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Intel's lead on conflict minerals presents a human rights challenge for business

Source: Thomson Reuters Foundation - Thu, 13 Mar 2014 05:02 GMT
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In a 2009 file photo, gold miners form a human chain while digging an open pit at the Chudja mine in the Kilomoto concession near the village of Kobu, 100 km (62 miles) from Bunia in northeastern Congo. REUTERS/Finbarr O'Reilly
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Intel Corp has spent more than five years figuring out how to rid its supply chain of minerals that finance violence in the Democratic Republic of Congo region, and now it is offering to show other companies how they can do the same.

Intel’s offer to “open source” its methods for verifying that none of its products contain minerals from armed groups involved in the DRC conflict could save other companies significant amounts of money and give them a head start in meeting new U.S. regulations that require them to certify their products are conflict free.

“For us, this has always been about doing the right thing,” Intel CEO Brian Krzanich said at a meeting in the U.S. Senate offices on Wednesday with DRC officials where he announced the move.

Its decision to work on stanching a multimillion dollar mineral trade - used by rebel groups to finance one of the world’s longest running and most brutal conflicts - stands in contrast to how leading representatives of corporate America have responded to the tragedy.

The U.S. Chamber of Commerce, Business Roundtable and National Association of Manufacturers have sued to overturn or limit the conflict minerals rule, adopted by Congress in 2010. They argued before the U.S. Court of Appeals in January that it is impractical, too costly, and would force them to make political statements about the content of their products, in violation of their First Amendment freedom of speech rights.

At the heart of their arguments is that business should not be dragged into fundamentally political issues and that they should not be held responsible for righting the wrongs of the world. Strategically their lawsuit is a pushback against the trend for global corporations to take more responsibility for labour conditions, environment, corruption and human rights - issues that traditionally were the realm of the state.

Over the past two decades, transnational corporations have grown bigger and more powerful than many states where they operate, and their global supply chains have turned them into empires affecting broad swathes of people. With that power has come new responsibilities. At first corporations embraced voluntary accords to address human rights concerns, starting with audits of fair labour standards after child labour scandals in the garment industry in the 1990s. But the Rana Plaza factory collapse in Bangladesh in April 2013, which crushed more than a thousand workers to death, exposed the limitations of corporate compacts and audits of their supply chain.

Voluntary accords have succeeded in setting a commonly agreed set of global standards, said Arvind Ganesan, director of the business and human rights division of Human Rights Watch. The technology industry has agreed on privacy standards; security standards have been negotiated. The United Nations has formed the Global Compact for business members who sign up to a common framework for human rights, labour, environment and anti-corruption. The U.N. Guiding Principles on Business and Human Rights in 2011 lay out responsibilities.

But voluntary accords can only help so much.

“The strain today is that we never intended voluntary accords to be the only ones. Our thinking was that they would become law because we rarely see companies or governments adopt human rights out of enlightened self interest,” Ganesan said.

Enter the legislative mandates. Anti-bribery laws have spread in many countries over the past decade. The U.S. and the European Union both require extractives companies to disclose payments to governments in a bid to counter corruption, and there is the U.S. conflicts minerals rule. 

In the United States, corporate lobbies have challenged both the extractives disclosure and conflict minerals laws in court, arguing they overreach and impose too heavy a burden on business. Certainly they can carry sizable costs. The Securities and Exchange Commission estimates that about 6,000 companies are affected by the conflict minerals rule and it will cost them between $3 billion and $6 billion to check their supply chain, with ongoing annual costs of  $207 million to $609 million.

This is where Intel comes in. Carolyn Duran, Intel’s director of supply chain, said it took a long time to develop its system for bagging, tagging and verifying minerals as they reach the smelter. Now the costs are manageable and other companies can benefit by learning from its experience.

The benefits are tangible, said Faida Mitifu, the DRC ambassador to the United States. At first reduced demand caused hardship in communities dependent on illegal mines, but as violence has ebbed, it has helped foster peace, she said.

“It has had a significant impact and created a more responsible chain,” Mitifu said. “The government has worked closely with the mining companies and put in place a system of certification, and we have noticed very positive progress in terms of the industry, and inward investment. More and more, we are exporting clean minerals.”

Who would want to oppose that?

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