Gold is one of the great contributors to luxury’s impacts, whether environmental or social. Understanding how will enable companies to mitigate and reduce these. John Mulligan, Head of Sustainability Strategy at the World Gold Council (WGC) and President of the Sustainable Development Commission at the World Jewellery Confederation (CIBJO), shares his vision of the sector’s ongoing evolutions towards a more sustainable gold industry and the Watch and Jewellery Initiative 2030’s role in the necessary shift.
As Head of Sustainability Strategy at the World Gold Council (WGC), can you explain how you are working on ensuring the responsible sourcing of gold?
I have been at the WGC for two decades now, and we have always talked about responsible gold and responsible gold mining. But, over those decades, it has become more pressing to demonstrate exactly what is meant by the term ‘responsible’. The Responsible Gold Mining Principles (RGMPs) is the World Gold Council’s – and its members – response in defining what responsibility looks like in practice, although this guidance is applicable to the whole formal gold mining sector. It took two years of consultation to establish these principles. Over 300 organisations – mining corporations, NGOs, local communities, governments – took part in the process. We agreed on a set of 10 major principles driven by a global ESG approach. They encompass 51 smaller principles that can, wherever possible, be independently verified. The commitment to these is now mandatory for all members. It means that around 60% or more of annual gold production from listed, transparent companies of the sector is now covered by reporting in line with the RGPMs.
From an investor’s, consumer’s or stakeholder’s perspective, these corporate actors can now demonstrate how they perform on any particular issue related to responsible gold mining and respond to external requests and expectations. This is a significant improvement in industry transparency.
But a larger topic, for me at least, is how this connects to the rest of the upstream supply chain, in regard to all the different standards in place, and to downstream players, such as refiners, and watch and jewellery companies. Coordination to reach global coherence across the gold value chain is therefore going to be key.
These principles, and other standards, apply mostly to large-scale mining companies who typically submit to established regulations and obligations to disclose and report, but who can also act in ways that can produce substantial shifts and positive changes beyond the mine. Artisanal and Small Mining (ASM) is quite different. One of the challenges with ASM is that it usually operates in an unregulated environment where it is very difficult to evaluate impacts. Informality of businesses can merge into illegality. These mines very often lack capacity or government support. They are often located in areas of extreme poverty, in remote locations with limited resources to call upon. These factors can make the whole ASM sector vulnerable to very irresponsible actors, which can amplify negative impacts. While ASM can provide incomes for a lot of people, the challenge of moving to agreed responsible practices is even greater. Although often opaque and difficult to trace, ASM’s uncontrolled impacts can, unfortunately, have negative consequences beyond the immediate footprint of the mine.
What steps are taken to mitigate the environmental and social impacts of gold mining, which have implications for the impacts associated with downstream industries, especially for the luxury watch and jewellery sector?
Responsibility and sustainability are not just about mitigating risks and minimizing negative impacts. The big shift for gold mining, and mining more generally, has been to not only demonstrate it can manage and reduce any negative social and environmental impacts – to impose ‘no net harm’ – but to focus on positive contributions, particular with regards to social and economic development. The large gold mining companies often operate in developing countries where they can contribute to the local economy, as gold mining is often the only or the largest industrial sector. In Ghana, the largest gold producer in Africa, over a quarter of its foreign income typically comes from gold. But it is not just the sale of gold that contributes to national GDP. When you track the value gold mining can create in specific locations, as we have been doing for years now, you find that around 60 to 80% of the expenditures of the gold mining industry remain within the countries that host mining operations. This includes not only payments relating to land use and the license to mine but also direct and indirect taxation, salaries of the workforce, local procurement, infrastructure development, and community-based spending. And, by employing local workers and paying them well above average wages, and by seeking out local suppliers, gold mining frequently helps develop local economies and expand business and development opportunities.
Environmentally, it is undeniable that gold mining has a physical impact – yes, it digs big holes in the ground! The situation now, however, is that when you start a gold mine, you need to understand its likely environmental impact in advance, and to plan how to manage those impacts for the whole life of the mine. An awareness of environmental custody and legacy impacts are now a key part of the equation. Large scale mining corporations already have to build in consideration of rehabilitation strategies into their mine plans, which will include provisions for care and restoration of the land, including reforestation and ongoing biodiversity protection.
These expectations are also now reflected and codified in the RGMPs. We not only aspire to no net harm but are also increasingly looking at how we can move to net-positivity. That is, we’re asking can miners actually improve the environments in which they operate?
Gold mining also uses a lot of energy for mineral extraction and processing. If the energy is fossil-fuel based, then gold production remains a substantial generator of greenhouse gas emissions, contributing to climate change. Gold’s emissions profile is therefore quite similar to that of the wider world economy in that, to decarbonise the production process, it first needs to decarbonise its energy sources. But, as gold mining often occurs in remote places and developing economies with little energy infrastructure, if the mining companies do not start to decarbonise, nobody will. Gold mining’s climate-focused actions and clean energy solutions can therefore have wider beneficial side-effects for local economies and communities as well. These early moves to renewable energy sources, potentially opening up clean power, can spark wider changes. We have witnessed this over the past 4-5 years in several countries – particularly in Africa and Latin America, but also in Western Australia and elsewhere. Gold mining companies have often been the first movers in introducing renewable energy systems in locations where it was not being developed or not yet economically viable.
