RCS Global - 7th Multi-Stakeholder Forum on Responsible Mineral Supply Chains


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This presentation by Harrison Mitchell, Director of RCS Global, was made at the expert learning session on conflict-affected and high-risk areas during the 7th Multi-Stakeholder Forum on Responsible Mineral Supply Chains held on 26-28 May 2014 in Paris.

Find out more at: http://mneguidelines.oecd.org/icglr-oecd-un-forum-paris-may-2014.htm

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RCS Global - 7th Multi-Stakeholder Forum on Responsible Mineral Supply Chains

  1. 1. 1 www.rcsglobal.com A practical approach to 3TG risk assessment and mitigation in conflict affected and high risk areas Harrison Mitchell Director harrison@rcsglobal.com www.rcsglobal.com May 2014
  2. 2. 2 OVERVIEW • This presentation summary describes upstream due diligence from the point of view of an International Trader. It was first presented at the 7th Annual OECD-ICGLR-UN GoE Conference on Responsible Supply Chains in Paris May 26th 2014 by Harrison Mitchell • Discusses • The company’s reasons for Acting • Upfront Challenges • Approach and design of practical due diligence • Initial results and Reponses from suppliers • General thoughts on key issues www.rcsglobal.com
  3. 3. 3 SUPPLY CHAIN AT A GLANCE www.rcsglobal.com Miners Exporters Int. Traders Smelters Refiners Manufacturers Component Manufacturers Brands Supply Chain Due Diligence Upstream Midstream Downstream Due Diligence Certification & Assurance schemes CFS program SEC Audit OECD States: Due diligence should be appropriate to your company’s position in the supply chain = intelligent response based on understanding supply chain and risk analysis
  4. 4. 4 REASONS FOR ACTING Multiple pressures compelled our client to act • Commercial – demands from the market to comply with the CFSI conflict free smelter program • Regulatory - direct local (ICGLR) and indirect internationally reaching laws (DF1502) mean pressures from above and below given their position in the supply chain • Reputational – risk of association with conflict/human rights abuse/child labour • Responsibility/moral – no responsible company wants to make money from conflict/HR abuse and child labour • International Norms on Human Rights and Transparency – the company was starting to respond to the emerging international norms on Human Rights and Transparency which influence DD response www.rcsglobal.com
  5. 5. 5 UPFRONT CHALLENGES Upfront challenges • Significant challenges in identifying what was effectively a new approach towards due diligence that was rigorous, based on good practice and appropriate to their position in the supply chain (as a trader) • Needed to be sensitive to commercial realities but also be able to legitimately respond to risks = assign significant responsibility to the producer/local trader but also provide support to supplier and maintain oversight • Key questions: • How to identify what is a high risk area? • Balancing practical with normative (and usually vague) guidance • Which guidance to use? = based around OECD www.rcsglobal.com
  6. 6. 6 APPROACH www.rcsglobal.com Opted for a combination of: • IDENTIFICATION: Using Heidelberg Conflict Barometer as an impartial way to identify high risk areas worldwide + CSFI country lists. • Commercial pressures meant that effectively DRC + 9 countries had to be considered high risk due to DF1502 and CFSI program requirements. • CONSISTENT INTERNAL STRATEGY: Company policy consistent with the OECD DDG that targeted conflict/HR/child labour risks + communicating expectations to suppliers • PIGGYBACK ON EXISTING COMPANY APPROACHES: Enhanced KYC process to check background of ALL new 3TG suppliers • Online search for sanctioned individuals/companies including UN • Enhanced Supplier questionnaire about officers and shareholders • Request for information on subsidiaries and partners • LOCAL CERTIFICATION: Only sourcing certified material from CFSI approved programs • INDEPENDENT ASSESSMENTS: Supplemented all of the above with own risk based annual independent assessments on a % basis, ongoing monitoring and better communication with suppliers and certification scheme
  7. 7. 7 RESULTS AND RESPONSES Initial Results and Responses • Understanding that this is now a permanent issue within the company – training and roll out to other departments are needed • Independent assessments identified a number of risks that are being addressed and leading to changes in program design and deployment • Program is providing assurance to the company executive concerned about liability now able to use DD to their commercial advantage • The program provides confidence to talk commercial steps in high risk areas www.rcsglobal.com
  8. 8. 8 SUMMARY THOUGHTS • Can take some time to set up, but worth being rigorous at the beginning of the process to get full support across multiple company departments. You need people to take on new responsibilities to make this work! • Identification of high risk areas still requires targeting of risks within those areas. Conflict Barometers is broad – best way to identify local risks is by being on the ground using local sources = independent risk assessments, information from suppliers and certification scheme • There is a lack of guidance on practical deployment of upstream due diligence. In addition, there is a lack of a common framework for companies/audit firms to conduct upstream assessments • We are still in an area of rapid development – with new rules like the EU coming forward – companies need guidance to respond effectively www.rcsglobal.com
  9. 9. 9 www.rcsglobal.com A practical approach to 3TG risk assessment and mitigation in conflict affected and high risk areas Harrison Mitchell Director harrison@rcsglobal.com www.rcsglobal.com May 2014