DRAFT POLICY PAPER

SUSTAINABILITY CERTIFICATION OF SMALL-SCALE GOLD MINERS

AS A CHANCE TO INCREASE ENVIRONMENTAL PROTECTION IN THE

PHILIPPINES

JACEK KOZIKOWSKI

PROGRAM FOR LEADING GRADUATE SCHOOLS

CROSS-BORDER LEGAL INSTITUTION DESIGN

GRADUATE SCHOOL OF LAW

NAGOYA UNIVERSITY

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Table of contents

Abstract ......................................................................................................................................................... 2

1. Introduction ........................................................................................................................................... 3

2. Background of the small-scale mining sector ....................................................................................... 4

2.1. Current situation ............................................................................................................................ 4

2.2. Environmental concerns ................................................................................................................ 6

2.3. Current legal framework ............................................................................................................... 7

3. Sustainability certification schemes ...................................................................................................... 9

3.1. Background information ............................................................................................................. 10

3.2. Current developments of the certification industry ..................................................................... 10

3.3. Existing sustainability certificates in the mining sectors ............................................................ 11

4. Sustainability certification of the Philippines’ small-scale mining ..................................................... 12

4.1. Comparative studies: lesson from Bolivia .................................................................................. 13

4.2. Challenges for the Philippines .................................................................................................... 14

5. Conclusions ......................................................................................................................................... 16

Bibliography ............................................................................................................................................... 18

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Abstract

Small-scale mining (ASM) activities bring many challenges to the environmental governance in the

Philippines. The operation of ASM still highly relies on use of mercury in the mineral extraction process,

causing severe damage to the natural environment and human health. Moreover, small-scale miners are

involved in a large network of illegal trading of minerals, causing over 90% of extracted gold being

smuggled out of the country every year.

In this context, this paper propose a design of the sustainability certification scheme for the Philippine’s

mining sector as a means to improve the environmental governance of the country. This initiative is based

on the voluntary compliance with sustainability and accountability standards of small-scale miners, using

market based incentives. As a result, due to the inclusion of ASM communities into the global supply chain,

miners can get better return for their work if they comply with certain environmental and accountability

standards (e.g. eradication of mercury use, transparent production proceedings). Compliance with such

standards will result in obtaining, a globally recognizable, certificate of sustainable small-scale mining

production.

The proposal is based on the comparative studies with the already existing sustainability certification

scheme of the small-scale mining in Bolivia. In this context, the lesson from Bolivia provides an insight

into the necessary conditions for the successful implementation of the certification scheme (e.g.

organizational capacity of the sector). The paper also focuses on possible obstacles to the eventual

implementation of sustainability certification in the Philippines small-scale mining sector.

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1. Introduction

Small scale mining is a traditional form of mining relying on manual labor, with minimal or no

mechanization.1 Preservation of small-scale and artisanal mining (ASM) has gained international attention

on development and industry agendas due to the big number of people involved in this activity. Currently,

there are more than 30 million small-scale miners around the world with more than a half of these people

living and working in the Asia and Pacific region.2 Overall, artisanal and small-scale mining employs ten

times more people than large-scale mining.3

Despite the positive effects of small-scale mining activities on local economy, these activities also have

adverse impact on the environment, health of the individual, and the development of the communities. It

has been estimated that small-scale mining for gold is the world’s second worst mercury polluter,

responsible for one-quarter to one-third of global mercury pollution.4 ASM releases 640–1350 tons of

mercury a year from at least 70 countries.5 Small-scale mining operations slowly, but consequently destroy

the natural environment in developing countries.

The reason for the adverse impact of ASM on the environment is the unlawful operation of the sector

without compliance to environmental and labor regulations. The miners fail to comply because of the lack

of education or financial and technical skills to sustain or expand their business activities. Overburdened

with costs of compliance with regulatory framework, small-scale miners are massively involved in illegal

selling of extracted minerals causing tax avoidance and decreasing governmental revenue from the whole

sector.6

This study explores the possible solutions to the current impact of small-scale gold mining activities

on the natural environment and development of the Philippines. First, the paper presents the background of

ASM activities in the Philippines and its negative impact on the natural environment. Second, the paper

provides analysis of the development of sustainability certification schemes. Third, the study explores

1 “A Background Study on the Small-Scale Gold Mining Operations in Benguet and South Cotabato and their

Impact on the Economy, the Environment and the Community”, Bantay Kita Occassional Paper Series No. 2012-02,

March 2012, p.7. 2 “Asia-Pacific Conference on Artisanal and Small-scale Mining,” para.4., accessed September 12, 2013,

http://www.sam.mn/en/sam-project-news/278-asia-pacific-conference-on-artisanal-and-small-scale-mining.html. 3 “IIED Shines a Light on Small-scale Mining | International Institute for Environment and Development,” March 5,

2013, para.5, accessed September 12, 2013, http://www.iied.org/iied-shines-light-small-scale-mining. 4 Shefa Siegel, Marcello M. Veiga, The myth of alternative livelihoods: artisanal mining, gold and poverty,

International Journal of Environment and Pollution 41(3/4): 273, 2010 5 Telmer, K.H. and Veiga, M.M. 2009. ‘World Emissions of Mercury from Artisanal and Small Scale Gold Mining’

in N. Pirrone and R. Mason (eds) Mercury Fate and Transport in the Global Atmosphere. Springer. 6 Roberto R. Romulo, Small scale mining: Immeasurable damage, The Philippine Star, October 18, 2013, accessed

April 20, 2014, http://www.philstar.com/business/2013/10/18/1246421/small-scale-mining-immeasurable-damage.

