OECD Gap Analysis: BSP

Transcription

1 BSR REVIEW OECD Gap Analysis: MAY 2016 Introduction, Objectives, and Brief Description The Better Sourcing Program ( or the Program ) requested that BSR (Business for Social Responsibility) conduct an independent third party review of documentation to assess the degree of alignment between s documented processes with international standards, specifically the upstream (mine to export) aspects of the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas ( OECD DDG ) and the Supplement on Tin, Tantalum, and Tungsten ( 3T Supplement; collectively the Guidance ). BSR s review was intended to: 1) Identify gaps between documentation and upstream (mine to export) aspects of OECD DDG and 3T Supplement, and 2) Develop a roadmap for to align with upstream aspects of OECD DDG and the 3T Supplement. During this process, BSR closely reviewed the expectations contained in the OECD DDG and 3T Supplement, then conducted a desk-based review of core documents, mapping them against the OECD Guidance and 3T Supplement. Our assessment of alignment with OECD DDG followed an iterative process that included identifying existing or potential gaps to, followed by submission of additional documents or update of the core documents previously submitted, and subsequent BSR review of the new documentation. Findings and Limitations Based on BSR s review process of core documentation as of April 30, 2016 (discussed below), nothing has come to our attention that we would consider to be a gap between s stated processes and the OECD DDG and 3T Supplement. We believe that a review of s processes in actual practice would be necessary to further substantiate the Program s alignment with the OECD DDG. BSR has reviewed documentation based on our familiarity with the OECD DDG and the Supplements, with the aim of improving the Program s alignment with recognized international standards. We note that BSR is not a formal auditing or assessment organization. Our responsibility in performing this review is to only, and in accordance with the terms of reference agreed with them. We do not accept or assume any responsibility for any other purpose or to any other person or organization. Summary of BSR followed an iterative process with during this review, in which we highlighted and reviewed potential gaps between s framework and the OECD DDG, followed by review, revision of documentation as needed, and re-submission to BSR. Overall, this process consisted of: 1) development of initial gap analysis and submission of analysis and core documents to BSR. 2) BSR review of expectations contained in OECD DDG and 3T Supplement. This included identification of key areas to review for potential gaps and review of applicability of elements of the Guidance. 3) Detailed BSR review of initial gap analysis, and mapping of core documents to the OECD DDG and 3T Supplement. In this step, core documents reviewed by BSR (listed in the Detailed supplement) were reviewed against each specific element within the Guidance. BSR OECD Gap Analysis for 1

2 4) BSR engagement with OECD and other organizations, such as the CFSI, to better understand their processes and expectations of upstream assessment programs for alignment with OECD DDG. 5) BSR submission of questions, potential gaps, and recommended document updates to, followed by BSR- discussion. 6) update of documentation as needed. 7) submission of additional and updated documentation to BSR. 8) BSR review of updated documentation against the previously identified questions or gaps. 9) Development of a final BSR perspective on alignment with the OECD DDG and 3T Supplement. This work involved staff that have led BSR s conflict minerals work for more than six years, as well as staff that have worked extensively on human rights and supply chain issues, including support for assessment work through BSR s Bettercoal and Railsponsible efforts. BSR reviewed and offers its perspective only on documents listed in this document s supplement as of April 30, This includes documents such as the and the Model Supply. Due to the pre-export pilot phase is in, we were able to review the template documents and not yet implementation-linked documents or client documents such as signed services agreements or adopted supply chain policies, nor did we conduct site visits or interviews with clients implementing the Program, or with stakeholders. However, has at no case suggested that we would not have access to the information contained therein once moves into full implementation phase. Greater details of the analysis methodology, including the specific gap analysis tool used, can be found in the supplement to this document. Conclusion and Recommendations As noted on the first page of this document, nothing has come to BSR s attention that we would consider to be a gap between s stated processes and the OECD DDG and 3T Supplement. Having said that, we did not conduct a review of the Program s processes in actual practice, and we believe that such a review would be necessary to further substantiate the Program s alignment with the OECD Guidance. BSR recommends several elements for further development and strengthening of s approach. First and most significantly, we recommend that continue to engage with independent parties to review and provide credence to the Program at set intervals. Such engagements should be strengthened by engaging with a reputable third party verification or auditing organization (again noting that BSR is not a verification or auditing organization), and should review in-process efforts and documentation, in addition to any updates in core documents reviewed here by BSR. In addition, we recommend that continue to report on its efforts and status, including the results of third party review. Independent review and public reporting will continue to enhance the legitimacy of the Program and reassure outside parties that the Program is effectively addressing issues faced in mineral supply chains affected by conflict. We note that such measures are not an expectation for alignment with OECD, but should strengthen the Program s legitimacy in the eyes of downstream material users and other stakeholders. Finally, we note that assigning authority and responsibility to senior staff with necessary competence, knowledge, and experience is clearly instructed in documents such as the Model Supply and, and there may be an opportunity to make this point even more forcefully by placing it into the as a status criterion covering responsibility and accountability. BSR OECD Gap Analysis for 2

