Conflict Minerals, Cobalt and Mica
Information and Services for Conflict Minerals
Conflict Minerals: Definition and Corporate Responsibility
Conflict minerals, also known as conflict resources, are raw materials or natural resources often extracted in conflict zones and high-risk areas under illegal conditions and without governmental oversight. The extraction of these materials is frequently associated with systematic human rights and international law violations. Consequently, conflict minerals play a pivotal role in Corporate Social Responsibility (CSR) and the due diligence obligations of businesses.
1. What Are Conflict Minerals?
2. Relevance for Businesses
Conflict minerals are thus a critical issue for society and politics, as well as a key factor in sustainable and responsible business practices.
3. Legal Requirements for Businesses in the EU and the USA
EU Regulation 2017/821: Due Diligence in the European Union
Since January 21, 2021, companies in the EU are obligated to comply with due diligence requirements under the OECD Guidelines for Multinational Enterprises when dealing with conflict minerals. These obligations are based on EU Regulation 2017/821, which came into force in 2017, with the actual due diligence, management, and risk management requirements becoming mandatory in 2021.
Key Aspects of the Regulation:
- Scope: The regulation applies to importers of specific conflict minerals (3TG: tin, tantalum, tungsten, and gold) and their ores into the EU.
- Affected Regions: Conflict-affected and high-risk areas are identified, with an updated list available at www.cahraslist.net.
- Objectives: Companies must ensure transparency and conduct risk analyses to prevent human rights violations or the financing of armed conflicts through their supply chains.
Dodd-Frank Act: Requirements for US Companies
In the USA, publicly traded companies using conflict minerals have been subject to similar due diligence requirements since 2014 under Section 1502 of the Dodd-Frank Act.
Key Features of the Dodd-Frank Act:
- Purpose: To ensure that conflict minerals are sourced responsibly and do not finance armed groups in conflict regions.
- Regions Covered: The regulation focuses on materials originating from the Democratic Republic of Congo (DRC) and neighboring countries, including Angola, Burundi, Central African Republic, Republic of Congo, Rwanda, South Sudan, Tanzania, Uganda, and Zambia.
- Comparison to the Kimberley Process: Similar to the Kimberley Process, which regulates the trade of blood diamonds, the Dodd-Frank Act aims to ensure the lawful and responsible trade of conflict minerals.
Shared Goals: Responsibility and Transparency
Both the EU Regulation and the Dodd-Frank Act aim to prevent conflict financing and combat human rights violations through transparency and due diligence obligations. Businesses in both regions are required to thoroughly examine their supply chains and implement measures to comply with legal requirements.
4. Reporting and Transparency Obligations under the Dodd-Frank Act
Reporting Obligations:
Companies must disclose:
- Usage: Whether conflict minerals are present in their products.
- Necessity: Whether the use of these minerals is essential for the functionality or production of the product.
- Origin: The countries from which the raw materials are sourced.
These findings must be reported to the SEC and published on the company’s website.
Conflict Minerals Report and Due Diligence:
If a company determines that it uses conflict minerals, it must conduct a “good faith” investigation to trace the origin of the materials. If sourced from the DRC or neighboring
- Investigation Results: The origin of the minerals used.
- Actions Taken: Steps implemented to verify the supply chain.
An independent audit is also required to ensure compliance with legal standards.
5. Due Diligence Requirements for Conflict Minerals in the EU
The European Union established Regulation (EU) 2017/821 to promote responsible trade in conflict minerals such as tin, tantalum, tungsten, and gold. Adopted on May 19, 2017, the regulation aims to ensure transparency and security in the supply chains of companies importing these materials.
Goals of the Regulation:
The “Union System” ensures that EU importers, smelters, and refiners act responsibly. Companies must take measures to prevent the trade of materials that contribute to conflicts or enable human rights abuses.
Due Diligence Obligations for EU Importers:
Importers of conflict minerals in the EU must adhere to due diligence requirements based on the five steps of the OECD Due Diligence Guidance:
- Establishing a Management System: Companies must build transparent and reliable management structures to monitor their supply chains.
- Identifying and Assessing Risks: Potential risks along the supply chain must be identified and evaluated.
- Developing and Implementing Risk Management Strategies: Measures to mitigate or avoid identified risks must be developed and executed.
- External Audits: Independent third parties must conduct audits at critical points in the supply chain.
