03 Jun LME: the responsible sourcing proposal must be “effective and fair”
Georgina Hallett, who leads the work in responsible sourcing of the London Metal Exchange (LME), says the LME is not seeking to create its own standard or certification system, but rather to use the existing work to ensure that companies comply with the LME guidelines. Copper Mark could be among the certifications considered.
“We do not believe that having minimum standards mean that our requirements cannot be ambitious”. That is Georgina Hallett’s answer, Chief of Staff at the London Metal Exchange Group, where she plays a central role in the LME’s market reform and new strategic initiatives.
There, she leads the work on the responsible sourcing initiative, a subject that will directly impact the companies which brands are traded in the LME, a work that is in full development.
In an interview with Cesco, Georgina talks about the current status of the project and what it seeks to achieve with the new requirements. She also delves into how this criterion could be applied to companies.
The LME launched the next steps of its responsible sourcing proposals on April 26th in Paris during the OECD Forum on responsible supply chains. How did it go?
We were delighted since the LME’s proposals are based on the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. In general, we were really pleased with how it went. We were publishing a formal market-wide consultation on proposed rules for the application of responsible sourcing principles to all LME-listed brands, taking advantage of the strong commitment with market stakeholders in the LME’s October 2018 position paper, and reflecting the broad range of feedback we received. Many of our key stakeholders attended and the forum provided us an excellent opportunity to continue useful discussions in regards to responsible sourcing. Matthew Chamberlain, our Chief Executive, was able to attend the Forum and hear first-hand some of the excellent ideas that were discussed. That said, we are also conscious that we were providing a lot of new information, so it would take time for everyone to read the updated proposals and come back with their feedback.
How have the NGOs perceived the LME’s responsible sourcing initiative? Is the LME aiming rather at a minimum standard, than at an ambitious sustainability standard?
We have been (and will continue) engaging with the leading NGOs from the start of our process to ensure our responsible sourcing initiative is meaningful and effective, as well as fair and balanced. They have provided us with excellent insight and helpful guidance throughout our journey and we look forward to continuing to work with them to ensure our initiative provides lasting benefits to those at risk from metal that is not responsibly sourced.
We don’t believe that having minimum standards mean that our requirements cannot be ambitious. Standards are important for the LME because our market is a seller’s choice market. The seller decides which metal delivers into the Exchange to settle an open position. This has an important consequence for us, because it impacts our core price discovery process, and it means we have a responsibility to ensure that the metal a buyer receives in delivery meets certain basic standards, to ensure that they get metal which is reflective of the price they have paid for it and that it is comparable with other metals stored in LME-listed warehouses. We believe that, in the future, these standards should include responsible sourcing requirements.
Regarding the certification systems among different brands in different metals, does the LME believe this process has to be developed by a multi-stakeholder approach and under consideration of ISEAL guidelines (Global association for sustainability standards)? How the Risk Flag Assessment would be part of this process?
The LME is conscious that great work has already been done in respect of responsible sourcing certification systems – many of them being the product of multi-stakeholder development processes – and, as a result, it does not believe that it would be helpful for it to create its own standard or certification system. Instead, we are working with several standard providers (many of them work with ISEAL) to solve how we can leverage their existing work to ensure that our stakeholders do not have to repeat this work to meet the LME’s requirements.
The Red Flag Assessment (“RFA”) is the process through which LME-listed brands would self-assess in order to categorize themselves as higher- or lower-focus brands for the purpose of our requirements. All these assessments will be reviewed by us to ensure consistency across both outcomes. Following our review, the ratified results will be confirmed back to our brands.
How would it be applied?
This is designed to be risk-based so that our brands only take action based on their individual risk profiles. If they are higher-focus, we will ask them to choose a standard which has been assessed as being aligned with the OECD Due Diligence Guidance. Again, we don’t want to create a lot of extra work here, so, as a starting point, we are happy to confirm that standards and certifications which have already completed the OECD alignment process will not be required to re-complete this process for the LME.
For those standards which have not yet been through the alignment assessment process, in the 2018 position paper, we outlined a three-step process for ensuring that a brand is aligned with the OECD Guidance as follows: to identify a standard, to ensure the standard has undergone OECD alignment assessment by an accredited assessor, and been ratified as such by us; and finally to demonstrate compliance with the standard and validate this compliance with us.
Focusing on copper, the International Copper Association (ICA) has shared their study “Identifying sustainability issues in copper production” and the Copper Mark initiative is moving forward. How is your engagement-interaction with the ICA / Copper Mark program?
The ICA has been instrumental for us in developing our proposals. They – along with a number of industry bodies (including Cesco!) – reviewed a preliminary version of the position paper, and they have been engaged ever since, providing feedback and sharing their expertise. We know they will also have feedback on the consultation which is out now. In the meantime, we are working with them now to identify how their members subscribing to the Copper Mark can use that to meet the LME’s requirements and the LME is a member of the ICA’s Copper Mark working group.
Finally, China accounts for more than 50% of copper Chilean exports. How’s been Chinese reception about LME Responsible Sourcing Initiative? How’s been their reception considering also their participation in copper mining facilities in Africa?
China is not only a crucial country for Chile but for the LME too (the Hong Kong Exchanges is our parent company!). Many of our members, producers and end users are China-based or have considerable interest in mainland China and we continue to work with these stakeholders to ensure we listen and incorporate their feedback into our responsible sourcing Initiative. To date, we have received excellent feedback from our Chinese stakeholders and we will be running sessions in Shanghai, and other key cities in China, throughout 2019 to ensure we develop further engagement with these parties.