g. due to regulations or trade relationsthat
make a material more or less critical.
Many mitigation measures can be implemented on the scale of the company, especially measures that
reduce damage or exposure to risks. Mitigation measures that reduce the sources of risks might
require more often the support of policymakers, such as investments in recycling or exploration, which
might not be profitable in certain market conditions. Furthermore, these mitigation measures have
the potential to affect a large range of companies, making the mitigation effort more structural.
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3. Summary of the Round Table Discussion
The Round Table Discussion took place in two parallel virtual panels during the workshop of November
17. Panel 1 was moderated by Alessandra Hool (ESM Foundation) and applied a focus on the industry
perspective on building resilient supply chains. Panel 2, moderated by Dieuwertje Schrijvers
(University of Bordeaux), had a policy focus. Both panels addressed the following overarching topics:
§ The influence of policies
§ COVID-19 impact
§ Sustainability
§ Cooperation
The panelists were asked questions on the above-mentioned topics. In parallel, participants of each
panel were invited to contribute with their opinions and ideas by providing comments on a virtual
whiteboard via the platform Miro.
During the follow-up workshop of 11 December, an overall summary was presented of the four
overarching topics. The participants of the workshop were invited to further reflect on the outcome
of the parallel sessions, both by a live discussion and via the commenting function on the virtual
whiteboard.
This section presents the final summary of the input gathered during the two virtual workshops.
3.1. The influence of policies
The workshop participants discussed to what extent companies or policymakers are responsible to
build resilient supply chains, and which policy tools could be deployed.
Companies were found to be responsible to manage their risks. This means that companies need to
identify what raw materials they use, and what potential risks are related to these materials. As this
is a resource-intensive task, a screening step that evaluates resource use by order-of-magnitude mass
balances might be a good starting point (following the Pareto principle). Risks could be related to an
unstable access to the materials, fluctuating prices, or the company’s image. The identification of risks
is especially important for technologies for the future, e.g. hydrogen technologies, fuel cells, or new
types of smart phones. Once risks are identified, the company should mitigate these risks. Mitigation
strategies include establishing reliable supply contracts, diversifying supply, start with recycling of
internal scraps or, via new business models, with recycling of end-of-life products taken back from
downstream customers, investing in R&D to increase circularity and substitutability of raw materials,
or price hedging. Risk mitigation is increasingly becoming common practice, although it is more
challenging for small companies with a lower capacity to make large investments.
Profit optimization is a main driver, but should not be the only driver for risk mitigation; responsible
sourcing is important as well. A strong policy framework is needed to hold companies accountable for
unsustainable operations, either via regulations (e.g. such as the Dodd-Frank act, or recent initiatives
requiring due diligence in the EU, Switzerland, and Germany) or via positive incentives, such as tax
benefits. Consumers also have a role here, although they generally do not have an overview of which
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14
regulations or standards apply to a certain company. Furthermore, consumers also prioritize costs
over sustainability. It is possible to be profitable while implementing sustainable strategies at the same
time. However, if there are no incentives, sustainability does not naturally happen. If there are too
many regulations, companies could move to countries with lower requirements. Hence, (long-term)
profitability and sustainability incentives must be balanced.
There are different viewpoints on the extent that policymakers are responsible for building resilient
supply chains depending on the dominant political vision. On one side of the political spectrum, it
could be argued that policymakers are responsible for supporting the free market. This could be
facilitated by improving access to information e.g. via data sharing platforms while at the same
time safeguarding proprietary information, e.g. on prices, volumes, and supplier terms and conditions.
Supporting the free market also requires creating a level playing field. This involves removing barriers
to free trade, such as import and export restrictions although these might also support sustainable
circularity, e.g. by linking restrictions to clear standards of sustainable management of exports for
reuse, refurbishment, or recycling. Integrating environmental and social externalities into the market
can also enable a level playing field. The latter could be achieved by developing, implementing, or
supporting certification schemes.
3
However, the playing field should also stay stable at least
regarding the direction in which it is going, contrary to the policy swings that we now see in the USA.
Consistent policies over a period of 10-20 years are necessary for companies to make capital
investments, make strategic alignments, and hire training. Supply chains can take a fair amount of
time and capital to set up and to adapt.
