Apple’s Conflict Minerals Smelters Nearly 100% Audited

by Stinson Leonard Street - Dodd-Frank and the Jobs Act
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Apple has filed its Form SD for the year ended December 31, 2015. It includes this disclosure:

The combination of training, public reporting and a ticking clock drove the number from 82 smelters and refiners participating in a Third Party Audit program by the end of 2013 to 242 participating smelters and refiners by the end of 2015. Of these 242 participating smelters and refiners, 86% had already completed a Third Party Audit by the end of 2015, while the other 14% were in the process of undergoing such a Third Party Audit as of December 31, 2015.

That’s impressive.

How did it do it? By spending enormous time and energy, and a non-negotiable policy:

Still, some smelters and refiners chose not to take advantage of Apple’s assistance programs, while others refused to take part in any Third Party Audit entirely. Neither pressure nor incentives for help were enough to persuade them to comply. Accordingly, Apple directed the removal of 35 smelters and refiners not willing to participate in a Third Party Audit, and as of December 31, 2015, these 35 smelters and refiners are no longer reported in Apple’s supply chain. In addition, Apple has notified its suppliers that it has recently required the removal of another refiner from its supply chain for its failure to satisfy requirements in connection with its Third Party Audit and its subsequent delisting by the LBMA after December 31, 2015. Apple has had no choice but to remove these smelters and refiners from its supply chain, as Apple views compliance as non-negotiable.

The following disclosure is also interesting:

Based on the reports reviewed by Apple and additional information provided by iTSCi, Apple has received confirmation that three incidents linked to smelters reported in Apple’s supply chain have occurred in which individuals identified as members or potential members of organizations within the meaning of “armed groups,” as defined in Item 1.01(d)(2) of Form SD, in particular the police in the DRC and the DRC national army, were alleged to be involved. Each incident appears to have involved no more than a few individuals in isolated theft, illegal tax or similar criminal activity, potentially for personal gain, and, based on information received to date, the alleged perpetrators have been sanctioned or the specific incident has otherwise received some level of official redress by the local authorities. Apple continues to actively investigate the follow-up actions that have been taken to address these incidents. However, with respect to these three incidents, Apple has not, to date, been able to determine whether specific minerals were included in Apple’s products. The challenges with tracking specific mineral quantities through the supply chain currently prevent the traceability of any specific mineral shipment through the entire manufacturing process.

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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