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already operating sustainability certification schemes using Bolivia as a case study for its successful

implementation. Finally, the paper explores the possible impact of the adoption of certification schemes in

the Philippines and discusses possible challenges to its successful operation.

2. Background of the small-scale mining sector

Small-scale gold mining has a long standing tradition in the Philippines dating back to the 10th century.7

For ages small-scale mining played crucial role in the Philippine’s history and development.8 Today in the

Philippines, there are approximately 300,000 artisanal gold miners, which directly sustains over 1 million

people. 9 The Australian and New Zealand Chamber of Commerce of the Philippines (ANZCHAM)

estimated that reserves of gold in the Philippines account for over 367 US billion dollars.10 Considering the

fact that over 70% of gold extraction comes from small scale mining, the economic potential of this sector

is enormous.11

2.1. Current situation

The current legal framework of the mining industry in the Philippines provides a little incentives for

small-scale miners to comply with environmental, labor or health standards. The eventual regulatory

compliance imposes a high and often unachievable financial burden on small scale miners. This situation

has been exacerbated along with the 2012 revenue regulations imposing 2 % excise tax and 5 % creditable

withholding tax on small-scale gold miners and traders.12 As a result in 2012 the amount of gold legally

7 “A Background Study on the Small-Scale Gold Mining Operations in Benguet and South Cotabato and their

Impact on the Economy, the Environment and the Community,” p.7. 8 E. J. Caballero “Gold from the gods: Traditional small-scale miners from Benguet Province, Philippines,”

University of Hawaii, 1992 Chapter III, p. 50-104. 9 "Final Report”, Global Forum on Artisanal and Small-scale Gold Mining 7–9 December 2010, Manila, January 20,

2011, p.4., accessed September 10, 2013, http://www.unep.org/hazardoussubstances/Portals/9/Mercury/

Global%20forum/Global%20forum%20on%20artisanal%20and%20small%20scale%20gold%20mining.pdf. 10 P. Pavlova and J. Hincks, “The Philippines: an Overview Fits and Starts and False Departs” in Mining in the

Philippines, Revisiting the Rim, Global Business Report, Engineering and Mining Journal, March 2013, p. 64. 11 B. Natividad, “Small-scale Miners in 30 Provinces Account for 70% of Mined Gold - MGB,” InterAksyon.com,

January 6, 2012, Para. 1, accessed September 12, 2013, http://www.interaksyon.com/article/21330/small-scale-

miners-in-30-provinces-account-for-70-of-mined-gold---mgb. 12 Revenue Regulations No.6-2012 from April 2, 2013 on the taxation on the Sale of Gold and other Metallic

Minerals to Bangko Sentral NG Pilipinas and other Persons or Entities, Amending Revenue Regulations No. 7-2008,

and further amending section 2.57.2 (T) of Revenue Regulations no. 2-98, as amended, Republic of the Philippines,

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sold to the central bank of the Philippines, which is the only body entitled to purchase ASM gold13, fell

94 % from a year earlier.14 This situation further resulted in, up to 90 percent of small-scale Philippine gold

production, being smuggled out of the country, especially to Hong Kong.15 Official Philippine data reflect

legal exports of gold to Hong Kong in both 2010 and 2011 at approximately just three percent of the total

volume recorded by Hong Kong authorities.16 According to UN Commodity Trade Statistics, Hong Kong’s

official figures of Philippine gold in 2011 were 11 times the Philippine numbers for gold shipments to Hong

Kong.17 Media reports say that the smuggling chain often starts with foreign investors establishing its’

operation under the cover of domestic small-scale miners to bypass Philippine mining laws and protocols,

as well as to avoid the large capital requirements, fees, and taxes associated with large-scale mining.18 Even

though, the gold smuggling in the Philippines is not the main focus of this paper, this issue must be taken

into account because it affects the operation of the whole sector. The phenomenon of gold smuggling

discloses the problem of lack of transparency in the small-scale mining sector. Currently, even licensed

small-scale miners do not provide information about the quantity of extracted minerals and their value.

