Welcome for London Metal Exchange decision on responsible sourcing

By agency reporter
April 24, 2019

Global Witness has welcomed the London Metal Exchange’s decision to introduce responsible sourcing rules for LME-listed brands and will contribute a detailed comment to the consultation. This will build on a joint open letter from 13 global NGOs sent to LME CEO Matthew Chamberlain, in December 2018. 

Sophia Pickles, supply chain investigator for NGO Global Witness said: "Global Witness welcomes responsible sourcing rules for LME brands and particularly requirements for brands to publicly report on financial crime and corruption risks in line with EITI and OECD standards, and on named individuals directly responsible for supply chain due diligence within their supplier networks.

"Only when brands provide this kind of detail, alongside information on human rights, conflict financing and other risks, will they demonstrate to investors, shareholders and customers that they take the full range of their potential or actual business impacts seriously.

"However, supply chain risks that span conflict-financing, financial crime and corruption are global in their reach: high-risk corruption risks do not recognise borders. The LME’s final responsible sourcing rules should not turn around lists of conflict-affected and high-risk areas but rather ensure that LME-listed brands and their producers have processes in place that can spot and respond to risk wherever it arises. Brands assessing information spanning producers, suppliers and their shareholder interests, as the LME recommends in its draft, is a positive step and cannot not be limited by geography. 

"The metal sector must be more ambitious in its endeavour to demonstrate its responsible business: named company directors already sign off on reports under money-laundering regulations: why shouldn’t the same apply to supply chain due diligence reports, including for LME brands?

"The LME must also go further when it comes to tackling the impacts of its brands on the planet. The Exchange must require companies to report on environmental and climate risk, too. The 2018 IPCC report makes the scale of the global climate challenge clear: LME brands bear responsibility within that. Climate-related financial and non-financial risk disclosures are increasingly sought by investors and have recently become a legal requirement in the EU - the metals sector, which relies on investment, would do well to get ahead of the curve.

"Finally, we caution the LME against over-reliance on industry schemes as a means of demonstrating responsible business. Our research, and that of a 2018 OECD study, consistently shows that membership of or coverage by an industry scheme does not guarantee that an entity is undertaking responsible sourcing in practice.

"The market needs to move away from the idea that scheme membership or certification demonstrates 'compliance' and that this is adequate: instead the LME should focus on the individual, independent annual reporting published by brands and producers, and use this as the means of scrutinising and testing corporate efforts to identify and respond to supply chain risks. Tick-box compliance will not change business behaviour in practice: the market must instead look to detailed due diligence reporting as a record of efforts and a company’s means of demonstrating best practice."

* Read the joint letter from NGOs here

* Download the London Metal Exchange consultation documents here

* Global Witness https://www.globalwitness.org/en-gb/

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