Promoting sustainable minerals through global supply chains: scaling up or crowding out sustainability?

Rachael Diprose, Nanang Kurniawan, Kate MacDonald and Poppy Winanti
Apr 25, 2022
#Mining
#South Asia

Supply chain regulation seeking to promote sustainable production processes in natural commodity sectors has proliferated in recent decades in response to concerns about the social and environmental impacts of global commodity extraction. Alongside traditional forms of regulation involving government law and policy, a range of non-governmental regulatory systems have emerged, often combining voluntary regulatory standards and monitoring systems with the provision of market incentives and resources to support sustainable production. Such systems can include voluntary standards and certification systems, alongside a range of other private sector or multi-stakeholder-led governance schemes that aim to promote more sustainable processes of natural resource production and trade.

While many of these governance systems have focused on improving sustainability practices within individual supply chains, more recent governance initiatives have placed increased emphasis on efforts to scale up sustainable production beyond supply chain boundaries, through facilitating changes in the wider market and policy environment and recruiting support from widening circles of business and government organizations (Molenaar et al., 2015). While such scaled-up approaches have attracted significant recent interest, critics have questioned the capacity of voluntary non-governmental approaches to bring about broad-based change, arguing instead that such approaches tend to crowd out government regulation through hollowing out state capacity, weakening societal pressure for strengthened regulation or legitimizing fundamentally harmful models of production and trade (LeBaron & Lister, 2021). In this blog piece, we argue that the ability of supply chain actors to shape sustainability practices hinges strongly on how supply chain sustainability strategies are shaped by the local political economy.

Investigating the multi-stakeholder Tin Working Group (TWG) in Indonesia

To gain further insights into this topic, in a recent study (Diprose et al., 2020) based on 35 formal interviews and extensive informal discussions as well as regular visits and collaborative activities in sites of production between 2016 and 2019, we investigated a case study of supply chain governance initiatives in the Indonesian tin sector. The focus was on exploring governance interactions surrounding the multi-stakeholder Tin Working Group (TWG). The group was established by prominent global electronics brands together with a range of economic and political actors in the Indonesian tin sector. Based on this analysis, we found that despite the stark contrasts that are often drawn between the challenges faced by governmental versus non-governmental approaches to sustainability governance, in fact, both types of governance face strikingly parallel challenges as they seek to transform deeply entrenched extractive economic development models promoted by powerful political and economic actors in major production locations. As we explore in detail in the study, mineral resource extraction and production often occur in locations characterized by what we call local 'extractive settlements'—that is, entrenched configurations of power and interest in which influential economic and political actors both control and benefit from continued resource extraction. Hence, the capacity of global supply chain actors to influence sustainability practices depends critically on how supply chain sustainability strategies interact with the local political economy of natural resource extraction.

The Tin Working Group: planned and unplanned effects of supply chain sustainability interventions

The TWG was established in response to a period of sustained public scrutiny of high-profile global electronics brands such as Apple, Samsung, and Foxconn, who produce smartphones, computers, and other electronic devices for global markets. They source significant volumes of tin from Indonesia’s Bangka and Belitung provinces. Around a third of global tin production is located in Indonesia, and approximately 90% of Indonesia’s tin production comes from Bangka and Belitung provinces in Indonesia (Hodal, 2012). Scrutiny concerning tin was spearheaded by an international coalition of civil society organizations who had documented a range of adverse social and environmental conditions under which these companies sourced tin in Indonesia (FOE, 2012). In response, major corporate actors acknowledged the need for strengthened systems of sustainability governance in corporate supply chains—thus spurring initial efforts to establish the TWG. Initially convened by the Sustainable Trade Initiative (IDH), and later by the Responsible Minerals Initiative, the TWG involved major global electronics companies, metals manufacturers, tin producing companies, the Indonesian Tin Exporters Association (AETI), and various Indonesian government officials and civil society organizations.

The program was developed in two distinct phases. In the first phase, it articulated ambitious aims to ‘transform’ mining practices in line with sustainability principles. Within global supply chains, principles of traceability, transparency and sustainable sourcing were promoted amongst tin-purchasing companies, with some TWG member companies also making financial commitments to support improved practices. However, these initiatives were implemented unevenly across companies and proved difficult to sustain when direct public pressure on corporate participants from NGO campaigns and media coverage subsided (TWG, 2015).

