Will Conflict Minerals Soon Be An All-In-One Supplier Code Of Conduct?

by Source Intelligence

on July 2, 2015

After two years of running through Conflict Minerals Compliance Programs, the regulated community is asking, where do we go from here?  What are the appropriate steps forward to create a more efficient process that will not be heavily scrutinized by regulators and NGOs?

 

Appropriate Scoping and Due Diligence

 

In looking at reporting information for 2013 and 2014, very few Form SDs or Conflict Minerals Reports provide extensive discussion on process, more specifically relating to sustainability and transparency in the supply chain.  Many have focused on response rates, suggesting that the Reasonable Country of Origin (RCOI) rates were the true foundation of their program, rather than that of creating a viable, sustainable process focused on appropriate scoping and due diligence.

At the 3rd Marcus Evans Conflict Minerals Reporting and Supply Chain Transparency Conference in Chicago, Illinois, there was plenty of discussion about what was considered a reasonable response rate during RCOI.  However, beyond that, there was rich discussion about the implementation of new process improvement strategies and how large issuing companies can ease the burden on suppliers.  During a panel discussion featuring members of the Aerospace industry, each member specifically referred to changing their terms and conditions for new supplier contracts to feature a section on Conflict Minerals. One speaker in the industry discussed the possibility of a recertification of the company’s supplier code of conduct to provide leverage in dealing with suppliers who were unwilling to cooperate with Conflict Minerals reporting.

 

OECD Due Diligence Framework

 

Building certain controls into the process gets to the heart of the very first step in the OECD Due Diligence Framework for Responsible Supply Chains.  The guidance specifically states, “in order to establish strong company management systems, companies should: strengthen company engagement with suppliers to include supply chain policy incorporation into contracts or agreements with suppliers.” Additionally Step 1(D) of the OECD Framework continues, “Where possible, assist suppliers in building capacities with a view to improving due diligence performance.”  A focus on supplier response alone does not foster quality data or clarity regarding what the expectation is for different types of suppliers in the supply chain.

With so much confusion abound regarding the options for reporting to the SEC in 2015, there is a collective progression taking place regarding how the Conflict Minerals rule is viewed.  Certain industries are making progress on integrating Conflict Minerals information into the larger discussion of supply chain transparency, referring to other issues like Anti-Corruption, Slavery, and Restricted Substances (REACH/ROHS) as important hot button foci that run in parallel to Conflict Minerals. In many cases the idea of passing papers through the supply chain is fading and true holistic supply chain transparency programs are filling the void.  The regulated community continues to evolve both in how risk mitigation is viewed and how complex issues are being handled in the supply chain.  Those companies that have jumped into evaluating their controls and management systems related to supply chain operations certainly have a leg up, and that truly has nothing to do with the overall RCOI response rates.

 

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