Countering Corruption and Strengthening Integrity across Green Minerals Supply Chains
We seek early stage ideas, prototypes, and/or proven solutions seeking validation and scaling that target and reduce corruption across green mineral supply chains. Scroll down for more information.
As the world strives to keep global warming below 1.5 degrees Celsius and transition to renewable technologies, global demand for minerals critical for the transition to a green economy (“green minerals”) such as cobalt, lithium, copper, and rare earth elements are projected to skyrocket. By 2050, to meet our shared global climate goals, the World Bank estimates that the annual production of these minerals may need to increase by more than 500% compared to today’s levels.
A handful of developing countries are poised to capitalize on the surge of demand the world is witnessing for minerals critical for green energy technologies, e.g. for electric vehicle batteries and solar power. Yet, these same countries suffer from poor governance and high levels of corruption. More than half of the world’s reserves of cobalt, nickel, and rare earth elements are located in countries with high levels of corruption. Ambitious climate change goals create a sense of urgency and competition to secure green mineral rights, potentially short-cutting processes designed to ensure transparent and accountable resource management. This fast tracking ultimately makes green mineral supply chains vulnerable to exploitation. Corrupt mining deals result in a loss of revenue for producer countries and communities, which negatively impacts investments in development at the national and local levels, as corrupt actors divert and launder money from award and operation contracts.
Prominent forms of corruption across green mineral supply chains (see below image) include bribery, embezzlement, money laundering, undisclosed royalty payments, “side deals” for projects that never materialize, and non-compliance with regulations.
For businesses and organizations, the risk of corruption begins at the first entry point to the supply chain – the decision to explore and extract – as it is necessary to work closely with the government throughout the development and operation of mining projects. Public officials typically act as gatekeepers with the power to allocate extraction rights to foreign or state-owned enterprises, specify local content requirements, and select commodity buyers and traders. In addition, illegally-mined minerals leak into the global supply chain at the processing stage through bribery, trafficking, and forged documentation. Key corruption challenges in the sector relate to revenue transparency, the awarding of extraction rights and procurement contracts, the disclosure of who ultimately gains financially (also known as beneficial owners) and whether those individuals are in positions of power or politically connected, governance within state owned enterprises, supply chain traceability and data interoperability, the difficulty of due diligence for ‘upstream’ supply chain partners, and limited local community engagement and oversight.
Recent innovations in green mineral supply chains have produced a number of exciting initiatives and partnerships, from strengthening transparency across e-procurement systems to establishing common platforms using blockchain technology to track and share data on beneficial ownership, just to share two examples. In most cases, anti-corruption efforts in this sector will face the same significant barriers encountered in other complex systems, including political opposition to reform and transparency in countries with systemic corruption; a lack of incentives to root out, report, and address corruption; a reliance on self-reporting and insufficient accountability mechanisms; and the high investment costs and development timelines for more sophisticated information technology systems using artificial intelligence, data mining, and machine learning.
Fulfilling the transformative promise of clean energy requires us to protect green mineral supply chains from systematic corruption. To this end, USAID has prioritized 29 minerals: aluminum, chromium, cobalt, copper, graphite, iron, lead, lithium, manganese, molybdenum, nickel, silver, titanium, vanadium, zinc, and 14 rare earth elements for this challenge activity. The complexity and nuance of this context requires investments in innovative solutions, combined with targeted technical assistance, to address critical gaps in safeguarding green mineral supply chains from transnational corruption.
New and emergent green energy technologies, ranging from electric vehicles batteries to solar panels, rely on more than two dozen “green minerals” that will be critical to a successful shift away from fossil fuels. As the world transitions to renewable energy sources, many countries are poised to capitalize on the surge of demand for green minerals. The potential for an international “green mining boom” could benefit millions through employment and inclusive, sustainable economic growth.
Yet without a significant course correction and investment in new, innovative approaches to addressing corruption, countries rich with green minerals will face the same resource curse that has plagued so many oil-rich countries. As a global community, we have an opportunity to collectively harness the transformational potential of green energy technologies while avoiding the distortion of governance – as well as the environmental ruin, human rights abuses and marginalization – that often accompany extractive industries. This will require preventing corruption from penetrating green minerals supply chains – and uprooting it where it does exist. The Powering a Just Energy Transition Green Minerals Challenge (JET Minerals Challenge) incentivizes the development, application, and scaling of innovations that root out corruption in green mineral supply chains to fulfill the promise of an inclusive, sustainable, and just clean energy future.
JET Minerals Challenge Statement:
The JET Minerals Challenge is seeking early stage ideas, prototypes, and/or proven solutions seeking validation and scaling that target and reduce corruption across green mineral supply chains.
This call for innovations will identify solutions that counter corruption and strengthen transparency, accountability, and integrity in the global rush to meet the unprecedented demand for green minerals. The Challenge will offer a combination of financial and nonfinancial resources to support a diverse range of solutions and innovators in both the testing and scaling of approaches, as well as helping innovators overcome barriers to addressing corruption within green mineral supply chains.
JET Minerals Challenge Tracks
The JET Minerals Challenge will identify, support, and reward promising and successful innovations, operating across global, regional, and/or local levels, which align with one or more of the following tracks:
Constraining Opportunities for Corruption
- Corruption thrives in the shadows that obscure how mining licenses, concessions, and rights are obtained; the terms of the deals; what mining royalties are received and where they go; and who ultimately benefits. In addition, it is often difficult to trace the journey of minerals from mine site to smelter and refinery to manufacturers to consumers. Hidden by systematic inefficiencies and a lack of adequate information, corrupt actors – often enabled by professional facilitators such as bankers, lawyers, and accountants – exploit the demand for green minerals to amass wealth for themselves and their networks.
- Innovative solutions in this track will constrain opportunities for corruption by simplifying systems, increasing competition on a level playing field, and promoting transparency across green mineral supply chains.
Raising the Costs of Corruption
- There is a notable contrast between the massive volumes of mineral wealth flowing out of a country and the limited investment going back into the communities and countries from which they came. Corruption can also be visibly out in the open – from the houses purchased from the proceeds of bid rigging or bribes, to the notable absence of an “agreed upon” tarmac road, to luxurious yachts crossing the globe. Systematic weaknesses, power imbalances, and impunity often “protect” powerful political and economic elites – including senior government officials and unscrupulous companies, state-owned enterprises, politically-exposed persons, and their transnational corrupt partners – from experiencing any real consequences (legal, economic, political, or reputational) of their criminal actions.
- Innovative solutions in this track will raise the costs of corruption by promoting accountability and challenging the status quo of pervasive supply chain exploitation.
- With current demand far exceeding supply, green minerals are a “seller’s market” with fierce competition. Producing countries have options for the sale of their resources and corrupt public officials may woo or be enticed by strategic competitors offering deals that align with their own personal interests or short-term gains at the expense of long-term, inclusive and sustainable economic growth. For companies all along the supply chain, from mining companies extracting the minerals to the well-known corporations that bring them to your home or garage, it may be cumbersome at best – or competitively disadvantageous at worst – for responsible actors to ensure integrity throughout the green mineral supply chain.
- Innovative solutions in this track will incentivize public and private integrity among producers and consumers of mineral products, cultivating a race to the top among companies utilizing green minerals.
Interested applicants are encouraged to review the JET Minerals Challenge Timeline below and submit a concept note to join the Countering Transnational Corruption Grand Challenge as part of the inaugural JET Minerals Challenge!