Technology / Your mobile may have a dark past

Your mobile may have a dark past

Ever wondered what goes into the making of everyday electronic goods? It might not be what you think.  

The minerals used in the manufacturing of mobile phones, IT equipment and other electronic goods in your house could well have a shady background.

The four most common natural resources found in these products – tin, tungsten, tantalum and gold – collectively go by another name: conflict minerals. Mined in countries torn by civil war such as the Democratic Republic of Congo (DRC), the sale of these resources has been used by armed groups to finance conflicts in the region.

Although efforts have been made internationally to reduce the trade in these materials entering our supply chains, there is a debate going on about whether they go far enough.   

Regulating conflict minerals                             

Regulations such as the Dodd-Frank Act, introduced in the US in 2010, have compelled companies to undertake due diligence on their supply chains if they suspect their materials come from areas such as the DRC. In the EU, new legislation the EU Conflict Minerals Regulations comes into force in January 2021.  

Regulations such as the Dodd-Frank Act, introduced in the US in 2010, have compelled companies to undertake due diligence on their supply chains if they suspect their materials come from areas such as the DRC. In the EU, new legislation the EU Conflict Minerals Regulations comes into force in January 2021.  

“It is a good thing that we do have some regulation coming into the EU,” says Elizabeth Cooper, research and policy manager at The University of Edinburgh – the first higher education institution in the UK to adopt a conflict minerals policy. “Having the EU policy is great for raising awareness and [the notion] that we have to do something about this issue now, but it is not as strong as some people might think.”

The EU legislation only requires companies in danger of importing conflict minerals to take steps, Cooper explains. If a company is reporting electronic products that already have minerals in them, then the rules do not actually apply to them.

Reputational risk          

But even if the regulation does not cover everything, there are consequences for companies found to be knowingly using conflict minerals – perhaps most crucially, the reputational risk.

“This has been driving a huge amount of action, starting from the brands like Apple and going straight down through to the supply chain,” says Andrew Britton, founder of Kumi Consulting.

“Linked to that is a rapidly growing awareness [from] banks, who are the financiers of this industry. They provide liquidity and increasingly [they] are asking questions about what sort of operations their money is being used to support.

“They are very nervous about being found on the wrong side of the argument or inadvertently funding something which is going to be linked to some quite serious issues.”

What can companies do?            

Britton stresses that companies should be following the OECD due diligence guidance developed in 2011. The guidance looks at what steps firms should be taking in the management of systems, assessing risks and auditing, and how they should transparently report on supply chain due diligence. The guidance applies to any level of the supply chain.

“It is certainly making quite a big difference in terms of driving action,” continues Britton. “[But], that said, it is still a long way to go, and different companies move at different paces. There is still a very large segment of [the] mineral supply chain that is moving very slowly on this issue.”

“It is certainly making quite a big difference in terms of driving action,” continues Britton. “[But], that said, it is still a long way to go, and different companies move at different paces. There is still a very large segment of [the] mineral supply chain that is moving very slowly on this issue.”

It is hard to eliminate conflict minerals completely, points out Cooper. “We find it really difficult from a public procurement perspective because we do not manage our own supply chains,” she says. “We don’t choose anything beyond the brand that we buy from – it is impossible to know what exactly is going on, as the supply chain is so complicated. That is the main challenge that companies need to focus on transparency more.”

Cooper, who worked on the university’s adoption of the policy, says: “We make sure procurement staff include relevant questions to suppliers in the process about conflict minerals and the suppliers report to us about what they are doing. It is about keeping that issue on the agenda in the procurement process.”

The policy has helped raise awareness, says Cooper – not only among staff, but other institutions that the university buys products with collaboratively, as well as the suppliers 

themselves. She recommends businesses become a member of the Responsible Minerals Initiative, which dispenses advice and templates for reporting about conflict minerals.

“They are very nervous about being found on the wrong side of the argument or inadvertently funding something, which is going to be linked to some quite serious issues”

Are conflict minerals the only problem?      

Britton also believes companies should look wider than simply the use of conflict minerals in their supply chain. He mentions the mineral cobalt, which is used to manufacturer lithium-ion batteries. Its production has been linked to child labour, and around 50 per cent of its reserves worldwide are found in the DRC.

Instead of focusing on a country or certain minerals, he says, companies need to do due diligence on their mineral supply chain as a whole. “Don’t just assume if you are not sourcing from the DRC there are no risks, because that is not the case,” Britton points out.

Instead of focusing on a country or certain minerals, he says, companies need to do due diligence on their mineral supply chain as a whole. “Don’t just assume if you are not sourcing from the DRC there are no risks, because that is not the case,” Britton points out.

He explains that companies can no longer presume themselves to be conflict-mineral free by simply eradicating any associations with the DRC from their supply chain. “Companies will have to work out where their materials are coming from, and if they are coming from high-risk areas then further due diligence is required,” he says. “For many companies the most significant environmental or social risk to their business actually resides in the supply chain. What companies should be doing is actually working out what the raw materials in the supply chain are. What are the critical dependencies?

“If a company is found to have child labour in their supply chain and they are a consumer brand, they are going to risk the sales of their products. The stock of a listed company could take a pummelling because people start to ask questions, or the brand becomes tarnished. That is a cost.”


 

By Joanne Frearson, Business Reporter


Originally published in Business Reporter Online: June 2018

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