On the other side of the political spectrum, the support of specific companies or sectors could be
justified. SMEs and technologies that use CRMs but which have low profit margins, such as renewable
energy technologies, could benefit from governmental aid. For example, tax credits could be provided
to companies that need to reconfigure their critical supply chains. The Japanese REE example
presented by Hitachi today just showed how efficient State-industry cooperation with an intensive
contribution of public funding via loans and a high-priority research effort across the whole supply
chain can help to overcome the REE challenge. However, close collaboration with companies, such as
via public-private partnerships, could be disadvantageous for other companies within the same
market. Policymakers could furthermore fill the gap between research and upscaling of new
technologies, and they can accelerate profitability by stimulating economies of scale. In the middle of
the political spectrum, policymakers could be attributed the responsibility to raise awareness on
supply chain criticality, for example by publishing a list of CRMs, and communicating with industry
experts. Finally, policymakers could create a supportive framework to companies by providing access
to finance, state aid, and beneficial fiscal conditions, and by protecting innovations.
Various examples of policy tools that could aid in building resilient supply chains were discussed.
Policymakers could implement new regulations, but already-existing regulations could also be applied
to manage CRMs. For example, in the USA, the situation around CRM was called an emergency, which
gave companies and governments access to the defense production act via an executive order,
allowing to secure the supply of CRMs. Another policy tool is to create standards and requirements,
in line with policy goals, which are compulsory for companies to access the stock market. Examples of
3
See, for example, https://hcss.nl/report/standards-critical-materials
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this are the Global Reporting Initiative which is voluntary and reports consolidated data at a
corporate level and the Canadian NI 43-101 reporting instrument, the latter contributing to
increased transparency and accountability of mining projects. Stock exchanges are private entities,
but they are regulated and they in turn regulate the participating companies. The London Metal
Exchange has announced that they will require listed brands (producers of steel, aluminum, zinc, etc.)
to declare the responsibility and traceability standards behind their products. Such information is
necessary for investors to make informed decisions. These initiatives should be intensified and
extrapolated to other stock markets. Other examples of policy requirements are requirements
regarding the recycled content or design for disassembly/recycling for new renewable energy projects.
Policymakers can furthermore establish sustainable partnerships and trade agreements. In Europe,
the European Commission works on the creation of common goals and trade agreements, with free
movement of goods among all EU member states. Another example is the German-Mongolian
Resource Partnership. Finally, policymakers could identify raw material production capacities, either
domestically or internationally. One drawback of too much policy intervention is that too many
regulations could block an efficient use of raw materials. Besides, new regulations could lead to
unintended responses of companies. Not only direct suppliers might be affected by regulations, but
also other actors in the value chains. The whole complex system of industrial actors should be taken
into consideration. Furthermore, regulations should be assessed regarding their costs and complexity
of implementation and enforcement, and the suitable timing of implementation. New rules should be
forward-looking to follow the rapid changes in the market.
3.2. COVID-19 impact
COVID-19 has led to a very sudden and global disruption, affecting both supply and demand, perhaps
even symmetrically. Whereas metals at the extraction stage often dominate the discourse on
criticality, all commodities, including food and energy materials, and all value chain stages including
the distribution of final goods were affected by the pandemic. Extracting countries might however
be more vulnerable for the consequences of the pandemic, because their economy is more dependent
on the export of raw materials. Also, less developed health system in poorer countries might affect
the ability to produce and amplify inequalities. Due to the generic and global nature of the disruption,
lessons might be taken from risk assessments in the financial market.
Shortages of products were caused by the lockdown of production facilities, but also by new societal
needs. Demand increased for medical equipment, but also for information technology equipment due
to global changes in people’s behavior: people worked more from home.
From the COVID crisis it became clear that not all disruptions can be prevented even if they can be
anticipated. In order to absorb potential shocks, we should move to more resilient supply chains. The
disruption caused by the pandemic was fast and had a high impact. This asked for very strong policy
responses. Governments demonstrated the scope and the scale of their willingness to seek resilience
and protect their economies. However, supply chains also should remain efficient. Companies need
to be cost efficient, and resource efficiency is necessary for climate mitigation. Mitigation of supply-
chain risks, or risk management in general, might ask for investments in the short term, but long-term
profitability can still be safeguarded which is presumably the objective of companies.
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Now, we have the opportunity to redesign the value chains and “build back better”. Increased
resilience could be achieved by increased adaptability, for example via increased substitution,
increased stockpiling, increased diversification (including locally and from secondary resources), and,
perhaps most importantly, enhanced collaboration among industries, as companies cannot manage
all risks alone. This was also demonstrated in the beginning of the pandemic, where German
companies jointly set out a strategy to respond to the spread of the virus. SMEs might be more
disadvantaged by the COVID crisis, as they have less reserves. However, as discussed during the
presentations, SMEs play an important role in the creation of more resilient supply chains as they
contribute to increased value chain diversity.
Companies should become more agile. Via R&D, they can invest in enlarging their options to react,
and increase their ability to change their activity when the supply or demand of materials and products
is disrupted. This might require a shift in the company’s strategy from “producing a product” to
“responding to a societal need”. Criticality risk mitigation, but also investments for circularity and
sustainability have both operational, day-to-day, and longer-term strategic aspects that should be
considered. The COVID crisis can teach companies to what extent they have the capacity to anticipate
and respond to supply risks.
