Tag Archives: EICC

New Conflict Minerals Reporting Template Issued by CFSI

The Conflict Free Sourcing Initiative (CFSI) has released version 4.0 of the Conflict Minerals Reporting Template or CMRT.

The timing of this release may cause confusion on the part of issuers and suppliers who are already done with their CMRT collection processes.  CFSI stated that

CMRT 4.0 is not recommended for filing 2014 supply chain data, but is designed for 2015 reporting.

For CY2014 filings, companies should continue using version 3.02 as they have been.  When the CY2015 supplier outreach begins, companies should ensure version 4.0 is used.

Global Witness, Amnesty International Claim 80% Noncompliance with SEC Conflict Minerals Requirements

Today, Global Witness and Amnesty International (“GW/AI”) published Digging for Transparency:  How U.S. companies are only scratching the surface of conflict minerals reporting.  The report was also covered in Bloomberg news, Reuters, BBC and reflected in the OpEd section of the New York Times.  In the report, the two groups claim that

… almost eighty percent of companies in the sample, many of which are household names, failed, in our assessment, to meet the minimum requirements of the law.

This is surprising to say the least, given that we completed a comprehensive analysis of all 1300 filings and came to a dramatically different conclusion1.  We took a detailed look into the GW/AI report to understand the data and conclusions.

Perhaps not surprisingly, their numbers and methodology develop misleading findings to support their sensational headline. Several contradictions were identified between the text, the numbers and facts.  Although the text sometimes (but not always) clarified that certain reporting elements are not actually mandated by the SEC requirements, the statistics portray the elements as being required.  This theme runs through the entire report – the statistics reflect GW’s and AI’s preferences for the content/detail of conflict minerals reports, but not noncompliance with the legal requirements.

One example of this inconsistency on page 7 of the report states that “Awareness by companies of the need to follow OECD guidance was extremely high, with ninety-six percent of the companies we analyzed stating that their reports conformed to the standard“, yet the following statement is made later:

Only forty-six percent of the surveyed companies provided information to the SEC about what they had done to follow each of the five steps in the guidance. Responsible companies should describe their supply chain checks in detail.2

The word “should” is correct.  How companies describe their due diligence framework and measures is not prescribed by the SEC rule.

Another example is the basis for how they arrived at their figure of 80% noncompliance3 .  The groups used twelve criteria against which their sampling of reports was assessed (see page 6).  Figure 3 on page 15 shows the percentage of the sampled reports that meet these criteria.  Interestingly, only three of those criteria are legally mandated without discretionary implementation (“Do RCOI”, “Submit report”, and “Report on website”), and the report shows close to 100% compliance on those elements.  Filers have significant discretion on how they report on eight of the elements (for which the report shows a much lower level of conformance) and are based on data sources the filers have limited control over.  Where filers’ discretionary approach to reporting differs from GW/AI’s desires, the groups considered that to be a noncompliance, and the reported percent “compliance” drops off significantly.

The remaining element (“Determine if under the law”) is a bit baffling.  Filers are not required to affirmatively file or otherwise state that they are not covered by the law, so by definition all filers are covered by the law.  Specifically stating that they are covered is neither mandated nor sensical.

The report further states that “for the companies who filed Conflict Minerals Reports, doing due diligence in conformity with the OECD guidance is a legal requirement of Section 1502.4    While this is correct, one can argue about whether it is legally mandated to address all components of the OECD Guidance.  The ambiguity comes from the fact that the rule takes a voluntary framework – written in terms of “should” and allowing companies to implement it based on their own circumstances and position in the supply chain – and incorporates it by reference into a legal mandate.  So we are faced with a requirement that allows discretionary implementation.  This is the same conundrum faced by EPA in the early 1990s when it considered mandating the use of the voluntary ISO 14001 environmental management standard.

GW/AI criticized the Conflict Free Sourcing Initiative’s (CFSI’s) smelter/refiner auditing program, stating that

… the audit protocols do not require all of its participating metal processors to undertake supply chain due diligence in accordance with the OECD guidance.5

In reality, the protocols and procedures do guide the CFS auditor to review documentation from industry associations such as ITSCi, Certified Trading Chains and the ICGLR Regional Certification Mechanism for supply chain due diligence activities conducted by or for the smelter/refiner.  In fairness to GW/AI, the extent to which this is done by the CFS auditors is unclear.

