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RECOMMENDATIONINTERNATIONAL INVESTMENT AND MULTINATIONAL ENTERPRISES
INVESTMENT
Recommendation of the Council on Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas[*]
25 May 2011 - C/MIN(2011)12/FINAL
Amended on
17 July 2012 - C(2012)93

I.    Objectives and Principles

1.   Members of the OECD’s Development Assistance Committee (DAC) agree to the objective of untying their bilateral Official Development Assistance (ODA) to the Least Developed Countries (LDCs) and Heavily Indebted Poor Countries (HIPCs) as a means to:

• foster co-ordinated, efficient and effective partnerships with developing countries;

• strengthen the ownership and responsibility of partner countries in the development process;

• demonstrate responsiveness to the requests from partner countries and others to increase the use of untied aid in order to promote aid effectiveness; and

• contribute to broader efforts with partner countries to promote their integration into the global economy.

2.   This Recommendation reflects the results of discussions in the DAC to respond to the Mandate provided at its 1998 High Level Meeting (see Annex III). It also reflects the subsequent decision by the DAC to revise the Recommendation in 2008 to extend its coverage to include the non-LDC HIPCs (the list of non-LDC HIPCs as of 1 January 2014 is provided in Annex II), to introduce provisions inviting non-DAC donors to untie their aid in parallel with DAC Members and inviting those responsible for procurement to promote respect for internationally agreed principles of corporate social and environmental responsibility. Finally, it also reflects the outcome of the 2013 review of the provision to extend the geographic coverage of the Recommendation to include non-LDC HIPCs. The shared intentions of DAC Members are to:

• untie their ODA to the LDCs and HIPCs to the greatest extent possible;

• promote and sustain adequate flows of ODA in terms of quality, volume and direction, in particular to the LDCs and HIPCs and ensure that ODA to these countries will not decline over time as a result of the implementation of this Recommendation;

• achieve balanced efforts among DAC Members.

3.   The report “Shaping the 21st Century: the Contribution of Development Co-operation”, set out the relative dependence of LDCs on aid and their relative need for accelerated progress towards the International Development Goals. However, HIPCs not part of the LDC group are also aid dependent and need to make progress towards these same goals. Therefore, this initiative aims to capture, for all these countries, the benefits of open procurement markets.

4.   In promoting the above objectives, DAC Members consider that reinforcing partner country responsibility for procurement, with appropriate guarantees for effectiveness, accountability, probity and transparency is intrinsic to this initiative. Similarly, promoting local and regional procurement in partner countries is a shared goal. DAC Members will work with partner countries to identify needs and to support efforts in both areas.

5.   This Recommendation does not restrict the prerogative of DAC Members to untie ODA to a greater extent than set out herein. DAC Members are invited to continue to provide untied ODA in areas not covered by the Recommendation when they already do so, and to study the possibilities of extending untied aid in such areas. Neither does this Recommendation pre-empt positions that DAC Members may take in discussions on related issues in other fora.

6.   Promoting effort-sharing among DAC Members is an integral part of this Recommendation. Variations in the structures and geographical orientations of DAC Members’ aid programmes, together with the coverage provisions of this Recommendation, can result in sizeable differences in the extent to which their ODA to the LDCs and HIPCs is presently untied, and in respect of their aid performance in these countries more generally.

7.   This Recommendation sets out objectives, principles and procedures for DAC Members untying aid in order to increase the effectiveness of that aid. In a global market for procuring aid funded goods, services and works, these good practices have a broader applicability and interest beyond DAC Members and have reference for all other countries providing aid to the developing countries. Accordingly, non‑DAC donors are also invited to consider the provisions concerning untied aid set out in this Recommendation and to take them into the fullest account possible in their aid relations with developing countries.

