The manufacturing industry has to contend with an enormous amount of different corporate social responsibility (CSR) requirements, but those responsible for the supply chain are increasingly facing the problem of how to ensure that all of their suppliers adhere to numerous, wide ranging compliance regulations. One of the most significant compliance issues about to take effect across the manufacturing industry is conflict minerals reporting.
Raw materials used in the manufacture of electronic components are typically sourced from many different locations around the world. One country that is considered mineral rich is the Democratic Republic of the Congo (DRC). Mining is crucial to the DRC economy, but some mines are controlled by militant groups that cause serious social and environmental issues in the region. These issues include serious human rights abuse, theft, extortion, forced child labour, deforestation and high taxation of mineral resources. Subsequently mining in the region contributes to a conflict that has claimed more than 5.4 million lives since it began in the late 1990’s. Increasingly, the manufacturing industry is seeking to only source “DRC Conflict Free” minerals, defined as products that do not contain minerals or their derivatives determined to be directly or indirectly financing or benefiting armed groups.
The DRC Conflict Free ban mainly affects four minerals: Cassiterite (tin ore), Wolframite (tungsten ore), Coltan (tantalum ore) and Gold. Collectively these are known as 3TG (Tin, Tantalum, Tungsten and Gold), and are used in the following supply chains:
- Tantalum is often regarded as the first conflict mineral and became popular following the growth of the mobile phone industry. Today it is used in electronic components inside mobile phones, computers, video game consoles, digital cameras and as alloy for making carbide tools and jet engine components.
- Tin is widely regarded as the primary funding source of rebel groups and used in alloys, tin plating, and solders for joining pipes and electronic circuits.
- Tungsten is used in metal wires, electrodes and contacts which are used in a multitude of electrical and electronic devices, and the DRC is the world’s 5th largest producer of the mineral.
- Gold is most often used in the manufacturing sector in electronic, communications and aerospace equipment due to its superior electric conductivity and corrosion resistance.
Over the past couple of years a number of organisations have been formed to help define processes on the clamping down of conflict minerals sourcing. The International ‘Organisation for Economic Co-Operation and Development’ (OECD) has designed a 5 step framework for identifying and removing conflict minerals from the supply chain. Additionally two bodies have been established to help high tech companies implement the OECD framework, the Electronic Industry Citizenship Coalition (EICC) and the Global eSustainability Initiative (GeSi).
To try and remove conflict minerals from global supply chains, the U.S congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. . Section 1502 of the act is a provision related to the sourcing of conflict minerals. This means that all companies submitting filings to the SEC must now complete forms to confirm that they are not using conflict minerals across their supply chain. The first submission is due for 31st May 2014 and then annually by 31st May each year. Any company, there are estimated to be around 6000 of them, that file Forms 10-K, 20-F or 40-F with the SEC each year will be affected by this new law. In particular those that operate in the aerospace, automotive, high tech, defence and medical devices sectors will be impacted. According to Deloitte, “the complexity of today’s supply chains combined with lack of visibility into sourcing practices will be one of the key challenges of ensuring that Dodd-Frank can be adhered to.”
One tool that has been developed by EICC to help companies adhere to the Dodd-Frank law is the conflict minerals reporting template, which complies with the SEC’s due diligence requirements. This Microsoft Excel based reporting template embraces the OECD’s 5 step framework and asks specific questions to ensure that conflict minerals are not used across a supply chain. Given that conflict minerals reporting is now law for North American based SEC filings, it is in a company’s interests to find an efficient way to conduct the reporting process with minimal effort and without disrupting the day to day operation of the companies being asked to complete the survey.
There are two key challenges to ensure successful reporting of conflict minerals. Firstly the company must ensure that it has up-to-date contact information for every company across the supply chain. Secondly all companies must complete the survey questions in a timely manner so as not to delay an SEC filing. Efficient contact management is therefore critical to the success of this reporting process, and to help ensure that a company remains within the law on conflict mineral reporting.
Establishing a community management strategy is never easy, especially given the global nature and diversity of today’s suppliers. One of the simplest ways to engage with a global community of trading partners is through a common platform that is accessible through nothing more than a web browser. One such platform is GXS Active Community, a cloud based community management tool that has been designed to support people to people interactions across a supply chain. The platform uses a combination of centralised contact management and mass communication tools to allow a company to reach out to their trading partners anywhere across a supply chain. When using this platform, the EICC reporting tool could either be distributed as an email attachment or it could be replicated within the platform’s built in survey module. Therefore any company that has to comply with the new conflict minerals reporting process will be able to ensure that all its supply chain contacts are up to date but more importantly that it also has full traceability over which suppliers have actually completed their submission. Any trading partner that fails to complete the report for any reason will automatically be sent a reminder email, significantly improving response rates and helping to ensure that a SEC filing is completed on time.
Supply chain directors need to recognise the role that they can play in the fight against mining of conflict minerals by ridding them from their supply chains. Using an effective community management tool they’ll not only gain greater visibility of their supply chains and ensure they adhere to government legislation like the Dodd-Frank law, but they’ll also be helping to rally the fight against the mining of conflict minerals in suffering regions.
Director of Industry Marketing for Manufacturing