Responsible Sourcing of Metals and Gems from ASM Mineral Sectors

Estelle Levin Nally AMDCEthiopia8 April 2016

About this presentation

Photo © Estelle Levin Ltd. 2007

• What is responsible sourcing? • A strategy for procuring minerals in a way that contributes to a

company’s social and environmental compliance obligations, CSR commitments and risk environment.

• Applies all along value chain but most significant at the ‘pinch points’, e.g. refiners, gem manufacturers, after the first point of export-import of ASM commodity

• Presentation purpose: • Show why and how the market is seeking to source ASM minerals responsibly• Consider what the implications are for African countries achieving the AMV

• Scope• Responsible sourcing only, not value chains or financing• Export-oriented minerals only (precious metals, gems, rare earths, cobalt, etc.), not the

neglected minerals sector• Market? Businesses downstream of ASM producer nations, and consumer governments

Africa Mining Vision and Responsible Sourcing

Photo © Estelle Levin Ltd. 2007

Responsible sourcing creates a market push for achieving the Africa Mining Vision

Sustained, long-term trading relations based on mutual benefit between mineral importers and ASM supply chains provides commercial stability.

This makes the gradual formalisation and professionalisastion of mineral entities along the value chain more feasible, as the basis for ensuring …

…The “transparent, equitable and optimal exploitation of mineral resources “ which will “underpin broad-based sustainable growth and socio-economic development”

Why does business care about responsible sourcing?

Motivations for doing Responsible Sourcing

ComplianceLaw, e.g. DFA

CSR, e.g. Global Compact

Certification schemes, e.g. RJC

International norms, e.g. UNGPs

Risk Management

NGO & media attention

Brand protection

Investigations & exposes, e.g.

Panama Papers

Market Opportunity

Pioneer New markets

‘Ethical’ value proposition

Story-telling (comms)

The

The

Why does business care about responsible sourcing?

Motivations for doing Responsible Sourcing

ComplianceLaw, e.g. DFA

CSR, e.g. Global Compact

Certification schemes, e.g. RJC

International norms, e.g. UNGPs

Risk Management

NGO & media attention

Brand protection

Investigations & exposes, e.g.

Panama Papers

Market Opportunity

Pioneer New markets

‘Ethical’ value proposition

Story-telling (comms)

The

Why does business care about responsible sourcing?

Motivations for doing Responsible Sourcing

ComplianceLaw, e.g. DFA

CSR, e.g. Global Compact

Certification schemes, e.g. RJC

International norms, e.g. UNGPs

Risk Management

NGO & media attention

Brand protection

Investigations & exposes, e.g.

Panama Papers

Market Opportunity

Pioneer New markets

‘Ethical’ value proposition

Story-telling (comms)

How business does Responsible Sourcing: the 7 Approaches

Responsible Sourcing

Supply Chain Traceability

Due Diligence

CSR / Sustainability Interventions

Mining and Supply Chain Certification

Philanthropy

Advocacy

Avoiding ASM

Different mineral sectors privilege different approaches.

Different supply chain tiers privilege different approaches.

Different geographies privilege different approaches.

Some approaches stand up as ‘responsible’ by themselves; others do not.

What does the push to responsible sourcing mean for African Governments?

Responsible buyers can be a partner to help tackle various commercial problems and opportunities in the ASM sector

• Access to finance for viable SSM ventures with potential to grow

• Support for value-addition projects in country• Support to tackle major issues impeding formalisation and

sustainability in the sector• Influence ASM trading entities to improve practices• Do PR on a country’s efforts in international policy arenas

with international civil society and donors• Lobby donors to provide additional support to a state to

enable responsible business to flourish• Lobby sectoral associations to adjust standards to be

more realistic for ASM• Positive story-telling and marketing of products

containing ASM minerals

• What can AMDC do to capitalise upon these opportunities?

What does the push to responsible sourcing mean for African Governments?

The market approach to responsible sourcing is driven by 5 major policy priorities

• Neoliberalism and the transparency agenda (accountability led by civil society and media rather than government; industry prefers self-regulation)

• Anti-aid agenda (reduce aid dependency to create self-sufficiency)

• Sustainability agenda (enhance positive impacts, reduce negative ones)

• Human rights agenda (governments protect, business respect, citizens claim)

• Due diligence agenda (know and manage risk in your operations, and up your supply chain)

• Are you aligned with the market’s priorities? • Do these same policy positions bring value to you in how you

could formalise and develop the sector? Why? Why not?• What can AMDC do to build understanding between African policy

priorities and market policy priorities?

What does the push to responsible sourcing mean for African Governments?

You are in competition with the circular economy!

