“Ensuring responsible business conduct with regards to conflict minerals – Q&A for companies”

 

CONFLICT MINERALS Q&A

 
 

Well-documented links between extractive activities and conflicts in some regions of the world have sparked concerns about companies’ contribution to a vicious cycle of violence, instability, and human rights abuses. In this context, regulatory requirements for responsible business conduct are rising to ensure business respect for human rights and the environment. For adverse impacts related to minerals and metals from conflict-affected and high-risk areas (conflict minerals), an increasing number of laws are obliging companies to conduct due diligence.

But what exactly are conflict minerals, how are companies linked to them and how are they expected to address the risks and impacts of these materials?

In the following, we answer the most important questions for companies looking to get their conflict minerals due diligence started in line with international standards.

 

What are typical human rights risks and impacts of mining?

 
 

Anywhere in the world, mining is a high-risk activity with potentially high impacts on people and the environment. This is due to the nature of extractive activities, which are typically land intensive and often require heavy machinery or potentially harmful chemicals to extract the materials. The type of mining – whether it is industrial or artisanal – also influences its social and environmental impacts.

Typical human rights risks and impacts of mining include:

  • Environmental impacts, including water and soil contamination and air pollution

  • Impacts on local communities’ rights, e.g. to housing, food, water, health

  • Impacts on indigenous peoples’ rights, e.g. right to free, prior and informed consent

  • Corruption

  • Conflicts, e.g. in case of conflicting interests of industrial projects and small-scale miners, conflicts over impacts of mining or profits from resource exploitation

  • Conflict finance e.g. in case of extortion by illegal armed groups

To ensure responsible business conduct and identify the human rights risks and impacts of specific mining operations, companies need to gain a better understanding of the challenges and dynamics of the local context.  

—> For a more detailed answer, refer to the pdf with the full Q&A.

 

What are conflict minerals?

 
 

Conflict minerals are minerals and metals from conflict-affected or high-risk areas (CAHRAs). As defined in the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, these areas are “identified by the presence of armed conflict, widespread violence or other risks of harm to people” and are often characterised by widespread violations of human rights and national or international law.

Conflict minerals are a challenge for responsible business conduct because extractive activities in sensitive contexts pose additional risks for people and the environment. While the production of minerals and metals can be an important source of national income and development for producing countries, it can also cause poverty , insecurity and human rights abuses. This may be the case when it destroys the livelihood of or displaces local communities, is used to finance illegal armed groups, or is produced under precarious conditions that endanger the health and life of workers.

Only tin, tantalum, tungsten and gold are covered by existing conflict minerals regulations, but other materials have also been well researched and documented for the human rights risks related to their production.

—> For a more detailed answer, refer to the pdf with the full Q&A.

 

Where is the risk of negative impacts greatest?

 
 

The extractive industry is an inherently high-impact industry with significant risks for people and the environment. Therefore, it requires a responsible operation mode to minimize potential negative impacts in any country it occurs. The presence of certain risk factors in a country or area makes it more difficult to ensure responsible business conduct, and thus increases the likelihood that mining negatively impacts peace, stability, development and human rights.

Some of the most important risk factors that may exacerbate negative impacts of mining include:

  • Corruption

  • State Fragility

  • Poverty

  • Conflict

  • Weak natural resource governance

When produced in a conflict-affected or high-risk context, all types of minerals and metals can potentially be linked to conflict financing and severe human rights abuses. To ensure responsible sourcing of minerals and metals, it is thus essential to trace back the supply chain to identify where and how they were mined, extracted and traded. While it is always recommended to conduct thorough due diligence for minerals and metals, additional measures are necessary to address the risks and impacts of conflict minerals.

—> For a more detailed answer, refer to the pdf with the full Q&A.

 

How can I identify company links to conflict minerals?

