Keeping the evil out of necessity: how technology can usher in the next generation of due-diligence in mining supply chains.
Any organisation extracting, refining and even using large quantities of minerals will be aware of the moral peril facing their business. The spectre of human rights, exploitation and environmental impacts looms large over an industry that is nonetheless indivisible from economic growth. Responsible minerals businesses expend vast amounts of energy and focus to eradicate such practices and ensure their supply chain adds value to the communities they impact.
The massive increase in demand for metals, including precious metals, for use in technology or as an investment is fuelling a boom in the industry, and with such pressures comes the need to increase scrutiny of materials supply chains yet further.
This manifests itself beyond mere public scrutiny, with emerging legislation placing new requirements on business. For example, the EU’s Conflict Minerals Regulation regulates all organisations importing >100kg of gold per year into the EU (applying directly to 600 - 1,000 EU importers). Based on the OECD’s five-step framework for minerals: Due Diligence Guidance for Responsible Supply Chains from Conflict-Affected and High-Risk Areas, new requirements include carry out an independent third-party audit of supply chain due diligence, with accompanying annual reports.
Ahead of the regulation, behind the technology
Despite these regulations having been in place since 2017 and enforceable since 2021 within the EU, many of the processes the industry has put in place predates the regulation by several years. These intensive processes designed to root out bad practice have proven to be effective, yet cost and manpower intensive. And, compliance data is hardly shared B2B.
It is for this reason EU member states have taken their time to enforce the legislation. And yet, the new ways of working outlined in the regulations pose an opportunity for a true paradigm shift in due diligence. With the advent of new technologies such as distributed ledger, the precious metals supply chain has an opportunity to enhance, to digitalize its due diligence while simultaneously reducing cost and the manpower required to undertake obsolete manual processes.
An industry led approach
While the forbearance of regulators has allowed the precious metals supply chain to manage its own risks – broadly to good effect – that forbearance is unlikely to continue in light of new improved processes. That is why the industry is determined to remain one step ahead by leveraging tools from emerging technology start-ups like aXedras.
aXedras has developed a blockchain-/DLT-based platform that permits the tracking of precious metals through the supply chain and the exchange of data and documents associated with their movement. This provides businesses and even end-users with the ability to trace the material from strata to product and to look up its accompanying documentation. The opportunities this provides to meet regulatory requirements are considerable. Among others, Article 4 (f) “as regards minerals” and (g) “as regards metals” of the Regulation (EU) 2017/821 can be met at ease by the Union importer, the Bullion Integrity Ledger™ by aXedras enables the preservation of all the required provenance and chain of custody data along the precious metals supply chains from upstream suppliers, via refiners to the downstream market. aXedras is currently in discussion with industry representatives, authorities and auditors in the DACH-region (i.e., Germany, Austria, Switzerland) about the process of digitally documenting supply chains, identifying points of origins of minerals and metals, and keeping accurate records change from a departmental effort into a more accurate yet relatively trivial business process. Speed is important too, as the ability to trace material through the supply chain provides business with the ability to undertake analytics that indicate trends, identify anomalies and, ultimately, address risks as they emerge.
Transparency, digital transformation of an industry can move the industry from looking at risks retrospectively to managing them as they emerge. The impact on ESG-related practices and revealing fraudulent activities could be enormous. But the benefits span way beyond due diligence.
Such deep, timely insight into precious metals supply chains has the potential to find enormous economies of scale and identify efficiency savings with a value orders of magnitude greater than any initial investment might require.
Technology empowers Compliance and Innovation
What is so exciting about this technology – and the reasons the industry is taking notice – is the fact that the growing pressure of regulatory compliance on issues of sustainable practice is driving the adoption of technology that will help the industry scale responsibly in response to the growing demand for minerals. And as companies like aXedras continue to develop their products to solve for these previously diametrically opposite priorities we can expect the industry to develop exciting business models that can unlock the potential of manufacturing economies across the globe.
aXedras itself represents a neutral tech company based in Switzerland, which has been developing its software solutions for precious metal industry focusing on efficiency, integrity and a novel combination of essential confidentiality paired with required transparency since its inception. Concept partnerships with representatives from the industry, close relationships with industry associations and regulators empowered the development of the Bullion Integrity Ledger™, a digital platform for global, end-to-end precious metal supply chains.