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Free webinar: Industry introduction to the new IGF ASM Management Guidance

  • By RCS Global
  • Published 14th February 2017
  • Tagged

Endorsed by the IGF’s 56 member countries, the IGF Guidance for Governments: Managing artisanal and small-scale mining primarily supports governments seeking to better-manage their ASM sectors. However, it has also been endorsed by virtually every key industry body — including the ICMM, LBMA, WGC, RJC, IRMA, TANB, CDI and RJC — and has key implications for companies in the sector:

  • The guidance represents a significant new tool for companies and downstream businesses looking to strengthen both their engagement with ASM and ASM-related issues in the upstream and their coordination and collaboration with host governments. This helps companies improve their impact and overall ability to achieve responsible-sourcing objectives.
  • With the endorsement of nearly all governments with a recognised ASM sector, the guidance is set to become a trusted blueprint for the management and regulation of ASM sectors. It can help provide a more predictable, reliable and responsible sourcing environment for mining companies and mineral traders, refiners and manufacturers.

The IGF Guidance for Governments: Managing artisanal and small-scale mining was produced by RCS Global with input from a range of industry, government and civil society stakeholders during multiple global and public consultations in 2015 and 2016.

To mark the publication of the Guidance, RCS Global and the IGF will be hosting two industry-focused webinars in the coming months.

The webinars will introduce the Guidance and de-brief participants on its implications for industry and on its potential timeline for implementation. There will also be a discussion on the practical steps that can be taken to use the initiative to strengthen ASM compliance.

  • The second webinar will be on March 21, 2017 at 8:00 am CET/4:00 pm JST to accommodate people in Europe, Africa and Asia. A registration link will be sent closer to the date.

Here is a selection of reactions from industry groups:

“Governments must take lead responsibility for managing ASM issues and are a key partner to our members exposed to ASM risks. The ASM Guidance fills a much-needed gap in providing governments with good practice approaches to managing ASM. We encourage its uptake and application in countries with ASM sectors.”
Tom Butler, President and CEO of ICMM

“The World Gold Council supports responsible ASM that demonstrates appropriate environmental, safety and labour practices and is not linked to conflict. We support access to international markets for gold from responsible ASM. We recognise the efforts of RCS Global, and their ASM Guidance, who are playing a key role in seeking to improve ASM conditions and practices and enable access to markets.”
Terry Heymann, Chief Financial Officer, World Gold Council

“We welcome the development of good practice guidance for Governments on responsible mining, such as the ASM Guidance for Governments. We look forward to drawing on the Guidance within our work on this issue and we will support its promulgation across multi-stakeholder forums”, says Tyler Gillard, Head of Sector Projects, Responsible Business Conduct Unit, OECD. “ASM is crucially important for rural livelihoods in many regions around the globe, providing jobs, skills, and development. We hence welcome the IGF’s effort to tie together various government-backed standards, including the OECD Due Diligence Guidance for Responsible Mineral Supply Chains, in this new IGF Guidance. This avoids conflicting or confusing expectations and recognises the crucial role for due diligence and private sector buyers in government policy-making on ASM, to create an enabling environment for inclusive and responsible global supply chains.”
Tyler Gillard, Head of Sector Projects, Responsible Business Conduct Unit, OECD.  

“Governments are key partners in managing and working with ASM. The more capacitated our government partners are and the more effective they are in leading on ASM management, the easier it will be for the industry to engage with and support a formalised and better-organised ASM sector. We therefore very much welcome the development of this guidance material focusing on governments and we look forward to its implementation.”
Ruth Crowell, CEO of the London Bullion Market Association (LBMA) 

“This guidance has been sorely needed for a long time and it’s great to see it come to fruition.”
Anne-Marie Fleury, Director, Standards and Impacts, Responsible Jewelry Council (RJC)

“ASM plays an important role in the mining of tantalum raw materials.  Efforts to increase governments’ understanding of ASM matters is welcome and the T.I.C. will continue to support such initiatives.”
Roland Chavasse, Director of the Tantalum-Niobium International Study Center

“The Cobalt Development Institute welcomes the IGF Guidance for Governments on managing artisanal and small-scale mining, as only a concerted effort by concerned parties, including governments which have a major part to play, will succeed in improving livelihoods in this important economic sector.”
The Cobalt Development Institute

“The Initiative for Responsible Mining Assurance (IRMA), while focused primarily on creating value for recognition of responsible mining at industrial scale sites, is conscious of the critical issues and overlap with artisanal scale mining. We appreciate the opportunity to learn more through this new guidance, discuss the issues with groups that lead in this space, and consider how we might together contribute to common benefit of the stakeholders most affected.”
Aimee Boulanger, Coordinator, Initiative for Responsible Mining Assurance (IRMA)


A fond farewell to Michèle Brülhart Banyiyezako

  • By RCS Global
  • Published 17th January 2017
  • Tagged

After four years with RCS Global Michèle Brülhart Banyiyezako will be leaving the company in March this year to become the EICC’s new Technical Director. With her co-Directors Dr Nicholas Garrett and Harrison Mitchell, Michèle has overseen the establishment of RCS Global as one of the world’s leading responsible raw materials supply chain audit and advisory groups. She was central to the development of the company’s audit offering while also playing a key role in redefining industry practice globally.

In our tenth year of operation, RCS Global is going through a period a rapid expansion commercially and Michèle has taken the opportunity to step down from her role to focus on a new challenge in a key role between industry and regulators. The Directors and Board at RCS Global would like to take this opportunity to thank Michèle for all of her work and her contribution to the success RCS Global has witnessed over recent years.

Michèle will continue to work on RCS Global audit and advisory projects up to her departure. Subsequently she expects to continue working closely with the company within the responsible raw materials sector.

RCS Global has witnessed considerable growth over the last eighteen months in both its audit and advisory business while the company has responded to demand by increasing its research and insight – making it one of the industry’s leading thought leaders across issues ranging from cobalt to ASM. The company has also significantly strengthened its senior team and expanded its auditing and advisory expertise, especially in Asia. The company now has a presence in the Americas, Sub-Saharan Africa and China as well as every major downstream market.

After the culmination of the company’s recent strategic review, and in collaboration with Michèle, RCS Global are now taking this opportunity to bring in a new Director with the industry experience and expertise to manage and consolidate this growth while ensuring a continuation of the quality of auditing and advisory work which has become synonymous with RCS Global.

Speaking about her departure Michèle said:

“I have spent four excellent years at RCS Global, consolidating the core business and helping to create the industry’s leading audit practice. And most importantly, I have enjoyed working with a group of peers that are equally passionate about driving positive change and providing the highest quality outputs to our clients. The company now stands at the forefront of the responsible raw materials sector and I am proud to have been part of that achievement. My new role gives me the opportunity to explore a new challenge, which I am hugely excited about, and I look forward to continuing to engage with RCS Global in that capacity.”

Speaking of Michèle’s departure, Harrison Mitchell and Dr. Nicholas Garrett said:

“We would like to express our sincere gratitude to Michèle for her dedication and service. Our working relationship was not just one marked by professional respect, but by friendship. We have been in the trenches together and have achieved great things both in shaping and mainstreaming the global responsible sourcing agenda, but also in cementing RCS Global’s position as world class, respected and expanding company. We are excited about Michèle’s next step, we very much look forward to working with her in her new capacity as the EICC’s Technical Director, and we wish her a nothing but the best for the future.”

What the EU conflict minerals rule means for EU companies.

  • By RCS Global
  • Published 2nd December 2016
  • Tagged

This week the EU Parliament formally adopted mandatory due diligence for mineral importers. This could have a significant effect on EU based companies. Following the announcement, we have pulled out several highlights for mineral importing companies, and brands that use 3TG material to be aware of:

Checking country of origin will not be sufficient

Importers of ‘conflict minerals’ – tin, tantalum, tungsten and gold – will be required to undertake mandatory due diligence checks of their material. We note that country of origin is not the only indicator that should trigger DD: information on transit or an irresponsible supplier should also prompt a background check.

This suggests to us that gold importers especially, will now be required to dig a little deeper when buying from known transit areas such as Dubai or India. However, 3Ts likewise, will need to demonstrate that material bought from China, for example, has not simply transited directly from a high-risk country such as DRC or Myanmar.

Small businesses and recycling are exempt, but there is scrutiny on the gold sector. This is welcome news as the gold sector continues to be rocked by successive scandals of either smuggling or fraud (see the recent Global Witness exposé).

New performance indicators are coming

Large companies (with over 500 employees) will be encouraged to report on their sourcing practices based on new performance indicators.

How serious is this? We can only go from the suggested text in the 20 May 2015 version which provides the following amendment: “(11a) Directive 2014/95/EU of the European Parliament and of the Council 1a requires companies with more than 500 employees to disclose information on a number of policies including human rights, anti-corruption and supply chain due diligence.

This Directive provides for the Commission to develop guidelines in order to facilitate the disclosure of this information. The Commission should consider including in those guidelines performance indicators with regard to responsible sourcing of minerals and metals.[Our emphasis]. “Requires” would suggest that this is far from voluntary – but it’s unclear at this stage what reporting will be required.

Existing schemes will be brought up to the OECD Due Diligence Standards

Existing industry and other OECD due diligence guidance conformant schemes will be used – but they will be checked to ensure they meet the standards of the OECD Guidance. As RCS works with all major industry schemes either as advisors or auditors we know that most have been heading this way in anticipation of this move. The OECD itself is working with the CFSI, RJC, ITSCI, LBMA, and DMCC on an alignment exercise and independent schemes like the Better Sourcing Program have already moved to bring their program in alignment with the OECD Guidance. However, the existing industry schemes that struggle to meet OECD alignment will have some work to do to ensure they meet minimum standards.

Defining and appraising definitions around conflict affected and high-risk areas

It’s good to see the commission take on the thorny issue of trying to define conflict affected and high-risk areas. This has the potential to highlight a number of regions and issues beyond Africa. We hear that this came about because the compulsory nature of the rule resulted in business groups insisting that the EU define high risk areas, rather than leave the assessment to companies themselves – as the OECD Guidance recommends.

To do this, the EC plans to select experts to draw up a list of areas and due diligence issues. The law will also be reviewed every two years, and this review may include a review of other minerals. We hear the OECD itself is likely to be instrumental in defining which minerals are likely to be high risk


If you are an EU based importer of 3TG – you need to get your due diligence program in alignment with the OECD Guidance. As a first step, if you have done nothing, consider working with RCS Global to map your supply chain and understand where you might be exposed to 3TG risk.

For those importers already with a due diligence program up and running – you should consider undergoing a CFSI Downstream Audit, which RCS Global has developed in partnership with the CFSI. The audit allows you to demonstrate compliance and you will be listed on the CFSI’s publicly accessibly registry of compliant companies. It is highly recommended that you demand your suppliers also undergo this audit to facilitate your own due diligence implementation.

CFSI and RCS Global will hold a webinar on December 8, 2016 from 11-12pm Eastern Standard Time to provide an overview of the audit, including a general Q&A session. To join the webinar contact Hillary Amster, CFSI Audit Program Manager, at [email protected]. To schedule an audit or to discuss the program, contact Michèle Brülhart, Head of Global Audit Practice at RCS Global, at [email protected].

If you don’t have a due diligence program, you need to start now.

Now, more than ever, large EU businesses and manufacturers will be expected to have mapped their supply chain exhaustively, and reviewed responsible sourcing policies and practices. Not only should these practices now be in alignment with the OECD Due Diligence Guidance, but the same should be expected of a company’s suppliers.

RCS Global can help with this process. We are already working with many leading manufacturers to bring their due diligence programs up to the industry standards being set in the EU, the US and globally.

For a free consultation, please email Harrison Mitchell, RCS Director for Responsible Sourcing at [email protected]. We look forward to discussing your case and your options in greater details.

