FAQs

ESG Waypoint is an interactive global mapping tool that compiles and analyses a comprehensive range of authoritative, publicly available data sources, to help procurement, sustainability and compliance teams to identify and understand country-level environmental, social and governance (ESG) risks. It is built on Kumi’s proven, risk-based due diligence methodology and is powered by Grouptree’s technology.

ESG Waypoint provides risk analysis through two lenses:

• ESG: Provides country-level data to identify environmental, social and governance risks
• CAHRA: Provides country-level data to identify ‘conflict-affected and high risk areas’ (CAHRAs) based on the definition and guidance provided by the European Commission in relation to the EU Conflict Minerals Regulation

The ESG lens includes the following categories and topics:

• Environmental: Climate Change, hazardous substances, biodiversity loss, air pollution, deforestation, water scarcity and water pollution.
• Social: Forced labour, civil and political rights, freedom of association, conflict/peace, labour rights, OHS and plant safety, gender inequality and press freedom.
• Governance: Corruption and bribery, money laundering and terrorist financing, rule of law and sanctions.

We use three different categories within the ESG lens to provide a more nuanced picture of the risks present in each country. By separating risks across the three ESG categories, companies can better identify specific risks and target their due diligence efforts to relevant areas after detecting a high-risk location in their supply chain.

• Human rights: Forced labour, civil and political rights, child labour and press freedom.
• Conflict: Conflict/peace, EU CAHRA List.
• Governance: Corruption and bribery, rule of law, money laundering and terrorist financing, EU and US sanctions.
• Mineral flows: Mining of 3T, gold, other minerals, presence of mineral transit routes, presence of at least 100,000 ASM miners.

A series of due diligence regulations, standards and requirements expect companies to determine CAHRAs as defined by the EU and OECD. These include:

• European Union Batteries Regulation (EUBR)
• European Union Conflict Minerals Regulation (EUCMR)
• London Bullion Market Association’s Responsible Gold Guidance (LBMA RGG)
• London Metal Exchange’s (LME) Responsible Sourcing Requirements
• London Platinum and Palladium Market’s (LPPM) Responsible Sourcing Guidance
• Responsible Jewellery Council’s Code of Practices (RCJ COP)
• Responsible Minerals Initiative’s Responsible Minerals Assurance Process (RMI RMAP)

By providing a specific lens for CAHRA identification, ESG Waypoint supports companies in meeting regulatory and industry standard requirements for CAHRA identification as a vital early step in mineral supply chain due diligence. Whilst there are no prescribed sources of data from which a CAHRA must be defined, many of the reputable sources commonly suggested for CAHRA identification by regulations, standards and requirements are captured in the methodology for the CAHRA lens in Kumi's ESG Waypoint.

No formal and universal list of CAHRAs or a list of specific risks that make a country a CAHRA currently exists. However, companies are still required to determine which countries are CAHRAs in order to conduct their riskbased due diligence.

Based on the indicators in ESG Waypoint, we use a binary yes/no trigger system to identify whether a country is a CAHRA. Each risk category has multiple topics, each composed of one or more publicly available indicators providing relevant data. If the indicator rating is above the threshold, the risk area is triggered, triggering in turn the risk category, and therefore flagging that country as a high-risk jurisdiction.

Risks are determined at the country level because:

• Most risks do not vary significantly between different regions within the same country. For example, governance and corruption risks tend to be linked to mechanisms of the nation state; individual regions within a country seldom (if ever) have the autonomy to provide ‘good governance’ if there are risks at a national level. Increased risks of human rights abuses usually occur in countries with weaknesses in national-level controls, such as the rule of law.
• Publicly available data sources are usually limited to country-level data. Simply put, the region-level data available in the public domain are insufficient and inadequate to provide a consistent and credible global methodology for analysing risks.
• Focusing on region-level risks can provide false confidence and undermine the purpose of indicative risk analysis. The purpose of indicative risk analysis is to determine whether further due diligence is needed: focusing only on region-level risks (e.g. is the location where minerals are sourced within a conflict-affected zone) could mean that more systematic risk factors are missed (e.g. likelihood of human rights abuses).

Companies should undertake further due diligence to understand the true nature of the potential risks identified. ESG Waypoint provides data for specific risk topics allowing companies to delve deeper into specific issues within broader E, S, G and CAHRA risk categories and conduct targeted and effective due diligence. If you need support in developing your due diligence programme or undertaking any part of the due diligence process, get in touch with Kumi at info@kumi.consulting.

ESG Waypoint is a service that collates and presents a wide range of publicly available data sources. All data sources are clearly referenced. Each data source will have its own methodology and limitations; users of ESG Waypoint should consult the referenced source data if they are interested in understanding the detailed methodology used for a particular data source.

In general, a common limitation is the timeliness of data: many data sources are indexes that are updated periodically, often annually. This can mean that an index does not reflect recent events; for example, if a war breaks out in a country that previously did not have conflict, the Heidelberg Conflict Barometer may not capture this new conflict until the next annual refresh of its data.

Another point to note is that ESG Waypoint uses a number of indicators that count the presence of legislation as a proxy for measuring risks. These indicators do not take into account the enforcement of legislation, customary practices or the actual situation on the ground, for which data is not readily available.

However, since the purpose of ESG Waypoint is to help companies to scope risks and determine if or where more due diligence is needed, limitations such as those discussed above do not constrain the value that the data in ESG Waypoint provides. The data provided is sufficient to inform companies on the next steps they should take in the implementation of due diligence in their supply chains.

You can contact us for more information and support at info@kumi.consulting. You can also read our case studies and Insights at https://kumi.consulting to learn more about supply chain due diligence.