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Business in a Globalized World

Discussion Case: Conflict Coltan in the Global Electronics Industry Supply Chain

Most people have never heard of coltan, although it is an essential ingredient in electronic products
they use every day. Columbite-tantalite, or coltan as it is commonly known, is a black metallic ore.
When refined, it produces tantalum, which is used to regulate electricity in portable consumer
electronics, such as smartphones, laptops, play stations, and digital cameras. The largest share of
coltan comes from Africa; other sources include Australia, Brazil, and Canada.

In the late 2000s, a common concern emerged among members of an oddly matched groupthe
electronics industry, the United Nations, governments, and human rights organizations. All wished to
ban conflict coltanore that had been traded by warring groups to fund horrific civil conflict in the
Democratic Republic of the Congo (DRC). Their efforts led, ultimately, to a set of international
guidelines, national laws, and voluntary initiatives whose goal was to keep the electronics industry and
its customers from inadvertently supporting killing, sexual assault, and labor abuses.

The Democratic Republic of the Congo is a nation of 71 million people in central Africa, covering a
vast region the size of Western Europe. Since the late 1990s, the DRC has been the site of a brutal
regional conflict, in which armed militias, including some from neighboring states, have fought for
control. Despite the presence of United Nations troops, as many as 5 million people have diedthe
most in any conflict since World War II. Warring groups have used sexual assault as a weapon to
control the population; an estimated 200,000 Congolese women and girls have been raped, often in
front of their husbands and families.

The United Nations and several NGOs reported that militias had systematically looted coltan and
other minerals from eastern Congo, using the profits to fund their operations. According to the
human rights group Global Witness: In the course of plundering these minerals, rebel groups and the
Congolese army have used forced labor (often in extremely harsh and dangerous conditions), carried
out systematic extortion, and imposed illegal taxes on the civilian population. They have also used
violence and intimidation against civilians who attempt to resist working for them or handing over the
minerals they produce.

Said a representative of The Enough Project, another human rights group, In eastern Congo, you see
child miners [with] no health or safety standards. Minerals are dug by hand, traded in sacks, smuggled
across borders.

Once minedwhether in the Congo or elsewhereraw coltan made its way through a complex,
multi-step global supply chain. Local traders sold to regional traders, who shipped the ore to
processing companies such as H.C. Starck (Germany), Cabot Corporation (U.S.), and Ningxia (China).
Their smelters produced refined tantalum powder, which was then sold to parts makers such as Kemet
(U.S.), Epcos (Germany), and Flextronics (Singapore). They sold, in turn, to original equipment
manufacturers such as Dell (U.S.), Sony (Japan), and Nokia (Finland).

By the time coltan reached the end of this convoluted supply chain, determining its source was nearly
impossible. The late Steve Jobs, then CEO of Apple, commented in an e-mail in 2010, We require all
of our suppliers to certify in writing that they use conflict free materials. But honestly there is no way
for them to be sure. Until someone invents a way to chemically trace minerals from the source mine,
its a very difficult problem.
As public awareness of atrocities in the Congo grew, governments and companies began to take
action. The Organization for Economic Cooperation and Development, an alliance of mostly European
nations, issued guidance for companies that wished to responsibly source minerals. A group of
electronics firms, collaborating under the banner of the Electronic Industry Citizenship Coalition (EICC),
developed a Conflict-Free Smelter Assessment Program, a voluntary system in which an independent
third-party auditor would evaluate processors and designate them as conflict-free. Minerals
originating from responsibly operated mines would be bagged and tagged and then tracked
through each step of the supply chain.

In 2010, the U.S. Congress passed the Wall Street Reform and Consumer Protection Act (also known as
the Dodd-Frank Act, and further discussed in Chapters 8 and 14). This law included a provision,
Section 1502, which required companies to disclose whether certain minerals and metals used in their
products, including tantalum, had come from the DRC or adjoining countries. It was scheduled to go
into effect in 2012. Supporters said that by shining a spotlight on conflict minerals, this law
would help drive them out of the supply chain.

Others, however, thought the law could unintentionally hurt the very people it was meant to help. A
journalist traveling in eastern Congo posted this report in late 2011: The smelting companies that
used to buy from eastern Congo have stopped. No one wants to be tarred with financing African
warlordsespecially the glamorous high-tech firms like Apple and Intel that are often the ultimate
buyers of these minerals. Its easier to sidestep Congo than to sort out the complexities of Congolese
politicsespecially when minerals are readily available from other, safer countries. . . .For locals,
however, the law has been a catastrophe.

