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Conflict Minerals Compliance Offers Opportunities

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.”

Hidden advantages
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.

5 comments on “Conflict Minerals Compliance Offers Opportunities

  1. Tom Murphy
    June 5, 2013

    Mike Bloomberg once pointed out to me that for every buyer on Wall Street, there's a seller. One will be a winner that day, and one will be a loser. So it goes with almost any business situation, including conflict minerals. 

    Will you groan about the expense of compliance with these rules? Or will you happily pocket a profit?

  2. Hailey Lynne McKeefry
    June 5, 2013

    I've always lived by a “tell me what i've got and i'll tell you why it's what i want” and it seems that PwC has taken a leaf out of that book. It's a good idea. I suspect that there are hidden benefits in many of these business situations. I'm not a fan for compliance for compliance sake… it just leads to a lot of paper sitting around and not much action. however, well applied standards can yeild broader benefits than you might imagine. For example, HIPAA compliance can help organizations have peple who are more likely to be aware of other IT security best practices.

     

    Does anyone have other examples of compliance yielding unexpected positive results?

  3. FLYINGSCOT
    June 6, 2013

    So far I believe companies see this as a chore and not a real opportunity.  Only once the consumers are willing to offer loyalty to compliant companies will everyone willingly jump on the bandwagon.  I hope this is not the case but this is what I am seeing at the moment.

  4. Cortney
    June 11, 2013

    The compliance is lending to a closed loop minerals management system. The manufactures required to purchase conflict free minerals is a good thing for the world. 

    Now the supply chain can become closed loop:

    mineral supplier-> manufacture-> assembly-> end user-> refurbrusher/redeployment-> recycler-> smelter->back into primary material

    The compliance laws & acts from the governing bodies should lead to responsible reuse and reduction of hazardous material starting or entering into unsafe hands.

    These rules are leading to less warfare for minerals and cleaner water supplies. If companies desire to establish a legacy, they should want it to be conflict free.  Great PR

    Do you know many places you can still landfill electronics, what most of the minerals are used for in manufacturing. This practice puts Cadmium, Lead, Mercury, Hexavalent Chromium or Chromium VI and Brominated flameretardants into the world's water supply. Many of these materials are recoverable and reusable materials.

    it is understood human life is a fragile life form. Many people (of behalf of their company) are worried about paperwork ?…or is it about making another dollar at the expense of humanity? 

    If procedure is followed, companies should be able to easily implement , shorter steps in their processes rendering them compliant.

    Cortney Horstman
    BCD Electro

     

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