Global Sourcing Can Lead to Ethical Issues

Technological advancements have led to an increased demand for the raw minerals required to make electronic gadgets and equipment used by individuals and businesses around the world. One of the most familiar electronic gadgets may be the smartphone. With technology companies, such as Apple, releasing new versions of smartphones as frequently as technology develops, the need for raw materials has naturally risen to keep pace with manufacturing. This has led to questionable material sourcing for tech companies, and placed the ethical issue of "conflict minerals" in the spotlight.

The term "conflict mineral" refers to anything extracted from a mine that is located within an active conflict zone. One of the worst conflict zones in the world is the Democratic Republic of Congo (DRC). It is also one of the most abundant in many of the resources, such as gold, tin, tantalum, and tungsten, that are vital to electronics manufacturing. Mineral mines within the DRC are often controlled by militias that treat much of the population, which is often subject to theft murder and rape, as an extension of the local lucrative resources. With the steadily increasing demand for electronics, a country rich in resources should begin to prosper. However, the valuable resources within the DRC have only profited the local militias, and intensified the chaos.

Since there has been no reliable way for electronics manufacturers to determine the exact origin of the resources that come from conflict zones, the ethical decision could be to cease all purchases from such locations. However, this may only further impoverish innocent workers, and incentivize dishonesty from material distributers that would continue to directly purchase conflict minerals from militias, and potentially claim they were responsibly mined.

Before 2010, there was ambiguity regarding where tech companies were sourcing the raw minerals that are used to make the electronic components in smartphones. Large and diverse companies were asserting that they lacked an awareness to some unethical business practices, such as sourcing conflict minerals, due their size and global reach.

In 2010, the Dodd-Frank reform bill took effect, and required the Securities and Exchange Commission (SEC) to determine a system that would require publicly traded companies to report whether any conflict minerals were provided by their supply chains. However, in 2013 The National Association of Manufacturers and the U.S. Chamber of Commerce, representing a large number of businesses, argued in federal court that the requirement was in violation of corporate free-speech rights. They won their case, though most businesses had not yet satisfied the requirement because of the challenge of checking every mine within their supply chain, and the complex relationships between the mines and the smelters.

After the reporting requirement was overturned, a large group of companies within the electronics industry, most notably Apple, Intel and Microsoft, established the Conflict Free Smelters Program (CFSP) which actively performs audits of smelters to determine if they are purchasing conflict minerals. Metals from audited mines are tracked by tamper-proof, tagged, and monitored bags, and the CFSP will only work with tracked materials. The Program also requires smelters to perform audits of the mines from which they source their materials, or lose business from the group of companies affiliated with the CFSP. Intel boasts that they have not only actively participated in the Program, but also helped some of the smaller smelters with funding their audit efforts when they lacked the resources to comply with the CFSP requirements.

Bribery and local corruption are still inescapable problems, however establishing a system was the first necessary step to eliminating the use of conflict minerals by the electronics industry. More importantly, conflict minerals that may work their way into the audited supply chain are limited, and the mines that are run by militias could be eventually found, and eliminated completely if more companies joined the effort.

Often, activist groups help bring both direct and indirect unethical behavior to the public's attention in the hopes of promoting change. Unfortunately, the Dodd-Frank disclosure requirement could have forced the change, but now it is up to a group of companies that have held themselves accountable, and worked to make their supply chains conflict-free with the optimism that other companies within the industry will be shamed into doing the same. If conditions improve around the world, it would be much easier for businesses to operate ethically, regardless of their size and global reach.


 By Joanna Trago

Article Source:  Global Sourcing Can Lead to Ethical Issues