5 Ways We Can Support Corporate Responsibility: The Case of Conflict-free Minerals

The image of the soulless, profit-driven corporation is an old one — but is it always the right one?

Corporate Greed, as imagined in 1882

Granted, many corporations have certainly deserved their villainy, but as we redefine what it means to do business both at home and abroad the image of a soul-sucking parasite (or octopus) is also undergoing a rethink. A good example of this is the recent focus on supply-chain management and the ethical sourcing and treatment (or lack thereof) as one moves farther and farther down the production line.

While worker abuse in Chinese factories is the national hot topic, before that, it was the presence of conflict minerals from the Democratic Republic of Congo in our electronics, in particular tin, gold, cobalt, tantalum, and tungsten.

Since 2007, numerous articles on the subject have been published in major media outlets like The Economist, The New York Times, The Globe and Mail, and The Washington Post highlighting both the horrible, slave-like mining conditions and the fact that many of the mines were controlled not by independent companies or by the Congolese government, but by militia groups.

A Mai Mai soldier, one of the many militias currently active in the DRC

These groups used the money gained from the sale of said minerals to purchase more weapons, thereby dragging out the conflict and unrest that has become horribly normal in the eastern part of the Congo where, coincidentally, much of the minerals are located.

Resources and Rebel Militia Groups in the Eastern Congo

A seemingly easy approach to this problem would be that if international companies (and their consumers) only knew that their production of, say cellphones, was furthering war, war crimes, and civil unrest, they would look into alternative, less harmful suppliers.  Since companies by nature focus ultimately on profit, legislation or bans on the purchase of conflict minerals may be needed in order to ensure ethical behavior if some companies decided to still purchase or use conflict minerals.

However, as one dives further into the issue, a number of factors quickly emerge and complicate the picture; most notably the fact that major companies have already taken a stand against the use of conflict minerals, and that legislation has been passed both in the United States and abroad, to combat their sale and use.

This information now raises the question of “is there anything left to be done?”

If we go on the assumption that only company participation and legislation are required in order to produce ethical behavior,then the issue of conflict minerals in supply chains would be solved.  Yet this equation is ultimately broken–and the assumption that produced it, false– because it leaves out a key player that is essential to this issue:  the voting consumer.  It is through this player that the next steps needed to address the conflict-minerals issue in supply chains will be (and must be) taken in order to help corporations and governments make good on their pledge to do good.

To highlight the need for this third actor, I’ll explore the history of corporations and governments tackling the conflict-minerals issue from 2004, with the establishment of the Electronic Industry Citizenship Coalition (EICC) to today, with the recent passage of state legislation in California supporting Section 1502 of the Federal Dodd-Frank Act‘s call for accurate reporting of conflict minerals in company supply chains.  In addition, I will also explain why the voting consumer is in a unique position of influence on this issue, as well as share 5 actions individuals can take.

While I will not be discussing the history of the Congo, its ongoing conflicts, and the effect that has had on the development of militias, largely due to the sheer scope of material,  I strongly suggest that anyone seeking more information start with this quick video from The Economist, then move onto Jeffery Gettleman’s recent article “Africa’s Dirty Wars“, as well as William Reno’s Warfare in Independent Africa.  For those seeking more information about Section 1502 of the Dodd-Frank Act, Foley Hoag, LLP’s blog Corporate Responsibility and the Law, has great coverage of the issue.

How Corporations and Governments Tired to Do Good — and got held up in the Process

In 2004, the EICC formed with the intent of “ensuring worker safety and fairness, environmental responsibility, and business efficiency”. In the electronics world, this meant knowing your suppliers and asking that they engage in legal and fair business practices, such as fair wages, safe working conditions, and no law breaking.  Hence, no desire for conflict minerals in the supply chain.

Shareholders wanted to know that the business they invested in was sound and wasn’t engaging in any questionably moral practices.  By joining an organization like EICC, companies could then report to their shareholders that they not only understood their need for ethical business, but had taken the extra step in bringing said practices farther into the corporate fold.

Companies like Apple and Phillips not only released public statements about their suppliers, supply chains, and the code of ethics they expect them to follow, but also allowed 3rd party audits to help determine whether or not any conflict minerals ended up in the supply chain.

All this is good for business —but it’s still not enough to completely remove conflict-minerals from the equation.

Scale is between 0-35%; not one of the major companies is close to 100% conflict mineral free. Data provided by Enough, a human rights and Congo activist group

One of the main issue with conflict-minerals is that they are obtained through illegal channels.  Illegal channels don’t necessarily keep records of who they sold what to, which can make it very hard to follow a paper trail back to the original mine.

On top of that, there are often various parties involved in the sale and transport of conflict-minerals before they reach a smelter or legal buyer. During this travel and transition period, minerals from illegal mine A can be mixed with those from legal mine B, then mixed with another compound from mine C, then sold as ore to a distributor, who sells it to a smelter.  This smelter might not even be in the same country or, as this flow chart from a 2010 audit by RESOLV of major electronics companies shows, the same continent.

This is the example supply chain flow chart
And this is an actual supply chain flow chart for tin. Note how many company names are missing at the lower levels.

A second piece of the tracing puzzle is that companies have no legal authority over others.  Company A can ask all of its suppliers to provide information regarding their distributor networks, but each supplier can decide whether or not it wants to turn over such information.

The same is true of the independent audit procedure, as one such audit company, RESOLV, noted in their 2010 report.  Only 25% of the contact companies supplied any information on their networks, even after receiving reassurance that the disclosure of such information would not violate any previous non-disclosure agreements or result in legal action.

