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What ‘due diligence’ means for the tin supply chain

usscmc by usscmc
November 17, 2019
What ‘due diligence’ means for the tin supply chain
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What ‘due diligence’ means for the tin supply chain

The International Tin Association and the Responsible Minerals Initiative joined forces to develop a set of guidelines aimed at clarifying what ‘due diligence requirements’ mean for the tin supply chain. 

“These Criteria are designed to align with the internationally recognized OECD (Organisation for Economic Co-operation and Development) due diligence guidance, assist with the new London Metal Exchange (LME) responsible sourcing requirements, and satisfy other upcoming requirements such as the EU Minerals Due Diligence Regulation,” ITA and RMI said in a media statement.

The OECD has 36 members, mostly countries with high-income economies and very high Human Development Index

The criteria enable audit firms and their individual auditors to conduct rigorous and consistent checks on whether any smelter has implemented OECD supply chain due diligence. 

The OECD conformance criteria specify that steps to establish policies and management systems, conduct a red flag review based on the collection of relevant supply chain information, and report on due diligence have to be implemented by all companies that meet the definition of a primary smelter, regardless of the source of their minerals.

The criteria also provide guidelines when it comes to the steps to be taken to collect additional supply chain information, conduct a risk assessment, establish an on-the-ground assessment team to assist in reporting and managing identified risks, as well as undergoing independent third-party assessments when companies are sourcing minerals known or suspected to be from a conflict-affected and high-risk area.

Incorporating these ground rules, the ITA and RMI “Assessment Criteria for Tin Smelting Companies” presents five steps that smelters are required to follow, namely:

  1. Establish strong company management systems, which requires companies to adopt and commit to a supply chain policy for minerals originating from conflict-affected and high-risk areas; structure internal management to support supply chain due diligence; establish a system of controls and transparency over the mineral supply chain; strengthen company engagement with suppliers; and establish a company-level grievance mechanism.
  2. Identify and assess risks in the supply chain, meaning that companies should identify and assess risks on the circumstances of extraction, trading, handling and export of minerals from conflict-affected and high-risk areas; identify the scope of the risk assessment of the mineral supply chain; map the factual circumstances of the company’s supply chains, underway and planned; and assess risks in the supply chain.
  3. Design and implement a strategy to respond to identified risks, particularly where a red flag review confirms the need for a risk assessment on minerals known or suspected to be from problematic areas. This entails that companies have a duty to report findings to designated senior management; devise and adopt a risk management plan; implement the risk management plan, monitor and track performance of risk mitigation efforts and report back to the designated senior management of the company and consider suspending or discontinuing engagement with a supplier after failed attempts at mitigation; and undertake additional fact and risk assessments for risks requiring mitigation or after a change of circumstances.
  4. Carry out independent, third-party audit of smelter’s due diligence practices where a red flag review confirms the need for a risk assessment.
  5. Report annually on supply chain due diligence, in other words, companies are asked to annually report or integrate into annual sustainability or corporate responsibility reports, additional information on due diligence for responsible supply chains of minerals from conflict-affected and high-risk areas.

“We are excited to announce this important step forward in progressing due diligence and responsible sourcing for the tin industry” said Kay Nimmo, head of sustainability at ITA, in the press brief. “We are proud to be able to bring together multiple views of complex due diligence expectations into this one new harmonised text which will be recognised by assessment processes of both our organisations and the market. This will not only improve risk management but will help to streamline information requests through the supply chain.” 

Nimmo explained that after incorporating consultation feedback from a broad spectrum of stakeholders across the tin supply chain, the new criteria will be used by the RMI to replace their “Tin Standard for the Responsible Minerals Assurance Process.” 

The executive also said that the new document improves the previous one by focusing exclusively on the tin value chain; structuring to reference each step of the OECD Due Diligence Guidance Supplement on Tin; highlighting additional, separate regulatory or downstream expectations; outlining practical expectations for red-flag review of suppliers; explaining how smelters may use OECD-aligned joint industry initiatives for due diligence support; and clarifying terminology and separating procedural or guidance text for auditors.

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