These are only a few examples from the report.

It is our view that the report and its conclusions take liberties with facts and interpretations of the legal mandate.  While Global Witness and Amnesty International may have certain desires for the content of the SEC filings, that does not make for noncompliance with the legal mandates.


 The GW/AI report states that 1321 reports were filed with SEC, which we think double counts for amended filings by also including the original filing superseded by the amendment.  They selected only 100 companies (less than 8% of the total filers) to review and assess, some of which are our clients.

2 Page 19.

3  “The main finding of our analysis is that only twenty- one percent of companies in our sample met all twelve of the criteria that constitute the minimum requirements of Section 1502 (see Methodology section above). While these criteria do not represent an exhaustive list of steps companies should take, this demonstrates that seventy-nine percent of companies we analyzed did not meet the minimum requirements of the law.”   Page 15.

4   Page 12.

5  Page 26.





CFSI Publishes New Conflict Minerals Disclosure Guide

Last month, the Conflict Free Sourcing Initiative (CFSI) published a new guidance document titled Five Practical Steps to Support SEC Conflict Minerals Disclosure.  This guidance can be used by downstream SEC issuers, although suppliers may find it helpful in understanding what their customers are facing and needing with regard to conflict minerals disclosures and supporting information.  Although the document may provide new approaches or thinking to some, for us it is business-as-usual, as our standard practices and typical advice are almost identical to what is set forth by CFSI.  We note, however, that we had no involvement in the document or with CFSI.

Toward the goal of offering practical information, CFSI states that

a downstream company may use the relevant parts of the OECD Guidance to meet its SEC compliance and reporting requirements by correlating the OECD Guidance steps to the SEC compliance steps needed to meet U.S. reporting requirements.

The document is organized in parallel with the OECD Fives Steps of Due Diligence, and each section includes a specific narrative concerning the relationship of the OECD Step to the SEC regulatory process.  Among the highlights are the following points made:

  • Conflict minerals teams should represent a broad cross section of the company and its functions
  • Companies may choose supplier prioritization factors, including 3TG content and annual spend (the two most common supplier screening factors identified in our study of the 2013 filings);
  • Defining “risk” in terms of downstream companies, which focuses on the smelter/refiner, not the upstream factors originally contemplated by the OECD Due Diligence Guidance;
  • Ground-truthing supplier information based on the issuer’s own internal expertise and expectations related to the product/materials obtained from suppliers, rather than blindly relying on supplier responses (particularly as this relates to 3TG content);
  • Suggested information sources, other than CFSI, for obtaining country of origin information, although third party sources such as those offered by us and SourceIntelligence are not mentioned; and
  • As we have stated for quite some time, CFSI also directly correlates a company’s RCOI efforts to Step 2 of the OECD framework, thereby distinguishing Step 2 and RCOI from “due diligence” in SEC reporting terms.

There are many other important points in the document and it is well worth the time to read.





Parts is Parts: Conflict Minerals Declarations

We were recently reminded of a famous and amusing commercial from the 1980s that brought the phrase “parts is parts” into the popular lexicon.  But in our case, the subject is conflict minerals rather than chicken.

By now, supplier responses to conflict minerals information requests have filled the in boxes of companies and data management systems. Although not universal, the EICC-GeSI Conflict Minerals Common Reporting Template has become the most common format for collecting the data. One question in the Template that may be seen as relatively benign  presents an opportunity for significant implications and interpretations: the declaration scope.

Many companies do not have a definitive way to link specific incoming materials/parts/components to individual products and customers.  Consider typical generic commodity components like nuts, bolts, wire and many basic electronic components, which may be stored in a commingled manner in boxes or bins.  Another common challenge arises when manufacturers obtain parts from distributors or vendor managed inventories.  In these situations, parts from multiple manufacturers are frequently commingled and not differentiated when incorporated into the final product, making it impossible to link specific component manufacturers with any particular final product.

Suppliers creating a company-level (or possibly division-level) conflict minerals declaration ease the burden of connecting the dots – any product may contain any component/material from any of their suppliers, and therefore any smelter and country of origin identified in their supply chain.  Easy enough, it seems.

