Beyond the Label: Rethinking Traceability in Critical Minerals

The global rush to secure access to critical minerals has once again drawn attention to the adverse impacts of mining on local communities. Democratic Republic of Congo (DRC), home to substantial cobalt production, has become a particular focal point. Calls for companies to ensure their cobalt supply chains are free from child labour have resonated widely, as well as concerns related to unsafe working conditions and environmental degradation. This has led to ill-informed company policies targeting the artisanal and small-scale mining (ASM) sector – including ones that exclude purchasing of ASM-produced materials altogether.

With companies and their home governments looking to identify “clean” sources of critical minerals and prove that the minerals they are purchasing are not contributing to human and environmental harms, calls for traceability have further ballooned over the past year.

Just recently, the UN Secretary-General’s Panel on Critical Energy Transition Minerals recommended the establishment of “a global traceability, transparency and accountability framework along the entire mineral value chain – from mining to recycling – to strengthen due diligence, facilitate corporate accountability and build a global market for critical energy transition minerals.”

However, there has been limited recognition or understanding of how past attempts to establish traceability in artisanal mineral supply chains associated with human rights abuses and conflict financing, including diamonds, gold and the 3Ts (tin, tantalum and tungsten), have yielded mixed results. Taking stock of these learnings could help pave a path for designing more successful initiatives in the future.

Traceability Across Supply Chains

Diamonds

The diamond sector has grappled with traceability for over two decades. There is no industry wide, independently audited traceability system for diamonds from pit to consumer.

The Kimberley Process Certification Scheme was established in 2003 and certifies the origin of rough diamonds as conflict-free. Countries are members of the sch eme and must introduce “internal controls” to ensure that conflict diamonds are excluded from trade. The certificate issued at export for each parcel of rough diamonds implies that the issuing government can track the diamonds to where they were mined—however the reality is often different.

Numerous reports have cited failures in internal controls within countries, especially those with artisanal production, that do not provide evidence of traceability and allow illicit or conflict diamonds to enter the supply chain. Moreover, as the certification is applied at the country of origin’s point of export and only follows rough diamonds—it provides an opportunity for illicit diamonds to be mixed with parcels at trading centers or during cutting and polishing. The World Diamond Council’s (WDC) System of Warranties (SoW), lacks transparency and robust independent scrutiny, not in alignment with international standards. WDC members self-assess against a set of standards and typically rely on KP certification for determination of proof of origin and with no due consideration of the condition under which the diamonds were produced and traded.

However, geopolitical events such as Russia’s invasion of Ukraine have reinvigorated the push for a more rigorous and transparent diamond supply chain. With Russia being a major diamond producer, the need to have an effective traceability system has gained urgency as companies have to comply with regulations to stop importing Russian-origin diamonds. The G7 imposed a ban on imports of Russian-origin diamonds starting January 1, 2024, and broadened the measure on March 1, 2024 to include Russian diamonds over one carat that are cut and polished in third countries.

How traceability for the diamond sector will be rolled out remains unclear, with tension between actors around implementation. Importantly, reports say that the technology for traceability of the supply chain is not yet available. This has resulted in the postponement of the G7’s traceability requirements by almost a year—to January 1, 2026. In the meantime, the United States has announced that importers can “self-certify” the country of mining in order to comply with the new requirements, which falls far short of even the most basic measures of traceability.

3Ts

Just ahead of the adoption of Section 1502 of the US Dodd-Frank Act in 2010—which required companies to state whether they were sourcing gold or 3Ts from DRC or its neighboring countries—the private sector began testing how to implement traceability for 3Ts. Powered by regulatory pressure and market requirements to ensure minerals purchased in Africa’s Great Lakes region were not funding armed groups active in the region, the first pilot for iTSCi, an industry-led mineral traceability scheme for the 3T sector, was launched in DRC and expanded rapidly across the region.

The iTSCi program served to support market access for the 3T sector in the region to maintain critical market access at a time when downstream buyers were feeling more consumer and regulatory pressure to ensure conflict-minerals were not reaching their supply chains. However, the scheme has faced criticism including for creating a monopoly over due diligence programs that restrict the potential for others to operate while also supporting a defacto buyer’s monopoly for iTSCi members.

To date, few other 3T traceability schemes have managed to move past a pilot stage or scale beyond a handful of sites, with the exception of the Better Mining program that operates in the DRC and Rwanda on a smaller scale than iTSCi, including in other mineral value chains such as cobalt.

iTSCi has also faced a number of other criticisms, including failure to address critical gaps in its system that allowed potentially fraudulent activity and laundering of minerals into the iTSCi program. The initiative also recently lost its recognition status with the Responsible Minerals Initiative (RMI), despite three years of discussion to address gaps. In its view, the RMI noted that it did not see recognition with iTSCi aligning with its mission to support responsible sourcing of minerals from conflict-affected and high-risk areas.

