Brand Watch: To get to net zero, we have to dig deep into the circular economy

Digging for raw nickel ore near Sorowako on Indonesia's Sulawesi island. REUTERS/Yusuf Ahmad

November 16 - With all eyes on the U.N. climate talks in Sharm el-Sheikh, even close observers of environmental affairs could be forgiven for missing the fact that this week is also Raw Materials Week.

An initiative of the European Union, the week-long event is designed to train minds on the vital importance that materials such as cobalt, rare earths, copper, nickel and lithium play in supporting the clean-energy transition.

Such materials have a crucial role in the manufacture of everything from battery storage units and electric vehicles (EVs) through to wind turbines, photovoltaic panels and hydrogen production facilities.

Yet, mining for these materials contributes to major biodiversity loss and energy-related carbon emissions, which, in turn, raises awkward questions for manufacturers of clean-tech solutions.

In a public letter published by over 230 civil society organisations, delegates to COP27 were warned that the low-carbon transition could see demand for critical materials increase sixfold.

Jean-Claude Katende, a spokesperson for the campaign group, Publish What You Pay, which helped coordinate the letter, accepts that the world “urgently needs to decarbonise” but fears that the extraction of minerals for “clean” technologies could damage the environment further.

“As we swap one set of finite resources for another, we must end the mistakes of the past,” he says, stressing the social and environmental problems that have been “plaguing mining for decades”.

Among the many examples of destructive extractivism cited by Publish What You Pay is Madagascar’s Ambatovy open-pit nickel and cobalt mine, the construction of which led to the clearing of around 2,000 hectares of pristine rainforest – prompting headlines about “reverse development”.

Solar panels in Sharm El-Sheik, Egypt - Indium, a key component of solar panels, is a finite resource and forecast to run out in 2050. REUTERS/Sayed Sheasha

So, what is the solution? The mining industry is keen to point to improvements in its practices over recent years. The industry-led International Council on Mining and Metals, for instance, has a prominent presence at COP27, making the case for “climate-smart and responsible mining pathways” at a string of high-profile discussion events. Similarly, responsible mining is the subject of one of the signature events during the current Raw Materials Week.

Doing less harm is certainly not beyond the wit of the mining sector, a field awash with engineering expertise and technical know-how. The above-mentioned Ambatovy, for example, has created “offset sites” in and around the mine area, intended to compensate for forest clearance at the mine site by slowing deforestation driven by small-scale agriculture elsewhere. Independent research suggests the conservation measure is on track to avert as much deforestation as was caused by the mine.

Yet efforts to reduce the harm with which resources are dug up avoids one major, inconvenient truth: these vital resources are finite. Indium, for instance, a key component in solar panels (as well as smartphones, flat-screen TVs and a host of other electrical goods), will run out within 50 years, says the European Chemical Society.

Long before reserves run dry, however, limitations in global trade are likely to emerge. Cobalt illustrates the potential supply-side headaches ahead for clean-tech manufacturers. More than 80% of production of this ferromagnetic metal (used in lithium-ion batteries, among other uses) comes from just three countries; the Democratic Republic of Congo, Cuba and Russia.

So brands in the clean-tech space are being encouraged to think differently and adopt a “circular” approach to sourcing critical materials: ie reusing existing materials in the value chain rather than digging them up fresh from the ground.

Such an approach would reduce import dependency as well as help avoid the vast amount of carbon emissions from the extraction and processing of raw materials, which accounts for around half of the global CO2 emissions, according to the World Economic Forum.

The energy transition is as much a “hardware story” as one about competing energy sources, says Joss Bleriot, head of institutions and governments at the Ellen MacArthur Foundation: "Given the material impact of revamping power generation and mobility systems, it is imperative to include a broad set of circular economy strategies in the transition plan,” he says.

Lithium-ion cells from old laptop battery packs are pictured at the Quadloop recycling facility in Lagos, Nigeria October 4, 2022. REUTERS/Temilade Adelaja

A new report from the London-based sustainability specialist, Systemiq, notes that European manufacturers currently rely on imports for over 98% of their lithium, platinum, graphite and rare earth elements.

To reduce such dependency, the report calls for ambitious policies to “flatten the curve” on demand for critical materials, either by substituting them for alternatives or optimising their use through design efficiencies.

Second, and no less important, is the need to dramatically increase Europe’s capacity for material reuse. For example, up to 95% of all key battery metals can be reprocessed, the report maintains. With the right infrastructure in place, reuse could account for up to 80% of metal demand for the battery industry by 2050, Systemiq calculates.

“Higher recycling rates help to decouple production from the traditional mining industry and the associated environmental pressures,” says Tilmann Vahle, Systemiq’s lead for sustainable mobility and batteries.

Yet, while the recycling of steel, aluminium and many precious metals is already well-established, he adds, progress on critical raw materials such as lithium, cobalt and neodymium remains minimal.

Boldly stepping into this debate is Epson. As part of a recent revision of its long-term environmental strategy, the Japanese electronics giant and printer maker last year committed to the highly unusual goal of becoming “underground resource free” by 2050.

It's no small task. The company’s chief executive, Yasunori Ogawa, concedes that replacing virgin materials across its entire portfolio represents “one of our biggest challenges”.

Theoretically, closing the loop for critical materials should be doable. In its Circular Economy Action Plan, the European Commission lays out a clear vision for a circular, “less waste, more value” approach to material use.

Yet, success relies not just on regulatory guidance but also industry investment and cooperation. In 2020, for example, the Commission gave the printer industry six months to come up with a voluntary agreement to ensure its products meet key green features such as energy efficiency and recyclability. The proposed accord by the industry failed to convince regulatory authorities, who consequently incorporated printing manufacturers into reforms to the EU's eco-design directive.

“Regulators gave the chance to companies to organize themselves (but) not all companies have the same level of understanding as far as sustainability and environmental consciousness are concerned,” explains Henning Ohlsson, European head of sustainability for Epson.

Epson has taken some important early steps to develop some novel biomaterial and bioplastic alternatives to mined materials. The company forms part of a cross-sector consortium in Japan, for instance, that is experimenting with producing biomass plastic (pararesin) from a microalga called Euglena.

Earlier this year, the company also announced plans to build a factory in Japan’s Aomori district to recycle used metal. The facility will support the company’s subsidiary, Epson Atmix, to produce metal powder, a key component for power supply circuits used in smartphones and electric cars, among other products. Atmix estimates that the new facility will meet around 25% of its raw material needs when it comes on stream in 2025.

Describing Epson’s underground-resource-free pledge as a potential “lighthouse initiative”, Systemiq’s Vahle says similar moves by other companies would provide important demand signals to investors for circular solutions.

However, pioneering companies will need to work more closely with regulators and others in the coming years, he argues. “Only then can these efforts scale to the level that they counter the urgent challenges of climate and environmental pressures that humanity faces.”

The logical link between reducing a carbon-intensive activity like mining and achieving the ambitious climate goals that many brands have now signed up to should be plain to all, says Fred Royan, global practice area leader for sustainability and circular economy at market analyst firm, Frost & Sullivan.

“At the end of the day, if anybody wants to be net zero, then they also have to be circular.”

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. Sustainable Business Review, a part of Reuters Professional, is owned by Thomson Reuters and operates independently of Reuters News.

Oliver Balch is an independent journalist and writer, specialising on business’s role in society. He has been a regular contributor to The Ethical Corporation since 2004. He also writes for a range of UK and international media. Oliver holds a PhD in Anthropology / Latin American Studies from Cambridge University.