The Serious Gaps Exposed Through Conflict Mineral, Supply Chain Compliance

As a two-year grace period soon expires, thousands of U.S. corporations are still scrambling to overcome severe obstacles to gather and authenticate a complex web of supply chain information to meet conflict minerals reporting requirements.

“In our analysis of Securities and Exchange Commission filings this year and through our detailed ongoing observations, far too many companies are severely lagging in getting commitments from suppliers to provide detailed information,” said Jess Kraus, CEO of Source Intelligence. “This is a huge obstacle, especially since we are fast approaching a key stage in Dodd-Frank – audited and verifiable reports on source materials.”

Source Intelligence has developed the Conflict Minerals Resource Center (CMRC) to support over 15,000 member companies.

Kraus said uncertainty in supplier data can only be eliminated through strict data assessment, validation and certification.

“Supply chain management requires a constant education and verification process with thousands of suppliers,” Kraus said. “Suppliers, supply routes and the location of source materials constantly change. Keeping tabs on these changes demand around-the-clock due diligence.”

In a recent SCMR article written by Diane A. Mollenkopf, PhD, and John E. Bell, PhD, The University of Tennessee, Knoxville College of Business Administration, supply chain managers were advised to consider recent issues surrounding conflict minerals, such as gold, tungsten, and tantalum.

“In the long term, issues with the new conflict mineral reporting regulations in the U.S. may be worked out and supply networks will have changed so that the chain of custody is well-documented and conflict-free,” said the authors. “But in the short term, companies may struggle to ensure (conflict-free) supply, and they will see an increased layer of administrative costs threatening their profit margins.

Thousands of U.S. companies were required to file initial reports with the SEC last June detailing whether their products or components contain tin, tungsten, tantalum or gold — dubbed “3TG” materials — from mines in the Democratic Republic of Congo (DRC) or adjoining countries. The U.S. and other countries have mandated conflict mineral reporting as a way to stymie the sale of these minerals to fund armed conflict in the DRC.

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