Roundtable on Conflict Free Gold


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Roundtable on Conflict Free Gold

  1. 1. Discussion Summary Roundtable onConflict-Free Gold New York City September 7, 2011
  2. 2. Copyright © 2011 The Fund for Peace and World Gold Council All rights reserved. This program description is proprietary to The Fund for Peace and International Alert. No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent from The Fund for Peace and International Alert.The Fund for Peace Sustainable Development, Sustainable SecurityThe Fund for Peace Publication FFP : S3BCR1130 (Version 11G)Circulation: PUBLICRoundtable Summarized bySonia HausenThe Fund for Peace1720 I Street NW, 7Washington, D.C. 20006United States of AmericaT: +1 202 223 7940F: +1 202 223 2 The Fund for Peace
  3. 3. Conflict-Free Gold Roundtable Overview Introduction & Contents On the 7th of September 2011, consensus and support within a broader Defining and Recognizing Conflict 4members of civil society, government, and global context. Experts assembled to share Creating and Maintaining Credibility 6the private sector convened in New York City perspectives, make furtherto discuss the World Gold Council’s (WGC) recommendations, discuss efficacy and The Mechanism 8draft Conflict-Free Gold Standards. The day- practical implementation, and jointly Conclusion & Recommendations 10long Roundtable was facilitated by the recognize the challenges facing companies About The Fund for Peace 11independent, nonpartisan, and nonprofit operating in complex and sensitiveorganization, The Fund for Peace. WGC, the environments. The following is an overviewinitiator of the meeting, sought feedback and of the various discussion topics, opinions, andguidance to ensure the Standard does what it advice brought to light by participants duringintends and addresses what matters to all the session. The session was held under therelevant stakeholders in order to build Chatham House Rule. Intention & Overview Representatives of the WGC - the 22- risk areas, the prime components are • To assess how this process fits within themember company market development assessments of conflict, company, and context of the ICGLR.organization - set the stage with an overview commodity. To ensure the Standard • To discuss cross-applicability and how theof the origins of the draft Conflict-Free Gold commands confidence and is embraced by Standard both supplements andStandards. The initiative was born out of a necessary stakeholders, the WGC had compliments other extant initiatives.growing conviction that a standard was published drafts for written comment in Junerequisite to demonstrate responsible 2011 and subsequently established a series • To examine Chain of Custody issues fromoperation in high-risk and conflict-affected of Roundtable meetings to garner further exploration/mining/refining perspectives.areas and that it may, in the future, serve as a guidance and actionable suggestions to • To converse on the impact of Dodd-Franktool to develop guidance for the industry as a improve the framework. Section 1502.whole. While members of the World Gold The participants of the first Roundtable • And more generally, to share thoughts andCouncil have a history of responsible sought a deeper understanding of the glean vantages of other stakeholders.production, it is difficult to demonstrate to Standard, the on-the-ground implications,external stakeholders exactly how this is and the ways the WGC had gone about The four main topics on the agenda were:achieved in practice. Previously, there was a development. Other goals of contributors 1. Defining and Recognizing Conflict;dearth of guidance on how to work were: 2. Creating and Maintaining Credibility;responsibly in conflict-affected and high-risk • To develop a better understanding of the 3. The Mechanism; andenvironments; this Standard is meant to producer side of the Standard and site- 4. The Big Picture.bridge the gap. Created in accordance with level implementation.OECD guidance on the responsible sourcing • To find out how multi-stakeholder groupsof minerals from conflict-affected and high may help industry tackle difficult issues. 3 The Fund for Peace
  4. 4. Conflict-Free Gold Roundtable Defining and Recognizing Conflict Assessing conflict has been one of situations adequately into account. also recognized, however, that this wouldthe trickiest issues to tackle. Participants • Since conflict is in constant flux, its take time and resources. The members of therecognized that defining countries or regions definition ought to encompass pre- and World Gold Council need criteria to presentlyas being in conflict is inherently difficult. For post- conflict climates as well. apply to the Standards.industry, publicly recognizing countries in • Regulatory sanctions/assessments (such aswhich they work as being (as the OECD Some participants felt that the industry was import/export provisions) were posited asdefines them) in conflict or at high risk of being faint-hearted in not being willing to useful guides, though these provisionsconflict could put strain on the company-host apply the criteria provided by the OECD; why tend to lag or remain in place after conflictgovernment relationship. The private sector, could