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:
The term ‘conflict minerals’ describes 4 minerals that are mined in politically unstable areas1:
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.
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.
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.
According to the EU, conflict minerals are mined in regions which are characterised by1:
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.
The EU adopted the Conflict Minerals Regulation to1:
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.
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.
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).
Ensuring these obligations are fulfilled is necessary to avoid strict 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.
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.
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.
