Why Companies Aren't Required to Label Their Products 'Conflict-Free'
This August, a court ruled that labeling goods made using minerals from warlord-controlled mines is a matter of opinion on moral responsibility, not a factual statement relevant to investors.
This story appears in the December issue of VICE magazine.
For ages, many Americans inadvertently and indirectly funded militias ravaging the Democratic Republic of the Congo by purchasing goods unwittingly or uncaringly made using minerals from warlord-controlled mines. But in 2010, a provision in the Dodd-Frank Act promised to end this conundrum by requiring US companies to trace the origins of their gold, tantalum, tin, and tungsten, common "conflict minerals," and publicly label their products as conflict-mineral-free or otherwise. It was a bold effort to end a persistent problem and raise public awareness. But this summer, a court affirmed that at least part of this solution might violate American legal norms.
Last year a court killed the public labeling requirement. This August a new decision upheld that ruling, arguing that "conflict-mineral-free" is a matter of opinion on moral responsibility, not a factual statement relevant to investors, who have a right to know about companies' worth and functionality—and little else.
Companies using the four conflict minerals are required to research and report their supply chains. While these filings are on the SEC site, they are often opaque to consumers, and unless a product is declared "conflict-free," its supply chain is not subject to audits. Looking at the weakness of the scant reports filed to date, activists fear this lack of accessible labeling may allow companies to slack off, undermining the law's potential.
Yet while reporting is weak, companies, like Apple, have apparently made major supply-chain changes, arguably improving the situation in the DRC. And Dynda Thomas, a lawyer specializing in conflict-mineral issues, believes that as NGOs issue their own public simplifications and ratings of company filings, they'll drive compliance beyond legal requirements, making the optional labels attractive.
"All we need is a minor disclosure obligation, and then NGOs will have acted publicly" to up the ante on what's functionally required, Thomas said. Yet while the ruling against mandatory labeling (which is being petitioned for review) isn't disastrous for conflict mineral reforms, it's still uncomfortable. It shows how hard it is for the state to compel companies to comply with even democratically endorsed campaigns for social good. That's a depressing reminder of the gap between practical and legal realities and values.