LONDON (Reuters) - The London Metal Exchange (LME) could ban or delist brands that are not responsibly sourced by 2022 under an initiative launched on Tuesday to help root out metal tainted by child labour or corruption.
But the LME, seeking to avoid overly punishing small mining brands to the benefit of larger miners such as Glencore, said it would not single out cobalt and tin for accelerated auditing.
Cobalt, a key ingredient in the batteries that power electric vehicles, is mined by small, artisinal operations mainly in the Democratic Republic of Congo, where supply chains are not strictly monitored.
“It would take us longer to take action against cobalt and tin brands because we would give them longer to comply,” LME chief executive Matt Chamberlain said on a call with reporters.
The proposal is the largest step yet by the LME, the world’s biggest market for industrial metals, to clean up global supply chains and marks a shift from the exchange’s traditional role of requiring its suppliers to meet only metallurgical standards.
“Global consumers rightly demand action on responsible sourcing – and our industry must listen,” Chamberlain said in a statement.
Under the new rules, all LME brands would by the end of 2020 undertake a “Red Flag assessment” based on guidelines set by the Organisation for Economic Co-operation and Development (OECD).
Based on those findings, the exchange would by 2022 audit brands identified as higher-risk with a view to banning them if they do not comply with requirements on responsible sourcing.
In a consultation paper in October, the LME said it wanted to ban cobalt brands that traded at a significant discount against prices gathered by trade publication Fastmarkets MB.
The discount was created by concerns that some providers of cobalt to the exchange may have used child labour.
Brands would be forced to publish fully all of their supply-chain information by 2024, the LME said.
A supply-chain investigator at non-governmental organisation Global Witness, Sophia Pickles, welcomed the LME’s increased focus on the reporting of financial crime and corruption risk.
Firms should also be encouraged to disclose environmental and climate concerns, Pickles said.
NGOs including Global Witness last year pressured the LME to hold off on banning cobalt brands seen as tainted and work with them instead to ensure compliance.
Additional reporting by Eric Onstad; Editing by Dale Hudson