Are you in compliance?

Don't miss out! Sign up today for our weekly newsletters and stay abreast of important GRC-related information and news.

Get updates on Compliance Week offerings, including new features, databases, research, and other resources, along with announcements of upcoming Webcasts, conferences, seminars, CPE/CLE opportunities and more.

Published every Thursday, Compliance Week Europe offers a condensed summary of risk, audit, and compliance news either originating in Europe, or of special interest to European compliance professionals. This newsletter will follow developments by the European Commission, as well as those of national governments across the region, or any U.S.-based news that might have consequence across the Atlantic. Frequency: weekly; Thursday a.m.

A fresh edition of Compliance Week delivered via e-mail and online every Tuesday morning, relentlessly focused on the disclosure, reporting and compliance requirements of our 25,000+ paying subscribers.

Published every Friday, Compliance Weekend was launched at the behest of subscribers, and offers a quick Plain English review of the week's key developments. We hope you enjoy this supplement to Compliance Week's Tuesday edition.

Activists Detail Their Expectations for Conflict Minerals Reports

Joe Mont | September 5, 2013

As companies prepare their first required reports on conflict mineral use for the Securities and Exchange Commission, a coalition of socially responsible investors and human rights groups have laid out their suggestions and expectations.

A paper released on Thursday, "Expectations for Companies' Conflict Minerals Reporting," describes the content sustainability and human rights activists want to see in Form SD filings and Conflict Minerals Reports required by the SEC.

The Dodd-Frank Act required the SEC to issue rules for issuers to disclose their use of so-called “conflict minerals,” (including tantalum, tin, gold, or tungsten) if those minerals originated in the Democratic Republic of the Congo (DRC) or an adjoining country. Minerals sourced from the DRC have funded violent militia groups. The first batch of SEC disclosures are due by May 31, 2014.

Responsible Sourcing Network and the Enough Project, authors of the paper, were both influential in the legislative effort. The receptive ear legislators and regulators have offered them may indicate a similar willingness support their suggestions and demands going forward.

“Investors would like to see their companies establish baselines the first year and specify the steps they are taking so we can then measure improvements in transparency and accountability reporting over time,” says Patricia Jurewicz, director of the Responsible Sourcing Network.

“Companies whose reports show compliance will benefit from positive public sentiment and increased brand recognition,” says Darren Fenwick, senior government affairs manager for the Enough Project, an offshoot of the Center for American Progress.

The paper details the groups' expectations for successful reporting. Companies should commit to only using minerals from smelters that have been audited as conflict-free by a credible program, such as the Conflict-Free Sourcing Initiative. They should also “take compliance beyond the reporting requirements, by participating in diplomatic efforts and humanitarian projects in the region,” it says.

SRIs and NGOs expect issuers to undertake due diligence as outlined in the OECD's (Organization for Economic Co-operation) “Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict- Affected and High Risk Areas.”

The investors and NGOs also expect to see policies and programs clearly stated in SEC reporting. “That way, it is easy to determine if an issuer's conflict minerals system and procedures are consistent with its policy,” the authors suggest.  

In their reporting, issuers should describe their process for communicating and implementing their policy throughout their entire corporation, including subsidiaries and suppliers.

Policy and supplier expectations should be included in contracts and agreements and suppliers should be encouraged to adopt “a robust” conflict minerals policy equivalent to the issuer's. There might also be a contractual obligation for suppliers and suppliers' suppliers to only source from conflict-free smelters when possible.

To assist smaller suppliers, issuers could implement an incentive program to provide tools, training, and other resources to build suppliers' capacities, the paper advocates.

Reporting should also include percentages or numbers for: employees reached by training programs; affected products for each mineral; suppliers not in compliance with the issuer's policy; suppliers adhering to OECD guidance; suppliers undergoing remediation to bring them into compliance with an issuer's program; smelters in the supply chain not participating in an independent verification program; and validated smelters not sourcing from the covered countries.

Issuers should encourage smelters to be audited through the Conflict-Free Smelters Program (CFS), or an equivalent.They may also consider participation in the CFS Early-Adopters Fund, or equivalent, which subsidizes smelter audits.

Companies should disclose the tools used to identify red flags in the collection of country of origin information from its suppliers. These warning signs may include: incomplete reporting templates; responses not backed with supporting documentation or evidence; and responses that do not identify smelters.