But not so fast.  This fully-inclusive perspective is one interpretation of the absence of supplier-product linkages, but there is an opposing view.

Absent the ability to link specific materials/components from specific suppliers (and their identified smelters and countries of origin), is it plausible that an issuer has no reason to believe that their specific materials/components originated from any particular smelter or country of origin, including Covered Countries? Depending on the issuer’s individual facts, circumstances and business risk, this “exclusive approach” may seem viable, but it could be counter to the SEC requirements.

Page 154 of the final release offers an analogy to this situation.  To paraphrase, where a material comes from a “mixed smelter” (i.e., a smelter that processes materials from multiple countries including Covered Countries), that circumstance “should provide an issuer with reason to believe that its conflict minerals may have originated in the Covered Countries.”  It stands to reason that the concept is the same if the word smelter is replaced with “supplier”.

So while “parts is parts”, we aren’t sure if issuers will be able to argue “what parts is what” or “which parts is where”.  Issuers considering an “exclusive approach” should carefully evaluate that in light of the mixed smelter analogy.

Conflict Minerals Evolution: CFSI Now Provides the Missing Link

We aren’t intentionally on a kick about evolution (see our earlier article about faith versus proof in supplier data), but we couldn’t pass up this opportunity to pun it up with the “missing link” reference.

You may be aware that the EICC’s Conflict-Free Sourcing Initiative (CFSI) launched a newly designed website (http://www.conflictfreesourcing.org).  What is not widely known is the little gem in the navigation bar named “rcoi data”.  The unassuming lower case font belies the valuable information therein.

We previously pointed out that there has not been a way to link CFSP-audited smelters/refiners with their associated countries of origin in order to disclose that information in Conflict Minerals Reports (CMRs).   This has been a gap going way back – some of us remember when the EICC maintained an aggregated list of countries of origin, but without a way to associate them with smelters/refiners.  The closest that most companies were able to come was either by relying on Question #2 of the EICC-GeSI Conflict Minerals Reporting Template (whether 3TG originates from the Covered Countries), or undertaking their own efforts to contact identified smelters to identify their countries of origin.

CFSI is now providing a solution – that little “rcoi data” tab.  The CFSI collects country of origin for all CFSP-compliant smelters/refiners and shares that RCOI data with its members in a summarized format by smelter.   The RCOI reports issued by CFSI to its members include:

  • A complete list of all compliant smelters/refiners and category of their sources
  • Categories include
    • R/S: smelter which processes solely recycle/scrap
    • L1, L2, L3: smelters which process ore based raw material from Level 1, Level 2 or Level 3 as defined in the CFSP protocol; Level 3 being the “adjoining countries”
    • DRC: smelter which process ore based raw materials from the DRC specifically

“Being able to provide this information to our members is the result of over five years of intense work by industry and collaboration with many stakeholders. This is a huge milestone for the CFSI and we continue to work to attract more smelters to be CFSP-compliant,” said Julie Schindall, Director of Communications & Stakeholder Engagement at the EICC.

There are some things to bear in mind.  First, you do have to join the CFSI as a member.  Second, the RCOI data is still confidential and is disclosed to members after the Agreement on the Exchange of Confidential Information (AECI) has been executed.  This means that commercial IT solutions are not likely to gain access to the information for purposes of using it for their customers.  As a matter of fact, this is addressed on their membership page Benefits of CFSI membership, such as RCOI data, may not be provided by member associations to their own constituents.

In all seriousness, this is a very big development.  Maybe our characterization of this as the Missing Link is still too subtle – maybe Sasquatch is better.

Essential Conflict Minerals Updates, Guidance and Lessons from the Conflict-Free Sourcing Initiative (CFSI) Workshop

Last Tuesday and Wednesday, we attended and spoke at the 12th Conflict-Free Sourcing Initiative (CFSI) Workshop held in Washington DC.    The CFSI is the newly renamed conflict minerals program initiatives of the Electronic Industry Citizenship Coalition (EICC) and the Global e-Sustainability Initiative (GeSI).

No other meeting brings together so many of the world’s most knowledgeable subject matter experts, and provides an open forum for others to take advantage of their expertise.  Attendance at the Workshop was strong at 180 attendees from industry, government and NGOs, along with a strong showing from IT systems providers, consultants and audit firms.