About RCS Global

RCS Global is one of the world’s leading responsible raw material supply chain audit and advisory groups. We empower upstream, midstream and downstream operators to demonstrate the highest standards of responsible supply chain due diligence and compliance. Together with our clients, we are making industry more ethical, accountable and transparent.

RCS Global has established an unrivalled position as the bridge between actors at each stage of the value chain, from major EU and US regulators and corporations to global manufacturers, processors, mining companies and artisanal mining communities. Our senior staff
each have over a decade of experience in supply chain auditing, advisory, technical assistance and research and our brand reputation is built on our team’s performance since 2008. We currently work with the OECD, CFSI, BetterCoal, CCCMC, RJC and other industry bodies, as well as world leading companies.

Our position means that we have:

  1. The experience, expertise and confidence
 to guide you through your next steps in implementing the OECD Due Diligence Guidance’s requirements. Whether that is obtaining more insights through research, making sure your management systems are robust, managing your supplier engagement and training, or undertaking supplier validation audits.
  2. A decade of boots on the ground experience. With our representation in China and Africa we have an in-depth understanding of mineral supply chains, from multinational downstream actors to micro-scale artisanal mining operations, as well as the governance realities these supply chains have to function in.
  3. A profound understanding of the risks in these supply chains and the standards that govern responsible supply chains worldwide – including regulatory and voluntary standards in North America, Europe and China.

Excellent professional networks, from companies, to implementing bodies and governments, NGOs and the media.

What you need to know about Downstream Audits

  • By RCS Global
  • Published 30th November 2016
  • Tagged

Access the new CFSI Downstream Audit guidance note from RCS Global

Earlier this month the CFSI’s 2016 Annual Conference took place in Santa Clara, California. The Conflict-Free Sourcing Initiative (CFSI) is a coalition of leading companies dedicated to improving the security and human rights conditions in their raw materials supply chains. The event itself is the pivotal annual conference for ethical mineral supply chain monitoring.

At the event RCS Global joined representatives from organisations ranging from the OECD, the China Chamber of Commerce of Metals Minerals & Chemicals Importers & Exporters (CCCMC), the European Partnership for Responsible Minerals (EPRM), the Alliance for Responsible Mining (ARM), and several leading campaigning organisations including Amnesty International, Global Witness, and the Enough Project.

One of the main areas of discussion at the event was the launch of the new CFSI Downstream Audit.

The audit provides a mechanism for companies to obtain independent validation of responsible sourcing practices in alignment with the OECD Due Diligence Guidance for Responsible Mineral Supply Chains from Conflict-Affected or High-Risk Areas. It is specifically designed to help 3TG processors, traders and manufacturers source responsibly and has particular relevance for companies importing 3TG-containing products into the EU in light of the forthcoming EU Directive on Conflict Minerals, which will require mandatory due diligence for importers of minerals and metals of 3TG.

This audit consolidates responsible sourcing reporting requirements within the downstream. This means companies can streamline audits as they may no longer need to commission and/or undergo multiple audits each year.

Learn more:
RCS Global played a leading role in the development of the audit, helping to construct the process on behalf of the CFSI. Given this position we wanted to give potential users of the audit a clear outline of what exactly it is; who it is relevant for; and how the audit process itself is carried out. Finally, we wanted to highlight how completion of the audit itself can be of real value to companies themselves.

To get insight into all of these questions you can access our CFSI Downstream Audit note here.

CFSI staff and our CFSI audit team are also available to discuss the program and auditing options at any time via the email address below.

Join our webinar:
CFSI and RCS will be jointly holding a webinar on December 8, 2016 from 11-12pm Eastern Standard Time to provide an overview of the audit, including a general Q&A session. To join the webinar or for general inquiries about the program, contact Hillary Amster, CFSI Audit Program Manager, at [email protected].

Schedule an assessment:
To schedule an assessment, contact Michèle Brülhart, Head of Global Audit Practice at RCS Global, at [email protected]

New publication: The emerging cobalt challenge: Competition, Concentration, and Compliance

  • By RCS Global
  • Published 4th November 2016
  • Tagged

As cobalt demand rises companies are increasingly facing the triple challenge of competition, concentration, and compliance. In this paper we explore the state of the market, the challenges companies face in sourcing cobalt and the potential compliance challenges in the market.

You can access the full paper here or read a summary below.

The report was featured exclusively in the Wall Street Journal here, while our Director, Harrison Mitchell also expanded on the report findings in an article for the compliance blog FCPA.

If you are interested in speaking with RCS Global about cobalt supply chain compliance or any other mineral supply chain issues please feel free to contact at any stage via [email protected]

Summary: The emerging challenge
“Cobalt demand is set to rise significantly as nascent demand from the electric vehicle market comes on line. At the same time, cobalt supply is tightening, with the world’s primary producer – the Democratic Republic of Congo – suffering from crumbling infrastructure and massive human rights challenges.”
Dr. Nicholas Garrett, Director at RCS Global.

This is the prospect manufacturers across the electrical manufacturing and electric vehicle market face in the next two years. From smartphones, to tablets, and from power tools to medical equipment, cobalt is the small but critical component powering the consumer tech revolution witnessed in the last decade. The cobalt powered lithium-ion batteries found in this technology is now also set to be the catalyst behind the imminent large-scale commercialisation of electric vehicles.

Yet, cobalt is a concentrated and complex market, dominated by one producer. The Democratic Republic of Congo (DRC), responsible for around 60% of global supply. As a consequence of a prolonged conflict and profound economic mismanagement in the 1990s, DRC’s once strong industrial mining sector has given way to a complex and largely unregulated cobalt sector, which many of the biggest companies in the world now have to grapple with.

At the same time, scrutiny from campaign pressure groups is increasing, forcing companies to further ensure transparency in their supply chains within the DRC. The recent Amnesty International Report and the Washington Post investigation are the best examples of this trend.

Regulators and Industry are waking up to the cobalt challenge
As a result of these challenges, a handful of major companies are moving to treat cobalt supplies in the same category as ‘conflict minerals’, which by law, are currently limited to gold, tin, tantalum and tungsten (3TG).

At the moment, this re-classification is industry-led with a few leaders setting the new standard but regulatory changes to incorporate cobalt are now a realistic possibility with the OECD leading a drive to expand supply chain transparency and due diligence to other commodities.

The OECD’s ‘Due Diligence Guidance’ is an aligned approach that provides a common standard for companies and remains the most helpful in guiding companies towards an internationally recognised supply chain due diligence program.

“Originally developed in the context of ‘conflict minerals’ and endorsed by the United States Securities and Exchange Commission, the European Commission and the Chinese CCCMC, the OECD’s Guidance is now the go-to standard to mitigate raw material supply chain risks in the upstream.
Harrison Mitchell, Director at RCS Global.

The state of the DRC and how risk can be managed
In the new RCS Global Report, further detail on the state of the market is highlighted, while the risk profile and potential human rights and labour rights threats currently present in DRC are laid out in full.

The report also goes on to offer a road map for the thousands of midstream and downstream companies now grappling with how to ensure their DRC cobalt supply chains can be ethical, “conflict free” and future-proofed against the compliance challenges coming over the horizon.

Through Dodd-Frank 1502 and especially through the OECD’s Due Diligence Guidance, much of the groundwork for a cobalt compliance program has been done. So if companies can set up due diligence programs, which follow the OECD’s framework then it is more than likely they’ll be future-proofed against compliance and regulatory risks coming down the line.

“Many companies underestimate the implementation requirements of the Guidance itself. The biggest error we see is companies not realizing that in the eyes of the OECD Guidance, they are responsible for the conduct of their partners throughout their supply chain right down to the mine. Companies like Apple have acknowledged this and are pushing out their due diligence across their supply chains but many others see this as a daunting prospect. It needn’t be. In the same way that much of the regulatory groundwork has already been done, so the due diligence industry has matured as well. There are researchers and consultancies who have built up specialist cobalt expertise and can steer companies through this compliance challenge. But these companies must start the process now – if they don’t, they risk being caught out.”
Harrison Mitchell, Director at RCS Global

New publication: Can state gold buying programs help formalise and better manage ASM?

  • By Nicolas Eslava
  • Published 6th May 2016
  • Tagged

In February this year, a state gold buying mechanisms (SGBP) unexpectedly hit the limelight, when an AFP story on Gabon’s efforts to formalise what the Government described as “anarchy” in the artisanal gold sector even hit the UK’s tabloid press.

[…] in 2014 the government decided to address the “anarchy” of the situation of the artisanal gold diggers explains state representative, suggesting, the state’s management of this gold production “will improve living conditions for our people” with the development of “small mines better organised and semi-automated”.

While “anarchy” is a term that does not typically do the ASM sector justice, Gabon’s Government’s system for buying and collecting small-scale gold production to gain better visibility and control of the activity in the sector, complements well RCS Global’s latest report, published last week through the International Institute for Environment and Development (IIED).

In the report “State gold-buying programs: effective instruments to reform the artisanal and small-scale (ASM) gold mining sector? “, which features case studies of our previous research on SGBPs in Bolivia, Colombia, Côte d’Ivoire, Ghana, and the Philippines we detail SGBPs’ challenges and their potential as instruments for artisanal and small-scale gold mining (ASGM) formalisation and sector management.

At a time where market conditions and the broad development agendas are encouraging governments to look at the sustainable integration of their ASGM production into their markets, SGBPs are an important policy instrument that can fulfil multiple objectives.



ASGM Gold trader weights its stash, nearly 2 Oz, Maniema, DRC (2015).

SGBPs, what are they and how do they work 

In a nutshell SGBPs allow a state to buy gold from ASGM operators through a network of official buying stations, offering an opportunity to foster positive interactions between ASGM miners and the State, build mutual confidence and support the formalisation of the sector.

In certain countries SGBPs purchase gold from sellers fulfilling responsible sourcing and/or specific legal requirements. In other countries SGBPs operate a ‘no questions asked’ policy, sometimes buying gold regardless of where it stems from or how it was sourced. Some SGBPS purchase directly from ASGM miners, while others purchase from middlemen. SGBPs operate at specific junctures of the ASGM sector value chain (see the red links in the figure below) to meet its purity and quantity requirements.

Furthermore the structure of the ASGM supply chain means that downstream customers, including final consumers, have the capacity to push for cascading purchasing standards (sometimes imposed on them through regulations, be they national or extra-territorial – such as Dodd-Frank 1502 or the forthcoming EU Directive on Conflict Minerals).


Often offering premium prices to attract sellers, or making it mandatory for legal sellers to sell into the SGBP, SGBPs fulfil particular objectives as part of a government ASGM strategy:

Indirectly reform the ASGM sector. When a government lacks the capacity to monitor and enforce regulations in the ASGM sector, an SGBP can be set up to complement a voluntary system of regulations where ASGM operations can participate in so to receive special incentives for their compliance with said voluntary regulations.

Raise standards in ASGM operations. A well-managed SGBP can link the miners to the government, even in areas of limited state presence, and generate trust and goodwill. When sellers come to sell gold to SGBPs, the state has an opportunity to set or insist on the application of international due diligence and responsible sourcing standards that traders and their suppliers must meet.

SGBPs also have been (and still are) used as a vehicle for certain states to collect revenue and bolster national gold and foreign currency reserves.


