Beyond Tier 1: challenges in meaningful due diligence for mineral supply chains

The OECD’s six-step framework for responsible business conduct (RBC) relies fundamentally on the information that can be obtained in Step 2, identifying and assessing adverse impacts along supply chains, as the analytical foundation for effective supply chain due diligence. However, many companies struggle to see beyond Tier 1 suppliers due to sub-supplier reluctance, governance gaps, complexity, or fears of losing competitive advantages. Overcoming these visibility barriers is key, as it is estimated that most human rights and environmental risks occur in the remote supply tiers. To tackle these challenges to visibility deeper in the supply chain, downstream firms can leverage EU reporting regulations, engage upstream suppliers as dual-role agents, collaborate with NGOs and business associations, utilize informational assistance platforms like the DiliCHANCE One-Stop-Shop, or adopt mineral traceability schemes, collectively enabling a scalable approach to building transparent and resilient supply networks.

In the OECD RBC Framework, step 2 is where the effort of due diligence in the supply chain truly begins. It can be seen as the analytical backbone and ensures that subsequent steps of the framework actions are grounded in a robust understanding of the company’s real and potential adverse impacts. Step 2 is extensive, especially in the sourcing networks of complex supply chains of raw materials and of products that rely on them, such as in the automotive or technology industry, and many companies can underestimate the actual extent to which their supply chains go.

•  Downstream companies can utilize their direct suppliers in a way of “double agency”, where they simultaneously act as both buyers and de facto regulators of their sub-suppliers, leveraging contractual power to drive data collection.
•  Downstream companies can creatively collaborate with other actors and responsible business associations to improve implementation of voluntary sustainability standards or the implementation of voluntary mineral supply chain standards.
• Collaborating with mineral traceability initiatives and innovative efforts such as blockchain enabled digital product passports, can assist downstream companies with improved understanding and increased sustainability of their supply chains.
• Regulations, such as the EU’s Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and its Omnibus reforms, will soon create a legal baseline for scoped companies to prove the origin of materials. Many companies who will no longer fall under the CSRD and CSDDD mandatory reporting requirements reported that their companies are still planning to maintain or even expand their sustainability reporting for business risk management.