Circular Economy in Mining – Active Integration of Environmental, Social and Governance Criteria into the Core Business

1  Introduction

For the third year in a row, Environmental, Social and Governance (ESG) criteria are the biggest risk for the mining and metals sector, according to the international consulting network Ernst and Young. At the same time, they are their biggest opportunity to drive differentiation and improvements that will create long-term value for both the sector and all its stakeholders (1). Originally promoted by the United Nations in 2004 as a market-driven initiative, ESG integration is now being tightened by regulatory pressure. It is considered one of the most widely adopted “sustainable benchmarks” on a global level, describing the link between corporate governance, and social and environmental sustainability (2). The increasing relevance of ESG criteria can be seen both in the context of a mining company’s business activities and in the reporting of its sustainability-oriented issues. Particular attention is paid to the impact of mining on local communities, as well as mining waste and its management. Today, safe storage of tailings is a key concern for stakeholders who are demanding that mining companies do more to prevent dam failures, which can lead to devastating consequences for local communities and the environment and cost billions to fix. Furthermore, companies are expected to engage in water stewardship, as well as to attain net zero emissions (1).

A joint recent CEO study by the United Nations Global Compact and the consulting firm Accenture found that 72 % of mining and metals CEOs agree that sustainability issues including decarbonization are very important to important when it comes to their company’s future success (compared to an average of 54 % throughout all industries) (3). Currently, the mineral resource investment landscape is reshaped by climate change issues (4). So far, more than 100 major financial institutions worldwide have already divested from thermal coal and now focus on opportunities and growth tied to investments in the energy transition (5). 63 % of investors would avoid investing in mining companies that fail to meet their decarbonization targets (6). Regulation is exerting pressure by dictating tough time schedules and strict requirements, e. g., EU taxonomy regulation, Corporate Sustainability Reporting Directive (CSRD), with the aim to channel capital flows into sustainability-oriented economic activities (7). Mining companies are therefore faced with the balancing act of achieving growth and economic return on the one hand and the need to invest in decarbonization, sustainability and ESG-related issues on the other. Several leading mining companies, e. g., BHP, Rio Tinto, Vale, Glencore, Anglo American, have already committed themselves to become carbon neutral by 2050 by the latest (8). The question remains, what the path to the goal will look like.

A promising approach to meeting this challenge lies in intelligently linking ESG criteria with the core business in order to create financial value. In other words, to create “ESG-oriented business cases”. Sustainability-oriented business model innovations, here especially with a focus on Circular Economy (CE), offer interesting perspectives for the mining sector to reconcile environmental and social requirements with economic returns. They represent the best opportunity to address indirect emissions within the value chain (“Scope 3” emissions) by establishing sustainable supply chains, networks or collaborations. This way, the concept of the CE also becomes a means of risk management for mining companies, assuming its utmost goal is to ensure the company’s long-term existence and optimize its adaptation to a constantly changing environment.

The current momentum of the CE is fundamentally based on increasingly critical stakeholders and an innovation push (9). The latter is based on the triad of future technologies, business model innovations, and supporting subsidies (9). In their publication “Waste to Wealth” Lacy et al. quoted the additional value creation opportunities through Circular Economy with approximately 4.5 trillion US$, which should result from the redefinition of “waste” (10). In order to capitalize on the associated opportunities, Lacy et al. proposed business models based on sharing platforms, product use extension, resource recovery, the concept of “product/resource as a service” and circular inputs, such as the use of renewable energy (10, 11). Furthermore, they identified ten key technologies that play a central role in supporting the CE. This list has now grown to 27 technologies and includes artificial intelligence, machine learning, blockchain, 3D printing, nanotechnology, energy harvesting, material science innovations and biotechnologies (11). Financial vehicles focused on CE (“Circular Finance”) are also winning pace. The spectrum of circular finance innovations includes any form of financial service or instrument integrating CE indicators into the business or investment decisions, in order to enable and accelerate the circular transition (12, 13). Related investments can be found in many sectors already. Vehicles like circular bonds, public equity funds, venture capital for circular projects are already available on the market and are recording high growth rates (14, 15).

