Dilemma: Tracing 'conflict-free' minerals through a complex supply chain

Apple has made a public commitment to extend its social responsibility efforts to the raw materials that it uses in the manufacture of its products.¹ This commitment has been made as the company works to ensure compliance with the provisions of the Dodd-Frank Consumer Protection and Wall Street Reform Act that address disclosure around ‘conflict minerals’.

In particular, the company requires suppliers to only use ‘conflict-free’ metals from sources that meet Apple’s human rights and environmental standards.² The company notes, however, that the lengthy nature of its supply chain – as well as the nature of the refining process – makes it “difficult to track and trace these materials”. Apple illustrates this challenge by noting that its supply chain runs through “family-run mines, brokers, smelters, refiners, and commodity exchanges – before reaching a component or subcomponent manufacturer”.

Good practice: Supply chain mapping and joint auditing of smelters

Apple takes two key approaches to this challenge. The first is to map its supply chain down to smelter level in order to:

• Identify which suppliers are using tantalum, tin, tungsten or gold
• Identify where such suppliers are sourcing these metals from

The second is to work with the EICC and the Global e-Sustainability Initiative (GeSI) to:

• Audit relevant smelters
• Validate identified mineral sources as ‘conflict-free’

In addition, Apple is – along with others in the electronics industry – engaging with the Securities and Exchange Commission (SEC) and the US State Department as they develop the regulations that will ultimately implement the terms of the Dodd-Frank Act.

Results: Achievement of a crucial first step in complex supply chain management

In 2010, Apple completed a detailed study on the use of tantalum, tin, tungsten or gold throughout its supply chain – including both component/subcomponent suppliers and metal smelters. The results of this study – which marks a crucial first step for any company attempting to exclude potential ‘conflict minerals’ from its supply chain – is set out in the table below:

	Tantalum	Tin	Tungsten	Gold
Suppliers using metal in components of Apple products	23	125	23	116
Smelters used by these Apple suppliers	12	43	13	41

In addition, Apple is an active participant in the Extractives Work Group – a joint EICC/GeSI initiative. It is through the Extractives Work Group, that Apple launched a process to validate smelters that comply with company standards. Apple is also contributing to the development of standards for auditing smelters, as well as supply chain mapping tools.

In 2010, the Extractives Work Group started to carry out third-party auditing of smelters to ensure they do not use ‘conflict minerals’ from DR Congo or its neighbours. The auditing process includes a review of business processes and documents related to the purchase of raw materials. A finding of ‘non-compliance’ can result from:

• The presence of conflict minerals
• Insufficient documentation
• Non-participation in the audit process

Extractives Work Group auditing of all tantalum and tin smelters is expected to be completed by the end of 2011. Once this process is complete, Apple will require all suppliers to only source from validated smelters. Indeed, Apple is planning to incorporate source validation into all of its own regular supplier audits.

¹ Apple, Apple Supplier Responsibility – 2011 Progress Report, 2011,
http://images.apple.com/supplierresponsibility/pdf/Apple_SR_2011_Progress_Report.pdf

² See, for example, the Apple Supplier Code of Conduct,
http://images.apple.com/supplierresponsibility/pdf/Supplier_Code_of_Conduct_V3_1.pdf

³ Note: many suppliers use more than one of each of these metals