Responsible mineral supply chains Global multi-stakeholder cooperation in producing, processing & consuming countries Tyler Gillard, Head of Sector Projects Responsible Business Conduct Unit OECD

Conflict financing & serious abuses of human rights in mineral supply chains

• Exploitation and trade of mineral resources can be associated with serious human rights abuses, conflicts, terrorist financing, money-laundering and bribery

• These issues impact security of supply, access to raw materials, access to markets, company reputation & their global investment and trade opportunities

• Global issue (Africa, Asia, Latin America, Europe)

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• Affects all sorts of mineral resources (3T&G, precious stones, coal, etc.)

• Affects to different extent artisanal mining and large-scale mining

Responsible mineral supply chains Global support for OECD Due Diligence Guidance

Political Industry &

Consumer

Legal &

regulatory • G8 (2007, 2008, 2009,

2011, 2013)

• UN Security Council

Resolutions on DRC

(2009, 2010, 2011, 2012)

and Ivory Coast (2013)

• ICGLR Heads of States

Lusaka Decl. (2010)

• OECD Council

Recommendation (2011)

• EU Parliament; EU CSR

strategy +

Commissioners statement

on raw materials

• China-OECD Programme

of Work

• Consumer campaigns

and civil society (e.g.

Amnesty Int’l, Global

Witness, PAC, Enough

Project)

• Industry: EICC

(electronics), AIAG

(automotive), AIA

(aerospace) LBMA, RJC &

WGC (gold & jewellery),

CCCMC (China)

OECD-benchmarked industry

audits cover ~85-90% of total

refined gold production

OECD-benchmarked industry

audits cover ~93% Ta, ~75%

Sn, ~60% W production

• Section 1502 of U.S.

Dodd-Frank Act conflict

minerals reporting

• Draft EU regulation on

responsible mineral supply

chains

• Legal requirement in

DRC, Rwanda, Burundi &

Uganda

• Conflict Minerals Bill in

Canada

• Relevant legislation on

forced labour, child labour

(e.g. UK & US)

OECD Due Diligence Guidance for

Responsible Mineral Supply Chains Objective

To provide clear, practical guidance for companies to ensure responsible operations and sources of supply:

No support to non-state armed groups, No “serious abuses”

Prevent & mitigate support to public security forces, bribery, tax evasion, money-laundering and fraud in supply chains

Strengthen internal controls, due diligence systems, engagement with suppliers (e.g. supplier upgrading)

Method and scope

5-step risk-based due diligence process, applies to all minerals & all companies throughout the entire mineral supply chain that potentially contribute to conflict, serious abuses, bribery, tax evasion and money laundering through mining or mineral sourcing practices

The Guidance

5-step due diligence framework for all minerals (Annex I)

Model Supply Chain Policy (Annex II) outlining key risks and appropriate responses

Measures for Risk Mitigation (Annex III)

Supplement on 3Ts; Supplement on Gold

Appendix on Artisanal and Small-Scale Mining

“Whole of supply chain” due diligence e.g. simplified metal supply chain

“Downstream” companies:

Identify “choke points” in supply chain

(e.g. metal smelter or refiners)

Collect information on their upstream

due diligence (e.g. both through

individual efforts and industry auditing)

Use collective industry leverage to

encourage improvement of upstream

due diligence

“Upstream” companies:

Establish traceability or chain of custody to

mine of origin

For “red flagged” supply chains, undertake on-

the-ground assessments of mines, producers

& traders for conflict, serious abuses, bribery,

tax evasion, fraud, money-laundering

Collaborative engagement with local gov’t,

CSOs, local business to prevent & mitigate

impacts, monitor

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OECD Implementation Programme on responsible mineral supply chains

Over 700 organisations involved

– Started in 2011, involving governments (OECD and non-OECD), business (whole supply chain, from mine to market), civil society and other experts

Information-sharing and promotion of due diligence

– Peer learning between business & between governments

– Tools, workshops, webinars and training on due diligence and enabling policy-making

– Partnering with producing, processing & consuming countries: Africa, China, Colombia, India, Middle East ,Turkey, EU, USA

Collaboration and problem-solving

– Coordinated solutions on specific challenges (e.g. lowering costs, sharing risk information)

– Harmonisation and mutual recognition of industry programmes

– Increasing volumes of exports of responsible minerals sourced from conflict-affected and high-risk areas to support development

Forum on Responsible Mineral Supply Chains & regional workshops

– Annual event every year at OECD in May (600+ participants, 3 days + side events)

– Regional events each fall (Beijing in 2015, Kinshasa in 2014, Kigali in 2013) 7

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Global implementation

MOFCOM designated the China Chamber of Commerce Metals, Minerals and Chemicals (CCCMC) to work with the OECD on responsible mineral supply chains

OECD and CCCMC signed a Memorandum of Understanding (MOU) on responsible mineral sourcing in October 2014, including due diligence outreach in China and a tool to help Chinese companies operationalise the OECD Guidance, improve access to market access, ensure security of responsible supplies, strengthen reputation

OECD and China sign Programme of Work, including cooperation on responsible mineral supply chains in July 2015

Chinese Due Diligence Guidelines, based on the OECD Guidance, published in December 2015

On-going implementation work in China

Developing a smelter / refiner audit framework & system

Cooperation with AQSIQ to standardize and embed into legal framework

Country cooperation Example: China

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Significant uptake by business supports global implementation

THANK YOU

For further information on the OECD’s work on Responsible Business Conduct http://mneguidelines.oecd.org/ http://www.oecd.org/corporate/mne/mining.htm

Impacts and challenges: International business

• Improved transparency and integrity of mineral supply chains

• But long way to go for companies to fully implement the

Guidance, in particular insufficient company reporting

• Specific challenges for SMEs remain

• Integrity and alignment of industry programmes globally

• Need for cost optimisation of due diligence efforts across the supply chain

Business case for doing due diligence

• upfront costs but better understanding of sources of raw materials and suppliers

• improved internal controls, record keeping, reporting

• better opportunities to access finance and inform better decision making

OECD Secretariat Alignment Assessment of Industry Programmes

Indications that due diligence is working towards breaking the link between mineral extraction, trade and conflict in the Great Lakes region

• Militarization of mining sites and trading networks in the Great Lakes region remains a challenge, particularly for gold

• In 2012 UN Group of Experts on the DRC: “Security situation at 3T mine sites has improved and trade in 3T has become a much less important source of financing for armed groups.”

• Need for additional scalable on-the-ground gold supply chain programmes

But it remains difficult to demonstrate the actual results on economic development and overall improvements of livelihoods

OECD projects on Measuring Results and on the Worst Forms of Child Labour

Impacts and challenges: Affected populations

Increased focus on mining sector governance

Improved data on production and trade

Improved capacity to raise taxes and levies

Implementation challenges remain in the Great Lakes region

Increased visibility of ASM with international buyers, donors and governments

Guidance first instrument with roadmap for economic and development opportunities for artisanal miners and formalization

Market-oriented perspective: secure buy-in of international trading, processing and consuming companies to buy responsible ASM minerals (e.g. “Just Gold” and “CBRMT” projects)

OECD FAQ on sourcing gold from ASM miners

Impacts and challenges: Governance and ASM