Minerals:  Initiatives

What is being done to reduce the negative impact of conflict minerals?

There is increasing pressure on companies operating in the mining industry in central and eastern Africa to source their materials in a more ethical way.  We, as consumers, can use technology to connect us together on issues that concern us, to be responsible to our fellow citizens. In the case of the materials that gives us this incredible technology, we have a meaningful connection all the way back to the mines. If we choose to, we can use our leverage as consumers to encourage companies to do better. Companies are starting to pay attention and are attempting to develop mines outside of war zones. The goal should be to develop more secure mines that respect residents and improve local economies.

There are a number of ongoing campaigns and initiatives focusing on ‘conflict minerals’. Resolution:Possible is not asking you to boycott certain products or companies. In fact, sometimes boycotting risks removing the local population’s ability to earn an honest living, and can force them to turn to militia activity or illegal smuggling. What we are interested in is highlighting initiatives making positive progress in this field.

This section splits the initiatives that exist for the tin, tantalum and tungsten (3T’s), gold and diamonds and offers a constructive analysis of the potential positive and negative impacts that each initiative affords.

Many of the initiatives listed below share similar characteristics:

  • a multilateral approach
  • engaging stakeholders at every level of the supply chain
  • setting common benchmarks
  • shared values (human rights, corporate social responsibility, transparency and accountability)
  • zero harm’ concept – stewardship for sustainability

Many initiatives also have common limitations:

  • As the conflict-free mineral trade is in its early stages most large companies selling the finished product do not deal with the mines directly in central and eastern Africa. They buy the parts from smaller companies, which in turn often buy the minerals once they have been mined. This then makes it easy for companies to establish plausible deniability.
  • There is no conflict-free phone or laptop on the market at the present time.

3 T’s

 Dodd-Frank Act in the USA (2011) – (previously known as ‘The Congo Conflict-Free Minerals Act’)

Section 1502 of the Dodd-Frank Act, a comprehensive financial reform which contains rules for banks and more protection for the people, was set in motion in 2011. The bill itself is over 2,000 pages long and addresses issues from debit cards to hedge funds and mortgage underwriting. Section 1502 requires companies to say where they get their imported minerals from, in an attempt to break the link between the region’s mining industry and violent factions. Hillary Clinton stated this act was there to “prevent the mineral wealth from the DRC ending up in the hands of those who fund the violence.” To do this we need transparency in the consumer electronics supply chain. Companies are required to ‘exercise due diligence on the source and chain of custody of such [conflict] minerals’. Several companies have begun the process and a UN report recently revealed positive effects in the DRC are being seen already.

With reference to the eastern Congo’s mineral trade in particular, this is a critical time. With companies covered by Section 1502 of the above act, a US law which is attempting to prevent the region’s minerals trade from funding war, the companies are in their first year of reporting and have to publish details on their efforts to check their supply chains by May 2014.

Potential benefits

  • Increased development and implementation of formal and defined policies
  • Increased engagement with direct suppliers on due diligence expectations, contractual obligations, and capacity building
  • Progress made in identifying smelters in the supply chain to the best of their efforts
  • Industry associations are supporting their members and non-members through standardised tools and education about minerals sourced from conflict and high-risk areas.
  • More companies have to source responsibly from the Great Lakes Region

Concerns:

Conflict-Free Tin Initiative

The Conflict Free Tin initiative pilot launched in October 2012 aims to make market forces not armed forces the critical factor in the minerals trade in DRC, stop the violence and ensure the long–term survival of communities who depend on mining for their livelihoods. The initiative addresses the fact that  the battle between war lords and militias to control resources will continue for as long as the mines and transport infrastructure are vulnerable to anyone with the military means for extortion.

Potential Benefits

  • Pragmatic transparency system based on a mine at Kalimbi – monitors metal from one end of the supply chain to the other – right from the moment the tin ore is removed from the tunnel, through the processing, its selling and placement in containers for export.
  • Traceable and responsible trade: international electronic companies can tick their commercial boxes and their customers who want ‘conflict-free’ products are reassured that they are are produced in a socially responsible way.