Even if supply chains are still vulnerable to large disruptions, much improvement has been made,
especially behind the scenes. For example, regarding REEs, in the past decade a wealth of additional
information and knowledge has been gained about resources, also outside current producing
countries. Significant progress has been achieved at laboratory scale on the improvement of processes
for primary production, recycling, and reuse. These innovations are not commercialized yet, but this
can be expected in the next decade. Commercialization is important to effectively contribute to
increased resilience. It depends on one’s policy perspective whether it is deemed appropriate that
government funding is used to bridge the gap between the lab and commercial upscaling, as stated
before.
Furthermore, materials that were critical 10 years ago, such as europium and terbium, have changed
status due to rapid technological development (e.g. the fast uptake of LED lamps replacing fluorescent
lamps). Technological shifts in jet engines or batteries might lead to similar changes in determinations
of critical raw materials. Various signals hint towards a decreasing role of Nd and Dy for high
performance magnetic materials in the future, which may become significantly substituted by more
common raw materials. Foresight studies that point out expected innovations and identify future
CRMs are very useful in this regard.
3.3. Sustainability
Sustainability is a broad topic covering the environment, society, and the economy. It is stated that
there is no long-term economic sustainability without environmental sustainability and social
acceptance.
We are still much relying on the primary extraction of raw materials, because the demand for raw
materials is increasing and stocks are still being built up. Therefore, it is important that primary
extraction is conducted in a sustainable manner. Increased circularity can improve the sustainability
of the use of raw materials and make the sector more resilient, by also accounting for environmental
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and social performance of secondary production. For a comprehensive view, considering social
aspects, energy consumption, water use, resource efficiency, and pollution, strong evaluation
methodologies are needed. Whereas policymakers can debate circularity and sustainability in
conceptual terms, scientist, engineers, and companies need to develop quantified terms that measure
the extent to which activities, technologies, and investments are indeed sustainable. This helps in
formulating clear Environmental, Social, and Governance (ESG) objectives and commitments by
companies, contributing to their credibility.
Primary extraction is still mostly taking place in emerging economies. In order to escape the “resource
curse” (the paradox that countries with more natural resources have lower economic growth), these
countries need to develop their own sustainability, resilience, and competitiveness goals. Adding value
along the resources’ value chain is more challenging in emerging economies, as they do not always
have access to affordable power, reagents, or qualified labor. Institutions such as the World Bank
could provide assistance where needed.
In order to create environmentally and socially sustainable primary extraction and recycling practices,
investments are needed. However, in both sectors, many workers have an informal status, i.e.
artisanal and small-scale miners (ASM) and informal recyclers, for example in India. Formal recognition
of their work is a requirement before investments will be made. The workers need rights, e.g. access
to land and security of tenure, and education in the value of the products and the dangers of their
activities. If the right incentives are set, developing and transitional economies might be able to meet
low emission policies and simultaneously address inequality and social impacts.
Circularity could be enhanced by formulating circularity targets, or recycling targets, that are raw
material specific. Recycling targets of certain percentages or tons of waste are not sufficient to
improve the circularity of CRMs, because they are used in such small quantities that they are not well
represented by mass-based targets. This is also discussed in the IRTC perspective paper.
4
Circularity is
also impeded by sensitive information about flows. Moving towards more circularity requires
investments in viable recycling technologies and infrastructure. Increased automatization and
digitalization could overcome current limitations, although related technologies might require, in turn,
more CRMs. However, technology is not the only limiting factor, especially in industrialized countries.
If it is not evident that recyclable products will be collected and will enter state-of-the art processes,
and companies are reluctant to make large investments into this. The legislative framework could
incentivize the collection of end-of-life products and the implementation of circular business models
such as leasing systems or deposit systems.
It remains a question of debate how the willingness to pay for sustainabilitycan be increased, and
which mechanisms governments or voluntary standard initiatives can provide to increase it, such as
price premiums, ecolabels, or boarder tax adjustments. Carbon taxes might improve the business case
for recycled raw materials. If the true (environmental and social) costs of materials would be
accounted for, stewardship over those materials would become a more natural solution to
4
Tercero Espinoza, Luis et al. 2020. “Greater Circularity Leads to Lower Criticality, and Other Links between
Criticality and the Circular Economy.” Resources, Conservation and Recycling 159: 104718.
https://doi.org/10.1016/j.resconrec.2020.104718.
