Nickel refiners in Indonesia lag global peers on water pollution monitoring

Indonesia is set to be the largest supplier of nickel to the battery industry this decade, yet only a quarter of refiners operating in the country have water pollution monitoring systems in place, according to Benchmark’s Nickel ESG report.

Indonesian nickel refiners are lagging far behind the global rate of 48% of operating nickel refiners having monitoring systems in place, according to Benchmark.

The data comes amid increasing concerns about the potential environmental impact of nickel production in Indonesia, with reports of the pollution of local water supplies from the nickel industry. The country is rich in biodiversity, and home to a number of unique species, coral reefs and marine life.

The country is set to account for 60% of the nickel market by 2030, according to Benchmark, making sustainability issues a key concern for the world’s largest automakers.

Elizaveta Kremer-Nidzelskaya, an ESG analyst at Benchmark, argues that regulatory compliance by companies should be considered a bare minimum.

Companies “could go further by undertaking and funding water toxicity studies, as well as studies on biodiversity and how it is impacted by mining activities in the area, as it remains heavily understudied,” she said.

Indonesia’s ESG Risk

Although Indonesia has the largest share of refined nickel production globally of any individual country, and is expected to grow this share over the next decade, local communities and environmental campaigners have been pushing back against the industry’s rapid development.

“Exhaust from coal plants within nickel smelter facilities reaches water bodies and causes water temperatures to rise, and so drives away the fish local people rely on for their livelihoods,” Kremer-Nidzelskaya gave as an example of the nickel industry’s impact on the local environment and communities.

The Indonesian Forum for Living Environment, Friends of the Earth and a collective of other environmental groups, last year wrote a letter urging Tesla to reconsider sourcing its nickel from the region due to “potentially devastating impacts on the environment and the lives of Indonesian people”.

Last month, Wired–a US-based technology magazine–reported on the Indonesia Morowali Industrial Park, which is home to several nickel refiners. The piece highlighted poor waste management, water pollution, and untenable working conditions, amongst other major environmental, social, and governance (ESG) issues including “polluted water flowing directly into the sea”.

High-pressure acid leaching is an increasingly popular route to produce refined nickel in Indonesia, generating tailings. Although the tailings are not disposed of in the ocean, the effluent generated, after tailings are dried or stacked, sometimes is.

“The effects are not well known as there aren’t many toxicity studies undertaken to determine the effect this practice is having, specifically whether or not tailings effluent being released is affecting water toxicity,” Kremer-Nidzelskaya said.

“Ideally [the effluent] is neutralised but without proper monitoring, there are no guarantees,” Bruna Grossl, an LCA practitioner at Benchmark, added.

Strategies for improvement

A combination of stronger policy and regulation from the Indonesian government and action from the companies operating in Indonesia is required to mitigate the environmental risks.

“Although the Indonesian government imposes regulatory limits on the acceptable levels of toxic chemicals present in water, enforcement remains weak,” Kremer-Nidzelskaya said.

Tom Drabble, an ESG analyst at Benchmark, added that “It is important that water is reported on an asset-by-asset basis to allow for true transparency and to allow for a greater understanding of a company’s environmental impact in terms of water.”

Rio Tinto, a London-headquartered mining company, today announced it would be the first major miner to report water usage on an asset-by-asset basis, potentially leading the way for other global mining companies to follow suit.

A tool which companies can employ to increase their transparency is a Life Cycle Assessment, which can be done at an individual asset level as well as at the whole company level.

“LCAs can help because they assess and quantify a range of impacts on the environment, including water consumption potential and marine eutrophication,” Kremer-Nidzelskaya said. “This can help companies identify impact hotspots and so better address them, as well as weigh up trade-offs between different processing routes in terms of environmental impacts, including those on water.”

This analysis draws from Benchmark’s Nickel ESG Report – a recent addition to Benchmark’s sustainability division.

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