The widespread unlawful operation of small-scale miners causes many domestic conflicts for

resources between large miners and indigenous communities.19 The spread of illegal mining activities and

lack of compliance with environmental regulations led to issuance of a special order deputizing personnel

of the National Bureau of Investigation-Environment and Wildlife Protection and Investigation Division to

assist in the enforcement of laws against illegal miners.20 According to the Mines and Geosciences Bureau

Department of Finance, Bureau of Internal Revenue. ftp://ftp.bir.gov.ph/webadmin1/pdf/63018RR%20No.%206-

2012.pdf. 13 Republic of the Philippines Congress of the Philippines Metro Manila REPUBLIC ACT NO. 7076, AN ACT

CREATING A PEOPLE’S SMALL-SCALE MINING , PROGRAM AND FOR OTHER PURPOSES, Section 17. 14 Mining Industry Statistics, Mines & Geosciences Bureau, Department of Environment & Natural Resources of the

Republic of the Philippines, 6 November 2013, accessed April 15, 2014,

http://www.mgb.gov.ph/Files/Statistics/HistoricalMineralIndustryStatistics.pdf 15 Rosemarie Francisco, “Special Report: Philippines’ Black Market Is China’s Golden Connection,” Reuters,

August 23, 2012, http://www.reuters.com/article/2012/08/23/us-philippines-gold-idUSBRE87M02120120823. 16 http://www.philstar.com/business/2013/10/18/1246421/small-scale-mining-immeasurable-damage 17 United Nations Commodity Trade Statistics Database,

http://comtrade.un.org/db/dqBasicQueryResults.aspx?px=H2&cc=7108&r=608&p=344&rg=2&y=2012&so=8; and

http://comtrade.un.org/db/dqBasicQueryResults.aspx?px=H4&cc=71,7108&r=344&p=608&rg=1&y=2012&so=8. 18 http://www.philstar.com/business/2013/10/18/1246421/small-scale-mining-immeasurable-damage 19 C. Traywick, “Sitting on a Gold Mine: Will Mining Make or Break the Philippines?,” September 13, 2013, Time, ,

accessed September 10, 2013, http://world.time.com/2012/09/13/sitting-on-a-gold-mine-will-mining-make-or-break-

the-philippines/, para. 3. 20 Special Order (SO) No. 2013-85, Mines and Geosciences Bureau, http://www.mgb.gov.ph/art.aspx?artid=500.

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the problem of illegal mining has become an urgent concern in many parts of the country, involving

environmental, health and safety concerns as well as the non-payment of taxes.21

2.2. Environmental concerns

The negative impact of ASM on environment results from several activities. First, the most

significant environmental harm is done by the traditional method of gold extraction by mercury

amalgamation. This ancient method, though extremely hazardous is still widely used in the Philippines,

causing uncontrolled disposal of mercury waste into the environment. Even though the use of mercury in

small-scale mining is forbidden under the law, miners continue to use this chemical.22 This situation results

also from the limited capacity of government agencies to enforce the law.23According to the United Nations

Environment Programme (UNEP) some 26 tons of mercury are dumped annually into bodies of water in

Mindanao, resulting bioaccumulation in fish and other aquatic organisms which are then consumed by

people.24 Mercury impairs brain function, damaging coordination and memory, lowering intelligence, and

causing hearing loss, birth defects and miscarriages.25 Moreover, the polluted water systems affect the cattle

and livestock industry and agricultural production.

Second, the ASM activities require huge amounts of water for mineral processing that deprive people

of domestic usage of this valuable resource. Third, when miners establish new sites they cut down the forest

which causes a loss of topsoil in turn affecting the stability of the ground. For the miners, this causes regular

risks of drowning from flash floods or the collapse of retaining walls during the rainy season. 26 The

destructive effect of ASM on the natural environment in the Philippines led to the establishment of the

initiative by several international non-governmental organizations (NGOs) entitled the Mercury Reduction

21 MGB, NBI collaborate to curb illegal mining, Mines and Geosciences Bureau, November 25, 2013,

http://www.mgb.gov.ph/art.aspx?artid=500. 22 Executive Order No. 79, Institutionalizing and Implementing Reforms in the Philippine Mining Sector Providing

Policies and Guidelines to Ensure Environmental Protection and Responsible Mining in the Utilization of Mineral

Resources, Section 11 (e), http://www.gov.ph/2012/07/06/executive-order-no-79-s-2012/. 23 C. Traywick, “Sitting on a Gold Mine: Will Mining Make or Break the Philippines?” 24 “Health and Environmental Impact of Mercury in Small-Scale Gold Mining in the Philippines”, presentation at

UNEP-DENR Global Forum on Artisanal and Small-Scale Gold Mining, Manila, December 7-9, 2010, slide 2,

accessed September 10, 2013, http://www.unep.org/hazardoussubstances/Portals/9/Mercury/Documents/ASGM/

Presentations_Forum/Day%202/Health_and_Environmental_Impact.pdf. 25 Ban Toxics. 2010. The price of gold: Mercury use and current issues surrounding artisanal and small scale gold

mining in the Philippines. Ban Toxics!, at www.bantoxics.org. 26 Ibid, slide 9.

