By Zandi Shabalala
LONDON (Reuters) - The London Metal Exchange (LME) must force its brands to disclose their impact on the environment as part of the exchange's efforts to clean up supply chains, a letter signed by 16 NGOs said.
The NGOs were responding to an LME proposal launched in April that, among other initiatives, outlined its plans to ban or delist brands that are not responsibly sourced by 2022 but said market consensus had not yet developed on ways to report and enact environmental requirements.
The LME, the world's biggest market for industrial metals, is under pressure to take tougher action against metals tainted by human rights abuses such as child labour or corruption.
The letter from the NGOs, which include Global Witness, Amnesty International and OECD Watch, urges the LME to "mitigate, and where possible reverse, the damage caused by the metals and minerals industry it facilitates".
"We cannot allow the path to a zero-carbon economy to come at the cost of lives in producing and manufacturing countries," the letter says, adding the LME must introduce environmental and climate disclosures.
The LME is expanding its offering to include contracts for commodities used in electric vehicles and smartphones such as cobalt and lithium, in addition to metals such as copper and aluminium.
The LME said as part of its proposal, approved brands would need to obtain the "ISO 140001" certification, which is an international standard for an effective environmental management system.
Miners such as BHP (AX:BHP), Rio Tinto (L:RIO) and Anglo American (L:AAL) say they are reducing their impact on the environment by, for instance, cutting water use and rehabilitating pits, but disasters such as the Vale's (SA:VALE3) Brumadinho dam collapse in Brazil have highlighted shortcomings.
The NGOs also cautioned the LME from relying on assurance schemes set up by companies in the metals industry as they do not guarantee full compliance with globally-accepted requirements for responsible sourcing.
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.