We were not able to make every session of interest, but we did compile a summary of what we saw as the high points of the two days.  Some of this is new information, and some is not so new, but worth bringing forward due to the amount of discussion and confusion on the regulation and OECD Due Diligence Framework that came out in audience Q&A periods.

  • The growth of internal company expertise for conflict minerals program development and deployment continues to be strong.  Use of external resources by these companies is therefore rather low.  This has been generally effective up to a point (especially for purposes of controlling costs).  But some have either stalled out, have had higher priorities placed on them or feel the need for a new set of eyes to look at their program.  There now appears to be a trend for companies to seek third party program reviews.  In some cases, the companies only need a limited scope review – for instance of their operating procedures or of their RCOI process framework.
  • More than one session pointed out an important aspect of relying on the conflict free smelter (CFS) audit program results.  The CFS listings provide an aggregated list of the Countries of Origin that have been identified across all the smelters/refiners.  This list is available only to CFSI members who sign non-disclosure agreements.  Some of the countries identified include Covered Countries, although those are sources verified as not funding or benefitting armed groups.  It is not currently possible to link individual smelters/refiners to specific countries of origin, nor “de link” specific countries of origin from individual smelters/refiners based solely on information from the CFS.  Therefore, companies relying on CFS arguably “have reason to believe that conflict minerals may have originated in a Covered Country”, triggering Due Diligence, a Conflict Minerals Report, and possibly the third party audit of the CMR.

Companies wishing more certainty may choose to contact the smelters/refiners directly, ask if they purchase any materials from Covered Countries, and obtain some form of reasonably reliable documentation from them supporting their answer.  It may also be possible to link/de-link countries of origin and smelters by comparing the answers in Question 2 and the smelter list of the Common Reporting Template.

  • Several audience members questioned the value of the required efforts by downstream companies.  Presenters responded by saying that the value is related to finding how close a company is to the smelters/refiners and, based on that knowledge, determining the level of influence a company has on their smelters/refiners to push for assessing/changing their raw material sourcing practices, or being audited by the CFS.
  • One presenter pointed out that the typical time for ore to make its way from the mine to the final product is between 9 – 12 months.  This timing may be worth keeping in mind within strategy and policy development.
  • The next Enough! company surveys are not likely to be sent to targeted companies until the end of 2013.  Enough! said they are evaluating significant changes to the survey:  new questions, modified questions, adding new industries/companies, and inviting other NGOs to participate in the survey process.  The tentative goal for the publication date of the rankings themselves is May 2014.
  • The EU representative clarified three important matters in relation to the EU Directive on conflict minerals that is in development.  First, it appears that rather than expanding the list of minerals/metals, the EU Directive will be limited to 3TG as a starting point.  Second, the Directive will not be limited to Africa, but will have a global scope.  No further detail was offered on other countries, but one would reasonably anticipate Indonesia and Latin America will end up on the list.  Third, the Directive will apparently be consistent with the OECD Due Diligence Framework and will not create a competing or divergent system.
  • Ambiguity still exists around the CMR audit trigger and the possible deferral.  The CFSI is developing a white paper/FAQ that should be available around the first of the year stating their position on the question.  The most common questions brought forth at the meeting are:
    • Is the audit triggered only when information is available on all four metals, and at a product level?
    • Is it necessary to link specific suppliers to specific products in order to make product-level determinations for the audit applicability?
    • Is the audit triggered solely by virtue of the source being located in a Covered Country – without regard for whether the material did finance or benefit armed groups?
    • If a known DRC Conflict Free source is identified in a company’s supply chain for a single metal (such as tantalum), does that trigger the audit?
  • With the emphasis this year on obtaining baseline or initial supplier information, some presenters commented that it may be a good idea to send suppliers a reminder before the end of 2013 to provide any updates/new information they may have on their own supply chain.  Many companies have change management notification requirements for their suppliers that address when actual physical/material changes are made, but these may not specifically cover situations where new information is obtained about existing materials.
  • It may be worth reviewing the regulations and preamble again.  The regulation and its wording are confusing and complex at times, and many find themselves focusing on certain aspects while forgetting others.  There are numerous areas where a refresher is worthwhile, but specific matters that jumped out at us during our conversations at the Workshop:
    • Page 157 of the Release, concerning reasonableness of the RCOI process; and
    • Footnote 562 (page 189 of the Release), offering suggested disclosure language explaining or clarifying “DRC Conflict Free” determinations and “undeterminable”.  This language may be considered a model to be adapted to an issuer’s particular situations.
    • Remember that “DRC Conflict Undeterminable” status is to be claimed only after undertaking due diligence measures, not just by completing the RCOI.