The following article highlights the relevance of the CE and derives a definition of the intensively discussed concept in the context of mining. Furthermore, the article points out potential key principles as well as exemplary business model innovations and their advantages, but also discusses influencing factors that should be taken into account.

2  Interpretation of the CE in mining

The fascination of mining and its processes lies in increasing very low concentrations of minerals and metals to supply core raw materials to most global supply and value chains enabling production of our everyday essentials. However, low concentrations of material come along with the production of a huge amount of mine wastes. In some cases, e. g., gold ores, about 99 % of mined material is considered waste. Due to significantly dropping ore grades of a variety of extracted minerals and metals, waste volumes will rise further. Mine wastes occur as solid, liquid or gaseous by-products, in the forms of tailings, waste rock or contaminated fresh water. They consume land, create dust storms and silt streams, contaminate surface water and groundwater (16). Altogether, the mining and metals industry is among the world’s greatest generators of waste with approximately 10 bn t/a, which amounts to 40 to 55 % of the global total. Per annum, the global mining industry generates approximately 6.5 Mt of tailings (11). How can this waste potential be used profitably?

Generally, the CE is discussed as one of the most effective, promising concepts for the transition towards sustainable development (17). In a first approximation, the CE describes an economic system that is based on business models replacing the “end-of-life” concept seeking to reduce, alternatively reuse, recycle and repurpose materials in production, distribution and consumption processes. CE complements the conceptual basis of the “industrial ecology” framework (18) and offers a systemic umbrella concept (19, 20) for a wider range of circular strategies. The CE concept contrasts with the current linear economic model, which is the basis of the predominant business models in industrialized and emerging countries. According to this model, the majority of raw materials are extracted, processed, turned into products, distributed to the markets, used by consumers and then disposed of.

The 2030 UN Agenda and its Sustainable Development Goals (UNSDGs) provide both a framework and objectives for the CE at the political level. The growing requirements of investors channel business operations in an ESG-compliant manner. The research findings of Schroeder et al. underpin that CE practices and corresponding business models can contribute to achieving a considerable number of UNSDGs. The strongest relationships exist between CE practices and the objectives of SDG 6 (Clean Water and Sanitation), SDG 7 (Affordable and Clean Energy), SDG 8 (Decent Work and Economic Growth), SDG 12 (Responsible Consumption and Production) and SDG 15 (Life on Land) (21). The overlap with many ESG requirements is already evident at this point.

In their analysis, Parra et al. describe multiple potentials for supporting the SDGs in the mining context (22). However, the recent report of the Responsible Mining Foundation (RMF) and other international studies come to the conclusion that the use of circular strategies, e. g., the use of circular resources, has not yet been sufficiently widespread within the industry (23, 24, 25). Currently it can be seen that more mining companies are investing in recycling, but the structural deficits in the market have not yet been fully overcome in this regard. Glencore can be taken as an example, as it is engaging in battery recycling alongside recycling of base metals such as copper, zinc, nickel, and lead (1). So far, some other companies communicate their recycling-oriented activities mostly implicitly (24). However, the singular approach of recycling does not embody the core idea of the CE, nor is it a business model innovation in the strict sense, that addresses all challenges of the sector.

The general interpretation of the CE obviously contrasts with the traditional concept of mining and consequently poses a challenge, because usually the profit of a mine results from an increase of material consumption. This frequently cited conceptualization is supported by the common visualization of the CE which uses a “downstream focus”, and whose part-value chain CE model ranges from production of goods to consumer goods markets. It omits the significant stages of raw material extraction, material waste/landfill, which according to this interpretation, are limited to flows that should be minimized (26, 27, 28).

