7 Key Takeaways from the RY2015 Conflict Minerals SEC Filings
Companies can utilize Conflict Minerals Reporting as an opportunity to thoroughly investigate their supply chains, create value-sharing and mitigate risk by getting to know their suppliers throughout the supply chain.
Last week, Source Intelligence released “Conflict Minerals Reporting. A Deeper Look into RY2015 SEC Filings.” The report provides an in-depth analysis of benchmarking data from over 1200 Conflict Minerals Reports submitted by public companies, in accordance with Dodd Frank Act Section 1502. Complementary to the report, Source Intelligence also released an on-demand webinar going over key insights and findings from the RY 2015 SEC Filings, featuring resident Chief Scientific Officer Jennifer Kraus, and Michael Littenberg, leading supply chain compliance lawyer, Partner at Ropes & Gray. To watch, click here.
7 Insights from 2015 Conflict Minerals SECC Filings
The process of analyzing data of the reporting year 2015 SEC filings has provided Source Intelligence to identify key trends and insights over time. The following are 7 main takeaways from the 2015 reporting year that managers can utilize to implement effective changes in time for the following year’s reporting requirements.
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Lengthier Conflict Minerals Reports are signaling increased transparency efforts.
Between RY 2014 and RY 2015, the maximum Conflict Minerals Report page length almost doubled, from 47 to 79 pages. The average page length increased from just over 6 pages to 11 pages. Although this data point may seem insignificant, this is a key indicator revealing companies’ efforts to improve transparency along their supply chains. Companies reported details on how conflict minerals policies were implemented, improvement areas noted, and action plans on how to incorporate changes in the future. With companies learning over time, lengthier reports signal increased awareness of the importance of supply chain transparency, as well as company efforts to achieve transparency. -
More companies are effectively utilizing the OECD due diligence framework.
The U.S. Securities Exchange Commission (SEC) issued the Conflict Minerals Final Rule in 2012, and the ruling requires companies to utilize a nationally or internationally recognized due diligence framework. Currently, the Organization for Economic Co-operation and Development (OECD) is the only approved and recognized provider, which comprises of a 5-step framework. The 5 steps are as follows: (1) Establish strong company management systems; (2) Identify and assess risk in the supply chain; (3) Design and implement a strategy to respond to identified risks; (4) Carry out independent third-party audit of supply chain due diligence; (5) Report annually on supply chain due diligence. The framework was broken down in such a way in order to assist companies in identifying and managing risks up and down supply chains, pertaining to minerals from conflict areas. This reporting year, 80% of companies specified the use of the OECD framework, and also provided more detail on operations on how to meet the defined steps of due diligence. This was a vast increase from companies who reported utilizing the framework in RY 2014, at just 50%. In addition, 70% of filers also included their entity’s conflict mineral policy in their reports, in addition to describing planned future actions for improving supply chain transparency and due diligence. This demonstrated that utilizing the OECD framework in depth has allowed companies to thoroughly appraise their supply chain investigation processes, and help them realize where improvement can be made.
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Smelter information increased but is still an area for improvement.
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More independent audits were utilized to validate information.
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Use of third-party service providers increased, helping companies connect more with their suppliers.
This reporting year 749 companies, or 62%, specified the use of a third-party service provider to design and implement due diligence and compliance methods on behalf of the companies. More and more companies are utilizing third-party service provider because investigating the supply chain and aggregating data can be a daunting and time-consuming task. Third-party providers can collect and verify valuable data from suppliers, cross-reference and verify data, and assist with the due diligence reporting process. -
Getting to know your supply chain leads to value-sharing and risk mitigation.
The points above demonstrate how the SEC Dodd-Frank Act Section 1502 (Conflict Minerals Rule) serves as a beneficial opportunity for companies. The Ruling require companies to investigate their supply chains more deeply and thoroughly than ever before. The hurdle of identifying smelters and refiners requires companies to gain full communication and cooperation from their suppliers all the way upstream. This process becomes a beneficial tool for companies by encouraging value-sharing with their suppliers, and by identifying and mitigating potential risk. Uncovering the supply chain can provide company decision-makers the opportunity to evaluate their operations, and identify ways to prevent risks, as supply chains become more and more intertwined in a globalized economy -
Sustainability has become a priority for shareholders and investors.
Source Intelligence’s ““Conflict Minerals Reporting. A Deeper Look into RY2015 SEC Filings” provides an in-depth analysis of how companies are fulfilling their Conflict Minerals Reporting requirements, and how methods are changing and improving over time. To download the full report, click here. To watch our on-demand webinar on key trends and highlights with additional insights from experts, click here.
A recent study also found that 90% of executive-level investors will evaluate companies’ sustainability efforts before making any investment decisions. A company’s effectiveness on implementing and carrying out ESG efforts signal to investors that the company is thinking seriously about long-term growth. They also see a strong link between sustainability and financial performance. Among investors that were interviewed, the top reasons for placing value on corporate sustainability performance were: increased potential for long-term value creation, improved revenue potential, and demonstration of operational efficiency.