SGBPs’ challenges

Our case study research also highlights a number of recurrent challenges to the implementation and operation of SGBPs. These challenges can weaken SGBPs in a variety of ways, most notably they can render the SGBP too costly to be run sustainably or constrain its operations to the point of non-efficacy, particularly by weakening its position as the dominant market player. Challenges are:

  • Misapplication of price incentives can make the SGBP a deficit generating policy instrument depended on political goodwill. High price incentives can also attract smuggled gold from neighbouring countries, which can generate tensions;
  • Lack of coordination between central banks, which usually govern SGBPs, and the ministries responsible for ASGM policy implementation can result in SGBPs that are not adapted to the realities on the ground, undermining effective implementation;
  • A general lack of incentives for ASGM operators to sell to the SGBP can fail to foster regular interactions between the two parties, resulting in ASGM operators selling to the best buyer at the time of the sale and the SGBP struggling to attract sufficient volumes;
  • Lack of pre-financing and credit – typically lacking access to formal credit ASGM operators often have to resort to financing sources that oblige them to sell back to their creditor and therefore block them from selling to the SGBP;
  • Centralised gold collection –SGBP buying stations need to be on or near the mines to capture ASGM miners’ production, miners who live hand to mouth and often sell their gold on a daily basis. This is a significant capacity challenge, especially in areas of limited state presence or control.
  • Due diligence deficiencies – are a common characteristic and can result in SGBP non-compliance with national and international laws and good practice requirements, thereby limiting the government’s ability to sell on the gold afterwards. However, effective due diligence is not only costly but also technically demanding and demands long term commitment and capacity. Not all countries considering an SGBP would meet these criteria from the word go and the incremental deepening of due diligence may therefore be required.


RUCOM issues copy

Above: placard against the RUCOM, Colombia’s traceability mechanism, Antioquia Department, Colombia. Picture courtesy of Alexandra Uran (2015). Below: gold buyer from Antioquia, unregistered with RUCOM at the time of the picture (2015), openly advertises its services in Florencia, Caquetá Department, Colombia.


(Partially) Successful SGBPs practices

Our case studies suggest, SGBPs can fulfil their objectives and overcome the recurring challenges when they are backed by political commitment and their objectives are congruent both with state institutional capacity and the realities on the ground. Based on (partially) successful SGBPs and non-state programs from Colombia, Côte d’Ivoire, Ghana and the Philippines, the report points to the following considerations to make them more effective:

  • Design financially sustainable programs to shelter implementation from shifting political priorities and long-term deficit;
  • Shorten the value chain by removing intermediaries in order to offer higher prices to miners and decentralise gold collection to achieve this objective;
  • Impose regulations gradually to conserves a certain goodwill among ASM operators;
  • Build local community and stakeholder support and incentivize their participation to foster societal pressures towards compliance;
  • Build capacity, transparency and resilience in state institutions, and facilitate their coordination through a dedicated management team that reports to an ASM taskforce[i];
  • Provide non-fiscal incentives, including: credit, equipment, services and training, and bringing normality and stability to the ASGM miners and their relatives;
  • Foster effective ASGM taxation to discourage cross-border smuggling, determine which is the appropriate level of taxation for ASM gold, if any as ASGM is often a survival activity.


Capacity copy

Left: miners operating in precarious conditions and in violation of national mining regulations despite operating in an area regularly visited by State services (DRC, 2015). Right: relevant ministry and CSOs representatives assist to a workshop on ASM governance in Antananarivo, Madagascar (2015); a country suffering of an acute precious gems smuggling problem.


So what should a successful SGBP look like?

We found two approaches to be helpful and promising some level of success:

SGBPs with a ‘no questions asked’ policy, are the easiest to implement as they require limited state expenditure and infrastructure, often relying to an extent on traders to purify and mobilize gold from the mining regions to the buying stations. However by relying on middlemen they create entry points for gold of dubious origin and are therefore non-compliant with international requirements for due diligence, unless an existing system of due diligence is already in place and can thus guarantee traceability from the mine-sites to the buying station. Access to key gold markets is moving towards the need to provide acceptable levels of traceability and due diligence; ‘no questions asked’ SGBPs will thus increasingly have to reform to incorporate standards if they want to continue to sell to international buyers.

Given the current international trend these SGBPS can play a role in ASGM sub-sectors where gold is already produced in line with legal and international requirements, where legal requirements pertaining to due diligence do not apply, or in cases where there is significant scope for incremental compliance, so long as the non-compliant gold is not earmarked for export, and an effective implementation program exists; said drive towards increasing transparency will force these SGBPs to either implement traceability measures or being progressively shun by key buyers having to or wanting to abide by said rules.

Examples of working SGBPs that do not effectively implement due diligence standards are Ghana and the Philippines.

Community-based SGBPs rely on the involvement of the community at the local level to achieve successful implementation and operation through local monitoring and (indirectly) social pressure, and can be effective due to their broad support base. Furthermore, by collecting gold through local structures these schemes shorten the trading chain and allow the SGBP to offer a higher price for the gold purchased. To invest the local community in the SGBP they offer incentives, including financial (percentage of the gold collected), community development and training.

The drawback of community based SGBPs is that they take time to implement and to become sustainable, not to mention profitable for governments interested in setting up an SGBP to strengthen their reserves (among other objectives), and that they need a certain level of State presence at the local level to be efficient.

Examples of community based programs are Colombia’s non-state run Oro Verde® and Côte d’Ivoire’s Groupements à Vocation Cooperative – although the latter was co-opted by a non-governmental group during Côte D’Ivoire political crisis, leading to its discontinuation.


Choco_ASM Information copy

A poster from the local environmental oversight agency urges people to adopt responsible mining practices and protect biodiversity in Quibdó Airport, Chocó (2014). Chocó is the department where Oro Verde is implemented.


Sounds interesting?

Further details, case studies, and a broader set of analysis and recommendations extending far from the possible scope of a blog note are available in our report: click here to download it.

[i] As described in the Intergovernmental Forum on Mining, Minerals, Metals, and Sustainable Development Guidance for Governments on Managing Artisanal and Small Scale Mining, 2015.

Unless stated otherwise all pictures are from the author.

How the EITI can support artisanal and small-scale mining (ASM)

  • By Nicholas Garrett
  • Published 13th April 2016
  • Tagged

At the recent EITI Global Conference in Lima, Peru, I facilitated the session on Artisanal and Small-Scale Mining (ASM) and how the EITI can support countries’ efforts to formalise and professionalise the ASM sector.


Why is this important?DSC_0405 for blog

The answers are multiple and straightforward. Everyone knows the ASM sector is wrought with challenges, but also massive opportunities for local poverty reduction and rural economic diversification. As my colleague, Eddie Rich wrote on the same topic last year, a key challenge is that the data on the sector is “sparse, unreliable, and all over the place”.

Much money is spent on ‘snapshot’ studies on ASM, while mechanisms designed with the objective to consistently generate reliable ASM data for easy public consumption, so to further transparency and accountability in the sector have seen somewhat less attention.
The EITI provides a platform for strengthening government systems to collect and improve the quality of data, to get data interoperable with other government data, to build a platform for dialogue and to build trust. ASM data is an area the EITI can help with.

That’s a controversial suggestion, which in the past was often met with a frown, rather than an enthusiastic smile. However, having ASM on the agenda at the EITI Global Conference and the more granular levels of conversation around this issue suggest more people understand the vision.

Vision? Well, here is ‘what if’:

What if the ASM “sector”, which provides a livelihood and a major source of economic opportunity for millions of people is no longer ‘too unknown’ or ‘misunderstood’ to be considered ‘too complex’ to engage with?

What if the data required for Governments and other stakeholders to effectively work with the ASM sector was readily accessible in a digestible and practically meaningful format?

What if this data consisted not just of mine sites, production volumes or export values, but also of more detailed data on environmental, political and social indicators?

With access to such data it is possible to implement an ASM management strategy that sub-categorises the sector sub-nationally so to open up engagement-, impact mitigation- and management opportunities to help ASM operate more responsibly.

While this does not resolve the over-arching challenge for ASM to obtain legal titles to land and resources, better data on the sector can inform better ASM management strategies. Better strategy implementation can allow ASM realise its rural development potential, which it otherwise often fails to deliver on.


RCS Global’s on-going work on the ASM Management Guidance for Governments (draft) developed for the Intergovernmental Forum on Mining, Minerals and Metals provides a strategic framework to achieve this. In the context of the EITI Global Conference we simulated the implementation of the compact version of this practical tool assisting Governments – together with other stakeholders – to better manage ASM.

The simulation of the Guidance, drawing on the Peruvian case, was a success and the final version of the ASM Management Guidance (compact and complete versions) will be available to implementing Governments and other stakeholders within 2-3 months.


ASM session EITI Global Conference 2016 Lima for blog

How can the EITI help?

Tapping existing data sources and finding new ways to generate data to inform the implementation of ASM management strategies is essential to achieve progress.

The EITI, now implemented in 51 countries, has historically focussed on the oil, gas and industrial mining sectors. ASM typically does not produce material revenues at the national level and was therefore often ignored in EITI reports.

However, requirement 6.3 in the 2016 EITI Standard requires an estimate of the informal extractive sector’s contribution to the economy. This includes contextual (and more data) on the ASM sector.

Selected EITI implementing countries, such as the DRC, Ghana, Niger and Togo, already include some data on ASM production in their EITI reports. While not part of the formal EITI reconciliation exercise this data provides important insights into the ASM sector and its interrelationship with formal economic and development processes in the countries. Many other EITI countries have expressed an interest in further guidance on how the EITI can be a tool for addressing ASM challenges.

In complementarity to the forthcoming final RCS Global/IGF ASM Management Guidance for Governments, the World Bank has produced a useful short note (currently in draft format) elaborating some ideas for MSGs on EITI ASM reporting. The note spells out some of the benefits of incorporating ASM into EITI reporting and suggests three options for reporting of one – or a combination – of the following data sets: a) providing an overview of ASM activity, b) production, and c) revenue data.

Collecting this data will be a step in the right direction, yet the challenge with existing Government collected data sources is that in many EITI implementing countries these are often incomplete and lack sufficient scrutiny. The ASM sector is a useful money-laundering tool and is often abused by criminal elements seeking to benefit from smuggling or under- and mis-declared activities. Increasing the capacity of Governments to collect data can only partially improve the situation unless such capacity building measures are coupled with anti-corruption measures and making ASM sector operators a willing stakeholder in reporting.

In a second step, just like with the abundance on oil, gas and industrial mining data, the ASM data has to be made available in a meaningful and easily digestible format.


Incorporating into EITI reporting vetted data from supply chain initiatives

Some work has been done over the years on the significant synergies that exist between the EITI and the rich ASM production and trade related data that ASM mineral assurance and/or certification programs such as, for example, CTC, Fairmined, ITSCI, the Kimberley Process and the Better Sourcing Program generate.

Integrating the respective databases underpinning these programs with public EITI reporting would provide additional assurances over the integrity of the collected data, overcoming some of the data challenges mentioned above. Matching the production and export volumes and values through these schemes can in certain countries also help efforts to curb smuggling and illegal exports, where extraterritorial legislation (such as the US Dodd Frank Act Section 1502) requires exports in certain minerals and metals to be certified compliant with international guidance, such as the OECD Due Diligence Guidance for Responsible Supply Chains.

Looking at the trade in artisanally produced minerals and metals in turn complements well the EITI’s current efforts to extend the initiatives from one focussed on the extractive stage to one that includes the trading stage in the value chain.

Much of this activity shows that ASM – as a subsection of EITI implementation – is becoming a more dynamic and innovative thematic area. This makes it very important to pick up early lessons from the first movers in implementation and to continue to push the scope for collaboration between the EITI and other supply chain initiatives.


About the author

ASM session EITI Global Conference 2016 Lima Nicholas Garrett for blog


Dr Nicholas Garrett is a Director at RCS Global and at the Better Sourcing Program. He is a globally recognised expert in issues of transparency, ASM and responsible global supply chains.

Meet RCS Global here in April and May 2016

  • By RCS Global
  • Published 11th April 2016
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22-23 April: Beijing, China.

Responsible Cobalt Seminar organised by the China Chamber of Commerce of Metals Minerals & Chemicals Importers & Exporters (CCCMC).

