How Responsible Sourcing Affects Metal Markets

How Responsible Sourcing Affects Metal Markets

The global focus on responsible sourcing has gained increasing momentum over recent years, with an escalation of interest driving both public awareness and consumer demand for assurances as to the provenance of resources and materials. Corporate initiatives to address environmental, social and governance (“ESG”) concerns in supply chains have become a central feature of financial reports and business planning. At the same time, legislation has increased the pressure on metals market actors and encouraged greater care when sourcing metal. Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed by the U.S. Congress in 2010, requiring publicly listed companies to check and report on their supply chains for tin, tungsten, tantalum and gold (3TGs). In Europe, the Conflict Minerals Regulation is due to go live in January 2021.

For over 140 years, the London Metal Exchange (LME) has set requirements for metallurgical standards and shapes (e.g. cathode or ingot) when approving brands that can be used to deliver against LME contracts (and consequently, the brands that make up the LME price). It is only more recently that the market demand for responsibly sourced metal has meant we have the remit to extend those requirements to include conditions for how that metal is sourced. We believe we have a key role in facilitating the adoption of responsible sourcing principles, and that we can no longer accept the possibility that our users be placed in a position where they can take delivery of metal from one of our listed warehouses that does not meet those principles. Furthermore, we need to ensure that the LME price reflects the value of responsibly sourced metal, and is not artificially depressed by metal which is not.


To learn how the upcoming EU Conflict Minerals Regulation will affect companies sourcing raw materials, attend our webinar, The London Metal Exchange & Responsible Mineral Sourcing.


To achieve this, we have grounded our approach in the OECD’s Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD Guidance) as we believe this is the most globally-accepted approach to responsible sourcing. Our responsible sourcing requirements will leverage the OECD-aligned metals standards already available (or in development) to conduct due diligence on brands that operate in conflict-affected and high-risk areas (CAHRAs). It is our aim that in the not-too-distant future we will be in the position where all our LME registered brands will have undertaken appropriate responsible sourcing work corresponding to the OECD framework for risk-based due diligence.

On the environmental side, we are also introducing requirements for all LME-listed brands to hold a valid certificate for ISO 14001 (or equivalent), to ensure that environmental management systems are firmly embedded in the operations of all brand-producing companies. As the sustainability agenda continues to develop we will keep working with the industry to see how the LME can best reflect evolving market demands, including possibilities for low carbon aluminum, or sustainability concerns to be incorporated within the LME’s broader responsible sourcing requirements.

Finally, we firmly believe our industry should contribute to development challenges in a proactive manner. As such, the LME Board has allocated $2 million USD, funded by market enforcement proceeds, to charitable initiatives in the responsible sourcing sector.

We are taking action because the value of our market is based on providing metal that meets globally-accepted standards for responsible sourcing, and because the metals sector looks to us to provide leadership on these important topics; mostly, however, we are taking action because we believe it is the right thing to do, and we are proud to serve a market that demands nothing less.

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