Unlinking minerals and conflict in the Eastern Congo

Due diligence mineralsHannah 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.

Useful links

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

OECD Guidelines for Multinational Enterprises

Responsible gold also means supporting livelihoods of artisanal miners

Mukungwe mine photo Gregory Mthembu-Salter
Mukungwe mine. Photo courtesy of Gregory Mthembu-Salter

Today’s post is by Tyler Gillard, who leads the OECD’s work on responsible mineral supply chains (@tylergillard) and Roel Nieuwenkamp, Chair of the OECD Working Party on Responsible Business Conduct (@nieuwenkamp_csr)

Last year, a blind Congolese civil society leader named Eric Kajemba helped broker a deal between the Congolese army, local authorities, three powerful Congolese families and a Canadian mining company to de-militarise a lucrative gold mine in South Kivu province of the Democratic Republic of the Congo (DRC).

The mine, called Mukungwe, supports an estimated 5,000 thousand so-called “artisanal” gold miners, who work in harsh conditions and have for years lived under constant threat of extortion and violence by armed groups, the military and criminal gangs that operated in the area.

Kajemba’s efforts, and the support given by both the mining company and the Congolese government, were made in part because of growing international pressure on companies and governments to ensure that minerals used in everyday products don’t finance or fuel violent conflict or human rights abuses when mined in conflict zones.

Yet this same push for “conflict-free” minerals has also created new challenges for mines in eastern Congo, like Mukungwe, to access formal gold markets, mainly because of unreasonably high – and frankly counter-productive – compliance expectations.

To a certain extent this is normal. Formalising a previously informal economy will always create new compliance hurdles. At least this is an improvement over the challenges the miners had previously faced, namely escaping violence, extortion and forced labour at the end of a gun. Still there is a need for greater awareness among consumers and the gold industry that responsible gold also means sourcing responsibly from conflict areas and supporting artisanal miners in their efforts to meet the new demands of the market.

In 2010, US Congress spurred major action when it adopted section 1502 of the Dodd-Frank Act, obliging public companies to report on products containing certain minerals that may be benefiting armed groups in the Democratic Republic of the Congo (DRC). The European Union also proposed a draft regulation in March 2014 on responsible supply chains of minerals from any conflict area worldwide. OECD Due Diligence Guidance was singled out in both cases as the key standard for companies to maintain responsible mineral supply chains.

Gold is one of the minerals targeted by these efforts – and the big players in the gold industry have taken note. The London Bullion Market Association (LBMA), an industry body that maintains standards for the London gold market, made it mandatory for its gold refiners to undergo annual audits that would demonstrate they sourced gold responsibly and in line with the international standards set by the OECD. The World Gold Council and the Responsible Jewellery Council adopted voluntary certification schemes to implement the OECD’s due diligence guidance. Notably, the Dubai Multi-Commodities Centre also adopted audits requirements for its refiners in 2012.

Despite some challenges in rolling out these schemes, this is still a serious achievement. The audited LBMA refiners alone cover 85-90% of gold produced annually. It may even be tempting to say “mission accomplished”, since the gold market is basically conflict-free. However we cannot: there’s still a lot more to do.

Shrinking the last 10% of the informal gold market will be a challenge. And more should be done to strengthen some of the existing audit schemes too. But it’s necessary, and worth the effort. In 2013, more than $115 billion worth of gold was produced. Even if only 5% of that production benefited armed groups or criminal organisations worldwide, that’s still almost $6 billion that’s ended up in the wrong hands.

In contrast to the significant progress made in the formal gold industry, there has been little progress towards creating responsible supply chains of artisanal gold.

Artisanal gold mining generally means informal mining done with rudimentary tools, with little or no attention to health and safety, often rife with child labour and in areas of high-risk or conflict. Governments around the world often ignore the untapped potential of artisanal mining – which accounts for a whopping 90% of the global gold mining workforce – preferring instead to focus their efforts on attracting large-scale mining investments that bring far greater revenues to state coffers.

