For a long time, the industry has been deep in conversation about the reporting requirements for the Securities and Exchange Commission's Dodd-Frank rules. Unfortunately, it's been just that: talk.
The SEC adopted the final rules for the Dodd-Frank Wall Street Reform and Consumer Protection Act in August 2012. Dodd-Frank impacts an estimated 6,000 publicly traded organizations and up to 20,000 associated companies. It requires public companies to disclose the presence of conflict minerals (tin, tantalum, tungsten, or gold) originating from the Democratic Republic of the Congo or specific adjoining countries.
The vast majority of public organizations covered under the rule will fail to meet the requirements by a May 31 deadline, according to the Conflict Minerals Survey released this month by PricewaterhouseCoopers. Only 4% of companies have finished drafting their filings for the mandated conflict minerals rule, and 90% are only in the early stages of the complex planning.
"Time is running out and companies need to move fast," Bobby Kipp, a partner in PwC's risk assurance practice and the firm's conflict minerals leader, said in a press release. "Those that are just beginning to gather information and draft their filing are at risk of not only falling behind, but of missing opportunities in terms of supply chain improvements, competitive advantage and enhanced customer and stakeholder trust."
PwC polled 700 people in 15 industries. The respondents cited a variety of challenges, from scoping the project and surveying suppliers to performing due diligence and drafting filings. For example, getting suppliers to respond to a conflict minerals request for information can take six months, according to 2013 data from Source Intelligence, a large supplier registry. Some suppliers don't understand the rules and their requirements, or they are overwhelmed by requests from multiple customers, PwC said.
Compliance has proven to be a resource-intensive task. In fact, 62% of the respondents said they needed to put one or two people full-time on conflict minerals compliance, and 21% needed to put 3-5 people on it. At the same time, 67% do not anticipate needing an independent private sector audit in the first two years, "either because they source their minerals from outside the covered countries or expect them to be Democratic Republic of Congo conflict undeterminable."
The good news is that, for the most part, organizations are taking conflict minerals compliance seriously and are approaching it as a continuous improvement project, though one that has gotten a slower start than anticipated.
Kelvin Harris, a supply chain specialist on PwC's conflict minerals team, said in the release on the survey:
As organizations see the clear business opportunities in complying with the rule, they also understand the significant consequences that can result from conflict minerals sourcing. Our study showed that visibility into a company's supply chain is becoming an expectation of various stakeholders, demonstrating that conflict-free sourcing is escalating in importance across the board and within different industries.
How long do you think that it will take the electronics industry to get in step with Dodd-Frank? What are the biggest stumbling blocks you see?
— Hailey Lynne McKeefry, Editor in Chief, EBN