Initial company reports submitted under a landmark U.S. law that aims to stop the minerals trade fuelling violence in eastern Democratic Republic of Congo (DRC) are disappointing, warns Global Witness.
U.S.-listed companies that manufacture products containing tin, tantalum, tungsten and gold from the DRC and its neighbours have until June 2nd to file their first Conflict Mineral reports with the Securities and Exchange Commission (SEC) under the Dodd Frank Act's Section 1502 (known as the conflict minerals provision). The provision aims to break the links between the DRC's vast mineral wealth and the violent armed groups that profit from the trade.
"While some firms have made strong submissions, most reports filed to date don't include enough information to show that companies are doing credible checks on their supply chains," said Sophia Pickles, a campaigner for Global Witness. "Companies must step up their efforts to demonstrate that they are sourcing responsibly - or they risk being in breach of the law."
Companies that source minerals from DRC or a neighbouring country must report on the steps they have taken to check their supply chains and assess risk - a process known as due diligence. But Global Witness is concerned that a number of the conflict minerals reports already filed with the SEC do not contain adequate detail.
"Done properly, these reports should give consumers and shareholders a crucial window onto what companies are doing to ensure they are buying minerals responsibly," said Pickles. "However, the failure by some companies to disclose meaningful information suggests they have not taken the necessary steps to find out what is really going on along their supply chains."
Many of the reports filed so far raise serious questions about the quality of due diligence being carried out by companies. In particular:
some companies have published minimal - if any - information on their efforts to determine which countries the minerals in their products are sourced from;
the majority of companies have not demonstrated how they assess their suppliers' due diligence practices;
the majority of companies have not demonstrated the steps they have taken to identify and mitigate the risks in their supply chain; and
only one company, Intel, has so far obtained an audit of its conflict minerals report.
As the June 2nd deadline looms Global Witness calls on companies to step up their act. They should submit comprehensive, clear and detailed information about their supply chain due diligence in line with international standards set out by the Organization for Economic Co-operation and Development (OECD) and mandated by Section 1502. This should include an audit of the due diligence section of the reports. Independent audits are a critical part of the OECD framework and help ensure that reports are accurate and credible.
"Section 1502 has already catalyzed positive changes in the way that U.S.-listed companies approach the sourcing of metals in the DRC," said Pickles. "Companies that do not provide adequate detail on the systems they have put in place to source responsibly risk breaching U.S. law. They also lay themselves open to speculation about whether they are doing enough to avoid contributing to conflict and abuses through their mineral purchases."
Global Witness is monitoring and evaluating the substance and quality of the reports with a view to assessing the extent of company efforts to source minerals responsibly and is available for comment.
At the time of publishing, 39 companies had submitted filings with the SEC.