Dive Brief:
- Major U.S. companies including Apple, Starbucks and Tiffany & Co., have been revealed as buyers of tin from the United Wa State Army (UWSA) in Myanmar, reported Reuters Tuesday.
- The UWSA was placed under U.S. sanction for potential narcotics trafficking in 2003, meaning that those U.S. companies that maintain "direct or indirect" dealings are at risk of violating sanctions. Since that time, Chinese suppliers have maintained ties and purchased tin from the UWSA mine, implicating American supply chains.
- Supply chain scrutiny has generally been outsourced by many leading companies, creating an opaque view of sources of mineral and other items from areas which are considered blacklisted.
Dive Insight:
Since the passing of the Dodd-Frank Act in 2010, improvements in tracing conflict minerals have occurred, but ongoing outsourcing, both of product components and supply chain oversight, make global compliance a challenge for numerous U.S. companies.
Transparency within supply chains provides greater compliance in sourcing from conflict free production sites, but as the manufacturing of complex items like phones, ovens and luxury items involves not only subcontracting but also sub-subcontracting, it is possible for even a well-intentioned company to lose sight of the original source of its materials. For example, 90% of the 1,262 companies filing reports on their mineral sourcing in 2014 were unable to confirm conflict-free status.
Clearly, keeping tabs on sourcing within a global supply chain is a challenge. The amount of money spent was no guarantee of success. However, those companies which retained oversight over their supply chain had a far higher success rate of uncovering potential violations than those who turned the task over to a third party. Actual investigation appears to work best, such as that conducted by Intel which, as a result of sending staff to inspect suppliers, was able to not only guarantee a conflict-free acquisition rate of 90%, but also submitted its findings to a voluntary external audit.
