At the end of March, Apple released its third Conflict Minerals Report. Often these reports get praised when companies describe themselves as having achieved a “conflict free” status. Apple’s report, however, chooses not to use this description, and we think that’s a good thing.
You might expect that an organization like Global Witness, which campaigns on the issue of conflict minerals in a bid to stop a country’s natural resources fueling conflict and human rights abuses, would want companies to declare themselves “conflict free.” But, this term has been applied at different times to mean different things, and can be misleading, especially when it is not accompanied by a detailed description of how the company has reached this conclusion.
The reality is that supply chains, particularly in conflict-affected and fragile states, are fluid and ever-changing. This means that even the most well-managed supply chains are not immune to the possibility of contributing to human rights abuses or corruption. It’s for this very reason that we don’t believe that supply chains or the final products should be definitively described as “conflict free.” When looking at companies’ responsible sourcing practices, the most important part isn’t a passive “conflict free” label; it is the evidence that companies are actively, continually checking their supply chains to look for red flags and risks, and when necessary, taking the appropriate steps to address these problems.
Apple recognizes this distinction in the opening paragraphs of this year’s report. They say that for the first time, one hundred percent of the metal processors in its supply chain – the smelters and refiners that turn raw mineral ore into useable metals – have been audited by various certification schemes and certified as conflict free. But, Apples notes that while other companies would use this as an opportunity to describe their products as conflict free, “Apple does not believe that Third Party Audit program participation alone is sufficient to label products ‘conflict free.’ Apple believes it has more work to do.”
This decision is a big deal. It highlights the very significant distinction between attaching a “conflict free” declaration on products and the need for an ongoing process of supply chain checks, known as due diligence. It is a welcome progression from words to action.
What’s also crucial here is that Apple recognizes the limitations of what they call third party audit programs: the industry-created schemes that audit smelters and refiners and certify them as conflict free or not conflict free. These schemes, like the Conflict Free Sourcing Initiative (CFSI) and the London Bullion Market Association’ Responsible Gold Guidance were designed mostly to help U.S.-listed companies who are required by a U.S. law, known as Section 1502 of the Dodd Frank Act, to carry out checks on their supply chains if they believe their products contain one or more of four minerals – tin, tantalum, tungsten and gold – sourced from the Democratic Republic of Congo and its neighbors. The CFSI scheme, in particular, is limited in what they base their assessments on and falls below the international standards for supply chain checks. For example, it doesn’t require its participants to demonstrate that they regularly carry out risk assessments or have risk management strategies in place.
As Apple rightly recognizes, relying solely on these types of tools is an insufficient means of ensuring that the minerals that end up in our everyday consumer goods do not fund conflict or human rights abuses. This responsibility cannot be outsourced. For this reason CFSI and schemes like it should only be seen as supplementary tools to help companies with their due diligence; companies must remember that they are individually responsible for checking their supply chains as well as the quality of those checks.
Apple’s report is also significant in that it includes some of the most detailed reporting we have seen so far in the conflict mineral reports filed under Section 1502. While the report isn’t perfect, Apple’s more honest reporting on what they do know about their supply chains, how they address red flags, where information gaps and weaknesses still exist and how they plan to strengthen their due diligence is refreshing. It is this type of evidence-based responsible sourcing that gives confidence to investors and consumers that a company is responsibly managing its supply chain risks.
This detailed reporting is a positive step forward and is much more representative of the spirit of the internationally-recognized OECD guidance for this type of due diligence. The guidance is very clear in recommending that supply chain checks are a flexible and iterative process, grounded in constant improvement and tailored to a specific company’s operations and position in the supply chain. We hope that other companies will follow Apple in prioritizing the process prescribed by the OECD guidance over the achievement of a conflict free declaration.
As Apple acknowledges in their report, it’s true that they still have more work to do. Earlier this year, Amnesty International and Afrewatch revealed that cobalt used in lithium-ion batteries found in products manufactured by major companies like HP, Apple, and Samsung may have been mined by children as young as seven years old in southern Congo. While much of Apple’s due diligence appears to be focused on the four minerals included in the Section 1502 legislation, it is important that all companies, including Apple, take a more holistic approach. This involves looking at other minerals – like cobalt –that have come from any high risk and conflict affected areas of the world as required by the OECD guidance, not just Congo and its neighbors.
While Apple still has some way to go before their conflict mineral reporting fully meets the internationally expected standards, they are now much closer to it, and their report shows robust supply chain checks are possible. This is an approach that others should follow and aim to surpass. Global Witness is calling on all companies to ensure they’re providing detailed and substantive information about risks they have identified in their mineral supply chains and the steps they have taken to address these as they prepare their filings ahead of the May 31 deadline. It’s only by doing so responsibly that consumers and investors can be assured that companies really are trying to break the link between the minerals trade and conflict and human rights abuses.