30th September 2013
Last week, Forbes.com published a piece by Tim Worstall in which he argued against the introduction of legally binding measures in the EU to tackle conflict minerals. The piece, titled ‘Global Witness’ Latest Silly Suggestion on Conflict Minerals’ argued for a voluntary industry-led scheme and suggested that the cost to business of implementing legally binding measures will be too onerous. Sadly, Forbes.com didn’t want to publish a separate article to present a different opinion to this one-sided piece. As such, we are publishing our full response below.
We need an informed debate to break the links between natural resources and conflict, not unhelpful rhetoric.
Right now, some of the world’s most brutal conflicts and human rights abuses are being funded by internationally-traded minerals and gems that enter the European market. Armed groups and violent security forces profit from the control of mines and trading routes in places like eastern Democratic Republic of Congo (DRC), Colombia, Burma, Zimbabwe and Central African Republic (CAR). Companies that list on our global markets buy these resources, often without regard for whether they are funding harm.
As the world’s largest trading bloc, the European Union has a responsibility to make sure that European firms are doing business responsibly. The best way to do this is not a voluntary, industry-led scheme – as advocated by Tim Worstall in his 23rd September piece on Forbes.com – but via legislation that requires companies using and trading natural resources from conflict and high-risk zones to check their supply chains and disclose whether they’re buying metals or gems that have fuelled conflict and abuse. Such legislation will be essential to break the link between natural resources and conflict and to develop a legitimate trade that benefits citizens and the economies of conflict-affected countries.
As the EU considers the detail of what its legislative standards should look like, it is unsurprising that some sections of the business community are arguing that the costs of compliance would be too high, and making the case for voluntary measures.
Worstall argues that it would be too costly for the EU to impose legislative obligations on companies, citing the US Dodd Frank conflict minerals legislation as an example. The fact that some US-listed companies who were not previously sourcing minerals from the eastern DRC have begun to do so since mandatory reporting was introduced is a clear indication that this law is not prohibitive to business. Moreover, the compliance costs being bandied around by US industry lobbyists are overinflated; Claigan, an independent environmental consultancy with expertise in supply chain management, found that some industry groups exaggerated the number of affected companies, grossly overstated the costs of compliance software and drew conclusions based on out of date information. Claigan has revised down their own estimated costs of compliance by more than 20 per cent, taking it to just over US$ 640 million for all companies covered by the law.
Worstall also exaggerates the number of companies legislation may affect, making the absurd claim that ‘your local coffee shop will have to write to the cutlery supplier to get a declaration that no conflict tungsten was used in the manufacture of the teaspoons.’ This seems to be the result of a misreading of Global Witness’s recommendation that due diligence regulations would apply to ‘any undertaking or natural person, initially placing the covered raw materials, or any product containing such materials, onto the market of any member state.’ The coffee shop would clearly not be the first entity to place the forks on the market and so would not have to do the due diligence.
Instead of legislation, Worstall advocates a voluntary, industry-led scheme which focuses on ‘fingerprinting’ minerals at processing plants to combat the conflict minerals trade. Any argument for voluntary measures to address the problem is seriously flawed. A decade and a half of UN and NGO reports exposing the links between conflict and minerals in eastern DRC failed to compel companies to look more closely at their supply chains. It is only since the US introduced legislation that companies have significantly changed their behaviour.
Moreover, Worstall’s support for ‘fingerprinting’ fails to address the complexity of conflict financing. While it may be possible to trace minerals from the processor back to the mine, this doesn’t reveal anything about what happened along the way. For example, it’s common for armed groups to tax the trade at roadblocks – these illegal and harmful revenues would not be picked up by traceability alone.
Effective legislation is good for business. It allows companies to mitigate the risk of reputational damage by facilitating responsible supply chains, and shores up their bottom line by establishing sustainable access to key natural resources. We are not calling for business to be suffocated by unnecessary legislation; we are simply calling for business to source responsibly. The only way to achieve this is via strong, legally binding EU legislation.
Annie Dunnebacke, Global Witness Deputy Campaigns Director