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Transparency ensures the ESG and growth of Europe’s critical raw materials economy

On Monday 16 March 2023, the European Commission proposed the EU Critical Raw Material Act (CRMA), setting clear goals for how the EU will source and manufacture the critical minerals that are vital to building its green and digital economies.

Key to the CRMA is accelerated timelines for siting and permitting new mines and processing facilities, while also ensuring environmental protection and responsible and sustainable production. To some, these goals may seem incongruent. However, when digital transparency of mineral extraction, processing, and manufacturing is applied, Europe, its industries and citizens can ensure that a high standard of environmental and social conduct is upheld. So that Europe’s clean energy economy is built transparently.

To meet these goals, organisations need to know the flow of materials across their supply chain. With increased traceability, comes more visibility and the opportunity to ensure high standards are upheld.

Growing need for Critical Materials—especially those that are responsibly sourced

Critical raw materials (CRMs) such as lithium, magnesium and natural graphite are used in everyday life for a wide variety of purposes. These include in home and mobile technologies, laptops and LED bulbs, green energy infrastructure such as solar panels, wind turbines, and electric vehicle batteries.

CRMs are strategically important for Europe as it seeks to strengthen its economic, geopolitical, energy, and climate resilience. Currently, the EU is heavily import-dependent for its raw materials, often sourced from quasi-monopolistic third-party providers. What’s more, is that the environmental and responsible sourcing standards in these other parts of the world might not always uphold European values for how people and planet need to be treated.

The EU Critical Raw Material Act will enable the EU to deliver on its climate ambitions

The global shift to more electrified and digitalised economies means that demand for critical raw materials will rapidly increase over the coming decades. Global demand for lithium, for example, is expected to increase 89-fold by 2050. In the EU, demand for base metals, battery materials, and rare earths is expected to grow fivefold just in the next seven years. The CRMA aims to secure sustainable access to these necessary raw materials while meeting the EU’s ambition to become the first climate-neutral continent.

The CRMA is key to increasing and diversifying the EU’s raw material supply, setting goals of mining at least 10% of the EU’s strategic raw material needs within the region annually by 2030, as well as processing at least 40% of those needs. In addition, its ambition is that 15% of the EU’s annual consumption of strategic raw materials should come from recycling by 2030, reducing reliance on raw materials and delivering a more circular energy transition.

Transparency is key in balancing growth with ESG

Europe achieving the sourcing goals set out in the CRMA will require the continuous balance of increasing critical materials extraction, processing and recycling. While also maintaining proof that such growth is conducted sustainably, responsibly, with the interests of the local community at the forefront.

Active engagement between public and private sectors will have to take place. Continuous transparency will need to be embraced and deployed, with products and producers sharing their ESG credentials and being encouraged by the marketplace for doing so.

Supply chain traceability has a key role to play

The goals are clear; businesses across the EU need to review how they will source and manufacture the critical minerals.

CRMs represent a critical segment of the economy in underpinning its responsible and ethical sourcing practices and calculating upstream Scope 3 emissions. Supply chain traceability enables organisations to prove the provenance and ESG qualifications of raw and recycled materials and subsequently track the physical flow of those materials through the value chain.

To support businesses in this transition Deloitte and Circulor recently announced an alliance to support upstream miners and material producers with supply chain transparency.

Circulor’s complete traceability solution combined with Deloitte’s expertise, creates a data-driven proof that can be used to re-evaluate supply chains, improve ESG performance and create new business opportunities, while navigating the increasingly complex regulatory landscape.

Circulor is already providing ESG transparency for Vulcan Energy, Europe’s largest known lithium resource, to track their Zero-Carbon LithiumTM and measure CO2 emissions across battery and electric vehicle (EV) supply chains. In a world-first for lithium traceability, Vulcan Energy aims to support Europe’s growing demand while setting a benchmark for sustainable and transparent extraction. Full-scale, carbon-neutral production is planned for late 2025 and Circulor’s traceability data will enable Vulcan to provide offtake customers with data-driven proof of responsible sourcing and embedded emissions, as they strive to achieve their ESG ambitions.

What’s next

Unlocking the opportunities in Europe for upstream producers won’t be easy, however, production in Europe has the potential to show the rest of the world how the clean energy economy can be built responsibly and sustainably. With Circulor and Deloitte’s support, extractive industries can have the full suite of knowledge and strategic guidance they need to turn the CRMA, expected to be enacted next year, into an opportunity and ensure long-term competitiveness.

To learn more about critical minerals, read our article series.

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