In our current age of supply-chain transparency, a $4 latte can come with an explanation of where the coffee was grown and how, even luxury goods like diamonds are under pressure to prove that they are ethically sourced.
Consumers now want to know where products were mined, the communities they benefited; a guarantee that their product is ethical. The brand reputation of mining companies is becoming increasingly contingent on a transparent approach to supply chain management. This poses a challenge in an industry where corruption rarely takes centre stage in negotiations between buyers and sellers.
There remains no single universal understanding of the term corruption. Across the globe, different types and forms of corruption are tolerated and manifested differently.
The reality is, that no matter the jurisdiction or the company, corruption in the mining industry is somewhat common. The State of Play 2019 survey found that corruption was encountered most frequently in emerging economies. On the contrary, the USA (the biggest spender globally on political lobbyists) was perceived to sit at the other end of the corruption spectrum, with Australasia.
While policing and government reforms can help tackle these issues, the industry is increasingly turning to technology to shine a light on corruption.
Innovative data analytics can now identify anomalies in expenses, pinpoint suspect gift-giving patterns and identify potential links with criminal figures. ICT-enabled whistleblowing tools can facilitate detailed reporting on cases of corruption that can be followed up with action. Open access information champions transparency and fairness amongst miners and enable community participation. Blockchain technologies prove accountability by enabling constant tracking of minerals from mine to product.
The success of technology in reducing corruption is contingent on their suitability for local context and needs. It must be said that technology may also enable corruption, therefore the following should be considered before pursuing a solution:
- How does corruption manifest in the operation?
- What technologies exist to minimise corruption or the influence of corruption?
- What are the applications of this technology in the given context?
- What impact and limitations does this technology have in the given context?
- In what ways could the technology facilitate corruption?
The incentive to adopt these capabilities exists – as the demand for transparency heightens and the business environment becomes more socially aware, consequences of getting caught become more dangerous.
The diamond industry has forged ahead in its use of blockchain technology to combat the long-running issue of conflict mining. The world’s largest diamond producer by value, De Beers, have tested a platform which enables the tracking of stones from mine to buyer. The platform, named Tracr, tracked 100 high-value diamonds along the value chain during the pilot in 2018. Each diamond is assigned a digital certificate including a Global Diamond ID and its details (carat, colour and clarity) are recorded. As the diamond is processed, its digital certificate is updated. To verify authenticity, Tracr uses images, planned outcome projections and the diamond’s certificate.
The TrustChain Initiative is a similar project that has been launched by a consortia of companies within the diamond industry. The technology is based on the IBM Blockchain Platform and the Hyperledger project. Similarly, the initiative is designed to track and authenticate diamonds from mine to retailer.
It is worth noting that the application of blockchain focused solely on traceability does not provide the full picture. Issues in the form of working conditions, involvement of armed groups or the presence of child labour may fly under the radar. Furthermore, the value of blockchain in tracking the supply chain, is only as good as the data that is entered into the system. Credible data about production, trading and sourcing may pose a challenge in remote areas.
Corruption is not limited to precious gems and supply chains. Transparency in the award of permits, licences and contracts is particularly critical. Techniques to identify this form of corruption are still immature and rely mainly upon government or industry intervention in the form of regulatory frameworks and disclosure listing rules. It is reported that Australian government agencies are now using data analytics to declare conflicts of interest and to scrutinise gifts and benefits. This involves screening 500-700 employee computers a year – 75% random and 25% focussed on devices used in high-risk roles. Movement in this area would represent a new chapter for mining and offer the opportunity to lead in this space.
This post builds on themes discussed in the 2019 State of Play Delivery Report.
ABOUT THE REPORT
The Delivery report was based on the largest survey in the global mining industry, surveying over 800 global mining professionals, the majority of which work at an executive level across 399 companies.
This report is the first to be released by State of Play in an ongoing 2019 series on innovation and strategy in the global mining industry. Two further reports will be released this year: Strategy and Ecosystem in August and September respectively.
The reports are the result of a partnership with Curtin University, METS Ignited, and The University of Western Australia.
State of Play reports are available from: www.stateofplay.org/results