Supply Chain Cops (and Robbers): On Conflict Minerals Compliance in Secondary Industries

Conflict minerals is a topic that Spend Matters and our sister site MetalMiner have probably covered and researched more deeply than many other sources combined. But the true cost of conflict minerals compliance is one that we’ve not dedicated enough time towards. And we also know how many in the supply chain continue to skirt the legislation, following the requirements to the letter of the law but not necessarily improving actual policing within the African supply chain (e.g., trucking material across borders before export).

In a Sourcing Journal Online column that’s a must-read for any industry, Stephan Lamar, executive vice president at the American Apparel & Footwear Association (AAFA), frames the costs and hassle of conflict minerals legislation for the industry he represents. As he writes, “although [the legislation] was aimed at the electronics industry, which is a massive user of these materials, the broad reach of the regulation has ensnared our industry as well. For the past 18 months, U.S. footwear and apparel companies have spent thousands of dollars and hundreds of man hours in a desperate effort to come into compliance.”

Furthermore, “the requirement is especially problematic for our industry since these minerals, if they appear anywhere in shoes and clothes at all, exist in only de minimis quantities. Moreover, our users are so far removed from the mines and smelters that getting accurate information on which to make the proper 1502 reports is all but impossible.” Yet thanks to the retail distribution of footwear and apparel – as well as the aggressive nature of some publicly traded companies (the legislation is to be enforced by the SEC, although actual enforcement has not yet begun) that are policing their supply chains more than others – many suppliers are still ensnared by the requirements.

Of course all of this raises the broader question of the true cost of legislation and whether Dodd-Frank will even have a material effect on reducing the funding of wars that often are waged with child soldiers. After all, warlords have far greater motivation to alter their profitable supply chains to conform or at least obfuscate or circumvent requirements than do companies have to invest in truly getting to the bottom of what’s happening three, four or even more layers down (aside from gathering disclosures and statements from suppliers).

Which of course begs the question: will the legislation, as crafted and enforced, ultimately amount to any more than a giant paper chase and keeping a bunch of lawyers and analysts within industry and the government gainfully employed?

What do you think? Drop a line or post a comment. We’d love to hear from you.

See further coverage of conflict minerals compliance on MetalMiner and Spend Matters:

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