Conflict minerals— tantalum, tin, tungsten, and gold—are essential to the manufacture of many electronic products and are abundant in the Democratic Republic of the Congo.
Unfortunately, the extraction and trade of these minerals are being used to finance armed conflicts that result in violence, rape, slavery, and other appalling human rights violations.
Back in 2010, the Dodd-Frank bill provided some momentum in stopping the trade of conflict minerals originating from mines financing armed rebel groups in war-torn eastern DRC or adjoining nations. Under the bill companies must certify their supply chain does not use these minerals.
But the details of Dodd-Frank are still being hashed out. The SEC was tasked with issuing rules on how to comply with the bill generally, but manufacturers are still waiting on those rules, now one year after the deadline.
“This issue is too serious to allow further delay,” representatives stressed. “Conflict minerals and non-transparent payments for natural resource extraction continue to be a weight on developing nations’ growth and are a risk to investors and the public.
“Worse, continued delay undermines efforts in the DRC to make the mining industry more transparent and to diminish the link between minerals and the funding of the brutal violence carried out by warlords,” said the letter.
Despite the SEC dragging its feet on specifics, companies should be making efforts to comply with Dodd-Frank. Public companies reporting to the FTC (Federal Trade Commission) should be filing periodic reports disclosing the origin of conflict minerals in their supply chain. And if conflict minerals do originate from Congo or an adjoining country, companies must prove due diligence, providing a description of the product, processing facilities and auditors.
This is easier said than done of course. Tracking conflict minerals at their source and then following them up the supply chain requires manufacturers to go several layers deep. Some companies—like AVX—which supply electronic components to Intel, Motorola and Hewlett-Packard, among others, have hired auditing companies at the mining source to oversee mineral extraction and transportation. Others avoid DRC altogether.
Not complying with conflict minerals regulation might win you a hefty fine – but the harm to a company’s brand is an even greater cost. Companies found to use conflict minerals from rebel-run mines win unwanted headlines.
The SEC has taken its eye off the ball, but not the general public or watchdogs. Nonprofits such as the Enough Project and sister sites score companies according to the progress they are making toward conflict-free supply chains in Congo.
To avoid falling behind and risking reputation, manufactures should consider the following best practices right now:
- Identify your company’s risk. If you’re a electronics company then you’re using conflict minerals
- Systematically track product parts and suppliers using tantalum, tin, tungsten, and gold
- Provide a system of record to prove due diligence
- Seek full materials disclosure from your supply chain
- Create an audit trail to report compliance
- Take action – request supplier declaration which is required by law
- Use supplier score cards
What steps have you taken to ensure your products are conflict free?