This article is based on the WRF’23 Loudspeaker Event organised by the African Circular Economy Network, Chatham House, Het Groene Brein and Turntoo on July 4, 2023. Below the event organisers provide an overview of the main discussions and takeaways of the event and invite you to join the conversation for this innovative idea to drive sustainability in the minerals and metals sector. Discover how resource leasing can drive the circular economy transition and create fair value chains.
The potential benefits of Maas would be:
- Contribution to transparent and accountable mineral resource governance – Maas models would allow governments and society more broadly to retain control over the natural resources
- Addressing the ‘resource curse’ – MaaS offers an alternative to the traditional model of ‘linear’ extractive-led growth
- Incentives for stock management and circularity – reducing waste, improving resource efficiency, promoting new product innovation
- Addressing chokepoints and price volatility of materials needed for the energy transition – amounts of available primary materials smaller than the demand requirements
- Win-win partnerships between Europe and Africa – implementing high ESG standards and local value creation
- Royalty payments can be used to fund socio-economic development programmes – in line with just transition mechanisms
The event explored the following questions relating to Maas moving from concept to reality:
- What are the governance mechanisms and traceability protocols necessary to ensure the responsible and sustainable use of resources through Materials-as-a-Service arrangements?
- How can corporate resource procurement systems be re-designed to support MaaS and promote the transition to more circular business models?
- How will the rents generated by MaaS be managed in a transparent and accountable manner, with the objective of maximizing the benefits to the local communities and the host country?
- How can Materials-as-Service be facilitated by digital product passports?
- What government policies and incentives will be necessary to enable MaaS models?
- What are key materials value chains to start the shift to MaaS models?
Brief Summary of ‘Materials as a Service (MaaS) in the Minerals and Metals Sector – WRF23 Loudspeaker Event
Introduction to Materials-as-a-Sevice by Sabine Oberhuber
Sabine Oberhuber introduced the Materials as a Service model as developed in 2013 by Turntoo. The model is based on the idea that resource rich countries / communities retain the ownership of metals and minerals mined on their territory and sell the materials as a service. This means instead of selling the materials themselves only the usufruct (the right to use these materials and gain a benefit from their use) would be sold along the value chain. The sale of the usufruct would be combined with the contractual obligation to guarantee the recoverability of materials at any point in time.
Consequently, every player in the value chain would be obliged to design, produce and sell their respective parts or final products in a circular manner – and as a result every product, every building would become a ‘material depot’. In addition to the current ‘value creation chain’ a ‘value sustain chain’ would be established in which materials can be circulated in continuous flows.
Equally important, a continuous financial flow to the countries of origin resulting from the rents paid for the materials would be established. This would imply that resource rich countries would start to benefit from the value creation generated with “their” material even after mines have been closed. In this way the current inequalities in the mining system could be bridged, not only for present but also for future generations, which in the current system will only be left with an empty mine.
To facilitate this Materials-as-a-Service system a whole range of system adaptations will be necessary starting from the documentation and tracking of materials, the development of new contractual, legal and trade agreements to finding ways of establishing a robust mechanism to let communities benefit from the financial flows generated.
The webinar intended to address these system adaptations and discuss the benefits and barriers to the introduction of a Material-as-a-Service model with renown experts from the field of circular economy, finance, mining, and property law.
Reflection by Patrick Schröder
Patrick Schröder highlighted that MaaS could be an important approach to advance circularity across mineral and metal supply chains. Furthermore, it could be a key approach to narrow the ‘circularity divide’ between Global North and Global South in the transition to a circular economy. However, MaaS has not yet been explicitly linked to the international circular economy transition and trade discussions. MaaS would also be a potential approach to facilitate a just transition from linear to circular value chains.
It could help recognizing rights to resources, resolve competing development interests and rectify existing inequities at an international level between countries, and on local level where in many cases communities do not benefit from current extractive activities. Getting started with Maas models for circularity could focus on specific metal value chains, such as “aluminium-as-a-service” which could link primary extraction and processing all the way to end-users and consumers.
Reflection by Ken Webster
Ken Webster shared his perspective on MaaS, which he sees as part of a very important discussion on what to do with economic rents. An allied concept currently discussed in this context is the Universal Basic Dividend. One of the central questions is how to organise the governance of such a system. The equal distribution of income generated by MaaS, should not be endowed to the state, but to a fiduciary trust which task would be to manage the capital and give out dividends to individual beneficiaries comparable to the Alaska Permanent dividend fund or the Government Pension Fund of Norway.
