Operating in the Brazilian Amazon
In order to tackle such challenges and based on our belief that sustainability can drive profitability, we are investing in advanced technologies and harnessing sustainable initiatives to make our operations more responsible and safer. The most important source of information is our Sustainability report for Hydro's operations in Brazil.
To improve our competitive position and secure access to the raw material for aluminium production, Hydro made the strategic move to buy the aluminium assets from Vale, a Brazil-based mining and metals company, in 2011. Hydro has had a presence in Brazil since the late 1970s through an ownership stake in the bauxite mining company Mineração Rio do Norte (MRN) and an ownership share in Alunorte alumina refinery since the mid-1990s. Today we have operations throughout the aluminium value chain in Brazil, from bauxite mining to finished extruded products and solutions, as well as energy.
Hydro's bauxite mine, Paragominas, and alumina refinery, Alunorte, are located in the state of Pará in Northern Brazil, and are connected by a 244 km bauxite slurry pipeline. Located next to Alunorte is the primary aluminium plant Albras, were Hydro has a 51 percent ownership. In addition, Hydro has three aluminium extrusion plants in Southern Brazil. Hydro employs around 6,000 permanent employees and 8,000 contracted workers (full-time equivalents) in Brazil in total. In addition, Hydro has a 5 percent ownership interest in MRN and off-take agreements with Vale for a further 40 percent of the bauxite volume produced by MRN.
Bauxite reserves are widely distributed around the world, particularly in tropical and subtropical regions. Guinea, Australia, Brazil, Vietnam and Jamaica hold over 70 percent of the world's known bauxite reserves.
Bauxite mining is a form of surface mining, known as strip, or open pit mining. It involves the removal of vegetation, topsoil and overburden in order to get to the underlying bauxite deposit. The process is then repeated on the subsequent strip. As a result, bauxite mining operations tend to disturb relatively large surface areas. Hydro's mine is in an area that is normally recognized as the deforestation belt around the central Amazon region. In the municipality of Paragominas, there has been a reduction in forest area of more than 60 percent over a period of 30 years. Within the mine itself, a number of the areas were exposed to selective logging and clear cutting before the commencement of bauxite mining operations in 2007. Reforestation and wildlife management at Paragominas are core elements of our sustainability strategy.
The Barcarena region, where the Alunorte alumina refinery and Hydro's Albras smelter is located, ranks low on the Human Development Index (measure of average achievement in key dimensions of human development: a long and healthy life, being knowledgeable and having a decent standard of living), and has one of the highest levels of violence in the world. There is a lack of access to basic services. The share of people with access to sanitation and clean water at less than 30 percent. Contributing to sustainable development through education and skills development is key to our social responsibility.
Hydro Bauxite & Alumina including the alumina refinery Alunorte and the bauxite mine Paragominas is certified according to the Aluminium Stewardship Initiative (Performance Standard and Chain of Custody), which is a leading standard for responsible production in the Aluminium sector. Hydro's Albras smelter is currently in the process of being certified.
Hydro is present throughout the aluminium value chain. We consider this a strength as we can address sustainability challenges across the full value chain, from mine to final product and recycling.
Managing our environmental impact
Hydro's environment strategy for 2030 addresses the industry's key environmental challenges. Our goal is to mitigate emissions to land, water and air, restore impacted biodiversity and reduce waste production. To achieve this, we monitor, identify and mitigate environmental risk throughout the lifetime of our operational sites.
Our most significant impact on biodiversity is at our mine in Paragominas. A rehabilitation program is in place to monitor the local flora and fauna and rehabilitate the mined areas. We target a 1 to 1 rehabilitation of available mined areas (i.e. those mined areas not used by or reserved for long-term mining infrastructure).
To increase our knowledge and secure a science-based approach to rehabilitation, the Biodiversity Research Consortium Brazil-Norway (BRC) was established in 2013. The consortium is a partnership between research institutions from the state of Pará, the University of Oslo and Hydro. It performs research on biodiversity to improve rehabilitation, generating new data on fauna and flora for local researchers.
