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techUK | Responsible mineral dialogue 29 April 2019 | Event write up

Introduction

On Monday 29 April, techUK held an event which explored what responsible mineral sourcing looks like with 16 speakers from international organisations, government, industry and specialist consultancies.

Below is a summary of the key points made during the day and more detailed summaries of each of the sessions, presentations, along with links to key resources and sources of further information.

Key themes and insights

Among the key points and insights made during the day:

  • Companies are not just concentrating on “conflict minerals” but “responsible sourcing” in the round: Labour conditions, practices and rights; health, safety and environmental standards; along with, land rights, governance, bribery and corruption are also important facets that are being focused on too.
  • The situation is dynamic: While traditional gold, tin, tungsten and tantalum have been under the spotlight, cobalt, mica, gemstones and jade are gaining attention and new regions are growing in significance. The situation is likely to remain dynamic.
  • Legislation and stakeholder pressure is driving change: Regulators, institutional investors and increasingly consumers have increasingly greater expectations for companies to be more transparent about their operating practices and to assume greater responsibility for the well-being of people and the environment, which includes those in extended supply chains.
  • Reconsider divesting from a region or from artisanal and small-scale mining (ASM): While this might be seen as an easy solution to support claims to be “conflict free”, it may lead to other significant social impacts for those involved in upstream supply chains. ASM employs around 40 million people in 80 countries, and an estimated 150 million people indirectly dependent on it for their livelihood. We must be more active in addressing underlying issues.
  • Due diligence is important: The OECD’s five-step framework is the basis for high quality due diligence and provides a framework for continual improvement. It’s not about having no risk it’s about recognising the risks in your supply chain and having in place the mechanisms for dealing with them.
  • Work together: No one downstream user will solve upstream problems. The Responsible Business Alliance, London Bullion Markets Association, the Responsible Jewellery Council and the European Partnership on Responsible Minerals provide an important framework in leveraging impact, avoiding duplication and collectively address issues on the ground.

Summaries of the panels and presentations

Introduction | Julian Lageard, Intel and chair of techUK’s Sustainable Supply Chain Group

Julian opened the event by outlining the challenges the sector faces in managing issues deep into complex supply chains and outlined some of the pioneer programmes that the sector has implemented. New stakeholder expectation and regulation is defining expectations of how companies should respond. Despite history of dealing with this issue, this is not one that the sector can address in isolation. We must work together to leverage impact.

Why responsible mineral sourcing matters | Jonathan Ivelaw-Chapman, COO, Responsible Business Alliance

  • The Responsible Business Alliance is a membership organisation that works with governments, NGOs and civil society to tackle issues in high-risks regions.
  • The risks around mineral sourcing is not just around conflict minerals: governance, labour and working conditions, environment, community, business and human rights are all important too. Land rights is also a growing issue.
  • The RBA leads the Responsible Minerals Initiative: a multi-industry effort which undertakes audits in over 28 countries with a focus on Asia, Europe and the US.
  • It provides best practice advice and support to its members which includes how to conduct third party audits, how to identify and address risks that are found, and how to report on those risks.
  • It also focuses on how to build capacity in the supply chain, supporting and developing tools that improve the quality and comparability of supply chain data (i.e. standardising blockchain inputs to allow for a common language), provide mine-side support and local community initiatives and help to build industry support.

The OECD due diligence framework | Rashad Abelson, Legal Expert, Extractives, Responsible Business Conduct Unit, OECD

