High Tech Weighs Risks & Rewards of Moving Beyond China
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The globalization of the electronics industry has presented both opportunities and challenges for the supply chain. As electronics companies source more raw materials from around the globe, practices associated with the mining of minerals have come under scrutiny. While initiatives such as the Dodd-Frank Act in the U.S. have improved conditions in certain regions, such efforts are not yet all-encompassing. A group of leading electronics and automotive companies has recently launched an effort to expand responsible sourcing practices across a wide range of materials and geographies.
The Responsible Raw Materials Initiative (RRMI), co-sponsored by the Electronic Industry Citizenship Coalition (EICC) and the Conflict-Free Sourcing Initiative (CFSI), will examine the use of a variety of minerals in the electronics and automotive supply chains. Dodd-Frank, which focuses on tin, tungsten, tantalum and gold (3TG), seeks to curtail human right abuses in the Democratic Republic of Congo (DRC). Members of RRMI -- which includes Apple, Cisco, Dell, Ford and HP, will review additional raw materials and geographies for possible inclusion in their responsible sourcing strategies.
Bob Mitchell, vice president of social and environmental responsibility at EICC
Even before the adoption of the Dodd-Frank “conflict minerals” act, electronics companies were taking steps to identify and mitigate adverse social and environmental impacts from the mining sector. Now there’s a growing body of research that points to effects from a variety of metals and materials, according to Bob Mitchell, vice president of social and environmental responsibility at EICC. The mining of cobalt, for example, has been linked to child labor in certain geographies, he said in an interview. As a group, electronics and automotive companies can drive change throughout their supply chains. "What's been missing is the effort to sew the various sourcing initiatives together so the electronics industry can invest in the efforts we feel will be the most productive," he said. The RRMI fills that gap.
The EICC has a history of collaboration and multi-industry solutions development to positively impact social change, Mitchell points out. Members of the EICC carry significant economic clout. The coalition is comprised of more than 110 electronics companies with combined annual revenue of greater than $4.75 trillion. Members agree to and promote practices and recommendations to bring about positive social and environmental change.
The responsible sourcing of raw materials, said Rob Lederer, executive director of the EICC, is a complex issue that requires a collaborative approach with governments, civil society and multiple industries. "By working together, we believe we can have a greater, more positive impact and help members meet current and future market, legal and regulatory expectations," he said in a statement.
Segments of the electronics industry have objected to Dodd-Frank which requires publicly traded companies in the U.S. to disclose the use of 3TG in their manufactured products. Compliance with Dodd-Frank, companies have argued, is time-consuming, costly and onerous. However, a majority of electronics companies are complying with the law, according to Conflict Mineral Benchmarking Study RY2015. Among the top 25 compliance leaders of 2015 were component makers Qualcomm, Intel, Cree, Nvidia, Microchip and QuickLogic.
Many public companies are embracing the spirit of Dodd-Frank in an effort to "do the right thing," according to Dr. Chris Bayer, author of the study. "These companies want to know for themselves if they are possibly funding armed groups. They not only want to know themselves but they feel they owe it to their employees and their shareholders.”
The RRMI will also be ahead of the curve as more conflict minerals legislation is being considered. The European Union’s conflict minerals plan expands beyond Dodd-Frank’s scope to include more minerals and geographies. The plan requires smelters and importers of raw materials to be able to trace the origin of certain minerals and is based on the OECD's due diligence guidance for responsible supply chains of minerals from conflict-affected and high-risk areas.
The RRMI, which is currently operating as a working group within the EICC, is using international standards such as the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights as guideposts. Its first order of business, said Mitchell, will be to assess materials and geographies according to risk and prioritize the areas in which participating companies can have the most impact.
Along with participating companies and cross-sector partners, the RRMI will develop proposals and recommendations to drive social and environmental improvements in mineral and metal supply chains. Throughout this process, the RRMI will serve as a focal point for engagement with interested stakeholders such as governments. The RRMI will develop a mechanism for partners, stakeholders and other companies that are not EICC or CFSI members to participate.
Response to the initiative from EICC members and outside organizations has been overwhelmingly positive. Mitchell presented the plan to multiple international organizations during the recent UN Forum on Business and Human Rights and has met with numerous other organizations. “We see a lot of potential for engagement and getting this effort off the ground,” he said. “There are great things to come.”
The effort is likely to have the desired result. The Conflict Mineral Benchmarking study found that compliance leaders can positively influence their supply chains. Businesses that have performed due diligence on their supply chain have been able to establish that they are only consuming clean 3TG while not boycotting the DRC.
EICC and CFSI members can participate in the RRMI by signing a declaration of support that demonstrates their companies’ commitment to the principles of the RRMI. For more information, visit www.eiccoalition.org/initiatives/RRMI or contact RRMI@eiccoalition.org.
The EICC is a nonprofit coalition of leading electronics companies dedicated to improving social, environmental and ethical conditions in their global supply chains. The CFSI is a multi-industry initiative with over 340 member companies and has been instrumental in developing the Conflict-Free Smelter Program, the Conflict Minerals Reporting Template, Reasonable Country of Origin Inquiry data, and a range of guidance documents on responsible sourcing 3TG.
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