Business in the Community’s (BITC) Advisory team have been looking at some of the most pertinent and current supply chain issues. Here we look at Conflict Minerals, a serious issue at the very start of complex global supply chains. This blog is published ahead of a report BITC will be releasing in response to the forthcoming EU legislation on conflict minerals.
Today, 6 November, is the International Day for Preventing the Exploitation of the Environment in War and Armed Conflict. Environmental degradation occurs in areas of conflict through the destruction of land by arms and the poisoning of crops and devastation of farms. While control over the natural resources themselves can also be the source of the conflict.
Important to us but precious for whom?
Conflict minerals are typically the so-called blood diamonds from Sierra Leona, as well as Tin, Tantalum, Tungsten, and Gold (commonly known as 3TG), from the Democratic Republic of Congo.
Throughout the last 60 years almost half of all internal conflicts have been linked to the exploitation of natural resources. These minerals can be found in many of the day to day products we use from our toothpaste to our phone.
“ As consumers, when we buy these products with indifference to where these minerals come from we become indirectly complicit in the conflict ”
The continued demand for these minerals often funds para-military and armed groups which undermine legitimate governments and commit human rights violations; including forced labour, inhumane working conditions, and sexual exploitation.
Reporting conflict minerals in the supply chain
The ethical case is clear but for companies, there is also a strong business case to know the origin of any conflict minerals within the supply chain. Once mandatory reporting becomes the norm, consumers will be able to compare and contrast different companies, which could potentially have an effect on purchasing behaviour.
As consumers, when we buy these products with indifference or ignorance to where these minerals come from, we become indirectly complicit in the conflict. Until recently companies have faced little incentive to act, consumer pressure has been minimal, and there was no pressure from external sources to comply.
The minerals we use every day
When refined it becomes a heat resistant powder that can hold a high electric charge. It's a vital component in many small electronic devices, especially in mobile phones and laptop computers.
Used in: Specialised electronics, micro capacitors, metalworking, alloys, electrolysis
Tungsten is a dense metal used in everything from light bulbs to TVs. Formula One cars to bullets. It's also used in mobile phones
Used in: Electrodes, transistors, bulbs, glass-to-metal seals
Refined tin is used in most household electronic items as it's used as the solder for circuit boards.
Mandatory reporting could trigger consumer-led action, by providing like for like comparison of products, and allowing for a more informed buying decisions.
Supply chain risks from global movement
The global movement of the minerals adds another layer of complexity to this issue. Even though, conflict areas are well known, minerals are not exported by the countries themselves. They are usually smuggled to neighboring countries, where they are later exported to other countries to be smelted with other minerals from all over the world.
This means tracing the minerals back to where they are being extracted is a very difficult task.
Furthermore, mines in conflict areas are usually worked with little to no regard for sustainable extraction, putting at risk the long-term security of supply.
In the short-term, the productivity benefits from monitoring supply chain risks, real time supply forecasting and avoiding recalls means there is a potential for £3billion in annual savings, according to BITC’s 2013 publication, Fortune Favours the Brave.
So, how is this issue being addressed?
International organisations have been introducing legislation and guidelines to help companies engage and track down their supply chains.
Non-mandatory guidelines conflict mineral free supply chains:
The Kimberly process (2003) aims to prevent conflict diamonds entering the mainstream diamond supply
OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (Revised in 2012) provides assistance for those who wish to identify and address any possible points of entry for conflict minerals. Minerals: Tin, Tantalum, Tungsten and Gold.
Mandatory reporting requirements being introduced:
The Dodd Frank act in 2010 was the first to require mandatory reporting for American listed companies.
The EU is set to introduce measures to require all organisations that have any interaction with these minerals to report on their origin. Minerals: 3TGs, Diamonds, Jade and others.
With an issue which concerns large global supply chains, there needs to be a global effort in this field. Therefore it is encouraging to see a number of emerging certifications and guidelines originating beyond developed economies:
The International Conference on the Great Lakes Region (ICGLR) have provided a list and certified the mines within the Democratic Republic of Congo which are conflict free
Chinese Due Diligence Guidelines for Responsible Mineral Supply Chains is in the process of development and is aligned to the OECD equivalent. This is a crucial step in creating an accountable supply chain, as China is where much of the manufacturing, smelting and refining takes places to supply the international demand.
Crucially, the legislation is not supposed to divert demand away from the countries in question. Many of these nations have legitimate mines which provide employment opportunities for large numbers of the local population. If companies were to avoid countries such as the DRC completely, they will affect those people whose income relies on these mines.
'Moral case too strong to ignore'
Given the importance of these minerals in our day to day life, it is imperative for companies to understand their own direct or indirect connection to this supply chain. With the introduction of mandatory reporting, companies need to be proactive about traceability of their supply chain and plan for the right types of investments to increase visibility and control over potential supply chain risks.
BITC’s supply chain experts have long advocated for a comprehensive supply chain strategy and selection service, strong supplier relationships, and a transparent reporting culture not just for your tier one suppliers but beyond. The business benefits are plentiful and for conflict minerals the moral case is too strong to ignore.
BITC Advisory Services can help member companies understand how they will be affected by coming legislation and how to promptly prepare for future reporting requirements. If you would like to hear more get in touch with Elena Espinoza, Head of Advisory Services on Elena.Espinoza@bitc.org.uk.
Read our previous blog about the importance of SME’s in diversifying supply chains and procuring locally.