EU Regulation on Conflict Minerals

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EU Regulation on Conflict MineralsThe need for supply chain transparency and intelligent risk management

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Background

EU Regulation on Conflict Minerals

Competing visions for conflict minerals due diligence in the EU.

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Who needs to be concerned?


Compliance implications cut across industries and functions.In addition to smelters/refiners and importers, key sectors using 3TG include:

1. Sourcing/procurement 2. Legal 3. Risk management 4. Reporting

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Proposed Regulation goes beyond the US Dodd-Frank Act


…in terms of application, themes and scope…

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Likely challenges


Difficulties encountered in Dodd-Frank reporting are likely to be exacerbated.

Traceability

• Opaque supply chains

• Blending of minerals

• Illegal trading and document falsification

Definitions• ‘High-risk country’?

• ‘Conflict’?

• ‘Human rights abuses’?

Monitoring• Which countries to monitor?

• How to address shifting geographic goal posts?

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Traceability: A precursor for responsible management


Viable solutions ultimately dependent on the traceability of 3TG minerals.

67% of companies reporting under the US Dodd-Frank Act don’t know the origin of their 3TG. This is likely to be a ‘journey’ for affected EU companies, using risk-based prioritisation

Cooperation, coordination and sophisticated data / assurance

management required

Mine Traders Smelters / refiners Traders Component

manufacturersProduct

manufacturers

DownstreamUpstream

Primary focus on smelters / refiners carrying out due diligence

Due diligence required by all actors

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Definitions and monitoring: A moving target?


‘High risk’ countries not currently defined OR prioritised.

Tantalum from DR Congo?

Tungsten from China?

Gold from Zimbabwe?

Tin from Myanmar?

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What can companies do?


The OECD Guidelines as a key due diligence starting point.

Potential challenges !Policy scope (e.g. ‘conflict’/ ‘human rights’ definitions)

!Mapping of internal 3TG use – and external sources

!Degree of ‘tainting’ of 3TG supplies through the amalgamation of ores/metals/components at any stage

!Opaque, multi-layered ore/metal trading

!Lack of existing supplier information

!Defining – and providing – an acceptable level of assurance to business partners and consumers

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Products and services

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1. Insight 3TG Commodity Briefings


Commodity value-chain overviews in the context of conflict minerals compliance

► Country / 3TG risk scoring (to allow benchmarking and monitoring across locations and commodity)

► 3TG in national context, including:• Mining locations / forms / actors• Trading routes / dynamics / actors• Export locations / patterns / actors

► Commodity conflict issues, including:• Political violence and civil unrest• Criminality• Security forces and human rights

► Commodity human rights issues, including both ‘serious’ and ‘other’ abuses relating to:• Civil / political rights• Economic / social / cultural rights• Labour rights

► Sub-national GIS risk-mapping

Research, analysis and scorecards

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AuGold

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TaTantalum

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WTungsten

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SnTin

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2. Risk prioritisation 3TG Source Country Reports


In-depth, sub-national reports focused on key source country risks

► Country / 3TG risk scoring (to allow benchmarking and monitoring across locations and commodity)

► 3TG in national context, including:• Mining locations / forms / actors• Trading routes / dynamics / actors• Export locations / patterns / actors

► Commodity conflict issues, including:• Political violence and civil unrest• Criminality• Security forces and human rights

► Commodity human rights issues, including both ‘serious’ and ‘other’ abuses relating to:• Civil / political rights• Economic / social / cultural rights• Labour rights

► Sub-national GIS risk-mapping

Research, analysis and scorecards

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3. Analysis Online risk management platforms


► Interactive online tools to centralise, analyse and report on risks in the 3TG supply chain

► Pre-packaged risk indices from Verisk Maplecroft’s well-established, proprietary portfolio

► Supplier screening based on location, management systems, activity and other relevant variables

► Integration of SAQ and first/third-party audit results

► Flexible data analytics to support solutions across different sectors and functions

► Auto-generation of compliance scorecards for supply chain actors and/or supply chain ‘phases’

► Action Plan generation based on risk, issue severity, reputation and other relevant variables

► Base platform tailorable to client-specific needs

Innovative, online platforms that generate insight and support OECD-aligned compliance by analysing client, Verisk Maplecroft and supply-chain partner information

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4. Management In-depth advisory services


OECD Due Diligence Guidance

Best practice policy, guidance and tool development (best practice)

Supply chain risk and impact assessment (remote and on-the-ground)Supplier engagement (SAQs, auditing)

Strategy development and Action Plan formulationScreening and assurance methodologies

Auditing of supply chain partners (remote and on-site)

Public reporting (media, sustainability reporting, integrated reporting)

Client solutions

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5. Supply chain traceability Data driven solutions

Mine global trade data to identify the provenance of 3TG, and assess the likelihood that it originates from ‘conflict-affected and high-risk areas’

► Data-driven supply chain traceability systems to help companies assess a commodity/product’s ethical performance

► Track 3TG minerals through the value chain (mine -> trader -> smelter/refiner -> trader -> component manufacturers -> manufacturers) using global trade data

► Overlay Verisk Maplecroft ESG + Political indices to help identify ‘red flags’ in the supply chain, which require further due diligence

► Analysis enables businesses to better understand potential sources of reputational/regulatory risk

Top exporters of trade Tin ores 2014

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Notice:


Strictly Private and Confidential

This discussion document has been prepared by Verisk Maplecroft and its contents and conclusions are confidential and may not be disclosed to any other persons or companies without Verisk Maplecroft’s prior written permission. The information upon which this discussion document is based comes from our own experience, knowledge and databases. The opinions expressed in this discussion document are those of Verisk Maplecroft. They have been arrived at following careful consideration and enquiry but we do not guarantee their fairness, completeness or accuracy. The opinions, as of this date, are subject to change. We do not accept any liability for your reliance upon them.

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Business

EU Regulation on Conflict Minerals