Cobalt & conflict minerals: The need for supply chain leaders

Michael Gibb, Global Witness //

The best time to plant a tree is twenty years ago. Or so goes an old proverb.

It is also the best time to start thinking seriously about sourcing minerals responsibly.

In recent years the links between conflict, human rights abuses and the minerals trade have been increasingly well documented and understood. While some conflicts are fought over control of mineral resources, others have deeper roots, but are still intensified and prolonged by the cash and economic incentives the trade can provide.

And while some armed groups are willing to suffer the hardships needed to profit directly from mining, many prefer instead to prey on those who have little choice but to face these dangers on a daily basis.

Elsewhere, in countries like Zimbabwe, resource-linked corruption on a grander scale has freed oppressive regimes and violent security services from national budgets and the oversight and accountability these bring, eroding the social contract and pushing already fragile states towards further conflict and instability.

The extractives sector ranked top of a 2014 analysis of international bribery cases conducted by the Organisation for Economic Cooperation and Development (OECD).

And while the resource-rich countries of the Central African Republic (CAR), the Democratic Republic of Congo (DRC) and South Sudan are home to just over eight per cent of Africa’s population, they account for almost forty per cent of the continent’s displaced population.

If there was ever a time when these problems could be dismissed as the concern only of others, it has long since passed. We know that many of the supply chains that take these resources to market make their way to Europe and North America, bringing with them a range of legal, financial and reputational risks to companies, investors and consumers.

At  the same time, they bring leverage and an opportunity to make a difference.

There is no single solution to conflicts and their links to the trade in minerals. But while no single piece is sufficient on its own, that does not mean individual pieces cannot each be necessary and essential.

The UN Guiding Principles on Business and Human Rights, operationalised in the minerals sector by the OECD’s Due Diligence Guidance for Responsible Mineral Supply Chains, make it clear that individual corporate responsibility is one such critical piece.

Like in other sectors – from textiles and food to financial services and waste disposal – companies are asked to take ownership of their supply chains and exercise appropriate due diligence when sourcing their minerals.

The OECD standard has now been established globally. It has been endorsed by all 34 OECD members, 19 non-members, and the UN Security Council. It is also increasingly reflected in domestic laws and guidelines, including section 1502 of the US Dodd-Frank Act, recently released industry guidelines for Chinese companies and legislative commitments made in the twelve states of the African Great Lakes region.

The EU is a surprising exception. It is lagging behind, with ongoing negotiations of its draft conflict minerals regulation threatening to undermine this standard and the consistency and level playing field it offers.

Despite this progress there is a great deal still to be done. Relatively few companies are doing due diligence to anything like the OECD standard, and fewer still are reporting on what they have done in any meaningful detail.

The debate is also still hampered by persistent misunderstandings of the process and its aims.

Making mineral supply chains more transparent and resilient to risk may seem like a daunting challenge. When faced with such a challenge it can be tempting to reframe it in more manageable terms. But solving a more manageable problem serves no one if it leaves the real issue obscured and untouched.

The “conflict minerals” narrative is too often framed by geography – most frequently by the geography of the DRC.

In some cases of semantic contortion, the meaning of ‘conflict’ has even been narrowed to be used synonymously with violence in eastern parts of Congo, as if armed confrontations and human rights abuses elsewhere in the world belong to a different category altogether.

The core concept of due diligence is not geography. It is risk. And risks are stateless and nomadic. They respect no borders and know no geography.

A flurry of recent reporting makes this clear. Child labour has been found in Congolese cobalt mines, but also in the gold mines of Ghana and Burkina Faso.

Armed groups have profited from CAR’s abundant mineral wealth, landing one EU company on the UN’s sanctions list for trading in gold and diamonds linked to a conflict that has displaced one fifth of the country’s population and left one in two in need of humanitarian assistance.

Recent reports have documented similar problems in Colombia, Mexico, and in Myanmar’s secretive jade mines. The trade in resources linked to conflict and human rights abuses is a global problem that companies must play their part in confronting, whatever they source and wherever they source it from.

VIDEO: Cobalt Mining in the DRC (Amnesty International)

The responsible sourcing debate should focus on how companies do business, not where.

As any successful company knows, risk is not necessarily a bad thing. Risks that are identified and well managed are called opportunities. The danger lies in unidentified and unmanaged risks.

No one, therefore, is asking companies to avoid risk entirely. Rather, companies are being asked to take ownership of their supply chains and to do something about the risks that can link their activities to human rights abuses and conflict financing – especially when sourcing from producing, processing, or transit countries where these risks are especially high.

Avoiding risk entirely is neither a requirement of the due diligence process, nor responsible. It may even be self-defeating, as it comes with risks of its own.

Divesting from a country or area simply because some additional care and diligence is required risks seriously disrupting local livelihoods and betrays a business model premised on indifference and a ‘don’t ask, don’t tell’ policy that is no longer defensible.

The process of proactively identifying and mitigating risks in supply chains – and reporting publicly on efforts to do so – gives companies a practical means of honouring their responsibilities and a clear means of signalling their good standing to customers.

If done well, this can double as a defence in cases where something goes wrong.

We are often told that due diligence on mineral supply chains is difficult. There is some truth to this, but not for the reasons most often cited.

The primary difficulty lies not in the technical or logistical challenges companies in the minerals sector have always made it their business to overcome, but in the conceptual shift needed to make real ongoing management of these risks part of doing business as usual.

This process will take time. More time than many of the trade’s victims have. Changing the way minerals are sourced by keeping this process on track and moving forward at pace will require leadership from progressive companies willing to show what is possible while others drag their feet and look for loopholes.

These companies know the second half of the proverb. They know that the second best time to plant a tree is today.

 

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