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The EU Conflict Minerals Regulation for responsible sourcing 

The Conflict Minerals Regulation (or the Regulation on Responsible Minerals Sourcing) aims to ensure conflict-free sourcing of minerals and metals, as such materials often finance armed groups and cause human rights abuses. The regulation puts in place due diligence obligations for the sourcing of tin, tantalum, tungsten, and gold imported to the European Union (EU). If these obligations are not fulfilled, importers risk receiving a legal order or fine. To circumvent the sanctions, companies have to follow the due diligence procedure.  

In this article, you can read about the Conflict Minerals Regulation in detail:

What does ‘conflict minerals’ mean?

The term ‘conflict minerals’ describes 4 minerals that are mined in politically unstable areas1

  1. Tin (Sn) 
  2. Tantalum (Ta)
  3. Tungsten (W) 
  4. Gold (Au)

Another name for ‘conflict minerals’ is ‘3TG’ or ‘responsible minerals’2. Currently, the term 'responsible minerals’ is gaining popularity as it removes the negative connotation.

Why do we need conflict minerals?

Conflict minerals are used in the production of many electronic devices, cars, jewellery1, and clean technologies3. In a phone, for example, tantalum is used to ensure the charging function, tungsten for vibration, tin for soldering connections, and gold for creating a circuit board4. The demand for these products containing 3TGs has been growing, putting pressure on the mining of the raw materials4. The extraction of conflict minerals, however, has come under criticism due to its political significance.

What is the problem with conflict minerals?

The mineral mines and refining facilities are often controlled by armed groups, which spend the profits on weapons and ammunition1. Furthermore, to trade as much of valuable resources as possible, they use forced labour and exploit the local communities and environment.

At the same time, addressing the issue is a challenging undertaking due to the dispersed and global nature of mineral supply chains5. One of the leading technology firms Apple, for example, has 200 suppliers and 242 smelters and refiners.

Where are conflict minerals mined? 

According to the EU, conflict minerals are mined in regions which are characterised by1

  • Weak governance and law violations
  • Ongoing armed conflicts
  • A fragile post-conflict state
  • A possession of sought-after minerals

Currently, the list of conflict-affected or high-risk areas includes 29 countries, of which some are Afghanistan, the Democratic Republic of Congo, and the Central African Republic. The registry, however, should be taken just as an indication. The companies will also have to source responsibly when extracting minerals in non-listed but nevertheless conflict-affected regions.

Figure 1: A map of the countries where conflict minerals are mined, according to the list created by the EU. Source: Conflict-Affected and High-risk Areas (CAHRAs) list.

What is the aim of the EU Conflict Minerals Regulation?

The EU adopted the Conflict Minerals Regulation to1:

  • Break the link between conflict and illegal exploitation of minerals
  • Stop the export of conflict minerals to the EU, as well as its use by smelters and refiners
  • Ensure EU importers meet international sourcing standards
  • Support local communities

These aims are achieved by establishing due diligence requirements for the sourcing of the 4 minerals that are imported into the EU from the conflict-affected areas.

Who does the EU Conflict Minerals Regulation affect?

The due diligence requirements directly apply to companies importing tin, tantalum, tungsten, and gold (3TGs) into the EU with an annual import volume above a certain threshold (see Appendix 1)6. These include both upstream firms (extracting, processing, and refining raw materials) and downstream companies (processing metals into a finished product)7. Minerals can take the form of mineral ores, concentrates, or be processed from other metals8. Firms working with recycled metal or operating beyond the metal stage (e.g. sourcing finished components, distributing end-user products containing conflict minerals) are excluded. 

The regulation also indirectly affects mine owners, smelters, and refiners as importers push for compliance with the responsible sourcing principles in their supply chains. 

Parties outside of the scope of the regulation are encouraged to use the framework to showcase their sustainability efforts in reports, such as those required by the Corporate Sustainability Reporting Directive or other voluntary reports.

Figure 2: Simplified conflict minerals supply chain. Source: Deloitte&EPRM.

What are the requirements of the EU Conflict Minerals Regulation?

The EU Conflict Minerals Regulation forces importers to implement a due diligence scheme7, which includes following the 5 steps identified in the OECD Guidance (Articles 1-5), as well as establishing a system for demonstrating compliance6 (Articles 6-7). 

