Pressure on US universities grows to de-fund conflict minerals

Numerous US student groups have launched initiatives to prevent universities from investing in or purchasing conflict minerals from the Congo. Stanford University, the first to take concrete steps last year by passing proxy voting guidelines, is now hosting a conference from April 8-10 to share experiences and strategies and to plan further actions.

These initiatives fall within the spirit of the US legislation passed last June. The Dodd-Frank bill does not punish companies for buying or using conflict minerals, instead imposing fines if they fail to publish what kinds of efforts they are taking to determine where their minerals are from (in "Conflict Minerals Reports"). In other words, the legislation will criminalize the lack of transparency, not the use of conflict minerals.

Hence the importance of private actors, such as universities. If universities - some of which have huge endowments - begin divesting from companies that use conflict minerals, these businesses will change their behavior.

This is the spirit in which universities such as Stanford have passed proxy voting guidelines, which mean that if a shareholder vote comes up with regards to this issue, Stanford will vote against the use of conflict minerals. It's an important, albeit symbolic step - it is unlikely that such a vote would come up in the first place, but it still sends a strong message.

The University of Pennsylvania is pursuing another route, this past week issuing a statement saying they would not purchase electronics from companies that are not members of the Electronics Industry Citizenship Coalition (EICC), which include most major electronics companies and has said its members will stop purchasing minerals from the eastern Congo in April this year if they are not properly tagged and traced. The U Penn initiative was also made following pressure by students.

Yale University, where I am involved in a similar initiative, is considering writing to major electronics companies it invests in (it has a $17 billion endowment that it invests) to ask them to adopt OECD guidelines in their due diligence efforts. If companies do not adopt thee guidelines, or if they are found to be in violation of the SEC rules or using conflict minerals, we would ask Yale to divest.

Will these initiatives have an impact? Hopefully, but it all depends on how this US-based pressure impacts the situation on the ground. Ideally, this pressure will create incentives for suppliers in the field to pressure the Congolese government to demilitarize key mining sites - after all, most large mining areas are now controlled by the Congolese army - and set up sound tracing schemes. At the same time, pressure would grow for the Congolese army to chase non-state armed groups out of other mining concessions and sanitize them, as well, for international trade. This would lead to less corruption of the Congolese military and greater incentives for demobilization for other armed groups. Some pilots for tracing schemes are under way, although the mineral export ban by the Congolese government between September 2010 - March 2011 brought a halt to those initiatives.

But there is another possibility: that the pressure in the US will just lead to a boycott of the Congo by endusers in the US, pushing trade to the domestic Chinese and Indian markets. Tens of thousands of Congolese jobs could be lost in the short-term and in the long-term little would change, as the endusers in Asia would probably not care much about due diligence. The authors of the conflict minerals bill say that these are scare tactics, and that western companies will continue to buy from the Congo, but I am less certain. Several Congolese organizations - including BEST in Bukavu and Pole Institute in Goma - are critical of the Dodd-Frank legislation and say the Congolese government and the industry need more time to implement the requirements.

The only way that we can ensure that activism in the US can have a positive impact on the situation in the Congo is that donors actively engage with the Congolese government to help demilitarize mining zones (perhaps starting with the lucrative Bisie mining area) and set up tracing schemes. If we don't do this, our efforts here in the US could backfire.

Unfortunately, there seems to be little movement in this direction by the US government. The Dodd-Frank bill required State Department to come up with a strategy for conflict minerals, including through support to the Congolese government, and State (after a long delay) finally brought out a short paper two weeks ago. I will post it later, but it does not appear to contain any new concrete diplomatic or institutional initiatives - a lot seems to be riding on the World Bank's Promines program.