Waste is generated through the aluminium production process and at all stages of the value chain. Our waste management approach focuses on the mitigation hierarchy: finding ways to avoid, minimize and recycle waste rather than sending it to landfill. Hydro's mining and refining operations generate significant amounts of residue which are stored in large onsite engineered storage facilities.
The mined bauxite must be washed before further processing, which generates tailings that are stored in dedicated tailings dams at our mining operation. In 2019 we initiated tests of the “Tailings Dry Backfill” methodology at the Paragominas mine, a novel approach to minimize the amount of tailings stored, by excavating dried tailings from the storage facility and returning it to the mined areas before they are rehabilitated. The methodology eliminates the need for continuous construction or upgrade of new permanent tailings dams. The pioneer application represents the end of the use of large dams for permanent storage of bauxite tailings. In 2020 we secured a license to start implementing the methodology full-scale.
Our tailings storage facilities at our bauxite mine Paragominas are monitored on a regular basis (using instrumentation) and are audited on an annual basis, including an international best practice audit by the external international geomechanical consultants Norwegian Geotechnical Institute and Geomecanica (2016). Our tailings storage facilities were also successfully audited following the Brumadinho tragedy (2019). Our tailings storage facilities at Paragominas differ significantly from those at the center of both the Samarco and Brumadinho tragedies (iron ore mines in Brazil), primarily due to the drier nature of our tailings and the more robust nature of the construction method in our tailings storage facilities.
Bauxite residue is a waste-product of the alumina refining process. This is filter pressed and stored in dedicated bauxite residue storage areas at our alumina refinery Alunorte. Alunorte uses an enhanced dry-stacking concept for handling bauxite residue. The use of modern press filters, built in connection with the new bauxite residue deposit DRS2, results in a bauxite residue with a very low moisture content (22 percent) which can be more efficiently stored. This new approach means that, per ton alumina produced, our bauxite residue now occupies only one fourth of the surface area in DRS2 than it did in our historical bauxite residue deposit (DRS1).
Managing our social impact
We acknowledge the many challenges related to human rights in the Amazon region. We recognize that businesses have a responsibility to respect human rights. We also recognize that business can have an important role in supporting and promoting human rights. You can read more about Hydro's approach to human rights here, including stakeholder dialogue, grievance mechanism and remediation.
To better understand our human rights impact, we have recently performed a human rights impact assessment with action plans to be followed up the next years.
Our human rights policy underlines the importance we place in protecting the rights of vulnerable groups.
We respect the UN Declaration on the Rights of Indigenous Peoples and adhere to the Indigenous and Tribal Peoples Convention (ILO Convention 169). Importantly, we recognize Indigenous and Traditional Peoples' rights to self-determination, to lands which they traditionally occupy, to their customs, traditions and institutions, and to free, prior and informed consent (FPIC).
Several traditional Quilombolas communities reside in the local communities next to our operations. We have regular dialogue with the communities, as well as Quilombolas associations. We also work to establish social programs and other income generation initiatives, including traditional farming. Recently, we have worked with partners to strengthen the governance and capacity of several Quliombolas associations.
We respect their rights to freedom of expression, association, and peaceful assembly and protest against our business and operations.
We have regular dialogue with employees' representatives and unions. Hydro has a Global Framework Agreement with international and national unions in Brazil.
We strive to take particular care to ensure that human rights and environmental defenders are included in our dialogues and that we listen to their concerns.
In Paragominas and Barcarena, we work to improve the capacity and livelihood of waste collectors, and to support the establishment and development of their associations. To this end, we have established social programs, the Sustentar Barcarena Program in Barcarena and the Cooperacamare Strenthening Program in Paragominas, both in collaboration with the local municipal authorities.
To encourage sustainable development in the regions where we operate, Hydro is involved in initiatives that increase income for people in communities where access to decent work is limited. We also support sports, cultural activities and education for vulnerable children and young people.
In the state of Pará we have more than 10 community development programs, and more than 700 employees are involved in volunteer actions. In 2019, we conducted more than 200 social dialogues, meetings and plant visits. You can read more about the programs in the Sustainability report for Brazil.
