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Manufacturers & Companies Are Struggling with ‘Conflict Minerals’ Reporting

When the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law in 2010, the US Securities and Exchange Commission (SEC) was allowed to create rules mandating manufacturers doing business in the US to disclose their use of so-called “conflict minerals.” These minerals are used to produce tantalum, tin, tungsten, and gold — known collectively as “3TG” and widely used in electronic components. Many originate from the Democratic Republic of Congo (DRC) and surrounding warlord- and militia-ravaged countries.

In attempts to weed out illicit 3TG trade and funding to the warlords and their violent causes, the US does not outright ban conflict mineral use, but it believes the public SEC filings will discourage companies from using DRC-region sources, encourage them to take action on their supply chains, and (over the long term) spawn alternative materials. To meet this year’s deadlines, companies submitted their reports to the SEC by June 2.

To avoid detection, local mining interests in the DRC have been known to smuggle the minerals to smelters in neighboring countries, making it extremely difficult for manufacturers sniffing their trail. According to Charles Riepenhoff, managing director of KPMG’s Forensic Advisory Services, the long and complex nature of the supply chain is proving to be a formidable barrier to compliance.

The Democratic Republic of Congo and adjoining countries are major sources of conflict minerals used to produce the '3TGs' -- tungsten, tantalum, tin, and gold -- used widely in electronic products. Often, warlords and militia groups control the mines and fund themselves through illicit minerals trade.   (Source: AT Kearney)

The Democratic Republic of Congo and adjoining countries are major sources of conflict minerals used to produce the “3TGs” — tungsten, tantalum, tin, and gold — used widely in electronic products. Often, warlords and militia groups control the mines and fund themselves through illicit minerals trade.
(Source: AT Kearney)

“Many companies are working cooperatively with their suppliers to develop the required information throughout the supply chain, but it’s a journey over time to develop and verify the validity of such information,” Riepenhoff told Design News .

“Many companies are, as demonstrated by their 2014 filings, relying on the conflict-free smelter audit process. Some companies have developed closed-loop systems which account for the source through production and use of the minerals.”

Riepenhoff is referring to recently established industry coalition and NGO programs in which smelters can get certified as being conflict-free after passing third-party audits. Closed-loop supply chains, naturally, are viable only for the largest organizations with the power to have captive suppliers.

To comply with the disclosure rule, companies have had to take on full-time staff to trace the often circuitous origins of the minerals. A PricewaterhouseCoopers survey conducted last year found that 89% of companies today employ at least one full-time worker tasked with 3TG reporting compliance and 6% have more than five employees focused on compliance.

To read the rest of this article, visit EBN sister site Design News.

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5 comments on “Manufacturers & Companies Are Struggling with ‘Conflict Minerals’ Reporting

  1. Nim4ever
    June 25, 2015

    The Conflict Minerals legislation is another typical boondoggle from our government bureaurcrats. The intent was well meant but in the big scheme of things more government interference in our lives costing industry billions in an attempt to comply with vague and misunderstood requirements. This affects 800 publically traded companies who use 10's of thousands of suppliers worldwide who do not have to comply. Nor do they want to spend the time and financial efforts in order to do so. This is a classic government Boondoggle. Can the government ever stay out of our business? The only gain here was to create more jobs to push more paperwork and cost business billions of wasted dollars. After 3 years I find many suppliers who do not have a clue what this even means nor will they ever attempt to comply if they are not required to do so. Curious if others are finding the same…

  2. Jon Pickard
    June 25, 2015

    There is little doubt that conflict mineral reporting is consfusing and difficult but implementing policies on a large scale like this it takes time. Perhaps in five years we'll have a better idea of how effective the law has been. In my opinion it is a step in the right direction as it encourages companies to consider their responsibility to the global community. 

  3. Hailey Lynne McKeefry
    July 6, 2015

    Nim4ever, it's clear that OEMs around the country complete underestimated the time and effort that compliance and reporting would take. I understand your concerns. at the same time, human rights issues are a big issue. What path should the instustry take to try to address this without goverment intervetion? Do you think organizations would?

  4. Hailey Lynne McKeefry
    July 6, 2015

    @Jon Pickard, I think it will take time to see what impact this legislation has had. At the same time, if you read the sustainability reporting that many large organizations do, there is a lot of evidence that we've finally begun to understand as an industry that there is good business benefit to efforts that are also good for the world (whether it's green issues or human rights). I'm hopeful that we are moving in a good direction.

  5. suhasuseless
    August 4, 2015

    nice article 

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