RSN BLOG

Wednesday
Apr162014

SEC Conflict Minerals Rule Upheld By Circuit Court - With One Disappointing Exception 

Yesterday, the D.C. Circuit Court issued an opinion upholding the integrity of the SEC conflict minerals rule in the case of National Association of Manufacturers v. SEC. Sustainable and responsible Investors (SRIs) largely applaud the ruling, commending the Court’s preservation of the vast majority of the conflict minerals reporting rule. A group of SRIs led by Responsible Sourcing Network voiced concern about the Court striking down one key element of the reporting requirements, which may have broader implications for shareholders.

This ruling mostly preserves the content of the final SEC rule pertaining to Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, with the exception of one noteworthy reversal. The Circuit Court held that the rule’s obligation to report products using a ‘conflict-free’ designation violates First Amendment protections against “compelled speech”. In effect, the Court is saying that it would infringe on a company’s civil liberties to force them to communicate about human rights abuses existing/not existing in their supply chains.

This aspect of the ruling does not bode well for business transparency advocates. If this ruling were broadly interpreted, it would turn mandatory business disclosures that are important to consumers and investors into First Amendment violations. Failing to disclose products as ‘conflict-free’ or ‘not conflict-free’ keeps information from consumers and investors that is vital to supporting responsible consumption and investment decisions.

Sustainable and responsible investors commend the Court for maintaining all other material components of the law and reinforcing the authority of the SEC in the matter. In the statement, investors reiterate that their expectations for companies remain unchanged and urge companies to continue with original compliance efforts by submitting all necessary reporting forms to the SEC by May 31, 2014.

Investors have long made clear that they want companies to avoid risk by implementing robust supply chain reporting. The court’s ruling broadly recognized that fact, but we believe the court was mistaken in striking down the product designation requirement. As investors and concerned parties, we believe companies should continue to push forward with the most robust reporting possible.

Tuesday
Apr082014

Proposed EU Conflict Minerals Legislation Fails to Meet Human Rights Expectations

On March 4th, after much anticipation, the European Union Commission proposed regulation for responsible minerals trading from conflict zones. While the EU deserves praise for taking definitive action on the issue, the recommended regulation has left campaigners and stakeholders underwhelmed. Advocates and experts say that without significant improvements, the regulation could fail to curb the human rights abuses it was designed to address.

The regulation would create a voluntary due diligence self-certification scheme for EU importers of tin, tantalum, tungsten and gold (3TG), in line with the OECD Due Diligence Guidance for importers of 3TG processed metals and unprocessed ores into EU countries. If implemented, this regulation would establish an opt-in ‘responsible importer’ certification system for importers of raw ore and metals who voluntary comply with the process. The proposal outlines a number of incentives to encourage self-certification, including increased access to public procurement contracts.

Despite these incentives, advocates say that a voluntary system that is not legally binding will fail to conclusively prevent the import of conflict minerals into EU countries. According to Judith Sargentini, the Green MEP and European parliament rapporteur on the file,

“Four years after Dodd-Frank, the European commission is presenting us with a neatly gift-wrapped, empty box that will not help the Congolese people set up a sustainable mining industry, does not demand transparent trading by European companies, and leaves them instead to obey an unbalanced piece of American legislation.”

NGO stakeholders have voiced dissatisfaction with the limited scope of the regulation. In contrast to the U.S.’s Dodd-Frank 1502 conflict minerals provision, the EU regulation omits key downstream players by focusing only on importers of raw ores and metals rather than manufacturers and companies that import finished products. In addition, the regulation suggests due diligence certification for only the 3TG supply chain, which excludes other minerals traded in a variety of conflict areas.

The EU proposed regulation, accompanied by a detailed ‘communication’, also fails to satisfy a request by companies to clearly define the criteria for identifying regions as “conflict-affected and high-risk.” The proposal similarly ignored repeated calls to action by both civil society groups and the EU Parliament who recommended firm and explicit requirements for companies to undertake risk-based supply chain due diligence.

The proposed regulation is not expected to be voted on by EU Parliament until later this year, which provides opportunity for stakeholder input and advocacy. The Responsible Sourcing Network plans to coordinate consensus edits to the draft with its MSG Policy Working Group. The aim is to have the EU legislation and Dodd-Frank 1502 harmonized so together they will definitively end the trade of conflict minerals from the Great Lakes Region near eastern Congo.

Thursday
Mar132014

Advancing Human Rights through Tech & Innovation at RightsCon

RSN Research Manager Karen Runde, second from left, speaks at RightsCon Silicon Valley Conference in San Francisco on March 4th, 2014

RSN Research Manager Karen Runde was invited to speak on a panel last week to discuss Supply Chain Transparency and Technology at this year’s RightsCon Silicon Valley Conference held at the Mission Bay Conference Center in San Francisco. RightsCon brings together thought leaders and emerging voices to host strategy and implementation sessions that provide opportunities to showcase new strategies and initiatives around five working themes:

  • Measuring and preventing risk in the ICT sector
  • Tech solutions for human rights challenges
  • Innovations in digital rights
  • Internet governance reform
  • Restoring rights in the age of surveillance

In addition to Karen, the other speakers on the panel were an interesting mix of experts from various organizations. Moderated by Rebecca Busse, Senior Manager of Stakeholder Engagement for Future500, the panel included Marina Colby, Senior Advisor on Trafficking in Persons at USAID’s Center of Excellence on Democracy, Human Rights, and Governance, Tom Rausch, Co-founder and Product Manager for Labor Link at Good World Solutions, and Steven Price, Program Manager at the Forest Trust.

