By: Steven B. Young
The 2024 study Standardizing “Green” Extractivism: Chinese & Western Environmental, Social, and Governance Instruments in the Critical Mineral Sector by Raphael Deberdt et al. examines the growing adoption of Environmental, Social, and Governance (ESG) standards by mining companies, with a focus on Chinese firms. Given China’s dominant role in the global supply of critical raw materials—often controlling or processing over 90% of some—it’s crucial to understand how both Western and Chinese companies are responding to ESG expectations. The practices of Chinese firms marks a significant change, particularly in the context of China’s key position in the global mineral supply chain.
Key Findings
1. Convergence of ESG Approaches Between China and the West
The study challenges the view that Western and Chinese ESG frameworks are fundamentally at odds. While historically shaped by Western institutions, ESG standards are increasingly being adopted by Chinese companies. This convergence is driven by reputational risks, national efforts to standardize corporate governance, and the need to align with global market expectations. Though the approaches still differ in emphasis, the gap between Western and Chinese ESG practices is narrowing as both regions adapt to international norms.
2. Differences in Stakeholder Priorities
While both regions are embracing ESG frameworks, key differences remain in how they prioritize stakeholders. Chinese companies tend to focus on downstream stakeholders, particularly end consumers, emphasizing ethical sourcing across the supply chain. In contrast, Western companies emphasize upstream concerns, focusing on the environmental and social impacts of mining operations, such as their effects on local communities and the company’s “social license” to operate. These differences reflect varying approaches to corporate social responsibility (CSR) shaped by different market contexts.
3. Chinese Companies’ Growing Engagement with ESG
Chinese mining companies are adopting international ESG standards to secure access to global markets. They reference global guidelines such as the OECD Due Diligence Guidance, while also adhering to domestic standards, such as those from the China Chamber of Commerce of Metals, Minerals and Chemicals (CCCMC). This dual adherence reflects the broader trend of Chinese companies balancing international ESG expectations with national priorities.
4. Variation in ESG Adoption Across Companies
There is significant variation in how mining companies adopt ESG practices, especially within China. Larger, internationally oriented companies—especially privately owned firms—are more likely to demonstrate comprehensive engagement with ESG standards. In China, privately owned companies tend to lead in ESG adoption, in contrast to state-owned enterprises (SOEs), highlighting the influence of ownership structure and market exposure on ESG practices.
Explanations and Context
– Historical Development of ESG Standards
The rise of ESG standards in mining can be traced back to campaigns against “blood diamonds” and “conflict minerals,” which raised awareness about ethical sourcing and governance in resource extraction. These movements laid the groundwork for broader ESG adoption in the sector.
– Market Forces Driving ESG Adoption
The growing demand for responsibly sourced minerals is a key driver of ESG adoption. Investors and consumers are increasingly prioritizing sustainability, and mining companies must comply with standards like those from the London Metal Exchange (LME) to maintain market access and secure financing.
– China’s Role in Global ESG Governance
China’s influence in the critical minerals sector has sparked debates about its role in shaping global ESG standards. While China is adopting international best practices, it is also developing its own ESG guidelines, asserting its influence in global resource governance. Monitoring China’s participation in international forums, such as ISO standards for raw material sustainability, will be relevant.
Conclusion
The convergence of Western and Chinese ESG approaches in the mining sector underscores the global nature of the mineral supply chain and the recognition of sustainable practices. While differences remain, the trend toward alignment suggests that ESG obligations are becoming more universally accepted in response to global market demands and reputational pressures. However, variations in ESG adoption—particularly within China—indicate that factors such as company size, ownership structure, and international orientation play a significant role in shaping how mining companies engage with ESG. Continued research is needed to assess the real-world effectiveness of these standards, particularly in areas such as artisanal mining and the broader supply chain, to ensure that ESG practices lead to truly sustainable and responsible mining.
References
Deberdt, R., DiCarlo, J., & Park, H. (2024). Standardizing “green” extractivism: Chinese & Western environmental, social, and governance instruments in the critical mineral sector. The Extractive Industries and Society, 19, 101516. https://doi.org/10.1016/j.exis.2024.101516