Tag Archives: Newsweek

The Jenga of Conflict Minerals Reputation Risk

By now, you have almost certainly seen the Newsweek article on conflict minerals that targets Apple.  The article contains quotes from a number of conflict experts, including us (of course we have to mention that) and our friend Michael Littenberg.  Michael commented on the reputational risk aspect of conflict minerals, including the investment community.  While we agree in principle, our view is that the matter is more complicated than it appears on its face.

Late last year, we offered our commentary and referred to an article written by Norman Marks, a highly respected governance expert.  The sound byte we extracted from Norman’s thoughts:  reputational risk response should not be considered on an isolated basis.   Making aggressive corporate commitments to mitigate reputational risk impacts may have critical negative results in other ways.  For instance, a commitment to limiting purchases of electronic components to conflict free sources may address reputational risk and could also consolidate purchasing power, but it also negatively impacts supply chain resiliency in the event of a disruption.

Every company should attempt to identify and evaluate the different facets of, and linkage between, reputational risk of conflict minerals and other aspects of the business.

Newsweek Calls for Improvements in Conflict Minerals Audits

Today, Newsweek magazine published an article calling out Apple, the Conflict Free Sourcing Initiative (CFSI) and iTSCi.

Fundamentally – although in a sensationalistic slant – the article points out potential gaps and concerns about the mechanisms, processes and supporting data relied upon by the conflict minerals audit programs.  It also illustrates the point Michael Littenberg makes: “Big consumer brands are the low-hanging fruit for nonprofits and investor advocates, and they’re increasingly focused on this issue.”  And should mass media outlets like Newsweek continue to cover the topic, that will only increase the momentum.

To an extent, we feel our quote is somewhat out of context in that there do appear to be pockets of success relative to maintaining adequate documentation by some upstream supply chain actors.  At the same time, we have long advocated strengthening audits along the conflict minerals supply chain, going back to our comments at the 2011 SEC Conflict Minerals Roundtable.

The article also contains factual errors such as the SEC disclosure “requires U.S. publicly traded companies to audit their supply chains…” and that the compliance process is limited to the Reasonable Country of Origin Inquiry (RCOI).