The industrial transformation and circular economy promised by the European Green Deal hinges on the EU’s ability to anchor the supply of strategic extractives and thus, finds itself needing to tap oversea resources. To do this sustainably and in a way that also benefits resource-rich countries, the EU’s development cooperation must step-up to lead extractive alliances responsibly and ethically.

The Green Deal itself describes the role of trade policy in securing external raw materials, while also helping to tackle harmful practices, strengthening regulatory cooperation and placing EU standards throughout global value chains. This is critically important now that the Action Plan on Critical Raw Materials acknowledges that foreign raw materials will continue to satisfy EU demand.

Beyond trade policy tools, free trade agreements and enforcement, the Action Plan released in early September 2020 further highlights the role of international partnerships and external policy instruments to further advance the EU’s own commercial interests. Said differently, EU development, enlargement and neighborhood policy will be shoulder-to-shoulder with diplomacy and trade policy to diversify streams of key extractives.

Since 2011, the EU enlists a set of critical raw materials that are irreplaceable and strategic to industrial innovation and economic competitiveness (most notably, in the circular and digital economy, the energy transition and low-carbon technologies). Among others, this list includes two conflict minerals (tungsten and tantalum) and all rare earth elements.

Tungsten, tantalum, tin and gold ore (3TG), are grouped as conflict minerals because they are conflict-zone-obtained metals traded to finance armed conflicts and forced labor. Corrupted 3TG can sneak into EU supply chains—ending up in daily life technologies, including smartphones, computers, cars and even jewels.

Differently, rare earth elements (REE) are 17 top-specialty metals valuable for military, smartphone and wind turbine technologies. Termed at a time when they seemed scarce, REEs are abundant around the world, while exploitation in Europe is virtually null due to environmental protection, geological complications and economic unprofitability.

In short, the EU intends to source 3TG and REE critical raw materials from developing countries and fragile states, as well as from conflict-affected and high-risk areas (CAHRAs), which is potentially highly problematic. On one hand, 3TG supply chains entail the risk of fostering the violation of human rights. On the other hand, while the extraction of REE is hindered by ecological and economic concerns in the EU, the bloc shows its willingness to source such minerals from developing and vulnerable countries.

To obtain the minerals needed for the European Green Deal in a manner that is responsible, ethical, environmentally friendly and does not alienate developing and vulnerable states from the sustainable and social benefits of mining, the EU has been building a portfolio of normative sustainable extractive partnerships. Furthermore, in order to keep up with, and build on, the US’s and other initiatives around the globe, the EU has developed a legal instrument for the ethical extraction of resources, which focuses on conflict minerals.

Global Initiatives

In 2010, the Organization for Economic Co-operation and Development (OECD) benchmarked global due diligence for companies involved along 3TG supply chains originating in CAHRAs; therefore, providing a framework to address human rights abuses and avoid perpetuating conflict. That same year, the US Congress passed the OECD-inspired conflict minerals Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, triggering a global sense of urgency among diplomats and businesses.

The US provision introduced the supply chain’s obligations for publicly traded companies to evaluate the product-presence of unethical minerals from the Democratic Republic of Congo and surrounding states. It targeted downstream companies—those processing raw materials into final goods and distributing or delivering to final consumers—such as manufacturers and distributors who, to produce a report, flow-shift the burden of due diligence information to upstream raw material suppliers. In general, Section 1502 is said to be a naming-and-shaming bill. When the US provision entered into full force in 2014, about 1,300 stock-exchange companies were affected.

The OECD guidelines also sparked initiatives in Canada, Australia, China, Turkey, the UAE, as well as in 12 exporting African countries—all before the EU started taking matters into its own hands.

The EU’s legal instrument

Between 2010 and 2014, both the EU Commission (EC) and the EU Council vaguely addressed the EU Parliament’s (EP) continuous calls for legislative revision in the field of resource and mineral sourcing, with the US’s Dodd-Frank Act catching the EU off guard.

