Navigating the ESG Risks of Deep-sea Mining
A race to the bottom?
Deep-sea mining (DSM) is emerging as a new geopolitical frontier with significant ESG risks. It involves extracting critical minerals, such as nickel, copper and cobalt, from the deep ocean floor. The green energy transition and rapidly growing developing countries are increasing the demand for these minerals required for green and digital technologies. Polymetallic nodules (PMN), polymetallic sulphides (PMS) and cobalt-rich ferromanganese crusts (CFC) are seabed deposits that are being explored by private and state contractors. With the looming shortages of critical minerals, DSM offers nations a vast, secure and cost-effective supply of critical minerals which may help to ease geopolitical tensions over critical mineral supplies.
DSM has not yet been carried out in any nation’s exclusive economic zone (EEZ) or international waters. However, extensive mineral exploration and environmental studies are being conducted in unison with debates over exploitation regulations at the International Seabed Authority (ISA), suggesting that seabed mineral extraction may be on the horizon. Should DSM follow the development of offshore petroleum production, 35-45% of the demand for critical metals will come from deep-ocean deposits by 2065. In recent years, there has been increasing international pressure to commence DSM, highlighted by Japan’s announcement in 2022 to begin DSM off the coast of Okinawa, Nauru’s request to the ISA to adopt exploitation regulations by July 2023, the Norwegian parliament’s approval of DSM in the Norwegian Sea in January 2024, and the US’s draft bill to Congress advocating ‘The Responsible Use of Seafloor Resources Act’ in March 2024. Whilst the pressure is rising to begin commercial DSM operations, the ESG risks must be fully considered before diving into DSM.
Location of deep-sea deposits. Source: Miller et al. (2018).
Biodiversity harm
DSM could cause severe marine biodiversity harm and there are major limits to current knowledge of deep-sea ecosystems. New species and their interactions with the ecosystems are still being discovered in the deep ocean. Studies and exploration in the Clarion Clipperton Zone in the Pacific Ocean have been ongoing for two decades but there is still a lack of understanding of the impacts of DSM on marine ecosystems. A study conducted in 2022 revealed that just 1% of the areas designated for DSM exploration have the necessary scientific knowledge to enable evidence-based management whilst 58% of the scientific categories assessed for regions with mining exploration areas were shown to have no or next to no scientific knowledge to enable evidence-based management.
Deep-sea mining diagram. Source: Drazen, Jeffrey C. et al. (2020).
The collector vehicles used in DSM are likely to damage deep-water ecosystems. Over a 30-year mining license period, it is estimated that 8,000-9,000 square kilometres will be churned by mining vehicles. Within this process, living creatures in the path of mining vehicles will be crushed, along with fauna on the surface of the seabed, as nodules are dredged, along with life living on the nodules themselves which may threaten the food web in the area. The sediment plumes caused by mining vehicles and wastewater from each DSM operation spread across thousands of kilometres before settling on the seabed which could kill marine species, release toxic metals and disrupt the pelagic food chain. These serious biodiversity concerns have led to widespread support for a moratorium for DSM from over 600 scientists, 24 countries, 37 financial institutions and many multinational companies such as BMW, Google, Volkswagen and Volvo.
Social licence to operate
Social acceptance is highly coveted by the mining industry as it is crucial to obtain broad and local social acceptability to minimise costly disruptions. Whilst DSM proponents argue that it minimises social risks related to human rights violations associated with cobalt in the DRC, the longer-term social impacts are unknown due to the indirect nature of such mining for social dynamics. There are concerns about the cultural impacts of mining the seabed as the area has important cultural and spiritual importance for some coastal indigenous groups. Scientists have also warned that communities reliant upon fish stocks could be particularly vulnerable to the impacts of seabed mining because it could threaten their food security. DSM could also impact tourism from the environmental degradation and communities that might experience loss or degradation of key ecosystem services. Navigating the social legitimacy of DSM is likely to be more complex than for terrestrial mining as opposition will arise from a wider and more diverse group of stakeholders, as highlighted by the opposition to the failed Solwara 1 project in the Bismark Sea which encountered opposition from local communities in Papua New Guinea, national politicians and NGOs. Therefore, ensuring the social acceptance of DSM is crucial to mitigate any potential delays to operations.
Regulatory issues
There are major regulatory issues over DSM linked to the challenges and uncertainties associated with developing and implementing effective governance mechanisms. Given the unique environmental and technological aspects of DSM, regulatory frameworks must balance economic growth and the protection of marine ecosystems. The lack of harmonisation between national regulatory frameworks has resulted in difficulties in establishing consistent standards, coordinating activities across jurisdictions, and addressing transboundary environmental impacts. These difficulties are reflected by the High Seas Treaty, an international treaty to protect oceans of the world that lie outside national borders, which was finally agreed upon by UN member states after almost 20 years of negotiations. However, further issues linked to DSM in international waters have arisen due to the legal uncertainties regarding the distribution of benefits and the management of resources in these areas which are considered to be the "common heritage of mankind" under the United Nations Convention on the Law of the Sea (UNCLOS). A recent study found 30 major outstanding regulatory issues with the rules, regulations and procedures (RRPs) related to DSM because of not receiving sufficient time for discussion, divergent views amongst Member States, and a lack of information and inputs to progress negotiations. Given these findings, it is unlikely that the ISA will finalise RRPs amongst the 168 member states by 2025, presenting major uncertainties for states and private contractors as to whether these new sources of minerals may ever become available.
Table of major outstanding regulatory issues in the ISA’s draft RRPs. Source: Pickens, Chris et al. (2024).
Ready for take-off?
Given the growing demand for critical minerals and the potential economic and geopolitical benefits that DSM offers states, it is likely that seabed mining will commence in the next decade. However, the commercial viability of DSM is constrained by ESG risks and depends upon many factors such as commodity prices, extraction costs, permitting and approvals, and technological developments. Historically, there was widespread economic interest in DSM in the 1960s and 1970s but this ultimately amounted to nothing. Contrary to some outlooks, the history of DSM shows that the practice is not inevitable. Yet, as geopolitical competition ramps up to extract seabed minerals, stakeholders in the DSM industry must be cautious of these ESG risks of entering the race for seabed mineral resources. As French President Emmanuel Macron said at the COP27 climate summit in 2022 - “we must do everything to protect climate and biodiversity solutions in our oceans".