In June, we published our yearly investigation into which gaming hardware manufacturers may be funding armed conflict through their supply chains. At the time of publication, one major company was missing: Nintendo.
In that report, we outlined the results of yearly SEC filings from companies such as Apple, Sony, Microsoft, Google, and others that are intended to demonstrate how aware (or unaware) the manufacturers are of whether their supply chains for gold, tantalum, tin, and tungsten (collectively known as 3TGs, or conflict minerals) are supporting activities such as slave labor, bribery, illegal taxation, coercion, and violence by various groups. However, because Nintendo is not publicly traded in the US, the company did not have a filing available at the same time as the SEC deadline for those companies that are.
But to Nintendo's credit, it still publishes roughly the same information found in those filings every year in its Corporate Social Responsibility (CSR) report, which is usually translated into English by the end of July. With that, we can determine how well Nintendo is doing compared to its competitors at ensuring ethical sourcing of the minerals needed to manufacture Nintendo Switches, controllers, amiibo, and other electronic devices.
Nintendo's relationship with conflict minerals over the years has been a mostly disappointing one, with improvement only in increments over the years. That's despite the company's commitment to a 100% return rate in responses from its 3TG suppliers, whom it surveys yearly for data on its mineral supply chain. In 2014, the first year it reported, the company could only certify that 47% of the smelters and refiners (SORs) it used for the 3TGs in its products were on an industry-standard whitelist of SORs audited by a third-party to ensure conflict-free sourcing.
In 2015, Nintendo showed dramatic improvement, bringing its percentage of whitelisted SORs up to 72%. But things haven't moved much from there. In 2016, that number inched up to 74%, and in last year's report, it inched again to 76%.
Its latest report, entitled "Putting Smiles on the Faces of Our Supply Chain," is yet another inch. Nintendo once again had a 100% survey return rate in 2018, through which it identified a total of 323 SORs in its supply chain of 3TGs. Of those, 256 were identified as audited and conformant to industry standards for ethical sourcing, bringing its percentage of conformant SORs to 79% -- 3% higher than last year, and with ten fewer SORs total in its supply chain.
Furthermore, when we first looked into the Nintendo CSR report for 2019 at the time of its publication, Nintendo's numbers didn't add up. Most of the numbers were completely identical to last year's (something we've not seen in any other conflict minerals report since we began investigating them in 2015) and had an additional discrepancy in its total number of SORs. It was only after we reached out to Nintendo to check their accuracy that Nintendo realized they had not updated the conflict minerals portion of their CSR report with current data. They have now amended it.
So what is Nintendo doing, or not doing, about all this? Its CSR mineral procurement guidelines outline requires suppliers and production partners to ensure ethical sourcing, but there's little to suggest enforcement of said requirements. One statement in the report attests that Nintendo management is "using this information to define steps that should be taken with respect to responsible minerals procurement," but what those steps are or have been in the past remains unclear.
The one specific action Nintendo mentions is not in regards to 3TGs, but cobalt, which has its own ethical sourcing challenges that the company says it is attempting to increase its awareness of:
"In fiscal year 2018 we conducted a pilot survey for cobalt, an important mineral used in lithium-ion batteries," the statement reads. "Strong concerns have been expressed regarding child labor and inferior working environments in the mines of the Democratic Republic of Congo, which is known to have the largest deposits of cobalt in the world. Using the RMI Cobalt Reporting Template, we began a survey of distribution processes in our cobalt supply chain in fiscal year 2018 and we are working hard to fully understand the present conditions."