Conflict Minerals in the Democratic Republic of Congo. Ann Durrant Managing Director

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1 Conflict Minerals in the Democratic Republic of Congo Ann Durrant Managing Director

2 Why conflict minerals are an issue in the DRC Deadliest conflict since WW2 High demand consumer products Financing armed groups Widespread human rights abuses Picture here Exploitation

3 What we want to achieve Traceability Legitimate minerals Conflict free not Congo free Congolese benefits Picture here

4 What we plan to do Research and Report Analysis of situation What can be done Business perspectives Recommendations Develop process to achieve objectives Do something!

5 What is currently being done? Initiatives Dodd-Frank Act OECD Guidance Industry Initiatives Regional Initiatives

6 Benefits of Dodd-Frank Act Pioneering legislation Impacting profits Demilitarisation Facilitating reform Cleaning up supply chains

7 Issues of Dodd-Frank Act De-facto embargo? Vague Costly Safer countries Unemployment

8 What do we want from you? Perspectives Experiences Issues Picture here Possible solutions

9 To be continued. Next steps Volunteers for interviews Produce report March 2012 deadline

10 Thank you

11 Dodd Frank Act The most notable new legislation can be found in Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which has which has opened the door to peace and stability in the DRC. [1] This groundbreaking legislation is the first of its kind to attempt to increase transparency in the minerals sector in the DRC and is one of the biggest efforts ever mounted to clear up the supply chain. The Act focuses on the conflict minerals of cassiterite, columbite-tantalite, gold, wolframite or their derivatives, and requires companies to disclose annually the conflict minerals that they use from the DRC in their manufacturing process. It requires all publicly trading US companies to report due diligence on their supply chain for the four conflict minerals previously mentioned, from the DRC and adjoining countries. These reports must be publicly disclosed and must include an independent private sector audit, which should include the facilities used to process the conflict minerals, the country of origin of the conflict minerals and the efforts to specify the mine or location of origin. 1] Enough Project US Conflict mineral law opens the door to peace in the DRC

12 OECD Guidance Core of guidance is the OECD s aim to produce transparent mineral supply chains with a view to allow countries to benefit from their natural mineral resources and preventing the mineral trade from contributing to conflict, human rights abuses and insecurity. It outlines that in practice, companies should take the following steps to exercise due diligence: Identify the factual circumstances involving the extraction, transport, handling, trading, processing, smelting, refining, alloying and manufacturing/selling of products that contain minerals from conflict-affected and high-risk areas Identify and assess any actual or potential risks by evaluating the factual circumstances against standards set out in the company s supply chain policy Prevent or mitigate any of the identified risks by implementing a risk management plan. These may result in a decision to continue trade throughout the course of risk mitigation efforts, temporarily suspend while pursuing ongoing risk mitigation or disengage with a supplier after failed attempts at mitigation or where the company deems mitigation not feasible or or the risks unacceptable[2] [2] OECD Due Diligence Guidance for Responsible Supply Chains

13 Industry Initiatives The Tin Industry Association ITRI has developed itsci, the ITRI Tin and Tantalum Supply Chain Initiative due diligence scheme, which is currently being implemented in Rwanda and in the Katanga region of the DRC. The aim is to track tin and tantalum from extraction from the mine to the point of exportation by the comptoir (trading house). The Electronics Industry Citizenship Coalition (EICC) and the Global e-sustainability Initiative (GeSI) has launched a voluntary Conflict Free Smelter Programme for buyers and smelters. Companies that use minerals from the DRC and surrounding countries are required to provide proof that their purchases in their supply chain do not contribute to the ongoing conflict. Motorola Solutions for Hope Project is a pilot initiative to source conflict free tantalum from the DRC for Motorola Solutions products. Working with a tantalum capacitor supplier and key suppliers, Motorola have created a closed-pipe supply line, that will create a flow of tantalum that is conflict free, enabling miners to work whilst developing conflict free systems in the DRC. It is supported by the development and implementation of the initiatives listed above. An independent auditor will validate the project so it can be used by other companies wishing to ensure that their supply chains are conflict free while continuing to source minerals from the DRC.

14 Regional Initiatives The Minerals Tracking and Certification System from the Great Lakes Region of Africa, was adopted by eleven African heads of state in December As a result, Rwanda claims to have begun tagging 95% of its domestic minerals.[3] The German Federal Institute for Geosciences and Natural Resources (BGR) has piloted a Mineral Certification scheme in Rwanda, which has involved developing certified training chains (CTC). CTC s require specific mine sites to be certified by an independent third party audit and minimum standards for origin and CSR to be introduced, which are based on the guidance set out by the OECD. A bill in California has been drafted that would prohibit the state government from doing business with companies that fail to comply with federal regulations on conflict minerals. This is likely not to affect too many companies, only those that the Securities and Exchange Commission has filed a civil or administrative enforcement action against. However, this legislation reflects increasing significant concern regarding the ways minerals are sourced and how they are contributing to the ongoing conflict in the DRC. [3] The Enough Project, Certification: The Path to Conflict-Free Minerals from Congo

15 Issues of Dodd-Frank Act De-facto embargo? Vague and costly Despite its best intentions, the Dodd Frank Act has been widely criticised for being too vague (the SEC has delayed it proposed final rules until some time between August and December this year) and costly to implement and more harmful to those it was designed to help the Congolese people. The National Association of Commerce in the US has estimated that the new regulations will cost companies between $9-$16 billion a year to implement, while the Securities and Exchange Commission estimate the cost to be more around $71 million per year.[4] Safer countries and unemployment Most recently, in an article published in the New York Times at the beginning of August, David Aronson describes how Congress devastated Congo as it has brought about a de facto embargo on minerals in the region, [5] with smelting companies choosing safer countries to source their minerals and effectively boycotting the region. According to Aronson who visited the Kivu region this summer, scores of small-scale, artisanal miners have been put of work because of the legislation. [4] Bloomberg Business Week, A Rule aimed at Warlords upends American Mines [5] How Congress Devastated Congo, David Aronson, New York Times, 7th August 2011

16 Benefits of Dodd-Frank Act Pioneering legislation Impacting profits and Demilitarisation In response, NGO s such as Global Witness and the Enough Project along with a collection of 40 Congolese Human Rights groups, have come out in support of the legislation referring to it as the leverage needed to instil and impose ethical business practices in the Great Lakes Region [6] and declared that the US was commendable for pioneering a legislation to tackle this most complex issue. Since the passing of the Dodd-Frank Act, NGO s on the ground in the DRC claim that it is having a direct impact on the profits of armed commanders and use the demilitarisation of the Bisie mine as evidence that the Dodd-Frank Act is having the desired effect. Facilitating reform and cleaning up supply chains The legislation is facilitating some reform, pushing companies to investigate their supply chains thoroughly and to clean them up. The fragmented supply chain process means that companies are not immune from risk of contributing and being associated with risks. Companies have a responsibility to conduct due diligence in identifying and trying to prevent risks associated with conditions in which minerals are extracted and the relationships with suppliers. [6] A Conflict over Conflict Minerals, New York Times, 15th August 2011, Cleaning up supply chains