As we approach the end of conflict minerals compliance year 4
(with 3 years of reports behind us), companies are budgeting for
how they will address conflict minerals in 2017. Since the SEC rule
took effect, supply chain professionals and in-house lawyers have
found that compliance is complicated, time-consuming, and still
changing because of the increasing expectations of non-governmental
organizations and other stakeholders. Companies are eager to find a
compliance solution that will take less time and fewer resources.
The "bad news" is that, although IT and software
solutions can be an invaluable tool and provide great value,
companies cannot expect to comply with the SEC rule's
requirements solely by entering into a relationship with a strong
To be sure, software and IT solutions can provide invaluable
assistance to companies as they implement and improve their
conflict minerals programs. But, there are many important elements
of conflict minerals compliance and reporting that are simply not
addressed even by the best IT or software systems. You will want to
make sure that your board and senior management understand that
signing the contract with a software provider is the start (and not
the end) of your compliance work. They may need to understand that
your budget contemplates additional resources to complete your
annual reasonable country of origin inquiry, due diligence, and
reporting. And, it would be wise to continue to include room in
your budget for auditors and legal advisors. (We won't discuss
the independent private sector audit (IPSA) here, but there has
been no change since last year and no additional guidance on IPSAs
from the SEC.)
IT and software can make supplier outreach and questionnaire
efforts more efficient and can help to minimize supplier fatigue.
They can also help with other crucial activities such as:
mining of product recipes, bills of
material, and material data safety sheets
supplier engagement (training and
education, automated follow up, determination of country of origin,
identification of smelters/refiners)
noting gaps and red flags in supplier
development of audit trail
vetting, verifying, and listing of
smelter/refiners and determining DRC conflict-free status based on
recognized certification programs
But, there are other important elements of conflict minerals
compliance and due diligence that are not addressed by IT or
software solutions alone. These elements include:
development and implementation of
consideration of potential countries
of origin, which has significant implications for reporting
analyzing important details behind
certain data summarized by the software provider
considering important stakeholder
input (investors, customers, NGOs, activists)
identifying and addressing possible
risks associated with disclosure
addressing the elements of the OECD
Due Diligence Guidelines not covered by supplier engagement and
smelter/refiner identification and vetting
protecting proprietary product
information and know-how
monitoring changes in compliance
requirements, guidance and industry norms
As the number of suppliers and scope of due diligence grow, more
companies are turning to IT and software solutions to help them
with large portions of their supplier outreach, smelter/refiner
vetting, responses to customers, and creation of audit trail. But,
there are many elements of conflict minerals compliance that cannot
be effectively addressed by a software platform. It is important to
remember that additional resources will continue to be needed to
meet the conflict minerals compliance requirements arising out of
the SEC rule (and the EU regulation when it is finally rolled
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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