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Ruling is a marker in efforts by human rights groups to place responsibility on multinationals for damage they can inflict on local communities
The human rights agenda inched forward this week when a court affirmed the bulk of a new U.S. regulation that requires businesses to check their supply chains on everything from jewelry to cars, planes and mobile phones for conflict minerals.
The ruling was another marker in efforts by human rights groups to place increasing responsibility on multi-national corporations for the damage their business activities can inflict, knowingly or unknowingly, upon local communities.
The conflict minerals rule, known as Dodd-Frank Section 1502, aims to foster peace and stability by throttling rebel funding in the east of the Democratic Republic of Congo.
Although Congo's last war officially ended in 2003, its mineral-rich east has seen no peace since then. The civilian population has been preyed upon by a series of rebel groups and ill-disciplined government forces.
The U.N. and rights organisations have accused armed rebel groups and Congolese soldiers of an array of human rights abuses, including use of child soldiers, summary executions and widespread sexual violence against women.
The violence is fuelled by illegal mining of tin, tantalum, tungsten and gold. Section 1502 - by requiring companies to check whether they use minerals from the region - attempts to stifle demand.
"This decision sends a strong signal to companies that they must take responsibility to ensure their supply chains are not fueling conflict in the DRC," said Corinna Gilfillan, Head of Global Witness’ Washington office.
"Just the due-diligence requirement will have a huge impact," said Holly Dranginis, policy analyst at Enough Project, which works to end crimes against humanity.
At first blush, the U.S. Court of Appeals ruling appeared to be a set back because the three-judge panel ruled it would violate the freedom of speech rights of corporations if they were forced, as part of checking their supply chains, to state whether their products were "conflict free".
Advocates have argued that this statement provides important information for consumers and investors who care about ethical sourcing.
But on closer reading, it was clear that the court in important ways upheld the guts of the regulation -- namely that publicly traded companies must check their supply chains for conflict minerals and report back to the Securities and Exchange Commission – albeit without that judgement on their findings -- and that it was not the job of the SEC to question the wisdom of Congress in passing the human-rights related law.
The court had no truck with the argument brought by the National Association of Manufacturers that the SEC had failed to prove the disclosure rule would achieve its purpose of bringing peace and stability to the Congo. The SEC’s role is to implement the law, not reset it, and the court said that it was not for the SEC to measure the rules’ social impact.
"Here, the rule’s benefits would occur half-a-world away in the midst of an opaque conflict about which little reliable information exists, and concern a subject about which the Commission has no particular expertise. Even if one could estimate how many lives are saved or rapes prevented as a direct result of the final rule, doing so would be pointless because the costs of the rule—measured in dollars—would create an apples to-bricks comparison," the court said.
In other words, the court said human lives cannot be measured in dollars and cents.
WHAT NEXT?
U.S. listed companies are expected to file their first reports on conflict minerals to the SEC by May 31. The European Union, meanwhile, is considering similar legislation. Norway and France also have versions of social impact reporting for business.
Several hurdles remain, however, regarding exactly what must be in the SEC reports. Next week, the lower court issues written instructions on how the SEC should proceed in light of the Section 1502 ruling. Then on May 19, the full court of appeals hears oral arguments in a separate case on labeling of products, which could affect the freedom of speech argument.
Whatever the final outcome Arvind Ganesan, director of business and human rights at Human Rights Watch, said the latest decision was a milestone because it was the first time the court upheld the corporate reporting tool in forwarding the human rights agenda.
"Freedom of speech and the rights of the consumer to know what is in the product, was a bit of a setback," he said. "But taking a look at the bigger picture, the principle of disclosure by companies on their human rights was affirmed and the responsibility of corporations is spreading."
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