CSR and Conflict Minerals

Supply chains and local working conditions are vitally important issues in CSR.  Conflict minerals are an especially problematic area, as sourcing of raw materials can sometimes be difficult to discern. Soon, however, it will be mandatory for U.S. companies to adhere to new regulations geared towards creating transparency in the use of conflict minerals.  Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act entrusts the SEC with establishing a regulatory framework as of April of 2011, which will require public companies to issue reports and be audited on their use of conflict minerals.  In light of the complexity inherent in ascertaining which mining operations are controlled by rebels, USAID and the State Department have been directed to map out the constantly shifting conflict territories and guide companies in this process.

The viciousness of the civil war provoked by the Revolutionary United Front in Sierra Leone in the 1990's, brought global awareness to the issue of conflict diamonds.  It became glaringly evident that the appetite of western consumers for diamonds was financing these and other violent insurgencies in Angola, Liberia, Ivory Coast, the Democratic Republic of the Congo (DRC), and the Republic of Congo. All of these countries are now part of the Kimberely Process which was instituted after much deliberation in 2003, under the auspices of the United Nations.  In order to filter out conflict diamonds from the legitimate diamond trade, the process entails the acquisition of validated government certificates for both rough and polished diamonds and requires that they be transported in tamper proof containers. As a result of this certification process, almost 99% percent of traded diamonds are now considered to be conflict-free.

Global attention has now turned to the conflict minerals of tin, tantalum, tungsten, and gold.  These materials are used in a wide variety of electronic and digital devices, while gold of course is in great demand for its intrinsic as well as use value and is of particular importance to the jewelry industry. The main area of contention is the DRC, where mineral mining has been fueling the violent subjugation of vulnerable populations. Various warring factions including the Hutu, Mai Mai, Rwandan backed rebels, and units broken off from the Congolese army are fighting over control of the mines.

The weapon of choice has been very public and savage rapes of women. This torturous tactic not only traumatizes the direct victims of the attacks, but demoralizes whole villages as the violated women are often disowned by their husbands after being defiled.  This breaks up families destroying the social fabric while abandoned children are frequently forced into becoming sex slaves or armed combatants.   Additionally, the mines are unsafe and laborers live and work under armed guards in deplorable conditions.  The mining operations are also environmentally destructive and devastate rather than enrich the local population.

Since this issue emanates from deep within the supply chain, some industry representatives claim it is too difficult to ascertain the source of these materials. The minerals are mined, sent to smelters, and then off to manufacturing facilities in other countries. According to John Norris, the Executive Director of the Enough Project, there are middle men well versed in these minerals who can readily identify specific origins. As for concerns that U.S. firms will be at a competitive disadvantage while others in China, Russia, India will have access to these cheaper mineral sources; it seems likely that pressures from the global community will ultimately force the issue. For example, the London-based group Global Witness is currently suing the UK for their refusal to name companies and investigate those involved in trading in conflict minerals.

While some members of the electronics and jewelry industries are lobbying to defuse the soon to be enacted regulations, some higher minded firms are already taking steps to develop processes by which to audit, trace, and certify sourcing of these raw materials along the lines of the Kimberely process.  Among those taking a proactive CSR stance to eliminate the use of conflict minerals are Motorola, Intel, Dell, and HP.

Photo Credit: by Julien Harneis