 
 

As the use of metals is indispensable for most aspects of the economy and modern life, almost all companies are somehow linked to their extraction and trade. Companies can be linked to (conflict) minerals and metals through their own operations, business relationships or value chain:

 
 

But not every mineral or metal is a conflict mineral. To conduct a high-level analysis of whether the minerals and metals linked to your company may be sourced from conflict-affected and high-risk areas, we propose a six-step process:

Mapping raw materials

  1. Map the different minerals and metals linked to the company

  2. Map the materials’ geographic origin - if unknown, make assumptions based on the materials’ publicly available national production numbers

    Mapping Risks

  3. Map general country risks by matching the main producing countries of the material with the key risk factors for producing conflict minerals (e.g. poverty, corruption, conflict, State fragility)

  4. CAHRAs list: check if the production countries are included in the indicative list of conflict-affected and high-risk areas developed for the four materials covered by the EU conflict minerals regulation.

  5. Identify material-specific country risks through high-level online research on the human rights impacts of the material in the main production countries

    Evaluation

  6. Evaluate the overall risk of the material causing negative impacts on peace and human rights in the production country based on the analysis abov

An example of how this high-level analysis could look like in practice can be found on page 10 of our conflict minerals Q&A.

 

How can I address the risks arising from conflict minerals?

 
 

Human rights due diligence

To ensure responsible business conduct and respect for human rights, all companies are expected to implement human rights due diligence (HRDD).

The higher the risk for negative human rights impacts, the more thorough a company’s HRDD processes must be. To ensure responsible business conduct in conflict-affected and high-risk areas, companies are thus required to conduct heightened due diligence: analyse their risks and impacts closely, take strong measures, and integrate additional considerations in their due diligence processes.

Conflict-sensitive approach 

Businesses are not neutral actors in conflicts. Their actions and the impact of their operations will influence conflict dynamics, even when they act with best intentions and do not take sides. As a consequence, when operating in conflict-affected contexts, companies should implement a conflict-sensitive approach. According to the UN Working Group on Business and Human Rights (p.10/11), this encompasses three main steps: 

  1. Identify root causes of tensions, grievances and potential triggers that can affect conflict 

  2. Map the main actors in the conflict and their motives, capacities and opportunities to inflict violence 

  3. Identify own impacts: anticipate the ways in which the businesses’ own operations, products or services impact upon existing social tensions and relationships between the various groups, and/or create new tensions or conflicts 

By taking effective measures to ensure responsible business conduct, companies can use their influence to help turning the production of minerals and metals in sensitive contexts into a driver for peace and development. Under certain circumstances, however, and as a last resort, the only way companies can avoid becoming complicit in human rights abuses may be to stop sourcing minerals and metals from certain areas and find alternative materials elsewhere.

—> For a more detailed answer, refer to the pdf with the full Q&A.

 

What obligations arise from the Swiss conflict minerals regulation?

 
 

The due diligence requirements of the new Swiss conflict minerals regulation have been defined analogous to the requirements specified in EU Regulation 2017/821. The regulation applies to Swiss companies that import or process conflict minerals to / in Switzerland. This includes minerals and metals containing tin, tantalum, tungsten or gold from conflict-affected and high-risk areas (CAHRAs) above certain annual quantities.

Companies and individuals in the scope of the regulation have to implement a 5-Step Framework which is based on the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals:

  1. Management system: establish a management system with a supply chain policy for minerals and metals potentially sourced from CAHRAs, including a system to trace back the supply chain

  2. Risk analysis: assess and evaluate the risks of negative consequences of minerals and metals potentially sourced from CAHRAs

  3. Risk management plan: define a risk management plan and implement measures to minimize the identified risks

  4. Third-party audit: audit compliance with the due diligence requirements through an independent expert

  5. Annual report: publish an annual report about the company’s compliance with due diligence requirements

Exemptions: Recycled metals and companies that implement equivalent international standards, such as the EU Regulation 2017/821 and the OECD Due Diligence Guidance for Conflict Minerals, are exempt from the regulation.

The EU and Swiss due diligence requirements for conflict minerals are below international standards on responsible business conduct (such as the UNGPs or OECD Guidelines) in various aspects. A company that complies with the regulations without implementing a full human rights due diligence may not fulfil international standards, due diligence legislation, or the expectations of its business partners and investors. Consequently, conflict minerals due diligence should be regarded as complementary, not alternative to general human rights due diligence.

—> For a more detailed answer, refer to the pdf with the full Q&A or our overview of the new Swiss regulation.