The path ahead in Conflict Mineral Compliance

In May, 2014 (deadline for submitting the Conflict mineral compliance report to SEC for the year 2013), we saw many listed companies submitting their form SD and conflict mineral reports to SEC to complete their reporting obligations. During the same period most of the associated frameworks were also undergoing changes. This caused amplified challenges for the electronic industry and its supply chain, to manage the compliance effort comprehensively. However the efforts undertaken by EICC, GeSI, CFSP, OECD and IPC to give clarity and direction to the industry in a short time frame were noteworthy.

We reviewed the SD form submissions of several publicly listed companies to understand the nature of research done that led to the ‘conflict mineral declaration of 2014’.

We observed, towards the end of 2013 and beginning of 2014 all companies frantically sent out CMRTs and started collecting responses from their supply base. Also most of the companies gave out their CMRT forms at a company level without effectively identifying the smelters in their supply chain. Additionally the effort done on implementing the due diligence process was very limited. This resulted in responses that were similar across the supply base and comprised very limited mineral traceability information. The final outcome was, most companies provided their compliance status as ‘Unknown’.

We understand that the conflict mineral compliance and reporting process is expected to evolve further in the coming years, hence in this article we are sharing a few areas of primary concern for the companies:

• The upcoming challenge in conflict mineral compliance will be to show incremental progress in the efforts on a year-on-year basis.
• Most companies will have to invest effort in identifying smelters in their supply chain.
• Identifying the product chemical composition and driving product level CMRT declarations from the suppliers will be a crucial step for companies to channelize their efforts towards high impact suppliers, who account for the major percentage of conflict minerals in their products.
• The due diligence process implementation will have to be performed in alliance with expert consulting companies.

Because of the already existing regulations in compliance (including ROHS, REACH, WEEE and Prop 65), most electronic companies will have to reach out to their supply base to collect diverse information. Due to the vast depth of efforts and the evolving nature of conflict minerals compliance, most companies might resort to end-to-end conflict mineral solution providers rather than running this as a special project within their finance or compliance department. Most software solution providers in the environmental compliance area have already extended their solution to include conflict mineral modules which will make this consolidation more easy and achievable. The ideal strategy for the industry will be to consolidate these activities with the conflict mineral RCOI.