A new disclosure requirement under United States law, which obligates companies to audit their supply chains in order to determine whether any materials are sourced from conflict mines in the Democratic Republic of Congo (DRC) and surrounding countries, is having the desired effect. That was the finding from a number of recent independent studies, which confirmed that many companies are making greater efforts than ever before to learn more about their suppliers. However, Washington DC-based non-profit organisation Enough Project believes that many other companies can still do a lot better when it comes to identifying conflict mineral sources.
Under section 1502 of the Dodd Frank Act, companies are required to disclose to the United States Securities and Exchange Commission (SEC) whether any components from their supply chains include the so-called 3TG metals of gold, tin, tantalum and tungsten from conflict zones. This is the third year that such submissions have been required.
Content from SEC filings show that this year’s reports include more detailed information on implementation policies and future actions than ever before, according to Chemical Watch. Some 80 percent of companies have also followed OECD due diligence steps when identifying and managing their supply chain risks. This is up from 50 percent last year.
According to the study findings, the top performing brands this year include Hasbro, Hewlett Packard, Intel and 3M. However, only one percent of companies filing SEC submissions were able to declare their supply chains to be ‘DRC conflict free’, which requires a private audit.
Enough Project associate director of policy Sasha Lezhney said: “Apart from the growing leaders, many companies in the middle of the pack are still doing the bare minimum and treating this as a box-ticking exercise – simply trusting suppliers, not investigating spurious claims and not joining collective efforts to dig deeper.”
He added: “In particular, companies using gold and tungsten need to do more digging into their supply chains, weed out non-compliant smelters, and source more conflict-free minerals from Congo that can improve livelihoods on the ground.”
Last year, the European Parliament imposed tough new legislation that imposed mandatory due diligence checks on conflict mineral sources by companies operating in the European Union.
The fact that many organisations are still coming up short when it comes to gathering information on their suppliers once again demonstrates the value in having a robust supplier compliance programme. At the end of the day, the market will dictate the supply chain and if collective buyers take a stance on compliance it will trickle back to the mines and corrupt officials.
Companies should continue to conduct due diligence on their suppliers of conflict minerals. But this should not be limited to a simple questionnaire. Dig deeper and focus on the real owners, operators and their reputation.