Listed US firms will be required to disclose whether they use so-called conflict minerals sourced from the Democratic Republic of Congo (DRC), under a new securities rule adopted on Wednesday.
The Securities and Exchange Commission (SEC) said that companies using tantalum, tin, gold, tungsten and other minerals in their products had to report to the authorities if the minerals came from the DRC or neighbouring countries.
The new rule, part of the broader Dodd-Frank package of mostly finance industry regulations, aims to support efforts to curb the exploitation of mines by rebel groups in eastern DRC.
“A company that uses any of the designated minerals is required to conduct a reasonable ‘country of origin’ inquiry that must be performed in good faith and be reasonably designed to determine whether any of its minerals originated in the covered countries or are from scrap or recycled sources,” the SEC said.
The rule can apply to a firm that contracts other manufacturers, in China for instance, to make its products.
Rights groups have placed growing pressure on the business world to stop directly or indirectly fuelling the conflict in the DRC by buying valuable rare minerals mined in the region to the benefit of insurgents and rebels.
The rule raised protests from companies and some regulatory officials saying that it placed international social goals into regulations aimed mainly at protecting investors.
“The SEC just isn’t the right tool for this type of social policy exercise, as we should know from past experience,” said SEC commissioner Daniel Gallagher. “As the chairman stated when proposing the conflict minerals rule-making nearly two years ago, ‘expertise about these events does not reside within the commission’,” he added.
The Information Technology Industry Council (ITIC), which represents electronics producers, applauded the measure.
“Any mining activities that fuel conflict are unacceptable, and the tech sector will continue to work with the international community to ensure transparency and responsible practices within global supply chains,” ITIC vice-president Rick Goss said.
But human rights group Global Witness said the rule had been modified to give manufacturers a large loophole.
“We are extremely disappointed that the rule will allow companies to describe the origin of their minerals as ‘undeterminable’ for a period of two years, or four years for small companies. Delays in implementing the law postpone the moment at which companies take responsibility for the impact of their purchases.”