Putting Your Money Where your Morals Are? Information to Curb Conflict and Influence Corporate Conduct

by Erika George –

Imagine being able to ensure that the electronic devices we use daily do not fund further violence in a region where rape is routinely used as a weapon of terror in a decades old conflict that has cost millions of lives. Unfortunately, access to information just became more complicated for concerned consumers and investors.

In a highly anticipated ruling on a portion of the Dodd Frank Financial Reform Act, the Court of Appeals for the District of Columbia rejected a mandate requiring products to be labeled “not conflict free” as unconstitutional because it would in effect require a corporation to “tell consumers that its products are ethically tainted.” By compelling a corporation to “confess blood on its hands” the Court concluded the regulation interfered with freedom of expression.

Yet in rejecting the “conflict free” reporting requirement the Court compromised an important First Amendment value—the right to receive information. In fact, the right of consumers to receive information is the primary reason commercial speech is constitutionally protected. As the United States Supreme Court has explained: “So as long as we preserve a predominantly free enterprise economy, the allocation of our resources in large measure will be made through numerous private economic decisions. It is a matter of public interest that those decisions, in the aggregate, be intelligent and well-informed.”

As investors and consumers we face an array of choices among commercial products. In an expanding global market economy, characterized by complex supply chains crossing multiple borders, our ability to make intelligent choices depends on access to information. Our choices have consequences.

The Court of Appeals contends: “Products and minerals do not fight conflicts.” While the Court likely did not intend to minimize the unspeakable atrocities occurring in the conflict zone, this position completely misses the point.

Products and minerals may not fight conflicts but an illicit minerals trade has fueled continued fighting in the Congo for years. It has been called the deadliest conflict since WWII. The United Nations estimates that the minerals trade accounts for 20-40% of the revenue of illegal armed groups operating in the region. Commerce and conflict are connected.

Congress believed our private economic decisions could have a constructive impact on curbing a conflict recognized by the United Nations as one of the world’s worst humanitarian crises. In crafting the conflict minerals rule, the Securities and Exchange Commission, the federal agency responsible for policing capital markets exercised its power to regulate securities in a manner consistent with Congressional intent.

To be sure, corporations alone cannot end conflict in the Congo. But the business community can foster constructive change. Since Congressional action on conflict minerals, the Electronics Industry Citizenship Coalition (EICC), a coalition of leading electronics corporations have developed a conflict-free smelter program tracking minerals back to mines of origin.

“Conflict free” reporting requirements could have served to catalyze a broader public conversation about corporate social responsibility, morality in the marketplace, or the manner in which global supply chains connect our investment and consumer choices to social conditions around the world. Instead, we are left with less information to influence public discourse and make private economic decisions.

Erika R. George is a Professor at the S.J. Quinney College of Law and Co-Director of Center for Global Justice