LBMA Sustainability and Responsible Sourcing Strategy 2024-2026
By Sakhila Mirza, Executive Board Director and General Counsel
Introduction: Responsible Sourcing and beyond
Responsible Sourcing has been front and centre in LBMA’s efforts to ensure integrity, robust governance and meaningful transparency in the global gold supply chain. We, at LBMA, are now expanding our focus, by going beyond Responsible Sourcing, and launching the three-year sustainability strategy (also known as SRS Strategy).
2024 will mark 10 years of Good Delivery List (GDL) Refiners undergoing an independent third-party audit against LBMA’s Responsible Gold Guidance – the document that underpins GDL Refiners’ commitment to stringent ethical business practices. It will also be the first year of implementation of the three-year SRS Strategy (not to mention my 10 years in precious metals!)
A lot has happened, and a number of key milestones have been hit in the intervening years. I know just how much work has been involved in leading the Responsible Sourcing strategy, from establishing new processes for implementation and enforcement, to engaging with industry experts, civil society and national authorities, to working on improving transparency and communications. Yet, when developing this three-year SRS Strategy, and in the spirit of continuous improvement, I feel there is still so much more to do.
LBMA’s commitment to ensure that there is a credible assurance programme for the global industry has resulted in nine versions of the Responsible Gold Guidance, each one pushing the agenda for ethical sourcing further than the one before it. Supporting the implementation of each guidance requires extensive collaboration across the value chain. A critical component is the thorough review process – first by independent and qualified assurance experts, then by LBMA’s Responsible Sourcing team and the LBMA leadership – to provide confidence that the standards are being faithfully enforced.
All this work will not stop, nor will it slow down.
The drive for continuous improvement means the scope of the programme will continue to grow, as will LBMA’s insistence that better and higher standards are adapted in response to new sourcing challenges, as well as the evolving demands and concerns of consumers, investors and regulators. This reality and philosophy forms part of Focus Area One of our first three-year SRS Strategy.
Sustainability: The Priorities and The How
The SRS Strategy has followed an extensive public consultation and sets out five areas of focus for LBMA. These focus areas define what we mean by ‘sustainability’ and also support the need to be transparent about our priorities for the next three years. It should come as no surprise, therefore, that LBMA’s Responsible Sourcing Programme – the fundamental pillar for all GDL refiners – has been identified as Focus Area One. In delivering on our commitment to higher and better standards, LBMA will work with the Refiners Working Group to meet the list of deliverables we have provided, and continue to engage with the wider eco-system through public consultations. Consultations are an important tool to help us understand expectations, and confirm if we are moving in the right direction.
The very important issue of LBMA’s engagement with the Artisanal and Small-scale Mining (ASM) sector is outlined in Focus Area Two. One of the unintended consequences of regulatory and legislative changes has been the impact on direct sourcing of ASM material by GDL Refiners, which currently accounts for approximately 1% of combined throughput. LBMA started work in this area last year through a feasibility study which led to clear priorities, and a plan of action. This was communicated in October 2022 and, through the formation of the Task Force, is progressing well.
Focus Area Three goes beyond the responsibility and requirements for GDL Refiners, and addresses trust and integrity across the full value chain. The objective is to strengthen relationships with bullion banks, miners, recyclers, and traders to ensure a sustainable supply chain. This includes working with bullion banks to better align with OECD requirements and to support them with their supply chain reporting, and where relevant, their precious metals sustainability agenda, too. Furthermore, technology will play a pivotal role in supporting sustainable development, and LBMA will work with market participants to understand the type of industry guidance needed to help with market-wide implementation.
LBMA is also committed to continuing engagement with two other important groups to achieve this: the International Bullion Centres (IBC) and central banks. In 2020 LBMA published the IBC Recommendations, in an effort to strengthen our relationships with willing national authorities. Collaboration like this is essential in reinforcing sustainable supply chains through policy development and enforcement. Additionally, with the central banks keen to pursue a sustainable investment agenda, LBMA recognises the opportunity to engage with them to support their prioritisation, which includes global decarbonisation. Decarbonisation is also a high priority for several value chain actors, and LBMA’s intention is to understand the role that we can play to support the wider market, as highlighted under Focus Area Five.
Overall, we have committed to a number of deliverables under Focus Area three, but the underlying focus is to improve transparency. This is going to involve establishing small, targeted working groups to guide LBMA on expectations and requirements, and, where relevant, develop public reporting templates. Through these working groups, we can then identify appropriate and reasonable timelines to deliver this strategy. Again, LBMA is not working alone on this focus area, and will be developing strategic partnerships to help with progress.
Focus Area Four, to keep it simple, is to demonstrate what LBMA is doing to support sustainability. How do we ensure we are running a sustainable organisation that is aligned with industry colleagues and best practice? More details will be shared on this in Q1 of 2024.
And finally, Focus Area Five highlights the wider sustainability agenda, and covers climate change and GHG emissions, UN Sustainable Development Goals, biodiversity and human rights issues. Our commitment here is high level, at this stage, as we navigate several challenging issues and identify partnerships with other organisations with whom we can collaborate to deliver on our pledges. Eventually, we will have to implement defined targets to help determine success and whether we are even heading in the right direction. In order to understand what those targets should be, we intend to work with subject matter experts over the next three years to provide LBMA with specific recommendations to action. A detailed plan will need to be established to ensure we can meet all that we have highlighted under this focus area, which also supports the Sustainability Declaration that was signed in Lisbon 2022. This plan, together with the timelines, will be shared for market wide consultation in the first half of 2024.
I hope this goes some way to explain our intention on how we plan to implement the three-year strategy. We are committed to public reporting on our progress under this SRS Strategy, and also to highlight the challenges we encounter, as we navigate the next three years. It is undoubtedly ambitious, but its without question necessary to support the future of sustainable supply chains.