US firms negligent in reporting ‘conflict minerals’, study claims

Conflict minerals [Image Journeys/Flickr]

Many US companies are failing to comply with a law against financing armed movements active in eastern Democratic Republic of Congo through the purchase of “conflict minerals,” according to a new study.

“Our analysis shows that most companies seem to prefer business-as-usual to genuinely addressing the risk that their mineral purchases bankroll armed groups overseas,” Amnesty International said in a study released jointly with Global Witness, which combats the looting of natural resources from poor nations.

The two groups monitored application of one part of the Dodd-Frank Act, a US financial reform law passed in 2010. The section, regarding minerals such as gold, tin, coltan and tungsten potentially coming from conflict zones, took effect in 2014.

US companies listed on the stock exchange must now inform regulators if they procure such raw materials, and whether those come from the DRC or any one of nine countries on its borders.

The firms are required to describe the steps they have taken to ensure that the minerals they use have no connection with the strife in the DRC. The law gives companies between two and four years to comply, depending on their size.

Amnesty and Global Witness stated that more than 1,000 US companies are affected by the new regulations. The two rights groups focused on 100 of these firms, carefully studying the statements they had made to the Securities and Exchange Commission.

‘Minimum requirements’

The joint report concluded that “79 percent of the 100 companies analysed failed to meet the minimum requirements of the US conflict minerals law.”

Moreover, only 16 percent had investigated “beyond their direct suppliers to contact, or attempt to contact, the smelters or refiners that process the minerals,” it said.

The NGO report comes as the European Union tries to pass through its own law on responsible sourcing of minerals. But unlike the Dodd-Frank Act, the draft EU regulation will be mainly voluntary, in order to avoid placing extra burdens on European businesses.

>> Read: Parliament adopts relaxed measures on conflict minerals

The eastern provinces of the vast DRC are rich in minerals but have been wracked for more than 20 years by violent ethnic and territorial conflicts, and even strife over nationality. National and regional political interests further complicate the situation.

Most of the belligerents illegally profit from mining or trafficking in the abundant natural resources – some of which end up being used as vital components of electronic products such as mobile telephones.

The country’s highly acclaimed doctor, Denis Mukwege – who has treated thousands of victims of mass rape by DRC combatants – says notable progress has been made to keep money invested in minerals from going to armed groups.

In an opinion article in Thursday’s edition of the International New York Times, Mukwege wrote about efforts since 2010 by tech giants such as Apple and Hewlett Packard to ensure traceability of their supplies.

Mukwege also hailed moves in October by a government-affiliated mining industry group in China to enforce scrutiny across its foreign supply chain.

He also noted looming European Union regulations that would encourage – though not require – EU smelters and refiners to fully vet the provenance of supplies to avoid conflict minerals.

But as the history of Dodd-Frank demonstrates, getting companies implicated to join the effort to deprive armed groups business in the mineral trade will not be easy.

Provisions of the law on “conflict minerals” were bitterly opposed by business interests in the United States, which fought against measures they considered too costly or cumbersome to enforce. In the DRC, the legislation also sparked debate.

In an open letter published last September, 70 scientists, politicians and NGO officials argued that the Dodd-Frank Act has a number of unintended and damaging side-effects.

For example, they wrote that the legislation had led a number of international buyers to conform by simply withdrawing from the DRC, where no reliable means of certifying origin exists.

Thousands of artisanal miners who lost their jobs as a result became choice recruits for armed movements.

Supporters of the legislation contend that its benefits are already being seen, while foes claim that although minerals can prolong conflicts, they do not cause them.

In his op-ed piece, however, Mukwege argues that laws like Dodd-Frank are inevitable and urgent unless voluntary efforts are undertaken to stop the ultimately deadly trade.

“Companies must conduct honest, rigorous investigations of their supply chains, publicly reporheir findings, and act on the results to ensure that their money ? and ours ? no longer ends up in the hands of violent rebels,” he wrote.

“If they are unwilling to do so, governments must compel them to action.”

The European Commission presented a voluntary scheme last year aimed at stemming the import of minerals from conflict zones and prevent their use to finance war and strife.

>> Read: EU drafts conflict minerals law, with opt-in clause

So-called 'conflict minerals' include minerals such as gold, tantalum (the material used to make mobile phones vibrate), tungsten and tin, whose revenues are used to finance armed conflicts.

The conflict mineral zone includes the Democratic Republic of Congo and neighbouring countries including Angola and South Sudan, according to a US definition. These states make up 17% of the global production of tantalum, 4% of the global production of tin, 3% of tungsten and 2% of gold.

The long-awaited Commission proposal, presented in March 2014, aimed to implement a system for the responsible procurement of minerals from regions beset by conflicts in general, and from the Great Lakes region of the Democratif Republic of Congo in particular, an area especially hard hit by the phenomenon.

European smelters and refiners are the only industries that will be forced to use responsibly sourced minerals and display an approved European importer on the label, under the proposed EU scheme.

The proposed regulation, supported by the political right, is vehemently criticised by the left and the Greens, who had hoped for a system with binding standards at all stages in the supply chain.

>> Read: Parliament adopts relaxed measures on conflict minerals

A binding system has already been in place in the United States since 2010. Under the Dodd-Frank act, American companies are obliged to provide detailed certifications for their materials.

  • May: EU Parliament to vote on draft regulation on sustainable sourcing of minerals

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