  • The OECD Due Diligence Guidance for Responsible Mineral Supply Chains sets out a framework for helping companies to understand their supply chains better and address through continuous improvement. The Guidance focuses on risks of serious human rights issues, money-laundering, conflict and terrorist financing and bribery. They are global and can be applied to any mineral resource, both energetic and non-energetic.
  • The OECD Guidance has strong political, industry/consumer and legal support. Most recently, the London Metals Exchange recently announced that it will require all listed producers to provide evidence of implementation of the OECD Guidance in order to trade on the exchange.
  • The OECD works closely with partnerships around mutually reinforcing initiatives and works to ensure that the growing number of legal instruments and industry initiatives being adopted are harmonised with the Guidance. Recent activity has also included an assessment to the degree in which industry schemes on responsible sourcing are aligned with the Guidance.
  • The OECD has a number of useful resources for companies including baseline assessments on risks associated with mineral supply chains in specific geographies (i.e. sourcing gold from Columbia), tools that provide practical actions to address the worst forms of child labour and FAQs on sourcing from artisanal mining.
Future work includes research on cost sharing; the potential for distributed ledger technology to support due diligence; training to build capacity (policing, governance, carrying out due diligence); development of a research tool to better understand risks in supply chain; and an impact measurement tool to understand the impact of carrying out due diligence on the ground.

Regulating the EU responsible mineral regulation | Simon Trevenna, UK Group Manager, Conflict Minerals, Department for Business, Energy and Industrial Strategy

  • In the UK, the Foreign and Commonwealth Office is the policy lead on the EU Regulation on mineral sourcing whilst the Office for Product Safety and Standards is the National Competent Authority (NCA).
  • The EU Regulation will come into force on 1 January 2021 and the UK has committed to implement it. A UK Statutory Instrument will likely follow a consultation and impact assessment in the coming months. The aspiration is to align as much as possible with the EU Regulation, but this will be explored giving due consideration to the ongoing EU Exit negotiations.
  • The Regulation largely focuses on smelters and refiners but may require downstream users to carry out due diligence in future. This will be subject to a review in 2021 which will assess the degree to which downstream users are doing so voluntarily via the EU’s Transparency Platform. The Regulation does not apply to recovered materials.
  • The role of the NCA in the UK is to educate and support businesses with compliance. Industry is encouraged to work with the NCA. The NCA is very likely to have a suite of powers to sanction non-compliance.

Risks across the mineral supply chains – what have we learned so far? With: Sakhila Mirza, General Counsel, London Bullion Market Association; Andrew Cooper, Manager – Standards, Responsible Jewellery Council; and, Angela Jorns, Specialist, Responsible Mining & Development, Levin Sources.

  • Industry schemes can leverage impact: The nature of industry schemes in representing either access to market or a significant buying power means that they can be more effective in leveraging influence.
  • Industry schemes are continuously evolving: Schemes are continuously developing as they mature to reflect emerging risks, learnings and to refine the process.
  • In future there is likely to be more cross-recognition: As most industry schemes are confirmed as compliant with the OECD’s due diligence guidelines, the ability to cross recognise has increased.
  • Implementing due diligence only for conflict minerals risks overlooking other issues: Audits needs to cover a broad range of social and environmental issues. It is now not enough to simply assess mines for issues relating to conflict.
  • Companies and industry schemes should get more recognition for engaging with the ASM sector: The ASM sector employs millions of people globally. While often considered riskier for companies, engaging with and tackling issues related to ASM has huge potential to improve the lives of millions of people working in this sector.

The European Partnership for Responsible Minerals | Annie McGee and Lia Suguimotomagor, Responsible Business Unit, Foreign and Commonwealth Office.

  • The European Partnership for Responsible Minerals (EPRM) is a multi-stakeholder initiative which has been designed as an accompanying measure to the EU Regulation and currently focuses on 3TG.
  • The EPRM is comprised of three pillars – a government pillar, an industry pillar and a civil society pillar. The UK government, via the Foreign and Commonwealth Office, is a founding member, provides seed funding and currently chairs the government pillar. The EU, UNEP and the OECD are observers. It is gaining strong political and industrial support.
  • It was established to create better social and environmental conditions at mines and local mining communities through a variety of projects. It is also providing support to guide companies, particularly SMEs, through the due diligence process.
  • The EPRM has ran two call for projects and received a wide range of proposals. EPRM’s multi-stakeholder approach has meant projects focusing in the upstream are having real impact particularly through making links with the downstream.