Concerns

‘Due Diligence Guidance and Guidelines for Multinational Enterprises’ (Organisation for Economic Coordination and Development (OECD)

A benchmark offered and integrated into the laws of 11 African countries including DRC and Uganda. All parties (Heads of State, industry and civil society etc.) were involved in the process from the beginning. Traders understand due diligence and the fact the international market wants proof of where the product comes from. Yet this has not avoided all conflict.

The OECD Guidance gives a five-step framework to exercise due diligence:

  1. Establish strong company management systems;
  2. Identify and assess risks in the supply chain;
  3. Design and implement a strategy to respond to identified risks;
  4. Carry out independent third-party audits of refiner’s due diligence practices;
  5. Report annually on supply chain due diligence.

Companies attempting conflict free mineral use (according to the criteria listed in the OECDs Due Diligence Report in January 2013)

A graphic showing companies attempting conflict free initiatives

The OECD table is only one organisation attempting to assess the effectiveness of companies using conflict-free minerals, however, there are a growing number of league tables assessing companies success rate in a conflict-free mineral approach. For example, the Enough Project: U.S. based NGO contacted 21 consumer electronics industry leaders in 2008 to ensure they used conflict-free minerals in their supply chain. A ‘league table’ was produced showing electronics companies who have since made progress in responsibly sourcing minerals, with Hewlett Packard coming out on top, followed by Intel, Motorola and Nokia.

Fairphone (2013)

A social enterprise with the aim of developing a mobile phone designed and produced with minimal damage to the people and planet. More specifically, the main motivation is to develop a smart phone, which does not contain conflict minerals and contributes to ensuring fair labour conditions for the workforce along the supply chain. So far over 15,000 phones have been ordered and production is about to start for the first batch.

Potential Benefits:

  • A new Conflict-free model, utilising fair resources that put people first
  • Transparent relationships with suppliers ensuring good working conditions and safe recycling practices
  • Accountable supply chain
  • Consumers can understand what’s inside your phone

Concerns:

  • Who’s to hold Fairphone accountable to their claims?
  • How to measure ‘fair’ vs ‘unfair’?
  • How to balance the continuum between being both altruistic and profit-orientated?
  • How to foster a system of fair employment with global dealings and affect change among existing manufacturers?
  • Will people choose ethics over features in the long-term?
  • China is the choice of manufacturing location – will they be limited by the whole supply chain being in Asia?

Centre for Resolution Conflicts

Looks at a bottom-up approach to conflict minerals problem. A pro-active stance on the conflict-minerals problem where employment of former combatants involved in the conflict related to mineral extraction in towns and villages across eastern DRC is seen as key to reducing or de-escalating the conflict. This contrasts to the top-down OECD approach, which can be seen to be dealing with the fruit, and not the root of the problem. The procedures set out in the ‘due diligence’ plan are specifically focused on corporate mining companies, who can afford to follow the procedures. Small-scale miners in fact constitute the majority of people employed in the gold trade. Small-scale miners have not in fact heard of the OECD, or transparency or supply chain management. Their only knowledge is that they sell their gold to traders and that the final destination is Bunia.

Voluntary Principles on Security and Human Rights: Implementation Guidance Tools

A dialogue on security and human rights between companies and NGOs involved in the extractive and energy sectors, all with an interest in human rights and corporate social responsibility.

Extractive Industries Transparency Initiative

A global standard ensuring transparency and better governance of all natural resources. The initiative promotes revenue transparency and accountability in the extractive industry.

Large-scale vs artisanal mining

Now the standard has been raised we need to look at the developmental side and close the gap (Ruth Cromwell – London Bullion Market Association). Legal structures alone won’t contribute to development. There is a need for active collaboration with host governments which could change the perception of the mining industry as a cash cow to an active partner in development.

Artisanal miners coops

Artisanal miners constitute the second biggest workforce in the world and depend on on the mining sector for opportunites. However, as outlined above, artisanal miners rights’ are often abused by governments as they are normally subsistence miners and don’t have enough money and power to introduce minimum standards for themselves across the mining sectors in East and Central Africa. New initiatives are becoming more popular whereby artisanal miners come together in cooperative groups which merge into unions which maximises their strengths for bigger benefits. The Rwandan government for example is endorsing this strategy.

Options for Supply Chain Management – Conflict-Free Smelter (going vertical):

A voluntary program, with independent third parties evaluating a smelter’s procurement activities. The audit determines if the smelter demonstrated that all materials they processed originated from conflict-free sources. Demands a reputable auditor.

