A Conflict Minerals Regulation that Works

Strengthening the European Commission’s proposal for a „Regulation setting up a Union System for Supply Chain Due Diligence Self-Certification of Responsible Importers of Tin, Tantalum and Tungsten, their Ores, and Gold originating in Conflict-Affacted and High-Risk Areas“.

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The trade in natural resources fuels some of the world’s most deadly conflicts and worst forms of human rights abuse. Resources like gold, diamonds, tungsten, tantalum, jade, timber, and tin, provide funding to armed groups and abusive security forces, and stand as economic impediments in the way of peace. The resource trade also promises many fragile and conflictaffected areas a chance for much-needed investment and development. In order to deliver on this promise, however, companies must commit to sourcing and trading these resources responsibly. This is where the EU must show leadership by doing more to promote and support responsible sourcing in Europe.

The Central African Republic is in the midst of a deadly conflict fuelled in part by the country’s abundant natural resources. Over half the population is in need of humanitarian assistance.1 One in four has been displaced from their home by the conflict.
Since its suspension from the Kimberley Process in May 2013, 140,000 diamond carats (worth around US$24 million) are estimated to have been smuggled out of CAR. The illicit gold trade is estimated at 2 tonnes per year (worth around US$60 million). At the Ndassima mine alone, former Séléka forces collect approximately US$150,000 in taxes per year from gold production, which is estimated at 180 kg per year.2

The EU is a major trading hub for many of the natural resources that are at risk of funding conflict and human rights abuses. The EU is the world’s largest economy, the world’s largest trading block, and home to 500 million consumers.3

In 2013, the global trade in tin, tantalum, tungsten and gold (3TG) ores, concentrates, and metals was worth in excess of €123 billion.4 The EU accounted for almost a quarter of this trade. Millions of euro worth of 3TG enters the EU every year from highrisk and conflict-affected areas, including parts of countries such as Afghanistan, the Central African Republic, Colombia, the eastern DRC, Myanmar, and Zimbabwe.

The EU is also the second largest importer of mobile phones and laptops in the world, and three of the top six importers of mobile phones are located in the EU. In 2013 the EU imported mobile phones to the value of €29.5 billion, as well as €26.5 billion in laptops, €13 billion in electronic circuits, and €3.8 billion in gold jewellery. These products all contain 3TG that may have funded conflict or human rights abuses. With this kind of global influence, the EU has a duty to ensure its trade is responsible.

The Commission’s draft proposal to regulate the trade in conflict minerals will do little to change the current situation. It is voluntary, meaning companies can choose whether to comply. It is open only to direct importers of ores and metals, thereby leaving out minerals found in manufactured and part-manufactured products. And, it covers only a handful of the natural resources driving conflict and human rights abuses worldwide.

A narrow voluntary scheme is a backwards step that undermines international responsible sourcing standards. OECD Due Diligence Guidance has been available to companies sourcing and trading natural resources from conflict-affected and high-risk areas since 2010. This Guidance operationalises the existing UN Guiding Principles on Business and Human Rights by setting out a practical five-step framework for companies along the supply chain to carry out risk-based due diligence. The EU made a commitment to promoting this Guidance in May 2011.

“[A] move to make reporting entirely optional risks leaving the most responsible companies exposed while those least attentive to their human rights responsibilities continue their current practices undeterred.”

John Ruggie, author of the UN Guiding Principles on Business and Human Rights, in an open letter to José Manuel Barroso, President of the European Commission.5

OECD Guidance is based on the idea that companies right along the supply chain should put in place processes that help them identify, mitigate, and publicly report on risks in their supply chains. This process envisions companies throughout the supply chain working together by sharing information about identified risks and what has been done to address them. It is not the responsibility of a single link in the chain.

The voluntary scheme proposed by the Commission applies only to a handful of EU companies that directly import 3TG ores and metals. By proposing another voluntary scheme, but which applies to far fewer companies than existing international standards, the Commission risks undermining a fundamental principle of the OECD Guidance and the UN Guiding Principles.

Voluntary measures do not change companies’ sourcing practices. The OECD Guidance has been available to companies since 2010, yet survey data reveals that few European companies have put in place the due diligence processes it recommends.6 According to the European Commission, up to 17% of EU companies working with 3TG are already indirectly affected by US Dodd-Frank Act section 1502, as they supply to US customers that are required to do due diligenceon their supply chains. For these companies, supply chain due diligence is already a reality. […]

[Read the full paper as PDF here]

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