Global Policy Forum

Conflict Minerals: Time to Dig Deeper

The Dodd-Frank Act, in the US, is a recent example of government action on corporations using conflict minerals. However, this article argues that the Dodd-Frank Act, and similar action in other countries, provides a very limited response to the illicit mineral trade. While the act requires companies to show where their mineral resources come from as part of good practice, it does not hold them accountable.  Furthermore, international oversight of resource extraction is notoriously difficult in conflict-ridden regions. The Kimberley Process for diamonds demonstrates the difficulty with using "certificate of origin" to determine where natural resources have come from. Governments should to take a stronger stand with real penalties for corporations that continue to use conflict minerals.  


By Alex Bescoby

December 6, 2010

Tucked inside the mammoth Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law on July 21 2010 by the US president, Barack Obama, is a piece of legislation that could signal an important outward expansion to the limits of corporate responsibility for buyers of raw materials.

This legislation stipulates a new requirement for any US-listed company to publicly disclose whether its products contain materials sourced from zones of conflict. The aim is to stop revenues from mines and trade routes being used to fund campaigns of violence.

The legislation has a semi-explicit focus on the Democratic Republic of Congo (DRC) where a succession of conflicts has directly or indirectly caused around five million deaths, and where, among other ills, rates of sexual violence are frighteningly high. Research suggests that revenues from minerals such as tin, coltan and gold have played an important role in the perpetuation of conflict.

Building momentum

Severing the link between natural resources and conflict has preoccupied academics, diplomats and NGO activists for decades, but one approach now building momentum is the implementation of "certificate of origin" schemes that aim to track minerals along the supply chain from mine to market.

The Kimberley Process, set up in 2003 to address the trade in so-called blood diamonds fuelling conflict in West Africa, has been the most high-profile of these initiatives. It relies on governments, mining companies and civil society to monitor compliance. There has also been talk, though little progress, on restricting the trade in "blood oil" sold by militants in Nigeria's Niger delta region.

However, with growing consumer awareness of the connection between conflict in countries like the DRC, and the minerals contained in popular lifestyle items like laptops and mobile phones, pressure has been building on major industrial purchasers of raw materials to play their part too.

The new US legislation places the burden of responsibility on manufacturers, particularly of electronic goods, to categorically prove that they are not using minerals sourced from zones of conflict.

The act has caught some manufacturers unprepared, but others have jumped before they were pushed. Industry-led efforts include pilot schemes by the Electronics Industry Citizenship Coalition and the International Tin Research Institute, among others.

A daunting task

Despite this momentum and the progress represented by the Dodd-Frank Act, certificate of origin schemes are no silver bullet. Many activists fear that they provide inadequate incentives for companies to change the way they operate.

As it stands, the legislation itself does not punish companies sourcing minerals from the DRC or other such regions. It requires only that companies publicly declare their sources, and any "enhanced due diligence efforts" (for which read "certificate of origin scheme") they have taken to avoid sourcing conflict minerals.

The hope is that the naming and shaming exercise will encourage companies to adopt a responsible approach, but less scrupulous firms may calculate that the reputational flak does not justify major changes to supply arrangements. Some argue that past efforts by the UN to name and shame companies trading in conflict minerals has had little impact. For non-US listed companies, of course, the act has no effect at all.

Whether or not these concerns are merited, the most problematic issue, for manufacturers at least, is the sheer scale of the practical obstacles to compliance. Industry figures such as Apple's CEO Steve Jobs have suggested that it is a highly difficult undertaking to follow minerals confidently from mine to market in a setting like the DRC.

The process requires a basic level of stability and infrastructure that is often completely lacking. A significant proportion of the country's minerals are produced through informal and subsistence mining. Accurate record and book-keeping is far from universal. And, cross-border smuggling is rife.

Insecurity and corruption

The atmosphere of endemic insecurity and corruption makes it difficult for outside observers to independently monitor extraction. Even the Kimberley Process, where the dominance of the diamond industry by one company - De Beers - made the tracking process considerably simpler, has struggled with these problems.

The risk is that manufacturers decide they cannot reliably track their supplies and instead avoid the DRC entirely - starting what could become a de facto embargo on DRC minerals. In a country where around 10 million people depend on the artisanal mining trade for their livelihoods, this would be disastrous.

Certainly, compliance will not be easy; manufacturers will need to invest heavily in building their own capacity and that of their suppliers to track minerals, and managers will need to radically rethink where they see the limits of their responsibility.

But companies are not alone. A wide variety of stakeholders are providing support. The US state department, for example, plans to regularly map which mines are controlled by armed groups, and the OECD is consulting on draft guidelines for companies' "enhanced due diligence". Civil society groups are also working to support implementation. Such multi-stakeholder support is crucial if manufacturers are to fulfil their own role.

Scratching the surface

Nonetheless, companies' concerns highlight a deeper problem. While mineral revenues have been one crucial factor in sustaining the violence, restricting them will not by itself resolve this complex and deeply embedded conflict. Much broader efforts are also needed in political, socio-economic and other areas to build peace and stability.

And ultimately it is only if wider progress is made to end the conflict - at least at the local level - that certificate of origin schemes can really work. Even with broad support, companies will not be able to trace minerals reliably in an environment of endemic insecurity.

Those committed to avoiding conflict minerals are at some stage likely to face a choice. Either they should become more actively involved in the wider, and extremely challenging, task of building basic stability in the areas from which they source. Or they should avoid the mineral-rich DRC altogether.

If they decide on the latter, it may be the long-suffering local population who will lose out overall.









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