CASE STUDIES
LME responsible sourcing requirements for a multinational zinc producer
A multinational zinc producer and LME-listed brand commissioned Kumi to strengthen its supply chain due diligence management system to comply with the London Metal Exchange’s (LME’s) responsible sourcing requirements. Kumi worked with the client to review the company’s procurement processes, control systems for material traceability and supply chain transparency and analyse due diligence policies and procedures to identify gaps and good practices.
The zinc producer owns and operates numerous mine sites and processing facilities and, in addition to its production, procures material from third-party mines and traders. A major challenge for the company was developing a consistent process for determining ‘conflict-affected and high-risk areas’ (CAHRAs). The CAHRA identification process not only triggers red flags that require enhanced due diligence under LME requirements but also determines which LME track (A, B, or C) an LME-listed brand can use to demonstrate the implementation of responsible sourcing practices. To support the client Kumi:
- Conducted a gap analysis of the client’s due diligence and risk management processes;
- Made detailed findings and recommendations for how the client would achieve alignment with the LME’s Responsible Sourcing Handbook;
- Updated the client’s CAHRA identification procedure.
Recommendations
We found that information requested through the client’s existing KYC and due diligence processes only focused on core compliance issues and didn’t capture key ESG risks, particularly concerning conflict-affected and high-risk areas.
We worked with our client to expand the scope of its supplier screening process in line with industry best practice and, after proactively engaging with the LME to adjust compliance track (switch from track C to track A), the client established a formal CAHRA procedure.
Thanks to our client’s efforts to address discrepancies with the exchange’s responsible sourcing requirements, the LME has granted additional time to make the necessary and meaningful improvements before next year’s Track A deadline.
The Outcome
As a result of our work, the client demonstrated a clear pathway towards compliance and avoided losing its approved member status. As an LME-listed brand, the company has maintained business relations and worked constructively with suppliers to improve due diligence processes. Our client is also now better positioned to manage identified risks across its geographically diverse supply chain.