Case study: Managing risks within supply chains

October 20, 2021

Case study: Managing risks within supply chains

Recent EU directives, which are also binding for member states such as Germany, require companies to know their supply chains in detail and to share responsibility for any violations of environmental protection or human rights along the entire supply chain. The keyword here is: Supply Chain Act. For small to medium-sized companies in particular, it is usually difficult or impossible to know exactly all the partners involved, right down to the raw material producers, and their working methods. Both the mining of metals as well as the work of many local authorities is often very difficult for outsiders to keep track of.

Companies that use tin, tungsten, tantalum or even gold in Germany or Europe, for example, also fall under the EU regulation on the import of so-called 'conflict minerals', as these have a reputation for contributing to conflict financing in Central Africa (DR Congo, Uganda, Rwanda and Burundi). While there are a number of certified mines outside conflict areas in these regions, proving this is extremely complex and costly for the respective companies. Moreover, gaps in knowledge represent an enormous reputational risk for the companies concerned. Individual organisations and their interest groups behind them are now actively capitalising on the disclosure of actual, but often only assumed, environmental and human rights scandals.

Solitaire Advisory advises a European trader of tin and tungsten with its specialists on precisely these challenges. The aim is to ensure that the trader complies with the strict regulations and can prove a transparent supply chain from mining, in which it has invested itself, to the smelter and import. To this end, the risk consultants on the ground in Central Africa work together with the necessary government agencies and other specialists from Solitaire Advisory's network. Our task is first of all to find out whether the current political situation makes investments appear sensible at all and whether the governments concerned generally honour contracts. Furthermore, it is necessary to investigate which exporters can present official licences on site, which authorities issue export certificates under which circumstances and which steps have to be followed to ensure certification. These analyses and advisory measures allow the trader to implement his activities with relative security both in Central Africa and in the EU and to continue without further risk of regulatory pitfalls.

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