Conflict Minerals: Flexibility in Supplier/Upstream Engagement

The following post is based on material contained in the MetalMiner report (available for free download): Conflict Minerals: Building Responsible Manufacturing Supply Chains. Join MetalMiner and Spend Matters for the Conflict Minerals EDGE event taking place on May 6th in Chicago.

A key concern that downstream participants expressed in the OECD Cycle 3 Final Report was interpreting the level of information the Guidance required from them “about upstream and smelter due diligence and the level of information downstream companies should review under Step 2” (Page 14). Throughout the document, OECD made great efforts to clarify that flexibility in the design and execution of supplier engagement was intended, expected and observed in the pilot and that companies “are focusing their efforts, per the Guidance, on the ‘internal controls over their immediate suppliers,’ which are their tier-1 suppliers” (Pages 17, 29-30).

OECD stated that “modalities for supplier engagement may vary according to the position of the company in the supply chain as reflected in the menu of options provided in the Guidance. Downstream companies are free to choose which approach would suit best their specific situation” (Page 42). The pilot demonstrated that participants chose “to exclude or include parts of the Guidance based on what is relevant for their position in the supply chain... which is in line with the intention of the OECD Guidance” (Page 61).

On page 20 of the report, there is a diagram of Steps 1–5 of the OECD due diligence framework as now envisioned to apply to downstream companies.

This diagram focuses on Tier 1 suppliers as the direct information source, clarifying from the original interpretation that The Upstream report also noted that “two tin smelters have also passed the CFS audit and have been designated conflict-free. However, due to antitrust rules, the program has not disclosed their identities yet, thus it is not possible for the team to confirm that they source from the Great Lakes region” (Page 40 of Upstream report).

Downstream companies needed to obtain information directly from upstream actors. The report further discussed “engag[ing] relevant first-tier suppliers and request information about those suppliers’ own supply chains” (Page 26) and “urg[ing] suppliers to have the same expectations of their own suppliers to ensure alignment throughout the supply chain” (Page 21).

Key Point: Companies may scope and implement supplier engagement in a manner that is appropriate for their own situations and that reflects their position in the supply chain in relation to upstream actors. Reliance on information from Tier 1 suppliers is acceptable.

Curious to learn from experts and exchange pragmatic practices with industry colleagues also tasked with Conflict Minerals compliance? Join MetalMiner and Spend Matters for the Conflict Minerals EDGE event taking place on May 6th in Chicago.

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