On 23 April, the London Metal Exchange (LME) launched a formal market-wide consultation on the introduction of responsible sourcing standards for all traded metals.
Under the new rules, all LME listed brands will be required to undertake a phased approach, starting with a Red Flag Assessment based on the OECD Guidelines for Multinational Enterprises by the end of 2020. Brands considered at risk will then be audited by the LME and will need to adopt OECD-aligned responsible sourcing standards as well as environmental standards by 2022. All brands will have to publish their Red Flag Assessments to the market by the end of 2024, while respecting any confidentiality requirements in their commercial contracts.
The new rules will also expect brands to confirm whether they facilitate disclosure of financial crime and corruption risks under the Extractive Industries Transparency Initiative.
The rules were announced following civil society campaigns in December 2018 which were launched after a 2017 investigation linked the extraction of some of the cobalt traded on the LME’s exchange to child labour in the Democratic Republic of Congo.
The aim of the initiative is to encourage companies to investigate and manage their supply chains better from an environmental, social and governance (ESG) perspective. Sun Lihui, Director of the Development Department of the China Chamber of Commerce of Metals Minerals & Chemicals Importers & Exporters has specified that:
“In recent years, the global focus on responsible sourcing of raw materials has expanded from traditional physical requirements to include environmental, social and governance (“ESG”) concerns. As the world’s most influential non-ferrous metal trading exchange, the LME is the first to formulate and publish a responsible sourcing policy on copper, aluminium, lead, zinc, nickel, tin, and cobalt. It plays a positive role in transforming and leading the global non-ferrous metals industry procurement and trade policy, and will promote companies to improve their supply chain management capacity continuously.”
The LME has emphasised that it is committed to adopting a “consensual approach” to enforcing the new rules. Simultaneously, it has issued a warning to listed brands that failure to comply could lead to suspension or delisting.
Public consultation on the new rules will close on 30 June 2019. Read the full LME statement here.