Europe’s conflict minerals conundrum

The EU will have to tread carefully when considering which minerals and countries to include in its upcoming conflict minerals legislation.

Many of these industries are niche and inflexible meaning any swift and significant change will likely have a negative impact on the EU and on the source country that the legislation is designed to clean up.

For example, the Democratic Republic of Congo relies heavily on income from mining copper, tin, tantalum and cobalt. Not all raw materials exported from the Congo, or central Africa for that matter, are associated with armed rebel groups.

European lawmakers have to be careful not to discriminate against these legitimate sources.

Before enacting the legislation, they should look at each mineral industry individually and the role played by the country under scrutiny. For example, 55% of cobalt concentrate comes from the Congo, while 60% of flake graphite and 85% of rare earth elements are from China.

All are key ingredients in the technologies we use on a daily basis, yet there are no major replacements for supply from these areas in the short term.

Adding the “conflict” label to either minerals or countries could badly disrupt these small industries, causing supply shortages, price spikes and ultimately having a negative impact on western end users.

There is also a huge risk of developing a toxic reputation for countries like the Congo, destroying their main source of revenue, and making the conflict much worse.

These central African mining areas are vast and fragmented: hundreds of mines operate to feed raw material concentrate to the country’s smelters, which produce metal for export. Local economies and workers rely on this as their only source of income.

Western legislation will have to be crafted to ensure “conflict free” does not turn into “Congo free”. The goal should be to disrupt the cause of the conflict and not the legitimate local producers and end users of these minerals.

But it is a fine line.

According to an open letter from 70 academics and experts, the good that the landmark Dodd Frank legislation from the US intended, in reality it turned into a “de facto embargo” on raw materials from the Congo.

One positive of Dodd Frank is that it has forced major companies to disclose the sources of their raw materials. Apple Inc, for example, has created a Supplier Responsibility page on its website, a major step towards supply chain transparency. Apple even declared (in typical Apple fashion): “We hope our transparency inspires others to do the same.”

It is just the start, however, and major challenges still remain.

“The best [the US conflict minerals act] has done so far is to cause some slight anxiety from mostly electronics majors who worry about being named and shamed by the fact they have been receiving and using conflict minerals since 1994,” Chris Grove, President of Commerce Resources Corp explained to Benchmark.

“The situation has improved somewhat since the Dodd Frank was made law, it has been reported – especially by NGOs such as The Enough Project – and this is something I hope is true. However, I don’t think anyone believes that enough has yet been accomplished,” Grove added.

Political and economic complexities aside, the fact that both the US and the EU are now taking an active stance against conflict minerals means that ethical sourcing is just starting.

It is now down to the politicians to strike the balance between regulation and business so not to fundamentally damage these conflict-torn, developing countries to a state of complete disorder.

As Michael Gibb from Global Witness succinctly puts it: “It is not about changing where we do business but about changing the way we do business.”

The era of supply chain transparency has begun.