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.


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.


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.


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, or download Proxy Preview 2014 at



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.


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.