In 2010, in the course of the massive Dodd-Frank financial regulations package, the United States Government adopted a series of disclosure rules aimed at easing the harm done by conflict minerals, specifically Tin, Tantalum, Tungsten and Gold, to the Democratic Republic of the Congo and surrounding countries.
Determined to thwart the conflict mineral regulation, the United States Chamber of Commerce, the Business Roundtable and the National Association of Manufacturers, all major trade groups, have fought the requirements in court. Most recently, in January 2014, the groups argued in front of the U.S. Court of Appeals for the District of Columbia that such regulations were invalid.
Despite the appeals of their representative industry groups, several companies have taken public stands in favor of the requirements and worked to eradicate conflict minerals from their supply lines. While several companies should be lauded for their efforts, Intel has proven itself ahead of the curve in this vital goal.
While the processes used by Intel to clean out its supply line are diverse, the general goal has been capacity building. Whatever the expectations of multinational corporations, the Democratic Republic of the Congo simply does not have the capacity to regulate labor, human rights, ethics or sustainability requirements.
This is a problematic truth that companies outsourcing to or using materials from countries with low capacity, in particular those with poor governance, a major problem south of the Sahara, must deal with.
Doing the right thing
By assisting suppliers build up their capacity to regulate such issues, it creates a much more sustainable model. This way, when Intel and similar companies, or various Western governments, set expectations for environmental, human rights and labor compliance, suppliers can ensure they are met, rather than being forced to repeat the onerous process of building compliant facilities and procedures.
The company’s CEO, Brian Krzanich stated Intel’s goals succinctly. “For us, this has always been about doing the right thing.”
In addition to the company’s success in removing conflict minerals from its supply chain, it has challenged others to do so and offered to help in the process.
According to Reuters, this is an important step in getting other companies to work towards conflict-free production. The Securities and Exchange Commission guesses that nearly 6,000 companies will be affected by the regulation and banishing conflict minerals from their supply chains will initially cost somewhere between $3 and $6 billion with substantial ongoing costs, up to $700 million annually.
Intel knows first-hand the costs associated with this important goal. The company has been working for nearly five years on the project, with affiliated costs finally reaching manageable levels. The company figures others can learn from its experiences. Gary Niekerk, the Director of Intel’s Corporate Social Responsibility program has already worked with prominent corporations such as Hewlett Packard and Apple.
While no one doubts Krzanich’s assertion that the goal of the project has been to reduce the horribly bloody war fuelled by conflict minerals, Intel has also acknowledged the public relations boost to taking on such an important project.
Counting the inherent costs
Niekerk told Forbes that “sustainability issues may not be at the center of most consumers’ buying decisions, but if you look at the trends it’s becoming more top-of-mind.”
Being at the forefront of this movement can only help Intel in the long run.
In an interview with Forbes, Niekerk recalled the beginnings of Intel’s conflict-mineral free production. He said that after receiving a troubling letter on the havoc caused by conflict minerals from a number of non-governmental organizations there was an internal meeting. Costs were not discussed, neither were potential business benefits.
According to Niekerk, Krzanich’s mentality was simple; “the situation in the Congo is terrible and [he wanted] Intel to be a part of the solution, not part of the problem.” While at the time Intel had no idea the difficulties or costs that would come along with auditing the supply line, they do now.
In the same Forbes interview, Niekerk warned that such corporate social responsibility is contagious.
“I remember a situation where we wanted to drill a water-well at one of our sites outside the U.S. We had the legal right to do this and the return on investment (ROI) seemed pretty straight forward; that is until we started asking questions around the sustainability of the underling aquifer, the impact of the job losses resulting from the loss of our revenue to the local water municipality, the public’s concerns of private companies accessing ground water, and “what if” scenarios related to drops in water supply or water quality due to extended drought or climate change,” he told Forbes.
Intel has worked for years to make its products conflict free. The company’s success is an important step in eradicating horrific violence from the Democratic Republic of the Congo and surrounding countries, fueled by western demand for electronics and the minerals used to create them.
At the moment powerful lobbying groups are asking American courts to invalidate the rules that will force companies to disclose conflict mineral use. Intel has gone the other direction, inviting other companies to utilize its years of work and expertise to ensure that they too can be part of the solution.
