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CNBC

The next conflict minerals could be in your smartphone

Analysts and human rights bodies say cobalt should be added to the list of minerals which require heighted supply chain scrutiny

PUBLISHED : Monday, 29 August, 2016, 1:24pm
UPDATED : Monday, 29 August, 2016, 5:23pm

Leonardo DiCaprio's 2006 movie "Blood Diamond" shed light on the sometimes dubious origins of luxury goods.

The movie highlighted increasing concern about human rights violations in the supply chain and the diamond industry has been put under pressure to eliminate minerals of unknown or dubious sources.

Now, attention is shifting to metals and other commodities that are mined using child or slave labor, or in dangerous conditions.

Cobalt is an insignificant-looking grey metal that risk consultancy Verisk Maplecroft says may be the next so-called conflict mineral. It is used to make the rechargeable batteries found in cell phones, laptops, electric vehicles, aircraft and power tools. The metal is predominately mined in the Democratic Republic of Congo (DRC), where critics say children as young as seven-years-old labour in horrendous conditions.

"The glamourous shop displays and marketing of state-of -the art technologies are a stark contrast to the children carrying bags of rocks and miners in narrow manmade tunnels risking permanent lung damage," Mark Dummett, a researcher at human rights charity Amnesty International, said in a report on cobalt mining in the DRC in January.

The term "conflict mineral" carries a lot of legal ramifications. US Securities and Exchange Commission rules mean public companies must track the source of commodities designated conflict minerals in their supply chains in an effort to combat the financing of militia in countries like the commodities-rich DRC.

At present there are only four legally designated conflict minerals – tantalum, tin, gold, and tungsten – of which the first three are commonly mined in the DRC. Some analysts and human rights bodies say cobalt should be added to the list of minerals for which companies have to conduct heighted supply chain scrutiny.

These calls increased after Amnesty International's report, which alleged that a subsidiary of Chinese mineral giant Zhejiang Huayou Cobalt bought cobalt from mines in the DRC where child labour was rife. Amnesty said Huayou Cobalt sold the processed metal onto battery component manufacturers in China and South Korea, who claimed to supply 16 multinational consumer brands, including Apple.

Complex supply chains spanning several continents present challenges for companies who are required to determine where every commodity and component in their products come from. In response to Amnesty's report, Apple said it was evaluating if the cobalt in its products came from the DRC and if so, whether it was via Huayou Cobalt.

The US company added that it did not tolerate underage labor and that when it had conducted an audit in 2014, 16 underage workers were discovered out of a workforce of 1.6 million. These cases were "successfully addressed," Apple said.

Huayou Cobalt said it was unaware that any of its "legitimate suppliers" employed children at their mining sites or operated in unsafe conditions.

Verisk Maplecroft has warned that workers of all ages in the DRC are at "extreme of risk" of exposure to forced labor or trafficking.

The consultancy said this type of modern-day slavery was common across many poorer countries – not just in Africa – and that the goods and components produced might find their way on to shop shelves in Europe and the US.

"Companies are heavily reliant on goods and raw materials from India and China. However, sourcing from these countries can come with a substantial risk of association with forced labour," Verisk Maplecroft said in a report.

"The risk is endemic in India's agricultural sector and is prevalent in parts of its garment sector. The exploitation of children in the mining of minerals is also common. Forced labor, including the exploitation of young apprentices, occurs across multiple sectors in China, including electronics production, mining and agriculture," it added.

Under-pressure multinationals are turning to outside consultancies to help them understand their own supply chains. One is RCS Global, whose tag line is "making sure" and has bases in Colombia, Rwanda, South Africa, China the US and the UK.

"If you look at the issue of slave labour or forced labour, I think where there are extremely unregulated supply chains, in countries of weak governance, you are sure to find this issue and that goes for any material," Harrison Mitchell, director of responsible supply chains at RCS Global, told CNBC.

He said companies were typically ignorant of exactly where they sourced their materials, rather than indifferent.

"There is quite a bit of movement on this issue in terms of companies taking the issue seriously," Mitchell told CNBC.

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