Conflict Minerals Rules Show The Value Of Knowing Your Supply Chain
The end of May was the deadline for companies that use so-called conflict minerals in their products to report to the Securities and Exchange Commission in the US.
The rules, part of the Dodd Frank legislation that emerged in the wake of the financial crisis, cover products that use tin, tantalum, tungsten and gold (often abbreviated to 3TG). One of the main sources for these metals is the Democratic Republic of Congo and the mining of them is helping to fund militia groups and extend what the Enough Project, a US campaigning group, calls the deadliest conflict since the Second World War.
According to the group, the civil war in the central African country has claimed 5.4 million lives since it started in 1994. Conflict minerals rules are an attempt to end the fighting by removing funding from the combatants. While the US rules are the most immediate issue for businesses, the European Union is introducing its own rules, as are Canada and Australia.
This is a business issue as well as a humanitarian one because the 3TG metals are used in a whole range of products, from golf clubs to hearing aids, from jewellery to toothpaste. But the sector that will be most affected is consumer electronics, where the metals are used in mobile phones, computers and tablets. As a result, some of the world’s biggest and most high-profile brands have found themselves in the spotlight – companies such as Apple, Intel, Microsoft, Sony and Samsung.
Dodd Frank (named after the two senators that steered the law through Congress) directly affects about 6,000 companies, who are in turn demanding answers on conflict minerals from a further 250,000 or so suppliers.
Companies that are affected will have to determine whether their products use conflict minerals, and if so, whether they come from the DRC or the nine countries that surround it via a process known as a Reasonable Country of Origin Inquiry (RCOI). There are some tools to make this process easier, such as the Conflict Minerals Reporting Template, an electronic form that companies throughout the supply chain can use to disclose whether conflict minerals have been used and to identify the smelters involved.
There is also a new standard from IPC, the global association for the printed board and electronics assembly industry, to help companies comply with Dodd Frank.
If the minerals are from the region, the company must work out if they are from banned sources and it must report its findings to the SEC. A lot of businesses have found the process more arduous and expensive than they thought it would be, but the costs of compliance could be far greater – not just financially but in terms of bad publicity, loss of reputation and possibly loss of business as a growing number of organizations including government departments and some of the world’s biggest companies, such as Intel and HP, commit to becoming “conflict mineral-free”.
But conflict minerals are just one manifestation of an increased focus on supply chain transparency – a focus that is not going to go away.
In part, this increased scrutiny is a reflection of our multi-media world, which makes it easier for consumers and others to see what is going on and tell other people what they think about it.
Partly, it comes from companies themselves looking more closely at their own operations and realizing that many of their impacts reside in their supply chains. A number of recent high profile events such as the fatal textiles factory fire at Rana Plaza in Bangladesh and the horsemeat scandal in Europe have brought home to the world’s biggest companies the fact that they sit at the top of global supply chains about which they know alarmingly little.
Supply chain issues can happen in any industry – the chemicals industry, for example, already has to deal with regulations such as the EU’s REACH (Registration, Evaluation, Authorization and Restriction of Chemicals) and RoHS (Restriction of Hazardous Substances) rules. Other materials that could prove controversial include timber and palm oil (deforestation leading to climate change), diamonds and cobalt (conflict in DRC), while there are also social issues to contend with, including child labour, bribery and corruption and human trafficking. In future, it is possible to envisage companies having to provide evidence that they are complying with regulations or social norms on everything from the amount of water used in their products to how much tax they pay.
While some businesses grumble about the cost of compliance, others are taking a more pro-active approach, looking at their supply chains to find out where the major risks are, where there may be opportunities to cut costs and even to identify new products and services.
“With Dodd Frank and other conflict mineral rules being just one part of a complex network of regulations, mandates and demands from customers for action on a wide range of issues, taking action to comply with it can be part of a pro-active approach that creates a framework for all your sustainability initiatives, from product design to end of life disposal or recycling,” says Michael Betz, vice-president of business and community development at life cycle analysis (LCA) experts PE International.
The OEM (original equipment manufacturer) supply chain is unquestionably moving toward compliant materials, phasing out and replacing current components and materials with new green ones, according to the German industrial giant Siemens. “OEMs cannot afford to wait for the changes to be forced upon them by their supply chain; rather they must take a pro-active approach to assess the impact that material choices may have on downstream processes,” the company says.
The conflict minerals issue is just one illustration of the fact that supply chain transparency is here to stay. Companies taking early action to uncover the secrets of their supply chains can turn it from burden into opportunity.
This is a business issue as well as a humanitarian one because the 3TG metals are used in a whole range of products, from golf clubs to hearing aids, from jewellery to toothpaste. But the sector that will be most affected is consumer electronics, where the metals are used in mobile phones, computers and tablets. As a result, some of the world’s biggest and most high-profile brands have found themselves in the spotlight – companies such as Apple, Intel, Microsoft, Sony and Samsung.
Dodd Frank (named after the two senators that steered the law through Congress) directly affects about 6,000 companies, who are in turn demanding answers on conflict minerals from a further 250,000 or so suppliers.
There is also a new standard from IPC, the global association for the printed board and electronics assembly industry, to help companies comply with Dodd Frank.
If the minerals are from the region, the company must work out if they are from banned sources and it must report its findings to the SEC. A lot of businesses have found the process more arduous and expensive than they thought it would be, but the costs of compliance could be far greater – not just financially but in terms of bad publicity, loss of reputation and possibly loss of business as a growing number of organizations including government departments and some of the world’s biggest companies, such as Intel and HP, commit to becoming “conflict mineral-free”.
But conflict minerals are just one manifestation of an increased focus on supply chain transparency – a focus that is not going to go away.
In part, this increased scrutiny is a reflection of our multi-media world, which makes it easier for consumers and others to see what is going on and tell other people what they think about it.
Partly, it comes from companies themselves looking more closely at their own operations and realizing that many of their impacts reside in their supply chains. A number of recent high profile events such as the fatal textiles factory fire at Rana Plaza in Bangladesh and the horsemeat scandal in Europe have brought home to the world’s biggest companies the fact that they sit at the top of global supply chains about which they know alarmingly little.
While some businesses grumble about the cost of compliance, others are taking a more pro-active approach, looking at their supply chains to find out where the major risks are, where there may be opportunities to cut costs and even to identify new products and services.
“With Dodd Frank and other conflict mineral rules being just one part of a complex network of regulations, mandates and demands from customers for action on a wide range of issues, taking action to comply with it can be part of a pro-active approach that creates a framework for all your sustainability initiatives, from product design to end of life disposal or recycling,” says Michael Betz, vice-president of business and community development at life cycle analysis (LCA) experts PE International.
The OEM (original equipment manufacturer) supply chain is unquestionably moving toward compliant materials, phasing out and replacing current components and materials with new green ones, according to the German industrial giant Siemens. “OEMs cannot afford to wait for the changes to be forced upon them by their supply chain; rather they must take a pro-active approach to assess the impact that material choices may have on downstream processes,” the company says.
The conflict minerals issue is just one illustration of the fact that supply chain transparency is here to stay. Companies taking early action to uncover the secrets of their supply chains can turn it from burden into opportunity.