these issues be left to risk assessments is ended.therefore, prefers objective lists of regions or provided by companies? Others suggestedcountries over flexible and discretionary • To address the oft-protracted nature of that there are a number of existing lists of conflict, assessments should move beyondguidelines, and the World Gold Council seeks countries (e.g. as operated by FAFO in the US)a third-party source for that identification. not causing towards not sustaining or as being ‘high risk’ in terms of weak prolonging conflict.Furthermore, aside from Dodd Frank Section governance or vulnerability to criminal1502 which declares conflict in the D. R. • Using ‘ confli ct’ and ‘ hi gh risk’ groups and money laundering. In relation toCongo outright, governments have also been interchangeably leads to ambiguity. the selection of regions being left to theloath to pass judgments on their peers. • Other initiatives such as the EITI, BGR, choice of individual countries, it was pointedPolitical aversion to conflict recognition ICGLR, or the Ruggie framework are useful out that this would be a difficult way in whichincreases the complexity for the application models; the OECD provides pragmatic to operate a standard if two gold miningof the standard. Thus, the dialogue guidance, but is not a decision making companies, operating in close proximity camecommenced by examining the challenges of body. to different conclusions about the conflictholistically and definitively assessing risks inherent in that region; stakeholdersconflict. There was group consensus that no one is would expect consistency of application of a currently assessing and publicizing conflict standard.Recommendations on sufficiently, and this problem extendsConflict Assessment beyond the gold industry. With governments Regional vs. National Assessments and industry being unable or unwilling toSuggestions were put forth to give primacy to provide this requisite function, there is an Participants concurred that national-levelassessments made by the international open space for civil society to fill the void. It assessments largely overlook regionalcommunity such as the ICRC. However, some was suggested that a multi-stakeholder group disparities (e.g. it is not ideal to apply thefelt international organizations (like the ICRC) may be one way to assess conflict and stay same conflict label to both South Kivu andmay wish to remain neutral. The UN was abreast of changing climates and Katanga). Proximity tests would allow forargued by some to have the greatest unpredictable situations. With goals of more focused regional analysis. How oneinternational legitimacy but others pointed clarity, flexibility and ease, regional expert might determine the distance or porousnessout that Security Council resolutions groups could utilize academics and NGOs on between different regions of a single statedepended crucially on the power dynamics the ground. A concern was raised that this entity was not addressed.between the P5 rather than an objective group may suffer legitimacy issues – i.e. theyassessment of conflict situations. cannot determine conflict without Snapshot of Industry Perspectives• There was a suggestion that one could use international law as a guideline. In response, the definition of conflict as per it was posited that the international Companies require an unambiguous international humanitarian law, but others perspective must be balanced with the delineation of conflict in order to have considered that would be too limiting, as it critical reality on the ground; access to local something clear and transparent to present does not take pre- and post-conflict expertise is one way to achieve this. It was host gov e rn m ents an d to av oi d 4 The Fund for Peace
  5. 5. Defining and Recognizing Conflictuncomfortable situations and/or legal issues. Western Perspectives to create an overarching initiative withInternal mechanisms to address conflict broader reach. A multi-stakeholder initiative -already exist. Most companies are risk averse; How to assess conflict is only one part of the that goes beyond defining conflict or simplyperception matters. One participant stated it quandary; who defines it is an equally valid addressing one sole commodity – may help towould be illogical for a refinery to accept consideration. Western perspectives may drive progress to this that is even tentatively perceived as differ from the way other cultures recognizebeing conflict-gold. South Sudan was brought conflict. There is a mounting perception that A Starting Pointup as an example. It is known to have gold international standards are being imposed byreserves but their provenance is uncertain; in a Western agenda on producing countries. The draft WGC standard currently providesthis situation it is unclear whether a refiner Assessments which seemingly do not account three triggers for companies to undertake ashould accept it even though it comes from a for other points of view are often left conflict assessment – a UN resolution;sovereign government. Regarding gold from vulnerable to criticism. This inevitably begs national law from a country of standing andthe D. R. Congo, many refiners would rather the question – who is the Standard ultimately influence and