Thus while company A can’t claim 100% conflict-minerals free chain, they can make the claim that they are asking their suppliers to engage in good business practices which, in this case, means a minimal, if any, use of conflict minerals.

While companies can ask but can’t enforce the behavior of other companies, the government can.  However, despite the passage of Section 1502 of the Dodd-Frank Act that would require all publicly traded US companies to identify conflict-minerals in their supply chains, there has yet to be any formal guidelines and repercussions decided upon.

It appears that the lack of said guidelines two years after the Act’s passage is the result of our ongoing debate over the role of government and the power it has over business and commerce.  Some congress-members, like Jim DeMint (R-SC), Michele Bachmann (R-MN), Richard Shelby (R-AL) and Senate Majority Leader Mitch McConnell (R-KY), wish to completely overturn the Dodd-Frank Act; others want to support some of its ideas but don’t want to give the Securities and Exchange Commission (SEC) –the organization responsible for regulating conflict minerals– final say as they feel it’s an overreach of power.

As present, it means that companies are still left to their own devices to develop and decide best reporting practices, which at the very least, could lead to a multitude of ratings and symbols, adding potential confusion to consumers, shareholders, and suppliers as they try to understand whether or not a company deals with conflict minerals.  At it’s worst, the lack of clear process and procedure could mean that more companies decide to avoid the issue altogether — or say that their hands are tied while they await instruction from Congress.

This is were you, the voting consumer, enter into the equation.

The Customer Is Always Right

As customers, we have the say in whether or not a company succeeds or fails.  If we don’t like a particular product, we can simply chose to not buy it.  If there is a product that you do want (or need), you can search for a particular product that meets your needs or ask a company to consider providing one.   At the end of the day, it’s the consumer that has the last word — and companies will bend over more than you might suspect in order to make that sale.

On the civic side, we are also voters.  We have the ability to influence our representatives at the local, state, and national level through our actions, words, and ultimately, our vote.  Politicians understand this, which is why they spend so much time courting their constituents.  Even if you didn’t vote for your representative, they are still your rep — and your words mean something.  By letting him or her know about the issues that are important to you, and that you want represented, you are influencing the discussion and the eventual action.

If companies and governments never heard from us, they might not take action.  Not never take action, as both the establishment of the EICC and the passage of the Dodd-Frank Act refute that point, but never move beyond that initial step.  In order to devote the resources to a particular course of action, it must be labeled as a high priority.  If feedback never comes –and companies do want to hear from you— then an item gets moved down the priorities list until it’s either neglected or done away with altogether.

Practicing and ensuring ethical business deals and conduct in a hyper connected world is not only good for business- it’s good for everyone.

Here are 5 ways that you can show companies that you care about their efforts to do good.

5 Ways You Can Support Corporate and Government Pledges to Avoid Conflict-Minerals

1. Educate Yourself

Believe it or not, companies and politicians start from the perspective that you’re a smart individual, capable of forming his or her own opinion of an issue, product, or service, and then taking action.  Prove to them how smart you are by learning about conflict minerals and how they affect many different actors.  Don’t just read up on human rights abuse reports or company mission statements; expand your horizon to follow local, national, and international legislation; business reports; and history of the countries where conflict minerals originate and commentary on the debate itself.  Otherwise, let the buyer beware.

2. Ask Questions

When shopping for a new product, ask sales reps if they know how their product was made.  This may involve contacting corporate via email for more detailed info if Bob at Best Buy has no clue.  Stress your interest in purchasing products that conform with company’s ethics and responsibilities goals.

If you’re in manufacturing, purchasing, or supply-side management, review potential suppliers and seek out those who are members of the EICC.  These companies have pledged to follow ethical standards and practices with regards to their products components and resources.  Ask for documentation to support/validate claims and learn how you can assess your own supply chains.

3. Talk with your wallet

One of the best ways to support companies that practice ethical behavior and corporate responsibility is to purchase their goods and services over those who don’t.  Having completed step 1 and 2, you should now be able to let your money do the talking.  Remember that the bottom line is always top priority for those in the for-profit sector and a decrease in sales is always noted and analyzed by management and shareholders alike.

4. Support State and Federal Legislation

The 2009 Dodd-Frank Act included a provision that requires all publicly traded companies to disclose their supply chain information in order to list any conflict minerals that originated from the DRC (Section 1502).

In addition, a few states like California, Maryland, and Massachusetts have signaled that they support this provision and have introduced and/or passed legislation that would require public companies in their jurisdiction to comply. This additional level of support sends a message to national representative about the importance of the existing federal legislation, which can help them make the case for supporting and funding the SEC to the appropriate level in order to ensure the reporting of conflict minerals in company supply chains.

If you live in a state where there is current legislation before state governments, such as Massachusetts, consider adding your name to the list of state supporters or writing directly to your representative.  This will be presented to the State Legislature Tuesday, April 3, 2012 as they consider the issue.

Image courtesy of Congo Action Now (CAN), a Boston-based human rights group who helped to introduce legislation to the MA State Legislature

If there is currently no conflict minerals legislation before your state government, contact your local rep and ask them to introduce state or county legislation.  Seek out local civic, human rights groups, and corporate chambers of commerce to help with the drafting of proposed legislation.

5. Connect with others

Our friends and family networks are powerful influence webs; research has shown that these groups tend to have higher levels of influence on our behavior than others.  In particular, the frequency of sharing of information within these groups appears to correlate to future behavior and outcome.  By sharing and discussing the desire to create and live in a community that values human rights and corporate responsibility, these ideas  move from the individual to the community sphere where they can be shared, discussed, and acted upon by others.