We welcome David Schatsky as a guest contributor. David is principal analyst and founder of Green Research, a research, advisory and consulting firm focusing on clean tech, alternative energy and sustainability. He is at work on a study of the impact of the conflict minerals regulations on U.S.-listed companies and their suppliers. David is also the founder/editor of the website Dodd-Frank Section 1502, a valuable and timely compendium of news items on conflict minerals issues.
Hundreds of people turned out on Tuesday, December 13 for a day-long discussion titled, “Transparency, Conflict Minerals and Natural Resources: What You Don’t Know About Dodd-Frank.” The event was held at the National Press Club in Washington, D.C. and was co-hosted by The Brookings Institution, a public policy think tank and Global Witness, a non-governmental organization that works to end conflict and poverty poor, often resource-rich, countries.
The day was organized in two parts. The morning was focused on Dodd-Frank Section 1504, dealing with extractive industries disclosure. The afternoon focused on Section 1502, the conflict minerals disclosure.
Rep. Jim McDemott (D-Wash) opened the session and Sen. Benjamin Cardin (D-Md.) presented the closing comments. The Rev. Jim Wallis spoke at lunch. The full agenda and list of speakers is available here.
The conversation was stimulating because the conveners managed to bring together a diverse group. On the panels were representatives of advocacy groups, major corporations, and consultants and a human rights lawyer. The audience consisted of journalists, clergymen, industry representatives, attorneys and more.
Despite the diverse composition of the panels, they tended to be very harmonious. There was broad support for both Dodd-Frank provisions. The focus of disagreements was the details of the regulations now being crafted by the SEC. On the Extractive Disclosure panel, for instance, Laurel Green, group climate change executive for Rio Tinto, asserted that tracking payments by “project” was likely to be too onerous because of what she asserted was the inherent ambiguity of the term. Isabel Munilla, U.S. director of Publish What you Pay, disagreed, claiming that even local stakeholders in the affected countries want that level of disclosure.
On the conflict minerals panel, both representatives from industry, Sandy Merber from General Electric and Tim Mohin from AMD, are robust supporters of the provision but argued that a phase-in of the requirements is probably best, while some flexibility in the due diligence requirements is necessary to accommodate the different scale and capabilities of companies in the supply chain.
Some points made in the course of the panel discussion:
- Section 1502 allows companies to rely on an industry-wide process for determining the status of the mines and smelters from which their minerals are obtained, sharing and lowering costs compared to the impractical alternative of every company tracing its own supply chain all the way back to the mines.
- While the number of mines and suppliers may be large, the number of smelters is relatively small. Expanding the conflict-free smelter program therefore is imperative.
- The Public-Private Alliance (PPA) for Responsible Minerals Trade, announced last month, is intended to prevent “conflict-free” from turning into “Congo –free.” (The U.S. Department of State and U.S. Agency for International Development (USAID) will invest $3.2 million in it, specifically to support conflict-free minerals certification and traceability. More than 25 companies, trade associations, and other organizations have said they will join and will contribute funds toward a goal of an additional $2 million by the end of next year.)
- Merber of GE asked that the SEC define the “due diligence” required by the law to mean due diligence of the conflict minerals report itself and not of the supply chain, which would be much more costly.
- Merber also asked that the SEC keep two key concepts in mind as it formulates its rules: 1) that the objective is to press the supply chain to move to conflict-free smelters; 2) to favor disclosure and transparency rather than prescriptions of what individual due diligence should look like. (This would seem to shift the bulk of the burden to the international and trade associations and away from individual companies.)
- To those in the private sector who argue that governments must play a key role in achieving the goals of this legislation, Corinna Gilfillan of Global Witness pointed out that the Congo government has issued a law requiring companies there to implement the OECD due diligence guidelines. She also asserted that companies need not wait for final SEC rules to begin implementing procedures that follow those guidelines.
- Bruce Calder of consulting firm Claigan Environmental commented that one of the major costs of compliance at large companies is establishing effective communication with disparate internal functions/staff.
- Consistent with its previous comments to the SEC, Calder strongly disputed the compliance cost estimates published by the National Association of Manufacturers, citing experience with RoHS information technology systems implementation at other companies and suggesting that costs will be much more modest.
- Merber of General Electric said he sees section 1502 as part of a broader trend toward greater supply chain transparency. GE intends to design its compliance program to be flexible so it can accommodate new transparency requirements they expect will materialize in the future.
There was broad agreement that the sooner the rules are finalized, the better if will be for industry and for the people on the ground in Congo.