3 Supplement: Detailed and Alignment with OECD SCOPE & METHODOLOGY BSR s objective in this work is to provide an independent third party assessment of s approach to providing traceability of minerals in the African Great Lakes Region, specifically through a BSR review of potential gaps between documentation and the upstream aspects of the OECD DDG and 3T supplement, and the development of recommendations for further alignment with the Guidance. As a first step, BSR requested that submit to BSR an initial gap analysis comparing the Program s core documents with the OECD Guidance and 3T Supplements, together with core Program documents that demonstrate alignment with the Guidance and Supplements. The review was an iterative process in which BSR was able to prompt for additional documentation and also recommend updates to submitted documents, for further development and subsequent BSR review. submitted eight documents to BSR for review that detail the approach and practical implementation of in mineral supply chains, in alignment with the OECD framework, specifically: 1. P R-0100 KYCC and SCE Questionnaire Guidance R-0301 Model Supply 6. R-0400 Traceability User Guide 7. P-0400 Disclosure Policy 8. A-0100 Introduction Manual This document provides details of the gap assessment against the OECD framework. The methodology used for this analysis was to structure the assessment over 4 tiers; T1, T2, T3, and T4, which refer to the OECD DDG 5 Step Framework (steps 1-5) and its supplements and annexes. Each level is incrementally more specific; e.g. T4 will refer to specific bullet points or paragraphs contained in one OECD Step. The documentary architecture the backbone of implementation is logically structured, with the various documents responding to different aspects of implementation cross-referencing others. As a result, BSR s review considered the suite of documents as a whole, as opposed to a single implementation manual. In the initial gap analysis and review, BSR identified several uncertainties or gaps with respect to the OECD DDG and 3T Supplement. Examples included:» The need for clearer expectations around the definition and role of security forces (per OECD DDG 1A.1.5 using the key below, model supply chain policy).» The need for a clear expectation that authority and responsibility specifically to senior staff with the necessary competence, knowledge and experience to oversee the supply chain due diligence process (per OECD DDG 1B.1, model supply chain policy).» Clarification of the expectation that companies establish long-term relationships with suppliers in order to build responsible sourcing relationships. (per OECD DDG 1D.1). BSR OECD Gap Analysis for 3

4 In each case where BSR identified uncertainties or gaps, these were discussed with. In some instances, submitted additional documentation that addressed the potential gaps. In other instances, BSR suggested modifications to the core documents that would address gaps, which was then reviewed by followed by updates to the relevant documents. Key to understanding level references T1 General Step 1 Step 2 Step 3 Step 4 Step 5 T2 Breaks down Steps 1 to 5 of the OECD DDG as specified in the 5- Step Framework Step 1A Step 1B Step 1C Step 1D Step 1E Step 2A Step 2B Step 3A Step 3B Step 3C Step 3D Step 4A Step 4B Step 5A T3 Breaks down Steps 1 to 5 of the OECD DDG as specified in the Supplement for Tin, Tantalum and Tungsten of the 5-Step Framework Step 1A.1 Step 1A.2 Step 1C.1 Step 1C.2 Step 1C.3 Step 1C.4 Step 1C.5 Step 1D.1 Step 1D.2 Step 1D.3 Step 1D.4 Step 2A.I Step 2A.II Step 2B.I Step 2B.II Not Applicable Step 4B.1 Step 5A.1 Step 5A.2 Step 5A.3 T4 Breaks down Steps 1 to 5 of the OECD DDG as specified throughout every point in the suite of OECD DDG supplements and annexes Step 1A.1.1 Step 1A.1.3 Step 1A.1.5 Step 1A.1.7 Step 1A.1.8 Step 1A.1.9 Step 1A.2.2 Step 1A.2.4 Step 1A.2.6 Step 1A A.I.A 2A.I.B Not Applicable Not Applicable Not Applicable BSR OECD Gap Analysis for 4

