Some say you can't make a silk purse out of a sow's ear. Consultants that advise companies on regulatory compliance tend to disagree.
Most companies that have to comply with the US Securities and Exchange Commission's conflict minerals rules see them as a hassle and an expense. PricewaterhouseCoopers says conflict minerals compliance contains hidden business opportunities.
“Some businesses view the rule as a compliance exercise,” says PricewaterhouseCoopers, in a recently-posted paper, “while others view it as an opportunity to strengthen their supply chains and their brands.”
The SEC's conflict minerals rule, which was adopted in August 2012 under the Dodd-Frank Act, requires publicly traded companies to annually disclose information on the source of minerals contained in their products, such as tantalum, tin, gold, and tungsten, that are sourced from covered countries.
We've seen this all before. When Congress passed the Sarbanes-Oxley Act in the early 2000s, legislation meant to create greater transparency and internal control over corporations' financial statements, some, like the author of this Information Management article, touted the competitive and business value benefits of Sarbanes-Oxley compliance.
PricewaterhouseCooper's case can be summarized as follows. Compliance is going to necessitate coordination with suppliers, and that can help companies optimize their supply chains. On the brand front, pursuing a conflict-free strategy could bring a company new customers.
“Even if your company's objective is solely compliance, you will face strategic supply chain questions,” says the PwC paper.
For example, companies will have to catalogue products that may contain conflict minerals and the suppliers who are providing those parts.
“Companies — particularly those with decentralized purchasing — can use that data to proactively review their supplier relationships and sourcing strategies,” says PwC. “You may be able to use the data to negotiate better pricing by consolidating purchasing across business units for certain products.”
There may also be the opportunity to consolidating the supplier base. That, PwC reminds you, means less data gathering for conflict minerals compliance in the future.
PwC also asserts that companies that elect to go conflict free can turn that status into a competitive advantage. “Companies that sell to retail consumers, especially in industries like consumer electronics, may have the greatest potential. Already external rankings like those from Greenpeace have begun to spotlight conflict minerals activities as part of the criteria that consumers should be aware of.” B2B suppliers could gain market share by being the first suppliers certified as conflict-free.
Are these real business opportunities or just thin gruel? It depends on the company, the status of its supply chain, and who its customers are.
Providing business opportunities wasn't the purpose of the conflict minerals rule, any more than it was that of Sarbanes-Oxley. Nor does the effort at trying to squeeze out a business benefit diminish the hassle and the costs associated with compliance. In fact it could increase them. Each company has to calculate its own ROI.
But since you have comply anyway, it's worth considering deriving a benefit from all the hassle. It's all about making lemonade out of lemons.