How companies can meet – and beat – Apple’s strong start on 2015 Conflict Minerals Filings
As analysts of companies’ conflict minerals filings to the Securities and Exchange Commission (SEC), we at Responsible Sourcing Network (RSN) received a welcome surprise this year: Apple filed its 2015 Conflict Minerals Report (CMR) with the SEC more than three months early! Apple has set a strong example for other companies. Even more important than being the first company out the gate for the second round of filings, Apple explicitly rejected a “Congo-Free” approach to risk management.
Rather than funnel its demand through a limited number of smelters and refiners, or avoid entirely those sourcing in Central Africa, Apple is expanding the base of smelters and refiners that have been verified as conflict-free.
-Apple Inc., 2015 Conflict Minerals Report, page 1
In this post, we evaluate Apple’s performance using two of RSN’s four measurement areas: Promoting a Conflict-Free Minerals Trade and Reporting & Transparency. In an upcoming post, RSN will offer companies a preview of our expectations in the areas of Policy & Management Systems and Assessing Exposure and Responding to Risk.
Below are 5 best practices RSN encourages companies to include in their SEC filings. Apple delivered on four, which means there’s still room to overtake the front-runner!
Promoting a Conflict-Free Minerals Trade
In its second Conflict Minerals Report (CMR) submitted in 2015, Apple details its efforts to support a genuinely “conflict-free” minerals trade in the Democratic Republic of the Congo (DRC) and the neighboring countries, the approach advocated by RSN and other stakeholders that supported the original Dodd-Frank 1502 legislation on conflict minerals.
1. Do not encourage an embargo of the DRC
In its sustainability report, the first US company to reach a market cap of $700 billion has a message for its peers: Don’t take the easy way out.
The simplest path to calling Apple’s products conflict-free would be to redirect our demand through a small subset of smelters that are either conflict-free verified, or aren’t sourcing from Central Africa.
But this approach would do little to influence the situation on the ground, something we care deeply about. That’s why we have been working to expand the number of verified sources in this region, so that more people can earn a good living, in better conditions.
-Apple Inc., Supplier Responsibility: Labor and Human Rights
Apple’s approach negates the argument that companies can’t or won’t trace their supply chains all the way to the smelter. Some companies appear to have explicitly requested their suppliers to avoid the DRC region, a practice which has the potential to contribute to a devastating embargo effect on artisanal miners.
2. Work with partners on the ground
In contrast, Apple is proactively supporting a clean minerals trade, which is the very purpose of this regulation. RSN praises Apple for its efforts to source responsibly from the “covered countries:” Angola, Burundi, Central African Republic, DRC, Republic of Congo, Rwanda, Tanzania, Uganda, and Zambia, all of which appear in Apple’s SEC disclosure as possible countries of origin for its minerals. The company is proving that product innovation and strong stock performance can go hand-in-hand with concern for the people behind its products, heeding the concerns of investors and consumers.
Apple details its efforts to engage non-governmental organizations, trade groups, and government agencies to promote change. Two examples include:
Working with Solutions for Hope to provide iPads and solar chargers to the Diamond Development Initiative to support a registration system for artisanal miners in DRC regions affected by conflict. Using a mobile mapping and survey application developed by Solutions for Hope, this registration enables artisanal miners to enjoy more formal protections and better economic opportunities.
Funding a project from the foundation Humanity United to advance Partnership Africa Canada’s work to track, certify, and export artisanal gold from eastern DRC, which includes the creation of economic incentives for local miners and traders to sell via legal sales channels.
-Apple Inc., 2015 Conflict Minerals Report, page 3
3. Measure the right outcomes
Apple measures outcomes in terms of the number of smelters or refiners that it has encouraged to go through the Conflict-Free Smelter Program audit process to become verified as “conflict-free.” The company states:
The number of conflict-free smelters and refiners in Apple’s supply chain has more than doubled in the past year.
- Apple Inc., 2015 Conflict Minerals Report, page 1
Reporting and Transparency
RSN encourages companies to use their official SEC conflict minerals filings to describe all due diligence efforts and any steps that go beyond minimum compliance, including activities undertaken to promote a conflict-free minerals trade in the DRC. Hunting through hundreds of PDF documents and websites is not a realistic task for analysts. Placing all information within the official SEC filing makes it possible for sustainable and responsible investors to aggregate and analyze company performance on addressing the risks and opportunities presented by conflict minerals.
4. List all known countries of origin and provide a detailed list of smelters or refiners.
Apple discloses 80 countries as possible points of origin for its four conflict minerals: tin, tantalum, tungsten, and gold. In addition it has identified over 200 smelters and refiners and includes all of their country locations and the minerals processed at each location.
5. Link to a dedicated conflict mineral or supply chain responsibility page.
Apple links to its general investor page, rather than to the page of its website that deals with conflict minerals in more depth. RSN is looking for a link directly to a publicly accessible page devoted to conflict minerals where stakeholders can easily locate the company’s current conflict minerals policy, the full text of the conflict minerals filing, and updates on ongoing due diligence efforts between annual filings.