Annual Report 2022
Sustainability and Responsible Sourcing
Declaration of Responsibility and Sustainability Principles
Gold plays a unique role in the global economy – in stimulating economic growth, in protecting the financial security of nations, communities and families, and in enabling advances in medical, environmental and communication technologies.
Public trust is fundamental to the many positive contributions that gold makes to socio-economic progress. To maintain and strengthen that trust, the gold industry – convened by LBMA and the World Gold Council – agreed to the Declaration of Responsibility and Sustainability Principles which formally express a shared commitment to operating in a responsible and sustainable way based on a clear set of shared goals.
Signed at the October 2022 LBMA/LPPM Global Precious Metals Conference in Lisbon, the Declaration commits to ten key sustainability objectives, including responsible sourcing standards, respect for human rights, the advancement of the UN Sustainable Development Goals, and action and disclosures on climate change.
Signatories to the Declaration are LBMA, World Gold Council (WGC), Singapore Bullion Market Association (SBMA), China Gold Association, Swiss Association of Precious Metals Producers and Traders, London Metal Exchange (LME), Dubai Multi Commodities Centre (DMCC), India Gold Policy Centre (IGPC), India Bullion and Jewellery Association (IBJA), India International Bullion Exchange (IIBX), World Jewellery Confederation (CIBJO), Artisanal Gold Council (AGC), Responsible Jewellery Council (RJC), and the Watch and Jewellery Initiative 2030.
In March, LBMA and the World Gold Council co-hosted the Sustainability and Responsibility Summit in London.
The event opened a discussion on the integral role that climate concerns must take when it comes to making business decisions – particularly mitigating our impact on carbon output.
The other key focus of the event was the launch of LBMA’s ASM initiative. Artisanal and Small-scale Mining (ASM) supports as many as 40 million people worldwide and accounts for up to 20 percent of global mined production, yet equates to approximately 1 percent of the throughput of Good Delivery List (GDL) Refiners.
The Summit brought together some of the leading minds and practitioners in the ASM space to discuss key obstacles and opportunities in the sector, most notably, entry points for GDL Refiners looking to increase their direct sourcing of ASM material.
To guide our thinking, LBMA commissioned a feasibility study led by Phuzumoya, a South Africa-based consulting firm. The study’s remit was to examine commonly understood barriers faced by ASM producers and suppliers, and to consider practical and actionable ways by which LBMA and Good Delivery List Refiners could provide better market access and legitimacy to the ASM sector. (See ASM Report sidebar).
The ASM Report
The ASM feasibility study was released at the LBMA/LPPM Global Precious Metals Conference in October.
The report identified several promising avenues of opportunity for LBMA and GDL Refiners to pursue in future years. The biggest takeaway from the report is that, for the initiative to succeed, it will require outreach by LBMA to willing producer governments and GDL Refiners to agree and establish more ASM-friendly regulatory regimes. This engagement will require the active participation of donor governments, and UN agencies such as UNEP, to help facilitate the implementation of these regimes.
The report also recommends greater discussion with WGC members, many of which possess significant economic and political capital in the countries in which they operate and could leverage more desirable regulatory conditions that would encourage greater cooperation between ASM and industrial miners working on or near each other’s concessions.
The most significant recommendation, however, was that LBMA should establish a Good Delivery List for processors and intermediate refiners, whose members would (as a condition of membership) conduct due diligence on their ASM suppliers. Such a List would provide refiners with additional due diligence comfort and result in greater volumes of material (running into the tonnes), and would be easier for LBMA to assess as part of the annual third-party audits. The List would build on the model championed by PX Précinox (a Swiss GDL Refiner) and the Responsible Mineral Initiative’s work with aggregators.
LBMA was urged to look to countries such as Colombia, Ghana, Nicaragua and Peru as entry points for engagement, as governments and industrial producers there have demonstrated a more constructive approach and willingness to advance ASM reforms.
In parallel to Phuzumoya’s report, LBMA also struck an ASM Working Group Plus, comprised of GDL Refiners and NGOs with an established track record working to create responsible ASM supply chains in Africa and Latin America. These groups include IMPACT, Levin Sources, ARM and the Swiss Better Gold Initiative (SBGI). The terms of reference for this working group are to foster information sharing and cooperation between Refiners and ASM experts. Going forward, the Working Group will be reconstituted as the ASM Taskforce and will help guide LBMA in the implementation of some of the recommendations made by Phuzumoya (see more in Future Developments).
