Conflict Minerals and PLM – Making a Difference through the Supply Chain

I have a special treat for you this morning, a guest post from our partner, Andrew Sweatman, Compliance Solutions Manager, PE INTERNATIONAL. If, like me, the first thing that came to your mind when you heard the term “conflict minerals” was Leo DiCaprio’s movie Blood Diamond, then you will definitely enjoy this eye-opening post on conflict minerals and and how PLM can help minimize your company’s exposure to conflict minerals.

Walking down a supermarket aisle we are faced with more and more ethical choices about the products we buy. We see “recycled content paper”, “fair trade coffee” and “dolphin friendly tuna” on labels to help us make smarter choices. It is becoming obvious that we all have a role to play in reducing our impact on the planet through the products we consume. “Conflict Minerals” is the latest issue linked to products that we use everyday, in particular high-tech products.

Like coffee companies sharing profits to benefit farmers, or fish producers reducing harm to dolphins, electronics companies are now coming to terms with their use of minerals that may be supporting conflicts in Africa. This issue is as complex as the supply chain that winds its way back to the war zones, it goes far beyond parts, and it includes smelters and raw materials suppliers.

To make it even more complicated the US Government is requiring companies to declare their use of such conflict minerals.



The conflict

Many products have a secret life that we don’t fully appreciate; specifically electronic products may contain minerals that help fund violent conflicts in conflict zones in the Democratic Republic of Congo (DRC). These minerals are tin, tantalum, tungsten and gold, so called “Conflict Minerals” that help power mobile phones, laptops, and MP3 players. Armed groups earn hundreds of millions of dollars every year by trading conflict minerals.  Government troops and militias fight to control the mines, murdering and raping civilians to fracture the structure of society.

The Washington based not-for profit “Enough Project” has claimed that over 5.4 million people have died and over 2 million civilians displaced from the conflict in the Congo, it is sadly the deadliest conflict since World War II.

Here is an excerpt from the report “From Mine to Mobile Phone: The Conflict Minerals Supply Chain” supplied by the Enough Project.

“Ben, 15, tells that he had worked in a mine since he was 10 and narrowly avoided a mine shaft that collapsed, a common occurrence. The conditions are slightly better in some of the mines, but as Robert, a local youth leader and civil society activist told us, “Overall, mine workers get very little from mining; in the armed areas it is only worse.” Meanwhile, the armed groups rack up the profits at the mines, earning up to 90 percent of the profits in some areas. Every dollar captured by the armed groups is a dollar that does not go into improving Congolese lives through better schools, health care, or jobs.”

Locals in mining communities are forced to take part in the illicit mining economy. Money earned from the sale of conflict minerals is used for personal profit and to further violent causes.

Minerals are smuggled out of Congo through neighboring countries, then shipped to smelters around the world for refinement. Once minerals are processed in this way, it’s difficult to trace their origin. Conflict minerals easily make their way to the U.S. and all over the world in consumer products.

Governments act

Outrage from consumers and other Non-Governmental Organizations has lead to Governments demanding that action be taken against companies using conflict minerals.

In July 2010, the U.S. Congress signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act. Within this act is Section 1502 which requires publicly traded companies to report their use of conflict minerals.

Companies have to register their use of conflict minerals from January 2013. Actual reports need to be filed by 31 May 2014 for the calendar year 2013.

A phased in period of between 2 and 4 years for small and large companies respectively is given to give companies time to accurately identify their sources.

Leading by example

The Enough Project not only tells of the horrors of the conflicts but the positive actions that companies are taking to understand their use of these minerals. They have implemented a rating system which measures companies’ conflict minerals performance. The latest report “Taking Conflict Out of Consumer Gadgets: Company Rankings on Conflict Minerals 2012”, rates 24 electronic companies on their efforts.

Companies are ranked into 3 groups based on a range of initiatives (including: tracing, auditing and certification) to meet the Projects’ conflict free goals. Companies are ranked into 3 groups:

– 30% and above
– 10-30%
– 10% and below



Figure 1. Electronics companies ranked by progress on conflict minerals – percentage of progress toward responsible sourcing of conflict minerals

Below are some examples of the initiatives taken by 3 companies towards responsible sourcing of conflict minerals.

Intel

Intel has become a leader through the following actions:

• Intel was the first company to publicly commit to making a fully conflict-free product within a deadline—a conflict-free micro processing chip by 2013


• Intel chairs the review committee for the smelter audit program


• Co-chairs the industry association work group on conflict minerals


• Has visited 50 smelters


• Co-founded a program with HP and GE to pay for smelter audits, and


• Has visited eastern Congo to better understand how the company can have a positive impact

HP

HP has been active at multiple levels:

• When enough smelters are available it will require its suppliers to use only audited, conflict-free smelters


• HP also co-founded the smelters incentive program


• HP has been active by helping Congo develop a clean minerals trade, serving on the governance committee, purchasing minerals from Congo, traveling to eastern Congo to see local systems firsthand, and


• The most active corporate participant in a diplomacy work group on Congo

Apple

• Apple is the first company to publicly identify the number of smelters in its supply chain of 175 smelters


• Require its suppliers to use only audited, conflict-free smelters, when enough are available


• It also leads a smelter training program

Industry standards

To help industry meet the deadlines imposed by the SEC, in August 2012 the Electronics Industry Citizenship Coalition (EICC) and the Global eSustainability Initiative (GeSI) published a Conflict Minerals Reporting Template. This template is used manufacturing companies to ask standardized questions to their suppliers about the use and origin of conflict minerals in their component parts.  The EICC-GeSI Reporting Template has become the most widely used Conflict Minerals questionnaire in the electronics industry and enables manufacturing companies to identify the smelters that process conflict minerals which are used in their supply chains.

The role of PLM

For many companies complex information about their products and components are found in their PLM systems. PLM can provide a way to find parts in a product that contain conflict minerals if substance information is provided in the product BOM structure. Ideally a company can find all the Tungsten, Tin, Tantalum and Gold in their products to identify the company’s potential risk of non-compliance.The company can focus on these parts and substances and use tools such as the EICC/GeSI template to match part numbers to suppliers and smelters that can provide Conflict Free materials.

Rather than having parallel systems address substances of concern in products, the Siemens PLM Software Substance Compliance tool can help integrate compliance programs into one effective system based on the PLM Teamcenter backbone. Ultimately, this enables companies to produce green, socially and environmentally compliant products.

Learn more about Teamcenter Sustainability and Environmental Compliance solution.