5 RESULTS Based on final review of documents, including additions and updates as noted above, we have not identified nor do we have reason to believe that there are any outstanding gaps between the framework and the OECD DDG and 3T Supplement. The eight documents provided by cover all five steps of the OECD Framework at a T1 (general) level, and while some aspects of T2 or T3 levels may not be directly addressed in all core documents, these aspects are either addressed by other documents (sometimes at a more detailed T3 or T4 level), or the aspects are not applicable to the framework (for example, expectation of 3 rd party audits at the smelter level, which is outside the scope of ), and these do not constitute gaps. Specifically, these include: At T2 level (1A, 1B, 1C, etc.):» Three areas were not covered in either the P-0100 or. The does not refer to Steps 3A, 4A and 4B of the OECD DDG. The does not clearly address steps 2B, 3A, 3D and 4A of the OECD framework. However, this is not detrimental towards conformance, as these steps are comprehensively addressed in other specific documents that have been developed by, such as the Risk, as can be seen in the gap analysis tables below.» The Introduction Manual, which provides a general overview of the Better Sourcing Program, does not address six areas at T2 level (steps 1A, 1D, 3A, 4A, 4B, and 5A). These areas should not be considered as gaps in s alignment with the OECD Guidance due to their specificity, which is covered in the relevant documents, not the Manual. For example, the specific reference to a supply chain policy (step 1A) is not made in the Manual, but rather in the specific R-0301 Model Supply document. At T3 (e.g. 1A.1) level:» Document R-0400 Traceability User Guide does not fully cover Step 1C.4 of the OECD Guidance, which lists a series of characteristics the traceability system must have. s traceability partner, GeoTraceability meets most of these characteristics, and the remaining traits, which cause the partial gap, refer to the payment of taxes, fees and royalties. These characteristics can be found in other documents that explain how implements risk management (again, as can be seen in the gap analysis tables below). This is due to the design of the framework, which operates with 2 complementary systems: the traceability system and the risk management system.» As the assessment levels become more specific the list of gaps grows when evaluating a general document such as the A-0100 Introduction Manual. At T3 level the Manual does not explicitly refer to the requirements of OECD Steps 1, 2, 4 and 5. Again, we look at the purposes of documents and at the alignment of the framework as a whole with the Guidance, taking into account the other relevant documents assessed.» With reference to Step 4 (third party auditing), the or the Introduction Manual state that participants must undergo a third party audit, but do not outline the details, as the OECD DDG's Supplement on 3Ts notes its application specifically to smelters/refiners, not upstream participants and is therefore not directly applicable to documentation. Again, these constitute areas where key documents do not directly address aspects of the OECD DDG, but are not considered gaps either because of coverage by other aspects of the framework, or because they are out of scope and not applicable to the framework. BSR OECD Gap Analysis for 5

6 Summary Conformance Table - T1 Level OECD DDG Step Step 1: Establish Strong Company Systems Step 2: Identify and Assess Risks in the Supply Chain Step 3: Design and Implement a Strategy to Respond to Identified Risks Step 4: Carry out an Independent Third-Party Audit of Supply Chain Due Diligence at Identified Points in the Supply Chain Step 5: Report on Supply Chain Due Diligence P-0100 R-0301 Model Supply P-0400 Disclosure Policy R-0400 Traceability User Guide A-0100 Introduction Manual P-0100 R-0100 KYCC and SCE Questionnaire Guidance A-0100 Introduction Manual P-0100 A-0100 Introduction Manual P-0100 A-0100 Introduction Manual P-0100 P-0400 Disclosure Policy A-0100 Introduction Manual BSR OECD Gap Analysis for 6

