On May 19, in a webinar hosted by Michael Littenberg at SRZ, the Responsible Sourcing Network (RSN) will release its full report Mining the Disclosures: An Investor Guide to Conflict Minerals Reporting. The report is aimed at helping investors better understand the US Securities and Exchange Commission (SEC) conflict minerals disclosures and determine potential financial implications of the information, as well as offer guidance to reporting companies on broadening their disclosure.
RSN states that they applied their ranking system to “51 of the largest market cap companies from 17 high exposure industries”, and these results will be announced in the webinar. In advance of the release, RSN has made available three documents – their Indicators Shortlist, Indicators Longlist and Step-by-Step Guidance for Companies and Investors.
We have reviewed these documents and provide our thoughts, beginning with a surprise. Although we don’t agree with everything, RSN’s indicator lists are generally reasonable and appropriately aligned with the OECD Guidance and the SEC disclosure requirements. RSN presents their information in a way that is easy to understand and clearly separates best practices from basic compliance – something that the Global Witness/Amnesty International report on the SEC conflict minerals disclosures falsely considered as one and the same.
Two of the indicators advocated by RSN we have thoughts on are:
- Whether the issuer disclosed various quantitative metrics on products, suppliers, supplier response rates and smelters/refiners. As RSN makes clear, disclosure of this information is voluntary, and each issuer will make their own decision about reporting metrics. We feel this is appropriate in certain instances. For instance, where an issuer has a very small number of suppliers, metrics help make clear the context of a short smelter/refiner list.
- Whether the issuer provided details about the specific steps they took to conform to the OECD Guidance or simply referred to the Guidance. This has broader implications than perhaps understood by RSN as doing so could significantly increase the cost/effort of the Independent Private Sector Audit (IPSA) when that is required.
The timing of the release of RSN’s indicator lists may be problematic as there are only days left before the filing deadline, which leaves issuers little time to make any changes they may want. Each investor group will decide the level of importance they place on the conflict minerals disclosures, and of course each company should assess the context of their reporting and decide what approach to take. There will certainly be some companies who adopt RSN’s concepts, but not all.