This perspective excludes extraction and import of natural resources as well as the outflows of waste materials from the core of the model, leading to the situation, that the primary sector is overlooked in most circular value chains (26) despite its huge potential for CE business cases. However, the commitment to a low-carbon future is resource intensive and can only be realized through a combination of primary and secondary resources. The transition to “clean energy technologies” requires a wider range and quantity of materials compared to fossil fuel-based electricity generation technologies and results in a larger “material footprint” (29). At least 23 key minerals – beyond them iron, copper, aluminum, nickel, lithium, cobalt, platinum, silver and rare earth metals – will be critical to the development and deployment of clean energy technologies (30, 31). Although societal interest in combating climate change is apparently increasing, current production and consumption patterns provide a contrasting picture. In particular, the expanding middle class and its high standard of living are the main drivers of resource use. In the time between 1970 to 2017, the annual extraction of materials worldwide grew from 27 to 92 bn t. If this kind of producer and consumer behavior prevails, 190 bn t of material will be required annually by 2060, assuming a global population of approximately 10 bn people (32, 33). So far, only 8.6 % of the resources that are extracted return to the production system as input into new everyday essential products (34). The figures of critical raw materials, the clean energy technologies heavily rely on, are even worse. The End-of-Life-recycling rate for rare earths i. e. is estimated to be below 1 % (35). The same rate is evaluated for the global lithium recycling (36).

The prerequisite for the conceptual design, strategic use and operationalization of the CE in the corporate context is its careful description and delineation in terms of content. Based on a sustainability-oriented perspective, the following key principles can be identified to operationalize the CE in the mining context in line with ESG and regulatory requirements:

1. Optimize stocks through extending the value of materials, e. g., use of mine’s by-products.
2. Act eco-efficiently and eco-effectively in daily operations, e. g., through improved recovery rates both in mining and mineral processing.
3. Eliminate waste by extending value of resources, i. e. through minimized waste (tailings, gaseous emissions, effluent). The development of feasible approaches for lower grade ores (37).
4. Implement “Extended Producer Responsibility” (EPR), e. g., by enabling tracking and tracing of materials and alloys at the End-of-Life (EoL) stage with aid of information technologies.
5. Circular product and process design through corporate collaboration (“material stewardship”), e. g., improved reuse of water and material by implementing cyclic systems. Collaboration with the manufacturing sector in favor of circular product design (38).
6. Creating “shared values” for the local communities and beyond, e. g., through community health and education measures. Development of infrastructure; integration of local suppliers; use of renewable energies. Consideration of the post-mining phase on the basis of innovative business models (39).

Further investigation of circular business cases should ideally take into account the entire life cycle of the mine with the phases of prospecting, exploration, development, extraction, closure and reclamation. This perspective is endorsed by the European Union (EU) Circular Economy Action Plan, which also examined best practices in its “Extractive Waste Management Plans” (42). Depending on the status – greenfield or brownfield – of the mine project, the degree of management influence on the application of circular aspects varies.

Generally, circularity at the mine site can be achieved in two ways: First, miners are material suppliers and initiate the most product value chains. Second, they are industrial buyers/users of products and services at the mine site (technical operating system including physical infrastructure, equipment and further assets that are created and/or utilized at the mine site). With this dual perspective, a bunch of CE opportunities evolves at the mine site and also beyond, if the mining company engages in collaborations, e. g., with local mining operators, upstream supply vendors, other key partners in the downstream value network (39). This extended interpretation of the CE for mining is illustrated in figure 1. It links the cycles of the upstream and downstream stages of the value chain.

Fig. 1. Circular Economy in mining (Own illustration based on (26, 40, 41)). // Bild 1. Circular Economy im Bergbau (Eigene Darstellung basierend auf (26, 40, 41)).

Depending on the type of resource, location of the deposit and available options to collaborate, circular initiatives can be implemented at the micro level – throughout the mine site – involving material and company aspects – the meso level – within so-called eco-industrial parks engaging in industrial symbiosis – and the macro level – across the local community, region for optimized infrastructure and energy use. The more network activities are expanded, the more business cases will usually arise.