Please feel free to contact us if you have questions about the meeting or conflict minerals programs.  We are happy to talk with you.

Enough Issues 2012 Company Rankings on Conflict Minerals

Two years after its initial rankings, activists Enough! have issued their updated rankings on electronics companies’ progress on conflict minerals.

Even CNN picked up this up and reported it on the front page of CNN.com.

A quick review of the summary report indicates that Enough appears to have addressed some of the points from our critical review of the initial 2010 rankings.  However, our comments concerning the three flawed questions remain substantially valid.

Although we have not yet analyzed the detailed responses behind the summary report (those responses are available here), we plan to do so soon.

Similarly as we look even further ahead, we anticipate updating our own report on the financial impact of Enough’s rankings.

OECD Downstream Pilot Program Second Report Predictions

Based on our ongoing dialogs with clients and other companies, and our attendance at last week’s EICC-GeSI Conflict Minerals Workshop in Philadelphia, we have a few predictions about the upcoming second report on OECD’s downstream pilot program on the implementation of their due diligence guidance.  The report was originally scheduled for release last month, but is not yet available and we don’t know when it will be published (although we would expect in advance of the next meeting the first week of May).

As our client base consists more of heavy industry, hard metals and non-electronics consumer products, some of our predictions stand in contrast to “conventional wisdom.”

  1. Especially for US companies subject to DF1502, there is an increasing recognition that the makeup of the downstream pilot participants is heavily skewed toward the electronics industry, and the results of the pilot are therefore not representative of heavy manufacturing or other non-electronics sectors.  At the same time, we expect an increased awareness of conflict minerals (CM) issues in pilot participants which means a related increase in uptake of basic program elements such as company policies on conflict minerals.
  2. Many companies (arguably most companies (a) outside the electronics industry and (b) not participating in the Pilot Program) are still awaiting the final SEC regulations before moving forward on CM program development/implementation.
  3. There continue to be significant questions about how to engage/influence smelters in situations where business relationships do not directly include the smelters.
  4. Confidentiality remains a major concern with no clear solution.
  5. Adoption of the EICC-GeSI Common Reporting template continues to be held back due to its stand alone, non-integrated nature as a simple spreadsheet.  This is especially the case for companies with very large/ complex supply chains, although technological solutions are being developed to bridge this gap.
  6. Validation of information from suppliers is a complex exercise with no simple answer.
  7. Communications with suppliers and customers are not just “one and done” – different types of communications are being used depending on the requests, and sometimes multiple/labor-intensive follow-ups are required.
  8. The tension between CFS, OECD and the anticipated SEC requirements is growing, especially related to the definitions of  “conflict free” and the applicability of audits under Step 4 of the OECD, CFS and the Conflict Minerals Report.
  9. There is increasing uncertainty as to how upstream verifications are conducted within smelter (or other downstream) audits.
  10. Some companies in the supply chain – especially those not under SEC jurisdiction and not in the electronics industry – are not required to address CM and are not integrating CM requirements in their procurement.  Concern is growing that CM program costs are creating financial disadvantage in the short term and may continue to do so until CM matters are fully embedded throughout all supply chain actors across all sectors and geographies.
  11. The CFS program is viewed as having major shortcomings, such as:
  • Only 11 smelters have been approved since the program’s inception 2 years ago.
  • The tin, tungsten and gold sectors have not been supportive of the program.
  • Only three audit firms are approved by EICC to conduct all CFS audits.
  • There is no transparency or published standards for CFS auditor qualifications or selection criteria.  Other industries are seeking “approval” of auditors they have already screened for their purposes (ie., LBMA gold).
  • The CFS program only publishes “approved” smelters, and does not provide an indication of specific smelters that are in corrective action mode, or that do not pass.
  • The CFS program does not allow for risk mitigation under OECD.  Passing a CFS audit requires 100% conflict free materials at the time of the audit as well as verification that smelter purchasing processes ensure that only 100%  conflict free materials continue to be purchased.

