Statistical Data Analysis

DRC: Demystifying the Conflict Minerals - The 3Ts and Gold Mystery

Conflict minerals - Tin, Tungsten, Tantalum and Gold have been a bone of contention between the government and organizations for years in the Democratic Republic of Congo (DRC). This is because of extensive violations of human rights and the conditions under which these minerals are extracted from DRC and its neighboring nine countries and passed, via middlemen, to companies across the globe.

DRC is a country of irony. Even though its citizens are among the poorest in world, DRC is widely considered to be the richest country in the world regarding natural resources; its untapped deposits of raw minerals are estimated to be worth in excess of US$ 24 trillion. The DRC has more than 30% of the world's diamond reserves and 70% of the world's coltan. Owing to its abundance in natural resources, DRC has often been targeted by local rebel groups and even neighboring countries like Rwanda, Uganda and Burundi during the first and second Congo wars.

This has led to ‘section 1502’ in the Dodd-Frank Act. The Act’s intent is to try and curb the violence and exploitation in DRC and neighboring nine countries by exposing companies that use minerals derived from this region through disclosure and public pressure. The latest in the Dodd-Frank Act is that public companies will have to comply with the SEC’s conflict minerals rule filing, for the first time by May 31, 2014.

As per the July study conducted by PWC “Conflict minerals survey: How companies are preparing”, it is estimated that 6000 SEC issuers will have to provide new disclosures under the rule. Approximately 275,000 private companies that are part of the issuers’ supply chains will also be affected.

 The report also states that nearly 900 executives surveyed are still in the initial stages of their compliance efforts, while 16% have not yet begun gathering information, and 32% are still determining if the rule even applies to them.

The single most challenging task for the companies is getting accurate and complete information from their suppliers.

How can organizations meet the new regulation?

Large organizations have supply chains spread across the globe, making it complex and difficult to comply with the conflict minerals rule. Collecting accurate and complete information from tiers of suppliers is a daunting task.

Organizations need to devise a company-wide policy to establish a conflict free supply chain. Devising this policy will require thorough analysis of the supply chain. The same should be widely communicated internally and externally to the suppliers and the stakeholders.

The PWC survey highlights that approximately 47% of the surveyed companies plan to gather conflict minerals rule-related information from the suppliers through survey. Supplier management technology can help organizations carry out surveys among tiers of suppliers to gather relevant information. Additionally, organizations can ask their direct suppliers to carry out the survey with their sub suppliers. This ensures information from across the supply chain is collected by the organization. 

The level of transparency demanded by the act requires organization to leverage technology for relevant results in lesser time. Organizations should also carry out on-site audits at the supplier/sub supplier factories after conducting the initial survey for better accuracy of the information provided by the supplier.

Being responsible corporates, organizations should ensure compliance to the conflict minerals regulation, even though it is too strenuous an activity.

 

Roshnee Mistry, Strategic and Content Marketing, Zycus

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Roshnee Mistry

Roshnee Mistry, Strategic and Content Marketing, Zycus

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