Just in time for those Forms SD and conflict minerals reports, due May 31, the OECD has posted a new edition of the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, Third Edition. The third edition states that it “provides clarification on the scope of the Guidance by removing language in the Introduction that was perceived to limit its application only to the supply chains of tin, tantalum, tungsten and gold. The updated edition now clarifies that the Guidance provides a framework for detailed due diligence as a basis for responsible supply chain management of all minerals.” No other substantive changes are identified.

In addition, at the end of April 2016, the OECD declassified a Report on the Implementation of the Recommendation on Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict- Affected and High-Risk Areas, which was originally submitted to the OECD Council in October 2015. The Report finds that, in the first years of implementation, many adherents have demonstrated commitment and political leadership “to support implementation of the Guidance specifically by private sector operators.” In addition, the Report indicates that regulatory measures, such as Dodd-Frank, “have had the largest impact in terms of promoting responsible sourcing of minerals among businesses. While voluntary standards have a role to play in promoting uptake, especially among the more progressive businesses, well-designed regulatory approaches have provided the strongest impetus for business to change how they operate. At the same time, it is important that regulatory measures continue to be carefully balanced in order to incentivise responsible engagement, in particular in conflict-affected and high-risk areas, while avoiding adverse impacts; embargoes and disengagement by business from these areas can cause adverse impacts for mining communities and mineral producing countries.” In discussing the impact of due diligence implementation and the challenges remaining, the Report provides the following insights and observations:

  • “While it is still too early to draw firm conclusions, there are indications that due diligence contributes to breaking the link between mineral extraction and trade and conflict in the GLR [Great Lakes Region], at least with regards to 3T [tin, tantalum and tungsten] mines. The UN Group of Experts on the DRC (‘UN Group’) reports since 2012 that as a result of the implementation of due diligence ‘the security situation at tin, tantalum and tungsten mine sites has improved and trade in tin, tantalum and tungsten has become a much less important source of financing for armed groups’. It also reported that the implementation of private sector due diligence efforts in the DRC and Rwanda had resulted in increases in government revenues and improved government capacity to monitor the mineral sector. In addition, the implementation of due diligence in global mineral supply chains has resulted in major improvements in supply chain transparency, including in the emergence of multiple lists of all known 3TG [3T and gold] smelters and refiners and the publication of associated audit reports.

  • “However, challenges persist. The UN Group of Experts 2014 report states that armed groups continue to control many mine sites and profit from mining and the minerals trade. The UN Group estimates that in 2013 98% of gold produced in the DRC was smuggled out of the country and that nearly all of the gold traded in neighbouring Uganda – the main transit country for Congolese gold – is illegally exported from the DRC. The Group also reports of continued smuggling of 3T minerals and its potential to undermine the credibility and progress of international certification and traceability mechanisms. There is also a common agreement that the advancement of reforms needed to boost the implementation of the ICGLR RCM [International Conference on the Great Lakes Region Regional Certification Mechanism] in the countries concerned has been slow.

  • “Other significant hurdles need to be overcome, linked to the practical implementation of the Guidance. In particular, there is still a long way to go for companies to fully implement the reporting component of the [Due Diligence] Framework (step 5). Further harmonisation between industry programmes is also needed.

  • “Finally, it remains difficult to demonstrate the actual effects of the Guidance on the economic development of local communities and on the overall improvement of human rights’ protection. To date, most supply chain due diligence efforts have focused on implementing traceability, and have yet to consider ways to prevent risks and address the root causes of human rights abuses. This is particularly the case for issues such as child labour and impacts on gender in mining areas.

  • “In order to address the challenges identified above, it is crucial that Adherents [to the Recommendations] and other governments, private sector operators and civil society representatives continue to implement the Guidance though a number of measures: (i) Strengthen regulatory and policy coherence and interventions on responsible mineral supply chains, consistent with the Guidance; (ii) Strengthen incentives for industry implementation of the Guidance and engagement in conflict-affected and high-risk areas; (iii) Support the broader use and uptake of the Guidance in all high-risk mineral supply chains globally; (iv) Increase donor support and engagement in conflict-affected and high-risk areas to create an enabling environment for the effective implementation of the Guidance; And (v) increase engagement with relevant national industry associations to promote the broadest possible use and implementation of the Guidance.

  • “To contribute to these long term objectives, the Investment Committee and Development Assistance Committee approved a 2015-16 work plan aimed at achieving a number of important interrelated results: (i) Enhanced positive impact of due diligence in conflict-affected and high-risk areas; (ii) Increased transparency and accountability globally in mineral supply chains; And (iii) improved understanding and awareness of natural resource-related conflicts, the informal economy and the role of the private sector, and increased implementation of the Guidance beyond tin, tantalum, tungsten and gold supply chains.”