Conflict Minerals and Dodd-Frank: An Update (Part 4)

Please click here for Part 1, Part 2 and Part 3 of this series.

In wrapping up this series, we'll conclude with a few practical tips from MetalMiner and the latest findings from an ISM/CAPs study examining organizational preparedness. For a more comprehensive analysis on the topic, check out the MetalMiner research compendium on conflict minerals. As a part of the compendium, we include the full text of a MetalMiner post profiling one organization that went through the field trials to examine traceability and auditing for the tantalum supply chain across sites in the US and Japan, as well as a scrap metal company in the US.

MetalMiner's takeaways from this experience suggest that "supply chain auditing takes careful planning. The audit process is far more efficient if it begins close to the point of materials origin and works forward. Starting at the consumer/end-use results in the audits being incomplete."

Another key observation MetalMiner makes is that the provisions of Dodd-Frank are likely to impact companies outside of the direct purvey of the enforcing authority, the SEC. This is because conflict minerals "audit mandates will directly impact non-publicly traded companies as they are likely to be part of the supply chain of directly-regulated companies. Information and audit requests will flow through the entire chain, which is the goal of the law. Moreover, the onus will be on the buying organizations themselves to validate supplier-provided information. Already, "materials buyers are demanding third party audits/evaluations, demonstration hesitation to rely on self-declarations by suppliers. Such company-supported requirements go beyond 'SEC standards' and "may push companies to engage third party auditors for all conflict minerals and related statements," according to MetalMiner.

Who will be running this from a company vantage point? Supply management/procurement groups is what it seems like. The ISM/CAPs research study suggests that among supply management, finance, operations and other functions, "more than three-fourths of the survey population reported their supply management group has or will have this responsibility." Yet considering the readiness of procurement organizations to embrace more automated approaches that leverage technology to manage multi-tier supplier audit and related information, it's our observation that among that among the 75% of companies where procurement is taking the lead, it's likely that less than 25% of that total will be able to leverage a toolset that goes beyond Excel to gather, document, and manage third-party multi-tier supplier information. That is, unless they quickly embrace a supplier management platform to do so before the requirements kick in.

- Jason Busch

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