• Strategic disengagement from ASM supply chains by some large brands

• We have to show them how ASM is the responsible choice! • Measure your impacts• Demonstrate management of negative impacts• Tell stories of ASM contribution

• Ultimately, do you want to keep responsible buyers engaged? Why? Why not? What’s the alternative? Is it better?

• What can African governments and AMDC do to keep responsible buyers get more interested in ASM minerals?

What does the push to responsible sourcing mean for African Governments?

You are in competition with each other as the preferred responsible source of ASM minerals

• Buyers apply criteria as to whether or not to do business in or source from certain countries

• Buyers are expecting you to make ASM formalisation and positive impacts more feasible and more likely. How?

• Political stability and predictability• Provide an enabling legal framework and operating

environment• Mitigate the risks in the operating environment,

e.g. corruption, illicit financial flows, discrimination against vulnerable groups, human rights violations, disregard for the environment

• Work with the private sector and civil society for a joined-up approach

• Demonstrate alignment with their policy priorities

What can African governments and AMDC do to enable mineral buyers / processors to source responsibly from ASM value chains in their jurisdictions?

Other questions

• What concrete actions could AMDC take to help governments engage better with responsible sourcing initiatives, and vice versa? • Which of the report’s recommendations would enable

responsible sourcing if implemented?

• What are the responsible sourcing initiatives that AMDC could engage with?

• How can AMDC add value to these initiatives and vice versa?

• How to incorporate the Africa Mining Vision into their planning and implementation?

• In what ways are these initiatives opportunities for AMDC? And threats?

• What are the concrete actions AMDC could take?

• Where is there clear water, i.e. gaps for AMDC to address issues in responsible sourcing that are under-served?

EXTRA SLIDES

Approach 1: Supply Chain Traceability

What is it? Tracking is following the material down the supply chain from origin to end user. It ‐documents real time movements of the physical mineral. Tracing helps the buyer know where the mineral came from, went, and how. It is following the material or its owners/handlers up the supply chain from end user to origin. Tracing is done using data / documentary evidence only.

So What? Why do it? Tracking a.) Prevent theft or laundering of material into a supply chain, and b.) gather data that makes traceability possible by the downstream users and their auditors. Tracing allows a buyer to map the historical movement of material, from origin to user, by revealing each prior tier of the supply chain. This allows them to a.) do due diligence and b.) make claims about their mineral and turn these into stories for marketing.

Now What? How to do it? The many different approaches include bespoke in-house systems and service providers. Which one is best depends on the mineral, geography, and goals.

Upstream Supply Chain Traceability Example Systems

3Ts iTSCiGeoTraceabilityMetTrakAnalytical Fingerprinting

Gold MineralCareITOA in DRC GeoTraceability, ARM’s eCert

Diamond GIAKPCSMineralCare

Coloured Gemstones

MineralCareCorporate proprietary systems, i.e. Gemfields, MuzoGIA (larger, valuable stones)

Dimension Stones

ID Stone

2. Due Diligence

What is it? Due Diligence is “an on-going, proactive and reactive process through which companies can ensure that they respect human rights and do not contribute to conflict” (OECD DDG)

Scope may be confined to conflict, worst human rights, white collar crime risks. Some companies are packing more sustainability risks into their due diligence systems, e.g. Hg management, health and safety, mining in protected areas, etc.

So What? Why do it? • International mandate. Due diligence on mineral supply chains is largely

directed by: • the UNGPs, OECD Guidelines for MNEs, the OECD’s Due Diligence

Guidance.

• Compliance push: Supporting laws • ICGLR countries, US, EU (pending), Switzerland (civil society push)

• Market imperative: exposed brands are pushing it up their supply chains across minerals• Apple, Intel, Fairphone, Valcambi, Argor Heraeus, Signet, luxury

jewellers etc.

2. Due Diligence

Now What? How to do it? Due Diligence involves building management systems, identifying, assessing, and mitigating risks, reporting on this, providing assurance on this reporting and activities undertaken.

Four domains for assessing risk1. Geography (operating environment) for provenance and entity2. Entity (KYC)3. Mineral (KYP)4. Money (KYM) #FollowtheMoney

Example systems:• ICGLR’s Regional Certification Mechanism• Conflict Minerals Initiatives, e.g. iTSCi, BSP, Just Gold, MineralCare• Proprietorial systems, e.g. Valcambi Due Diligence Procedures for ASM

sourcing• The GIFF Project

3. CSR / Sustainability Interventions

What is it?

• Scope may include conflict and white collar crime risks. • Techniques may include due diligence up value chain or only at the level of the mine,

region, or country of origin. • Ultimate goal is not so much risk management as driving change towards positive impacts

and more sustainable ASM systems.