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in Artisanal and Small-Scale Gold Mining in the Philippines 2011-2014.27 This initiative involves the

training of miners in non-mercury gold extraction, teaching of rural healthcare workers about how to deal

with mercury poisoning and raising awareness about the dangers of using this chemical element. Education

of small-scale miners and other capacity building projects play an important role in increasing the

environmental protection in the Philippines. The government of the Philippines also expressed a political

will in fighting the mercury use in the mining sector by accessing the Minamata Convention on Mercury

adopted on October 10, 2013.28 As a result of accession the government shall take steps to reduce, and

where feasible eliminate, the use of mercury from mining and mineral processing. 29 Moreover, the

government must develop and implement national action plan containing strategies to eradicate the use of

mercury from the small-scale mining sector.30

2.3. Current legal framework

The current legal framework of the Philippines covers four main regulations concerning small scale

mining: 1) Presidential Decree no. 1899 establishing small-scale mining as a new dimension in mineral

development31 ; 2) People’s Small-Scale Mining Act of 1991, creating a people’s small-scale mining

program32 ; 3) Philippine Mining Act of 1995, instituting a system of mineral resources exploration,

development, utilization and conservation33; and 4) Small-Scale Mine Safety Rules and Regulations34.

Presidential Decree no. 1899, issued in 1984, governs small scale mining operations for areas not

declared as Peoples’ Small-Scale Mining Area (PSSMA).35 According to this act, small-scale mining refers

to any single unit mining operation, with the annual production less than 50,000 metric tons of ore.

27 R. C. Gutierrez, “Current Experience on the Mercury-Free Transition in Artisanal and Small-Scale Gold Mining

in the Philippines”, presentation at Asia-Pacific Regional Conference on Artisanal and Small Scale Mining,

Ulaanbaatar, Mongolia, 2013, slide 21, accessed September 10, 2013,

http://www.eisourcebook.org/cms/End%20June%20

2013/Philippines%20ASM%20Mercury-free%20transistion%20experience.pdf. 28Minamata Convention on Mercury, http://www.mercuryconvention.org/Portals/11/documents/conventionText/

Minamata%20Convention%20on%20Mercury_e.pdf 29 Ibid., Art. 7 (2) 30 Ibid., Annex C. 31 “Presidential Decree no.1899 establishing small-scale mining as a new dimension in mineral development.” 32 “Republic Act no. 7076 an act creating a people’s small-scale mining program and for other purposes.” 33 Republic Act no.7942 an act instituting a new system of mineral resources exploration, development, utilization

and conservation. 34 DENR Administrative Order No. 97-30, Small-Scale Mine Safety Rules and Regulations, September 11, 1997,

http://www.denr.gov.ph/policy/1997/MIN_DAO-97-30.pdf. 35 “Presidential Decree no.1899 establishing small-scale mining as a new dimension in mineral development.”

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Additionally the act requires that small-scale mining activities: 1) are conducted in artisanal way, without

the use of sophisticated mining equipment; 2) keep the minimal investment on infrastructures and

processing plant; 3) rely on manual labor; and 4) are owned, managed or controlled by an individual or

entity qualified under existing mining laws, rules and regulations.

The People’s Small-Scale Mining Act of 1991, established a people’s small-scale mining program

which includes the identification, segregation and reservation of certain mineral lands as People’s Small-

Scale Mining Areas.36 Moreover the program:1) recognizes prior existing rights and productivity; 2)

encourage the formation of cooperatives; 3) extends the technical and financial assistance, and other social

services; 4) extends the assistance in processing and marketing; 5) regulates small-scale mining industry

with the view to encourage growth and productivity; and praise for the efficient collection of government

revenue.

The Philippine Mining Act of 1995 requires the holder of small-scale mining contract to strictly

comply with its environmental, safety, health and social provisions.37 The law requires small-scale mining

operators to complete the following procedures: 1) register their activities and secure governmental permits,

2) register mining workers through organization of cooperatives, 3) comply with the required safety, health

and environmental conditions, and 4) submit production reports and pay taxes and other royalties.

Finally the small-scale mining activities are subject to safety rules and regulations.38 These rules

provide technical requirements for the legal operation of mining sites and regulate different stages of the

mining process. The legal framework provides a sound basis for the operation of ASM, but not many small-

scale miners comply with established requirements.

An understanding of the social situation and motivations of people engaged in this sector is necessary

to provide a successful framework for the operation of ASM in the Philippines. Small-scale mining is

largely a “poverty driven activity, typically practiced in the poorest and most remote rural areas of a country

by a largely itinerant, poorly educated” and vulnerable populace with little other employment alternatives.39

Small scale miners can be divided into four groups: 1) permanent miners, who conduct activities year round;

2) seasonal miners, who mine along with other activities such as farming; 3) rush miners, who migrate to

mining areas encouraged by newly discovered resources; and 4) shock-pull miners, for whom the mining

36 “Republic Act no. 7076 an act creating a people’s small-scale mining program and for other purposes.” 37 “Republic Act no.7942 an act instituting a new system of mineral resources exploration, development, utilization

and conservation.” 38 DENR Administrative Order No. 97-30, Small-Scale Mine Safety Rules and Regulations, September 11, 1997,

http://www.denr.gov.ph/policy/1997/MIN_DAO-97-30.pdf. 39 “Oil, Gas, and Mining Unit - Small-Scale Mining,” Para. 1, accessed September 12, 2013,

http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTOGMC/0,,contentMDK:20246087~menuPK:50939

2~pagePK:148956~piPK:216618~theSitePK:336930~isCURL:Y,00.html.