Given the informal and often illegal nature of the activity, artisanal gold mining continues to be one of the easiest ways for armed groups and criminals across the globe to earn sizable revenues though mafia-style extortion tactics used on the miners and their gold traders. A UN expert group reported in January that artisanal gold is still a major source of financing for armed groups in the DRC, which has seen one of the worst conflicts in recent history, claiming an estimated (pdf) 5.4 million lives since 1996.

As the Mukungwe mine shows, not all of the artisanal gold produced in the Congo supports conflict. But almost all of it is mined informally and smuggled out of the country, making it difficult for international buyers to establish traceability. As a result, markets take a very risk-adverse attitude towards artisanal gold worldwide. Refiners and traders are often expected to provide a sort of “100% conflict-free” guarantee to their financier banks and customers before buying artisanally-mined gold.

If European supermarkets can’t guarantee that the beef they’re selling isn’t horsemeat, how could the banks and other buyers expect refiners to provide guarantees on artisanal gold, which almost by definition is produced informally, without infrastructure, licensing, or really any type of government support and oversight that could help give such assurances?

Banks, buyers and even consumers today need a reminder of what is helpful, and actually expected. These types of “100% conflict-free” expectations are counterproductive, and based on a misperception of international standards.

Standards like the OECD Due Diligence Guidance actually encourage companies to work with artisanal miners, without demanding perfection. Responsible sourcing of minerals is about good faith efforts to work and improve conditions in the supply chain. Unless a buyer finds evidence of armed group involvement or serious human rights abuses in the mine or trader, on-going engagement with artisanal miners is the recommended course of action. Otherwise, there’s a risk that the trade will become even more hidden, leaving the miners in a worse-off position.

Today the discourse within the international community on “conflict minerals” has changed. It’s not just about conflict-free. What’s important is promoting responsible sourcing of minerals from conflict areas, despite the challenges. Whole-scale disengagement with artisanal miners almost always has harsh consequences for miners’ livelihoods.

What can help solve this catch 22? Consumer demand, for starters – at least until local governments take on their responsibilities to help artisanal miners. Jewellers should tap into this demand and begin sourcing – and marketing – responsible artisanal gold from conflict areas (see the Enough Project below). Which consumer wouldn’t appreciate knowing their wedding ring helped support peace and development for some of the world’s worst-off miners living in a conflict zone?

An OECD report on the Mukungwe gold mine in the DRC is one of a series in the pipeline that show how buyers can get directly involved in gold supply chains from areas of conflict. These reports examine the risks associated with specific gold mines and trading routes, and provide concrete recommendations for buyers and governments to help them build responsible sourcing and engagement practices that help artisanal miners. Today, however, the Mukungwe mine still has no legal route to export gold, and no buyer that’s willing to help improve the miners’ conditions, maximise their gold yields, get their documentation in order to export securely, and guard against interference from armed groups.

How long will these miners wait for buyers before they themselves turn to criminal behaviour, for lack of other opportunities? How long before the armed groups decide to come back to the mine and re-establish their grip on the lucrative business? Apparently not very long. On 21 December, armed men stormed Mukungwe and killed at least 10 people, including a 15-year old boy. Although the attackers quickly vacated the mine soon after the attack, the need for responsible engagement could not be more urgent.

Useful links

OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas

Conflict minerals: demonise the criminals, not the miners by Chuck Blakeman, founder of the Crankset Group, on the Insights blog

A recent campaign from the Enough Project noted Signet and Tiffany as industry leaders in responsible gold sourcing, followed by JC Penney, Cartier and Target. The Responsible Jewellery Council has also helped drive responsible practices in the gold sector. Some consumer-labelling schemes for jewellery have also emerged, such as Fairmined or Fairtrade Gold, which could help consumers looking to source gold responsibly.

