Conflict Minerals: Navigating Ethical Sourcing Challenges

The mining industry faces increasing scrutiny over the sourcing of conflict minerals – raw materials extracted in areas of armed conflict and human rights abuses, primarily in the Democratic Republic of Congo (DRC) and adjoining countries. 

These minerals, when traded, can perpetuate violence and exploitation in these regions.

The term ‘conflict minerals’ typically refers to four specific metals: tin, tantalum, tungsten, and gold, known collectively as 3TG. These minerals are essential components in various industries, including electronics, automotive, and construction. Tin is used in solders and alloys, tantalum in capacitors, tungsten in cutting tools, and gold in electronics and jewellery.

The mining of conflict minerals often involves severe environmental, social, and governance (ESG) transgressions. These include forced labour, child labour, and dangerous working conditions. Environmental damage is common, with unregulated mining leading to deforestation, water pollution, and soil degradation. The profits from these mines frequently fund armed groups, perpetuating cycles of violence and instability.

Dodd-Frank Act & conflict mineral regulation

In response to these issues, various international laws and regulations have been established. The US took a significant step with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Section 1502 of this act requires companies listed on US stock exchanges to disclose their use of conflict minerals.

The Securities and Exchange Commission (SEC), which oversees US financial markets, implemented rules in 2012 to enforce the Dodd-Frank Act's conflict minerals provisions. These rules mandate that companies conduct due diligence on their supply chains and report their findings to the SEC. This has led to increased transparency and awareness in the mining industry.

The European Union has also taken action. In 2021, the EU Conflict Minerals Regulation came into force. This regulation applies to EU-based importers of 3TG minerals, requiring them to conduct due diligence on their supply chains. 

The aim is to ensure that 95% of all EU imports of tin, tantalum, tungsten, and gold are sourced responsibly.

Responsible Minerals Initiative 

For mining companies and businesses using these minerals, ensuring responsible sourcing can be complex. 

The Responsible Minerals Initiative (RMI), an industry-led organisation, provides resources to address these challenges. The RMI's Responsible Minerals Assurance Process (RMAP) assesses smelters and refiners to determine if they have systems in place to source minerals responsibly.

Companies can use the RMI's list of RMAP-conformant smelters and refiners as a starting point for their due diligence efforts. By prioritising suppliers who source from these certified facilities, businesses can reduce the risk of inadvertently supporting conflict through their mineral purchases.

Mining industry grapples with supply chain transparency

The mining industry must navigate these regulations while maintaining profitability and meeting market demands. 

This often requires significant investment in supply chain transparency and traceability technologies. Companies are increasingly mapping their supply chains to identify potential sources of conflict minerals, often tracing materials back through multiple tiers of suppliers.

Some mining companies have implemented blockchain technology to enhance traceability. This allows for the creation of an immutable record of a mineral's journey from mine to end-user, providing greater assurance of responsible sourcing. However, implementing such systems can be costly and technically challenging, particularly for smaller mining operations.

The issue of conflict minerals extends beyond the 3TG metals. Cobalt, a crucial component in batteries and increasingly used in renewable energy technologies, has been associated with similar issues in the DRC. As demand for cobalt grows, driven by the shift towards electric vehicles and green energy, the mining industry must address these concerns proactively.

Mining companies are also exploring alternative sourcing regions to reduce reliance on conflict-prone areas. This includes developing new mines in more stable regions and investing in recycling technologies to recover minerals from electronic waste. These strategies can help mitigate supply chain risks and reduce the industry's exposure to conflict mineral issues.

The challenge of conflict minerals highlights the interconnectedness of global supply chains and the responsibility of the mining industry to consider the broader impacts of its operations. As regulations evolve and stakeholder expectations increase, mining companies must stay informed and adapt their practices accordingly.

For the mining industry, addressing conflict mineral issues is not just a matter of compliance but an opportunity to contribute to more stable and ethical global resource markets. By prioritising responsible sourcing, the industry can play a crucial role in promoting peace and sustainable development in conflict-affected regions.

Bindiya Vaki, CEO and co-founder of risk management specialist Resilinc says that, according to a PwC’s Global Investor Survey, ensuring responsible supply chain practices have become top priorities for investors when considering which businesses to lend their support and resources to. 

"Supply chain ESG regulations are changing and evolving all the time," she says, "and businesses must stay on top of them."

She adds: "So whether it is unethical sourcing of products or the danger of forced labour companies could be at risk of compliance issues which, in turn, could lead to serious supply disruptions.

"This is why deep visibility into sustainable and ethical business practices should be part of a company’s CSR and/or ESG programme."