This could be cheaper, leaner and cleaner for companies to source certified smelter, rather than certifying mines, mine by mine in the DRC. This is a good option for businesses who cannot afford to invest in an entire vertical operation, from mine to manufacture.

Alternatively, large electronic companies can get into the smelting business, they can take control of smelters. This has already been achieved by some companies such as Kemet, who purchased mining rights to control their own mining processes. This helps quality control, so a company can monitor its own supply chain.

Instead of every business taking pains to certify the specific mine-of-birth of raw materials aka ‘conflict minerals’. Rather, every business could conduct business with reputable smelters, which would have to be placed in more stable areas in the Congo. They would be certified and would assure downstream customers that all smelted materials are conflict free.

DRC Mining Transparency Site

A website launched to promote transparency in the DRC’s mining sector. Elizabeth Caesens, head of the Carter Center’s mining governance project in DRC, says the website aims to target ‘Congolese actors who sometimes lack access to information about the more technical aspects of mining governance, such as mining contracts, revenue payments [and] production figures’.

The International Conference on the Great Lakes Region (ICGLR) (2004)

An intergovernmental organisation which was based on the recognition that political instability and conflicts involving its eleven member states have a considerable regional dimension and thus require addressing through concerted efforts.

MONUSCO

The United Nations Organisation Stabilisation Mission in the DRC attempts to ensure peace in the region and reduce problems associated with conflict-minerals. However there has been corruption within MONUSCO as peacekeeping troops have been caught smuggling minerals such as cassiterite and dealing weapons to armed groups. There are suggestions that MONUSCO exists to maintain the system for plundering Congo’s wealth instead of using it to improve the loves of Congolese people. Human Rights Watch first raised awareness of this serious issue in 2007.

What we can take from the above initiatives is that solutions are complicated and do not rest on electronic companies alone. The problem requires a comprehensive strategy, which must include serious policy action by the international community, the Obama Administration, regional governments, the UN, and NGOs – on issues of land tenure, security, governance, rule of law, and livelihoods. But electronics companies, as the main end user of minerals from Congo, bear a responsibility for cleaning up their supply chains. Our cell phones should not be fueling violent conflict. The companies have an important role to play in being part of the bigger solution.

 

GOLD

Conflict-Free Gold Standard (October 2012)

The World Gold Council has developed the Conflict-Free Gold Standard, an industry-led approach to combat the potential misuse of mined gold to fund armed conflict. The Standard has been developed with our member companies, comprising the world’s leading gold producers, and with extensive input from governments, civil society and supply chain participants. It aims to raise industry standards and set best practice for others to follow. The standard aim to stop gold mining from funding wars in conflict states encompasses the entire supply chain.

Effectiveness? A recent conference organised by the Guardian involved organizations and companies involved to discuss how effective it has been. Customers are starting to ask where their goods are coming from and a lot of work is going on across and along the supply chain ‘reaching out geographically and embedding the effects [of the standard] in different countries.’

Whistleblowing is build into the standard, “so there are tools for accountability for all to see what is going on in the supply chain. Governments need to take responsibility, but so do companies, civil society and investors,” said Sophia Pickles, a Global Witness campaigner. The informal market has not yet been addressed, whereby mining companies trade informally to the benefit of armed groups who take gold from DRC to Dubai.  These traders do not belong to the World Gold Council and so do not have to abide by its rules.

Gold Supplement Implementation Programme

The gold programme of activities, launched in May 2013, brings together key players across the gold supply chain, including OECD and partner countries, implementing governments, regional and international organisations, civil society, industry and other experts.

Like the Tin, Tantalum and Tungsten (3T) pilot implementation programme, the gold implementation programme will help foster peer-learning, constructive dialogue, and mutual understanding on due diligence practices and associated challenges across the supply chain. It will also help facilitate discussions around workable solutions to due diligence implementation, including the possible design of innovative market opportunities for responsibly sourced gold from conflict-affected and high risk areas, in particular from artisanal and small-scale sources.

While the primary geographic focus would be on gold sourced from Africa’s Great Lakes region, the gold implementation programme may include activities covering other regions, given the global scope of the OECD Guidance. The gold implementation programme is a voluntary exercise which will take place over an initial 12 month period, with possible extension.