7 GAP ANALYSIS TABLES OECD DDG (T2) 1A Adopt, commit to and communicate a company policy for the supply chain of minerals originating from conflictaffected and high-risk areas. P-0100 (page 8) (page 7) Mgmnt (page 4) R-0301 Model Supply OECD DDG Supplement on 3T (T3) 1A.1 The policy must be consistent with the standards set forth in the model supply chain policy Step 1: Establish Strong Company Systems P-0100 (page 8) (page 4) Annex II: Model Supply (T4) 1A.1.1 Regarding serious abuses associated with the extraction, transport or trade of minerals, the policy must specify that the company does not tolerate, nor by any means profit from, contribute to, assist with or facilitate the commission by any party of: any forms of torture, cruel, inhuman and degrading treatment any forms of forced or compulsory labour, which means work or service which is exacted from any person under the menace of penalty and for which said person has not offered himself voluntarily the worst forms of child labour other gross human rights violations and abuses such as widespread sexual violence war crimes or other serious violations of international humanitarian law, crimes against humanity or genocide 1A.1.3 Regarding direct or indirect support to non-state armed groups, the policy must state that the company will not tolerate any direct or indirect support to non-state armed groups through the extraction, transport, trade, handling or export of minerals. "Direct or indirect support" includes but is not limited to: procuring minerals from, making payments to or otherwise providing logistical assistance or equipment to, non-state armed groups or their affiliates who: o illegally control mine sites or otherwise control transportation routes, points where minerals are o o traded and upstream actors in the supply chain illegally tax or extort money or minerals at points of access to mine sites, along transportation routes or at points where minerals are traded illegally tax or extort intermediaries, export companies or international traders P-0100 (pages 8-9) P-0100 (page 8) R-0301 Model Supply (page 1) BSR OECD Gap Analysis for 7

8 1A.1.5 Regarding public or private security forces, the policy must state that the company: will agree to eliminate direct or indirect support to public or private security forces who: o illegally control mine sites, transportation routes and upstream actors in the supply chain o illegally tax or extort money or minerals at point of access to mine sites, along transportation routes or at points where minerals are traded o illegally tax or extort intermediaries, export companies or international traders will recognise that the role of public or private security forces at the mine sites and/or surrounding areas and/or along transportation routes should be solely to maintain the rule of law, including safeguarding human rights, providing security to mine workers, equipment and facilities, and protecting mine site or transportation routes from interference with legitimate extraction and trade Where we or any company in our supply chain contract public or private security forces, we commit to or we will require that such security forces will be engaged in accordance with the Voluntary Principles on Security and Human Rights. In particular, we will support or take steps, to 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 support efforts, or take steps, to engage with central or local authorities, international organisations and civil society organisations to contribute to workable solutions on how transparency, proportionality and accountability in payments made to public security forces for the provision of security could be improved support efforts, or take steps, to engage with local authorities, international organisations and civil society organisations to avoid or minimise the exposure of vulnerable groups, in particular, artisanal miners where minerals in the supply chain are extracted through artisanal or small-scale mining, to adverse impacts associated with the presence of security forces, public or private, on mine sites P-0100 (page 8) R-0301 Model Supply (pages 1-2) BSR OECD Gap Analysis for 8

9 1A.2 The policy must include a clear and coherent management process to ensure risks are adequately managed R-0301 Model Supply (page 2) 1A.1.7 Regarding bribery and fraudulent misrepresentation of the origin of minerals, the policy must state that the company: Will not offer, promise, give or demand any bribes, and will resist the solicitation of bribes to conceal or disguise the origin of minerals, to misrepresent taxes, fees and royalties paid to governments for the purposes of mineral extraction, trade, handling, transport and export. 1A.1.8 Regarding money laundering, the policy must state that the company: Will support efforts, or take steps, to contribute to the effective elimination of money laundering where we identify a reasonable risk of money-laundering resulting from, or connected to, the extraction, trade, handling, transport or export of minerals derived from the illegal taxation or extortion of minerals at points of access to mine sites, along transportation routes or at points where minerals are traded by upstream suppliers. 1.A.1.9 Regarding the payment of taxes, fees and royalties due to governments, the policy must state that the company: will ensure that all taxes, fees, and royalties related to mineral extraction, trade and export from conflict-affected and high-risk areas are paid to governments and, in accordance with the company s position in the supply chain, we commit to disclose such payments in accordance with the principles set forth under the Extractive Industry Transparency Initiative (EITI). 1A.2.2 Regarding risk management of serious abuses, the policy must state that the company will: suspend or discontinue engagement with upstream suppliers where we identify a reasonable risk that they are sourcing from, or linked to, any party committing serious abuses as defined 1A.2.4 Regarding risk management of direct or indirect support to non-state armed groups, the policy must state that the company: will immediately suspend or discontinue engagement with upstream suppliers where we identify a reasonable risk that they are sourcing from, or linked to, any party providing direct or indirect support to non-state armed groups P-0100 (page 10) R-0301 Model Supply (pages 1-2) P-0100 (page 10) R-0301 Model Supply (page 2) P-0100 (pages 10, 13) R-0301 Model Supply (page 2) R-0301 Model Supply (page 2) R-0301 Model Supply (page 2) BSR OECD Gap Analysis for 9

