Conflict-Free Minerals: What Can Donors Do?

Conflict-Free Minerals What can donors do?

March 2012

WHAT Are THe mAin minerAlS concerned?

50

Sn Tin

73

Ta

Tantalum

USES: About half of tin production is used in solder and tin plating of steel. Another major use is food packaging.

SOURCES: Most tin comes from cassiterite. The top five countries for tin mining are Indonesia, China, Peru, Bolivia and DR Congo (where one-third of the world’s cassiterite reserves are found).

USES: Extracted from coltan, the leading use of tantalum is in electronic capacitators, used in consumer electronics (e.g. mobile phones, DVD players). The demand for these electronics is large and growing, with global production of mobile phones averaging 25 units per second, 24/7.

SOURCES: The top five countries for tantalum mining are Brazil, Mozambique, Rwanda, DR Congo and Australia.

74

W

Tungsten

79

Au Gold

USES: Notable uses include incandescent light bulb filaments, Xray tubes and superalloys.

SOURCES: The top five countries for tungsten production are China, Bolivia, Germany, Portugal and Israel. While DRC represents only 2-4% of world production, tungsten is a growing source of revenue for armed groups.

USES: Monetary reserves, jewellery and various industrial applications (e.g. wiring).

SOURCES: The top five countries for gold production are China, United States, Australia, South Africa and Russia.

THe AfricAn greAT lAkeS region Some of the world’s largest known deposits of these minerals are located in the African great lakes region. The International Conference of the Great Lakes Region (ICGLR) includes Angola, Burundi, Central African Republic, Republic of Congo, Democratic Republic of Congo (DRC), Kenya, Uganda, Rwanda, Sudan, South Sudan, Tanzania and Zambia.

conflicT-free minerAlS Are A developmenT iSSue One in five fragile states is considered mineral-dependent, meaning that minerals represent at least 25% of the country’s exports.

Mineral-dependent fragile states include the Democratic Republic of Congo (DRC), Guinea, Sierra Leone, Papua New Guinea, Burkina Faso, Central African Republic, Georgia, Somalia and Zimbabwe. In addition, an estimated USD 1 trillion worth of untapped mineral reserves were identified in Afghanistan in 2010.

Minerals can create jobs and growth, as in DRC, where the livelihoods of an estimated 20 million people — and 78% of exports — depend on the mining sector, and where minerals are the main engine of growth. But minerals such as gold, tin, tantalum and tungsten can also fuel conflict and contribute to serious human rights abuses.

These adverse impacts sap development results well beyond the mining sector: Illegal trade, rents and corruption limit incentives for reform in the public sector (including the security sector); they limit the state’s accountability to citizens; and they limit the state’s ability to deliver public services. In mineral-dependent fragile states, breaking the nexus between conflict and minerals is critical to peace and prosperity (see Figure 1). figure 1 Conflict-free minerals: Transforming a vicious cycle into a virtuous one

CONFliCT MiNERAlS



Smuggling and criminal activity

violence and poverty

CONFliCTFREE MiNERAlS

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Weak state capacity

Sustainable livelihoods

Stability and growth

lack of domestic revenues



fiscal revenues



State capacity for public services

WHy noW? in recognition of the role of minerals in development, a unique coalition has negotiated a set of realistic guidelines for companies extracting or buying minerals from conflict zones. The oecd-un due diligence guidance, as these guidelines are known, helps companies all along the supply chain to identify and address the potential negative impacts of their mineral sourcing practices so that they do not fuel conflict. The Guidance is based on a five-step framework for risk-based due diligence (see reverse).

The Guidance has been widely endorsed. It was approved by the OECD Development Assistance and Investment Committees, and the OECD Council of Ministers. Eleven heads of state of the International Conference of the Great Lakes Region (ICGLR) and eight emerging economies have endorsed the Guidance. Since mid-2011, the Guidance has been piloted by over 90 companies including Boeing, Ford, General Electric, Hewlett-Packard, Lockheed Martin, Nokia, Oracle, Panasonic, Philips and Siemens.

The Guidance provides a practical way to make minerals work for development:

•

Consumer and civil society scrutiny: Consumer, civil society and social media movements are increasing the pressure on companies extracting or buying minerals from conflict zones to take basic steps to “know and show” that these minerals do not fuel conflict or contribute to human rights abuses.

