Most Companies Still Struggle With Source of Conflict Minerals

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By Andrea Vittorio

Companies trying to make sure minerals in computer chips, jewelry, and other products don’t fuel conflict in Africa still struggle with identifying their source.

Two-thirds of companies that submitted conflict minerals reports to the Securities and Exchange Commission this year didn’t say where their tin, tantalum, tungsten, or gold was mined, according to an annual analysis by the nonprofit Development International released July 25. That’s essentially unchanged from last year and the year before.

“This is the crux of the issue,” Chris Bayer, Development International’s principal investigator, said. “If you haven’t been able to nail down the country of origin with a high level of accuracy, you cannot begin to parse out whether you have minerals that have been tainted by conflict.”

Companies from Apple Inc. to Tiffany and Co. are required by the 2010 Dodd-Frank Act to report to the SEC every year on their use of minerals that have been linked to violence and human rights abuses in the Democratic Republic of Congo and neighboring countries. Such disclosures may be in for a regulatory rollback if Republican policymakers have their way.

The reporting rule, which until recently spent years in a legal battle with industry groups, has been targeted because it’s seen as difficult to implement and outside the traditional purview of disclosure regimes. Human rights groups have come to its defense, saying it gives consumers and investors insight into how companies address risk in their supply chains.

Filings Down

“I think that the biggest stride that has been made in all this is the awareness of the issue” and the actions companies have taken to monitor their supply chains, Lawrence Heim, managing director at Elm Sustainability Partners LLC, told Bloomberg BNA. “That may not be reflected in every conflict minerals report.”

Elm, which provides companies with advice and auditing on conflict minerals, helped sponsor the Development International analysis.

The analysis looked at conflict minerals disclosures by about 1,150 companies, slightly fewer than in past years. Some companies didn’t file anything despite having filed before, while others provided less information than they have in the past.

An SEC spokeswoman declined to comment on whether the filers may have been taking cues from the commission’s relaxed stance on enforcement. Companies that only offer basic disclosures on where they think the minerals in their products come from won’t get in trouble, according to a statement issued by the agency in April.

Scores Up

Corporate reporting on conflict minerals, now in its fourth year, is getting better.

Almost three times more companies than last year got at least 75 percent of the total possible points on report quality in Development International’s scoring system. Three companies—Apple, Intel Corp., and Kemet Corp.—earned perfect scores.

One thing companies are saying more about is how they are surveying suppliers and using the information collected. Apple, for example, is cutting minerals processors that aren’t willing to participate in independent third-party audits.

“Companies are more likely to start setting those expectations because there’s a critical mass” of audited smelters and refiners, Leah Butler, who directs the Conflict-Free Sourcing Initiative, told Bloomberg BNA. More than 350 companies, including Intel and Kemet, participate in the initiative’s auditing and reporting programs.

To contact the reporter on this story: Andrea Vittorio in Washington at avittorio@bna.com

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bna.com

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