Conflict Minerals in the Democratic Republic of Congo. Dylan Scudder
a local setting but not in a company’s home country, how should it conduct itself?
Significant risks include:
Social: If the child labor issue in Kivu is left unresolved, then SD could be acting legally, yet unethically.
Economic: Failure to handle the social and environmental concerns in the area could harm SD’s reputation, and consequently, its bottom line.
Environmental: The Lowland Gorilla is severely endangered. Unless SD takes measures to protect this rare species, extinction is only a matter of time.
Demographic: Children in Kivu outnumber the adult population. SD needs to accommodate this fact without depending on the exploitation of children.
Political: As the overall security situation in Kivu remains tenuous, SD needs to consider the potential political impact of any decisions.
Defining the Problem
Most of SD’s coltan comes from the DRC, one of the most dangerous and demanding business environments in the world. SD’s DRC main office is in Kinshasa, the capital. However, there are also field offices in South Kivu, closer to mining operations. There are many risks in the area. If these risks are not managed successfully, the company’s global reputation could suffer badly.
Figure 1.2: Forecasted prices for tantalite ore over the next five years.
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SD faces a dilemma. First, coltan is a mineral that every manufacturer in the electronics industry, including SD, must have. Second, there are compelling reasons not to source coltan in this region. You know that children work under harsh conditions to extract the coltan that SD buys. Also, there are various guerrilla groups in the DRC. On your desk is a report from the SD Field Manager in South Kivu Province.
Field Report
SPEEDY DEVICES INC.
From: Karen Adams, Field Manager, Kindu, South Kivu Province
Subject: Field Report—Child Labor in South Kivu Province
The situation here is complicated. We buy coltan through local suppliers. They should not buy coltan from guerrillas, but we cannot control everything they do. The government seems stable. Our staff is not in danger now, but the future is uncertain. In addition, an Australian NGO called “Kids in Crisis” (KIC) has recently opened a small office ←7 | 8→in Kindu town. They say they will work with the local community, the authorities, suppliers and foreign businesses to fight against child labor in South Kivu.
KIC’s goal is “elimination of child labor from the materials used by multinationals.” So, I suppose they are here to persuade SD to make sure that children are not used to extract the coltan that SD buys. This would not be easy, because we would have to check where all the coltan comes from. Do we want to cooperate with KIC on this, or not?
There is some background information to think about.
First, in this culture, it is normal for children to work hard from an early age. That is how many families survive here. Second, child labor is not illegal in the DRC, but we need to research the effect of US law. Third, various guerrilla groups are controlling the local coltan industry.
I am meeting with KIC next Tuesday. I need your input before that meeting.
Karen Adams
Field Manager
Applying the Pentalemma Model
It seems that your biggest problem may be the issue of child labor. Of course, SD would never exploit children. Such rules of conduct are written in the company’s CSR policy. However, critics such as KIC say indirect exploitation is just as bad as direct exploitation.
This kind of criticism is a huge problem because it damages the company’s global image. SD is getting nervous about this, so there is intense pressure on you to propose a solution. The Pentalemma method of problem-solving creates five solutions to the problem. The first solution satisfies one stakeholder, but not the other. For example, it satisfies the shareholders, but not the local communities. The second solution is the opposite of the first solution; it satisfies the local communities, but not the shareholders. The next three solutions are in-between—waiting to decide, compromising between the two main stakeholders or somehow satisfying all stakeholders.
In business, and in the case of SD, this means that you can create five solutions and try to satisfy as many stakeholders as possible. To do ←8 | 9→this, you need to explore all the possibilities and try to create a win-win situation. By looking at this range of possibilities, the client company can put together a plan, discuss it with everyone and create a win-win for the business as well as its stakeholders.
The head of your planning department, Keith Poulter, sends you the below email with some ideas about how to do this.
Pentalemma Inc.: BOARD BRIEFING PAPER
Client: Speedy Devices Inc.
Subject: Child Labor in South Kivu Province, DRC
Author: Keith Poulter, Head of Planning, Africa and Asia
Staff Turnover
SD needs 23 staff members in the province. It is difficult to find local people with the required skillsets. Ten foreign employees have resigned in South Kivu due to stress-related reasons so far this year. SD should consider better pay and better security for staff in South Kivu.
European Electronics Child Protection Plan
European Electronics (EE) is another multinational corporation (MNC) that buys coltan in South Kivu. Last week, EE announced a new worldwide “Child Protection Plan.” SD should monitor this situation closely.
Gorilla Movie
German filmmaker Andreas Brandt plans to create a documentary on the Central African gorillas. Coltan mining is one factor causing their population to decline rapidly. Brandt is famous for his criticism of big business.
DRC Military Situation
Ms. Adams is correct that South Kivu has recently become more stable. The government seems to have control within the area, but rebels could ←9 | 10→challenge them again over the next six months. This could increase security costs for SD. It could also put rebels in control of more coltan mining. SD staff may even have to leave the area.
Keith Poulter
Head of Planning, Africa and Asia
The Simple Dilemma
Poulter, Adams and SD representatives initially concur that SD has a choice between prioritizing either profit (you call this Option A) or the environment (Option B). SD managers lean toward Option A as being more realistic than Option B. You begin to analyze these two paths.
Option A—Get Coltan Elsewhere
Getting coltan from South Kivu is becoming very expensive and risky. Sooner or later, war will return to this area. While SD is here, how can it get coltan that has no connection with guerrillas or criminals? It seems impossible to be sure about these things. US law (the Dodd-Frank Act) prohibits dealing in conflict minerals. Coltan is a conflict mineral. Coltan is also connected to child labor and environmental destruction. SD should act according to US law, and we must protect its image. The company may need to acquire coltan from a more peaceful region or country.
Option B—Cooperation
NGOs have two main concerns. The first is that children are being exploited in order to supply coltan to big foreign companies. If military groups are involved, then coltan becomes a conflict mineral. Their second concern is the effect on the environment, especially on endangered gorillas. The solution to both issues is communication, better understanding and cooperation. MNCs should cooperate with KIC and the local authorities to improve the lives of young people. The same applies to the gorilla problem. Businesses