10 1A.2.6 Regarding risk management of public or private security forces, the policy must state that the company will: Devise, adopt and implement a risk management plan with upstream suppliers and other stakeholders to prevent or mitigate the risk of direct or indirect support to public or private security forces. Where the company identifies that such a reasonable risk exists, it will suspend or discontinue engagement with upstream suppliers after failed attempts at mitigation within six months from the adoption of the risk management plan 1.A.2.10 Regarding risk management of bribery and fraudulent misrepresentation of the origin of minerals, money-laundering and payment of taxes, fees and royalties to governments, the policy must state that the company will: Commit to engage with suppliers, central or local governmental authorities, international organisations, civil society and affected third parties, as appropriate, to improve and track performance with a view to preventing or mitigating risks of adverse impacts through measureable steps taken in reasonable timescales. We will suspend or discontinue engagement with upstream suppliers after failed attempts at mitigation. R-0301 Model Supply (page 2) R-0301 Model Supply (page 2) OECD DDG (T2) 1B Structure internal management to support supply chain due diligence (pages 7, 8) A-0100 Introduction Manual (pages 2-3) (pages 2-3) OECD DDG Supplement on 3T (T3) 1. Assign authority and responsibility to senior staff to oversee supply chain due diligence 2. Ensure availability of resources to support the operation and monitoring of supply chain due diligence processes 3. Put in place an organisational structure and communication processes to ensure information reaches relevant employees and suppliers. 4. Ensure internal accountability with respect to the implementation of supply chain due diligence (pages 7, 8) R-0301 Model Supply (page 2) (pages 2-3) BSR OECD Gap Analysis for 10

11 OECD DDG (T2) 1C Establish a system of controls and transparency over the mineral supply chain P-0100 (pages 8, 9) (pages 8-11) (pages 3, 5, 6-10) A-0100 Introduction Manual (pages 2-3) OECD DDG Supplement on 3T (T3) 1C.1 Local mineral exporters must collect and disclose the following information: all taxes, fees, royalties paid to government any other payments to government officials all taxes and other payments to public or private security forces or other armed groups the ownership and corporate structure of the exporter the mine of mineral origin quantity, dates and method of extraction locations where minerals are consolidated, traded, processed, or upgraded identification of all upstream intermediaries, consolidators or other actors in the upstream supply chain transportation routes 1C.2 International concentrate traders and mineral re-processors must: Incorporate the above disclosure requirements (1) into commercial contracts with local exporters Collect and disclose the following information: o All export, import and re-export documentation o identification of all immediate suppliers o all information provided by local exporter 1C.3 Smelters/refiners must: Incorporate the above disclosure requirements (1 + 2) into commercial contracts with international concentrate traders, mineral re-processors, and local exporters Maintain the information generated by the chain of custody/traceability system for a minimum of 5 years and make it available to downstream purchasers and to any institutionalised mechanism, regional or global, with the mandate to collect and process information on minerals from conflict-affected and high-risk areas. 1C.4 All upstream companies must: Introduce a chain of custody and/or traceability system that generates the following information: o mine of mineral origin o quantity and dates of extraction o locations where minerals are consolidated, traded, or processed o all taxes, fees, royalties or other payments made to governmental officials o all taxes and other payments made to public or private security forces or other armed groups o identification of all actors in the upstream supply chain (page 9) (pages 5-7) P-0400 Disclosure Policy (Refer to Collected Data List and RMP-1 doc) Not Applicable Not Applicable P-0100 (page 9) (Pages 8-9, 11) BSR OECD Gap Analysis for 11