In an effort to address this concern, two companies, AVX and Motorola, joined forces to create an
initiative called Solutions for Hope. Their aim was to begin using coltan from the DRC that could be
verified as conflict-free, in order to support legitimate exports from that nation as it struggled to
recover from years of civil conflict. In one of the first shipments, in late 2011, coltan was shipped from
a licensed concession holder in the DRC to a certified conflict-free smelter in South Africa. During the
next year, the initiative planned audits by key stakeholders.

Despite progress on many fronts, some called for a higher level of collaboration among companies,
governments, and NGOs. The Enough Project said that the missing link was a common
certification program for conflict minerals. It called for a high-level negotiation process . . . aimed
at building multi-stakeholder consensus for a scheme to unite current initiatives around common
standards and certify conflict-free minerals from Congo from mine to end product.

3. What steps could be taken by governments, NGOs, and companies to strengthen the process to
exclude conflict minerals from the global supply chain?

To strengthen the process to exclude conflict minerals


a) Increasing transparency of the suppliers

b) Support and incentive for the suppliers who comply
c) Using more technology to track the source
d) Reducing the number of intermediaries
e) Measure against kick-backs.

This problem is not just about the supply chain process. The problem has to be addressed from
multiple angles.

Suppose we emphasize more on stringent measures and transparency, this may lead militia to

1. Move to some other buyer,

2. Some other means of income e.g. mining other minerals not included in the Laws.

Also, In a country like Congo, where people have very few alternate sources of income, this may lead
to economic collapse, more poverty and more frustration. The situation may get worse.

Moving people away from terrorism:

Eradicating poverty Create alternate sources of income and fund entrepreneurs via
Providing incentives to move away from terrorism. Engaging people in other activities like
sports, arts etc.,
Eradicating centralised power, suppression and injustice
Democracy and removing extreme suppressive powers
Infrastructure development
Military support to govt to facilitate control over militia regions


Innovate and find a new substitute. A not-so-easy solution.

Discussion Case: Apples Supplier Code of Conduct and Foxconns Chinese Factories

In March 2012, the Fair Labor Association (FLA) released the results of an independent, month-long
investigation, commissioned by Apple, on labor conditions at three enormous Chinese factories where
the companys iPhones, iPads, and other popular consumer electronics were manufactured. The FLA, a
nongovernment organization committed to promoting fair labor practices globally, found a number of
serious violations of Apples supplier code of conduct, as well of its own standards. Among the key
findings of the audit were these:

During peak production periods, all three factories, which were operated by the Taiwanese firm
Foxconn, had exceeded the mandated limit of 60 hours of work per week, and many employees had
been required to work more than seven days in a row.
Fourteen percent of workers had not received fair pay for overtime. Workers were paid in 30-minute
increments, so if an employee worked 55 minutes of overtime, for example, she would be paid for one
half hour, not for the full period worked.

Almost two-thirds of workers said that their pay did not meet their basic needs. Average wages at
Foxconns plants, the report said, were about $426 to $455 a month, including overtime.

Almost half said they had experienced an accident or injury at work or had personally witnessed one.
Many workers said they were in pain by the end of their workday.

Particularly worrisome was the FLAs discovery that Foxconn had instructed employees on how to
respond to questions during earlier audits conducted by Apple, using what the FLA called a cheat
sheet to avoid detection of code violations.

At the time of the report, Apple was riding a wave of business success, lifted by a series of innovative
products and services. In 2012, Apple was the largest publicly traded company in the world by market
capitalization, with revenues exceeding those of Google and Microsoft combined. The company
directly employed more than 60,000 people and operated more than 350 stores in 10 countries, as
well as its iTunes online music store. Fortune magazine had named Apple the most admired company
in the world for four years in a row.

But there was a dark side to the companys success. Since the 1990s, Apple had outsourced almost all
of its manufacturing, mostly to China. The companys biggest supplier was Foxconn, which by 2012
had become the largest manufacturer of consumer electronics in the world. Foxconns facility in
Shenzhen, Chinaone of three audited by the FLAoperated like a good-sized city, with its own
dormitories, cafeterias, hospital, swimming pool, and stores. In its complex of factories, 300,000
workersmany of them young women and men from rural areaschurned out electronics for Sony,
Dell, IBM, and other major brands, as well as Apple.

In 2006, a British newspaper ran a story alleging mistreatment of workers at the Shenzhen facility.
Apple investigated and found some violations of its supplier code of conduct, which it had introduced
in 2005. The following year, the company published its first annual supplier responsibility progress
report. By 2011, Apple had inspected nearly 400 suppliers and had terminated 11 for serious

In 2010, a series of developments focused a fresh spotlight on harsh conditions in Foxconns factories.
In a few short months, nine workers committed suicide by throwing themselves from the upper floors
of company dormitories. (Foxconn responded by putting up nets to catch jumpers, raising wages,
and opening a counseling center.)

