Friday, September 21, 2012

Soon Businesses Will Be Required To Disclose Where Their Minerals Come From

DEMOCRATIC REPUBLIC OF THE CONGO (LOS ANGELES TIMES) -- New regulations in the U.S. could see publicly traded companies have to state whether or not their mineral purchases are directly funding conflicts in the Democratic Republic of the Congo or neighboring countries. However, despite it's good intentions, there are activists and businesses that are questioning the effectiveness of the legislation.
Money from mineral exports is directly
 funding DRC militia groups
The law will require that publicly traded companies state whether they use minerals from the troubled region, as well as assessing whether their minerals are 'DRC conflict free'. Activists focused on the conflict believe that naming and shaming the bigger corporations using this law may lead to them ceasing in their activities. The U.S. Chamber of Commerce has questioned how costly and effective these laws will be, stating that cutting off one source of revenue won't stop militias from fighting.
There are also huge flaws in the currently proposed legislation. Whilst the DRC is synonymous with government troops and rebels involved in mass slayings and rape, some companies will be able to disassociate themselves with the minerals and legislation as they do not directly make/mine the product. This will let many big brands off the hook as they merely stick a label on a product and sell it, rather than mining it themselves and facing the legislation.
Legitimate US companies in Africa could be harshly affected by this. The SEC estimates that the overall cost of this legislation could escalate to as much as $4 billion. Many companies may cease to do business in Congolese minerals. The biggest question remaining is how will this new legislation affect businesses and the conflict itself, once it is put into place?
Source: New Regulations Seek To Expose Congo Conflict Minerals (Reliability: High)

Comment: Businesses in the US could suffer dramatically if this legislation is put in place. With the SEC estimating losses at $4 billion and the U.S. Chamber for Commerce putting that figure between $8 and $16 billion, this is a huge move that may punish businesses without necessarily fixing the bigger issue of militia and DRC conflict.

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