Towards Transparency and Corporate Responsibility in Mineral Sourcing

25-01-2021

 

By looking at the spectrum of legal initiatives recently introduced by governments in the areas of corporate human rights due diligence and responsible business conduct more broadly, it is clear they belong to the same trend towards increased transparency and corporate responsibility.

Notwithstanding their differences, in terms of approach, scope and nature of the requirements, those initiatives can be grouped under two broad headlines: mandatory reporting versus mandatory due diligence.

With the former, legislation mandates the disclosure and transparency of certain information. Examples include the EU Non-Financial Reporting Directive currently up for revision, the UK Modern Slavery Act and the Australian Modern Slavery Act.

With the latter, legislation requires the conduct of due diligence for specific sectors/issues next to an obligation to report/disclose. Examples include the French Duty of Vigilance Law, the Child Labour Due Diligence Act adopted by the Dutch Senate in 2019 and the EU Responsible Sourcing of Minerals Regulation which entered into application on 1 January 2021.

Let’s take a look at the EU Responsible Sourcing of Minerals Regulation

Regulation (EU) 2017/821 on the responsible sourcing of minerals from conflict-affected and high-risk areas is the most recent example of EU-wide legislation requiring the conduct of due diligence next to an obligation to report.

It mandates entities importing tin, tungsten, tantalum and gold (3TG) into the EU from Conflict-Affected and High-Risk Areas (CAHRAs) to conduct due diligence and report on it starting from 1 January 2021.

The OECD Due diligence guidance for responsible supply chains of minerals is the framework for companies to check whether the minerals and metals they import have been mined and processed responsibly.

Far-reaching impacts

The Regulation is expected to have impacts far beyond the companies directly within the scope of the requirements.

Indeed, EU importers of 3TG ores, concentrates and metals originating from CAHRAs will need to identify the smelters and refiners in their supply chains as part of their due diligence obligations. They will have to ensure that the smelters and refiners source and process the minerals and metals in a responsible way. If they don’t, EU importers will have to manage the associated risks and report on this. The Commission is finalising work for the publication of a global list of responsible smelters and refiners which will help companies identify smelters and refiners that source responsibly.

Downstream companies operating beyond the metal stage are currently not mandated to conduct due diligence by the EU law. Nevertheless, they will soon have the possibility to share information about their due diligence efforts in the minerals supply chain via a transparency platform. The details of the Responsible Minerals Information System ReMIS platform are currently being finalised by the Commission. While the sharing of information will be done on a voluntary basis, it can be anticipated that this will create pressure in the marketplace and increased stakeholder expectations.

The EU Commission is due to assess the functioning and effectiveness of the Regulation on a regular basis. The first review cycle is already planned to take place by 1 January 2023.

Depending on the level of due diligence uptake, including by downstream companies, the EU Commission might consider amending the scope of the Regulation both in terms of minerals’ coverage and companies’ focus.

Looking for useful supporting tools?

The Regulation acknowledges that voluntary supply chain due diligence schemes can help meet the Regulation’s objectives.

Their recognition is therefore contemplated and will be conducted on the basis of a methodology and criteria developed by the Commission and modelled along the lines of the OECD alignment assessment methodology.

The Commission is currently finalising the assessment of a number of schemes that applied to be officially recognised as complying with the aims of the EU Regulation. 

To overcome the challenge with identifying CAHRAs, the Commission published non-binding guidelines for the identification of conflict-affected and high-risk areas and other supply chain risks. The Commission also contracted an external agency to produce an indicative, non-exhaustive list of CAHRAs to be revised on a quarterly basis.

Acknowledging the need to build capacity and raise awareness among SMEs in particular, the Commission established the ‘due diligence ready!' portal. It offers a compilation of tools and training materials on minerals and metals supply chain due diligence and is available in seven languages.

The Due Diligence Hub by the European Partnership on Responsible Minerals (EPRM) not only offers a one-stop-shop for minerals supply chain due diligence and responsible sourcing information, it also provides case studies from various companies and deep dives into EPRM projects that support due diligence.

What amfori Advocacy has been up to

The trend towards more mandatory legislation in the sphere of business and human rights is likely to accelerate in the near future.

The European Commission has made clear commitments to this effect and is intending to table a legislative proposal on human rights and environmental due diligence in the second quarter of this year.

Some of the features of the EU responsible sourcing of minerals Regulation might serve as a blueprint for the Commission’s work on human rights and environmental due diligence. These include anchoring the due diligence obligations to international normative frameworks like the OECD, recognising the role of voluntary initiatives and offering tailored support mechanisms for SMEs. 

To support the Commission’s work on human rights and environmental due diligence, amfori issued recommendations in February 2020.

We are currently busy responding to the Commission’s consultation on Sustainable Corporate Governance which will inform the content of the future EU legislation.

Get in touch with valentina.bolognesi@amfori.org if you want to engage and/or know more about amfori advocacy work in the field of human rights due diligence.

Related news and resources

Human Rights Due Diligence: The Landscape and amfori’s Recommendations for EU Institutions

EU Regulatory Landscape on Transparency