guidance from a multi-turn away questionable gold than wager a intended for? Who requires assurance? End- stakeholder group. It was becoming clear,good reputation. Currently only a very small users demand it; a primary objective is to however, that it would likely take two toproportion of global gold production comes externally demonstrate that members three years to establish a governancefrom active conflict zones, including 0.6% of operate responsibly. Accountability also framework for a new multi-stakeholdernewly mined gold coming from the D. R. extends beyond consumers to civil society at process and it was, therefore, suggested thatCongo itself. large. A representative of an international the use of an authoritative existing organization drew attention to the benchmark might be appropriate. In thisThere is a shared interest between importance of international humanitarian law context some participants commended thecompanies and people - they both want as the foundation of the standards; Heidelberg Conflict Barometer. Opinionsstability and sustainable peace. As a result of companies should not try to make it up as were voiced that the index may not be able tolegislation and the de facto embargo in the D. they go along. respond quickly to dynamic situations, thatR. Congo, the supply chain has been altered. countries deemed in conflict are not involvedThe WGC Conflict-Free Gold Standard is Bigger Than Gold in the assessment, and that it was relativelyneither about stigmatizing countries nor unknown (so that its methodology was notspecifically about the D. R. Congo. It is The complexities of defining conflict extend well known). While not perfect, there wasintended to aid member companies far beyond the gold industry alone. general consensus that it was a sufficientdemonstrate that they can operate Convening stakeholders to identify and place to start. Participants acknowledged theresponsibly in conflict and high-risk areas assess conflict is a global, cross-sector need for clarity and flexibility in conflictglobally. undertaking. Particularly in light of the recent assessment; there is space for both soft and challenges facing the Kimberley Process (KP), hard criteria going forward. the timing may be right to use this Standard 5 The Fund for Peace
  6. 6. Conflict-Free Gold Roundtable Creating and Maintaining Credibility The WGC seeks to ensure that all believe in the Standard and what models are with regional actors.essential components are in place to create valuable in their eyes. • P u bli ci zi n g as p ect s of i nt er naland maintain credibility; this will rest in part management and training procedures.upon the confidence of third parties in the Participants offered the following ways to • Ensuring that all stakeholders are at therigor of the standard and the degree of enrich credibility: table (with specific mention of India andtransparency around issues like audit. Civil • Clarifying timelines with respect to China). Participants agreed this would besociety, for example, wants the application of Remedial Action Plans (albeit there was no ideal; unfortunately, there is significantlythe Standard to have value. Industry must clear consensus about what an acceptable less buy-in from these countries. Somemeet broader community standards, window should be). argued, creates opportunities for ‘conflict-customer requirements of certification and • Monitoring progress of Standard gold’ flows.verification, and ensure that their decisions implementation.are defensible. This session illuminated whatit would take for various stakeholders to • Ongoing consultation and engagement Auditing & Transparency Audit assurance is necessary to foster useful guidance tool; the EITI may also be a WGC pointed out the security and safetycredibility. A participant recommended the support. It was stressed that the WGC has issues involved in making certain documentsauditing concept extend to reach “beyond always intended that implementation of the and information public and called forthe four corners of a company.” It was stated standards should be audited by an specifics on what is required for transparencythat refiners should not only know their independent and authoritative third party. rather than blanket statements. While havingcustomers (the miners), but also their some limits on transparency (e.g. where tocustomer’s auditors. A multi-stakeholder/ Transparency publish information might, in itself aid thetripartite committee to review audits and commission of a crime or place the safety ofreports would lend credibility from the NGO Civil society stressed the import of public others at risk) seemed acceptable toperspective. The ICGLR’s D. R. Congo auditing disclosure. Currently, it is unclear whether representatives of the NGO community,procedures are clearly outlined and may be a the audits will be available externally. The details were not discussed. Artisanal and Small-Scale Mining (ASM) Concern was voiced that the together during analysis. The Standard is not A member of the refining community voicedStandard ought to paint a more in-depth meant to apply to ASMs but only to large- frustration that while the standards for large-picture of what gold production can look like scale mining. That said, some miners are, in