As SEC reporting companies finalize their conflict minerals disclosures each year, they typically review the Form SD requirement that calls for a description of any steps taken or to be taken to improve their conflict minerals due diligence. This required disclosure is typically provided in sections called “Actions Taken and to be Taken to Improve Due Diligence” and “Continuous Improvement” and the like. Since there is time for reporting companies to consider and implement improvement actions for calendar year 2022, now is a perfect time to review the most recent filings to survey improvement actions included in the reports for calendar year 2021. This is especially true because, in this current regulatory climate, the conflict minerals disclosure requirements and their enforcement are not likely to be reduced.
We undertook a review of the filings by the 207 companies that were included in the Responsible Sourcing Network’s Mining the Disclosures report for 2019 (“2019 Report”), which is the most recent investor guide of SEC conflict minerals due diligence reporting. The preparers of the 2019 Report viewed them as “leading companies” in the various industries covered. The industries listed below were covered by the 2019 Report and they were included in our survey of actions being taken to improve conflict minerals due diligence. They are listed here in the order presented in the 2019 Report. The number indicated beside each industry is the number of the companies in such industry covered in the 2019 Report.
Some of the surveyed companies did not file Form SDs for calendar year 2021, some did not file conflict minerals reports, and some did not include responses to this specific improvement actions requirement. But, those that did provided an array of actions. Some are actions that certain reporting companies have been taking since 2014. Some actions show ongoing development of systems and processes over time. Some actions are very far-reaching and indicate a significant investment relating to upstream suppliers and smelters and refiners.
Below is a summary of the types of actions and steps that the companies that were included in the 2019 Report listed in their filings for reporting year 2021. In some cases, we combined or revised certain of the actions. In some cases, we anonymized certain specifics in the actions to be more generally applicable.
Review and update conflict minerals policy annually
Re-distribute conflict minerals policy to suppliers annually
Engage with and assist suppliers to increase and improve responses
Conduct on-site visits to assess sourcing procedures of high-risk suppliers
Direct suppliers to Responsible Minerals Initiative (RMI) eLearning curriculum
Direct suppliers to information and training resources
Present training webinar for low quality responders or first time reporters
Have direct engagement meetings with top 10 suppliers
Host in-person or virtual training sessions for suppliers
Encourage suppliers to put a conflict minerals policy in place or improve their existing conflict minerals policies
Encourage suppliers to communicate their conflict minerals policies
Review suppliers’ conflict minerals policies annually
Request improved quality of responses
Make conflict minerals reporting a contract requirement
Include conflict minerals compliance in purchase orders or terms and conditions
Require product-level responses to conflict minerals reporting template
Request suppliers report immediately upon determining that smelters and refiners (SORs) that are not conformant
Determine root cause of changes or reductions in responses
Provide FAQs to suppliers on conflict minerals compliance
Work with suppliers that are found to be providing components or materials containing conflict minerals from sources that support conflict in the Covered Countries to establish alternative sources
Encourage non-responsive suppliers or suppliers that source from non-conformant SORs to develop corrective action plans
Continue to analyze spend data against supplier response data to identify inconsistencies and areas of potential enhanced focus for supplier outreach efforts
Continue publishing regularly updated factory lists to company website
Provide downloadable traceability disclosure on company website disclosing direct and indirect suppliers
Use third-party software for data gathering and document retention
Share diligence results with conflict minerals steering committee or working group
Use commodity managers to reach out to non-responsive suppliers
Review suppliers for “red flags” indicating that they are high-risk
Require that new suppliers agree to conflict minerals policy during on-boarding process
Improve supplier communication program by involving purchasing department
Monitor legislative developments regarding responsible conflict minerals sourcing
Make additional investments in conflict minerals due diligence tools
Monitor best practices of peer companies
Institutionalize conflict minerals compliance program by memorializing and improving standard operating procedures
Improve reporting process by documenting responsibilities and timeline for due diligence and reporting
Enhance the ability to identify conflict minerals in raw materials that are new to the business
Analyze new products to determine content of conflict minerals
Work with a third-party consultant to review key in-scope suppliers and consider possible additional due diligence procedures
