The EU has reached a ‘political understanding” on its conflict minerals Regulation, obliging European smelters and refiners of targeted metals to prove their supply-chains are conflict free. But will this be successful in tackling conflict minerals? We explain here what steps are still needed.
Missing the target
After several months of tense negotiations, EU politicians agreed to place mandatory requirements on smelters and refiners importing raw materials, but not their downstream users.
There are three good reasons why this partial approach doesn’t make sense:
- EU smelters and refiners of gold, tin, tantalum and tungsten make up just 5% of global production. Unless similar efforts are taken world-wide, suppliers will simply be encouraged to buy their metals outside of Europe. We’re worried about competitiveness impacts.
- EU smelters and refiners are already conflict-free. They comply with several independent due-diligence schemes, which are based on OECD guidelines and include third-party auditing. For example, more than 300 companies participate in the Conflict Free Sourcing Initiative, while 99% of cassiterite imports from Central African countries are controlled through the Tin Supply Chain Initiative.
- Products and their constituent parts are not covered by due diligence requirements. Mobile phones and laptops containing conflict minerals will still be imported freely into Europe, as well as their constituent parts such as circuit boards or processors.
In short, we’re left with an agreement that would have little impact on those affected, while placing EU producers at a competitive disadvantage with other areas of the world
Getting the details right
EU legislators have rightly agreed that a company’s compliance with existing due-diligence schemes should be recognised as equivalent to the new requirements. This is an essential step to save EU smelters and refiners from double regulation and extra costs. Companies that already demonstrate high standards should not need to do so a second time.
But crucially, we still don’t know how the acceptance of third party due-diligence schemes will work in practice. The real details will be defined in the next months.
Three big questions remain open:
- Which areas will actually be covered? The Commission’s proposal leaves much room for subjective interpretation and legal uncertainty, creating problems if companies would need to decide themselves which countries are “conflict-affected’. We’re requesting a “black” list of mines and companies dealing with illegal operations.
- How to exclude recycled metals? EU institutions have confirmed that recycled metals scrap is not subject to requirements, due to practical impossibilities with tracing its origin. Recyclers now need a simple and workable procedure to exclude their products.
- How will member states finance their due-diligence? Each member state will need to ensure compliance with the system. We’re concerned that not all have the resources for dedicated agencies and training to make sure requirements are properly implemented.
At Eurometaux, we’re committed to work closely with the Commission to answer these questions in a way that makes sense both for companies and regulators. But until then, we won’t be able to judge the real effectiveness of the EU’s initiative.
Europe’s politicians may have achieved their headlines with last month’s “political agreement”, but now’s the time for everyone to roll up their sleeves and work out the real details.
If we really want to improve the situation in the DRC and other conflict-affected areas, then two other major steps are also needed.
- A due diligence system should be introduced worldwide, to create a level playing field for all operators
- The EU needs to take stronger actions to improve things on the ground in conflict-affected areas
Once EU legislators have implemented their new trade requirements, we’re expecting a widening of ambition and scope across both areas. Until then, no one should pretend the conflict minerals issue is being effectively addressed.