Fairtrade & Conflict Minerals
In this blog, leading conflict minerals expert Estelle Levin explains why Fairtrade Gold should be seen as good news for small-scale miners and the international gold trade as a whole.
Informal artisanal miners in the Democratic Republic of the Congo.

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Fairtrade Gold can be an option for responsible in-region sourcing of artisanal gold from the Great Lakes Region

By Gonzaga Mungai   |   May 27th, 2014   |   0 Comments

Responsible sourcing and supply chain expert Estelle Levin travelled to the OECD-UN-ICGLR 7th bi-annual conflict minerals conference in Paris to announce that the Fairtrade Standard for Gold and Associated Precious Metals is under revision to achieve alignment with the OECD Due Diligence Guidance, making “conflict-free” gold from artisanal and small-scale miners in the Great Lakes Region available to international buyers.

“I’m at the OECD-UN-ICGLR 7th bi-annual conflict minerals conference in Paris to announce that I’m doing an alignment check of Fairtrade Standard for Gold and Precious Metals for Artisanal and Small Scale Mining against the OECD Due Diligence Guidance and corresponding responsible sourcing initiatives. This is a big deal!  Particularly for US issuers looking to source gold from artisanal miners in the nine covered countries of D0dd-Frank and report as ‘DRC Conflict-Free'; and for millions of artisanal and small-scale miners desperately looking for international markets for their gold.  Let me explain why.

Section 1502 of the Dodd-Frank Act requires US issuers who manufacture, or contract to manufacture, to perform due diligence on their supply chains for gold (and tin, tantalum and tungsten). The law specifies that companies who discover that their gold originated from or transited through DRC or any of the nine adjoining countries must carry out deeper due diligence to determine if their gold is ‘DRC Conflict-Free’ or ‘Not Found to be DRC Conflict-Free’.[1] Getting definitive answers on the legality and risk management practices of gold from artisanal and small-scale miners (ASM) in the Great Lakes Region is nigh on impossible without great cost in the majority of cases. This is because artisanal and small-scale gold mining (ASGM) and trading networks are commonly informal and sometimes illegal.[2]

As a result, industry’s response to Dodd-Frank has largely been to disengage from ASM gold markets in Africa as a whole. This disengagement has implications both in producer and consumer markets. 12% of the world’s mined gold comes from the ASGM Sector. This 300 tonnes per annum is mined by approximately 15 million people who create around $10 billion[3] of value for rural economies in over 70 countries around the world. Eastern DRC alone was estimated to produce around $400m of gold a year (8 tons) in 2013.[4] Disengaging from ASM supply chains either dries up an important source of income for people in rural economies or drives the trade deeper underground, as unscrupulous buyers pay lower prices and launder illegal gold into legitimate supply chains.

Industry gets this. At the EICC’s Conflict Minerals Conference in March 2014, the message was loud and clear: ‘Buy in-region!’ ‘Sourcing African metals is the responsible thing to do.’ Indeed, disengagement from ASM supply chains needs to be carefully thought through given article 22 of the OECD Guidelines for Multinational Enterprises (MNEs), which state: [5]

“Appropriate responses with regard to the business relationship may include … as a last resort, disengagement with the supplier either after failed attempts at mitigation, or where the enterprise deems mitigation not feasible, or because of the severity of the adverse impact. The enterprise should also take into account potential social and economic adverse impacts related to the decision to disengage.”

But industry is thwarted. On the one hand, the OECD Guidelines for MNEs oblige industry to keep buying ASM gold (where violations have not be egregious); on the other buyers, must do due diligence of their supply chains which compels them (largely for commercial reasons) to avoid ASM gold that cannot demonstrate conformance with the OECD Due Diligence Guidance. This is a dilemma, and Fairtrade International presently offers what I regard as a small but scalable and thus significant solution through the Fairtrade Gold programme. Let me tell you why.

