Blog: GAO Issues Annual Report Showing Only Slight Progress In Disclosures On Conflict Minerals

by Cooley LLP

The GAO has recently issued its third annual report on conflict minerals. The GAO is required by Dodd-Frank to report annually on the effectiveness of the SEC’s conflict minerals rule in promoting peace and security in the DRC and adjoining countries  (the “covered countries”) as well as on the rate of sexual violence in war-torn areas of the covered countries. (To read about last year’s report, see this PubCo post.) One sentence in the report says it all: “Our review of companies’ conflict minerals disclosures filed with SEC in 2016 found that, in general, they were similar to disclosures filed in prior years.” In light of the provision in the Financial CHOICE Act of 2017 that would repeal the Dodd-Frank conflict minerals mandate, you have to wonder if this will be the GAO’s last report on the topic?  (See this PubCo post.)

The GAO found that a similar number of companies (1,230) filed conflict minerals disclosures in 2016 as in 2015 (1,281) and 2014 (1,321), with the small decreases likely attributable to acquisitions. About 97% of companies performed a reasonable country-of-origin inquiry, which was comparable to 2015 and 2014. Approximately 49% reported in 2016 whether the conflict minerals in their products came from the covered countries —the same as in 2015, but an increase from 30% in 2014.

In 2016, about 96% companies reported conducting due diligence, compared with 97% in 2015, with an overwhelming majority using the OECD framework.

SideBar:  The GAO report noted that companies varied in the amount of information they provided in describing their due diligence efforts, leading the GAO to question whether some had actually failed to follow all the steps of the OECD guidance. The report cites as an example, the absence in some cases of discussion of all aspects of step 5, such as “steps taken to manage risks and efforts to monitor and track performance for risk mitigation.” An OECD official advised the GAO “that if a company is not able to complete a specific step, its public disclosure should indicate planned future action to complete the step.”  However, SEC officials, while agreeing that companies must conform to all material aspects of the  due diligence framework, “explained that some aspects of the framework’s requirements may not be material to company facts and circumstances for the purposes of their SEC filings. Under those circumstances, a company may not be required to provide an explanation of how its efforts conformed to the framework or why it did not complete any aspect of the framework, according to SEC officials.”

Not surprisingly, some company representatives and industry participants reported that the OECD guidance did not exactly dovetail with the requirements of the SEC rule, leading to “confusion about using the OECD framework to fulfill some of the SEC rule’s requirements and about the need to perform due diligence in addition to the RCOI. For example, they noted that the OECD framework includes a country-of-origin inquiry as part of due diligence, while the SEC rule presents the RCOI and due diligence as two distinct steps.”  Perhaps, if the rule survives and nothing else is done, the SEC could at least clarify its rules to conform more closely to the guidance that has been almost universally adopted.

According to the GAO report, after conducting due diligence, about 55% of companies were unable to confirm the source of the conflict minerals in their products, compared with 67% in 2015.  About 39% of companies indicated in 2016 that they were able to determine that their conflict minerals came from the covered countries or from scrap or recycled sources, compared with 23% in 2015.

Most significantly, just as in prior years, almost all of the companies that conducted due diligence reported in 2016 that they could not determine whether their conflict minerals financed or benefited armed groups in the covered countries. In the GAO’s sample, only one company stated that its conflict minerals did not finance or benefit armed groups in the covered countries and declared its products to be DRC conflict free. This company also filed an independent private-sector audit as required.

SideBar: Of course, under recent court decisions holding that, to the extent that the conflict minerals rule required companies to state publicly that any of their products have not been found to be “DRC conflict free,” it violated the First Amendment, as well as related statements from Corp Fin, companies have not been required to state that conclusion.  (See this PubCo post, this PubCo post and this PubCo post.)

Of the companies that filed Form SD in 2016, only 19 companies included an IPSA, compared with six in 2015 and four in 2014.

The GAO also reported that, to improve their due diligence efforts, companies indicated that they were planning to:

  • “examine products and supply chain for additional risks, such as by gathering missing information;
  • contact suppliers to encourage conflict-free sourcing, such as by sharing a conflict-free sourcing policy or encouraging participation in conflict-free certification programs; and
  • work directly with suppliers to help support their conflict-free sourcing, such as by providing hands-on training.”

According to the GAO, although companies continued to experience the same challenges as in prior years related to the  complexity of their supply chains, some improvements in standardization of data collection processes were reported. In addition, some company representatives noted that the process had the benefit of increasing awareness both internally at their companies and among their suppliers of the use of conflict minerals.

[View source.]

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.

© Cooley LLP | Attorney Advertising

Written by:

Cooley LLP

Cooley LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.