- Reporting: Companies must regularly publish reports on their actions and findings to ensure transparency.
Enforcement and Complaint Mechanisms:
While the OECD Guidelines are not legally binding, the EU regulation has introduced stricter complaint and mediation procedures, allowing stakeholders to report violations and seek resolutions.
6. Obligations and Steps for Companies Regarding Conflict Minerals
International regulations such as the U.S. Dodd-Frank Act and the EU Regulation 2017/821 impose specific obligations on companies to ensure transparency and accountability in the use of conflict minerals. This is particularly relevant for companies listed on U.S. stock exchanges as well as European suppliers, who are directly or indirectly affected.
Obligations for Companies in the Supply Chain
- Direct Impact: Companies listed on U.S. stock exchanges must annually report the use and origin of conflict minerals.
- Indirect Impact: European suppliers to U.S. companies must also provide evidence of their supply chains to comply with their partners’ reporting obligations.
- Voluntary Disclosure: In the EU, manufacturing companies with more than 500 employees are encouraged to voluntarily disclose their supply chains for conflict minerals.
Reporting Obligations and Documentation Requirements
- Origin of the Minerals: Companies must disclose whether they use tin, tantalum, tungsten, or gold (“3TG”) and whether these minerals originate from the Democratic Republic of Congo (DRC) or surrounding countries.
- Necessity in the Product: It must be clarified whether these minerals are necessary for the function or production of the product.
- Conflict Mineral Report: If the minerals originate from DRC or surrounding countries, a report is required that includes the following:
- Measures to clarify the origin.
- Proof that the trade does not support armed conflict.
- Independent verification of the information by a certified body.
The report must be prepared annually and published by May 31 of the following year, regardless of the company’s fiscal year-end.
Due Diligence Obligations under EU Law
The EU regulation requires importers of conflict minerals to implement a due diligence system.
The key requirements include:
- Supply Chain Monitoring: Tracking the origin of minerals.
- Risk Management: Measures to minimize risks arising from raw material sourcing.
- Reporting: Regular disclosure of actions and results.
Sanctions for Non-Compliance
- Companies that violate EU regulations may face sanctions.
- In the U.S., failure to comply with reporting obligations may also result in legal and financial consequences.
Economic Impact
Approximately 195,000 companies worldwide are directly or indirectly affected by the reporting and documentation obligations. Compliance with these regulations requires significant efforts in the supply chain but helps reduce conflicts in high-risk areas and strengthens Corporate Social Responsibility (CSR).
7 Impact of Regulations on the Supply Chain
Compliance with legal requirements regarding conflict minerals presents companies with complex challenges. It is not enough to merely check the contents of components and materials. Companies must provide detailed proof annually that the conflict minerals used originate from the affected regions and demonstrate to what extent they are “necessary” for the function or production of a product.
Determining the Necessity of Conflict Minerals
Whether a conflict mineral is considered “necessary” depends on several factors:
- Indispensability in the Product: The mineral must be an essential component of the final product.
• Intentional Use: The use of the mineral must have been planned and deliberate, such as in the manufacturing of electronic components.
• No Accidental Contamination: Residues, such as tin in steel that results from contamination, are not considered necessary conflict minerals.
Steps for Identifying Conflict Minerals in the Supply Chain
The review of the supply chain includes the following measures:
- Supplier Notification: Companies inform their suppliers about the legal requirements and request information on components and materials that may contain conflict minerals or their derivatives.
- Supply Chain Traceability: The entire supply chain of the affected components is analyzed to identify the smelters and refineries involved in processing the minerals.
- Origin Verification: It is checked whether the identified minerals come from recycled material, scrap, or directly from conflict zones.
Opportunities for Companies through Compliance
Compliance with conflict mineral regulations offers companies not only the opportunity to meet legal requirements but also to strengthen their Corporate Social Responsibility (CSR). Companies that act as role models can demonstrate transparency and sustainability in their supply chain, which increases trust from customers and partners.
Support in Implementation
The complex requirements for traceability and reporting require a well-thought-out strategy and systematic approach. We support you with:
- Supply Chain Analysis: Identifying conflict minerals and their sources.
- Report Preparation: Assisting with documentation and the creation of necessary reports.
- Consulting and Guidance: Planning the first steps toward implementing the requirements together.
