Raw materials extraction in conflict regions
What are “conflict resources”?
Rare metals such as tungsten, tin, coltan and gold can be found in many products we use every day, including mobile telephones and computers. One important mining area for these metals is in the east of the Democratic Republic of the Congo (DRC). Because of its ongoing conflicts between armed groups, which regularly spill over into attacks on the civilian population, the DRC is known as a “conflict region”. The situation is escalating in the east of the country in particular. The warring factions are using raw materials to finance their operations – either by trading with them directly or by charging commodity traders illegal taxes.
How can we stop conflict resources from entering the global supply chain?
There are various possible approaches, but it is hard to know which is best. The United States responded by passing the Dodd-Frank Act. It stipulates that US listed companies must provide information on the origin of the tungsten, tin, tantalum and gold their products contain. Why? Because these ores, designated as “conflict resources”, might come from the DRC or from one of its nine neighbouring countries. If they do, the US companies must prove that the money paid for the ores did not help finance armed groups.
Is the obligation to provide proof feasible?
It is certainly not easy to provide proof. Hundreds of different components are used to make electronic devices, for example. It is practically impossible to prove the “clean” origin of each of the individual raw materials along the entire supply chain – especially since the raw materials themselves have already passed through seven to twelve production steps before they even get into the final product. The influence these companies have on raw materials producers and on mining conditions is very limited. We should also remember that onsite extraction is usually not carried out by large companies, which would have regulated structures and international networks, allowing buyers to exert pressure on the sellers to improve conditions. In the DRC, ores are extracted by around 500,000 “freelance” miners at thousands of individual pits, which cannot possibly all be monitored. And yet only round-the-clock monitoring can guarantee that the raw materials are extracted and traded in a manner that is genuinely conflict-free.
So, ultimately, such a strict law generates pseudo-transparency only. It does not provide 100-percent certainty that all the raw materials are conflict-free. It is practically impossible for small and medium-sized enterprises in Germany to fulfil the requirements of this law. Blanket laws like the Dodd-Frank Act also have damaging side effects for the affected countries.
What are those side effects?
Let’s take Congo as an example again. Because they find it impossible to provide the required evidence that raw materials are conflict-free, many companies are now avoiding importing from Congo altogether. But a general boycott of this nature also punishes those Congolese raw materials producers who do work responsibly. They can’t sell their commodities, even if they are clean. Ultimately, that destabilises the whole country. Many thousands of former soldiers work in Congolese mines. It doesn’t help anybody if those men lose their jobs; in fact, it increases the likelihood that the civil war will flare up once again. People have to feed their families somehow – and one way to do that is by working as a mercenary. We must stop that from happening. The stability the region so urgently needs can only come about through economic development. Also, an Oeko-Institut study found that resolving the conflict in Congo is a much more complex issue than simply curbing the trade in conflict resources.
What other ways are there of solving the problem?
We have to look at the start of the supply chain, not the end. So instead of forcing raw materials buyers in industrialised countries to provide questionable evidence of the materials’ origins, we should engage with the countries of origin. Support needs to be given to responsible mining projects in those countries, and there needs to be a gradual increase in the availability of certified raw materials. There is high demand for “conflict-free” raw materials, and that demand is being fuelled still further by industry efforts such as the Conflict-Free Sourcing Initiative and many others. But because the affected countries of origin have only been able to offer very limited amounts of certified raw materials to date, those countries are often no longer considered as suitable supply sources.
What must policymakers do?
They need to establish reliable structures in Congo, for example. Only when we are able to actually say what mine what resource comes from, and to ensure general safety and the necessary infrastructure, will the conditions be in place for monitoring local mines and trade channels. Someone sitting at a desk in the United States or Europe is not in a position to track who is involved in the extraction and trade of raw materials, and whether, for example, illegal customs duties are being used to finance armed groups. Monitoring all of this and enforcing the applicable laws must remain the duty of nation states. It is not a task that can be delegated to the private sector.
What is industry doing?
Sustainability and transparency are of great importance to us, including in raw materials policy. German industry is working with various initiatives such as Bettercoal and the Aluminium Stewardship Initiative to promote responsible and sustainable raw materials acquisition. At the same time, there are a whole host of initiatives that are specifically tackling the issue of conflict-free raw materials. They include the CFSI and the LMBA, the World Gold Council’s “Responsible gold mining” report, and the Responsible Jewellery Council.
What is the EU doing about the problem?
The European Commission has presented a generally well-balanced proposal for dealing with raw materials from conflict regions – although we believe it still contains several weaknesses and ambiguities. The Commission envisions a voluntary self-certification scheme and aims to offer companies incentives to participate in the scheme. It also plans to set up supporting measures in mining locations. The European Parliament, on the other hand, wants to introduce a law along the lines of the US model – which we regard as problematic, for the reasons outlined above. The BDI is taking part in the political process on behalf of German industry and hopes that, in the end, a solution will be found that can realistically be implemented by those involved and, at the same time, will have a genuinely positive effect in the countries in question.