How mining became a global CSR Achilles' heel

24 September 2019 10:28am

CSR

Our globalized society relies heavily on high-speed communication, made possible by the continuous innovation in the global electronic industry. Everyday electronics like smartphones, tablets and laptops, along with the rapidly growing market for Internet of Things (IoT) technology, require a vast amount of resources, particularly rare earths and other metals such as gold.

Recently, the Guardian—in collaboration with a collective of investigative journalists led by Forbidden Stories—uncovered ongoing human rights abuses as well as environmental failures in the Tanzanian North Mara goldmine, whose extracted deposits are also part of the supply chain of global hi-tech giants like Apple, Canon and Nokia. These recent findings make it necessary to take a closer look at why identifying possible supply chain risks is particularly important for the electronic industry and how corporations could best comply with the ethical expectations for responsible sourcing in line with their own Corporate Social Responsibility (CSR) commitments.

Mining, a high-risk factor for the global tech industry 

Valued at approximately USD 1.75 trillion, the electronics industry is one of the largest industrial sectors in the global economy, generating more revenue than any other goods-producing sector according to recent estimates published by the World Bank. Through the high consumption and utilization of rare earths and minerals such as gold, which is mainly used for conductors on circuit boards during the production process, global tech-giants are increasingly dependent on resilient and stable mineral sources.

Currently, developing countries especially in South-East Asia, Latin America and Africa are facing an increased growth in the tech-related mining industry and while environmental standards for emission, effluent and groundwater contamination exist, the mining industry often falls short on compliance. According to the United Nations, this can be traced back to a variety of reasons:

  • Weak law enforcement
  • Lack of monitoring capabilities
  • Shortage in skilled human resources.

As a result, tech companies in particular face increased pressure to implement comprehensive due diligence and proactive monitoring to assess and identify possible mining-related risks in their supply chain to meet both regulatory requirements and their corporate social responsibility commitments.

Identifying the supply chain risk of the hi-tech industry 

But what exactly are the risks for a company’s ethnic liability and how can these supply chain and third-party exposures be best monitored, identified and prevented?

The recent findings, with regard to human rights abuses and environmental wrong doings in a Tanzanian gold mine have brought these issues into the public spotlight again and underline how neglecting an approach to responsible sourcing procedures can lead to increased media attention and scrutinization by the public eye.

Corporate initiatives such as the Responsible Minerals Initiative, a network of more than 380 companies and associations have committed their work to improving the flow of information regarding responsibly-sourced minerals by providing companies with a variety of supportive tools and resources.

The recent report of serious misconducts in Tanzania is only one of numerous examples of how the tech-related mining industry has come under scrutiny. Environmental and worker rights abuses in countries such as the Democratic Republic of Congo and Malaysia have become a common feature in the media.

The consequences of human rights and environmental malpractice can be severe for the involved companies. A brand’s reputation is highly dependent on consumers and investors, who increasing assess companies’ performance in terms of human rights and environmental protection. By demanding insights into companies’ supply chain and third-party agreements, responsible sourcing can also constitute a commercial incentive for businesses to distinguish themselves from their competitors.

A Nielsen study found that more than 55 percent of global respondents favoured products form companies that are committed to a positive social and environmental impact. Amy Fenton, the Global leader of public development and sustainability at Nielsen concluded that,

“Consumers around the world are saying loud and clear that a brand’s social purpose is among the factors that influence purchase decisions. This behavior is on the rise and it provides opportunities for meaningful impact in our communities, in addition to helping to grow share for brands.” 

The positive effect of increased consumer awareness has led to several improvements and increased due diligence by leading tech companies such as Apple, which removed 10 smelters and refiners from its supply chain in 2017 because they failed to comply with audits.

Besides the important factors of investor and consumer contentment, countries around the globe are beginning to adopt or amend legislation aimed at expanding transparency in supply chains. In the case of the European Union, for example, Regulation 2017/821 requires companies to publicly share their supply chain policies and report their auditing reports to their member states. As these requirements are strengthened, companies will face increased risk of fines, civil and even criminal liabilities.

Can mining be sustainable? 

Tech-related mineral sourcing is often located in ecologically sensitive, less-developed and remote areas that partially also includes indigenous territories and land. A 2016 collaborative work, conducted by the UNDP, the World Economic Forum, the Columbia Centre on Sustainable Investment and the Sustainable Development Solutions Network with regard to the UN’s Sustainable Development Goals, has concluded that mining effects on regional development are ambiguous at best. When managed appropriately, it can help create sustainable jobs, increase innovation and foster investments in regional infrastructure. At the same time, poor management can lead to devastating environmental effects, displaced populations, rising inequality and violent conflicts.

The Organization for Economic Co-operation and Development (OECD) has published a guide on how due diligence should be carried out for minerals supply chains from high risk and conflict-affected areas.

While experts agree that tech-related mining is not likely to transform into a complete sustainable industry, the re-evaluation of supply chains and third parties after recent reports of environmental and human rights abuses in the Tanzanian North Mara goldmine can not only prevent electronics companies such as Canon, Apple or Nokia from regulatory breaches and possible legal consequences but also from a damaged reputation.

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