Case Study: Intel

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Case Study: Intel

Company Background

Intel is a Silicon Valley technology company. It’s the world’s second largest manufacturer of microchips (after Samsung) and it has been an industry leader in the computing market since the 1970s.

Intel doesn’t purchase tin, tungsten, tantalum or gold directly, but the intermediary products it buys from its suppliers contain these four metals. These metals are given special focus in the OECD DDG for their risk of association with conflict and human rights abuses at some mining locations worldwide.

 

Context to OECD DDG implementation

Intel set itself the goal of becoming an industry leader in responsible sourcing. Prior to the Securities and Exchange Commission’s publication of final rules on US conflict minerals legislation, in 2012, Intel declared its intention to manufacture the world’s first commercially available microprocessor containing only conflict-free tantalum, tin, tungsten, and gold. Intel achieved this aim a little less than two years later.

US conflict minerals legislation, which utilises the OECD DDG, has been criticised in some quarters for incentivising companies to simply “de-risk” their supply chains, by ceasing to source minerals from the Democratic Republic of Congo (the country that the law focuses on). This can be detrimental to individuals and communities in the country that rely on mining for their livelihoods.

Intel is committed to not simply dis-engage from challenging supply chains. In 2011, Intel, partnered with the U.S. State Department, the U.S. Agency for International Development and other companies to form the Public-Private Alliance for Responsible Minerals Trade (PPA), which works in the Democratic Republic of Congo and neighbouring countries to foster more responsible mineral supply chains. Intel was also instrumental in the creation of the Responsible Minerals Initiative – an organisation with broad multi-industry support that has created several of the freely-available tools featured in the EPRM Knowledge Portal, including the Conflict Minerals Reporting Template.

Due Diligence Process: Step 1

Intel identified the complexity of the electronics supply chain as a key challenge for its due diligence efforts. The supply chain is decentralised, spread out over many countries, which makes it economically efficient but problematic for traceability.

Knowing this, Intel focused its due diligence management systems on getting a sound initial understanding of its supply chain. In 2009, Intel asked its suppliers to complete a survey on the origins of the tantalum, tin, tungsten and gold used in the products and components they supplied to the company. The survey helped Intel to understand its suppliers’ existing due diligence policies and practices and their own level of supply chain knowledge, in particular in regards to the smelters and refiners they sourced from.

Intel posts its responsible sourcing policy online, and its policy implementation is reviewed by the company’s CEO and senior managers within its Technology and Manufacturing Group.

Due Diligence Process: Step 2

Intel bases its risk identification efforts on two main tools: the list of Responsible Minerals Assurance Process (RMAP) conformant smelters and refiners, and the Conflict Minerals Reporting Template (CMRT) – both of which it helped to develop.

Each year Intel surveys its supply chains, to identify the smelters and refiners of tin, tungsten, tantalum and gold, and assesses the risk they represent based on their presence on (or absence from) the RMAP list. 

Intel also engages with its direct suppliers to encourage them to complete the Conflict Minerals Reporting Template, through which these suppliers pass information about their smelters and refiners and their due diligence practices down the supply chain to Intel. Intel requires its suppliers to source tin, tungsten, tantalum and gold from responsibly-certified smelters and refiners, or smelters and refiners that Intel itself has determined do not process conflict minerals. It makes this condition a contractual requirement.

As a downstream company Intel doesn’t need to look beyond its smelters and refiners to fulfil the OECD DDG, but the company chooses to go further – it conducted on the ground reviews of the minerals trade in the Democratic Republic of Congo in 2010 and 2013

Due Diligence Process: Step 3

When risks are identified, Intel works with smelters and refiners to mitigate them. Intel conducts frequent site visits to improve smelters’ and refiners’ practices, and to encourage them to undergo audit programs – it has visited over a hundred of them since 2009, in 23 different countries. While Intel always aims to work constructively with smelters and refiners to foster improvements, the company will ultimately disengage from mineral supply chains that cannot uphold its responsible mineral sourcing standards.

Due Diligence Process: Step 4

Intel’s extensive site visits help the company to understand the unique operating characteristics of individual smelters and refiners, and determine the current gaps in their ability to trace the source of ore to countries and mines of origin. With this knowledge, Intel can help smelters and refiners to effectively undertake audits such as the Responsible Minerals Assurance Process, which follows the OECD DDG and which Intel helped to develop.

Due Diligence Process: Step 5

Intel publicly discloses the due diligence efforts it has undertaken through its website. It publishes its responsible sourcing policy, a white paper entitled “Intel’s Efforts to Achieve a Responsibly Sourced Mineral Supply Chain”, and its disclosures to the US Securities and Exchange Commission on its conflict minerals sourcing practices.

 

Challenges, lessons learned and key partners

The challenges presented by the complexity of 3TG supply chains prompted Intel to adopt a highly collaborative approach to due diligence. From 2009 onward, the company played a key role in convening a number of meetings that brought together the consumer electronics, information technology, jewellery, automotive and aerospace industries to tackle conflict issues in supply chains holistically. Intel was instrumental in the creation of the Conflict Free Sourcing Initiative, which later became the Responsible Minerals Initiative – a membership body of more than 350 companies from ten different industries.

The Responsible Minerals Initiative makes available a large range of tools and resources for companies to conduct supply chain due diligence, including the widely-used Conflict Minerals Reporting Template (CMRT). The CMRT is an important tool for managing supply chain complexity, because it allows companies from a diverse range of industries to disseminate supply chain due diligence information using a common rulebook.

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