The TWG attempted to localize global sustainability norms by convening workshops to raise awareness of sustainability issues amongst local industry, government and civil society actors. It also commissioned research on the social and environmental impacts of tin production to inform the creation of a ‘Roadmap’ document that identified challenges and pathways to sustainable tin production in Bangka Belitung. Efforts were made to engage key government actors to support ‘Roadmap’ implementation and facilitate broader policy dialogue on sustainable practices. However, a lack of funds to support the implementation of the Roadmap alongside uneven government engagement with the TWG and its activities—especially on Bangka Island where the economy is almost entirely reliant on tin production—made it difficult to operationalize these plans (NCEA, 2015).

In the TWG’s second work-phase, its aims were narrowed to focus on a more modest set of pilot projects addressing occupational health and safety (OHS) and land reclamation. Whereas this ameliorated some specific problems related to worker safety and land rehabilitation, efforts to extend impact beyond localized pilots proved difficult to sustain. While the direct impacts of these TWG’s interventions (i.e., those impacts that were anticipated by TWG’s design and resulted directly from its interventions) remained limited, TWG also had some indirect impacts, often via unintended pathways.

Patterns of indirect influence depended on the ways both state and societal actors at national and subnational levels responded to the TWG’s intervention. Many subnational actors on Belitung Island had prior reasons for resisting offshore mining and large-scale mining onshore, as a result of prior diversification of livelihood strategies away from a reliance on mining, and associated concerns about negative impacts of mining on alternative livelihoods in sectors such as fishing and tourism. These actors were able to draw on transnational sustainability discourses to strengthen their position within local regulatory struggles. This created opportunities for the TWG to exert indirect influence in Belitung (but less so in tin-reliant Bangka island) by using workshops and associated processes of stakeholder engagement to amplify policy discourses on the value of environmental restoration and conservation and supporting alternative livelihood strategies such as tourism, fishing and small-scale agriculture. Yet the TWG made few efforts in Belitung to actively build alliances with local environmental coalitions in support of more sustainable tin mining. Instead, sustainability discourses tended to be mobilized by local organizations in ways unintended by the TWG: primarily bolstering local resistance to efforts by the national state-owned tin company (PT Timah) to scale-up offshore mining.

Nationally, the central government and PT Timah were initially reluctant to engage directly with the TWG amidst an environment of resurgent resource nationalism and an associated tendency to question the legitimacy of international efforts to influence domestic governance processes. However, the government had a strong interest in reducing both artisanal mining practices and illicit exports, which had increasingly threatened PT Timah’s profits and central government royalty revenues; such interests aligned with some aspects of TWG’s agenda. New government policies on export regulation and verification of tin sources thus supported TWG sustainability principles to the extent that strengthened sustainability regulation bolstered efforts to centralize control over tin supply chains.

PT Timah later made efforts to strengthen the traceability of its tin sources and its compliance with OHS standards and to support the establishment of smallholder cooperatives. Such engagement partly reflected changes in company leadership, and also PT Timah's objectives as one of the few companies capable of meeting the new regulatory requirements regarding supply verification. Supporting smallholder cooperatives allowed PT Timah to incorporate artisanal miners into supply chains, thereby reducing the risk of their return to rival smelters and informal trading networks, while also complying with traceability requirements. The TWG thus made some localized contributions to tackling OHS and land rehabilitation issues through its activities—thus contributing in marginal ways to the goal of supporting sustainable production. Yet because tightened traceability demands strongly favored large supply chain actors such as PT Timah, it also contributed in diffuse and largely unintended ways to consolidating the power and control of entrenched political and economic elites over regulatory authority, market share and associated revenue flow from tin production. While unintended, in effect TWG strategies helped stabilize (especially on tin-reliant Bangka island) an extractive settlement that had been contested by subnational authorities and artisanal miners. This settlement in turn supported the interests of international tin buyers who depend on a stable tin supply (Erman, 2008; Gellert, 2010).

Scaling up or crowding out sustainability?

Reflecting on the Indonesian experience as presented above, our analysis found little evidence that TWG’s interventions in the Indonesian tin sector displaced or undermined government policies seeking to strengthen sustainable tin production. To the extent that the TWG’s interventions indirectly influenced government policies, such influence did not hollow out government efforts to strengthen sustainability regulation, but rather reinforced policies on supply verification that were already being promoted by powerful national interests for reasons related only tangentially to global sustainability concerns. At the same time, the established extractive settlement remained firmly defended by precisely the national and sub-national actors within Indonesia whose support would be needed for strengthened state-led regulation. Those dimensions of the sustainability agenda that were more poorly aligned with local interests continued to receive little support. While global supply chain initiatives produced some marginal benefits, they neither scaled up nor crowded out sustainability in more significant ways.

