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.
Posted in Auditing, conflict minerals, EHS, Governance, sustainability
Tagged audit, auditing, coltan, Conflict Minerals, Congo, corporate responsibility, csr, Dodd-Frank, DRC, OECD, SEC, Securities and Exchange Commission, supply chain, sustainability, tantalum, tin, tungsten, wolframite
See the press release here about SEC’s roundtable to be held in Washington DC on October 18, 2011. More information will be provided as it becomes available.
Posted in Auditing, conflict minerals, Governance, risk assessment, sustainability
Tagged audit, auditing, coltan, Conflict Minerals, Congo, corporate responsibility, csr, Dodd-Frank, DRC, gold, internal audit, OECD, SEC, Securities and Exchange Commission, supply chain, sustainability, tantalum, tin, tungsten, wolframite
Elm welcomes Michele Bruelhart as a guest blogger. Michele is the Global Traceability Manager with UL-STR in Burundi and attended the EICC-GeSI Workshop held in Brussels recently. She provided Elm with her perspective on the meeting, and regional progress on conflict minerals programs/infrastructure.
The challenges surrounding supply chain traceability of so called “conflict minerals” continue to be discussed in numerous fora in Europe and the US. Starting with roundtable consultations organized by the World Gold Council, the EICC-GeSI Group and the London Bullion Market Association (LBMA) held their conferences last week in Brussels which will be followed by the launch of a Public-Private Alliance for Responsible Minerals Trade in October and lastly a meeting of the OECD hosted working group on the implementation of the Due Diligence Guidance in November.
Broadly speaking, participants of these meetings appear divided into two groups: those contributing to discussions on the 3Ts (tin, tantalum and tungsten) and those trying to address the issues around gold. For the former, the EICC-GeSI Workshop provided an overview on the latest progress (or lack thereof) since their previous workshop in June of this year. Some of the main points from Brussels are summarized below:
- The EICC-GeSI reporting template for the downstream supply chain is publicly available and has been piloted by a number of companies. While the tool itself was found to be helpful, it does not address the main challenge faced by end-user companies, which are (1) how to reduce the complexity and number of suppliers standing between the end product and the smelter in their supply chains and (2) how to get responses from supplier, investing a reasonable amount of time and resources.
- The hours required to obtain a completed reporting template from all suppliers seem disproportionate to the information sought. Furthermore, the data provided by suppliers is not validated or verified externally. Lastly, the tool merely allows companies to gather information “backwards” for a finished product, rather than “forwards” (i.e., trying to prevent conflict minerals from entering the supply chain). By the time all the information is collected and compiled, the product will most likely have been sold already, whether smelters used for its production were “conflict-free” or not. Given these limitations, it is not clear if the template truly responds to the needs of companies that are required to report under Section 1502 of the Dodd Frank Act. [Ed. note – this process/timing gap may also create liabilities in the context of representations and warranties made about the nature or status of the material, which could be proven incorrect once all relevant information is available].
- Investing time and resources to gather information from suppliers regarding the smelters used in a company’s supply chain makes sense only if there is a sizeable list of conflict-free smelters that have been approved in the framework of the Conflict Free Smelter Program. So far, this list comprises six tantalum smelters. Assessment protocols for the other metals have been published this summer, though to date no smelters for tin and tungsten or refineries for gold have been approved as “conflict-free”. Despite the progress made in this program and the EICC-GeSI’s repeated assurances that it remains possible for smelters to source from the African Great Lakes region, the requirements defined for smelters to continue purchasing minerals from the Democratic Republic of Congo (DRC) or its neighbors provide a significant disincentive to do so. The assessment protocols list a number of conditions that must be fulfilled for minerals from the Great Lakes region. Among those figure full traceability for the shipment – something that has not been achieved yet for three of the DRC’s four affected provinces – and the implementation of the OECD Due Diligence Guidance. On the latter, it remains to be seen how this criteria should be implemented as the OECD is stressing that its Guidance should be understood as a process over time, whereas a mineral purchase is a punctual transaction. [Ed. note: As Elm previously reported, OECD has softened its stance on its Guidance. In addition, EICC CFS audits may not be completed in time for many companies to use them for purposes of fiscal year 2012 SEC compliance].
- In the region itself, progress has been quite significant. The DRC Government is about to make the implementation of the OECD Guidance a requirement for companies bearing administrative sanction, mine site inspections have taken place at over 30 mine sites in North Kivu and the Government expects to be ready to issue regional certificates for its minerals within the ICGLR framework by the end of 2011. ITRI’s tag-and-bag scheme is targeting 75% of the 3Ts from Katanga province to be tagged by the end of this year and the German federal institute BGR has validated 35 mines against its Certified Trading Chains Standard.
