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.
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.
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.
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.
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.
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.