What are the US and EU regulatory requirements for conflict minerals?
The US and EU have both introduced regulatory requirements related to conflict minerals
to promote responsible and sustainable sourcing practices.
The regulatory requirements in the US and EU are as follows:
The US regulatory requirements of conflict minerals refer to the reporting obligations of publicly traded companies in the United States regarding the use of certain minerals originating from conflict-affected areas. The regulation, known as the Conflict Minerals Rule, was implemented in 2010 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The Conflict Minerals Rule requires companies to report whether their products contain certain minerals, including tantalum, tin, tungsten, and gold, which are often sourced from conflict-affected areas in the Democratic Republic of Congo and neighbouring countries in central Africa. The law aims to curb the trade of these minerals, which is often used to finance armed groups and fuel violence in the region.
Under the Conflict Minerals Rule, companies that are publicly traded in the United States must conduct a reasonable country of origin inquiry (RCOI) to determine whether any of the minerals in their products come from the covered countries. If the company determines that its minerals are not sourced from those countries or are from recycled or scrap sources, it must submit a report to the Securities and Exchange Commission (SEC) stating so. If the company determines that the minerals are from the covered countries, it must conduct due diligence on its supply chain to determine whether the minerals are funding conflict.
If a company determines that its products contain conflict minerals, it must file a conflict minerals report with the SEC. The report must include a description of the due diligence measures taken, the products that are not DRC conflict-free, the facilities used to process the conflict minerals, and the country of origin of the conflict minerals.
The Conflict Minerals Rule also requires companies to have their reports independently audited and to make the reports publicly available on their websites.
Overall, the Conflict Minerals Rule aims to increase transparency in the supply chain and promote responsible sourcing of minerals from conflict-affected areas. The rule has faced criticism for being too costly for companies and for having a limited impact on reducing conflict in the covered countries.
The EU regulatory requirement related to conflict minerals is primarily driven by the EU Conflict Minerals Regulation, which entered into force on January 1, 2021. The EU Conflict Minerals Regulation applies to all EU importers of tin, tungsten, tantalum, and gold, regardless of whether they are listed on EU stock exchanges.
The EU Conflict Minerals Regulation requires EU importers to conduct due diligence on their supply chains to identify and mitigate the risks of conflict minerals being sourced from conflict-affected and high-risk areas. The regulation also requires EU importers to submit annual reports to their national authorities, providing information on their supply chain due diligence practices.
It promotes responsible and sustainable sourcing practices by encouraging companies to take steps to ensure that their minerals do not contribute to human rights abuses, armed conflict, and environmental degradation.
The key features of the new regulations are as follows:
Mandatory Due Diligence:
The regulations require companies that import or process tin, tantalum, tungsten, and gold to carry out mandatory due diligence checks on their supply chains. This includes identifying and assessing the risks of conflict minerals in their supply chains, as well as implementing measures to prevent the use of conflict minerals.
The regulations require companies to source their minerals responsibly, taking into account the social, environmental, and governance risks associated with mining and processing activities.
Companies must provide an annual report on their due diligence practices and supply chain management. The report must include information on the company's policies and procedures, as well as any risks identified and actions taken to address them.
The regulations allow for the certification of responsible sourcing practices, which can be used to demonstrate compliance with the regulations.
The regulations are enforced by national authorities in EU member states. Companies that fail to comply with the regulations may face fines, legal action, or other penalties.
The new EU regulations on conflict minerals are part of a global effort to address the issue of conflict minerals. The regulations aim to promote responsible sourcing and prevent the use of conflict minerals in supply chains, which can help to reduce the trade in conflict minerals and contribute to the protection of human rights and the environment.
The US and EU regulatory requirements related to conflict minerals aim to promote responsible and sustainable sourcing practices and help to prevent human rights abuses, armed conflict, and environmental degradation. Companies that operate in the US and EU are required to comply with these regulations and take steps to ensure that their minerals are responsibly sourced.
As conflict minerals consultants, we can help companies navigate the complexities of these regulatory requirements and develop effective strategies for responsible sourcing.