Nevertheless, some important issues were not addressed during the Brussels workshop:
- First and foremost, it remains unclear if the Congolese Government has the financial and human capacity to enforce the various rules and regulations that were passed over the last couple of months. In particular as the country is preparing for Presidential elections in November, no concrete plans for the enforcement of recently taken measures were presented, nor does the Government appear to take a clear leadership role in coordinating the various efforts on the ground.
- For the in-region tracing or certification schemes, the monitoring and evaluation process of participating companies is not fully transparent. In the case of the mine visits of the DRC Government, no information is provided on the standards applied to flag a specific mine green, orange or black or the qualifications of the mine inspectors. For BGR’s and ITRI’s certification and traceability schemes, the boundaries between baseline assessments, preparation of participating companies, third party verification and remediation are not clearly defined. The absence of clearly defined tasks may lead to potential conflicts of interest where verifiers could be consulting and auditing the same companies.
- The presentation of Gregory Mthembu-Salter of the United Nations Group of Experts (UN GoE) on the Democratic Republic of Congo painted a rather grim picture of the likelihood to see any of the above schemes being implemented in the Kivu provinces. The security situation in the Kivus renders the implementation of any traceability scheme difficult and the level of due diligence required from buyers in ensuring their purchases do not benefit armed groups appears to be prohibitively high.
- The highly unique aspects of the gold supply chain and its traceability remain unresolved. There are growing doubts that a viable framework applicable to gold will be available in the near future.
Despite these activities along the entire mineral supply chain there remains much to be done to establish credible systems of assurance in the African Great Lakes region that satisfy the needs of end user companies obliged to report on the origin of their raw materials.
Posted in Auditing, conflict minerals, Governance, risk management, sustainability
Tagged audit, auditing, coltan, Conflict Minerals, Congo, corporate responsibility, csr, Dodd-Frank, DRC, EICC, GeSI, gold, internal audit, OECD, risk assessment, SEC, Securities and Exchange Commission, STR, supply chain, sustainability, tantalum, tin, tungsten, UL, wolframite
Elm has released a demonstration version of its pioneering Self-Implemented Conflict Minerals Audit Preparation© tool, or SICMAP℠. The demo contains abridged content, but retains the functionality, pragmatic approach and simplicity of the full version.
“While we originally designed SICMAP℠ to assist companies in preparing for audits, we have seen an unexpected interest in use of the tool as a conflict minerals program development guide/framework”, said Lawrence Heim, Elm’s conflict minerals services leader. “The demo version was made available because of the increased demand and interest.”
To request a copy of the demo version, contact Lawrence Heim at firstname.lastname@example.org.
Posted in Auditing, conflict minerals, Risk, risk management, sustainability
Tagged audit, auditing, coltan, Conflict Minerals, Congo, corporate responsibility, csr, Dodd-Frank, DRC, internal audit, internal controls, OECD, SEC, Securities and Exchange Commission, supply chain, sustainability, tantalum, tin, tungsten, wolframite
IPC has announced a pilot study of the OECD due diligence guidance that will run until June 2012. Elm confirmed that this study is an OECD-lead study intended to help the OECD identify important changes to their document.
We recently wrote about views expressed by companies who tried to implement the Guidance earlier with little success. Another post dealt with the inconsistencies between the OECD Guidance and SEC standards for auditors and auditing engagements.
It appears that OECD has capitulated – essentially reverting the status of their “final” standard back to a draft. While that may be good news to some extent, critical questions arise about the uncertainty it creates in the content of SEC’s upcoming final regulations, as well as how the project timing will impact companies seeking to implement a program to meet 2012 or even 2013 reporting.
Posted in Auditing, conflict minerals, Governance, Risk, sustainability
Tagged audit, auditing, coltan, Conflict Minerals, Congo, corporate responsibility, Dodd-Frank, DRC, internal controls, OECD, risk assessment, SEC, Securities and Exchange Commission, supply chain, sustainability, tantalum, tin, tungsten, wolframite
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.
Posted in Auditing, conflict minerals, EHS, Governance, HSE, Risk, risk management, sustainability
Tagged audit, coltan, compliance management, Conflict Minerals, Congo, corporate responsibility, Dodd-Frank, DRC, environmental compliance, gold, HSE, internal controls, OECD, SEC, Securities and Exchange Commission, supply chain, sustainability, tantalum, tin, traceability, tungsten, wolframite
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.
Posted in Auditing, conflict minerals, EHS, Environment, Governance, HSE, sustainability
Tagged audit, California, coltan, Conflict Minerals, Congo, Dodd-Frank, Environment, environmental, internal audit, internal controls, OECD, risk management, SB657, SEC, Securities and Exchange Commission, supply chain, sustainability, tantalum, tin, traceability, tungsten, wolframite