Mica supply chain

Mica is the primary raw material of our effect pigments, which are used in applications such as automotive and industrial coatings, as well as in the cosmetics and food industries. Although it naturally occurs in many locations around the world, we mainly procure mica from India, where it is mined in the northern states of Jharkhand and Bihar. This region suffers from political instability and poverty with widespread child labor, so we’ve taken special measures to ensure with our social and environmental standards.

Our approach to responsibility in the mica supply chain

Following a study conducted in 2008, we found that the people in Jharkhand and Bihar were gathering mica from the tailings of abandoned mines or off the ground– sometimes together with their children. This constitutes a clear violation of our company values and our Human Rights Charter. We do not tolerate child labor and contractually prohibit our suppliers from employing children.

We have made a conscious decision to maintain our business relationships in the north of India and are taking on responsibility for this region by safeguarding jobs there. To ensure that we procure mica without the use of child labor, we have completely reorganized our supply chain and now source the raw material exclusively from qualified mines. This formal working environment is the only way to ensure compliance with our standards, since child labor cannot be ruled out if mica is gathered in publicly accessible areas.

How we organize our mica supply chain

We maintain direct, regular contact with mine lease holders, mine operators and mica processing plant owners. We have informed our business partners about our social and environmental standards, and they support our efforts to keep the mica supply chain free of child labor. Our Procurement staff in Kolkata, India are in direct contact with these partners; they are present at the mines or processor sites during audits and customer visits and are available to answer any questions or address complaints. Whenever non-compliance with our standards is identified, we work with suppliers to ensure the appropriate and swift implementation of corrective measures. This year we therefore suspended two supplier relationships. A corrective action plan was put forward, and the suppliers are now implementing the rectification measures we required.

The mica supply chain

Our commitment: Compliance with guidelines and standards

As a signatory to the United Nations Global Compact, we are actively involved in working to abolish child labor. Going above and beyond the legal requirements, we are committed to ensuring that our mica supply chain adheres to the same internal and external standards and guidelines that apply to our other supply chains.

Auditing our mica supply chain

To ensure that all mines and processing companies adhere to our standards, we monitor our business partners for compliance with our environmental stewardship requirements as well as occupational health and safety regulations. We carry out comprehensive pre-announced audits, as well as unannounced inspections.

Annual audits

Environmental Resources Management (ERM), a global provider of consulting services, conducts annual audits that review the working conditions along with environmental, health and safety standards. Audit reports are compiled to document any identified shortcomings and define corrective actions. Our employees in Kolkata and Darmstadt subsequently make sure that these issues have been resolved.

In March 2017 ERM conducted nine audits. The majority of the corrective measures identified in previous audits had already been implemented at this point, or were underway. Identified defects primarily involved occupational safety precautions and gaps in the implementation of management systems. When violations are discovered, we work together with the suppliers to ensure that these are corrected in a satisfactory manner. When breaches are not rectified through the appropriate corrective action, we freeze relations with the respective company, or even terminate the business relationship altogether.

Following an amendment to Indian legislation, the responsibility for the licensing of mines was transferred from the Central Government of India to the individual states. To support the mine operators in complying with this new legislation, ERM analyzed the relevant processes in the mines between August and October 2017. At a joint workshop we explained the new approval process to the mine operators and mica processing companies.

Monthly inspections

Since 2013, the Indian organization IGEP has been carrying out unannounced monthly inspections of working standards in mines. In 2017 four mica mines and five processing plants were checked by IGEP. During these inspections, IGEP monitors occupational safety and compliance with the ban on child labor, for instance, as well as consistent process documentation. They also check whether our suppliers have held the mandatory training sessions for their employees.

Tracking system for mica sources

We use a tracking system to ensure that the supplied mica comes exclusively from legal mines qualified by our company. All mine owners record the daily extraction volume of their mines in a logbook. The license fees that the mine owners must pay to the government are based on these documented amounts of mica. On a monthly basis, we review the volumes of mica reported in the logbook and supplied to the processing companies. Furthermore, we carry out a cross-check by verifying the relevant transport documentation, known as “challans”.

In November 2017 our employees surveyed the mining activities of our suppliers to document the actual daily output of the mica mines and cross-check the actual output against the documentation provided.

Community outreach in the mica supply chain

The states of Jharkhand and Bihar are among the most impoverished regions in India. Together with IGEP, we are working to improve the living conditions of the families in the mica mining areas. The literacy rate and the number of children who attend school are far below the Indian national average, according to a 2016 study by the organization Terre des Hommes and the Centre for Research on Multinational Corporations. Among our efforts, we are financing three schools run by our partner IGEP in Jharkhand, where more than 500 children and adolescents are enrolled. Moreover, tailoring and carpentry courses are also offered. At a fourth school opened by one of our mica suppliers in 2014, we achieved our goal of providing scholarships for 200 children in 2017.

In addition to our education efforts, we are committed to improving local access to healthcare. To this end, in 2010 we established a health center operated by IGEP to serve the region’s 20,000 residents. Two medical professionals work at the center and also provide regular health services to schools. Previously there was no healthcare of any kind in this region.

Stakeholder dialogue on the mica supply chain

We keep interested customers and other regularly informed on our mica sourcing activities. Our employees in Kolkata and Darmstadt also maintain contact with our project partners and other advocacy groups, as well as with local and state authorities.

In November 2017, we attended the kick-off conference for the Responsible Mica Initiative in Delhi. We are a founding member of this initiative, which was established following the Mica Summit 2016. The program is committed to improving the traceability of mica in the supply chain and building sustainable living conditions in local communities. At the summit, a five-year implementation plan was announced to achieve a fully traceable and responsible mica supply chain in India, mainly focused on eliminating child labor and improving occupational safety in India’s mica industry.

New sources of mica

We have found additional sources of mica outside India that meet our stringent quality, social and environmental standards. Part of our mica, for example, is now supplied by Brazilian companies. In this way, we are securing the supply of this raw material over the long term and avoiding potential supply bottlenecks. Furthermore, as an alternative to pigments based on natural mica, we also manufacture effect pigments based on synthetic substrates.

Adherence to laws and regulations as well as to voluntary codices that are internal to Merck KGaA, Darmstadt, Germany. Compliance is a component of diligent corporate governance.
People or organizations that have a legitimate interest in a company, entitling them to make justified demands. Stakeholders include people such as employees, business partners, neighbors in the vicinity of our sites, and shareholders.

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