How and Why to Strip Conflict Minerals From Your Supply Chain

How and Why to Strip Conflict Minerals From Your Supply Chain

Congo mining - CC license by Flickr user Julien Harneis

Meeting the demands of a new U.S. law on conflict minerals will pose new costs and challenges to companies, but will also bring more transparency and supply chain standardization, while keeping less money from being funneled to violence-plagued areas.

One of the main things companies should do is act as soon as possible on the conflict mineral requirements of last year's financial reform bill, said Rory King, director of global product marketing for IHS, an information and analysis firm.

King and fellow IHS senior content solution strategist Scott Wilson laid out the steps companies should take regarding conflict minerals during a GreenBiz.com webcast, Green Products and Supply Chain Disruption: Conflict Minerals in the Supply Chain, sponsored by IHS.

Under the new law, companies must disclose to the Securities and Exchange Commission if they have potential conflict minerals in their supply chains from the Democratic Republic of Congo or other sources of conflict minerals. 

The law specifically points to the Democratic Republic of the Congo as a major source of conflict minerals. While the country is awash in natural resources with a mineral value of $10-24 trillion, Congo's gross domestic product is half that of Vermont, said Andrew Reese, editor of Supply & Demand Chain Executive magazine.

"The country has basically been in a state of conflict for more than 15 years in one way or another," Reese said. Corruption, slavery, child labor and rape are widespread, with armed groups controlling most of the major mines. 

The minerals in question are or are used to make tin, coltan, tantalum, tungsten, gold and other derivatives. While the issue of blood diamonds has made the jewelry industry a particular target for removing conflict minerals, most of the minerals here are used to make various electronics parts.

An IHS survey of companies found than just over half were even aware of the conflict minerals law. "A lot of companies don't have the processes in place to identify all of the regulations and anticipate the regulations that are being developed that will affect supply chains," Wilson said.

One of the challenges companies will face is to find out the actual source of what they use. "People that work on complex products have many, many layers in their supply chain," and will have to reply on other suppliers to gather critical information, Wilson said. 

The best things for companies to do, he and King said, are to start acting on the law immediately, reading up on it and understanding what they need to do. Companies will need to figure out their IT needs for gathering and storing information on their minerals. Companies can also get involved with industry efforts being led by groups like the Electronic Industry Citizenship Coalition and IPC.

Businesses should also be prepared for different scenarios, such as if they are called out for using conflict minerals, so they can respond with what they currently are, or aren't, doing to clean up their supply chain.

King noted that some companies have taken steps to have conflict-free chains by moving away from suppliers in Africa altogether. Suppliers can make themselves more attractive to companies by showing they are already conflict-free, which is more appealing to companies than having to delve into their current suppliers to determine their status.

Additionally, King said, companies need to be transparent on the issue and will benefit from having more-standardized supply chains that lower their costs and risks.

An archived version of the webcast will be available on GreenBiz.com.

Congo mining - CC license by Flickr user Julien Harneis