Conflict minerals law
The eastern Democratic Republic of the Congo (DRC) has a history of conflict, where various armies, rebel groups, and outside actors have profited from mining while contributing to violence and exploitation during wars in the region. The four main end products of mining in the eastern DRC are tin, tungsten, tantalum, and gold, which are extracted and passed through a variety of intermediaries before being sold to international markets. These four products, (known as the 3TGs)[1] are essential in the manufacture of a variety of devices, including consumer electronics such as smartphones, tablets, and computers.[2]
Some have identified the conflict as significantly motivated by control over resources. In response, several countries and organizations, including the United States, European Union, and OECD have designated 3TG minerals connected to conflict in the DRC as conflict minerals and legally require companies to report trade or use of conflict minerals as a way to reduce incentives for armed groups to extract and fight over the minerals.
In the United States, the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act[3] required manufacturers to audit their supply chains and report use of conflict minerals. In 2015, a US federal appeals court struck down some aspects of the reporting requirements as a violation of corporations’ freedom of speech, but left others in place.[4]
Conflict Minerals Regulation in the EU[edit]
Like the US, the EU wanted to stabilise and guarantee the steady supply of 3TG.[79] On 16 June 2016 the European Parliament confirmed that "mandatory due diligence" would be required for "all but the smallest EU firms importing tin, tungsten, tantalum, gold and their ores".[80]
On May 17, 2017, the EU passed Regulation (EU) 2017/821 of the Parliament and of the council on the supply chain due diligence obligations for importers of tin, tantalum, tungsten, their ores, and gold from conflict-affected and high risk areas.[81] The regulation took effect in January 2021, and directly applies to certain companies that mineral ores, concentrates and processed metals containing or consisting of 3TG into the EU from conflict-affected or high-risk areas.
On August 10, 2018, The European Commission published their non-binding guidelines for the identification of conflict-affected and high-risk areas and other supply chain risks under Regulation (EU) 2017/821 of the European Parliament and of the council.[82]
Increases in business process outsourcing to globally dispersed production facilities means that social problems and human rights violations are no longer only an organization matter, but also often occur in companies’ supply chains and challenge supply chain managers.[83] Besides the harm conflict minerals do where they are produced, human rights violations also raise an enormous risk to corporate reputations. Consumers, mass media and employees expect companies to behave responsibly and have become intolerant of those who don't.
Consequently, firms that are located downstream in the supply chain and that are more visible to stakeholders are particularly threatened by social supply chain problems. The recent debate concerning conflict minerals illustrates the importance of social and human rights issues in supply chain management practice as well as the emerging need to react to social conflicts.
Rapid developments continue to be made in clean energy technology including solar PV, energy storage systems, and batteries especially in the electric car market. Critical minerals mining required for these technologies has increased as demand has increased, which can drive conflict through supply chains in source countries.[13] This contributes to increasing environmental degradation especially of water resources, as poorly or untreated mine effluents cause mass destruction of aquatic ecosystems along with rendering ground and surface water resources unsafe for consumption. This degradation increases reliance on mining jobs for survival as food chains and land are destroyed. It also incentivizes violence-for-profit mechanisms, and to address these issues increased transparency is needed in supply chains. The Responsible Business Alliance code of conduct, the largest industry coalition related to conflict minerals in supply chains, states that “falsification of records or misrepresentation of conditions or practices in the supply chain are unacceptable."[84]
Initiatives like the Dodd–Frank Wall Street Reform and Consumer Protection Act or the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas[85] demand that supply chain managers verify purchased goods as ‘‘conflict-free’’ or implement measures to better manage any inability to do so.
Firms have begun to apply governance mechanisms to avoid adverse effects of conflict mineral sourcing. However, the mere transfer of responsibilities upstream in the supply chain apparently will not stop the trade with conflict minerals, notably due to two reasons:
In the context of mineral supply chains, due diligence represents a holistic concept that aims at providing a chain of custody tracking from mine to export at country level, regional tracking of mineral flows through the creation of a database on their purchases, independent audits on all actors in the supply chain, and a monitoring of the whole mineral chain by a mineral chain auditor. In this sense, due diligence transcends conventional risk management approaches that usually focus on the prevention of direct impacts on the core business activities of companies. Moreover, due diligence focuses on a maximum of transparency as an end itself while risk management is always directed towards the end of averting direct damages. However, besides the Dodd–Frank Wall Street Reform and Consumer Protection Act and the OECD Guidance, there is still a gap in due diligence practices as international norms are just emerging. Studies found that the motivation for supply chain due diligence as well as expected outcomes of these processes vary among firms.[83] Furthermore, different barriers, drivers, and implementation patterns of supply chain due diligence have been identified in scholarly research.[83]
Several industry organizations assist responsible companies with conducting due diligence tracking of minerals through the supply chain. Multiple international industry initiatives have been assessed for whether they fulfill the OECD guidance on conflict minerals.[86]
Organizations and activists involved[edit]
The FairPhone Foundation raises awareness of conflict minerals in the mobile industry and is a company which tries to produce a smart phone with 'fair' conditions along the supply chain. Various industry and trade associations are also monitoring developments in conflict minerals laws and traceability frameworks. Some of these represent electronics, retailers, jewelry, mining, electronics components, and general manufacturing sectors. One organization – ITRI (a UK-based international non-profit organization representing the tin industry and sponsored/supported by its members, principally miners and smelters.[88]) had spearheaded efforts for the development and implementation of a "bag and tag" scheme at the mine as a key element of credible traceability.[89] The program and related efforts were initially not likely to extend beyond the pilot phase due to a variety of implementation and funding problems that occurred.[90] In the end however, the device did enter the market.[91]
Human and environmental consequences of conflict mineral sourcing are underrepresented in current approaches to solving the issue. These include documented slavery-like conditions and forced displacement stemming from historical external control over resources in the Congo, and deforestation, loss of biodiversity, soil erosion, water pollution, and other factors which helps perpetuate a positive feedback loop of violence. Multiple NGOs are involved in political, social and economic research, as well as awareness or legal activism campaigns. A focus of these groups is to criticize both the intent and effectiveness of conflict mineral law and to provide better solutions or alternatives to address the intersectionality of the issue. Economic influences and supply chain due diligence have been somewhat addressed, but the human and environmental cost must be considered central to make real progress on conflict reduction.[92] Organizations such as the Property and Environment Research Center (PERC) or the Responsible Business Alliance (RBA) conduct research in the area of “free market environmentalism” and attempt to produce economically viable solutions to integrate with existing conflict mineral supply chains.[84][93]
The effectiveness of the law has been called into question by international human rights organizations such as Amnesty International and UNICEF, who apply on site humanitarian research to analyze ongoing impacts and conflict. As of 2016, “no country legally requires companies to publicly report on their cobalt supply chains” and Amnesty International has gathered photographic evidence and scientific data of human rights abuses and has traced that cobalt into global supply chains.[27] PERC has conducted economic and policy analysis to better understand production of conflict minerals, and cites numerous unexpected consequences of the conflict mineral law due to its failure to address any of the aforementioned human or environmental factors associated with the issue.[94] One key issue that has been the topic of discussion among scholars is the failure of conflict mineral law to address fundamental historical, political, and legal issues. As Central Africa specialist Christoph Vogel states, this failure “demonstrates how Western advocacy and policy have relied on colonial frames to drive change.”[95] The approach of solving these conflicts through economic regulation is an example, as the root cause of the violence is forcible extraction by colonial nations so change will not occur without cessation of this extraction.