Home > Corporate Social Responsibility, Market change > Retailers Fight to Escape ‘Conflict Minerals’ Law

Retailers Fight to Escape ‘Conflict Minerals’ Law

December 2, 2010

“Top U.S. retailers including Wal-Mart Stores Inc. and Target Corp. are battling to limit a new federal law that could force them to report whether their store-brand goods contain minerals from war-torn Central Africa.

The requirement, part of the Dodd-Frank financial law passed in July, aims to pressure companies to spurn so-called conflict minerals—tin, tantalum, tungsten or gold from parts of the Democratic Republic of Congo or neighboring countries. Income from those minerals is blamed for fueling violence that has claimed millions of lives in eastern Congo, which a senior United Nations official recently branded the world’s rape capital.

Under the new law, public companies using any of the four minerals from Central Africa must report what steps they have taken to verify the minerals weren’t taxed or controlled by rebel groups. Products that don’t contain minerals that benefited such groups can bear the label “DRC conflict free.” Companies that fail to verify their sources can still sell their products, but could face embarrassment.”

Source: Wall Street Journal, December 2 2010

Observations:

  • Retailers don’t want to report what they did to control sustainable and responsible extraction and trading of the minerals used in their white label products. The law is designed to force sellers to disclose the sources they use for their products in order to make the use of ‘conflict minerals’ transparent to the public.
  • Similar government, industry and NGO-driven initiatives are deployed around the world, especially in the area of precious metals and gemstones.

Implications:

  • The new law forces ‘downstream’ retailers of final products to become more involved in the ‘upstream’ mining of the products. As miners have to comply with supply chain standards of the customers, the value chain becomes more integrated and more demand driven.
  • It is likely the mining industry will have to implement a REACH-like system to track and report the supply and origin of its products. Although it might take a decade or more to establish an industry standard, various miners are starting to implement internal systems.
  • The retailers are assuming a similar strategy as Nike did in the sweatshop supply problems it faced, taking the viewpoint that they are not responsible for the social responsibility of their suppliers. However, as complying to the new law would not cost them much and the potential consumer reaction is large, they would better give up their resistance and lead the change.

©2010 | Wilfred Visser | thebusinessofmining.com

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