When They’re Not Worried About Regulations, Companies Aren’t Worried About Conflict Minerals Disclosures


Back in the heady days of 2014, with a wildly different Presidential administration, Section 1502 of the Dodd-Frank Act required companies to submit conflict minerals disclosures to the U.S. Securities and Exchange Commission (SEC). For the first time, transparency around conflict minerals became mandatory, and it made a huge difference. Before Section 1502, with the exception of diamonds, supply chain transparency was an afterthought for many companies. Our favorite laptop and auto brands weren’t necessarily funding conflict minerals, but trusting them and their suppliers at their word didn’t count for much. However, with the implementation of 1502 and transparency on the rise, it seemed like we were well on our way to a corporate world that didn’t support destabilization in the Congo region. But 2017 is, as ever, full of unpleasant trends.

This is the fourth year that companies have filed conflict minerals disclosures. By now one would think that companies know the ropes. They know what the expectations are from Responsible Sourcing Network (RSN), human rights groups, and impact investors. RSN, along with Enough Project, first issued a list of expectations in 2012 and we have been scoring against them ever since. In this year’s sample pool of 206 companies, only nine companies, or 4% (Intel, Microsoft, Qualcomm, Apple, Royal Philips, HP, Alphabet, Nokia, and General Electric) were in the top three categories – superior, leading, strong – while 175, or 85%, were in the bottom two categories – weak and minimal. Comparing 2016 to 2017 in our annual analysis, 80% of the companies achieved lower scores.  

Why did the majority of the companies do so poorly this year? It was likely a combination of reasons, but the main one is that many companies are not taking their SEC disclosures as seriously this year as years past due to the numerous political attacks on 1502. The decision to not enforce due diligence requirements by the SEC’s former Acting Chairman Piwowar deprived the law of its meaning and added dangerous uncertainty – uncertainty that some companies did not fail to notice. Political efforts to dismiss Section 1502 have also been fruitful. On September 13, the House of Representatives passed an amendment to the 2018 Appropriation Bill that would gut the SEC’s enforcement of Section 1502. This action was preceded by a leaked Executive Order drafted by President Trump, which threatened to suspend the conflict minerals section on the foolish notion that a law aimed to curb funding for armed groups involved in rape and mass violence somehow threatens the national security of the United States.

The data proves that without regulatory threat, corporations won’t act to secure basic rights for those mining the ore that allows us to send messages from our smart phones, to fly in airplanes, or to wear gold jewelry. Some companies in the technology sector and the jewelry industry have publicly stated they will continue their efforts to address conflict minerals whether there is a law or not. However, the majority of companies in industries with less public visibility, like integrated oil and gas companies, steel, building materials, and business services sectors are reporting as little as possible and are not willing to take a public stand for human rights. All of these mentioned industries had scores in the weakest category the last two years, and received even lower scores this year. One company, Walmart, lost over 30 points. It ended up with the worst score in our sample group because it didn’t file a disclosure with the SEC at all, and gave no explanation as to why not. Consequences, consequences.

What are the impacts if a company doesn’t address its link to conflict minerals? For starters, investors are taking note. RSN’s annual Mining the Disclosures report makes it easy for investors to compare the performance of companies within an industry group. Some big investors are concerned, as demonstrated by the position of investors representing $5 trillion in assets under management, to maintain a robust 1502 SEC rule. Investors could make adjustments to their portfolios if they have apprehensions about a company’s ability to manage risk. For example, one smart investor (Domini Impact Investments) did not see progress from BP on its safety record, so chose to keep BP out of its portfolio. Several months later Domini saved a lot of money when BP’s stock tanked due to the Deepwater Horizon oil spill. Linked to a company’s responsibility to its investors is maintaining a license to operate. This issue is intrinsically a social and moral responsibility to the mining communities in the Democratic Republic of the Congo. Without a peaceful and stable Congo, companies may not have the minerals they need to make their products.

Why are companies so resistant when the accomplishments around Section 1502 have been so astounding? The legislation has spurred collaboration and has led to multi-industry efforts like Responsible Minerals Initiative (RMI), which has verified over 77% of eligible smelters and refiners processing tin, tantalum, tungsten, or gold are sourcing their minerals responsibly. Over 200 mines are now certified conflict-free, and governments and businesses are working together to support certified conflict-free mining projects in the region. This level of collaboration within and across governments, businesses, and supply chains is unprecedented, and likely would not have happened without the legislation.

There is a better way forward. The leaders highlighted in the report should be commended. Their efforts are evident, and continuous, to improve their conflict minerals supply chain risks. The companies that have fallen short need to step up. They’re out of excuses. It is overdue and initiatives are already in place to provide strong mechanisms for action. The claim that concrete resources are lacking to allow companies to fulfill their duty is pure fiction. The positive impact on the ground will only grow as more companies take responsibility and get involved, and demonstrate a growing market for responsibly-mined minerals. The time has come for companies to integrate into their daily procurement practices their responsibilities to their stakeholders, and more important, to the people of Congo.