Conflict Minerals

It has long been known that the extraction of minerals has become entangled with human conflict in the eastern Democratic Republic of Congo (DRC).

Known as conflict minerals or 3TGs, tin, tantalum, tungsten and gold mined in the DRC have been linked to the funding of armed groups, and have helped to fuel a war for over twenty years. Worth hundreds of millions of dollars per year, the minerals provide a valuable source of income to rebel groups, militias, and criminal gangs. Some of the minerals are smuggled out of the country, along with the industry’s profits, leaving the DRC’s population of 77 million struggling to survive.[1] The minerals go on to be used in electronic products such as laptops, e-readers and mobile phones.

Cobalt, another mineral mined in the DRC, is used in lithium-ion batteries but is not currently listed as a ‘conflict mineral’ under the Dodd-Frank Act. However, there are plans afoot to change this. 

Conflict minerals and electronic brands

Since 2009, the US campaign group ‘Enough’ has been working to get the big electronic brands to take responsibility for the sourcing of their minerals. It has asked companies to check that the minerals in their end products have not been used to fund the war in the DRC.

Enough was one of the first organisations to rank the biggest electronic companies’ efforts towards sourcing conflict-free minerals. Its first ranking, in 2010, considered Intel and HP to be the only corporates making efforts to invest in and source conflict-free minerals. In its second report, two years later, many of the brands covered, including Philips, Acer, Dell, Apple and Microsoft, had made significant steps in improving their sourcing of conflict-free minerals.

However, it was felt that companies were not going far enough to support the trade of conflict-free minerals and that regulation was needed to assist in moving things forward.

What is the Dodd-Frank Act?

In 2010, a landmark piece of legislation was passed in the US under the Dodd-Frank Act. Section 1502 of the Act aimed to disrupt the trade in Congolese conflict minerals with a law that required US publicly listed companies to find out whether their purchases of 3TGs were inadvertently funding armed groups in the DRC.

Although the legislation was watered down – following challenges by three of America’s largest lobbying groups: the US Chamber of Commerce, the National Association of Manufacturers (NAM) and the Business Roundtable – companies who manufactured products that contain the 3TGs were expected to conduct a reasonable ‘country of origin’ inquiry. The inquiry was used to determine whether any of the minerals in their products originated in the DRC and surrounding countries, or were from scrap or recycled sources.

All companies are expected to submit their report to the US Securities and Exchange Commission (SEC) by the 31st of May each year. 2016 marked the third year of reporting by companies on their use of conflict minerals.

Analysis of Dodd-Frank Act Section 1502

The Amnesty International and Global Witness report ‘Digging for Transparency’, released in 2015, conducted an analysis on the 2014 batch of conflict minerals filings submitted to the SEC. Their analysis found that companies’ first Conflict Minerals Reports were “weak in relation to identifying and responding to risk in the supply chain. Companies also performed poorly in identifying the origin of minerals and the smelters and refiners in their supply chains.”

A subsequent report by the Responsible Sourcing Network (RSN), also released in 2015, looked at the second batch of Conflict Minerals Reports, and confirmed that companies were failing to respond to risks they had identified in their supply chain. However, the report also stated that scrutiny was driving change. In particular, the IT sector had performed better in its analysis of minerals.

RSN stated in its report:

“when manufacturers increase their ability to trace the minerals of specific components back to the smelter level and beyond, and insist on sourcing conflict-free minerals from the DRC region, they are changing the status quo. Because of Section 1502, more businesses are recognising that the human rights of miners and mining communities cannot be separated from the use of these minerals.”

The effect of the Dodd-Frank

One major concern following the creation of the Dodd-Frank Act was that it would cause a de facto boycott of minerals mined in the DRC and surrounding countries. The RSN stated “It is critical that companies specifically and clearly communicate their commitment to promote a conflict-free minerals trade in the DRC region.”

While some newspapers, such as the New York Times, reported that mining had ceased in some of the regions and unemployment had increased, others argued[3] that the effects were hard to measure due to poor data collection in the region and the fact that other influences may have caused a change in the number of working mines. For example, in 2010 the president of the Congo banned mining in the eastern Congolese provinces of North Kivu, South Kivu and Maniema in an attempt to decrease violence fuelled by the global trade in conflict minerals. 

Research undertaken by Ethical Consumer in August 2016 found that many electronic companies had a policy that committed them to continue sourcing from the region. Only two IT companies, HTC and AsusTek, were found to have policies which explicitly banned suppliers from sourcing from the DRC.

Conflict-free sourcing initiatives

One way in which companies can provide support to the region is by helping to fund conflict-free sourcing initiatives. Pioneering companies such as Motorola have helped to fund the ‘Solutions for Hope’ programme, which tested the feasibility of a responsible and traceable supply chain for tantalum from the DRC to promote the economic stability of the area. Other companies, such as Fairphone, are committed to working within the DRC and have helped to develop traceable systems for the minerals mined there.

However, as the RSN noted, “leadership must expand beyond a small group of highly committed companies to become the norm”. While projects such as ‘Scaling Up Minerals’ work in partnership with the International Tin Research Institute (ITRI) to develop systems for companies to use, funding and support is needed from all those who benefit.

Ethical Consumer has therefore found it encouraging to see that many of the electronic companies covered in this magazine are members of the Conflict Free Sourcing Initiative (CFSI).

The CFSI was founded in 2008 and today has over 300 company members which it works with on the issue of conflict minerals. It set up the Conflict Free Smelter Program (CFSP), which identifies smelters and refiners that produce conflict-free materials.

In 2014 the CFSI announced that there were now conflict-free smelters for each of the 3TGs. Sasha Lezhnev, Senior Congo Policy Analyst at Enough commented:

“having conflict-free smelters now available for all four conflict minerals is a tremendous achievement that we’ve all been waiting for for years. It means that electronics, aerospace and other companies can make informed choices in their supplier decisions based on conflict-free sources, and it is critical that more and more companies begin doing so.”

Apple and Fairphone are two companies that are now sourcing 100% of their minerals from certified smelters or conflict-free sources.

What’s happening in the EU?

The Dodd-Frank Act has also influenced regulation in China and Europe, who have been drafting their own legislations on the sourcing of conflict minerals.

In June 2016, the European Parliament, the Council of Ministers, and the European Commission reached a ‘political’ agreement on the key elements of a conflict minerals regulation. However, the agreement was not as strict as some had been calling it: for example, it fails to cover companies who manufacture or sell products within Europe that contain 3TGs.

Instead, the law focuses on importers of the minerals, which covers fewer companies. However, it will go further than the Dodd-Frank Act in covering all “conflict affected and high risk areas” in the world.

As part of the agreement the European Parliament managed to include a voluntary provision for companies whose products contain 3TGs in their supply chain.

“Big EU firms that make or sell such goods – i.e. those subject to EU law on ‘non-financial reporting’ (above 500 employees) – will be encouraged to report on their sourcing practices based on a new set of performance indicators to be developed by the EU Commission. Moreover, these businesses will be able to join a registry to be set up by the Commission and report voluntarily on their due diligence practices.”

A press release published on Amnesty’s website said:

“The agreement represents a first step in the right direction, but the law ultimately risks falling well short of its intended objective. EU policy makers have caved in to the demands of big business by exempting the vast majority of EU companies trading in minerals from the law… By agreeing to exempt these corporations from the law, the EU has instead put its faith in the hope that companies will choose to source minerals responsibly without being required to do so. This has been tried before, through voluntary standards. These have had minimal impact, as there are still far too few companies taking steps to check their supply chains for conflict and human rights risks.”

No final date of implementation has been given for the legislation and technical details still need to be finalised.