A central requirement on companies active in the commodity sector is to have in place thorough due diligence procedures.
The implementation of these procedures has multiple aims, all of which ensure that companies identify and avoid dealing with commodities that have not been obtained legally or fairly. Appropriate supply chain due diligence should ensure that companies do not deal in any way with commodities that are:
a) illegal (e.g. stolen or pillaged)
b) obtained illegally (e.g. through corrupt practices, or without extractive licenses)
c) obtained in violation of human rights norms (e.g. mined using child labour)
d) obtained in violation of environmental norms (e.g. unacceptably high sulphur emissions from smelting)
e) obtained from conflict zones, failed states and occupied territories without explicit ROHMA authorisation
f) obtained contrary to internationally applicable trade sanctions
g) obtained without due compensation being made to the countries from where the commodities derive (e.g. bad management of public assets or embezzlement)
The procedures in place must be sufficiently exhaustive so as to enable a company to trace a commodity all the way back to its origin. Companies must know where a commodity originally derives from (e.g. the exact mine or well), the conditions under which it has been acquired and must be able to identify and document the complete chain of ownership until the present day. Due diligence procedures must be particularly rigorous where commodities derive, or may potentially derive, from high-risk areas.
In order to fulfil their supply chain due diligence obligations, companies must adhere to the following guidelines, which have been based on the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas:
1. Establish strong company management systems. Companies must:
A) Adopt, and clearly communicate to all business partners, a company policy on the acquisition of commodities that extends the length of the supply chain, incorporating the standards against which due diligence is to be conducted.
B) Structure internal management to guarantee supply chain due diligence.
C) Establish a system of controls and transparency over the supply chain. This includes a chain of custody and a traceability system or the identification of upstream actors in the supply chain.
D) Strengthen company engagement with suppliers. A supply chain policy must be incorporated into contracts and/or agreements with suppliers. Where possible, assist suppliers in building capacities with a view to improving due diligence performance.
E) Establish an early-warning risk-awareness system.
2. Identify and assess risk in the supply chain. Companies must:
A) Identify risks in their supply chain.
B) Assess risks of adverse impacts in light of the standards of their supply chain policy
3. Design and implement a strategy to respond to identified risks. Companies must:
A) Report findings of the supply chain risk assessment to the designated senior management of the company.
B) Devise and adopt a risk management plan. Devise a strategy for risk management by either:
i) continuing trade where the risk identified can and is eliminated (for example, where a business partner shows preparedness to apply appropriate human rights standards and proceeds immediately to implement the necessary measures);
ii) temporarily suspending trade while assessing whether the risk identified can and will be eliminated; or
iii) disengaging with a supplier after failed attempts to eliminate a risk or where it is clear from the outset that the risk identified cannot be eliminated.
C) Implement the risk management plan, monitor and track performance of risk elimination efforts and report back to designated senior management.
D) Undertake additional fact and risk assessments for risks requiring elimination, or after a change of circumstances.
4. Integrate any findings of ROHMA-certified auditor
Companies are required to have their internal due diligence procedures and associated risk management strategies audited by an independent ROHMA-certified auditor. Companies must ensure that any gaps or discrepancies identified by the auditor are remedied and any recommendations for improvement either of the policy or the risk management strategy are integrated as soon as possible.
5. Report on supply chain due diligence
Companies must publicly report on their supply chain due diligence policies and practices and may do so by expanding the scope of their sustainability, corporate social responsibility or annual reports to cover additional information on commodity supply chain due diligence.
Specific conflict related duties
Companies shall refrain from any action which contributes to the financing of conflict and commit to comply with relevant United Nations sanctions resolutions or, where applicable, domestic laws implementing such resolutions.
1. While sourcing from, or operating in, conflict-affected and high-risk areas, companies shall neither tolerate nor by any means profit from, contribute to, assist with or facilitate the commission by any party of any kind of human rights violations, war crimes or other serious violations of international humanitarian law, crimes against humanity or genocide.
2. Companies shall immediately suspend or discontinue engagement with upstream suppliers where they identify a reasonable risk that they are sourcing from, or linked to, any party committing serious abuses as defined in paragraph 1.
3. Companies shall not tolerate any direct or indirect support to non-state armed groups through the extraction, transport, trade, handling or export of commodities. “Direct or indirect support” to non-state armed groups through the extraction, transport, trade, handling or export of commodities includes, but is not limited to, procuring commodities from, making payments to or otherwise providing logistical assistance or equipment to, non-state armed groups or their affiliates who:
i) illegally control mine or well sites or otherwise control transportation routes, points where commodities are traded and upstream actors in the supply chain; and/or
ii) illegally tax or extort money or commodities at points of access to mine or well sites, along transportation routes or at points where commodities are traded; and/or
iii) illegally tax or extort intermediaries, export companies or international traders.
4. Companies will immediately suspend or discontinue engagement with upstream suppliers where they identify a reasonable risk that they are sourcing from, or linked to, any party providing direct or indirect support to non-state armed groups as defined in paragraph 3.
Regarding public or private security forces:
1. Companies agree to eliminate direct or indirect support to public or private security forces who illegally control mine or well sites, transportation routes and upstream actors in the supply chain; illegally tax or extort money or commodities at point of access to mine sites, along transportation routes or at points where commodities are traded; or illegally tax or extort intermediaries, export companies or international traders.
2. Companies recognize that the role of public or private security forces at the mine and well sites and/or surrounding areas and/or along transportation routes should be solely to maintain the rule of law, including safeguarding human rights and providing security to mine or well workers, equipment and facilities.
3. Where companies or any company in their supply chain contract public or private security forces, societies commit to or will require that such security forces will be engaged in accordance with the Voluntary Principles on Security and Human Rights. In particular, companies must adopt screening policies to ensure that individuals or units of security forces that are known to have been responsible for gross human rights abuses will not be hired.