In 2015, the EP reversed the 2014 EC’s proposal for a conflict mineral’s regulation, which ignored universal compliance for EU importers sourcing in conflict areas. Consequently, EU Parliamentarians requested mandatory third-party import certifications for smelters and refiners as they are the last point of effective origin tracking. The EP also demanded the introduction of supply chain risk identification for approximately 880,000 downstream EU manufacturers.

EU institutions then engaged with stakeholders across several sectors, industries and countries to develop the Conflict Minerals Regulation legislated in 2017. This regulation mandates the placement of OECD-based supply chain due diligence systems—directly targeting between 600 and 1,000 EU-based raw-3TG importers and indirectly affecting around 500 smelters and refiners. The targeted and affected companies are required to submit due diligence data to the EU Due Diligence Portal and report online their due diligence practices for sourcing high-risk minerals from CAHRAs. Third-party audits are at the core of demonstrating that minerals were obtained from smelters and refiners with proper due diligence practices.

This EU legislation regulates more forms and states of mineral than the US’s Dodd-Frank Act and spreads over a wider territory—including yet to-be-identified CAHRAs (the EU is still developing a non-exhaustive, non-definitive list of CAHRAs, which will be regularly updated).

The EU Conflict Minerals Regulation provides EU Member States (MS) with direct faculties to assess compliance—but only entitles MS to extend a notice of remedial action for non-compliant importers. Moreover, the document omits legal penalties for non-compliance. Thus, MS have limited formal pubic enforcement competence and the regulation “sets an extremely low bar for accountability for companies engaged in irresponsible sourcing or that fail or inadequately to report on their supply chain efforts”, according to a note by Amnesty International.

Contrary to the EP’s demands, this regulation exempts downstream manufacturers and sellers using 3TG in manufactured products. This is because 69% of EU imports are finished products (e.g., machines, cars, chemicals, manufactured goods), while raw materials make up only 4% of imports.

When the EU Conflict Minerals Regulation came into effect on 1 January 2021, such timing was crucial, as the Green Deal will increase the already high demand of these minerals. To illustrate, as expressed by former EU Trade Commissioner Cecilia Malmström, the EU—as the world’s largest trading bloc—imports 15% of global 3TG, with the number rising to 35% if ores and concentrates are included.

Analysis of the EU Conflict Mineral Regulation

We must recognize that, in comparison to the US provision, the EU Conflict Minerals Regulation (in some respects) goes beyond the Dodd-Frank Act. For example, more details are requested from EU concerned entities as they must submit data instead of merely publishing a report. The geographic and mineral scopes covered are also wider than those embraced by the US provision.

Nevertheless, it is still insufficient—being implemented at a later date and at a smaller and, in some respects, a more superficial level. The EU regulation also diverges from the US provision as it targets less companies, while exempting downstream companies. In other words, it does not hold inland economic agents accountable, but rather puts the burden of both proof and compliance on extraterritorial upstream actors.

Given that EU manufacturers and distributors are exempt, the final use of minerals remains unregulated. And, because imported finished products remain unregulated, over two-thirds of imports used by corporations and consumers could potentially contain corrupted 3TG. Thus, by exonerating upstream actors, the EU does not actually hold manufacturers, distributors and retailers within the EU accountable—a critical point in considering the EU’s long-term green goals.

The EU Conflict Mineral Regulation is more concerned with having and implementing due diligence supply chain systems, rather than with the responsible sourcing of minerals. In this line, the regulation can be regarded as a symbolic normative regulation on oversea mines and businesses that indicates the unwillingness and/or incapacity of MS to regulate their own domestic entities operating in conflict regions.

That is not to say that the EU remains indifferent to what goes on beyond its borders to satisfy its own needs. The bloc’s development cooperation belongs to a portfolio of alliances to ensure access to responsibly, ethically and sustainably sourced materials in a manner that intends to bring about beneficial change and inclusive growth in raw material-abundant host countries. Partnerships should then be created to spark real change in the EU; however, the EU currently only limits sparking change upstream and not downstream.

