Last week, the OECD Ministerial Council endorsed the Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-affected and High-Risk Areas. This endorsement by 42 countries, as well as the earlier endorsement of the document by the Heads of States and Governments of the International Conference on the Great Lakes Region (ICGLR), makes the Guidance the most widely recognized standard for due diligence on conflict minerals. Furthermore, the EICC-GeSI initiative has amended their Conflict-Free Smelter (CFS) Program, adding the implementation of the OECD Guidance as a mandatory requirement for any smelter sourcing minerals from the Democratic Republic of the Congo (DRC) or its neighboring countries in order to be eligible for the CFS Program.
The OECD Guidance relies on a system of information gathering and supplier assurances. It does not ask downstream companies to ensure full traceability of the minerals in their products. Similarly, the CFS Program only requires smelters to fully trace their purchased minerals back to the mine, as well as (if minerals from the DRC or neighboring countries are among the purchases) to implement the OECD Guidance. It does not request the same type of information from component or product manufacturers.
Upstream suppliers in the African Great Lakes region are working towards mineral traceability and certification schemes, many of which involve significant investments in human and physical capital. At this point in time, most of the schemes aim at tracking minerals from the mine to the export station (actually still leaving a gap between the point where minerals leave East African ports and the arrival of the shipments at the smelter level).
Just as there are transactional records in the upstream supply chain, downstream companies can be expected to keep records on their purchases and sales of products containing conflict minerals. One is to assume that if it is possible to trace a bag of minerals from the midst of the Congolese jungle to the Kenyan port of Mombasa, it would be feasible to use today’s technologies to trace a shipment of tantalum wires from a smelter to the product manufacturer.
Why then do efforts of downstream companies focus on “soft” requirements, rather then the physical tracking of material which would allow ruling out that any conflict product had entered the supply chain with much more certainty?
Partly, requesting suppliers to implement due diligence measures may be easier and less costly. Also, end-user companies seem to be aware of the fact that it will not be possible to make credible claims in the near future that a specific product is “conflict-free”. Unlike for other commodities (see the example of palm oil), end-user companies have not (yet?) publicly committed to a cut off date by which all their products will be conflict-free.
Nonetheless, companies may end up looking into the establishment of an electronic tracking mechanism, to be able to verify claims made by suppliers that their sources are conflict-free. Service providers like STR Responsible Sourcing would be able to provide spot-check verifications of those systems, using sampling methodologies and risk assessments to ensure information submitted by high-risk suppliers is accurate and complete. Electronic systems to trace raw materials have already been developed and implemented by companies such as Historic Futures. It is interesting to see though that this part of conflict mineral traceability seems to be approached on a company- rather then an industry-level.
As with other aspects of the conflict-mineral issue though, an industry-based approach to traceability of the metal products in the downstream supply chain would be better suited to avoid multiple requests for the same information at suppliers, as well as to provide the necessary leverage needed for the implementation of the system.
