Inside Intel's phenomenal effort to end its use of conflict minerals

We tend to think that large corporations have total, intentional control over their own businesses -- local abuses are quite reasonably assumed to derive from pressures from above, to be extensions of the overall corporate culture rather than exceptions to it. But highly complex and, particularly, highly globalized companies often find it difficult to exert total control over their entire operations. Increasingly sprawling and complex, companies as diverse as Coca Cola(Opens in a new window) and Firestone(Opens in a new window) have found that it is often quite simply hard to know whether you're acting ethically across a truly global business.

That's part of the reason why an announcement from Intel last month is so phenomenally impressive: After having hit its 2014 milestone of eliminating so-called "conflict minerals" from its processors, the electronics giant can now boast(Opens in a new window) that its entire product line is free of conflict metal. That might not seem like a big achievement -- to enforce a buying policy on yourself -- but there's a reason it's taken so long: Intel is part of a fight to reform not one, but two industries, a fight that's going to have to continue without meaningful help from politicians or regulators.

In some other parts of the world, those termed "conflict zones," a nearby mine is often little more than an invitation to be murdered. Local populations are treated almost like an extension of the resources themselves, captured nearby and put to work. When one murderous militia takes an area from another, the locals simply change hands for the most part. Conditions don't generally improve, and each successive conquering brings with it new waves of preemptive punishment. Theft, murder, and particularly rape, are used as institutional tools to cow workers and appease the militias' rampant criminal soldiers and employees.

The term "conflict mineral" has never been specific to a sample's mine of origin and applied to basically anything extracted from a mine in an active conflict zone like the DRC. That makes sense -- chaos, corruption, and poor organization in these areas meant there was no truly reliable way to buy only the responsibly mined ore and refuse the blood-stained. As a result, the conventional wisdom was that the only ethical thing to do was ban all minerals originating from conflict zones -- the EU(Opens in a new window) tried to enact the largest such ban last year, but the law is not expected to make it past the veto of certain governments.

In any case, these total bans are imperfect solutions. While they undoubtedly take money out of the hands of warlords and murderers, like all sanctions they also siphon money away(Opens in a new window) from innocent workers and worsen poverty in an already destitute area. Worse, for a high-level manufacturer like Apple or Cisco, simply deciding not to buy conflict minerals often doesn't cut it, and can functionally achieve little more than encouraging dishonesty in the materials companies that do the direct purchasing from mines. Though it ought to be impossible due to various laws and regulations around the world, conflict tantalum from the eastern Congo still accounts for up to half(Opens in a new window) of the total amount in use today.

In the US, regulators found out just how hard it can be to track conflict minerals with 2010's Dodd-Frank reform bill, which required the SEC to figure out a system to require companies to publicly report whether their supply chains included conflict minerals. Though it was popular with activists(Opens in a new window), this disclosure requirement was struck down(Opens in a new window) a few years later in a ruling that called it an infringement on the free speech of corporations comparable with requiring health warnings on cigarette boxes. The real point, though, is that it probably didn't matter in the short term, since a report from Amnesty International found that(Opens in a new window) almost three quarters of the companies affected by the conflict resource restriction had not reported enough information to satisfy the regulations anyway.

One big reason for the low participation is the difficulty of actually complying. With so many mines to check, and such complex interconnections between those mines and materials companies, it was difficult to imagine a way to enforce purchasing standards -- so the smelting companies were a perfect target for further effort. These companies, mostly in Russia and China, condense a literally unknown number of mines down to a few dozen listed groups. It's these companies that sell to corporations like Intel, and so they were the electronics industry's preferred point of attack.

To have any hope of actually succeeding, a large group of electronics industry companies set up the Conflict Free Smelters Program (CFSP) to do independent audits of smelters. The group basically works to provide smelters with the ability to audit mines, then requires that those smelters do those audits or lose business from the organization's long list of corporate members(Opens in a new window). Though it was eventually removed from law, Dodd-Frank's conflict minerals provision lives on through this voluntary program and its requirements for smelters. Intel went a step further, pledging $250,000 to help smaller smelters who wanted to comply, but didn't have the resources to do so.

One of the main features of the Conflict Free Smelters Program is referred to as "bag and tag," in which metals from audited mines are loaded into tagged, trackable bags with tamper protections. These bags are monitored from the mine to the smelter, and working only with tagged ore is the main provision for CFSP compliance. It's not perfect, local bribery and corruption being by far the most difficult problem to curb, but it means that any conflict metals that do work their way into the system will be a minority. It also provides a mechanism to find and eliminate bad mines from the supply chain eventually, even if they did manage to stay longer than they ought to have.

The idea is that if audits are even mostly accurate, and companies do stop buying from any smelter that drops out of the program's requirements, then local warlords won't be able to monetize control over mines, and attacks will cease. Intel clearly derives real pride from employing so many local Congolese people in a way that ensures fair compensation and working conditions; by Western standards, miners in the DRC make very little, but by local standards it's more than enough to live and save. So long as they can ensure that working in a mine doesn't expose workers to a very real risk of being captured and made into a literal slave, the world's electronics manufacturers believe responsible mining is good for developing communities.

But the future of conflict minerals is not assured to improve. The removal of the Dodd-Frank disclosure requirement is telling, in that the argument was that there is no overall public interest in knowing the human rights history of the product you're buying, and so it's not an issue of consumer advocacy. In a particularly revealing comment, one corporate lawyer attacked(Opens in a new window) the reporting provision as trying to "affect the international market for these conflict minerals by shaming companies."

Yes. The Dodd-Frank provision was, definitively, an attempt to create a moral hierarchy in a portion of the business world. Rather than the negative labeling on cigarettes, it had more in common with the positive labeling on organic food, though in this case it's compulsory, so lack of certification would have been much more meaningful. It would have created a situation in which the vast majority of companies could not initially claim compliance, and given those that could a new form of elite status within the market. It was attacked for requiring more oversight than the supply chains could provide, but the whole point was that with proper enforcement it could have forced those supply chains to improve. It had the potential to affect corporate practices far more fundamentally than even a truly enormous industry group could hope to.