Conflict-Free Smelter Program Gets an Update as Legislation Lags
When the Dodd-Frank financial reform bill was signed into law last year, it included a provision on removing conflict minerals from electronic supply chains. The measure would require companies sourcing minerals used in electronics -- tantalum, tin, tungsten and gold, among others -- from the Democratic Republic of Congo and neighboring countries to certify that those minerals did not come from mines whose revenues fund the ongoing violence in the region.
Hailed as a step forward for supply chain transparency, nearly one year after it was signed into law the conflict minerals provision has failed to be enacted.
Late last month, the Securities and Exchange Commission delayed the implementation of the rule until sometime between August and December of this year. Despite the delay, companies and industry groups are moving forward with their own initiatives to make their supply chains conflict-free, and more transparent in the process.
The voluntary initiative, which was scheduled to go into effect on April 1 of this year, was expanded to incorporate new guidelines from the OECD, which in December published a detailed framework for creating conflict-free supply chains.
The five-step process outlined by the OECD includes, at the top level:
1. Establish strong company management systems.
2. Identify and assess risk in the supply chain.
3. Design and implement a strategy to respond to identified risks.
4. Carry out independent third-party audit of supply chain due diligence at identified points in the supply chain.
5. Report on supply chain due diligence.
The update to the Conflict-Free Smelter program means that participating companies must not only implement the OECD guidelines, but conduct a third-party review of their supply chains to verify compliance with the guidelines as well as requiring documentation from smelters about the mines of origin for all materials supplied.
Getting suppliers to certify the origin of minerals is complicated in any developing region, but especially so in the war-torn DRC. The Wall Street Journal, writing about the Dodd-Frank conflict minerals law, notes:
The minerals in question pass through many hands before reaching manufacturers, making tracing their origin difficult. AT&T said in a filing with the SEC that as a retailer of phones and devices made by others, it is far removed from the manufacturing process.
To track the four minerals specified in Dodd-Frank in a wireless handset, AT&T estimates it would have to wade through 35 manufacturers, 60 to 80 parts suppliers, more than 1,000 commodity-part suppliers and an unknown number of brokers and distributors to get to the mine that was the original source of its tin and tantalum.
"Tracing metals and verifying they are conflict-mineral free is very difficult," a Microsoft spokeswoman said.
That hasn't stopped some IT companies from making their own efforts to eliminate conflict minerals from their products.
Earlier this year, a coalition of companies including Apple, Dell, HP and Microsoft stepped up their efforts on supply chain transparency, in an effort to get out ahead of the Dodd-Frank regulations.
And GreenBiz.com in January hosted a webcast on removing conflict minerals from supply chains. That webcast is archived and available for free viewing from GreenBiz.com.
Photo CC-licensed by greenhem.