Conflict minerals: Congo communities say support Dodd-Frank

Click for more information on OECD Due Diligence Guidance and the text itself

On October 10th, we published an article from US businessman Chuck Blakeman criticising the Dodd-Frank Act’s section on conflict minerals, saying it was against the interests of the people of the DR Congo. Today, we publish a reply from Prince Kihangi Kyamwami, Secretary-General of  BEDEWA, the agency in charge of development in the Walikale region of the DRC, supporting Dodd-Frank.

Everybody seems to think (mistakenly) that they can say: “I’ve been to the Congo and met the local communities. These communities live mainly by exploiting minerals. Section 1502 of the Dodd-Frank Act affects their means of living, and the economic stability of the region is threatened by a de facto ban. This law deprives thousands of people of their livelihood, etc.”

To be frank, this simplistic view is irritating. People who share it shouldn’t believe they’re helping us. On the contrary, they’re destroying us and working against the interests of Walikale. Have they really met local communities, or are they just interested in the minerals and, given the difficulty in getting to the communities, limited themselves to talking to city-based mining interests? Interests that will exploit such talk in their own interests to make official declarations that engage local communities for no reason at all.

Anybody claiming to defend a people should first get to know that people – its history, culture, way of life – and know where to find it. Otherwise, you’re only mocking this people. Experience has shown how tricksters pass themselves off as the people’s champion. They show the world the people’s misery and highlight the need to improve its well-being. But at the end of the day, you realise they’re looking after their own interests.

Who can seriously claim that before the mining sector was liberalised, Walikale’s population went hungry? Mineral resources aren’t Walikale’s only source of wealth: it also has vast tracts of very rich farmland. It’s a territory made for agriculture .

Before 1985, Walikale had numerous pasturelands. Apart from abundant rice crops, there were also many plantations producing high quality coffee, cocoa, plantains and maize, to name only the main cash crops, as well as market gardening, vegetables and palm oil.

These haven’t all disappeared, and the population won’t starve just because mining has been suspended. Artisanal miners with no plots of land complain about mining being stopped, not the local communities.

As everyone knows, over the past decade, the great powers, dictators, private firms, criminal networks and rebel forces have ruthlessly exploited our wealth, plunging most of the population into extreme poverty. The profits from mining haven’t helped local development or local communities. These minerals were exploited with nothing given back in return. Taxes and state levies rarely if ever reach the local community. This windfall didn’t go unnoticed by the DRC’s neighbours, who helped themselves.

These minerals don’t just create conflicts and wars, they help to sustain them, with armed groups fighting for control of mining areas, as happened in Kaseke in July 2011, when a large share of the population had to flee fighting between two groups. We suffer more from having to watch passively how our minerals are exploited than from leaving them buried for the good of future generations.

Mineral resources are by definition non-renewable, making it urgent to find solutions for the harmonious, viable and sustainable development of the mining sector. And Walikale is ready to support the suspension of mining activities for another five years to help reform the sector.

To this end, Walikale’s local communities renew their support to national indicatives (ITIE/RDC, Revision of the Congo Mining Law) sub-regional ones (CIRGL) and those at international level (ITRI/OECD). And in particular, we reaffirm our support for Section 1502 of the July 2010 Dodd-Frank Act, because it marks a break. It contributed to implementing solutions allowing for the traceability of resources from the mine to the point of export in view of local development.

The communities are therefore placing all their hopes in this law. Thanks to this law, they stand to benefit from their natural resources one day. As well as that, this law intends to cut the link between trade in these minerals and the conflicts that bring grief to the people of the Congo daily. Walikale’s local communities there call for the application without further delay of the regulations based on the Dodd-frank Act concerning conflict minerals. This is what we need now.

Desirable economic transformation of this wealth requires good governance, transparency and a stable socio-political climate. It is the state’s responsibility to ensure that this natural mineral wealth is exploited in the most beneficial, efficient and best way. The state must ensure that due diligence in minerals supply is observed and discourage campaigns against the citizens’ interests.

