Companies Need to Improve Conflict Minerals Disclosures

By Yin Wilczek

Oct. 24 — As companies prepare their second conflict minerals disclosures, the emphasis is on “more and better” processes, a consultant said Oct. 24.

That includes the disclosure of “better information,” trying to obtain a higher response rate from suppliers and moving toward more efficient processes, said Christopher McClure, who leads the Midwest Forensics Accounting Practice at consulting firm Crowe Horwath LLP.

“That can mean expanding the resources that you're designating towards conflict minerals, it could be implementing a better technology program that will help you to ease the workload and create some more efficiencies,” McClure said. “There are a lot of things companies are doing now to refine and focus” their efforts.

More Resources Available

At the same time, there are more resources now than were available when companies were filing their first-ever disclosures, the consultant added. These include conflict minerals filings by peers and competitors as well as industry-specific initiatives—such as those for the automotive and apparel industries—that have emerged.

“There's still a gap, obviously, between the way the law is written and the specific questions that companies have,” McClure said. “Filling that void is now the job of the industry groups and others that are stepping forward and providing white papers and templates and doing other things that will help companies” in their disclosure obligations.

McClure spoke at a Practising Law Institute briefing with Michael Littenberg, a New York-based partner at Schulte Roth & Zabel LLP, and Beverly Wyckoff, associate counsel, global regulatory affairs at Dover Corp.

Under 1934 Securities Exchange Act Rule 13p-1, U.S. public companies and foreign private issuers must disclose their use of so-called “conflict minerals”—gold, tantalum, tin and tungsten from the Democratic Republic of Congo and the surrounding region—if those minerals are “necessary” to a product they manufacture.

The SEC requirement implements a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act that sought to establish transparency and accountability in mineral supply chains to ensure that companies don't source their minerals from the region and thus fund the ongoing conflict there.

About 1,300 issuers—substantially fewer than anticipated by the SEC—filed first-ever disclosures in June that covered their use of the minerals in calendar year 2013.

Steps for 2014

As companies prepare for their next disclosures, McClure suggested that they refresh their conflict minerals policies if necessary, based on their approach to the issue. “Are you on the front lines” of the initiative or “are you a supplier?” he asked. “Or are you a company that is less in the spotlight and more focused on SEC compliance at this point?”

Companies must assess the stakeholders involved, the potential risks of the disclosures and, in some cases, the potential rewards, McClure said, noting that some companies have used conflict minerals to differentiate themselves from their competitors. “So there are a lot of different approaches to conflict minerals depending on what your focus and profile is,” he said.

Moreover, McClure said companies, among other measures, should: adapt current grievance mechanisms to accommodate conflict minerals, as required by the Organisation for Economic Co-operation and Development Due Diligence Framework; utilize existing or new technology to automate and manage processes; update systems to better collect data; expand document-retention policies for conflict minerals; improve supplier-acceptance procedures and outreach programs; and update contract and purchase order language.

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To contact the editor responsible for this story: Mike Moore at

The Schulte, Roth & Zabel paper, “Conflict Minerals Reporting: A Review of Calendar Year 2013 Filings and Recommendations for Calendar Year 2014 Compliance,” is available at