Conflict-free gold standard and conflict minerals due diligence

New standard is based on internationally recognised benchmarks for guidance on due diligence.

December 17, 2012

By Terry Heymann – Director, Responsible Gold

Gold plays an increasingly important role in technology. Its unique properties make it indispensible to applications in electronics, medicine, energy efficiency and environmental science. Regrettably, some of gold’s special characteristics, including its intrinsic value and portability, have made it a potential source of finance for illegal, armed groups involved in civil wars and insurgencies.  In 2010, the U.S. Congress included gold in its conflict minerals reporting requirements under the Section 1502 of the Dodd-Frank, requiring U.S. registered companies to report on the origin of gold and other conflict minerals in their products.

While the proportion of newly mined gold tainted by conflict is very low, it is important that responsible manufacturers take steps to exclude gold misused in this way from entering their supply chains. This is important for manufacturers in the electronics sector who want to provide reassurance to consumers and to comply with emerging regulatory requirements. Neither gold producers nor end users want products to be associated with violence and human rights abuses.

To address this issue, the World Gold Council and leading gold mining companies and refiners have developed the Conflict-Free Gold Standard. The standard, which was published in October 2012, is based on internationally recognised benchmarks such as the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected Areas and the UN Guiding Principles on Business and Human Rights and the Voluntary Principles on Security and Human Rights.  The OECD Guidance has also been recognized as a framework for conducting due-diligence by the U.S. Securities and Exchange Commission (SEC), in their rule-making to implement section 1502 of the Dodd-Frank Act. However, unlike the OECD global approach, the U.S. legislation focuses on the Democratic Republic of the Congo (DRC) and the nine adjoining countries.

Development of the Standard spanned  almost three years of work and involved testing and global consultations across five continents with governments, international institutions, non-governmental  organizations (NGOs), academics and supply chain participants, including the electronics industry.   Mining companies will start implementing  the standard early in 2013.

The Conflict-Free Gold Standard is a framework by which gold miners can show that their operations have been conducted in a manner that does not cause, support or benefit unlawful armed conflict or contribute to serious human rights abuses or breaches of international humanitarian law. When a company is operating in an area assessed to be “conflict-affected or high-risk”, it sets out expectations of company performance in areas such as human rights, the governance of security providers, the declaration of payments to governments, evidence of regular community engagement, the availability of whistle-blower facilities and of a grievance mechanism for use by local people.  

Implementing companies will have to report publicly on their conformance with the Standard and such disclosure will have to be externally assured. The information that companies publish will be useful to a range of stakeholders including the next participant in the supply chain (usually a refinery), governments and civil society groups.

The Standard provides a key building block that refiners can use as part of their due-diligence processes so that they can provide assurance to downstream users.  A number of assurance processes have been developed for use by gold refiners – including the Conflict-Free Smelter Programme, developed by the Electronic Industry Citizenship Coalition (EICC)and the Global e-Sustainability Initiative (GeSI). Similar approaches for refiners have been developed by the London Bullion Market Association and the Responsible Jewellery Council. The three organizations have agreed to mutually recognize each other’s approaches, offering relief to those concerned about “audit fatigue” and associated business costs.

The Conflict-Free Gold Standard has global application, in line with the OECD Guidance. The Conflict-Free Gold Standard is designed, in part, to “operationalize” the OECD guidance for gold miners. One example of this is the approach to determining which areas should be considered “conflict-affected or high-risk.” The OECD Guidance does not specify such areas nor provide guidance on how such areas should be identified. The Conflict-Free Gold Standard, in contrast, lays out an approach that companies can use, recognizing that such “labelling” of countries or regions can be unwelcome to host governments. To address this, the Conflict-Free Gold Standard refers to the imposition of international sanctions and to external sources of information, including as a primary benchmark, the Conflict Barometer produced by the well-respected Heidelberg Institute for Conflict Research.

It is crucial that in combating the potential misuse of gold, producers operating in conflict-prone areas who are not fuelling unlawful armed conflict are still able to sell their minerals on international markets. Stigmatising whole countries or depriving thousands of people of their legitimate livelihoods does not contribute to building peace and stability. This is why the World Gold Council and a number of leading electronics companies are working together through the U.S government-led Public-Private Alliance on Responsible Minerals Trade in the African Great Lakes Region. One of its first projects is supporting the formalization of artisanal gold miners working in the Eastern DRC. Gold mining in the DRC is dominated by this sort of informal mining; it is currently difficult for these miners to provide the paperwork and external checks required to demonstrate that their production is “conflict-free.”

The Conflict-Free Gold Standard represents a landmark achievement. It is the first initiative, developed by the private sector but with input from a full range of stakeholders, that provides an approach for operating in areas impacted by armed conflict.  Responsibly undertaken, mining and its related enterprises play a critical role in contributing to sustainable development in many developing countries. The economic contribution of responsible gold mining creates new possibility for these nations and communities – and demand from the electronics industry continues to play an important role in supporting such economic and social development.

More information
Documents related to the Conflict-Free Gold Standard, are available on the World Gold Council website. Films, including views from government, industry and civil society on the Standard are also available.