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The value of things: How transparent is the raw materials trade?

Corruption and inhumane working conditions – these are some of the criticisms levelled at players in the international raw materials trade. Transparency should make companies more accountable and ensure greater certainty for consumers.

In 2001 Belgian human rights groups launched a campaign to draw attention to the shocking conditions in and around the Congolese coltan mines. The slogan ‘No blood in my cell phone’ points out the connection between the manufacture of mobile telephones and the conditions under which the ore coltan is extracted. Ultimately, the two largest companies dealing in coltan, H.C. Starck and Cabot Corporation, gave in to increasing public pressure and stopped doing business with the DR Congo.

There are increasing demands for ethical responsibility on the part of the companies in the raw materials trade. Consumers want to know where the raw materials come from and what the ecological and social conditions are like in the mining areas. Yet harsh working and environmental conditions are found not only where coltan is extracted. Who really knows where the copper comes from that is used in our cars and computers, for example?

From cell phones to cars: the production of raw materials affects us all

As a rule, consumers have hardly any information about the origin of raw materials used. According to the German Copper Institute (DKI), almost half of the copper used in Europe is produced by recycling waste. This material has the same properties as copper coming directly from the mines. But recycling conserves limited natural resources, reduces waste, and helps save energy.

However, the balance is different in the case of primary raw materials. The contracts concluded between resource-rich developing countries and the processing companies in the industrialised nations are confidential. The lack of transparency in the raw materials trade encourages corruption and is frequently associated with environmental degradation and inhumane working conditions. Furthermore, revenues from raw materials often disappear in dark channels, depriving the local population of its development opportunities.

Transparency is essential in the raw materials trade

Non-governmental organization (NGOs) stress that social and ecological standards will not be maintained unless negotiations and payments between companies and governments are transparent. Mindsets are now changing. In 2003 the Extractive Industries Transparency Initiative  (EITI) was founded in Europe. Developing countries undertake to ensure the transparency of payments from companies that extract raw materials to the state. 36 states have so far signed up to EITI.

The most far-reaching legislation to date was introduced in the USA in 2010. One passage in the Dodd-Frank Act obliges companies listed on the US Stock Exchange to provide evidence relating to certain raw materials, such as coltan, gold and tungsten, proving that they do not originate from conflict regions.

In Europe companies use voluntary obligations to eliminate shortcomings. At present a proposal from the European Commission is being discussed under which firms trading in raw materials would undertake to disclose their payments to foreign governments.

October 2012

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