How To Stop Conflict Minerals From Killing Congo

If you thought the 2010 financial regulation law was just about stopping the next financial crisis, you wouldn’t quite be correct. Contained in its 848 pages is an unusual provision that has little to do with Too Big To Fail or bringing transparency to derivatives trading. It’s about minerals.

Or, to be exact, conflict minerals from the Democratic Republic of Congo, whose civil war is fueled by trade in tungsten, tin, tantalum, and gold. Section 1502 puts a disclosure requirement on publicly-listed companies to say whether their products contain conflict materials, and to report that information to investors. And it’s likely that major names from the electronics and automotive industries will be affected soon.

70 companies currently have no idea whether their products are 'conflict-free.'

The U.S. Chamber of Commerce has lobbied to weaken the provision (though Microsoft, General Electric, and others have distanced themselves from those efforts), but the U.S. Securities and Exchange Commission is set to enforce the law in the next few weeks. Which leaves companies no choice but to beef up their due diligence procedures--no easy task. PricewaterhouseCoopers says 70 companies currently have no idea whether their products are "conflict-free", while 49 say their supplies could be disrupted.

So what should they, or any other company concerned about the issue, do? A report published in May by Global Witness, a U.K.-based campaign group, gives some practical suggestions. In line with U.N. and OECD guidelines, it recommends strengthening systems to trace minerals to where they were mined; identifying ways in which payments may end up in military hands; being ready to take action if those risks materialize; having independent audits; and publicly disclosing what steps have been taken.

The report encourages collaboration to make the job easier. "Companies can choose to pool their resources to carry out on-the-ground risk assessments and can enlist external experts to help them, as long as the companies retain responsibility for the information gathered and their response to it," it says.

It won’t be easy--though, as campaigners, lawmakers and peacemakers agree, public disclosure is the less painless way forward. Stopping the trade completely would harm both U.S. and DRC companies, and probably raise prices for consumers. This way, the trade stays intact, but has a chance of becoming a little less harmful.