Contact us for a non-binding initial consultation – we help you tackle the challenges of the regulations and future-proof your supply chain.
8 Cobalt: A Resource Between Innovation and Challenge
Cobalt is a heavy metal that is gaining increasing importance, especially due to its use in lithium-ion batteries, which are essential for electric vehicles, smartphones, and numerous other applications. This development presents companies with ethical, environmental, and regulatory challenges that must be addressed.
Importance and Use of Cobalt
Cobalt was originally mainly used for coloring glass and ceramics. However, since the 1990s, its use has expanded significantly. Today, it is a key component in lithium-ion batteries, which are installed in most electric vehicles, smartphones, and other mobile devices.
The demand for cobalt is steadily growing. According to the German Raw Materials Agency (DERA), demand is expected to double by 2026 compared to 2017. Despite efforts to develop cobalt-free batteries, many manufacturers continue to rely on the raw material and secure long-term contracts for so-called “clean cobalt.”
Challenges in Cobalt Mining
A large portion of the world’s cobalt reserves is located in the Democratic Republic of the Congo (DRC), where over 50% of global reserves are stored. Mining in the DRC often takes place under precarious conditions, including child labor and human rights violations.
In 2017, Amnesty International uncovered serious issues in the supply chain. Although there were initial plans to include cobalt in the Dodd-Frank Act (Sec. 1502) regulations, these efforts were blocked due to resistance from many companies. The complexity of the supply chain—since cobalt is often a byproduct of copper and nickel mining—made it difficult to clearly identify and validate the smelters involved.
CSR and Voluntary Commitments
Increasing public attention has prompted companies to make their supply chains more transparent. Major players like Tesla and General Motors (GM) have taken steps to source cobalt responsibly. For example, Tesla collaborates with Glencore, one of the few RMI-certified companies in the DRC. GM follows a similar strategy and is building a sustainable “electric mobility ecosystem.”
Many other companies have also voluntarily committed to disclosing their entire cobalt supply chain. In line with OECD guidelines, reporting includes all conflict and high-risk areas (CAHRAs), taking a more comprehensive approach than the “3TG” minerals.
Regulatory Requirements and Environmental Aspects
Cobalt is subject to strict environmental and safety regulations. According to the European REACH chemical regulation, cobalt (CAS No. 7440-48-4) is classified as hazardous to health. It can cause allergic skin reactions, respiratory issues, and asthma, as well as having long-term harmful effects on aquatic ecosystems.
Manufacturers and importers are required to provide safety guidelines and take preventive measures to minimize risks to humans and the environment.
Conclusion
Cobalt remains an essential raw material in modern technology. However, the challenges related to ethics, the environment, and regulation require innovative approaches and close collaboration throughout the supply chain. Companies that take proactive action can not only meet regulatory requirements but also strengthen their Corporate Social Responsibility (CSR) and position themselves as leaders in sustainable practices.
9 Mica: Shimmering Beauty, Dark Shadows
Mica, also known as muscovite, is a mineral found in countless everyday products—from car paints and electronics to cosmetics. Despite its widespread use, mica remains relatively unknown but is increasingly coming into the public spotlight due to regulations such as Germany’s Supply Chain Act. At the same time, its extraction and processing raise serious ethical and human rights concerns.
Uses of Mica
Mica is a collective term for 37 different minerals, with the most commonly used varieties being muscovite and phlogopite. Due to its versatile properties—electrical insulation, heat resistance, and shimmering shine—mica is used across various industries:
- Automotive industry: A component in paints, cables, dashboards, and bumpers (about 0.1% of a vehicle’s weight).
- Electronics: Used in circuit boards, semiconductors, cables, and lithium-ion batteries.
- Cosmetics: Provides a shimmering effect in nail polishes, lipsticks, and shampoos.
- Consumer goods: Found in coffee machines, children’s toothpaste, and other household items.
The main producers of mica are India (30% of the global market) and China. In India, mining is mainly concentrated in the states of Bihar and Jharkhand, where about 800 villages are directly affected by mica mining.
Child Labor and Abuses in Mica Mining
The extraction of mica is often associated with severe human rights violations. Particularly concerning is child labor, which is prevalent in many mining areas. According to the human rights organization terre des hommes, about 30,000 children work in the mines under dangerous conditions in India alone.
Key Issues:
- Hazardous working conditions: Children and adults risk injury, illness, and even their lives.