12 o transportation routes Make all information gained and maintained available to downstream purchasers and auditors and to any institutionalised mechanism, regional or global, with the mandate to collect and process information on minerals from conflict-affected and high-risk areas. Avoid cash purchases and ensure that all unavoidable cash purchases of minerals are supported by verifiable documentation Support the implementation of the EITI principles and criteria 1C.5 All downstream companies must: Introduce a supply chain transparency system that allows the identification of smelters/refiners in the company's mineral supply chain and obtains the following information: o identification of all countries of origin, transport and transit for the minerals in the supply chains of each smelter/refiner Maintain records for a minimum of 5 years Support extending digital information-sharing systems on suppliers to include smelters/refiners. (pages 5-7) R-0400 Traceability User Guide (pages 9-18) Not Applicable OECD DDG (T2) 1D Strengthen company engagement with suppliers OECD DDG Supplement on 3T (T3) Corresponding 1D.1 Establish long term-relationships with suppliers P-0100 (Pages 1, 14) 1D.2 Communicate to suppliers expectations on responsible supply chains of minerals and incorporate the supply chain policy into commercial contracts and/or written agreements with suppliers, which can be applied and monitored. 1D.3 Consider ways to support and build capabilities of suppliers to conform to the company supply chain policy R-0301 Model Supply (pages 1-2) (page 8) 1D.4 Commit to designing measurable improvement plans P-0100 (page 11) BSR OECD Gap Analysis for 12

13 1E OECD DDG (T2) Establish a company level grievance mechanism P-0100 (page 12) (page 10) A-0100 Introduction Manual (pages 2-3) OECD DDG Supplement on 3T (T3) Develop a mechanism allowing any interested party to voice concerns regarding the circumstances of mineral extraction, trade, handling and export; or provide such a mechanism directly or through collaborative arrangements with other companies or organisations, or by facilitating recourse to an external expert or body (i.e. Ombudsman) Corresponding (pages 3, 8) Step 2: Identify and Assess Risks in the Supply Chain OECD DDG (T2) OECD DDG Supplement on 3T (T3) Corresponding OECD DDG Appendix: Guiding Note for Upstream Company Risk Assessment (T4) Correspo nding Document s 2A Identify risks in their supply chain as recommended in the Supplements P-0100 (page 8) 2A.I Upstream Companies A. Identify the scope of the risk assessment of the mineral supply chain. B. Map the factual circumstances of the company's supply chain(s) under way and planned. (page 5) 2A.I.A. Create Enabling Conditions for a Risk Assessment Use an evidence based approach Preserve the reliability and the quality of the company fact and risk assessment of a supply chain Ensure an appropriate level of competence R-0100 KYCC SCE Questionn aire Guidance (page 3) BSR OECD Gap Analysis for 13

14 (page 5) (pages 1, 3, 5, 8) A-0100 Introduction Manual (pages 2-3) (pages 3, 5, 8-10) 2A.I.B. Establish an on-the-ground assessment team in the conflictaffected and high-risk areas 1. Upstream companies should: Ensure the assessment team consults with local and central governments to gain information, with a view to strengthening cooperation and opening avenues of communication between government institutions, civil society and local suppliers. Ensure the assessment team regularly consults with local civil society organisations with local knowledge and expertise. R-0100 KYCC SCE Questionn aire Guidance (page 3) R KYContext Questionn aire R SCE Questionn aire Establish or support the creation, where appropriate, of community- monitoring networks to feed information into the assessment team. Share information gained and maintained by the assessment team throughout the entire supply chain, preferably through a computerized system with web accessibility for companies in the supply chain and any institutionalised mechanism, regional or global, once in place with the mandate to collect and process information on minerals from conflict- affected and highrisk areas. 2. Upstream companies establishing the assessment team should define BSR OECD Gap Analysis for 14

15 the scope and capacities of the onthe-ground assessment team to undertake the following activities: a) Obtain first-hand evidence of the factual circumstances of mineral extraction, trade, handling and export. This includes: 1. i) The militarisation of mine sites, transportation routes and points where minerals are traded. The assessment team should track the militarisation of mine sites, transportation routes and points where minerals are traded. Interactive maps which indicate the location of mines, armed groups, trade routes, roadblocks and airfields can constitute an additional source of information for companies.39 Tracking the militarisation of mines, transportation routes and points where minerals are traded means identifying factual circumstances resulting in direct or indirect support to non-state armed groups and public or private security forces (as defined in the model supply chain policy in Annex II). 2. ii) Serious abuses associated with the extraction, transport or trade of minerals (as defined in the model supply chain policy in Annex II) committed by public or private security forces, non-state armed groups or other third parties operating in mining areas, along transportation routes or BSR OECD Gap Analysis for 15

