Countries take a global stand on conflict minerals
In regards to Environment, Health & Safety legislation, we rarely see a consistent and global approach to protect human rights through regulation impacting the environment. The form, impact, and status of these regulations differ, but the objective is uniquely the same: to address the emergence of conflict minerals mined with the high cost of ignoring basic human rights.
The US requires reporting for conflict minerals used for “functionality or production”
In the United States, the Dodd-Frank Wall Street Reform and Consumer Protection Act has been in effect since 2010, but compliance with the act is scheduled to start this year with reporting deadlines looming in May 2014. The Act requires publically traded companies to investigate, as part of due diligence efforts, whether conflict minerals were used in the company’s production. Conflict minerals are currently defined as cassiterite, columbite-tantalite, gold, and wolframite.
This examination applies to conflict minerals sourced from the Democratic Republic of the Congo and surrounding countries. Covered countries include Central Africa Republic, South Sudan, Zambia, Angola, Republic of the Congo, Tanzania, Burundi, Rwanda, and Uganda. The Act states “…the exploitation and trade of conflict minerals originating in the Democratic Republic of the Congo is helping to finance conflict characterized by extreme levels of violence in the eastern Democratic Republic of the Congo, particularly sexual- and gender-based violence…”
A company must comply with the Dodd-Frank Act if the company uses conflict minerals in the “functionality or production” of a product the company manufactures. The “functionality or production” standard creates supply chain transparency in manufactured products because it requires that minerals be traced to the original country of origin. A company must first determine whether its product contains conflict minerals that subject the company to reporting under the Act, and then must determine whether these minerals originated in a country covered by the act. If the answer is yes, the company is required to submit a Form SD and may be required to submit a Conflict Minerals Report (note that limited exceptions apply to recycled or scrap sources containing conflict minerals). The SEC provides guidance for companies to make “the functionality or production” determination and to assist in the required reporting. The first reporting deadline is 31 May 2014.
Minerals sourced from the listed countries have been historically used to finance militias, raising human rights concerns and increasing human risks. Through the Form SD reporting and supplemental Conflict Minerals Reports, the US is ultimately requiring disclosure of human rights violations for end consumers rather than banning the use of conflict minerals from these countries. Through this due diligence, the U.S. government is requiring companies to track sources of minerals in its supply chain to ensure the final products do not perpetuate the violation of basic human rights.
EU calls for input on possible action on ‘conflict minerals’
The EU and Canada might line up with the United States in the regulation of ‘conflict minerals’ according to latest initiatives. On 26 March 2013, the Directorate General for Trade of the European Commission launched a public consultation on ‘conflict minerals,’ requesting the views of interested stakeholders on possible EU initiatives. The EU consultation request comments on the responsible sourcing of minerals originating from conflict zones and high-risk areas, including “war zones, post-war zones, as well as areas vulnerable to political instability and civil unrest.”
In the introduction to the public consultation, the European Commission cited examples of existing initiatives:
- At the international level: the UN Guiding Principles on Business and Human Rights; the OECD Guidelines for Multinational Enterprises; and the OECD Due Diligence Guidance for responsible supply chains of minerals from conflict-affected and high-risk areas or the Extractive Industry Transparent Initiative;
- United States: Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd Frank Act), sections 1502 and 1504; and
- At EU level: Commission Communication on Commodity markets and raw materials (2011) and Commission Communication on Trade, growth and development (2012)
Public consultation is the first step towards a possible regulatory measure on ‘conflict minerals’ at the EU level. The European Commission will use the responses from the public consultation to determine how to increase or continue efforts with respect to due diligence initiatives and support for good governance mining. All interested stakeholders can submit their contributions online by completing the questionnaire by 26 June 2013.
Canada proposes Bill to regulate ‘conflict minerals’
One day before the EU launched its public consultation on conflict minerals, a bill was re-introduced in Canada on the same issue (C-486 from 26 March 2013). Under the bill, Canadian companies would be required to exercise due diligence when extracting, processing, purchasing, trading and using designated conflict minerals from the Great Lakes Regions of Africa.
The Great Lakes Region of Africa would include Angola, Burundi, the Central African Republic, the Democratic Republic of the Congo, Kenya, Rwanda, Sudan, Tanzania, Uganda and Zambia, and any additional country specified by the International Conference of the Great Lake Region. Similar to the Dodd-Frank Act in the United States, the Canadian Bill also requires due diligence measures and annual reporting. As determined under the Dodd-Frank Act in the US, Canada would also regulate the designated minerals originating in the Great Lake Region of Africa (gold, casserite, wolframite, coltan, or any of their derivatives, such as tin, tungsten and tantalum or any other mineral or derivate specified by ministerial order).
It remains to be seen if the EU and Canadian initiatives become a reality. The initiatives in the EU and Canada show increasing regulatory activity to obtain information on companies’ supply chain and make supply chains more transparent for the end consumer.