12.  Finally, there continues to be an emphasis on third party auditors providing critical information verification and program credibility in the myriad national and industrial traceability frameworks, process stages and reporting steps.  However, there is almost universal lack of recognition about the importance of the quality of auditors or need for oversight/accreditation.  Even further, questions are already arising as to what constitutes an “audit” versus other types of less formalized reconnaissance, investigations and assessments.


Guest Viewpoint: EICC-GeSI Conflict Minerals Workshop in Brussels

Elm welcomes Michele Bruelhart as a guest blogger.  Michele is the Global Traceability Manager with UL-STR in Burundi and attended the EICC-GeSI Workshop held in Brussels recently.  She provided Elm with her perspective on the meeting, and regional progress on conflict minerals programs/infrastructure.


The challenges surrounding supply chain traceability of so called “conflict minerals” continue to be discussed in numerous fora in Europe and the US. Starting with roundtable consultations organized by the World Gold Council, the EICC-GeSI Group and the London Bullion Market Association (LBMA) held their conferences last week in Brussels which will be followed by the launch of a Public-Private Alliance for Responsible Minerals Trade in October and lastly a meeting of the OECD hosted working group on the implementation of the Due Diligence Guidance in November.

Broadly speaking, participants of these meetings appear divided into two groups: those contributing to discussions on the 3Ts (tin, tantalum and tungsten) and those trying to address the issues around gold. For the former, the EICC-GeSI Workshop provided an overview on the latest progress (or lack thereof) since their previous workshop in June of this year. Some of the main points from Brussels are summarized below:

  • The EICC-GeSI reporting template for the downstream supply chain is publicly available and has been piloted by a number of companies. While the tool itself was found to be helpful, it does not address the main challenge faced by end-user companies, which are (1) how to reduce the complexity and number of suppliers standing between the end product and the smelter in their supply chains and (2) how to get responses from supplier, investing a reasonable amount of time and resources.
  • The hours required to obtain a completed reporting template from all suppliers seem disproportionate to the information sought. Furthermore, the data provided by suppliers is not validated or verified externally. Lastly, the tool merely allows companies to gather information “backwards” for a finished product, rather than “forwards” (i.e., trying to prevent conflict minerals from entering the supply chain).  By the time all the information is collected and compiled, the product will most likely have been sold already, whether smelters used for its production were “conflict-free” or not. Given these limitations, it is not clear if the template truly responds to the needs of companies that are required to report under Section 1502 of the Dodd Frank Act. [Ed. note – this process/timing gap may also create liabilities in the context of representations and warranties made about the nature or status of the material, which could be proven incorrect once all relevant information is available].
  • Investing time and resources to gather information from suppliers regarding the smelters used in a company’s supply chain makes sense only if there is a sizeable list of conflict-free smelters that have been approved in the framework of the Conflict Free Smelter Program. So far, this list comprises six tantalum smelters. Assessment protocols for the other metals have been published this summer, though to date no smelters for tin and tungsten or refineries for gold have been approved as “conflict-free”. Despite the progress made in this program and the EICC-GeSI’s repeated assurances that it remains possible for smelters to source from the African Great Lakes region, the requirements defined for smelters to continue purchasing minerals from the Democratic Republic of Congo (DRC) or its neighbors provide a significant disincentive to do so. The assessment protocols list a number of conditions that must be fulfilled for minerals from the Great Lakes region. Among those figure full traceability for the shipment – something that has not been achieved yet for three of the DRC’s four affected provinces – and the implementation of the OECD Due Diligence Guidance. On the latter, it remains to be seen how this criteria should be implemented as the OECD is stressing that its Guidance should be understood as a process over time, whereas a mineral purchase is a punctual transaction. [Ed. note:  As Elm previously reported, OECD has softened its stance on its Guidance.  In addition, EICC CFS audits may not be completed in time for many companies to use them for purposes of fiscal year 2012 SEC compliance].
  • In the region itself, progress has been quite significant. The DRC Government is about to make the implementation of the OECD Guidance a requirement for companies bearing administrative sanction, mine site inspections have taken place at over 30 mine sites in North Kivu and the Government expects to be ready to issue regional certificates for its minerals within the ICGLR framework by the end of 2011. ITRI’s tag-and-bag scheme is targeting 75% of the 3Ts from Katanga province to be tagged by the end of this year and the German federal institute BGR has validated 35 mines against its Certified Trading Chains Standard.