In 2011, two separate explosions at factories where iPads were being made (one was Foxconns facility
in Chengdu), apparently caused by a buildup of combustible aluminum dust, injured 77 and killed
four. At Wintek, another Chinese supplier, 137 workers were sickened after using a toxic chemical
called n-hexane to clean iPhone screens.

In January 2012, the public radio show This American Life broadcast a feature by monologist Mike
Daisey about his interviews with workers leaving their shifts at Foxconns Shenzhen facility, which
related in dramatic fashion their disturbing stories. Although Daiseys piece was later criticized for not
being entirely factual, it prompted some listeners to launch a petition drive on that
quickly garnered more than a quarter million signatures calling on Apple to protect workers that made
their iPhones.
Just one week later, Apple announced it had joined the Fair Labor Association, the first
electronics company to do so. The FLA, founded in 1999, was a nonprofit alliance of companies,
universities, and human rights activists committed to ending sweatshop conditions. At Apples request
and with the companys financial support, the FLA immediately undertook the most extensive audit
ever conducted of conditions in Chinas electronics supply chain. Auditors spent weeks inspecting
Foxconns three big Chinese factories, and 35,000 workers filled out anonymous questionnaireson
iPadsabout their experiences.

In response to the FLAs findings, Apple issued a statement saying, Our team has been working for
years to educate workers, improve conditions and make Apples supply chain a model for the industry,
which is why we asked the FLA to conduct these audits. For its part, Foxconn agreed to reduce
overtime from 80 to 36 hours per month by July 2013, while raising wages to prevent workers from
losing income. It also agreed to pay workers retroactively for unpaid overtime and to improve health
and safety protections. Thats a major commitment, said the head of the FLA. If Apple and Foxconn
can achieve that, they will have set a precedent for the electronics sector.

Text Needed

The term global corporate citizenship refers to putting an organizations commitment to social and
environmental responsibility into practice worldwide, not only locally or regionally. Companies
demonstrate this commitment by proactively building stakeholder partnerships, discovering business
opportunities in serving society, and transforming a concern for financial performance into a vision of
integrated financial and social performance. Corporate citizenship has become increasingly global
in scope, reflecting the global nature of commerce and emerging awareness of the worldwide scope
of many social issues. Since corporations are not global citizens, but citizens of a single country, the
notion of citizenship takes on more all-encompassing meanings ranging from indirect involvement
in various community or environmental organizations to explicit and aggressive leadership in
addressing societal problems on a global scale.

Roberto Civita, chairman and chief executive officer of the Brazilian Abril Group, has defined global
corporate citizenship as capitalism with a social conscience. According to many business leaders,
global corporate citizenship used to be simple and optional. Now, a decade into the 21st century, it
has become complicated and mandatory. This is because global markets, lightning-quick access to
information, and heightened stakeholder expectations have compelled organizations of all sizes to
establish an integrated global corporate citizenship strategy as part of their overall business plan.

The Economist Intelligence Unit investigated the notion of corporate citizenship by interviewing
dozens of senior executives and surveying managers at 566 companies. They concluded that
corporate citizenship is becoming increasingly important for the long-term health of companies . . .
74 percent of respondents to the survey say corporate citizenship can help increase profits at their
company . . . Survey respondents who say effective corporate citizenship can help to improve the
bottom line are also more likely to say their strategy is very important to their business (33 percent)
compared with other survey respondents (8 percent).

A research report from a leading academic center defines global corporate citizenship in these terms:
Global corporate citizenship is the process of identifying, analyzing, and responding to the companys
social, political, and economic responsibilities as defined through law and public policy,
stakeholder expectations, and voluntary acts flowing from corporate values and business strategies.
Corporate citizenship involves actual results (what corporations do) and the processes through which
they are achieved (how they do it). This definition of global corporate citizenship is consistent with
several major themes discussed throughout this book:
Managers and companies have responsibilities to all of their stakeholders.

Corporate citizenship or responsibility involves more than just meeting legal requirements.

Corporate citizenship requires that a company focus on, and respond to, stakeholder expectations
and undertake those voluntary acts that are consistent with its values and business mission.

Corporate citizenship involves both what the corporation does and the processes and structures
through which it engages stakeholders and makes decisions, a subject to which this chapter next

What are the core elements of global corporate citizenship? One scholars answer to this question is
shown in Exhibit 7.A.