Join RCS Director Harrison Mitchell and Asia Manager Bowen Zhang at Responsible Cobalt Seminar organised by the China Chamber of Commerce of Metals Minerals & Chemicals Importers & Exporters (CCCMC).


26 April: Munich, Germany.

Aluminium Stewardship Initiative (ASI) inaugural Annual General Meeting.

Join RCS Project Director Nicolas Eslava at the Aluminium Stewardship Initiative (ASI) inaugural Annual General Meeting.


10-14 May: Paris, France.

10th ICGLR-OECD-UN GoE Forum on Responsible Mineral Supply Chains
Join RCS Directors Harrison Mitchell, Nicholas Garrett, and Michèle Brülhart at the  10th ICGLR-OECD-UN GoE Forum on Responsible Mineral Supply Chains.

Michèle Brülhart nominated to be included in the 2016 Top 100 Conflict Minerals Influence Leaders

  • By RCS Global
  • Published 9th March 2016
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RCS Global is pleased to announce that our Head of Auditing Michèle Brülhart has been nominated to be included in the 2016 Top 100 Conflict Minerals Influence Leaders list compiled by Assent.


Michele’s nomination highlights the results of her tireless work on the design and implementation of effective due diligence and third party audit systems from the mines of the African Great Lakes region to end users in the Americas, Asia and Europe. Michele has been a key influence in the efforts put forward by various actors, having contributed to the design and harmonisation of many conflict minerals third party audit mechanisms, including the CFSI, LBMA, RJC and the OECD Guidance. In addition to this work Michele is also deeply involved in the implementation of validation mechanisms, conducting audits along the entire mineral supply chains, and using her expertise to train auditors, auditees and suppliers all over the world.

Michele’s work has been able to steer positive changes in this complex industry thanks to the positive involvement of our trend-setting clients  and the support of key implementers and policy makers.


Assent’s online vote is open until March 16th. And you can vote for Michele by clicking here.

End of Year Message

Dear clients, partners and friends

As another year comes to a close, RCS Global would like to thank all of you for your most valued support. 2015 was a hugely successful year for us in which we significantly extended our global work portfolio, appointed Michèle Brülhart onto RCS Global’s board, and made important structural improvements. For example, as part of our accelerated growth, we consolidated the creation of a China based team, operating throughout the year. We are also particularly proud of the very positive results our new quality management system has produced, which has yielded not just many positive client reviews, but has also allowed our clients to provide feedback through a structured mechanism, which has allowed us to make internal process adjustments and tailor our offerings even better to our clients’ needs.

Workwise, our Responsible Supply Chains work area has seen significant growth. While our work with some of the largest global brands on their responsible sourcing practices is often confidential, we are very proud that our team helps to shape responses and solutions to todays responsible sourcing challenges, globally. In 2015 we have:

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The EITI and commodities trading transparency: where are we headed?

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For the past 2 years RCS Global has been advising Trafigura on its journey to become the commodities trading industry leader on transparency. With developments in the trading industry transparency space accelerating towards the end of 2015, we would like to share our view of next steps.

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Meet RCS Global in December 2015

  • By RCS Global
  • Published 27th November 2015
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2 – 3 December: Beijing, China

International Workshop on Responsible Mineral Supply Chains

Join RCS Director Michele Brülhart and Bowen Zhang who will be leading the discussion on the Chinese conflict minerals auditing framework at the CCCMC and OECD hosted International Workshop on Responsible Mineral Supply Chains in Beijing, China.

RCS Global progresses work on the IGF ASM Management Guidance

  • By Nicholas Garrett
  • Published 10th November 2015
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RCS Global’s collaboration with the Inter-Governmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF) in developing the IGF Guidance for Governments on Managing Artisanal and Small-Scale Mining (ASM) was a core piece of the agenda at the IGF’s 11th Annual General Meeting from October 27 to 29, 2015 in Geneva. We delivered a well-received workshop on the ASM Management Guidance, which was a key milestone in the further development of the Guidance into 2016.

This year’s AGM was attended by over 250 participants from 67 countries, as well as representatives from international organizations, industry associations and civil society organizations. At the meeting, delegates welcomed five new members to the IGF: France, Germany, the Netherlands, the Islamic Republic of Iran and Rwanda. This brings the total number of IGF member countries to 54.

Many of the IGF’s member countries face acute issues in ASM. The IGF’s ASM Management Guidance is therefore supposed to provide the necessary steps for Governments globally to manage ASM.

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2015 Wrap up for responsible sourcing and conflict minerals

  • By Harrison Mitchell
  • Published 10th November 2015
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HM blog 2

Harrison Mitchell speaks at the LBMA Responsible Gold Forum, Vienna, October 2015

We recently started a series of gossip calls with one of our clients – swapping stories from responsible sourcing before getting down to business. It’s been fun, illuminating and interesting – so we thought we would share the picks of the bunch that suggest where the sector is moving over the next year.

OECD, EU and China regulatory update

The OECD is slowly but surely expanding their Due Diligence Guidance to jurisdictions around the world. Adoption of the guidance as either a voluntary or regulatory program is expanding from Colombia to Turkey to the EU itself acknowledging OECD DDG as a basis for their program. While the EU rule is still a couple of years out – China (CCCMC) is launching an OECD based guidance of its own – you can access the English version of the draft guidance here. The guidance also looks to establish an audit program, initially focused on smelters and refiners, to be launched in 2016. Michele and Bowen will be in Beijing 2-3 December to join the OECD and CCCMC hosted 2015 International Workshop on Responsible Mineral Supply Chains.

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Meet RCS Global in November 2015

  • By RCS Global
  • Published 5th November 2015
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10 -11 November: Berlin, Germany

German Raw Materials Conference, Assuming Responsibility – Promoting Sustainability in the Raw Materials Sector

Meet RCS Director Dr Nicholas Garrett at German Raw Materials Conference hosted by the Federal Ministry for Economic Affairs and Energy (BMWi) and the Federal Institute for Geosciences and Natural Resources (BGR) in Berlin, Germany.


Meet RCS Global in October 2015

  • By RCS Global
  • Published 12th October 2015
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20th October: Vienna, Austria

LBMA/LPPM Precious Metals Conference 2015

Join RCS Director Harrison Mitchell during the LBMA/LPPM Precious Metals Conference 2015, to be held at the Hilton Vienna. Harrison Mitchell will be speaking and participating in a panel of experts discussing Global Developments in the implementation of the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas.

19 – 22 October: Bern, Switzerland

EITI Board Meeting

Meet RCS Director Dr Nicholas Garrett at the 30th EITI Board Meeting in Bern, Switzerland.

 30th October: Geneva Switzerland

Intergovernmental Forum on Mining, Minerals and Sustainable Development (IGF) Annual General Meeting

Join RCS Director Dr Nicholas Garrett who will be leading a consultative workshop on Putting the Guidance for Governments on Managing Artisanal and Small-scale Mining to Use, during the Intergovernmental Forum on Mining, Minerals and Sustainable Development (IGF) Annual General Meeting in Geneva.

Where RCS Global will speak in September 2015

10–11 September: Antananarivo, Madagascar. Workshop organised by GIZ

Artisanal Mining Sector: Governance and Initiation of a Permanent Dialogue (Atelier « Secteur minier artisanal à Madagascar: Gouvernance et initiation d’un dialogue permanent)

Join RCS Global Project Director Nicolas Eslava during a two-day workshop that will include the presentation of the RCS Global’s guidance for governments on how to manage artisanal and small-scale mining (ASM), developed for the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF). It will include a discussion of the relevance of the ASM management guidance to Madagascar’s vibrant ASM sector.

23-24 September: San Jose, California, U.S.A.

CFSI Annual Conference 2015

Join RCS Directors Harrison Mitchell and Michèle Brülhart at the Conflict-Free Sourcing Initiative’s (CFSI) annual conference in San Jose, California, where they will be presenting the latest issues on quality of supply chain mapping data and related challenges for suppliers when exercising due diligence. RCS Director Michèle Brülhart will also be presenting the revised gold audit protocol during the CFSI focus group meeting ahead of the conference to select CFSI members and industry experts, to discuss improvements to the gold audit program.

Here is what you need to know about China’s new Conflict Minerals Guidelines

In July, RCS Global met with the China Chamber of Commerce of Metals, Minerals & Chemicals Importers and Exporters (CCCMC) in Beijing to discuss efforts to ensure conflict free sourcing. CCCMC has over 6’200 members across the entire mineral supply chain, including the majority of Chinese smelters and refineries supplying international value chains.

Earlier this year, CCCMC published Guidelines for Social Responsibility in Outbound Mining Investments (the Guidelines). The Guidelines include a requirement for companies to conduct risk-based supply chain due diligence to avoid funding or fuelling conflict.

To operationalize the due diligence requirement CCCMC has developed the Chinese Due Diligence Guidelines for Responsible Mineral Supply Chains (the CM Guidelines). RCS Global has received an early copy of this draft and we have summarized the five key areas here:

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7 reasons why trading companies disclosing payments to governments makes good business sense

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The trillion dollar commodities trading industry is under increasing pressure from advocates and policy makers to adopt more responsible business practices. In this first of a series of blogs on social and political license risks for the commodities trading sector I analyse a central concern of policy makers and advocates: the disclosure of commodities trading companies’ payments to governments.

Supported by the Extractive Industries Transparency Initiative (EITI), the global transparency standard in commodities, and Trafigura Beheer B.V., one of the world’s leading independent oil, metals and minerals trading companies, RCS Global has published a business case for the commodities trading industry to disclose data on commodities trading companies’ payments to governments. The report can be downloaded on RCS Global’s website. Continue reading…

RCS Global invites participation in online consultation for Guidance for Governments on Managing Artisanal and Small-Scale Mining (ASM)


RCS Global invites you to participate in the online public consultation process on the draft Guidance for Governments on Managing Artisanal and Small-scale Mining (ASM), which RCS Global has produced for the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF). Continue reading…

OECD Conference: Responsible Supply Chains Update – May 2015

The annual OECD Conference on Due Diligence and Responsible Sourcing was held last week in Paris, France. Here are the key takeaways from this crucial conference in the calendar year.

  • New due diligence actions from China and the EU to appear in 2015
  • OECD Due Diligence is becoming mainstream worldwide for companies and countries
  • SEC issuers are concerned with data quality which is creating pressures and increasing scrutiny upstream on gold and development issues

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RCS Global Director to join Mining Indaba event in Cape Town

Join RCS Global Director Nicholas Garrett at Mining Indaba to discuss cutting edge issues in Communities, Artisanal & Small-Scale Mining; CSR Strategy; Social Sustainability & Human Rights; Strategy, Policy & Legislation, and Institutional Reform; Supply Chain Due Diligence & Conflict Minerals Compliance; Transparency & Anti-Corruption in the Extractive Industries.

Click here to discover our new website and learn more about our services, and email Nicholas to arrange a meeting between Tuesday – Friday 10-13 of February.

What’s behind your supplier’s declaration of conflict free supply chains?

RCS Global conducts the world’s first independent conflict minerals audits of Asia-based suppliers. By Michèle Brülhart

RCS Global recently completed a second round of conflict minerals audits of Asia based suppliers to review their determination of scope for the country of origin inquiry and validate the declarations made in the Conflict Minerals Reporting Template (CMRT) of the CFSI. Perhaps not surprisingly, we found that referring to the smelter and refinery list as the only criteria to determine risk associated with a supplier is not an effective way to capture risks in the conflict minerals supply chain. Here are some of the observations RCS Global made that directly impact SEC issuer’s ability to report “DRC conflict free”:

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El Dorado: The Search for Responsible Gold Continues


When will gold buyers and investors begin to fully support efforts in Due Diligence and Responsible Supply Chains?

