Conflict Mineral Legislation Sends Mining Companies into Overdrive

Mining is incredibly harmful from both an environmental and social stance. In the Democratic Republic of Congo, rebel groups and government forces have been locked in a 15-year-long war and mineral sales are a key part of the conflict with diamond dollars ending up in the pockets of Congolese war lords.

New US regulations are trying to stem the tide of conflict minerals like tantalum, tin, tungsten and gold which are commonly used to make electronic gadgets, with new regulations.

SEC Regulates Sale of Minerals from Conflict Areas

The Dodd-Frank financial reform law has a CSR provision that is expected to take effect later this year. The Securities and Exchange Commission is still drafting the regulation and the rule is already creating many issues for U.S. companies and is pulverizing Central Africa’s mining sector as companies delay purchases until they can vouch for the minerals.

This has put companies and their CSR managers into overdrive. Michael Loch, the director of supply chain corporate responsibility for Motorola Solutions recently visited  Katanga to certify that tantalum from the mine that Motorola wants to purchase was in no way connected to the Congo’s armed conflict. Chipmaker AMD was going to tell suppliers that they have two weeks to prove the solder, capacitors and diodes they supply to make its semiconductors aren't being made with minerals from military-controlled mines in the Congo.

“This has started to spread compliance costs and burdens throughout the economy, upon hundreds of thousands of businesses,” said Tom Quaadman, vice-president of the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness.

The National Association of Manufacturers estimates the Dodd-Frank provision could cost companies between $9 billion and $16 billion to implement. The SEC puts the cost at around $71 million a year. The legislation is also having an impact in the automotive sector.  Ford Motor asked all its 1,400 suppliers to disclose whether they use any of the four minerals in their parts. Congolese mineral exports are down 90% due to this regulation.

Ethical Diamond Trade in Jeopardy

Over at the Marange diamond fields in Zimbabwe, which that have an estimated worth of up to US $800 billion, there have been serious allegations of human rights abuses. The extraction of the diamonds and subsequent release into the global market has put the ethical diamond trade in jeopardy.

In 2002, the Kimberley Process Certification Scheme (KPCS) was created to prevent the sale of ‘blood diamonds', or stones used by rebel groups to fund civil wars. The World Diamond Council, the group formed to represent the interests of the diamond industry in KPCS decisions, said in a press release that traders in the industry should avoid Marange diamonds for the time being.

Annie Dunnebacke of Global Witness, a UK-based NGO says that, "there is currently no guarantee of a ‘conflict-free’ diamond on the market. It’s not something the consumer wants to hear, but the fact is unless you’re buying from certain companies that have a “mine to market” certification scheme or from retailers that only buy from a certain mine, there’s no way of knowing."

This is therefore another source of CSR worry for jewellery brands. Major brands like Tiffany and DeBeers invest a substantial amount in sourcing conflict-free diamonds. The current issues with KPCS will create problems that might cut into their market share and the only way they can boost this is to through CSR.

Sustainability in conflict areas is always an issue for CSR managers and this kind of Catch-22 situation is not something that is going to die down anytime soon.

 Image Credit: Wiki Commons