Every year, millions of dollars are channeled to armed rebels and insurgents and the source of these funds comes from the trade of minerals used in consumer goods of every type. Now known as “conflict minerals,” tin, tantalum, tungsten and gold (the 3TGs) are mined mostly in the Democratic Republic of Congo (DRC) and surrounding nations. The eventual sale and use of minerals originating from these countries frequently helps finance violence and prolong the illicit working economy where civilians endure harsh conditions of armed conflict and human rights abuses.
In response to the call from human rights groups and international organizations rallying to aid the citizens of these regions, the U.S. Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010. While there are many facets of this law, it requires all publicly traded U.S. companies to disclose annually if any of the goods they sell contain any of the 3TGs. This is determined by a strict framework based on reasonable country of origin and other criteria.
However, as the new administration is sweeping clean “burdensome” regulations, there is a chance that it might also widen the gap for unethical sourcing practices. The Wall Street Journal reported that the acting chairman of the Securities and Exchange Commission (SEC), Michael Piwowar, has “little regard” for the ruling. This has been a common theme. The rule has been legally challenged in courts since its inception; opponents feel it is compelled speech that violates the First Amendment.
Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the “Conflict Minerals Law,” requires publicly-traded U.S. companies to disclose the sources of certain minerals in their products originating in the DRC. Manufacturers are required to obtain an audit performed by an independent third party to verify their supply chain, and brands and retailers will require detailed data about the composition of their products, the country of origin of conflict minerals and the means of production throughout their supply chain.
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Compliance with the final rule requires companies to develop, execute and document their process for a reasonable standard of care. I have worked closely with many brands under the requirement to report conflict minerals traceability to the SEC, and conclusively the largest percent have confirmed it is very difficult to provide the level of transparency requested under Dodd-Frank. Most times, product data below certain tiers in the supplier stream doesn’t exist. But they all agree this isn’t an excuse to be non-compliant and disregard ethical standards.
Regardless of what happens to the SEC rule, supply chain transparency and detailed sourcing information about tin, tantalum, tungsten and gold will be required of many companies going forward. The EU has its own conflict minerals regulation, so companies should not stop their investigations and review activities. Turning a blind eye to ethical violations is not an option for brands that have the watchful eye of concerned consumers and NGOs.
Companies have spent a lot of time, energy and money trying to comply with the ambiguous requirements in the Dodd-Frank Act. The investments have proven to be fruitful, though painful.
Pressure from the focus on conflict minerals is working to deter armed groups in the eastern Congo and surrounding regions. In 2016, the Enough Project reported positive advances corresponding to the stated purpose of Section 1502; increased security for civilians in some mining areas, a significant reduction in armed group control in 3T mining areas, improved safety and health standards for miners in some mining areas, organized local advocacy in support of reforms, in-region development initiatives, and the initial implementation of the region’s first system to assess mines and certify minerals as conflict-free.
Complete and thorough accountability is complex; calling for brands to track information gathered from their suppliers at every level. But de-regulating would only renew hope for those conducting illicit activities. Manufacturers still need to maintain social and ethical compliance standards for other reasons, so the burden remains.
By Gary M. Barraco, director of global product marketing at Amber Road