Principles of [Global] Corporate Citizenship Exhibit 7.A

Good corporate citizens strive to conduct all business dealings in an ethical manner, make a
concerted effort to balance the needs of all stakeholders, and work to protect the environment. The
principles of corporate citizenship include the following:

Ethical Business Behavior

1. Engages in fair and honest business practices in its relationship with stakeholders.

2. Sets high standards of behavior for all employees.

3. Exercises ethical oversight of the executive and board levels.

Stakeholder Commitment

4. Strives to manage the company for the benefit of all stakeholders.

5. Initiates and engages in genuine dialogue with stakeholders.

6. Values and implements dialogue.


7. Fosters a reciprocal relationship between the corporation and community.

8. Invests in the communities in which the corporation operates.


9. Respects the rights of consumers.

10. Offers quality products and services.

11. Provides information that is truthful and useful.

12. Provides a family-friendly work environment.

13. Engages in responsible human resource management.

14. Provides an equitable reward and wage system for employees.

15. Engages in open and flexible communication with employees.

16. Invests in employee development.


17. Strives for a competitive return on investment.


18. Engages in fair trading practices with suppliers.

Environment Commitment

19. Demonstrates a commitment to the environment.

20. Demonstrates a commitment to sustainable development

Question Please answer

1. Do you think that Apple has demonstrated global corporate citizenship, as defined in this chapter?
Why or why not?

Corporate social responsibility is important because it offers sustainability and improves employee engagement
and performance.

Talking certain important terms from the text about global corporate citizenship,

Companies demonstrate this commitment by proactively


Consider the text

In 2006- a British newspaper......... Just one week later, Apple announced it had joined the Fair Labor
Association, the first electronics company to do so.

Apple has always been reactive to allegations and accusations.

Financial and social performance.-Social improvements of the labourers have not been considered

Social, political, and economic responsibilities - A big corporation could have exercised its clout for proper
labour reforms in a foreign country like China. Apple seems to have neglected this.

Direct or indirect involvement- There seems to be no direct or indirect involvement in the welfare of the
labourers. No significant investment in community activities.
Environmental protection- Repeated accidents leading to the leakage of toxic chemicals at manufacturing
facilities show the lack of concern here.

The psychological breakdown and suicides clearly indicate an absence of family-friendly work environment.

The necessity for equitable reward and wage system for employees have been repeatedly offended by Foxconn.

The audit clearly shows a lack of transparency in communication

Setting up of counselling centres at Foxconn- Foxconn is trying to treat the problems faced by employees
rather than finding the root cause of the problems in the company and correcting it. Prevention is better than

Corporate citizenship or responsibility involves more than just meeting legal requirements. - Apple seems to
have been doing just enough to meet the international legal requirements and obligations. A clear lack of
conscience is present. It has not gone beyond the legal requirements to help the Chinese labourers.

It has been doing enough to save its brand image from getting tarnished.

Foxconn has also tried to manipulate audit results. Foxconn has repeatedly undergone labour abusing practises
and has received a clean chit from apple and the actions taken so far seem to be just an eye wash. Apple seems
to be reluctant to move away from low cost manufacturers.

So, Apple has not demonstrated global corporate citizenship, as defined in this chapter.

1. positive active duty

Negative remove negativity (duty to not to make the case worse / duty to not harm) harmful things
Positive - add positivity ( duty to help/assist ) good things
Active- take action
Passive- refrain from action

1. Negative active - take action to remove harm .e.g. Help an accident victim
2. Negative passive refrain from harmful. e.g. Not smoking in public so that to avoid from harming
3. Positive active take action to do good things e.g. protect human rights.

Here, the duty to speak out against human rights violation is positive since it is believed that it is done to change
the minds of the perpetrator of the violation and to protect the victim.

2.Detail about relevant case not attached. Hence , it cannot be answered

etermine the six best aspects of Nestls sustainability

evaluating a companys sustainability efforts.

Nutrition, CSV-Water, and Rural Development.

1.Nestle has brilliantly focused on strategic CSR initiatives incorporating sustainability

Nestle has made sure that it always receives a part of the value created through these initiatives

Nestle Creating shared value-e work hard to ensure that employees and those who work in our
supply chain are protected from all forms of political, legal and social abuse.

2. Corporate branding and PR

3. Relationship building with stakeholders

4. Well structured efforts

Key Performance Indicators

environmental performance indicators
in accordance with the comprehensive option of the Global Reporting Initiatives (GRI) G4
guidelines and Food Processing Sector Supplement and UN Guiding Principles
External assessments
They are trackability, measurable and comparable

5.Transparency and engagement