The trading of illegal minerals to finance conflicts, particularly in central Africa, is an ongoing concern for us all. However, meeting the demands of the Dodd-Frank Act has proven easier said than done.
In 2010, the Dodd-Frank Act was the first legislation aimed expressly at addressing the issue by changing corporate behavior. Without regard to the on-going legal battle and two year transition period, from January 2012, all companies listed on a U.S. stock exchange have been obliged to disclose if any of the tantalum, tin, tungsten or gold in their products originated from the Democratic Republic of Congo (DRC) or adjoining country. If so, these companies are required to perform due diligence on the material source and chain of custody. Kemet was the first capacitor manufacturer to declare products conflict-free in a SEC filing; others have experienced difficulties in meeting those demands.
The European Union is now moving to finalize its own legislation against the trade in conflict minerals and, post Dodd-Frank, was urged to impose less burdensome obligations. The current European Commission proposal includes a voluntary self-certification scheme that will only apply to companies marketing raw materials. This would include organizations such as smelters. But crucially, it would not include importers of components that may have conflict-mineral content. The European Parliament is considering amendments that may demand tougher measures.
A lot has been said about the Dodd-Frank Act. Various groups have questioned its effectiveness, and highlighted potential negatives: one being the fear of damaging legitimate trade with impoverished nations, particularly the war-ravaged DRC. On the other hand, I believe we should applaud its architects for taking action to deal with a difficult problem.
A key reason Kemet has been able to comply readily with Dodd-Frank is our vertically integrated closed-pipe supply chain for tantalum powder. We are one of the world's largest, if not the largest, consumer of capacitor-grade tantalum, so it is fitting for us to take the lead by creating the most complete and readily auditable supply chain.
We “closed the pipe” by working closely with a known conflict-free mine in the DRC, thus preventing unknown sources feeding into the supply chain. We have also achieved vertical integration by incorporating our own smelting and refining facilities. This assures complete control over the provenance of all materials. Our supply chain has been audited both by the Electronic Industry Citizenship Coalition (EICC) and the Global e-Sustainability Initiative (GeSI).
We also gain several additional and valuable advantages. Since we now manage the entire production process, we have complete control over the characteristics of our tantalum powders. This not only helps us ensure the highest capacitor quality and reliability, but also gives us an edge in new product development. We can prototype and fine-tune new powder formulas and capacitor internal components quickly and cost effectively to meet the evolving needs of electronic product designers in fast-moving sectors such as automotive, aerospace, smart energy and lighting. Our vertically integrated supply chain also allows us to ensure stable supply and pricing, to protect both ourselves and our customers against delays and fluctuations that are beyond the control of other capacitor producers.
Ultimately, this puts Kemet in a unique position: we have achieved the traceability needed to demonstrate compliance with some of today's most important legislation, while also ensuring stable trading terms for customers, and maintaining the lead in delivering products that meet current and future market requirements. That's not to mention the results achieved on the ground in Kisengo, DRC, which I will be writing about in a subsequent post.
In the meantime, let us know what how your organization is tackling the complexity of conflict mineral compliance in the comments section below.