The OECD Due Diligence Guidance

for Responsible Supply Chains of

Minerals and its implementation

programmeAmerican Chamber of Commerce to the European Union

Brussels, December 9

Louis MaréchalPolicy adviser on extractivesOECD Investment Division

Conflict financing and serious abuses of human rights

Non-state armed groups or public security forces, associated with serious abuses:

• Illegally control mine sites, transportation routes, or dealers in minerals

• Illegally “tax” or extort money or minerals from artisanal miners, mineral traders and exporters

• Illegally “tax” or extort money or minerals at mine sites, transportation routes, or points where minerals are traded

Gold from the Democratic Republic of the Congo• Alluvial, artisanal gold

& informally, illegally mined

• Estimated conflict area annual ASGM output: ~10 tonnes

• Market value: $380 millionSource: WGC & IPIS (2014)

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Demand for responsibly produced minerals

Political

• G8 (2007, 2008, 2009,

2011, 2013)

• UN Security Council Resolutions on DRC (2009, 2010) and Ivory Coast (2013)

• ICGLR Heads of States endorsement (2010)

• OECD Council Recommendation (2011)

Consumer

• Consumer campaigns in US and Europe

• From brand-name users via industry groups (EICC, GeSI)

Legal

• Section 1502 of US Dodd-Frank Act conflict minerals reporting

• Draft EU legislation on responsible mineral supply chains

• Legal requirement in DRC, Rwanda and Burundi

• Draft conflict mineralsact in Canada

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Objectives, method, scope & key features

Objective Developed through a multi-stakeholder process to provide clear, practical

guidance for companies to ensure they do not contribute to conflict or human rights abuses through their mineral and metal production and procurement practices

Method and scope 5-step risk-based due diligence process, applies to all companies

throughout the mineral supply chain that produce or potentially use minerals from conflict-affected or high-risk areas

Applicable to all minerals, on a global scope

Key features One set of expectations : a common framework for due diligence

expectations throughout the entire mineral supply chain from mines until end users

Risk-based approach:Intensity of due diligence proportional to risk Progressive approach: promotion of constructive engagement with

suppliers in order togradually affect change

Reasonable and good faith efforts: Not 100 % compliance overnight

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Structure of the Guidance

Supplement on 3Ts

Supplement on gold

Appendix on artisanal and small scale mining for gold

Annex I: description of 5- step approach

Annex II: modelsupply chain

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policyAnnex III: principles for riskmitigation

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Annex II - Key risks and responses

Step 2: risk assessment

Suspend or discontinue engagement with supplier when:

Sourcing from parties linked to serious abuses

Direct or indirect support tonon-state armed groups

Devise and implement a risk management plan when

Direct or indirect support to public or private security forces

Bribery in the supply chain, fraud or misrepresentation of chain of custody or traceability information

Money-laundering through the mineral supply chain

Non-payment by suppliers of taxes, fees and royalties related to mineral extraction, transport and export, or non-disclosure of payments by suppliers in accordance with EITI

NO!

MITIGATE!

Industry initiatives can help companies implement the OECD Guidance but don’t take away individual companies’ own responsibility

Glo

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Miners (artisanaland industrial)

Refiners & Smelters

Bullion Banks

Downstream manufacturers (electronics, jewellers & others)

3T Programmes

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Gold Programmes

Key points for companies engaging in mineral supply chain due diligence

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• Step 1, 2 and 5 should become usual business practices to identify potential links between minerals and conflict finance / serious abuses of HR

• The duty of a company to act responsibly is tied to the potential impacts of its operations

• Guidance for companies– sources a company can use are numerous:– United Nations Security Council resolutions / Group of Experts

reports– Multiple thinks tanks and research institute (IPIS, International

Crisis Group, etc.)– Academic research (Heidelberg Institute, SIPRI, etc.)– Press articles, Int’l / local NGO reports, etc.