The principles and activities along the entire minelife cycle described above fulfill the three core objectives of the CE and support a holistic approach:

1. The productive life of resources is extended to keep materials and products in the system and at their highest utility for as long as possible to optimize their values.
2. Waste and pollution are ideally designed out of the economic system through fully costing their impacts and generating additional values by recycling, reusing and repurposing the materials.
3. Natural systems are regenerated to protect essential functions (clean water and air, healthy soils, carbon storage and flood protection) (19, 39).

3  Influencing factors of the CE in mining

Achieving the circular transition of the mining and metals sector entails redistributing resources, opportunities and power among actors and thus, will be a mid- to long-term project, contested and conflict-ridden. Shifting to a CE system requires overcoming barriers. In many cases radical innovation and socio-institutional change is necessary. Innovation on companies’ side relates to technology, product and process design and revenue models and will therefore entail holistic business model innovation and the courage to do so. How can the circular transition of such an influential sector be accelerated? What is the role of mining companies and their decision makers? More specifically: What drivers can they leverage or what barriers must they overcome?

Many studies have investigated influential factors of the CE cross-sectoral, using different research methods (literature reviews, group discussions with stakeholders, expert interviews, international case studies) (43, 44, 45, 46). Due to the fact, that CE influencing factors do not act in isolation, but are intertwined, their interrelationships have been examined – on a regional level in the EU (47) and by mapping causality networks from the macro-level perspective (48). Also numerous studies already exist for the mining and metals sector which investigate different stages of the mining and metals value chain. Barriers and their intensity were evaluated (49), interrelationships were identified in an emerging economy context (50), light was shed on the status quo of large-scale mining companies (24). Technological issues – with a focus on mine wastes – have been reviewed and described many times, e. g., by Lottermoser (51), Gaustad (52), Kinnunen et al. (53, 54). Also further downstream some studies exist, especially with a focus on critical raw materials and derived products, e. g., high-performance permanent magnets (55, 56).

Reviewing this extensive literature basis, a total of six categories of influencing factors can be identified, which are divided into internal as well as external factors, but also show intersections (Figure 2).

Fig. 2. Internal and external influencing factors of the Circular Economy in Mining (Own illustration based on (24, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56)). // Bild 2. Interne und externe Einflussfaktoren der Circular Economy im Bergbau (Eigene Darstellung basierend auf (24, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56)). Photo/Foto: Korshunov, A. (https://unsplash.com/de/fotos/NWByxwVN-J0)

ESG investments i. e. are influenced from inside and outside, as visualized by corresponding arrows. Miners can positively contribute to investments by innovating their business models towards ESG requirements (inside-out). On the other hand, companies cannot influence the development of investment criteria (outside-in). The highest system level, i. e. the macro-level of society as a whole, shows the greatest distance here from the level of action of the decision-makers in the mining company. This level can hardly be influenced by the company, unless it is reinforced by cross-company or cross-sector cooperation (meso level). Internal factors entail the categories “organizational”, “operational”, “financial” and “technological”. External factors comprise the clusters “political/regulatory” and “market-driven”. Characteristic for the mining sector is, that some boundary conditions exist, that are dependent on the deposit, e. g., location, and can therefore hardly be influenced although they can be attributed to the internal factors.

4  Circular business model innovation in mining – case studies

Alongside the predominantly singular recycling approaches of mining companies described at the beginning, there are fortunately already case studies of more comprehensive initiatives.

