Discrete manufacturers are grappling with many different challenges as they work toward the May, 2014 deadline to file their first disclosures with the SEC under the new conflict minerals ruling.
While the requirements of the law itself seem to be generally understood, the great unknown has been the baseline expectations of NGOs and socially conscious consumers watching this issue.
For roughly 6,000 companies, the exercise of probing their supply chain for minerals tainted by the armed conflict in Central Africa will potentially represent a significant brand risk.
In June 2013, Nintendo was singled out via an online campaign by the anti-slavery group Walk Free, for using conflict minerals in its products and for being unresponsive to petitions asking it to undertake more responsible sourcing. This campaign was based on investigative research carried out by Walk Free and other organizations.
In that context, the idea of filing similar information with the SEC and publishing it on the company website has to feel a little bit like wearing a “kick me” sign for organizations effected by this law.
So, how can a manufacturer confidently publish their conflict minerals findings without fear of a public relations nightmare, or worse?
Practical recommendations for reporting and compliance
In September 2013, the Responsible Sourcing Network and the Enough Project helped to answer this question by jointly publishing a detailed set of recommendations and measurements to guide manufacturers as they develop their conflict minerals filings for 2014.
Both of these groups are thought leaders in the field of responsible sourcing, and their paper aims to achieve the maximum positive impact in the region by urging companies to comply with the letter AND the spirit of the law.
Download the full paper, Expectations for Companies’ Conflict Minerals Reporting, for free on the Enough Project site.
The paper stresses the importance of developing and disseminating policies and supply chain strategies which support responsible sourcing from the DRC region. As the authors reminder their readers, the goal of the Dodd-Frank legislation is “to ensure a conflict-free Congo, not a Congo-free product.” Some of the key metrics include:
- % of products/product categories containing 3TG
- % of surveyed 3TG products
- % of responding suppliers
- % of products with indeterminate 3TG status
- % of 3TG products with smelters identified
- % of suppliers using material from CFS smelters
- % of staff that are aware and educated on the company’s conflict-free sourcing policies
- % of suppliers that have received a copy of the company’s policies
Among the best practices outlined, here are several highlights:
- The company’s policy should be included in supplier contracts, and the company should source conflict-free 3TG materials from the region
- The company should publicly list all 3TG smelters and list the country of origin for all 3TG minerals in its supply chain
- The company should also support the establishment of a responsible/conflict-free supply chain in the effected region or alternative-livelihood initiatives for miners and smelters by working with NGOs and other groups in the region
Although there will always be room for interpretation, and this paper by no means represents the position of all of the stakeholders in this issue, it nonetheless provides the closest thing to a roadmap for manufacturers that are approaching the conflict minerals issue with the caution it deserves.
The key message: demonstrate that your company is making a conscientious effort to establish a conflict-free supply chain, with sourcing policies that will be consistently communicated and enforced among your suppliers.
Even if you find conflict minerals within your current supply chain, a public filing which honestly discloses that fact and outlines a remediation plan to achieve conflict-free status will be looked upon much more favorably than those organizations that choose to file as “undeterminable” while that loophole exists.
Visit the Conflict Minerals Compliance Resource Center to learn more about the conflict minerals regulation, compliance solutions, and emerging best practices from leading organizations.
This article was originally authored by Christopher L. Harden, CHMM, and will also appear in the November issue of AIAG’s Corporate Responsibility newsletter. To learn more, or to subscribe, visit AIAG online.