Background

The energy transition, continuing digitalisation, and the rise of AI have significantly elevated the importance of mineral value chains. Mineral extraction, particularly artisanal and small-scale mining (ASM), has become a focal point for stakeholders due to complex sustainability impacts, including deforestation, biodiversity loss, and human rights violations. ASM employs over 225 million people globally and provides a substantial proportion of critical minerals such as tin, tantalum, tungsten, gold (3TG), cobalt, and copper. This report examines the human rights challenges linked to ASM and the role of investors in promoting responsible sourcing practices.

The problem

While ASM provides essential livelihoods, it is frequently linked to conflict funding, forced labour, unsafe working conditions, and gender-based violence. Global efforts to facilitate the formalisation of ASM activities and instil responsible sourcing have had limited effectiveness on the ground. Consequently, companies and investors continue to face legal, regulatory, operational, and reputational risks. International frameworks, such as the United Nations Guiding Principles (UNGPs) and OECD guidance, establish clear expectations for businesses to identify and address human rights and conflict-related risks through a proactive, risk-based due diligence approach.

Surge of demand for critical minerals underscores the importance of responsible sourcing

The demand for minerals like graphite, cobalt, nickel, and lithium is projected to increase up to four times by 2040 to support clean energy technologies. Extraction is highly concentrated geographically, with the Democratic Republic of the Congo (DRC) holding over 70% of global cobalt reserves. This concentration, combined with the fact that China accounts for over 65% of global processing for key minerals, presents significant transparency challenges for stakeholders attempting to conduct supplier due diligence in jurisdictions with limited data availability.

ASM mining, conflict and human rights violations

ASM is a major source of global supply, accounting for 20% of gold and 26% of tantalum. However, the sector is often associated with child labour, with over a million children estimated to be affected globally. In the DRC, armed groups frequently control mining areas and trade routes to fund their activities. Women comprise approximately 30% of the ASM workforce but are disproportionately affected by environmental harm and face a high risk of gender-based violence. Large-scale mining (LSM) also presents risks, including water pollution and conflicts with local communities over land use.

Regulatory focus on ASM formalisation and responsible mineral sourcing: successes and challenges so far

Formalisation aims to integrate ASM into the formal economy to provide legal protections and generate state revenue. Success has been hindered by weak governance, corruption, and high administrative burdens. The OECD Due Diligence Guidance offers a five-step framework for risk-based due diligence. While regulations like the US Dodd-Frank Act and the EU Conflict Minerals Regulation have improved corporate transparency, their impact on reducing violence in the DRC remains inconclusive. Some regulatory requirements have led companies to disengage from high-risk regions, which can negatively affect local economies dependent on mining.

Company risks, challenges and good practice

Companies failing to address human rights risks in their supply chains face legal proceedings, sanctions, and investor divestment. Supply chain opacity, particularly at the smelter and refiner level, remains a primary challenge. Best practices identified in the report include establishing board-level oversight, adopting a collaborative cross-functional approach to risk management, and conducting independent research beyond a reliance on industry certification schemes. Advanced companies are beginning to broaden their due diligence scope to include minerals beyond the traditional 3TG, such as mica, cobalt, and lithium.

The role of investors in addressing mineral sourcing risks and facilitating responsible sourcing practices

Investors have responsibilities under the UNGPs to conduct heightened human rights due diligence (hHRDD) in conflict-affected and high-risk areas (CAHRAs). Recommended actions include internal capacity building, proactive portfolio monitoring, and policy engagement. Investors can leverage their influence through collective initiatives like the Global Investor Commission on Mining 2030. Engagement should focus on whether companies are implementing robust mitigation measures and supporting responsible engagement with ASM communities rather than simply avoiding high-risk jurisdictions.

Stakeholder engagement guide for investors – promoting responsible mineral sourcing practices

Investors are encouraged to evaluate whether portfolio companies have comprehensive responsible mineral sourcing policies aligned with OECD and UNGP guidelines. Engagement should verify if companies implement a chain of custody or traceability system capable of identifying the mine of origin and tracking all payments made to public or private security forces. Companies should demonstrate a commitment to risk mitigation over simple risk avoidance to ensure that mineral sourcing continues to support local developmental opportunities.