Expand scope of engagement with consultants
Use specialist outside counsel to assist with reasonable country of origin inquiry (RCOI) and due diligence
Assure that documentation is centrally collected, maintained and retained
Continue supplier consolidation efforts to reduce the number of suppliers to streamline due diligence
Monitor suppliers’ compliance with conflict minerals requirements
Include conflict minerals response as performance indicator
Use supplier scorecard with conflict minerals elements
Work with suppliers to avoid de facto boycott of legitimate minerals from Covered Countries and conflict-affected and high-risk areas (CAHRAs)
Use RMI’s Mineral Grievance Platform
Monitor progress of suppliers with high-risk SORs
Require suppliers to remove high-risk SORs within 2 reporting cycles or face termination of supplier relationship
Refine and improve escalation process to ensure timely remediation
Cancel a non-responsive or non-cooperative supplier’s contract or implement a phased-in termination of the business relationship by stopping new orders
Accelerate escalation of identified “SORs of Interest” that are not Responsible Minerals Assurance Process (RMAP) conformant
Adopt corrective actions that vary based on factors such as supplier size, risk level, supplier capabilities and the company’s ability to meet quality control requirements associated with customer specifications
Annually assess the effectiveness of risk mitigation plan
Actions relating to Smelters and Refiners
Direct all suppliers’ SORs to participate in RMI, London Bullion Market Association (LBMA), or Responsible Jewellery Council (RJC) third-party audit program
Provide SORs direct assistance with their RMPA process
Encourage new SORs to become conformant
Actively monitor “active” status SORs and take action if conformant status not obtained timely
Contact SORs directly if status changes from conformant
Eliminate non-conformant SORs before products introduced into market
Make direct inquiries to SORs not identified in RMI RCOI data
Increase focus on activities upstream of SORs to gain better visibility as to the location and the conditions at the location where conflict minerals are sourced
Provide internal training to help improve engagement with suppliers that report high-risk smelters (especially to address the high-risk smelters subject to Ukraine related sanctions action)
Further analyze and monitor the impact that the conflict in Ukraine may have on the company’s SORs
Scan for credible media on each SOR to flag risk issues
Compare the list of SORs against government watch and denied parties lists
Continue to work with our in-scope suppliers to remove SORs from supply chain that experience a change in their RMAP status
As travel restrictions are lifted, continue visiting SORs and mine sites to better understand issues SORs face in the compliance process
Actively participate in and lead various RMI programs and working groups
Continue membership and participation in RMI through monthly membership and semi-monthly workgroup meetings and collaborate with other industry groups and peer companies
Continue to participate in RMI’s plenary and due diligence practices team calls
Contribute to RMI’s Audit Fund
Participate in RMI Smelter Engagement Team
Participate in Organization for Economic Cooperation and Development (OECD) partner forums
Continue membership in Responsible Business Alliance (RBA)
Utilize the RBAs Validated Audit Process for third party on-site supplier audits
Participate in industry group smelter engagement team
Work with relevant industry groups
Become a member of European Partnership for Responsible Minerals (EPRM)
Fund a mine monitoring program
Develop traceability tools to obtain and share mine-level data
Partner with organizations to support mining communities
Contribute to chain of custody tools that have been developed
Collaborate with industry to create blockchain tool to enable transparency and responsible sourcing performance
Build on prior blockchain project in certain countries
Maintain ongoing participation in the International Conference on the Great Lakes Region (ICGLR) Audit Committee
Fund women empowerment programs in target countries
Fund programs on artisanal mining programs
Engage with other companies in same industry and evaluate opportunities to enhance the conflict minerals program
Implement industry-tailored model supplier code of conduct
Conflict-Affected and High-Risk Areas (CAHRAs)
Expand program to expect responsible conflict minerals sourcing from all CAHRAs
Identify CAHRAs in company supply chains
Expand programs to undertake due diligence on additional minerals (cobalt, mica and others)
Support development of RMI’s Minerals Agnostic Standard and Pilot Reporting Template (PRT) to collect data on all minerals
Dynda Thomas has extensive experience in the areas of mergers and acquisitions and project finance. She has had principal responsibility for numerous mergers, acquisitions and dispositions for public and private companies in a wide range of sell-side and buy-side auctions and negotiated transactions.
As leader of the Squire Patton Boggs’ conflict minerals team, Dynda focuses on relevant industries’ best practices in working with clients’ legal, procurement and compliance groups. She advises on developing and reviewing procurement policies,...
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