In mid-October, the Responsible Gold Conference hosted by the London Bullion Market Association (LBMA) and the Responsible Jewellery Council (RJC) was held in Lima, Peru, as part of the LBMA’s annual gold conference. The conference centred around due diligence and the development of responsible gold supply chains, which while progressing are far off being mainstream activities within the artisanal and small scale gold supply chains. RCS Global was invited to speak on due diligence on responsible gold supply chains and presented as part of a panel of experts on the topic which included Rand Refinery and Metalor.

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RCS Global advises Trafigura on transparency journey


Trafigura Beheer B.V., one of the world’s leading commodity trading firms, yesterday announced its commitment to a new policy designed to encourage the disclosure of payments to governments by commodities traders under the auspices of the Extractive Industries Transparency Initiative (EITI), the global standard for improving transparency of revenues from natural resources. Trafigura has been and continues to be advised on this journey by RCS Global ( Andrew Gowers, Trafigura’s Global Head of Corporate Affairs says, “RCS Global have done very thorough and highly professional work for us over the past 12 months in the context of our commitment to revenue transparency. We are very happy with their subject matter knowledge, their understanding of the intricacies of the trading industry and their ability to provide relevant and pragmatic advisory. We continue to rely on their services along this important journey of demonstrating our commitment to responsible business.”

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RCS Global Director Harrison Mitchell presents on due diligence at British Parliament in London


On 20th October, RCS Global director Harrison Mitchell presented to a packed session of the All Party Parliamentary Committee on Extractives on conducting human rights due diligence in raw materials supply chains.

The presentation, which can be found here, provides a background for why human rights due diligence is increasingly important for all companies in the supply chain, from miners, to traders, manufacturers and investors. Human rights issues will continue to be of significant importance to the APPC, as well as the extractive sector generally, particularly in light of new legislation currently under discussion by the European Union on conflict minerals.

Latin America Notes: Solutions to ASM mining conflicts, a need for stakeholder participation


According to the Observatorio de Conflictos Mineros en América Latina (Latin American Observatory on Mining Conflicts) there are more than 150 significant conflicts in the region, with many more smaller conflicts occurring. Mining conflicts generate high levels of strife and impacting negatively all stakeholders; hence it is important for decision makers, at the institutional and corporate levels, to understand how they affect the livelihoods of all actors. When referring to mining conflicts the image that generally springs to peoples’ minds is one of local communities pitted against a gigantic transnational company. However, often things are more nuanced. Conflict can, and does, happen between all actors whose livelihoods depend or are impacted by mining activities including between different segments of local communities. Any extractive activity will impact the rights of the local populations, and unless processes are set up for the local communities to express their opinion and influence decisions about impacts on their life, conflict is inevitable.

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Conflict Minerals Upstream Audits – An Auditor’s View


RCS Global was recently asked to present to the OECD Audit Working Group on the practical challenges of conducting supply chain audits in the Democratic Republic of Congo (DRC).

In the absence of formal auditor training in the upstream mineral supply chain, exchange between the audit schemes developing a conceptual idea or standard and the auditors tasked with verifying its implementation is limited to informal platforms such as the OECD Working Group. Continue reading…

Conflict Minerals Audits

The term “conflict minerals audit” is often used to describe a wide variety of assessments that have emerged to review sourcing practices along the minerals and metals supply chain. There are audits of mining operations, mineral exporters, mineral processors, component or product manufacturers as well as of course the future audits of SEC issuers under Section 1502 of the Dodd-Frank Act. This blog provides a typology of audits to shed some light on the developments in the auditing space of conflict minerals.

Audits in the conflict minerals space can be broadly separated into three categories: legally required audits, membership audits and voluntary audits. In each category, the audit approach and objective can differ and consequently, the auditors carrying out the work can change.

Part A: legally required audits:

Ironically, the first legally required audit in the conflict minerals space is one of the latest to be carried out in practice. The Conflict Minerals Report Audit mandated by Section 1502 of the Dodd-Frank Act is a legal requirement for companies issuing reports to the U.S. Security and Exchange Commission (SEC). It follows an assurance approach that has similarities to a financial audit, albeit auditors are not required to be certified public accountants (CPAs). The Conflict Minerals Report Audit has two main objectives: 1) the verification that an issuer’s due diligence framework is designed in conformity with the criteria set forth in a nationally or internationally recognized due diligence framework (which to date is ONLY the OECD Due Diligence Guidance) and 2) whether the issuer actually performed the due diligence measures as they were described [1]. As such, the audit is relatively “light” in that it does not verify whether the due diligence measures taken actually conform to the internationally recognized due diligence framework – it simply checks the design of the due diligence system on paper and verifies if the issuer has done what they said they would do.

The second, legally required, audits are the mine inspections and verification of exporters under the framework of the International Conference on the Great Lakes Region (ICGLR). These audits in principle apply to supply chain actors in the Member States of the ICGLR[2], subject to the condition that the country has implemented the ICGLR’s Regional Certification Mechanism (RCM). Currently only Rwanda and the DRC are moving towards a full implementation of the RCM. Audits under the ICGLR claim to be aligned with the OECD Due Diligence Guidance for Responsible Mineral Supply Chains from Conflict-Affected or High-Risk Areas (“OECD DDG”), thereby following the ISO certification approach. Audits are intended to provide evidence that mine sites are free of conflict and serious human rights abuse and that minerals exported from the country can be traced back to the mine of origin. Mine inspections are carried out by the respective Government agencies and the ICGLR’s Audit Committee is expected to provide guidelines on the accreditation of auditors for the assessment of exporters this year. However considering the slow progress of the RCM it might be another 2-4 years before these auditors get into the field.

Thirdly, audits under the OECD DDG can be considered legally required. The OECD DDG is currently the only internationally recognized due diligence framework referred to by the SEC, thereby making it somehow mandatory for companies to implement the guidance in order to comply with Section 1502. There are two types of audits included in the OECD DDG. The first audit is described in Step 4 of the Guidance and should be applied at “identified points in the supply chain[3]”. Its objective is to verify that sourcing practices at these points are in conformance with the OECD DDG. The points identified are the smelter and refinery (for gold) and audits are to be carried out in accordance with ISO19011. However, the OECD itself does not propose an audit mechanism, nor does it accredit auditors. Rather, the Guidance refers to the need for institutionalized mechanisms to establish such audit schemes that conform to the guidelines set forth in Step 4. Such audit schemes include those described in Part B below, namely the CFSI, LBMA and DMCC. However, in particular for the CFSI, the program design may not yet be fully in compliance with the requirements of Step 4 of the OECD DDG. A compatibility analysis done in 2011[4] highlighted gaps which appear still relevant today in regards to the public disclosure of information as well as risk mitigation.

The second type of audit under the OECD DDG are the Upstream Risk Assessments which are described in more detail in the Appendix to the 3Ts Supplement of the Guidance. While strictly speaking these are risk assessments, the expectation here is to independently verify upstream actors’ conformance with the OECD DDG. As these assessments are not conducted under the framework of an institutionalized mechanism, there is more flexibility (or some may say inconsistency) in the approach followed as well as the procedure to select qualified auditors. In addition to the challenge related to auditor qualification, there is a shortage of auditors willing and able to carry out these assessments. In particular international auditors are reluctant to travel to remote areas in Central Africa on a regular basis. RCS is working on a detailed methodology and checklist for these upstream risk assessments, however input is required at the international level to ensure the results of the assessments are considered credible and can be relied upon further downstream.

Part B: Membership audits

Membership audits are those assessments which are mandatory for any participant in a given initiative or organization. These are not legally required, although companies face increasing pressure from downstream customers to join a specific organization. Membership audits include:

1) The Conflict-Free Smelter Initiative (CFSI): a program focused exclusively on tin, tantalum, tungsten and gold (3TG) processors and based on the ISO19011 Standard. Auditors are approved by the CFSI and the objective of the audit is to demonstrate that all incoming 3TG material is conflict free.

2) The London Bullion Market Association (LBMA): an association of gold refiners that used to be based on quality criteria only. Accreditation as “good delivery refiner” since 2012 includes the requirement to undergo regular audits of gold sourcing practices. The objective is to demonstrate compliance with the OECD DDG as well as conflict-free sourcing of gold. The LBMA allows for audits based on ISAE 3000 and ISO19011 Standards and is currently the only scheme offering both an assurance and certification approach for its members. Auditors are approved by the LBMA. The Dubai Multi Commodity Centre follows a similar approach for their refiners. However the DMCC audit guidance, while not excluding ISO based audits, is much more targeted towards assurance providers.

3) International Tin Research Institute (ITRI): ITRI established the in-region sourcing mechanism iTSCi, working with upstream companies to ensure the 3Ts are traceable to the mine of origin and are proven to be free of conflict and serious human rights abuses. ITSCI members are regularly audited (for mineral processors the audit may be carried out as part of the CFSI) and auditors are selected by ITRI.

Part C: Voluntary audits

Broadly speaking, voluntary audits are divided into two types: 1) Audits commissioned directly by the company wishing to demonstrate responsible 3TG sourcing practices. Depending on their operations, companies may use the World Gold Council’s Conflict-Free Gold Standard, the RJC’s Chain of Custody Standard or directly the OECD DDG. 2) Audits required by the company’s customer, comparable to Code of Conduct audits for social and environmental issues. This includes for example Signet’s Responsible Sourcing Protocol that is currently being applied to all Signet suppliers as well as other, company-specific, verifications of supplier’s sourcing practices. Another example, still in the jewellery sector, is the Jewelers Vigilance Committee’s (JVC) recent guide to conflict minerals, which recommends for companies to conduct supplier audits.

Voluntary audits differ in their approach and objectives depending on the individual company.

As this extensive list shows, the auditing business around conflict minerals compliance has grown tremendously in the past three years. While there are more and more qualified and experienced auditors available, auditor capacity remains a challenge in assuring these audits are carried out consistently and results can be relied upon with confidence. In addition, a lot of progress has been made in cross-recognizing audit results among different institutional mechanism, however there is certainly a need to further harmonize efforts and avoid the duplication of efforts. A first step towards this goal would be to raise awareness on the commonalities and differences among the audit mechanisms so as to create a better understanding of where there are overlaps.

Going forward, independent verification of practices along the mineral and metal supply chain will remain crucial to maintain the credibility of certification and approval mechanisms. This is particularly true for upstream and midstream operations where actors have the ability to exercise more direct influence over conditions at the mine site of origin. In the downstream part of the supply chains, verification is likely to be less concerned with mineral sourcing conditions and more focused on ensuring supplier claims are accurate and truthful. Consequently, there is significant potential to incorporate conflict minerals audits at component or product manufacturers into existing social, environmental or quality inspections and thus reduce the burden on auditees.

[1] AICPA Conflict Minerals Reports Q&A, January 2014

[2] ICLGR Member States are the DRC, its 9 adjoining countries, Sudan and Kenya.

[3] OECD Due Diligence Guidance for Responsible Mineral Supply Chains from Conflict-Affected or High-Risk Areas, Step 4, p.19

Due diligence in the gold supply chain: How much is enough?

On November 5, 2013, the M23 rebellion in the Democratic Republic of Congo (DRC) officially announced the end of their insurgency in the Eastern Provinces of the country. Just one day earlier, the Swiss Federal Prosecutor’s Office opened an investigation into the refiner Argor-Heraeus for allegedly laundering significant volumes of illegally extracted gold from the DRC between 2004 and 2005.

The two events are part of the larger picture of the illegal exploitation of natural resources in the DRC and in particular the linkages of the illegal trade in gold with activities of armed groups. Despite the official ‘end’ to the M23 rebellion, it is important to remember that the Congolese Army (FARDC) and the still operating armed groups, such a…, which is said to have links with Islamist Al-Shabab, continue to profit from the predation on artisanally mined gold. The Congolese Army (FARDC) is now being hailed as the victor over M23, but one must not forget that the FARDC is also known to be amongst the greatest perpetrators of human rights abuses and, further threatening companies’ reputational exposure.