II.   Implementation

a)    Coverage

8.   Untying is a complex process. Different approaches are required for different categories of ODA, and actions by DAC Members to implement the Recommendation will vary in coverage and timing. Bearing this in mind, DAC Members will untie their ODA to the LDCs and HIPCs to the greatest extent possible and in accordance with the criteria and procedures set out in this Recommendation:

i)DAC Members agreed to untie ODA -- to the Least Developed Countries by 1 January 2002, and to non-LDC Heavily Indebted Poor Countries by 1 October 2008 -- in the following areas: balance of payments and structural adjustment support; debt forgiveness; sector and multi-sector programme assistance; investment project aid; import and commodity support; commercial services contracts, and ODA to Non-Governmental Organisations for procurement related activities.

ii)In respect of investment-related technical co-operation and free standing technical co‑operation, it is recognised that DAC Members’ policies may be guided by the importance of maintaining a basic sense of national involvement in donor countries alongside the objective of calling upon partner countries’ expertise, bearing in mind the objectives and principles of this Recommendation. Free-standing technical co-operation is excluded from the coverage of the Recommendation.

iii)In respect of food aid, it is recognised that DAC Members’ policies may be guided by the discussions and agreements in other international fora governing the provision of food aid, bearing in mind the objectives and principles of this Recommendation.

b)    Effort-Sharing

9.   Promoting a more balanced effort-sharing among DAC Members is a necessary process. Pursuant to paragraphs 2, 5, and 6 of this Recommendation, DAC Members agree to undertake their best endeavours to identify and implement supplementary effort-sharing actions in accordance with the mechanism set out below.

Mechanism

10.   To this end, DAC Members should apply the following reference indicators matrix and procedures:

• Reference indicators matrix

11.   The situations of DAC Members and their evolution over time with respect to initial positions and reference points will be set out in a reference indicators matrix (see Annex I). The elements of this matrix will be used in conjunction with DAC Member performance profiles (see below) to monitor and assess the progress made by DAC Members towards more balanced effort-sharing.

• DAC Member performance profiles

12.   DAC Members will prepare annual country profiles setting out their positions in respect of the reference indicators matrix and, on that basis, identify initial and medium term supplementary actions to promote effort-sharing. Peer review of these profiles by the DAC will be used to help DAC Members identify and undertake supplementary actions in furtherance of a more balanced effort-sharing in respect of the reference indicators matrix.

13.   The implementation of this part of the Recommendation will be assessed as part of the annual reports covering all aspects of this Recommendation. These reports will be considered by the DAC High Level Meeting, which may recommend further actions, as well as in the peer reviews of individual DAC Member’s development co-operation policies. An overall review of the effort-sharing mechanism and procedures was conducted in 2009 which confirmed that a more balanced effort-sharing had been achieved.

c)    Procurement regime

14.   The procurement of goods and services covered by this Recommendation should follow the DAC’s Good Procurement Practices for Official Development Assistance[1].

15.   In conducting procurement of aid-supported goods and services, and in partnership with developing countries, DAC Members should apply relevant commitments and guidance such as:

• The 2016 Recommendation of the Council for Development Co-operation Actors on Managing the Risk of Corruption [C(2016)156 & CORR1];

• The 1997 OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and the Recommendation of the Council for Further Combating Bribery of Foreign Public Officials in International Business Transactions [C(2009)159/REV1/FINAL].

16.   Those responsible for procurement should promote respect from suppliers with agreed international standards of corporate social and environmental behaviour. This could be done through reference to environmental and social considerations in tendering procedures.

d)    Transparency

17.   For untied aid offers covered by this Recommendation, DAC Members should, and in collaboration with partner countries as appropriate, provide or ensure ex ante notification. This provision does not apply to activities with a value of less than SDR 700,000 (SDR 130,000 in case of investment related technical co-operation).

18.   DAC Members should respond promptly and fully to requests by other DAC Members for further information on, or clarification concerning untied aid offers covered by this Recommendation.

19.   DAC Members should ensure that the DAC will be provided with information on contract awards pertaining to the untied aid offers covered by this Recommendation.

e)    Derogation

20.   For individual aid offers, DAC Members may, in exceptional circumstances, take measures inconsistent with the terms of this Recommendation, in situations where they believe it to be justified on the basis of overriding, non-trade related, development interests. Derogations are to be justified in a letter to the Secretary-General of the OECD and to the DAC Chair and will be followed up in review procedures.

f)    Monitoring and evaluation

21.   The DAC will monitor all aspects of this Recommendation through a combination of different mechanisms:

• Annual reports covering all aspects of the Recommendation, as well as the experience in delivering its objectives. These reports, which will be reviewed by the DAC in time for its annual High Level Meeting, will, inter alia:

assess the impact of the Recommendation on the volume, quality and directions of ODA flows;

set out DAC Members’ policies in respect of investment-related technical co-operation and food aid;

review the implementation of this Recommendation with respect to promoting effort-sharing among DAC Members in accordance with the mechanism set out in section IIb above;

review DAC Members’ procurement practices and patterns for untied aid offers;

assess progress towards strengthening partner countries’ local procurement capacities and improving the access of partner countries’ enterprises to aid funded procurement;

address, in addition to the provisions for bilateral consultations set out above, specific concerns that may be raised by individual DAC Members in respect of the Recommendation.

