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Snapshot of Conflict Minerals

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CAPS Research

March 2012, Inside Supply Management^® Vol. 23, No. 2, page 34

CAPS Research: Promoting Supply Management's Best Practices
Despite growing concerns about the source and mining of conflict minerals, many organizations lack the policy and reporting structures to track these materials.

CAPS Research conducted a SnapShots Benchmarking Survey that asked various supply management organizations how they are addressing the legislation regarding conflict minerals.

In 2010, the U.S. Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Section 1502 of this legislation requires manufacturers regulated by the U.S. Securities and Exchange Commission (SEC) to submit an annual report if their products contain metals derived from specified conflict minerals commonly mined in the Democratic Republic of the Congo (DRC) and surrounding countries. Mines in the region are controlled by militia groups that derive their funding from the sale of conflict minerals.

The intent behind Section 1502 is to reduce violence in the DRC and its neighboring areas by decreasing the demand for minerals from these mines and, subsequently, reducing or stopping the funding of the armed groups that are linked to human rights violations and conflicts.

The most common conflict minerals, identified as tin (cassiterite), tantalum (columbite), tungsten (wolframite) and gold, pass through multiple intermediaries and layers of the supply chain. Eventually, they find their way into a wide variety of products, including mobile pho

nes, digital cameras, laptops, hearing aids, automotive parts, turbine blades, golf clubs, drill bits, jewelry and dental products.

Survey Findings

After an initial screening question that asked whether conflict minerals are "necessary to the functionality or production of your company's products," the survey asked the following six questions to get an idea of where companies stand in their efforts to address Section 1502 of the Dodd-Frank Act. Industries represented by the companies impacted by the legislation include: aerospace and defense, chemical manufacturing, electrical equipment/products manufacturing, electronics manufacturing, environmental services and equipment, healthcare products, industrial manufacturing, metals and mining, and semiconductor manufacturing.

Does your company have policies/procedures in place regarding the identification of conflict minerals used in your company's products, or used in the manufacturing process? Only 22 percent of survey participants reported they have policies/procedures in place. Of the companies without policies/procedures, 90 percent reported they expect to have those in place within the next 12 months.

Has your company developed (or implemented) a supply chain mapping program to determine the source of minerals classified as conflict minerals? Not surprisingly, only 13 percent of companies reported their organization has developed or implemented a supply chain mapping program. Of that group, only one company reported it can trace the source of these minerals to individual smelters or mines.

Has your company asked suppliers for country of origin and chain of custody documentation for minerals defined as conflict minerals? About 22 percent of the survey population reported asking suppliers for this information. All of the survey participants who reported their organizations are capable of determining the source of conflict minerals also reported that they have asked their suppliers for this information.

A small number of the survey population (approximately 9 percent) reported asking suppliers for this information despite lacking a supply chain mapping program to track the source of conflict minerals.

Has your company conducted audits of its suppliers that provide minerals defined as conflict minerals to determine the origin and chain of custody of these minerals? Only one survey participant reported having audited suppliers to determine the source and chain of custody of conflict minerals. However, approximately 60 percent of the survey population reported their intention to conduct supplier audits in the next 12 months to attain that information.

Have your sourcing strategies changed, or will your sourcing strategies change to ensure that your company's products and/or manufacturing processes can (or will) be certified conflict-free? Only 9 percent of companies reported that their sourcing strategies have changed to ensure their products and/or manufacturing processes can be certified conflict-free. About 61 percent report that their strategies will change. Surprisingly, 22 percent report that their sourcing strategies will not change. A small group (9 percent) indicated this was not applicable to their organizations.

Within your company, which function has (or will have) primary responsibility for tracing the origin/sources of conflict minerals? Answer options given to survey participants were: supply management, finance, operations or other functions. More than three-fourths of the survey population reported their supply management group has or will have this responsibility. It's not surprising that some participants (13 percent) reported they were unsure which department would have primary responsibility for this task. Nine percent reported operations currently has primary responsibility, and none of the survey participants reported their finance group has this primary responsibility.

For questions about this survey and other benchmarking activities, please email the benchmarking team at metrics@capsresearch.org. SnapShots Benchmarking Surveys are short surveys of about five questions on topics of general interest. The brevity of the SnapShots questions allows a quick turnaround from survey to final report.

This column contains findings from the 2011 CAPS Research SnapShots Benchmarking Survey Conflict Minerals Reporting Requirements.

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For more information, send an e-mail to author@ism.ws.

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