Addressing the water risks of increased mineral demand will require coordination across the supply chain. While the current geopolitical context makes this more challenging, there are ways for policymakers and companies to boost supply-chain resilience and sustainable mining.
The production of critical minerals – such as cobalt, copper, lithium, nickel, manganese and rare earth elements – is indispensable to the global economy and the energy transition. Yet extractive activities are closely tied to water consumption and pollution, which creates and exacerbates negative social, environmental and economic impacts that are likely to grow as mining production inevitably increases. The monitoring and prevention of these impacts are vital for the stable and sustainable supply of critical minerals.
Ensuring fairness for all parties and the environment, across the supply chain – from producers to consumers and all who are affected by mining and minerals processing, manufacturing, use and final end-of-life disposal – is essential. The following recommendations offer practical approaches to achieve more sustainable mineral supply chains and a fairer water footprint in the mining sector.
Governments should pursue cross-sectoral coordination. Many governments struggle to balance short-term revenue needs with long-term environmental and social safeguards, often due to the lack of political will, institutional capacity, funding and/or insufficient cross-sectoral coordination. Broader engagement on the part of government institutions and supervisory bodies in balancing demands is necessary to boost the level of political will to address some of the larger structural factors preventing a more coordinated approach. This includes ensuring that actions move beyond disparate interventions that are siloed in individual sectors or government departments. Instead, a holistic approach is needed that aims to strengthen coordination between ministries responsible for water, agriculture, energy, industry, the environment, economic development and finance. This coordination can be facilitated through a basin-level assessment that integrates: water availability, sectoral withdrawals, return flows and pollution loads, land-use and hydrological connectivity, governance arrangements, and economic drivers to understand cumulative impacts and trade-offs across the basin. Such an assessment can be undertaken by governments or in partnership with the private sector.
Authorities should reassess the value of water in governance. Basin-level assessments will reveal the true economic, environmental and social costs of water use across competing sectors. Strengthening water governance in producing countries requires integrating these basin-level insights into allocation rules, permit systems and pricing mechanisms, so that exported and domestically traded goods reflect the real value of water. Drought and flood planning in the context of climate change should be integrated into the allocation of permits for mining and minerals processing activities to avoid impacts that could limit production and the availability of water. Further cross-sectoral integration is possible through the coordination of water, climate and biodiversity actions across government agencies and the identification of synergies between producer and consumer countries as well as public and private sector entities.
Private sector actors will benefit by recognizing and addressing water risks. Evidence from across the mining sector shows that water risks are translating directly into financial and operational costs. Mining companies are increasingly forced to invest in expensive alternatives to freshwater resources such as desalination plants, long-distance pipelines and enhanced treatment systems to secure water supplies.
Failures in tailings management have demonstrated how catastrophic accidents can devastate communities and ecosystems while destroying corporate value. Financiers and downstream industries are beginning to recognize that water scarcity, flooding and climate risks are material to their portfolios and supply chains. Water is no longer seen as a peripheral compliance issue but increasingly as a strategic resource that determines competitiveness and viability. Addressing these water risks at all stages of mining and minerals activities will contribute to securing supply chains.
Investors and financiers would benefit by integrating water and climate risks into credit and market models, evaluating portfolios against water stress and extreme weather events, and making climate resilience a condition of capital. To meet potential stricter government regulation, consumer pressure and conditions of finance, mining companies must invest in operational improvements such as closed-loop water systems, aggressive recycling and robust tailings management with independent audits and emergency planning. Investing in recycling and circularity to meet primary demand can contribute to decreasing the pressure on water resources.
