Question

The Wall Street Journal highlighted the issue of conflict minerals in an article entitled “Retailers Fight to Escape ‘Conflict Minerals’ Law.” Retailers, including Walmart and Target, protested part of a new US law that requires companies to verify that products with minerals from Central Africa are not taxed or controlled by rebel regimes: “Some of the largest US retailers argue they shouldn’t have to comply with the rule if they don’t exercise direct control over the manufacturing of goods carrying their own brands… Tracing the source of minerals is a tricky task, companies say, because many intermediaries stand between them and the mines.” Based on what you learned in this chapter and the sidebar on conflict diamonds in Angola, do you agree or disagree with the statement above and the retailers’ position? Why or why not? Should retailers that have their name on a product be held accountable for how the product is made, ensuring that it was produced in an ethical and socially responsible manner?

Answer 1

Firstly, I shall re-phrase the scenario as below:

1. US govt. introduced a law which mandated that the US Companies importing minerals from Central Africa should verify that their payments against the imports are not finding their way to the pockets of a rebel regime i.e. their imports are not contributing financially to the rebel regimes which may be operating locally in an unauthorized manner and also those minerals are being produced in an ethical and socially responsible manner

2. The local US companies have resisted compliance with this new law saying that tracing source of minerals is very complicated and tricky since many intermediaries are involved which may not necessarily be visible to them.

My viewpoint is as follows:

a) The US govt. is rightly concerned that the products being sold in US or being exported from US must be produced in an ethical and socially responsible manner such that it is not contributing to the financial strength of illegal rebel regimes which may be operating in some Central African nations.

b) The retailers resisting this new law are having genuine concerns too. Since they are commercial firms operating with the objective of maximizing profits for their shareholders. They have no means to identify and control the complete supply chain involved in extracting the minerals from mines till being shipped to US.

c) In my view, the responsibility to ensure that the items being imported in US are produced ethically and socially responsible manner lies with the US govt. and not the companies which are importing. If the US govt is truly serious about this then, it should ensure this through tight governance actions.

• US govt. should tighten the laws/procedures pertaining to imports from such countries so that US companies are only dealing with sources that represent the official government.
• US govt. should closely work with authorized governments in such countries to establish the official sources/contacts which are operating in an ethical and socially responsible manner.
• US govt. should also use all means to keep an eye on the ground reality in such countries. In case, the situation is not stable or in control, then US govt. should go ahead and immediately suspend all trade dealings with such countries till a stable local government is established.

In summary, the US government is primarily responsible for this and should take all necessary steps to ensure that minerals from Centrals Africa are being sourced from official local sources. It should provide all required support to US companies to import necessary minerals from Central African countries. Similarly, the US Companies should be transparent about their requirements and work closely with US govt. agencies to import those from reliable sources.