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activities became a coping mechanism for shocks such as loss of employment, conflicts or natural disaster.

40 Although ASM groups may face the same problems — such as child labor, mercury use or illegal trade

— their structural challenges and drivers can be very different. As a result policy responses need to

understand mining communities’ varying incentives and the particular challenges facing different groups

within those communities. 41

In this context, the policy makers must take into account financial and organizational capacities of

small-scale miners to comply with any environmental regulations that the government impose on the sector.

There is a little chance that an ASM community would comply with environmental standards if it was

connected with any additional financial burden or lack of tangible benefits. Thus, how to conduct small-

scale mining operations in an environmentally sustainable and profitable manner is an important challenge

to the Philippines’ policymakers.

3. Sustainability certification schemes

This paper explores one of the solutions for improving the environmental governance in the context of

small-scale mining, focusing on incentivizing miners to comply with environmental standards. The paper

expands from the viewpoint that the negative impact of ASM on the environment can be limited by

improving the level of transparency and public participation within the sector. The paper proposes voluntary

contribution of smalls scale miners to the more sustainable mineral extraction in the form of sustainability

certification. The certification would provide financial incentives to small-scale miners to comply with

environmental regulations.

Certification is the process by which compliance with certain requirements or standards are

confirmed and guaranteed. Sustainability certification have been developed to assure consumers, processors,

retailers, investors and other supply chain players that particular products have been manufactured, traded

and processed in a way that reduces the harmful impact of environment.42 This paper expands from the

view point that the negative environmental impact of ASM in the Philippines can be limited through

voluntary certifications of small scale mining activities.

40 Responding to the challenge of artisanal and small-scale mining - How can knowledge networks help?, IIED

Sustainable Markets papers, International Institute for Environment and Development, p.4 41 Ibid. 42 42 E. Blackmore, C. Holzman, A. Buxton, “Scaling up certification in artisanal and small-scale mining:

Innovations for inclusivity”, International Institute of Environment and Development, 2013, p.14.

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3.1. Background information

The sustainability certification addresses the environmental performance of ASM communities with

a focus on leveraging the market as a driver demand. Certification scheme connects small-scale miners with

the global mineral supply chain. On one side of the certification scheme small-scale miners gain financial

incentives to comply with environmental requirements incorporated into the sustainability certification

scheme, which results in better return from their activities. With sufficient organization and number of

small-scale miners involved in the certification scheme the sector could scale up gold sales obtaining better

prices in the market. On the other side of the scheme are consumers, which have confidence that a piece of

jewelry they purchase has met sustainability standards. Importantly for the consumers, the certification

offers transparent and traceable supply chain for small-scale gold mining. Certified gold is kept separate

from non-certified gold during processing, refining and manufacturing so that traceability can be

maintained.43 This solution ensures consumers that on every stage of gold processing, from the moment of

extraction until the sales of jewelry to consumers, the process met sustainability standards. As a result

certification scheme offers fully transparent supply chain for artisanal and small-scale mining. Moreover,

premium due to compliance with sustainability certification encourage small-scale miners to play active

role in decisions on how the money should be invested. In this context, sustainability certification promotes

public participation.

The voluntary nature of the certification scheme creates a choice for the ASM community; that is

whether or not it wants to produce goods in a sustainable way at a higher profit or stay with traditional

extraction methods at a lower profit. The demand for certified minerals will increase the price of goods and

also increase the share of small-scale miners in the price of final products. Therefore, certification will be

based exclusively on financial incentives of compliance with sustainability requirements.

3.2. Current developments of the certification industry

Recently, the use of sustainability certification schemes has been expanding. The expansion has

resulted in the general increase of sales of certified products, and multiplication of certification schemes.44

A number of certification schemes were created in the agriculture industry, where small-scale farmers can

financially benefit from compliance with environmental and labor law standards. The evidence from the

43 Oro Verde, Colombia – short profile, http://www.fairtrade.org.uk/includes/documents/cm_docs/

2011/O/Oro%20Verde%20Profile%20short%20version.pdf, p.2. 44 E. Blackmore, C. Holzman, A. Buxton, “Scaling up certification in artisanal and small-scale mining: Innovations

for inclusivity”, International Institute of Environment and Development, 2013, p.7.

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agriculture sector suggests, however that certification generally reaches only those small-scale producers

who are well organized, have resources and the capabilities to comply with sustainability standards.45 The

requirement of organizational capabilities, limits the potential impact of certification schemes on

development by reaching only the most proactive and entrepreneurial small-scale producers. Regardless of

industry, a successful certification scheme must be very carefully considered, taking into account the

realities of all participants and elements of the sector. Another important concern for the certifications

schemes is the diversified nature of small-scale producers which results in different level of social

engagement in the certification enforcement. In this context, the certification might face significant

resistance among small-scale miners who conducts ASM activities on a seasonal or short-term basis,

without long-term visions of the gradual development of their business. As a result, certification schemes

should address mainly those miners, who permanently work in the sector and focus on long term business

and sustainability goals.

