Tag Archives: GeSI

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.

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.