EU: Flawed Reliance on Audits for Raw Materials Rules

(Brussels) – European governments risk relying too much on voluntary audit and certification initiatives to protect rights in European Union minerals supply chains, Human Rights Watch said in a question-and-answer document released today. EU laws, including the draft Critical Raw Minerals Act released in March 2023, need to recognize that compliance with voluntary standards is no substitute for rigorous regulatory scrutiny and enforcement.

Audit and certifications initiatives purport to assess and certify companies’ respect for human rights and the environment by auditing their compliance with a voluntary standard. The draft Critical Raw Materials Act, which aims to secure a sustainable supply of strategic materials for the EU, relies on audit and certifications to verify whether new mines, refineries, and other projects are sustainable enough to merit government support. Research has shown, however, that third-party audits have inherent limitations and that voluntary initiatives frequently lack the detailed criteria and rigorous methodology needed to properly evaluate companies’ compliance with human rights or environmental standards.

“The European Union shouldn’t outsource oversight of mines, refineries, and smelters to voluntary initiatives,” said Jim Wormington, senior corporate accountability researcher and advocate at Human Rights Watch. “Audits or certifications provide no guarantee that a company respects human rights or the environment.”

Human Rights Watch has conducted extensive research into the operation and effectiveness of voluntary audit and certification initiatives. This research has focused in particular on initiatives related to jewelry sourcing, including standards developed by the Responsible Jewelry Council and the London Bullion Market Association, as well as standards used by the global car industry, particularly the Aluminum Stewardship Initiative.

The mining, refining, and processing of minerals has a long track record of human rights abuses, including violations of Indigenous peoples’ right to free, prior, and informed consent for decisions affecting their land and resources; child labor; unsafe working conditions; forced displacement; land loss; and devastating waste spills. Due to skyrocketing demand for minerals for new energy technologies, such as electric cars and solar panels, mining is expanding into new regions and communities, creating new risks of human rights abuses and threats to the environment.

Increased recognition of the human rights and environmental risks in mineral supply chains has led to a proliferation of voluntary audit and certification initiatives. Some initiatives conduct on-the-ground audits of mines and other facilities in minerals supply chains, while others focus on auditing the sourcing practices of companies that purchase raw materials. Several initiatives do both.

In addition to the draft Critical Raw Materials Act, the EU has also integrated audits and certifications into the Conflict Minerals Regulation, which entered into force in 2021, and a forthcoming Batteries Regulation.

Human Rights Watch work, and research by other civil society organizations, has shown the serious shortcomings of voluntary audit and certification initiatives. Many standards were developed and are governed primarily by mining companies and industry groups, which can compromise their ability to develop strong standards and audit processes.

Audit methodologies frequently do not include adequate participation, if any, from communities and workers, and focus too much on companies’ internal policies and practices rather than their on-the-ground impact on human rights.

Many voluntary initiatives also do not require companies to share detailed audit results, information on the audit process, or findings of noncompliance. They also do not adequately involve workers, Indigenous peoples, affected communities, and other relevant stakeholders in determining the corrective action needed for human rights and environmental harm.

Human Rights Watch is a board member of the Initiative for Responsible Mining Assurance (IRMA), the only mining sector audit initiative that it is equally governed by civil society and the private sector. IRMA is comparatively the strongest standards initiative that mining companies can use to provide transparency on their conduct and practices, although it needs significant improvement to safeguard the independence of audits and more effectively push mining companies to remedy harms.

Instead of relying solely on audits and certifications, the Critical Raw Minerals Act should require the European Commission to conduct its own independent analysis of whether a project meets the sustainability and human rights standards set out in the law, Human Rights Watch said.

The act should explicitly require the commission’s analysis to draw on a range of sources, including information in audit and certification reports but also interviews with and reports from community groups, unions, and worker-led organizations, and consultations with nongovernmental organizations.

The commission, when weighing information in audits against other sources, should consider the credibility of the standards and methodology used to conduct the audit. Under no circumstance should the fact that a company conducted an audit or received certification prevent it from being held liable for human rights and environmental harm.

“Audits and certifications have serious limitations and should only be one of many tools used to assess companies’ practices,” Wormington said. “Regulators should not equate compliance with voluntary mining standards and respect for human rights.”