Thursday, July 22, 2010

Corporate Accountability on Conflict Minerals

A new US law does not do enough to sever the link between natural resources and conflict. However, it's a good start. Here's why.

“Rider” legislation – passed mainly because it is tacked on to the end of unrelated, yet popular bills – is frequently seen as an example of how elected officials (ab)use procedures to boost their own popularity with constituents.

However, one such rider has been widely heralded. According to a small clause in the major financial reform bill President Obama signed into law this week, American companies are now required to publicly disclose whether they have attempted to ensure that their products are free of “conflict minerals” from the Democratic Republic of the Congo.

Civil society activists praised the new law, saying that it is an important measure that may help separate consumer goods from conflict.

Indeed, there are good reasons to support this bill. While its proponents do not claim it will solve conflict in the DRC, it has taken a concrete step on the issue that mandates some action on the part of corporations. It is a realistic first step that has the potential to project the issue of conflict minerals onto a larger political agenda.

Industry officials, such as those from Hewlett Packard, also supported the legislation. Although it might seem strange that the tech industry would welcome further regulation, it is important to note that the bill does not impose penalties on companies that report taking no action. Some have criticized the bill for doing too little and failing to exert sufficient pressure on corporations to exert transparency. The law is mainly useful for concerned consumers who want to distinguish between companies that monitor their minerals and those that do not, and make purchases accordingly.

It is true that there is little reason for corporations to fear the new regulation. However, there are potential ramifications for corporations that should be considered before criticizing the new law.

Now, corporate executives can exercise less plausible deniability when pressured to address allegations that their products contain conflict minerals. This is especially true when a corporation’s competitors are taking steps to investigate their own supply chains.

Pressure will come not only from consumer activism, but from increasing competition in the tech sector. Transparency on conflict minerals could become a selling point.

Although this law is a positive development, further steps must be taken to stop minerals from funding conflict. The most urgently-needed measure is an international convention on the supply of minerals commonly linked to conflict, similar to the Kimberley Process on Diamonds. Although more research is needed into how mineral supply chains could be tracked to the source, this is perhaps the only measure that has the potential to hold both corporations and producers sufficiently accountable.

For now, though, this rider law is a pretty good start.

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