• The annual reports will also provide input for the peer reviews of individual DAC Member’s development co-operation programmes.

• A comprehensive evaluation of its implementation and impact was carried out by the High Level Meeting in 2009. That evaluation concluded that DAC Members fully met the commitments in the Recommendation to untie agreed categories of ODA and that improvements in effort sharing were significant and sustained.

• At the scheduled review of the extension of the coverage of the Recommendation to non-LDC HIPCs in 2013, the DAC decided to renew this extension for a further five years.[2] The next review will take place in 2018, at which time a DAC Member may decide to use, after that date, tied aid as part of its ODA to a non-LDC HIPC, in which case it is required to notify the country/ies concerned and the DAC Chair of its decision to do so.

22.   DAC Members will work with stakeholders, particularly partner countries, to ensure the Recommendation delivers its objectives.

ANNEX I    

5-STEP FRAMEWORK FOR RISK-BASED DUE DILIGENCE IN THE MINERALS SUPPLY CHAIN

While specific due diligence requirements and processes will differ depending on the mineral and the position of the company in the supply chain (as detailed in the mineral Supplements), companies should review their choice of suppliers and sourcing decisions and integrate into their management systems the following 5-step framework for risk-based due diligence for responsible supply chains of minerals from conflict-affected and high-risk areas:

1.   Establish strong company management systems. Companies should:

A.   Adopt, and clearly communicate to suppliers and the public, a company policy for the supply chain of minerals originating from conflict-affected and high-risk areas. This policy should incorporate the standards against which due diligence is to be conducted, consistent with the standards set forth in the model supply chain policy in Annex II.

B.   Structure internal management to support supply chain due diligence.

C.   Establish a system of controls and transparency over the mineral supply chain. This includes a chain of custody or a traceability system or the identification of upstream actors in the supply chain. This may be implemented through participation in industry-driven programs.

D.   Strengthen company engagement with suppliers. A supply chain policy should 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 a company-level, or industry-wide, grievance mechanism as an early-warning risk-awareness system.

2.   Identify and assess risk in the supply chain. Companies should:

A.   Identify risks in their supply chain as recommended in the Supplements.

B.   Assess risks of adverse impacts in light of the standards of their supply chain policy consistent with Annex II and the due diligence recommendations in this Guidance.

3.   Design and implement a strategy to respond to identified risks. Companies should:

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 throughout the course of measurable risk mitigation efforts; (ii) temporarily suspending trade while pursuing ongoing measurable risk mitigation; or (iii) disengaging with a supplier after failed attempts at mitigation or where a company deems risk mitigation not feasible or unacceptable. To determine the correct strategy, companies should review Annex II (Model Supply Chain Policy for a Responsible Global Supply Chain of Minerals from Conflict-Affected and High-Risk Areas) and consider their ability to influence, and where necessary take steps to build leverage, over suppliers who can most effectively prevent or mitigate the identified risk. If companies pursue risk mitigation efforts while continuing trade or temporarily suspending trade, they should consult with suppliers and affected stakeholders, including local and central government authorities, international or civil society organisations and affected third parties, where appropriate, and agree on the strategy for measurable risk mitigation in the risk management plan. Companies may draw on the suggested measures and indicators under Annex III of the Due Diligence Guidance to design conflict and high-risk sensitive strategies for mitigation in the risk management plan and measure progressive improvement.

C.   Implement the risk management plan, monitor and track performance of risk mitigation efforts and report back to designated senior management. This may be done in cooperation and/or consultation with local and central government authorities, upstream companies, international or civil society organisations and affected third parties where the risk management plan is implemented and monitored in conflict-affected and high-risk areas.

D.   Undertake additional fact and risk assessments for risks requiring mitigation, or after a change of circumstances.

4.   Carry out independent third-party audit of supply chain due diligence at identified points in the supply chain. Companies at identified points (as indicated in the Supplements) in the supply chain should have their due diligence practices audited by independent third parties. Such audits may be verified by an independent institutionalised mechanism.

