MetalMiner welcomes a guest viewpoints on conflict minerals compliance from Brad Brooks-Rubin, Of Counsel at Holland & Hart LLP.
In the first couple posts of this series (Part One and Part Two), we established the dilemma facing companies as they consider compliance with section 1502 of the Dodd-Frank Act/the SEC’s conflict minerals rule (and, it should be said, possible future EU regulations): direct your suppliers to ensure none of the relevant minerals come from the Democratic Republic of the Congo (DRC) or the Great Lakes Region and likely make reporting to the SEC easier; but in so doing, undermine the ultimate purpose of the law and face likely scrutiny for abandoning the region.
So, as the Clash asked in their classic song, should a company stay or should it go? Although some companies are reportedly being advised to go and err on the side of being “Congo-free,” my view is that companies must explore and understand their options for staying and remaining engaged in the region, even if it impacts their initial SEC reporting.
How can companies do this? Here are a few ideas.
1. Engage directly with various in-region sourcing systems and then put in orders for conflict-free material to generate demand for this material.
The most direct way to ensure your supply chain contains “conflict-free” material that comes from the DRC/Great Lakes Region is to demand minerals sourced from one of several efforts underway to promote “in-region” sourcing. These initiatives vary in scope and structure, but each offers the opportunity to source minerals through “closed pipe” and other types of mechanisms that include ongoing monitoring.
In order to sustain and potentially expand their reach (estimates indicate that about 8-10% of mining sites in eastern Congo are verified as conflict-free; though the number seems low, this in itself is quite a remarkable achievement), these schemes need more active participation from downstream companies, including directing suppliers to source directly from them. These systems include: the iTSCi scheme; Solutions for Hope supply chain, and the Conflict-Free Tin Initiative. In due course, grantees of the Public-Private Alliance for Responsible Minerals Trade will also have pilot supply chain efforts underway.
2. Push particularly on those suppliers within the supply chain that are purchasing from smelters to join the conflict-free smelter program and similar efforts; give them a window after which purchases may cease if they are not in the program.
One of the most positive developments to emerge in the response to the conflict minerals concerns is the improved due diligence conducted by the “chokepoints” in the supply chains of the relevant minerals. Through improved procedures used by smelters and refiners, downstream companies can purchase metals with greater confidence that the processors have ensured that the inputs are conflict-free. If your suppliers are not sourcing through processors participating in the Conflict-Free Smelter program, London Bullion Market Association, and the Responsible Jewellery Council, tell them it is time to do so, or you may be forced to look elsewhere.
More ideas, including how to leverage trade associations, laid out in the conclusion. If you’re a manufacturer needing to comply, tell us what you think – leave a comment below!
Editors’ note: The viewpoints, perspectives and/or opinions of guest contributors do not necessarily reflect those of MetalMiner, its sponsors, clients or partners. Contact the author directly here.