As illustrated by the criminal case in Switzerland, the issue of “conflict minerals” is by no means new or restricted to specific parts of the DRC, or about to somehow ‘whither away’. While today’s attention is centered on North and South Kivu, the gold referred to in the case of the Swiss investigation reportedly originated from Orientale Province, home of some of the DRC’s most productive artisanal gold mines and also one of the geographical foci of a renaissance in industrial gold mining.

The rebel group cited in the Argor-Heraeus case, the Nationalist and Integrationist Front (FNI), which is also said to have traded gold for weapons from UN peacekeepers, officially put down its weapons in 2007. While places and actors have changed over the past decade, the way gold is used as a conflict financing vehicle has not.

Refiners, however, are now subject to stricter (self-)regulations to ensure their gold is sourced responsibly than they were in 2004. In particular the Swiss gold refining businesses are subject to strict Anti-Money Laundering (AML) regulations, monitored by the Swiss Financial Market Supervisory Authority (FINMA). These include annual third-party audits of the refiner’s AML practices. As a result when industry mechanisms such as the London Bullion Market Association (LBMA) and the Responsible Jewellery Council (RJC) started defining requirements for the responsible sourcing of gold, Swiss refiners were among the first to get involved, oftentimes pointing to existing controls on and reviews of their AML systems. Some of the Swiss refiners continue their engagement with responsible gold sourcing mechanisms, including information sharing on their AML programs to benefit other refiners but also more directly through the Swiss Better Gold Initiative to source gold from the DRC in a legal and sustainable manner that benefits local communities.

Considering the increased controls and third party verifications of refiners’ sourcing practices, the question remains though how far due diligence measures can be expected to extend into the supply chain. Although the Gold Supplement to the OECD Due Diligence Guidance defines a supplier as “any individual or organization who is considered to be a participant in the supply chain for the supply of gold and gold-bearing materials”, the expectation under the OECD framework – and consequently the LBMA and RJC – are for refiners to have controls in place only over their direct counterparty. On the other hand, the statement released by “Track Impunity Always” (TRIAL) on 4th November 2013 says the refinery should have assumed that the gold resulted from pillage.

Without commenting on the specific case referred to by TRIAL, the expectations that refiners should go beyond the facts at their disposal and make assumptions on actors and their linkages in the gold supply chain presents a number of practical challenges. In-depth investigations into gold supply chains may be feasible for a refiner with a dozen or maybe even a hundred counterparties. However, refiners with thousands of counterparties may find it difficult to gather detailed information not only on the counterparties themselves, but the entire gold supply chains.

Nevertheless, full transparency can only be achieved if all actors in the supply chain enforce Know Your Customer (KYC) requirements. Refiners may be able to use their influence and knowledge to work beyond their first tier contacts, looking into the entities supplying gold to their counterparties. For example, refiners could request information on the sources of gold from recycling businesses selling gold material to them. They could provide technical assistance to counterparties on AML and KYC standards and requirements, offering tools or templates for smaller businesses to use. Any such measures may be tailored to the type of counterparty as risks for conflict minerals in the supply chain or money-laundering practices may be smaller if the customer is a renown international bank, rather than an international recycler. Equally, the refiner’s influence over the latter may be larger.

The criminal investigation in Switzerland highlights that the gold sector in this country continues to undergo intense scrutiny for its past and present actions. The only way to respond for the Swiss refiners is to continuously improve their due diligence systems and push for all actors in their gold supply chains to do the same.

For comments on this article or for more information on how we can help you conduct due diligence in gold supply chains, contact me at [email protected] and visit our website here.

My thanks to Nicholas Garrett for his contribution to this post.

A Quick Update on a Possible EU Directive on Conflict Minerals

A number of clients and colleagues have been asking me for updates on the potential EU Directive on conflict minerals– so I thought I would gather together the information we currently know and engage in some informed speculation.

Two recent speeches by EC DG Trade representatives Karel De Gucht  – the EU Commissioner of Trade and Signe Ratso, Director of the EC DG Trade allow us to glean the following:

  • The public consultation on the EU Directive has ended with 280 submissions, 80% from businesses. The EU is now undergoing an impact assessment of a potential rule. The subsequent European Commission legislative proposal and Communication are expected in December, 2013. If it doesn’t make it through this year’s agenda we can expect significant delays due to elections next year.
  • The impact assessment has been done (or largely done), according to this press release, and will be released in December as well. The impact assessment was conducted by iPoint  – also  a conflict minerals service provider of IT software and the press release states: “One major part of this study presents the results of a survey conducted with users of the iPoint”. One would assume that the impact assessment covers more businesses than iPoint users, as it would seem those iPoint users would be more likely to be first movers with greater exposure to conflict minerals legislation in the US, and thus be better informed than the average EU business that might be affected.
  • Consensus seems to have emerged that anything out of the EU should use the OECD Due Diligence Guidance (OECD DDG) as a reference in terms of both relevant products and scope. Note that the OECD DDG is worldwide in scope and not restricted to the DRC + 9 countries as the US SEC conflict minerals rule deriving from DF section 1502.
  • It seems likely that the EU is looking to target the upstream part of the supply chain – i.e. from mine to smelter, while at the same time complementing the DF1502 requirements with a view to provide information necessary for reporting to US for downstream companies. There was a suggestion that importers would be able to use “EU Responsible Import Certificates” when able to demonstrate that their minerals are from responsible sources.
  • Reasonable and effective are key words guiding the approach – with an emphasis on tackling the issues of conflict upstream without unnecessarily burdening downstream companies. Details of what that actually means are vague, but there doesn’t appear to be an appetite for strong legislation that would require companies to report. Rather one suggested approach could be company self-declarations monitored by OECD national authorities – in the same way as is done with the OECD Guidelines for Multinational Enterprises.

So how does that potential translate into real world due diligence?

Warning: Speculation below.

It seems pretty safe to assume that the OECD DDG will be at the heart of anything emerging from the EU. This is of course of immense relief to companies and experts who have been working for the last three years at actually implementing the OECD DDG and hoping that the EU would not derail the approach. In the consultation process, concerns were raised that the EU would basically try and translate the OECD DDG into law, something which would make compliance very difficult for companies as the Guidance doesn’t set clear criteria for implementation.

The likely worldwide application of the directive is a partial response to criticism that DF1502 had created a de facto trade embargo of sorts on 3TG from the DRCongo and surrounding countries. FARC rebels operating in Colombia and Venezuela were specifically referenced in one speech as areas where CM due diligence should be applied. One EU representative stated, “The EU text is intended to apply globally and will “provide incentives for sourcing from high risk areas” – but was short on details on how that would work exactly.

Finally, what could an upstream to importer approach look like? One speech noted that the pinch point in the supply chain was at the smelter level – which suggests more pressure on smelters to ensure they are sourcing responsibly. But with many smelters outside of Europe, it may be that the EU will seek to exert influence on companies that place material on the EU market as occurs with the EU Timber Regulation. The due diligence requirements of Timber regulation actually look very similar to the OECD DDG approach in that importing companies would have to conduct due diligence on the origin of the material, the supplier, as well as undergo a risk assessment and develop a risk mitigation strategy. The timber regulation also recognises certified timber automatically, which would also translate very well in the mineral sphere where a number of up and midstream certification schemes are already running.

In conclusion, while the OECD DDG seems like it will be at the heart of the EU approach, there are few hard details on what it will request of companies. If the EU approach is indeed a voluntary approach, or what really could be considered a weak approach through OECD national contact points, the EU Directive runs the risk of being completely side-lined by the strong regulation that came out of the US. After all the OECD DDG is already a voluntary mechanism that companies can follow and companies that are directly or indirectly affected by DF1502 are already moving to achieve compliance.

Please do contact me if you have any comments or further information at [email protected]

Thanks to Michèle Brülhart and Nicolas Eslava for their help with this post.

PS:  The Responsible Sourcing Network and the Enough Project have released a guidance setting out the information they expect companies to provide as part of their reporting obligations under DF1502.…

Conflict-free sourcing: The case of gold (Part I)

When the US Congress passed Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Section 1502) on “conflict minerals”, it soon became clear that companies would have to differentiate in their due diligence approach between the so-called “3Ts” (tin, tantalum and tungsten) and gold. In this blog series, RCS examines the response of the gold industry to the requirements of Dodd-Frank Section 1502. The first part looks at challenges the gold industry faces in the exercise of due diligence and provides an overview on initiatives taken along the supply chain to promote the responsible sourcing of gold. In subsequent parts of this series, RCS will focus more specifically on due diligence mechanisms implemented at the mining as well as refining level.

The reasonable country of origin enquiry that companies are required to carry out under the US legislation presents a number of challenges that are unique to the gold supply chain. Among those is the value of gold, making it commercially interesting to trade the commodity in small quantities and to recycle gold products. According to the World Gold Council, approximately one third of gold on the market at any point in time is recycled and thus cannot be traced back to the mine of origin anymore. Secondly, gold is not only used to manufacture jewelry or other consumer goods but also serves as an investment product. Thirdly, mined gold does not necessarily require heavy equipment or specialized knowledge to undergo basic refining.

As a result of these attributes, gold can – somewhat paradoxically – be both easy and difficult at the same time to track through the supply chain. Where actors attempt to conceal the origin of gold, the small quantities of gold and complexity of the supply chain renders any attempt to identify the mine of origin nearly impossible. However, owing to the high value of the commodity, legitimate trade in gold is very often accompanied by an extensive paper trail and subject to intensive scrutiny to prevent and eliminate practices of money laundering and bribery. Both arguments were initially advanced by the gold industry to justify what could be considered a slow response to Dodd-Frank Section 1502 when compared to efforts for the conflict-free sourcing of 3Ts. Whereas tantalum smelters underwent third-party audits under the EICC-GeSI Conflict-Free Smelter (CFS) Program as early as 2010, requirements for the responsible sourcing of gold for refineries were only published starting 2012.

Despite the reservations during early attempts to respond to the requirements of Dodd-Frank Section 1502, the gold industry has since caught up with efforts in the 3Ts sector. Industry associations such as the Responsible Jewellery Council (RJC), the London Bullion Market Association (LBMA), the World Gold Council (WGC) and the Dubai Multi Commodities Center (DMCC) have published their approach for the responsible sourcing of gold.

Whereas the EICC-GeSI Conflict-Free Smelter (CFS) Program, the primary mechanism for compliance with Dodd-Frank Section 1502 for tantalum and tin, focuses on the independent third-party verification of smelters’ documentary evidence on the source and chain of custody of minerals, the gold industry has chosen an approach emphasizing the establishment and implementation of appropriate management systems. In as much as possible, the WGC, LBMA or RJC encourage their members to expand existing mechanisms such as the sustainability reporting for large-scale mining operations or anti-money laundering systems for gold refineries to include information on the conflict-free sourcing of gold. Management systems, including the company’s own assessment of the conflict-free nature of their operation, have to be tested and verified by independent third-party auditors.

As positive as these efforts are in encouraging and incentivizing responsible sourcing practices for gold, they have so far not had any impact on the key issue US Congress attempted to address through Section 1502 of Dodd-Frank. In fact, gold mined in the DRC is highly unlikely to appear in the supply chain of a LBMA accredited Refiner, a RJC or WGC Member. Mining activities in the DRC are almost exclusively linked to illegal and illegitimate trade in gold, thus escaping the scrutiny of these formal organizations.

Furthermore, initiatives taken by industry associations have highlighted the challenge of associating artisanal mining operations in formalized supply chains. In particular, the requirement to establish strong management systems for compliance with an industry standard de facto excludes artisanal miners from participating, as their operations in most cases are not sufficiently formalized.

