Companies need to respect human rights and avoid contributing to conflict through their mineral sourcing practices.
Companies need to respect human rights and avoid mineral sourcing conflict.
Thousands of companies are being affected by the US Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires companies to track the source of some of the most commonly used minerals in manufacturing. The purpose of this law is to cease the trade of “conflict minerals”.
The Dodd-Frank Act is by no means the only initiative that will lead to greater transparency throughout the supply chain. In March 2013, the European Commission launched a public consultation that explores the possibility of an EU-wide law to encourage responsible sourcing of minerals from conflict-affected and high-risk areas. The main difference between the SEC and the EU approach is that the EU regulation will not just be limited to the Democratic Republic of Congo (DRC) and adjoining countries, like the Dodd-Frank is.
In addition there has been a proliferation of industry initiatives to address conflict minerals including:
The objective of all the above is to help companies respect human rights and avoid contributing to conflict through their mineral sourcing practices.
Regulatory requirements around the supply chain look set to increase, which makes the importance of having a flexible and institutionalised process all the more critical. Any company that supplies an SEC registrant is already affected, irrespective of where they are based and the indications are that conflict mineral reporting will extend beyond the US in the future. No-one can afford to sit back and watch.
What are conflict minerals?
According to the Dodd-Frank Act, the term ‘conflict minerals’ covers four specific minerals mined in the DRC and adjoining countries. The four minerals are: Gold, Cassiterite (Tin); Columbite-tantalite, (Tantalum); and Wolframite, (Tungsten). Collectively, they are referred to as ‘3TG’.
What does the Dodd – Frank Act require?
Section 1502 of the Dodd-Frank Act requires companies to determine if 3TG metals are used in the manufacture of their products and, if so, determine whether they originated in the DRC countries. Companies are required to trace the supply chain for the source and produce an independently audited report on their due diligence efforts. If the metals did not originate in the DRC, companies must report how their origin was determined.
Who must comply with the Act?
The Act applies to any company that files an annual report with the US Securities and Exchange Commission (SEC). SEC registrants will also need to gain assurances from their Tier 1 suppliers about the source of minerals used in the manufacture of their products. Even companies which are not registered with the SEC but who supply SEC registrants will need to put processes in place to trace and provide evidence of their materials’ origins.
From when do the rules apply?
Companies are required to produce a report for each calendar year, irrespective of their own fiscal reporting dates. The first reporting deadline in respect of the 2013 calendar year is 31 May 2014 and the reporting deadline will fall on 31 May in each subsequent year.
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For our latest thought leadership on Conflict Minerals, please visit our Centre of Excellence on Conflict Minerals.