Conflict Minerals: Starring Dodd-Frank as the Grinch Who Stole Christmas
Categories: Governance Risk and Compliance, Procurement Strategy & Planning, Procurement Systems & Architecture, Supply Chain Management | Tags: Conflict Minerals, L1, Technology
Many manufacturing organizations continue to hustle to comply with Conflict Minerals rules and a May 2014 filing deadline. But the rules actually get more complicated in 2014 and beyond. We won’t provide a backdrop on Conflict Minerals legislation in this analysis, but have included links to our earlier coverage and research (and our Conflict Minerals survival guide) at the end. In short, we would categorize the current and emerging environment as one where companies (and individuals, especially within smaller suppliers) are already – or will soon go – heads down into an aggressive implementation model.
Dodd-Frank Playing The Grinch
Indeed, we expect that for some organizations, there won’t be much of a holiday break or fun time as small and mid-tier suppliers scramble to conduct their own supply chain mapping analyses – unless they take humor and solace in the fact that Dodd-Frank can really be The Grinch Who Stole Christmas (complete with conflict-free tinsel). Indeed, while many companies are on their way to compliance, we see suppliers in hustle mode figuring out how to comply and meet customer requirements.
The deadline that’s looming is based on a change in 2015 reporting rules (from 2014) that will prevent companies from marking “source undeterminable” on their compliance questionnaires. Manufacturers beginning in January of 2014 will no longer be able to enjoy the “one time excuse” they’ve had this time around in being able to mark their traceability information down as nebulous.
Some companies further up the supply chain are also placing year-end (or close) deadlines on their suppliers for initial reporting requirements as well – leading us to believe that the last two months of the year, which are usually a quiet time for many manufacturers, will see the hum of shop floor equipment and production lines replaced by the halogen lamps of offices as procurement teams struggle to fill out customer questionnaires and conduct their own diligence with their supply chains.
Or the Big Nothing?
On the one hand, we could argue Conflict Minerals is proving the headache and time suck that many thought it would be after the original Dodd-Frank legislation was crafted. Indeed, there’s a significant amount of activity we see among many suppliers right now – and complaints as well. We also see more interest resurfacing on the procurement side of the equation for large manufacturers and even retailers and CPG companies as companies prepare for the looming 2015 change.
But on the other hand, we also see less interest in the topic on some levels than we would have thought. A recent conference on Conflict Minerals that one of our colleagues attended had only 20 participants (the organizer had no doubt planned for 50 or more – similar attendance to our own event, Conflict Minerals EDGE, earlier this year). We also don’t see consulting practices at either Big 5 or boutique firms doing a bang-up business in the area. Granted, supplier management and supply chain risk is hot overall and many firms can’t recruit resources fast enough. But Conflict Minerals is not driving the growth of many of these activities and client projects. Moreover, the sale of Conflict Minerals specific software is proving itself to be just like any other compliance initiative – which is to say interesting (and needed) but not necessarily a blockbuster alone.
So what are we left to conclude based on this mixed view of activity? We would argue that Conflict Minerals compliance is:
- Typically being handled in-house by most companies
- Being managed “on the cheap” as much as possible
- Not necessarily being automated by regulatory-specific software (specific just to Conflict Minerals) though a few small players have started to jut out ahead of the competition
- Is consuming more and more time for small and medium-sized suppliers
- Likely become an even bigger headache in Q1 2014 as manufacturers at every level of the supply chain need to do double-duty to get more accurate information regarding country of origin and conflict free information for 2015 reporting requirements
For those organizations looking to learn more about Conflict Minerals compliance requirements, we encourage you to download our additional research, conducted with partner MetalMiner. We also encourage you to check out our compliance survival kits, details below.
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