You May Not Have Heard of This Dodd-Frank Provision, but It’s Saving Lives | Commentary

Posted April 17, 2015 at 5:00am

By Samir Goswami Debate continues in Congress and among policymakers around changes to the Dodd-Frank Act. Last year’s budget bill included a last minute Wall Street-backed provision that rolls back a rule affecting derivatives, which some cite as a financial product that contributed to the 2008 economic crisis. Regardless of what further changes are made to Dodd-Frank, one section of the law has started to have a profound impact. This section (1502) requires companies in the United States to determine whether conflict minerals from the Democratic Republic of Congo are used in any of their products and report those findings to the U.S. Securities and Exchange Commission. In the SEC’s own words, “Congress enacted Section 1502 of the Act because of concerns that the exploitation and trade of conflict minerals by armed groups is helping to finance conflict in the DRC region and is contributing to an emerging humanitarian crisis.”  

The DRC has been in a state of violent conflict for nearly two decades, is plagued by countless militias that prey on the land and other people, and has almost no functional government or rule of law. With its economy in shambles and the majority of the population living in poverty, one might question how so many militias are able to stay in business, and with seeming impunity. But the DRC is rich in a number of valuable minerals. The militias have been able to gain control of many of the mines operating in the country and sell their plunder to Western technology and jewelry companies — and then, Western consumers. Militias are thus able to amass a great amount of wealth to pay their soldiers, providing greater incentives for people to join them. The Dodd-Frank Act deals with four of these so-called conflict minerals: tin, tantalum, tungsten and gold, sometimes collectively referred to as 3TG. The provision requires companies in the U.S. to analyze their supply chains to determine whether, at any point in the manufacturing process, their company uses any of these minerals, and whether those minerals came from the DRC or surrounding countries. They must report their findings to the government and make their findings public on their website so that consumers are aware of the origins of their products.  

Some companies have responded, but some have also complained that the provision is overly cumbersome and places excessive requirements and cost burdens on them. There are also those who argue the measure negatively affects the situation in the DRC by closing down mines that previously employed thousands of civilians.  

Despite these debates, we should not lose sight of the measure’s intent to help end violent conflict in the DRC by cutting off militias’ primary source of funding — and there is initial evidence that it is working. Since the Dodd-Frank Act was passed, militias’ funding from mining of conflict minerals has dropped by 65 percent. The Congolese army and the U.N. Force Intervention Brigade have wrested many mines from the control of violent militias, diminishing the atmosphere of impunity in which they operated in those areas. The situation in the DRC is still dismal, but the intent of this provision of Dodd-Frank should be given a chance. And conflict minerals are not the only materials for consumers to be concerned about — the International Labor Organization estimates that 14.2 million people around the world are victims of forced labor and exploitation in economic activities and that this represents $43 billion in annual profits across a variety of industries including construction, manufacturing, mining, fishing and utilities.  

Procurement and sourcing managers already use a host of online tools to vet for financial, environmental or political risks in their supply chains — why not use the same data driven approach to vet suppliers and contractors for how they treat their workers? While we may argue about the appropriate regulatory and policy frameworks required to eliminate human rights violations, there shouldn’t be any opposition to conducting due diligence to ensure that we’re not funding exploitation, especially when we know that these risks exist. That is the broader aim of Section 1502 of the Dodd-Frank Act and similar measures — realizing that supply chains can be tools for economic empowerment and opportunity — not sources of exploitation and unjust resource depletion.  

Samir Goswami is a regional sales director at LexisNexis, the world’s largest database of primary law and news archives.

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