Sustainability and Responsible Sourcing Report 2022
Section 2: General Counsel Report
BY SAKHILA MIRZA, EXECUTIVE BOARD MEMBER AND GENERAL COUNSEL
Sustainability and Responsible Sourcing Strategy: An Overview
Sustainability is the key to a better future. We started the journey to a sustainable future 10 years ago, with the launch of the Responsible Sourcing Programme. The Programme has focused on mitigating supply chain risks and developing confidence and providing transparency in sourcing precious metals.
More recently over the last three years, we have been prioritising delivering against our strategic objectives that were announced in 2019. A lot has been achieved in line with those objectives, as highlighted later in this section. However, as we move to develop the next three-year plan, it’s clear that there is still a lot more to do. And importantly, we are keen to look beyond responsible sourcing and focus on developing the sustainability agenda more widely.
Next year, we will be announcing our three-year Sustainability and Responsible Sourcing Strategy (Strategy). We have already started some of this work, through the launch of Responsible Gold Guidance version 9 (RGG 9) and the development of the Sustainability Principles for the precious metals market. Through the next three-year Strategy, we will explain our priorities for the industry, how we intend to meet the sustainability objectives and what we are committed to deliver.
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, LBMA and the World Gold Council – along with key participants in the global gold industry – have had advanced discussions around agreeing to a Gold Industry Declaration of Responsibility and Sustainability Principles.
The Principles will be launched at the LBMA/LPPM Global Precious Metals Conference, and will seek to better align the relevant responsible sourcing practices of the gold industry with each other, as well as with the UN Sustainable Development Goals (SDG) and the UN Guiding Principles for Business and Human Rights. These will form the basis for the LBMA priorities.
THERE IS NO ESCAPING THE GROWING FOCUS ON ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) RISKS, AND THE NEED FOR SUSTAINABLE SUPPLY CHAINS.Sakhila Mirza, EXECUTIVE BOARD MEMBER AND GENERAL COUNSEL
Various workstreams launched by LBMA during these last three years have already gone some way to ensure that discussion around environment requirements moves up the business agenda. Most poignant has been the inclusion of the crucial topic of climate to the conversation. Our Sustainability and Responsible Sourcing Summit, which took place in March 2022, highlighted the integral role that climate concerns – particularly mitigating our impact on carbon output – must take when it comes to making business decisions.
Furthermore, in the Responsible Gold Guidance version 9 (RGG 9), which was launched in November 2021, there is a strong focus on the environmental risk assessment. As part of the due diligence requirements, Good Delivery List (GDL) Refiners are expected to address environmental factors in their primary gold supply. These factors are further explained in the Refiners Toolkit and, where relevant, LBMA will also look to recognise credible industry programmes that can inform Refiners’ due diligence.
As part of our next three year strategy, we will be working with our members on how we can collectively commit to reducing the industry’s greenhouse gas emissions, in line with goals of the Paris Agreement. In addition, we need to improve our disclosure and reporting practices, and we will be focusing on how we report on climate change, by following the framework set out by the G20 FSB’s Task Force on Climate-Related Financial Disclosures (TCFD).
ASM and the Social Inclusion
A key thrust is identifying opportunities to change the narrative and reimagine Artisanal and Small-Scale Mining (ASM). LBMA has convened an ‘ASM Working Group Plus’, comprised of GDL Refiners and leading ASM practitioners. In addition to providing a forum to build trust and exchange insights and information, this group provides guidance on actionable ways by which GDL Refiners can up their processing of ASM material. This focus on ASM is crucial – which is why ASM is the main focus of this year’s Sustainability and Responsible Sourcing Report.
Directing efforts to include ASM material and communities within the precious metals supply chain is essential to increase direct sourcing by GDL Refiners, and to help support and destigmatise the sector overall.
However, we need to better understand the risks and challenges, and how to overcome some of the issues that arise with ASM, for example the impact on environment. This work will also contribute to Sustainable Development Goals and improve engagement with, and efficient governance of, the sector. Read Section 3 for more information.
LBMA Processes and Transparency
LBMA has been focused on improving our processes over the years, providing more clarity and transparency. Having clear review and decision-making processes, managing any potential conflicts of interest and making sure our standards continue to evolve have been some of the key priorities that we have worked on.
The work of the LBMA Compliance Panel has evolved, and it now performs a central role in the audit review process. The Physical Committee continues to advise and support the work of LBMA through robustly challenging our policies and processes, while also providing guidance where needed. Finally, through improved reporting over these years, we have been able to explain our processes in more detail, while recognising that more still can be done. A key development has been the Country of Origin report, which has informed our priorities and key areas of focus.
Climate change will be part of the LBMA Sustainability strategy, to be published in 2023.SAKHILA MIRZA, EXECUTIVE BOARD MEMBER AND GENERAL COUNSEL
Collaboration, intelligence-sharing and consultation are important to ensure the highest standards are achieved. We are always looking for feedback and we reflect this as much as we possibly can, through a phased-in approach. Ongoing progress is fundamental to the development of LBMA standards.
To further support the implementation of LBMA standards, it is necessary to ensure that we can support efficiencies across the supply chain by working alongside key actors to avoid duplication. To that affect, we are establishing an alignment assessment process to identify upstream programmes that support the LBMA ESG requirements under LBMA’s RGG 9. These efforts will also support alignment with OECD Trading Hubs outreach activity.
In addition, the industry has also come together to collaborate on the benefits of the technology advances and how they can support the risks that we face as an industry. The Gold Bar Integrity Project, which is a joint effort between LBMA and the World Gold Council, is focused on provenance and transparency over chain of custody through the entire value chain (from rock to ring), spanning all products. More than 30 industry participants came together to focus on the technology-led pilot, which has garnered a lot of invaluable feedback. More will follow on this project in due course – another example of the benefits of working together.
How have we delivered against our 2019 strategic objectives?
Building leverage across the value chain:
- International Bullion Centres Recommendations
- Responsible Sourcing Virtual Summit 2021
- Sustainability and Responsible Sourcing Summit 2022
- Strengthening co-operation with the upstream through the alignment process and strong communications
- Raising awareness of LBMA standards and asking for feedback on further improving those standards
- Improving co-operation with downstream programmes
- Reflecting downstream responsible sourcing requirements through the next version of the Global Precious Metals Code.
- LBMA Responsible Gold Guidance version 9
- Improved Refiners Toolkit
- Supporting webinars on the implementation of Responsible Gold Guidance version 9
- Third Party Auditor Guidance version 2
- Global Precious Metals Code version 2
- Disclosure Guidance version 2
- Improving the Grievance and Incident Review Process processes
- Publication of the first Responsible Sourcing Annual Report in 2020 and subsequent 2021 report
Enhancing credibility of the Audit Programme:
- Third Party Audit Guidance
- Annual Auditor training programme
Engaging responsibly with ASM:
- ASM Due Diligence Toolkit
- ASM Working Group
- ASM Report