Is Your Mineral Sourcing in Conflict?

Minerals are categorized as conflict minerals when they are sourced from a region considered a conflict zone, and when access to and sale of the commodity perpetuates fighting in the region. In mid-2017 the EU passed the Conflict Minerals Regulation, which will become effective as of January 2021.

The reporting is not an all EU-invention. Similar requirements exist in the U.S. since 2010, known as the Dodd-Frank Regulation. This U.S. requirement impacts organizations that are publicly traded across the states. The U.S. reporting obligations, unlike the new EU regulation, focuses only on the Democratic Republic of Congo, where companies have an obligation to disclose whether or not they source minerals that originate from DR Congo (or one of its 9 neighboring countries). With this act the term Conflict Minerals was established.

The EU regulation targets companies that import 3TG minerals and metals into the EU: Tin (Sn), Tungsten (W), Tantalum (Ta) and Gold (Au), regardless of where these originate from. The regulation itself has a high ethical stand and is designed to decouple the armed conflicts and the mineral trade liaisons. The EU will publish and regularly update indicative, but non-exhaustive the list of conflict and high risk areas. This means that companies will also bear an obligation to report if the minerals they source are from a new-conflict or non-listed conflict area. Aside from the list of conflict areas, the EU will also publish the White List indicating global smelters and refiners, which source minerals in an ethical and responsible way.

The regulation will apply to EU based companies directly. Indirectly, the regulation will have a global impact on smelters and refiners, looking into entire supply chains. To support the reporting process, companies should use the five-step due diligence framework, designed by the Organisation for Economic Cooperation and Development (OECD).

The post Brexit UK will be out of the EU before the regulation compliance date, and the reporting requirement will depend on the deal achieved between the parties by 2019. Yet, as the conflict minerals regulation is about ethical practice in sourcing minerals, it would be unlikely that the UK would leave under the radar unethical mineral sourcing. The UK might either follow the EU regulation or create their own law.

Who will be required to report under the new EU Regulation on Conflict Minerals?

It is estimated that the regulation will directly capture about 1,000 importers of 3TG across the EU.  The regulation will require organizations to conduct due diligence and review their supply chains to ensure their 3TG procurement comes only from socially responsible and conflict-free sources. In addition, companies subject to the NFR Directive (Non-Financial Reporting) will be obliged to include in their reporting all relevant information on their policies and practices in connection to conflict minerals.

Upstream organizations - mining companies, raw material traders, smelters and refiners must comply with mandatory rules on due diligence when they import.

Downstream organizations - traders, component producers, contract manufacturer/assembly, end users-other businesses, governments) fall under one of the two categories: 1) organizations that import metal-stage products, and they must meet mandatory due diligence rules: or, 2) organizations that operate beyond the metal stage do not have obligations under the regulation, but they are expected to use reporting and other tools to make their due diligence more transparent, including large companies affected by the non-financial reporting directive.

To talk to an expert to help with your assessments, contact us. To find out more about Non-Financial Reporting, explore our blog.

Contributed by Jana K. Pataky, Sustainability Consultant at Schneider Electric Energy & Sustainability Services.

Since 2010, Schneider Electric is committed to ensuring no conflict minerals are sourced for our products, not directly nor to our supply chain. Read more about our commitments:

https://www.schneider-electric.com/en/about-us/suppliers/conflict-minerals.jsp

https://www.schneider-electric.com/en/download/document/conflict-minerals-statement/

https://www.schneider-electric.com/en/download/document/DKS-Letter/