27 February 2020
IRP Report Proposes Governance Framework for Extractives
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UNEP's International Resource Panel has released the report titled ‘Mineral Resource Governance in the 21st Century: Gearing Extractive Industries Towards Sustainable Development’.

The report maps existing international governance frameworks for minerals industries and presents recommended improvements.

The report calls for moving beyond the current paradigm of social license to operate, proposing a governance framework based instead on a “sustainable development license to operate”.

The UN Environment Programme’s International Resource Panel (IRP) has called for the development of a ‘Sustainable Development License to Operate’ (SDLO), in its report on the governance of extractive industries. Governments have increased efforts to decouple their economies from resource use, but the demand for extractive resources is projected to continue to grow, especially in emerging economies.

As a basis for the proposed SDLO framework, the report titled, ‘Mineral Resource Governance in the 21st Century: Gearing Extractive Industries Towards Sustainable Development,’ maps over 80 existing international governance frameworks and initiatives that focus on delivering the SDGs. The authors lament, however, that the existing frameworks do not operate in a sufficiently coordinated or integrated manner.

Noting that extractive industries can cause extensive and lasting damage, the report critiques the current paradigm of “social license to operate” (SLO), which it notes arose as a response to business risk. The SLO paradigm aims to accommodate community demands to the minimum extent necessary to avoid public opposition and social conflict, and associated reputational damage, the authors write.

To move beyond SLO and consolidate existing instruments, the report sets out consensus-based principles, policy options and best practices that are compatible with the SDGs and other international policy commitments. It identifies eight SDGs in which the extractive sector, if well-managed, can play a positive role: Goals 1 (no poverty), 6 (clean water and sanitation), 7 (affordable and clean energy), 8 (decent work and economic growth), 9 (industry, innovation and infrastructure), 13 (climate action), 15 (life on land) and 16 (peace, justice and strong institutions). 

Effective mineral resource governance incorporates human rights, responsible business practices, greater engagement of home countries, and economic decoupling.

UNEP emphasizes that the minerals and metals industry can promote social cohesion, inclusiveness and economic progress among low-income countries and vulnerable populations, but guidance is needed. The report elaborates that the SDLO model advocates for fairer deals, equal share of benefits among stakeholders and holistic consideration of regulations that are not inclusive on their own. 

The proposed SDLO framework addresses large-scale mining and investigates artisanal and small-scale mining (ASM), in which some marginalized groups in certain geographies partake, though often without oversight by policymakers. The framework does so in part by extending responsibility to ensure implementation is shared by both “host” and “home” countries, and by expanding the scope to a broader swath of the extractive value chain. However, the authors caution that the SDLO is not a substitute for laws and regulations, and that extractive industries place large demands on natural resources such as land and water.

Prerequisites of an effective mineral resource governance framework, the report notes, include decoupling economic growth from environmental and social impacts, protecting human rights, establishing responsible business practices, and ensuring greater engagement of home countries. With respect to national and sub-national governance, the report recommends that countries establish three public institutions: an environment directorate, a mining directorate and a geological survey to regulate the mines and metals industries. The report also articulates the role and responsibility of host governments, which includes devising responsible concession agreements, mainstreaming environmental assessment, domesticating natural capital accounting, ensuring transparency and channeling extractive rents into public investment.

Internationally, the report advocates for the creation of an International Minerals Agency to improve coordination mechanisms, or at least settling on an international agreement to share data on economic geology, mineral demand and the industry’s impacts. It suggests that this agreement could be negotiated through existing for a such as the UN Environment Assembly, the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development, and wider ongoing UN processes focused on reviewing progress towards the SDGs.

Previous SDG Knowledge Hub coverage of the Summary for Policymakers is also available. [Publication: Mineral Resource Governance in the 21st Century: Gearing Extractive Industries Towards Sustainable Development]

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