Such findings have important implications for global supply chain sustainability initiatives in sites of established resource extraction:

Scaling up influence at sites of production depends on effective coalition building. Opportunities to scale up depend on the ability to harness support from both established powerholders and wider social coalitions. Opportunities to build sustainability coalitions with actors such as local environmental organizations, communities whose livelihoods are linked to alternative economic sectors, or supportive public officials and politicians, need to be actively and strategically pursued through efforts to engage domestic interests supportive of overlapping sustainability agendas.

Recruiting the support of established powerholders into pro-regulatory coalitions is crucial but challenging and needs to be responsively designed and managed. Efforts are more likely to succeed if they offer some opportunity for these actors to benefit from regulatory changes, even if reasons for engagement diverge from intended regulatory purposes. However, in such cases incumbent actors may seek to modify or co-opt supply chain initiatives in ways that better align with their own pre-existing interests. Such vulnerability to diversion or capture demands strategic design and responsive management of sustainability governance initiatives to ensure sustainability objectives are not undermined over time—for example through actively planning for changes in political leadership, adapting strategies of government and stakeholder engagement in response to evolving political dynamics, and investing in the contextual relationships and knowledge required to facilitate such a responsive approach.

Pilots can be useful entry points but can lead to sustainability stalemates instead of scaled-up impacts if not carefully sequenced. Localized pilot programs can be useful for engaging reluctant actors, helping them see the benefits of engaging with sustainability agendas while broader sustainability coalitions gain strength. But, such programs need to be designed with sequencing and ratcheting up in mind, otherwise, they may constrain future action and fail to challenge the power relations on which unsustainable production practices are grounded.

An explicit political economy analysis can help supply chain initiatives adapt to varied local contexts. How processes of coalition-building and regulatory contestation play out are highly sensitive to the specific national and subnational histories and political economies of sites of production. The extent to which sustainability initiatives may penetrate and transform a domestic regime depends critically on which actors and interests control different elements of regulatory processes, the degree of plurality and fluidity of interests and power relations, and whether key actors perceive supply chain interventions as an opportunity or a threat. A political economy analysis can help evaluate the potential for influence in a particular context and inform the design of effective intervention strategies.

While our analysis has illustrated the limited capacity of voluntary non-governmental global supply chain initiatives to challenge entrenched domestic interests within extractive political settlements, it has also shown the potential for such initiatives to contribute to sustainability if they can reinforce or amplify local interests aligned with sustainability agendas. Designing supply chain sustainability initiatives in ways that respond explicitly to political economy dynamics in sites of resource extraction can thus strengthen their potential to support the crucial task of fostering more sustainable production of natural resources.

References
Diprose, R., Kurniawan, N., Macdonald, K., & Winanti, P., (2020). Regulating sustainable minerals in electronics supply chains: local power struggles and the ‘hidden costs’ of global tin supply chain governance. Review of International Political Economy, 1-26.

Erman, E. (2008). Rethinking legal and illegal economy: A case study of tin mining in Bangka Island. Southeast Asia: History and Culture, 37, 91-111.

FoE. (2012). Mining for Smartphones: The true cost of tin. Friends of the Earth.

Gellert, P.K. (2010). Extractive Regimes: Toward a Better Understanding of Indonesian Development. Rural Sociology, 75(1), 28-57.

Hodal, K. (2012, November 23). Death Metal: Tin Mining in Indonesia. Guardian Newspaper. Retrieved from:

LeBaron, G., & Lister, J. (2021). The hidden costs of global supply chain solutions. Review of International Political Economy, 1-27.

Molenaar, J.W., Gorter, J., Heilbron, L., Simons, L., Vorley, B., Blackmore, E., & Dallinger, J. (2015). Sustainable Sector Transformation How to Drive Sustainability Performance in Smallholder-Dominated Agricultural Sectors. Aidenvironment, New Foresight, IIED, Commissioned by IFC: Amsterdam, The Netherlands.

Netherlands Commission for Environmental Assessment (NCEA). (2015). Recommendations for good practice EIA in Indonesian Tin Mining.

Tin Working Group (2015). The roadmap of responsible tin operations in Indonesia: Developing responsible tin management through a multi-stakeholder based strategy.

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