OECD Implementation Programme

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Over 500 organisations involved– Started in 2012– Governments (OECD and non-OECD), international organisations,

business,civil society and other experts

Information-sharing and promotion of due diligence– Tools, workshops, webinars and training– Outreach: Africa, China, Colombia, India, Middle East and Turkey– Peer learning

Collaboration and problem-solving– Coordinated solutions– Harmonisation and mutual recognition of industry programmes– Promotion of responsible mineral sourcing from conflict-affected

and high- risk areas Forum and workshops on Responsible Mineral Supply Chains

Mandarin edition of the Due Diligence Guidance available since May 2014

MOFCOM designated the China Chamber of Commerce Metals, Minerals and Chemicals (CCCMC) as key partner to work with the OECD on responsible business conduct in minerals

OECD and CCCMC signed a Memorandum of Understanding (MOU) on responsible mineral sourcing, to cover due diligence outreach in China and a tool to help Chinese companies operationalise the Guidance

The objective is to develop Guidelines for Chinese companies, based on the OECD Guidance, as well as an audit system for smelters and refiners in China

The Guidelines have been approved and published during a dedicated workshop in China in December 2 & 3, 2015

Mineral (3TG) specific guidance / audit protocols will be developed in 2016 through a multi-stakeholder process

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Implementation and outreach in 2014/15 -Focus on China

OECD Implementation Programme – main outcomes

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• Impressive uptake of countries – producing, processing, consuming

– Endorsement by ICGLR and ICGLR Member States– US Dodd-Frank Act– Proposal for a EU regulation– Cooperation with the Popular Republic of China / Turkey /

Colombia, etc.

• Impressive and increasing private sector buy-in– increased coverage by industry programmes of due diligence

implementation by their members, in particular at the smelter and refining stage

• Improved understanding and awareness of due diligence, through extensive capacity-building programmes

• Increased global awareness of artisanal mining– Within producing countries– By the international donor community

Implementai

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Global implementation of OECD Guidance

► July 2010 – Section 1502 of the US Dodd-Frank Act:

Specific reporting requirements for public companies using 3Ts and gold

DRC and adjoining countries focus (reasonable country of origin inquiry)

If from “DRC countries”, companies need an audited“Conflict Minerals Report”

► August 2012 – Final US SEC Rules recommend companies use the OECD Due Diligence Guidance

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RegulationSection 1502 of the U.S. Dodd-Frank Act

Under Dodd-Frank, audited “Conflict Minerals” report should include:

• Country of mineral origin

• Due diligence procedures

• Smelters of minerals

• Mine of origin (to greatest possible specificity)

► March 2014 – Draft EU initiative and legislation released:

Based on OECD Due Diligence Guidance

Initially a voluntary self-certification scheme for importers of 3T and gold into EU common market

Significant amendments by MEPs on 20 May

Accompanying measures

► Amended text currently examined by EC, Council and EP through the trilogue process

Cooperation with the EUEU initiative on responsible mineral supply chains

OECD Secretariat is actively supporting the EU Institutions to help ensure maximum alignment with the OECD Guidance, and develop accompanying measures

Work programme 2015-2016Objectives and activities

3 main objectives and 4 streams of work

1. Enhanced positive impact of due diligence in conflict-affected and high-risk areas

2. Increased transparency and accountability globally in mineral supply chains

3. Improved understanding & awareness of natural resource-related conflicts, the informal economy and the role of the private sector, beyond tin, tantalum, tungsten and gold supply chains

What do we hope to see in mineral supply chain due diligence in 5 years?

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• Supply chain due diligence reporting is embedded incommon business practices

• New supplements and / or activities as part of the implementation programme are developed? Other natural resources covered ?

• Private sector engagement in CAHRA has increased significantly (i.e. support to responsible ASM)

• Expanding geographic scope of due diligence implementation (South East Asia?)

Thank you

For further information on the OECD’s work on Responsible Business Conduct

http://mneguidelines.oecd.org/ http://www.oecd.org/corporate/mne/mining.htm Tyler.gillard@oecd.org; louis.marechal@oecd.org; Hannah.KOEP-ANDRIEU@oecd.org

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