The European Parliament has voted to approve rules designed to dramatically reduce trade in conflict minerals.
Starting in January 2021, a new European Union (EU) law will impose due-diligence obligations on companies importing tin, tantalum, tungsten, and gold (3TG). Importers will be required to identify risk in their supply chains, design and implement a strategy to respond to risks, and report annually on their due-diligence efforts.
As part of their internal management system, EU-based companies will be required to list the minerals they are importing by trade name and type, provide suppliers’ names and addresses, and indicate the country of origin of the minerals and the quantities and date of mining. When minerals come from conflict-affected and high-risk areas, importers will also have to disclose the mine of origin; consolidation and processing locations; and taxes, fees, and royalties paid.
According to the European Commission (EC), the rules—which apply to minerals originating from all countries that export to the EU—will cover up to 95% of imports. The Commission said the law will directly impact between 600 and 1,000 EU-based importers. It will also indirectly affect about 500 3TG smelters and refiners globally.
The Washington, D.C.-based Conflict-Free Sourcing Initiative (CFSI) praised the action. “The utilization of collaborative industry platforms in the EU framework will be a critical factor in harmonizing systems, maintaining company engagement, and managing costs to supply chain actors as the EU requirements go into effect,” says CFSI Program Director Leah Butler.
The regulation sets out different rules for upstream and for downstream companies. Upstream importing firms—those engaged in exploration and extraction of raw materials—will have to comply with all due-diligence rules, as the EC deems this the most risky part of the supply chain. While downstream companies—those importing metal-stage products—will also have to meet mandatory due diligence rules, companies operating beyond the metal stage will have no obligations under the regulation.
EU member states will be responsible for checking whether importers comply with the regulation. Member states will be authorized to examine documents and audit reports. If needed, they will be permitted to conduct on-the-spot inspections of an importer's premises.
Meanwhile, U.S. regulations pertaining to the due diligence and disclosure requirements of manufacturers that use conflict minerals face potential curtailment. In January, acting Securities and Exchange Commission Chair Michael Piwowar invited public comment on “reconsideration of conflict minerals rule implementation” under the Dodd-Frank Act.
Notwithstanding efforts to repeal the act’s conflict mineral provisions, at least some industry observers feel that U.S. companies are not likely to backtrack on their commitment to responsible minerals sourcing.
“Sound strategies to reduce negative environmental and social impacts improve brand [equity] and profitability,” says Pamela Gordon, senior consultant at Antea Group, an international engineering and environmental consulting firm. “Tech companies in the States know this and are not retreating from their sustainability tracks owing to a change in administration.”