Red Flags, Green Future: Tackling Corruption in Mining Licensing

Conflicts over access to the minerals needed for the energy transition are sparking all over the globe, from geopolitical disputes to grassroots protests. Just last month, Global Witness reported more than 100 instances of mining-related protests and violence annually in the top ten producers of copper, cobalt, lithium and nickel alone. Much of this unrest centers on at least one of two critical questions: who has the rights to extract these minerals, and how are they treating nearby communities and ecosystems?

In most countries with transition minerals, mining cannot legally proceed without a license. For mining firms, securing a license can be a time-consuming and costly burden—one that can sometimes lead to corrupt practices. “Fast-tracking” licensing and permitting processes has become go-to of the mining lobby—and many companies have had success. In recent years, jurisdictions including the European Union, Norway and Brazil have announced new strategies or developed rules to deliver on this demand, with politicians in many more countries pushing for similar changes.

Yet, the steps in licensing processes that are the most time-consuming are often those that provide the best safeguards against the harms of mining for communities and nature. These include securing free, prior and informed consent (FPIC), carrying out meaningful community consultation, and conducting environmental and social impact assessments. Achieving efficiencies and better decision-making around licensing is possible—but it requires scaling up resources, facilitating better training, and ensuring knowledge transfer for ministries and officials, rather than cutting corners on these essential steps.

Red flags for corruption risk in licensing

At NRGI, our experience examining corruption in the high-risk licensing and contracting stages of the decision chain for extractives projects means that we watch these developments with interest—and no small amount of alarm. In part, this concern inspired our new research, launched today, on corruption risks in the licensing and contracting of transition mineral projects. 

Our report, Ten Red Flags, draws on the methodology of our 2017 report Twelve Red Flags, which examined corruption risks in licensing and contracting across the extractives sector. Looking at 10 different transition minerals since 2010, we reviewed over 100 cases of alleged corruption, identifying 53 that met our evidence threshold across 30 countries. These cases occurred in high-, middle-, and low-income countries across five continents, and involved a diverse range of minerals. Alarmingly, we found that most countries with the largest transition mineral reserves have experienced cases of corruption. Nearly two-thirds of all reserves are in countries where corruption has been documented, and eight out of the 10 countries with the highest reserves had reported cases.

The risk of corruption in licensing and contracting is a global problem. The following countries appeared multiple times in our database as the home jurisdictions of companies involved in corruption cases: Australia, Canada, China, Russia, Switzerland, the U.K. and the U.S. There is an unfortunate tendency among higher-income countries like these, many of which depend on minerals sourced elsewhere to power their energy transitions, to see corruption as a problem of lower- and middle-income countries. Our findings firmly refute this narrative and reaffirm the shared responsibility of all countries to investigate and prosecute corruption, including foreign bribery.

Map: Corruption as a global problem

For each of these cases, we identified red flags that indicate corruption risk. These cover the types of companies granted licenses or contracts, the ways companies unduly influence decisions and decision-makers—often with implications for democratic processes—and how officials circumvent proper processes. While many of these corruption risks will be familiar to those working in the extractives sector, this report highlights emerging concerns, including the longer-term time scales of some corruption schemes, how corruption can flare up around elections, and its connection to social and environmental harms.

The consequences of corruption in licensing and contracting

The impacts of corruption are stark. Some government officials and mining company executives are already exploiting corruption around licenses and contracts to deny citizens and communities of their fair share of the benefits of mining transition minerals. With corruption starting in the licensing and contracting phase, companies are able to neglect and harm vulnerable populations and ecosystems with impunity. Corruption also delays mineral production, sometimes for years. In this way corruption in the licensing and contracting of transition minerals projects is actively undermining a just energy transition.

A swift transition away from polluting fossil fuels is essential to fight climate change, but this shift must also be just to ensure long-term sustainability and avoid breaching planetary boundaries. Decisions by authorities in producing countries about licensing and contracting process for new transition mineral extraction are integral to this effort. Authorities must take these decisions carefully to prevent mining communities, particularly in lower- and middle-income countries, from becoming sacrifice zones.

By providing officials, companies, regulators and enforcement agencies, civil society and journalists with the “clues” to identify corruption risks, we aim to contribute to the safeguarding of a just and equitable energy transition.