Hannah Koep-Andrieu of the OECD’s Responsible Business Conduct Unit (@H_KoepAndrieu)
The Dodd-Frank Act and its Section 1502 on conflict minerals adopted in 2010 obliges public companies in the United States (US) to undertake supply chain due diligence and report on products containing certain minerals that may be benefiting armed groups in the Democratic Republic of the Congo (DRC). The Act’s supporters celebrate that it finally holds companies sourcing minerals from conflict zones accountable, while critics claim that implementation of the law is cumbersome and expensive for companies and that singling out the DRC and adjoining countries created an effective embargo and is hurting local producing communities.
While both accounts hold some truth, as usual the reality is much more complicated.
To assess five years of work on responsible mineral supply chains in the Great Lakes region, the OECD worked with the International Peace Information Service (IPIS) to determine the impact in eastern DRC, the region most in the spotlight. Since 2009, IPIS collected data on security conditions at over 1100 mining sites in eastern DRC (North and South Kivu provinces, Maniema, northern Katanga and southeast Province Orientale) and published interactive maps showing armed group presence at mine sites.
More due diligence tools and positive results in 3T minerals
Since the launch of the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas in 2011 the number of tools, regulations, initiatives, and programmes developed to foster responsible mineral sourcing and combat the illicit exploitation of minerals has dramatically evolved. The OECD Guidance is now referenced in domestic regulations, for example in the US, and the European Union (EU) is currently drafting a regulation that is based on the Guidance. As a result, as of 2016 the US and EU markets could both be covered by mandatory provisions requiring mineral supply chain due diligence on all imported products containing tin, tungsten and tantalum (3T) and gold. Hundreds of companies and industry initiatives across the supply chain now implement the OECD’s five-step due diligence framework to ensure they produce and source responsibly.
Companies are also beginning to understand that responsible trade of minerals from areas of conflict or high-risk is possible when carrying out due diligence. However, this wasn’t always the case. Disengagement from the DRC was indeed dramatic in 2010-2011, but this was due to a number of contributing factors: the DRC President banned the mining of affected minerals for almost a year; the US legislation was adopted; new consumer and political attention was given to the issue in the OECD, the UN Security Council, the G8 and elsewhere; and new market expectations for conflict-free minerals emerged. Exports fell for tungsten from peak years in 2007 when the DRC exported 1,200 tonnes to less than 50 tonnes in 2010. Since then, the market for minerals from the region without proof of due diligence has continued to shrink, while the market for traceable, responsibly-sourced minerals has grown, suggesting that due diligence implementation is shaping global metal demand. Traceable exports of 3T now fetch almost 30% higher prices, compared to non-traceable materials.
Responsible sourcing initiatives and the uptake of due diligence have also seen positive results on the ground; significant gains have for example been made in raising the volume of responsibly sourced 3T minerals from eastern DRC. The due diligence and traceability programme iTSCi saw an increase of traceable 3T exports from the DRC, Rwanda and Burundi from approximately 300 tonnes in 2010 to a peak of 19,500 tonnes in 2014. The first half of 2015 has seen lower exports of 7,800 tonnes, reflecting reduced incentives for miners as global commodity prices dropped. The percentage of 3T workers at mines affected by interference from non-state armed groups and public security forces dropped from 57% in 2009/10 to 26% in 2013/14 at sites visited by IPIS. This drop reflects both a cleaning up and contraction of the 3T sector in eastern DRC.
Interference at mining sites persists
While this uptake of due diligence is encouraging, interference of armed groups in mining areas continues to disrupt not only the livelihoods of well over 1 million miners and their communities but also fuels human rights violations and contributes to perpetual conflict financing. Artisanal and small-scale mining (ASM) in the DRC’s eastern provinces remains a central source of revenues for several hundred thousand people. IPIS figures suggest that more than 216,000 miners work in ASM in eastern DRC alone. In addition to direct employment, these miners each support about four to five community members.
While the news is better on 3Ts, gold remains a significant headache – in 2013/2014, four out of five artisanal miners in the eastern provinces were found to be working in the gold sector. This is partly the result of a tangible shift in production from 3T to gold since 2009. 2013/14 research also shows the strong significance of gold to conflict financing in eastern DRC, with a non-state armed group or public security force presence at 524 of around 850 gold mines (61%), compared to 59 of over 200 3T sites (27%). In terms of livelihoods and socio-economic impact, such shifts are difficult for miners and communities alike; at times gold rushes see thousands of miners migrate to a new site, stretching the already often severely limited infrastructure of rural communities in terms of access to land, water and basic housing and causing inter-communal tensions or even outright conflict.
Way ahead: Need for mining sector reforms
Companies are getting better at understanding and implementing supply chain due diligence, but governments have their role to play as well. In the context of attempts to improve governance in the sector, the advancement of mining reforms has been slow. A large majority of artisanal sites remain outside the legal trade as regulatory frameworks either stipulate that ASM is illegal or create prohibitive financial or administrative criteria for legalisation. For our work to have a real and lasting impact on the ground, formalisation, legalisation, regulatory reforms, access to land and the acknowledgement that ASM is an important rural livelihood are key; without policy change in those areas, it will be difficult to improve socio-economic and security conditions in fragile mining regions.
The OECD works to develop common understandings of due diligence standards to foster responsible business conduct, whether this is in minerals, garment and apparel, finance or agricultural supply chains. The aim of this work is not to single out regions or countries but to enable companies to carry out supply chain due diligence in all their operations globally in order to identify those areas and suppliers that carry the greatest risk of negative impacts, such as human rights abuses. Due diligence should be risk-based and progressive, meaning that companies should focus on those areas where risks are greatest and work towards a progressive improvement of due diligence practices.
Supporters and critics of the US Dodd Frank Act are both right – the challenges are enormous but there is room for optimism as the tools and initiatives to tackle the issues become increasingly widespread and refined.
2015 International Workshop on Responsible Mineral Supply Chains, Beijing, China, 2-3 December
Hosted by the China Chamber of Commerce of Metals Minerals & Chemicals Importers & Exporters (CCCMC) and the OECD
The workshop will discuss the role of governments, industry associations, international partners, businesses, non-governmental organisations, and other stakeholders in promoting responsible mineral supply chains. The workshop will also launch the new Chinese Due Diligence Guidelines for Responsible Mineral Supply Chains developed as a result of co-operation between between the CCCMC and the OECD. Participants can learn about what is expected from them to implement these guidelines and participate in a consultation on audit protocols related to these guidelines. Draft agenda