A partnership for the Regulation

The newly re-named EC’s Directorate-General for International Partnerships (DG INTPA -formerly DG DEVCO) is the co-founder of the European Partnership for Responsible Minerals (EPRM). The EPRM was established in 2016 by a selected group of European donors, governments, private companies and NGOs with the goal of complementing and extending the limited capacity of the Conflict Minerals Regulation to materialize real change on the extraction field.

The EPRM intends to boost the sourcing of ethical and conflict-free resources by ensuring in-site mine compliance under OECD standards and improving 3TG due diligence practices. At the same time, the EPRM works on the sustainable development of local artisanal and small-scale 3TG mining communities in CAHRAs and seeks to bridge sourcing, production and trade.

A proposal for strengthening the EPRM’s impact

While the EPRM consists exclusively of EU actors and transnational corporations from developed nations, including local actors could lead to better results and be more beneficial to all parties. For example, national and local authorities of host countries, as well as local NGOs, CSOs or even corporate initiatives, can act as observers, mediators or evaluators not only regarding the implementation of due diligence supply systems (the focus of the EU’s Conflict Mineral Regulation), but also on the overall factual responsible sourcing of raw resources (one of the gaps of the same legislation).

Most importantly, inclusive membership can foster local ownership—otherwise resource-rich countries would be alienated. EU support for supply chain due diligence will then be no different from corporate social responsibility regarding their efforts to be industrially and economically competitive, while also leading global climate and environmental action.

Other relevant partnerships

The portfolio of development cooperation partnerships goes beyond the EPRM. The EU financially and politically supports the Extractive Industries Transparency Initiative (EITI) and the Extractives Global Programmatic Support (EGPS) Multi-Donor Trust Fund. The EITI is a worldwide, multi-stakeholder coalition that promotes governance and accountability through revenue transparency along mineral, oil and gas value chains; whereas the EGPS is a World Bank program for the inclusive and sustainable implementation of EITI in resource-dependent fragile and in-conflict states.

Additionally, DG INTPA, together with the United Nations Development Programme, joined a capacity-building program initiated by the Organization of African, Caribbean and Pacific States (ACP) for managing low-value mineral activities. In turn, the ACP-EU Development Minerals Programme turned into a global reference for responsible artisanal and small-scale mining.

Lastly, CONNEX is a G7 project to enhance developing countries’ negotiating expertise on the extractive sector, so that investment contracts are conceived in a manner that promotes sustainability and development in host nations. The EU recently became a part of the initiative in the second half of 2020.

Discussion

There is no doubt that the EU will use trade, diplomatic and cooperative means to secure access to critical raw materials for the European Green Deal. Whereas the EU Directorate-General for Trade and the European External Action Service will deploy hard policy and diplomacy, it is imperative for the DG INTPA to lead extractive partnerships into filling the gaps left by the EU Conflict Mineral Regulation; namely, guaranteeing truly ethical and responsible mining operations beyond the sole implementation of due diligence systems and focusing on reporting and data submission. Accordingly, the EU development cooperation should take a critical stance and leverage its role in multi-stakeholder partnerships to implement and upgrade governance mechanisms and forums with local organizations.

Moreover, given the European legacy, it is disconcerting that the EU lacked an initiative spark—delaying regulations of mineral sources and imports—acting only as a reaction to the US’s move towards responsible mining. Now is the time for the EU to use the Green Deal to take the lead in sustainable and responsible mining while, in parallel, leading by example in moving towards carbon neutrality and economic transitioning towards sustainability.

To summarize, while the EU hesitated in the past to introduce a legal mechanism to regulate conflict minerals, it should not hesitate to ethically govern extractive sourcing. Given that the EU does not hold inland actors accountable, the EU must—as their first step— exponentially increase its governance alliances and supervise responsible mining operations; and, in the future, the EU must also address its own downstream entities. Only then will the EU ensure an all-embracing supply chain due diligence and—hence—have full accountability.