Companies and governments should collaborate on inclusive approaches. Assurance of environmental and human rights safeguards requires the meaningful participation of affected communities and civil society. Stronger state leadership, more comprehensive permit requirements – including on climate change, accountability and reporting – and multi-stakeholder platforms that include stakeholders in decision-making are needed to ensure that social and environmental safeguards are embedded in mining governance and operations. It is important for mining and minerals processing companies to demonstrate increased commitment to inclusive consultation and community engagement and a willingness to address local concerns. Benefit-sharing agreements can ensure that economic gains are shared fairly with local communities and Indigenous peoples. The input of civil society and communities is crucial for monitoring impacts, advocating for rights and attempting to hold both companies and governments accountable. Where mining encroaches on Indigenous lands or vulnerable ecosystems, the absence of transparent and participatory decision-making between the various stakeholders undermines trust and legitimacy.
Private and public actors should adopt a whole-of-supply-chain approach. Downstream industries can boost demand for responsibly sourced minerals by mandating social and environmental safeguards and referring to existing sustainability guidelines, such as the OECD’s Due Diligence Guidance for Responsible Mineral Supply Chains, in procurement and trade agreements. If such agreements are designed to evaluate water use and risks through basin-level assessments and establish means for data disclosure, transparent oversight and resilience planning, they can incentivize trade partners to cooperate on virtual water trade governance. Trade and domestic policies need to reflect the true value of water to prevent the worsening of water scarcity in exporting countries. Accounting for the opportunity costs and associated social and environmental impacts of water use in the production of minerals in water pricing can avoid subsidies and incentives that prevent sustainable, equitable and efficient virtual water trade.
Fair water footprints should be adopted across mineral supply chains. The governance recommendations mentioned above along with the adoption of the fair water footprint principles across the entire supply chain could provide a strong basis for ensuring that the trade in critical minerals meets sustainability criteria. SSIs are one element that can provide clear guidance on what companies should aspire to. The efforts by ICMM, the Copper Mark, the Mining Association of Canada and the World Gold Council to create a consolidated mining standard represents a positive move towards more standardized expectations of best practice.
Care must be taken through transparency and independent audits to avoid greenwashing by companies and through engagement of the public sector in producer countries to avoid usurping government authorities in managing activities in their country. Currently, the environment and water are not well addressed in SSIs. The rising concerns about water reported to CDP by companies and finance institutions should encourage more comprehensive guidance on the sustainability issues associated with water consumption and pollution.
Take collective action across the supply chain. To succeed, sustainable virtual water trade is likely to require a greater degree of collective engagement. Nations seeking to further international cooperation, such as those that signed the Glasgow Declaration for Fair Water Footprints at the COP26 UN climate summit in 2021, should continue to engage and learn from one another in and beyond such forums to ensure their trade dependencies – critical minerals included – better support shared water security and drive global ambition forwards. At the basin level, collective action can function under integrated water resources management (IWRM), Water–Energy–Food–Environment Nexus (WEFE Nexus), regional planning processes, and/or through corporate water stewardship.
Producer, intermediary and consumer countries should boost multilateral cooperation. Along the supply chain, as policy shifts to account more fully for environmental and social safeguards, there will need to be a mechanism for trading partners to voice concerns – for example, through diplomatic channels such as the Trade and Environmental Sustainability Structured Discussions (TESSD) at the World Trade Organization (WTO). TESSD aims to identify concrete actions that members can take individually or collectively, including ways to assess whether goods and services that impact biodiversity and natural resources, including textiles, transportation, agriculture, electronics and waste, can contribute to environmental and developmental sustainability.
In December 2026, there is the prospect of furthering the water cause at the 3rd UN Water Conference, which will be co-hosted by the United Arab Emirates and Senegal. The conference presents a rare opportunity for the international community to agree on measures to accelerate implementation of SDG 6 on ensuring the availability and sustainable management of water and sanitation for all.
Critical minerals are the backbone of the clean energy transition, but the sustainability of their trade hinges on how water is managed. By engaging all actors across the supply chain – from mine to market to recycling loop – there is an opportunity to reduce impacts, protect communities and ecosystems, and secure the long-term viability of the green energy transition. Water stewardship, climate resilience and transparent governance are not peripheral concerns but decisive factors that will determine whether the mineral economy contributes to a just and sustainable future.
