2012-08-27

Co.Exist

Walmart, Target Don't Have To Reveal Conflict Mineral Connections

A stringent new law would force companies to disclose when they use resources from war-torn Congo. Except the law turns out to have a large-corporation-size loophole.

Advocates for ethically sourced minerals scored a big win this month when the Securities and Exchange Commission voted for a rule that requires public companies in the U.S. to reveal whether their products contain conflict minerals, or minerals mined in the Democratic Republic of Congo, that are helping to fund violence in the area. There’s just one problem: a loophole in the rule says that retailers don’t have to report conflict-mineral connections--meaning big box stores such Walmart and Target escape scrutiny.

According to the just-passed rule, originally mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, manufacturers have to reveal use of conflict minerals such as gold, tin, tantalum, and tungsten if they are "necessary to the functionality or production of a product."

An earlier version of the rule also required retailers that sold their own brand-name products to disclose conflict-mineral use, even when those products are manufactured by outside contractors. But the retailers lobbied against this, and the final version now includes a provision saying that companies that don’t directly control production over their products--like many big-box stores--don’t have to disclose. The reason is that they ostensibly can’t figure out the origins of their products, and so there’s no way for them to know whether the products contain conflict minerals. Retailers who do control production all the way from contracting to manufacture do have to disclose.

The National Retail Federation is, of course, happy with the decision. “It’s very important that a distinction be made between a retailer who is acting as a manufacturer and has control over what is in a product and the vast majority who do not. While retailers abhor the violence in the Congo, compliance with these regulations could still be extremely difficult and there is considerable debate on whether filing reports with the SEC will make any difference," said Jonathan Gold, the National Retail Federation’s vice president for supply chain and customs policy, in a statement. Co.Exist contacted Walmart for comment, but we have yet to hear back.

The SEC ruling is undeniably a step toward supply-chain transparency--approximately 6,000 companies will now have to disclose use of conflict minerals. But is it enough when retailers can claim ignorance and be exempted from the regulations? It might be. Voluntary changes by big companies such as Intel, HP, and Apple have already created an environment where armed groups in the Congo make just 35% of what they made two years ago by mining conflict minerals. That number will almost certainly drop further with the SEC ruling.

As for the companies that are required to disclose--they have until May 31, 2014, for their first report.

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