Why Conflict Minerals Reporting May Be Good for Business

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If your company files with the SEC and uses components that contain tin, tantalum, tungsten or gold (3T&G) sourced in the Democratic Republic of Congo (DRC) or adjoining countries, yours is one of thousands of U.S. companies required to file their first annual conflict minerals report on June 2. Despite the recent ruling by a federal court that has thrown some doubt as to whether the reporting requirements will change, or whether the deadline may be pushed back, organizations should nonetheless be ready to file.

Background

The ongoing, extremely violent war for control of the mineral-rich African region is often funded by the sale of 3T&G, which is why 3T&G came to be designated as conflict minerals. Governments and NGOs around the world have enacted measures to stem the flow of money to the groups responsible for the war and to stop a multitude of human rights abuses that take place at mines run by them. To reroute buyers of 3T&G from the war-connected groups to mines and smelters not connected to the violence and abuse is thought to be the most effective means for those outside the DRC to help solve the problem.

Penned into the Dodd-Frank Act’s Section 1502, the conflict minerals reporting requirement aims to foster responsible sourcing, i.e., for companies to trace the conflict minerals in their supply chains back to the smelters and mines to make sure they are not purchasing conflict minerals. The new reporting requirements are intended to channel U.S. companies’ purchasing power to abuse- and conflict-free mineral sources.

Three Hidden Opportunities in Conflict Minerals Reporting

It can be hard to see more reporting requirements as a good thing. But many companies have already taken the initiative to develop programs and standards for compliance that raise the value of their companies’ intangible assets, like reputation and supply chain transparency, while complying with a global effort to change the dynamic of human exploitation and extreme violence.

Below are three ways companies are leveraging the new conflict minerals reporting requirement to help bolster and protect their organizations:

1) Demonstrating Sector Leadership & Reaping the Reputational Rewards

Complying with the SEC reporting requirements can set your company up for market differentiation as the ethical brand that offers “conflict-free” options to consumers. In every sector, leaders will emerge to pioneer efforts, develop new standards and, in the process, establish themselves as leaders in the conflict minerals area.

2) Getting a Jump Start on Due Diligence 

As environmental and social responsibility continue to play a greater role in companies’ success, supply chain due diligence that looks forward to product sunsetting and back to the source of materials is only going to become more important. Any methods and standards developed to address conflict minerals reporting requirements can be transferred and adapted to other supply chain areas and will help make your brand stand out—in a good way.  

3) Reducing Third Party Supply Chain Risk

Conflict minerals due diligence requires a deep dive into your supply chain, and it requires patience to follow the trail to the source. When you succeed, you come away with not only greater transparency in your own supply chain, but in your suppliers’ supply chains, as well. Establishing methodology and standards is a great way to streamline due diligence efforts and make reporting easier. The standards and methodology can then be applied to other areas of your supply chain.

In a new whitepaper, “Conflict Minerals Reporting Compliance: Seven Imperatives For Chief Compliance Officers,” NAVEX Global offers insights on steps compliance professionals should take to ensure they meet the reporting requirements, while strengthening their ethics and compliance program. We also provide examples of companies who have gone above and beyond the requirements—and are reaping the benefits of doing so.

Topics:  Conflict Mineral Rules, Natural Resources, Reporting Requirements, SEC

Published In: General Business Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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