Influencing mandatory supply chain due diligence
Responsible sourcing

Triodos urges for responsible sourcing of conflict minerals

Case Study

In 2015, the European Parliament voted for mandatory supply chain due diligence on conflict minerals for all EU importers, smelters and user companies. With its vote the European Parliament responded to the investor statements that Triodos Investment Management jointly initiated.

Responsible sourcing

For over a decade, Triodos has been supporting efforts to break the connection between the mining of so called ‘conflict minerals’ and the extremely violent conflict in the Democratic Republic of Congo (DR Congo) and its surrounding countries. Triodos has been engaging with companies in industries that use most of the minerals, discussing responsible sourcing and requiring a commitment from companies to avoid the use of conflict minerals.

Tantalum, tin, tungsten and gold are the best-known ‘conflict minerals'. They are used in a wide range of products, from cars to cell phones, and are often sourced from DR Congo. Revenues from the mining of these minerals have been used to fuel an extremely violent conflict in the region. Many mining sites are still controlled by militant groups or factions of the Congolese army. These gangs are responsible for ongoing violence and serious human rights abuses, including both child and forced labour.

Revenues from the mining of these minerals have been used to fuel an extremely violent conflict in the region.
Arthur van Mansvelt, Senior Sustainability Analyst Triodos Research

U.S. Dodd Frank Act boosted disclosure

In 2010, a landmark law was passed by US Congress to address this situation.  The Dodd–Frank Wall Street Reform and Consumer Protection Act requires U.S.-listed companies to provide disclosures about the use of tantalum, tin, tungsten and gold that emanate from DR Congo and the nine neighbouring countries. Investors have greatly benefited from the information provided in the disclosures. During our first year of reporting, over 1,300 companies disclosed their efforts to map the supply chains, partnering with their suppliers to identify and address social risks, and communicate to investors and consumers the implications of their mineral sourcing decisions.

It has also spurred collaboration across industries to collect supplier information and establish a verification system with smelters and refiners.

triodos-urges-for-responsible-sourcing-of-conflict-minerals-inline1
Tin is one of the most well-known conflict minerals.

Impact on the Congo region

The supply chain transparency required by the Dodd Frank Act does have impact ‘on the ground.’ It is transforming the very opaque mining sector originating in DR Congo and the region. While there is still much progress to be made, companies have begun to directly engage with upstream actors, smelters and miners, in the region. Participation by downstream companies, users, is occurring through responsible sourcing initiatives such as Solutions for Hope and the International Tin Research Institute’s Tin Supply Chain Initiative (iTSCI).

We engaged with thirteen companies in several different industries about the possible steps companies can take to assess their supply chain.
Arthur van Mansvelt

Companies can make a difference

But what about disclosure by European companies? A 2013 study by the Dutch Centre for Research on Multinational Corporations (SOMO) found that very few European companies disclose their use of conflict minerals on a voluntary basis. From around two hundred European companies assessed, only a few are affected by the U.S. legislation, and most do not report on conflict minerals at all. Concerned by this small number, we took the initiative to contact European companies that our SRI funds invest in to learn more about their awareness of conflict minerals and their motivation to carry out supply chain due diligence.

Level playing field required

The Dodd–Frank Act conflict mineral disclosure rules demonstrated how mandatory disclosure can make a difference. The Act has turned the issue from a brand reputational risk to a multi-sector reporting requirement.

As responsible mineral sourcing was not sufficiently taken up by businesses on a voluntary basis, Triodos encourages a European regulatory requirement of comparable structure and strength to create a level playing field. The resulting transparency would help businesses, consumers and investors make an informed choice and enable them to select companies that can credibly claim to offer or use conflict-free minerals.

However, early 2014, the European Commission published a proposal for a framework of voluntary self-certification with a focus on the smelters, and no obligations for the users of conflict minerals.

A strong plea for stricter rules

In October 2014, together with a group of responsible investors and organisations, Triodos Investment Management published a joint investor statement to the European Commission, the European Parliament, and the European Council, calling upon the EU policy makers to ensure more compatibility between the proposed EU conflict minerals regulation and the Dodd-Frank Act. The statement was initiated by a working group composed of Triodos Investment Management, Boston Common Asset Management, Calvert Investments, Eurosif, Responsible Sourcing Network, Trillium Asset Management and US SIF: The Forum for Sustainable and Responsible Investment and has been signed by other organisations. The letter was well-timed to become part of the debate in the European Parliament and in the Dutch Parliament.

On 13 May 2015, just prior to the final vote in the European Parliament, we (or the working group) published a final call to members of the European Parliament, reminding them to make supply chain due diligence on conflict minerals a priority and requirement for companies that use these minerals. On 20 May 2015, the European Parliament voted for mandatory supply chain due diligence on conflict minerals. Triodos sees this European legislation as another important step to offer minerals from ‘conflict free’ mines.

For an overview of Triodos Research engagement activities and how we influence the companies we invest in, please visit our socially responsible investing page.

The rights of all images of the article belong to Fairphone, a Dutch label that makes conflict free mobile phones.

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