A well-regulated mining sector governed with transparency, and well organised and supported  can help lift the Congo’s people out of extreme poverty, restore public finances to help the state function properly, and contribute to regional and international development, as is the case for many other countries in the world.

Useful links

The above is a translation. The original article in French is here

OECD work on due diligence concerning conflict minerals

Transcript of remarks by US Secretary of State Hillary Rodham Clinton at the adoption ceremony of the Recommendation on Due Diligence Guidance on 25 May 2011

OECD Guidelines for Multinational Enterprises

Conflict minerals: demonise the criminals, not the miners

What's the best way to help him?

On July 15, we published Conflict Minerals: Hands-Off Is Not a Solution by Stephen P. Groff, former Deputy Director of the OECD Development Co-operation Directorate, now Vice President of the Asian Development Bank. Today, we publish a reply from Chuck Blakeman, founder of the Crankset Group, who recently visited the Democratic Republic of Congo to promote small business growth.

Stephen Groff’s article Conflict Minerals: Hands-Off is Not a Solution is remarkably naive and removed from the actual problem, and represents a pervasively uninformed and simplistic view of what is going on in the DR Congo. As a result of the Dodd-Frank Act’s demonization of minerals instead of criminals, exportation of the four minerals covered by the Act has nearly evaporated from the Congo.

A recent article in The Economist says that 95% of mineral exports have evaporated, while Motorola’s Solution for Hope Project argues that “Tens of thousands of people in the DRC depend on artisanal mining, many operating in regions where conflict is not present. Their livelihoods and the economic stability of the region have been threatened by the de facto ban.”

Personal experience backs this up. Our company, Groupe Weyi, has 50 tons of coltan from a local tribe sitting in a warehouse. Six weeks ago we had a buyer. Today we can’t find anyone buying coltan from DR Congo, anywhere in the world.

Our export process is well documented, government approved and done through a highly visible process that tracks it from the mine to the ship – but no one is buying. The smelters all say that minerals coming out of the Congo are “radioactive” now. Why buy from there when they can buy from a dozen other places on the globe without risking misperception? They have simply left the area.

So while all of those who are thousands of miles away pontificate about how great this solution is, honest miners all across the Congo are now starving because they can’t find a buyer.

Everyone likes to say this isn’t impacting people on the ground. But please note who everyone is quoting – giant NGOs, giant organizations, giant corporations and giant governments. Nobody seems to have spoken to anyone on the ground. That should say something very powerful to us. Why don’t the supporters of Dodd-Frank produce a poll of people in the Congo to tell us how much they love this law? Because the only support they can find is people who don’t live there.

I can produce chiefs and whole tribes who have been devastated by this demonization of minerals instead of criminals. Dodd-Frank is like blaming houses for the presence of a burglar. It burns down every house in the town so the burglar has nothing to steal. The burglar will simply move on to steal from stores instead of houses. Meanwhile 1 million people in the Congo who depend on mining for a living are being devastated by the universal collateral damage of this “nuclear” option.

The militias existed long before they found minerals as a source of revenue. What in the world makes anyone think that burning down the entire mining industry in the Congo will put the criminals out of business? What an incredibly naive and simplistic solution. The criminals will simply find something else to steal.

These minerals are mined in six regions – five of which are hundreds to a thousand miles from the conflict zone and aren’t even connected by a road. Dodd-Frank burns all of them down, too. The very people you think this is supposed to protect are being destroyed.

Get the United Nations to grow a backbone and go in and root out the militia. Or require Kinshasa to grow a backbone. Do anything we can to rid the world of those militias, but don’t do it at the expense of every man, woman and child throughout the Congo related to mining. A nuclear option that demonizes minerals instead of criminals is not acceptable.

Groups like ours are the solution, not another bureaucratic process that will only make it difficult for honest people to export while the criminals scoff and pay a bribe to make it all go away.

