Due Diligence & Risk of Harm
In the second blog, we discussed some important definitions, including the definition of ‘due diligence’: “the care that a reasonable person exercises to avoid harm to other persons or their property.”
An example of a reasonable physician performing due diligence, or ‘exercising care to avoid harm’ would be their reflection;
“What is the risk that my patient will experience stomach problems if I treat their joint pain with an anti-inflammatory drug?”
The reasonable physician knows that for some patients, anti-inflammatory medications can cause effects on the patient’s stomach. The physician would inform the patient of the potential risks and benefits of taking the drug. Then they would write the prescription if the information the patient provided confirmed that the risk from the medication was not great and the benefit was significant.
It is this concept of due diligence that has been written into the EU Conflict Minerals Regulation.
Companies in the EU that import the 3TG metals will be required to:
- establish strong company management systems
- identify and assess risk in the supply chain
- design and implement a strategy to respond to identified risks
- carry out an independent third-party audit of supply chain due diligence
- report annually on supply chain due diligence
The focus of that due diligence needs to identify harmful social, ecological, and/or economic consequences of the company’s activities within their ‘sphere of influence’ — along their supply chain.
Let’s look in more detail at three types of risk of harm that can occur along the mineral supply chain.
Both large scale mining and artisanal and small-scale mining can place demands on the community.
The arrival of LSM can challenge the ownership of the land and the resource, especially in areas that have traditionally been the site of artisanal mining. LSM can require the displacement or relocation of the community away from a future mine site.
As natural resources, and in particular water, are diverted to mining use, the natural environment is altered, producing consequences downstream from the mining site. Mines have a finite lifespan, and the closure of mine activity can have an impact both on the landscape and on the future economy of the region.
Discovery of a new mineral resource can rapidly change the traditional agrarian livelihood as the land becomes unavailable for agriculture and the population shifts to subsistence mining to survive.
Proper due diligence considers these potential community impacts, and triggers transparent discussion and planning with the community and the government.
As mentioned in an earlier blog, the advent of a mineral artisanal ‘gold rush’ in many countries has brought significant human conflict and suffering. Both paramilitary groups and organized criminal groups are inflicting human rights abuses including torture, forced labour, child labour, trafficking of adults and children, the sale of children, debt bondage, restricted freedom of movement and sexual abuse.
Paramilitary and organized criminal groups have been active in extortion, land seizure, and smuggling. The very mine sites are frequently hand-dug pits and subject to collapse, while the means of mineral extraction can lead to chemical exposure to dangerous substances like mercury, cyanide, and uranium.
Proper due diligence stimulates the mineral supply chain to identify instances of individual harm and human rights abuse all along their supply chain, and to respond to those risks.
Uncontrolled LSM or ASM mining activities can have a significant impact on the environment.
Mining processes use significant quantities of water, and when that water becomes contaminated, the effects are felt not only downstream but also in the surrounding soil and groundwater. Land that once grew crops can be rendered useless. Emissions from mineral processing can release volatile process chemicals and greenhouse gases. Mine waste in the form of tailings and waste ponds further contaminate the land and disrupt biodiversity.
Further along the supply chain, mineral smelting is a major cause of air pollution. Sulphur dioxide emission produces acid rain which then acidifies soil and water bodies. The waste matter left over from the smelting process, including slag, other contaminant elements like lead, cadmium and arsenic, when released as particles in the air, reduce air quality and affect public health.
With proper due diligence, actors in the mineral supply chain can identify offending smelters and prompt responsible mineral processing. With transparency will come responsibility.
International action supporting mineral supply chain due diligence:
The Mosi-oa-Tunya Declaration was adopted on 13 September 2018 at the International Conference on Artisanal and Small-scale Mining and Quarrying (ASM18) in Livingstone, Zambia.
This declaration called on government and international private sector to ensure production and sourcing practices do not contribute to adverse human rights or conflict and its financing.
It encourages the use of the OECD Due Diligence Guidance for all mineral supply chains. The ‘Mosi’ Declaration was approved by five-hundred and forty-seven delegates representing 72 nations.
EU Non-binding Guidelines for identifying conflict-affected and high-risk areas, Commission Recommendation (EU) 2018/1149, were published on 10 August 2018. These guidelines will aid companies in understanding the definition of conflict-affected and high-risk areas (CAHRAs), as described in the EU Conflict Minerals Regulation.
In addition to providing suggested open source resources for companies to use in identifying conflict-affected and high-risk areas, the guidelines provide a series of ‘red flag’ topics.
Red flags are situations that “give rise to a reasonable suspicion that the minerals may contribute to conflict or serious abuses associated with their extraction, transport or trade.”
Now, with a clearer picture of the components of ‘risk of harm’ in the mineral supply chain under our belts, we will take a more detailed look at the actual components of the mineral supply chain in the next blog. See you soon!