Regulating Conflict Minerals from the EU: How does that look?

Regulating Conflict Minerals from the EU: How does that look? By Dylan Walker 

The controversy surrounding companies purchasing and extracting minerals from conflict zones is similar to the issue of blood diamonds, which was brought to light in the 1990s. The main question being asked here is whether transnational companies such as Intel, Panasonic, Apple and others are funding armed conflicts through their purchasing of these minerals.

One of the key means by which armed groups control and exploit conflict minerals is through the terrorisation and exploitation of local populations – often through systematic human rights abuses such as rape, unlawful killings and forced labour. As a result, these companies run the risk of complicity in these human rights violations by facilitating the entrance of conflict minerals into legitimate supply flows.

In March of 2014, the European Union (EU) took its first formal steps in tackling human rights violations in regions where conflict minerals are extracted. The European Commission had proposed that more rigorous processes be set in place to ensure transparency in the supply chain of minerals such as gold, tungsten, tantalum and tin (otherwise known as the 3Ts), and their derivatives.

These highly sought-after minerals are used in the manufacturing of just about every high-tech item we use today, including vehicles, laptops, mobile devices, as well as various machinery and jewelry. By mid-2015 the EU were able to strengthen its initial proposal by passing a draft law which made non-conflict certification for importers of the 3Ts and gold, mandatory. The rationale behind this is that this mandatory certification would be an assurance that the importers had carried out due diligence checks along its supply chain to ensure that the minerals have not been sourced from conflict zones. Furthermore, since it is mandatory it would also mean that those sourced from conflict zones are less likely to appear on the European market, Thus, forcing out armed groups of the supply chain as their operations would no longer be economically sustainable. This has been the case in the DRC, under the Dodd-Frank Act, which saw a 67% reduction in the presence of armed groups around certain mines in 4 years (from 2010 to 2014).

A year later in June 2016, Members of the European Parliament (MEPs) managed to secure mandatory, third party due diligence reports on all importers, smelters and refiners of conflict minerals. Due diligence will be conducted according to the Organisation for Economic Cooperation and Development (OECD) due diligence guidelines which are in line with the United States Securities and Exchange Commission’s (SEC) section 1502 of the Dodd-Frank Act.

This act was the first of its kind, in that it held transnational companies trading on US markets accountable for making sure that their products were free of conflict minerals. The main difference between the EU legislation and the Dodd-Frank is that the latter only takes into account conflict zones in the DRC, whereas the EU has taken a stronger stance and expanded this to include conflict and high-risk zones across the globe. The European Commission has announced that it will develop this list of zones in consultation with outside experts.

The process of due diligence will include companies having to provide proof of the history of the materials imported for manufacturing purposes. This would apply for each product’s supply chain, starting from the time it is extracted, with emphasis placed on where it is extracted and by whom it is extracted. EU member states will be responsible for ensuring compliance by companies within their jurisdictions. Unlike the U.S. rule, EU companies involved in the manufacturing of products containing gold and the 3Ts are not under direct obligation. However, companies subject to the EU Directive on Non-Financial Reporting will be encouraged to report on their sourcing of conflict minerals. These reports are set to be based on performance indicators to be developed by the European Commission. Additionally, the Commission is looking to create a transparency database through which companies can voluntarily report on their due diligence efforts.

There has been great support of the proposed regulations from the civil society community, rejecting the notion of self-regulation, citing Volkswagen’s deception surrounding its vehicles’ carbon emissions. Mr Abbot Leonard Santendi, the Secretary General of the Bishops Conference of the DRC and the leader of its Commission on Natural Resources, has stated that the impact of the Dodd-Frank has spurred real changes on the ground by DRC citizens, civil societies and business actors towards responsible mineral extraction. Santendi believes that taking a multi-pronged approach, with the international legislations as foundation, is the most effective way to help the communities affected by illegal mining operations.

One of the challenges facing the regulation regime is government corruption, which is prevalent in regions where conflict minerals are extracted. In some cases the government funded army are the perpetrators of these operations. Often government agents and politicians are profiting from smuggling operations as authorities charge unofficial fees and tariffs for certification processes. This is where the role of civil societies and whistleblowing groups on the ground should be closely and transparently involved in monitoring the mineral tracing system.

The exact timing for the release of the final text is not yet confirmed, however, according to a recent analysis article by Squire Patton Boggs, it is likely to be during the first quarter of 2017.

Photo: MONUSCO/Sylvain Liechti under Creative Commons – Share Alike 2.0 Generic

 

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