RSN BLOG

Thursday
Jun262014

Trafficking in Persons Report Keeps Uzbekistan at Lowest Ranking

For the second year in a row, Uzbekistan has been placed in the lowest ranking possible in this year’s Trafficking in Persons (TIP) report released by the United States Department of State. Uzbekistan has not demonstrated to the U.S. government that it is making a significant effort to change its noncompliance with minimum trafficking standards. As a result, it faces possible punishment of sanctions.

This ranking sends a message to Uzbekistan that even though forced labor of children under the age of 16 has largely been eradicated, more must be done to dismantle the system of that forces a million of its own citizens to harvest cotton every year.

“While the decision is an important step to curb forced labor, further pressure will still be needed,” said Nadejda Atayeva, president of the Association for Human Rights in Central Asia. “Tashkent’s well-established pattern of breaking its international commitments means that the Obama administration should be ready to follow through with the consequences set out in the legislation, including travel restrictions on Uzbek officials who organize and profit from forced labor.”

Pressure must continue to be applied from a multitude of sources. The United States government recognizes the atrocities happening in Uzbekistan and is taking action to demonstrate practices by the Uzbek government are unacceptable. It is time for retail companies, consumers, investors, and lending institutions to take similar actions. It is of utmost importance that retail companies understand from where their cotton originates to be certain it was not picked from forced hands in the fields of Uzbekistan.

Friday
Jun132014

World Bank Approves Problematic Uzbekistan Projects

In a disappointing move, the World Bank has decided to fund three projects in Uzbekistan despite concerns raised that such investments risk perpetuating the state-sponsored system of forced labor in the cotton sector. The Uzbek government controls all aspects of the cotton industry and forces over a million of its own citizens to harvest cotton annually. Funding projects in Uzbekistan will only allow the political elite to more deeply line their pockets with cotton profits.

The Uzbek government forces many students, including 16-17 year olds, to work in cotton fields without adequate housing or food for weeks, pays farmers prices below cost of production, and sells this “white gold” at world market prices. After much international outcry over forced child labor, including 141 brands vowing not to purchase Uzbek cotton until the forced labor practice stopped, the Uzbek government almost entirely eliminated children under the age of 16 from working in the harsh harvesting conditions during the 2013 harvest. Unfortunately, teenagers, university students, and adult citizens were still forced to harvest cotton under the threat of expulsion from school, imprisonment, unemployment, or punishment.

Something must be done to rectify this dysfunctional and antiquated system of modern day slavery. By funding these Uzbek projects before seeing any real progress toward changing the root causes of forced labor, the World Bank is perpetuating a broken system. In a letter to the World Bank, Responsible Sourcing Network and other members of the Cotton Campaign stated, “The mass use of forced labor in the cotton sector of Uzbekistan is particularly pernicious in that it is organized by the state. The World Bank acknowledges this problem in project documents for each of the proposed projects.” It is disappointing that the World Bank went forward with these projects despite recognizing the seriousness of the issue.

It is now a pivotal time for retail companies, consumers, investors, and lending institutions to speak out against these human rights violations and to solidify their commitments not to use or invest in cotton grown in Uzbekistan. It is necessary more than ever to keep pressure on the Uzbek government to change its underlying structure of systemic forced labor so come harvest season in the fall, no child or adult will be forced to labor in the fields.

Monday
Jun092014

RSN Director Patricia Jurewicz, on Terra Verde, KPFA 94.1

RSN Director Patricia Jurewicz, right, with Terra Verde host Adrienne Fitch-Frankel

RSN Director Patricia Jurewicz recently appeared on 94.1 KPFA’s Terra Verde, a live public affairs program focusing on investigating and analyzing environmental issues from a global perspective. She joined the program to discuss conflict minerals reporting and corporate transparency. If you missed the live broadcast, you can listen to recording below. Just click the play button, or use the link below to download the clip.

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Thursday
May152014

Investors Applaud Court Decision on Conflict Mineral Reporting

A motion from the National Association of Manufacturers, U.S. Chamber of Commerce, and Business Roundtable to stay the SEC’s conflict minerals reporting rule was denied.

