Conflict Minerals Issue Becomes More Complex For Supply Chain Managers

Resistence to the Securities and Exchange Commission ruling that requires publicly traded companies to disclose the origins of conflict minerals contained in their products is breaking down rapidly, say compliance experts.

“If you were to ask me how many supply chain managers were questioning the urgency of this issue, I would have given you a different answer,” says Sonal Sinha is the associate vice president of industry solutions at MetricStream, Inc, a developer of enterprisewide governance, risk, and compliance (GRC) software and cloud-based services. “But today, that number is much smaller. Nearly every manager and auditor is aware of the need to come up to speed on this.”

As reported in Supply Chain Management Review, the deadline for meeting the deadline for Section 1502 of the Dodd-Frank Act regulations approved by the SEC is May 2014.

The July 23, 2013 court ruling, which rejected the legal challenge made by various industry bodies to further review or set aside the conflict minerals ruling, is likely to prompt organizations to move forward quickly with the execution of RCOIs, due diligence (if required), and reporting.

Meanwhile, a MetricStream survey indicates that many organizations are in the process of deploying or planning to deploy appropriate solutions for conflict minerals management. While these solutions might be manual or automated, the majority of organizations are aware that eventually, they will need something that is more sustainable and
permanent.

“Smaller companies may not want to make a big capital investment in this diligence all at once,” allows Sinha, “but we are just telling them, they really should do something.”

Indeed,  researchers say that many of the respondents surveyed have indicated that they believe the ruling is a step “in the right direction.”

MetricStream says it is likely that we will begin to see similar regulations enacted in other countries. The European Union is already considering implementing a conflict minerals regulation, and has recently completed a public consultation inviting opinions on the scope of the draft ruling. Canada has also introduced Bill C-486 in Parliament, which would require Canadian companies to exercise due diligence with respect to conflict minerals sourced from the Great Lakes Region of Africa.

Sinha says getting second- and third-tier sourcing partners to comply with the new law may be another challenge down the road, as “it becomes very muddy” when tracing from multiple sites of origin.

She remains optimistic, however.

“When you have all levels of upper executive management evaluating the risk associated with non-compliance – even CFOs – you have to believe that most of us are on the right track.”

SC
MR