This week, the Securities and Exchange Commission ruled in favor of a bold and humanitarian new disclosure requirement. Publicly traded companies will soon be required to disclose whether the products they make use what are known as conflict minerals.
In other words, investors and the public will have access to information on whether their favorite gadgets and products included human misery in their supply chains. Although the situation still isn't perfect, there are signs of continuing progress in this area from both the SEC and some members of corporate America.
Conflict in Congo
Conflict minerals include substances such as gold, tin, tungsten, and tantalum, and are sourced from Eastern Congo and nearby war-torn African countries. These substances are called conflict minerals because they fund armed groups in Eastern Congo.
When most of us fire up our smartphones and other fun gadgets, we don't think about the way the sourcing of their mineral components contributes to abject human misery and terror far from our own backyards and comfy living rooms.
Congolese militia groups that have taken over the mining of these minerals use tactics like violence, murder, rape, and extortion to control the mines. Child labor and even genocide are allegedly occurring in Congo as we speak.
The SEC's ruling is controversial; this disclosure requirement was required under Section 1502 of the Dodd-Frank Act but has faced many hurdles, not least of which is corporate America's distaste for the rule. For example, the U.S. Chamber of Commerce may sue to block the requirement.
Meanwhile, John C. Bradshaw, executive director of the Enough Project, which stewards the RAISE Hope for Congo campaign, pointed out that the one-year delay before the SEC even made this ruling is a disappointment, as is the two-year phase-in that buys companies some time before implementing any supply chain clean-up as Congolese citizens suffer.
Leaders and losers
Some companies have already made some impressive steps in making their supply chains conflict-free ahead of the regulation.
The Enough Project recently released its 2012 Company Rankings on Conflict Minerals, which illustrated companies that have proven themselves leaders or losers in this arena.
Here are some worthwhile steps by huge companies:
- Intel (Nasdaq: INTC) was the first company to publicly commit to a completely conflict-free product: a microprocessing chip planned for 2013.
- Apple (Nasdaq: AAPL) gets accolades for being the first company to disclose 175 smelters in its supply chain, and requires its suppliers to use audited, conflict-free smelters when they are available.
- Sony, Advanced Micro Devices (NYSE: AMD), SanDisk (Nasdaq: SNDK), and several other huge electronics manufacturers have improved their efforts by more closely surveying their suppliers, conducting early due diligence procedures, and joining a smelter audit program.
Enough highlighted two companies for their outstanding degree of leadership in the area. In addition to the achievement outlined above, Intel has gotten involved with a smelter audit committee, an industry association group on conflict minerals, and has visited Eastern Congo. Hewlett-Packard (NYSE: HPQ) has made such steps as vowing to use only conflict-free smelters when enough are available, being the most active corporate participant in diplomacy efforts in Congo, and signing on with a stakeholder group asking for strong SEC regulations.
One company deserves a thorough walk of shame on this issue. Nintendo's Wii and DS may seem like such touchy-feely products, but that company has made absolutely zero known effort to keep an eye on its supply chain at all.
Conflict-free would make far smarter smartphones
Information is power, and consumers deserve to know what kind of supply chain produced the items they support with their discretionary dollars. Investors need to be aware of the risks and ramifications of brutal, inhumane supply chains as well.
Free information and awareness help markets work smoothly, and consumer and investor dollars can push corporations to act responsibly, both here and abroad. A future without conflict in our favorite electronic gadgets would be a far better one; as shareholders and part owners of public companies, let's push to ensure our companies' profits don't rely on human beings paying terrible tolls elsewhere in the world.
Apple and Intel are both making some impressive moves in this area. If you're interested in reading about Apple inside and out, check out our new premium report on the iDevice giant by clicking here. If you prefer to learn about the leading chip maker, don't miss this premium report on Intel.
Check back at Fool.com for more of Alyce Lomax's columns on environmental, social, and governance issues.
