Category Archives: EHS

Elm Summary, Analysis of OECD Conflict Minerals Pilot Study Report for Downstream Companies

Ahead of this week’s meeting in Paris, the Organisation for Economic Development and Cooperation (OECD) published its Baseline Reports on the pilot project for the implementation of the Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas, Supplement on Tin, Tantalum, and Tungsten.

Two separate reports were published, one for upstream companies (from the mine to the smelter) and another for downstream companies (from the smelter to the final product).

Click here to download our summary and analysis of the baseline report for downstream companies.

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Added Heat Causes Conflict Minerals Reaction

We admit that the majority of articles about conflict minerals are not particularly exciting reading – including our own.

A recent exchange in the Forbes blog is different.  While we take no position on the facts or opinions presented by either party, we do find this repartee far more interesting reading than we are accustomed to seeing on the topic.

Read the first piece here, the initial response here and the third installment here.  Will there be more?  We can only guess.

Leading EHS Audit Organizations Comment to SEC on Conflict Minerals Regulations

Prior to the November 1 closing of the reopened public comment period on SEC’s proposed conflict minerals regulations, several companies and individuals filed new or updated comments.  Among the commenters are two organizations serving environmental, health and safety auditing practitioners.

The comments support (a) the use of Performance Audits as an appropriate audit standard for the Conflict Minerals Reports under SEC, and (b) appropriate auditor expertise and certification beyond ISO19011 for various audits within a conflict minerals management system.

The Auditing Roundtable is a professional organization dedicated to the development and professional practice of environmental, health, and safety (EHS) auditing.  Founded in 1982, the Roundtable represents the voice of the profession with more than 800 members.  The Roundtable’s comments can be read here.

The Board of Environmental Auditor Certification (BEAC) is an independent, nonprofit corporation established in 1997 to issue professional certifications relating to environmental, health, and safety auditing and other scientific fields. BEAC was originally created as a joint venture between the Institute of Internal Auditors (IIA) and The Auditing Roundtable.  BEAC is a member of the Council of Engineering and Scientific Specialty Boards (CESB), a third-party accreditation board, and is recognized by the American Chemistry Council (ACC); the American Industrial Hygiene Association (AIHA); the American Society of Safety Engineers (ASSE); the Auditing Association of Canada (AAC) ; the Global Reporting Initiative (GRI); and the National Organization for Competency Assurance (NOCA).  BEAC’s comments can be read here.

 

EHS Journal Article on Sustainability, Financial Valuation

Recently, Elm posted a piece discussing comments from Kevin Parker, the CEO of Deutsche Asset Management, an investment firm with three-fourths of US$1 trillion under management.

We expanded that original post for EHS Journal, who just published it.  The expanded version dives deeper into trends in the past decade supporting Parker’s assessment of why capital markets are bullish on carbon-intensive investment opportunities even in light of this era of sustainability.

View the article in its entirety here.

An Inconvenient Reality For Environmental/Sustainability Professionals?

For years, those of us in the environmental/sustainability profession have sought credible ways and metrics for quantifying the economic value of our efforts, activities and programs.  A myriad of studies completed dating back to the late 1980s attempt to demonstrate “environmental value”.  Most of these studies have shown rather tenuous linkages or used meaningless metrics.

Interestingly, most of these studies link to equity markets – i.e., stock prices.  Maybe because stock prices grab headlines, are tied to compensation or are the target to which Boards and senior executive generally manage.

The problem is that environmental/sustainability matters don’t fit into this model, either because they tend not to be financially material, or they don’t develop economic certainty within the “current quarter” myopia of corporate management, financial markets and analysts.

A recent article on the topic was published in The International News.  The article includes an interview with Kevin Parker, CEO of Deutsche Asset Management (DeAM) on the subject of how capital markets currently view environmental/sustainability risks.  DeAM manages over US$775 billion in assets.

With simplicity, clarity and unquestionable credibility from the financial market viewpoint, Parker made key points in the article and interview:

  • Bond markets are poised to punish polluting companies in the aftermath of the Macondo oil spill and Fukushima nuclear crisis.
  • “The process of re-pricing carbon and environmental risk has begun, because these two events were catastrophic.”
  • By contrast, shorter-term equity and commodity markets have continued to chase high-carbon opportunities, including voracious emerging market demand for coal.
  • But investors in longer-term debt including bonds will increasingly avoid unsustainable companies … an inexorable trend that will push up their borrowing costs.
  • “What this boils down to be risk in capital markets, and capital markets know how to price risk once they understand it.”

Pension investment managers realized this years ago since they emphasize stability and a long-term investment horizon.

But there seems to be far less recognition of this by environmental/sustainability practitioners, as the amount of studies, white papers and pseudo-financial metrics is mounting, with continued emphasis on the equities side of capital markets.  Perhaps the driving forces for this are general economic pressures facing companies are pushing staff to find ways to justify their existence and cost, consultants are trying to come up with that elusive short-term ROI metric for the cost of their services to clients and much of the HSE/sustainability media are vying for limited attention on the part of their readership.

Given Parker’s comments – and the lackluster historical success of valuation of environmental/sustainability matters in the context of stock prices – perhaps it is time to redirect our efforts at finding relevant and credible metrics.

In limited circumstances, financial value of environmental/sustainability initiatives can manifest in material and short-term impacts.  Those instances give practitioners hope of riding those coattails.  But generally, the reality is a little inconvenient.

US State Department Issues Conflict Minerals Traceability Statement

Last Friday, the US State Department issued its statement on conflict minerals supply chain traceability.  Section 1502 of the Dodd-Frank Act requires that the State Department – in parallel with the SEC – provide guidance on due diligence activities to companies.

The Department stated that

… it is critical that companies begin now to perform meaningful due diligence with respect to conflict minerals. To this end, companies should begin immediately to structure their supply chain relationships in a responsible and productive manner to encourage legitimate, conflict-free trade, including conflict-free minerals sourced from the DRC and the Great Lakes region. Doing so will facilitate useful disclosures under Section 1502, as well as effective responses to any discovery of benefit to armed groups.

The Department specifically endorses the guidance issued by the Organization for Economic Cooperation and Development (OECD) and encourages companies to draw upon this guidance as they establish their due diligence practices. We encourage companies, whether or not they are subject to the Section 1502 disclosure requirement, that are within the supply chain of these minerals to exercise due diligence based on the OECD guidance and framework as a means of responding to requests from subject suppliers and customers.

Companies should no longer be in a “wait and see” mode.  Basic planning, assessment and program development can – and should – begin now.

If nothing more, companies should evaluate whether the OECD Guidance is the appropriate reference point.  As we pointed out in an earlier post, that guidance contains a number of pitfalls and auditor impairments that may deter its use by many companies.

Revision to SICMAP℠ Tool for Conflict Minerals, OECD Incorporates California Supply Chain Law

The Elm Consulting Group International LLC has released a new revision to the Self Implemented Conflict Minerals Audit Preparation Tool.  The update, Revision 1.33, incorporates

  • Minor changes in response to feedback obtained from the late June EICC Extractives Supply Chain Workshop VI in Washington DC;
  • Further clarifications on the OECD framework, its relationship to SICMAP℠  and SEC auditor standards; and
  • Related elements of California Transparency in Supply Chains Act of 2010.

Lawrence M. Heim, CPEA, is leading the firm’s conflict minerals services and SICMAP℠ development:

In our discussions with various companies and workshop attendees, we obtained feedback on a few minor changes and clarifications to improve the tool.  In addition, we decided to incorporate the new California law as there are many similarities between those mandates and the conflict minerals requirements.

The video introduction and overview of SICMAP℠ can be viewed here.