In 2012, the U.S. Securities and Exchange Commission issued its final rule to implement the conflict minerals supply-chain requirements set forth in the Dodd-Frank Act Section 1502, a law designed to discourage companies from doing business in ways that ultimately support exploitation and conflict in the Democratic Republic of Congo and adjoining countries.
DFA Section 1502 requires publicly listed companies to disclose the source of any tantalum, tin, tungsten and gold, the four conflict minerals, that are used in their products or operations. They also must identify the degree to which they have visibility over their supply chains and the specific due diligence actions carried out for supply-chain transparency.
As the first reporting deadline of May 31, approaches, many in the automotive industry are struggling to understand the regulation and its requirements for due diligence and public reporting to the SEC.
One way companies can simplify the compliance process and gather a greater understanding of the DFA requirements is to reach out to a reputable third-party auditor with expertise in conflict minerals and experience in supply-chain auditing.
DFA Section 1502 will have a direct effect on a wide range of industries, including aerospace, electronics, industrial production, jewelry, medical devices and more.
The automotive industry will be directly impacted, as there are various vehicle components that regularly contain conflict minerals.
These components include radiators, fuel tanks, batteries, brake pads and most electronic appliances. In the automotive industry, all four minerals are of concern, as all are necessary to the functionality or production of auto parts.
Automakers are expecting suppliers to provide detailed and accurate information on the source of their conflict minerals and their own due-diligence actions. While only publicly listed firms fall under the scope of DFA Section 1502, the new conflict minerals law affects the entire automotive supply chain, as automakers turn to their suppliers for information and place new demands related to conflict minerals.
We are witnessing a surge of pressure on automotive suppliers to comply with the regulation and suppliers who manufacture with conflict minerals would do well to engage early.
They can learn the basics by reviewing the “OECD Due Diligence Guidance On Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas,” the foundation of all conflict minerals due-diligence systems.
By reaching out to full-service third-party providers of conflict minerals auditing and consultation, both small suppliers and large automakers can simplify and accelerate their compliance process while also adding value. In addition to standard supply-chain auditing, the leading third-party providers offer conflict-minerals training, due-diligence assessments and accredited certifications.
Companies don’t have to go it alone. Recruiting a third party can be an optimal choice – especially for those companies who are late to the process.
Although the new conflict minerals law can be complex and even burdensome, it is important to note that those who approach these new requirements strategically, seizing the opportunity to enhance logistics, find efficiencies and strengthen processes for transparency and responsible sourcing will have an advantage moving forward.
Supply-chain transparency and responsible sourcing are concerns that only will gain more traction. Those who position themselves ahead of the curve today will have a tangible advantage tomorrow.
Lucas Lopez-Videla is a marketing specialist at Bureau Veritas. Born in Rio de Janeiro, Lucas has a background in business management, social and environmental sustainability and public policy. He holds a BA in International Studies from the University of St. Thomas and an MBA from Fordham University.