Product differentiation in mineral commodities based on sustainability indicators: The case of copper mining

Abstract

Metals are commonly characterized as commodities, as there are little to no differences across products. Despite this traditional view, there has been an increasing attempt to assess mineral production, including socioeconomic and environmental impacts, besides their financial performance. In this line, sustainability reports have been the fundamental tool to provide transparent and public information on these impacts, varying in quality and quantity across companies. Based on this premise, we analyze several indicators to assess the potential for differentiation in the copper mining industry. We consider mine site-level data on water withdrawal and greenhouse gas (GHG) emissions, publicly available from sustainability reports from companies operating in 20 countries representing almost 80% of global production. Socioeconomic and governance data is available nationally, which limits more detailed analysis in these aspects. Data gathering indicates that since 2017, copper companies have stabilized regarding the availability of data provided in sustainability reports.Results for copper mining show that water withdrawal is a leading indicator in terms of differentiation potential. Differentiation is higher when continental water is considered, creating a significant incentive for companies to invest in alternative water sources. Sustainability differentiation in copper mining disproportionately affects low-income countries when socioeconomic aspects are considered, mainly if governance measures are used. In this sense, high-income countries are more likely to support product differentiation based on responsible production standards.