OECD Due Diligence Guidance for Responsible Mineral Supply

OECD Due Diligence Guidance for Responsible Mineral Supply Chains Hannah Koep-Andrieu Policy Adviser, Extractives Responsible Business Conduct Unit

Demand for responsibly produced minerals Consumer • Consumer and civil society campaigns (e. g. Amnesty Int’l, Global Witness, Partnership Africa Canada, Enough Project, etc. ) • Industry: EICC (electronics), AIAG (automotive), AIA (aerospace) LBMA, RJC & WGC (gold & jewellery), CCCMC (China) Political • G 8/7 • UN Security Council Resolutions on DRC (2009, 2010) and Ivory Coast (2013) • ICGLR Heads of States endorsement (2010) • OECD Council Recommendation (2011) • EU Parliament • CSR strategy • Commissioners statement on raw materials • China-OECD Programme of Work Legal • Section 1502 of US Dodd. Frank Act - conflict minerals reporting • EU legislation on responsible mineral supply chains • Legal requirement in DRC, Rwanda and Burundi • Relevant legislation on forced labour, child labour (e. g. UK & US) and due diligence expectations (France)

Objective and scope Objective ü 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 ü 5 -step risk-based due diligence process, applies to all companies throughout the mineral supply chain that produce or potentially use minerals from conflictaffected or high-risk areas ü Applicable to all minerals, global geographic scope Role of stakeholders ü Companies: Implement due diligence and the 5 -step framework, possibly through industry associations or initiatives ü Governments: Create the enabling environment for responsible mineral supply chains ü Civil society: Monitor mining sector governance and company activities throughout the global mineral supply chain 3

So how?

5 -Step Framework for Due Diligence 1 Establish strong management systems: Policy, internal capacity, supplier & business partner engagement, internal controls, data collection, grievance mechanism 2 Identify, assess and prioritise sourcing risks: map operations, business partners & supply chains, prioritize based on severity of harm (sector, counterparty, and site for high-risk issues) 3 4 5 Manage risks : inform senior management, fix internal systems, build leverage individually or collaboratively, use existing networks to manage risk (e. g. industry, workers reps, non-traditional partnerships), build internal and business partner capacity Audits at refiners and smelters: where relevant, monitor medium-high-risk operations, products or services, after change of circumstance, undertake audits, assurance, etc. Communicate and report on due diligence: with due regard for commercial confidentiality and competitive concerns

‘Whole of supply chain’ due diligence Appendix on Artisanal and Small-Scale Mining Choke point: Refiners and Smelters “Upstream” companies: “Downstream” companies: ü Establish traceability or chain of custody to mine of origin ü For “red flagged” supply chains, undertake on-theground assessments of mines, producers & traders for conflict, serious abuses, bribery, tax evasion, fraud, money-laundering ü Collaborative engagement with local gov’t, CSOs, local business to prevent & mitigate impacts, monitor ü Identify “choke points” in supply chain (e. g. metal smelter or refiners) ü Collect information on their upstream due diligence (e. g. both through individual efforts and industry auditing) ü Use collective industry leverage to encourage improvement of upstream due diligence

How is this relevant to you?

Jewellery supply chain due diligence ü OECD Due Diligence Guidance is applicable to all minerals, globally ü Supplement on Gold but the same 5 -step due diligence process applies to all other materials ü Focus in EU regulation on gold has brought about increased awareness by authorities and law enforcement bodies: ü New rules on cash imports into the EU will include gold ü More law enforcement and customs investigations into gold

Significant uptake by all stakeholders supports global implementation

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

Step 1: Set up company management systems ü Adopt a policy on minerals from conflictaffected and high-risk areas ü Communicate the policy to suppliers and incorporate due diligence expectations into contracts ü Learn about due diligence and conflict minerals ü Appoint a knowledgable staff member to be in charge of due diligence ü Keep records related to mineral purchases and risks ü Establish a transparency system over the supply chain: Use chain of custody or traceability tracking system for minerals 11

Step 2: Identify and assess risks Upstream: ü conflict risks at mines ü conflict risks along transport routes and at trading centres ü conflict risks associated with suppliers ü Risks within chain of custody or traceability scheme (corruption, fraud etc. ) Downstream: ü Use best efforts to identify smelters / refiners ü Assess risks by evaluating whether smelters undertake due diligence (eg reviewing audit participation and audit information) Greater risk of fraud = more monitoring!12

Step 3: Respond to identified risks ü Report findings to senior management ü Devise, adopt and implement a risk management plan, that includes: STOP sourcing from or engagement with suppliers that are: ü Committing serious abuses ü Providing direct or indirect support to non-state armed groups (ex: rebel or militia groups) CONTINUE sourcing but MITIGATE RISKS for all other risks Risk mitigation ü Make a plan for how to eliminate the risks you identified ü Monitor supply chain with support from stakeholder networks 13

Step 4: Independent third-party audits of smelter/refiner due diligence ü For the OECD Due Diligence Guidance, the focus is on audits at the smelter and refiner level ü Audits usually happens outside the producing region ü Can be carried out by industry programmes, such as: 14

Step 5: Report annually on supply chain due diligence Every year companies should write a report on the due diligence they have carried out, including: ü Due diligence and conflict minerals policy ü Examples of communication with suppliers regarding due diligence expectations ü Name of the person responsible for due diligence in the company ü Description of the chain of custody or traceability system ü How the company complies with DRC and ICGLR requirements ü Company risk assessment and risk management ü Summary audit reports of smelters/refiners with due regard taken of business confidentiality and other competitive or security concerns 15