I recently had the privilege to testify before the House Financial Services Committee’s Monetary Policy and Trade Subcommittee (Nov. 17, 2015). The hearing was held as part of continued oversight of the Dodd-Frank Act, signed into law by President Obama in 2010. The focus of the hearing was on the conflict minerals provision in Dodd-Frank, which directed the Securities and Exchange Commission (SEC) to issue rules requiring companies to disclose whether they source “conflict minerals” – tin, tungsten, tantalum, and gold – from the Democratic Republic of Congo (DRC) and its neighboring countries. These minerals are used in countless products, from cell phones to satellites. These rules were developed out of concern that the exploitation and trade of conflict minerals by armed groups is helping to finance conflict and humanitarian strife in the DRC and its nine neighboring countries.
Unfortunately, and as reflected most recently in the regrettable tone of the hearing, many have sought to discredit the rule as a “failure.” This narrative, pushed since 2010, has steadily crept into the mindset of not only members of Congress and reputable media outlets, but in many top executives of the Fortune 500’s most venerated companies. And even while many companies have tried to make conflict minerals and supply chain compliance a key and honored part of their corporate responsibility mission, there are those that continue to suggest that the rule portended only negative consequences. These critics routinely imply that the people of the DRC have been harmed, that purchases of “conflict-free” minerals have dropped, and that companies simply can’t (and perhaps shouldn’t) comply.
I assure you that there’s more to this narrative—and we must consider the good that this rule has done for both business and society.
As the chief executive officer of KEMET (a U.S. based global manufacturer of electronic components and one of the world's largest users of tantalum), I have seen the worldwide business community respond to the rule and I have experienced the powerful social and economic impact that it can have on the people of the DRC.
Simply put, at KEMET the narrative is quite different. KEMET viewed Dodd-Frank as an impetus for developing an innovative and socially sustainable solution to sourcing conflict-free tantalum from the DRC. The rule gave our suppliers, our customers, and industry at large a blueprint to guide our collective decision-making. But it also gave KEMET its raison d’etre for investing in the DRC. The business value has since become crystal clear: we now better control our costs and generate increased returns ($53 million annual run rate), created jobs, supported socially responsible investment in the DRC, and reduced fluctuations in ore and powder pricing in order to better support global demand.
How did we realize this vision? We helped establish the “Partnership for Social and Economic Sustainability.” one of the electronics industry’s first vertically integrated, closed-pipe, sustainable sourcing models. We procure tantalum ore directly from a conflict-free mine in the DRC that is operated between KEMET, our mining partner, and the people of the mining town of Kisengo. The closed-pipe allows us to ensure that no tantalum from non-conflict-free sources enters our supply chain.
Prior to our involvement in Kisengo, their mining process was old-fashioned and the community didn’t have access to basic needs such as: infrastructure, clean water, and stable health and educational resources. Our investments have mechanized the mine, making it more efficient and safer. We built a new hospital for the mineworkers and the people of Kisengo – over 14,000 cases have been treated in the last 16 months. We constructed a new school that has 1,854 students and outfitted it with resources to continue operating. We established access to clean water and eradicated cholera as a result. We installed solar powered streetlights and refurbished basic infrastructure (roads and bridges). This is just the beginning. We have not, and will not stop there.
Now, there is no question on provenance and there is a clear road map to ethically source tantalum from the DRC. The bigger picture is this: Kisengo, the DRC, and the region’s vital natural resources drive the creation of economic value and we must cherish them and protect their local communities. And make no mistake, Dodd-Frank’s rule gave us a blueprint and allowed companies like KEMET to envision better solutions for our stakeholders and beyond.
As KEMET’s story suggests, it’s time we broaden the narrative on conflict minerals – and then perhaps, the role that American companies can play in being economically and socially responsible.
Loof is CEO of KEMET Electronics.