- Obscured supply chains: The illegal origin of mica is often hidden by intermediaries.
- Increase due to COVID-19: The economic hardship caused by the pandemic led many families to send their children to work in the mines.
Conclusion: Between Responsibility and Challenges
Mica is an essential raw material in many industries, but it presents significant ethical challenges. The introduction of the Supply Chain Act marks an important step in promoting transparency and responsibility in global supply chains. However, numerous gaps remain, particularly in the monitoring and enforcement of regulations.
Companies that actively review their supply chains and address abuses not only fulfill their legal obligations but also demonstrate their commitment to sustainability and human rights. Change in the mica industry is possible—but it requires stronger collaboration between companies, governments, and civil society actors.
10. Burden of Proof and Documentation of Conflict Minerals: A Challenge for Companies
The legal regulations concerning conflict minerals present a significant challenge for companies worldwide. The burden of proof associated with complying with these regulations is particularly demanding for companies dependent on global supply chains. For many companies, it is difficult to meet the necessary due diligence requirements, as a wide range of complex steps are involved between raw material extraction and the manufacturing of the final product. Companies must not only prove the origin and processing of conflict minerals but also coordinate a variety of inquiries throughout the supply chain. Given the increasing requirements and the growing volume of documentation, it is nearly impossible for most companies to manage these tasks manually.
The Challenge of Conflict Minerals Documentation
The journey from raw material extraction to finished product is often opaque. This is particularly true for conflict minerals—such as tin, tantalum, tungsten, and gold—where companies must provide detailed proof of whether and how these substances are used in their products. This proof requires extensive documentation, encompassing all relevant information about the origin of the minerals and the steps in the supply chain. Due to the complexity and the numerous suppliers involved, this process can be overwhelming without efficient systems and support. The documentation burden is immense, and errors can lead to legal consequences and damage the company’s reputation.
Our Solution: Efficient Support with Material Compliance Solution (M.C.S.)
To help companies address this challenge, we offer a comprehensive solution for managing and documenting conflict minerals through Material Compliance Solution (M.C.S.). Our service includes everything companies need to efficiently meet legal requirements:
- Expert Knowledge: We bring in-depth expertise in material research and material compliance management, helping companies manage the burden of proof through precise and legally sound documentation.
- Automated Processes: With our software solution, companies can significantly reduce the documentation effort and save time. Our tools allow for quick and error-free collection and management of the necessary data regarding the origin of conflict minerals.
- Consulting and Support: We provide companies with tailored advice to ensure they meet their compliance objectives without the risk of errors and excessive manual effort.
Many companies already trust our years of experience and expertise in material compliance and have relied on us for support in the area of conflict minerals. With Material Compliance Solutions M.C.S., you can strengthen your compliance while freeing up valuable resources for other areas of your business.
Your Advantage: Save Time and Minimize Risks
The requirements for companies regarding conflict minerals are high, and the error rate associated with manual processing is not only time-consuming but also risky. With our support, you can not only ensure compliance with legal requirements efficiently but also strengthen your CSR efforts. We help you avoid errors, reduce the burden of proof, and protect your company’s reputation.
Our Services in the Area of Conflict Minerals
Would you like to learn more about our solutions or need support in implementing the legal requirements for conflict minerals? We offer customized consulting and support to ensure that you fulfill your due diligence requirements efficiently while enhancing your Corporate Social Responsibility (CSR).
With our expertise, we help you minimize potential risks, comply with legal regulations, and make your supply chain more transparent. Our solutions are not only legally sound but also provide genuine added value for your business.
We provide comprehensive information and tailored services on the topic of conflict minerals. Our goal is to assist companies in complying with legal requirements such as the Dodd-Frank Act or EU Regulation 2017/821.
Whether you need support in preparing a Conflict Minerals Reporting Template (CMRT), reviewing your supply chain, or implementing due diligence measures, we are here to provide expert knowledge and innovative solutions.
Our services include:
- Consulting and training on legal requirements and reporting standards
- Support in origin analysis and risk assessment in the supply chain
- Preparation and optimization of your CMRT and EMRT documentation
- Monitoring and updating of smelter lists based on the latest information from the Responsible Minerals Initiative (RMI)
Benefit from our expertise and ensure the legally compliant and efficient implementation of your compliance requirements. Contact us for more information or a non-binding quote!