So What? Why do it? • Compromise for minerals for which 100% traceability is infeasible. • Responds to broader sustainability mandates than OECD DDG (e.g. SDGs, Global Compact)• A company can pursue interventions that are aligned with their brand values and priority

areas for impact (e.g. worker / women’s rights, water quality, sustainable livelihoods, etc.), • Creates proactive communications opportunities for marketing purposes• Creates reactive communications opportunities if a negative issue surfaces in the media

Transparency Provenance identification

Risk assessments

Design interventions

Improve sustainability of

value chains

3. CSR / Sustainability InterventionsNow What? How to do it? Impact-driven Interventions in the ASM community, producer nation and/or manufacturerCreating standards for sourcing at sector or company level

1. RESP, brand gem manufacturer, the Dragonfly Initiative, RJC Task Force (coloured gems)

2. Mining companies (gems, gold)3. Kemet Partnership (tantalum)4. Solidaridad (gold)

Example Initiative: major brand coloured gem manufacturer• ELL project since 2011.

1. Supply chain transparency & provenance consultations and investigations

2. Country and gem level ‘deep dive’ risk assessments of existing sources: 1. Analyse sustainability risks in the operating environment 2. Decide if we want to continue to engage or disengage

3. Scope then feasibility assessments of alternative and additional sources1. Country and gem level opportunity analysis, including

commercial, due diligence, sustainability, and impact considerations, possible interventions

4. Partner needs assessments and relationship building

4. Mining & Supply Chain Certification

What is it? • Responsible business practices is assured through 3rd party certification. • Involves all of traceability, due diligence, & CSR/sustainability – a ‘total

quality’ guarantee

So What? Why do it? • Allows businesses to provide auditable guarantees on their responsible

business practices • Generates industry leaders that can potentially transform sectors if

other actors leverage the opportunity, e.g. generating centres of excellence, empowered miners able to advocate for rights, improved political support for ASM formalisation and rights, etc.

• More likely to drive impact for participating entities and their stakeholders

• But scale of impact depends on type of system (niche vs. sector approach)

4. Mining & Supply Chain Certification

Version 1: NGO or Industry led Example Initiatives

1. RJC2. IRMA3. Fairtrade4. Fairmined5. DDI

Version 2: Government-led Example InitiativesGovernments lead system & issue certificates based on auditor’s recommendations

1. KPCS (diamonds)2. ICGLR Regional Certification Mechanism (3TG)3. UNICRI (coloured gems)

None for coloured gems – yet!(in progress)

5. PhilanthropyWhat is it? 1. Business as usual plus a charitable act: A type of offset2. Can be combined with any of the above approaches

So What? Why do it? • Suits small businesses and ones with conservative culture

• Cheaper and easier as it does not require a cultural and operational shift:

• A company doesn’t have to change its activities, carrying on without due attention to harms its (in)actions may be causing

• Company can treat its charitable act as a gesture of goodwill, and use this for marketing / publicity.

• Risky when done in isolation (Greenwash risk); can be positive when combined with other responsible sourcing activities.

• Required by law in some geographies (e.g. India’s CSR law)

Example InitiativesDiamond Empowerment Fund, Brilliant Earth, Other?

6. Business Advocacy on an ASM issueWhat is it? Business seeks to push a point of view or the adoption of particular standards at the policy level and up their supply chains in order to make their preferred approach the norm

So What? Why do it? • Prove that industry can self-regulate – mandatory compliance push

unnecessary• Have a first-mover advantage in getting systems in place to address a

threat / opportunity

How to do it?• Develop your own system or standard then push to make this the industry

norm• Participate in conferences as a speaker or on organising committee• Fund research and strategising on an issueExample Initiatives

1. E.g. Apple and CFSP, (conflict minerals)2. Tiffany & Co. and IRMA, (sustainable mining)3. Signet and RJC, (sustainable jewellery supply chains)4. De Beers and DDI (ASM and development)5. Valcambi’s ASM standards (responsible sourcing from ASM)

Selection of Initiatives in Africa Supporting Responsible Sourcing

Also various country-based World Bank projects

Mineral Initiative

Gold Minimata Convention National Action Plans for ASM FormalisationThe GIFF ProjectFairtrade Gold in Tanzania, Kenya, UgandaFairmined Gold in Senegal, Burkina Faso

3TG USAID’s CBRMT (DRC and ICGLR)ICGLR’s Regional Certification MechanismThe Dutch Public Private Partnership

Diamonds Diamond Development Initiative

Coloured stones RESPUNICRI