RSN BLOG

Wednesday
Apr302014

Multi-Stakeholder Group Meets with former-Senator Russ Feingold

RSN Director Patricia Jurewicz, second from right, with Special Envoy to the Great Lakes Region former-Senator Russ Feingold, second from left, and the RSN-convened Multi-Stakeholder Group

Yesterday, the Multi-Stakeholder Group (MSG) Against Conflict Minerals, convened by RSN, had a face-to-face meeting with Special Envoy to the region, Russ Feingold, at his office in Washington D.C.

Following up on a call with former-Senator Feingold in February, the MSG focused on promoting incentives to purchase minerals from the Democratic Republic of the Congo (DRC).

Specifically, the group discussed ways to avoid creating an embargo effect on the region due to the increased due diligence requirements on companies mandated by Dodd-Frank Section 1502. Some end users and smelters have decided to avoid the region all together as their strategy toward risk management. However, other companies are committed to sourcing conflict-free from the DRC and using their leverage to help bring peace to the region.

The two main incentives promoted by the MSG included government procurement preferences and a mechanism to acknowledge and reward companies sourcing conflict-free from the region. In addition, encouraging cross-border tax and tariff harmonization in the Great Lakes Region was discussed as a way to minimize smuggling.

During the face-to-face meeting, the MSG also stressed the importance of establishing peace and accountability in the region. This multi-stakeholder meeting with Special Envoy Feingold was critical in linking diplomatic engagement to corporate practices as diplomacy and responsible supply chain sourcing are two sides to the same coin. After all, conflict-free minerals will not be available in large quantities until there is a conflict-free Congo.

The MSG plans to continue its interaction with Mr. Feingold to strengthen the multi-stakeholder and industry conflict-free sourcing initiatives in the DRC. Simultaneously, the promise of increased economic development and revenues from responsible mining will support the Special Envoy in his priorities of bringing stability, democracy, and peace to the region.

Friday
Apr252014

SEC Receives First-Ever Conflict Minerals Disclosure

In a major landmark for conflict minerals disclosure, the SEC received yesterday the first-ever due diligence disclosure report filed in compliance with the Dodd-Frank conflict minerals rule. The report, filed by Siliconware Precision Industries Co., Ltd., includes a completed Form SD as well as Conflict Minerals Report. Siliconware Precision is a provider of comprehensive semiconductor assembly and test services, and has been recognized as a best-in-class supplier to Intel for the past three years.

According to Siliconware Precision’s report, the company determined the minerals in their products to be “DRC conflict undeterminable.” While this determination is not entirely substantial, it does satisfy the letter of the law. As more reports come in, we expect to see better disclosure and deeper due diligence.

The report consists of a summary of the due diligence processes undertaken to determine the conflict minerals status of the minerals used in the company’s semiconductor packaging services.  Based on Electronic Industry Citizenship Coalition and Global e-Sustainability (EICC/GeSI) due diligence measures, the company engaged in a supply-chain survey with direct suppliers of materials containing conflict minerals and a comparison of smelters and refiners identified in the supply chain survey against the list of “conflict-free” smelters identified in the Conflict-Free Smelter program.

Despite the recent mixed ruling from the DC Circuit Court regarding the disclosures, this early submission signals that companies are committed to fulfilling 1502 due diligence requirements in compliance with the rule. Though the report is not as robust as investors and advocates might like, we are pleased that the reporting process is moving forward, and we look forward to more disclosure as the deadline nears. Issuer submissions are due to the SEC by May 31, 2014 for the reporting period covering January 1 to December 31, 2013.

Thursday
Apr242014

One-Year Anniversary of Tragedy at Rana Plaza in Bangladesh

On the one-year anniversary of one of the worstworkplace disasters in history, investors are reminding companies of their responsibility to address human rights abuses throughout their supply chains. An investor statement signed by 134 institutional investors representing $4.1 trillion in managed assets was released today by the Interfaith Center on Corporate Responsibility, and was covered in the Wall Street Journal.

Below is an article penned by Lauren Compere, Managing Director and Director of Shareholder Engagement at Boston Common Asset Management, addressing the role investors can play in ending these kinds of tragedies. The article first appeared in Proxy Preview 2014, a free resource that covers environmental, social, and sustainable governance shareholder proposals to help shareholders vote their values. To learn more, read our Proxy Season Updates at asyousow.org, or download Proxy Preview 2014 at proxypreview.org.

THE REAL RISKS BEHIND CHEAP CLOTHING: INVESTORS TAKE ACTION ON BANGLADESH

LAUREN COMPERE

Managing Director and Director of Shareholder Engagement, Boston Common Asset Management

The November 2012 Tazreen garment factory fire and the April 2013 Rana Plaza building collapse in Bangladesh resulted in the deaths of over 1,500 garment workers. The pursuit of low-cost manufacturing comes at a high social price and represents a material supply chain risk to companies and investors alike. Since May 2013, Boston Common Asset Management has helped to lead an investor coalition, coordinated by the Interfaith Center on Corporate Responsibility and representing more than 200 organizations in Europe, North America, and Australia with $3.1 trillion in assets, to encourage companies to address systemic problems in the Bangladesh apparel supply chain.

The coalition issued an investor statement calling on companies to act in coalition to enact system-wide reforms that would prevent future loss of life due to unsafe working conditions. The coalition encouraged 21 companies to join the Bangladesh Accord on Building and Fire Safety (the Accord), which includes worker representation and is legally binding. Over 130 companies have joined the European-led Accord to date—including PVH Corp., one of few U.S. companies to do so. ASOS and Disney are amongst the companies that have decided to avoid sourcing from Bangladesh, and Gap, JCPenney, Target, VF Corporation (Timberland), Walmart, and others have joined the Alliance for Bangladesh Worker Safety (the Alliance), backed by North American retail associations. Li & Fung has joined the advisory board of the Accord at the request of its customers but has not joined the Accord directly. In October 2013, adidas joined the Accord after Boston Common led a dialogue with the company on behalf of the coalition.

Despite the investor coalition’s progress to date, companies must be more transparent about their sourcing practices. Companies need to begin to disclose from where they are sourcing and how they are investing in capacity building down the supply chain to the factory floor. Investors can advocate for companies to take concrete actions, such as supporting common standards for factory inspections, joining the International Labor Organization Better Work Program in Bangladesh, which addresses broader worker human rights and encouraging victim compensation by contributing to the recently established international trust fund. This proxy season, whether in constructive dialogues, investor statements, resolution filings, or annual shareholder meeting questions, every company that is part of the global apparel supply chain will be asked: “How are you applying the lessons learned from the Bangladesh tragedy into your supply chain practices?”

For more information, download Proxy Preview 2014.

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.