Fairtrade International has over 20 years of experience as a standard setting and certification organisation that works to deliver sustainable products to markets. In 2006, Fairtrade International decided to branch out into gold and in partnership with the Alliance for Responsible Mining developed the ISEAL-compliant Fairtrade/Fairmined standard for gold, following four years of extensive consultation across a broad range of stakeholders from mining communities to markets in Brazil, Bolivia, Colombia, Peru, Mongolia, Madagascar, Tanzania, Uganda, Sierra Leone, USA, and more.[6] In 2011 Fairtrade certified gold from ASM producers in Bolivia, Colombia and Peru was launched in the UK market and Canadian markets, with other markets soon to follow. The ARM/Fairtrade partnership ended in 2013 and the first ‘Fairtrade Gold and Associated Precious Metals’ Standard was published in November 2013. It has over 130 core requirements at certification, and is designed to

promote the formalization of the artisanal and small scale mining (ASM) sector through the establishment and membership of Artisanal and Small Scale mining organizations (AMSO). Thus, bringing with it improved working conditions for producers, strengthened producer organizations with the capacity to lobby for legislation and public policies that promote a responsible ASM sector, improved environmental management (including mitigating the use of mercury and ecological restoration), social security, gender equality, child protection and the elimination of child labour in mining communities, the well-being of families and children, fairer market access, benefits to local communities in mineral rich ecosystems, and improved governance to this sector.”[7]

There are currently two certified producers in Latin America, producing around 600kg certified gold per annum; with two more groups due to be certified in 2014 this will rise to around 800kg. Critically, the first Fairtrade certification of ASM organisations (ASMOs) in Africa will be taking place in mid-2015, representing 900 miners in three of the nine covered countries under Dodd-Frank: Kenya, Tanzania and Uganda.

Let me put that another way: all you US issuers will be able to source gold from Fairtrade artisanal miners in the covered countries and report as ‘DRC Conflict-Free’.

But there’s more that people concerned with conflict minerals should know about Fairtrade Gold:

  • Formalizing and legalizing ASM can be done.  Fairtrade Africa along with other support organisations is enabling nine previously informal African ASMOs to become legal and compliant with the Fairtrade Standard in just three years.
  • Fairtrade ASMOs earn more.  Since Fairtrade Africa and partners began working with the miners, they all are now trading more profitably, in addition to benefitting from training in business and entrepreneurship, safe use of mercury, internal control systems, labour rights and decent work conditions, health and safety and more.
  • Fairtrade production can help ICGLR producer nations achieve more resilient and legitimate ASM sectors. Supporting miners earn more from their gold within a system that requires compliance to social, environmental, and economic requirements is in effect an about-turn from the impact of disengagement by ‘responsible buyers’ from artisanal gold production in the Great Lakes Region. Fairtrade is also presently pursuing establishing Centres of Excellence so that Fairtrade certified miners can extend their impact more systemically by providing training and demonstrations on their improved production practices and management systems to presently uncertified miners in the same regions.
  • Fairtrade gold can be used in electronics and jewellery products. The new Fairtrade Gold business models are designed to encourage higher trading volumes to bring greater benefit to both the miners, and the market. It’s still possible to keep the gold fully traceable to the end-user, and label that product, but Fairtrade now offers a mass balance option that will appeal to larger entities who wish simply to make provenance claims in their CSR reporting rather than on the product.
  • The Fairtrade Premium adds the equivalent of £15 ($25) onto the cost of a wedding ring. The miners use the $2,000 / kg Premium as a “tool for development by investing it in the social, economic and environmentally sustainable development of the ASMO and its miners and through them, their families, workers and surrounding community.”[9]
  • You can also buy Fairtrade certified silver from these same miners.