Another challenge that has been underscored by the iTSCi program has been the cost structure, which places a heavy financial burden on upstream actors, particularly artisanal miners. These costs, often prohibitively high, create barriers to participation and incentivize informal trade channels. iTSCi has acknowledged the challenge of upstream actors bearing the brunt of the cost for the system, and has set a goal for increasing downstream contributions from 1% to 10% (80% of the initiative is funded by upstream members).

The question of “who pays?” for traceability and due diligence more broadly is not unique to the 3T sector, and prompted the OECD to write a position paper on assessing the costs and value of due diligence.

Gold

Traceability in the artisanal gold sector has faced significant challenges, and to date has received little investment or success in creating a sustainable and scalable system—both in DRC and more globally.

The clandestine and fragmented nature of artisanal gold supply chains, where small-scale miners operate in remote areas and rely on informal networks to sell their output, presents a major obstacle for traceability efforts. Coordinating these dispersed networks requires significant resources, and without centralized control, achieving standardization remains an immense challenge.

The associated costs of setting up a traceability system within such a fragmented and decentralized system are often prohibitive, leaving upstream actors unlikely to engage in traceability. As in the case of 3Ts, this begs the question of who pays for traceability systems. IMPACT’s experience with gold traceability in DRC highlights the limited appetite among downstream actors to share these costs. This reluctance often leaves a disproportionate financial strain on the upstream, which serves to disincentivize their willingness to carry out traceability.

Gold’s high value and small size further intensifies these challenges, making it an attractive target for smuggling and money laundering, and pulling many actors into informal sales channels. Smugglers can easily transport gold across borders, bypassing official channels and evading traceability measures. This fungibility—where one piece of gold is indistinguishable from another—creates significant hurdles for maintaining transparency, particularly in regions with porous borders and weak enforcement mechanisms.

Moreover, regulatory gaps in key markets such as the UAE and India significantly undermine traceability efforts. These jurisdictions often lack robust enforcement of transparency requirements and due diligence standards, allowing illicit gold to enter legal markets unchecked. The absence of a standardized global framework for regulating gold supply chains heightens these challenges, limiting the universal applicability and credibility of traceability systems.

Another issue is the increasing reliance on recycled materials as a workaround for traceability obligations. By focusing on recycling, companies sidestep the challenges of primary material traceability, leaving systemic issues of supply chain transparency and accountability unaddressed. This shift undermines the credibility of existing traceability systems and detracts from efforts to improve conditions in primary sourcing regions.

Key Lessons from Previous Traceability Efforts

While the context surrounding traceability efforts in the diamond, gold and 3T sectors may differ, IMPACT has observed several commonalities when it comes to the challenges that these efforts have faced. These challenges are relevant in the context of growing demands for critical mineral traceability.

Traceability for Whom?

In its recently released report The Role of Traceability in Critical Minerals Supply Chains, the Organization for Economic Cooperation and Development (OECD) and the International Energy Agency (IEA) note that “traceability should not be seen as the goal in and of itself – traceability systems should aim to support clear objectives.”

This begs the question – who is mineral traceability for?

Much of the impetus behind traceability efforts in the diamond, gold and 3T sectors has been on putting companies in a position to prove that they are not sourcing from high-risk areas with problematic supply chain issues. The lack of meaningful and credible systems has led to many reactionary and exclusionary private sector policies to exclude any ASM produced minerals, or to systems being ramped up too quickly despite significant concerns or failures.

The key question that is often missing is what are the goals of actors in the developing countries producing these minerals, especially mineral producing communities?

ASM communities have had mineral traceability systems imposed on them, with limited attention to what their goals are and how these systems benefit them. With no sense of real ownership or benefit, many upstream actors who are encouraged or required to trace their minerals have ignored, circumvented, or manipulated traceability systems. They adapt to local realities where smuggling, traditional governance, patronage networks, limited land rights, and corruption prevail.

Simply put, many ASM traceability systems have not been set up with enough consideration of whether they benefit the people most involved in artisanal production or are adapted to the realities in which they are operating.

If we look to the 3T sector in Africa’s Great Lakes region, there is a growing sentiment that traceability schemes and laws that encouraged them, haven’t improved peace and security for miners or mineral-producing communities and that these initiatives have not successfully broken the link between minerals and conflict financing. Some have even argued that traceability schemes have unintentionally created harm for those they were meant to help.

