Last Friday, the US State Department issued its statement on conflict minerals supply chain traceability. Section 1502 of the Dodd-Frank Act requires that the State Department – in parallel with the SEC – provide guidance on due diligence activities to companies.
The Department stated that
… it is critical that companies begin now to perform meaningful due diligence with respect to conflict minerals. To this end, companies should begin immediately to structure their supply chain relationships in a responsible and productive manner to encourage legitimate, conflict-free trade, including conflict-free minerals sourced from the DRC and the Great Lakes region. Doing so will facilitate useful disclosures under Section 1502, as well as effective responses to any discovery of benefit to armed groups.
The Department specifically endorses the guidance issued by the Organization for Economic Cooperation and Development (OECD) and encourages companies to draw upon this guidance as they establish their due diligence practices. We encourage companies, whether or not they are subject to the Section 1502 disclosure requirement, that are within the supply chain of these minerals to exercise due diligence based on the OECD guidance and framework as a means of responding to requests from subject suppliers and customers.
Companies should no longer be in a “wait and see” mode. Basic planning, assessment and program development can – and should – begin now.
If nothing more, companies should evaluate whether the OECD Guidance is the appropriate reference point. As we pointed out in an earlier post, that guidance contains a number of pitfalls and auditor impairments that may deter its use by many companies.