The hidden cost of sand: companies must address their sand supply chain risks

Sand is the world’s second most consumed resource. It is vital to industries as varied as construction through to high-technology manufacturing, including solar panels and semiconductor chips. And as a particularly critical ingredient in the production of concrete - which constitutes nearly half of all man-made mass on the planet - it is no wonder that 50 billion tonnes is extracted every year. 

Arguably, nowhere is the demand for sand more acute than across the Gulf region. The urban transformation of Gulf states including the United Arab Emirates, Oman, Qatar and Saudi Arabia is unsurpassed in modern history.

But what happens when demand outpaces regulatory governance, and opaque sand supply chains increase risks to workers? What do we really know about the hidden costs of this commodity - and how can responsible businesses address these risks?

Diversifying economies

Major infrastructure projects and development plans are critical to the success of long-term efforts to diversify Gulf state economies away from oil and gas revenues. And these projects all have at least one thing in common. From glass to concrete, asphalt to solar panels, they are heavily reliant on large quantities of sand. 

Despite the regional abundance of sand, the rounded nature of Arabian Desert sand is unsuitable for high-strength concrete. The result is that companies - from construction to hospitality and beyond - are reliant on international sand supply chains to obtain large amounts of this critical resource. Qatar alone accounts for 8-10% of all global sand and gravel imports - peaking at 15% of global imports in the run-up to the 2022 FIFA Men’s World Cup. 

For firms working to advance responsible business practices, navigating this supply chain presents a number of challenges, not least because the illegal sand trade is the third-largest illicit trade globally. 

Now a new report from Gulf Sustain, in partnership with Newcastle University and Design for Freedom by Grace Farms, has found that the Gulf region’s sheer demand for sand is outpacing national regulations. Combined with regional geopolitics and complex labour structures - in particular a reliance on migrant workers and subcontracting - sand-intensive companies operating in the Gulf face a complex risk environment.

The hidden costs

The social risks associated with higher-priced extracted resources - such as cobalt - are well-documented. This is important because companies understand and recognise the need to manage these risks throughout their supply chain. By comparison, the risks linked to sand have been remarkably underexplored. But by examining the entire sand supply chain in the Gulf region, Gulf Sustain and its partners have identified three primary labour and social risks.

At the extraction stage, the study confirmed that a governance vacuum allows illicit trade networks, who capitalise on the challenges companies face verifying the source of materials. By operating outside regulation, illicit extraction is an enabler of risks including corruption and forced labour.  

When the material reaches the processing stages, exposure to silica dust and extreme heat present health hazards for workers - while long-haul drivers in the logistics network risk being subjected to exploitative conditions.

And finally, regional construction data shows a significant disparity between direct employment versus the total labour footprint. This suggests the widespread use of subcontracting arrangements - which are often complex and multi-tier, obscuring oversight, driving a risk of worker exploitation on construction sites.

Given the scale of demand for sand and silicate - estimated to be as much as 70,000 times the combined volume of higher-priced minerals like cobalt, lithium and gold - sand-intensive companies operating in the Gulf face a high level of exposure to these supply chain risks.

The responsibility of construction businesses

Developers, contractors and multinational firms hold significant power to shape labour conditions: from setting procurement standards to ensuring safe work conditions and auditing suppliers. That said, the extensive use of opaque subcontracting arrangements can make oversight more difficult.   

But businesses are responsible for addressing labour risks throughout their supply chains. As such, the report calls on companies to move beyond compliance and towards proactive supply-chain governance - down to the sand extraction and logistics level - that aligns with the United Nations Guiding Principles on Business and Human Rights. 

To achieve this, it identifies technological traceability tools that can identify high-risk suppliers, such as Digital Product Passports to verify the origin, processing and handling of materials. The report also recommends how companies can address the systemic risks associated with subcontracting, including reducing excessive layers and mandating transparent wage systems.

Sand is the foundation of modern industrialisation, critical to the construction sector, economies and nations - and green energy. But the social impacts of the sand supply chain - including forced labour and unsafe working conditions - have so far been largely  overlooked in the region. For businesses, we now have the research to inform a sustainable sand economy that mitigates against labour risks, helping create responsible supply chains fit for the economic shifts underway.