What Conflict Minerals Regulation Means on the Ground

Authors

• Amaya Gorostiaga

  Former Manager, BSR

I recently returned from a trip to Kigali, Rwanda, where I attended a regional conference on mineral certification—an effort to create responsible supply chains for “conflict minerals” mined from the African Great Lakes Region. Through the discussions, I learned where the region stands on promoting transparency and good governance in the artisanal and small-scale mining sectors, and the implications that recent legislative efforts would have on companies operating in, or sourcing from, the region.

The exploitation of high-value minerals in the Democratic Republic of the Congo has been widely linked to the ongoing conflicts happening in the eastern part of the country. Various efforts are aligning to certify responsible and legal mines and trace mineral production along the supply chain from the point of origin to the end-user company—something akin to the Kimberley Process on conflict diamonds.

Meeting attendees provided an update on regional efforts to create a common framework for certification schemes that would distinguish conflict minerals from conflict-free metals. All participants agreed that success is necessary to increase investor confidence and economic development across the region.

While the 11 countries that make up the Great Lakes Region are hard pressed to implement a workable certification system, many companies are awaiting the final rules from the U.S. Securities and Exchange Commission (SEC) on the Dodd-Frank Act, which will likely require them to publicly report on minerals sourced from the region the first fiscal year after the final rules are released in April or May 2011.

While the legislation is seen as a viable alternative to sanctions that would effectively put millions of livelihoods at risk, this timeline has placed pressure on both governments and companies alike to develop the processes to trace the minerals from the mine all the way to the end user. In Rwanda, I got a glimpse of the scale and enormity of these efforts during a visit to a certified artisanal mine, where I witnessed the implementation of a traceability scheme that involves tagging every bag of minerals to guarantee their “point of origin.”

However, locations where these efforts are taking place are still considered by many as “pockets of compliance” in a large region where much remains to be done to consolidate and expand traceability measures. Governments and civil society have called for more funding, resources, manpower, and time. In anticipation of the SEC ruling, buyers across eastern Congo have stopped purchasing minerals in fear of accumulating stockpiles that won’t sell on the international market. This cessation of investment in the region will only result in increasing conflict, unemployment, and poverty—the exact outcomes the Dodd-Frank Act seeks to prevent.

The choice between placing an embargo on the region over investing in supply chain due diligence is not a solution. Instead, companies can join efforts to develop and implement common traceability standards by collaborating with government, civil society, industry associations, and peer companies. By supporting efforts to develop practical systems that follow the intent of the legislation, companies can guarantee predictable sources of supply and support the wider goals of development and peace for the Great Lakes Region and its people.