Nevertheless, some important issues were not addressed during the Brussels workshop:

  • First and foremost, it remains unclear if the Congolese Government has the financial and human capacity to enforce the various rules and regulations that were passed over the last couple of months. In particular as the country is preparing for Presidential elections in November, no concrete plans for the enforcement of recently taken measures were presented, nor does the Government appear to take a clear leadership role in coordinating the various efforts on the ground.
  • For the in-region tracing or certification schemes, the monitoring and evaluation process of participating companies is not fully transparent. In the case of the mine visits of the DRC Government, no information is provided on the standards applied to flag a specific mine green, orange or black or the qualifications of the mine inspectors. For BGR’s and ITRI’s certification and traceability schemes, the boundaries between baseline assessments, preparation of participating companies, third party verification and remediation are not clearly defined. The absence of clearly defined tasks may lead to potential conflicts of interest where verifiers could be consulting and auditing the same companies.
  • The presentation of Gregory Mthembu-Salter of the United Nations Group of Experts (UN GoE) on the Democratic Republic of Congo painted a rather grim picture of the likelihood to see any of the above schemes being implemented in the Kivu provinces. The security situation in the Kivus renders the implementation of any traceability scheme difficult and the level of due diligence required from buyers in ensuring their purchases do not benefit armed groups appears to be prohibitively high.
  • The highly unique aspects of the gold supply chain and its traceability remain unresolved.  There are growing doubts that a viable framework applicable to gold will be available in the near future.

Despite these activities along the entire mineral supply chain there remains much to be done to establish credible systems of assurance in the African Great Lakes region that satisfy the needs of end user companies obliged to report on the origin of their raw materials.


Update on Conflict Minerals from Washington, DC

Elm attended this week’s EICC Extractives Supply Chain Workshop VI on conflict minerals, where approximately 200 attendees were present from industry associations, manufacturers from a range of industries, retailers, law firms, the OECD and representatives of several Central African organizations in the minerals trade.

It is Elm’s opinion that a clear rift exists between policy development/governmental organizations and the companies who are expected to implement conflict minerals traceability programs.  Elm observed the following points being voiced most frequently in open discussions with panelists and in “hallway discussions” between attendees:

  1. Governmental and quasi-governmental organizations  are almost universally pointing to the recently finalized OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict Affected and High-Risk Areas and the Supplement on Tin, Tantalum and Tungsten as THE answer to all traceability program needs.  In contrast, many of the US companies present who have attempted to apply the Guidance consider the document unusable and unrealistic.  The most common complaints: a major lack of actionable, specific implementation steps/detail and the uncertainty about how the Guidance will comply with SEC requirements.
  2. Similarly, a confusing array of new standards, initiatives, policies and documents are emerging from a range of industry groups, non-governmental and quasi-governmental organizations – almost all of which are seeking funding.  Attendees questioned the value and cost to the affected companies and raised concern over possible conflict with SEC regulations and auditor standards.  Also noted:  practically every one of these emerging initiatives includes its own separate third party audit program.
  3. Impacted companies are highly concerned about the availability and confidentiality of supplier information.  Specific examples brought forth:  exposing potentially sensitive information including business/supplier relationships; the reality that few supply chain levels will be able to directly identify mines of origin in information-gathering questionnaires; and the unique information availability challenges of the scrap supply chain.
  4. Recognition that the gold supply chain is significantly different from that of the other conflict minerals and a unique – and far more complex – solution will be needed for reasonable traceability.

Fundamentally, US companies that are impacted by Section 1502(b) of the Dodd-Frank Act are seeking pragmatic implementation guidance/support that

  • reduces the risk of non-compliance with the upcoming SEC regulations,
  • maintains business confidentiality,
  • supports conformance with customer requirements/contractual mandates, and
  • is based on a framework of reasonable expectations.

Elm’s recently announced Self-Implemented Conflict Minerals Audit Preparation© tool (SICMAP℠) is available to support companies seeking such solutions.  Feel free to contact us to learn more.