Groupe Weyi is not a mining company, not a multinational, but a company incorporated in the DRC, majority owned by a Congolese, that works with local tribes to build a local, sustainable economy and solve poverty within 5-10 years in the Congo and 10-20 years in Africa. Exporting minerals is what the tribes feel right now is their best, most stable and sustainable source of income, and one that can create higher wages almost immediately.

Mining will also generate revenues for creating other longer-term, much better local economic options at a much higher level than micro-financing could achieve, including agriculture, herding and husbandry, aviation and water transportation. We are already building our first commercial river barge. We will also use profits to rebuild infrastructure, water, schools, clinics and other necessary services.

A local economy will never be built on the backs of large corporations or multi-national entities, but by the emergence local businesses throughout the Congo creating a sustainable local economy that is not dependent on large corporations or mining for their existence.

And it won’t be built by depriving people of their livelihood. Unconscionable is the best description of Dodd-Frank’s 1502 provision.

Useful links

OECD work on due diligence concerning conflict minerals

Transcript of remarks by US Secretary of State Hillary Rodham Clinton at the adoption ceremony of the Recommendation on Due Diligence Guidance on 25 May 2011

OECD Guidelines for Multinational Enterprises

Conflict Minerals: Hands-Off Is Not a Solution

Click for more information on OECD Due Diligence Guidance and the text itself

Today’s post is contributed by Stephen P. Groff,  Deputy Director of the OECD Development Co-operation Directorate

What do an artisanal miner in the Democratic Republic of Congo, computer companies, and the Organisation for Economic Cooperation and Development in Paris have in common? They all have a keen interest in ensuring that mining in Africa does not fuel conflict.

Last month, U.S. Secretary of State Hillary Clinton chaired a meeting celebrating the OECD’s 50th anniversary where ministers from OECD and developing economies agreed on a set of practical recommendations that will keep minerals from becoming “conflict minerals”.

And recently in Washington, there were an important series of events around conflict minerals bringing together 200 downstream companies to discuss approaches and take action to ensure responsible sourcing.

In fragile African states, illegal exploitation of natural resources has fueled conflict across the region for a decade. While data is scarce, it is estimated that up to 80% of minerals in some of the worst-affected areas may be smuggled out — bound for use by jewelers, the automotive and aerospace industries, producers of medical devices and other manufacturers around the world.

Trade and investment in natural mineral resources hold great potential for boosting growth and prosperity in the developing world. Too often though, misguided or illicit exploitation of these resources has contributed, directly or indirectly, to armed conflict, human rights violations, crime and corruption, and international terrorism, thereby impeding economic and social development. The story of “blood diamonds” is familiar to many — brought back into the spotlight recently by a controversial decision to allow diamond exports from Zimbabwe – but there are many other minerals that contribute to conflict across the continent.

In 2010 the US Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly referred to as the Dodd-Frank Act. This law has received a lot of attention because of its sweeping new regulation of the financial industry. Less known, however, is the fact that this same law (under Sec. 1502) imposes additional reporting requirements on publicly traded companies manufacturing products that could potentially be using “conflict minerals” (in particular tantalum, tin, tungsten and gold). The law obliges these companies to report to the Securities and Exchange Commission disclosing their tax, royalty and other payments on each project they operate. This provision will cover US and European companies as well as many from emerging markets that sell shares on US stock exchanges.

Until last month, companies did not have a set of government-backed recommendations on how to undertake supply-chain due diligence. The new OECD guidance clarifies how all involved — from local exporters and mineral processors to the manufacturing and brand-name companies that use these minerals in their products — can identify and better manage risks throughout the supply chain. The guidance is also designed to foster private sector engagement in sustainable sourcing practices that nurture revenue-generating trade in clean minerals, creating a peace dividend while supporting broader development goals.

