Sustainable Sourcing of Minerals in the Democratic Republic of the Congo

Authors

• Marshall Chase

  Former Associate Director, BSR

• France Bourgouin

  Former Manager, BSR

The sourcing of tin, tantalum, tungsten, and gold (often referred to as “3TG”) from the Democratic Republic of the Congo (DRC) and adjoining countries has gained international attention in recent years because of the role these materials can play in financing armed groups in the world’s deadliest conflict since World War II. At the same time, the extraction of these minerals from the DRC and wider African Great Lakes Region is dominated by artisanal and small-scale mining, and many people in the region depend on this industry for their livelihood.

Recent legislation and other initiatives have prompted companies to improve the management of their supply chains as they seek to meet new reporting requirements—in particular the May 31 U.S. Securities and Exchange Commission (SEC) deadline under Section 1502 of the Dodd–Frank Act. However, while these efforts focus specifically on conflict, myriad other social and environmental issues at these mining sites may be overlooked. Moreover, the lack of enforcement of existing regulations and the mismanagement of how these minerals are produced, transported, and/or traded at the mine-site level can trigger socioeconomic and environmental instability and contribute to human rights violations.

The increased attention to supply chain due diligence has created a unique opportunity for both large-scale mining companies operating in the DRC and manufacturing companies to contribute to a healthy society and environment. Businesses stand to benefit through improved supply chain sustainability and stability, mitigation of reputational risks, and stronger supply chain management.

A recent BSR working paper outlines the opportunities and constraints facing miners in the DRC, and it highlights how companies can extend their activities on conflict minerals to contribute to positive local sustainable development for mining communities.

Artisanal and Small-Scale Mining: Opportunities and Challenges

Artisanal and small-scale mining—a labor-intensive process that requires minimal capital, mechanization, or technology—contributes more than a sixth of global mineral output, and directly involves 20 to 30 million people, while supporting the livelihood of many times that number globally. Because this industry is based in remote areas with limited infrastructure and few other formal economic activities, the mining industry drives local economies and provides a reliable source of income, with higher wages than those in other rural regions. In the DRC in particular, it has been estimated that mining, principally from the artisanal and small-scale sector, supports the livelihood of as many as 8 million people.

Despite the economic opportunities the sector creates, this type of mining is also associated with human rights violations, poor labor conditions, damage to the local environment, and corruption. In terms of environmental issues, mining activities are often connected with erosion and deforestation of protected areas, biodiversity loss, and water pollution. Artisanal and small-scale gold-mining is one of the world’s biggest mercury polluters.

The social impacts of the industry are also significant. Much of this mining activity operates outside health and safety legislation or enforcement, and miners face physical risks such as unpredicted rockfalls, and injury or death due to lack of proper protective equipment such as helmets and masks. The miners are also subject to long working hours and poor sanitation conditions, and the surrounding communities face issues such as increased drug and alcohol abuse, prostitution, and health challenges such as malnutrition, malaria, typhoid, tuberculosis, and sexually transmitted diseases (including HIV/AIDS). The most at-risk groups are women and children. Women are subject to forced labor and sexual violence, and children are also forced to work, often in dangerous conditions, where they must crawl into small spaces, hauling loads of ore and heavy materials and facing exposure to toxins such as mercury while processing ores.

Along with these concerns, the conflicts in the DRC and the Great Lakes Region—and in other extractives regions such as Colombia and Burma —have been exacerbated because mining can serve as a funding source for armed groups.

The Case for Company Engagement

Today, companies—particularly those subject to the SEC’s conflict minerals reporting requirements—are paying more attention to the use of minerals from the DRC in their products. As they address these new reporting needs, companies can strengthen their supply-chain management by taking a more comprehensive approach to understanding the risks and opportunities associated with minerals sourcing from the DRC region. The miners and their communities are key stakeholders for such an approach, whether a company is involved in using materials in its finished products, or in mining or other business interests in the region.

We must be clear that that it is not the role of extractives or manufacturing companies to solve all of the human rights and other problems associated with mining in this region. Indeed, the UN Guiding Principles on Business and Human Rights give the state the duty to protect human rights. But the Guiding Principles do highlight business’ responsibility to avoid infringing on human rights and to address adverse impacts that they are involved in. Beyond this kind of supply chain due diligence, however, it can be in a company’s best interest to support solutions to human rights and other issues.

In discussions with BSR members and other companies, we have heard more company leaders expressing a willingness to engage in these discussions. Going beyond due diligence helps companies in many ways:

• Manage reputational risk and opportunity: Incidents of child labor, environmental damage, illegal activities, and human rights abuses taking place in the vicinity of the mining concessions often affect corporate reputations if there is a perceived lack of engagement on the issues. These issues in a “downstream” company’s supply chain can also pose reputational risk—as evidenced by the ongoing focus on conflict minerals, supply chain slavery, supplier working conditions, and more. Proactive engagement can deflect potential criticism, strengthen a company’s reputation, and may support a company’s case in discussions about future business with customers or about regulation with government.
• Effectively manage the supply chain: Many downstream companies are integrating conflict minerals tracking into their existing supply chain social and environmental responsibility efforts to comply with the new U.S. regulations. Because of the potential reputational risks outlined above, it may be cost-effective and more efficient to broaden supply chain management systems to include human rights issues, environmental standards, labor conditions, and land-use conflict.
• Ensure stable material supplies: Supporting stability, good governance, and improvements in environmental and social performance of artisanal and small-scale mining of these minerals can help increase productivity and efficiency on mine sites and ensure that these supplies remain available—and that global materials prices remain stable.
• Ensure legal and social license to operate: Relationships with small-scale miners are often critical for large-scale mines hoping to gain and retain access to exploration licenses. This also ensures better relationships with communities surrounding the mines.

The Challenge of Company Engagement

While the rationale for company support to address artisanal and small-scale mining issues should be clear, the opportunities on how to engage are not as obvious. There are a range of efforts to support supply chain due diligence, including the Public-Private Alliance for Responsible Minerals Trade, the Solutions for Hope program, and various certification efforts. Unfortunately, few efforts are aimed at raising awareness among companies of opportunities to support the small-scale mining sector and local community development in ways other than direct sourcing relationship and due diligence. Several issues have contributed to this: Companies have focused on developing their conflict minerals due diligence and reporting systems to meet regulatory requirements; an increase in violence in the DRC has made it difficult to engage systematically; and clear opportunities for engagement with scattered, informal mining remain limited and not well-understood.

Now that many companies have reporting systems in place, we believe it is an appropriate time to turn attention to roles companies can play in supporting this sector and local communities in the DRC for mutual benefit.