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maintaining affordability, and design for revocery would be incenivized, as well as product-service
systems which are more resilient against price volatilities. If take-back is incentiviced for example
via deposits or leasing schemes standardization would help to facilitate recycling. However,
standardized product compositions are hard to achieve in innovative sectors where products undergo
quick developments.
Challenges and strategies towards increased sustainability are specific to each economy but might also
be raw-material specific. For example, different strategies might be relevant for low-margin
commodities that are used in large quantities, such as iron and copper, and specialty metals, such as
rare earth elements. Investing in sustainability and circularity requires a mid-to-long term perspective.
Hence, companies need a mandate to justify such investments, as shareholders often demand short-
term profits. In any case, companies with a long-term vision tend to perform better, also economically.
Investments might also be needed in education, in order to introduce the concepts of sustainability
and circularity in engineering and business curricula to ensure that the next generation of workers has
proficiency with the concepts and tools to address these issues widely. In Europe, the European
Commission already pushes towards increased circularity and resource efficiency, which could provide
the mandate to make such investments.
3.4. Cooperation
Collaboration between companies is very important to achieve responsible sourcing, because OEMs
do not always have an overview of their supply chains beyond their first-tier suppliers. However, there
is already some improvement regarding the transparency of supply chains, for example in the field of
batteries and consumer electronics. Companies also need to collaborate to achieve a circular economy
for example between manufacturers and recyclers: recyclers need to understand what materials are
present in products, whereas manufacturers refrain to disclose this to protect propriety information.
Also, local collaboration might become more important, for example to achieve industrial symbiosis.
Collaboration is hindered by IP rights, know-how, antitrust laws, and domestic policy, which instead
results in a concentrated supply of technology materials. Sharing information could be facilitated if
recyclers become an integral part of the company group. Distributed ledger technologies, such as
blockchain, could support the sharing of information while protecting confidentiality.
At the moment, every actor aims to optimize their own performance. There is a need for a system
perspective: there should be an alignment of interests of actors within the value chain, and trade-offs
need to be addressed. It is important to recognize that sustainability and circularity do not always lead
to win-win solutions. Furthermore, the dual role of actors in CE business models should be taken into
consideration, which could create competitive tensions: manufacturers supply primary products and
components, and perform remanufacturing and refurbishing activities, while consumers act as
suppliers of products and components. This requires a revision of the established and traditional
relations.
International collaboration and increased multilateralism are needed to overcome global as well as
local sustainability challenges, and pandemics. Currently, there are many initiatives towards increased
sustainability, but none of these take a real comprehensive and global perspective. There is a need for
an international framework that establishes common goals and redefines “competitiveness”, as
currently different actors around the world can play according to different rules. The UN Sustainable
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Development Goals are internationally agreed upon, so they can provide the basis for such a
framework. This should be organized and hosted by a neutral global institution, for example by the
WTO or via the creation of an “International Mineral Resources Authority”, following the model of the
International Energy Agency. International finance institutions such as the World Bank, the Asian
Development Fund, and national initiatives such as China's Belt and Road Initiative (BRI) supply
funding and financing for development projects for resource extraction and development. Alignment
with these institutions could contribute to including appropriate sustainability metrics into investment
and decision-making processes, which reduces the chance of lock-in of unsustainable technologies
within large projects which will operate during the following decades.
Collaboration is also crucial to create more diverse supply chains. Developed economies need to
collaborate with emerging economies when they do not have domestic ores. More collaboration
however means more complexity. This increased complexity could mean that a local problem can
easily become a global problem, as we saw during the pandemic. Complexity is difficult to avoid and
not necessarily a bad thing, as diverse supply is more complex, but also more resilient. However,
certification programs and sustainability goals are more difficult to implement in diverse and complex
supply chains. Focusing on domestic solutions could lead to increased resource nationalism and distort
international (trade) relations. Diversification thus contradicts the current tendency to become
increasingly self-reliant.
This summary was written by Dieuwertje Schrijvers, Sophia Ganzeboom and Alessandra Hool.
About the project
The International Round Table on Materials Criticality in Business Practice (IRTC-Business), supported
by EIT RawMaterials, is a continuation of the IRTC project with the aim to support the advancement
of the evaluation and mitigation of criticality by establishing a dialogue between international experts
from industry, academia, and governments. The project consists of over more than 40 researchers
from Europe, US, Canada, Australia, Japan, Korea and China; 15 of them industry representatives
which form the advisory group of the project. IRTC-Business publishes joint scientific papers on current
topics in criticality; its final outcome will be a web-tool for company decision-making on raw material
risks. More information is available on https://irtc.info.
Coordinator contact
Alessandra Hool
ESM Foundation, Junkerngasse 56, 3011 Bern, Switzerland
alessandra.hool@esmfoundation.org
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