3.3. Existing sustainability certificates in the mining sectors

Until now, the mining and jewelry industry have used certification as a mean to ensure customers of

the origins and history of products. In recent years, certification emerged in reaction to the conflict over

minerals trade in the Democratic Republic of Congo; where over 90% of national mineral production came

from small-scale mining.46 The mineral certification in Congo addresses conflict-free minerals, assuring

that there is no abuse of human rights during the production process.

The Colombia’s Alliance for Responsible Mining (ARM) is an example of gold supply chains and

responsible mining practices that are certified ASM communities in Latin America.47 In 2011, certified

45 E. Blackmore, J. Keeley, R. Pyburn, E. Mangus, L. Chen, Q. Yuhui, , “Pro-poor certification: assessing the

benefits of sustainability certification for small-scale farmers in Asia”, Natural Resource Issues No. 25.,

International Institute of Environment and Development, 2012, p.15. 46 “The Democratic Republic of the Congo Post-Conflict Environmental Assessment: Synthesis for Policy Makers”,

United Nations Environment Programme, 2011, p.32, accessed September 4, 2013,

http://postconflict.unep.ch/publications/UNEP_DRC_PCEA_EN.pdf. 47 M.L. Baretto, “Legalization Guide For Artisanal And Small Scale Mining (ASM): Draft For Discussion”, ARM

Series on Responsible ASM No.5, p.5, accessed September 14, 2013, 2013,

http://www.communitymining.org/images/

sampledata/publicaciones/Guia%20de%20legalizacion/Legalisationguide.pdf.

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miners from Peru48, Colombia49, and Bolivia50 received premiums worth 122,500 USD for their operation

compliant with sustainable schemes.51 Another initiative is The Responsible Jewelry Council Member

Certification (RJC), which addresses diamond and gold jewelry supply chains.52 This certification operates

on the code of conduct that defines responsible ethical, social, and environmental practices. There also two

other initiatives certifications: 1) The Initiative for Responsible Mining Assurance (IRMA); and 2) The

Development Diamond Standard TM.53

Despite the positive trend in the development of certification schemes, the scope of application and

the practical outcomes have been fairly limited for several reasons.54 First, most of the existing and

developing schemes focus on medium and large scale mining, whereas ASM is only a niche part of the

scheme’s scope. Second, the certification schemes mainly focus on jewelry sector, excluding non-metals

like gems, of which 80% are mined with artisanal methods. Third, the existing schemes have not reached a

significant scale in terms of the number of certified organizations, causing a marginal presence of ASM

products on the market. Finally, the requirements to have legitimate and formalized organizations are a

significant barrier to many small scale miners. These are the main challenges that must be addressed when

designing an efficient and operable sustainability certification scheme for the Philippines.

4. Sustainability certification of the Philippines’ small-scale mining

In order to accommodate the needs of the small-scale mining in the Philippines, the certification scheme

must utilize the experience of already existing schemes in other countries. For this purpose the paper

provides a comparative analysis of the already existing certification schemes and their development in

Bolivia. The paper used the following criteria in order to choose the most appropriate country for a

comparison: 1) similar level of economic development; 2) importance of extractive industry in country’s

48 Sotrami Mining Organisation, Peru – short profile,

http://www.fairtrade.org.uk/includes/documents/cm_docs/2011/S/SOTRMAI%20Profile%20short%20version.pdf 49Oro Verde, Colombia – short profile, http://www.fairtrade.org.uk/includes/documents/cm_docs/

2011/O/Oro%20Verde%20Profile%20short%20version.pdf. 50 Cotapata Mining Co-Operative, Bolivia, short profile, http://www.fairtrade.org.uk/includes/documents/

cm_docs/2011/C/Cotapata%20Profile%20shorter%20version%20100111.pdf 51 “Asia-Pacific Conference on Artisanal and Small-scale Mining,” para.12, accessed September 12, 2013,

http://www.sam.mn/en/sam-project-news/278-asia-pacific-conference-on-artisanal-and-small-scale-mining.html 52 The Responsible Jewelry Council is a not-for-profit, standards setting and certification with more than 440

Member companies that span the jewelry supply chain from mine to retail. 53 Initiative for Responsible Mining Assurance, http://www.responsiblemining.net/the-irma-process/; Development

Diamonds Standards™, http://www.ddiglobal.org/dds/. 54 “Scaling up certification in artisanal and small-scale mining: Innovations for inclusivity,” p.12.

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development; 3) similar environmental challenges in mining industry; and 4) positive result from

implementation of similar measures.

