* Any views expressed in this article are those of the author and not of Thomson Reuters Foundation.
Siddharth Kara’s recent open letter laid bare the ethical challenges in the supply chain of cobalt, a metal that is an important input in the smartphones we use or the electric cars we are beginning to purchase.
Before the 2016 Amnesty International investigation, few outside the industry knew of the problem of child labour persisting in artisanally mined cobalt that enters international supply chains.
Companies have started to respond by auditing actors in their supply chain against industry-wide standards – this emerging proactive approach by several large global tech and auto brands is a hugely positive step forward.
These audits are revealing bad actors that choose to ignore human rights risks in their supply chains. Once identified, these actors are forced to reform or threatened to be cut out of the supply chain. While expulsion is rare, companies are increasingly taking the improvement process seriously.
However, audits and the suspension or ending of sourcing from bad actors is only part of the solution. It is useful taking stock of the status quo around the ‘conflict minerals’ issue in that regard.
Despite ground-breaking legislation such as Section 1502 of the 2010 US Dodd Frank Act and the recently passed EU Conflict Minerals Legislation (which are currently not applied to cobalt) and the proliferation of associated audits, so-called ‘3T minerals’ (tin, tantalum, tungsten) and gold financing armed conflict in the East of the DRC are today still laundered into companies’ supply chains.
Minerals are ‘certified’ by fallible, paper-based due diligence systems offering very little real assurance that production has been ethical. By accepting this model, consumer-facing companies turn a blind eye on problems that exist in production countries and insufficiently contribute to transparency and responsible production.
An opportunity exists to correct these issues in conflict minerals and avoid similar mistakes in cobalt by digitizing due diligence and designing technology-based in-country projects.
Digital tools such as the smartphone applications designed for the Better Sourcing Program, for example, allow for the collection and sharing of production and trade data for the highly complex ‘first mile’ – from mine site to smelter.
They are currently successfully implemented at select mine sites in Rwanda and the DRC, including in cobalt. In this system, field agents collect data with a bespoke smartphone application and share this data with purchasers to demonstrate compliance with responsible sourcing standards.
Data-led approaches like this are transforming the due diligence process to one where companies in a supply chain can monitor and address responsible production issues every day.
They try to incentivize purchasing companies to invest in improving conditions on the ground and allow them to monitor the impact of those investments.
The digitally accessible data on production conditions and socio-economic impact is also valuable to external stakeholders like government, donors, and NGOs.
Using parts of the data, these actors’ policies and projects are better informed and are better able to improve the lives of communities in and around mine sites. This is the long-term, sustainable solution to the challenge Mr Kara outlines so starkly in his recent piece.
Nonetheless, the cost for data collection and dissemination is currently borne by producers and exporters, who thus are ‘punished’ for transparency. They bear the cost of the enhanced due diligence, which ultimately benefits the consumer brands who can have actual assurances over their supply chain, instead of relying on a porous paper based system.
In a market where pre-financing is key and margins are tight, support from companies further down the supply chain is needed to scale transparent data collection and reward responsible production.
If consumer brands really care about sourcing ethically – they should put their money behind it. Only when scaled and used can transparency truly make a difference in ensuring not only that companies comply with international regulation, but that they actually contribute to supply chains that make the lives of the people at the source of them better.
Mr Kara talks of consumer companies allocating “1% of their annual free cash flow towards the education, health, security, decent pay, and dignified treatment of their employees in the DRC.”
A mere fraction of this figure would enable the role out of technology-based solutions which would significantly reduce the space for bad practice to persist and ensure good practice can be identified, supported, and promoted by big global brands that want to make a difference in their raw materials supply chains.
This is how the challenge will be truly solved.
Now’s the time to act.
Ferdinand Maubrey is the Managing Director of Better Cobalt, a non-profit pilot initiative making the production of cobalt more responsible and transparent.