Consumer Electronics Takes the Lead in Conflict-Free Sourcing

Consumer electronics companies are more advanced than jewellery retailers in promoting conflict-free sourcing from the Democratic Republic of Congo, according to a just-released NGO report.

The Enough Project carried out an in-depth study of 20 well-known brands that source gold, Tin, TUNGSTEN and TANTALUM (3TG) in their supply chains.

And it has published a ranking on their efforts to improve supply-chain transparency and support conflict-free mining in the DRC.

Although other sectors also source 3TG, the report focuses on consumer electronics and jewellery. This is because they "have demonstrated the potential to be catalytic in the development of new policies and practices regarding responsible sourcing, and they are also particularly attuned to consumer pressure."

Apple, Alphabet (Google), HP, Microsoft and Intel were ranked highest in the consumer electronics industry, with Apple making the top score of 114 out of a possible 120 points, plus an additional eight points in extra credit.

There were two opportunities for extra credit: for taking steps to ensure the company’s minerals did not originate from national parks; and for making financial contributions to the Conflict-Free Smelter Program (CFSP) Initial Audit Fund.

Toshiba, Samsung, Sony and IBM were the lowest scorers in the consumer electronics sector.

Signet and Tiffany came top in jewellery retail, with Walmart and Neiman Marcus scoring the least points.

Companies from this sector generally lagged far behind, with the remaining eight jewellery retailers scoring between zero and 20 points.

Annie Callaway, report author and advocacy manager at the Enough Project, said the results of the company rankings showed that "some are beginning to more thoroughly understand and embrace due diligence and responsible sourcing practices". But she added that "all companies that use these minerals should commit additional resources in support of a truly conflict-free mining trade."

This means "actively contributing to collaborative multi-stakeholder and livelihood initiatives in order to build long-lasting systems that benefit the Congolese people, consumers, investors, and corporate supply chains alike," she said.

Criteria

Companies were ranked, based on four criteria:

conducting conflict minerals sourcing due diligence and reporting;

developing a conflict-free minerals trade and sourcing these from Congo, particularly gold;

supporting and improving livelihoods for artisanal mining communities in Eastern Congo; and

conflict-free minerals advocacy.

The report noted that many of the ranked companies "have consistently improved the quality of their due diligence programmes, including developing and implementing more sophisticated risk management processes and moving beyond annual reporting."

It recommends that companies:

improve and support public reporting on supply-chain due diligence;

conduct continuous due diligence, not just annual reporting;

engage in multi-stakeholder projects to design and support progressive initiatives;

support conflict-free sourcing opportunities and livelihood opportunities in mining communities with financial investment and public support; and

"set the bar higher" by continuing to improve efforts.

It also calls on other industries, including aerospace and defence, medical equipment, automotive and banking to join the effort to build transparency in global supply chains and "create behavioural shifts that favour responsible business".

Strong legislation

The report also says that companies’ efforts needed to be "bolstered by strong legislation, which reinforces the importance of collective efforts to address conflict minerals."

It calls on members of the US Congress to reject any amendments to defund or repeal Dodd-Frank Section 1502, which the NGO says would "undo significant progress made over the past five years, since the law was implemented".

Dodd-Frank Act Section 1502 requires publicly traded companies to conduct due diligence and report to the Security and Exchange Commission (SEC) on whether their sourcing of 3TG is supporting armed groups in the DRC or its neighbouring countries.

Meanwhile, the US treasury department has called for scrapping the rule requiring disclosure related to conflict minerals, as well as other parts of the Dodd-Frank Act.

Acting SEC Chairman Michael Piwowar issued a statement in April, suggesting that the agency would not seek enforcement for failure to submit 'enhanced disclosure' documents, but companies are reported to have largely continued the practice.

On 3 November Bill Huizenga (R-Michigan), chair of the House Financial Services Monetary Policy and Trade Subcommittee, introduced bill (HR 4248) to the House of Representatives. Its aim is to amend the Securities Exchange Act of 1934 to repeal certain disclosure requirements related to conflict minerals, and for other purposes.

Mr Huizenga also added a provision to the pending appropriations bill that would bar funding for enforcing the provision.

Methodology

Companies were first contacted about the Enough Project’s intention to rank them in February and were given one month to respond to the survey questions.

The NGO then consulted with the companies to find out extra information and reviewed their websites and SEC filings.

It is the fourth ranking the Enough Project has conducted since its first in 2010.