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The Elm Consulting Group International LLC today announces a groundbreaking cost effective tool to support companies preparing for conflict minerals traceability audits or customer inquiries.
The delay in SEC’s final rule triggered many questions from companies about planning and pre-audit preparation. This led us to a solution that is valuable in almost any foreseeable final regulation scope/content and companies planning responses to customer inquiries – yet significantly reduces costs during this period of uncertainty.
SICMAP℠ focuses on basic program elements equally relevant to companies responding to customer inquiries/procurement requirements and those working to comply with the upcoming SEC regulations on conflict minerals. Successive and more complex tasks – for both program development and audit preparation – are identified based on initial SICMAP℠ findings, lessons learned from working through the SICMAP℠ process, and the final regulatory requirements once they are known. The final rule, when published, will clarify the level of detail for some of the efforts.
Screenshots (which can be enlarged by clicking on them) show some of the features and functionality in SICMAP℠ include:
“At a glance” color-coding indicates progress/status of both program development and audit preparation
Live links to reference materials on the internet
Summaries of language from the U.S. legislation (which will not be changed by SEC’s final regulations)
Step-by-step pragmatic guidance on specific program elements
Highlights of emerging international initiatives in comparison/contrast to SEC audit standards
Topics covered in an intuitive and pragmatic way include:
Reasonable assurance and representative sampling concepts reflecting SEC auditor standards
Information management systems
Supply chain mapping
Communications planning and content
Scrap materials – special definitions and challenges in traceability efforts
Considerations in selecting an auditor and preparing for the site visit
The tool is based on Elm’s experience as one of four firms worldwide that have completed conflict minerals traceability independent audits. Elm’s tantalum traceability audits in 2010 resulted in the first ever “Conflict-Free Smelter” designation*, covering sites in the US and Japan.
We continue to recommend that companies move forward with planning activities, but defer third party audits until planning is substantially complete and the SEC regulations are final. As with almost any new management program, a formal third party audit should be the last step of the implementation process – not the first.
SICMAP℠ will be commercially available beginning June 6, but feel free to contact us beforehand with questions.
* Issued by the industry association sponsoring the audits. The Conflict Free Smelter (CFS) program is emerging as the leading conflict minerals third party certification program for smelters by the electronics industry.
On Tuesday May 31, The Elm Consulting Group International LLC will formally announce a major development in our conflict minerals traceability services.
Lawrence Heim, Elm Director and leader of the firm’s conflict minerals services:
SEC’s delay in promulgating their final conflict minerals rule has resulted in a significant amount of uncertainty within affected companies. Many of these companies are challenged by cost constraints as they seek information, guidance and solutions to yet-unknown compliance standards. Our announcement next week provides a highly cost-effective solution in balancing these challenges.
If you would like to receive the announcement and related information directly, send an email to Lheim@elmgroup.com.
A little more that a week ago, Elm received information from two independent sources that SEC was not going to publish the final Conflict Minerals regulations by the statutory deadline of April 15, 2011.
Today, this was confirmed by information on SEC’s website. At this time, SEC’s anticipated date range for the final rules is August to December 2011.
Although the delay extends the uncertainty of specifically what the requirements will entail, it provides impacted companies a much-needed expanded window of opportunity to plan basic program elements and begin specific communications with suppliers and customers.
One key element of compliance that won’t change is the complexity of structuring a supply chain-oriented audit program. We have written on this matter several times in the past and continue to counsel clients to begin this planning as soon as possible, and defer any auditing until this has been carefully considered. Some of our earlier comments on the risks of moving forward in the absence of planning are perhaps even more relevant given the rule’s delay:
Companies directly regulated by SEC. Audits conducted “pre-rule” risk being non-compliant with the final SEC requirements. Early adopters may be faced with paying for audits a second time to achieve compliance. Reputational damage is possible where companies publicize or market the results of audits that are non-conforming to the final rule. At an extreme, companies could face lawsuits over nonconforming audits in a manner similar to lawsuits filed for non-GAAP financial reporting or certain corporate social responsibility reports.
Privately-held companies responding to customer demands. For these companies, the risk is not compliance oriented, but centers on unnecessary costs and reputational damage. Where customers demand this information of suppliers, the demands must be met. The question becomes “is SEC compliance driving the customer’s request?” If so, …the customer’s need may not be so urgent or burdensome as originally thought; and early adopter efforts on the supplier’s part may be overkill/overly expensive in light of a rule deferral period. Legal action from customers who rely on the “pre-rule” audit information and reputational damage are both possible where companies publicize or market the results of audits that are non-conforming to the final rule. Suppliers would be wise to work with customers to find an acceptable balance between the drivers, timing, scope and cost.
… Elm continues to recommend that companies move forward with implementation evaluation, scoping and planning activities, but wait for SEC’s rule to be finalized before conducting audits.
The conflict minerals regulations are listed under the heading Corporate Governance & Disclosure, with the subheading of Section 1502.
In a related matter, many reports during the past week stated that the conflict minerals rules were finalized or went into effect on April 1. Those reports erroneously used the words “rules” and “regulations” when referring to the voluntary auditing program created by EICC, who announced April 1 as the official commencement date for full program rollout.
The wikipedia entry on conflict minerals has been substantially edited to reflect recent events, add definitions and provide details on the substantive provisions of the auditing and disclosure requirements of the law.