scale firms must be rigorous, well– from illegal, illegitimate actors to various fact, very eager to work on the ASM issue on documented, audited, transparent, andpractices of legitimate ASM. There was then a the ground as it can be a challenge for both verified by civil society, artisanal miners arecall to clarify the role of the WGC with operations and reputation; and they seemingly subject to none. Having suchrespect to ASM. Industry recognizes that recognize the importance of ASM in many polarized standards place refiners in aartisanal mining is a missing ‘puzzle piece’ countries as an important source of difficult position. A participant then pointedand that many distinct types of artisanal livelihoods. out that there are no double standards –miners exist which should not be lumped either production of the gold supply chain 6 The Fund for Peace
  7. 7. Creating and Maintaining Credibilitycontributes to conflict or it doesn’t. But, with The WGC is, however, working with should not be taking the place of governmentrespect to the D. R. Congo, refiners feel that governments and civil society on the OECD with respect to the provision of services.ASM producers just cannot meet necessary gold supplement which it hopes will become With engagement and learning, the rightstandards of due diligence there. The gold an over-arching framework for due diligence balance of community involvement iswill get to market through informal sectors or requirements for all forms of gold possible. Furthermore, finding balancethrough refiners who don’t care about production. betw ee n total c ertificatio n andstandards (e.g. the Ugandan refinery). disengagement is difficult. This gets at the Finding Balance crux of what the Standard is trying to achieveThe WGC is not in a position to solve the ASM – making it possible for companies to work inproblem. They can work on securing the Increasing private sector involvement in ASM difficult locales and be safe and chain, encouraging formalization of communities raises specific challenges; when Otherwise the places, often already sufferingartisanal miners, and promoting a more companies take on too much responsibility, from poverty, will have even less economicholi sti c analysis of the positiv e liability and supply chain concerns may be development; disinvestment should typicallydevelopmental contributions gold can have. raised by stakeholders. Companies also be a last resort. 7 The Fund for Peace
  8. 8. Conflict-Free Gold Roundtable The Mechanism This session was intended to prod if attempting to summarize in subsequent section was specifically mentioned tostakeholders believed the Standard capable pages (19-25). ‘negatively affect credibility.’of achieving its purpose, to develop • P19-28: On public grievance processes, it • From an NGO perspective, the inclusionconsensus that it indeed is on its way, and to was clarified that there are both of grievance mechanisms, or increasedseek guidance on how to improve the corporate grievance mechanisms and mention of the process, would lendmechanism. Over 900 preliminary inputs community grievance mechanisms. credibility.(over 20 from established organizations) had • P20: Clarification of ‘open and • The use of the word ‘militia’ was flaggedalready been received and would be taken transparent’ manner was thought to be from a number of perspectives. Forinto consideration. They touched on topics desirable. example, the standards should not onlysuch as granularity, audit assurance, • P22: Situations when a company does or cover situations of insurgency but also ofgrievance processes, alignment with other does not publicly distance itself…perhaps violence perpetrated by criminalinitiatives, suggestions of useful models, and a slight language adjustment is in order networks, terrorists and drug gangs. Inroutes to ensure conformance. as it currently begs the question, how far? addition, some people argued that the standards should seek to prevent theThe following specific issues were bought up • P22: Clarification suggested on civil financing of abusive army units – evenduring the discussion: society and whistle blowing. though they nominally represent the• P18: The language outlining Part B may • Regarding grace-periods for Remedial sovereign government. not accurately reflect what the WGC is Action Plans, the lack of a timeline in each 8 The Fund for Peace
  9. 9. Conflict-Free Gold Roundtable Conclusion & Recommendations In the final session, participants place, are functional and are sufficiently well- company’s best interest.discussed how the draft Standard fit into informed and enforced when it comes to • The importance of industry taking a lead inexisting legislation, opportunities to conflict situations. the formalization of ASM was reiterated.streamline or work together with other • Independent third party audits are key and • A recommendation was made that the WGCinitiatives, the role of industry within broader the Standard must be stress tested. reach out to the ICGLR. Collaboration maycontexts, and the meaning of success. • While the goal of stopping the flow of be useful as this initiative already has conflict-gold out of the D. R. Congo is political commitment from the highestRefiners pointed out that they have been laudable, it