"Fair Trade" Electronics - A Viable Idea?
By Matt Chanoff, TFI Chief Economist, and Pamela J. Gordon, TFI President
May 01, 2012
International FAIRTRADE Certification Mark: Applied to electronics in the future?
Most electronics companies are simply waiting for the final regulations implementing the "conflict minerals" declaration inserted as Section 1502 into the Dodd Frank Act in 2010. Others are preparing now for the impending requirement, by working closely
with the EICC's progressive efforts and asking suppliers about their readiness to determine whether any "conflict mine" metals are in their products. And some, like Intel, Motorola, Dell, and AMD, have been ahead of policymakers in dealing with these issues, according to Aaron Hall of Enough Project, a human-rights organization focused on this issue. But there's one company, capacitor maker KEMET Corp., that's taking conflict-free into its own hands. Kemet recently acquired Niotan Inc. - a leading manufacturer of tantalum powders - to take charge of a responsible "chain of custody" for its tantalum capacitors. We wonder...is this the start of "Fair-Trade Electronics?"
Where the RoHS Directive and REACH Regulation from the European Union seek to reduce the environmental impact of electronic and electrical equipment, 1502 seeks to reduce social impact. The four substances - tantalum, tin, tungsten, and gold - are heavily mined in the Congo, and much of the mining in that war-torn central African country is controlled by militias that use the proceeds to fund ongoing conflict. Mining in the Congo doesn't just fuel the electronics industry, it also fuels murder, rape, slavery, conscription of child soldiers, and ongoing violence.
KEMET's strategy looks like "fair trade" - a business model so far seen in coffee, chocolate, and textiles - applied to extraction and refining. The fair trade model typically involves creating direct relationships with upstream producers, simplifying the supply chain by cutting out intermediaries, branding and pricing end products at the high end of the market, and using additional margin to benefit the original producers. Those benefits can include better wages and working conditions as well as social investments in local schools, infrastructure, health clinics, and so on.
KEMET's VP Strategic Marketing & Business Development Dr. Dan Persico explains that the Niotan acquisition will supply a significant portion of their tantalum powder requirements, and over the long term the specific mine they are working with in the conflict-free Katanga Province of the DRC is capable of supplying all of their tantalum needs and more - thus cutting out the "middle men." KEMET has contracted with the mine in part because it works with a miners cooperative to ensure fair wages. It is also working with OECD and non-governmental organizations to establish and audit strict rules for work safety and security, and has in addition earmarked US$1.5 million over a two-year period for social sustainability projects.
- What about "branding and pricing at the high end of the market"? KEMET publicly refers to "100% conflict free tantalum." Though it's not yet clear whether Kemet will command premium prices, certainly they are ahead of the pack as OEMs demand "conflict free" guarantees.
Granted, tantalum capacitors are one of hundreds of types of components in a typical electronic product. Nonetheless, the principles behind KEMET's strategy and bold implementation is a starting point for other companies as they prepare to comply with 1502 and – if applied to other worker-safety and fair-payment points in the company's products - could be the precursor of "Fair Trade Electronics."
Do you think "Fair Trade Electronics" is in our future? Please comment.