As the U.S. Securities and Exchange Commission prepares to vote on legislation related to the mining of conflict minerals in the Democratic Republic of Congo major multinational companies including Intel, Motorola and Dell are working diligently to clean blood and corruption from their supply chains. The success of multi-stakeholder efforts like the Responsible Sourcing network process have help multinationals, activist groups and DRC civil society work together to frame the issues and implement solutions.
Section 1502 of the 2010 Dodd-Frank Act carries two sets of rules with it, one of which would require “companies to examine their supply chains and report whether they use tin, tantalum, tungsten and gold from the Democratic Republic of Congo (DRC) in their products.” The second rule would “require oil, gas and mining companies to disclose payments they make to governments.” An SEC vote should have taken place almost two years ago—the SEC missed its April 17, 2011 deadline—and after pressure from U.S. lawmakers, humanitarian and environmental groups, the SEC announced that it would meet on August 22, 2012.
“The issue is not limited to a single humanitarian effort in Africa,” said Jess Kraus, CEO of Source 44, a company that helps businesses improve the transparency of their suppliers. “Rather, it’s about companies looking deeper into their supply chain.”
When lawmakers issued a letter to the SEC on June 22, 2012, they urged SEC Chairwoman Mary Schapiro to ensure no additional postponements. “There is no clear reason for the delay,” the lawmakers wrote. “The Commission has had more than enough time to consider and respond to all of the substantive comments from industry, civil society, investors and others.”
With so much violence, child slavery, and corruption in the DRC, and so many companies receiving minerals from the area, there is broad cross-sectoral and stakeholder agreement that Section 1502 of the Dodd-Frank Act is needed to help stop warlords and armed groups funding conflict that has decimated the region.
“I believe conflict has gone on for as long as it has because the conflict minerals and revenues from mining go to feed the rebel groups,” says Patricia Jurewicz, director for the Responsible Sourcing Network.
The RSN has brought together companies from the telecommunications, aerospace, medical supply, ICT and other industries with international and Congolese stakeholders in a multi-year process that has helped frame the issues and identify solutions. Participants in the process have focused primarily on addressing elements associated with supply chain challenges while simultaneously engaging as a group on policy proposals.
Several companies have already instituted steps against conflict minerals, preparing for Section 1502 and putting checks into place on whether or not conflict minerals are being used in their products. If any conflict minerals are found, according to the law, the “companies would need to conduct a due diligence check to track them through the supply chain to their origins.” The latter would be the most difficult part, as such minuscule amounts are used within most products, especially electronics, and gold alone is difficult to trace back to its origins because it is so easily manipulated and smuggled.
Companies like Dell and Intel have added a code of conduct that excludes “conflict minerals from their supply chains, and jewelry retailers are pressuring manufacturers to do the same.” Some European gold refineries have opted to cease sourcing gold from African artisanal miners, over their lack of ability to provide sufficient tracking paperwork.
Gold continues to make its’ way to international markets from the DRC’s remote regions and the Dodd-Fran impact has yet to have the same effects on the gold trade as it has on the trade in tungsten, tin and tantalum in terms of fueling conflict, according to a recent assessment by the U.N. Group of Experts.
“Gold is just less tractable as a mineral in terms of being responsive to this kind of regulation, because it’s so easily smuggled,” said Fred Robarts, coordinator of the Group of Experts’ report. “The total volume of gold moving is still quite high.”
In Ituri, Silva Ucima, who runs the association for artisanal miners, said that “only a fraction of the gold produced here is declared and shipped legally.” The remainder, and majority, of the gold disappears into Uganda, where it is repackaged and moved on to third countries.
Controlling some of the metals will be extremely difficult, especially in the case of gold, but companies are preparing and already adhering to the guidelines of Dodd-Frank, and they are checking their supply chains to make certain conflict minerals don’t make it into their products.