Report with case study on the Andina copper mine in Chile highlights need to legally regulate due diligence in the downstream value chain
"The Andina copper mine in Chile", 3. March 2023
Due diligence in downstream value chains
The Chilean Andina mine is a copper mine of the state-owned Codelco mining company in Los Andes Province in Aconcagua Valley near the capital Santiago de Chile. The mining activities are exacerbating the water shortage in the region in three ways:
- polluting the surrounding waters
- consuming vast amounts of water
- contributing to glacier retreat
Already a number of villages around the Andina mine are having to be supplied by water tanks as natural water sources have dried up or become contaminated. And yet Codelco is still continuing with its plans to expand the mine. These plans are not only highly controversial, but they are also not being communicated transparently by the company.2 Despite these grievances, a large number of European mining equipment manufacturers have close ties to the Andina mine. [...]
Numerous European manufacturers of mining machines and mining equipment have had, and others still do today, business relationships with the Andina mine. In 2013, Caterpillar Global Mining Europe GmbH and SMT Scharf signed a contract with Codelco to supply key technology for the Continuous Rockflow project at the time when the protests were flaring up around the mine. In 2012, Siemens received the maintenance and repair contract for all the technical equipment in the mine, designed as a ‘long-term partnership’. The multinational company ABB has also undertaken various orders from Codelco for the Andina mine, and appears to have a close business relationship with the mining company. In 2006, ABB was commissioned to implement a comprehensive automation system. In addition to engineering services and commissioning, this significant contract also included the maintenance and monitoring of the system for a period of eight years, i.e. until the end of 2014, as well as the support services for the environmental monitoring system. ABB also installed a gearless mill drive in the Andina mine in 2010/11. So ABB clearly maintained a close business relationship with Codelco in the Andina mine during the time of the public opposition to the planning of Andina 244. In 2019, the Swedish mining equipment supplier Epiroc was commissioned with the maintenance of the mining equipment in the Andina mine for a period of seven years. Epiroc had already supplied various items of equipment for the mine before that, such as blast hole rotary and other drilling rigs.
According to publicly available company information, none of the companies have used their business relationships to encourage Codelco to make its plans or prevention and remedial measures more transparent. We believe that collective pressure exerted by the business partners would have a significant leverage effect (cf. our study Downstream due diligence in the European mining equipment industry, pp. 18-21). This collective action could be stimulated by European legislation and so significantly increase the impact. If due diligence in downstream value chains becomes mandatory for European companies, collective action in the Andina case would be far more likely than if it were on a voluntary basis. Due diligence in downstream value chains means that companies must assess and respond appropriately to product, sector, country and customer-specific risks with which they are associated through the sale or use of their products. In order to illustrate links between machine deliveries and maladministration at the Andina mine, SMT Scharf's business relationship with Codelco is considered in more detail below. This is intended to demonstrate the potential for more responsible mining that could be developed through mandatory due diligence obligations in downstream value chains. [...]
The case study shows why the legal regulation of due diligence obligations in downstream value chains is necessary within the framework of the currently discussed Corporate Sustainability Due Diligence Directive (CSDDD). European mining machinery manufacturers are currently involved in a number of highly questionable mining projects all over the world. So far, they have made little to no use voluntarily of their opportunities to influence and work towards prevention and remedial measures. Such measures are the most promising if the supplying companies work together to achieve them. The fact that companies are prepared to take such action together is much more realistic if it is on the basis of a corresponding legal obligation rather than the result of a few individual pioneering companies acting voluntarily. Aside from this, due diligence obligations in downstream value chains can effectively work towards ensuring exploration and expansion plans for mining projects are as minimally invasive as possible, which is often inadequately addressed in the case of due diligence obligations in upstream value chains.