Similarly, gold mining companies often have a significant role to play in introducing local initiatives to bolster or reinforce resilience in the face of accelerating and potentially destructive physical climate impacts.
We have spent several years analysing the gold industry’s climate impacts and its responses and solutions in striving to decarbonise and enhance locale adaptation and resilience. Our research findings are available online at: https://www.gold.org/esg/gold-and-climate-change
Since most of gold’s impact comes from extraction, shouldn’t recycling be enhanced for gold production?
A substantial part of the world’s gold supply has been recycled gold for a very long time. It now typically represents 25 to 30% of total annual supply. Gold is almost indestructible and endlessly malleable and reformable, and therefore almost uniquely recyclable. This and its enduring value have helped ensure gold remains an inherently circular material. However, a challenge remains in that we need to ensure all the inputs into these circular flows – the gold that is to be refined and re-refined – are transparently responsible? This is an issue the industry is grappling with now, and great progress has been made in recent years in developing more robust chains of custody and responsible sourcing practices.
But a wider adjacent issue is how can we encourage circularity at the source of production, in mining processes and their use of other resources? For example, water is certainly a concern that needs to be addressed. How can companies use or consume less water – perhaps introducing circular or even move to closed-loop water systems? How can they treat the water better or contribute to enhanced quality water in the local environment and potentially have a net-positive impact? Materials used at every step of the production process need to be scrutinized through this circular lens. This is where a lot of further improvements can be made, in addition to the circularity that is already a key dynamic of the downstream gold market.
There is a lot of discussions about recycled gold and its strict definition, can the WGC implement a stringent definition of it to avoid loopholes?
We are highly aware of the current discussions and controversies around the definition of recycled gold. In response, we are engaged with a wide range of industry experts in striving to arrive at a broadly accepted definition which is both clearer and more stringent but also compatible with wider global standards of good practice in how to approach recycling. The WGC therefore both supports and contributes to the efforts of ISO (the International Standards Organisation) in attempting to create a consensual definition of recycled gold via the organisations technical committee on precious metals and jewellery. After over a year of discussions and development, a draft international standard has now been submitted for the world’s national standard organisations to vote on. If it is accepted, a new globally agreed ISO definition could see light within a matter of months.
That said, this will then form part of a broader standard which also describes the baseline criteria for how we identify and validate responsibly-sourced gold more broadly. That standard can then be used to underpin the certification schemes of other organisations like the London Bullion Market Association (LBMA), the Responsible Jewellery Council (RJC), and others. These organisations will hopefully ensure their schemes and associated assurances process are aligned with the ISO standard, while other bodies such as the World Jewellery Confederation (CIBJO) can build out their educational and industry guidance reference materials, to further encourage convergence and coherence across the industry.
What concrete examples can you give of actions led with the Watch and Jewellery Initiative 2030 that will contribute to a Nature Positive, sustainable future for the Gold market?
The WJI 2030 brings together leading brands to define and demonstrate what leadership can be in terms of sustainability. It pushes members to make firm commitments to ambitious targets – for example, decarbonisation plans approved by the Science-Based Targets initiative (SBTi). Its focus on three key pillars – climate change risk mitigation, biodiversity preservation, and enhanced diversity and inclusiveness – is also increasingly accompanied by a growing awareness of their interconnectedness. But the WJI2030 not only strives to lead but also to encourage industry collaboration, producing and sharing resources and guidance to encourage and support others in their sustainability journey.
The watch and jewellery industry represents the end of the supply chain, including for gold, but the process of driving improvements and measuring impacts requires companies to engage and collaborate across the whole value chain. The needed impacts will often require substantial changes at a distance from the jewellery sector, upstream. So cross-industry dialogue and engagement will be increasingly important. This is now becoming a key factor reshaping the gold market, with the WJI2030 playing an active role.
The WJI2030’s mission, as I see it – and I am privileged and proud to chair its climate programme – is therefore not only to explain and educate, but also to prompt and direct action. The big challenge is how to spark coherent collective responses from the small and medium size entities (SMEs) that obviously do not have the same resources and skillsets as the big leading brands. This is where the WJI2030 has demonstrated its strengths – drawing on the experience of industry leaders, but also understanding it needs to support the smaller players in helping them translate their initial commitments into positive actions and outcomes. Acknowledging these different needs has, in part, led to the WJI2030’s creation of a growing range of very useful resources and practical guides. See, for example, its Human Rights Navigator, its Nature Primer and its Nature Roadmap, creating an accessible knowledge base whilst signposting pathways for future actions – particularly, for those vital first steps. These resources are highly relevant for all segments and players across the market, including those directly engaged in gold. Alongside its guidance materials, the WJI203 continues to demonstrate an instinctively collaborative nature, building alliances with key environmental and social organisations, to supplement and support the positions and progress of its main members. The WGC has been a proud supporter of the WJI2030, as has CIBJO, and all are organisations with which I am honoured to be associated as we all strive to be agents of change.