By Charles King, Pund-IT, Inc. February 5, 2014
The finished state of consumer electronics products—bright and shiny in their meticulously sterile packages—fundamentally contradicts how they are manufactured. Anyone who has spent time on a factory floor knows this. The work is often dirty and occasionally dangerous, emphasized speed leads to injuries and the constant stress of repetitive motion and work quotas take other kinds of tolls.
But issues deeper in the supply chain—where and how common and critical base minerals are extracted, refined and prepared for production—also deserve attention. In many or even most cases, issues including the living and working conditions of miners, and the impact of these processes on the environment are pretty well understood. But not always, and that is especially the case in regions where political and economic conflict are rife.
Often in those places, the greedy elite benefit by brutalizing and terrorizing the vast majority of their countrymen and women. Nowhere in the world is this more common than in the Democratic Republic of Congo (DRC) where, despite the country’s mineral wealth, some 80% of its 65M+ citizens subsist on 30 cents or less per day and the average life expectancy (48 years in 2013) is among the world’s lowest.
The vastness of the DRC’s natural and mineral resources is hard to imagine. Along with being part of the world’s second largest rain forest, the DRC contains a wealth of strategic minerals, including cobalt, copper, zinc, gold, diamonds, silver, magnesium, germanium, uranium, coltan and petroleum. In fact, it is estimated that the DRC has anywhere from 64% to 80% of the world’s reserves of coltan (critical to electronics manufacturing), 34% of cobalt and 10% of copper.
But extracting and processing these resources comes at a terrible human cost. Many mines and smelting facilities in the DRC and adjoining countries depend on what are effectively slave laborers. Moreover, much of the general population is systematically terrorized both by government forces and their opponents. Hundreds of thousands of women have been raped by soldiers and militia groups. An estimated six million people have died as a result of political conflicts and related causes since 1996, and an average of forty-five thousand people die each month.
Conflict Minerals—The IT Angle
What does any of this have to do with the technology industry? Quite a bit, actually, from both legal and moral perspectives.
Let’s consider the former point first. In Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, gold, columbite-tantalite (coltan), cassiterite (tin) and wolframite (tungsten) which are mined in and near the DRC are identified as “conflict minerals” that the Securities and Exchange Commission (SEC) is tasked to regulate as part of a broader effort to destabilize their illicit trade and exploitation.
The Department of State issued guidance concerning due diligence in July 2011, and in November 2012, the SEC’s final rule implementing Section 1502 took effect, setting forth disclosure and reporting requirements relating to companies’ use of the four conflict minerals. In May of this year, companies using those minerals, which include virtually every major IT and consumer electronics vendor, will be required to disclose what they have done and are doing to abide by the regulations.
Some companies are addressing the issue in a highly proactive manner. For example, during his first CES keynote, Intel’s new CEO, Brian Krzanich, stated that the company had achieved a critical milestone, and that the minerals used in microprocessor silicon and packages manufactured in Intel’s factories are now “conflict-free” as concluded by third-party audits or direct validation by Intel’s supply chain organization.
That the company and its new CEO are moving forward so aggressively is hardly surprising. When he took on the job of overseeing Intel’s manufacturing facilities in 2009, Krzanich made eliminating conflict minerals a priority. In 2012 he set the milestones in place to create conflict-free CPUs and appointed Carolyn Duran as director of the program. The process was anything but simple; Intel contacted scores of smelters globally and personally met with the 60+ it engages directly. But while challenging and complex, the effort paid off.
Intel certainly isn’t alone in ridding its supply chain of conflict minerals. The Enough Project’s Raising Hope for Congo campaign has been tracking and ranking similar efforts by technology and electronics vendors, and while its current (2012) rankings are somewhat dated, they provide some insights on which companies are making progress (Intel, HP, AMD, Dell, Apple, Microsoft) and which need to work harder (Canon, Nikon, Sharp, HTC, Nintendo). All involved companies have time to get it right—there’s a two-year window to comply with the SEC regulations—but we expect the issue to be increasingly highlighted after the disclosure deadline in May.
The second and perhaps thornier issue related to conflict minerals is moral in nature. Technology and consumer electronics are enormous and enormously successful industries with immense and still-growing customer populations. But how popular will a company remain and how badly will its shiny packaging and reputation be tarnished if its material success requires the suffering and broken lives of enslaved workers, child miners and rape victims?
Some may dismiss the idea out of hand, believing that the global demand for technology is so high and public understanding of the DRC’s ongoing political and social conflicts is so low that negative side effects will be minimal. We consider that an unenlightened form of whistling past the graveyard which ignores the dedication of activists and the success of analogous efforts like those around conflict or “blood” diamonds.
But whatever the eventual impact of Section 1502 of the Dodd-Frank Act happens to be, Intel and the other vendors consciously flushing conflict minerals out of their supply chains are doing the right thing for themselves, their shareholders, their customers and the world.
© 2014 Pund-IT, Inc. All rights reserved.