4.1. Comparative studies: lesson from Bolivia

Bolivia, ranked 108th in the UNDP Human Development Index has a similar level of economic and

social development as the Philippines, ranked 114th. 55 Mining has always been important in Bolivia and

remains a key sector of the Bolivian economy. 56 Having a significant number of small-scale mining

activities in the country, Bolivia also deals with similar environmental issues related ASM such as mercury

use.57 Finally, Bolivia is one of the first successful examples in the world of the establishment of small-

scale mining sustainability certification schemes.58

Bolivia has a well-organized small-scale mining activities with cooperatives covering 83% (65.890

miners) of the working force in the mining sector.59 The Cotapata Mining Co-operative has been the first

small-scale mining organizations in Bolivia involved in the sustainability certification.60 The co-operative

operates in the Cotapata National Park, supporting 88 families.61 In December 2010, Cotapata co-operative

joined the Fairtrade and Fairmined certification scheme addressing environmental, social and labor

conditions of gold extraction. The Fairtrade and Fairmined certification is a result of two organizations,

Fairtrade International (FLO) and the Alliance for Responsible Mining (ARM) combining their expertise

to enable small-scale and artisanal miners to improve their livelihoods.62

Miners organized within the Cotapata co-operative get a monthly salary around 4-8 times higher than

the national minimum of 80$ per month. The level of payment depends on the profit which miners equally

split between all members.63 The extracted gold is being transported and sold to trading houses where it is

refined and exported. Compliance with Fairmined certification scheme gives a chance to small-scale miners

55 Human Development Index and its components, United Nations Environmental Programme 2012,

https://data.undp.org/dataset/Table-1-Human-Development-Index-and-its-components/wxub-qc5k. 56 Espinoza, Jorge (2010) La Minería en Bolivia, Su Realidad. La Paz, Bolivia: Plural, pp.117-123. 57 Leontien Cremers, Judith Kolen, Marjo De Theije (Eds), Small-Scale Gold Mining in the Amazon: the Cases of

Bolivia, Brazil, Colombia, Peru and Suriname, p.10. 58 M.L. Baretto, “Legalization Guide For Artisanal And Small Scale Mining (ASM): Draft For Discussion”, ARM

Series on Responsible ASM No.5, p.5, accessed September 14, 2013, 2013,

http://www.communitymining.org/images/ 59 Small-Scale Gold Mining in the Amazon: the Cases of Bolivia, Brazil, Colombia, Peru and Suriname, p.22 60 Cotapata Mining Co-Operative, Bolivia, short profile, http://www.fairtrade.org.uk/includes/documents/

cm_docs/2011/C/Cotapata%20Profile%20shorter%20version%20100111.pdf 61 Ibid. 62 Fairtrade And Fairmined Gold: Empowering responsible artisanal and small-scale miners, p.11. 63 Cotapata Mining Co-Operative, Bolivia, short profile.

14

to selling their gold directly to importers in Europe without intermediaries. An advantage of Bolivian

mining structure is its organization in the form of cooperatives, which allow boosting the volume of

extracted minerals, further resulting in better bargaining position of small-scale miners. The Cotapata co-

operative has been able to “break the cycle of corrupt transactions to avoid high Bolivian taxes and

export”.64

4.2. Challenges for the Philippines

In choosing the best model for the Philippines, the certification should built on the experience of

other countries and organizations involved in the development of the small-scale mining. The International

Institute of Environment and Development provides guidelines concerning the inclusion of ASM miners in

sustainability certification. According to this organization, the design of the new certification scheme must

include several important features.65

First, the scheme must allow for different types of structures to be included so as to enable

certification for unorganized miners. These structures must include traders who buy from ASM and can

hold certificates, large-scale mines that have ASM on their concessions, community based structures and

non-governmental organizations (NGO’s) who can hold the certificate on behalf of the miners. Moreover,

the community based-structures and NGO’s could own or share-in the accountability for the

implementation of sustainability standards. The government-led multi-stakeholder initiatives or private-

public partnerships could support capacity building, training and support for producers to get certified and

to produce more sustainably. In this context the eventual certification for the Philippines could include

either one of existing trade networks developed by, for example Fairtrade or Fairmined or establish its’ own

trading structures. The example of government led trading and marketing company is Ghana Precious

Minerals Marketing Company Limited.66 Establishing a governmental agency responsible for marketing

and overseas transactions of small-scale gold solution could potentially solve two problems related to the

Philippines small-scale mining – unsustainable gold extraction and smuggling. The Ghana agency has been

established as a response to a massive smuggling of gold from the country and was assigned with the

responsibility for the purchase and marketing of the extracted gold. The Company has licensed about 750

local Gold Buyers who operate in mining communities in the country to purchase gold.67

64 Idib. p.2. 65 “Scaling up certification in artisanal and small-scale mining: Innovations for inclusivity,”, p.30-32. 66 Precious Minerals Marketing Company Limited, http://pmmcghana.com/aboutus/4. 67 Ibid.

15

Second, the eventual scheme must consider costs of certification and ensure benefits for ASM

community as costs are always a barrier for small-scale miners to become certified and to mine in a

sustainable way. The calculation must include both costs of complying with sustainability standards and

the auditing and certification. In order to lower costs of auditing, local NGO’s could provide these services.

