Machinery providers fail to recognize human rights risks in Myanmar’s jade mines

REPORT | 20 June 2018

Irresponsible jade extraction has led to extensive human suffering and environmental degradation in Myanmar’s conflict-affected Kachin state. The use of heavy mining equipment, manufactured by companies such as Caterpillar, Komatsu and Volvo Construction Equipment, has enabled extraction to take place at an unprecedented speed. A Swedwatch report finds that the companies rely on insufficient human rights safeguards regarding risks associated with the use of their equipment.

Since the early 2000s, jade has been extracted at an unprecedented speed in Myanmar’s northern state of Kachin, levelling mountains and deforesting vast areas of intact forests. Irresponsible mining practices have also severely impacted local communities: seemingly thousands of people have lost their access to land and livelihoods, and hundreds allegedly die every year in landslides and flooding caused by negligent jade mining. Residents are also heavily impacted by the violent armed conflict between Myanmar’s state army and the armed ethnic group Kachin Independence Army. Since 2011, over 100,000 people have been forced to flee. According to experts, the jade industry is permeated by corruption and considered to be closely linked to the conflict, as its revenues allegedly contribute to financing the conflicting parties.

Myanmar’s jade trade is a multibillion dollar industry and was, according to estimates, valued at around USD 31 billion in 2014. However, 50 to 80 percent of the jade stones are believed to be smuggled out of the country. The large-scale extraction would not be possible without the import of heavy equipment such as dumpers, backhoes and excavators. Imports have increased significantly in the past 20 years and are brought into the country via distributors and dealerships or are smuggled from China. The equipment is used by mining companies, many of which reportedly have close links to the Myanmar military and generals from the old military junta.

Swedwatch’s report scrutinizes efforts taken by three multinational companies, whose machines are used in the jade extraction, to address human rights risks in a high-risk context. The report builds on research conducted by Swedwatch in Myanmar and on an analysis of measures that may be expected within the provider-customer perspective, focusing on Caterpillar (USA), Komatsu (Japan) and Swedish Volvo Construction Equipment, including its subsidiary Terex Trucks.

The UN Guiding Principles on Business and Human Rights (UNGPs) stipulate that a company can be linked to adverse impacts on human rights even if the impacts are caused or contributed to by a business partner, such as a customer. According to the UNGPs, companies that sell products should exercise their leverage towards its business partners in order to mitigate risks that the products are used in activities leading to negative impacts. If a company experiences that it alone does not possess sufficient leverage, it should seek ways to increase the leverage, for example by forging partnerships with other companies in the sector.

Though it is clear that none of the companies reviewed in the report can or should be held accountable for the complex situation in Kachin, Swedwatch’s report indicates that the three companies fail in their compliance with the UNGPs regarding the sales of their machines in Myanmar. None of the companies are able to demonstrate adequate efforts to identify, mitigate or prevent risks associated with the use of its equipment, specifically as regard to adverse impacts on human rights and the environment in the nation’s mining areas. In dialogue with Swedwatch, two companies state that they lack possibilities to control the end use of sold products throughout their lifecycle. However, the companies’ responses indicate that none of them have tried to identify where or how its products are used in Myanmar. Further, none of the companies could demonstrate efforts in line with international frameworks regarding exercising their leverage towards local business partners.

If governed responsibly, Myanmar’s valuable mineral assets could play an important role in helping the country meet the Sustainable Development Goals. With this report, Swedwatch urges the companies to conduct ongoing human rights due diligence in Myanmar and other high-risk markets in order to identify how the use of their products affects people and the environment. The process should be conducted with a gender perspective and should follow the OECD Due Diligence Guidance for Responsible Business Conduct or an equally recognized guidance. The companies should also individually or jointly explore how they can embed human rights commitments as contractual provisions in sales and service agreements in high-risk markets such as Myanmar. As global leaders of producing mining machinery, the three companies could significantly influence the overall market’s adherence to international human rights standards.

The report Overlooked and underminedCommunities affected by jade mining operations in Myanmar and the responsibilities of companies providing machinery has been developed with support of the Church of Sweden who also participated in developing its recommendations.