We initiated the Sustainable Barcarena Initiative (SBI) in 2018 as an independent platform for sustainable development in Barcarena in Pará state. The overall aim is to bring local stakeholders together to discuss challenges and opportunities, strengthen capabilities and ultimately invest in priorities defined by them to develop social initiatives together. Hydro is contributing BRL 100 million to SBI over a 10-year period. The Hydro Sustainability Fund (HSF) serves as a non-profit organization to manage the investments and to provide technical support for the local organizations.
In 2020, the fund established partnerships with USAID and the Partnership Platform for the Amazon's Solidarity initiative to strengthen initiatives in the Amazon region. In response to Covid-19, the fund together with these partners are financing income generation projects for local production of face masks, as well as strengthening of existing social projects for local farmers through the pandemic. In addition, a partnership between the fund, the Mitsui Fund and Instituto Peabiru will invest BRL 1.3 million to microfinance the production of manioc for local family-based agriculture.
The fund launched its first round of financing in December 2019. Based on set criteria, BRL 765 000 has been allocated to projects that will support local associations, increase the capacity of community businesses and promote cultural events. The implementation is on hold due to Covid-19.
In Pará state we also engage with regional initiatives to preserve the Amazon. We run several programs to develop local suppliers, enhance entrepreneurship and strengthening of traditional livelihood. One example is our partnership with the Centro de Empreendedorismo da Amazônia, the Fund and the Partnership Platform for the Amazon. You can read more about the programs in the Sustainability report for Brazil.
Managing our climate impact
We are working systematically to reduce our greenhouse gas emissions and our operations in Brazil are key to reach Hydro's global target to reduce carbon emissions by 10% by 2025 and 30% by 2030.
One of our most important tasks in Brazil is to secure a greener energy mix at Alunorte, the world's largest and most energy-efficient alumina refinery. This is a key enabler for the 30% carbon emissions reduction target in 2030.
We also aim at replacing heavy fuel oil with liquid natural gas and the project is on track to reduce 600kt of CO2 by 2025. Moreover, we have a pilot planned in 2021 for installation of three electrical boilers thereby substituting three coal-based boilers. One electrical boiler is approved, while two boilers will be presented for approval if the first is successful. This represents a 400kt CO2 reduction potential by 2025.
Given available renewable energy in the region at attractive cost, the next step will be to electrify our remaining boilers that use coal. This will reduce our CO2 emissions by another 2 million tonnes by 2030.
Hydro's supplier and business partner requirements regarding social and environmental responsibility are, as stated in our global directives and procedures, an integral part of all stages of the procurement process. The requirements cover issues related to environment, human rights, anti-corruption and bribery and working conditions, including work environment. These requirements set out in Hydro's Supplier Code of Conduct are based on international standards, including UN Global Compact, the ILO core conventions, UN Guiding Principles on Business and Human Rights and other UN documents and instruments. Find more information about responsibility in our supply chain here.
Developing and strengthening suppliers is an important pillar to our approach. We work to improve supplier performance through corrective action plans or supplier development programs. You can read more about the Supplier development program in Brazil here.
Joint ventures in the Amazon
In the municipality of Oriximiná in Pará, Brazil, we are part of the joint venture MRN bauxite mine. MRN is the operator of the mine. Hydro has a 5% ownership interest in MRN and off-take agreements with Vale for a further 40% of the volume produced by MRN.
Hydro works with MRN and the other shareholders through the board of directors and relevant technical committees to require the safe operation of MRN including of its tailings storage facilities, in accordance with all relevant applicable laws and standards. MRN's rehabilitation program has been running for several decades.
Concerns have been raised about traditional peoples' rights during the process for the mine expansion. Hydro engages with MRN through the Board of Director's Committee to request that the scope of the planned environmental and social impact assessment (ESIA) and Quilombola consultation processes for the expansion project comply with local, national and international standards. MRN is currently engaged in understanding and responding to local stakeholder expectations regarding concerns over the impacts of MRN's operations on local communities. MRN also supports the Sustainable Territories Program, a social program to promote long-term development of traditional communities in Oriximiná.