One of these is the “BHP Tailings Challenge”, which was launched in 2020. BHP mining operations in North and South America generate several million tons of copper tailings every year. These tailings consist mainly of ground rock, unrecoverable or uneconomic metals, chemicals, organic matter and effluent from the process used to extract the desired products from the ore. They usually leave the processing plant in a slurry form (diluted with water) and are often stored on the surface in tailings storage facilities (TSFs). BHP’s objective is to safely operate and close these TSFs. With this in mind, the company decided to focus on open innovation and launched an external competition with the aim of developing innovative solutions to repurpose these copper tailings and reduce the amount of tailings stored. The challenge met a great demand. From 19 countries 156 submissions were received, of which twelve were short-listed to proceed to the proof-of-concept stage. Among them was the project “recomine” of the Helmholtz Institute Freiberg (HIF) (57). In mid-2022, two finalists were selected to conduct pilot tests in a controlled environment. A collaboration between Auxilium Technology Group and Metso Outotech developed a solution that aimed to fully repurpose BHP’s copper tailings. Copper, as well as other valuable metals, can be recovered in this approach. Water is removed from the remaining tailings, which can subsequently be used as construction aggregate or are converted into an insulating material. A consortium of Americas Tailings Inc. and Advancing Materials Processing Inc. provided the second finalist, whose approach is to produce fertilizer from copper tailings. By the end of the fiscal year 2023, both teams had completed controlled testing stage. The results are currently being evaluated for on-site replicability (58).

Genex Power Ltd. is an Australian Securities Exchange (ASX)-listed company, focused on developing a portfolio of renewable energy generation and storage projects across Australia. Although it is not a mining company, its flagship project, the “Kidston Pumped Storage Hydro”, can be cited as another example of repurposing abandoned mines as part of the CE. In this case, the former mine sites of the Kidston gold deposit in northern Queensland are being used as energy storage systems, in this case the former upper and lower mining pits, which are used to generate hydroelectric power from solar energy. During times of peak demand, water discharges from the upper reservoir to the lower reservoir through reversible pump turbines to generate up to 8 h of continuous electricity. The project, which will be operational in 2025, is the first pumped hydro project in Australia in several decades and the first to be developed by the private sector. According to its own data, it is the third largest electricity storage facility in Australia (59). This case study presents interesting opportunities for cooperation with the mining sector or for long-term business model innovations.

Industrial symbiosis refers to another promising business model pattern in the context of the CE that promotes collaborations beyond the mine gate. It involves transforming waste from one sector into a product or material that is useful to another sector. Industrial symbiosis works particularly well in industrial parks, where companies from different sectors operate in close proximity. The Kokkola Industrial Park (KIP) in Western Finland is a good example of promoting the CE of an entire region. The collaboration between companies and industries is based on material and resource flows from processes that serve as fuels for others. Boliden’s Kokkola zinc smelter, e. g., provides excess heat and steam to generate heat and electricity for buildings in the region. The heat and steam would otherwise be lost, but in this case equates to the energy consumption of about 16,000 households. The energy is also classified as carbon-free because the main fuel in the roasting process is a zinc concentrate that contains almost no carbon. Further, Boliden turns sulphuric acid, a by-product of mining, into a raw material, which is needed by other companies in the KIP. The sulphuric acid supplied by Boliden’s sulphuric acid plant is delivered via pipelines to neighboring industrial partners, reducing transportation-related emissions and costs (60).

5  Conclusion

A growing number of companies across all industries have recognized the CE and its circular strategies as an opportunity to reduce costs, create additional revenues, and manage risks – particularly in relation to ESG criteria and legislation, as well as climate change and decarbonization targets.

This paper highlights the relevance of the CE in the mining sector and points out its extensive potential for ESG-oriented business model innovation. Building on a contextual definition and the derivation of key principles, the paper identified internal as well as external influencing factors and revealed implementation opportunities for mining managers based on practical case studies. With this information base, it contributes to the operationalization of the CE in the mining sector.

The realization of the energy transition is resource-intensive and must therefore build on a combination of the extraction of primary and secondary raw materials. Studies reveal that the implementation of CE is successful when it is flanked by a sound business case (61). These business cases do not happen by chance but are the result of active identification and innovation. The CE concept supports decision-makers in actively seeking and striving to realize additional value creation and capture innovation rents. Sustainability-oriented business model innovation is considered the prime technique for miners to integrate ESG criteria into their core business, to proactively address regulatory requirements and to successfully position themselves in the competitive environment in the long term. Circular business model patterns are among the most promising approaches in this context (1, 62).

The holistic design can be realized with the aid of the CE principles for mining, which consider the mining life cycle from raw material extraction to mining waste recycling and link it to the cycle of consumer goods.