A new regulation issued by the U.S. Securities and Exchange Commission last week requiring publicly traded companies to trace the origin of specialty industrial minerals and disclose those from the Democratic Republic of Congo, or neighboring regions, has strong support from computer maker Hewlett-Packard because it can help cut off the proceeds to violent militias that abuse local populations, a top executive said Tuesday.
Under the rule
, which was required by the 2010 Dodd-Frank financial reform law, companies will have to annually disclose their use of so-called "conflict minerals" on a new form, beginning on May 31, 2014. The intent is for the public to put pressure on companies to buy raw minerals from sources that aren't engaged in human rights abuses.
Tantalum, tin, gold and tungsten are mined in eastern Congo and used in all consumer electronics products. Government forces and opposition militia groups, each supported by various neighboring countries, have been engaged in a bloody civil war that has killed an estimated 3 million people. Taking advantage of the anarchy that exists, fighters on both sides have engaged in murder, rape, destruction, looting, and widespread massacres, often deliberately targeting civilians and causing mass dislocation. The combatants fight to control mines where the minerals are excavated and use the cash from exports to buy weapons, which help them oppress the local population.
The "conflict mineral" provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act is not widely favored by industry because of the perceived difficulty of tracking minerals through opaque supply chains that can include small mines, trucking companies and obscure middlemen, and how to determine whether DRC minerals are included when minerals from multiple global sources are combined by smelting companies.
The mining, telecommunications, electronics, automotive, aerospace, and jewelry industries, as well as retailers with private-label contract manufacturers, are most impacted by the rule. Even companies that are not regulated by the SEC will be effected because the regulated companies will have to trace the minerals back through their suppliers.
In public comments filed during the rulemaking process, HP was one of the few companies that advocated for reporting on the sources of conflict minerals.
"It would be easy for any corporation at this level of the food chain to step back and say, 'Well, that's so far removed from us. Those minerals are sold to someone in another country, then they're sold to someone else, and then sold to a smelter, and sold to someone else and finally eight or 10 steps later HP receives something with that mineral in it," Tony Prophet, senior vice president of printing and personal systems operations, said during a seminar on the importance of supply chains to economic development at the Center for Strategic and International Studies in Washington.
"But when you read the stories (of abuse) it's hard to say that's somebody else's problem. If you know that through basic strategy and some action and pressure on the industry that you can have an impact in changing the lives of those people over time," he added.
The Enough Project
, a non-governmental organization working to end genocide and crimes against humanity, has ranked HP No. 2 in the world among the world's largest electronics companies on their efforts to use conflict-free minerals in their products.
HP belongs to the Public-Private Alliance for Responsible Minerals Trade, a coalition created last November by the U.S. government along with private sector and humanitarian organizations to help African governments deny militias from using extorted mining proceeds to support their activities.
The U.S. government, companies, trade associations and civil groups have promised to provide $5.2 million in financial and technical resources to develop pilot supply chain programs that allow businesses to procure minerals from mines that have been certified to be conflict-free.
Prophet said HP, which wants to set a good example for the rest of the industry to follow by setting aggressive and transparent targets, will soon have the ability to declare where the minerals in its products came from and what path they took to the manufacturing floor. Company policy will eventually be to purchase material from smelters that follow standards for conflict-free minerals.
HP has had some success auditing smelters and following the trail back through various parties to the origin point, he added.
"It's not an idea that HP gets ahead, but that the industry comes along together to create this sort of traceability and accountability" that will allow it to shift more more responsible sources of raw minerals, Prophet said.
(For more background on the issue, read the November feature story
in American Shipper
on mandating due diligence for mineral supply chains.) - Eric Kulisch