As I started to write this latest blog, I was struck by a memory from 1972. For many, the early 20s are years of confusion and challenge as one works their way through the often contradictory opinions of family, friends and society to establish one’s own perspective on what is important in life.
Johnny Nash’s hit, “I can see clearly now”, expresses that behind clouds and darkness lies hope and blue skies. I thought of this, as there are dark clouds of abuse and misuse present all along the gold supply chain, and yet there is hope that the skies can be cleared.
Let’s take another look at the gold supply chain from the perspective of where the links may be weak.
“There can be no keener revelation of a society’s soul than the way in which it treats its children.” - Nelson Mandela
You may recall we started this series of blogs with the premise that consumers want to know whether a product and the products contained within that product have been sourced and manufactured responsibly, and specifically, whether the sourcing of minerals involved conflict or the use of child labour.
We then identified that in the past decade, countries have developed environmental, health, safety and human rights regulations that should result in responsible sourcing. Yet mineral supply chains are fraught with instances of human rights abuses, child labour, and illegal activities.
The US Department of Labor Bureau of International Labor Affairs (Ilab) has published reports on child labour since 2001. The most recent report “Findings on the Worst Forms of Child Labor” was published last year for 2017.
This reports details the prevalence, legal framework, enforcement of laws, coordination of government activity, government policies, social programs and suggested actions concerning child labour for each of 191 countries. The reports list goods and products that are believed to be produced by child labour or forced labour.
The most commonly listed agricultural goods are sugarcane, cotton, coffee, tobacco, cattle, rice, and fish.
The most commonly listed manufactured products include bricks, garments, textiles, footwear, carpets, and fireworks, while the most commonly listed mined or quarried goods are gold, coal and diamonds.
The Ilab reports, as well as the US Department of State Trafficking in Humans Report, identify 28 countries where gold is currently mined or processed by child labour or forced child labour.
Benin, Burkina Faso, Burundi, Cameroon, Central African Republic, Côte d’Ivoire, Democr. Rep. Congo, Ethiopia, Ghana, Guinea, Mali, Niger, Nigeria, Senegal, Sudan, Tanzania, and Uganda.
Indonesia, Mongolia, North Korea, and the Philippines.
Bolivia, Colombia, Ecuador, Nicaragua, Peru, Suriname, and Venezuela.
Well, a couple of these countries, like North Korea for example, are autocratic states having little regard for human rights or international convention.
Some countries, like Mali, lack sufficient resource to implement programs or provide social services for children.
Some countries suffer from official indifference to the plight of certain of their citizens for tribal, cultural or religious reasons.
Yet other countries suffer from significant corruption at a local, regional or national level; corruption in this context is the abuse of entrusted power for personal or private gain.
Transparency International, a global nonprofit organization based in Berlin, Germany, has been producing a “Corruption Perceptions Index” since 1995. This index ranks 180 countries by their relative rank of perceived corruption. Not surprisingly, 26 of these 28 countries where child labour or forced labour is used in gold mining, appear in the bottom half of the corruption ranking.
So is that it: some countries just don’t manage the issue of child labour well? Not at all.
It might be a good time to try asking, “Why?”. Why do children work in mining? This is truly a complex question, however, there are tools to help us look a bit deeper into the possible answers.
You may have heard of, or you may have used the “5 Whys”, an iterative analysis tool to discover the root cause of an issue. There often are more than one answer to a given question, and for each response to the question “Why?”, “Why?” is asked again — often to 5 layers deep.
An incomplete example of using 5 Whys to the question, “Why are children working in mining?” could include responses like this:
Why are children working in mining? 1) Because they are forced to. Why? Because their family is impoverished and need their help to provide income. Why? Because the land they used for agriculture has been usurped. Why? Because some officials allowed it to be developed and did not plan for the needs of the local residents. Why? i) Because they were bribed to do so, or ii) because the mining land is open to free use, or iii) because there are historical precedents to mine use that the government does not want to change.
Root cause: Government mismanagement.
Why are children forced to work in mining? 2) Because it is the historical culture. Why? Because families educated their children this way. Why? i) Because formal schooling was not available and, ii) children could contribute to the stability of family income. Why? i) Because the state doesn’t have the resources to fund education, or ii) Because family financial survival demands it or iii) the community economy is not stable. Why? i) Because corruption has looted the finances of the country.
Root causes: Cultural family structure; government corruption.
Here is another “5 Why” question:
Why is there corruption in the gold supply chain? 1) Because gold can be used to launder money. Why? Because gold can be easily transformed to hide its origin. Why? Because gold is; i) fungible, ii) valuable, iii) easily smuggled. Why? i) Because the true source of a fungible good is difficult to prove. Why? Because a fungible good sourced illegally will look identical to the good that has been sourced legally. ii) Because gold is easily traded and exchanged internationally between banks, companies, and individuals. iii) Because gold is dense and thus occupies much less volume than other smuggled goods.
Root causes: Valuable fungible goods that are easily smuggled are a “gold mine.”
Why is there corruption in the gold supply chain? 2) Because the illegal economy can surreptitiously influence the supply chain. Why? i) Because there is little transparency in the supply chain; ii) Because the supply chain for gold is complex and international; iii) Because regulation of the industry requires ‘officials’ for a number of validation steps. Why? i) Because each link does not know their supplier’s supplier or beyond; ii) Because there are millions of potential providers of service along the chain; iii) Because officials can be easily bribed.
Root causes: Involvement of a myriad of individuals in the supply chain, each with their human weaknesses.
This 5 Whys process is a good group activity. The answers above only scratch the surface. Children are mining for a number of reasons, and correcting the problem calls for a number of actions, not the least of which is an improvement in the transparency of the supply chain.
Yes, there are dark clouds present in the gold supply chain. I do believe there will be blue skies. I hope that I have whetted your appetite for the next blog. Yes, we will discuss money laundering and gold.
Fix the Problem, Not the Blame.