The guidance seeks to avoid what all involved would consider an unhappy outcome: boycotting of mining in countries like the Democratic Republic of Congo (DRC). By incorporating the flexibility to allow trade to continue, it promotes responsible sourcing, bearing in mind that supply chains cannot become 100% conflict-free overnight. In this way, it avoids massive pull-outs that would have severe consequences for the poor populations that depend on mining for their bread and butter.

Responsible solutions are possible. For instance, “bag and tag” programs — a scheme to track the origin of tin and developed to implement to the OECD guidance — are now being used in the DRC and Rwanda by companies extracting and trading in minerals.

In a wide show of support, many have called on the Securities and Exchange Commission to refer to this guidance as providing reliable due diligence measures to meet the reporting obligations under section 1502. Such a reference to internationally agreed standards in the implementing rules being written now and anticipated to be issued in the coming months would ensure that companies will have one clear set of due diligence expectations throughout the entire supply chain, thereby avoiding multiple and potentially conflicting requirements for companies on how due diligence should be implemented.

Section 1502 of the Dodd-Frank Act and a whole-of-government approach to the implementation of the new guidance offered by the OECD are excellent examples of how we can deliver on a “new paradigm for development” — one that looks beyond aid. In her speech last month in Paris, Secretary Clinton emphasized that we need a “new approach to development that will better prepare developing countries to move from aid to sustainable and inclusive growth.” This work moves us solidly in that direction.

Useful links

Transcript of remarks by US Secretary of State Hillary Rodham Clinton at the adoption ceremony of the Recommendation on Due Diligence Guidance on 25 May 2011

OECD Guidelines for Multinational Enterprises

This article was also published in the Huffington Post

Blood, sweat and fear

Even worse on a trawler

Like most of us these days, I do a search on Internet when writing something. Today, I wanted to write about the Chilean mine rescue, but I found another story about 33 miners. Their accident happened in England in 1838 and they all died, including Charles Hutchinson, aged nine.

Reports for Royal Commissions later in the century show that child labour was nothing exceptional: “Janet Snedden, aged 9… Comes down a quarter before 6 and goes up again about 4 p.m.” is a typical example.

The Coalmining History Resource Centre where I found the reports has a national database of mining deaths in the UK, showing that accidents were typical too. Today, only the location seems to have changed. Ask somebody to supply the missing word in “China. Mine…” and the chances are they’ll say explosion or disaster. Yet mining isn’t the most dangerous civilian profession in OECD countries at least. Another UK study concluded that the fatal accident rate among fishermen was 115 times greater than in the general British workforce.

Despite their radically different workplaces, mining and fishing are similar in that they depend on natural resources and on people putting their lives and health at risk to keep us supplied. Apart from the actual physical dangers, other aspects of workers’ conditions in these industries can be horrendous. The newly published OECD Insights on Fisheries cites the case of Chinese fishers who not only had to pay $470 to secure a place on a boat, but had to agree to have their appendix removed before going to sea and to pay $47 for the operation themselves. And these were among the lucky ones who actually had a contract.

Movies like Blood Diamond show the other prices to be paid when vital metals and minerals come from conflict zones and help to provoke and sustain the conflicts themselves.

Putting an end to a trade controlled by brutal, heavily-armed gangs with friends in high places isn’t going to be easy, but at the end of September, key players in the supply chain of tin-tantalum-tungsten and gold, met with government representatives and international and civil society organisations to finalise guidance on responsible supply chain management of conflict minerals at an OECD-ICGLR conference (International Conference on the Great Lakes Region).

The following week 11 African countries endorsed an OECD system for the responsible sourcing of minerals.

We’ll have to wait to see if words are followed by actions, but hopefully one day this business will seem as unthinkable as sending children down a mine.

Useful links

OECD work on due diligence in the mining and minerals sector

International Network on Conflict and Fragility

Consultation on the Guidelines for Multinational Enterprises and the UN “Protect, Respect and Remedy” Framework