Raw material and conflict regions
Conflict minerals are natural resources that are mined and produced in regions dominated by violent civil and ethnical conflicts. The mining is often done illegally beyond governmental supervision but controlled by armed rebel groups. Mining under such conditions entails constant violations of basic human rights and breaches of international law. Forced labor is daily routine, and the revenues are used to finance wars and combats. The illegal funds prolong and aggravate the regional conflicts and guerilla fights. One of the worst regions globally for this is the eastern Democratic Republic of Congo where fierce fighting has been going on for decades, fueled by ethnical conflicts and the region’s natural resource wealth. Counting more than approximately 5 million victims, this war is already considered the deadliest conflict since World War II. Several armed troops finance their combats with revenues from tantalum, gold, tin and tungsten mines. On the demand side, these four conflict minerals are crucial for the electronics industry in particular but also for other industries and their customers (see Figure 1). Gold, tantalum, tin and tungsten are critical elements of common products, such as notebooks, smartphones, tablets, cars, airplanes and lighting.
Raw material and conflict regions
Conflict-free minerals – how to proceed?
Many companies seek to take over more responsibility for their supply chain and their raw materials because public awareness and concern for these issues is increasing, and legal restrictions and demands are in the ascent. The four minerals in question are often sourced from the eastern Congo, and the supply chain flows as follows: First, numerous larger and smaller mines exploit the raw material. As a next step – independent of their legal or illegal origin – they are traded on national or international markets by resellers. Then, they are exported and smelters obtain the metals. From there the refined metals go to the manufacturing industry and are integrated into the final products like mobile phones or laptops that make their way to the consumers (Figures 2 and 3).
Intel’s Conflict-Free Initiative
At first, knowing or even proving that the acquired raw materials were conflict-free looked like quite an insoluble problem for Intel. Founded in 1968, Intel now employs approximately 100,000 people and is considered the topmost company in semiconductor innovation. Despite these early setbacks, as one of the pioneers in the domains of corporate social responsibility and sustainability, Intel has, in fact, succeeded in producing the very first conflict-free microprocessors that are available on the market. This goal was achieved in 2014 after more than five years of consequent preparation and intensive business process reengineering. The clear and uncompromising targets by Intel CEO Brian Krzanich were an important success factors. He stayed on track despite initial difficulties and adhered to his goals unmistakably: “I want this stuff out of the supply chain, a roadmap with targets and dates.” Getting there was a long and tough journey:
- The suppliers couldn’t solve the problem
As a first step Intel contacted all its suppliers to learn more about their sourcing. Did they source from the Congo, and to what extent did they supply conflict minerals? About a third of them did not react at all to the inquiry. Another third informed Intel that they did not know anything about the origin of their minerals. The remaining suppliers claimed that they did not supply conflict minerals from the Congo but were unable to prove this statement. So discussions with suppliers reached a deadlock.
- Banning all minerals from the Congo was not a viable solution
Intel’s next thought was to ban all minerals from the Democratic Republic of Congo. However, this ban would have hit a vast number of legally employed miners in small mines and deprived them of their livelihood. Intel would have run the risk of reinforcing the humanitarian problems of the region instead of reducing them. Hence, they had to continue searching for another solution.
- Smelters were identified as potential cooperation partners
Finally, Intel identified smelters and refiners as potential partners in solving the problem of conflict minerals. The process analysis revealed that smelters represent a bottleneck along the supply chain. All traded minerals end up with one of about 160 smelters worldwide. It is obvious that these 160 smelters can be monitored more easily than the over 16,000 suppliers. The smelters are mostly located in Asia or the Middle East and refine the supplied minerals by means of chemical processing in huge ovens. In this place, minerals from different sources get mingled; therefore it is mandatory to determine and document the source of the supplied material before the smelting process begins. To make sure that this happens, Intel cooperated with other companies, NGOs and governments to develop a new system. Now, the system starts directly at the Congo mines and enables the smelters to track their sources.
- Bags &Tags to brand the raw material
Directly at the Congo mines the legally sourced minerals are sealed and marked by “Bags & Tags.” The tags are crucial later on in the process because they enable the smelters to check their origin. Soon, admittedly, the bags themselves turned out to be sought-after trading goods, but Intel acted immediately and succeeded in identifying abused bags and in quickly fixing the loopholes.
- Certificates, controls and audits of the cooperating smelters
Thanks to the fairly manageable number of smelters and their increasingly proactive and positive attitude towards cooperation with their clients, the identification of the minerals can be considered the centerpiece of the Conflict-Free Initiative. This is where controls and audits take place. These, in turn, hold the smelters responsible for providing clean documentation of origin and the exclusive use of minerals from strictly conflict-free mines.
Since the start of the initiative in 2009, Intel representatives have visited almost 100 smelters in over 20 countries (see Table 1). The visits have the objective of explaining the significance of conflict-free minerals and gathering documentation on where the minerals originated. Control systems were implemented in cooperation with the smelters, and Intel recommended joining the Conflict-Free Smelter Program of the globally active Conflict-Free Sourcing Initiative. In addition, smelters were visited unannounced to observe and eventually improve the documentation processes and to start projects that investigated the origin of minerals in collaboration with the smelters. Providing evidence that minerals are conflict-free is by far the biggest problem for the companies. It is even more difficult if the smelters do not participate directly in any certification of their supply chain. Despite international cooperation each company needs to keep its own supply chain conflict free. The majority of the smelters have therefore already chosen to be certified by third-party organizations and procedures, such as the London Bullion Market Association’s Responsible Gold Program or the Responsible Jewellery Council Chain-of-Custody Certification Program.
Results of the Intel Conflict-Free Initiative
Intel is the first company worldwide that is able to track the path of minerals from the mine to the smelter and the first US company that guarantees completely conflict-free microprocessors. Intel still sources from the conflict-ridden region of the Democratic Republic of Congo, under the condition that the mines are guaranteed to be in responsible hands. The cooperation with the smelters brings about higher demand and in consequence higher prices for legally sourced minerals. Many small miners and their families in the region directly benefit from the higher earnings. At the same time it becomes more difficult for rebel groups to finance their activities from illegal mining. Unfortunately such initiatives are not sufficient to end the kind of civil war going on in the eastern Congo. However, they do make the world a little bit better, also for consumers who can be sure that, at least, they do not indirectly support the conflict. Intel hopes that the positive summary of this initiative will motivate more and more companies to critically scrutinize their supply chain and to optimize it in compliance with ethical standards.
There remains much to be done
Currently, the conflict-free guarantee applies to microprocessors only. However, Intel is pursuing also producing its other products, such as SSD cards or Ethernet and Wi-Fi products from conflict-free minerals. And Intel is not the only company facing this challenge: Tin, tantalum, tungsten and gold are only four of around 30 metals that are used in each and every smartphone. Besides, there are other regions apart from the Congo with conflicts around the sourcing of raw materials. The mining and trade of high-tech supply minerals in many countries is not even close to any fair-trade standards. Many more players in the whole industry need to join initiatives and initiate intensive and oftentimes painstaking process work in their own supply chains so that one day consumers can expect entirely conflict-free electronic products and not just products with individual components that are conflict free.