Just as U.S. companies seem to have a handle on conflict minerals legislation, the EU is poised to pass its own law regarding these materials that are widely used in electronics.
In the U.S., the so-called conflict minerals rule, Dodd-Frank Section 1502, requires public companies to disclose the presence of conflict minerals (tin, tantalum, tungsten, or gold) originating from the Democratic Republic of the Congo or specific adjoining countries in their products. These regions are controlled by groups that are widely known for their human rights violations. The legislation aims to cut off a source of funding for these groups.
The EU’s Committee on International Trade is scheduled to vote on its conflict minerals proposal during an April 13-14 meeting. The full European Parliament is tentatively scheduled to address it on May 19. This week, a group of high-tech trade associations, including the IPC, issued a statement to EU members. “While there are many good ideas in the proposed amendments, we cannot support any new concepts that do not adhere to the Organization for Economic Co-operation and Development (OECD) framework or have not been subject to adequate regulatory impact assessment,” the statement reads.
Compliance with the U.S. rule has proven problematic for many businesses. According to a 2014 PriceWaterhouseCoopers survey, organizations continue to find the process to be challenging at nearly every step: scoping, surveying suppliers, performing due diligence and drafting filings. As a result, 62 percent of survey respondents reported needing one to two full-time resources for their conflict minerals compliance efforts, and 21 percent needing three to five full-time resources, a substantial evolution over the last year. It ultimately comes down to performing reasonable due diligence, and according to PwC’s survey, companies in the technology, energy and metals industries appear to be the furthest along.
In its letter to the EU, the trade associations ask members to consider:
Acknowledging existing industry schemes. Several industry schemes have been established over a number of years specifically to help break the link between conflict financing and the sourcing of 3TG, allowing companies to make informed choices about conflict minerals in their supply chains. Complementing the Union system, schemes like the London Bullion Market Association Gold Standard (LBMA), the Responsible Jeweler Council Certification Program (RJC) and the Conflict Free Sourcing Initiative (CFSI) focus on the same “pinch point” in the global metals supply chain as the Union does. These schemes use independent third--‐party audits to certify smelters and refiners with systems in place to assure sourcing of only conflict--‐free materials. There is mutual recognition between these schemes and the Union should also include provisions to allow for the accreditation of these schemes, to avoid duplication of efforts and reinforce their impact. These schemes have proved successful in increasing the transparency across the minerals supply chain. They should all be supported in order to continue to expand the number of compliant smelters and refiners.
A common list of smelters/refiners. A white list of smelters and refiners should be produced at EU level by the Commission in consultation with the OECD and in conjunction with the LBMA, CFSI, RJC and equivalent schemes in order to prevent duplication of effort, administrative and financial burden on companies and SMEs as well as confusion in the global marketplace.
Maintaining a focus on 3TG and exclude recycled materials. The majority of stakeholders are of the view that the Union system should follow or mirror the OECD due diligence framework. This means maintaining the current focus on tin, tungsten, tantalum and gold and excluding recycled materials, as well as following the OECD process to identify and address additional minerals. Each of the 3TG is dealt with in a dedicated supplement that has been prepared as a result of consultation with all relevant stakeholders. Consequently, additional minerals should only be considered within the Union system once the OECD process to identify and deal with such minerals has been completed.
Keeping focus upstream. Concentrating on upstream supply chain operators and on facilitating the transmission of quality information in the supply chain leverages the appropriate point in the supply chain, is consistent with the OECD guidance and with industry initiatives, and complements the Dodd--‐Frank Act Section 1502. Beyond the pinch point of smelters/refiners, it becomes exponentially more difficult to identify the origins of metals.
Supply chain due diligence information. In line with the OECD Guidance and inparticular Step 5, downstream companies should be allowed the flexibility to identify the most appropriate ways to provide information on supply chain due diligence to their supply chains and customers. The EU Directive on disclosure of non--‐financial and diversity information could serve this purpose.
Defining conflict zones and high--‐risk areas. We do not feel that it should be up to companies to define conflict zones and high--‐risk areas. Definitions should adhere to internationally recognized definitions such as the OECD and the International Red Cross.
Along with the IPC, the letter was issued by AmCham EU, the European Committee of Domestic Equipment Manufacturers (CECED), DIGITALEUROPE, the Japan Business Council in Europe (JBCE), the Japan Electronics and Information Technology Industries Association (JEITA), the Korea Electronics Association (KEA), Semiconductor Equipment and Materials International (SEMI), the Trans-Atlantic Business Council (TABC), and TechAmerica Europe.
Until recently, there was no U.S. standard format for conflict minerals reporting for the electronics industry. The IPC recently released a recommended template for collecting data from suppliers and provides a Conflict Minerals Due Diligence Guide; the Electronics Industry Citizenship Coalition along with the Global e-Sustainability Initiative provides a reporting template, tools and resources for compliance. The organizations only recommend the usage of these materials -- there is currently no standard required by the SEC.
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