‘Practical Guidance for market participants in the Gold and Precious Metals Industry’ – Dubai Multi Commodities Centre (DMCC)

On 29 April 2012, the DMCC created a guidance document in order to assist the DMCC-licensed members along with other industry participants in the UAEs, to enforce acceptable standards of the due diligence and responsible supply-chain management. A UN Expert Group will liaise with DMCC to identify UAE-based importers of gold from eastern Africa and trace the destination of gold within the UAE and beyond.

Diamonds

Kimberley Process (2003)

The Kimberley Process attempts to halt human rights abuses resulting from armed groups using profits of diamonds to fund their wars or coup d’etats. This ensures that the international supply of diamonds does not come from areas of armed conflict.

The Kimberley Process Certification Scheme follows the diamonds from the mine to importation. A system of warranties from the World Diamond Council, which follows from polishing to retail, ensures that, “the diamonds herein invoiced have been purchased from legitimate sources not involved in funding conflict and in compliance with United Nations Resolutions. The undersigned hereby guarantees that these diamonds are conflict free, based on personal knowledge and/or written guarantees provided by the supplier of these diamonds.”

Potential benefits:

  • There is no better system in place than the Kimberley Process presently.
  • The KP has had a positive impact in reducing conflict directly related to diamond mines and has increased African governments revenues thanks to the official certification scheme. These increased revenues have had a positive impact on society through the education and health investment in these countries.
  • The KP is effective in regulating and playing a preventative role in reducing the likelihood of violence directly related to diamonds.
  • The KP has worked towards initiatives that improve the conditions of artisanal miners

Concerns:

  • Loophole in system: the narrow definition as a diamond sold by an armed group to wage war against a government does not cater for instances whereby an actual government commits abuses when it mines or sells diamonds.

 

Responsible Jewellery Council (2005)

A response by the jewellery industry by bad publicity from hard done to communities and the environment from irresponsibly sourced jewellery (conflict minerals). This not-for-profit Council was formed in 2005, with the aim of setting standards and a certification process. It has more than 440 member companies that span the jewellery supply chain from mine to retail. Members commit to and are independently audited against the RJC Code of Practices – an international standard on responsible business practices for diamonds, gold and platinum group metals.

Criticism – Greenwashing

In 2013, an international coalition of unions and environmental NGOs – including Earthworks, Mining Watch Canada and United Steelworkers – called for a major overhaul of the Council, which was accused of administering poor governance and weak standards. These actors produced a 124-page report titled More Shine Than Substance which criticises the RJC certification scheme, claiming that the system is flawed as it does not consider the source of products, certifying companies as a while and not individual sites or facilities. Various loopholes were identified such as a failure to ban developments in conflict zones. The main problem not addressed apparently is lack of civil society involvement meaning that the board is industry controlled rather than a multi-stakeholder process.

Response

RJC rejected the claims in the report saying that they continue to follow international best practice. The fact that RJC were accepted as a full member of the ISEAL Alliance in 2012, which accredits certification bodies, does go some way to show the value of RJC.

Facts

A multi-stakeholder approach, although necessary, is a slow and painful process. Trust can take a long time to establish among different stakeholders. It must be questioned as to why the actual communities negatively impacted on by the jewellery industry pre-RJC do not have a seat at board meetings.  Also, even if the RJC code of practices is one of the strongest in terms of depth and breadth of criteria, in order to inspire consumer confidence, the decision-making bodies need to open up and become more transparent.

 

UN Sanctions

The UN has made the following resolutions in an attempt to improve the situation surrounding conflict diamonds:

Chapter VII of UN Charter

  • – Resolution 864 (1993)
  • – Resolution 1173 (1998) – Ban of illicit diamonds – Arms embargo
  • – Resolution 1448 (2002) – Sanctions lifted by Security Council
  • – Resolution 1306 – Ban import of rough diamonds

Potential benefits:

  • Can force the country in question to adjust its position on its diamond industry due to reduced investment in other key areas of the economy
  • Sets international standards on conflict diamonds issue
  • Can in the long term ensure governments receive the benefits of its’ diamond revenue

Concerns:

  • Can lead to increased violence, human rights abuse, rape and the recruitment of child soldiers.
  • Can escalate the likelihood of armed conflict

Resources

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