On September 5, 2013, a white paper titled, “Expectations for Companies’ Conflict Minerals Reporting,” was released by two NGOs dedicated to human rights issues, the Enough Project and the Responsible Sourcing Network, describing in detail the expectations and suggestions of certain sustainable and responsible investors, or SRIs, and nongovernmental organizations, or NGOs, for the content of Form SD filings and Conflict Minerals Reports expected to be filed with the SEC next year. The two groups make a number of suggestions that far-exceed the literal requirements of the SEC’s conflict minerals rules. The paper, which is available at www.enoughproject.org/files/Expectations-for-Companies-Conflict-Minerals-Reporting.pdf, suggests that issuers disclose, among other things:
- their conflict minerals policies and programs, including steps to communicate and implement the policies throughout the entire organization, including subsidiaries, and to suppliers;
- the general product categories that contain necessary conflict minerals and the percentage of each category containing each conflict mineral;
- a list of conflict minerals smelters in the issuer’s supply chain;
- country of origin information for all conflict minerals;
- percentages or numbers of:
- products containing conflict minerals, including products containing conflict minerals of undeterminable origin
- conflict minerals suppliers that have responded to a supplier survey
- supplier audits conducted and the results
- suppliers that are not in compliance with the issuer’s conflict minerals policy
- suppliers that have a conflict minerals policy consistent with the OECD Guidance and the issuer’s policy
- suppliers that are subject to remediation to bring them into compliance with the issuer’s policy
- smelters in the supply chain that (i) do not participate in an independent verification program such as the Conflict-Free Smelter Program; (ii) source from the covered countries; and (iii) do not source from the covered countries; and
- the measures that will be taken in response to any “red flags,” which include incomplete reporting templates, responses that lack supporting documentation, responses that are inconsistent with public information, and responses that do not identify smelters.
In addition, the white paper encourages issuers to support clean minerals trade initiatives in the covered countries, encourage smelters to be validated as conflict-free under the Conflict-Free Smelter Program, and implement an incentive program to provide training and other resources for suppliers. In addition, the white paper suggests that, in their conflict minerals policies, issuers commit to “identifying and eliminating any other minerals in the supply chain that may support human rights violations.”
As the June 2, 2014 deadline for filing the first Form SD and Conflict Minerals Report approaches, we would not be surprised to see other interested groups weigh in and issue guidance on various matters that they would like to see issuers address in their conflict minerals reporting. However, while these types of guidelines may be helpful to issuers in setting aspirational goals for disclosures in their conflict minerals reports or in other public disclosures, we question whether many issuers will have the resources or capability to disclose information beyond what is otherwise mandated under the SEC’s rules. This is particularly true for issuers that are far removed from the conflict minerals sourcing decisions in the supply chain and are already having difficulty obtaining information from their suppliers as to the origin of conflict minerals contained in materials and components that they purchase or contract to manufacture.