Intel Stiff-Armed Pursuing African-Mine Conflict Minerals – Bloomberg
Intel Corp.’s chips contain tantalum, gold, tin and tungsten — all made from minerals that can be mined from war-torn parts of the Democratic Republic of Congo. Carolyn Duran’s job is to make sure they aren’t.
For the past five years, Duran and her team have confronted companies that produce the metals to find out whether they use ore from mines controlled by militias in the central African nation. The effort is aimed at starving the gangs of revenue, and it has involved trekking to 21 countries and visiting 86 companies that turn ore into metal.
Along the way, Duran says, her staff has been met with indifference, foot dragging and outright resistance — underscoring the thorny process of excluding ore that has passed through the hands of the DRC’s militias. Under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, U.S. companies must disclose their use of conflict minerals from the DRC or adjoining countries to the Securities and Exchange Commission by June 2. Those that don’t comply will be required to publicly disclose what they’ve done to identify conflict minerals in their products.
“Every single member of Intel’s conflict team has felt, at some point, that we’ve hit an insurmountable task,” said Duran, 43, a Portland, Oregon-based engineer with a Ph.D. from Northwestern University in materials science.
The rule faces legal challenges from the U.S. Chamber of Commerce, the Business Roundtable and the National Association of Manufacturers. These groups say compliance would force companies to disclose how they contribute to human rights issues, thereby violating their right to free speech. They also argue that the rule imposes “staggering costs” because the infrastructure to certify conflict-free suppliers doesn’t exist.
“We understand the seriousness of the humanitarian situation in the Democratic Republic of Congo,” the groups said in a joint statement. “But we maintain that corporate disclosure requirements are an inappropriate and ineffective way to address the ongoing turmoil in that region.”
Boeing Co. initially criticized the rule. The airplane manufacturer has since “been working diligently to carry out its requirements,” said Tim Neale, a spokesman for the Chicago-based company.
Intel, along with Hewlett-Packard Co. (HPQ) and Apple Inc. (AAPL), are among the companies that have embarked on pushes to make their products conflict free, providing early case studies for other companies seeking to follow suit.
While Duran and others have encountered supplier resistance and grueling conditions, their endeavors have so far helped about 100 smelters become certified as not using conflicted ore from the DRC, according to the Conflict-Free Sourcing Initiative, a non-profit based in Alexandria, Virginia. That’s out of an estimated 300 to more than 600 smelters worldwide, according to Julie Schindall, a spokeswoman for the CFSI.
“It’s very important for that legislation to stick,” said Sasha Lezhnev, a policy analyst for the Enough Project in Washington, a nonprofit focused on ending genocide. “If the entire law and rule were to be overturned, you would start to see more and more mines get militarized. You’d see companies saying this isn’t our legal requirement.”
Duran said more companies need to act to eliminate the market for ore taken out of the DRC’s ground at gunpoint. The ores for tantalum, tin, tungsten and gold are all found in the DRC, many from mines run by the militias.
“Not as many companies as I would like are rolling up their sleeves and helping,” she said. “It’s still a very small pool.”
The endeavors follow past pushes around conflict minerals, including efforts in the 1990s and last decade to end the purchase of so-called blood diamonds from civil war-ridden countries such as Angola and Cote d’Ivoire. More recently, the focus has been on the DRC, which has been embroiled in a civil war since the early 1990s that has resulted in the loss of millions of lives.
Intel began working to eliminate its use of minerals from the DRC’s militarized mines in 2009 after Brian Krzanich, then a vice president and now the company’s chief executive officer, heard about abuses in the country.
“A lot of the income from these mines goes to fuel the chaos, the gangs and the so-called warlords,” said documentary maker Paul Freedman, who’s working on a film about the consequences of the conflict.
Since a blanket embargo would have devastated the DRC’s economy, Intel decided to only cut out ore from mines controlled by militias. Duran, a company veteran who joined in 1998 and who was a process engineer in research and development, was appointed to lead the four-person conflict team. The Santa Clara, California-based company declined to say how much it has spent on the effort.
Duran and her team focused on trying to certify suppliers. That involves conducting an audit of the supplier or getting the smelter to submit to one by a third-party firm, seeking to prove that smelters have records showing they don’t use ore from mines controlled by the armed gangs. She started tracing where the metals in Intel’s supply chain originated and identified smelters, which turn ore into metal, as the point where the market for the smuggled materials could be choked off.
Yet persuading smelters to reveal where they got their ore from wasn’t easy. Duran and her team were greeted by smelters in places from South America to China with questions such as “why do you care?” to “stop bugging me,” she said.
One member of her team was turned away at the door of a smelter after flying to Bolivia. Another has spent three years trying to get a smelter to agree to an audit, she said.
Even when smelters were convinced to cooperate, many said they couldn’t afford to pay for an audit. Intel, with contributions from Hewlett-Packard and the GE Foundation, wrote checks to defray the expense, which the companies calculate cost as little as $5,000. Other smelters said they didn’t have any documentation showing where their ore came from because deals had been done with a handshake.
Hewlett-Packard and Apple have done similar work. Jay Celorie, who heads Hewlett-Packard’s conflict mineral program, said he’s traveled to smelters to get them on board. Turning up in person is the best way to convince suppliers, he said.
“A smelter’s decision to participate is primarily based on their customers’ demands,” he said. “The end goal, which Intel has demonstrated, is getting the smelters convinced that participating in the program and being audited is good for their business.”
Apple has also sent staff to visit smelters and it has cooperated with organizations working on the issue in the DRC, said Chris Gaither, a spokesman for Apple. The Cupertino, California-based company published two lists of smelters in its supply chain this year, with the number verified as conflict-free increasing to 75 in May from 59 in February.
Duran, who juggled her travels to smelters with raising three sons, said it took two years for Intel to begin seeing some results with its conflict-free program. As recently as 2012, there were still fewer than 10 smelters that had been validated. Since then, smelters have begun changing their stance and some have sought out audits to make sure they aren’t disqualified as a supplier, she said.
One supplier that Intel and Apple’s efforts have made an impact on is Malaysia Smelting Corp., based in Kuala Lumpur. Chief Executive Officer Chua Cheong Yong said his company, the world’s third-largest producer of tin, was able to pay for the annual audits with funding from the technology companies. His operation is listed as conflict-free.
All smelters need to sign up to create an airtight system that will allow his company to source conflict-free ore from the DRC, Chua said.
“If consumers stop buying materials from the Congo, then people like us have to disengage because we cannot put ourselves in a position where people won’t buy from us,” he said. “They must buy conflict-free products, not Congo-free products.”
In January, Krzanich declared that Intel had successfully made its processors conflict free. That doesn’t end Duran’s efforts, which she said have further to go because more companies need to get on board.
“We’re not there yet,” Duran said.
To contact the editors responsible for this story: Pui-Wing Tam at email@example.com Tom Giles