Many of the world’s largest gold companies are set to adopt a new standard that claims to guarantee their products as conflict-free

What do you get when you cross precious metals with poverty? It sounds like the opening of a joke. It’s not. The answer is only too clear in the dozens of bloody conflicts, both small and large, that play out in many of the most mineral-rich corners of the globe.

In response, the gold industry has developed a conflict-free gold standard. The driving force behind the initiative is the World Gold Council, whose members are responsible for about three-fifths of global gold production.

The standard reflects a twin concern on the part of the gold industry, says World Gold Council director Terry Heymann. First, it demonstrates the “continuing efforts” that large mining firms are making to mine responsibly. Second, it is designed to stimulate wider economic development by encouraging “responsible investment in conflict-affected or high-risk areas”.

There are other motivations, too. The most obvious is regulatory. Following the introduction of the Dodd-Frank Act in 2010, US miners operating in conflict regions now face new chain-of-custody disclosure requirements. There are commercial imperatives as well. Consumers on the street are increasingly demanding to know that their gold bracelet isn’t tainted by human rights abuses in the supply chain.

“In essence, [the standard] is an industry-driven attempt to protect the reputation of gold amid negative perceptions that a small proportion of global gold output may potentially be associated with armed conflict,” says Gus Macfarlane, director of political risk consultancy Maplecroft.

Human rights groups are broadly welcoming the new standard. To date, most efforts touching on conflict minerals have concentrated on the so-called “3Ts” of tin, tantalum and tungsten, says Patricia Jurewicz, director of the US-based Responsible Sourcing Network. Encompassing gold fills an important gap. The World Gold Council’s cross-sectoral reach marks an important factor too, she says. “Because the WGC works with many different sectors, [such as] jewellery, electronics, and banks, its standards have far-reaching implications.”

And the standard has other features that are winning praise. Diane Klein, project manager at UK peace-building charity International Alert, points to the place conflict now enjoys in mining companies’ risk assessments, not just in terms of business risks, “but also what kind of a risk the company's operation poses to the existing local context”. More significant still is the standard’s external assurance requirements. Few if any voluntary agreements include such clauses, says Klein.

Another link in the chain

Concerns exist, however. The most important is the relationship between the World Gold Council’s new standard and the OECD’s existing guidance on responsible mineral supply chains. The latter enjoys existing endorsement from the UN Security Council and OECD ministers, as well as a number of national governments, including the conflict-ridden Democratic Republic of Congo. Mining companies “should refer to and implement the OECD Guidance first and foremost”, argues Sophia Pickles, conflict resources campaigner at UK non-profit group Global Witness.

The World Gold Council’s Terry Heymann confirms that the OECD guidelines are the industry’s “overarching framework”. The conflict-free gold standard really comes into its own at the production level, he stresses. In that sense, it’s another link in the chain, much like the London Bullion Market Association’s responsible gold guidance that governs the refining process.

The standard’s provision of heightened levels of assurance should help keep the doors of the world market open to clean gold from conflict-affected states. That’s especially important for legitimate African producers operating in such regions. Without such assurance, those doors could quickly close. That would hit local economies hard, which could arguably lead to more social conflict, not less.