April 24, 2014

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Are We Beginning to See the Light? Lou Reed and Supply Chain Responsibility

The devil is in the details as companies decide how to engage with supply chain issues involving conflict minerals.

Brooks-rubin_brad

By Brad Brooks-Rubin

As 2013 ends, the inevitable review of important events and trends begins. For me personally, the passing of Lou Reed was a watershed. Reed was a true innovator and legend who remained true to himself even as he made his share of mistakes.

Leave or Attempt Reform?

Professionally, the single trend/question on my mind the most in 2013 was how to square the ever-growing concerns with minimizing negative human rights and conflict impacts of supply chains with the push to incentivize responsible sourcing from the areas experiencing the most devastating impacts? And do we know what responsible sourcing means in all situations?

Conveniently enough, Lou Reed can help frame this discussion. In the Velvet Underground classic “Beginning to See the Light,” he sang:
Lou-Reed

Some people work very hard
But still they never get it right
Well I'm beginning to see the light.
There are problems in these times
But none of them are mine  

Baby, I'm beginning to see the light.

The lyrics capture two of the essential issues for downstream supply chain responsibility, how to respond to “conflict minerals” from Eastern Congo or Colombia/Venezuela, child labor in mining and cocoa in Ghana or diamonds fueling corruption in Zimbabwe: which problems are mine, and how do I get it right?

What Problems Must a Company Take Responsibility for?

The first question is how to define what problems a company must take responsibility for. Although there are open questions about the depth and strength of consumer consciousness – in the United States and Europe, let alone emerging economies like India and China – recent legislative actions (Dodd-Frank 1502 on conflict minerals, the California Transparency in Supply Chains Act on human trafficking, to name just two) and the adoption of the UN Guiding Principles on Business and Human Rights establishing a corporate duty to respect human rights make the test of that consciousness somewhat beside the point.

That is, it does not suffice anymore to argue that “not enough consumers care enough” about what they buy; meaningful data on such issues is hard to find, and companies now have obligations that go beyond sales. So, to my mind, a company may reasonably think that any of the problems in these times could become its own.

How Can Companies Get It Right?

The harder question is how a company is supposed to get it right when it responds to these problems. As advocacy around conflict minerals from eastern Congo has evolved, the thrust has moved from ensuring companies have no connection to armed groups to prioritizing staying involved in the region.

By asking them to contribute to “in-region” sourcing and other “responsible” efforts, advocates are increasingly telling companies that, to get it right, they must not only do no harm – but make things better.

In the case of eastern Congo, downstream companies and trade associations like ITRI are undertaking responsibilities within the mining sector that should reasonably be expected to be handled by the national government or international community: tagging certified minerals, securing trade routes and responding to risks created by armed groups. But because of capacity and other issues facing the Congolese authorities, it is the private sector that has taken them conflict-diamondon instead.

To Engage or Not to Engage

By contrast, in situations like the diamond trade in Zimbabwe (initial period of violence followed by accusations of wide-scale corruption) or the Central African Republic (CAR)(rebellion followed by months of chaos and brutal violence), the private sector has been told not to engage, even in the face of arguments that responsible engagement by Western companies could play a positive role.

When the European Union recently eased sanctions related to Marange diamonds, advocates criticized this and the Belgian diamond sector’s subsequent courting of Zimbabwean diamond traders, even while few doubt that the introduction of more rigorous sourcing standards by Antwerp could help open up the details of the diamond trade there. In CAR, authorities are desperate for a return of outside diamond companies and an end to a Kimberley Process ban on trade to help stabilize an ever-worsening situation.

Although there are contextual elements of these latter situations that differ tremendously from that of eastern Congo, as well as the very real legal issues of economic sanctions and Kimberley Process suspension, each is also an area where the minerals trade is viewed as potentially contributing to improved governance and development, just as in Congo. Yet instead of hearing that responsible investment is the way to get things right, companies are told to stay away and governments encouraged to maintain those legal barriers.

Lessons to Learn

Full disclosure: these approaches (responsible investing in eastern Congo, targeted sanctions in Zimbabwe, suspension of diamond trading in CAR) were also close to the policies of the U.S. government when I served at the State Department from 2009-2013, and generally remain so. Not because of any particular advocacy but because, evaluated in their own right, these were the best policies to follow. I do not question whether these policies are correct in and of themselves, but rather seek to ask what can be learned from them to guide corporate activity in future conflicts.

Put another way, in a world where companies are expectedconflict-free-diamonds to deal with a potentially limitless array of supply chain concerns, do they have the tools they need to understand when responsible engagement is to be prioritized over disengagement?

And when they do engage, is it appropriate that “responsible” engagement often means assuming quasi-governmental functions? And even if that is appropriate, do companies have a sufficient and cost-effective array of tools to get those steps right?

I do not have the answers to these questions but rather hope to bring the discussion together and push it forward so that we can all begin to see a brighter and deeper light of supply chain responsibility.

Rest in Peace, Lou.

The opinions, beliefs and viewpoints expressed by CSRwire contributors do not necessarily reflect the opinions, beliefs and viewpoints of CSRwire.

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