Editor's Note: This guest post was written by Anna Bulzomi, a human rights lawyer currently working with IPIS Research where she handles issues of business & human rights and natural resources. Anna is also a Governance Committee member of the Public-Private Alliance on Responsible Minerals Trade.
On March 5, 2014, the European Commission released its long-awaited responsible trading strategy for minerals from conflict zones. The strategy is composed of a draft Regulation setting up an E.U. system of self-certification for importers of tin, tantalum, tungsten, and gold (3TG) and a Joint Communication presenting the overall comprehensive foreign policy approach on how to sever the link between conflict and the trade of minerals.The Regulation will now be examined by the E.U. Parliament and the Council, who will need to agree on a final text.
Unsurprisingly, the issue of conflict minerals is a pressing one at the E.U. level, with the Union being one of the largest markets for 3TG and currently accounting for 25% of the global trade in 3Ts and 15% in gold.
The Regulation – basically a draft law – would establish a system that is fundamentally different from the approach taken by the U.S. Dodd-Frank Act and Securities and Exchange Commission (SEC) rule.
First, the E.U. Regulation would only cover importers of 3TG (and their ores) into the Union – roughly 400 companies.Dodd-Frank, on the other hand, applies to downstream entities that manufacture or contract to manufacture products containing these metals and that are listed with the SEC – roughly 6,000 companies of different sizes and active across different industry sectors.
Secondly, while Dodd-Frank identifies a set of ‘covered countries’ in the African Great Lakes region, the E.U. Regulation would have a broad geographical scope, targeting the supply chains of 3TG originating from any conflict-affected or high-risk area.
Finally, but perhaps most importantly, the E.U. Regulation would not require strict legal compliance. Fearing that a mandatory due diligence scheme would cause companies’ disengagement from conflict-affected and high-risk areas, the E.U. executive came up with a ‘voluntary system for supply chain due diligence self-assessment’.
Basically, this would be a system where importers can freely choose to opt in and source their minerals in accordance with the 5-step due diligence framework set out by the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. Or, they can choose to go ahead with ‘business as usual’ and not invest time and resources into compliance efforts. Critics from E.U. campaign groups said that the voluntary nature of the initiative fails to create a real demand for conflict-free minerals in the E.U.
Business & human rights experts, namely the architect of the U.N. Guiding Principles (UNGPs), John Ruggie, also expressed concern with regards to the non-binding character of the due diligence exercise envisaged by the E.U.
The E.U. has embraced the UNGPs through its 2011 Communication, where the expectation that all E.U. enterprises meet the corporate responsibility to respect human rights is clearly articulated. Furthermore, the E.U. already adopted legislation on mandatory supply chain due diligence to ensure that illegally harvested timber does not reach the E.U. market.
Against this background, a voluntary system for due diligence in the supply chains of 3TG seems to be lowering the bar that the E.U. itself tried to set in other areas of responsible business conduct.
A detailed analysis of the E.U. draft law and its assessment against business & human rights standards is available here: http://ipisresearch.be/publications_detail.php?id=443