This week, the D.C Circuit Court of Appeals denied a request from trade groups to temporarily suspend the SEC conflict minerals rule. Investors welcomed the decision, which leaves in place the requirement that companies complete their conflict minerals due diligence disclosure filings by the June 2nd deadline. All reporting expectations remain unchanged with the exception of the use of “DRC conflict-free” terminology.

This decision to uphold near-full implementation of the rule is very important to sustainable and responsible investors, who are relying on the conflict minerals due diligence disclosures for brand valuation, risk assessment, and investment decisions. Investors released a public statement today detailing the importance of 1502 implementation and their continued support of the rule.

Read the investor statement

The ruling acknowledges and supports companies’ ability and willingness to comply with the rule. Early reports are already completed and have been submitted to the SEC.

The SEC promptly came out with a statement clearly explaining the adapted filing requirements per the Appeals Court ruling in April against use of the compelled “DRC conflict-free” speech. Despite this statement, trade groups still argued that the entire rule had been called into question and needed revision. Fortunately, the court did not agree with this faulty argument and the rule remains in effect. Companies should continue preparing and submitting their filings in line with the SEC requirements.

As the June 2nd deadline approaches, investors commend the conflict minerals supply chain due diligence that companies have undertaken and look forward to reviewing the filings. The first set of reports will provide a baseline level of information from which companies will be expected to expand and deepen as their due diligence efforts become part of their daily business activities. This court decision offers even more legitimacy to the mandate of the rule to promote responsible and transparent sourcing practices in the conflict minerals supply chain. With this decision, work can continue to progress toward bringing peace and prosperity to the citizens of the DR Congo and Great Lakes Region through a reformed minerals trade.

Friday
May022014

SEC Confirms that Conflict Minerals Disclosure will Move Forward Despite Court Ruling

UPDATE 5/5/14: The SEC has released an amendment to the disclosure rule that postpones compliance reporting only for the portion of the regulation questioned by the Circuit Court ruling. Click through to learn more.

In response to the recent uncertainty over the conflict minerals rule, the Securities and Exchange Commission (SEC), released a statement unequivocally defending the integrity of the rule and reinforcing the continued expectation for full company compliance by June 2, 2014.

“Subject to the guidance below and any further action that may be taken either by the Commission or a court, the Division (of Corporate Finance) expects companies to file any reports required under rule 13p-1 on or before the due date.”

RSN and its investor colleagues welcome this statement in light of the confusion surrounding the recent D. C. Circuit Court of Appeals opinion and the suggested stay of the rule by Commissioners Daniel M. Gallagher (R) and Michael S. Piwowar (R). As a group of concerned investors, we issued an open letter expressing our concerns with some aspects of the opinion two weeks ago.

The SEC statement justifiably rejects the requested stay, ensuring that the reports will go forward as planned. The request is completely unwarranted considering issuers’ main obligations under the conflict minerals rule remain intact. Furthermore, Keith Higgins, SEC Division of Corporate Finance Director, adequately acknowledged the one minor terminology change in his statement.

Higgins directly addressed any confusion regarding the implications that the court’s decision would have on compliance by explicitly identifying the amended report expectations following the ruling. These include:

  • If the company has products that fall within the scope of Items 1.01(c)(2) or 1.01(c)(2)(i) of Form SD, it would not have to identify the products as “DRC conflict undeterminable.”
  • No company is required to describe its products as “DRC conflict free,” having “not been found to be ‘DRC conflict free,’ or ‘DRC conflict undeterminable.’

Other than these minor exceptions, the rule and the according compliance requirements remain intact. A stay of the rule would unnecessarily halt all of the work companies have been implementing to meet the June 2, 2014 reporting deadline. The SEC has already received the first issuer filing last week.

This statement rightfully confirms companies’ continued obligation to report on due diligence activities undertaken in compliance with the rule. Investors look forward to reviewing issuer submissions as an important milestone for increased disclosure of hidden risks in corporate supply chains.