Ref. Ares(2023)3726807 - 30/05/2023
From:
To:
JAHNS Hanna (CAB-HAHN)
Cc:
JANNES Pauline (CAB-HAHN); 
Subject:
Thank you / CRMA and governance - additional information
Date:
mardi 7 mars 2023 14:48:53
Dear Hanna,
 
Thank you for taking the time to meet with us recently to discuss the Critical Raw Materials Act
(CRMA) file. Please find follow up information below regarding the need for binding good
governance requirements. In case useful, we have also included additional statistics and
information at the bottom of the email.
 
Given the high risk of corruption in the extractives sector, we believe it is essential that the
proposed regulation includes binding requirements on companies extracting, processing
and using critical raw materials to carry out due diligence to address corruption and other
governance concerns throughout their value chain.
 
It is uncertain whether the Corporate Sustainability Due Diligence Directive (CSDDD) will address
corruption and other governance risks and its transposition and implementation will take several
years. However, wording currently being considered in the EP for inclusion in the CSDDD could
serve as a model for the CRMA:
 
‘adverse good governance impact’ means any adverse impact on good governance
resulting from the violation of one of the prohibitions enshrined in the international
conventions listed in the Annex or failure to comply with obligations under those
conventions, or any adverse impact on the proper functioning of public administration and
services, the rule of law, democratic electoral systems, and freedom of expression,
including bribery, corruption, blackmail, tax evasion, illegal political funding or exercise of
influence, and other business practices detrimental to good governance;
 
Annex: Violations of internationally recognized objectives and prohibitions included in good
governance and anti-corruption conventions. Such instruments include, among others:
1. United Nations Convention Against Corruption, 2003
2. United Nations Basic Principles on the Independence of the Judiciary, 1985
3. United Nations Declaration of Basic Principles of Justice for Victims of Crime
and Abuse of Power, 1985
4. Council of Europe Civil Law on Corruption, 1999
5. OECD Anti-Bribery Convention, 1997
6. European Union Convention against Corruption Involving Officials (EU
Convention against Corruption), 2005
 
We remain at your disposal to answer any additional questions you may have.
 
Yours sincerely,
 
 (NRGI)
(EUChanger)
 
Transparency Register Information:

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Natural Resource Governance Institute (NRGI): 688622614637-62
EUChanger: 285692738074-38
 
 
Corruption and other sustainability risks are very high in the extractive sector:
Extractives is an extremely high-risk sector, with the OECD finding that nearly 20% of all
international bribery cases come from this sector.
In the past, commodity booms have led to more corruption. With the chance to make
soaring profits, the risk appetite of public and private sector actors increase all while
regulators struggle to keep up with the pace of dealmaking. For more information, see
joint expert recommendations.
Reserves of key minerals are both more geographically concentrated than oil and gas
reserves (IEA) and found in countries that struggle with corruption. Percentage of energy
transition minerals located in countries with high levels of corruption, according to
Transparency International’s Corruption Perceptions Index (see TI analysis):
Rare earths 94%; Cobalt 70%; Nickel 59; Copper 41%; Lithium 34%.
For some key minerals, such as cobalt, the immaturity of the market and the dominance
of a few key players means that prices are opaque, making it easier for corruption to take
place undetected (see NRGI research).
 
Addressing corruption and other governance risks prevents delays and disruption:
Failing to address governance concerns or ensure proper community
consultation/environmental safeguards will lead to disruption and delays, rather than
facilitate access and supply - mining companies must have a social license to operate:
In Guinea, the world’s largest iron ore deposit is still undeveloped nearly 30 years
after exploration rights were first granted, with alleged corruption over the
licensing process a major issue.
In Peru, Las Bambas copper mine lost over 400 days of transit between 2016 and
2022 due to protests and road blockades after the community alleged that the
company failed to comply with a number of agreements.
NRGI’s research has found that mining lead times are an average of 2-3 years shorter in
mining jurisdictions with better governance, years we can ill afford to waste as net zero
targets approach. Better governance—by ensuring mining communities benefit and in
turn providing a more secure environment for investors—is also strongly associated with
increased exploration activity.
 
  |  Governance Officer
Natural Resource Governance Institute (NRGI)
|  www.resourcegovernance.org
Twitter: @
| pronouns: 
NRGI is on Twitter, Facebook, LinkedIn and YouTube
 

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