Recognizing these challenges, initiatives are emerging that aim to provide access to the international market for artisanal gold miners. Among those is the Fairtrade gold certification put in place by Fairtrade International; the Better Gold Initiative, a public-private-partnership supported by the Swiss Government; as well as the Certified Trading Chains (CTC), a project funded by the German Federal Institute for Geosciences and Natural Resources (BGR).

Under the Fairtrade gold certification, artisanal miners are required to comply with a set of minimum conditions, such as for example the elimination of child labor, to obtain certification. Certified operations gain market access as well as obtain a premium for the gold produced. However, the organization has started implementation of the mechanism in Latin America and although gradually expanding the project to include artisanal mine sites in Africa, does not include the DRC.

The Better Gold Initiative and the Certified Trading Chains, on the other side, work with artisanal mine sites in the DRC and (for CTC) Rwanda. However, focusing on pilot sites and relying on donor financing, these two initiatives present significant challenges for the scalability and business sustainability beyond an individual project.

Nevertheless, Dodd-Frank Section 1502 has resulted in positive change by encouraging the gold industry to set clear standards for actors in regards to responsible gold sourcing practices and to communicate more openly on the industry’s efforts to exercise due diligence on gold supply chains. The legislation, although unwittingly, also highlighted the existence of the market for gold that is not mined or traded within legal framework and which is situated largely outside of the influence of formal institutions. Looking forward, the gold industry should look to develop market-led approaches, particularly with small-scale miners, that seek to pull the informal trade into the formal sector, as well as seek closer ties between large scale and small-scale legal mining.

In the next part of this blog series, RCS will more closely examine the conflict-free gold standard established by the World Gold Council and its impact on large-scale gold mining operations.

How to govern and how not to govern artisanal and small-scale mining

This blog has been adapted from a speech that RCS Global Senior Consultant, Dan Paget, gave at the Intergovernmental Forum On Mining, Minerals and Metals and Sustainable Development Forum meeting at the PDAC International Convention in Toronto, March 5th 2013.

RCS Global works with the private sector to help companies make a sustainable impact on artisanal and small-scale mining (ASM), but we work with governments too to help them govern ASM. The ways in which ASM has been governed until the present is the source of many of the challenges of ASM. ASM is a site of industry and innovation, but it is also one where formality, conflict, human rights, environmental, biodiversity, corruption and other sustainability issues are acute. In this piece, I provide a snap-shot overview of governments’ and donor organisations’ work on ASM today.

First, I talk through the past of ASM programmes since the early 1970s. Second, I discuss current programmes and practice and how these build on the past. Thirdly, I draw out the challenges that have persisted through the past and into the present. Lastly, I offer brief recommendations on the way forward for governments and donor organisations.

Approaches to ASM of the past
Government used a variety of ways to work with ASM, but most approaches from 1972 until 2001 fall primarily into one of three types.Technical assistance was offered by governments to change the technology, equipment or methods used by ASM operations. In the 1970s, this often involved attempts to upgrade ASM into more profitable and modern ventures. Technical assistance often took the form of training, subsidised or free equipment, and the provision of credit.

State-sponsored buying programmes, especially gold-buying programmes, became a second major approach to ASM in the 1980s. In many countries, state companies or bodies became legal monopoly buyers of ASM gold production. Their objectives, in most cases, were to strengthen state gold reserves amid currency crises and to cut out trading intermediaries that were thought to be unduly profiting. In this respect, the approach was not about assisting ASM, or regulating it, but serving other national interests. Most state sponsored buying programmes operated ‘no questions asked’ policies. They required minimal documentation from their buyers, and so overlooked potential contravention of national laws and informality. This meant that a powerful source of leverage over ASM was overlooked.

Formalising and regulating ASM within a tailored framework emerged more recently and became a core part of government activity on ASM at the beginning of the 1990s. Formalisation, it was argued, integrated ASM into a system of government regulation, incentives and control that could be used to address various challenges associated with ASM. In this sense, formalisation became paradigmatically central to ASM reform. In the 1990s and onwards, a wave of mining law reforms saw the introduction of separate legal categories for ASM and efforts to integrate ASM into the formal economy.

Beginning in the 1990s but crystallising in the 2000s, governments have begun to focus on ASM more consistently as a development issue, and as a sustainable development issue. That has meant considering not just economic growth, but issues such as environmental impact, child labour, human rights, sustainable livelihoods. As a result, formalisation has stayed at the heart of national governments’ approaches to ASM. Technical assistance has also continued to play a key part in ASM approaches, but it has become more and more focused on managing the environmental impact of ASM, particularly mercury-reduction. National buying schemes, in contrast, have become unpopular. Many struggled to preserve a market share and to make a positive development impact, even though, hypothetically, well-managed programmes could strengthen government control over ASM.

Approaches to ASM of the present
Governments’ and donors’ focus on these issues – formalisation, technical assistance, economic development, buying schemes – was a good thing. It reflected a broad set of priorities and had a feasible end-point – a productive, formalised sector that would be governed by a regulatory system. However, this agenda has been diverted over the last ten years by two issues: mercury reduction and conflict minerals.

Mercury-reduction in artisanal and small-scale gold mining has been growing as an international issue since the 1980s, but in the 2000s, the United Nations Environment Programme (UNEP) and other agencies have supported several international programmes with the objective to reduce mercury-use.

The ‘conflict minerals’ issue has attracted a series of international responses, beginning with the Kimberley Process and more recently the United States Dodd-Frank Act Section 1502, which requires companies to exercise due diligence to determine the origin of the mineral and metal content in their products.

I do not want to detract from the importance of both of those agendas, but while they have received international attention and funding, the core agenda of ASM formalisation and assistance was not championed with the same energy or forcefulness. Although Communities and Small-scale Mining – CASM – was founded in 2001, it facilitated debate and information sharing without effectively driving policy programmes. National governments have often been unable to focus on the core agenda, because donor leadership has driven them to focus on mercury-reduction and conflict minerals compliance instead.

Challenges to ASM governance
If these attempts to assist and regulate ASM in the past and present have one common feature, it is the low rate of success. There are qualified success stories, such as the reforms conducted by the Government of Zimbabwe in the early 1990s or the legal reforms by the Government of Peru in the late 1990s and 2000s. However, in most developing countries where ASM takes place, it continues to display the same challenges that governments and donors have been seeking to address for decades.

Part of the reason is that ASM has outgrown the responses. Across the developing world, ASM has increased in a number of key minerals and metals since the 1980s, and especially since 2002. As government task force and subunits have been set up to address ASM, ASM operations have quickly become too numerous for those units to deal with.

Other reasons for failure include a series of implementation challenges. First among them is government capacity. Regulating and assisting ASM requires technical knowledge, monitoring and enforcement activities and well-run administrative procedures on the ground and across the country. In their absence, regulation is easy to avoid, and costly to adhere to.

Second, little attention is paid to the incentives facing ASM operators. Technical assistance often relies upon providing alternative technologies to miners that they then adopt, and low rates of take-up often come down to under-appreciation by implementing agencies of the burden that a business faces to switch methods, especially if those methods do not yield improved, or even equally effective results.

Third, many programmes have put great faith in a fallacy that once ASM operation are given ‘a push’ up-scaling and formalisation will follow naturally. In the outcome document of a 1995 Roundtable on Artisanal Mining, there was great talk about ‘ASM transformation’. In reality, while there are possible virtuous cycles of formalising, up-scaling, and growth, there are many practical barriers that can only be removed with time and patience. Perhaps the greatest common mistake of governments, and donors in particular, has been to treat ASM challenges as something that might be fixed in a short intervention. To address ASM issues, governments must build and maintain a monitoring and enforcement system that must keep pace with a changing industry. It will take time, institutional reform, resources, and commitment.

Commitment has been one of the biggest shortcomings in approaches to ASM to date. It is important to appreciate that national governments have mixed interests to ASM reform. Many interested parties benefit from the status quo, none the least dealers and traders of artisanally mined minerals. ASM represents an important political constituency in any emerging democracy, but often politicians can gain more popularity by raising anger against large-scale mining companies or promising immediate support rather than committing to some gradual process of reform. Donors’ interest in ASM, meanwhile, has often been fleeting.

The summation of all of these common challenges in project design and implementation is that there are many straightforward changes that could be made to ASM projects.

  • ASM Baseline Assessments should be built-in consistently to ASM projects to ensure that projects are based on consistent information. This information could be used, for example, to calculate the potential benefits that governments and communities will gain from formalising ASM, such as gains in tax revenue;
  • Institutional and stakeholder analysis should be built into project design so that when donors work with national governments, they can assess what the institutional interest in – and opposition to – reform will be;
  • There are ways that ASM laws and regulations can be adjusted to incentivise formalisation and to encourage investment and up-scaling of ASM operations, such as creating legal subcategories for artisanal mining and small-scale mining, harmonising tax categories, and making transformation from one type of license to another feasible;
  • Conduct a cost-benefit analysis to assess the incentives that ASM operators face and test whether ASM programmes are aligned with their incentives and priorities; and
  • Treat ASM formalisation as an enforcement issue, and not just as a development issue. Formalisation will take place when it is feasible, but also when there are disincentives to remaining informal.

There are many more examples. Practical and process-based guidance on how to approach ASM effectively is something programmes often lack. A large number of challenges in ASM come down to shortcomings in project design and implementation, which could be avoided with proper precautions and project planning. While ASM approaches will always need to be informed by local realities, there are only fragmented pieces of good practice in the public domain. There is no ‘toolkit’ or ‘guidance’ for national governments and practitioners that informs for approach design. A toolkit could profile examples of successful methods, offer guidance on what approaches and responses work under a range of circumstances, and provide resources and links to other good practice that can be used by practitioners.

Beyond purely technical issues of project design, interested parties should take a fresh approach to how they can cooperate and coordinate on ASM.

There are plenty of ambiguities in the responsibilities on ASM support that different stakeholders should carry. In the absence of well-established norms to which stakeholders can be held to account, there will always be those that shirk or pass on their responsibilities to others. National governments and donors should lead a debate about what roles other stakeholders have in the process, including ASM organisations and representatives themselves. Whenever ASM have organised civically to represent their interests, ASM has become a stronger national priority, and often the governance of ASM has improved.

Equally, companies’ possible contributions to ASM issues have been neglected. While ASM is a development issue at large, for some large-scale mining companies it is an acute risk issue. Large-scale mining companies have had as little luck in sustainably resolving ASM issues in the past as national governments have, but a collection of companies have recently demonstrated their willingness to play a proactive role in addressing ASM issues, and have plenty of special capacities that they can bring to the process.

Moreover, downstream users of metals are potential partners in ASM initiatives. Some initiatives such as Fairtrade and Fairmined Gold have created demand-driven ways to improve and assist ASM. The challenge to Fairtrade Gold is scale. The success of Fairtrade will be confined by the size of demand, which is limited to a small consumer market. I believe that changes in the culture of due diligence mean that there are new opportunities to develop closed-pipe ethical certification initiatives that reach larger markets.

On a closing note, I’d like to observe that ASM issues are not special. In fact, they are challenges that we can trace through history; struggles between state authorities that wish to regulate and economic ventures that wish to access land while avoiding interference. The lessons from the past are that the goals are attainable, and that the only obstacles are practical. Interested parties need to shift their focus from conceptual issues to how implementation can be improved and standardised. ASM challenges can be met by governments and other stakeholders, but only if they have the will to do so.

RCS Global works at the forefront of ASM strategy in the contexts of government policy, mining company – ASM relations and co-existence and downstream company due diligence. For more details, please contact RCS Global’s Head of ASM Practice, Nicholas Garrett.

Towards more effective and sustainable corporate responses to artisanal mining – Part 1

This is the first of two posts in which I will write about corporate artisanal mining responses. Artisanal mining, which remains an ill-defined and misunderstood phenomenon, is a reality in some of the most promising mining countries in the world.

Mining companies that are already or that may come into contact with artisanal mining need to take artisanal mining seriously, and develop and implement a response framework that is based on a well-defined business case.