With the pervasive environmental, social, and economic impacts of global supply chains and with an interconnected global economy, the panelists discussed challenges and effective solutions to bringing transparency into supply chains. The need to find solutions that are scalable is more necessary than ever, with accidents and fires in poorly maintained factories, substandard and inhumane working conditions, as well as forced labor and trafficking occurring at the raw commodity sourcing level. To get a birds-eye perspective of the best possibilities for systemic solutions, the panel spoke about their respective projects.

Karen spoke about the moving trend in transparency tools towards emphasizing verification systems such as the Conflict-Free Sourcing Initiative which can make transparency more efficient and minimize costs for companies when compared to chain of custody tracking. Marina Colby emphasized her work in the role that technology can play in strengthening USAID’s Counter-Trafficking in Persons (C-TIP) Policy as well as help coordinate amongst other government agencies and stakeholders. Tom Rausch of Good World Solutions introduced Labor Link, a mobile platform that uses basic mobile phone technology to provide companies with real-time data from their supply chain. Steven Price from The Forest Trust discussed a dashboard designed to drive real-time transparency in the pulp & paper industry (forestry concessions), reducing deforestation and other environmental and social costs.

Over 700 attendees from more than 65 countries and 375 institutions attended RightsCon, including some of the world’s leading human rights experts, investors, corporate leaders, engineers, activists, and government representatives. You can watch videos of the conference at www.rightscon.org.

Monday
Mar102014

Former Senator Feingold Praises RSN’s Multi-Stakeholder Group at Senate Hearing

Former Senator Russ Feingold was appointed as the U.S. Special Envoy to the Great Lakes Region and the Democratic Republic of Congo (DRC) in June 2013. Since his appointment to the position, things have started to move in the right direction and positive changes are being observed on the ground in eastern Congo. For example, the M23 militia group laid down their weapons in November 2013, and other rebel groups are considering doing the same.

In a recent U.S. Senate Hearing with the Foreign Relations Committee, Special Envoy Feingold twice mentioned the call he had on Feb. 13, 2014 with the Multi-Stakeholder Group (MSG) Against Conflict Minerals, which is convened by RSN. He stated that he learned from the call that companies are looking for incentives from the U.S. Congress to purchase minerals from the DRC, and not just avoid the region with a boycott.

In the above video, Feingold references the MSG in response to a question from Senator Boxer. He mentions the MSG one final time a few minutes later.

The MSG is now planning a face-to-face meeting with the Special Envoy in April to further discuss economic incentives for company engagement in the region.

Thursday
Feb202014

What are companies doing to fulfill their commitments to end forced labor?

Download Cotton Sourcing Snapshot

Since 2007, Responsible Sourcing Network (RSN) has engaged companies on the issue of forced labor in the Uzbek cotton sector. Some progress has been made, such as the ending of forced labor for children under 15. But those welcome changes have not ended slavery In Uzbekistan, and the issue still looms large in the supply chains of companies who source cotton without transparency or disclosure. RSN, along with SRI and NGO partners, felt it was time to take a snapshot of what the apparel and home goods industries are doing, and not doing, to help transition Uzbekistan away from its institutionalized labor abuse.

RSN’s latest publication, Cotton Sourcing Snapshot: A Survey of Corporate Practices to End Forced Labor, provides an overall understanding of what the industries are doing to identify risks, establish policies, implement procedures, and disclose practices to eliminate and prevent incidents of forced labor in cotton harvesting. This report follows on RSN’s 2013 publication, To the Spinner: Forging a Chain to Responsible Cotton Sourcing. It builds off the best practices highlighted in To the Spinner by identifying more in-depth examples of corporate procedures, providing an overall awareness of industry trends, and revealing which companies are excelling and which companies are underperforming.

Although companies may not appreciate being scored, many stakeholders have asked RSN what actions individual companies were taking to abide by the Cotton Pledge Against Child and Adult Forced Labor in Uzbek Cotton or other corporate commitments to not knowingly source Uzbek cotton. Conducting a survey, collecting best practices, and reporting on the results was the most efficient approach for RSN to communicate industry activities. In addition to understanding how companies are holding their suppliers accountable to not source Uzbek cotton, the survey had a goal of determining the activities or structures missing that could support companies and their suppliers in fulfilling their commitments.

By highlighting best practices, the report promotes examples that are currently being implemented and validates what can be done to avoid human rights risks at the raw extraction level. A few of the notable results from the survey that demonstrate the implementation of best practices include:

  • 18.5% are involved in spinner efforts individually or through another initiative
  • 16% provide training and require their suppliers/spinners to abide by their policies; an additional 8% also include this in their supplier contracts
  • 12% have independent third-party audits of their spinners/mills

By having a greater understanding of what the leading companies are doing and what percentage of the industries are following suit, the path forward becomes evident on how to prevent cotton picked with forced labor from entering product supply chains.

Download Cotton Sourcing Snapshot