Reflections on OECD Responsible Minerals Forum

'Continuous improvement' is a term familiar to anyone who has spent even any time in the responsible sourcing arena.

The OECD Due Diligence framework that underpins all leading responsible sourcing programmes is premised on the idea.

The genesis of the idea lies in the fact that different actors in the supply chain are not created equal, that some have different levels of awareness, means and challenges to meet sourcing standards than others. What is important, however, is a commitment to improve policies and practices over time; to mitigate and remedy vulnerabilities when they happen; to incrementally move toward better.

While attending last month’s OECD Forum on Responsible Mineral Supply Chains, however, it appeared as though a 'compliance' mindset had replaced continuous improvement as the north star we should be aiming for.

One NGO, for example, argued that the European Union should not “confuse certification with legal compliance” as audit schemes gain recognition under the Conflict Minerals Regulation; while another claimed that not only is membership to an industry programme no guarantee of due diligence, but that such programmes should be held legally responsible if standards are breached.

While there is a mandatory requirement for GDL refiners to meet their obligations under the Responsible Gold Guidance (RGG)---backed by enforcement teeth if necessary—the encroaching shift in thinking toward a legal interpretation of compliance is bad for the overall objective of improving sourcing and business practices in the gold sector.

Since the launch of the OECD Due Diligence Guidance in 2012, and as standards have strengthened, there is a growing awareness that some requirements are not just out of reach for some actors, but that they may actually perpetuate their exclusion from legal supply chains. Exhibit A: millions of artisanal miners who produce as much as 20 percent of global gold production, who largely operate outside any legal or regulatory framework, to the detriment of our collective efforts to influence improved behaviours and business practices.

Compliance is black and white and assumes perfection. For those struggling to meet the requirements of responsible sourcing programmes, such a binary approach acts as a disincentive to engagement. Why bother trying for better if the requirements are perpetually beyond reach?

Continuous improvement, on the other hand, is about differing shades of grey. It accepts a certain degree of imperfection, so long as adherents agree to progressive improvement. When and where sourcing challenges arise, it necessitates engagement, remediation and mentorship between refiners and their struggling suppliers.

Placing the entire onus for 'compliance' on industry programmes also negates the role of other players in the wider ecosystem, most notably governments and their responsibilities to design and enforce realistic and workable policies and laws that govern how gold is mined, exported and traded.

Continuous improvement may move at a pace slower than some may want, but those that take a longer view of where we started cannot dispute the fact that GDL refiners not only accept the centrality of credible due diligence, but that on balance the ever-expanding RGG requirements have improved their sourcing practices, as well as those of their suppliers. One such example is a new requirement introduced in RGG9 that requires suppliers in high risk jurisdictions to undergo an OECD audit of their supply chain. This requirement essentially broadens the scope and reach of due diligence beyond tier one suppliers, often in jurisdictions with limited awareness or indifferent embraces of carrying out such supply chain checks. That kind of continuous improvement, to paraphrase Captain Kirk in Star Trek, is “to boldly go where no responsible sourcing programme has gone before.”

With the compliance mindset diverging from the original spirit and letter of the OECD Guidance, perhaps it is time for the OECD to convene a Chatham House discussion to resolve this challenge, and clarify the different approaches and expectations of progressive improvement.

Joint Auditor Training

A more positive observation of the Forum was a discussion on ways to collaborate and improve auditor training by the various OECD-aligned audit schemes. Co-hosted by the OECD and the London Metal Exchange (LME), the session built on an earlier meeting at the OECD in February where participants discussed ways to deepen the “soft skills” of auditors—for example growing their awareness of sourcing vulnerabilities and the methods by which auditors can test for them during annual assurances.

The general agreement to support such an initiative is an encouraging demonstration of consensus among schemes--irrespective of the metal in scope—on the importance auditors play in applying rigour and credibility to how sourcing standards are implemented.

LBMA welcomes this effort and looks forward to working with aligned industry programmes to deepen the discussion on how we can all collaborate on raising the bar on auditor knowledge and practice.

ASM Update

The OECD Forum provided a welcomed opportunity for LBMA to meet with the Deputy Governor of the Central Bank of Ghana and the Deputy Minister of Lands and Natural Resources to discuss how synergies and relationships could be built between our ASM initiative, GDL refiners and efforts by the biggest African gold producer to create responsible sourcing practices in the ASM sector.

Recent efforts by the Ghanaian government to introduce technical supports and legislative changes in favour of artisanal miners have raised hopes the country could be on the brink of a significant breakthrough in formalizing the sector and increasing legal revenues and exports.

A lively partner session on the role of intermediate refiners (IRs) and aggregators in supporting the ASM sector also resulted in an agreement to investigate ways RMI’s accreditation system for IRs could be hardwired into our bilateral cross alignment agreement. Doing so would allow GDL refiners to comfortably source material from IRs that have passed an OECD assurance assessment.

Sanctions: Timely Reminder

In light of the recent sanctions placed on Polyus PJSC, and Polymetal JSC, the Russian unit of Polymetal International Plc. by the US Department of the Treasury’s Office of Foreign Assets Control, we wish to remind members of their obligations.

Under LBMA Member Rules, all Members must comply with all relevant economic/trade sanctions lists, which for the avoidance of doubt include – but are not limited to – the UN, EU, UK and US sanction lists. Breach of relevant economic/trade sanctions lists could lead to immediate removal from Membership.

This is in addition to separate GDL Refiners' obligations under LBMA Good Delivery Rules to adhere to UN, EU, US, UK, or any other relevant, economic and/or trade sanction lists.

The latest update as well as background on Russian Good Delivery bars are found on the LBMA website here. If you have any questions, please get in touch with LBMA.

Alan Martin
Head of Responsible Sourcing, LBMA

Responsible Sourcing News


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