5.   Report on supply chain due diligence. Companies should 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 mineral supply chain due diligence.

ANNEX II    

MODEL SUPPLY CHAIN POLICY FOR A RESPONSIBLE GLOBAL SUPPLY CHAIN OF MINERALS FROM CONFLICT-AFFECTED AND HIGH-RISK AREAS[1]

Recognising that risks of significant adverse impacts which may be associated with extracting, trading, handling and exporting minerals from conflict-affected and high-risk areas, and recognising that we have the responsibility to respect human rights and not contribute to conflict, we commit to adopt, widely disseminate and incorporate in contracts and/or agreements with suppliers the following policy on responsible sourcing of minerals from conflict-affected and high-risk areas, as representing a common reference for conflict-sensitive sourcing practices and suppliers’ risk awareness from the point of extraction until end user. We commit to refraining from any action which contributes to the financing of conflict and we commit to comply with relevant United Nations sanctions resolutions or, where applicable, domestic laws implementing such resolutions.

Regarding serious abuses associated with the extraction, transport or trade of minerals:

1.   While sourcing from, or operating in, conflict-affected and high-risk areas, we will neither tolerate nor by any means profit from, contribute to, assist with or facilitate the commission by any party of:

i)   any forms of torture, cruel, inhuman and degrading treatment;

ii)   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;

iii)   the worst forms of child labour[2];

iv)   other gross human rights violations and abuses such as widespread sexual violence;

v)   war crimes or other serious violations of international humanitarian law, crimes against humanity or genocide.

Regarding risk management of serious abuses:

2.   We 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 committing serious abuses as defined in paragraph 1.

Regarding direct or indirect support to non-state armed groups[3]:

3.   We 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” to non-state armed groups through the extraction, transport, trade, handling or export of minerals 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[4]:

i)   illegally control mine sites or otherwise control transportation routes, points where minerals are traded and upstream actors in the supply chain[5]; and/or

ii)   illegally tax or extort[6] money or minerals at points of access to mine sites, along transportation routes or at points where minerals are traded; and/or

iii)   illegally tax or extort intermediaries, export companies or international traders.

Regarding risk management of direct or indirect support to non-state armed groups:

4.   We 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 as defined in paragraph 3.

Regarding public or private security forces:

5.   We agree to eliminate, in accordance with paragraph 10, direct or indirect support to public or private security forces who illegally control mine sites, transportation routes and upstream actors in the supply chain; illegally tax or extort money or minerals at point of access to mine sites, along transportation routes or at points where minerals are traded; or illegally tax or extort intermediaries, export companies or international traders[7].

6.   We 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 the mine site or transportation routes from interference with legitimate extraction and trade.

7.   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.

8.   We will 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.

9.   We will 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.

Regarding risk management of public or private security forces:

10.   In accordance with the specific position of the company in the supply chain, we will immediately 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, as identified in paragraph 5, where we identify that such a reasonable risk exists. In such cases, we will suspend or discontinue engagement with upstream suppliers after failed attempts at mitigation within six months from the adoption of the risk management plan[8]. Where we identify a reasonable risk of activities inconsistent with paragraphs 8 and 9, we will respond in the same vein.

Regarding bribery and fraudulent misrepresentation of the origin of minerals:

11.   We 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[9].

Regarding money laundering:

12.   We 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.

Regarding the payment of taxes, fees and royalties due to governments:

13.   We 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).

Regarding risk management of bribery and fraudulent misrepresentation of the origin of minerals, money-laundering and payment of taxes, fees and royalties to governments:

14.   In accordance with the specific position of the company in the supply chain, we 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 minimising risks of adverse impacts through measurable steps taken in reasonable timescales. We will suspend or discontinue engagement with upstream suppliers after failed attempts at mitigation[10].