Stuck in the Middle

Most traceability schemes have disproportionately focused on the “first mile” of the mineral supply chains where minerals are produced – only to learn that there can be just as many challenges in the midstream supply chain.

Aggregation points, especially where mineral processing or mixing occurs, have proven very difficult for traceability of diamonds and gold. Gold refined in UAE or diamonds cut in India often lose their proof of origin when combined with materials from various sources. Even when one country or actor improves traceability efforts, these gains can be diluted or lost as materials are blended, making it difficult to maintain accountability further down the supply chain.

This will certainly be a major challenge for critical minerals, such as for cobalt where more than 65% of global production is refined in China.

This poses a problem for all types of mining – whether artisanal or industrial, because even one problematic source being mixed with others has the potential to taint them all. Further questions arise when you add recycled materials in the mix.

Who Pays?

The question of who should bear the burden of the cost of traceability has been a constant theme across the mineral supply chains that IMPACT has worked on. This pertains to both the start-up costs involved in creating and rolling out a traceability system, on top of the sustained costs that would be incurred for its continued maintenance.

While many downstream companies support the need for traceability of the minerals in their supply chains, there seems to be limited appetite to pay for them. Where companies may be willing to pay for running costs, the lack of funds to invest in scalable systems presents a significant hurdle. This creates a particular predicament, as when a specific problem comes into the spotlight, such as blood diamonds or child labour in cobalt, there is a rush to apply what is often a band-aid traceability fix, imposed on upstream actors with even less attention to the needs of local actors.

Traceability Doesn’t Tackle Root Causes

Traceability is one tool in the due diligence toolbox, not an end goal. It can allow companies to identify where their minerals come from and to conduct due diligence to understand who was involved and the context in which they were produced and traded.

But neither traceability nor due diligence will alone tackle the root causes of supply chain risks in critical mineral supply chains, especially when they don’t adequately consider the goals and benefits for those most impacted by their production. By focusing solely on material traceability without adequately addressing the systemic risks and challenges that underpin critical mineral supply chains, governments and private sector risk perpetuating cycles of poverty and insecurity rather than alleviating them.

Overemphasizing traceability can inadvertently sideline the very people it aims to support. When excluded from or unable to meet the requirements of traceability schemes, artisanal miners often have no choice but to remain dependent on informal networks, which can leave them at risk of predatory behaviours by a host of actors. There is a real risk in the critical minerals sector that artisanally produced minerals are relegated to the informal market as buyers search for small, medium and large-scale produced minerals where traceability advancements are likely to make greater headway and faster, given economies of scale.

The Path Forward for Traceability of Critical Minerals

One critical lesson for whatever comes next in the critical minerals sector is the importance of adopting bottom-up approaches. By involving local stakeholders, interventions can cultivate a sense of ownership and ensure that the benefits are both tangible and equitably distributed. This includes actors that are working informally or even illegally, as their exclusion may eventually undermine any efforts to implement a traceability system down the road.

Traceability systems must also account for the broader social, economic, and political ecosystems in which supply chains operate. Ignoring these contexts risks creating solutions that are either disruptive or unsustainable. For example, traceability systems are intrinsically linked to formal sales channels, and their implementation can disrupt traditional supply chain or governance roles as new processes, including payments, are introduced. This can lead to resistance by those who may view these systems as threatening their own source of livelihood or financial gain—or power.

Implementing traceability systems from scratch also requires robust financing, particularly in early phases. Relying solely on industry or resource-constrained governments often proves insufficient. While donor countries or other funders should play a crucial role in helping to kickstart traceability systems, an exit strategy for the dependency on this funding needs to be considered from the beginning. This requires all actors, operating in good faith, to have open and transparent dialogue about the real costs associated with maintaining traceability systems.

Furthermore, these systems must extend their focus beyond production to encompass recycling, transport, and trading activities. Without this, mineral traceability risks getting lost in the midstream supply chain, losing credibility or utility for actors further downstream. Addressing the entire supply chain also creates fewer opportunities for unscrupulous actors to exploit gaps and ensures a more comprehensive and credible approach to responsible sourcing.

Ultimately, an overly narrow approach to traceability systems, driven primarily by the needs of downstream companies located far from the realities of artisanal mining, are unlikely to succeed long-term. The ultimate goal of implementing traceability and due diligence systems needs to embed benefits to local communities as they define them.

While traceability alone cannot address the plethora of challenges facing ASM communities, if designed inclusively and integrated into broader development goals, it can be a powerful tool for positive change. The focus must shift from minerals to people, ensuring those most affected by mining have a seat at the table.