So, how can you take part? Well, there’s actually a long list, but here’s my top three:

  1. Help Fairtrade scale up and out to new organisations and in new countries. Do you know ASMOs in the Great Lakes Region (or elsewhere) who might be interested in becoming Fairtrade certified? Do you know an organisation that would see a business and/or development case to invest in new Fairtrade production? Let Fairtrade know.
  2. As I said at the start, the Fairtrade Standard is presently being revised to ensure alignment with the OECD Due Diligence Guidance for Minerals from Conflict-Affected and High-Risk Areas. The Standard broadly satisfies the guidance, but we want to make sure there are no gaps to ensure consumer confidence. We are also engaging some of the other conflict minerals initiatives to ensure the Fairtrade system is aligned and delivers gold to the market in a form that gives confidence and commercial advantage. The draft standard will be ready for public consultation in August 2014. Please take part in the Fairtrade standard revision consultation – tell Fairtrade how we can best align the Fairtrade Standard with the Due Diligence Guidance so that your company will have the confidence to buy from Fairtrade producers in Africa, and elsewhere. You can register your interest here.

Oh, and of course, buy some Fairtrade gold jewellery! It is now available in Australia, Belgium, Canada, Denmark, Ireland, Luxembough, Norway, Sweden, South Korea, UK and soon in the USA and Switzerland. Or get it on the internet – here’s a good place to start. And why stop at jewellery?  Fairtrade mobile phones, laptops, stereos… maybe by 2016 we can get those gold potassium cyanide manufacturers on board, hey? I put it to you.”

***

Estelle Levin is Director of ELL, a specialist consultancy dedicated to responsible mining and sourcing. Over the past decade, Estelle has worked on sustainability in the extractives sector, with specialisms in developing commercially viable systems for chain of custody assurance, risk assessment and management and due diligence; in fostering peace and development derived from artisanal and small-scale mining (ASM) sectors; and in managing ASM in protected areas and critical ecosystems and on/near large-scale mining concessions. Estelle has substantial experience in efforts to address ‘conflict minerals’ and develop best practice in mineral supply chains around the world. She has worked in the Great Lakes Region since 2003 and in West Africa since 2004.

Estelle has been involved in the development and operationalization of the OECD Due Diligence Guidance (DDG) in a number of capacities. She has additionally helped develop and / or advised on around 20 voluntary standards to safeguard social and environmental issues in minerals supply chains. For example, Estelle co-authored the Fairtrade Gold Feasibiility study in 2006, carried out scoping studies to find potential Fairtrade ASMOs in Uganda and Tanzania in 2007 and Sierra Leone in 2009, participated in consultations on ‘Standard Zero’ in Salvador (Brazil), Washington D.C., Ulan Bataar, and Brasilia, and rewrote part of the Fairtrade Standard for Gold etc in 2013.

Estelle serves on the Fairtrade Gold Technical Advisory Group and the Responsible Jewellery Council’s Standards Committee. She is a Member of the IUCN’s World Commission on Protected Areas and as an Industry Fellow at The Centre for Social Responsibility in Mining, The University of Queensland, Australia.

[1]Note that the SEC’s ruling on 14th April 2014 on reporting on products as ‘not found to be DRC Conflict-Free’ complicates this simple division. See Brad Brooks-Rubin’s explanation for further information.

[2]SARW, OSISA 2012: Conflict gold to criminal gold – the new face of artisanal gold mining in Congo. At: http://www.osisa.org/sites/default/files/from_conflict_gold_to_criminal_gold.pdf

[3]Discounted by 20% from $12 bn to reflect mine-gate price typically received by ASM

[4]IPIS Research 2013: Analysis of the interactive map of artisanal mining areas in Eastern DR Congo. At: http://www.ipisresearch.be/publications_detail.php?id=428. In 2012, the Enough Project estimated a production of 14 tons (800m USD) in Eastern DRC. Enough Project 2012: From child miner to jewellery store – the six steps of Congo’s conflict gold. At: http://www.enoughproject.org/files/Conflict-Gold.pdf

[5]OECD, 2011. II. Commentary to General Policies, item 22, page 25.

[6]I personally led consultations in Uganda, Tanzania and Sierra Leone, with over 500 participants in mining communities and capital cities in 2007 and 2009.

[7] Fairtrade Standard for Gold and Associated Precious Metals for Artisanal and Small-scale Mining, November 2013, p. 4. http://www.fairtrade.net/small-producer-standards.html

[8]Fairtrade Gold Standard, November 2013

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