From Conflict Minerals to Clean Lead: Lessons for Global Supply Chain Reform
How well does global demand-side regulation need to work?
This is a guest post by Étienne Dyer, a student at Concordia University.
Many prospective solutions to lead poisoning from low-quality ULAB recycling have been focused on national-level policy in countries where the recycling is happening.
Some of these ideas are supply-side solutions—find the lead recyclers and either subsidize the good ones or get the bad ones to consolidate and upgrade their facilities. But tightening standards in one country may push recycling into other countries with cheaper and lower standards. This is what happened with the United States and Mexico.
National demand-side policies that have appear to have worked rely on domestic lead demand. Brazil managed to steer domestic lead demand toward clean recycling by requiring manufacturers to prove they’re using lead that they can guarantee was formally recycled. But it’s unclear if this approach works in countries like Nigeria, which have no domestic manufacturers and export all of their lead abroad.
A powerful alternative avenue could be driving change from some of the markets that are major consumers of new lead acid batteries and also home to some of the world’s largest manufacturers, the U.S. and the E.U. And there are existing models for this kind of legislation.
This piece examines the feasibility of demand-side regulation for lead recycling by analyzing legislation that seeks to curtail the use of “conflict minerals” from the Democratic Republic of Congo.
The conflict minerals parallel
In 2010, the United States passed a landmark piece of legislation aimed at diminishing the influence rebels groups have on mines in the Democratic Republic of Congo (DRC). Section 1502 of the Dodd-Frank Act required companies to audit their supply chains for tantalum, tin, tungsten, and gold (3TG) potentially sourced from conflict zones. The goal? To cut off funding to armed groups profiting from exploitation in artisanal and small-scale mines.
In the DRC, most of these informal mining operations are run by armed groups of various sizes, including local militias known as Mai-Mai. Working conditions are poor, child labour is common, and the profits go toward funding armed conflict.
But instead of attempting to target rebel groups directly, US legislators went after the American companies who were the ultimate buyers and users of these minerals.
Timeline
In 2006, the International Conference on the Great Lakes Region, composed of 11 African states including Angola, Sudan, Rwanda, and the DRC, created the first scheme to certify that minerals had come from conflict-free mines. This was a step forward, but there was no mechanism in place to apply pressure to buyers.
One year later, in 2007, the Washington, D.C.-based Enough Project was established with the objective of curtailing human rights abuse in east and central Africa. From 2009 onward, they were one of the main NGOs lobbying the US government to take action on the conflict mineral problem.
Their success came the following year via the Dodd–Frank Wall Street Reform and Consumer Protection Act, the legislation passed by the Securities Exchange Commission to address the 2008 financial crisis. Section 1502 of the act would require manufacturers who make use of tantalum, tin, tungsten or gold to audit their supply chain so as to ensure these metals were not sourced in a way that supported armed warfare in the DRC.
Two months after Dodd–Frank was enacted, the DRC enacted a mining ban in three of its eastern provinces, targeting informal mines run by rebel groups. This lasted only a few months, but attested to a clear desire to shift mining away from organized crime and willingness to cooperate with international entities.
China and the E.U. implemented their own conflict minerals guidelines in 2015 and 2017, respectively. The European regulations, which went into effect in 2021, concern importers of 3TG, and include a wider geographical scope, covering conflict-affected and high-risk areas worldwide. Its effects are still being evaluated, but it is encouraging to see that legislation is being passed more than a decade after Dodd–Frank, refining its scope and methods.
How Section 1502 works
Companies which manufacture components involving tin, tantalum, tungsten or gold have to internally audit their supply chain and report results to the SEC. These split into two general cases:
If they have no reason to believe their products are sourced from the DRC or neighboring countries, they briefly explain how they conducted their investigation, and post this on their website.
If they have a reason to believe they are sourcing from a conflict zone, then there are three possible outcomes.
If they believe the metals they purchase are “conflict-free,” then they must obtain a private sector audit of their report to corroborate their findings, in which case they can label their products as “DRC Conflict Free”.
If they cannot confirm their products are “conflict-free,” then they must file a Conflict Minerals Report, publish this on their website, and label their products as ‘Not Been Found to Be “DRC Conflict Free.”’
In the first few years, there was a “ramp-up” period where companies could label their products as “DRC Conflict Undeterminable.”
One striking aspect of this legislation is how few consequences companies faced for using conflict minerals. The law focused on transparency, and the main lever of the provision is “naming and shaming.” As a result, it didn’t attempt to prohibit or restrict the use of conflict minerals—it just required that companies disclose their use.
Presumably, lawmakers didn’t choose this because they thought it would be more effective than fines, but instead because it was easier. The amount of political capital needed to enact coercive regulations is huge, while these simply required disclosure and did not mandate specific sourcing changes.
The results
A detailed 2016 analysis came to a clear conclusion: Section 1502, from the point of view of the SEC, has not fared well. Companies have been largely uninterested in complying—which is not surprising, given that there are no mechanisms in place to entice them to do so.
Looking at the 2014 report, the year filing began, the author found that the number of companies who filed at all was about a third of what the SEC expected. Of the companies who filed, 99% (!) said they were unable to determine whether or not their products came from conflict-free mines, and out of 1321, only one was able to certify their products as conflict-free (good job, Intel).
Things don’t seem to have gotten much better: every year since 2014, the number of companies filing has decreased. The US Government Accountability Office released a report analyzing compliance up to 2022, and found that just under half of the companies whose reports they went through could not even determine the country of origin.
