Editor's note: This is the second article in a four-part series about how companies can comply with the SEC's new rule on conflict mineral reporting from the Responsible Sourcing Network. The first article provided guidance on how to determine whether a company is required to report, while this piece will discuss systems and tools designed to facilitate the reporting process. Come back to GreenBiz to read the remaining two articles in the series.
Now that the SEC rule for Section 1502 for reporting conflict minerals has been approved, many companies are asking themselves how to know if their products contain tin, tantalum, tungsten, or gold -- the four designated “conflict minerals.” It's actually fairly simple to find out the “ingredients” in a given product (reference a simple cheat sheet here).
But knowing where the mineral ore comes from and under what conditions it was mined is much more complicated. To comply with the new rule, companies will have to determine the source of the four minerals in thousands of components in their products. How can a company achieve this and not be bogged down by required time and detail needed to get the job done?
That's where technology and software come in. Though traceability systems and tools designed to provide transparency and accountability are nothing new -- numerous companies have traced a product's raw materials during well-publicized cases such as E. coli in broccoli, Mad Cow Disease in meat, and Melamine in infant formula -- there are a number of new software solutions coming online that provide companies the tools they need to trace their raw materials through multiple tiers of their supply chains.
Several software solutions utilize a data exchange template developed by members of the Extractives Working Group established by the Electronic Industry Citizenship Coalition (EICC) and the Global e-Sustainability Initiative (GeSI). The Extractives Working Group published the Conflict Minerals Reporting Template tool in 2011 to support the sharing of information relevant to conflict minerals up and down the supply chain. It was created using a basic Microsoft Excel document, is available at no charge, and enables suppliers to utilize one universal reporting template for managing data requests.
“HP helped develop the template in order to improve the accuracy and reliability of information on smelters, and to reduce burden on the supply chain,” says Jay Celorie, Global Program Manager for Conflict Minerals at HP. “The template will advance the goal of sourcing only conflict-free minerals, and HP is encouraged to see so many software companies utilizing this innovative tool.”
In addition, the template leverages the Conflict-Free Smelter Program (CFS), which audits and publicly reports smelters who are only purchasing from “conflict-free” sources. If manufacturers are able to trace their minerals to the list of verified smelters on the CFS website, this information will be able to feed into their SEC disclosure.
In his Huffington Post article, Tim Mohin, Director of Corporate Responsibility at AMD, does a great job of laying out the steps electronic companies are taking to trace their supply chains, engage smelters, and support certified conflict-free mineral sourcing in the DRC to comply with the SEC’s Conflict Mineral Rule 1502.
Photo of conflict-free coltan ore, which is used to make tantalum. Courtesy of Patricia Jurewicz.
Next page: Choosing a software solution
There are several questions companies can ask to determine which software solution will best meet its needs.
What is available for free?
The Dashboard can be downloaded free of charge from the EICC-GeSI website here. The dashboard is a desktop tool that assists companies and their suppliers to consolidate information from multiple templates, enables data analysis, and aggregates data from various smelters.
Where is the company located in the supply chain?
Companies should determine what systems its customers or suppliers are using. Is the chosen software system compatible with its customers’ and/or suppliers’ systems? Do either its customers or suppliers have to disclose to the SEC?
What is the industry sector doing?
Each industry is different. Factors like how consolidated an industry is or the number of steps between assembly and smelter must be taken into account. In some cases, an industry-wide approach makes the most sense and a company may want to encourage its industry association to take the lead.
The Automotive Industry Action Group (AIAG) for example, has developed and adopted a Conflict Minerals Platform, which is a web-based tool that enables companies to aggregate data from the EICC-GeSI Template. Automotive companies are encouraging their supply chain participants to adopt this tool to improve efficiency, lessen the burden of having to use different tools for each customer, and to standardize the reporting mechanism.
How complicated is the supplier base?
How broad are the industries that the company interacts with? Companies like GE, for example, manufacture everything from airplane engines to appliances to light bulbs. Such companies may buy directly from a smelter for some of their products and for others the smelters may be buried many tiers down in their supply chain. In this case, it may make more sense to use a software system that is tailored to meet the specific needs of the parent company since it is managing so many diverse suppliers at different levels of the manufacturing process.
Companies don’t have to reinvent the wheel and they don’t have to “go it alone.” Several online tools are already available and industry associations with an eye to minimizing costs are willing to promote systems all of their members can use.
Next page: Software solutions
Ready to take the next step? Here's some good resources to investigate:
Assent Compliance: http://www.assentcompliance.com/Conflict-Minerals-Services/
Foresite Systems: http://www.foresitesystems.com/
Greensoft Technology: http://www.
iPoint Systems: http://www.conflict-minerals.com/en/start-page/
Source 44: http://source-44.com/cm