This article is part of our special report Resource Efficiency.
Much attention has been paid over recent months to ways of cutting links between natural resources and the fuelling of unlawful armed conflict, particularly in the Democratic Republic of Congo, writes Terry Heymann. But policies to address the issue might also have unintended consequences, he warns.
Terry Heymann is the director of Responsible Gold in the World Gold Council, a non-profit association for the gold industry.
The World Gold Council, the market development organisation for the gold industry, is opposed to activities which finance or benefit unlawful armed conflict or armed groups. Working closely with our member companies and through an intensive consultation process involving governments, civil society, supply chain participants and development experts, we established the Conflict-Free Gold Standard.
This industry-led initiative set out an approach by which gold producers can demonstrate that their gold has been extracted in a manner that does not contribute to serious human rights abuses or breaches of international humanitarian law.
As such, the Standard is intended to support and advance the recommendations of the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. We welcome efforts to further support and reinforce on-going initiatives however we believe that any regulatory initiative that creates differential costs and risks associated with sourcing gold from specific countries is likely to lead to stigmatisation and reduced sourcing from those countries.
It is widely recognised that the approach taken by s.1502 of the Dodd-Frank Act, passed into US law by President Obama in July 2011, has had the unfortunate unintended consequence of reducing formal trade in minerals, so depriving tens of thousands of artisanal miners of their livelihood.
By contrast, initiatives that place the focus on responsible processes, such as that led by the OECD, can support a responsible minerals trade in conflict-affected areas, helping to improve economic and social conditions. We therefore suggest that the EU undertake three linked initiatives. Firstly, the EU should encourage all companies to publicly disclose their conflict-sensitive production or sourcing practices. There are many existing instruments that address responsible business conduct with regard to unlawful armed conflict.
There is no need for an additional instrument nor for mandating the use of a specific existing instrument. Encouraging companies to report on their conflict-sensitive business practices allows customers, investors, governments and civil society to understand what each company is doing, determine whether this is appropriate and make informed trading, investing and advocacy decisions.
This should be encouraged across all minerals, countries and supply-chains. Experience suggests that public reporting is a highly effective means of focusing management attention. Unduly focusing on the DRC or indeed gold leads to the risk of unwarranted stigmatisation.
Secondly, the EU should actively support and encourage a responsible minerals trade. Consideration should be given to creating a public-private alliance, similar to the Public-Private Alliance for Responsible Minerals Trade, led by a consortium of the US Government, industry (including the World Gold Council) and civil society.
Such an alliance could consider the best ways to promote responsible minerals trade through non-legislative means, for example, by supporting specific in-country schemes, showcasing examples of responsibly-sourced minerals from conflict-affected areas or recognising industry-led schemes that promote responsible business conduct. Thirdly, the greatest risks of funding unlawful armed conflict and criminal networks arise from illegal mining especially in the artisanal sector. To reduce these risks and improve development impacts and environmental and social practice in this sector, the EU should focus development aid on supporting appropriate formalisation programmes. Collectively, these three initiatives will allow the European Union to have a substantial, beneficial impact promoting responsible sourcing and addressing the development needs of resource-rich countries.
Through continued diplomatic efforts to address the underlying causes of conflict and progress security-sector reform, as well as multi-lateral engagement with development partners and emerging markets on these issues, the European Union is well placed to play a leading role in reducing unlawful armed conflict and lifting millions of people out of poverty.