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Tuesday, September 2, 2014

Act Now to Avoid the Taint of Conflict Minerals

Time is wasting for procurement officers who have not established viable and ongoing reporting procedures for their conflict mineral supply chains. Not only could they violate U.S. law and SEC rules, they might face sanctions in Europe and Canada, pressure from customers, and a public backlash that affects their brands and valuations.

This is because concern over conflict minerals doesn’t begin and end with the U.S. government. Canada introduced the Conflict Minerals Act earlier this year. While it hasn’t become law, it intends to expand the sanctioned areas in Africa where conflict minerals are extracted, broaden coverage to include other derivatives of the ores from which tantalum, tungsten, tin, and gold — 3TG — originate, provide no exemptions for scrap or recycled materials, and allow no leeway in determining whether materials are or are not from conflict mines.

Tin ore, a conflict mineral. Credit: ENOUGH Project

The European Commission had planned to draft similar legislation by late this year. The initiative has been pushed back to 2014, but observers agree it will be forthcoming and wide-ranging in coverage and requirements.

Add to these the various programs in the works at industry organizations — among them the U.S. Automotive Industry Action Group — and corporations, as well as reports of various U.S. states that are looking at banning procurement of products made with conflict minerals, and it’s clear that companies should start following the rules as soon as possible.

Even if companies meet lenient U.S. compliance requirements in the short term, there is already building backlash from activists against conflict minerals. Two notable efforts are underway in Canada alone.

According to reports, the Just Minerals Campaign is working to raise consumer awareness of the issue, in its effort to force manufacturers to produce a “fair trade cellphone” (tantalum is an important component of electronics). STAND Canada, formed to raise awareness of genocide in Africa, launched the Conflict-Free Canada Initiative earlier this year to publicize the issue of conflict minerals and the suffering they create.

As with the “blood diamonds” movement of the 1990s, conflict minerals are gaining traction as a social cause as well as a business issue. Don’t be surprised if celebrities are soon recruited to promote “conflict-free” electronics and other consumer goods and movies and television exploit the theme.

Meanwhile, activists have cited a number of electronics companies over their alleged use of conflict minerals. Last summer, for example, Nintendo came under fire by Walk Free, an anti-slavery group, which claimed the company’s corporate social responsibility guidelines regarding conflict minerals, posted on its website, were not a “substantive” policy.

Other companies are making a point to promote their consumer-targeted efforts at conflict minerals compliance. Ford and Harley-Davidson are among those that have been especially proactive in keeping the public — and their dealers — aware of their commitment not to use conflict minerals and efforts to purge them from supply chains.

Clearly, there is a public relations downside to conflict minerals — which can be turned into an upside with careful and strategic moves.

The conflict minerals issue has the potential to become a defining moment for companies’ brands and public image. Now is the time to put a plan in place that satisfies legal requirements both short and long term and addresses any concerns that consumers and other customers might have.



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