That business case comprises elements of legal compliance, risk mitigation (operational, reputational, socio-political, commercial and legal compliance risks), and the company’s sustainable development contribution, as well as the prospect of more profitable and sustainable operations.

Nevertheless, many companies still lack response frameworks for artisanal mining. Site management will often only start to think about an artisanal mining response when the activity becomes an “issue”. It is then often addressed in an ad-hoc manner, which fails to sustainably mitigate the risks associated with artisanal mining, and prevents the company from fully capitalising on the company’s artisanal mining response business case.

Ad-hoc measures often lack focus because guidance documents in the public domain are too general and sometimes incomplete and do not help companies to make sense of their options. In reality, there are viable and sustainable responses mining companies can adopt to fully capitalise on the response business case.

Looking back at five decades of company responses to artisanal mining, it is evident that the approaches that companies have chosen to respond to artisanal mining can be grouped into four broad categories: ignore, force, contain and formalise.

Ignoring an activity beset by risks significantly escalates a company’s risk exposure in all five risk categories mentioned above, and I would not recommend it.

Responding with force, which would include, for example, drawing on state security forces to evict artisanal miners from a concession or erecting permanent physical barriers (i.e. “the wall”) around a mine site. These measures can work unless those security forces or physical barriers are resisted, which in time they will be. This is why responding with force severely escalates a company’s exposure to reputational-, socio-political- and legal compliance risks. I would therefore not recommend it.

Containing the activity is the most common approach and can sometimes be successful, but is in many cases not sustainable. Containment includes, for example, measures to ensure company staff do not cooperate with artisanal miners, or using company security and community policing to control access to the concession.

These measures seem particularly successful in areas where artisanal mining is a traditional activity, pursued by a manageable number of people (up to hundreds, rather than thousands), and/or in cases where the social license firmly rests with the mining company. In geographies or circumstances where this is not the case, containment approaches have proven to eventually fail, increasing companies’ risk exposure.

Formalisation remains a misunderstood concept in many ways, but in this context I use it to mean providing active support to artisanal miners to meet legal requirements and become formally organised and licensed operators, which are in the process often “upgraded” to formal small-scale mechanised operations. This suggestion is often met with the response “Nick, are you mad?”, and I often have to spend some time explaining why formalisation can work, despite existing examples of failure.

Historically speaking, formalisation attempts have often failed not because the idea of formalisation is “mad”, but because of the way in which formalisation processes were prepared and implemented. Formalisation, which can be coupled with containment elements, can therefore potentially provide a sustainable solution to otherwise unruly artisanal mining activities, if the formalisation process is well prepared and implemented. This is especially so in cases where other approaches, such as containment, have failed, and companies are left with a choice between “force” and “formalise”.

That said, formalisation is particularly promising in geographies where legal frameworks do not prohibit companies from formally engaging with artisanal miners and where the company and the artisanal miners are not permanently competing for the exact same resource.

While this is all good in theory, how should companies go about developing and implementing a response framework and implementation strategy? The most important point to remember is that the process for developing an ASM response framework and eventually implementing activities is a key determinant for success or failure.

Stage 1: Corporate ASM response framework and guideline
At a corporate level, few companies have a developed ASM response framework with usefully elaborated guidelines, reflecting the company’s global good practice and legal commitments, which set the macro parameters for sites to frame their site-level response. This means that when artisanal mining becomes an issue at a site, corporate headquarters may find themselves unable to provide practical guidance to site managers. Under these circumstances, site managers have proven to ad-hoc measures that can provide some relief, but often turn out to be unsustainable over the long-term.

It is therefore important that the company adopts a corporate-level response framework. This framework sets the macro-parameters to ensure a consistent and compliant company-wide approach to artisanal mining. Again, site managers often say to me “Nick, are you mad, our circumstances are totally different to those on other sites”. Circumstances do in fact differ, which is why the framework provides guidance and direction without preventing sites from tailoring responses to local circumstances.

Stage 2: ASM Baseline and risk assessment
It sounds extreme, but at site level, the success or failure of an ASM response can stand and fall with the quality of an ASM baseline and risk assessment. Only when a site understands key aspects of the “ASM situation” it is dealing with, including the socio-political aspects of the artisanal mining activity at hand, has a response a chance of success. A high-quality baseline study and risk assessment should thus provide enough information for the company to make the right decision on whether containment or formalisation approaches will be required to find a sustainable solution to the artisanal mining challenge at hand. Taking this step seriously will save the company significant sums of money later on in the process.

Stage 3: Supplementary Studies
For containment and formalisation approaches to live up to their potential, they need to be underpinned by supplementary studies prior to strategy implementation. Depending on the company, a Human Rights Impact Assessment and/or Voluntary Principles Assessment should inform a containment strategy. This is to ensure it is compliant with the company’s commitments on human rights and for it not to increase the company’s reputational and socio-political risk exposure.

Formalisation approaches, on the other hand, require both a mineral resources assessment so as to identify a suitable area for the formalised ASM operations to mine, as well as a census in order to refine baseline study data and determine the number and status of participants in the formalisation process. A census is a relatively more time-intensive endeavour than a baseline and should be undertaken with sufficient legs on the ground and time to analyse the gathered data thereafter.

Stage 4: Strategy development
Once the decision has been made to either “contain” or “formalise” and supplementary data has been gathered, the implementation strategy has to be developed. The reason why I do not mention “ignoring” or “forcing” ASM here is because a company will do so at its peril and I do not recommend it. Containment and formalisation strategy development is an expert task, for which companies like my company ( have amassed years of knowledge and hands-on experience. A good strategy defines and elaborates the objectives, based on the baseline and risk assessment, and in line with a company’s artisanal mining response framework.

For containment the strategy development should take into consideration several implementation options, such as, for example access control, community policing, or measures to prevent staff from cooperating with artisanal miners. For formalisation the strategy development should take into consideration several aspects, including the determination of resource availability, number and nature of participants in the formalisation process, as well as, various implementation options, including legal, organisational, commercial and technical support elements.

For both response options, the implementation strategy needs to map out clear roles and responsibilities of key partners, such as government and sometimes other mining companies, as well as expert advisors and implementation NGOs, along with the community and the artisanal miners themselves. In countries, where I have come across artisanal mining as a prevalent phenomenon, it has been absolutely pivotal to ensure that government is a participant and a political supporter of both containment and formalisation processes.

With these deliberations in mind, the implementation strategy provides a clear roadmap and timeline for ensuing activities. These include engagement with government, implementation partners, the community and the miners, as well as implementation of containment and/or formalisation activities and – importantly – monitoring and evaluation of the process. Because this strategy works within the parameters set by the corporate artisanal mining response framework, it will honour the company’s global good practice and legal commitments.

I will write more about this second half of the process and the activities it includes in the second blog of this two-blog series. Watch this space!

Integrating Human Rights due diligence into corporate risk management: RCS welcomes the ICCM launch of its new Guidance

The introduction to the UN Guiding Principles emphasises that a company’s responsibility to respect human rights can be discharged through effective due diligence. Through its experience of the natural resources supply chain in complex environments, RCS is well-placed to assist mining companies in their approach to human rights, and welcomes the International Council on Mining and Metals’ launch of a guide focused on integrating due diligence into corporate risk management processes.

ICMM’s guide does not prescribe a “one-size-fits-all” approach to human rights due diligence. Rather, it emphasizes that companies need to ensure that their approach adequately responds to the local contexts in which they operate. This is where RCS can support mining companies, through reviewing their existing risk management processes, identifying how they can build on them to ensure they are adequately addressing human rights and whether their existing processes are consistent with the UN Guiding Principles.

Human rights within a company are first and foremost a responsibility, but they can also represent an opportunity for business in a number of ways, from risk management to market access and access to capital. Public and private sources for major project finance are increasingly likely to make capital available to businesses with strong records of responsible management of human rights issues.

In the current economic climate, we believe it is particularly crucial for mining companies, at all stages of their development, to ensure the human rights question does not hamper their ability to raise project finance and attract new investors.

RCS Director Harrison Mitchell speaks at the Munich Center on Governance workshop on Standards and Certification in the minerals trade

Spring came early to Munich this year, with two sunny days on March 22 and 23 for the workshop on Standards and Certification in the minerals trade held at the Munich Center on Governance (MCG) in Germany. Hosted and sponsored by BGR (the German Federal Institute for Geosciences and Natural Resources), MCG and Cost (European Cooperation in Science and Technology), the workshop bought together academics and practitioners to discuss international approaches to certification in the sector.

RCS was represented by our Director Harrison Mitchell. Notable attendees included Paul Mabolia, in charge of Promines, the mining sector reform program of the Democratic Republic of Congo, who discussed the efforts to work on certification in the Congo. A key problem he identified was the sustainability of the traceability schemes, due to the expense of financing them. He noted that it makes no sense to “tag an empty bag” and suggested that there was a sense of urgency to ensure material could be sold internationally in the first place. Reviewing his comments on the de facto embargo in place, RCS was reminded of a warning we gave to the international community back in April 2009, when we suggested that “banning, or even disrupting the trade will have a severe effect on the livelihoods of up to one million people in the Great Lakes region.”

While the debate has come a long way since RCS’s first reports on Congo’s mineral trade in 2009 and 2010, many of the issues raised are still relevant.

How can gold be traced when the trade is currently 95% informal? Are certification schemes just a distraction away from the real problems of entrenched poverty in the DRC’s mineral sector? How are the schemes going to be financed?

Angeline Gough discussed the Forest Stewardship Council’s work in the forestry sector providing pro-poor value chain assessments. The FSC has been holding workshops to identify where local communities could achieve more value in their supply chains, by cutting out the middle men or improving efficiency. We speculated with her about whether such a method could work in artisanal mining communities.

Of particular concern is the fact that achieving more value likely results in cutting out the middleman (a commonality between forestry and minerals), who has a vested interest in maintaining the current status quo. From experience, middlemen often act as considerable spoilers to attempts to formalise and help artisanal miners achieve more value. They can be gatekeepers to information about the value of the resource, or encourage dependency through the monopoly of capital that is needed to fund activities. The silver bullet consists in convincing the middlemen to join community efforts to achieve increased value together… while taking a pay cut.

Harrison spoke as a panellists with Dr Philipp Pattberg (Associate Professor for Transnational Environmental Governance at the Institute for Environmental Studies), Anna Stetter (Chair of Global Governance and Public Policy at the Geschwister-Scholl-Institute of the Ludwig-Maximilians-Universität) and Julia Steets (Associate Director of the Global Public Policy Institute in Berlin). The discussion called into question the effectiveness of certification as an effective instrument to achieve sustainability objectives in the first place. Dr Pattberg noted that there exists a ‘paper reality’ (great term!) as there is a lot of desk research, but not a lot of information on the impact on the ground. Anna Stetter’s work is interesting in its attempts to identify an ideal certification scheme that balances effectiveness, legitimacy and efficiency. However, the panel later noted that structure should follow function and objectives of a scheme first and foremost. Harrison discussed the fact that both the design and implementation of certification schemes often are a political process, where the priority of Northern and consumer states trumps the needs of Southern producer states. The result is Southern states jumping through hoops that tick the boxes of Northern consumers, but which may have little to do with the sustainability and economic growth concerns of producers.

Finally, Harrison noted that there were often “successes by accident” in certification schemes. For instance, the Kimberley Process for diamonds cannot be said to be successful in tracing diamonds (for a number of reasons), but has done a lot to formalise the international export and trade of diamonds. This has resulted in an increase in export revenues by exporting states. Likewise, the various conflict mineral schemes are at an early stage, but market pressures to comply with the schemes are already resulting in mid-level companies adopting and implementing policies on labour standards and human rights, where sometimes there were none before.
Thanks to the organisers for a highly worthwhile conference.


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