More information    

The Supplement on Tin, Tantalum and Tungsten [C/MIN(2012)12/ADD1] and the Supplement on Gold [C(2012)93/ADD1], which are an integral part of the Guidance, are available at www.oecd.org/daf/investment/mining

   
Non-Member Adherents [1]   

Argentina

  • Adherence date: 25 May 2011

Brazil

  • Adherence date: 25 May 2011

Colombia

  • Adherence date: 23 May 2012

Costa Rica

  • Adherence date: 30 September 2013

Kazakhstan

  • Adherence date: 20 June 2017

Latvia

  • Adherence date: 25 May 2011

Lithuania

  • Adherence date: 25 May 2011

Morocco

  • Adherence date: 25 May 2011

Peru

  • Adherence date: 25 May 2011

Romania

  • Adherence date: 25 May 2011

Ukraine

  • Adherence date: 15 March 2017
Relevant bodies:
Investment Committee
Development Assistance Committee

[*] At the time of adoption, Brazil made the following statement: “In adhering to the present Recommendation Brazil understands that the Due Diligence Guidance has been developed on the basis of the experience in the Great Lakes Region in Africa. Brazil is of the view that companies should take due account of relevant decisions by the United Nations, including resolutions of the UN Security Council, in determining if other zones of operation can be considered to be conflict-affected or high-risk areas.”
[1] DAC(86)22 (Corrigendum, 2nd Revision), also reproduced in ‘Development Assistance Manual: DAC Principles for Effective Aid. OECD 1992.
[2] At the 2013 review, Japan notified the DAC that, in accordance with paragraph 21 of the Recommendation, it reserves the right to use tied aid as part of its ODA to all non-LDC HIPCs listed in Annex II. Accordingly, as of 1 October 2013, Japan may use tied aid as part of its ODA to all non-LDC HIPCs in conformity with the Recommendation.

[1] This Model Supply Chain Policy for a Responsible Global Supply Chain of Minerals from Conflict-Affected and High-Risk Areas is intended to provide a common reference for all actors throughout the entire mineral supply chain. Companies are encouraged to incorporate the model policy into their existing policies on corporate social responsibility, sustainability, or other alternative equivalent.
[2] See ILO Convention No. 182 on the Worst Forms of Child Labour (1999).
[3] To identify non-state armed groups, companies should refer to relevant UN Security Council resolutions.
[4] “Affiliates” includes négociants, consolidators, intermediaries, and others in the supply chain that work directly with armed groups to facilitate the extraction, trade or handling of minerals.
[5] “Control” of mines, transportation routes, points where minerals are traded and upstream actors in the supply chain means (i) overseeing extraction, including by granting access to mine sites and/or coordinating downstream sales to intermediaries, export companies or international traders; (ii) making recourse to any forms of forced or compulsory labour to mine, transport, trade or sell minerals; or (iii) acting as a director or officer of, or holding beneficial or other ownership interests in, upstream companies or mines.
[6] “Extort” from mines, transportation routes, points where minerals are traded or upstream companies means the demanding, under the threat of violence or any other penalty, and for which the person has not voluntarily offered, sums of money or minerals, often in return for granting access to exploit the mine site, access transportation routes, or to transport, purchase, or sell minerals.
[7] “Direct or indirect support” does not refer to legally required forms of support, including legal taxes, fees, and/or royalties that companies pay to the government of a country in which they operate (see paragraph 13 below on disclosure of such payments).
[8] As detailed in Step 3(D) of Annex I, companies should conduct an additional risk assessment on those risks requiring mitigation after the adoption of the risk management plan. If within six months from the adoption of the risk management plan there is no significant measurable improvement to prevent or mitigate the risk of direct or indirect support to public or private security forces, as identified in paragraph 5, companies should suspend or discontinue engagement with the supplier for a minimum of three months. Suspension may be accompanied by a revised risk management plan, stating the performance objectives for progressive improvement that should be met before resuming the trade relationship.
[9] See OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (1997); and the United Nations Convention Against Corruption (2004).
[10] As detailed in Step 3(D) of Annex I, companies should conduct an additional risk assessment on those risks requiring mitigation after the adoption of the risk management plan. If within six months from the adoption of the risk management plan there is no significant measurable improvement to prevent or mitigate the risks of bribery and fraudulent misrepresentation of the origin of minerals, money-laundering and payment of taxes, fees and royalties to governments, companies should suspend or discontinue engagement with the supplier for a minimum of three months. Suspension may be accompanied by a revised risk management plan, stating the performance objectives for progressive improvement that should be met before resuming the trade relationship.

[1]Latvia became Member of the Organisation on 1 July 2016.
 
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