By Ruth Crowell, LBMA Chief Executive

Ruth Crowell, LBMA Chief Executive

It is a great pleasure to introduce LBMA’s 2021 Responsible Sourcing Report, which provides an overview of LBMA’s work as well as more detail on the performance of the annual audit process, our Incident Review Process, including case studies from individual Good Delivery List (GDL) refiners.

It also includes for the Country of Origin (CoO) of all gold and silver refined by each GDL refiner during the past year, as well as the Country of Destination. Transparency and stakeholder engagement are vital to creating credible standards.

I welcome you to review LBMA’s work over the last year and give feedback on the strategic priorities that we have identified for the future.

Call for Global Industry Action – Transition Plan for Net Zero Emissions Targets

As people reflect on the lessons learnt from the pandemic, the issue of sustainability has come sharply into focus. Ensuring a sustainable future for the gold industry is, of
course, a vital part of what we all do. And there is both opportunity and risk for industry.

Each firm is different, but we would recommend following the framework set out by the G20, FSB’s Task Force for Climate Related Financial Disclosures – not just on what to disclose, but what to actually do. That means sorting out (Board level) governance, having a clear strategy, taking appropriate risk management measures and setting out targets and metrics.

Beyond our individual firms and markets, we should come together to help build a sustainable future for the industry. I call on all of the precious metals industry, from rock to ring, to create a Transition Plan for the industry to meet net zero emissions targets. This must be industry-wide, inclusive and truly global. And to be clear, this isn’t just about saving the planet, or satisfying the regulators, this is a business agenda to ensure that the precious metals industry stays healthy and profitable. We must act now, given the given the pace of global warming, 2050/2060 targets may even be brought forward.

Transparency and stakeholder engagement are vital to creating credible standards.

Responsible Gold - The Next Chapter

Since our last report, we have written and consulted on Responsible Gold Guidance (RGG) Version 9. This new chapter represents the most substantial change for industry since we launched the first version ten years ago. We are grateful for all of the stakeholder engagement to date and look forward to continuing to work on challenges beyond the LBMA’s audit programme.

RGG Version 9 not only demonstrates our commitment to enforcing our own standards but also significantly enhances refiner transparency and auditor standards. Creating this next chapter is a significant achievement, particularly as we also had to implement virtual audit standards to ensure that the quality of audits did not suffer during the pandemic.

Our CoO data shows a 16% drop in GDL refiners sourcing Artisanal & Small Scale Mined gold.

COVID-19 Due Diligence

During the ongoing COVID pandemic, we have all faced significant disruptions to our daily lives. The precious metals industry itself saw not only high prices, but also major disruption to supply chains & movement of metal around the world. Refiners were shut down; planes were grounded whilst travel restrictions forced many audits to be conducted virtually.

Despite these challenges, our Responsible Sourcing Programme and strategic plan has continued to advance, albeit with unexpected additional work streams. One main strategic priority however has faced further setbacks. Our CoO data shows a 16% drop in GDL refiners sourcing Artisanal & Small Scale Mined gold.

Notwithstanding our calls to action & support from stakeholders, more work is needed to support these vulnerable communities. More global engagement is needed to address this challenge. LBMA has worked to change its audit programme to provide support, but as an industry we need a collective approach.

Support Needed for ASM Communities

Sourcing gold responsibly from high-risk and conflict-affected regions should be something that adds to a company’s reputation. The cost of due diligence in these challenging environments, unfortunately, is often too high to sustain. The real cost, however, is borne by the 40 million people around the world who depend on ASM for their livelihood.

If we are going to create demand for responsibly sourced material from high-risk and conflict-affected areas, we need to educate consumers on the right questions to ask to make a positive difference in the lives of these vulnerable people. And we need industry and stakeholder support to communicate what responsible buying looks like and to celebrate companies that do the right thing.

Digitising the Value Chain

Educating consumers and downstream companies becomes significantly easier when you can share with them the life story of the gold they are buying. Even easier if they can see this value chain journey on their own phones. With real data, consumers can understand the different types of gold supply and trust that it has been sourced responsibly. Choosing to buy ASM gold becomes easier when you can see its digital life story.

Blockchain technology can allow consumers and investors to see exactly where the gold they own was mined, refined, recycled and traded. There are many products available which can do just that. LBMA has been working with the professional vaulting ecosystem to digitise the global value chain, through its Gold Bar Integrity initiative. Digitising the gold industry is a significant challenge, but I’m delighted to report that we have made real progress this year. LBMA has launched a Security Feature Standard and review process to recognise security features.

The next step is the launch of the track and trace database to not only bring the value chain to life, but to enhance these security features. Refiners and mints around the world have used security features for years to protect the integrity of their individual production.

A global database which brings these efforts together not only enhances the Security Feature, but delivers a better, transparent service to clients, investors and consumers worldwide. I’m grateful for all the stakeholder engagement to date and look forward to bringing this digital ecosystem into reality.