16 points where minerals are traded. Respond to specific questions or requests for clarifications made by cooperating companies and put forward recommendations for the company risk assessment and risk management. All cooperating companies may put forward questions to, or request clarifications from, the on-theground assessment team on the following: i) Evidence generated by the traceability and chain of custody system [Step 1 (C)] and the risk assessment [Step 2]. ii) Information on suppliers (intermediaries and exporters) in line with Know your customer / supplier protocols, such as those implemented through anti-money laundering compliance systems. Receive and assess grievances voiced by interested parties on the ground and communicate to cooperating companies. 2A.II Downstrea m Companies A. Identify smelters/refiners in their supply chain B. Identify the scope of the risk assessment of the mineral supply chain Not Applicable BSR OECD Gap Analysis for 16

17 2B Assess risks of adverse impacts P-0100 (page 8) (pages 1, 3, 8-10) 2B.I Upstream Companies C. Assess risks in the supply chain (against the Annex II: model supply chain policy): Review applicable standards: o Company supply chain policy consistent with Annex II o National laws of: (pages 3, 5, 8-10, 11) A-0100 Introduction Manual (pages 2-3) countries where the company is domiciled or publicly traded countries from which minerals are likely to originate countries of transit or re-export o Legal instruments governing company operations and business relations o Other relevant international instruments (e.g. OECD Guidelines for multinational enterprises, international human rights, humanitarian law) Determine whether the circumstances in the supply chain meet the relevant standards BSR OECD Gap Analysis for 17

18 2B.II Downstrea m Companies C. Assess whether smelters/refiners have carried out due diligence for responsible supply chains of minerals from conflict-affected and high-risk areas: Gain evidence on DD practices of the smelter/refiner Review the information Cross-check evidence of DD practices of the smelter/refiner against Annex II standards and OECD DDG Work with the smelter/refiner and contribute to finding ways to build capacity, mitigate risk and improve DD performance Not Applicable D. Where necessary, carry out joint spot checks at the smelter/refiner's own facilities BSR OECD Gap Analysis for 18

19 OECD DDG (T2) Step 3: Design and Implement a Strategy to Respond to Identified Risks OECD DDG Supplement on 3T (T2) Corresponding 3A Report findings of the supply chain risk assessment to the designated senior management of the company 3B Devise and adopt a risk management plan. A. Report findings to designated senior management, outlining o Information gathered o Actual and potential risks identified B. The possible consequences of the plan implementation can be: o Continue trade + risk mitigation o Temporary suspension of trade + risk mitigation o Disengagement with supplier Steps to devise the plan: 1. Review Annex II policy to determine if risks can be mitigated by continuing, suspending or terminating relationship with suppliers. 2. Manage risks that do not require terminating relationship with suppliers through measurable risk mitigation - progressive improvement within reasonable timescales. 1. Review Annex II policy to determine if risks can be mitigated by continuing, suspending or terminating relationship with suppliers. 2. Manage risks that do not require terminating relationship with suppliers through measurable risk mitigation - progressive improvement within reasonable timescales. a. Consider and take steps to build leverage over upstream suppliers. i. Upstream Companies - mitigation efforts should focus on finding ways to engage with stakeholders ii. Downstream Companies - mitigation efforts should focus on supplier's value orientation and capability training to enable them to conduct and improve DD performance. b. Consult with suppliers and stakeholders and agree on the measurable risk mitigation plan, this plan should: o be adjusted to the suppliers and the context of their operations o state clear performance objectives within a reasonable timeframe o include qualitative and/or quantitative indicators to measure improvement i. Upstream Companies should: o Publish the supply chain risk assessment o Publish the supply chain management plan o Make them available to local and central authorities, upstream companies, local civil society, and affected third parties. R-0301 Model Supply (page 1) P-0100 (pages 4, 8-15, ) (pages 10-11) (pages 1, 9-10) A-0100 Introduction Manual (pages 2-3) BSR OECD Gap Analysis for 19