In any case, the most important directive in costs allocation is the final economic benefit of ASM

community.

Third, consumers, retailers and brands must create the demand for sustainable minerals sourced from

small-scale mining activities. Currently the global mineral market is expanding in order to address growing

demands for minerals in the jewelry or industry. Of the 2,800 tons of gold extracted from the earth in 2012,

over 1,800 tons were used to make jewelry.68 Over $137.5 billion was spent on gold jewelry in 2010,

making it one of the world’s largest categories of consumer goods.69 The demand is a driver for investment

and creates necessary interests from manufacturers, brands and retailers, who want to ensure sustainable

mineral supply chains and to consider the importance of working with ASM sources. The government of

the Philippines has also an important role to play in increasing the demand for sustainable minerals. The

government must show the political support to ASM communities and support a good reputation of minerals

extracted by small-scale miners. An education of consumers through social campaigns supported by the

government would also increase the need for sustainable minerals.

In order to achieve a satisfactory level of market demand for sustainable goods, consumers must be

aware of the production process and conditions of work among small-scale miners. The market demand

would create a necessary connection between mining communities and consumers who want to support the

miners while purchasing products manufactured in an environmentally sustainable way. The establishment

of strong bonds between consumers and certified producers would enable the ASM communities to be

integrated in the global market and receive a better return for their work. The certification scheme must be

designed in a way that would shorten the distance between minerals produced by small-scale miners and

the final product being delivered to consumers.

Finally, the certification schemes must engage miners in the development of not only the standards

but also in the design of the certification system. Miners can best identify the gaps between their situation

and the standards, eventual costs, and the ways in which they can most efficiently be checked by auditing

companies and NGOs. The inclusion of small scale miners in the process of certification design would

reflect the trend of increasing public participation in the environmental governance.

68 Gold Demand Trends: Third Quarter 2013, World Gold Council,

http://www.gold.org/investment/research/regular_reports/gold_demand_trends/, p.15. 69 Fairtrade And Fairmined Gold: Empowering responsible artisanal and small-scale miners, A Fairtrade Foundation

and Alliance for Responsible Mining Report, January 2011, p.4.

16

In the context of the above mentioned requirements, all actors involved in the design of a suitable

sustainability certification for the Philippines small-scale mining will also have to address some concerns

related to the feasibility of this solution. First, in comparison to Bolivia, where 80% of the mining sector

works in the form of co-operatives, the Philippines has a limited organizational capacity of the small-scale

mining sector. As a result capacity building projects and development of organizational structures of the

sector must be continued. Second, the policymakers and other actors involved in the certification design

must consider, whether it is suitable for the Philippines to create its own, new and specific scheme, or access

to already existing certifications such as Fairmined and Faitrade Gold. On one hand, accession to existing

schemes can help to overcome initial obstacles with certification design such as lack of financial and

organizational capacities of miners. Moreover, already existing schemes have a significant level of brand

recognition in developed countries and are well networked with trade partners around the world. On the

other hand, establishment of the new scheme could address particular challenges of the Philippines small-

scale mining sector and build the first trade network of sustainably extracted gold in Asia and the Pacific

region. Third, the policymakers must accommodate the role of the government within the certification

scheme. Sufficient attention must be paid to issues related to amendment of the tax law, which under the

current regulations, exacerbated the problem of illegal extraction and gold smuggling. Fourth, the

policymakers must face the issue of a market competition between governmental or certification agencies

and gold smugglers, who often purchase gold for a better price and do not demand any compliance with

environmental or labor standards. In this context, the certification and governmental agencies must

cooperate in order to ensure competitive market incentives for the small-scale miners, which would bring

them back to the legal market. Finally, the policymakers must address the issue of costs and organizational

capacities related to monitoring of the compliance with certification standards by the small-scale miners.

Keeping in mind the large number of people involved in the small-scale mining and their geographical

dissemination within the country, the monitoring system could become a great challenge.

5. Conclusions

Establishment of sustainability certification schemes for small scale mining, by interested groups, can

positively contribute to the increase of environmental protection in the Philippines. The certification can

increase the presence of ASM products on the global marker and boost the economic growth of the

Philippines, making use of their natural resources. The design and eventual operation of new certification

schemes can potentially face many challenges connected with the unique features of small-scale mining

and its currently unorganized structure. Therefore, the design of sustainability certification must be a joint

17

effort of miners, national and local governments and supply chain actors – traders, manufacturers, brands,

retailers, consumers, certification schemes, NGO’s and multilateral funding institutions. The complexity of

issues concerning small-scale mining in the Philippines, makes the certification schemes operation feasible

only dependent upon a proper collaboration between all involved actors. The synergy achieved through

cooperation will allow small-scale miners to gain a necessary awareness of sustainability issues and

encourage the environmentally friendly mineral production by ASM communities. The sustainable

production of minerals connected with tangible profits would create a long expected social and legal

authorization of artisanal and small scale mining activities. As a result, the Philippines would be able to

make a substantial profit from its reach natural resources and at the same time preserve its natural

environment.

18

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