remains nearly impossible levels.undertaking anti-money laundering checks, without government buy-in, security sector • The OECD’s gold supplement is insupply chain and know your customer reform and the rule of law to drive change. development and the LBMA is now onanalysis for years. It is now about instillingtrust and demonstrating to external • Having a local grasp of regional dynamics board in developing standards for refiners.stakeholders that these mechanisms are in is integral to assessments and is in the Defining Success ‘What does success look like to you?’ or region but that it is a category of gold • An NGO participant stated that success is,Stakeholders defined it as follows: that is not subject to taint. first, assuring consumers that gold is• From a manufacturing perspective, success • With respect to ASM, the gold industry conflict-free, and second, cutting off the would be satisfying the customer with the could replicate how the Kimberley Process conflict-gold supply chain from the D. R. most rigorous requirements. (KP) dealt with similar issues. During Congo. Increased company engagement on• For the WGC, audit assurance is a key development, two tandem efforts were the ground and assistance to local miners objective. Success is an internationally created to simultaneously inform one is encouraged. supported certification and traceability another. The NGO - Diamond Development • Broad replication (in countries like India scheme, allowing members to demonstrate Initiative International (DDII) – was and China) would indicate success. gold is conflict-free. The Standard does not developed specifically to work on the ASM • Ultimately, success is ongoing sourcing imply that gold comes from a specific area issue. from difficult regions. Harmonization Harmonizing initiatives – for example more inclusive and comprehensive. be paramount going forward. In thewith the RJC or the EICC - would allow for re- Confusion, overlap, and audit fatigue could meantime, a practical solution to miners andenforcement and increased effectiveness. lead to paralysis; hence, the way forward is refiners was offered – adopt the mostExtending the long-term view of these clearly through seeking synergies. rigorous standard and you’ll probably beprocesses would render each mechanism Coordination and a big picture approach will compliant with the others. 9 The Fund for Peace
  10. 10. Conclusion & Recommendations Conclusion Participants accepted the Standard as fundamentally missing from the Standard. In and extend beyond the gold industry, wererequisite, learned how the WGC is developing general, it was a day of recognizing and aligned in a common goal of making theit, commended industry for taking steps tackling exceedingly complex issues in a Standard as credible as possible. Furthertoward certifiable conflict-free gold, and spirit of collaboration as opposed to consensus and support for the Standard wasacknowledged the substantial difficulties contention. This perhaps signifies an fostered and many felt there is room forfacing the WGC. Suggestions, feedback and evolution and maturation of discussions on increased civil society involvement. Lookingperspectives on what matters to stakeholders companies operating in conflict or high-risk forward, the WGC invites continuingwere voiced, but participants did not venture areas. The participants, with seasoned feedback.a strong opinion that anything was understanding that issues are global in nature 10 The Fund for Peace
  11. 11. About The Fund for PeaceConflict Early Warning Transnational Sustainable Development,and Assessment Threats Sustainable Security The Fund for Peace is an international organizations, the military,independent, nonpartisan, 501(c)(3) non- nongovernmental organizations, academics,profit research and educational organization journalists, civil society networks, and thethat works to prevent violent conflict and private sector.promote sustainable security. The Fund for Peace offers a wide range ofWe promote sustainable security through approaches for conflict mitigation that are initiatives focused on our central objective:research, training and education, engagement useful to decision-makers. to promote sustainable security and theof civil society, building bridges across ability of a state to solve its own problemsdiverse sectors, and developing innovative The Fund for Peace adopts a holistic approach peacefully without an external military ortechnologies and tools for policy makers. to the issues stemming from weak and failing administrative presence. Our programs fall states. We work at both the grassroots level into three primary thematic areas:A leader in the conflict assessment and early with civil society actors and at policy levels • Conflict Early Warning and Assessment;warning field, the Fund for Peace focuses on with key decision makers. We have worked in • Transnational Threats; andthe problems of weak and failing states. Our over 50 countries with a wide range ofobjective is to create practical tools and partners in all sectors: governments, • Sustainable Development, Sustainable Security. The Voluntary Principles on Security & Human Rights 11 National-Level Implementation Guidance Note
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