In 2010 the US Government adopted the Dodd Frank Act 1502. This Act is a disclosure requirement that calls on companies to determine whether their products contain conflict minerals – by carrying out supply chain due diligence – and to report this. Since then there was a wish in the EU for similar legislation. In 2017 the EU adopted Regulation 2017/821/EU, the Conflict Minerals Regulation (CMR). The Regulation will take effect on 1 January 2021.
In politically unstable areas, trade in valuable minerals can be used to finance war, armed groups, forced labour, human rights abuse, support corruption and money laundering. The most used minerals for this purpose are Tin, Tungsten, Tantalum and Gold (also referred to as 3TG). These minerals are often used in everyday electronic products. By buying consumer products that contain minerals from high-risk area's, the EU and its citizens - unknowingly - finance conflict, which makes the EU co-responsible. Countries that are considered high-risk are those whose minerals are in high demand and are suffering from armed-conflict.
The CMR ensures that importers of 3TG meet international responsible sourcing standards, set by the OECD. It further ensures that global and EU smelters and refiners process responsibly sourced minerals. The purpose is to help break the link between conflict funding and illegal exploitation of minerals and help put an end to abuse. The Regulation applies to approximately to 1,000 companies.'
Anyone (both individuals and companies) importing 3TG into the EU will be directly affected by the CMR, whether they are importers in the form of ores, concentrates or processed metals, whose annual import exceed a specified threshold. Importers can be e.g. producers of mobile phones, medical devices, the automotive sector, etc. It is estimated that the CMR will apply to 95% of the total import of 3TG. Indirectly the CMR will promote responsible sourcing of smelters and refiners, whether they are based inside the EU or outside. The EU will draft a 'white-list' of global smelters and refiners which source responsibly.
The CMR distinguishes upstream and downstream users. Upstream users are firms that extract, process and refine raw materials. Downstream is the further process of metals produced during the upstream stage into a finished product. The downstream stage includes the sale of the product to other businesses, governments or private individuals. The CMR creates different rules for upstream and downstream.
Upstream must comply with the mandatory rules on due diligence. Downstream falls into 2 categories:
Directive 2014/95 is the EU Non-Financial Reporting Directive (EU NFR). The EU NFR requires large companies that carry out business in the EU (> 500 employees) to disclose certain information on the way they operate and manage social and environmental challenges. It is estimated that this Directive applies to about 6,000 companies in the EU. The obligation is to include non-financial statements in the annual report starts in 2018 onwards. The companies are expected to use reporting and other tools to make their due diligence more transparent. The Conflict Minerals Regulation falls under this Directive.
The mission of the OECD is to promote policies that will improve the economic and social well-being of people around the world. This is includes guidance on Due Diligence Guidance for Responsible Supply Chains from Conflict-Affected and High Risk Areas.
Companies with obligations under the CMR will already be familiar with the OECD guidance. Due Diligence means acting with reasonable care and investigating an issue before making a decision. Companies must check that what they buy is sourced responsibly and do not contribute to conflicts or other illegal activities.
Based on the OECD Guidance, five steps can be distinguished when importing conflict minerals:
To comply with the CMR it is advised to put in place systems and processes that provide:
When minerals come from conflict and/or high-risk areas, importers must provide information on:
Make sure your supply chain is transparent.