Despite pressure from lobbyists, last month the European Parliament voted to pass a law forcing companies to ensure their products do not contain minerals from conflict zones such as the Democratic Republic of the Congo and the Central African Republic. While the law is still to be rubber stamped by the European Commission it is likely that up to 880,000 companies in Europe could be affected by the Bill including those in mining, telecommunications and motor vehicle manufacturing.
Background
Since 2011 there has been guidance from the Organisation for Economic Co-operation and Development (OECD), to assist companies with ensuring their supply chain is responsible. The OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas provides detailed recommendations to help companies both respect human rights and avoid contributing to conflict through their mineral purchasing decisions and practices. However, since September 2013 mounting pressure has forced the EU to look into creating a law which goes further to ensure European businesses are not acting in a manner which fuels conflict and human rights abuses.
Under the new Bill, mineral importers of tin, tungsten, tantalum and gold ("3TG minerals"), as well as smelters and refineries, will have to ensure that revenues from the minerals they use do not fund wars in conflict zones. However, the Bill goes further than that proposed by the European Parliament’s International Trade Committee and also catches manufacturers that use 3TG minerals in their manufacturing processes. Manufacturers caught include producers of consumer products such as mobile phones, tablets and cars. Producers of these goods, a large part of the EU’s export business, will have to ensure minerals used are sourced responsibly and will be subject to mandatory certification.
What does this mean?
The Bill still has to pass through the Council of Europe and changes may still be made due to widespread industry criticism. Critics have pointed to similar US legislation which has caused many companies to pull out of conflict zones such as the Democratic Republic of the Congo, rather than trying to implement challenging and complex checks on their supply chain. It is also thought that the requirements of the Bill may be particularly hard for SMEs to implement successfully.
While there may be changes made to the Bill in the coming months it is likely that the finished Bill will still have a large effect on many companies, especially those involved in sectors such as motor vehicle production and electronics. Companies should give themselves a head-start by reviewing their supply chain now to ensure they are ethically sourcing 3TG minerals and won’t fall foul of the new provisions.
For further information or advice on the issues raised in this article, please contact James Saunders and Alison Rochester.