  1. Management system obligations (Article 4)
    The first requirement is to establish a management system in a downstream company designed to put the necessary responsible sourcing policies and processes in place.
  2. Risk assessment obligations (Article 5)
    Importers are required to assess sourcing risks on the basis of the data collected through a traceability system.
  3. Risk management obligations (Article 5)
    After identifying the threats, the importers are instructed to arrange processes to respond to risks and make long-term decisions regarding the supply of minerals.
  4. Third-party audit obligations (Article 6)
    Importers are required to conduct audits of ‘flagged’ upstream smelters and refiners. The importer audit is not required when the smelters and refiners are included in the list9 created by the European Commission7.
  5. Disclosure obligations (Article 7)
    After evaluating its supply chain practices, the importer must provide information about audit reports to their immediate downstream purchasers and the National Competent Authorities (NCA). The EU also requires to publicly communicate about the sourcing practices. While disclosing the reports, the importers need to be mindful of commercial confidentiality.
  6. Compliance & documentation obligations (Article 3)
    Besides establishing an assessment and reporting system, the regulation requires importers to maintain the documents necessary to demonstrate compliance.
  7. Ex-post checks obligations (Article 11)
    This documentation and access to premises should be granted whenever the authorities want to check compliance after the initial evaluation.
Figure 3: Obligations of the EU Conflict Minerals Regulation for importers of tin, tantalum, tungsten, and gold. Source: Circularise.

Ensuring these obligations are fulfilled is necessary to avoid strict sanctions.

What are the sanctions?

A major risk associated with non-compliance is sanctions in the form of corrective measures and fines10. After conducting inspections, the designated NCA orders a firm to address an issue6. Failure to introduce corrective measures is followed by a fine. The magnitude of penalties varies per member state. In Germany, for example, the maximum fine is 50K EUR10. Local authorities can also introduce extra measures such as an import ban in Finland or a  “black list” of non-compliant companies in the Czech Republic.

Mapping the supply chain: How Circularise can help

Ensuring compliance with the regulation requires continuous tracking of the chain of custody of material from the mine of origin to the brand owner or even the end user5. Due to the opaque nature of the supply chain, this is a significant undertaking and presents a web of challenges from resourcing, administration, to data integrity, and intellectual property protection. 

Companies should consider integrating digital traceability tools to overcome these challenges. One available solution is Ciruclarise’s traceability software. It allows companies to manage Digital Product Passports and share key insights into their products with other supply chain actors, without risking sensitive data.

Circularise has extensive knowledge of sustainable mining. Together with industry partners, Circularise is developing a “Circular System for Assessing Rare Earth Sustainability (CSyARES)”. This system makes credible upstream sustainability and LCA information available to the downstream actors. With the help of Circularise, companies can perform due diligence. 

Contact us

About Circularise

Circularise is the leading software platform that provides end-to-end traceability for complex industrial supply chains. We offer two traceability solutions: MassBalancer to automate mass balance bookkeeping and Digital Product Passports for end-to-end batch traceability.

Appendices

Appendix 1: List of minerals and metals within the scope of the EU Conflict Minerals Regulation. Source: Regulation (EU) 2017/821.
Resources
  1. "Conflict Minerals Regulation - Trade - European Union." https://policy.trade.ec.europa.eu/development-and-sustainability/conflict-minerals-regulation_en. Accessed 19 Dec. 2022.
  2. "What are conflict minerals? - Responsible Minerals Initiative." https://www.responsiblemineralsinitiative.org/about/faq/general-questions/what-are-conflict-minerals/. Accessed 19 Dec. 2022.
  3. "Green Conflict Minerals." https://www.iisd.org/story/green-conflict-minerals/. Accessed 19 Dec. 2022.
  4. "Conflict Minerals in Electronics - alive magazine." 27 Sep. 2016, https://www.alive.com/lifestyle/conflict-minerals-in-electronics/. Accessed 19 Dec. 2022.
  5. "80% of Companies Don't Know If Their Products Contain Conflict ...." 4 Jan. 2017, https://hbr.org/2017/01/80-of-companies-dont-know-if-their-products-contain-conflict-minerals. Accessed 19 Dec. 2022.
  6. "02017R0821-20201119 - EN - EUR-Lex - European Union." 19 Nov. 2020, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02017R0821-20201119. Accessed 19 Dec. 2022.
  7. "Conflict Minerals Regulation: The regulation explained - Trade." https://policy.trade.ec.europa.eu/development-and-sustainability/conflict-minerals-regulation/regulation-explained_en. Accessed 19 Dec. 2022.
  8. "Responsible Minerals Regulation - gov.ie." 25 Jun. 2021, https://www.gov.ie/ga/foilsiuchan/b3c69-responsible-minerals-regulation/. Accessed 19 Dec. 2022.
  9. "FAQs - How to comply with the EU Conflict Minerals Regulation." https://europeanpartnership-responsibleminerals.eu/cms/view/73f644c4-da24-4134-b381-97e541e46a15/faqs-how-to-comply-with-the-eu-conflict-minerals-regulation. Accessed 19 Dec. 2022.
  10. "The EU Conflict Minerals Regulation." https://www.eurac-network.org/sites/default/files/202106_coregroup_reviewpaper_3tg_implementation_memberstates.pdf. Accessed 19 Dec. 2022.
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