Image sourced from the GAO report
Despite this, it appears companies did respond: starting in 2010, many outlets reported a de facto boycott on Congolese mineral exports. The legislation also appears to have spearheaded a global effort to curtail the use of conflict minerals through similar regulations, like the ones enacted by China and the EU.
The unstable nature of the problem makes establishing causal relationships especially difficult, but trends have emerged since 2010.
First, it seems to have substantially pushed down the price of and reduced the volume of 3TG minerals mined and exported from the DRC. A 2014 Washington Post article quoted tin miners as saying that since the law passed, they received $4 per kilo, while the global market price was $22 per kilo. 2011 reporting from Bloomberg and The Wall Street Journal found a 90% decrease in DRC export volumes of tin and a 70% decrease for all 3TG minerals.
And armed groups have become less prevalent in 3TG mines. In 2012, The Enough Project released a report on the effect on Dodd–Frank over the two years since it had been enacted, and found a 65% decrease in armed groups’ profit from 3TG mining. Multiple sources refer to the 2018 investigation by the International Peace Information Service (IPIS), which surveyed 2419 congolese mines and reported that 80% of tin, tantalum and tungsten mines were conflict-free, as well as 60% of gold mines.
We don’t have pre-Dodd-Frank numbers, but UN reports suggest this is a big improvement over the previous near-total control by rebel groups. These figures also align with one study claiming that that violence decreased in regions mining the 3Ts, but increased in regions mining gold. One hypothesis for this is that gold can more easily be smuggled out of the country as a luxury good, safe from the watchful eyes of tech supply chain analysts—the 2023 IPIS report found that 98% of gold was smuggled out of the DRC. (As a side note, IPIS produces incredible interactive maps about the complex relationship between mining and armed conflict in the DRC.)
But while the law seems to have substantially reduced the amount of militia-run 3TG mining, that does not appear to have been a broadly effective solution for improving conditions in the DRC. Widely cited by critics of the regulations, Parker et al. found that Dodd–Frank increased the probability of infant death in villages affected by Dodd–Frank by 143%, likely due to reduced income for families.
The law also seems to have had little impact on organized warfare in the DRC as a whole. While reports like the one published by the Enough Project have shown that rebel groups have partially left 3TG mines, researchers argue this hasn’t really affected their influence across the Congolese mining regions. The deep roots of rebel groups in these areas means running the mines was replaced by other means of earning income, such as smuggling minerals, and looting and taxing the areas they control. The 2023 IPIS report claims that “61% of the miners are subjected to the interference of armed actors,” which is disappointing, given that their 2009 report claims there were armed groups in “slightly more than 50% of the sites.”
The US Government Accountability Office, in their 2022 report on the effects of the legislation, similarly found that violence had increased in the region between 2017 and 2021. That being said, it’s hard to fault the effort for not solving armed conflict in central Africa—this is perhaps more of a lesson about what targets policy should aim at.
The impression we were left with is that there was a sharp decrease in exports of 3TG from the DRC, then gradual recovery as mines were audited and accredited as conflict-free. This piece by Foreign Policy, published last May, gives a great look into the history of the legislation, its effects on the local population, the traceability process (mainly carried out by iTSCi), and its shortcomings.
How this could work for lead
A traceability scheme could be a great solution to reduce informal lead recycling. Dodd-Frank got the rebels out of mines—it just turns out this might not have been the best way to solve the DRC’s issue of armed conflict. We know that informal recycling causes lead poisoning. Stopping informal recycling will definitely be a good way to reduce it.
Clarios, the world’s largest battery manufacturer, already audits its smelter lists to ensure they’re not sourcing conflict minerals from the DRC, a system they and their competitors could apply to informal lead recycling as well.
With this in mind, some key take-aways:
1) Demand-side approaches work. Despite how weak the enforcement of Section 1502 was, it was clearly effective in getting rebels out of tin, tantalum, and tungsten mines in the DRC.
2) Legislation can be flawed and still have a substantial impact. The reasons for which Dodd–Frank was ineffective from the point of view of the SEC (low compliance from companies) are unrelated to the other ways it failed (it didn’t eliminate armed conflict in the DRC). It seems plausible that we could have traceability schemes like Dodd–Frank, which carry a relatively low political cost in countries like the U.S. and the E.U., but are effective enough to successfully reduce informal recycling abroad.
3) Raising political capital for the issue of global lead poisoning might be difficult. The Second Congo War, which created a lot of the present instability in the region, caused 3.9 million deaths from 1998 to 2004. The groups linked with exploitative mining perpetrate sexual violence on an astounding scale. This creates more of a popular sentiment of “something has to be done” than the often-hard-to-perceive but incredibly large ongoing destruction caused by lead poisoning. That being said, this is likely not a deal-breaker—fair trade coffee is a good example of a hugely popular certification that wasn’t the result of graphic violence.
4) Regulation should consider what informal recyclers do next. The immediate impact of Dodd–Frank was hard-felt by Congolese miners—the vast majority of whom were not rebels themselves. Robust traceability schemes could have been implemented ahead of time to ensure that legitimate mines were able to continue to operate before the measures affecting US companies were enacted.
All in all, we are optimistic about the idea of demand-side legislation for lead recycling. While Dodd-Frank may have done more immediate harm than good in the DRC, it succeeded on one key objective: getting rebels out of the mines. Its flaws feel like something that can be improved upon in the context of lead recycling, especially since we wouldn’t be relying on second-order effects of legislation—the goal would be the specific reduction in informal recycling itself.
Demand-side regulation may not be perfect, but it might just be good enough.
With edits from Hugo Smith.
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