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Binding requirements from governments: Legislation in some OECD countries is making due diligence a requirement (e.g. the U.S. Dodd-Frank Act, §1502). The governments of resource-rich countries are also taking measures to increase transparency in the mining sector and to impose due diligence requirements (e.g. DRC, Rwanda and Burundi). This means that the Guidance has implications for companies along the whole supply chain, regardless of whether they are based in OECD countries, emerging economies, or host countries.

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lessons learned from the first generation of extractive industries initiatives: The Guidance benefits from the lessons learned from the Extractive Industries Transparency Initiative (EITI) and the Kimberley Process, and builds on them to ensure coherence and complementarity.

WHAT cAn donorS do?

Companies may be tempted to simply pull out of conflict-affected zones. For example, while there is booming demand for tantalum and DRC has an increasing share of world production (from nil in 1999 to 13% in 2009), there are alternative sources, including Brazil, Australia and Canada. This would result in shutting fragile states from global markets and stifling economic growth.

The evidence on whether more companies are investing in due diligence or are pulling out is mixed. The pressure on companies to source conflictfree minerals can lead either to a growing legitimate mineral sector that generates jobs, growth and domestic revenues; or plummeting sales of minerals in conflict-affected countries.

To contribute to a conflict-free mineral sector, donors should ask the following:

 How should our development, raw material, trade and investment agendas factor in the growing demand for conflict-free minerals?

 What are we doing to promote observance of the Guidance by companies headquartered in our country?

 Can we support implementation of the Guidance (e.g. by developing the capacity of partner governments, regional organisations such as the ICGLR, and civil society)?

 Due diligence in the mining sector alone will not put an end to conflict. Beyond the mining sector, can we identify, jointly with other donors, the top priorities to effectively enable responsible mineral sourcing?

 The DAC and OECD Investment Committee have a responsibility to “monitor the implementation of the OECD Recommendation and to report to Council no later than 2013.” What achievements do we want to report in 2013?

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A five-STep frAmeWork for riSk-bASed due diligence

1 2 3 4 5

Establish strong company management systems Identify and assess risk in the supply chain Design and implement a strategy to respond to identified risks Third-party audit of smelters/refiners’ due diligence practices Report annually on supply chain due diligence

About the OECD-UN Due Diligence Guidance OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas

Trade and investment in natural mineral resources hold great potential for generating income, growth and prosperity, sustaining livelihoods and fostering local development. However, a large share of these resources is located in conflict-affected and high-risk areas. In these areas, exploitation of natural mineral resources is significant and may contribute, directly or indirectly, to armed conflict, gross human rights violations and hinder economic and social development. The OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas provides step-by-step management recommendations endorsed by governments for global responsible supply chains of minerals in order for companies to respect human rights and avoid contributing to conflict through their mineral or metal purchasing decisions and practices. The Due Diligence Guidance may be used by any company potentially sourcing minerals or metals from conflict-affected and high-risk areas, and is intended to cultivate transparent, conflict-free supply chains and sustainable corporate engagement in the minerals sector.

Please cite this publication as:

OECD (2011), OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, OECD Publishing. http://dx.doi.org/10.1787/9789264111110-en

This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and statistical databases.

Visit www.oecd-ilibrary.org, and do not hesitate to contact us for more information.

OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas

This Guidance provides step-by-step recommendations for responsible supply chains of minerals in order for companies to respect human rights and avoid contributing to conflict through their mineral or metal purchasing decisions and practices.

The Guidance may be used by any company potentially sourcing minerals or metals -:HSTCQE=VVVV]^: from conflict-affected and high-risk areas, and is intended to cultivate transparent, conflict-free supply chains and sustainable corporate engagement in the minerals sector.

OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas

ISBN 978-92-64-1111-89 20 2011 06 1 P

For more information...

OECD DAC Secretariat: Ms. Juana de Catheu, juana.decatheu@oecd.org, +33 (0)1 45 24 15 23 OECD Investment Committee Secretariat: Ms. Lahra Liberti, lahra.liberti@oecd.org, +33 (0)1 45 24 79 47

>> Read more at http://oe.cd/clean-minerals