20 P-0100 (pages 6, 8, 10, 13-15) 3C Implement the risk management plan. C. o o o o Implement the risk mitigation plan Monitor and track performance of risk mitigation Report back to designated senior management Consider suspending or discontinuing engagement with a supplier after failed attempts at mitigation 1. Upstream Companies Should do the above steps in cooperation and/or consultation with local and central authorities, upstream companies, international or civil society associations, and affected third parties. (pages 10-11) (pages 8-11) A-0100 Introduction Manual (pages 2-3) 3D Undertake additional fact and risk assessments for risks requiring mitigation, or after a change of circumstances D. After implementing a risk mitigation strategy companies should repeat Step 2 of OECD DDG. If there is a change of circumstances, companies may have to repeat Steps 2-3 of the OECD DDG. Note: A change of circumstances may be: o Change of supplier or actor in the chain of custody, place of origin, transportation routes, or point of export. An increase in conflict in specific areas, changes in military personnel overseeing an area, and ownership or control changes in the mine of origin (pages 3, 8) A-0100 Introduction Manual (pages 2-3) BSR OECD Gap Analysis for 20

21 Step 4: Carry out an Independent Third-Party Audit of Supply Chain Due Diligence at Identified Points in the Supply Chain 1 OECD DDG (T1) Supplement on 3T (T2) Document Supplement on 3T (T3) Companies at identified points (indicated in the Supplements) in the supply chain should have their DD practices audited by independent third-parties P-0100 (pages 6-7) (page 11) A-0100 Introduction Manual (pages 2-3) A. Plan an independent third-party audit of the smelter/refiner' s DD. B. Implement the audit in accordance to 1-4 (above) s Not Applicable Not Applicable 4A.1 Scope of the audit All activities, processes, and systems used by the smelter/refiner to conduct supply chain DD. 4A.2 Audit criteria The audit will determine the conformity of the smelter/refiner against the standards and processes of the OECD DDG. 4A.3 Audit principles: a. Independence b. Competence c. Accountability 4A.4 Audit activities: a. Audit preparation b. Document review c. In-site investigations d. Audit conclusions 4B.1 Implementation of the audit: a. Local mineral exporters: o Allow access to company sites and all documentation and records of supply chain DD o Facilitate safe-access to on-the-ground-assessment team b. International concentrate traders and mineral reprocessors: c. Smelters/refiners: d. All downstream companies: 4B.2 Institutionalised mechanism for responsible supply chains from conflict-affected and high-risk areas, that would: a. With regard to audits: o Accreditation of auditors o Overseeing and verifying audits o Publishing audit reports b. Develop and implement modules to build capabilities of suppliers to conduct DD and mitigate risk c. Receive and follow-up on grievances of interested parties with the relevant company Not Applicable Not Applicable Not Applicable Not Applicable (page 10) Not Applicable Not Applicable 1 It is worth noting that the OECD DDG's Supplement on 3T (in this GAP analysis, T2 and T3 levels), notes its application specifically to smelters /refiners, not upstream participants and is therefore not directly applicable to documentation. BSR OECD Gap Analysis for 21

22 OECD DDG (T1) Compani es should publicly report on their supply chain DD policies and practices P-0100 (page 10) (pages 11-12) A-0100 Introduction Manual (pages 1-3) Supplement on 3T (T2) A. Annually report or integrate into annual sustainability or corporate responsibility reports, additional information on DD Step 5: Report on Supply Chain Due Diligence P-0100 (page 10) (pages 11-12) Supplement on 3T (T3) 5A.1 All upstream companies: 1. Company management systems o Company supply chain DD policy o structure responsible for DD o Control systems over the mineral supply chain o How do these control systems operate and what data they have yielded o Company's database and record-keeping system o Disclose information on payments to governments in line with EITI criteria and principles 2. Company risk assessment in the supply chain o o Publish the risk assessment Outline methodology, practices and information yielded by on-the-ground assessment 3. Risk management o Describe steps taken to manage risks o Summary report on risk mitigation strategy and capability training, involvement of stakeholders o Describe efforts to monitor and track performance P-0400 Disclosure Policy (RMP docs) (pages 11-12) 5A.2 Smelters/refiners: 1. Publish audit reports of smelters/refiners N/A 5A.3 All downstream companies: 1. Company management systems o Company supply chain DD policy o structure responsible for DD 2. Risk assessment and management o Describe steps taken to identify smelters/refiners in the supply chain and assess their DD practices o Describe steps taken to manage risks 3. Audits Publish audit reports N/A BSR OECD Gap Analysis for 22