Conflict Minerals Compliance | Regulations

Overview

Irresponsible mining practices can have severe social and environmental consequences. It is not just tin, tungsten, tantalum, and gold (3TG) that pose risks, but also other minerals such as Cobalt, Mica, and metals used in the automotive and electronics sectors. Regulations on conflict minerals aim to address the trade of minerals from conflict-affected regions associated with human rights violations and armed conflicts.

Mineral Due Diligence Awareness

The Responsible Minerals Initiative (RMI) focuses on increasing awareness of the social and environmental impacts of mineral extraction and processing in supply chains. RMI worked closely with the Organization for Economic Cooperation and Development (OECD) to develop the Due Diligence Guidance for Responsible Mineral Supply Chains from Conflict-Affected and High-Risk Areas to promote responsible mineral sourcing practices.

RMI has developed templates aligned with OECD guidelines to collect information on mineral origin, smelter, and refiner details from the supply chain.

Conflict Minerals Reporting Template (CMRT) – Report due diligence on 3TG minerals: tantalum, tin, tungsten, and gold. (3TG)
Extended Minerals Reporting Template (EMRT) – Report cobalt and mica supply chain due diligence information.
Pilot Reporting Template (PRT) – Report on due diligence information for minerals not covered by the conflict minerals reporting template.

Objectives of Mineral Supply Chain Regulation

The regulation aims to disrupt the financing of armed groups involved in human rights abuses and armed conflict in regions where conflict minerals are sourced promoting peace and stability.

Eliminate the sourcing of conflict minerals that have been linked to human rights violations, forced labour, child labour and other forms of exploitation.

Increase transparency in the supply chain by collecting and sharing information with stakeholders and consumers. This increased transparency helps ensure that minerals are sourced responsibly and supports efforts to establish ethical supply chains. Consumers can choose to support businesses that prioritize responsible sourcing.

The regulation aims to encourage businesses to adopt responsible sourcing practices and promote the use of conflict-free minerals.

Non-compliance with the conflict mineral regulation may result in businesses:

Directly or indirectly fund the operations of the armed group through the purchase of minerals from conflict-affected regions.
Acting as an enabler of human rights violations down the supply chain.
Facing administrative sanctions, paying fines/penalties, and losing brand reputation.
Products that contain conflict minerals can cause sourcing delays due to supply chain disruptions.

Responsible sourcing implementation challenges

Here are some challenges an organization may face when trying to stay compliant with responsible sourcing practices.

Supply chain complexity

Conflict minerals regulations require companies to trace the origin of minerals used in their products. This can be difficult due to the limited transparency and complexity of global supply chains

Traceability

The goal of conflict minerals regulation is to have businesses trace the source of minerals like 3TG, mica, and cobalt used in their products back to their smelter of origin, that is, the identification of the Smelter or Refiner (SOR). Hence, finding a responsible SOR can be challenging

Supplier Engagement

Getting a 100% response from the suppliers can be difficult, especially if the businesses require mineral reporting per item level. In such cases, data collection, consolidation, and auditing can become complex owing to the volume of data, which can prove challenging for suppliers

Supply chain due diligence

Companies may need to conduct audits or engage third-party auditors to proactively identify, manage, and report risks in their supply chains and validate the information provided by their suppliers. However, auditing complex supply chains can be time-consuming, costly, and resource-intensive.

Finding alternative minerals

Minerals often exhibit certain qualities and characteristics that make them desirable for specific applications. For example, Tin is more conductive and has higher electrical resistivity, which can be used in sensitive applications. Discovering substitute minerals can present considerable technical challenges and significantly higher costs.