The advantage of such a system would be transparency and accountability for financial flows. But there are also challenges for example a) people are not familiar with the legal principle of usufruct – the right to enjoy the use and sell advantages of the use of another’s property. b) or that the right to buy, sell and exchange and giftneed not include the right to consume or destroy. This means that serious background work is needed on often novel contractual arrangements, but also the question on how to define the right level of rents in order to make it feasible, certainly in the case where material is locked up in a product long term, such as buildings and finally how to establish a structure which works long-term despite the fact that companies come and go and even governments are clearly not forever.
Reflection by Innocent Onah
Innocent Onah, noted that MaaS would be a significant distortion to the current broader natural resource governance framework in Africa and all current stakeholders involved, as new market participants would be involved in establishing MaaS. At the same time, he underlined that the concept still needed additional research tailored to the specific needs of countries for which he suggested at least five different scenarios under two broad categories. Category 1 – i} Emerging economy, ii} developing economy, iii} least developing economy; Category 2 – iv) resource-rich country context, and v) resource-poor country context.
These would depend on conditions and factors such as resource wealth and quality of existing governance frameworks in order to establish the right tools for implementation. While current initiatives regarding circular economy transition are challenging, such as implementation of extended producer responsibility (EPR) in some countries, we could reflect on the extended responsibility for the owner of resources which may ideate a chain of business models at multiple levels of the economic spectrum.
Another important barrier for adoption of MaaS might be the fact that Africa has huge immediate infrastructure needs (estimated gap of up to $107.5 billion a year), while MaaS would provide a smaller, albeit long-term revenue stream, it’s reliability to sustainably finance critical government expenditure requires more detailed analysis, but with high optimism that MaaS could work.
Reflection by Hugo Meyer van den Bergh
Hugo Meyer van den Berg sees current legal systems unprepared for a system such as MaaS yet sees scope for incorporating it within the existing legal frameworks. For example, in some African countries the state is regarded as the custodian of mineral resources (either by virtue of the Constitution or mining legislation) and has the task to exploit them to the benefit of its people. Extending the ownership over the lifetime of materials thereby unlocking the value which is created by them via a materials-as-service system would fit very well in already existing policies.
However, in the current practice this principle only applies as long as minerals are under the ground. The right for exploration and income generation is transferred to the owner of the mines. In addition, in current property law materials become part of larger entities (products) and their ownership follows the larger entity. Addressing this might involve the introduction of something like a co-ownership and changing the way property is looked at, which would require a significant regulatory reform. But given the goal to reach net-zero and the role some of these critical raw materials play in achieving this goal is an important motivation to examine how a method such as at material-as-as-service can be incorporated in the legal system. Finally, it could ensure that countries unlock and retain the value of natural resources longer than only the period in which they were extracted.
Reflection by Christian Spano
Christian Spano pointed out that in order to reach a truly circular economy there is a need to look at both product and process circularity – not only in mining but any industry. He described process circularity focusing on the land where the mining operation is , starting with precision mining – which is currently already being developed in the mining industry but then going beyond.
The aim is to first design out waste in the mining process and reducing its impact on the environment with the ultimate goal of reaching net-zero operations and leaving a positive legacy both on nature and social. Secondly, he stressed that product circularity is a precondition for a material-as-a-service system, which depends on products being designed in a way that materials can be recovered efficiently at any point in time. This would go beyond traditional recycling and apply a multiple set of circular interventions when the product is in use, not only when it reaches end of life.
However, implementing MaaS in the current linear system is very hard – the current system has been designed to favour linear production. In order to enable MaaS we need to put in place the right conditions – regulation, technology, finance, new business models. An incentive for directing materials into circular products and infrastructure would be to focus on stocks – instead of a focus on waste – which could be build up by an ownership model such as MaaS. While the focus is currently on rents from the use of the products/materials when discussing MaaS the most important value lies in building up a stock of material over time.
Mining companies are more likely to perceive the potential of MaaS, foremost because the concept allows to build up substantial resource stocks (a mine above the ground), which over time may see significant increase in value and alleviate the pressure of current mining companies focused on the extraction in natural stocks only. Spano could see mining companies building up a portfolio with multiple lines of revenue or value creation, based on material sale, rents and the managing the financial value of both, the natural and urban stocks.
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