Enough, Responsible Sourcing Network Publish Their Expectations of SEC Conflict Minerals Filings

NGOs The Enough! Project and Responsible Sourcing Network (backed by socially-responsible investment firms Boston Common Asset Management, LLC and Calvert Investments) have published a document titled “Expectations for Companies’ Conflict Minerals Reporting”.  This paper is offered as detailed guidance for issuers submitting a Form SD and Conflict Minerals Report (CMR) to the US Securities and Exchange Commission (SEC).

According to the authors, the intent of the paper is to “articulate key reporting components that are important to many SRIs and NGOs and to suggest indicators that can be tracked over time to allow for comparability between reports and measure improvement.”  The paper continues that the “listed indicators will allow stake-holders to easily compare reports and measure progress” and that “competitive evaluations will likely occur on these public disclosures.

The document sets forth a significant amount of detail, what the authors consider best practices and relevant numeric indicators well beyond the SEC requirements.

And as if there is not already confusion about the concept of “due diligence”, the paper references four processes an issuer should undertake that combine – and in our view, expand – what SEC and OECD establish.  SEC outlines three steps, only one of which is defined as “due diligence”.  The OECD Framework contains five steps, although only one or two map to SEC’s due diligence component (see this graphic for an explanation).

While we agree that the report provides potentially valid ideas for future conflict minerals program improvements, issuers need to walk before they run.  The paper may spark further thought/discussion, but existing SEC regulatory requirements and OECD framework offer enough significant and unprecedented challenges for Year 1 implementation and reporting.

In another article, we explore implications of this paper on the Conflict Minerals Report (CMR) audit effort and cost.

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