Corporate Inaction on Minerals Due Diligence Motivates RSN to Shift Gears

By Raphael Deberdt and Patricia Jurewicz

After six years of comparative year-on-year assessments of corporate due diligence under Section 1502 of the Dodd-Frank Act, Responsible Sourcing Network (RSN) will not publish a Mining the Disclosures 2020 report. The decision follows an identified stagnation in corporate efforts that reproduces poor due diligence efforts every year without much attention given to the concept of continuous improvement. Instead we will turn our attention to enhance research on artisanal mining with an aim to improve the lives of Congolese communities.

Mining the Disclosures constitutes the only yearly analysis of disclosures under the U.S. conflict minerals law, with the report expanding its scope in 2019 by adding an analysis of corporate actions to address harm of cobalt mining. It is a critical tool for consumers, investors, and business managers to promote good practices and minimize human rights risk in the extractives sector. As a comprehensive assessment, the rating includes more than 70 sub-indicators providing in-depth perspectives in companies’ implementation of the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict Affected and High-Risk Areas. The sample itself, with more than 200 companies across 26 industries, provides the breadth needed to assess the alignment of publicly traded companies with internationally-recognized due diligence systems. 

The trends we perceived after six years are, however, concerning. While leading companies remain profoundly involved in their supply chains, developing groundbreaking programs and ensuring that investments in responsible minerals supply chains does not fade, the majority of companies perform below expectations. A troubling tendency identified in the last two years shows the reuse of past disclosures and the lack of any significant information with a limited approach of only providing a compliance-oriented discourse. There has also been a trend of more companies not filing at all. These issues, combined with the lack of improvement, have transformed the conflict minerals legislation from a human rights-based framework to a corporate exercise disconnected from all realities on the ground. RSN also recognizes the limitations of its reports and the race for points that the rating system entails, often at the expense of more honest and constructive discussions. 

Appealing to corporate social responsibility, laws like Section 1502 of the Dodd-Frank Act are, however, tied to the political willingness for their success. In light of the current U.S. administration and its complete disregard for corporate regulation, the implementation of due diligence systems has been left to the decision of companies. Once again, leading companies still prevail, with some achieving a level of proactivity in the development of innovative due diligence systems that extend well beyond the tin, tungsten, tantalum, and gold (3TG) field. We hope that the upcoming U.S. presidential election, and the implementation of the EU’s conflict minerals regulation in January 2021, will re-establish due diligence—and not only compliance—as a goal to achieve. 

Exacerbated by the current health and financial concerns surrounding the COVID-19 pandemic, it is more than ever critical for companies to engage with upstream actors and ensure the sustainability of supply chains tied to low income, vulnerable communities. To successfully tackle these challenges, entire industries, and not just single companies, must embrace collaborative processes that allow for information sharing, solution implementation, and cost distribution. The success to ending human rights abuses, environmental devastation, corruption, and other negative impacts of the extractive sector, will be tied to the ability of companies to work together in long-term programs implemented in partnership with national authorities and the local population. The need to increase program support of local civil society and ethical business practices is critical to ensure their successful implementation. Finally, single approach programs have shown their limitations and their inability to effectively respond to the challenge of extractive industries in societies. Only an integrated and collaborative perspective, associating companies, governments, and civil society, and tackling every aspects of the challenge of responsible minerals sourcing can provide a long-term solution. 

RSN’s commitment to responsible minerals supply chains remains unchanged. We will strive to provide companies, investors, and stakeholders with the expertise we have developed in the past decade to help support due diligence in 3TG, cobalt, lithium, and other raw minerals. Aligned with this, we will provide the Responsible Minerals Initiative (RMI) and its membership with in-depth research on the cobalt artisanal and small-scale mining (ASM) sector to inform their future actions in this critical field. At this juncture, we feel it is important to direct RSN’s efforts to increasing transparency and accountability in the informal artisanal mining sector in the Democratic Republic of the Congo. We will advance coordination between the business and academic worlds to provide high-quality research on cobalt and avoid potential unintended consequences on local communities.  

In 2021, RSN aims to publish a Mining the Disclosures report with an updated structure and methodology. While we are not releasing the report this year, RSN anticipates that leading companies will keep raising the bar, despite the impact of COVID-19 on their internal finances. We hope that the laggards follow suit and embrace their responsibility to invest in the Congolese mining communities that enable their products to function.