EU Deal: Far from Reality

In a new report, Swedwatch presents the practical implications of existing regulations on conflict minerals and concludes that EU negotiations have failed to address key issues related to the illicit trade.

Products that are used every day, such as mobile phones, laptops and light bulbs, contain minerals extracted, to a large extent, in conflict-affected areas where armed groups use the illicit trade of minerals to finance continued conflict.

Companies listed on the U.S. stock exchange are required to conduct supply chain due diligence of conflict minerals, in case their products contain such minerals.* The OECD has also adopted a due diligence guidance.** The EU has reached an agreement on new legislation requiring upstream companies, i.e. smelters/refineries, to conduct due diligence in cases where they source tin, tantalum, tungsten, or gold.

The Swedwatch report “Far from Reality” provides an analysis of the implications of existing regulations, with the Democratic Republic of Congo (DRC) as an example. The report concludes that the EU agreement falls short of international standards, and should instead build on the OECD Guidance – which also includes downstream actors, i.e. electronics and automotive companies.

Another worrying aspect of the agreement is the fact that due diligence requirements on upstream companies will rely on establishing an exhaustive list of conflict-affected and high-risk countries, instead of requiring on-going due diligence in accordance with the OECD Guidance. Such a provision risks becoming rigid and unadaptable to constantly changing circumstances in conflict-affected and high-risk areas.

The final law will apply to all EU Member States. Swedwatch recommends that the Swedish and other governments implement more far-reaching requirements on their companies, in order to cover both upstream and downstream actors. Likewise, Swedish companies themselves, whose products contain conflict minerals, should rather adhere to the OECD Guidance.
*The so called Dodd-Frank Act was adopted in 2010, and includes a reporting requirement for listed companies, whose products include conflict minerals, to conduct due diligence and annually report results.

** The OECD adopted a due diligence guidance on conflict minerals in 2011. The guidance distinguishes between upstream and downstream companies. Depending on the type of company, size and the capacity, the guidance establishes requirements for traceability and due diligence procedures.