Many Companies Still Struggling with Conflict Mineral Reporting

mining Sergey Milovidov/Adobe Stock

Nearly two-thirds of the companies that filed conflict mineral reports with the U.S. Securities and Exchange Commission this year did not disclose the country of origin for the tin, tantalum, tungsten and gold (3TG) in their supply chains. According to a new analysis of the 1,216 conflict mineral reports filed for 2015, just 33% of companies identified whether these minerals were sourced from conflict zones in Africa.

The independent analysis and report released by the non-profit Development International, authored by DI Principal Investigator Chris Bayer and backed by Assent Compliance and other organizations, also showed country of origin reporting improved just 2% since last year’s filings. This was not a sufficient increase, said Bayer, who expected more companies to drill further down into their supply chains. If companies cannot determine country of origin for the 3TGs, they cannot know if they are funding armed groups in the Democratic Republic of Congo, he said.

Additionally, the majority of companies (63%) filing conflict mineral reports either explicitly or implicitly stated that their products were “DRC conflict undeterminable,” according to the report.

However, the roughly one-third of conflict mineral report filers that were able to make a country of origin determination clearly show that gaining this level of supply chain visibility is possible. These are the companies that want control over their supply chains and want to be seen as responsible consumers of 3TGs, Bayer said.

“The fact that one-third of companies are going for it means it is possible,” he said.

Companies Scoring High in Conflict Mineral Due Diligence

There were some positive findings from the analysis, however. Bayer pointed to the companies that not only scored perfectly on SEC compliance but also scored highly when it came to the Organization for Economic Cooperation and Development Due Diligence Guidance — the only internationally recognized due diligence framework recognized in the SEC conflict mineral reporting rule. In Bayer’s analysis, 13 companies received 100% on both SEC and OECD compliance. And, 116 companies, or 11.5% of all conflict mineral report filers, scored at least 75% on both SEC and OECD compliance.

“I just tip my hat,” Bayer said of those companies. “That is some serious effort.”

HP was among the firms that scored highly in both SEC compliance and OECD. It scored 100% in SEC compliance (8% higher than in reporting year 2014) and received a 93% in OECD conformance. When combined, HP received an 87% compliance score in Bayer’s analysis.

HP began conducting conflict mineral due diligence around 2007, according to Jay Celorie, global program manager for conflict minerals at HP. This was roughly five years before the SEC published its conflict mineral report rule in 2012 and seven years before companies first filed SEC conflict mineral reports.

“We felt so strongly as a company we wanted to do everything we could to not contribute to these armed groups perpetrating these atrocities,” Celorie said.

Pressure from NGOs on the electronics industry prior to 2010 also motivated HP to begin trying to gain visibility into its supply chain. Celorie said HP wanted to develop a program and tools to determine where its tantalum and other minerals were sourced from and if they were connected to armed groups in the DRC.

Celorie said it is nice that HP is recognized as one of the top-compliant companies in the Development International report and is getting credit for its due diligence in conflict mineral reporting.

“When you have an independent entity, such as Development International, do a very complete and objective view of all of these disclosures, and then you get recognized in terms of completeness and understandability — if that came through, that is very rewarding,” Celorie said.

Calling attention to companies leading the way in conflict mineral reporting is one of the goals of Development International’s yearly analysis of SEC filings, Bayer said. However, the report also is effective in calling out the companies still lagging in conflict mineral reporting.

Celorie believes when more companies do due diligence to gain more visibility into mineral supply chains, industries as a whole will benefit. The information obtained through effective conflict mineral reporting can be shared throughout industries, he said, making more companies aware of conflict mines and problematic smelters or refiners.

“It all comes down to that pressure being applied down in the supply chain,” Celorie said.

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