Global Witness welcomes the London Metal Exchange’s decision to introduce responsible sourcing rules for LME-listed brands and will contribute a detailed comment to the consultation, building on a joint open letter from 13 global NGOs sent to LME CEO Matthew Chamberlain, in December 2018.
Sophia Pickles, supply chain investigator for NGO Global Witness said:
“Global Witness welcomes responsible sourcing rules for LME brands and particularly requirements for brands to publicly report on financial crime and corruption risks in line with EITI and OECD standards, and on named individuals directly responsible for supply chain due diligence within their supplier networks.”
“Only when brands provide this kind of detail, alongside information on human rights, conflict financing and other risks, will they demonstrate to investors, shareholders and customers that they take the full range of their potential or actual business impacts seriously.”
“However, supply chain risks that span conflict-financing, financial crime and corruption are global in their reach: high-risk corruption risks do not recognise borders. The LME’s final responsible sourcing rules should not turn around lists of conflict-affected and high-risk areas but rather ensure that LME-listed brands and their producers have processes in place that can spot and respond to risk wherever it arises. Brands assessing information spanning producers, suppliers and their shareholder interests, as the LME recommends in its draft, is a positive step and cannot not be limited by geography”.
“The metal sector must be more ambitious in its endeavour to demonstrate its responsible business: named company directors already sign off on reports under money-laundering regulations: why shouldn’t the same apply to supply chain due diligence reports, including for LME brands?”
“The LME must also go further when it comes to tackling the impacts of its brands on the planet. The Exchange must require companies to report on environmental and climate risk, too,” said Pickles. “The 2018 IPCC report makes the scale of the global climate challenge clear: LME brands bear responsibility within that. Climate-related financial and non-financial risk disclosures are increasingly sought by investors and the metals sector, which relies on investment, would do well to get ahead of the curve. The EU has recently agreed on new rules for investors to do due diligence on environmental, social and governance risks and impacts.”
“Finally, we caution the LME against over-reliance on industry schemes as a means of demonstrating responsible business”, continued Pickles. “Our research, and that of a 2018 OECD study, consistently shows that membership of or coverage by an industry scheme does not guarantee that an entity is undertaking responsible sourcing in practice.”
“The market needs to move away
from the idea that scheme membership or certification demonstrates “compliance”
and that this is adequate: instead the LME should focus on the individual,
independent annual reporting published by brands and producers, and use this as
the means of scrutinising and testing corporate efforts to identify and respond
to supply chain risks. Tick-box compliance will not change business behaviour
in practice: the market must instead look to detailed due diligence reporting
as a record of efforts and a company’s means of demonstrating best practice.”
The LME Responsible Sourcing position paper: A Joint NGO statement
The London Metal Exchange (LME) Responsible Sourcing proposal in its current form fails to ensure that the operations and trading practises of LME members will meet international responsible sourcing standards, as laid out by the OECD Guidance.
Global Witness statement for London Metal Exchange responsible sourcing seminar 2018
Global Witness welcomes the LME’s recognition of the need for responsible sourcing but warns that proposals outlined in its October 2018 Position Paper will be ineffective in their current form.
Global Witness statement for London Bullion Market Association (LBMA) and Responsible Minerals Initiative (RMI) annual conferences
The LBMA and RMI must use their annual gatherings to ensure that member smelters, refiners and traders prioritize improving responsible sourcing practices to bring them in line with international responsible sourcing standards in practice, not just on paper.