Projects funded from the first round are:

  • A globally applicable Market Entry Standard (CRAFT Code) to engage with artisanal and small-scale miners of gold, particularly in conflict-affected and high-risk areas.
  • An open-source DRC incident reporting register designed to increase transparency and incident follow-up.
  • A project linking impact investors with Kenyan gold mines.
  • Land reclamation at former tin mines in Indonesia.
  • Occupational health and safety training of artisanal miners in Indonesia.
  • Financial literacy training for artisanal miners.
  • Pilots of blockchain traceability systems.
  • Participants were encouraged to engage with the EPRM including on ideas for projects in the upstream

Approaching due diligence – views from downstream users | With: Adam Schäfer, Director of Supply Chain Sustainability, Intel; Andrew Clifton, Sustainability Manager – Engineering and Design, Rolls Royce; and, Martin Baxter, Executive Director, IEMA

  • Use the OECD guidance as your baseline: The guidance is supported by governments, industry groups and civil society.
  • Don’t disengage with suppliers: Need to balance the need to develop real partnerships with suppliers with the need to place robust processes and standards in place.
  • Align transparency with stakeholder/shareholder needs: Consider what information is needed for stakeholders and shareholders to be able to validate your approach and recognise you have a sound system in place for managing risks.
  • Accept you are dealing with imperfect data: Data will never be perfect but that shouldn’t stop you in sharing what you have.
  • A narrative approach should accompany hard KPIs: Numbers alone do not reveal the full story.
  • KPIs should be flexible: To reflect new risks and issues that you have identified and are acting on.
  • Collaborate to create leverage: One company alone is unlikely to have the leverage to impact mine-side activity. Compliment your own auditing by working with other downstream users in industry schemes to share intelligence and leverage impact.

Future mineral risks – Cobalt | Alice Valvodova, Head of Advisory, Knowledge and Training, RCS Global Group

  • RCS Global Group is a specialist advisory and audit firm in responsible sourcing with a presence in Africa, Asia, the Americas, EU and the US. It is the world’s leading auditor of raw materials and works at every step of the supply chain to enable improvements in due diligence.
  • Increasing concern and scrutiny of cobalt (and other battery metals – lithium and nickel) supply chains driven by the projected growing demand for the mineral for lithium-ion batteries used in electric vehicles and electronics. The market is expected to double by 2025. Further, with 58 per cent (and 65 per cent by 2025) of all cobalt sourced from the DRC there will be limited prospects to move away from the Congo.
  • There are risks along the entire supply chain. Mid-stream risks include lack of governance, poor environmental standards and poor labour standards. At source, artisanal and small scale (ASM) mining is largely informal with issues including child labour, military presence, legality, corruption and environmental damage.
  • There is a growing number of company-level actions: individual companies mapping and auditing their supply chains; industry initiatives that provide shared tools and solutions and the emergency of technology-based solutions like blockchain.
  • Industry initiatives include the Responsible Minerals Initiative (RMI) and Responsible Cobalt Initiative (due diligence capacity building and audits against OECD Due Diligence Guidance standard), the Cobalt Industry Responsible Assessment Framework (CIRAF) (good practice management and reporting framework covering several risk areas including human rights, OHS and environment), Responsible Minerals Initiative (audits, refiner requirements) and the Global Battery Alliance (working to create a socially and environmentally responsible value chain for lithium ion batteries).
  • A Responsible Sourcing Blockchain Network for cobalt was recently launched too by RCS Global Group in collaboration with IBM and companies along the cobalt supply chain including Volkswagen, Ford Motor Co, LG Chem and Huayou Cobalt.
  • Better Cobalt is a project to improve responsible production and trade of cobalt in the DRC through the continuous monitoring of conditions at ASM and semi-mechanised mine sites.

Credits:

Created with images by dawnydawny - "mineral rock texture" • Shane McLendon - "untitled image" • Ashley Knedler - "untitled image" • Curioso Photography - "untitled image" • Curioso_Photography - "drone knoll helicopter"

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