Responsible Sourcing Report 2021
Section 1: Introduction
Since the first Responsible Sourcing Report was published in September 2020, it has been an unprecedented intervening period for all of us, as the global pandemic disrupted supply chains and took our lives into an ever more virtual world.
From a Responsible Sourcing perspective, COVID-19 restrictions interrupted the ability of refiners to visit suppliers as part of their due diligence requirements and of auditors to travel to physically access refineries. Virtual meetings had to replace the on-site visits, whilst virtual audits replaced on-site audits. New standards had to be introduced, even if in some cases only temporarily. However, what was important was the need for strong communication lines across the entire value chain. In 2020, LBMA developed a weekly webinar programme that helped stakeholders understand the market challenges and developments. These proved, and continue to prove, to be very popular, and have supported the efforts to engage and better communicate with all key stakeholders.
The pandemic changed the way we engaged with external stakeholders, imposing a virtual presence at key international events – such as the OECD Forum on Responsible Mineral Supply Chains. LBMA also actively sought out the views of key partners on priorities, objectives and actions through bilateral conversations, participation in constructive external events such as African Mining Indaba and through ongoing engagement with collaborative initiatives with partners such as the RMI, RJC, WGC and ICMM.
LBMA’s outreach to International Bullion Centres (IBCs) provided us with an opportunity to raise Responsible Sourcing practices and expectations directly with government and industry decision-makers. There was strong engagement from all 12 IBC centres, as well as close co-operation with other key stakeholders in a virtual capacity which made the lines of communication easier. We report more below on the progress to date.
Finally, the development of the Responsible Gold Guidance (RGG) Version 9 afforded extensive consultation with refiners and a broad range of stakeholders, including Good Delivery List (GDL) refiners, industry partners and international organisations. LBMA would like to extend a special thanks to all those that provided constructive feedback to RGG Version 9. Your insights and suggestions are very much appreciated and undoubtedly have contributed to a better final product.
The LBMA Responsible Sourcing Programme (Programme) has been dynamic in its approach to continuous improvement and has strived over the years to reflect on lessons learnt as well as feedback received from stakeholders. The rest of this report is focused on providing an update on the Programme.
LBMA Standards
Systems, processes and controls have been, and continue to be, established to maintain an efficient market that is built on integrity and transparency. LBMA maintains three important standards:
- The Good Delivery system, which covers metal quality and provides market participants with the assurance that their gold and silver bars meet the international requirements. Only gold and silver bars that meet the Good Delivery standards, produced by GDL refiners, are acceptable in the settlement of a Loco London contract. See Section 10 for more information on the GDL.
- The Responsible Sourcing Programme (Programme), which covers the ethical sourcing of the metals and provides confidence in the market that all the gold sitting in the London vaults has been sourced responsibly. Every GDL refiner must pass an audit under this programme. See Section 11 for more details on the Programme.
LBMA’s Programme is a commercial necessity for any major refiner. Loss of LBMA accreditation would have serious commercial consequences for refiners. - The Global Precious Metals Code, which covers the ethical trading of precious metals and applies to all participants actively trading in the Loco London precious metals market.
Value Chain for Precious Metals
Where Do GDL Refineries Source the Metal?
Refiners source their gold and silver from many different sources. This can largely be broken into: Mined Material (Large-Scale Mining (LSM); Artisanal and Small-Scale Mining (ASM); Mining By-product and Recycled Material (unprocessed, melted, industrial by-product, jewellery, electronic scrap, etc). Each source poses different risks and challenges, and all refiners are required to address this as part of their due diligence assessments. See Section 12 for more detail on the different sources.
Responsible sourcing cannot exist in silos. It requires commitment, collaboration and action from a broad spectrum of actors—from national governments, enforcement agencies, industry partners—and, of course, GDL refiners
Responsible Sourcing Eco-system
Although LBMA administers the GDL, ultimately the responsibility to ensure that metal is ethically sourced is shared across the entire industry. This means that the Programme is part of a wider ecosystem, which together ensures coverage in parts of the supply chain that other components simply cannot reach. Industry due diligence programmes, National authorities, downstream actors and other stakeholders, such as civil society, all have a role to play and must work together to successfully address supply chain risks. See Section 13 for more details.
This means collaboration, intelligence-sharing and consultation are crucial to ensuring the highest standards of Responsible Sourcing across the industry.