We blogged about the situation in the Democratic Republic of Congo (DRC) yesterday. In the post, United to End Genocide Executive Director Bama Athreya wrote:
We all are connected directly to this conflict through our cellphones, computers and cars, and one thing each one of us can do immediately is to support efforts to curtail the lucrative minerals trade that fuels the weapons trade — “conflict minerals.”
Fortunately — thanks to pressure from activists across the country — Congress took action in 2010 to address the issue of conflict minerals in Congo. However, implementation of the law is now being delayed by a federal agency known as the Securities and Exchange Commission (SEC).
Companies, consumers, investors and, importantly, Congolese citizens cannot afford to wait for the SEC to prolong issuance of disclosure rules concerning conflict minerals any longer. Companies remain in a position of uncertainty without clear guidance on how to source conflict-free minerals from DRC. This uncertainty causes significant risks to investors and leaves consumers without a valuable accountability tool. The greatest uncertainly is to Congolese citizens fighting for safety in their country that has recently been further destabilized by the re-election of the incumbent president, Joseph Kabila, which has been challenged by the United States and much of the international community for being highly fraudulent.
The U.S. congressional intent behind the Congo conflict minerals provision (section 1502) of the Dodd-Frank Wall Street Reform and Consumer Protection Act is to stop the flow of revenues from minerals sales to armed groups. These armed groups perpetuate extreme violence, particularly sexual- and gender-based violence in DRC. Some mines in eastern DRC are taxed or controlled by armed groups that smuggle these minerals into neighboring countries like Rwanda and Uganda for shipment to smelters in Asia that are later used as components in final products purchased by U.S. consumers every day. However, not all mines are funding these groups and legitimate mines can serve as a significant source of revenue for Congolese citizens.
When Dodd-Frank was passed in July 2010, Congress tasked the SEC with promulgating regulations to implement its requirement that publicly traded companies submit and make public on their websites an annual report disclosing the origin and chain of custody of any conflict minerals in their supply chain. Submissions should also describe products manufactured or contracted to be manufactured that may contain minerals that directly or indirectly finance or benefit armed groups in DRC or neighboring countries. These minerals, found in everyday electronics such as mobile phones, video games and cameras, include tin, tantalum, tungsten and gold. If a company should find that it does not source conflict minerals from DRC or its neighboring countries, it must still disclose the process it used to reach this conclusion.
Greater transparency in the form of more thorough corporate reporting is essential to customers and investors alike. Customers gain the opportunity to make more informed decisions with their purchasing power – which matters to companies – and to demand that companies honor the responsibility to respect human rights. Corporate disclosures pertaining to responsible sourcing practices for minerals in a standardized and more comparable manner allow investors to protect shareholders from reputational, regulatory, legal and operational risks. Indeed transparency alone will not break the link between the violence in DRC and the extraction, trade and transport of conflict minerals.
A more comprehensive approach to achieving peace and stability in DRC involves reforms to the Congo’s weak governance and security sectors, as well as an empowered Congolese civil society. Yet the knowledge and information derived from stringent disclosure requirements will allow U.S. consumers and investors to support the Congolese as they work toward peace and stability, and perhaps just as important, to hold corporations accountable to responsible sourcing practices free of conflict minerals.