Some of you may have heard about last week’s SEC (U.S. Securities and Exchange Commission) decision that will require American electronics manufacturers to trace and publish where and how they get their raw materials. I’m talking specifically about those minerals deemed ‘conflict minerals’: cassiterite, which is used to produce tin, wolframite, used to produce tungsten, coltan and gold (though platinum is mysteriously absent form this list), which come from the Democratic Republic of the Congo and it’s immediately neighbouring countries. Well, after a lengthy and overdue process since the enactment into law of the act demanding this regulation, the final form of the rules are here. So should we celebrate?
Of course, even though I think the real victories are the changes that some members of the consumer electronics industry have already made, voluntarily. Sure, many of these were in preparation for the SEC’s final regulations. And sure, they may have done so to avoid potentially more binding, stricter regulation when the decision finally comes through. But these changes are a huge step in the right direction, and the added transparency required by the SEC will certainly benefit investors, especially those who want to put their money where their ethics is. In a nutshell, the regulations will require electronics manufacturers to submit an annual report, beginning in 2014, which tracks their supply chains all the way back to where the minerals were mined. If those minerals came from DRC or any nearby countries, then the companies must publicly provide evidence that they exercised diligence to avoid using conflict minerals, including a private audit certifying that those minerals are conflict-free.
The rules and regs are a move towards increased transparency, but they lack teeth due to opposition (and even threat of litigation) by some key industry groups, including the U.S. Chamber of Commerce. For example, some companies can declare the origins of their minerals indeterminable, if they were mined sufficiently in advance of the legislation. Also, its pleasing that the audits are to be carried out by someone other than the company potentially doing the infringing, but the new SEC rules have a long way to go before they begin to resemble something like the Kimberly Process for conflict diamonds, a joint civil society/industry/government venture with the participation of 77 different countries. But then again, maybe the voluntary actions of industry leaders like Intel and Apple (that’s right, Apple doesn’t have a patent on the use of conflict-free minerals) are indicative of an electronics industry that’s ready to self-regulate, or indicative of a changing market that favours electronic gadgets that don’t fuel civil war. Fingers crossed, because the SEC didn’t include any real enforcement mechanism for companies found to be in violation of the rules. And let’s not forget that these rules only apply to companies listed on the U.S. stock exchange: sure, that’s most of them, but not every major electronics manufacturer is listed on the NYSE.
There’s no denying that the rules will cost companies money. There are no exceptions, no minimum allowed amount of conflict mineral per product before a company must meet annual reporting and auditing obligations. So what I’m afraid of here is that some businesses will jump ship, moving their supply chains elsewhere. As the Enough Project has said, it’s important to make sure that conflict-free doesn’t mean Congo-free. What’s required is systemic change, something EWBers can all rally around, not just withdrawing from the region to avoid the problem.