The proposed SEC disclosure rules for the conflict minerals provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act have caused concern to mount among OEMs about the legislation’s impact on the electronics supply chain. Will it result in higher component costs? Will foundry production be disrupted? How can I possibly be expected to map out my entire supply chain from finished product down to sources of the most basic mineral content?
There is no doubt that the effects of this legislation will ripple throughout all layers of the electronics supply chain. How deep and wide these ripples will spread is still open for debate. What we do know, however, is the electronics supply chain is no stranger to the challenges imposed by such regulations. Remember RoHS and WEEE? We also know that when faced with these challenges, cooperation, communication, and commitment are our best defense.
The Dodd-Frank legislation does not ban the use of the minerals in question -- columbite-tantalite (coltan and tantalum), cassiterite (tin), gold, wolframite (tungsten). It does, however, require companies to disclose whether their products contain materials mined from the Democratic Republic of Congo, a region plagued by violence.
It's still early in the game, but you can bet that those companies that are among the first to label their products "conflict free" are going to enjoy a significant competitive edge. So, if you haven't already, I encourage you to conduct internal procurement reviews and engage with suppliers and/or distributors to identify potential conflict metals within their supply chains.
Establishing a clear chain of custody from mines to finished products is no small task, but distributors like Avnet Inc. (NYSE: AVT) can be particularly helpful in this effort. Traceability is an essential feature of Avnet's overall sustainable supply chain strategy. We are keenly aware of our responsibility to maintain as socially and environmentally responsible a supply chain as possible -- whether we are talking about environmental protection, counterfeit components, or raw materials sourced from the violence-ridden territories.
As the requirements for this initiative are further defined, Avnet will continue to work with customers and suppliers to develop the tools and strategies necessary to ease the compliance burden.
This initiative is going to be complicated and drawn-out, but there is so much more at stake than just compliance to a law. Violence in the eastern Congo has resulted in the death of nearly 7 million people and untold human atrocities over the last 12 years, according to The Enough Project, an organization committed to the prevention of genocide and crimes against humanity.
The trade in conflict minerals provides rebels and criminal networks within the region with hundreds of millions of dollars a year. The electronics industry is in the unique position to significantly diminish the resources available to these brutal and corrupt forces.
One more thing to keep in mind; it is estimated that going "conflict free" would cost companies just one penny per product. Even if this estimate is grossly understated, can we put a price on human life?