Highlights of SRS Report 2022
LBMA’s Responsible Sourcing Programme (RSP) plays a fundamental role in providing trust and confidence in the global precious metals market. All GDL Refiners must comply with the Responsible Sourcing requirements, or risk losing their GDL accreditation.
LBMA’s RSP is aligned to the OECD Due Diligence Framework for Conflict-affected and High-Risk Areas, and is premised on the concept of continuous improvement. In line with that, LBMA standards evolved in 2022 with the launch of new versions of the Disclosure Guidance and the Third Party Audit Guidance (TPAG).
Version 9 of the Responsible Gold Guidance (RGG 9) was issued in November 2021 and came into effect on 1 January 2022. This gave GDL Refiners one year from that date to implement the new reporting requirements specified in the latest version. Audit reports filed in 2023 will be the first to be evaluated against RGG 9.
The Disclosure Guidance and the TPAG support GDL Refiners and assurance providers in meeting the reporting and disclosure requirements outlined in RGG 9. New versions of both documents were published in December 2022.
The amended Disclosure Guidance provides greater alignment with the OECD Due Diligence Guidance Step 5 reporting requirements and, in some instances, goes beyond this to encourage more transparent and meaningful public communication by Refiners. While the Guidance removes the requirement for Refiners to issue a mandatory Public Interest Report, a focus instead has been placed on improving the quality of the information and transparency of the Compliance Report that Refiners submit as part of their annual third-party assurance.
Going forward, Refiners will be expected to disclose greater details regarding such items as:
- The number of zero-tolerance and high-risk suppliers identified
- The nature of the zero tolerance and high risks encountered
- The steps taken to mitigate these risks, including any communication with regulators or LBMA, and the Enhanced Due Diligence procedures followed
- The number of on-site visits to high-risk counterparties or areas for risk assessment purposes and the percentage that were conducted by external assessors, while keeping due regard to business confidentiality and other competitive concerns
- The number of intermediate refineries with high-risk supply chains that supplied independent assurance reports and the plan for obtaining the remainder
- A description of any non-conformances identified during the audit process and the steps taken to address them.
To read more about LBMA’s Responsible Sourcing Programme, please consult the 2022 Sustainability and Responsibility Report.
RS Performance in 2021
Compared with the 2020 figures, gold-related non-conformances remained relatively static, both in overall numbers, as well as disaggregated numbers according to risk level. The lack of any high-risk non-conformances for the second straight year is a sign that enhanced due diligence, even in conflict-affected or difficult environments, can result in appropriate mitigation of potentially reputationally damaging risks. Silver non-conformances, meanwhile, dropped by half. The latter is a reflection of the growing awareness of the due diligence challenges and requirements in the silver supply chain, which only started reporting responsible sourcing practices in 2018. With 2022 being the first year of implementation of RGG 9, LBMA expects these numbers to rise next year as Refiners work to meet the higher reporting requirements.
Auditor Review / Training Update
Those on LBMA’s Approved Auditors List play a critical role in ensuring a robust, independent assessment of GDL Refiners’ performance. For this reason, LBMA invests significant time communicating with auditors, particularly during the audit assessment period, and providing annual training to keep them apprised of changes to reporting requirements or emerging issues they should be aware of.
For example, the Responsible Sourcing Team engaged with auditors over public concerns around mining and sourcing practices from environmentally and culturally protected areas in the Amazon. Similarly, the enactment of the Uighur Forced Labour Prevention Act in the United States in June 2022 led to direct conversations with auditors (and Refiners) to ensure there was no forced labour in the supply chains of Chinese Refiners.
Annual training for LBMA approved assurance providers was held in November and early December 2022.
Led by Synergy Global, the training focused on material changes between versions 8 and 9 of the Responsible Gold Guidance (RGG), as well as new reporting requirements introduced in the upcoming Third Party Audit Guidance.
The current three-year strategy drew to a close at the end of 2022 and will be renewed in early 2023. While this process is still to be finalised, LBMA remains committed to advancing the sustainability and governance of the global precious metals market.
Some elements of the previous strategy will remain – for example, our work improving the harmonisation of sourcing standards in International Bullion Centres (IBCs) and the continuous improvement of the RGG – however, in light of the ASM feasibility study, a bigger focus will be placed on operationalising the report’s recommendations. This includes establishing an ASM taskforce composed of a broad cross-section of industry practitioners and international organisations with expertise in the sector. The taskforce will serve as a sounding board to LBMA as it moves to engage with producer governments and create the framework that will underpin a potential Good Delivery List for ASM aggregators.